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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OPTICAL SECURITY GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
OPTICAL SECURITY GROUP, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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OPTICAL SECURITY GROUP, INC.
535 16th Street
Suite 920
Denver, CO 80202
(303) 534-4500
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD SEPTEMBER 16, 1998
To the Shareholders:
The annual meeting of the shareholders of Optical Security Group, Inc. (the
"Company") will be held in the Bard Center for Entrepreneurship Development,
Suite 300, 535 16th Street, Denver, Colorado 80202 on September 16, 1998, at
10:30 A.M., for the following purposes:
(1) To elect the Company's board of directors for the ensuing year.
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent accountants for the fiscal year ending March 31, 1999.
(3) To consider and act upon a proposal to approve a compensation plan for
outside directors.
(4) To transact such other business as may properly come before the meeting.
The board of directors has fixed the close of business on August 11, 1998, as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure adequate representation at the meeting, you are urged to sign
and return the enclosed Proxy as soon as possible in the postage pre-paid
envelope enclosed. Any shareholder attending the meeting may vote in person,
even if he or she has return a Proxy.
OPTICAL SECURITY GROUP, INC.
August 14, 1998 By:________________________________
Catherine M. Gotwalt, Secretary
THE ANNUAL REPORT TO SHAREHOLDERS INCLUDING FINANCIAL STATEMENTS ARE BEING
MAILED TO SHAREHOLDERS TOGETHER WITH THESE PROXY MATERIALS ON OR ABOUT AUGUST
14, 1998.
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
TO SAVE THE COST OF FURTHER SOLICITATION, PLEASE MAIL YOUR PROXY CARD PROMPTLY.
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OPTICAL SECURITY GROUP, INC.
535 16th Street, Suite 920
Denver, CO 80202
(303) 534-4500
PROXY STATEMENT
The enclosed Proxy is solicited by the board of directors of Optical
Security Group, Inc. (the "Company") for use at the annual meeting of
shareholders to be held on Wednesday, September 16, 1998, at 10:30 a.m., local
time, or at any adjournments of such meeting for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Shareholders. The annual
meeting will be held in the Bard Center for Entrepreneurship Development, Suite
300, 535 16th Street, Denver, Colorado 80202.
If the Proxy is executed and returned, it will be voted at the meeting in
accordance with any accompanying instructions, and if no specification is made,
the Proxy will be voted for the proposals set forth in the accompanying Notice
of Annual Meeting of Shareholders. Shareholders who execute Proxies may revoke
them at any time before they are voted, either by writing to the Company at the
address set forth above or in person at the time of the meeting. Additionally,
a shareholder may revoke a previous Proxy by duly executing a Proxy bearing a
later date.
The close of business on August 11, 1998, has been fixed as the record date
for determining the shareholders entitled to notice of and to vote at the
meeting. Only shareholders of record at the close of business on that date will
be entitled to vote at the meeting and any adjournment thereof. This Proxy
Statement, the Proxy, Notice of Annual Meeting of Shareholders, and Annual
Report, including financial statements for the fiscal year ended March 31, 1998,
are being mailed to shareholders of record on or about August 14, 1998.
Management of the Company does not intend to present and does not have
reason to believe that others will present any other items of business at the
annual meeting. However, if other matters are properly presented to the meeting
for a vote, the persons named in the Proxies will vote the Proxies in accordance
with their best judgement pursuant to discretionary authority granted in the
Proxies.
The Company's common stock ("Common Stock") and Series B 8% Cumulative
Convertible Exchangeable Preferred Voting Stock ("Series B Shares"; and together
with the Common Stock, collectively, the "Voting Stock") have voting rights. As
of June 8, 1998, the Company had outstanding 5,758,950 shares of Common Stock
and 1,793 Series B Shares. The holders of the Common Stock are entitled to a
total of 5,758,950 votes--one vote for each share of Common Stock held by them.
The holders of the Series B Shares are entitled to a total of 298,998 votes--one
vote for each share of Common Stock issuable to the holders of the Series B
Shares upon conversion of their Series B Shares.
The presence in person or by proxy of the holders of the Voting Stock
representing a majority of the Voting Stock will constitute a quorum.
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The cost of preparing, printing and mailing the enclosed Proxy,
accompanying Notice, Proxy Statement, Annual Report, and all other costs in
connection with solicitation of Proxies will be paid by the Company including
any additional solicitation made by letter, telephone, or telegraph. Failure of
a quorum to be present at the meeting will necessitate adjournment and will
subject the Company to additional expense.
ELECTION OF DIRECTORS
The following table sets forth the name, age, and position with the Company
for each nominee for director:
Name Age Position
---- --- --------
Richard H. Bard 50 Chairman of the Board, and Chief Executive Officer
Martin T. Hart 62 Director
J. R. Holland, Jr. 54 Director
Richard D. Lamm 63 Director
Bruce I. Raben 44 Director
Mark T. Turnage 37 Director, President, and Chief Operating Officer
RICHARD H. BARD has been a director and chief executive officer of the
Company since September 1993. He was elected chairman of the board in April
1994. Mr. Bard served as president from April 1994 to July 1997, and treasurer
from September 1993 to December 1994. Mr. Bard is also the chief executive
officer of Bard & Co., Inc., a diversified investment management company, and
chairman of Security Technology Group, Inc., a private company involved in
electronic security system integration. From 1989 to 1991, Mr. Bard was vice-
chairman of ComputerLand Corporation and chief executive officer of ComputerLand
International, Inc (since renamed Vanstar Corporation). From 1986 to 1988, Mr.
Bard was chairman and chief executive officer of Coast America Corporation, the
franchisor of Coast-to-Coast Hardware stores. From 1978 to 1986, Mr. Bard was
the president and chief operating officer of FoxMeyer Corporation, a large
pharmaceutical distributor and franchisor of drug stores. Mr. Bard is also a
director of Vanstar Corporation.
MARTIN T. HART has been a director since December 1993 and serves as the
chairman of the Compensation Committee, and as a member of the Audit Committee
and Nominating Committee. Mr. Hart has been a Denver-based businessman and
investor for the past twenty-eight years. He is also a director of Schuler
Homes, Inc., T- Netix, Inc., Ardent Software, Inc., P.J. America, Inc. and PNB
Financial Group, the holding company for Pacific National Bank, and a trustee of
MassMutual Corporate Investors and MassMutual Participation Investors.
J. R. HOLLAND, JR. has been a director since July 1994, and serves as
chairman of the Audit Committee, and as a member of the Nominating Committee.
Since 1991, he has been the managing director of Hunt Capital Group, L.L.C. and
president and chief executive officer of Unity Hunt, Inc.,
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diversified investment companies based in Dallas, Texas. He is also a director
of Placid Refining Company, Heartland Wireless Communications, Inc., and TNP
Enterprises, Inc.
RICHARD D. LAMM has been a director since December 1993 and serves on the
Audit Committee. He previously served as a director from 1989 through 1992.
Since 1987, Mr. Lamm has been a professor and director of the Center for Public
Policy and Contemporary Issues at the University of Denver. He was a law
partner at Berliner, Boyle, Pablan, Zisser and Walter P.C. and O'Connor and
Hannan, from 1987 until 1992. Mr. Lamm served as the governor of the state of
Colorado from 1975 to 1987.
BRUCE I. RABEN has been a director since February 1995. He serves as
chairman of the Nominating Committee and is a member of the Compensation
Committee. Since February 1996, Mr. Raben has been the managing director of
CIBC Oppenheimer Securities Corp. in Los Angeles. From March 1990 until January
1996, he served as the executive vice president and director of corporate
finance at Jefferies & Company, Inc., an investment banking firm. He is also a
director of Equity Marketing, Inc. and Terex Corporation.
MARK T. TURNAGE has been president and chief operating officer of the
Company since July 1, 1997. He was elected to the board of directors on June
26, 1998. Mr. Turnage served as managing director of OpSec International from
November 1995 to July 1997 and prior to that as vice president from July 1994 to
July 1997. From 1991 to 1994, Mr. Turnage practiced law with Davis, Graham &
Stubbs in Denver, Colorado. From 1986 to 1989, Mr. Turnage served as a
management consultant with McKinsey & Co.
All nominees have consented to serve if elected. In case any nominee shall
be unable or shall fail to act as a director, the persons named as proxies shall
have full discretion to vote for such other person or persons as may be
nominated.
Vote Required
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Provided a quorum is present at the meeting, the six nominees receiving the
highest number of votes cast by the holders of the Voting Stock voting as one
class will be elected directors. Unless the Proxy contains contrary
instructions, it is intended that the Proxies will be voted for the election of
the nominees listed above.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF THE VOTING STOCK VOTE
"FOR" THE SIX NOMINEES LISTED ABOVE.
COMPANY MANAGEMENT
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
- --------------------------------------------
The following table sets forth the name, age, and position with the Company
of executive officers (other than executive officers listed as nominees) and
significant employees as of July 1, 1998:
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Name Age Position
---- --- --------
Edward Dietrich 45 President of OpSec U.S., and
Senior Vice President Sales.
Catherine M. Gotwalt 42 Secretary
Gerald A. Melfi 47 Chief Accounting Officer and Treasurer
EDWARD DIETRICH has been president of OpSec U.S. since July 1997, and
senior vice president sales since October 1996. Mr. Dietrich served as vice
president sales of OpSec U.S. from August 1994 to October 1996. Mr. Dietrich
was employed by American Bank Note Holographics, Inc. from February 1992 until
August 1994 as the director of sales and marketing. From June 1989 to February
1992, he was vice-president of United States business development for Business
Vision Management Systems, Inc., a computer software company.
CATHERINE M. GOTWALT serves as the corporate secretary. She has served in
this capacity since 1989.
GERALD A. MELFI serves as the Company's chief accounting officer and
treasurer. Mr. Melfi also is employed as the chief financial officer for Bard &
Co., Inc., a diversified investment management company.
CORPORATE GOVERNANCE
- --------------------
The board of directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, taking into
consideration the interest of the shareholders. Directors of the Company serve
in such capacity until the next annual meeting of the shareholders. The board of
directors met three times during the fiscal year ended March 31, 1998. Except
for Mr. Richard Lamm who missed one meeting, each incumbent director attended
all of the board of directors' meetings.
The Company had a Compensation, Audit, and Nominating Committee during the
year ended March 31, 1998. Committee members are appointed to serve until the
next annual meeting of directors or until their successors are duly appointed.
The following table sets forth the names of the committee members as of July 1,
1998, and their terms on the committee.
Audit Committee Term
----------------- ----
J. R. Holland, Jr., Chairman Since December 15, 1994
Martin T. Hart Since December 15, 1994
Richard Lamm Since December 15, 1994
Compensation Committee Term
---------------------- ----
Martin T. Hart, Chairman Since December 15, 1994
Bruce Raben Since November 28, 1995
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Nominating Committee Term
-------------------- ----
Bruce Raben, Chairman Since October 23, 1996
Martin T. Hart Since October 23, 1996
J. R. Holland, Jr. Since October 23, 1996
The Compensation Committee is responsible for establishing and reviewing
policies governing salaries, bonuses, incentive compensation and the terms and
conditions of employment of senior executives and other key employees. In
addition, the Compensation Committee is responsible for oversight of the
Company's stock option plans. The Compensation Committee receives
recommendations from management and brings its recommendations to the full board
of directors. The Compensation Committee met once during the fiscal year ended
March 31, 1998. All of the committee members attended the meeting.
The Audit Committee confers with the Company's independent accountants to
review the plan and scope of their proposed Company audit as well as their
findings and recommendations upon completion of the audit. The Audit Committee
met once during the fiscal year ended March 31, 1998. All of the committee
members attended the meeting.
The Nominating Committee met once during the fiscal year ended March 31,
1998. All of the committee members attended the meeting. The nomination
committee selects the nominees for election to the board of directors at the
annual meeting of shareholders. The nominating committee will consider
recommendations for nominations from the shareholders. Recommendations for
nominations should be addressed to the Company, Attn: Nominating Committee, at
the address provided on the first page of this Proxy statement and must be
received by the Company no later than May 31, 1999.
During the year ended March 31, 1998, no director of the Company was also
an executive officer of another entity which had an executive officer of the
Company serving as a director of such entity, or as a member of the compensation
committee of such entity.
There are no family relationships among the Company's directors or
executive officers. The Company's officers serve at the discretion of the
Company's board of directors.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- -------------------------------------------------
The Company believes that during the fiscal year ended March 31, 1998, its
directors, officers and greater than 10% beneficial owners complied with all
filing requirements under Section 16(a) of the Securities Exchange Act of 1934,
as amended.
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EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the chief
executive officer ("CEO") of the Company and each of the Company's other
executive officers (two officers) whose total annual salary and bonus exceeded
$100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
------------------- Compensation
Awards
------------
Securities
Underlying All Other
Name Year Salary Options Compensation
- ---- -------- --------- ------------ ------------
Richard H. Bard 1998 $175,000 50,000 --
Chief Executive 1997 $150,000 342,878 --
Officer 1996 $125,000 300,000 --
since 9/17/93 and
President 4/1/94-7/1/97
Mark T. Turnage 1998 $120,505 50,000 $11,519(1)
President since 1997 $ 77,600 80,000 $41,984(1)
7/1/97; 1996 $ 67,629 20,000 --
Managing Director
of OpSec
International
11/95-7/97
Edward Dietrich 1998 $111,667 50,000 --
President OpSec 1997 $ 80,625 50,000 --
U.S. since 7/1/97; 1996 $ 77,500 10,000 --
Sr. VP Sales 10/96
to present; VP Sales
OpSec U.S. 8/94 to
10/96
_____________________
(1) Fiscal 1998 and Fiscal 1997 housing allowance paid on behalf of Mr. Turnage
relating to his overseas assignment in the United Kingdom.
STOCK OPTIONS
- -------------
The following table sets forth information concerning stock options granted
during the fiscal year ended March 31, 1998, to the Named Executive Officers.
Each option represents the right to purchase one share of the Company's Common
Stock.
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OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL
# SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION
NAME OPTIONS FISCAL YEAR PRICE DATE
- ---- ------- ----------- ----- ----
Richard H. Bard 50,000 (1) 18% $6.00 July 16, 2002
Mark T. Turnage 50,000 (2) 18% $6.37 June 15, 2002
Edward Dietrich 50,000 (2) 18% $6.37 June 15, 2002
_______________________________________
(1) Issued under the Company's Nonqualified Stock Option Plan.
(2) Issued under the Company's Incentive Stock Option Plan. Vesting ratably
over four years beginning June 16, 1998.
The following table sets forth information concerning each exercise of
stock options during the fiscal year ended March 31, 1998, for the Named
Executive Officer and the fiscal year-end value of all unexercised in-the-money
options (regardless of when granted) held by such person.
AGGREGATED OPTION/EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-End(#) at FY-End($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Exercised Unexercisable Unexercisable/(1)/
- ---- -------------- --------- -------------- ------------------
Richard H. Bard - - 1,092,878/0 $632,000/$.0
Mark T. Turnage - - 73,333/ $ 45,700/
126,667 $ 10,600
Edward Dietrich - - 65,833/ $ 45,700/
104,167 $ 10,600
- ---------------
(1) Market value of underlying securities based on the average of the high and
low bid of the Company's Common Stock on March 31, 1998, on NASDAQ of $5.44 per
share minus the exercise price.
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LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
- ------------------------------------------------------
There were no awards made to any Named Executive Officer under any long-
term incentive plans.
REPRICED OPTIONS
- -----------------
In the fiscal year ended March 31, 1998, there were no actions taken
regarding the repricing of options relating to Executive Officer Compensation.
EMPLOYEE PENSION, PROFIT SHARING OR OTHER RETIREMENT PLANS
- ----------------------------------------------------------
During the fiscal year ended March 31, 1998, the Company did not have a
defined benefit, pension plan, profit sharing or other retirement plan.
COMPENSATION OF DIRECTORS
- -------------------------
Standard Arrangements. Beginning July 1, 1997, through the fiscal year
---------------------
ended March 31, 1998, the Company's policy was to pay outside directors a
director's fee of $1,000 per attendance in person at all regular meetings on the
board of directors. Additionally, outside directors serving as committee
members were to receive a fee of $500 per attendance in person at each regularly
scheduled committee meeting. During this period all board and committee
meetings were held by telephone. Therefore, no compensation was paid to outside
directors pursuant to this policy.. The standard compensation package for
outside directors will change if the proposal to approve the compensation plan
for outside directors, described below, is adopted.
Other Arrangements. During the year ended March 31, 1998, the Company did
------------------
not grant stock options to any non-officer directors.
EMPLOYMENT CONTRACTS
- --------------------
On July 16, 1997, Mr. Richard H. Bard, the Company's chief executive
officer and the Company entered into an amendment to Mr. Bard's employment
contract extending his employment contract for an additional two years. Mr.
Bard is in the third year of his employment contract, which expires March 31,
2001. The employment contract provides for a salary of $200,000 for the third
year, $240,000 for the fourth and fifth year, and bonuses in such amount as the
board of directors may determine. Additionally, Mr. Bard, under his employment
agreement, is entitled to grants of stock options during the term of the
contract in an amount sufficient to maintain a 20% beneficial ownership of the
Common Stock, his beneficial ownership of the Common Stock as of December 31,
1995 ("Base Ownership"). If the Company is sold or merged into another company
prior to March 31, 2003, Mr. Bard is entitled to a stock bonus of 250,000 shares
of Common Stock. In addition to benefits available generally to other Company
employees, Mr. Bard is entitled to a $500 per month automobile allowance and
reimbursement of expenses incurred on behalf of the Company. If the Company
terminates Mr. Bard's employment prior to the expiration of the contract, Mr.
Bard is entitled to a buyout at 150% of the value of the contract at the time of
termination. During the fiscal year ended March 31, 1998, no bonus was granted
to Mr. Bard; however, to maintain his Base Ownership, Mr. Bard was issued
options from the Nonqualified Stock Option Plan to purchase 50,000 shares of
Common Stock.
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No other executive officers have written employment contracts with the
Company or any termination or change of control benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Compensation Committee members are employees or former
employees of the Company, and no executive officers of the Company participated
in deliberations of the Company's Compensation Committee concerning executive
officer compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following outlines certain relationships and related transactions
during the fiscal years ended March 31, 1997, and March 31, 1998.
Effective March 27, 1997, the Company completed a private offering of
526,899 shares of Common Stock. The purchase price of such shares was $6.00 per
share. The purchasers of the shares were granted certain registration rights.
In the offering, Mr. Bard and Mr. Lamm and his spouse purchased 16,866 and
12,000 shares of Common Stock for a purchase price of $101,200 and $72,000,
respectively.
The Company leases its Denver office space from 16th & Welton Investment,
Inc., a corporation owned by Mr. Bard and members of his immediate family. In
the fiscal year ended March 31, 1998, the Company paid a total of $88,158 under
such leases. Unless renewed or extended, the leases expire in 2000.
Mr. Bard has an employment agreement with the Company. (See COMPANY
MANAGEMENT - Employment Contracts.)
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
- -----------------------------------------------
The following table sets forth, as of June 8, 1998, the number of and
percentage of outstanding shares of the Company's Common Stock, beneficially
owned by (a) all directors and nominees, naming them, (b) the Named Executive
Officers, (c) the directors and executive officers of the Company as a group,
without naming them, and (d) persons or groups known by the Company to own
beneficially 5% or more of the Common Stock:
Name and Address of Amount and Nature of Title Percent
Beneficial Owner Beneficial Ownership of Class of Class
- ---------------- -------------------- -------- --------
Richard H. Bard 1,808,343/(1)/ Common 25.93%
535 16th Street, Suite 920
Denver, CO 80202
Yoram Curiel 337,135/(2)/ Common 5.65%
9400 E. Iliff Ave., #303
Denver, CO 80231
Edward Dietrich 89,568/(3)/ Common 1.53%
535 16/th/ Street, #920
Denver, CO 80206
Martin T. Hart 242,148/(4)/ Common 4.15%
875 Race Street
Denver, CO 80206
J.R. Holland, Jr. 15,000/(5)(6)/ Common 00.26%
4000 Thanksgiving Tower
1601 Elm Street
Dallas, TX 75201
Hunt Capital Group, L.L.C. 838,929/(6)(7)/ Common 13.80%
4000 Thanksgiving Tower
1601 Elm Street
Dallas, TX 75201
Richard D. Lamm 71,583/(8)/ Common 1.24%
c/o University of Denver
2050 East Iliff, #224
Denver, CO 80208
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Name and Address of Amount and Nature of Title Percent
Beneficial Owner Beneficial Ownership of Class of Class
- ---------------- -------------------- -------- --------
Gudrun Pasternak/ 466,668/(9)/ Common 8.10%
Hans M. Andresen
Halskestrasse 3-5
47877 Willich
Germany
Philena Enterprises, Inc./ 403,635/(10)/ Common 7.01%
Mark Bar
P. O. Box 6246
Denver, CO 80206
Bruce I. Raben 66,679/(11)/ Common 1.15%
Suite 2340
1999 Avenue of the Stars
Los Angeles, CA 90067
Mark T. Turnage 102,006/(12)/ Common 1.74%
535 16/th/ Street, #920
Denver, CO 80202
Advantage Technology, Inc. 300,000 Common 5.20%
676 Patriot Lane
Lancaster, PA 17601
All executive officers 2,437,397/(13)/ Common 33.12%
and directors as a group
(9 persons)
_______________________
(1) Includes 170,000 shares held in an IRA, and shares held as custodian for a
family member. In addition, includes the right to acquire, currently or
within 60 days, 1,215,878 shares of Common Stock.
(2) Includes 15,534 shares held by a family member and 10,000 shares held by
entities controlled by Mr. Curiel.
(3) Includes the right to acquire, currently or within 60 days, 88,333 shares
of Common Stock.
(4) Includes the right to acquire, currently or within 60 days, 79,000 shares
of Common Stock.
(5) Includes the right to acquire, currently or within 60 days, 15,000 shares
of Common Stock.
(6) Mr. Holland is the manager and president of Hunt Capital Group, L.L.C. Mr.
Holland has no ownership interest in Hunt Capital Group, L.L.C. and
disclaims beneficial ownership of the shares held by Hunt Capital Group,
L.L.C.
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(7) Includes the right to acquire, currently or within 60 days, 320,000 shares
of Common Stock.
(8) Includes 9,470 shares held as trustee for family members and 10,200 shares
held by his spouse. In addition, includes the right to acquire, currently
or within 60 days, 25,000 shares of Common Stock.
(9) Gudrun Pasternak and Hans M. Andresen are husband and wife and each own
233,334 shares of Common Stock. Ms. Pasternak disclaims beneficial
ownership of the shares held by Ms. Andresen. Mr. Andresen disclaims
beneficial ownership of the shares held by Ms. Pasternak.
(10) Mr. Mark Bar is the president of Philena Enterprises, Inc. and, for
purposes of calculating the percentage of beneficial owner, the shares held
by Philena Enterprises, Inc., Mr. Bar, and Mr. Bar's spouse have been
aggregated.
(11) Includes 6,000 shares held by Mr. Raben's spouse. Mr. Raben disclaims
beneficial ownership of these shares. In addition, includes the right to
acquire, currently or within 60 days, 48,333 shares of Common Stock.
(12) Includes 6,173 shares held as trustee for family members, and the right to
acquire, currently or within 60 days, 95,833 shares of Common Stock.
(13) Includes the right to acquire, currently or within 60 days, 1,601,210
shares of Common Stock.
Shares Outstanding
- ------------------
As of June 8, 1998, the Company also had outstanding 1,793 Series B Shares.
The holders of the Series B Shares are entitled to one vote for each share of
Common Stock issuable upon conversion of the Series B Shares (166.67 common
shares for each Series B Share) on all matters to which holders of the Common
Stock are entitled to vote. In addition, under Colorado law, the holders are
entitled to vote on certain matters, including matters effecting the rights of
the Series B Shares, as a class. No director or executive officer owns
beneficially any Series B Shares.
PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
The board of directors has selected Ernst & Young LLP, independent
certified public accountants, to audit the books and records of the Company for
fiscal year ending March 31, 1999. A representative of Ernst & Young LLP is not
expected to be present at the shareholders meeting.
Vote Required
- -------------
Provided a quorum is present at the meeting, the affirmative vote of a
majority of holders of the Voting Stock represented at the meeting is required
to approve the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP.
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PROPOSAL TO APPROVE COMPENSATION
PLAN FOR OUTSIDE DIRECTORS
The holders of the Voting Stock are being asked to approve the compensation
plan for outside directors (the "Plan") described below.
Description of the Plan.
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Upon election or reelection to the board of directors at an annual meeting
of the shareholders, each director who is not an employee of the Company (an
"outside director"), will receive a grant to purchase 5,000 shares of Common
Stock. Such grant will be issued pursuant to and subject to the terms of the
Company's Nonqualified Stock Option Plan ("NSO"). The exercise price of the
options will be equal to the Market Price of the Common Stock on the date of the
grant. "Market Price" means the closing bid price of the Common Stock as
reported on the The Nasdaq Stock Market/SM/ or such other national securities
exchange which is the principal market for the Common Stock. Such options will
be immediately exercisable and will expire five years from the date of the
grant.
In addition, upon election or reelection to the board of directors at an
annual meeting of the shareholders, each outside director will receive $10,000
as compensation for services to be rendered as a member of the board of
directors. Outside directors elected to the board of directors other than at an
annual meeting of the shareholders will receive a pro rata portion of $10,000
based on the number of months remaining until the next annual meeting of
shareholders. Such amount will be payable in cash or at the sole election of
the outside director, in shares of Common Stock provided that the Company has
a sufficient number of Common Stock available for such grant and the Company is
not required to register the Common Stock subject to such grant under any
federal or state securities laws. For purposes of such grant, the shares of
Common Stock will be valued at the Market Price on the date of the meeting at
which the outside director was elected or reelected to the Company's board of
directors. Such shares will be immediately vested and will not be subject to
forfeiture if the director fails to serve his full term.
The purpose of the Plan is to provide an incentive to persons to become or
continue as directors of the Company and to align the interests of outside
directors with the Company's stockholders to promote the success of the Company.
Provided that all nominees for directors are elected at the annual meeting and
this proposal is approved, five directors will receive compensation pursuant to
the Plan.
No specific number of shares of Common Stock have been reserved for
issuance to outside directors pursuant to the Plan, however, a maximum of
2,000,000 shares can be issued under the NSO.
Certain Federal Tax Consequences
- --------------------------------
Generally, outside directors will not be taxed upon grant of any option
under the NSO pursuant to the Plan. At the time of exercise of the option, the
outside director will realize ordinary income for federal tax purposes in an
amount equal to the excess of the then fair market value of the shares purchased
over the option exercise price. The Company will generally be entitled to a
compensation deduction at such time provided the Company satisfies certain
reporting obligations. When an outside director disposes of shares acquired by
the exercise of the option, generally, any amount received in excess of the fair
market value of the Common Stock on the date of exercise of
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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.
Outside directors also will realize ordinary income for federal tax
purposes upon receipt of the $10,000, whether paid in cash or in shares of
Common Stock. The Company will be entitled to a corresponding compensation
deduction in connection with such payments.
Vote Required
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Provided a quorum is present at the meeting, the affirmative vote of a
majority of holders of the Voting Stock represented at the meeting is required
to approve the Plan.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-KSB for the year ended March 31,
1998, will be sent to any shareholder of the Company upon request. Requests for
a copy of this report should be addressed to the secretary of the Company at the
address provided on the first page of this Proxy statement.
SHAREHOLDER PROPOSALS
Any shareholder proposal which may properly be included in the proxy
solicitation material for the 1999 annual meeting of shareholders must be
received by the secretary of the Company no later than May 31, 1999.
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OPTICAL SECURITY GROUP, INC.
ANNUAL MEETING OF SHAREHOLDERS
PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned appoints Richard H. Bard or Gerald A. Melfi, as proxies,
each with the power to appoint his substitute and authorizes them to represent
and to vote as designated below all of the shares of common stock and/or Series
B 8% Cumulative Convertible Exchangeable Preferred Voting Stock of Optical
Security Group, Inc. held of record by the undersigned on August 11, 1998, at
the annual meeting of shareholders to be held on September 16, 1998, or any
adjournments thereof.
1. Election of Directors:
___ For all nominees listed ____ WITHHOLD AUTHORITY
below (except as marked to vote for all
to contrary below) nominees below
INSTRUCTIONS: To withhold authority to vote for any nominee, strike a
line through the nominees name.
Richard H. Bard, Martin T. Hart, Richard D. Lamm, J. R. Holland, Jr., Bruce
I. Raben, Mark T. Turnage
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent accountants, for the fiscal year ending March 31, 1999:
____ FOR ____ AGAINST ____ ABSTAIN
3. To approve a compensation plan for outside directors:
____ FOR ____ AGAINST ____ ABSTAIN
4. The proxies are authorized to vote upon such other business as may
properly come before the meeting or any and all adjournments hereof:
____ FOR ____ AGAINST ____ ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO INDICATION IS MADE, THIS PROXY
WILL BE VOTED FOR 1 THROUGH 3.
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Please sign exactly as your name appears herein. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership or limited liability company, please sign in
partnership or limited liability company name by authorized person.
Dated: _________________, 1998 ______________________________
Signature
______________________________
Signature (if held jointly)
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY,
USING THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING.
