<PAGE>
As filed with the Securities and Exchange Commission on July 23, 1998.
Registration No. 33-____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
OPTICAL SECURITY GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
________________________
Colorado 84-1094032
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
________________________
535 16th Street, Suite 920, Denver, Colorado 80202
(Address of Principal Executive Offices)
_________________________
OPTICAL SECURITY GROUP, INC. 1992 INCENTIVE STOCK OPTION PLAN
OPTICAL SECURITY GROUP, INC. NONQUALIFIED STOCK OPTION PLAN
OPTICAL SECURITY GROUP, INC. STOCK BONUS PLAN
(Full Title of the Plans)
_________________________
Catherine M. Gotwalt, Corporate Secretary
535 16th Street, Suite 920
Denver, Colorado 80202
(303) 534-4500
(Name, Address, and Telephone Number, Including Area Code, of Agent for Service)
_________________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed Amount
Amount to Maximum Maximum of
Title of Securities to be be Offering Price Aggregate offering Registration
Registered Registered Per Share (1) Price (1) Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.005 per share (the
"Common Stock") 2,000,000 Shares(2) $5.875 $11,750,000 $3,466.25
2,000,000 Shares(3) $5.875 $11,750,000 $3,466.25
60,000 Shares(4) $5.875 $ 352,500 $ 103.99
</TABLE>
(1)Computed on the basis of the price at which stock of the same class was sold
on July 21, 1998, pursuant to Rule 457(h) of the Securities Act of 1933, as
amended, solely for the purpose of calculating the amount of the registration
fee.
(2)Optical Security Group, Inc. 1992 Incentive Stock Option Plan.
(3)Optical Security Group, Inc. Nonqualified Stock Option Plan.
(4)Optical Security Group, Inc. Stock Bonus Plan.
________________________________________________________________________________
<PAGE>
OPTICAL SECURITY GROUP, INC.
----------------------------
PROSPECTUS
----------
Number of Shares: 2,000,000
Optical Security Group, Inc.
Common Stock
(par value $.005 per share)
Name of Plan: Optical Security Group, Inc.
1992 Incentive Stock Option Plan
July 23, 1998
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
INFORMATION CONCERNING OPTICAL SECURITY GROUP, INC.
---------------------------------------------------
Optical Security Group, Inc. (the "Company"), formerly known as TSL,
Incorporated, is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance with
the Exchange Act, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at its regional offices at 1801 California Street, Denver,
Colorado 80202. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission, Room 1024, 455 Street, N.W.,
Washington, D.C. 20549. In addition, certain of such materials are also
available through the Commission's Electronic Data Gathering and Retrieval
System ("EDGAR").
<PAGE>
Upon written or oral request of the secretary of the Company, the following
documents, which constitute the remainder of a prospectus of which this document
forms a part, will be made available, without charge, to any individual granted
an option to purchase common stock of the Company, par value $.005 per share
(the "Common Stock"), under the Optical Security Group, Inc. 1992 Incentive
Stock Option Plan (the "Plan"):
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1998.
(2) All other reports filed by the Company pursuant to Section 13 or 15(d)
of the Exchange Act since June 28, 1998.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment that indicates that all securities offered have been sold or that de-
registers all securities then remaining unsold, shall be deemed to be
incorporated in this prospectus by reference and to be a part of this prospectus
from the date of filing of such documents.
Each of the documents described above are incorporated into this prospectus
by reference. Requests for copies of these documents may be made to Catherine M.
Gotwalt, Secretary of the Company, at the Company's principal executive offices
at 535 16th Street, Suite 920, Denver, Colorado 80202; 303-534-4500.
INFORMATION CONCERNING THE PLAN
-------------------------------
The Plan was approved on April 20, 1993 by the Company's Board of Directors
which amended the Plan on June 25, 1993, and became effective on December 3,
1993, following the affirmative vote of a majority of all votes of the Company's
stockholders. The Plan was amended on August 16, 1996, by vote of the Company's
stockholders.
The following is a summary of the principal features and tax aspects of the
Plan:
1. Purpose of the Plan.
-------------------
The Plan is intended to help the Company attract and retain officers and
key employees and to encourage those individuals to make significant
contributions to the long-term performance and growth of the Company and its
subsidiaries. The Company believes that affording stock ownership will foster
this purpose by joining the interests of these officers and key employees with
the interests of the Company's stockholders.
2
<PAGE>
2. Administration of the Plan.
--------------------------
The Plan is administered by a committee (the "Committee") composed of two
or more members of the Company's Board of Directors who are appointed by the
Board, have no set term of service and serve at the discretion of the Board.
The Committee selects individuals who may participate in the Plan, the number
and term of options granted under the Plan, the purchase price of Common Stock
covered by each such option, and the provisions of the stock option agreement
governing each option. The Committee also is charged with interpreting the
terms and provisions of the Plan and the option agreements and is authorized to
take all other actions necessary or advisable to adminster the Plan. For further
information concerning the Committee, or the Plan, contact Catherine M. Gotwalt,
Secretary of the Company at the address or telephone number listed under
"Information Concerning Optical Security Group, Inc."
3. Eligibility.
-----------
The Committee selects recipients of stock options from officers and
employees of the Company and its subsidiaries.
4. Granting and Exercise Price.
---------------------------
Under the Plan, the Committee is authorized to issue stock options that
qualify as incentive stock options under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Committee will decide the number of
shares of Common Stock covered by each option, the purchase price and the terms
of option agreements.
Stock options granted under the Plan provide the recipient (the "option
holder") the right to purchase Common Stock at a price (the "Option Exercise
Price") fixed in a stock option agreement (the "Option Agreement") which each
recipient of an option must execute at the time of the grant. Under the Plan,
the Option Exercise Price must be at least 100% of the fair market value of the
Common Stock at the time the option is granted. However, if the option holder
owns stock in an amount exceeding 10% of all issued and outstanding voting stock
of the Company at the time the option is granted, the Option Exercise Price
must be at least 110% of the fair market value of the Common Stock on the grant
date. Fair market value of the Common Stock generally will be determined with
reference to the bid quotations on the Common Stock, as reported by the National
Quotation Bureau Incorporated. The Committee has decided that the Option
Exercise Price must be the greater of $6.00 or the market price on the issuance
date. This price formula will remain in effect at least until the Company's
Articles of Incorporation are amended to delete a provision which provides for
adjustments in the conversion price of the Company's Series B Common Stock. The
Series B Shares are not part of the Plan, and transactions in those shares do
not impact execution of the Plan.
5. Timing of Exercise and Forfeiture.
---------------------------------
3
<PAGE>
The Committee decides and incorporates in the Option Agreement the time
period during which an option may be exercised. For all options, the exercise
period starts one year from the date on which the option is granted. No exercise
period can be longer than ten (10) years from the date it is granted. However,
options granted to individuals owning more than 10% of the issued and
outstanding voting stock of the Company can have an exercise period no longer
than five (5) years. If an option holder ceases to be employed by the Company
for any reason other than death or disability and his or her option has "vested"
(i.e., one year from the grant date has passed), he or she may exercise the
----
option for up to three months after cessation of employment to the same extent
as permitted on the date of such cessation. An employee whose employment is
terminated due to disability, as defined in Section 22(e)(3) of the Code, may
exercise options vested at termination of employment for up to one year after
cessation of employment. Upon the death of an option holder while employed by
the Company, his or her vested options are exercisable for a period of up to
three months after death by the individuals to whom the decedent's rights under
the option pass by will or the laws of descent and distribution and then only to
the extent the decedent was entitled to exercise the options as of the date of
his death.
Neither the Plan nor ownership of options or Common Stock confers upon any
option holder any right to continue employment with the Company or limits the
Company's right or ability to terminate employment of that employee.
6. Procedure to Exercise Options.
-----------------------------
During an option exercise period, an option holder may exercise his or her
option by paying the Option Exercise Price for some or all of the Common Stock
subject to the option in cash or by certified bank check, shares of stock in the
Company having a fair market value equal to the Option Exercise Price of the
Common Stock, or a combination of the two. If any law or regulation requires
the Company to take any actions before issuing the Common Stock upon exercise of
the option, the Company will not deliver the Common Stock until it has complied
with that law or regulation.
7. Limitation on Value of Shares Covered by Options Granted to Any Employee.
------------------------------------------------------------------------
The aggregate fair market value (determined at the time the option is
granted) of the Common Stock underlying options granted to any option holder in
one calendar year cannot exceed either $100,000 or the amount permitted by
Section 422A of the Code. For purposes of these restrictions, Common Stock
underlying options granted under the Plan will be aggregated with Common Stock
underlying options granted under any other stock plan of the Company and its
subsidiaries.
8. Government Regulations.
----------------------
The Plan and the grant and exercise of options are subject to applicable
government rules and regulations. Notwithstanding any contrary provision of the
Plan, any Option Agreement, or this prospectus, the Company's Board of Directors
may change the Plan and any Option Agreement in any manner the Committee feels
is necessary to conform the Plan and/or any such Option Agreement to those rules
and regulations.
4
<PAGE>
9. Special Rules Applicable to Section 16 Insiders.
-----------------------------------------------
In addition to the restrictions on exercise of options contained in the
Plan and in any Option Agreement, the exercise of options owned by officers,
directors who are employees and other insiders (owners of more than 10% of the
Common Stock) are affected by the provisions of Section 16 of the Exchange Act.
Section 16 requires such a shareholder to pay to the Company profits received
from the purchase and sale of any Common Stock within a six-month period, and
may prohibit stock sales or option exercises by such persons within six months
of the purchase and sale by them of Common Stock outside of the Plan. Section
16(b) of the Exchange Act generally provides that, in the case of an officer,
director or insider who elects to pay the Option Exercise Price under an option
by delivery of previously acquired Common Stock, the election to deliver such
Common Stock may only be made (1) during a ten-day "window" period specified in
Rule 16b-3 or (2) at least six months prior to the date on which the option is
exercised.
10. Assumed Options.
---------------
In connection with any transaction to which Section 424(a) of the Code
applies, the Company may exchange new options for existing options or may assume
obligations under existing options. Section 424(a) of the Code applies to the
substitution of a new option for an old option or the assumption of an old
option because of a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation. In such a case, Section 424(a)
requires that (a) the new option or assumption of an old option does not give
the option holder additional benefits and (b) the excess of the aggregate fair
market value of the shares subject to the option immediately after the
substitution or assumption over the aggregate option price of those shares is
not more than the same excess value immediately before the transaction.
Notwithstanding any term of the Plan or any Option Agreement, the Committee will
attempt to substitute or assume options on the same terms as the old options and
at exercise prices which do not change the spread between the option price and
the fair market value of the Common Stock.
11. Restrictions on Issuance of Common Stock.
----------------------------------------
The exercise of each option will be conditioned on the option holder's
completion, to the satisfaction of the Company, of any withholding tax
requirements; compliance with state or federal law or rules of any securities
exchange; and the consent or approval of any regulatory body. The Company will
try to promptly notify each option holder of all such requirements when the
option holder informs the Company that he or she wishes to exercise an option.
The Company may require an exercising option holder to make certain
representations concerning ownership and intended disposition of the Common
Stock to be purchased upon exercise of the option. Option holders who are
directors, officers or principal shareholders of the Company may be required to
represent to the Company, inter alia, that they are acquiring the Common Stock
in good faith for investment and not for resale or distribution.
5
<PAGE>
Options granted pursuant to the Plan are subject to the condition that if,
within the earlier of (1) a two-year period beginning on the date of grant of an
option or (2) a one-year period beginning on the date after which any Common
Stock is issued to an option holder upon the exercise of an option, the option
holder makes a disposition of the Common Stock by sale, exchange, gift, transfer
of legal title or otherwise, he or she will promptly report that disposition to
the Company in writing and furnish to the Company any information the Company
may reasonably requests.
12. Transferability.
---------------
No option granted under the Plan may be transferred or assigned by an
option holder except by will or the laws of descent and distribution, and each
option may be exercised during the option holder's lifetime only by him or her.
No option may be pledged or hypothecated or subject to execution, attachment, or
similar process except with the express consent of the Committee.
13. Amendment and Discontinuance.
----------------------------
The Plan may be altered, suspended or discontinued by the Board of
Directors of the Company. However, without approval by the affirmative vote of
a majority of the Company's Common Stock voting in person or by proxy at any
meeting of the Company's stockholders, no action by the Board of Directors may,
(1) abolish the Committee, change the qualification of its members or withdraw
the administration of the Plan from its supervision; (2) make any material
change in the class of eligible employees; (3) increase the total number of
shares reserved for purposes of the Plan [currently 2,000,000 shares of Common
Stock] except upon a reclassification, consolidation or merger of Company; (4)
increase the total number of shares for which an option or options may be
granted to any one recipient; (5) extend the term of the Plan or the maximum
option periods for exercise of options; (6) decrease the minimum option price
except upon a merger, reclassification or reorganization; or (7) materially
increase the benefits accruing to employees participating under the Plan.
Without an option holder's consent, no amendment, suspension or termination
of the Plan can alter or impair the rights or any of the obligations under any
option previously granted under the Plan. Unless previously terminated by the
Board, the Plan shall terminate on April 20, 2003.
14. No Rights As Stockholder.
------------------------
No option holder shall have any right as a stockholder of the Company with
respect to Common Stock covered by an option until the date of exercise. No
adjustment for any dividend or otherwise shall be made if the record date
thereof is prior to the exercise date of the option.
15. Reclassification, Consolidation or Merger.
-----------------------------------------
To any extent that the number of issued shares of Common Stock is increased
or reduced by a change in par value, split up, reclassification, stock dividend
or similar transaction, the number of
6
<PAGE>
shares subject to an option and the Option Exercise Price will be adjusted
proportionately by the Committee, whose determination shall be conclusive. If
the Company is reorganized, consolidated or merged, an option holder shall be
entitled to receive options covering shares of the reorganized, consolidated or
merged company in the same proportion, at an equivalent price, and subject to
the same conditions. The new option or assumption of the old option will not
provide any additional benefits or remove any previously-held benefits.
16. Tax Aspects.
-----------
The following is a brief summary of the advice of the Company's counsel
regarding the United States income tax treatment, and the Company's independent
certified public accountants regarding the United Kingdom income tax treatment,
of stock options and Common Stock issued pursuant to the Plan. Such advice is
solely for the Company's use and benefit and is not intended as advice to
recipients or holders of options or Common Stock or Plan participants. This
brief summary does not purport to be complete. Reference should be made to the
applicable provisions of the Code and the laws of the United Kingdom, and option
holders are urged to consult their personal tax advisors prior to making
decisions relating to Plan participation that may affect their income tax
liability. The tax treatment afforded by the Code to transactions under the Plan
will not govern transactions to which United Kingdom tax laws apply. The Company
has not obtained and does not include information concerning the tax laws of any
other jurisdiction.
(a) General Tax Treatment.
---------------------
United States. When an individual is granted an option under the
-------------
Plan, he or she is not liable for any taxes. When the option is exercised for
cash, the option holder will not be liable for any taxes if (1) he or she has
been continuously employed by the Company or a subsidiary until at least three
months before exercise of the option, and (2) does not sell the Common Stock
purchased upon exercise of the option until a date at least two years after the
option was granted and one year after it was exercised. For purposes of
avoiding a taxable event, a disabled employee has up to one year after
termination of employment to exercise his or her vested options. Requirements
for continuous employment and a holding period for the Common Stock are waived
in the case of an employee's death.
When an option holder sells the Common Stock acquired by the exercise
of the option, any amount received in excess of the fair market value of the
Common Stock on the date of exercise of the stock option will be treated as long
or short-term capital gain, depending upon the holding period of the shares. If
the amount received is less than the fair market value of the shares on the date
of exercise, the loss will be treated as long or short-term loss, depending upon
the holding period of the shares.
For example, on May 1, 1998, an employee is granted an option to
purchase 1,000 shares of Common Stock at a purchase price of $6.00 per share,
its current market value. The employee receives no taxable income. The option
holder cannot exercise the option until May 1, 1999. On September 1, 1999, when
the Common Stock is selling at $10 per share, the option holder
7
<PAGE>
buys 500 shares of Common Stock by paying $3,000 to the Company. Although the
Common Stock is worth $5,000, the option holder does not receive taxable income
on the $2,000 difference between the purchase price and the value of the Common
Stock. On December 1, 2000, all 500 shares of the stock are sold for $15 per
share. At that time, the shareholder must pay taxes on long-term capital gains
of $4,500 (sales price of $7,500 less purchase price of $3,000).
United Kingdom. The income tax effect of an exercise of options will
--------------
depend on the tax status of the employee at the date the option is awarded.
Unlike treatment under the Code, the tax laws of the United Kingdom do not
differentiate between qualified and nonqualified incentive stock option plans.
A local common national employee who lives and works in the United Kingdom will
be classified as a resident and ordinary resident for United Kingdom tax
purposes. A foreign national on temporary assignment in the United Kingdom for
a period of up to three years is likely to be classified as a resident but not
ordinary resident and not domiciled in the United Kingdom.
So long as the exercise price is consistent with the requirements of
the Plan and the Committee's decision (100% of the fair market value at the date
of grant or 110% if granted to an owner of more than 10% of the Common Stock;
the higher of $6.00 or fair market value), no taxable transaction will occur at
the date of grant. The grant of all options must be reported to the inland
revenue by the Company within 30 days of the end of its tax year.
Option holders who are United Kingdom residents and ordinary residents
on the date of grant will be subject to income tax when they exercise their
options and purchase the shares based upon the difference between the market
value of the Common Stock at the date of exercise and the exercise price. The
amount subject to tax should be converted to pounds sterling at the exchange
rate prevailing at the date of exercise of the option. The Company must
withhold income tax under the Pay As You Earn ("PAYE") system in respect of the
gain realized upon the exercise of an option where the shares are traded on a
recognized investment exchange, such as NASDAQ and the option was granted after
November 26, 1996. The Company is required to account for withholding tax and
recover the tax from the option holder within 30 days of the date of exercise.
Option holders who are residents but not ordinary residents at grant
will not be subject to a tax on the exercise of their option. Rather, the
recipient will be regarded as being in receipt of a notional interest free loan
by reason of his employment. As such, during the time an option holder holds
the Common Stock purchased upon exercise, he will be subject to income tax on an
annual benefit equal to interest calculated at the government's official rate of
interest (currently 7.25%) on that notional loan. Upon sale of the shares, the
notional loan is deemed to have been written off and becomes chargeable as
income from employment.
Upon the sale of Common Stock purchased upon exercise of an option, an
option holder will be subject to capital gains tax or loss in an amount equal to
the difference between the net sale proceeds converted to pound sterling at the
rate prevailing on the date of sale and exercise price plus any amounts taxed
upon the exercise of the option. The cost basis may be increased by an
indexation allowance to allow for increases in the cost of living as reflected
in the United Kingdom Retail Price Index between the month in which the Common
Stock is purchased and the month in
8
<PAGE>
which it is sold. Employees who are not domiciled in the United Kingdom are
subject to capital gains tax on sale of the Common Stock only to the extent that
proceeds of the sale are received in or remitted to the United Kingdom.
(b) Stock For Stock Exercises. The exercise of an option by the exchange
-------------------------
of Common Stock already owned by the option holder will not result in any
taxable gain or loss on the unrealized appreciation or depreciation of the
Common Stock exchanged.
When an option is exercised with previously acquired Common Stock of
the Company, the option holder's basis in the Common Stock purchased upon
exercise of the option is the same as his basis in the stock used to purchase
the Common Stock under the Plan, increased by any amount included in his growth
income as compensation.
(c) Other Laws. The stock option benefits provided under the Plan are not
----------
subject to the Employee Retirement Income Security Act of 1974, nor is the
taxation of such benefits governed by Section 401(a) of the Code.
CONFLICTING PROVISIONS
----------------------
The foregoing is only a summary of some of the material provisions and
operational features of the Plan. To the extent that this summary
Prospectus conflicts with any provision in the Plan or in any stock
option agreement issued under the Plan, the conflicting provisions of
the Plan and/or stock option agreement shall control.
9
<PAGE>
OPTICAL SECURITY GROUP, INC.
----------------------------
PROSPECTUS
----------
Number of Shares: 2,000,000
Optical Security Group, Inc.
Common Stock
(par value $.005 per share)
Name of Plan: Optical Security Group, Inc.
Nonqualified Stock Option Plan
July 23, 1998
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
INFORMATION CONCERNING OPTICAL SECURITY GROUP, INC.
---------------------------------------------------
Optical Security Group, Inc. (the "Company"), formerly known as TSL,
Incorporated, is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance with
the Exchange Act, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at its regional offices at 1801 California Street, Denver,
Colorado 80202. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission, Room 1024, 455 Street,
N.W., Washington, D.C. 20549. In addition, certain of such materials are also
available through the Commission's Electronic Data Gathering and Retrieval
System ("EDGAR").
<PAGE>
Upon written or oral request of the secretary of the Company, the following
documents, which constitute the remainder of the prospectus of which this
document forms a part, will be made available, without charge, to any individual
granted an option to purchase common stock of the Company, par value $.005 per
share (the "Common Stock"), under the Optical Security Group, Inc. Nonqualified
Stock Option Plan (the "Plan"):
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1998.
(2) All other reports filed by the Company pursuant to Section 13 or 15(d)
of the Exchange Act since June 28, 1998.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment that indicates that all securities offered have been sold or that de-
registers all securities then remaining unsold, shall be deemed to be
incorporated in this prospectus by reference and to be a part of this prospectus
from the date of filing of such documents.
Each of the documents described above are incorporated into this prospectus
by reference. Requests for copies of these documents may be made to Catherine
M. Gotwalt, Secretary of the Company, at the Company's principal executive
offices at 535 16th Street, Suite 920, Denver, Colorado 80202; 303-534-4500.
INFORMATION CONCERNING THE PLAN
-------------------------------
The Plan was approved on April 20, 1993 by the Company's Board of Directors
which amended the Plan on June 25, 1993, June 18, 1996 and June 16, 1997. On
December 3, 1993, the Company's stockholders, by a majority of all votes cast,
approved the Plan, as amended on June 25, 1993, and, by a similar vote, approved
the June 18, 1996 amendment to the Plan on August 16, 1996. The absence of
stockholder approval of the June 16, 1997, amendment (which altered rights of
transferability of options) does not affect the validity or enforceability of
that amendment. The Plan, as amended on June 16, 1997, is described in this
prospectus.
The following is a summary of the principal features and tax aspects of the
Plan:
1. Purpose of the Plan.
-------------------
The Plan is intended to enhance the Company's ability to attract, retain
and reward directors, officers, employees, consultants and advisors and to
encourage those individuals to make significant contributions to the long-term
performance and growth of the Company and its subsidiaries.
2
<PAGE>
2. Administration of the Plan.
--------------------------
The Plan is administered by a committee (the "Committee") composed of two
or more members of the Company's Board of Directors who are appointed by the
Board, have no set term of service, and serve at the discretion of the Board.
The Committee selects individuals who may participate in the Plan, the number
and term of options granted under the Plan, the purchase price of Common Stock
covered by each such option, and the provisions of the stock option agreement
governing each option. The Committee also is charged with interpreting the
terms and provisions of the Plan and the stock option agreements and is
authorized to take all other actions necessary or advisable to administer the
Plan. For further information concerning the Committee, or the Plan, contact
Catherine M. Gotwalt, Secretary of the Company at the address or telephone
number listed under "Information Concerning Optical Security Group, Inc."
3. Eligibility.
-----------
The Committee selects recipients of stock options (the "option holders")
from directors, officers, employees, advisors and consultants of the Company and
of its subsidiaries. Advisors and consultants cannot receive options in
connection with the offer or sale of securities of the Company or its
subsidiaries in a capital-raising transaction.
4. Granting and Exercise Price.
---------------------------
Under the Plan, the Committee is authorized to issue stock options that do
not qualify as incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee will decide the
number of shares of Common Stock covered by each option, the purchase price and
the terms of option agreements.
Stock options granted under the Plan provide the option holder the right to
purchase Common Stock at a price (the "Option Exercise Price") fixed in the
stock option agreement (the "Option Agreement") which each recipient of an
option must execute at the time of the grant. The Committee will set the Option
Exercise Price at any price not less than par value of the Common Stock at the
time an option is granted. Under the Plan, The Option Exercise Price is not
required to be equal to or to bear any relationship to the actual value of the
Common Stock on the date of exercise. However, the Committee has decided that
the Option Exercise Price must be the greater of $6.00 or the market price on
the issuance date. This price formula will remain in effect at least until the
Company's Articles of Incorporation are amended to delete a provision which
provides for adjustment in the conversion price of the Company's Series B Common
Stock. The Series B Shares are not part of the Plan, and transactions in those
shares do not impact execution of the Plan.
For example, if the option holder is granted an option on January 1, 1998,
with an Option Exercise Price of $20 per share, and at that time or
subsequently, the fair market value of the Common Stock is $35 per share, the
option holder can purchase all or a portion of the number of
3
<PAGE>
shares of Common Stock subject to his or her stock option for $20 per share,
even though the fair market value of the shares purchased will be $15 per share
higher than the purchase price.
5. Timing of Exercise and Forfeiture.
---------------------------------
The period for exercising an option begins once the option is granted and
ends on the date set forth in the Option Agreement. The maximum exercise period
is ten (10) years from the date it is granted. The Committee will establish the
exercise price, terms and exercise period, all of which need not be consistent
among option holders and Option Agreements, and can limit the number of shares
which an option holder may purchase during any period of time. The Committee may
provide for termination of options upon expiration of the employment of an
option holder who is an employee or termination of services by a non-employee or
may permit retention after such termination. Upon the death of an option holder
while employed or retained by the Company, his or her options shall be
exercisable for a period of up to three months after death by the individuals to
whom the decedent's rights under the option pass by will or applicable laws of
descent and distribution, but only the same way in which the decedent could have
exercised the option of the date of his death.
Neither the Plan nor ownership of the options or common stock confers upon
any option holder any right to remain employed by or in any advisory or
consulting position with the Company and does not limit the Company's right or
ability to terminate the employment of that employee, or the advisory or
consulting arrangement with a non-employee.
6. Procedure to Exercise Options.
-----------------------------
During an option exercise period, an option holder may exercise his or her
option by paying for some or all of the Common Stock subject to the option in
cash or by certified bank check, shares of stock in the Company having a fair
market value equal to the purchase price of those shares, or a combination of
the two. If any law or regulation requires the Company to take any actions
before issuing the Common Stock upon exercise of the option, the Company will
not deliver the Common Stock until it has complied with that law or regulation.
7. Limitation of Shares Covered by Options Granted to Any Employee.
---------------------------------------------------------------
The Plan prescribes no limit on the number of shares covered by options
granted to any one individual.
8. Government Regulations.
----------------------
The Plan and the grant and exercise of options are subject to applicable
government rules and regulations, and, notwithstanding any contrary provision of
the Plan, any Option Agreement, or this prospectus, the Company's Board of
Directors may make such changes in the Plan and any Option Agreement that may be
required, in the Board's discretion, to conform the Plan and/or any Option
Agreement to those rules and regulations.
4
<PAGE>
9. Special Rules Applicable to Section 16 Insiders.
-----------------------------------------------
In addition to the restrictions on exercise of options contained in the
Plan and in any Option Agreement, the exercise of options owned by officers,
directors and other insiders (owners of more than 10% of the Common Stock) are
affected by the provisions of Section 16 of the Exchange Act. Section 16
requires such shareholders to pay to the Company profits received from the
purchase and sale of any Common Stock within a six-month period, and may
prohibit stock sales or exercises of options by such persons within six months
of the purchase and sale by them of Common Stock outside of the Plan. Section
16(b) of the Exchange Act also generally provides that, in the case of an
officer, director or insider who elects to pay the Option Exercise Price under
an option by delivery of previously acquired Common Stock, the election to
deliver such Common Stock may only be made (1) during a ten-day "window" period
specified in Rule 16b-3 or (2) at least six months prior to the date on which
the option is exercised.
10. Restrictions on Issuance of Common Stock.
----------------------------------------
The exercise of each option will be conditioned on the option holder's
completion, to the satisfaction of the Company, of any withholding tax
requirements (see "Withholding Tax Requirements"); compliance with state or
federal law or rules of any securities exchange; and the consent or approval of
any regulatory body. The Company will try to promptly notify each option holder
of all such requirements when the option holder informs the Company that he or
she wishes to exercise an option.
The Company may require an exercising option holder to make certain
representations concerning ownership and intended disposition of the Common
Stock to be purchased upon exercise of the option. Option holders may be
required to represent to the Company, among other things, that they are
acquiring the Common Stock in good faith for investment and not for resale or
distribution.
Options granted pursuant to the Plan are subject to the condition that if,
within the earlier of (1) a two-year period beginning on the date of grant of an
option or (2) a one-year period beginning on the date after which any Common
Stock is issued to an option holder upon the exercise of an option, the option
holder makes a disposition of the Common Stock by sale, exchange, gift, transfer
of legal title or otherwise, he or she will promptly report that disposition to
the Company in writing and furnish to the Company any information the Company
requests.
11. Withholding Tax Requirements.
----------------------------
If the exercise of an option gives rise to any withholding tax
requirements, as a condition of exercising the option, an option holder must
satisfy those requirements, and provide information and make representations as
required by the Company to determine if withholding is required. If the Company
determines that withholding tax is required on exercise of an option, the
Company will
5
<PAGE>
notify the option holder of the withholding amount, and the option holder must
make payment by check or other means acceptable to the Company. The Company may
allow the option holder to pay the withholding amount by directing the Company
to withhold a number of shares of Common Stock otherwise issuable upon exercise
of the option in an aggregate value equal to the appropriate withholding amount.
However, any employee who is an officer, director or otherwise subject to
Section 16(b) of the Exchange Act may be restricted from using shares of Common
Stock to pay withholding. (See "Special Rules Applicable to Section 16
Insiders")
Any fractional share interest resulting from the delivery or withholding of
shares of Common Stock to meet withholding tax requirements will be settled in
cash. If the Company determines that no withholding tax is required upon the
exercise of any option, but subsequently determined that the exercise resulted
in taxable income requiring withholding, the employee shall promptly, upon being
notified of the withholding requirement, pay to the Company the amount required
to be withheld; and at its election, the Company may condition any transfer of
any Common Stock issued pursuant to the exercise of an option upon receipt of
such payment.
12. Transferability.
---------------
During an option holder's lifetime, the option may only be exercised by the
option holder. Options may be transferred or assigned by an option holder by
will or the laws of descent and distribution, and, if permitted by the
applicable Option Agreement, to an option holder's immediate family members or a
trust for his immediate family. "Immediate family" includes spouses, children,
and grandchildren. Permitted transferees of an option are subject to the terms
of the Plan and the Option Agreement. No option may be pledged or hypothecated
or subject to execution, attachment, or similar process except with the express
consent of the Committee.
13. Amendment and Discontinuance.
----------------------------
The Plan may be altered, suspended or discontinued by the Board of
Directors. However, without approval by the affirmative vote of the holders of a
majority of the Company's Common Stock voting in person or by proxy at any
meeting of the Company's stockholders, no action by the Board of Directors may,
(1) abolish the Committee, change the qualification of its members or withdraw
the administration of the Plan from its supervision; (2) make any material
change in the class of eligible recipients; (3) increase the total number of
shares reserved for purposes of the Plan [currently 2,000,000 shares of Common
Stock] except upon a reclassification, consolidation or merger of Company; (4)
increase the total number of shares for which an option or options may be
granted to any one recipient; (5) extend the term of the Plan or the maximum
option periods for exercise of options; (6) decrease the minimum option price
except upon a merger, reclassification or reorganization; or (7) materially
increase the benefits accruing to persons participating under the Plan.
Without an option holder's consent, no amendment, suspension or termination
of the Plan can alter or impair the rights or any of the obligations under any
option previously granted under the Plan. Unless previously terminated or
extended by the Board, the Plan will terminate on April 20, 2003.
6
<PAGE>
14. No Rights As Stockholder.
------------------------
No option holder has any right as a stockholder of the Company with respect
to Common Stock covered by an option until the date of exercise. No adjustment
for any dividend or otherwise will be made if the record date thereof is prior
to the exercise date of the option.
15. Reclassification, Consolidation or Merger.
-----------------------------------------
To any extent that the number of issued shares of the Company's Common
Stock is increased or reduced by a change in par value, split up,
reclassification, stock dividend or similar transaction, the number of shares
subject to an option and the Option Exercise Price will be proportionately
adjusted by the Committee, whose determination is conclusive. If the Company is
reorganized, consolidated or merged, an option holder will be entitled to
receive options covering shares of the reorganized, consolidated or merged
company in the same proportion, at an equivalent price, and subject to the same
conditions. The new option or assumption of the old option will not provide any
additional benefits or remove any previously-held benefits.
16. Tax Aspects.
-----------
The following is a brief summary of the advice of the Company's counsel
regarding the United States tax treatment, and of the Company's independent
certified public accountant regarding the United Kingdom income tax treatment,
of stock options and Common Stock issued pursuant to the Plan. Such advice is
solely for the Company's use and benefit and is not intended as advice to
recipients or holders of options or Common Stock or Plan participants. This
brief summary does not purport to be complete. Reference should be made to the
applicable provisions of the Code and the laws of the United Kingdom, and option
holders are urged to consult their personal tax advisors prior to making
decisions relating to Plan participation that may affect their income tax
liability. The tax treatment afforded by the Code to transactions under the Plan
will not govern transactions to which United Kingdom tax laws apply. The Company
has not obtained and does not include information concerning the tax laws of any
other jurisdiction.
(a) General Tax Treatment.
---------------------
United States. Pursuant to Section 83 of the Code, the granting of an
-------------
option will require taxes to be paid if the option has a "readily ascertainable
fair market value" at the time of its grant. In that case, the fair market
value will be treated as taxable compensation income.
For purposes of determining whether an option has "readily
ascertainable fair market value," regulations adopted under the Code divide non-
statutory stock options into two categories: those actively traded on an
established market and those not so traded. If an option granted to an employee
is actively traded on an established market, the option's value is deemed to be
"readily
7
<PAGE>
ascertainable." Options that are not actively traded on an established market do
not have a readily ascertainable fair market value unless that value can
otherwise be measured with reasonable accuracy. The regulations create an
irrebuttable presumption that an untraded option does not have a readily
ascertainable fair market value unless four conditions are met:
(1) the option is transferrable by the optionee;
(2) the option is exercisable immediately in full by the optionee;
(3) neither the option nor the stock which can be purchased on
exercise of the option is subject to any restrictions that have a
significant effect on the option's value; and
(4) the fair market value of the "option privilege" (the difference
between the exercise price and the value of the stock which may
be purchased) is readily ascertainable.
Options under the Plan are not actively traded on any exchange and may
be transferred only under limited circumstances (see "Transferability").
If the option does not have a readily ascertainable fair market value
at the date of grant, there is no tax due as a result of the grant of the
option, and taxes will not be due until the option is exercised. In such a case,
at the time of exercise, the option holder will have income in an amount equal
to the difference between the exercise price and the fair market value of the
stock at the date of exercise, and the Company will be entitled to a deduction
from its income in the same amount.
For example, on May 1, 1998, an employee is granted an option to
purchase 500 shares of Common Stock at $10.00 per share. At that time, the
option does not have a readily ascertainable fair market value. No taxes are due
as a result of the grant of the option. On February 1, 1999, the employee
exercises the option and purchases 500 shares of Common Stock at $10.00 per
share. The Common Stock is then worth $15.00 per share. Upon exercise, the
employee has $2,500 in income ($15.00-$10.00=$5.00 x 500 shares).
However, taxation upon exercise of the option may be delayed if the
Common Stock received by the option holder is, at that time, subject to both a
substantial risk of forfeiture and transferability restrictions. A substantial
risk of forfeiture is a circumstance in which the option holder's ability to
retain the Common Stock may be terminated by such events as his termination of
employment. The Common Stock may be nontransferable because of provisions of an
agreement between the option holder and the Company or because of Section 16(b)
of the Exchange Act. There currently are no agreements restricting the sale of
the Common Stock.
Under Section 83(b) of the Code, if an employee is not subject to tax
upon receipt of an option or Common Stock because of a risk of forfeiture and
transferability restrictions, he or she
8
<PAGE>
may elect to be taxed on the receipt of the option or Common Stock,
notwithstanding any risk of forfeiture or transferability restriction. If such
an election is made, taxation upon the receipt of option will be treated as
ordinary income equal to the fair market value of the option or Common Stock
upon issue. By making such an election, the employee will be taxed at ordinary
income rates at receipt of the option or stock and taxed at capital gains rates
on any subsequent appreciation. By not making the election, the employee will be
taxed for the tax year in which the Common Stock was sold on the fair market
value of the option or the Common Stock in the year the restrictions on
transferability and risk of forfeiture lapse.
An option holder=s tax basis in his or her shares of Common Stock
acquired on exercise of an Option will be equal to the exercise price paid by
the option holder plus the amount of income recognized by the option holder by
reason of his or her exercise of an Option. Upon a subsequent disposition of the
shares of Common Stock received on exercise of an Option, the difference between
the amount realized on such disposition and the option holder=s tax basis for
such shares generally will be treated as a capital gain or loss, which will be
short-term or long-term depending upon whether the shares are held for the
applicable long-term holding period following exercise of the Option (currently
more than one year).
All of the provisions concerning the timing of taxation of options
under the Plan and exercise of those options are subject to numerous, complex
rules, regulations and interpretations. Recipients of options under the Plan
should consult their personal tax advisors concerning the tax impact of any
transaction in options or underlying Common Stock.
United Kingdom. The income tax effect of an exercise of options will
--------------
depend on the tax status of the employee at the date the option is awarded. A
local common national employee who lives and works in the United Kingdom will be
classified as a resident and ordinary resident for United Kingdom tax purposes.
A foreign national on temporary assignment in the United Kingdom for a period of
up to three years is likely to be classified as a resident but not ordinary
resident of the United Kingdom and not domiciled in the United Kingdom.
If the exercise price is equal to 100% of the fair market value at the
date of grant, no taxable transaction will occur at the date of grant. However,
if the exercise price is less than fair market value, income tax liability will
be assessed on the difference between fair market value and the exercise price.
The grant of all options must be reported to the United Kingdom Inland Revenue
by the Company within 30 days of the end of its tax year.
Option holders who are United Kingdom residents and ordinary residents
on the date of grant will be subject to income tax when they exercise their
options and purchase the shares based upon the difference between the market
value of the Common Stock at the date of exercise and the exercise price. The
amount subject to tax should be converted to pounds sterling at the exchange
rate prevailing at the date of exercise of the option. The Company must withhold
income tax under the Pay As You Earn ("PAYE") system in respect of the gain
realized upon the exercise of an option by an employee where the shares are
traded on a recognized investment exchange, such as NASDAQ, and the option was
granted after November 26, 1996. The Company is required to account for
9
<PAGE>
withholding tax and recover the tax from the option holder-employee within 30
days of the date of exercise.
Option holders who are residents but not ordinary residents at the
grant of an option will not be subject to a tax on the exercise of their option.
Rather, the recipient will be regarded as being in receipt of a notional
interest free loan by reason of his employment. As such, during the time an
option holder holds the Common Stock purchased upon exercise, he will be subject
to income tax on an annual benefit equal to interest calculated at the
government's official rate of interest (currently 7.25%) on that notional loan.
Upon sale of the shares, the notional loan is deemed to have been written off
and becomes chargeable as income from employment.
Upon the sale of Common Stock purchased upon exercise of an option, an
option holder will be subject to capital gains tax or loss in an amount equal to
the difference between the net sale proceeds converted to pound sterling at the
rate prevailing on the date of sale and exercise price plus any amounts taxed
upon the exercise of the option. The cost basis may be increased by an
indexation allowance to allow for increases in the cost of living as reflected
in the United Kingdom Retail Price Index between the month in which the Common
Stock is purchased and the month in which it is sold. Employees who are not
domiciled in the United Kingdom are subject to capital gains tax on sale of the
Common Stock only to the extent that proceeds of the sale are received in or
remitted to the United Kingdom.
(b) Stock For Stock Exercises. The exercise of an option by the exchange
-------------------------
of Common Stock already owned by the option holder will not result in any
taxable gain or loss on the unrealized appreciation or depreciation of the
Common Stock exchanged.
When an option is exercised with previously acquired Common Stock of
the Company, the option holder's basis in the Common Stock purchased upon
exercise of the option is the same as his basis in the stock used to purchase
the Common Stock under the Plan, increased by any amount included in his growth
income as compensation.
(c) Other Laws. The stock option benefits provided under the Plan are not
----------
subject to the Employee Retirement Income Security Act of 1974, nor is the
taxation of such benefits governed by Section 401(a) of the Code.
CONFLICTING PROVISIONS
----------------------
The foregoing is only a summary of some of the material provisions and
operational features of the Plan. To the extent that this summary
Prospectus conflicts with any provision in the Plan or in any stock
option agreement issued under the Plan, the conflicting provisions of
the Plan and/or stock option agreement shall control.
10
<PAGE>
OPTICAL SECURITY GROUP, INC.
----------------------------
PROSPECTUS
----------
Number of Shares: 60,000
Optical Security Group, Inc.
Common Stock
(par value $.005 per share)
Name of Plan: Optical Security Group, Inc. Stock Bonus Plan
July 23, 1998
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
INFORMATION CONCERNING OPTICAL SECURITY GROUP, INC.
---------------------------------------------------
Optical Security Group, Inc. (the "Company"), formerly known as TSL,
Incorporated, is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance with
the Exchange Act, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at its regional offices at 1801 California Street, Denver,
Colorado 80202. Copies of such material can be obtained at prescribed rates
from the Public Reference Section of the Commission, Room 1024, 455 Street,
N.W., Washington, D.C. 20549. In addition, certain of such materials are also
available through the Commission's Electronic Data Gathering and Retrieval
System ("EDGAR").
<PAGE>
Upon written or oral request of the secretary of the Company, the following
documents, which constitute the remainder of the prospectus of which this
document forms a part, will be made available, without charge, to any individual
granted common stock of the Company, par value $.005 per share (the "Common
Stock"), under the Optical Security Group, Inc. Stock Bonus Plan (the "Plan"):
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1998.
(2) All other reports filed by the Company pursuant to Section 13 or 15(d)
of the Exchange Act since June 28, 1998.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment that indicates that all securities offered have been sold or that de-
registers all securities then remaining unsold, shall be deemed to be
incorporated in this prospectus by reference and to be a part of this prospectus
from the date of filing of such documents.
Each of the documents described above are incorporated into this prospectus
by reference. Requests for copies of these documents may be made to Catherine
M. Gotwalt, Secretary of the Company, at the Company's principal executive
offices at 535 16th Street, Suite 920, Denver, Colorado 80202; 303-534-4500.
INFORMATION CONCERNING THE PLAN
-------------------------------
The Plan was approved on April 20, 1993, by the Company's Board of
Directors and approved by a vote of the Company's shareholders on December 3,
1993.
The following is a summary of the principal features and tax aspects of the
Plan:
1. Purpose of the Plan.
-------------------
The Plan is intended to enhance the Company's ability to attract, retain
and reward directors, officers, employees, consultants and advisors and to
encourage those individuals to make significant contributions to the long-term
performance and growth of the Company and its subsidiaries.
2. Administration of the Plan.
--------------------------
The Plan is administered by a committee (the "Committee") composed of two
or more members of the Company's Board of Directors who are appointed by the
Board, have no set term of service and serve at the discretion of the Board.
The Committee selects Plan participants from the Company's officers, directors,
key employees and consultants, and determines persons to whom Common Stock
should be issued, the number of shares of Common Stock (the "Bonus Shares")
2
<PAGE>
granted to such individuals and the terms of each grant, including how long the
recipient must continue to work for the Company to retain the Bonus Shares.
Consultants and advisors who receive Bonus Shares under the Plan must have
performed bona fide services for the Company and may not receive stock for
services in connection with the sale of Company securities in a capital-raising
transaction. The Committee also is charged with interpreting the terms and
provisions of the Plan and is authorized to take all other actions necessary to
operate the Plan. For further information concerning the Committee, or the
Plan, contact Catherine M. Gotwalt, Secretary of the Company, at the address or
telephone number listed under "Information Concerning Optical Security Group,
Inc."
3. Eligibility.
-----------
The Committee selects individuals who are granted Bonus Shares under the
Plan from officers, directors, key employees and consultants of the Company and
its subsidiaries.
4. Granting and Vesting of Bonus Shares.
------------------------------------
The Committee, in its sole discretion, may grant Bonus Shares to an
individual eligible to participate in the Plan in an amount and on terms
determined by the Committee. In granting Bonus Shares, the Committee will
establish a vesting schedule which will dictate the period during which the
recipient must remain an employee of or continue to provide services to the
Company in order to retain all of the Bonus Shares. If the recipient of Bonus
Shares ceases employment or stops providing services to the Company before the
vesting schedule has expired, any Shares not fully vested will be forfeited by
the recipient and returned to the reserve of Common Stock set aside for the Plan
(the "Bonus Share Reserve"). In its sole discretion, the Committee also may
impose restrictions on the future transferability of the Bonus Shares as part of
the grant of those Shares. The Committee's grant of Bonus Shares will be
accompanied by a written notice which will establish the vesting schedule and
other terms of the grant.
5. Recipient's Representations.
---------------------------
The Committee generally will require that each recipient who receives Bonus
Shares represents in writing to the Company that he or she is acquiring the
Shares solely for the purpose of investment and with no present intention to
transfer, sell or otherwise dispose of any or all of the Shares except (1) by
will or descent or (2) pursuant to the opinion of counsel satisfactory to
Committee that the transfer is in compliance with applicable securities laws.
The Committee generally will affix to certificates representing the Bonus Shares
a legend indicating that the Shares have not been registered with the Commission
and are subject to stop transfer restrictions and forfeiture under the Plan.
6. Disposition of Bonus Shares.
---------------------------
Bonus Shares may be disposed of by a recipient only upon being fully vested
and then only (1) pursuant to an effective registration statement covering such
resale; (2) pursuant to an applicable
3
<PAGE>
exemption from registration verified in written opinion of counsel acceptable to
the Committee; or (3) in an transaction which meets all the requirements of Rule
144 promulgated by the Commission. If the Bonus Shares have been registered with
the Commission, no such restrictions on resale will apply, except in the case of
recipients of Bonus Shares who are directors, officers or owners of more than
10% of the Common Stock of the Company, who still must comply with one of the
three methods of disposition of restricted Shares.
7. Government Regulations.
----------------------
The Plan and the grant of Bonus Shares are subject to applicable government
rules and regulations. Notwithstanding any contrary provision of the Plan, any
notification, vesting schedule or this prospectus, the Company's Board of
Directors may make such changes in the Plan and any vesting schedule or Bonus
Share Agreement that may be required, in the Board's discretion, to conform the
Plan and/or any such related documents to those rules and regulations.
8. Special Rules Applicable to Section 16 Insiders.
-----------------------------------------------
In addition to the restrictions on vesting and transfer of Bonus Shares
contained in the Plan and in any related agreement, transactions in Bonus Shares
owned by officers, directors and other insiders (owners of more than 10% of the
Common Stock) are affected by the provisions of Section 16 of the Exchange Act.
Those provisions provide for the payment to the Company of profits received from
the purchase and sale of any Common Stock by an officer, director or insider
within a six-month period, and may otherwise restrict stock sales by such
persons within six months of the sale by them of the Bonus Shares, as well as
the purchase or sale of Common Stock outside of the Plan.
9. Withholding Tax Requirements.
----------------------------
If the grant of Bonus Shares gives rise to any withholding tax
requirements, as a condition of receiving the shares, a recipient must satisfy
those requirements, and provide information and make representations as required
by the Company to determine if withholding is required. If the Company
determines that withholding tax is required with respect to the grant of Bonus
Shares, the Company will notify the recipient of the withholding amount, and the
recipient must make payment by check or other means acceptable to the Company.
The Company may allow the recipient to pay the withholding amount by directing
the Company to withhold a number of Bonus Shares otherwise issuable in an
aggregate value equal to the appropriate withholding amount. However, any
employee who is an officer, director or otherwise subject to Section 16(b) of
the Exchange Act may be restricted from using Bonus Shares to pay withholding.
(See "Special Rules Applicable to Section 16 Insiders")
Any fractional share interest resulting from the delivery or withholding of
Bonus Shares to meet withholding tax requirements will be settled in cash. If
the Company determines that no withholding tax is required upon the grant of
Bonus Shares, but subsequently determined that the grant resulted in taxable
income requiring withholding, the employee shall promptly, upon being
4
<PAGE>
notified of the withholding requirement, pay to the Company the amount required
to be withheld; and at its election, the Company may condition any transfer of
any Bonus Shares issued pursuant to the grant of the Bonus Shares upon receipt
of such payment.
10. Restrictions on Issuance of Bonus Shares.
----------------------------------------
The grant of Bonus Shares will be conditioned on the recipient's
completion, to the satisfaction of the Company, of any withholding tax or other
withholding requirements; compliance with state or federal law or rules of any
securities exchange; and the consent or approval of any regulatory body. The
Company will endeavor to promptly notify each recipient of all such requirements
upon grant of the Bonus Shares.
11. Rights as a Stockholder.
-----------------------
Within 30 days after compliance by the recipient of Bonus Shares of all
requirements mandated by the Committee or by law, the Shares shall be issued and
a certificate or certificates for such Shares also shall be issued in the
recipient's name. Upon issuance of the Bonus Shares, the recipient will be a
stockholder with respect to all of the Shares represented by the certificate or
certificates, and will have all the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends and
other distributions paid with respect to such Shares.
12. Limitations.
-----------
Neither the establishment of the Plan nor any action taken by the Company
or the Committee under the Plan, nor any provision of the Plan or issuance of
Bonus Shares shall be construed as giving to any person the right to be retained
as an employee or consultant of the Company. Any right of action relating to the
Plan or the Bonus Shares, regardless of the location of the pertinent parties or
cause of action, will be barred and unenforceable after the expiration of one
year from whichever is the later of (1) the date of the act or omission
underlying such cause of action, or (2) the date upon which there has been
generally made available to stockholders an annual report of the Company or any
proxy statement for the annual meeting of stockholders which reports the
issuance of the pertinent Bonus Shares or lists aggregate issued and outstanding
Common Stock which includes the Bonus Shares.
13. Amendment and Discontinuance.
----------------------------
The Plan may be altered, suspended or discontinued by the Board of
Directors of the Company. However, no action by the Company's Board of Directors
may, without approval by the affirmative vote of the holders of a majority of
the Company's Common Stock voting in person or by proxy at any meeting of the
Company's stockholders, (1) abolish the Committee, change the qualification of
its members or withdraw the administration of the Plan from its supervision; (2)
make any material change in the class of eligible recipients; (3) increase the
Bonus Share Reserve (currently 60,000 shares of Common Stock) except upon a
reclassification, consolidation or merger of
5
<PAGE>
Company; (4) extend the term of the Plan; or (5) materially increase the
benefits accruing to persons participating under the Plan.
Without a recipient's consent, no amendment, suspension or termination of
the Plan may alter or impair the rights or any of the obligations under any
Bonus Shares or vesting schedule previously granted under the Plan. No Bonus
Shares may be granted during any suspension or after termination of the Plan.
Unless previously terminated or extended by the Board, the Plan will terminate
on April 20, 2003.
14. Reclassification, Consolidation or Merger.
-----------------------------------------
To any extent that the number of issued shares of the Company's Common
Stock is increased or reduced by a change in par value, split up,
reclassification, stock dividend or similar transaction, or if the Company is
reorganized, consolidated or merged, the recipient of Bonus Shares shall be
entitled to receive additional shares of Company stock or shares of the
reorganized, consolidated or merged company, as the case may be, in the same
manner as other Shareholders of the Company. Such new stock shall be subject to
the same vesting schedule and other restrictions as the Bonus Shares upon which
they are issued.
15. Tax Aspects.
-----------
The following is a brief summary of the advice of the Company's counsel
regarding the United States tax treatment, and the Company's independent
certified public accountants regarding the foreign income tax treatment, of
Bonus Shares issued pursuant to the Plan. Such advice is solely for the
Company's use and benefit, and is not intended as advice to recipients or
holders of Bonus Shares or other participants in the Plan. This brief summary
does not purport to be complete. Reference should be made to the applicable
provisions of the Internal Revenue Code (the "Code") and tax laws of the United
Kingdom, and holders of Bonus Shares are urged to consult their personal tax
advisors prior to making decisions relating to Plan participation that may
affect their income tax liability. The tax treatment afforded by the Code to
transactions under the Plan will not govern transactions to which United Kingdom
tax laws apply. The Company has not obtained and includes no information
concerning the tax laws of any other jurisdiction.
(a) General Tax Treatment.
---------------------
United States. A recipient of Bonus Shares will have taxable
-------------
compensation income in an amount equal to the fair market value of the Shares at
the date of issuance. However, pursuant to Section 83(a) of the Code, so long as
the Bonus Shares are subject to a substantial risk of forfeiture and
transferability restrictions, the taxable event is delayed until those
restrictions lapse. A "substantial risk of forfeiture" is a restriction that
conditions a recipient's right to full enjoyment of the Bonus Shares upon the
future performance of services by the recipient. Under the Plan, the Committee
will establish a vesting schedule for the Bonus Shares. Until the recipient has
remained an employee or has continued to provide services to the Company for the
full term of the vesting schedule, some or all of the Bonus Shares will remain
subject to a substantial risk of forfeiture.
6
<PAGE>
Regulations under the Code require that, to remain a "substantial risk of
forfeiture" and delay the recognition of taxable income, the services required
to be performed by the recipient must be "substantial" and the forfeiture
conditions must be likely to be enforced by the Company. These requirements must
be evaluated on a case-by-case basis.
Nontransferability may be established by the terms of the grant of
Bonus Shares, e.g., that the recipient cannot transfer such Shares except by
---
will or devise until termination of the vesting schedule, or that the Bonus
Shares remain subject to risk of forfeiture in the hands of any transferee.
In addition, application of Section 16(b) of the Exchange Act may
create both risk of forfeiture and nontransferability restrictions concerning
the Bonus Shares. So long as a sale of Bonus Shares by an officer, director or
insider at a profit could create liability under Section 16(b), those Shares
will be deemed subject to forfeiture and transferability restrictions under
Section 83 of the Code.
The Code affords an election to individuals subject to the provisions
of Section 83. Under Section 83(b) of the Code, a recipient of Bonus Shares may
elect to be taxed on the receipt of the Shares, notwithstanding any risk of
forfeiture or transferability restriction on the date of receipt. If such an
election is made, taxation upon the receipt of Shares will be treated as
ordinary income equal to the fair market value of the Bonus Shares upon
issuance. Any appreciation in the Shares after the date of receipt will be taxed
at short term or long term capital gain rates depending upon the length of time
the Shares are held.
If the owner does not make an election under Section 83(b) upon
receipt of the Bonus Shares, he or she will be taxed at ordinary income rates on
the Fair Market Value of the Bonus Shares in the year the risk of forfeiture and
transferability restrictions end.
Upon the sale of any Bonus Shares, the owner will be taxed at capital
gain rates for any gain measured by the difference between the fair market value
of the Shares on the date of tax recognition (the end of the vesting schedule or
election under Section 83(b) of the Code) and the price at which Shares are
sold. If the sale price produces a loss, i.e., the sale price is less than the
tax basis minus the initial cost, the loss will be treated as a short term or
long term capital loss.
United Kingdom.
--------------
The award of Bonus Shares to an employee gives use rise to an income
tax and, since December 5, 1996, a social security contribution liability.
If the Shares are ordinary unrestricted Common Stock, the amount
subject to income tax and social security will be the fair market value of the
Shares awarded. However, if the Bonus Shares are subject to restrictions on
their sale or disposition, or if there is a risk of forfeiture for some
predetermined period, the taxable value of the restricted Shares will be less
than the fair market value of unrestricted Shares.
7
<PAGE>
Where the award of Shares is evidenced by the issue of a share
certificate which sets out details of the restrictions but entitles the employee
to vote the Shares and receive dividends, the taxable value will need to be
agreed with the United Kingdom Inland Revenue. This will involve agreeing upon a
discount from fair market value to reflect the restrictions and the time before
the award fully vests.
Once agreed, this value will be subject to tax as income for the tax
year of the initial award. If the award is subsequently forfeited, it will not
be possible to reclaim the income tax already paid. However, the amount charged
to income tax will be a loss for capital gains tax purposes which can be set
against other capital gains realized in that or any subsequent tax year.
When the award vests, there is a further potential income tax charge
on the increase in value attributable to the removal of the restrictions. If the
restrictions are time based and run their normal course, the United Kingdom
Inland Revenue accept that there is no taxable increase in value at vesting.
On the sale of the Shares, the Employee will be subject to capital
gains tax on the difference between net sale proceeds and the base cost. The
base cost is the value charged to income tax on the initial award and on
vesting. The base cost can be increased by an Indexation Allowance to reflect
changes in the Retail Price Index between the month in which the Shares were
acquired and the month in which they are sold.
Where employment income is provided to an Employee in the form of
Shares which are tradeable assets, there is an obligation on the employer to
withhold income tax under the Pay As You Earn ("PAYE") system. There is also an
obligation to account for social security contributions. Shares traded on NASDAQ
are tradeable assets for this purpose, but if Shares are subject to
restrictions, they present practical difficulties to employers in determining
the taxable value. There are technical arguments which can be applied to justify
the late withholding of tax and social security.
It should be noted that, because of the risk of forfeiture, the United
Kingdom Inland Revenue often applies concessionary treatment to restricted share
plans under which the income tax and social security contribution charges are
deferred until the date an award of restricted stock fully vests. The taxable
amount would in these cases be the fair market value of the shares at the date
of vesting. The concession would only be applied if the employer binds all of
its employees to agree to this non-statutory treatment. The Company has not yet
applied for this concession but will seek the views of participating Employees
in the United Kingdom as to whether they wish the Company to do so.
(b) Other Laws. The Plan and grants of Bonus Shares are not subject to
----------
the Employee Retirement Income Security Act of 1974, nor is the taxation of such
benefits governed by Section 401(a) of the Code.
8
<PAGE>
CONFLICTING PROVISIONS
----------------------
The foregoing is only a summary of some of the material provisions and
operational features of the Plan. To the extent that this summary
Prospectus conflicts with any provision in the Plan or in any stock
option agreement issued under the Plan, the conflicting provisions of
the Plan and/or stock option agreement shall control.
<PAGE>
OPTICAL SECURITY GROUP, INC.
----------------------------
PART I. Information Required in the Section 10(a) Prospectus
ITEM 1. Plan Information*
ITEM 2. Registration Information and Employee Plan Annual Information*
- --------------------------
*Portions of the information required by Part I to be contained in the Section
10(a) prospectus, as such information is contained in the Registrant's Annual
Report for Form 10-KSB for its fiscal year ended March 31, 1998, is omitted from
the registration statement in accordance with Rule 428 under the Securities Act
of 1933 and the Note to Part I of Form S-8. The remainder of such information
is contained in the prospectuses filed herewith, pursuant to Rule 424(b).
- --------------------------
PART II. Information Required in the Registration Statement
ITEM 3. Incorporation of Documents by Reference
The following documents have been filed by Opsec Security Group,
Inc. (the "Registrant") with the Securities and Exchange Commission and are
incorporated herein by reference:
(a) The prospectuses of the Registrant, dated October 16, 1996, and
which forms a part of the Registration Statement of the
Registrant on Form S-3/A filed with the Securities and Exchange
Commission on October 16, 1996 (Registration No. 33-12703); and
(b) The description of the Registrant's Common Stock contained in
the Registration Statement on Form S-3/A filed with the
Securities and Exchange Commission on October 16, 1996, and
registering shares of Common Stock pursuant to Section 12(b) of
the Securities Exchange Act of 1934 (the "Act").
In addition, all documents filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Act subsequent to the filing of this
Registration Statement and prior to the filing of a post-effective amendment
that indicates that all securities offered have been sold or which de-registers
all securities then remaining unsold, shall be deemed to be incorporated by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded to the
extent that a statement contained in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such prior statement. The documents required to be so modified or
2
<PAGE>
superseded shall not be deemed to constitute a part of this Registration
Statement, except as so modified or superseded.
ITEM 4. Description of Securities
A description of the Registrant's Common Stock has been incorporated
by reference into this Registration Statement. See Item 3, above.
ITEM 5. Interests of Named Experts and Counsel
Not Applicable.
ITEM 6. Indemnification of Directors and Officers
Item 15 of Part II of the Registration Statement of the Registrant on
Form S-3/A (Registration No. 33-12703) hereby is incorporated by reference.
ITEM 7. Exemption from Registration Claimed
Not Applicable.
ITEM 8. Exhibits
4(a)(1) Optical Security Group, Inc. 1992 Incentive Stock Option
Plan.
4(b)(1) Optical Security Group, Inc. Nonqualified Stock Option Plan.
4(b)(1)(a) Optical Security Group, Inc. Amendment to Nonqualified
Stock Option Plan
4(c)(1) Optical Security Group, Inc. Stock Bonus Plan.
4(a)(2) Form of Stock Option Agreement pursuant to the Optical
Security Group, Inc. 1992 Incentive Stock Option Plan.
4(b)(2) Form of Stock Option Agreement pursuant to the Optical
Security Group, Inc. Nonqualified Stock Option Plan.
4(c)(2) Exemplar of Vesting Schedule pursuant to the Optical
Security Group, Inc. Stock Bonus Plan.
4(d) Amended and Second Restated Articles of Incorporation,
Optical Security Group, Inc., incorporated by reference to
Exhibit 3.24, Registration Statement on Form S-3/A,
Registration No. 33-12703, filed October 16, 1996.
3
<PAGE>
4(e) Amended and Restated Bylaws of Optical Security Group, Inc.,
incorporated by reference to Exhibit 3.22, Annual Report on
Form 10-KSB, filed June 28, 1995.
5 Opinion of Counsel Regarding the Legality of the Shares of
Common Stock being Registered.
24(a) Consent of Counsel (included in Exhibit 5).
24(b) Consent of Independent Auditors.
25 Power of Attorney
ITEM 9. Undertakings
A. RULE 415 OFFERING. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) ;that,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement. Provided, however, that paragraphs
(1)(i) and (1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the
Act that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
4
<PAGE>
B. FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Act (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Act) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
5
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City and County of Denver, State of Colorado, on this 22th
day of July, 1998.
OPTICAL SECURITY GROUP, INC.
By: /s/ Gerald A. Melfi
---------------------------------------
Gerald A. Melfi, Principal Financial
Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and power of attorney have been signed by the following persons in the
capacities and on the dates indicated:
By his signature, each of the following persons authorizes Gerald A. Melfii to
execute in his name and on his behalf, and to file any amendments (including,
without limitation, post-effective amendments) to this Registration Statement
necessary or advisable in the opinion of any of them to enable the Company to
comply with the Securities Act, and any rules, regulations and requirements of
the Commission thereunder, in connection with the registration of the additional
securities which are the subject of this Registration Statement.
Date: July 23, 1998 By: /s/ Richard H. Bard
---------------------------------------
Richard H. Bard, Chairman of the Board
and Chief Executive Officer
Date: July 23, 1998 By: /s/ Gerald A. Melfi
---------------------------------------
Gerald A. Melfi, Principal Financial
Officer and Treasurer
Date: July 23, 1998 By: /s/ Martin T. Hart
---------------------------------------
Martin T. Hart, Director
Date: July 23, 1998 By: /s/ J.R. Holland, Jr.
---------------------------------------
J. R. Holland, Jr., Director
Date: July 23, 1998 By: /s/ Richard D. Lamm
---------------------------------------
Richard D. Lamm, Director
Date: July 23, 1998 By: /s/ Bruce I. Raben
---------------------------------------
Bruce I. Raben, Director
Date: July 23, 1998 By: /s/ Mark T. Turnage
---------------------------------------
Mark T. Turnage, Director
6
<PAGE>
EXHIBITS ACCOMPANYING THE
S-8 REGISTRATION STATEMENT
Exhibit
Number Description
- ------ -----------
4(a)(1) Optical Security Group, Inc. 1992
Incentive Stock Option Plan.
4(b)(1) Optical Security Group, Inc.
Nonqualified Stock Option Plan.
4(b)(1)(a) Optical Security Group, Inc.
Amendment to Nonqualified Stock Option Plan
4(c)(1) Optical Security Group, Inc.
Stock Bonus Plan.
4(a)(2) Form of Stock Option Agreement pursuant
to the Optical Security Group, Inc.
1992 Incentive Stock Option Plan.
4(b)(2) Form of Stock Option Agreement pursuant
to the Optical Security Group, Inc.
Nonqualified Stock Option Plan.
4(c)(2) Exemplar of Vesting Schedule pursuant
to the Optical Security Group, Inc.
Stock Bonus Plan.
4(d) Amended and Second Restated Articles
of Incorporation Optical Security Group,
Inc., incorporated by reference to
Exhibit 3.24, Registration Statement on
Form S-3/A, Registration No. 33-12703,
filed October 16, 1996.
4(e) Amended and Restated Bylaws of Optical
Security Group, Inc., incorporated by
reference to Exhibit 3.22, Annual Report
on Form 10-KSB, filed June 28, 1995.
5 Opinion of Counsel Regarding the Legality
of the Shares of Common Stock.
24(a) Consent of Lohf, Shaiman & Jacobs, P.C.
7
<PAGE>
24(b) Consent of Independent Auditors.
25 Power of Attorney (included in signature page of this Registration
Statement).
8
<PAGE>
EXHIBIT 4(A)(1)
OPTICAL SECURITY GROUP, INC.
INCENTIVE STOCK OPTION PLAN
(AS AMENDED THROUGH AUGUST 16, 1996)
1. Purpose. The purpose of the 1992 Incentive Stock Option Plan (the
-------
"Plan") is to advance the interests of Optical Security Group, Inc. and any
subsidiary corporation (hereinafter referred to as the "Company") and all of its
shareholders, by strengthening the Company's ability to attract and retain in
its employ individuals of training, experience, and ability, and to furnish
additional incentive to officers and valued employees upon whose judgement,
initiative, and efforts the successful conduct and development of its business
largely depends, by encouraging such officers and employees to become owners of
capital stock of the Company.
This will be effected through the granting of stock options as herein
provided, which options are intended to qualify as "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue Code, as amended (the
"Code").
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer the Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is granted under the
Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not expired,
has been granted under the Plan.
(g) "Successor" means the legal representative of the estate of a deceased
optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any
Optionee.
<PAGE>
3. Administration of Plan. The Plan shall be administered by a committee
----------------------
of two or more directors appointed by the Board (the "Committee"). The Committee
shall report all action taken by it to the Board. The Committee shall have full
and final authority in its discretion, subject to the provisions of the Plan, to
determine the individuals to whom and the time or times at which Options shall
be granted and the number of shares and purchase price of Common Stock covered
by each Option; to construe and interpret the Plan; to determine the terms and
provisions of the respective Option agreements, which need not be identical,
including, but without limitation, terms covering the payment of the Option
Price; and to make all other determinations and take all other actions deemed
necessary or advisable for the proper administration of the Plan. All such
actions and determinations shall be conclusively binding for all purposes and
upon all persons.
4. Common Stock Subject to Options. The aggregate number of shares of
-------------------------------
the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 2,000,000, subject to adjustment under
the provisions of paragraph 9. The shares of Common Stock to be issued upon the
exercise of Options may be authorized by unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the purposes of the
Plan. In the event any Option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option but not purchased thereunder shall again be available for Options to be
granted under the Plan.
The aggregate fair market value (determined as of the time any option
is granted) of the stock for which any employee may be granted options which are
first exercisable in any single calendar year under this Plan (and any other
plan of the Company meeting the requirements for Incentive Stock Option Plans)
shall not exceed $100,000.
5. Participants. Options will be granted only to persons who are
------------
employees of the Company and only in connection with any such person's
employment. The term "employees" shall include officers as well as other
employees, and the officers and other employees who are directors of the
Company. The Committee will determine the employees to be granted options and
the number of shares subject to each option.
6. Terms and Conditions of Options. Any Option granted under the Plan
-------------------------------
shall be evidenced by an agreement executed by the Company and the recipient and
shall contain such terms and be in such form as the Committee may from time to
time approve, subject to the following limitations and conditions:
(a) Option Price. The purchase price of each option shall not be less
------------
than 100% of the fair market value of the Company's common stock at the time of
the granting of the option provided, however, if the optionee, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, the purchase price of the
option shall not be less than 110% of the fair market value of the stock at the
time of the granting of the option.
<PAGE>
(b) Period of Option. The maximum period for exercising an option
----------------
shall be 10 years from the date upon which the option is granted provided,
however, if the optionee, at the time the option is granted, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, the maximum period for exercising an option shall be five
years from the date upon which the option is granted and provided further,
however, that these periods may be shortened in accordance with the provisions
of Paragraphs 6 or 7 below.
Subject to the foregoing, the period during which each option may
be exercised, and the expiration date of each Option shall be fixed by the
Committee.
If an optionee shall cease to be employed by the Company for any
reason other than death, he may, but only within the three months (or, in the
event of the optionee's termination of employment due to disability, as defined
in Section 22(e)(3) of the Code, within the one year) next succeeding such
cessation of employment, exercise his option to the extent that he was entitled
to exercise it on the date of such cessation. The Plan will not confer upon any
optionee any right with respect to continuance of employment by the Company, nor
will it interfere in any way with his right, or his employer's right, to
terminate his employment at any time.
(c) Vesting of Shareholder Rights. Neither an Optionee nor his
-----------------------------
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from time to
------------------
time during a period (or periods) determined by the Committee and ending upon
the expiration or termination of the Option; provided, however, the Committee
may, by the provisions of any Option Agreement, limit the number of shares
purchasable thereunder in any period or periods of time during which the Option
is exercisable. An Option shall not be exercisable in whole or in part prior to
the date of shareholder approval of the Plan.
Options may be exercised in part from time to time during the option
period. The exercise of any option will be contingent upon compliance by the
Optionee (or purchaser acting pursuant to Section 6(b)) with the provisions of
Section 10 below and upon receipt by the Company of either (i) cash or certified
bank check payable to its order in the amount of the purchase price of such
shares (ii) shares of Company stock having a fair market value equal to the
purchase price of such shares, or (iii) a combination of (i) and (ii). If any
law or regulation requires the Company to take any action with respect to the
shares to be issued upon exercise of any option, then the date for delivery of
such stock shall be extended for the period necessary to take such action.
No option may be exercised until one year after the option was
granted.
(e) Nontransferability of Option. No option shall be transferable or
----------------------------
<PAGE>
assignable by an Optionee, otherwise than by will or the laws of descent and
distribution and each Option shall be exercisable, during the Optionee's
lifetime, only by him. No Option shall be pledged or hypothecated in any way and
no Option shall be subject to execution, attachment, or similar process except
with the express consent of the Committee.
(f) Death of Optionee. In the event of the death of an optionee while
-----------------
in the employ of the Company, the option theretofore granted to him shall be
exercisable only within the three months succeeding such death and then only (i)
by the person or persons to whom the optionee's rights under the option shall
pass by the optionee's will or by the laws of descent and distribution, and (ii)
if and to the extent that he was entitled to exercise the option at the date of
his death.
7. Assumed Options. In connection with any transaction to which Section
---------------
424(a) of the Code is applicable, options may be granted pursuant hereto in
substitution of existing options or existing options may be assumed as
prescribed by that Section and any regulations issued thereunder.
Notwithstanding anything to the contrary contained in this Plan, options granted
pursuant to this Paragraph shall be at prices and shall contain such terms,
provisions, and conditions as may be determined by the Committee and shall
include such provisions and conditions as may be necessary to meet the
requirements of Section 424(a) of the Code.
8. Certain Dispositions of Shares. Any options granted pursuant to this
------------------------------
Plan shall be conditioned such that if, within the earlier of (i) the two-year
period beginning on the date of grant of an option or (ii) the one-year period
beginning on the date after which any share of stock is transferred to an
individual pursuant to his exercise of an option, such as individual makes, a
disposition of such shares of stock by way of sale, exchange, gift, transfer of
legal title, or otherwise, such individual shall promptly report such
disposition to the Company in writing and shall furnish to the Company such
details concerning such disposition as the Company may reasonably request.
9. Reclassification, Consolidation, or Merger. If and to the extent that
------------------------------------------
the number of issued shares of Common Stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption of the old Option shall not give Optionee additional
benefits which he did not have under the old option, or deprive him of benefits
which he had under the old Option.
10. Restrictions on Issuing Shares. The exercise of each Option shall be
------------------------------
subject
<PAGE>
to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares purchased thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock covered by the Plan have been registered with
the Securities and Exchange Commission pursuant to Section 5 of the Securities
Act of 1933, each optionee shall, by accepting an option, represent and agree,
for himself and his transferees by will or the laws of descent and distribution,
that all shares of stock purchased upon the exercise of the option will be
acquired for investment and not for resale or distribution. Upon such exercise
of any portion of an option, the person entitled to exercise the same shall,
upon request of the Company, furnish evidence satisfactory to the Company
(including a written and signed representation) to the effect that the shares of
stock are being acquired in good faith for investment and not for resale or
distribution. Furthermore, the Company may, if it deems appropriate, affix a
legend to certificates representing shares of stock purchased upon exercise of
options indicating that such shares have not been registered with the Securities
and Exchange Commission and may so notify its transfer agent. Such shares may be
disposed of by an optionee in the following manner only: (1) pursuant to an
effective registration statement covering such resale or reoffer, (2) pursuant
to an applicable exemption from registration as indicated in a written opinion
of counsel acceptable to the Company, or (3) in a transaction that meets all of
the requirements of Rule 144 of the Securities and Exchange Commission. If
shares of stock covered by the Plan have been registered with the Securities and
Exchange Commission, no such restrictions on resale shall apply, except in the
case of optionees who are directors, officers, or principal shareholders of the
Company. Such persons may dispose of shares only by one of the three aforesaid
methods.
11. Use of Proceeds. The proceeds received by the Company from the sale
---------------
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
12. Amendment, Suspension, and Termination of Plan. The Board of
----------------------------------------------
Directors may alter, suspend, or discontinue the Plan, but may not, without the
approval of a majority of those holders of the Company's Common Stock voting in
person or by proxy at any meeting of the Company's shareholders, make any
alteration or amendment thereof which operates to (a) abolish the Committee,
change the qualification of its members, or withdraw the administration of the
Plan from its supervision, (b) make any
<PAGE>
material change in the class of eligible employees as defined in Section 5, (c)
increase the total number of shares reserved for purposes of this Plan except as
provided in Section 9, (d) increase the total number of shares for which an
option or options may be granted to any one employee, (e) extend the term of the
Plan or the maximum option periods provided in paragraph 6, (f) decrease the
minimum option price provided in paragraph 6, except as provided in paragraph 9,
or (g) materially increase the benefits accruing to employees participating
under this Plan.
Unless the Plan shall therefore have been terminated by the Board, the Plan
shall terminate ten years after the effective date of the Plan. No Option may be
granted during any suspension or after the termination of the Plan. No
amendment, suspension, or termination of the Plan shall, without an Optionee's
consent, alter or impair any of the rights or obligations under any Option
theretofore granted to such Optionee under the Plan.
13. Limitations. Every right of action by or on behalf of the Company or
-----------
by any shareholder against any past, present or future member of the Board, or
any officer or employee of the Company arising out of or in connection with this
Plan shall, irrespective of the place where such action may be brought and
irrespective of the place of residence of any such director, officer or employee
cease and be barred by the expiration of one year from whichever is the later of
(a) the date of the act or omission in respect of which such right of action
arises; or (b) the first date upon which there has been made generally available
to shareholders an annual report of the Company or any proxy statement for the
annual meeting of shareholders following the issuance of such annual report,
which annual report and proxy statement alone or together set forth, for the
related period, the number of shares issuable upon the exercise of the options
granted pursuant to this Plan; and any and all right of action by any employee
(past, present or future) against the Company arising out of or in connection
with this Plan shall, irrespective of the place where such action may be
brought, cease and be barred by the expiration of one year from the date of the
act or omission in respect of which such right of action arises.
14. Effective Date of the Plan.
--------------------------
This Plan shall become effective upon the adoption thereof by the
Board of Directors of the Company.
15. Governing Law. The Plan shall be governed by the laws of the State of
-------------
Colorado.
16. Expenses of Administration. All costs and expenses incurred in the
--------------------------
operation and administration of this Plan shall be borne by the Company.
<PAGE>
OPTICAL SECURITY GROUP, INC.
By:-----------------------------------------
Richard H. Bard
Chief Executive Officer
December, 1996
<PAGE>
EXHIBIT 4(B)(1)
OPTICAL SECURITY GROUP, INC.
NONQUALIFIED STOCK OPTION PLAN
(AS AMENDED THROUGH AUGUST 16, 1996)
1. Purpose. The Nonqualified Stock Option Plan (the "Plan") is intended
-------
to advance the interest of Optical Security Group, Inc. (the "Company") and its
shareholders, by encouraging and enabling selected officers, directors,
consultants and key employees upon whose judgement, initiative and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
stock. Options granted under the Plan are intended to be Options which do not
meet the requirements of Section 422 of the Internal Revenue Code of 1954, as
amended (the "Code").
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer the Plan.
(c) "Common Stock" means the Company's Common Stock.
(d) "Date of Grant" means the date on which an Option is granted under the
Plan.
(e) "Option" means an Option granted under the Plan.
(f) "Optionee" means a person to whom an Option, which has not expired,
has been granted under the Plan.
(g) "Successor" means the legal representative of the estate of a deceased
optionee or the person or persons who acquire the right to exercise an
Option by bequest or inheritance or by reason of the death of any
Optionee.
3. Administration of Plan. The Plan shall be administered by a committee
----------------------
of two or more directors appointed by the Board (the "Committee"). The Committee
shall report all action taken by it to the Board. The Committee shall have full
and final authority in its discretion, subject to the provisions of the Plan, to
determine the individuals to whom and the time or times at which Options shall
be granted and the number of shares and purchase price of Common Stock covered
by each Option; to construe and interpret the Plan; to determine the terms and
provisions of the respective Option agreements, which need not be identical,
including, but without limitation, terms covering the payment of the Option
Price; and to make all other determinations and take all other actions deemed
necessary or advisable for the proper administration of the Plan. All such
actions and
<PAGE>
determinations shall be conclusively binding for all purposes and upon all
persons.
4. Common Stock Subject to Options. The aggregate number of shares of
-------------------------------
the Company's Common Stock which may be issued upon the exercise of Options
granted under the Plan shall not exceed 2,000,000, subject to adjustment under
the provisions of paragraph 7. The shares of Common Stock to be issued upon the
exercise of Options may be authorized by unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the purposes of the
Plan. In the event any Option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option but not purchased thereunder shall again be available for Options to be
granted under the Plan.
5. Participants. Options may be granted under the Plan to the Company's
------------
employees, directors and officers, and consultants or advisors to the Company,
provided however that bona fide services shall be rendered by such consultants
or advisors and such services must not be in connection with the offer or sale
of securities in a capital-raising transaction.
6. Terms and Conditions of Options. Any Option granted under the Plan
-------------------------------
shall be evidenced by an agreement executed by the Company and the recipient and
shall contain such terms and be in such form as the Committee may from time to
time approve, subject to the following limitations and conditions:
(a) Option Price. The Option Price per share with respect to each
------------
Option shall be determined by the Committee but shall in no instance be less
than the par value of the Common Stock.
(b) Period of Option. The period during which each option may be
----------------
exercised, and the expiration date of each Option shall be fixed by the
Committee, but, notwithstanding any provision of the Plan to the contrary, such
expiration date shall not be more than ten years from the Date of Grant.
(c) Vesting of Shareholder Rights. Neither an Optionee nor his
-----------------------------
successor shall have any rights as a shareholder of the Company until the
certificates evidencing the shares purchased are properly delivered to such
Optionee or his successor.
(d) Exercise of Option. Each Option shall be exercisable from time
------------------
to time during a period (or periods) determined by the Committee and ending upon
the expiration or termination of the Option; provided, however, the Committee
may, by the provisions of any Option Agreement, limit the number of shares
purchasable thereunder in any period or periods of time during which the Option
is exercisable. An Option shall not be exercisable in whole or in part prior to
the date of shareholder approval of the Plan.
(e) Nontransferability of Option. No option shall be transferable or
----------------------------
assignable by an Optionee, otherwise than by will or the laws of descent and
distribution
<PAGE>
and each Option shall be exercisable, during the Optionee's lifetime, only by
him. No Option shall be pledged or hypothecated in any way and no Option shall
be subject to execution, attachment, or similar process except with the express
consent of the Committee.
(f) Death of Optionee. If an Optionee dies while holding an Option
-----------------
granted hereunder, his Option privileges shall be limited to the shares which
were immediately purchasable by him at the date of death and such Option
privileges shall expire unless exercised by his successor within four months
after the date of death.
7. Reclassification, Consolidation, or Merger. If and to the extent that
------------------------------------------
the number of issued shares of Common Stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to Option and the Option price per share shall be proportionately
adjusted by the Committee, whose determination shall be conclusive. If the
Corporation is reorganized or consolidated or merged with another corporation,
an Optionee granted an Option hereunder shall be entitled to receive Options
covering shares of such reorganized, consolidated or merged company in the same
proportion, at an equivalent price, and subject to the same conditions. The new
Option or assumption of the old Option shall not give Optionee additional
benefits which he did not have under the old option, or deprive him of benefits
which he had under the old Option.
8. Restrictions on Issuing Shares. The exercise of each Option shall be
------------------------------
subject to the condition that if at any time the Company shall determine in its
discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares purchased thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
Unless the shares of stock covered by the Plan shall, upon request of the
Company, furnish evidence satisfactory to the Company (including a written and
signed representation) to the effect that the shares of stock are being acquired
in good faith for investment and not for resale or distribution. Furthermore,
the Company may, if it deems appropriate, affix a legend to certificates
representing shares of stock purchased upon exercise of options indicating that
such shares have not been registered with the Securities and Exchange Commission
and may
<PAGE>
so notify its transfer agent. Such shares may be disposed of by an optionee in
the following manner only: (1) pursuant to an effective registration statement
covering such resale or reoffer, (2) pursuant to an applicable exemption from
registration as indicated in a written opinion of counsel acceptable to the
Company, or (3) in a transaction that meets all of the requirements of Rule 144
of the Securities and Exchange Commission. If shares of stock covered by the
Plan have been registered with the Securities and Exchange Commission, no such
restrictions on resale shall apply, except in the case of optionees who are
directors, officers, or principal shareholders of the Company. Such persons may
dispose of shares only by one of the three aforesaid methods.
9. Use of Proceeds. The proceeds received by the Company from the sale
---------------
of Common Stock pursuant to the exercise of Options granted under the Plan shall
be added to the Company's general funds and used for general corporate purposes.
10. Amendment, Suspension, and Termination of Plan. The Board of
----------------------------------------------
Directors may alter, suspend, or discontinue the Plan, but may not, without the
approval of a majority of those holders of the Company's Common Stock voting in
person or by proxy at any meeting of the Company's shareholders, make any
alteration or amendment thereof which operates to (a) abolish the Committee,
change the qualification of its members, or withdraw the administration of the
Plan from its supervision, (b) make any material change in the class of eligible
employees as defined in Section 5, (c) increase the total number of shares
reserved for purposes of this Plan except as provided in Section 7, (d) increase
the total number of shares for which an option or options may be granted to any
one employee, (e) extend the term of the Plan or the maximum option periods
provided in paragraph 6, (f) decrease the minimum option price provided in
paragraph 6, except as provided in paragraph 7, or (g) materially increase the
benefits accruing to employees participating under this Plan.
Unless the Plan shall therefore have been terminated by the Board, the Plan
shall terminate ten years after the effective date of the Plan. No Option may be
granted during any suspension or after the termination of the Plan. No
amendment, suspension, or termination of the Plan shall, without an Optionee's
consent, alter or impair any of the rights or obligations under any Option
theretofore granted to such Optionee under the Plan.
11. Limitations. Every right of action by or on behalf of the Company or
-----------
by any shareholder against any past, present or future member of the Board, or
any officer or employee of the Company arising out of or in connection with this
Plan shall, irrespective of the place where such action may be brought and
irrespective of the place of residence of any such director, officer or employee
cease and be barred by the expiration of one year from whichever is the later of
(a) the date of the act or omission in respect of which such right of action
arises; or (b) the first date upon which there has been made generally available
to shareholders an annual report of the Company or any proxy statement for the
annual meeting of shareholders following the issuance of such annual report,
which annual report and proxy statement alone or together set forth, for the
related period, the number
<PAGE>
of shares issuable upon the exercise of the options granted pursuant to this
Plan; and any and all right of action by any employee (past, present or future)
against the Company arising out of or in connection with this Plan shall,
irrespective of the place where such action may be brought, cease and be barred
by the expiration of one year from the date of the act or omission in respect of
which such right of action arises.
12. Governing Law. The Plan shall be governed by the laws of the State of
-------------
Colorado.
13. Expenses of Administration. All costs and expenses incurred in the
--------------------------
operation and administration of this Plan shall be borne by the Company.
OPTICAL SECURITY GROUP, INC.
By:_____________________________________
Richard H. Bard
Chief Executive Officer
December, 1996
<PAGE>
EXHIBIT 4(b)(1)(A)
AMENDMENT TO THE OPTICAL SECURITY GROUP, INC.
NONQUALIFIED STOCK OPTION PLAN
(EFFECTIVE AS OF SEPTEMBER 1, 1997)
Effective September 1, 1997 (the "Effective Date"), the Nonqualified Stock
Option Plan (the "Plan") shall be amended as follows:
1. Section 2 shall be amended to add a new subsection (h) as follows:
(h) "Transferee" means a transferee of an Option transferred pursuant
to Section 6(e)(ii).
2. Section 6(e) of the Plan is deleted in its entirety and replaced
with the following:
(e) Transferability of Options.
--------------------------
(i) Unless the agreement evidencing the Option specifically
provides that the Option may be transferable as provided in subsection (ii)
below, an Option granted hereunder shall be transferable or assignable by
any Optionee, only by will or by the laws of descent and distribution and
shall be exercisable, during the Optionee's lifetime, only by him.
(ii) Provided that the agreement evidencing the Option
specifically provides that the Option may be transferred as provided in
this subsection (ii), an Optionee may transfer his Option to members of his
immediate family or a trust, the sole beneficiaries of which are members of
his immediate family, provided that the Optionee does not receive any
consideration for such transfer. "Immediate family" includes an Optionee's
children, grandchildren, and spouse. Such right to transfer an Option
pursuant to this subsection (ii) shall terminate upon the death of the
Optionee.
(iii) Any Option transferred pursuant to subsection (ii) above
shall continue to be subject to the same terms and conditions that were
applicable to such Option immediately prior to such transfer except that
such Option shall not be further transferable or exercisable by the
Transferee other than by will or the laws of descent and distribution. A
Transferee by acceptance of the Option agrees to be bound by the terms of
the Plan and the Stock Option Agreement pursuant to which the Option was
granted. Except as limited in this subsection (iii), a Transferee shall
have the same rights, duties, and obligations as an Optionee.
<PAGE>
(iv) The Committee shall have full and final authority in its
discretion to grant Options which may be transferred pursuant to subsection
(ii) above and to amend Options granted prior to September 1, 1997, the
effective date of this provision, to provide that such Options may be
transferred pursuant to subsection (ii) above. Any such amendment to
existing Options must be in writing.
(v) No Option shall be pledged or hypothecated in any way and no
Option shall be subject to execution, attachment, or similar process except
with the express consent of the Committee.
3. Except as provided above, the Plan shall remain in full force and
effect.
The secretary of the Company, duly certifies that this Amendment was
adopted by the board of directors on June 16, 1997.
OPTICAL SECURITY GROUP, INC.
By:_______________________________
Catherine M. Gotwalt, Secretary
2
<PAGE>
OPTICAL SECURITY GROUP, INC.
STOCK BONUS PLAN
(AS ADOPTED ON APRIL 20, 1993)
1. Purpose. The purpose of this Plan is to advance the interests of
-------
Optical Security Group, Inc. (The "Company") and its shareholders, by
encouraging and enabling selected officers, directors, consultants and key
employees upon whose judgment, initiative and effort the Company is largely
dependent for the successful conduct of its business, to acquire and retain a
proprietary interest in the company by ownership of its stock, to keep personnel
of experience and ability in the employ of the Company and to compensate them
for their contributions to the growth and profits of the Company and thereby
induce them to continue to make such contributions in the future.
2. Definitions.
------------
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" means the directors duly appointed to administer the Plan.
(C) "Plan" shall mean this Stock bonus Plan.
(d) "Bonus Share" shall mean the shares of Common Stock of the Company
reserved pursuant to Section 4 hereof and any such shares issued to a
Recipient pursuant to this Plan.
(e) "Recipient" shall mean any individual rendering services for the
Company to whom shares are granted pursuant to this Plan.
3. Administration of Plan. The Plan shall be administered by a committee
----------------------
of two or more directors appointed by the board (the "Committee"). The
committee shall report all action taken by it to the Board. The Committee shall
have full and final authority in its discretion, subject to the provisions of
the Plan, to determine the individuals to whom and the time or times at which
Bonus Shares shall be granted and the number of Bonus Shares; to construe and
interpret the Plan; and to make all other determinations and take all other
actions deemed necessary or advisable for the proper administration of the Plan.
All such actions and determinations shall be conclusively binding for all
purposes and upon all persons.
4. Bonus Share Reserve. There shall be established a Bonus Share Reserve
-------------------
to which shall be credited 60,000 shares of the Company's Common Stock. In the
event that the shares of Common Stock of the Company should, as a result of a
stock split or stock dividend or combination of shares or any other change, or
exchange for other securities by reclassification, reorganization, merger
consolidation, recapitalization or otherwise, be increased or decreased or
changed into or exchanged for, a different number or kind of shares of stock or
other securities of the Company or of another corporation, the number of shares
then remaining in the Bonus Share reserve shall be appropriately adjusted to
reflect such action. Upon the grant of shares hereunder, this reserve shall be
reduced by the number of shares so granted. Distributions of bonus Shares may,
as the Committee
<PAGE>
shall in its sole discretion determine, be made from authorized but unissued
shares or from treasury shares. All authorized and unissued shares issued as
Bonus Shares in accordance with the Plan shall be fully paid and nonassessable
and free from preemptive rights.
5. Eligibility, and Granting and Vesting of Bonus Shares. Bonus Shares
-----------------------------------------------------
may be granted under the Plan to the Company's employees, directors and
officers, and consultants or advisors to the Company, provided however that bona
fide services shall be rendered by such consultants or advisors and such
services must not be in connection with the offer or sale of securities in a
capital-raising transaction.
The Committee, in its sole discretion, is empowered to grant to an
eligible Participant a number of Bonus Shares as it shall determined from time
to time. Each grant of these Bonus Shares shall become vested according to a
schedule to be established by the Committee directors at the time of the grant.
For purposes of this Plan, vesting shall mean the period during which the
recipient must remain an employee or provide services for the Company. At such
time as the employment of the Recipient ceases, any shares not fully vested
shall be forfeited by the Recipient and shall be returned to the Bonus Share
Reserve. The Committee, in its sole discretion, may also impose restrictions on
the future transferability of the Bonus Shares, which restrictions shall be set
forth on the notification to the Recipient of the grant.
The aggregate number of bonus Shares which may be granted pursuant to this
Plan shall not exceed the amount available therefore in the Bonus Share Reserve.
6. Form of Grants. Each grant shall specify the number of Bonus Shares
--------------
subject thereto, subject to the provisions of Section 5 hereof.
At the time of making any grant, the Committee shall advise the
Recipient by delivery of written notice, in the form of Exhibit A hereto
annexed.
7. Recipients' Representations..
---------------------------
(a) The Committee may require that, in acquiring any Bonus Shares, the
Recipient agree with, and represent to the Company, that the Recipient
is acquiring such Bonus Shares for the purpose of investment and with
no present intention to transfer, sell or otherwise dispose of shares
except such distribution by a legal representative as shall be
required by will or the laws of any jurisdiction in winding-up the
estate of any Recipient. Such shares shall be transferrable thereafter
only if the proposed transfer shall be permissible pursuant to the
Plan and if, in the option of counsel (who shall be satisfactory to
the committee), such transfer shall at such time be in compliance with
applicable securities laws.
(b) To effectuate Paragraph A above, the Recipient shall delver to the
Committee, in duplicate, an agreement in writing, signed by the
Recipient, in form and substance as set forth in exhibit B hereto
annexed, and the Committee shall forthwith acknowledge its receipt
thereof.
<PAGE>
8. Restrictions Upon Issuance.
--------------------------
(a) Bonus Shares shall forthwith after the making of any representations
required by Section 6 hereof, or if no representations are required
then within thirty (30) days of the date of grant, be duly issued and
transferred and a certificate or certificates for such shares shall be
issued in the Recipient's name. The Recipient shall thereupon be a
shareholder with respect to all the shares represented by such
certificate or certificates, shall have all the rights of a
shareholder with respect to all such shares, including the right to
vote such shares and to receive all dividends and other distributions
(subject to the provisions of Section 7(B) hereof) paid with respect
to such shares. Certificates of stock representing Bonus Shares shall
be imprinted with a legend to the effect that the shares represented
thereby are subject to the provisions of this Agreement, and to the
vesting and transfer limitations established by the Committee, and
each transfer agent for the common stock shall be instructed to like
effect with respect of such shares.
(b) In the event that, as the result of a stock split or stock dividend or
combination of shares or any other change, or exchange for other
securities, by reclassification, reorganization, merger,
consolidation, recapitalization or otherwise, the Recipient shall, as
owner of the Bonus Shares subject to restrictions hereunder, be
entitled to new or additional or different shares of stock or
securities, the certificate or certificates for, or other evidences
of, such new or additional or different shares or securities, together
with a stock power or other instrument of transfer appropriately
endorsed, shall also be imprinted with a legend as provided in Section
7(A), and all provisions of the Plan relating to restrictions herein
set forth shall thereupon be applicable to such new or additional or
different shares or securities to the extent applicable to the shares
with respect to which they were distributed.
(C) The grant of any Bonus Shares shall be subject to the condition that
if at any time the Company shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities, or
that the listing, registration, or qualification of any Bonus Shares
upon such exercise upon any securities exchange or under any state or
federal law, or that the consent or approval of any regulatory body,
is necessary or desirable as a condition of, or in connection with,
the issuance of any Bonus Shares, then in any such event, such
exercise shall not be effective unless such withholding, listing,
registration, qualification, consent, or approval hall have been
effected or obtained free of any conditions not acceptable to the
Company.
(d) Unless the bonus Shares covered by the Plan has been registered with
the Securities and Exchange Commission pursuant to Section 5 of the
Securities Act of 1933, each Recipient shall, by accepting a Bonus
Share, represent and agree, for himself and his transferees by will or
the laws of descent and distribution, that all bonus Shares were
acquired for investment and not for resale or distribution. Upon such
exercise of any portion of an option, the person entitled to exercise
the same shall, upon request of the Committee, furnish evidence
satisfactory to the Committee (including a written
<PAGE>
and signed representation) to the effect that the shares of stock are
being acquired in good faith for investment and not for resale or
distribution. Furthermore, the committee may, if it deems appropriate,
affix a legend to certificates representing Bonus Shares indicated
that such Bonus Shares have not been registered with the Securities
and Exchange Commission and may so notify the Company's transfer
agent. Such shares may be disposed of by a Recipient in the following
manner only: (1) pursuant to an effective registrations statement
covering such resale or reoffer, (2) pursuant to an applicable
exemption from registration as indicated in a written opinion of
counsel acceptable to the Company, or (3) in a transaction that meets
all the requirements of Rule 144 of the Securities and Exchange
Commission. If bonus Shares covered by the Plan have been registered
with the Securities and Exchange Commission, n such restrictions on
resale shall apply, except in the case of Recipients who are
directors, officers, or principal shareholders of the Company. Such
persons may dispose of shares only by one of the three aforesaid
methods.
9. Limitations. Neither the action of the Company in establishing the
-----------
Plan, nor any action taken by it nor the Committee under the Plan, nor an
provision of the Plan, shall be construed as giving to any person the right to
be retained in the employ of the Company.
Every right of action by or on behalf of the Company or by any
shareholder against any past, present or future member of the Board, or any
officer or employee of the Company arising out of or in connection with this
Plan shall, irrespective of the place where action may be brought and
irrespective of the place of residence of any such director, officer of employee
cease and be barred by the expiration of one year from whichever is the later of
(a) the date of the act or omission in respect of which such right of action
arises; or (b) the first date upon which there has been made generally available
to shareholders an annual report of the Company or any proxy statement for the
annual meeting of shareholders following the issuance of such annual report,
which annual report and proxy statement alone or together set forth, for the
related period, the number of shares issued pursuant to this Plan; and any and
all right of action by any employee (past, present or future) against the
Company arising out of or in connection with this Plan shall, irrespective of
the place where action may be brought, cease and be barred by the expiration of
one-year from the date of the act or omission in respect of which such right of
action arises.
10. Amendment, Suspension or Termination of the Plan. The Board of
------------------------------------------------
Directors may alter, suspend, or discontinue the Plan, but may not, without the
approval of a majority of those holders of the Company's Common Stock voting in
person or by proxy at any meeting of the Company's shareholders, make any
alteration or amendment thereof which operates to (a) abolish the Committee,
change the qualification of its members, or withdraw the administration of the
Plan from its supervision, (b) make any material change in the class of eligible
employees as defined in paragraph 5, (C) increase the total number of shares
reserved for purposes of this Plan except as provided in paragraph 4, (d) extend
the term of the Plan or, (e) materially increase the benefits accruing to
persons participating under this Plan.
<PAGE>
Unless the Plan shall theretofore have been terminated by the Board, the
Plan shall terminate ten years after the effective date of the Plan. No Bonus
Share may be granted during any suspension or after the termination of the Plan.
No amendment, suspension, or termination of the Plan shall, without a
Recipient's consent, alter or impair any of the rights or obligations under any
Bonus Share theretofore granted to such recipient under the Plan.
11. Governing law. The Plan shall be governed by the laws of the State of
-------------
Colorado.
12. Expenses of Administration. All costs and expenses incurred in the
--------------------------
operation and administration of this Plan shall be borne by the Company.
OPTICAL SECURITY GROUP, INC.
By:_______________________________
Richard H. Bard
Chief Executive Officer
December 1996
<PAGE>
EXHIBIT A
OPTICAL SECURITY GROUP, INC.
STOCK BONUS PLAN
TO: Recipient:
PLEASE BE ADVISED that Optical Security Group, Inc. Has on the date hereof
granted to the Recipient the number of Bonus Shares as set forth under and
pursuant to the Stock Bonus Plan. Before these shares are to be issued, the
Recipient must deliver to the Committee that administers the Stock Bonus Plan an
agreement in duplicate, in the form as Exhibit B hereto. The Bonus Shares are
issued subject to the following vesting and transfer limitations:
VESTING:
--------
NUMBER OF SHARES DATE OF VESTING
---------------- ---------------
TRANSFER LIMITATIONS:
---------------------
OPTICAL SECURITY GROUP, INC.
______________________________ By:___________________________________
Date
<PAGE>
Optical Security Group, Inc.
535 16th Street, Suite 920
Denver, CO 80202
Gentlemen:
I represent and agree that said Bonus Shares are being acquired by me for
investment and that I have no present intention to transfer, sell or otherwise
dispose of such shares, except as permitted pursuant to the Plan and in
compliance with applicable securities laws, and agree further that said shares
are being acquired by me in accordance with and subject to the terms, provisions
and conditions of said Plan, to all of which I hereby expressly assent. These
agreements shall bind and inure to the benefit of my heirs, legal
representatives, successors and assigns.
My address of record is:
and my social security number:
Very truly yours,
________________________
Receipt of the above is hereby acknowledged.
OPTICAL SECURITY GROUP, INC.
________________________ By:________________________________
Date Its_________________________
<PAGE>
EXHIBIT 4(A)(2)
STOCK OPTION AGREEMENT
OPTICAL SECURITY GROUP, INC.
THIS AGREEMENT is made this 26th day of June 1998, by and between OPTICAL
SECURITY GROUP, INC. a Colorado corporation ("Corporation") and ________________
("Option Holder").
1. GRANT OF OPTION. The Corporation has granted to the Option Holder an
----------------
option to purchase ________ shares of its common stock (the "Stock") at the
purchase price of $_______ per share, in the manner and subject to the
conditions hereinafter provided. Subject to the provisions of Section 4, the
option will expire on _____________. The option was granted pursuant to the
following plan or arrangement:
x Incentive Stock Option Plan
----------
__________ Non-Qualified Stock Option Plan
__________ Stock Bonus Plan
__________ Other (Describe agreement or circumstance
pertaining to grant of option)
Each Plan as described above is on file with the Secretary of the
Corporation and a copy will be provided to the Option Holder upon request. To
the extent applicable, the provisions of the Plan shall be deemed a part of this
Agreement.
2. TIME OF EXERCISE OF OPTION. Subject to the provisions of Section 4
---------------------------
regarding termination of the option, the options granted may be exercised at any
time after the date(s) indicated:
_____________________
_____________________
3. METHOD OF EXERCISE. The option shall be exercised by written notice
-------------------
directed to the Corporation, at the Corporation's principal place of business,
accompanied by check in payment of the option price for the number of shares
specified. The Corporation shall make prompt delivery of such shares, provided
that if any law or regulation requires the Corporation to take any action with
respect to the shares specified in such notice before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to take such action.
<PAGE>
The price of an exercised option, or portion thereof, may be paid:
(i) in cash or by check, bank draft or money order payable to the
order of the Corporation; or
(ii) at the discretion of the Corporation, through the delivery of
shares of the Corporation's Common Stock, with anaggregate Fair Market Value
equal to the option price, provided such tendered shares have been owned by the
Option Holder for at least one year prior to such exercise; or
(iii) at the discretion of the Corporation, by a combination of both
(i) and (ii) above.
4. TERMINATION OF OPTION. Except as herein otherwise stated, the option
----------------------
to the extent not previously exercised, shall terminate upon the first to occur
of the following dates:
(a) Any event provided by the Plan pursuant to which the option was
granted (i.e., termination of employment, death, disability, etc.);
(b) the expiration of the option as provided in Section 1;
(c) Other: At such time as the Option Holder ceases to be an employee
of the Company (in the case of incentive stock options) or ceases to be a
director of the Corporation (in the case of all other options), all options for
which the Vesting Date is after the date the Option Holder ceases to hold such
position with the Corporation will expire.
Notwithstanding the above,
(i) if the Corporation should merge, consolidate or effect a share-
for-share exchange with another company (and the Corporation will not be the
surviving entity) or should the Corporation sell all or substantial all of its
assets, then immediately prior to any such transaction, all options shall vest
and be immediately exercisable.
(ii) if the option holder dies or becomes permanently and totally
disabled prior to the expiration of any option, than all options shall vest and
be immediately exercisable. An option holder is permanently and totally disable
if he is unable to conduct the gainful activity in which he was engaged prior to
such disability by reason of any medically determinable physical or mental
impairment for a continuous period of not less than six months. An option
holder shall not be considered to be permanently and totally disabled unless he
furnishes proof of the existence thereof in such form and manner, and at such
times, as the
<PAGE>
Corporation may require.
5. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that
------------------------------------------
the number of issued shares of common stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to the option and the option price per share shall be proportionately
adjusted. If the Corporation is reorganized or consolidated or merged with
another corporation, the Option Holder shall be entitled to receive options
covering shares of such reorganized, consolidated or merged company in the same
proportion, at an equivalent price, and subject to the same conditions as the
options granted pursuant to this Agreement. For purposes of the preceding
sentence, the excess of the aggregate Fair Market Value of the shares subject to
the option over the aggregate option price of such shares immediately before
such reorganization, consolidation or merger, and the new option or assumption
of old option shall not give the Option Holder additional benefits which were
not provided under the old option, or deprive the Option Holder of benefits
which were available under the old option.
6. NOTICE TO CORPORATION OF CERTAIN DISPOSITIONS. Any Option Holder
----------------------------------------------
disposing of shares of stock acquired on the exercise of an option granted
pursuant to the Corporation's Incentive Stock Option Plan by sale or exchange
either (a) within two years after the date of the grant of the option under
which the stock was acquired or (b) within one year after the acquisition of
such shares shall notify the Corporation of such disposition and of the amount
realized upon such disposition.
7. REGISTRATION OF SHARES. The Corporation agrees to pursue its best
-----------------------
efforts to cause the shares (i) issuable upon the exercise of options granted
pursuant to this Agreement or (ii) in accordance with a stock bonus grant, to be
registered under the provisions of the Securities Act of 1933.
8. BINDING EFFECT. This Agreement shall inure to the benefit of and be
---------------
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
<PAGE>
Corporation may require.
5. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that
------------------------------------------
the number of issued shares of common stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to the option and the option price per share shall be proportionately
adjusted. If the Corporation is reorganized or consolidated or merged with
another corporation, the Option Holder shall be entitled to receive options
covering shares of such reorganized, consolidated or merged company in the same
proportion, at an equivalent price, and subject to the same conditions as the
options granted pursuant to this Agreement. For purposes of the preceding
sentence, the excess of the aggregate Fair Market Value of the shares subject to
the option over the aggregate option price of such shares immediately before
such reorganization, consolidation or merger, and the new option or assumption
of old option shall not give the Option Holder additional benefits which were
not provided under the old option, or deprive the Option Holder of benefits
which were available under the old option.
6. NOTICE TO CORPORATION OF CERTAIN DISPOSITIONS. Any Option Holder
----------------------------------------------
disposing of shares of stock acquired on the exercise of an option granted
pursuant to the Corporation's Incentive Stock Option Plan by sale or exchange
either (a) within two years after the date of the grant of the option under
which the stock was acquired or (b) within one year after the acquisition of
such shares shall notify the Corporation of such disposition and of the amount
realized upon such disposition.
7. REGISTRATION OF SHARES. The Corporation agrees to pursue its best
-----------------------
efforts to cause the shares (i) issuable upon the exercise of options granted
pursuant to this Agreement or (ii) in accordance with a stock bonus grant, to be
registered under the provisions of the Securities Act of 1933.
8. BINDING EFFECT. This Agreement shall inure to the benefit of and be
---------------
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
OPTICAL SECURITY GROUP, INC.
By___________________________
Richard H. Bard
Chief Executive Officer
_____________________________
<PAGE>
EXHIBIT 4(B)(2)
STOCK OPTION AGREEMENT
OPTICAL SECURITY GROUP, INC.
THIS AGREEMENT is made this 26th day of June 1998, by and between OPTICAL
SECURITY GROUP, INC. a Colorado corporation ("Corporation") and ________________
("Option Holder").
1. GRANT OF OPTION. The Corporation has granted to the Option Holder an
----------------
option to purchase ________ shares of its common stock (the "Stock") at the
purchase price of $_______ per share, in the manner and subject to the
conditions hereinafter provided. Subject to the provisions of Section 4, the
option will expire on _____________. The option was granted pursuant to the
following plan or arrangement:
__________ Incentive Stock Option Plan
X Non-Qualified Stock Option Plan
----------
__________ Stock Bonus Plan
__________ Other (Describe agreement or circumstance
pertaining to grant of option)
Each Plan as described above is on file with the Secretary of the
Corporation and a copy will be provided to the Option Holder upon request. To
the extent applicable, the provisions of the Plan shall be deemed a part of this
Agreement.
2. TIME OF EXERCISE OF OPTION. Subject to the provisions of Section 4
---------------------------
regarding termination of the option, the options granted may be exercised at any
time after the date(s) indicated:
_____________________
_____________________
3. METHOD OF EXERCISE. The option shall be exercised by written notice
-------------------
directed to the Corporation, at the Corporation's principal place of business,
accompanied by check in payment of the option price for the number of shares
specified. The Corporation shall make prompt delivery of such shares, provided
that if any law or regulation requires the Corporation to take any action with
respect to the shares specified in such notice before the issuance thereof, then
the date of delivery of such shares shall be extended for the period necessary
to take such action.
<PAGE>
The price of an exercised option, or portion thereof, may be paid:
(i) in cash or by check, bank draft or money order payable to the
order of the Corporation; or
(ii) at the discretion of the Corporation, through the delivery of
shares of the Corporation's Common Stock, with anaggregate Fair Market Value
equal to the option price, provided such tendered shares have been owned by the
Option Holder for at least one year prior to such exercise; or
(iii) at the discretion of the Corporation, by a combination of both
(i) and (ii) above.
4. TERMINATION OF OPTION. Except as herein otherwise stated, the option
----------------------
to the extent not previously exercised, shall terminate upon the first to occur
of the following dates:
(a) Any event provided by the Plan pursuant to which the option was
granted (i.e., termination of employment, death, disability, etc.);
(b) the expiration of the option as provided in Section 1;
(c) Other: At such time as the Option Holder ceases to be an employee
of the Company (in the case of incentive stock options) or ceases to be a
director of the Corporation (in the case of all other options), all options for
which the Vesting Date is after the date the Option Holder ceases to hold such
position with the Corporation will expire.
Notwithstanding the above,
(i) if the Corporation should merge, consolidate or effect a share-
for-share exchange with another company (and the Corporation will not be the
surviving entity) or should the Corporation sell all or substantial all of its
assets, then immediately prior to any such transaction, all options shall vest
and be immediately exercisable.
(ii) if the option holder dies or becomes permanently and totally
disabled prior to the expiration of any option, than all options shall vest and
be immediately exercisable. An option holder is permanently and totally disable
if he is unable to conduct the gainful activity in which he was engaged prior to
such disability by reason of any medically determinable physical or mental
impairment for a continuous period of not less than six months. An option
holder shall not be considered to be permanently and totally disabled unless he
furnishes proof of the existence thereof in such form and manner, and at such
times, as the
<PAGE>
Corporation may require.
5. RECLASSIFICATION, CONSOLIDATION OR MERGER. If and to the extent that
------------------------------------------
the number of issued shares of common stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to the option and the option price per share shall be proportionately
adjusted. If the Corporation is reorganized or consolidated or merged with
another corporation, the Option Holder shall be entitled to receive options
covering shares of such reorganized, consolidated or merged company in the same
proportion, at an equivalent price, and subject to the same conditions as the
options granted pursuant to this Agreement. For purposes of the preceding
sentence, the excess of the aggregate Fair Market Value of the shares subject to
the option over the aggregate option price of such shares immediately before
such reorganization, consolidation or merger, and the new option or assumption
of old option shall not give the Option Holder additional benefits which were
not provided under the old option, or deprive the Option Holder of benefits
which were available under the old option.
6. NOTICE TO CORPORATION OF CERTAIN DISPOSITIONS. Any Option Holder
----------------------------------------------
disposing of shares of stock acquired on the exercise of an option granted
pursuant to the Corporation's Incentive Stock Option Plan by sale or exchange
either (a) within two years after the date of the grant of the option under
which the stock was acquired or (b) within one year after the acquisition of
such shares shall notify the Corporation of such disposition and of the amount
realized upon such disposition.
7. REGISTRATION OF SHARES. The Corporation agrees to pursue its best
-----------------------
efforts to cause the shares (i) issuable upon the exercise of options granted
pursuant to this Agreement or (ii) in accordance with a stock bonus grant, to be
registered under the provisions of the Securities Act of 1933.
8. BINDING EFFECT. This Agreement shall inure to the benefit of and be
---------------
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
OPTICAL SECURITY GROUP, INC.
By___________________________
Richard H. Bard
Chief Executive Officer
____________________________
<PAGE>
EXHIBIT 4(C)(2)
EXEMPLAR OF VESTING SCHEDULE
PURSUANT TO THE OPTICAL SECURITY GROUP, INC. STOCK BONUS PLAN
The vesting schedule of the Bonus Shares granted pursuant to the Stock Bonus
Plan shall be established by a committee ("Committee") composed of two or more
members of the Company's Board of Directors who are appointed by the Board, have
no set term of service and serve at the discretion of the Board. No shares have
been issued under the Plan and no vesting schedule has been established.
<PAGE>
EXHIBIT 24(A)
July 23, 1998
Optical Security Group, Inc.
535 16th Street, Suite 920
Denver, Colorado 80202
Re: Optical Security Group, Inc. - Registration Statement on Form S-8 Covering
the Optical Security Group, Inc. 1992 Incentive Stock Option Plan,
Nonqualified Stock Option Plan, and Stock Bonus Plan
Gentlemen:
We have acted as counsel for Optical Security Group, Inc., a Colorado
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission of the Form S-8 Registration Statement
(the "Registration Statement") relating to an aggregate of 4,060,000 shares of
common stock, par value $0.005 per share, of the Company (the "Common Stock") to
be offered pursuant to the Optical Security Group, Inc. 1992 Incentive Stock
Option Plan, The Optical Security Group, Inc. Nonqualified Stock Option Plan,
and the Optical Security Group, Inc. Stock Bonus Plan (individually, a "Plan"
and collectively, the "Plans").
In such capacity, we have examined, among other documents, the Amended and
Second Restated Articles of Incorporation of the Company, the Bylaws of the
Company, and the corporate proceedings adopting the Plans and authorizing the
issuance of up to 4,060,000 shares of Common Stock under the Plans and performed
such other investigation as we have deemed necessary. We have relied without
further investigation on the proper authorization and authenticity of the
documents we have reviewed.
Based on the foregoing, we are of the option that:
1. The Company has been duly incorporated and is validly existing under
the laws of the state of Colorado.
2. Upon issuance and delivery of the shares of Common Stock pursuant to
the terms of the respective Plan under which such shares are to be issued, such
shares will constitute validly issued, fully paid, and non-assessable Common
Stock of the Company.
<PAGE>
Optical Security Group, Inc.
July 23, 1998
Page 2
This opinion speaks as of the above date only, may be made ineffective by
subsequent events, is provided for the sole use of the Company and may not be
relied on for any purpose by any other party. We hereby consent to the use of
our name in connection with the Registration Statement and to the filing of a
copy of this opinion as Exhibit 5 thereto.
Very truly yours,
LOHF, SHAIMAN & JACOBS, P.C.
Charles H. Jacobs
CHJ:rg
<PAGE>
EXHIBIT 24(B)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Optical Security Group, Inc.'s Nonqualified Stock Option
Plan, 1992 Incentive Stock Option Plan, and Stock Bonus Plan of our report dated
May 29, 1998, with respect to the consolidated financial statements of Optical
Security Group, Inc. included in the Annual Report (Form 10-KSB) for the year
ended March 31, 1998 filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Denver, Colorado
July 23, 1998
