<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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 ss. 240.14a-11(c) or ss. 240.14a-12
Holmes Protection Group, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total Fee paid:
-----------------------------------------------------------------------
[x] 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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<PAGE>
HOLMES PROTECTION GROUP, INC.
440 NINTH AVENUE (LOGO)
NEW YORK, NEW YORK 10001-1695
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Holmes Protection Group, Inc.:
The Annual Meeting of Stockholders of Holmes Protection Group, Inc. (the
"Company") will be held at the Omni Berkshire Place Hotel, 21 East 52nd
Street, New York, New York, at 10:00 a.m., local time, on Thursday, December
5, 1996, for the following purposes:
1. To elect three directors to the Board of Directors for three-year
terms.
2. To consider and act upon a proposal to amend and restate the
Company's Restated Certificate of Incorporation in order to delete a
provision relating to certain creditors' and stockholders' rights to
effect compromises or reorganizations.
3. To consider and act upon a proposal to adopt the Company's 1996
Stock Incentive Plan.
4. To ratify the appointment of Arthur Andersen LLP as the independent
accountants for the Company for the year ending December 31, 1996.
5. To transact such other business as may properly come before the
meeting.
All stockholders are invited to attend the meeting. Stockholders of record
at the close of business on November 5, 1996, the record date fixed by the
Board of Directors, are entitled to notice of, and to vote at, the meeting. A
complete list of stockholders entitled to notice of, and vote at, the meeting
will be open to examination by the stockholders beginning ten days prior to
the meeting for any purpose germane to the meeting during normal business
hours at the office of the Assistant Secretary of the Company at 440 Ninth
Avenue, New York, New York 10001-1695.
Whether or not you intend to be present at the meeting, please sign and
date the enclosed proxy and return it in the enclosed envelope.
By Order of the Board of Directors
/s/ Irving Kagan
-----------------------
Assistant Secretary
New York, New York
November 13, 1996
<PAGE>
HOLMES PROTECTION GROUP, INC.
440 NINTH AVENUE
NEW YORK, NEW YORK 10001-1695
(212) 760-0630
------
PROXY STATEMENT
------
The accompanying proxy is solicited by the Board of Directors (the "Board
of Directors") of Holmes Protection Group, Inc. (the "Company") for use at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Omni Berkshire Place Hotel, 21 East 52nd Street, New York, New York 10022, at
10:00 a.m., local time, on Thursday, December 5, 1996, and any adjournment
thereof.
VOTING SECURITIES; PROXIES
The Company will bear the cost of solicitation of proxies. In addition to
the solicitation of proxies by mail, certain officers and employees of the
Company, without additional remuneration, may also solicit proxies personally
by telefax and by telephone. In addition to mailing copies of this material
to stockholders, the Company may request persons who hold stock in their
names or custody, or in the names of nominees for others, to forward such
material to those persons for whom they hold stock of the Company and to
request their authority for execution of the proxies. The Company may
reimburse such persons for their expenses in connection with such request.
One-third of the outstanding shares of common stock, par value $.01 per
share (the "Common Stock"), present, in person or represented by proxy, shall
constitute a quorum at the Annual Meeting. The approval of a plurality of the
outstanding shares of Common Stock present in person or represented by proxy
at the Annual Meeting, is required for election of the nominees as directors
as set forth in Proposal 1. The approval of a majority of the outstanding
shares of Common Stock outstanding on November 5, 1996, whether or not
present in person or by proxy at the Annual Meeting, is required for the
approval of the amendment of the Company's Restated Certificate of
Incorporation (the "Charter") as set forth in Proposal 2. In all other
matters, the affirmative vote of the majority of the outstanding shares of
Common Stock present, in person or represented by proxy at the Annual
Meeting, is required for adoption of such matters, unless the vote of a
greater number is required by the Company's Charter, the Company's Amended
and Restated By-Laws (the "By-Laws") or the General Corporation Law of the
State of Delaware.
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or
abstention (except in the case of election of directors) with respect to each
matter to be acted upon at the Annual Meeting. Shares of Common Stock
represented by the proxy will be voted, except as to matters with respect to
which authority to vote is specifically withheld. Where the solicited
stockholder indicates a choice on the form of proxy with respect to any
matter to be acted upon, the shares will be voted as specified. Abstentions
and broker non-votes will have no effect on the outcome of the election of
directors or the ratification of the appointment of the independent auditors.
With respect to all other matters to be voted on by stockholders at the
Annual Meeting, abstentions will have the same effect as "no" votes, and
broker non-votes will have no effect on the outcome of the vote.
All shares of Common Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instructions are provided in a
proxy, the shares of Common Stock represented by such proxy will be voted (i)
FOR the election of the Board of Director's nominees for director as set
forth in Proposal 1, (ii) FOR the approval of the amendment and restatement
of the Charter as set forth in Proposal 2, (iii) FOR the adoption of the 1996
Stock Incentive Plan as set forth in of Proposal 3, (iv) FOR the ratification
of Arthur Andersen LLP as the independent accountants for the Company for the
year ending December 31, 1996 as set forth in Proposal 4, and (v) in
accordance with the proxy-holder's best judgment as to any other matters
raised at the Annual Meeting.
<PAGE>
A stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the office of the
Assistant Secretary of the Company, executing and delivering to the Company a
later-dated proxy reflecting contrary instructions or appearing at the Annual
Meeting and taking appropriate steps to vote in person.
At the close of business on November 5, 1996, 5,828,062 shares of Common
Stock were outstanding and eligible for voting at the Annual Meeting. Each
stockholder of record is entitled to one vote for each share of Common Stock
held on all matters that come before the Annual Meeting. Only stockholders of
record at the close of business on November 5, 1996 are entitled to notice
of, and to vote at, the Annual Meeting.
This proxy material is being mailed to stockholders commencing on or about
November 13, 1996.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Charter and the By-Laws, the Company's Board of
Directors is divided into three classes of directors, designated as Class A,
Class B and Class C, serving staggered three-year terms. The By-Laws provide
that each director serves from the date of his election until the annual
meeting of stockholders held in the third year following the year of his
election and until his successor is elected and qualified. The total number
of directors, and the number of directors in any class, may be increased or
decreased by a resolution adopted by a vote of three-quarters of the entire
Board of Directors. The number of directors is fixed at nine; however, only
eight directors are currently serving on the Board of Directors and one
vacant seat exists. The Company has no immediate plans to fill such vacant
seat on the Board of Directors.
For re-election to the Board of Directors as Class B directors for full
three-year terms expiring in 1999, the Board of Directors has nominated the
following individuals, each a current Class B director:
GEORGE V. FLAGG
LAWRENCE R. GLENN
EDWARD L. PALMER
The persons named in the accompanying proxy intend to vote for the
election as director of the three nominees listed above. Each nominee has
consented to serve if elected. The Board of Directors has no reason to
believe that any of the nominees will not serve if elected, but if any of
them should become unavailable to serve as a director, and if the Board of
Directors designates a substitute nominee or nominees, the persons named as
proxies will vote for the substitute nominee or nominees designated by the
Board of Directors.
The following table sets forth certain information with respect to each
person who is currently a director or executive officer of the Company, and
is based on the records of the Company and information furnished to it by
such persons. Reference is made to "Security Ownership of Certain Beneficial
Owners and Management" for information pertaining to stock ownership by each
director and executive officer of the Company.
2
<PAGE>
DIRECTORS AND OFFICERS OF THE COMPANY
The current directors and executive officers of the Company, their
positions held with the Company, their ages, and for directors, their class
and the year their term as director expires, are as follows:
<TABLE>
<CAPTION>
Class/Expiration
Name Age Positions of Term as Director
------------------------ ----- ---------------------------------------------- -------------------
<S> <C> <C> <C>
George V. Flagg ........ 55 President, Chief Executive Officer and Director Class B/1996
James L. Boehme ........ 48 Executive Vice President - Sales and Marketing
Glenn C. Riker ......... 51 Senior Vice President-Human Resources and
Assistant Secretary
Lawrence R. Irving ..... 40 Vice President - Finance
Pierre Besuchet(2) ..... 63 Director Class A/1998
Daniel T. Carroll(1)(2) 70 Director Class A/1998
Lawrence R. Glenn(1)(3) 58 Director Class B/1996
Mark S. Hauser(3) ...... 39 Director, Vice Chairman of the Board Class C/1997
William P. Lyons(1)(2) . 55 Director, Chairman of the Board Class C/1997
David Jan Mitchell(1)(3) 35 Director Class C/1997
Edward L. Palmer(1)(2) . 79 Director Class B/1996
</TABLE>
- ------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Retirement Benefits Committee.
The following is a brief summary of the background of each director and
executive officer of the Company:
George V. Flagg. Mr. Flagg joined the Company on January 8, 1996 as
President and Chief Executive Officer. Prior thereto, from September 1985 to
December 1995, Mr. Flagg served in various executive capacities at The
National Guardian Corporation, a security alarm services company ("National
Guardian"), and most recently as President (from May 1986 to December 1995)
and Chief Executive Officer (from May 1991 to December 1995). Mr. Flagg
became a director of the Company in May 1996.
James L. Boehme. Mr. Boehme was appointed Executive Vice President-Sales
and Marketing of the Company on January 8, 1996. Prior thereto, from March
1988 to December 1995, Mr. Boehme served in various executive capacities at
National Guardian, and most recently as Senior Vice President, Sales and
Marketing (from June 1994 to December 1995) and Vice President, Sales and
Marketing (from January 1990 to June 1994).
Glenn C. Riker. Mr. Riker has been with the Company since December 1989,
starting as Director of Human Resources and currently serving as Senior Vice
President of Human Resources and Assistant Secretary. Prior to joining the
Company, Mr. Riker was Vice President of Human Resources at Atlas Copco North
America, Inc., a manufacturer of industrial equipment.
Lawrence R. Irving. Mr. Irving joined the Company in May 1996 as Vice
President-Finance. From July 1995 to April 1996, Mr. Irving served as
Controller, and then as Vice President-Finance and Treasurer, respectively,
of Centennial Security Holdings, Inc., a security alarm services company.
Prior thereto, from April 1987 to June 1995, Mr. Irving served as Assistant
Controller, and then as Assistant Vice President/Assistant Controller,
respectively, of National Guardian.
Pierre Besuchet. Mr. Besuchet has been a director since 1991. Mr. Besuchet
has been the President of Gerant des Fortunes, a Swiss investment
management company since 1983. He is also a non-executive director of Faisal
Finance (Switzerland) S.A., a Swiss investment firm.
Daniel T. Carroll. Mr. Carroll has been a director since June 1996. Since
1982, Mr. Carroll has been the Chairman of The Carroll Group, a management
consulting company. He is also a director of A.M. Castle & Co., American
Woodmark Corporation, Aon Incorporated, Comshare, Inc., Diebold Incorporated,
Oshkosh Truck Corporation, Wolverine World Wide, Inc. and Woodhead Industries
Inc.
3
<PAGE>
Lawrence R. Glenn. Mr. Glenn has been a director since February 1996.
Since 1995, Mr. Glenn has been Chairman of J.W. Goddard and Company, a
privately owned investment company dealing in real estate, corpo- rate
finance and financial advisory services. Mr. Glenn is the retired former
Chairman of the Credit Policy Committee of Citicorp and Citibank, N.A. He is
also a director of First Bank of Americas and Gerber Childrenswear Holdings,
Inc.
Mark S. Hauser. Mr. Hauser has been a director since 1994. He was elected
Vice Chairman of the Board of Directors in May 1995. He is the founder and,
since 1991, has been a Managing Director of Tamarix Capital Corporation, a
New York-based private investment banking firm. Prior thereto, Mr. Hauser was
a Managing Director at Hauser, Richards & Co., and Ocean Capital Corporation,
private international investment banking firms. He is also a director of ICC
Technologies, Inc. and EA Industries, Inc.
William P. Lyons. Mr. Lyons has been a director since 1994. He was elected
Chairman of the Board of Directors in May 1995. He has been President and
Chief Executive Officer of William P. Lyons and Co., Inc., a private
investment firm, since 1975. From 1992 to 1995, Mr. Lyons served as Chairman
of JVL Corp., a pharmaceutical manufacturer, and from 1988 to 1991, he served
as Chairman and Chief Executive Officer of Duro- Test Corporation, a
manufacturer of specialty lighting products. Mr. Lyons was an adjunct
Professor of Management and Law at Yale University from 1973 to 1989. Mr.
Lyons is also a director of Lydall, Inc., Video Lottery Technologies, Inc.
and Keystone Consolidated Industries, Inc.
David Jan Mitchell. Mr. Mitchell has been a director since 1994. Since
January 1991, Mr. Mitchell has been President of Mitchell & Company, Ltd., a
New York-based private merchant banking company he founded. Since March 1992,
Mr. Mitchell has been a partner of Pertherton Capital Corporation, a
privately held real estate investment company. From April 1988 to December
1990, Mr. Mitchell served as a managing principal and a director of Rodman &
Renshaw, Inc., a publicly traded investment banking and brokerage firm. Mr.
Mitchell also serves as a director of Kellstrom Industries, Inc. and Bogen
Communications International.
Edward L. Palmer. Mr. Palmer has been a director since 1992. He is the
retired Chairman of the Executive Committee of Citicorp and Citibank, N.A.
Mr. Palmer's current directorships include Devon Group, Inc., Sun-Resorts
Ltd. N.V., FondElec Group, and Energy Services International Corporation. Mr.
Palmer has also served on the board of directors of several U.S. and
international corporations.
NOMINATION OF CERTAIN DIRECTORS
As described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, the Company is party to the following agreements
which entitle certain stockholders to nominate members of the Board of
Directors: (i) the Exchange Agreement, dated as of December 18, 1991, as
amended (the "Exchange Agreement"), with a group of insurance companies and
other institutions (the "Institutions") including John Hancock Mutual Life
Insurance Company and The Mutual Life Insurance Company of New York, and (ii)
the Investment Agreement, dated as of June 29, 1994 (the "Investment
Agreement"), with HP Partners L.P. Based on their aggregate percentage share
ownership, the Institutions currently have a right to nominate two directors.
Messrs. Palmer and Glenn were initially nominated by the Institutions and
appointed to the Board of Directors on November 30, 1992 and February 8,
1996, respectively, in accordance with the terms of the Exchange Agreement.
HP Partners L.P. currently has a right to nominate three directors. Messrs.
Hauser, Lyons and Mitchell were nominated by HP Partners L.P. and elected to
the Board of Directors on July 29, 1994 in accordance with the terms of the
Investment Agreement. HP Partners L.P. previously had the right to nominate
four directors. However, as a result of the Company's public offering of
Common Stock in September 1996, the number of directors HP Partners L.P. was
entitled to nominate to the Board of Directors was reduced from four to
three. In connection therewith, William Spier (a former director who was
elected to the Board of Directors as a nominee of HP Partners L.P.) resigned
from the Board of Directors on September 30, 1996. Messrs. Hauser, Mitchell
and Spier are stockholders and directors of the general partner of HP
Partners L.P. and Messrs. Mitchell and Spier are also limited partners of HP
Partners L.P. See "Security Ownership of Certain Beneficial Owners and
Management" and "Certain Transactions."
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS; BOARD OF DIRECTORS MEETINGS
The Board of Directors has established an audit, a compensation and a
retirement benefits committee to assist it in the discharge of its
responsibilities. The principal responsibilities of each committee and the
members of each committee are described in the succeeding paragraphs. The
Company's Board of Directors held 12 meetings during the fiscal year ended
December 31, 1995. The Board of Directors does not have a nominating
committee. This function is performed by the Board of Directors. All
Directors attended at least 75% of the meetings held by the Board of
Directors and by the committees on which they served during 1995.
The Audit Committee currently consists of Messrs. Carroll, Glenn, Lyons,
Mitchell and Palmer (Chairman). The Audit Committee held 2 meetings during
1995. The Audit Committee reviews the scope and results of the audit and
other services performed by the Company's independent accountants.
The Compensation Committee currently consists of Messrs. Besuchet,
Carroll, Lyons (Chairman) and Palmer. The Compensation Committee held 1
meeting during 1995. This Committee establishes objectives for the Company's
senior executive officers and sets the compensation of directors, executive
officers and other employees of the Company. It is also charged with the
administration of the Company's employee benefit plans, including stock
options plans.
The Retirement Benefits Committee currently consists of Messrs. Glenn,
Hauser (Chairman) and Mitchell. The Retirement Benefits Committee held 1
meeting during 1995. The Retirement Benefits Committee provides oversight for
the Company's pension and retirement benefit plans.
COMPENSATION OF DIRECTORS
Each non-employee director receives an annual director's fee of $15,000
(except for the Chairman who receives an annual fee of $25,000) and a fee of
either $500 per day for attending, in person, meetings of the Board of
Directors or committees of the Board of Directors, or $250 per day for
participating in such meetings by telephone. Non-employee directors are
reimbursed for their reasonable expenses incurred in connection with
attendance at or participation in such meetings. In addition, under the
Holmes Protection Group, Inc. 1996 Stock Incentive Plan (the "1996 Plan"),
each non-employee director who was a director of the Company on December 4,
1995 was granted an option to purchase 25,000 shares of Common Stock. Messrs.
Glenn and Carroll were each granted an option to purchase 25,000 shares of
Common Stock on February 8, 1996 and June 27, 1996, respectively, at the time
of their respective appointments to the Board of Directors. Such grants and
the terms thereof are subject to and conditioned upon stockholder approval of
the 1996 Plan at the Annual Meeting. See "Proposal 3 - Holmes Protection
Group, Inc. 1996 Stock Incentive Plan."
Directors who are employees of the Company receive no additional
compensation for their services as directors. However, such directors are
reimbursed for their reasonable expenses incurred in connection with
attendance at or participation in meetings of the Board of Directors or
committees of the Board of Directors.
The Board of Directors recommends a vote FOR the approval of the nominees
for election as directors.
5
<PAGE>
PROPOSAL 2
AMENDMENT AND RESTATEMENT OF THE CHARTER
The Board of Directors has unanimously declared it advisable and
unanimously recommends to the Company's stockholders that Article SEVENTH
("Article Seventh") of the Charter, which relates to certain creditors' and
stockholders' rights to effect compromises or reorganizations, be deleted.
On August 30, 1996, the Company entered in a $25 million secured Credit
Agreement with Merita Bank Ltd and Bank of Boston Connecticut (the "Banks").
At the Banks' request, and as a condition to the closing of such Credit
Agreement, the Company agreed to seek stockholder approval to amend the
Charter in order to delete Article Seventh relating to compromises and
arrangements with creditors and/or stockholders. The Banks requested the
removal of Article Seventh to avoid the risk that other creditors could
restrict the Banks' ability to have the Banks' debt repaid if such debt were
ever to represent less than one-fourth of the Company's outstanding debt.
Article Seventh is an optional provision permitted by the Delaware General
Corporation Law. It provides that the Company's creditors or stockholders, or
any class of them, may petition a court in the State of Delaware to order a
meeting of such creditors or stockholders to consider a proposed compromise
or arrangement with the Company. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders, as the case may be, agree to a
compromise or arrangement of debts owed to such creditors or the equity
interests held by such stockholders, such compromise or arrangement and any
resulting reorganization of the Company shall, if sanctioned by the Delaware
Court of Chancery, be binding on the Company and the creditors and/or
stockholders involved, including those creditors and/or stockholders who may
be opposed to such compromise and reorganization.
Article Seventh reads in full as follows:
"SEVENTH: Creditors: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this Corporation under the provisions of Section 291 of the
Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code, order
a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this Corporation as a consequence of such
compromise or arrangement and the said reorganization shall, if sanctioned
by the court to which the said application has been made, be binding on
all the creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this Corporation, as the case may be, and also
on this Corporation."
If the Charter is amended and restated to delete Article Seventh, creditors
and/or stockholders, or any class of them, representing three-fourths in
value of the claims against or equity interests in the Company will no longer
be able to impose a court-sanctioned settlement upon the remaining members of
the affected class under Delaware law. However, in the absence of Article
Seventh, creditors and stockholders will still be entitled to all rights
afforded by the Federal Bankruptcy Code. These include provisions under
Chapter 11 of the Bankruptcy Code which generally provide for a binding
reorganization of the Company's debt and/or equity interests upon an
affirmative vote of a majority in number and two-thirds in value or amount of
those voting in any particular class, provided that numerous other
requirements are met. There are some important differences between
reorganizations under the Bankruptcy Code and those permitted by Article
Seventh. Under the Bankruptcy Code: (i) stockholders cannot initiate a
reorganization and creditors may only do so if the Company fails to pay its
debts as they become due; (ii) the Company has the exclusive right to propose
a reorganization during the first 120 days, unless that period is increased
or reduced by the Bankruptcy Court for cause; (iii) votes may be solicited
only in conjunction with a disclosure statement which the Bankruptcy Court
has approved as containing adequate
6
<PAGE>
information; and (iv) a plan of reorganization may not be confirmed if the
plan does not provide each creditor and stockholder who has not accepted the
plan with as much consideration as would be received if the Company were
liquidated under Chapter 7 of the Bankruptcy Code. The provisions of Article
Seventh do not contain any such procedural requirements. However, any plan or
arrangement proposed under Article Seventh would have to be sanctioned by the
Delaware Chancery Court and would be subject to any requirements imposed by
the Delaware Chancery Court in connection therewith.
Deletion of Article Seventh may make it more difficult for a majority of
creditors and/or stockholders to obtain approval of any compromise,
arrangement or plan of reorganization that would benefit them, particularly
if such approval is sought when the Company is not insolvent. In the absence
of Article Seventh, creditors and stockholders would have to rely on the
rights provided by the Federal Bankruptcy Code and, with respect to general
corporate matters, the stockholders would have to rely on the general
provisions of the Delaware General Corporation Law.
The Board of Directors of the Company has adopted, subject to stockholder
approval, an amended and restated Certificate of Incorporation which will
delete Article Seventh in its entirety and renumber the remaining provisions
and make other conforming changes (the "Amended Charter"). The Board of
Directors believes that approval of the Amended Charter (i) will not have a
material adverse effect on the rights of stockholders who will still be
entitled to the full benefits and rights available under the Delaware General
Corporation Law and the Federal Bankruptcy Code, and (ii) will facilitate the
Company's relationships with the Banks.
The Board of Directors recommends a vote FOR the approval of an amendment
and restatement of the Charter to delete Article Seventh, which is designated
as Proposal 2 on the enclosed proxy card.
7
<PAGE>
PROPOSAL 3
HOLMES PROTECTION GROUP, INC.
1996 STOCK INCENTIVE PLAN
APPROVAL OF THE COMPANY'S 1996 STOCK INCENTIVE PLAN
The Board of Directors has adopted the 1996 Plan and it is being submitted
to stockholders for approval.
A description of the 1996 Plan, a complete copy of which is attached
hereto as Annex A, appears below.
The purpose of the 1996 Plan is to provide an incentive to and to attract,
secure and retain the Company's key employees, consultants and directors. The
1996 Plan provides for the grant of options to acquire a maximum of 2,000,000
shares of Common Stock. Of such shares, as of November 5, 1996, 830,000
shares were subject to outstanding options (subject to stockholder approval).
The 1996 Plan provides that, upon its approval, no further options or other
awards will be granted under either the Company's Amended and Restated Senior
Executives' Option Plan (the "Executives Plan") or the Company's 1992
Directors' Option Plan (the "Directors Plan"). All options outstanding under
the prior plans will continue to be governed by the terms of those plans. The
1996 Plan permits the granting of incentive stock options ("ISOs") or
nonqualified stock options ("NSOs"), each as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), at the discretion of
the Compensation Committee of the Board of Directors with regard to employee
or consultant optionees, and NSOs to non-employee directors.
The 1996 Plan is administered by the Compensation Committee. Subject to
the terms of the 1996 Plan, the Compensation Committee determines the terms
and conditions of options granted under the 1996 Plan to employees and
consultants of the Company and its affiliates. The Compensation Committee,
however, has no discretion with respect to the selection of non-employee
directors to receive options, the number of shares of Common Stock subject to
any such options, the purchase price thereunder or the timing of grants of
options to non-employee directors. Options granted under the 1996 Plan are
not transferable, except by the laws of descent and distribution, and are
evidenced by written agreements which contain such terms, conditions,
limitations and restrictions as the Compensation Committee deems advisable
and which are not inconsistent with the terms of the 1996 Plan.
The option exercise price must be paid in full at the time the notice of
exercise of the option is delivered to the Company and must be tendered in
cash or by transferring shares of Common Stock upon terms and conditions
determined by the Compensation Committee. The Board of Directors has certain
rights to suspend, amend or terminate the 1996 Plan, provided stockholder
approval is obtained.
In the event of a change in control (as defined in the 1996 Plan),
outstanding options vest immediately and become exercisable in full, whether
or not otherwise vested or exercisable. In addition, the optionee has the
right to surrender his or her options for cancellation within sixty days
after a change in control and receive a cash payment therefor.
Non-Employee Director Awards. The 1996 Plan provides for awards of options
to directors ("Eligible Directors") of the Company who are not employees of
the Company or its affiliates and who have not, within one year immediately
preceding the determination of such director's eligibility, received any
award under any other plan of the Company or its affiliates that entitles the
participants therein to acquire stock, stock options or stock appreciation
rights of the Company or its affiliates (other than options granted under any
other plan under which participants' entitlements are governed by provisions
meeting the requirements of Rule 16b-3(c)(2)(ii) promulgated under the
Securities Exchange Act of 1934, as amended). The exercise price of the
options is equal to 100% of the fair market value (as such term is defined in
the 1996 Plan) of the Common Stock on the date of grant. The options are
exercisable in whole or in part at all times during the period beginning on
the date of grant until five years from the date of grant.
Pursuant to the 1996 Plan, subject to stockholder approval, each
non-employee director in office on and after December 4, 1995 was awarded an
Initial Grant (as defined below). In addition, upon first election or
appointment to the Board of Directors, each newly elected or appointed
Eligible Director will be granted an
8
<PAGE>
option to purchase 25,000 shares of Common Stock (the "Initial Grant").
Immediately following each annual meeting of stockholders commencing with the
meeting following the close of fiscal year ending December 31, 1996, each
Eligible Director will be granted an additional option to purchase 1,000
shares of Common Stock.
In addition, on December 5, 1995, each of Messrs. Hauser, Lyons, Mitchell
and Spier were granted options under the 1996 Plan to purchase 15,000,
60,000, 30,000 and 15,000 shares of Common Stock, respectively, at an
exercise price of $5.56 per share. Such grants were made in recognition of
the extraordinary services that each of these individuals provided to the
Company in connection with the management transition and reorganization that
occurred during 1995.
Options granted to Mr. Spier pursuant to the 1996 Plan will not be
affected by the termination of his service as a director.
If an optionee's service as a director terminates for any reason other
than disability, cause (each as defined in the 1996 Plan) or death, the
optionee may exercise his options in the three-month period following such
termination. If the optionee's service as a director terminates by reason of
resignation or removal from the Board of Directors due to disability, the
optionee may exercise his options in the one-year period following such
termination. If an optionee dies while a director or within three months
after termination of service as a director, any options held by such director
may be exercised in the one-year period following the optionee's death by the
person to whom such rights under the options pass by will or pursuant to the
laws of descent and distribution. If an optionee's service as a director
terminates for cause, any options granted to such optionee will terminate
immediately.
Other Awards. The 1996 Plan provides that the Compensation Committee must
establish an exercise price for employee stock options that is not less than
the fair market value (as defined in the 1996 Plan) of the Common Stock on
the date of grant. Each ISO must expire within ten years of the date of
grant. However, if ISOs are granted to persons owning more than 10% of the
voting stock of the Company, the 1996 Plan provides that the exercise price
may not be less than 110% of the fair market value per share at the date of
grant and that the term of such ISOs may not exceed five years. Each employee
option vests at a rate and expires on a date designated by the Compensation
Committee.
If an optionee's employment is terminated by reason of death, disability
or retirement (as defined in the 1996 Plan), the Compensation Committee may
determine that any options held by such person become immediately exercisable
and may be exercised at any time prior to the expiration date of the options
or within twelve months (three months with regard to ISOs) after the date of
termination. If an optionee's employment is terminated for any reason other
than death, disability or retirement or if the Compensation Committee does
not provide the treatment discussed in the prior sentence, all unvested
options held by such person will terminate and all vested options will be
exercisable for a period of three months after the date of termination.
NEW PLAN BENEFITS
The following table sets forth the stock options that the individuals and
groups referred to below will receive in 1996 if the 1996 Plan is approved by
the Company's stockholders at this Annual Meeting.
9
<PAGE>
NEW PLAN BENEFITS
Holmes Protection Group, Inc.
1996 Stock Incentive Plan
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Name and Position Dollar Value ($) Underlying Options
---------------------------------------------- ---------------- ------------------
<S> <C> <C>
George V. Flagg
President and Chief Executive Officer ...... (2) 260,000
James L. Boehme
Executive Vice President-Sales and Marketing (2) 195,000
Glenn C. Riker
Senior Vice President of Human Resources ... -- --
Lawrence R. Irving
Vice President-Finance ..................... (2) 25,000
Richard Hickson (1)
Former President and Chief Executive Officer -- --
Brian H. Jaffe (1)
Former Vice President, General Counsel
and Secretary .............................. -- --
Eugene G. Lestardo (1)
Former Acting Chief Operating Officer ...... (2) 15,000
William C. Sholl (1)
Former Vice President Management
Information Systems ....................... -- --
Current Executive Officers as a Group ........ (2) 480,000
Current Non-Executive Directors as a Group ... (2) 280,000
Non-Executive Employees as a Group ........... (2) 10,000
</TABLE>
- ------
(1) Messrs. Hickson, Jaffe and Sholl resigned from the Company effective May
30, 1995, April 27, 1996 and March 31, 1996, respectively, and are not
eligible to participate in the 1996 Plan as of the date hereof. Mr.
Lestardo's employment with the Company terminated effective October 7,
1996. The stock options granted to Mr. Lestardo under the 1996 Plan will
not be affected by the termination of his employment with the Company.
However, Mr. Lestardo is not eligible for further grants of options under
the 1996 Plan. See "Executive Compensation-Summary Compensation Table."
(2) Dollar value is dependent upon the future share price of the Common
Stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 PLAN UNDER CURRENT LAW
An optionee will recognize no taxable income at the time an option is
granted.
An optionee will recognize no taxable income at the time of exercise of an
incentive stock option. If the optionee makes no disposition of the acquired
shares within two years after the date of grant of the incentive stock
option, or within one year after the transfer of such shares, the employee
will recognize no taxable income and any gain or loss that is realized on a
subsequent disposition of such shares will be treated as long-term capital
gain or loss. As to incentive stock options exercised, the excess, if any, of
the fair market value of the shares on the date of exercise over the option
price will be an item of tax preference for purposes of computing the
alternative minimum tax.
If the foregoing holding period requirements are not satisfied, the
optionee will realize (i) ordinary income for federal income tax purposes in
the year of disposition in an amount equal to the lesser of (a) the excess,
if any, of the fair market value of the shares on the date of exercise over
the option price thereof, or (b) the excess, if any, of the selling price
over the optionee's adjusted basis of such shares (provided that the
disposition is a sale or exchange with respect to which a loss (if sustained)
would be recognized by such individual) and (ii) capital gain equal to the
excess, if any, of the amount realized upon the disposition of shares over
the fair market value of such shares on the date of exercise.
10
<PAGE>
Employees, officers, consultants, agents, and independent contractors of
the Company will be required to include in their gross income in the year of
exercise of a non-qualified stock option the difference between the fair
market value on the exercise date of the shares transferred and the option
price.
The Company will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount as the optionee is
considered to be in receipt of compensation income in connection with the
exercise of non-qualified stock options or, in the case of an incentive stock
option, a disqualifying disposition of shares received upon exercise thereof.
If the holding period requirements outlined above are met, no deduction will
be available to the Company in connection with an incentive stock option.
Under the Revenue Reconciliation Act of 1993, for fiscal years beginning
after January 1, 1994, the Company may not be able to deduct compensation to
certain employees to the extent compensation exceeds $1 million per tax year.
Covered employees include the chief executive officer and the four other
highest compensated officers of the Company for that tax year. Certain
performance-based compensation including stock options are exempt provided
that, among other things, the stock options are granted by a compensation
committee of the Board of Directors which is comprised solely of two or more
outside directors (as defined in the Internal Revenue Code and Treasury
Regulations promulgated thereunder), the plan sets a maximum number of
options that may be granted to any person in any year, and the plan under
which the options are granted is approved by stockholders.
The foregoing discussion summarizes the federal income tax consequences of
the 1996 Plan based on current provisions of the Code which are subject to
change. This summary does not cover any state or local tax consequences of
participation in the 1996 Plan.
The 1996 Plan is not subject to any provision of the Employee Retirement
Income Security Act of 1974, as amended, and is not qualified under Section
401(a) of the Code.
The Board of Directors recommends a vote FOR the approval of the 1996
Plan, which is designated as Proposal 3 on the enclosed proxy card.
11
<PAGE>
PROPOSAL 4
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
independent accountants for the fiscal year ending December 31, 1996, and to
render other professional services as required.
The appointment of Arthur Andersen LLP is being submitted to stockholders
for ratification.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting, where they will have the opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
questions.
The Board of Directors recommends a vote FOR the ratification of Arthur
Andersen LLP as independent auditors of the Company, which is designated as
Proposal 4 on the enclosed proxy card.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership, as of November 5, 1996, of the Common Stock by (i) any person
known by the Company to beneficially own more than 5% of the outstanding
Common Stock; (ii) each director of the Company; (iii) the Company's former
Chief Executive Officer and each of the four most highly compensated current
or former executive officers (collectively, the "Named Officers") for
services rendered to the Company during each of the last three fiscal years;
and (iv) all directors and executive officers of the Company as a group,
including the Named Officers. All share and warrant amounts and related
exercise prices have been adjusted to give effect to the one-for-fourteen
reverse stock split of the Common Stock completed on March 27, 1995. On
November 5, 1996, there were 5,828,062 shares of Common Stock issued and
outstanding.
<TABLE>
<CAPTION>
Number of Shares of Common
Stock Beneficially Percentage
Name of Beneficial Owner Owned(1) Ownership(1)
--------------------------------------------------- -------------------------- ---------------------
<S> <C> <C>
HP Partners L.P.(2) ............................... 2,201,600 33.8%
c/o HP Management, Inc.
444 Madison Avenue, 38th Floor
New York, New York 10022
John Hancock Mutual Life .......................... 636,095 10.8%
Insurance Company(2)
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
The Mutual Life Insurance Company ................. 397,716 6.8%
of New York(2)
1740 Broadway
New York, New York 10019
TJS Partners, L.P.(2) ............................. 399,000 6.8%
52 Vanderbilt Avenue
5th Floor
New York, New York 10017
Stephen Feinberg(2) ............................... 324,600 5.6%
950 Third Avenue, 20th Floor
New York, New York 10022
Pierre Besuchet(3)(6) ............................. 19,048 *
Daniel T. Carroll(6) .............................. 2,000 *
George V. Flagg(6) ................................ 6,000 *
Lawrence R. Glenn(6) .............................. -- --
Mark S. Hauser(4)(6)(7) ........................... 2,201,600 33.8%
Richard Hickson ................................... 142 *
Brian H. Jaffe(5) ................................. 306 *
Eugene G. Lestardo(5)(6) .......................... 1,000 *
William P. Lyons(4)(6)(7) ......................... 2,210,600 33.9%
David Jan Mitchell(4)(6)(7) ....................... 2,204,600 33.9%
Edward L. Palmer(6) ............................... 2,592 *
Glenn C. Riker(5) ................................. -- --
William C. Sholl .................................. 2,207 *
All directors and executive officers as a group (15
persons)(3)(4)(5)(6) ............................. 2,246,895 34.5%
</TABLE>
- ------
*Represents less than 1% of outstanding Common Stock.
(1) Each director and executive officer has sole voting and investment power
with respect to the shares beneficially owned, except as otherwise noted
in the footnotes to this table. For purposes of this table, a person or
group of persons is deemed to have "beneficial ownership" of any shares
of Common Stock which such person has the right to acquire on or within
60 days of November 5, 1996. For purposes of computing the
13
<PAGE>
percentage of outstanding Common Stock held by each person or group of
persons named above, any shares which such person has or has the right to
acquire on or within 60 days after November 5, 1996 are deemed to be
outstanding, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
(2) Includes shares issuable upon the exercise of warrants having a current
exercise price of $10.68 per share, as follows: John Hancock Mutual Life
Insurance Company and affiliates - 68,394; and The Mutual Life Insurance
Company of New York and affiliates - 42,764. With respect to HP Partners
L.P., includes 685,714 shares of Common Stock issuable upon the exercise
of warrants having a current exercise price of $4.58 per share. The
information in the foregoing table and in this note is based on the
Company's records and on either a Schedule 13D or a Schedule 13G filed
with the Securities and Exchange Commission by each of the following
stockholders and dated as indicated: HP Partners L.P., dated January 20,
1995; John Hancock Mutual Life Insurance Company, dated January 16, 1996;
The Mutual Life Insurance Company of New York, dated March 2, 1995; TJS
Partners, L.P., dated June 17, 1996; and Stephen Feinberg, dated October
1, 1996. The Schedule 13D filed by TJS Partners, L.P. states that TJS
Management, L.P., TJS Corporation, and Thomas J. Salvatore may be deemed
to own beneficially the shares owned beneficially by TJS Partners, L.P.
(3) Excludes vested options to purchase 17,884 shares of Common Stock granted
to Mr. Besuchet under the Company's 1992 Directors' Option Plan (the
"Directors Plan"). Grants of stock options are no longer permitted under
the Directors Plan. Such options have a current exercise price of $13.97
per share, however, they become exercisable only if the price per share
of the Common Stock on the Nasdaq National Market is not less than $24.45
for 30 consecutive trading days. Such condition had not been met as of
November 5, 1996.
(4) Includes 1,515,886 shares of Common Stock and warrants to purchase
685,714 shares of Common Stock owned by HP Partners L.P. Messrs. Hauser,
Mitchell and Spier (a former director of the Company) are stockholders
and directors of the general partner of HP Partners L.P. and Messrs.
Mitchell and Spier are also limited partners of HP Partners L.P. Messrs.
Hauser, Mitchell and Spier are also the sole stockholders of the special
limited partner of HP Partners L.P. which is entitled to various rights
relating to 285,714 of the partnership's warrants. Pursuant to HP
Partners L.P.'s partnership agreement, Mr. Lyons has an arrangement to
participate in any economic benefit which Mr. Spier obtains as a result
of Mr. Spier's shareholding interest in such general partner.
(5) Excludes vested options granted under the Company's Amended and Restated
Senior Executives' Option Plan (the "Executive Plan") to each of Messrs.
Jaffe, Lestardo, Riker and one other former executive officer to purchase
2,656, 6,640, 4,427 and 2,656 shares of Common Stock, respectively, at an
exercise price of $7.28 per share. These options become exercisable only
if the price per share of the Common Stock on the Nasdaq National Market
is not less than $13.30 for 30 consecutive trading days. Such condition
had not been met as of November 5, 1996.
(6) Excludes options granted under the 1996 Plan to each of Messrs. Besuchet,
Carroll, Glenn, Hauser, Lestardo, Lyons, Mitchell and Palmer to purchase
25,000, 25,000, 25,000, 40,000, 15,000, 85,000, 55,000 and 25,000 shares
of Common Stock, respectively, at exercise prices ranging from $5.50 to
$5.56 per share. Also excludes options granted under the 1996 Plan to
each of Messrs. Flagg, Boehme and Irving to purchase 260,000, 195,000 and
25,000 shares of Common Stock, respectively, in accordance with their
respective employment agreements. The grant of all options under the 1996
Plan and terms thereof are subject to and conditioned upon approval of
such plan by stockholders at this Annual Meeting. See "Proposal 3-Holmes
Protection Group, Inc. 1996 Stock Incentive Plan."
(7) The address of such stockholder is: c/o Holmes Protection Group, Inc.,
440 Ninth Avenue, New York, New York 10001-1695.
14
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of annual and long-term
compensation earned by or paid to the Named Officers for services rendered to
the Company during each of the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- --------------
Other Securities
Annual Underlying All Other
Compen- Options/ Compen-
Salary Bonus sation SARs sation
Name and Principal Position Year ($) ($) ($) (#) ($)(1)
------------------------------ ------ ---------- --------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard Hickson (2) .......... 1993 $183,300 $ 7,600 $ -- -- $ --
Former President and Chief 1994 208,333 5,346 -- 35,418(3) --
Executive Officer 1995 108,605 -- -- -- --
Brian H. Jaffe (4) ........... 1993 115,000 6,000 10,400 -- 3,630
Former Vice President, General 1994 117,884 13,151 10,400 8,854(3) 3,931
Counsel and Secretary 1995 122,000 25,010 10,400 -- 4,325
Eugene G. Lestardo (5) ....... 1993 125,000 17,455 11,700 -- 4,500
Former Acting Chief Operating 1994 128,128 42,667 11,700 13,281(3) 4,624
Officer 1995 141,300 16,250 12,425 15,000(6) 4,628
Glenn C. Riker ............... 1993 86,000 15,300 13,000 -- 3,039
Senior Vice President-Human 1994 88,150 12,782 13,000 8,854(3) 3,209
Resources 1995 91,260 20,716 13,000 -- 3,476
William C. Sholl (7) ......... 1993 54,692 3,783 6,320 -- 208
Former Vice President- 1994 90,000 10,378 10,400 -- 3,011
Management Information Systems 1995 93,150 20,027 10,400 8,854 3,339
</TABLE>
- ------
(1) Represents matching contributions by the Company under the Company's
401(k) Plan. 20% of accrued matching contributions become vested on each
of the second through sixth anniversaries of employment and are fully
vested thereafter.
(2) Mr. Hickson resigned as President and Chief Executive Officer and a
director of the Company, effective May 30, 1995. His outstanding stock
options were canceled on such date pursuant to the terms of the
Executives Plan. From May 31 through September 30, 1995, Mr. Hickson
served as a consultant to the Company for which services he received
additional compensation of $6,531.
(3) 1994 option grants replaced a like number of options previously granted
under the Executives Plan to Messrs. Hickson, Lestardo and Riker in 1992
and Mr. Jaffe in 1994.
(4) Mr. Jaffe resigned as Vice President, General Counsel and Secretary of
the Company, effective as of April 27, 1996. His unvested options to
purchase 6,198 shares of Common Stock were canceled. Mr. Jaffe's vested
options to purchase 2,656 shares of Common Stock remain outstanding
through June 30, 1997. Mr. Jaffe is serving as a consultant to the
Company in exchange for compensation on a per diem basis.
(5) Mr. Lestardo served in the capacity of Acting Chief Operating Officer of
the Company from June 14 to December 31, 1995. Mr. Lestardo served as
President of Holmes Protection of New York, Inc., a wholly-owned
subsidiary of the Company, from October 1991 to October 1996. On October
7, 1996, Mr. Lestardo's position at the Company was eliminated as part of
a corporate restructuring and, as a result, Mr. Lestardo's employment
with the Company was terminated. Mr. Lestardo's unvested options to
purchase 6,641 shares of Common Stock under the Executives Plan were
cancelled, and his vested options to purchase 6,640 shares of Common
Stock remain outstanding through April 6, 1998.
(6) Represents a grant of stock options made in December 1995 under the 1996
Plan. All options granted thereunder are subject to and conditioned upon
approval of the 1996 Plan by stockholders of the Company at this Annual
Meeting.
15
<PAGE>
(7) Mr. Sholl joined the Company on May 26, 1993, which accounts for the
lower compensation level for such year. Mr. Sholl resigned from his
position with the Company, effective March 31, 1996. Under the terms of
the Executives Plan, his options to purchase 8,854 shares of Common Stock
have been canceled.
All information under "Executive Compensation" herein relating to stock
options (except for those granted under the 1996 Plan) and related exercise
and hurdle prices have been adjusted to give effect to the one-for-fourteen
reverse stock split of the Common Stock effected on March 27, 1995.
The following table contains information concerning the grant of stock
options made to the Named Officers during the fiscal year ended December 31,
1995 under the Executives Plan or the 1996 Plan:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value
----------------------------------------------------------------------- at Assumed
Annual
Percent of Rates of
Total Stock Price
Number of Option/SARs Appreciation For
Securities Granted to Market Price Option Term(2)
Underlying Employees Exercise or on Grant -----------------------
Options/SARs in Fiscal Base Price Date Expiration
Name Granted(#) Year ($/sh)(1) ($/sh) Date 5%($) 10%($)
- ---------------------- ------------ ------------ ------------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Eugene G. Lestardo (3) 15,000 60% $5.50 $5.50 12/4/2005 $51,884 $131,484
William C. Sholl (4) . 8,854 100% 7.28 6.12(5) 1/12/2005 23,807 76,089
</TABLE>
- ------
(1) Once vested, all options which have been granted under the Executives Plan
become exercisable only if the price per share of the Common Stock on the
Nasdaq National Market is not less than $13.30 for 30 consecutive trading
days. Such condition had not been met as of November 5, 1996. The 1996
Plan and all options granted thereunder are subject to and conditioned
upon stockholder approval at this Annual Meeting.
(2) Amounts indicated under the "Potential Realizable Value" columns above
have been calculated by multiplying the market price on the date of grant
by the annual appreciation rate shown (compounded for the term of the
options), subtracting the exercise price per share and multiplying the
gain per share by the number of shares covered by the options.
(3) Represents a grant of stock options made under the 1996 Plan. Such grant
and the terms thereof are subject to and conditioned upon the approval of
the 1996 Plan by stockholders at this Annual Meeting. Effective October 7,
1996, Mr. Lestardo's position as President of Holmes Protection of New
York, Inc. was eliminated and as a result, his employment with the Company
was terminated. The options granted to Mr. Lestardo under the 1996 Plan
will not be affected by the termination of his employment with the
Company.
(4) Represents a grant of stock options made under the Executives Plan. Mr.
Sholl resigned from his position with the Company, effective March 31,
1996. Under the terms of the Executives Plan, his stock options have been
canceled. See Note 7 to Summary Compensation Table.
(5) On the date of grant, January 12, 1995, the Common Stock traded on the
London Stock Exchange. Accordingly, the dollar-denominated market price on
the grant date has been converted at an assumed exchange rate of $1.56 per
British pound.
Except as disclosed above, no other grants of stock options were made in the
fiscal year ended December 31, 1995 to any of the Named Officers. No stock
options were exercised by any of the Named Officers during the fiscal year
ended December 31, 1995.
16
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at Fiscal Year-End (#) at Fiscal Year-End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
----------------------------- ------------------------- -------------------------
<S> <C> <C>
Richard Hickson ............. 0/0 0/0
Brian H. Jaffe .............. 2,656/0(1) 0/0
Eugene G. Lestardo .......... 3,984/24,297(1)(2) 0/0
Glenn C. Riker .............. 2,656/6,198(1) 0/0
William C. Sholl ............ 0/8,854(1) 0/0
</TABLE>
- ------
(1) Options were granted pursuant to the Executives Plan on July 29, 1994,
except in the case of Mr. Sholl whose options were granted on January 12,
1995.
(2) Includes options which were granted pursuant to the 1996 Plan on December
4, 1995.
17
<PAGE>
EMPLOYMENT AGREEMENTS
Mr. Flagg is employed by the Company pursuant to an employment agreement
dated January 8, 1996, which expires on December 31, 1997, but continues
year-to-year thereafter unless terminated in accordance with its terms. Mr.
Flagg's employment agreement provides for an annual base salary of no less
than $200,000. Mr. Boehme is employed by the Company pursuant to an
employment agreement dated January 8, 1996, which expires on December 31,
1997, but continues year-to-year thereafter unless terminated in accordance
with its terms. Mr. Boehme's employment agreement provides for an annual base
salary of no less than $150,000. Mr. Irving is employed by the Company
pursuant to an employment agreement dated May 13, 1996, which expires on May
31, 1998, but continues year-to-year thereafter unless terminated in
accordance with its terms. Mr. Irving's employment agreement provides for an
annual base salary of no less than $105,000. The salaries provided under all
of these employment agreements may be increased at the discretion of the
Board of Directors or the Compensation Committee thereof. Under the terms of
Messrs. Flagg's, Boehme's and Irving's respective employment agreements,
options to purchase shares of Common Stock under the 1996 Plan (260,000
shares in the case of Mr. Flagg, 195,000 shares in the case of Mr. Boehme and
25,000 shares in the case of Mr. Irving) have been granted subject to and
conditioned upon stockholder approval of the 1996 Plan at this Annual
Meeting. Messrs. Flagg, Boehme and Irving are also provided with certain
other benefits and perquisites pursuant to their respective employment
agreements. Upon termination of employment with the Company, Messrs. Flagg,
Boehme and Irving are each subject to a non-compete period of six months.
In accordance with Messrs. Flagg's, Boehme's and Irving's respective
employment agreements, upon a termination of employment by the Company for
reasons other than (i) "Cause," (ii) "Disability" (each as defined in such
employment agreements), or (iii) death, incompetency or bankruptcy, the
Company will be obligated to pay to each of Messrs. Flagg, Boehme and Irving
12 months base salary, and to maintain certain benefits. Upon termination of
employment by the Company within 12 months of a "Change-of-Control Event" (as
defined below), Messrs. Flagg, Boehme and Irving shall each be entitled to
receive their respective base salaries and certain other benefits for an
additional period of 12 months. As defined in Messrs. Flagg's, Boehme's and
Irving's respective employment agreements, a "Change-of-Control Event" means
the consummation of (i) a proxy contest for control of the Board of Directors
resulting in the person or entity or group of affiliated persons or entities
(collectively, a "Control Group") initiating such proxy contest electing a
majority of the members of the Board of Directors; (ii) the purchase by a
Control Group of the Common Stock or other securities of the Company which,
when aggregated with any other securities of the Company then held by such
Control Group, gives such Control Group "beneficial ownership" (as defined in
Rule 13d-3 promulgated under the Exchange Act) of securities representing
more than 50% of the combined voting power of the Company; or (iii) any such
transaction that the Board of Directors shall have favorably recommended to
stockholders of the Company at any time prior to its consummation, and such
recommendation shall not have been withdrawn.
Mr. Riker is employed by the Company pursuant to an employment agreement
dated October 12, 1994, which expires on December 31, 1996, and which
provides for an annual base salary of $91,260. The salary provided under the
employment agreement may be increased at the discretion of the Board of
Directors or the Compensation Committee thereof. Under the terms of the
employment agreement, Mr. Riker is entitled to receive cash bonus awards,
provided certain targets with regard to Company performance are met or
exceeded. Mr. Riker is also provided with certain other benefits and
perquisites pursuant to his employment agreement. Upon termination of
employment with the Company, Mr. Riker is subject to a non-compete period of
four months.
In accordance with Mr. Riker's employment agreement, upon a termination of
employment by the Company for reasons other than (i) "Cause," (ii)
"Disability" (as defined in the employment agreement), (iii) death,
incompetency or bankruptcy, or (iv) the expiration of the term of the
employment agreement, the Company will be obligated to pay four months base
salary to Mr. Riker, and to maintain certain benefits. Upon termination of
employment by the Company within 12 months of a "Contested Takeover Event"
(as defined below), Mr. Riker shall be entitled to receive his base salary
and certain other benefits for a period of 12 months. As defined in Mr.
Riker's employment agreement, a "Contested Takeover Event" means the
consummation of (i) a proxy contest for control of the Board of Directors
resulting in the person or entity or group of affiliated persons or entities
(collectively, a "Control Group") initiating such proxy contest electing a
majority of the members of the Board
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of Directors, or (ii) the purchase by a Control Group of the Common Stock or
other securities of the Company which, when aggregated with any other
securities of the Company then held by such Control Group, gives such Control
Group "beneficial ownership" (as defined in Rule 13d-3 promulgated under the
Exchange Act) of securities representing more than 50% of the combined voting
power of the Company; provided that no "Contested Takeover Event" shall be
deemed to occur if the Board of Directors shall have favorably recommended
the transaction to stockholders of the Company at any time prior to its
consummation, and such recommendation shall not have been withdrawn.
Upon the occurrence of a "Change-of-Control Event" and/or a "Contested
Takeover Event," as the case may be, the Company's maximum aggregate salary
payment obligation would be $1,001,200. Such amount is calculated by
combining the 1996 base salaries of each of Messrs. Flagg, Boehme and Irving
for a period of 24 months, together with the 1996 annual base salary of Mr.
Riker for a period of 12 months.
Messrs. Hickson, Jaffe, Lestardo and Sholl were employed by the Company
pursuant to employment agreements which contained substantially similar terms
to those in the employment agreement of Mr. Riker. Following the termination
of their respective employment agreements, Messrs. Hickson, Jaffe and Sholl
were each subject to non-compete periods of six months, three months and
three months, respectively. Mr. Lestardo is currently subject to a
non-compete period of six months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1995, the Compensation
Committee of the Board of Directors consisted of Messrs. Besuchet, Lyons
(Chairman), Palmer and Spier. None of these individuals has ever served as an
officer or an employee of the Company (other than by reason of the officer
status conferred upon the Chairman of the Board of Directors pursuant to the
Company's By-Laws). In addition, no executive officer of the Company has ever
served as (i) a member of the compensation committee or equivalent of another
entity, one of whose executive officers served on the Compensation Committee,
(ii) a director of another entity, one of whose executive officers served on
the Compensation Committee, or (iii) a member of the compensation committee
or equivalent of another entity, one of whose executive officers served as a
director of the Company.
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee establishes objectives for the Company's
executive officers, sets the compensation of Directors, executive officers
and other employees of the Company and is charged with the administration of
the Company's employee benefit plans, including stock option plans.
GENERAL POLICIES REGARDING COMPENSATION OF EXECUTIVE OFFICERS
The Company's executive compensation policies are intended (1) to attract
and retain high quality executive and professional talent and to motivate
these individuals to maximize stockholder returns, (2) to provide appropriate
incentives for executives to produce sustained, superior performance in order
to achieve the Company's business objectives, and (3) to align executives'
interests with those of the Company's stockholders in securing the long-term
growth and success of the Company. The Company's compensation structure
consists of base salary, incentive cash bonuses and stock options. Together
these components link each executive's compensation directly to individual
and Company performance. The initial base salary and terms of bonuses for
certain executive officers are contained in the employment agreements
described under the caption "Employment Agreements."
Salary. Base salary levels reflect individual positions, responsibilities,
experience, leadership, competitive practices, and potential contribution to
the success of the Company. Salaries are reviewed annually and vary based on
the Company's Chief Executive Officer's recommendation and assessment of the
individual executive's performance and the Company's performance, and the
Compensation Committee's review and approval thereof. The base salaries
specified in each executive's employment agreement, if applicable, are
adjusted as necessary, subject to any minimum salaries specified therein.
Bonuses. The Company is currently contemplating the restructuring of the
existing cash bonus provisions under the Company's Senior Management
Incentive Plan (the "Incentive Plan"). However, as of the fiscal year
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ended December 31, 1995 and according to the provisions of the Incentive Plan
as it currently exists, executive officers are eligible to receive incentive
cash bonuses based on the Compensation Committee's assessment of the
respective executive's individual performance and the performance of the
Company. Each officer has three assigned incentive award goals which, if met,
entitle such officer to an annual award of 10% of base salary for each goal
attained. The officer receives an additional bonus of one third of 1% of base
salary for each 1% increment by which a numerical goal is exceeded. These
goals are generally based on the Company's pre-tax income, recurring revenues
and the officer's departmental costs. The annual incentive award an executive
officer is eligible to receive can amount to up to 100% of the executive's
annual base salary. Bonus payments are paid quarterly and are subject to
year-end adjustment. In 1995, incentive award percentages earned by the Named
Officers ranged from 0% to 22.7% of base salary.
In addition to bonus payments under the Incentive Plan based on the
achievement of specific numerical goals, the Chief Executive Officer, in
consultation with the Compensation Committee, may from time to time
recommend, subject to the Compensation Committee's approval, additional
discretionary bonus payments to certain executive officers based on
exceptional individual performance.
Stock Options. The Compensation Committee believes that continued use of
stock options is an effective mechanism for long-term incentive compensation
of executive officers and certain other employees, and aligns their interests
with those of the stockholders. Accordingly, the Company has adopted, subject
to shareholder approval, the 1996 Plan described herein. If the 1996 Plan is
approved by stockholders, no further grants will be made under the Executives
Plan.
In 1993, the Internal Revenue Code was amended to limit the deductibility
of compensation paid to certain executives in excess of $1 million.
Compensation not subject to the limitation includes certain compensation
payable solely because an executive attains performance goals. The Company's
compensation deduction for a particular executive's total compensation,
including compensation realized from the exercise of stock options, will be
limited to $1 million. The Compensation Committee believes that the
compensation paid by the Company in the fiscal year ended December 31, 1995
will not result in any material loss of tax deductions for the Company.
COMPENSATION OF THE FORMER CHIEF EXECUTIVE OFFICER
Mr. Hickson's annual base salary of $225,000 for the fiscal year ended
December 31, 1995 was determined by the terms of his employment agreement, as
amended, for the 2 1/2 year period which commenced in June 1993 and
terminated upon his resignation effective May 30, 1995. The Compensation
Committee believes that, despite the Company's disappointing financial
results, the compensation earned by Mr. Hickson pursuant to his employment
agreement for the first five months of 1995 was appropriate in light of Mr.
Hickson's substantial contribution to improving the efficiency of the
Company's operations and his efforts toward positioning the Company's
business for further growth.
MEMBERS OF THE COMPENSATION COMMITTEE:
William P. Lyons (Chairman)
Pierre Besuchet
Daniel T. Carroll
Edward L. Palmer
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PERFORMANCE GRAPH(1)
The Company's Common Stock traded on the London Stock Exchange from 1984
through March 24, 1995. From March 27, 1995 through September 20, 1996, the
Common Stock traded on the Nasdaq SmallCap Market. Since September 23, 1996,
the Common Stock has traded on the Nasdaq National Market.
The graph below compares the cumulative total shareholder return on the
Common Stock since March 27, 1995 (the date the Common Stock began trading on
Nasdaq SmallCap Market) through September 30, 1996 with the cumulative
stockholder return of (a) the total return on the CRSP Total Return Index for
The Nasdaq Stock Market (US Companies) and (b) a "Peer Group Index." Total
return values were calculated based on the assumption of $100 invested and on
cumulative total return values assuming reinvestment of dividends. The Peer
Group is based on a selection of companies operating in the security alarm
monitoring industry and is comprised of Protection One, Inc., ADT Limited,
Automated Security (Holdings) PLC, Borg-Warner Security, and Response USA,
Inc. The Peer Group Index weighs the constituent companies' stock performance
on the basis of market capitalization measured on March 27, 1995. The stock
price performance shown on the graph below is not necessarily indicative of
future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG HOLMES PROTECTION GROUP, INC., CRSP TOTAL RETURN INDEX FOR THE
NASDAQ STOCK MARKET (US COMPANIES) AND A PEER GROUP INDEX
(IN DOLLARS)
[Graph appears here according to plot coordinates listed below]
12/31/91 12/31/92 12//31/93 12/30/94 12/29/95
-------- -------- --------- -------- --------
Holmes Protection Group, Inc. 72.3
Nasdaq Stock Market (US Companies) 69.8 81.2 93.2 91.1 128.8
Self-Determined Peer Group 82.4 93.2 99.9 95.3 128.1
- ------------
1. The materials contained under the caption "Performance Graph are not
"soliciting material," are not deemed filed with the Securities and Exchange
Commission and are not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date of
this Proxy Statement and irrespective of any general incorporation provision
contained therein.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1994, Mr. William Spier, a former director of the Company who resigned
on September 30, 1996, entered into an agreement with PremiTech Corporation
("PremiTech"), which is a limited partner of HP Partners L.P., to acquire
PremiTech's limited partnership interest for approximately $2,000,000, at the
option of PremiTech, in the event that PremiTech did not enter into an
agreement for the provision of information technology services to the
Company. Such information technology agreement was subsequently executed on
April 4, 1995, thereby terminating PremiTech's option to sell its interest in
HP Partners L.P. to Mr. Spier.
Pursuant to HP Partners L.P.'s partnership agreement, Mr. Lyons has an
arrangement to participate in any economic benefit which Mr. Spier obtains as
a result of Mr. Spier's shareholding interest in the general partner of HP
Partners L.P.
On December 4, 1995, each of Messrs. Hauser, Lyons, Mitchell and Spier
were granted options under the 1996 Plan to purchase 15,000, 60,000, 30,000
and 15,000 shares of Common Stock, respectively, at an exercise price of
$5.56 per share. Such grants were made in recognition of the extraordinary
services that each of these individuals provided to the Company in connection
with the management transition and reorganization that occurred during 1995.
The grant of all options under the 1996 Plan and the terms thereof are
subject to and conditioned upon stockholder approval at this Annual Meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who beneficially own more than ten percent of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. initial
reports of ownership and reports of changes in ownership of Common Stock and
the other equity securities of the Company. Officers, directors, and persons
who beneficially own more than ten percent of a registered class of the
Company's equity securities are required by the regulations of the Securities
and Exchange Commission to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended December 31, 1995, all Section 16(a) filing requirements applicable to
its officers, directors, and greater than ten percent beneficial owners were
complied with.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1995 is being mailed to stockholders with this proxy statement.
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DEADLINE FOR STOCKHOLDER PROPOSALS FOR 1997
Stockholder proposals intended to be considered for inclusion in the proxy
statement for presentation at the Company's 1997 Annual Meeting of
Stockholders must be received at the Company's offices at 440 Ninth Avenue,
New York, New York 10001-1695 no later than 120 days prior to the Company's
next Annual Meeting, for inclusion in the Company's proxy statement and form
of proxy relating to such meeting. All proposals must comply with applicable
Securities and Exchange Commission rules and regulations.
OTHER MATTERS
The Board of Directors is not aware of any other matter other than those
set forth in this proxy statement that will be presented for action at the
meeting. If other matters properly come before the meeting, the persons named
as proxies intend to vote the shares they represent in accordance with their
best judgment in the interest of the Company.
THE COMPANY UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES FILED THEREWITH. WRITTEN REQUESTS FOR SUCH REPORT SHOULD BE
ADDRESSED TO THE OFFICE OF THE ASSISTANT SECRETARY, HOLMES PROTECTION GROUP,
INC., 440 NINTH AVENUE, NEW YORK, NEW YORK 10001-1695.
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ANNEX A
HOLMES PROTECTION GROUP, INC.
1996 STOCK INCENTIVE PLAN
1. PURPOSE:
The purpose of this Plan is to strengthen Holmes Protection Group, Inc.
(the "Company") by providing (i) an incentive to its key employees,
consultants and directors, and thereby encouraging them to devote their
abilities and industry to the success of the Company's business enterprise;
and (ii) an inducement essential to attracting, securing and retaining the
services of persons best qualified to serve as key employees, consultants and
directors of the Company. It is intended that this purpose be achieved by
extending to all such persons an added long-term incentive for high levels of
performance and unusual efforts through the grant of Incentive Stock Options,
Nonqualified Stock Options and Restricted Stock (as each term is hereinafter
defined).
2. EFFECT ON OTHER PLANS:
Upon approval of this Plan by the stockholders of the Company pursuant to
Section 19 hereof, no further stock options or other awards shall be granted
under the Company's 1994 Amended and Restated Senior Executives' Option Plan
(formerly the "1992 Senior Executives' Option Plan"), (the "1994 Plan") or
the Company's 1992 Directors' Stock Option (the "1992 Director Plan"). All
stock options outstanding under the 1994 Plan and the 1992 Director Plan
shall continue to be governed by the terms of the 1994 Plan and the 1992
Director Plan, and the relevant stock option agreement pertaining to each
such stock option.
3. DEFINITIONS:
For purposes of the Plan, unless otherwise specified, capitalized terms
shall have the following meanings:
3.1 "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to holders of
the Shares in any transaction (or series of transactions) constituting or
resulting in a Change in Control or (ii) the highest Fair Market Value of a
Share during the ninety (90) day period ending on the date of a Change in
Control.
3.2 "Agreement" means the written agreement between the Company and an
Optionee or Awardee evidencing the grant of an Option or Award and setting
forth the terms and conditions thereof.
3.3 "Award" means a grant of Restricted Stock.
3.4 "Awardee" means a person to whom any Restricted Stock has been granted
under the Plan.
3.5 "Board" means the Board of Directors of the Company.
3.6 "Cause" means (a) for purposes of Section 6.4 hereof, the commission
of an act of fraud or intentional misrepresentation or an act of
embezzlement, misappropriation or conversion of assets of the Company or any
Subsidiary, and (b) for all other purposes, the commission of an act of
fraud, dishonesty, unlawful or illegal conduct, gross negligence,
insubordination, failure to substantially perform one's duties with the
Company or any Subsidiary, or intentional misrepresentation, or a violation
of the Company's Code of Business Ethics and Policies or similar set of
standards of conduct and business practices adopted by the Board, or an act
of embezzlement, misappropriation or conversion of assets or opportunities of
the Company or any Subsidiary, or a determination by the Board that there is
a reasonable basis for concern that any governmental agency or regulatory
authority, or similar authority in any jurisdiction in which the Company or
any Subsidiary conducts or intends to conduct business, seek licensing or
submit a proposal to conduct business may find the person unsuitable or
unfit, or the failure of the person to provide appropriate information to, or
cooperate with any regulatory or other governmental authority.
3.7 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or
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kind of shares or other securities of the Company, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property
dividend, combination or exchange of shares, repurchase of shares, change in
corporate structure or otherwise.
3.8 A "Change in Control" shall mean the occurrence during the term of the
Plan of:
(i) The "acquisition" by any "Person" (as the term "person" is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934
as amended (the "Exchange Act") of "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of any
securities of the Company which generally entitles the holder thereof to
vote for the election of directors of the Company (the "Voting
Securities") which, when added to the Voting Securities then "Beneficially
Owned" by such person, would result in such Person "Beneficially Owning"
forty percent (40%) or more of the combined voting power of the Company's
then outstanding Voting Securities; provided, however, that for purposes
of this paragraph (i), a Person shall not be deemed to have made an
acquisition of Voting Securities if such Person: (a) acquires Voting
Securities as a result of a stock split, stock dividend or other corporate
restructuring in which all stockholders of the class of such Voting
Securities are treated on a pro rata basis; (b) acquires the Voting
Securities directly from the Company; (c) becomes the Beneficial Owner of
more than the permitted percentage of Voting Securities solely as a result
of the acquisition of Voting Securities by the Company which, by reducing
the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by such Person; (d) is the Company or
any corporation or other Person of which a majority of its voting power or
its equity securities or equity interest is owned directly or indirectly
by the Company (a "Controlled Entity") or (e) acquires Voting Securities
in connection with a "Non-Control Transaction" (as defined in paragraph
(iii) below); or
(ii) The individuals who, as of April 1, 1996; are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if either the election of
any new director or the nomination for election of any new director by the
Company's stockholders was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall be considered as a member of
the Incumbent Board; provided further, however, that no individual shall
be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(iii) Consummation or effectiveness of:
(a) A merger, consolidation or reorganization involving the
Company(a) "Business Combination"), unless
(1) the stockholders of the Company, immediately before the
Business Combination, own, directly or indirectly immediately
following the Business Combination, at least fifty-one percent
(51%) of the combined voting power of the outstanding voting
securities of the corporation resulting from the Business
Combination (the "Surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities immediately
before the Business Combination, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
the Business Combination constitute at least a majority of the
members of the Board of Directors of the Surviving Corporation, and
(3) no Person (other than the Company or any Controlled Entity, a
trustee or other fiduciary holding securities under one or more
employee benefit plans or arrangements (or any trust forming a part
thereof) maintained by the Company, the Surviving Corporation or
any Controlled Entity, or any Person who, immediately prior to the
Business Combination, had Beneficial Ownership of forty percent
(40%) or more of the then outstanding Voting Securities) has
Beneficial Ownership of forty percent (40%) or more of the combined
voting power of the Surviving Corporation's then outstanding voting
securities (a transaction described in this subparagraph (a) shall
be referred to as a "Non-Control Transaction");
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(b) A complete liquidation or dissolution of the Company; or
(c) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a transfer to a
Controlled Entity). Notwithstanding the foregoing, (x) a Change in
Control shall not be deemed to occur solely because forty percent (40%)
or more of the then outstanding Voting Securities is Beneficially Owned
by (A) a trustee or other fiduciary holding securities under one or
more employee benefit plans or arrangements (or any trust forming a
part thereof) maintained by the Company or any Controlled Entity or (B)
any corporation which, immediately prior to its acquisition of such
interest, is owned directly or indirectly by the stockholders of the
Company in the same proportion as their ownership of stock in the
Company immediately prior to such acquisition; and (y) if an Eligible
Employee's employment is terminated and the Eligible Employee
reasonably demonstrates that such termination (A) was at the request of
a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates a Change
in Control or (B) otherwise occurred in connection with, or in
anticipation of, a Change in Control which actually occurs, then for
all purposes hereof, the date of a Change in Control with respect to
the Eligible Employee shall mean the date immediately prior to the date
of such termination of employment.
3.9 "Code" means the Internal Revenue Code of 1986, as amended.
3.10 "Committee" means a committee consisting of at least two (2)
directors who are Disinterested Directors and Outside Directors appointed by
the Board to administer the Plan and to perform the functions set forth
herein.
3.11 "Company" means Holmes Protection Group, Inc.
3.12 "Director Option" means an Option granted pursuant to Section 6
hereof.
3.13 "Disability" means a physical or mental infirmity which impairs the
Optionee's or Awardee's ability to perform substantially his or her duties
for a period of one hundred eighty (180) consecutive days.
3.14 "Disinterested Director" means a director of the Company who is
"disinterested" within the meaning of Rule 16b-3 under the Exchange Act.
3.15 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
3.16 "Eligible Employee" means any officer or other employee or consultant
of the Company or a Subsidiary designated by the Committee as eligible to
receive Options or Awards subject to the conditions set forth herein.
3.17 "Employee Option" means an Option granted pursuant to Section 7
hereof.
3.18 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.19 "Fair Market Value" on any date means the closing sales price of the
Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or if such Shares are not so
listed or admitted to trading, the arithmetic mean of the per Share closing
bid price and per Share closing asked price on such date as quoted on the
National Association of Securities Dealers Automated Quotation System or such
other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such
date, the Fair Market Value shall be the value established by the Board in
good faith and in accordance with Section 422 of the Code.
3.20 "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee as an Incentive
Stock Option.
3.21 Nonemployee Director" means a director of the Company who is not an
employee of the Company or any Subsidiary and who is first elected or
appointed to serve as a director of the Company after April 1, 1996.
3.22 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
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3.23 "Option" means a Employee Option, a Director Option, or either or
both of them.
3.24 "Optionee" means a person to whom an Option has been granted under
the Plan.
3.25 "Outside Director" means a director of the Company who is an "outside
directors" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
3.26 "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
3.27 "Restricted Stock" means Shares issued or transferred to an Eligible
Employee pursuant to Section 10 which are subject to restrictions which lapse
over time without regard to the performance of the Company, a Subsidiary or a
Division.
3.28 "Plan" means the Holmes Protection Group, Inc. 1996 Stock Incentive
Plan.
3.29 "Pooling Period" means, with respect to a Pooling Transaction, the
period ending on the day after the first date on which the combined entity
resulting from the Pooling Transaction publishes thirty days of combined
operating results or, if the Board makes a determination, such other period
following the Pooling Transaction which the Board reasonably determines is
appropriate in connection with the Pooling Transaction as a means of
qualifying for and preserving "pooling of interests" accounting treatment.
3.30 "Pooling Transaction" means an acquisition of or by the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
3.31 "Restricted Stock" means Shares issued or transferred to an Eligible
Employee pursuant to Section 9 hereof, which are subject to restrictions
which lapse over time without regard to the performance of the Company, a
Subsidiary or a Division.
3.32 "Retirement" shall mean the termination of employment with the
Company by reason of the attainment of the age which the Company, by policy
or otherwise, has established as the age at which salaried employees may or
shall be required to terminate their employment and receive retirement
benefits.
3.33 "Shares" means the common stock, par value $.01 per share, of the
Company.
3.34 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the
Company.
3.35 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of
the Code applies.
3.36 "Ten-Percent Stockholder" means an Eligible Employee, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.
4. ADMINISTRATION:
4.1 The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of
the Plan. The Committee shall keep minutes of its meetings. A quorum shall
consist of not less than two members of the Committee and a majority of a
quorum may authorize any action. Any decision or determination reduced to
writing and signed by a majority of all of the members of the Committee shall
be as fully effective as if made by a majority vote at a meeting duly called
and held. Each member of the Committee shall be a Disinterested Director and
an Outside Director. No member of the Committee shall be liable for any
action, failure to act, determination or interpretation made in good faith
with respect to this Plan or any transaction hereunder, except for liability
arising from his or her own willful misfeasance, gross negligence or reckless
disregard of his or her duties. The Company hereby agrees to indemnify each
member of the Committee for all costs and expenses and, to the extent
permitted by applicable law, any liability
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incurred in connection with defending against, responding to, negotiating for
the settlement of or otherwise dealing with any claim, cause of action or
dispute of any kind arising in connection with any actions in administering
this Plan or in authorizing or denying authorization to any transaction
hereunder.
4.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those individuals to whom Employee Options shall be
granted under the Plan and the number of Incentive Stock Options and/or
Non qualified Stock Options to be granted to each Eligible Employee and to
prescribe the terms and conditions (which need not be identical) of each
Employee Option, including the purchase price per Share subject to each
Employee Option, and make any amendment or modification to any Agreement
consistent with the terms of the Plan; and
(b) select those Eligible Employees to whom Awards shall be granted
under the Plan and to determine the number of Shares of Restricted Stock
to be granted pursuant to each Award and the terms and conditions of each
Award, and make any amendment or modification to any Agreement consistent
with the terms of the Plan.
4.3 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(a) to construe and interpret the Plan and the Options and Awards
granted thereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited
to, correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the
extent it shall deem necessary or advisable to make the Plan fully
effective, and all decisions and determinations by the Committee in the
exercise of this power shall be final, binding and conclusive upon the
Company, its Subsidiaries, the Optionees and Awardees and all other
persons having any interest therein;
(b) to determine the duration and purposes for leaves of absence which
may be granted to an Optionee or Awardee on an individual basis without
constituting a termination of employment or service for purposes of the
Plan;
(c) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(d) generally, to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.
5. STOCK SUBJECT TO THE PLAN:
5.1 The maximum number of Shares that may be made the subject of Options
and Awards granted under the Plan is 2,000,000. Upon a Change in
Capitalization, the maximum number of Shares shall be adjusted in number and
kind pursuant to Section 11 hereof; provided, however, that the maximum
number of Shares that any Eligible Employee may receive pursuant to the Plan
in respect of Options and Awards may not exceed 500,000 Shares. The Company
shall reserve for the purposes of the Plan, out of its authorized but
unissued Shares or out of Shares held in the Company's treasury, or partly
out of each, such number of Shares as shall be determined by the Board.
5.2 Whenever any outstanding Option or Award or portion thereof expires,
is canceled or is otherwise terminated for any reason, the Shares allocable
to the canceled or otherwise terminated portion of the Option or Award may
again be the subject of Options or Awards granted hereunder.
6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS:
6.1 Eligibility: The class of individuals eligible to receive grants of
options under this Section 6 of the Plan shall be directors of the Company
who are not employees of the Company or its affiliates and who have not,
within one (1) year immediately preceding the determination of such
director's eligibility, received any award under any other plan of the
Company or its affiliates that entitles the participants therein to acquire
stock, stock
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options or stock appreciation rights of the Company or its affiliates (other
than options granted under any other plan under which participants'
entitlements are governed by provisions meeting the requirements of
Rule 16b-3(c)(2)(ii) promulgated under the Exchange Act) ("Eligible Directors").
6.2 Grant
(a) Effective December 4, 1995, subject to approval of the Plan by the
stockholders of the Company and availability of an adequate number of
Shares designated under the Plan, each Eligible Director then in office
will be granted an option to purchase 25,000 Shares.
(b) Upon first election or appointment to the Board, each newly elected
or appointed Eligible Director will be granted an option to purchase
25,000 Shares.
(c) Immediately following each Annual Stockholders Meeting, commencing
with the meeting following the close of fiscal year 1996, each Eligible
Director, other than an Eligible Director first elected to the Board
within the twelve (12) months immediately preceding and including such
meeting, will be granted an option to purchase 1,000 Shares (such option
together with the options referenced in paragraphs (a) and (b) above, each
a "Director Option").
6.3 Purchase Price: The purchase price for Shares under each Director
Option shall be equal to 100% of the Fair Market Value of such Shares on the
date of the grant.
6.4 Vesting: Subject to Sections 6.5 and 8.4 hereof, each Director Option
shall vest and become exercisable in whole or in part at any time from the
date of the grant.
6.5 Duration: Each Director Option shall terminate on the date which is
the fifth anniversary of the grant date, unless terminated earlier as
follows:
(a) If an Optionee's service as a Director terminates for any reason
other than Disability, death or Cause, the Optionee may, for a period of
three (3) months after such termination, exercise his or her Option, after
which time the Option shall automatically terminate in full.
(b) If an Optionee's service as a Director terminates by reason of the
Optionee's resignation or removal from the Board, in either case, due to
Disability, the Optionee may, for a period of one (1) year after such
termination, exercise his or her Option, after which time the Option shall
automatically terminate in full.
(c) If an Optionee's service as a Director terminates for Cause, the
Option granted to the Optionee hereunder shall immediately terminate in
full and no rights thereunder may be exercised.
(d) If an Optionee dies while a Director or within three (3) months
after termination of service as a Director as described in clause (a) or
(b) of this Section 6.4, the Option granted to the Optionee may be
exercised at anytime within twelve (12) months after the Optionee's death
by the person or person to whom such rights under the Option shall pass by
will or by the laws of descent or distribution, after which time the
Option shall terminate in full; provided, however, that an Option may be
exercised to the extent, and only to the extent, that the Option or
portion thereof was exercisable on the date of death or earlier
termination of the Optionee's services as a Director.
6.6 Formula Award Plan: For purposes of this Section 6, the Plan is
intended to be an ongoing formula award plan (as described in
Rule 16b-3(c)(2)(ii) under the Exchange Act), such that the awards granted
hereunder shall not affect the recipient's disinterested status for purposes of
administering any stock related plans of the Company established pursuant to
Rule 6b-3 under the Exchange Act.
7. OPTION GRANTS FOR ELIGIBLE EMPLOYEES:
7.1 Authority of Committee: Subject to the provisions of the Plan and to
Section 5.1 hereof, the Committee shall have full and final authority to
select those Eligible Employees who will receive Options (each, an "Employee
Option"), the terms and conditions of which shall be set forth in an
Agreement; provided, however, that no person shall receive any Incentive
Stock Options unless he or she is an employee of the Company, a Parent or a
Subsidiary at the time the Incentive Stock Option is granted.
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7.2 Purchase Price: The purchase price or the manner in which the purchase
price is to be determined for Shares under each Employee Option shall be
determined by the Committee and set forth in the Agreement, provided that the
purchase price per Share under each Employee Option shall not be less than
100% of the Fair Market Value of a Share on the date the Employee Option is
granted (110% in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder).
7.3 Maximum Duration: Employee Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock
Option shall not be exercisable after the expiration of ten (10) years from
the date it is granted (five (5) years in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option
shall not be exercisable after the expiration of ten (10) years from the date
it is granted. The Committee may, subsequent to the granting of any Employee
Option, extend the term thereof but in no event shall the term as so extended
exceed the maximum term provided for in the preceding sentence.
7.4 Vesting: Subject to Section 8.4 hereof, each Employee Option shall
vest and become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Employee Option expires. The Committee may
accelerate the exercisability of any Employee Option or portion thereof at
any time.
7.5 Termination of Employment Due to Death, Disability or Retirement: In
the event the employment of the Optionee is terminated by reason of death,
Disability or Retirement, the Committee may provide in the Agreement that any
outstanding Options granted to the Optionee shall become immediately
exercisable and shall thereafter be fully exercisable at any time prior to
the expiration date of the Options or within twelve (12) months after such
date of termination of employment, whichever period is the shorter. However,
in the case of Incentive Stock Options, the favorable tax treatment
prescribed under Section 422 of the Code shall not be available if such
Options granted to the Optionee are not exercised within three (3) months
after such date of termination due to Retirement.
7.6 Termination of Employment Other Than for Death, Disability or
Retirement: If the employment of the Optionee shall terminate for any reason
other than death, Disability of Retirement or, if the Committee does not
provide in the Option Agreement the treatment described in Section 7.5 hereof
upon the termination of the employment of the Optionee by reason of death,
Disability or Retirement, the rights under any then outstanding Option
granted to the Optionee pursuant to the Plan shall, to the extent not then
exercisable, terminate immediately and, to the extent then exercisable,
terminate upon the expiration date of the Option or three (3) months after
such date of termination of employment, whichever first occurs, subject to
such exceptions (which shall be set forth in the Agreement) as the Committee
may, in its sole discretion, approve. Notwithstanding the foregoing, if the
employment of the Optionee is involuntarily terminated by the Company (other
than by reason of death, Disability or Retirement), any then outstanding
Option granted pursuant to the Plan to the Optionee shall terminate
immediately upon the termination of employment; provided, that the Committee
may, in its sole discretion, waive, in whole or in part, the automatic
forfeiture of such Employee Options or may condition such forfeiture upon
whether the termination of employment was for Cause and may set forth such
waiver or condition in the Agreement or at any other time, including
following the termination of employment.
7.7 Modification or Substitution. The Committee may, in its discretion,
modify outstanding Employee Options or accept the surrender of outstanding
Employee Options (to the extent not exercised) and grant new Options in
substitution for them. Notwithstanding the foregoing, no modification of an
Employee Option shall adversely alter or impair any rights or obligations
under the Employee Option without the Optionee's consent.
8. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS:
8.1 Non-transferability: No Option granted hereunder shall be transferable
by the Optionee to whom granted otherwise than by will or the laws of descent
and distribution, and an Option may be exercised during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal representative.
The terms of such Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the
Optionee.
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8.2 Method of Exercise: The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company
at the Company's principal executive office, specifying the number of Shares
to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid in full upon such exercise by any one or a combination of the
following: (i) cash or (ii) transferring Shares to the Company upon such
terms and conditions as determined by the Committee. Until such person has
been issued the Shares subject to such exercise, he or she shall possess no
rights as a stockholder with respect to such Shares. Notwithstanding the
foregoing, the Committee shall have discretion to determine at the time of
grant of each Employee Option or at any later date (up to and including the
date of exercise) the form of payment acceptable in respect of the exercise
of such Employee Option and may establish cashless exercise procedures which
provide for the exercise of the Option and sale of the underlying Share by a
designated broker or dealer. In that connection, the written notice pursuant
to this Section 8.2 may also provide instructions from the Optionee to the
Company that upon receipt of appropriate instructions from the Optionee's
broker or dealer, designated as such on the written notice, the Company shall
issue such Shares directly to the designated broker or dealer. Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Agreement evidencing the Option to the Secretary of the Company
who shall endorse thereon a notation of such exercise and return such
Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of Shares that may
be purchased upon exercise shall be rounded to the nearest number of whole
Shares.
8.3 Rights of Optionees: No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company
shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the
books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such Shares.
8.4 Effect of Change in Control: Notwithstanding anything contained in the
Plan or an Agreement to the contrary (other than the last sentence of this
Section 8.4), in the event of a Change in Control, (i) all Options
outstanding on the date of such Change in Control shall become immediately
and fully exercisable, (ii) the termination of an Optionee's employment
following the Change in Control shall not affect his rights under this
Section 8.4, and (iii) an Optionee will be permitted to surrender for
cancellation within sixty (60) days after such Change in Control, any Option
or portion of an Option to the extent not yet exercised and the Optionee will
be entitled to receive a cash payment in an amount equal to the excess, if
any, of (x) (A) in the case of a Nonqualified Stock Option, the greater of
(1) the Fair Market Value, on the date preceding the date of surrender, of
the Shares subject to the Option or portion thereof surrendered or (2) the
Adjusted Fair Market Value of the Shares subject to the Option or portion
thereof surrendered or (B) in the case of an Incentive Stock Option, the Fair
Market Value, on the date preceding the date of surrender, of the Shares
subject to the Option or portion thereof surrendered, over (y) the aggregate
purchase price for such Shares under the Option or portion thereof
surrendered; provided, however, that in the case of an Option granted within
six (6) months prior to the Change in Control to any Optionee who may be
subject to liability under Section 16(b) of the Exchange Act, such Optionee
shall be entitled to surrender for cancellation his or her Option during the
sixty (60) day period commencing upon the expiration of six (6) months from
the date of grant of any such Option. In the case of a Change in Control
which also constitutes a Pooling Transaction and notwithstanding anything
contained in the Plan or an Agreement to the contrary, the Committee may, and
with respect to Director Options shall, take such actions which are
specifically recommended by an independent accounting firm retained by the
Company, to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such, including, but not limited to,
providing that (i) all Options or, in the alternative, such Options held by
Optionees specifically identified by the Committee, shall not become
immediately and fully exercisable on the date of the Change in Control but
rather shall become immediately and fully exercisable on the date following
the last day on which the Pooling Period expires (whether or not the Optionee
is then an employee or director of the Company) and the holders of such
Options shall only have the right to surrender for cancellation Options or
portion thereof for the cash payment specified in clause (ii) of the first
sentence of this Section 8.4 after the day following the expiration of the
Pooling Period and for a period of sixty (60) days thereafter (in which case,
whether or not the Optionee
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holding any such Options remains an employee or director of the Company, any
such Option shall not terminate and shall remain exercisable for the greater
of sixty (60) days after the expiration of the Pooling Period and the date
such Option would otherwise terminate in accordance with the Plan and the
relevant Agreement), and/or (ii) the payment specified in this Section 8.4
shall be paid in the form of cash, Shares or securities of a successor or
acquirer of the Company, or a combination of the foregoing, as designated by
the Committee.
9. RESTRICTED STOCK:
9.1 Grant: The Committee may grant to Eligible Employees Awards of
Restricted Stock, which shall be evidenced by an Agreement between the
Company and the Awardee. Each Agreement shall contain such restrictions,
terms and conditions as the Committee may, in its discretion, determine and
(without limiting the generality of the foregoing) such Agreements may
require that an appropriate legend be placed on Share certificates. Awards of
Restricted Stock shall be subject to the terms and provisions set forth below
in this Section 9.
9.2 Rights of Awardee: Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Awardee as soon as
reasonably practicable after the Award is granted, provided that the Awardee
has executed an Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the
issuance of such Shares. If an Awardee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers and,
in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period prescribed
by the Committee at the time the Award is granted, the Award shall be null
and void. At the discretion of the Committee, Shares issued in connection
with a Restricted Stock Award shall be deposited together with the stock
powers with an escrow agent (which may be the Company) designated by the
Committee. Unless the Committee determines otherwise and as set forth in the
Agreement, upon delivery of the Shares to the escrow agent, the Awardee shall
have all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.
9.3 Non-transferability: Until any restrictions upon the Shares of
Restricted Stock awarded to an Awardee shall have lapsed in the manner set
forth in Section 9.4 hereof, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Awardee.
9.4 Lapse of Restrictions:
(a) Generally: Subject to Section 14 hereof, restrictions upon Shares
of Restricted Stock awarded hereunder shall lapse at such time or times
and on such terms and conditions as the Committee may determine, which
restrictions shall be set forth in the Agreement evidencing the Award.
(b) Effect of Change in Control: Notwithstanding anything contained in
the Plan, unless the Agreement evidencing the Award provides to the
contrary, in the event of a Change in Control, all restrictions upon any
Shares of Restricted Stock shall lapse immediately and all such Shares
shall become Filly vested in the Awardee.
9.5 Modification or Substitution: Subject to the terms of the Plan, the
Committee may modify outstanding Awards of Restricted Stock or accept the
surrender of outstanding Awards of Restricted Stock (to the extent not
exercised) and grant new Awards in substitution for them. Notwithstanding the
foregoing no modification of an Award shall adversely alter or impair any
rights or obligations under the Agreement without the Awardee's consent.
9.6 Treatment of Dividends: At the time the Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Awardee of dividends, or a specified portion thereof, declared
or paid on such Shares by the Company shall be (i) deferred until the lapsing
of the restrictions imposed upon such Shares and (ii) held by the Company for
the account of the Awardee until such time. If dividends are to be deferred,
the Committee shall determine whether such dividends are to be reinvested in
Shares (which shall be held as additional shares of Restricted Stock) or held
in cash. If deferred dividends are to be held in cash, there may be credited
at the end of each year (or portion thereof) interest on the amount of the
account at the
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beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Payment of deferred dividends, together with
interest accrued thereon, shall be made upon the lapsing of restrictions
imposed on such Shares, and any dividends deferred (together with any
interest accrued thereon) in respect of any Shares of Restricted Stock shall
be forfeited upon the forfeiture of such Shares.
9.7 Delivery of Shares: Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Awardee with respect to such Shares, free of all
restrictions hereunder.
10. EFFECT OF A TERMINATION OF EMPLOYMENT:
The Agreement evidencing the grant of each Employee Option and each Award
shall set forth the terms and conditions applicable to such Employee Option
or Award upon a termination or change in the status of the employment of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
as the Committee may, in its discretion, determine at the time the Employee
Option or Award is granted or thereafter.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION:
(a) In the event of a Charge in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to the (i)
maximum number and class of Shares or other stock or securities with respect
to which Options or Awards may be granted under the Plan (ii) the maximum
number of Shares with respect to which Options or Awards may be granted to
any Eligible Employee during the term of the Plan, (iii) the number and class
of Shares or other stock or securities which are subject to Director Options
issuable under Section 6 hereof; (iv) the number and class of Shares or other
stock or securities which are subject to outstanding Options or Awards
granted under the Plan, and the purchase price therefor, if applicable; and
(v) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or securities subject
to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a
modification as defined by Section 424(h)(3) of the Code and only to the
extent otherwise permitted by Sections 422 and 424 of the Code.
(c) Any stock adjustment in the Shares or other stock or securities
subject to outstanding Director Options (including any adjustments in the
purchase price) shall be made only to the extent necessary to maintain the
proportionate interest of the Optionee and preserve, without exceeding, the
value of such Director Option.
(d) If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an Option
with respect to, new, additional or different shares of stock or securities,
such new additional or different shares shall thereupon be subject to all of
the conditions, restrictions and performance criteria which were applicable
to the Shares subject to the Award or Option, as the case may be, prior to
such Change in Capitalization.
12. EFFECT OF CERTAIN TRANSACTIONS:
Subject to Sections 8.4 and 10.4(b) hereof, in the event of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation
of the Company (a "Transaction"), the Plan and the Options and Awards issued
hereunder shall continue in effect in accordance with their respective terms
and each Optionee and Awardee shall be entitled to receive in respect of each
Share subject to any outstanding Options or Awards, as the case may be, upon
exercise of any Option or payment or transfer in respect of any Award, the
same number and kind of stock, securities, cash, property, or other
consideration that each holder of a Share was entitled to receive in the
Transaction in respect of a Share.
13. TERMINATION AND AMENDMENT OF THE PLAN:
The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option or Award may be granted
thereafter. The Board may sooner terminate the Plan and the Board may at any
time and from time to time amend, modify or suspend the Plan; provided,
however, that:
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(a) No such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards theretofore granted under
the Plan, except with the consent of the Optionee or Awardee, nor shall
any amendment, modification, suspension or termination deprive any
Optionee or Awardee of any Shares which he or she may have acquired
through or as a result of the Plan;
(b) To the extent necessary under Section 16(b) of the Exchange Act and
the rules and regulations promulgated thereunder or other applicable law,
no amendment shall be effective unless approved by the stockholders of the
Company in accordance with applicable law and regulations; and
(c) The provisions of Section 6 hereof shall not be amended more often
than once every six (6) months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated thereunder.
14. CERTAIN LIMITATIONS:
Notwithstanding any other provision of the Plan to the contrary:
(i) stockholder approval shall be required for any material amendment
of the Plan to become effective (with materiality as determined for
purposes of Section 16(b) of the Exchange Act, the rules and regulations
promulgated thereunder, and the interpretations of the Securities and
Exchange Commission and its staff in connection therewith);
(ii) no amendment or adjustment of the exercise price of an Option
(whether through amendment, cancellation or replacement grants, or other
means of repricing of such Options), in respect of an Option having an
exercise price greater than the Fair Market Value of a Share as of the
date of such amendment or adjustment, shall be authorized under the Plan
unless stockholder approval of such repricing is obtained;
(iii) stockholder approval shall be required for any lapse or waiver of
restrictions on Shares of Restricted Stock not expressly specified in the
Agreement evidencing the Award; and
(iv) an Award of Shares of Restricted Stock shall provide for the lapse
of restrictions in no less than three years after the date of the Award in
respect of at least 50% of the Shares subject to that Award.
However, the Committee shall have the discretion to act in respect of
Options or Awards in a manner not in compliance with the requirements of this
Section 14.1, provided that the number of Shares which are the subject of
such Options or Awards does not exceed in the aggregate three percent (3%) of
the maximum number of Shares that may be made the subject of Options and
Awards under the Plan as set forth in Section 5.1 hereof.
15. NON-EXCLUSIVITY OF THE PLAN:
Except as provided in Section 2 hereof, the adoption of the Plan by the
Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
16. LIMITATION OF LIABILITY:
As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:
(i) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to terminate the
employment of any person at any time; or
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(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
17. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW:
17.1 Except as to matters of federal law, this Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to
conflicts-of-law principles.
17.2 The obligation of the Company to sell or deliver Shares with respect
to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
17.3 The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions
of the Plan or any Agreement in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
17.4 The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to
obtain for Eligible Employees granted Incentive Stock Options the tax
benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
17.5 Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or
obtained free of any conditions as acceptable to the Committee.
17.6 Notwithstanding anything contained in the Plan or any Agreement to
the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Company
in writing that the Shares acquired by such individual are acquired without a
view to any distribution thereof and will not be sold or transferred other
than pursuant to an effective registration thereof under said Act or pursuant
to an exemption applicable under the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder. The certificates evidencing
any of such Shares shall be appropriately amended to reflect their status as
restricted securities as aforesaid.
18. MISCELLANEOUS:
18.1 Multiple Agreements: The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same time, or at
some other time. The Committee may also grant more than one Option or Award
to a given Eligible Employee during the term of the Plan, either in addition
to, or in substitution for, one or more Options or Awards previously granted
to that Eligible Employee.
18.2 Withholding of Taxes: (a) The Company shall have the right to deduct
from any distribution of cash to any Optionee or Awardee, an amount equal to
the federal, state and local income taxes and other amounts as may be
required by law to be withheld (the "Withholding Taxes") with respect to any
Option or Award. If an Optionee or Awardee is to experience a taxable event
in connection with the receipt of Shares pursuant to an Option exercise or
payment of an Award (a "Taxable Event"), the Optionee or Awardee shall pay
the Withholding Taxes to the Company prior to the issuance, or release from
escrow, of such Shares. In satisfaction of the obligation to pay Withholding
Taxes to the Company, the Optionee or Awardee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of
the Committee, to have withheld a por-
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tion of the Shares then issuable to him or her having an aggregate Fair
Market Value, on the date preceding the date of such issuance, equal to the
Withholding Taxes, provided that in respect of an Optionee or Awardee who may
be subject to liability under Section 16(b) of the Exchange Act either: (i)
in the case of a Taxable Event involving an Option or an Award (A) the Tax
Election is made at least six (6) months prior to the date of the Taxable
Event and (B) the Tax Election is irrevocable with respect to all Taxable
Events of a similar nature occurring prior to the expiration of six (6)
months following a revocation of the Tax Election; or (ii) in the case of the
exercise of an Option (A) the Optionee makes the Tax Election at least six
(6) months after the date the Option was granted, (B) the Option is exercised
during the ten (10) day period beginning on the third business day and ending
on the twelfth business day following the release for publication of the
Company's quarterly or annual statement of sales and earnings (a "Window
Period") and (C) the Tax Election is made during the Window Period in which
the related Option is exercised or prior to such Window Period and subsequent
to the immediately preceding Window Period; or (iii) in the case of a Taxable
Event relating to the payment of an Award (A) the Awardee makes the Tax
Election at least six (6) months after the date the Award was granted and (B)
the Tax Election is made (x) in the case of a Taxable Event occurring within
a Window Period, during the Window Period in which the Taxable Event occurs,
or (y) in the case of a Taxable Event not occurring within a Window Period,
during the Window Period immediately preceding the Taxable Event relating to
the Award. Notwithstanding the foregoing, the Committee may, by the adoption
of rules or otherwise, (i) modify the provisions of this Section 18.2 (other
than as regards Director Options) or impose such other restrictions or
limitations on Tax Elections as may be necessary to ensure that the Tax
Elections will be exempt transactions under Section 16(b) of the Exchange
Act, and (ii) permit Tax Elections to be made at such other times and subject
to such other conditions as the Committee determines will constitute exempt
transactions under Section 16(b) of the Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise,
the Optionee shall, within ten (10) days of such disposition, notify the
Company thereof, by delivery of written notice to the Company at its
principal executive office.
(c) The Committee shall have the authority, at the time of grant of an
Employee Option under the Plan or at any time thereafter, to award tax
bonuses to designated Optionees, to be paid upon their exercise of Employee
Options granted hereunder. The amount of any such payments shall be
determined by the Committee. The Committee shall have full authority in its
absolute discretion to determine the amount of any such tax bonus and the
terms and conditions affecting the vesting and payment thereof.
18.3. Interpretation: Unless otherwise expressly stated in the relevant
Agreement, any grant of Options or an Award is intended to be
performance-based compensation within the meaning of Section 162(m)(4)(C) of
the Code. The Committee shall not be entitled to exercise any discretion
otherwise authorized hereunder with respect to such Options or Awards if the
ability to exercise such discretion or the exercise of such discretion itself
would cause the compensation attributable to such Options or Awards to fail
to qualify as performance-based compensation.
19. EFFECTIVE DATE:
The effective date of the Plan shall be the date of its adoption by the
Board, subject only to the approval by the affirmative vote of the holders of
a majority of the securities of the Company present, or represented, and
entitled to vote at a meeting of stockholders duly held in accordance with
the applicable laws of the State of Delaware within twelve (12) months of
such adoption.
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HOLMES PROTECTION GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 5, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Holmes Protection Group, Inc. (the
"Company") hereby constitutes and appoints Irving Kagan and Lawrence Irving,
and each of them, his true and lawful attorneys and proxies, with full power
of substitution in and for each of them, to vote all shares of the Company
which the undersigned is entitled to vote at the Annual Meeting of
Stockholders to be held at the Omni Berkshire Place Hotel, 21 East 52nd
Street, New York, New York 10022, on Thursday, December 5, 1996, 10:00 a.m.,
Eastern Standard Time, or at any postponement or adjournment thereof, on any
and all of the proposals contained in the Notice of the Annual Meeting of
Stockholders, with all the powers the undersigned would possess if present
personally at said meeting, or at any postponement or adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE NOMINEES LISTED ON THE REVERSE SIDE AND FOR THE
APPROVAL OF PROPOSALS 2, 3 AND 4.
(Continued and to be signed and dated on the other side)
[X] Please mark your
votes as this
The Directors recommend a vote FOR the Nominees listed in Proposal 1 and
FOR Proposals 2, 3 and 4.
1. Election of Directors FOR All nominees WITHHOLD AUTHORITY
listed (except as to vote for all
marked to the nominees listed
contrary, see instruction at left
below)
George V. Flagg,
Lawrence R. Glenn and [ ] [ ]
Edward L. Palmer
FOR AGAINST ABSTAIN
2. Proposal to approve an amendment and
restatement of the Company's Restated
Certificate of Incorporation. [ ] [ ] [ ]
3. Proposal to approve the Company's 1996
Stock Incentive Plan. [ ] [ ] [ ]
4. Proposal to ratify the appointment of Arthur
Andersen LLP as independent auditors. [ ] [ ] [ ]
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
line through the name of the nominee above.
The above named proxies are granted the
authority, in their discretion, to act upon
such other matters as may properly come before
the meeting or any postponement or adjournment
thereof.
Dated_________________________________, 1996
Signature(s)________________________________
Signatures__________________________________
Please sign exactly as your name appears and
return this proxy immediately in the enclosed
self-addressed envelope.
