REVOCABLE PROXY
CORCAP, INC.
This Proxy Is Solicited on Behalf of the Board of
Directors
The undersigned holder of Corcap, Inc. Common Stock hereby
constitutes and
appoints Millard H. Pryor, Jr., David W. Clark, Jr. and John E.
Sundman, or any
one of them with full power of substitution, as attorneys and
proxies for the
undersigned to appear and vote all of the shares of common stock
of Corcap,
Inc. (the "Company") standing on the books of the Company in the
name of the
undersigned at the 1995 Annual Meeting of Stockholders of the
Company to be
held at its Corporate Office, 90 State House Square, 10th Floor,
Hartford,
Connecticut on May 24, 1995 at 10:00 a.m. E.D.T. and at any
adjournments of
said Annual Meeting. A majority of such said attorneys and
proxies as shall be
present and voting (or if only one shall be present and voting,
then that one)
in person or by substitute or substitutes at said meeting or any
adjournment
thereof, shall have and may exercise all of the powers of such
said attorneys
and proxies hereunder. The undersigned hereby acknowledges
receipt of the
Notice of Annual Meeting and the Proxy Statement dated April 28,
1995 and
instructs its attorneys and proxies to vote as set forth on this
Proxy. The
undersigned shareholder may revoke this proxy at any time before
it is voted by
delivering to the Secretary of the Company either a written
revocation of the
proxy or a duly executed proxy bearing a later date, or by
appearing at the
Annual Meeting and voting in person.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
listed below
David W. Clark, Jr., Millard H. Pryor, Jr.
Norman Silberdick, John E. Sundman
(INSTRUCTION: To withhold authority to vote for any
individual nominee
write that nominee's name in the space provided below.)
_________________________________________________________________
1. To ratify the appointment of Coopers & Lybrand as independent
auditors of
the Company for the fiscal year ending December 31, 1995.
FOR AGAINST ABSTAIN
3. In their discretion, the proxies are authorized to vote upon
such other
business as may properly come before the Meeting.
The shares represented by this Proxy will be voted as specified.
IF NO CHOICE
IS SPECIFIED, THE PROXY WILL BE VOTED IN FAVOR OF EACH OF THE
SPECIFIED
NOMINEES IN PROPOSAL NO. 1, FOR PROPOSAL NO. 2, AND IN THE
DISCRETION OF THE
PROXIES AS TO OTHER MATTERS. HOWEVER, THIS PROXY CARD MUST BE
PROPERLY
COMPLETED, SIGNED, DATED AND RETURNED TO THE COMPANY IN ORDER TO
HAVE YOUR
SHARES VOTED. IF YOU DO NOT RETURN THIS CARD, YOUR SHARES WILL
NOT BE
REPRESENTED.
When signing as attorney, executor, administrator, trustee,
guardian,
custodian, or the like, give title as such. If the signer is a
corporation,
sign in the corporate name by a duly authorized officer.
Dated______________________________________, 1995
Signature________________________________________
Signature________________________________________
(if held jointly)
CORCAP, INC.
90 State House Square, 10th Floor
Hartford, Connecticut 06103-3720
(203) 247-7611
April 28, 1995
Dear Corcap Stockholders:
The following pages contain the formal notice of the 1995 Annual Meeting and
the Proxy Statement. Please be sure to complete,date, sign and return the
enclosed proxy card promptly to ensure that your shares will be voted.
Also enclosed is Corcap's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the year ended December 31, 1994.
You are invited to attend Corcap's Annual Meeting to be held on Wednesday, May
24, 1995 at 10:00 a.m. at Corcap's Corporate Office located at 90 State House
Square, 10th Floor, in Hartford, Connecticut.
Sincerely,
Norman Silberdick
Chairman
<PAGE>
CORCAP, INC.
_______________________________________________________________________________
__________________
NOTICE OF ANNUAL MEETING To Be Held May 24, 1995
To: The Owners of Common Stock
The 1995 Annual Meeting of Stockholders of Corcap, Inc. will be held at
Corcap's Corporate Office, 90 State House Square, 10th Floor, Hartford,
Connecticut, on Wednesday, May 24, 1995 at 10:00 a.m. (E.D.T.) for the
following purposes:
1.To elect four Directors to serve until the 1996 Annual Meeting of
Stockholders;
2. To ratify the appointment by the Board of Directors of the firm of
Coopers & Lybrand as independent auditors of the Company for the fiscal year
ending December 31, 1995; and
3.To transact any other business which may properly come before the
meeting or any adjournment or adjournments thereof.
Stockholders of record at the close of business on Wednesday, April 5, 1995
will be entitled to notice of and to vote at the 1995 Annual Meeting.
The Board of Directors urges you to complete, date and sign the accompanying
proxy and return it promptly in the enclosed envelope. All stockholders are
cordially invited to attend the Annual Meeting, and your right to vote in
person will not be affected if you mail your proxy.
By Order of the Board of Directors
Diane W. Burns
Secretary
Hartford, Connecticut
April 28, 1995
IMPORTANT
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
CORCAP, INC. PROXY STATEMENT
GENERAL
This Proxy Statement of Corcap, Inc., a Nevada corporation ("Corcap" or the
"Company"), is being mailed or otherwise furnished to its stockholders on or
about April 28, 1995 in connection with the solicitation by the Board
of Directors of proxies to be voted at its 1995 Annual Meeting of Stockholders
to be held on Wednesday, May 24, 1995 at 10:00 a.m. (E.D.T.) at Corcap's
Corporate Office on the tenth floor of 90 State House Square,
Hartford, Connecticut 06103-3720.
Enclosed with this Proxy Statement and Notice of Annual Meeting is a proxy card
on which the Board of Directors requests that you vote FOR Proposal No. 1 to
elect the four nominees proposed by management for election to the Board of
Directors and FOR Proposal No. 2 to ratify the appointment of Coopers & Lybrand
as independent auditors of the Company for the fiscal year ending December 31,
1995. We would appreciate your returning your completed proxy card as soon as
possible for use at the Annual Meeting or at any adjournments thereof.
Properly executed proxies received by Corcap's Secretary before the meeting
will be voted as directed unless revoked. A proxy may be revoked at any time
before it is exercised by notifying Corcap's Corporate Secretary in writing,
delivering a proxy with a later date or by attending the meeting and voting in
person. Unless you indicate on your proxy otherwise, shares properly
represented by proxies that are completed, signed, dated and returned to the
Company will be voted "FOR" the nominees for the Board of Directors named
on the proxy and "FOR" the appointment of Coopers & Lybrand as independent
auditors. Except for procedural matters incident to the conduct of the Annual
Meeting, the Company does not know of any matters other than those described in
the Notice of Annual Meeting that are to come before the Annual Meeting. If
any other matters are properly brought before the Annual Meeting, the persons
named in the accompanying proxy will vote the shares represented by the proxies
on such matters in their discretion.
All costs of solicitation of proxies will be borne by the Company. The only
costs anticipated are those ordinarily incurred in connection with the
preparation and mailing of proxy material. In addition to solicitations by
mail, the Company's Directors, officers and regular employees, without
additional compensation, may solicit proxies by telephone and personal
interviews.
Only holders of record of Corcap's Common Stock, par value $ .01 per share, at
the close of business on April 5, 1995 are entitled to notice of and to vote at
the meeting. On that date, there were 2,925,726 shares of Common Stock
outstanding, the holders of which are entitled to one vote per share.
ELECTION OF DIRECTORS (Proposal No. 1)
Pursuant to the Bylaws of the Company, the Board of Directors has fixed the
number of directorships at four, and the Board recommends that stockholders
elect the four nominees identified below to serve as Directors of the Company
until the next Annual Meeting and until their successors are elected and
qualified. All of the four nominees are presently serving as Directors of the
Company, each of whom were elected by stockholders at the 1994 Annual Meeting
of Stockholders. John C. Sanford and Antoine I. Dominic each resigned as a
director in December 1994 for personal reasons. Their seats on the Board will
not be filled because the Board reduced the number of directorships from six to
four.
If at the time of the Annual Meeting any of the four nominees should be unable
or decline to serve, the persons named in the proxy will vote for such
substitute nominee or nominees, if any, as the Board of Directors
recommends. The Board of Directors has no reason to believe that any nominee
will be unable or will decline to serve as a Director if elected. The
affirmative vote of a plurality of the votes cast at the meeting is required
to elect Directors. Abstentions, and share not voted on a particular matter on
proxies returned to the Company, will have no effect on the vote.
The following sets forth certain information concerning each nominee for
Director.
Millard H. Pryor, Jr. 62. Mr. Pryor is a Managing Director of Pryor & Clark
Company, an investment holding company. He presently serves as a member of the
Pension Committee of the Corcap Board. From June 1988 until his resignation in
June 1993, Mr. Pryor held the position of Chairman of the Board of Corcap. He
also held the position of Chief Executive Officer of Corcap from June 1988
until his resignation in June 1992. He has served as a Director of Corcap
since June 1988. From October 1985 until his resignation in June 1993, he
served as Vice-Chairman of the Board of Directors of CompuDyne Corporation
("CompuDyne"), and from June 1991 until his resignation in June 1992, Treasurer
of CompuDyne. He has served as a Director of CompuDyne since October 1985.
Until October 1991, Mr. Pryor was the Chairman and, until July 1988, the Chief
Executive Officer of Lydall, Inc. (manufacturing) for more than five years. He
is a director of The Hartford Funds (financial services), The Wiremold
Corporation (manufacturing), Pacific Scientific Company (manufacturing),
Infodata Systems, Inc. (computer software) and Chairman and director of GEO
International Corporation (manufacturing).
David W. Clark, Jr. 57. Mr. Clark is a Managing Director of Pryor & Clark
Company, an investment holding company. Until his resignation in June 1992, he
served as President, Chief Operating Officer and Treasurer of Corcap. He has
served as a Director of Corcap since June 1988. From October 1985 until his
resignation in June 1993, he served as Chairman of the Board of CompuDyne.
From May 1989 until his resignation in June 1992, he was the President and
Chief Executive Officer of CompuDyne. He has served as a Director of the
CompuDyne since 1985. Prior to becoming President of Corcap, Mr. Clark had
been employed by Lydall, Inc. for more than five years most recently as
President. He also serves as a Director of Acme United Corporation
(manufacturing), Checkpoint Systems, Inc. (manufacturing) and Northeast Savings
(banking).
John E. Sundman 68. Mr. Sundman is a member of the Audit Committee. He has
served as a Director of Corcap since June 1988. Prior to his retirement, which
became effective as of May 1, 1991, Mr. Sundman served as a Vice President of
Corcap, a position which he assumed as of November 30, 1989. Prior to that
time, Mr. Sundman served as Vice President-Finance, Treasurer and Chief
Financial Officer of Corcap from June 1988 until November 30, 1989. Mr.
Sundman served as Vice President-Finance, Treasurer and Chief Financial Officer
of Lydall, Inc. from 1978 to 1988 and also served as a Lydall director from
1979 to November 1989. He also served as a Senior Vice President of CompuDyne
from June 1988 to November 1989. He is a Director of Allis-Chalmers
Corporation (manufacturing).
Norman Silberdick 53. Mr. Silberdick was elected Chairman of the Board of
Directors of Corcap on June 3, 1993 and has served as President, Chief
Executive Officer and Treasurer of the Corcap and CompuDyne since June 26,
1992, having acted as a consultant to each company since April 1989. He has
served as a director since 1992. Mr. Silberdick presently serves as Chairman
of the Executive Committee (since June 1993) and Pension Committee of the
Corcap Board. Mr. Silberdick also serves as an independent financial
consultant to several companies.<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Directors. The Board of Directors held one regular meeting during 1994. The
Board also acted by unanimous written consent of its members on two occasions.
All Directors attended all of the meetings of the Board and of any committee on
which they served.
Directors who are not employees of the Company, or otherwise compensated by the
Company, were paid $500 for each meeting of the Board of Directors, plus
reimbursement of reasonable expenses for attending the meeting.
The Company's Board of Directors has three committees: the Audit Committee,
the Pension Committee and the Executive Committee. The Company does not have a
Nominating Committee. The Audit Committee considers and reviews all matters
connected with external audit reports, the auditors' management report and
similar matters. The Pension Committee makes recommendations concerning the
pension and profit sharing plans of the Company during intervals between
Directors' meetings. The Executive Committee acts on behalf of the Board of
Directors in the interval between its meetings on all matters other than those
specifically assigned by the Board of Directors to its other committees.
During 1994, the Audit Committee, the Pension Committee and the Executive
Committee held no meetings.
Executive Officers. The following table sets forth the name and age of the
chief executive officer of Corcap in 1994. Mr. Silberdick was elected Chairman
of the Board of Corcap on June 3, 1993 and President, Treasurer and Chief
Executive Officer on June 26, 1992.
Business Name and Age Office Experience
Norman Silberdick Chairman, President, Treasurer
53 years oldand Chief Executive Officer (1) *
__________________
* See previous table.
(1) Elected to such positions on June 3, 1993 and June 26, 1992
OWNERSHIP OF CORCAP COMMON STOCK
The following table lists, to the Company's knowledge, the ownership of Common
Stock of the Company, if any, on March 31, 1995, and the nature of such
ownership, for each of the Company's current Directors and each nominee for
Director, for all officers and Directors of Corcap as a group and for each
person who owns in excess of 5 percent of Corcap's common stock. Unless
otherwise noted, each holder has sole voting and dispositive power with respect
to the shares listed.
Amount and Nature
of Beneficial Percent
Name Title of Class Ownership of Class
Millard H. Pryor, Jr. Common Stock 22,200 (1)
51,030 (IRA)
83,230 2.9%
10,546 (2)<PAGE>
Amount and Nature
of Beneficial Percent
Name Title of Class Ownership of Class
David W. Clark, Jr. Common Stock 4,533
8,752 (IRA)
13,285
10,546 (2) *
John E. Sundman Common Stock 5,444(IRA)
51,834
57,278 2%
Norman Silberdick Common Stock None
All directors and
officers as a group
(4 persons) Common Stock 154,338 5.6%
* Less than one percent
(1) Includes 9,700 shares held by Mr. Pryor's wife, as to which Mr. Pryor
disclaims any beneficial interest.
(2) Mr. Pryor has neither voting nor dispositive power with respect to
these 10,546 shares. These shares are held under an Irrevocable Trust
Agreement of which Mr. Clark is a Co-Trustee and under which Mr. Clark has
voting and dispositive power respecting these shares.
EXECUTIVE COMPENSATION AND OTHER TRANSACTIONS WITH MANAGEMENT
The following table sets forth the total annual compensation of the Company's
Chief Executive Officer. Corcap had no employees in 1994 and no executive
officer received any compensation in 1994. Mr. Silberdick did, however,
receive compensation from CompuDyne for serving as an officer and employee of
CompuDyne, see "Investment in CompuDyne Corporation and other Related Matters."
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards
Restricted Securities All Other
Name and Salary Bonus Stock Underlying Compensation
Principal Position Year ($)(2) ($)(3) Awards(#)(4)Options(#)(5)($)(6)
Norman Silberdick (1)1994 0 0 0 0 0
President, CEO & 1993 0 0 0 0 0
Treasurer 1992 0 0 0 0 0
(1)Mr. Silberdick was elected Chairman of the Board of Corcap and CompuDyne on
June 3, 1993 and President, CEO and Treasurer of Corcap and CompuDyne on June
26, 1992.
(2)Mr. Silberdick was paid $100,000, $100,006 and $34,637 by CompuDyne in 1994,
1993 and 1992, respectively. No salary was received from Corcap.
(3)Bonuses of $50,000 and $30,000 were awarded to Mr. Silberdick by the
Executive Committee of the Board of Directors of CompuDyne in January 1993 and
February 1994, respectively, for services rendered in 1993 and 1992,
respectively. Mr. Silberdick did not receive a bonus in 1995 for services
rendered in 1994. As of March 1995, 100% of the 1993 and 1992 bonuses were
paid by CompuDyne.
(4)On November 12, 1992, the Board of Directors of CompuDyne authorized the
issuance of 300,000 shares of CompuDyne Common Stock to members of CompuDyne
management at a price of $.40 per share, the fair market value at such time.
The Board subsequently authorized the issuance of an additional 200,000 shares
of CompuDyne Common Stock to Mr. Silberdick at the same price and on the
same terms as those authorized on November 12, 1992. Under Stock Purchase
Agreements dated August 1, 1993, which were entered into pursuant to such
authorizations, such executive may purchase 25% of such shares on each of
August 1, 1993, 1994, 1995 and 1996 at $.40 per share, provided certain
conditions are met, including continued employment by CompuDyne, by paying cash
for such shares or by giving CompuDyne a five-year, non-recourse promissory
note, collateralized by the stock and bearing interest at 2% per annum over the
rate designated by the First National Bank of Maryland as its prime commercial
rate. The Stock Purchase Agreements further provide that within 90 days
of any Change of Control of CompuDyne, as defined, the executives will be
entitled to purchase all of the shares of CompuDyne Common Stock not yet
purchased under such Agreements by delivering a written notice to CompuDyne.
On August 1, 1993 and August 1, 1994, Mr. Silberdick purchased 50,000 shares of
CompuDyne Common Stock, or an aggregate of 100,000 shares, in exchange for
promissory notes pursuant to the Stock Purchase Agreement. On March 8, 1994,
Mr. Silberdick paid $4,000 under such promissory note. At December 31, 1994,
the value of the 100,000 shares issued to Mr. Silberdick on August 1, 1993 and
August 1, 1994, was $275,000, based upon the median of the high and low bids of
CompuDyne Common Stock as reported on the OTC Bulletin Board. At December
31, 1994, the value of the remaining shares that may be issued to Mr.
Silberdick under the Stock Purchase Agreements, 100,000, was $275,000. With
Mr. Dominic's resignation as an officer and employee of CompuDyne, the number
of shares to be issued to management has been reduced by 37,500 shares,
representing the amount of shares allocable to Mr. Dominic. The holders of any
shares issued under the Stock Purchase Agreements are entitled to vote and to
receive any dividends paid on the CompuDyne Common Stock. The CompuDyne Board
of Directors, however, do not intend to declare any dividends in the
foreseeable future.
(5) No stock options were granted in 1994.
(6) CompuDyne paid Mr. Silberdick $2,000 and $2,608 in 1994, and 1993,
respectively, as matching contributions in CompuDyne's 401(k) retirement
savings plan. CompuDyne matches dollar for dollar contributions up to 2% of
each employee's annual compensation. Prior to July 1992, CompuDyne
matched up to the first 4% contributed.
While Corcap has a Defined Benefit Pension Plan (frozen in June 1991), no
payment or benefit has ever been made to Mr. Silberdick under such plan.
RELATED PARTY TRANSACTIONS
Investment in CompuDyne Corporation and Related Matters. As of March 31, 1995,
Corcap owned 547,881 shares of CompuDyne Common Stock, or 34.2% of the
outstanding shares of CompuDyne Common Stock and a warrant to purchase up to
150,000 additional shares. In addition, a majority of the members of the
Corcap and CompuDyne Board of Directors, and senior management, are the same.
David W. Clark, Jr., Millard H. Pryor, and Norman Silberdick are each directors
of Corcap and CompuDyne. Mr. Silberdick has been President, Chief Executive
Officer and Treasurer of Corcap and CompuDyne since June 26, 1992. Mr. Pryor
was Chairman of Corcap and Vice-Chairman of CompuDyne and Mr. Clark was
Chairman of CompuDyne until their respective resignations on June 3, 1993.
They were each succeeded as Chairman by Mr. Silberdick. As a result of the
significant control that Corcap exercises over the operations of CompuDyne,
Corcap has, since the third quarter of 1988, included the accounts of CompuDyne
in its consolidated financial statements.
Messrs. Clark and Pryor are each entitled to receive $49,999 from Corcap for
compensation earned in 1991 and $100,000 from Corcap for compensation earned in
1990 and deferred by them for payment in subsequent years. No deferred payments
have yet been paid to them. Mr. Pryor was Chairman and Chief Executive Officer
of Corcap and Mr. Clark was President, Chief Operating Officer and Treasurer of
Corcap at such time.
Corcap currently has no full-time employees. However, there are two employees
of CompuDyne who are engaged in handling the various administrative
responsibilities for Corcap but are compensated by CompuDyne.CompuDyne
charged management advisory service fees to Corcap for the years
ended December 31, 1994 and December 31, 1993, in the amounts of $36 thousand
and $60 thousand respectively. Corcap has sublet to CompuDyne all of the
Corcap office space. Corcap office overhead costs are allocated to CompuDyne.
As of December 31, 1994, Corcap owed CompuDyne $5 thousand for management
fees. Prior to July 1991, CompuDyne owed Corcap a total of $3.7 million,
consisting of loans of $1.3 million bearing interest at 10% and $2.4 million of
other indebtedness. In July 1991, $2.4 million of intercompany indebtedness,
which related to $1.9 million of unpaid management fees and accrued interest at
12.5% on the management fees and other loans owed by CompuDyne to Corcap, was
cancelled. At the same time, CompuDyne repaid the $1.3 million loan.
CompuDyne financed the loan repayment to Corcap by causing its subsidiary,
Quanta Systems Corporation ("Quanta"), to borrow $1.3 million on a five-year
term basis accompanied by an 18-month, $300 thousand working capital line of
credit under a Loan and Security Agreement (the "Clipper Loan Agreement"), from
JM Clipper Polymers Corporation ("Clipper"). In December 1993, CompuDyne
negotiated an extension of the working capital line of credit to June 30, 1994.
The original $300 thousand line of credit initially expired on December
31, 1992, was extended to June 30, 1993 and then extended again to December 31,
1993 in the amount of $150 thousand. As of December 31, 1993, Quanta had not
used the line of credit.
During 1993, Quanta paid four quarterly installments of $25 thousand each due
March 31, June 30, September 30 and December 31, 1993 under the terms of the
Clipper Loan Agreement. Under such Agreement, Quanta was obligated to pay four
quarterly installments of $37.5 thousand during 1994, $50 thousand each quarter
in 1995, $75 thousand each quarter in 1996 and 1997 and a final payment of $250
thousand on January 1, 1998.
As a condition of its granting CompuDyne an extension to the Clipper Loan
Agreement, Clipper required that (a) CompuDyne grant Clipper a warrant (the
"Clipper Warrant") for 100,000 shares of CompuDyne Common Stock; (b) the
CompuDyne Preferred Stock owned by Corcap be converted into CompuDyne Common
Stock; (c) the right to all dividends on the Preferred Stock be waived; and (d)
that options for 500,000 shares of CompuDyne Common Stock be granted to key
members of CompuDyne management. The Board of Directors of CompuDyne granted
Clipper a warrant for 100,000 shares of CompuDyne Common Stock with an exercise
price of $.40 per share, a price above the fair market value of CompuDyne
Common Stock at November 12, 1992. Such warrant was immediately exercisable
and had an expiration date of November 18, 1996.
Corcap required, as a condition of its conversion of the Preferred Stock to
CompuDyne Common Stock and the relinquishment and waiver of accrued dividends
on the Preferred Stock, that CompuDyne issue a warrant (the "Corcap Warrant")
for 150,000 shares of CompuDyne Common Stock to Corcap. Such warrant was
immediately exercisable and has an expiration date of November 18, 1996.
In May 1994, CompuDyne negotiated a modification to the Clipper Loan Agreement
whereby CompuDyne agreed to pay $1 million in full satisfaction of its debt of
$1.163 million. On May 17, 1994, CompuDyne made a payment of $700 thousand,
established six quarterly payments of $50 thousand for the balance due and
terminated its working capital line of credit of $150 thousand with Clipper.
Clipper further agreed to surrender its warrant to purchase 100,000 shares of
CompuDyne Common Stock upon final payment of the outstanding debt.
On July 27, 1994, Clipper, Corcap Eastern, Inc. ("CE"), a wholly owned
subsidiary of Corcap, Inc., and Quanta, entered into an agreement. Under the
agreement, CE as lessor under a lease to Clipper for property located
in Dayville, Connecticut, terminated the lease in consideration for which
Clipper cancelled a promissory note from CE to Clipper in the amount of $1.774
million and released a mortgage securing such note. As further consideration
for the termination of the lease, Clipper forgave a further $250 thousand of
debt owing from Quanta to Clipper under the Clipper Loan Agreement. Quanta's
indebtedness to Clipper under the Clipper Loan Agreement had thereby been
reduced to $50 thousand, payable in five quarterly installments of $10
thousand commencing on September 30, 1994 and ending on September 30, 1995. In
July 1991, the Dayville real estate and building were leased to Clipper under a
"triple net" lease at an annual rental of $250 thousand, with an option to
renew for one additional ten-year term and an additional option to purchase the
facility for an amount equal to the principal amount of the mortgage plus $100
thousand.
As part of the foregoing transaction and as consideration for Corcap causing CE
to terminate the lease, Compudyne entered into an agreement with Corcap to
provide to Corcap management services and use of office facilities and to
absorb the cost of certain legal services for a period of four years without
charge to Corcap. CompuDyne has been charging Corcap $4 thousand per month for
such management services and facilities and approximately $2.5 thousand per
month for reimbursement of the cost of outside legal services.
On October 4, 1994, Clipper, CompuDyne and Corcap entered into a letter
agreement that provided for $20 thousand of obligations by Clipper for
environmental costs associated with the Dayville property be offset against
the indebtedness due Clipper from Quanta. CompuDyne, in turn, reduced the
amount of monies due it from Corcap for $20 thousand and Corcap then
established a liability for the environmental costs.
After the lease on the real estate at Dayville was cancelled with Clipper and
the then tenant gave notice that it would be reducing the amount of space that
it sublet from Clipper, the Company listed the Dayville property
with a commercial broker for sale and or lease. On October 5 1994, the Company
entered into a letter of intent with Fabrilock Inc., a newly formed corporation
for the purpose of manufacturing specialty non-woven textiles,
whereby Fabrilock would purchase the Dayville property in exchange for 20% of
their outstanding shares and the assumption by Fabrilock of the cost of the
environmental remediation of the property estimated to be between $58 thousand
and $248 thousand. Corcap recorded an environmental reserve for $248 thousand
in the third quarter of 1994. According to the letter of intent, five years
after the sale of the Dayville property, Fabrilock would have the right to
repurchase 50% of Corcap's holding of Fabrilock shares for $675 thousand
and, if Fabrilock repurchased the shares, Corcap would then have the right to
require Fabrilock to purchase the remaining 50% of the Fabrilock shares for
$675 thousand. The purchase price for the shares would be reduced
by the amount of environmental remediation costs incurred by Fabrilock in
excess of $100,000. The sale of the Dayville property is pending and is
contingent upon Fabrilock obtaining financing necessary for its operation.
Corcap believes the transaction will occur in July 1995, but no assurance can
be given that the Dayville property will be sold to Fabrilock or to any other
purchasers. Prior to entering into the letter of intent with Fabrilock,
Corcap attempted to lease and or sell the Dayville property but was unable to
obtain a price that it considered to be more attractive than the Fabrilock
transaction. In the event that the Dayville property is not sold to
Fabrilock, the Company will continue to attempt to lease or sell the property.
In November 1994, CompuDyne paid the Clipper Loan in full from a new borrowing
facility with the Asian American Bank and Trust Company. As a result, as of
December 31, 1994, CompuDyne had no debt and the warrant issued to Clipper
expired.
On November 12, 1992, the CompuDyne Board authorized the issuance of 300,000
shares of CompuDyne Common Stock to key employees of CompuDyne and Quanta at a
price of $.40 per share, the fair market value at such time. The Board
subsequently authorized the issuance of an additional 200,000 shares of
CompuDyne Common Stock to Mr. Silberdick at the same price and on the same
terms as those authorized on November 12, 1992. Under the Stock Purchase
Agreements dated August 1, 1993, which were entered into pursuant to such
authorizations, the employees may purchase an aggregate of 125,000 shares of
CompuDyne Common Stock on each of August 1, 1993, 1994, 1995 and 1996 at $.40
per share, provided certain conditions are met, including continued employment
by CompuDyne, by paying cash for such shares or by giving CompuDyne a
five-year, non-recourse promissory note, collateralized by the stock and
bearing interest at 2% per annum over the rate designated by the First National
Bank of Maryland as its prime commercial rate. The Stock Purchase
Agreements further provide that within 90 days of any Change of Control of
CompuDyne, as defined, the executives will be entitled to purchase all of the
shares of CompuDyne Common Stock not yet purchased under such Agreements by
delivering a written notice to CompuDyne. On August 1, 1994, an aggregate of
250,000 shares of CompuDyne Common Stock had been issued to five members of
senior management, (the "Management Shares") pursuant to the Stock Purchase
Agreements. Pursuant to such Agreements, the Management Shares were issued in
exchange for promissory notes. The remaining 212,5000 Management Shares
will be offered to such employees over the next two years in equal amounts at
$.40 per share so long as such persons are employed by CompuDyne. With Mr.
Dominic's resignation, the number of shares to be issued to management has been
reduced by 37,500 shares, representing the amount of shares allocable to Mr.
Dominic.
During the year ended December 31, 1994, Corcap sold 40,500 shares of its
holdings of CompuDyne Common Stock pursuant to Rule 144 under the Securities
Act of 1993, as amended (the "1933 Act").
As a result of the sale by Corcap of the 40,500 shares pursuant to Rule 144
under the 1933 Act and the issuance of 125,000 shares of CompuDyne Common Stock
to management on August 1, 1994,, Corcap's ownership of CompuDyne Common Stock
decreased from 40.7% of the issued and outstanding shares of CompuDyne
Common Stock as of December 31, 1993 to 35% as of December 31, 1994. After
assuming the exercise of the Corcap Warrant for 150,000 shares (which are
presently exercisable), Corcap's ownership would be increased
to 40.6%. Pursuant to Stock Purchase Agreements, dated August 1, 1993, and
August 1, 1994 between CompuDyne and five members of management, such persons
may purchase up to an additional 125,000 shares of CompuDyne Common Stock on
each of August 1, 1995 and 1996, assuming certain conditions are met. On
August 1, 1994, the stock ownership of all members of CompuDyne management (now
four persons) was 13.3% of the issued and outstanding shares of CompuDyne
Common Stock and, after assuming the exercise of the Corcap Warrant,
management's ownership would amount to 12.1%. If such persons purchase all of
such shares, Corcap's ownership, on a fully diluted basis, would be decreased
to 36.2% and management's ownership, on a fully diluted basis, would be
increased to 21.6%. If the promissory notes given pursuant to such Stock
Purchase Agreements are not paid in full when due, CompuDyne, as the holder of
such securities as collateral for such notes, will transfer such shares to
itself and such members of management will no longer own such shares.
In January 1995, Corcap sold an additional 13,500 shares of CompuDyne Common
Stock pursuant to Rule 144 under the 1933 Act, thereby decreasing its ownership
from 40.7% to 34.2%.
Prior to June 30, 1991, Corcap contributed to two defined benefit pension plans
(the "Plans") for certain Corcap employees. Plan benefits were frozen under
both defined benefit Plans effective July 1, 1991. During 1992,
Corcap was unable to make the last required quarterly payments to the Plans nor
any quarterly payments during 1993 and 1994. The required payment was not made
within 8 1/2 months after the close of the Plan year, or September 15, 1993,
which caused the Plans to have an unwaived funding deficiency with respect to
the unpaid quarterly amounts, subjecting Corcap to excise tax liability under
the Internal Revenue Code of 1986, as amended, of at least 10% of the funding
deficiency. On March 21, 1995 Corcap filed an application with the
Internal Revenue Service requesting a waiver of the minimum funding standard.
In such event, the Pension Benefit Guaranty Corporation could determine that
the Plans should be terminated, accelerating Corcap's obligations to fully fund
the Plans, which is currently estimated to be an aggregate of approximately
$1.2 million.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Sections 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10%
of the Company's Common Stock, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5. Officers, directors and 10%
shareholders are required by SEC regulations to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, during the
fiscal year ended December 31, 1994, the Company believes all Section 16(a)
filing requirements applicable to its officers, directors and 10% beneficial
owners were complied with.
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS (Proposal No. 2)
The Board of Directors has appointed Coopers & Lybrand to continue as
independent auditors for the Company for the year ending December 31, 1995,
subject to ratification of such appointment by the shareholders. Coopers
& Lybrand has acted as the independent auditors of the Company since June 1988.
Unless otherwise indicated, properly executed proxies will be voted in favor of
ratifying the appointment of Coopers & Lybrand, independent certified public
accountants, to audit the books and accounts of the Company for the year ending
December 31, 1995.
Representatives of Coopers & Lybrand will be present at the Annual Meeting.
They will be given an opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
The affirmative vote of a majority of the voting power by stockholders who are
present or represented by proxy at a meeting at which a quorum is present is
required to approve Proposal No. 2. Abstentions, and shares not
voted on a particular matter on proxies returned to the Company, have the
effect of a vote against approval of Proposal No. 2.
The Board of Directors recommends a vote FOR Proposal No. 2.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come before
the meeting. However, if any other matters are properly presented to the
meeting or any adjournment or adjournments thereof, it is the intention of the
persons named in the accompanying proxy to vote, or otherwise act, in
accordance with their judgment on such matters.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposals by stockholders which are to be presented at the Annual Meeting
to be held in May 1996 must be received by the Company by January 8, 1996 in
order to be included in the Proxy Statement and on the proxy card relating to
the 1996 Annual Meeting of Stockholders.
