VICON INDUSTRIES, INC.
89 Arkay Drive
Hauppauge, NY 11788
(631) 952-2288 (CCTV)
Notice of Annual Meeting of Shareholders
To Be Held on May 7, 2002
To the Shareholders of Vicon Industries, Inc.
Notice is hereby given that the Annual Meeting of Shareholders of Vicon
Industries, Inc. (the "Company"), a New York corporation, will be held at the
Company's corporate headquarters located at 89 Arkay Drive, Hauppauge, New York
11788, on May 7, 2002 at 10:00 a.m. local time for the following purposes, all
of which are more completely described in the accompanying proxy statement:
1. To elect two directors for terms expiring in 2005; and
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of Common Stock, par value $.01 per
share, authorized for issuance from 10,000,000 shares to 25,000,000
shares; and
3. To approve the 2002 Incentive Stock Option Plan covering 200,000
shares of Common Stock; and
4. To approve the 2002 Non-Qualified Stock Option Plan covering 200,000
shares of Common Stock; and
5. To ratify the selection of KPMG LLP, independent certified public
accountants, as auditors for the Company for the fiscal year ending
September 30, 2002; and
6. To receive the reports of officers and to transact such other
business as may properly come before the meeting.
Shareholders entitled to notice of and to vote at the Annual Meeting are
shareholders of record at the close of business on March 22, 2002 fixed by
action of the Board of Directors.
The Company's proxy statement is submitted herewith. The Annual Report to
Shareholders for the year ended September 30, 2001 is included with the proxy
statement.
By Order of the Board of Directors,
Hauppauge, New York Arthur D. Roche
March 22, 2002 Secretary
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YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return your proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional proxy solicitation. The giving of such proxy does not affect your
right to vote in person in the event you attend the meeting.
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PROXY STATEMENT FOR 2002 ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy, for use only at the Annual Meeting of Shareholders to
be held on May 7, 2002 at 10:00 a.m., and any and all adjournments thereof, is
solicited on behalf of the Board of Directors of Vicon Industries, Inc. (the
"Company").
Any shareholder executing a proxy retains the right to revoke it by notice
in writing to the Secretary of the Company at any time prior to its use. The
cost of soliciting the proxy will be borne by the Company.
PURPOSES OF ANNUAL MEETING
The Annual Meeting has been called for the purposes of electing two
directors whose term of office expires in 2005; approving an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 shares to 25,000,000 shares; approving
the 2002 Incentive Stock Option Plan; approving the 2002 Non-Qualified Stock
Option Plan; ratifying the selection of auditors; receiving the reports of
officers; and transacting such other business as may properly come before the
meeting.
The persons named in the enclosed proxy have been selected by the Board of
Directors and will vote shares represented by valid proxies. They have indicated
that, unless otherwise specified in the proxy, they intend to vote FOR the
election of two directors whose term of office expires in 2005; FOR the approval
of an amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 10,000,000 shares to 25,000,000
shares; FOR the approval of the 2002 Incentive Stock Option Plan; FOR the
approval of the 2002 Non-Qualified Stock Option Plan; and FOR ratification of
the selection of auditors.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received at the Company's principal executive
office no later than November 1, 2002, and must comply with all other legal
requirements in order to be included in the Company's proxy statement and form
of proxy for that meeting. Proposals of security holders not meeting the
requirements of Rule 14a-8 of Regulation 14A must comply with the requirements
set forth in the Company's Bylaws relating to business conducted at the Annual
Meeting of Shareholders.
This proxy statement and the enclosed proxy card are being furnished to
shareholders on or about March 29, 2002.
VOTING SECURITIES
The Company has one class of capital stock, consisting of common stock, par
value $.01 per share, of which each outstanding share entitles its holder to one
vote. Cumulative voting is not provided under the Company's Certificate of
Incorporation or Bylaws. Shareholders entitled to vote or to execute proxies are
shareholders of record at the close of business on March 22, 2002. As of March
22, 2002, there were 4,652,712 shares outstanding.
The presence, in person or by proxy, of at least a majority of the total
number of shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. In the event that there are insufficient votes for
a quorum or to approve any proposal at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit the further solicitation of
proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a shareholder to vote for the election of the nominees
proposed by the Board, or to withhold authority to vote for one or more of the
nominees being proposed. Under New York law and the Company's Certificate of
Incorporation and Bylaws, directors are elected by a plurality of shares voted,
without regard to either (i) broker non-votes, or (ii) proxies as to which
authority to vote for one or more of the nominees being proposed is withheld.
As to Proposal 2, the proxy card being provided by the Board of Directors
enables a shareholder to check the appropriate box on the proxy card to: (i)
vote "FOR" the proposal; (ii) vote "AGAINST" the proposal; or (iii) "ABSTAIN"
from voting the proposal. An affirmative vote of holders of a majority of the
Common Stock entitled to vote thereon is required to constitute shareholder
approval. Shares as to which the "ABSTAIN" box has been selected on the proxy
card, or for which there has been a broker non-vote, will have the effect of a
vote against the matter for which the "ABSTAIN" box has been selected.
As to proposals 3, 4, and 5, and all other matters that may properly come
before the Annual Meeting, by checking the appropriate box, a shareholder may
(i) vote "FOR" the proposal; (ii) vote "AGAINST" the proposal; or (iii)
"ABSTAIN" with respect to the proposal. Under the Company's Certificate of
Incorporation and Bylaws, and applicable law, the adoption of stock option plans
and the ratification of independent auditors and all other matters shall each be
determined by a majority of the votes cast affirmatively or negatively, without
regard to broker non-votes or proxies marked "ABSTAIN" as to the matter.
The effectiveness of proposals 3 and 4, relating to the approval of stock
option plans covering a total of 400,000 shares of Common Stock, is subject to
the adoption of proposal 2, increasing the number of authorized shares of Common
Stock, since there are presently only approximately 175,000 unreserved
authorized shares available for issuance under such proposed stock option plans.
Proxies solicited hereby will be returned to the Board and will be
tabulated by inspectors of election designated by the Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth information as to each person, known to the
Company to be a "beneficial owner" (as defined in regulations of the Securities
and Exchange Commission) of more than five percent of the Company's outstanding
Common Stock as of February 15, 2002 and the shares beneficially owned by the
Company's Executive Officers and Directors and by all Executive Officers and
Directors as a group.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned (1) of Class
------------------- ---------------------- --------
CBC Co., Ltd.
And Affiliates
2-15-13 Tsukishima
Chuo-ku
Tokyo, Japan 104 543,715 11.5%
Dimensional Fund Advisors
1299 Ocean Avenue
Santa Monica, CA 90401 320,900 (7) 6.8%
Chu S. Chun
C/O I.I.I. Companies, Inc.
915 Hartford Turnpike
Shrewsbury, MA 01545 299,457 (2) 6.3%
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C/O Vicon Industries, Inc.
Kenneth M. Darby 250,092 5.3%
Arthur D. Roche 146,601 (3) 3.1%
W. Gregory Robertson 20,972 (4) *
Kazuyoshi Sudo 18,772 (4) *
Milton F. Gidge 18,772 (4) *
Peter F. Neumann 17,072 (5) *
Total all Executive Officers
and Directors as a
group (6 persons) 472,281 (6) 10.0%
* Less than 1%.
(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment control over the shares of stock
owned.
(2) Mr. Chun has voting and dispositive control over 299,457 shares
but disclaims beneficial ownership as to all but 48,400 shares.
195,657 shares are owned by the International Industries, Inc. Profit
Sharing Plan and 103,800 shares are owned by Mr. Chun and immediate
family members.
(3) Includes 50,000 shares held by Mr. Roche's wife, 15,000 shares held by
their children and currently exercisable options to purchase 1,947 shares.
(4) Includes currently exercisable options to purchase 9,072 shares.
(5) Includes currently exercisable options to purchase 8,197 shares.
(6) Includes currently exercisable options to purchase 37,360 shares.
(7) Dimensional Fund Advisors had voting and investment control over 320,900
shares as investment advisor and manager for various mutual funds and
other clients. These shares are beneficially owned by such mutual funds
or other clients.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board is comprised of six directors: two directors whose term expires
in 2003; two directors whose terms expire in 2004; and two directors to be
elected for a term expiring in 2005. Directors serve for a term of three years
or until their successors are elected and qualified. No person being nominated
as a director is being proposed for election pursuant to any agreement or
understanding between any person and the Company.
The nominees proposed for election to a term expiring in 2005 at the Annual
Meeting are Mr. Kenneth M. Darby and Mr. Arthur D. Roche. In the event that
either such nominee is unable or declines to serve for any reason, the Board of
Directors shall elect a replacement to fill the vacancy. The Board of Directors
has no reason to believe that either person named will be unable or unwilling to
serve.
Unless authority to vote for the nominees is withheld, it is intended that
the shares represented by the enclosed proxy will be voted FOR the
nominees named in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT
Information with Respect to Nominee and Continuing Directors
The following sets forth the name of nominees and continuing directors,
their ages, a brief description of their recent business experience, including
present occupations and employment, certain directorships held by each and the
year in which each became a director of the Company.
Nominee and Their Director
Principal Occupations Since Age
-------------------------------------------------------------
Kenneth M. Darby
Chairman and CEO
Vicon Industries, Inc. 1987 56
Arthur D. Roche
Retired Executive Vice President
Vicon Industries, Inc.
Retired Partner
Arthur Andersen & Co. 1992 63
Continuing Directors whose Term of Office Expires in 2003
---------------------------------------------------------
Peter F. Neumann
Retired President
Flynn-Neumann Agency, Inc. 1987 67
Kazuyoshi Sudo
Chief Executive Officer
Toyo Management Inc. 1987 59
Continuing Directors whose Term of Office Expires in 2004
---------------------------------------------------------
Milton F. Gidge
Retired Director and Executive
Lincoln Savings Bank 1987 72
W. Gregory Robertson
President
TM Capital Corp. 1991 58
Mr. Darby has served as Chairman of the Board since April 1999, as Chief
Executive Officer since April 1992 and as President since October 1991. Mr.
Darby also served as Chief Operating Officer and as Executive Vice President,
Vice President, Finance and Treasurer of the Company. He joined the Company in
1978 as Controller after more than nine years at Peat Marwick Mitchell & Co., a
public accounting firm. Mr. Darby's current term on the Board ends in April
2002.
Mr. Roche served as Executive Vice President, Chief Financial Officer and
co-participant in the Office of the President of the Company from August 1993
until his retirement in November 1999. For the six months prior to that time,
Mr. Roche provided consulting services to the Company. In October 1991, Mr.
Roche retired as a partner of Arthur Andersen & Co., an international accounting
firm which he joined in 1960. His current term on the Board ends in April 2002.
Mr. Neumann is the former President of Flynn-Neumann Agency, Inc., an
insurance brokerage firm, from which he retired in 1997. Mr. Neumann's current
term on the Board ends in April 2003.
Mr. Sudo is President and Chief Executive Officer of Toyo Management, Inc.,
a consulting firm which he founded in 2001. Previously, Mr. Sudo was Chief
Executive Officer of CBC (America) Corp., a distributor of electronic, chemical
and optical products from 1996 to 2001 and a director of its parent company, CBC
Co., Ltd. Mr. Sudo's current term on the Board ends in April 2003.
Mr. Gidge is a retired director and executive officer of Lincoln Savings
Bank for which he served from 1976 to 1994 as Chairman, Credit Policy. He has
also served as a director of Interboro Mutual Indemnity Insurance Co., a general
casualty insurance company, from 1980 to 2001 and as a director of Intervest
Bancshares Corporation, a regional bank holding company from 1988 to 2001. His
current term on the Board ends in April 2004.
Mr. Robertson is President of TM Capital Corporation, a financial services
company, which he founded in 1989. From 1985 to 1989, he was employed by
Thompson McKinnon Securities Inc., as head of investment banking and public
finance. Mr. Robertson's current term on the Board ends in April 2004.
MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors has a number of committees including the executive
committee, the compensation committee, the audit committee and the nominating
committee.
The executive committee consists of Messrs. Darby (Chairman), Gidge,
Neumann, and Roche. The committee meets in special situations when the full
Board cannot be convened. The Committee met twice during the last fiscal year.
The compensation committee consists of Messrs. Neumann (Chairman), Gidge,
Robertson and Roche, all of whom are non-employee directors. The function of the
compensation committee is to establish and approve the appropriate compensation
for Mr. Darby, recommend the award of stock options, and to review the
recommendations of the CEO with respect to the compensation of all other
officers. The Committee met twice during the last fiscal year.
The audit committee consists of Messrs. Gidge (Chairman), Robertson, Roche
and Sudo, all of whom are independent directors except Mr. Roche. Mr. Roche
retired from the Company in November 1999 and was appointed to the audit
committee in April 2000. The Board of Directors determined that the appointment
of Mr. Roche, although a former officer of the Company, was in the best
interests of shareholders and the Company given the extensive financial
experience Mr. Roche brings to the deliberations of the audit committee. Such
experience is described previously herein. The audit committee operates under a
written charter adopted by the Board of Directors in April 2000. The audit
committee reviews the internal financial controls of the Company and the
objectivity of its financial reporting. The committee meets with appropriate
financial personnel from the Company and independent certified public
accountants in connection with their audits. The committee recommends to the
Board the appointment of independent certified public accountants to serve as
the Company's auditors, subject to ratification by the shareholders. The
independent certified public accountants have complete and free access to the
committee at any time. The committee met five times during the last fiscal year.
The nominating committee consists of Messrs. Roche (Chairman), Gidge and
Neumann. The committee considers candidates to the Board as nominees for
election at the Annual Meeting. Directors are selected on the basis of
recognized achievements and their ability to bring skills and experience to the
deliberations of the Board. The Board will consider written shareholder
recommendations for candidates at the next Annual Meeting of Shareholders, which
are submitted not later than November 1, 2002 to the Company's principal
executive offices and are addressed to the Chairman of the nominating committee.
The committee did not meet during the last fiscal year.
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company. Outside
members of the Board are kept informed of the Company's business through various
reports and documents sent to them, as well as through operating and financial
reports made at Board and committee meetings by Mr. Darby and other officers.
The Board of Directors held six meetings in the Company's 2001 fiscal year,
including all regularly scheduled and annual meetings. No Board member attended
fewer than 75% of the aggregate of (1) the total number of meetings of the Board
(held during the period for which he was a director) and (2) the total number of
meetings held by all committees on which he served (during the periods that he
served).
The directors are each compensated at the rate of $16,000 per year for
regular scheduled meetings. Committee fees are $1,000 per meeting attended in
person or by teleconference. Employee directors are not compensated for Board or
committee meetings. Directors may not stand for re-election after 70, except
that any director may serve one additional three-year term after age 70 with the
unanimous consent of the Board of Directors.
Certain Relationships and Related Transactions
The Company and CBC Company, Ltd.(CBC), a Japanese corporation which
beneficially owns 11.5% of the outstanding shares of the Company, have been
conducting business with each other for approximately twenty-two years. During
this period, CBC has served as a lender, a product supplier and sourcing agent,
and a private label reseller of the Company's products. CBC has also acted as
the Company's sourcing agent for the purchase of certain video products. In
fiscal 2001, the Company purchased approximately $3.5 million of products and
components from or through CBC. CBC has the exclusive right to sell Vicon brand
products in Japan and competes with the Company in various markets, principally
in the sale of video products and systems. Sales of all products to CBC were
$303,000 in 2001. Kazuyoshi Sudo, a director of the Company, was a director of
CBC until 2001 and former Chief Executive Officer of CBC (America) Corp., a U.S.
subsidiary of CBC.
Mr. Chu S. Chun, who has beneficial voting control over 6.3% of the Common
Stock of the Company, also beneficially owns a minority interest in Chun Shin
Electronics, Inc. (CSE), a South Korean public company that manufactures certain
of the Company's proprietary products. CSE also sells various security products,
including the Company's products, principally within the South Korean market. In
2001, CSE sold approximately $4.1 million of products to the Company through
International Industries, Inc. (I.I.I.), a U.S. based company controlled by Mr.
Chun. I.I.I. arranges the importation of all the Company's product purchases
from CSE. In addition, I.I.I. purchased approximately $276,000 of products
directly from the Company during 2001 for resale to CSE.
Report of the Audit Committee
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal control.
In fulfilling its oversight responsibilities, the Committee reviewed and
discussed with management the audited consolidated financial statements as of
and for the fiscal year ended September 30, 2001. Additionally, the committee
has reviewed and discussed with management and the independent auditors the
Company's unaudited interim financial statements as of and for the end of each
fiscal quarter. Such discussions occur prior to issuance of news releases
reporting quarterly results.
The committee discussed with the independent auditors the matters required
to be discussed by the Statement on Auditing Standards No. 61, Communication
with Audit Committees, as amended, of the Auditing Standards Board of American
Institute of Certified Public Accountants.
The committee received and reviewed the written disclosures and the letter
from the independent auditors required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended, of the Independence
Standards Board, and discussed with the auditor's their firm's independence.
Based on the reviews and discussions referred to above, the committee
recommends to the Board of Directors that the audited fiscal year-end financial
statements referred to above be included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2001.
Submitted by the Audit Committee,
Milton F. Gidge, Chairman Arthur D. Roche
W. Gregory Robertson Kazuyoshi Sudo
OTHER OFFICERS OF THE COMPANY
In addition to Mr. Darby, the Company has five other officers. They are:
John M. Badke, age 42 Vice President, Finance and
Chief Financial Officer
John L. Eckman, age 52 Vice President, Sales
Peter A. Horn, age 46 Vice President, Operations
Bret M. McGowan, age 36 Vice President, Marketing
Yacov A. Pshtissky, age 50 Vice President, Technology
and Development
Mr. Badke has been Chief Financial Officer since December 1999 and Vice
President, Finance since October 1998. Previously, he served as Controller since
joining the Company in 1992. Prior to joining the Company, Mr. Badke was the
Controller for NEK Cable, Inc. and an audit manager with the international
accounting firms of Arthur Andersen & Co. and Peat Marwick Main & Co.
Mr. Eckman rejoined the Company in April 2001 as Vice President, U.S. Sales
after serving as District General Manager with Honeywell, Inc. from June 2000 to
April 2001. From July 1996 to June 2000, he served as Vice President, U.S. Sales
of the Company after joining the Company in August 1995 as Eastern Regional
Manager. Prior to that time, he was Director of Field Operations for Cardkey
Systems, Inc., an access control security products manufacturer with whom he was
employed for 12 years.
Mr. Horn has been Vice President, Operations since June 1999. From 1995 to
1999, he was Vice President, Compliance and Quality Assurance. Prior to that
time, he served as Vice President in various capacities since his promotion in
May 1990.
Mr. McGowan was promoted to Vice President, Marketing in October 2001.
Previously, he served as Director of Marketing since 1998 and as Marketing
Manager since 1994. He joined the Company in 1993 as Marketing Specialist.
Mr. Pshtissky has been Vice President, Technology and Development since May
1990. Mr. Pshtissky was Director of Electrical Product Development from March
1988 through April 1990. Prior to that time he was an Electrical Design
Engineer.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or paid
for all services rendered to the Company during 2001, 2000 and 1999 by the Chief
Executive Officer and the Company's most highly compensated executive officers
whose total annual salary and bonus exceeded $100,000 during any such year.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-----------------------
Awards
---------------
Annual Compensation Restricted
Name and All Other Stock
Principal Position Year Salary ($) Bonus ($) Compensation Award
------------------ ---- ---------- ---------- ------------ ----------
Kenneth M. Darby 2001 $285,000 $ 75,000 (1) $ 3,000 (5) -
Chief Executive 2000 285,000 42,271 (1) 3,000 (5) 50,813 (6)
Officer 1999 275,000 261,690 (4) 3,000 (5) 111,814 (6)
Henry B. Murray 2001 $184,615 - $ 87,179 (7) -
Executive 2000 100,000 40,000 (2) - -
Vice President 1999 - - - -
Arthur D. Roche 2001 - - - -
Executive 2000 29,769 5,058 (3) - -
Vice President 1999 180,000 140,910 (4) - -
(1) Represents cash bonus based on certain performance measures, including the
Company's profitability, which was adopted by the Board of Directors upon
the recommendation of its Compensation Committee.
(2) Represents minimum guaranteed bonus for fiscal 2000.
(3) Represents cash bonus equal to 1.75% of the sum of consolidated pre-tax
income and provision for officers' bonuses pro-rated for the two-month
period of employment as Executive Vice President. Such bonus formula was
adopted for 2000 by the Board of Directors upon the recommendation of its
Compensation Committee.
(4) Represents cash bonus equal to 3.25% and 1.75% of the sum of consolidated
pre-tax income and provision for officers' bonuses for Mr. Darby and Mr.
Roche, respectively, which bonus formula was adopted for 1999 by the
Board of Directors upon the recommendation of its Compensation Committee.
(5) Represents life insurance policy payment.
(6) Represents deferred compensation benefit of 8,130 and 16,565 shares of
Common Stock awarded in 2000 and 1999, respectively, which are being held
by the Company in Treasury. The value of such stock is based on the fair
market value on the date of grant. At September 30, 2001, the quoted
market value of such shares approximated $28,000 and $56,000,
respectively, for the 2000 and 1999 awards.
(7) Represents lump-sum severance payout pursuant to Mr. Murray's separation
from the Company effective August 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
There were no options granted to the aforementioned executive officers during
fiscal 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
At September 30, 2001
-----------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-money
Options Options (2)
------------- -------------
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized (1) Unexercisable Unexercisable
----------------- ----------- ------------ ------------- -------------
Kenneth M. Darby -0- -0- -0-/21,539 -0-/$4,577
Henry B. Murray -0- -0- -0-/-0- -0-/-0-
Arthur D. Roche -0- -0- -0-/-0- -0-/-0-
(1) Calculated based on the difference between the closing quoted market prices
per share at the dates of exercise and the exercise prices.
(2) Calculated based on the difference between the closing quoted market price
($3.40) and the exercise price.
Employment Agreements
Mr. Darby has entered into an employment agreement with the Company that
provides for an annual salary of $310,000 through fiscal 2004. This agreement
provides for payment in an amount up to three times his average annual
compensation for the previous five years if there is a change in control of the
Company without Board of Director approval (as defined in the agreement). It
also provides him a payment in the amount of two times his base compensation and
a deferred compensation benefit of 70,647 shares of common stock upon
termination or expiration of his contract. In addition, Mr. Darby is eligible to
receive a cash bonus for fiscal 2002 to be determined at the sole discretion of
the Compensation Committee.
Report of the Compensation Committee
The Compensation Committee's compensation policies applicable to the
Company's officers for the last completed fiscal year were to pay a competitive
market price for the services of such officers, taking into account the overall
performance and financial capabilities of the Company and the officer's
individual level of performance.
Mr. Darby makes recommendations to the Compensation Committee as to the
base salary and incentive compensation of all officers other than himself. The
Committee reviews these recommendations with Mr. Darby, and after such review,
determines compensation. In the case of Mr. Darby, the Compensation Committee
makes its determination after direct negotiation with him. For each officer, the
Committee's determinations are based on its conclusions concerning each
officer's performance and comparable compensation levels in the CCTV Industry
and the Long Island area or similarly situated officers at comparable companies.
The overall level of performance of the Company is taken into account but is not
specifically related to the base salary of these officers. The Company also has
established an incentive compensation plan for all of the officers, which
provides a specified bonus to each officer based upon, among other things, the
Company's achievement of certain annual sales and profitability targets.
The Compensation Committee grants options to officers to link compensation
to the performance of the Company. Options are exercisable in the future at the
fair market value at the time of grant, so that an officer granted an option is
rewarded by the increase in the price of the Company's stock. The Committee
grants options to officers based on significant contributions of such officers
to the performance of the Company.
In addition, in determining Mr. Darby's salary for service as Chief
Executive Officer, the Committee considered the responsibility assumed by him in
formulating and implementing a management and long-term strategic plan.
Submitted by the Compensation Committee
Peter F. Neumann, Chairman W. Gregory Robertson
Milton F. Gidge Arthur D. Roche
STOCK PERFORMANCE GRAPH
The following graph compares the return of $100 invested in the Company's
stock on October 1, 1996, with the cumulative total return on the same
investment in the AMEX U.S. Market Index and the AMEX Technology Index.
(The following table is to be represented by a chart in the printed material)
COMPARISON OF FIVE YEARS CUMULATIVE TOTAL RETURN BETWEEN
VICON INDUSTRIES, INC. AND THE AMEX U.S. MARKET INDEX
AND THE AMEX TECHNOLOGY INDEX
Vicon AMEX U.S. AMEX
Date Industries, Inc. Market Index Technology Index
---- ---------------- ------------ ----------------
10/01/96 100 100 100
10/01/97 335 126 110
10/01/98 285 118 133
10/01/99 280 152 225
10/01/00 130 188 264
10/01/01 136 137 214
* Fiscal years ended September 30th.
INSERT GRAPH IN PLACE OF NUMBERS ABOVE.
PROPOSAL 2. TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE, AUTHORIZED FOR ISSUANCE
FROM 10,000,000 SHARES TO 25,000,000 SHARES
On February 6, 2002, the Board of Directors adopted a resolution proposing
an amendment of the Company's Certificate of Incorporation to increase the total
number of shares of Common Stock authorized to issue from 10,000,000 to
25,000,000 shares. At December 31, 2001, the Company had 4,652,712 shares of
common stock outstanding, 374,407 shares of common stock reserved for issuance
under the Company's stock option and deferred compensation plans, 145,000 shares
of common stock issuable upon the exercise of outstanding warrants and
approximately 4,653,000 shares of common stock issuable pursuant to the
Company's Shareholders Rights Plan adopted by the Board of Directors on November
14, 2001. Accordingly, the Company had only approximately 175,000 unreserved
authorized shares of common stock available for issuance at December 31, 2001.
The proposed amendment to paragraph Fifth of the Company's Certificate of
Incorporation would read as follows:
"Fifth: The aggregate number of shares which the Corporation shall have the
authority to issue, which shares shall not have preemptive rights, is 25,000,000
shares, par value $.01 per share."
The Board of Directors has determined that the number of unreserved shares
of Common Stock presently available for issuance is not sufficient to enable the
Company to respond to potential business opportunities and pursue objectives
designed to enhance shareholder value. The additional authorized shares will
benefit the Company by providing flexibility to the Board of Directors without
further action or authorization by stockholders (except as required by law), in
responding to business needs and opportunities as they arise, and for other
corporate purposes. These corporate purposes might include the obtaining of
capital funds through public and private offerings of shares of Common Stock or
of securities convertible into shares of Common Stock or the acquisition of
businesses, technologies or other assets for stock. In addition, the Board of
Directors may deem it appropriate to issue shares of Common Stock for
distribution to the Company's stockholders in the event of a stock dividend or
stock split, or for distributions to officers, directors and key employees
pursuant to stock option or other benefit plans. If such additional authorized
shares of Common Stock are subsequently issued to other than existing
stockholders, the percentage interest of existing stockholders in the Company
will be reduced. The issuance of any additional shares will be on terms deemed
by the Board of Directors to be in the best interests of the Company and its
stockholders. However, except for shares issuable under proposed stock option
plans included herein, there are no other present plans, agreements or
understandings regarding the issuance of the proposed additional authorized
shares.
Except as otherwise required by applicable law or stock exchange rules,
authorized but unissued shares of Common Stock may be issued at such time, and
for such considerations as the Board of Directors may determine to be
appropriate, without further authorization by stockholders. Stockholders do not
have any preemptive or similar rights to subscribe for or purchase any
additional shares of Common Stock that may be issued in the future, and
therefore, future issuances of Common Stock, may have a dilutive effect on
earnings per share, voting power and other interests of existing shareholders.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the approval of the Amendment to the Company's
Certificate of Incorporation to increase the Authorized Shares of Common
Stock from 10,000,000 shares to 25,000,000 shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED
SHARES OF COMMON STOCK FROM 10,000,000 SHARES TO 25,000,000 SHARES.
PROPOSAL 3. APPROVAL OF THE VICON INDUSTRIES, INC.
2002 INCENTIVE STOCK OPTION PLAN
The Board of Directors of the Company has adopted the Vicon Industries,
Inc. 2002 Incentive Stock Option Plan (the "Incentive Option Plan"). The purpose
of the Incentive Option Plan is to advance the interests of the Company and its
shareholders by providing certain officers and other key employees of the
Company, whose judgment, initiative and efforts are key to the successful
conduct of the business of the Company and its subsidiaries, with an additional
incentive to perform in a superior manner as well as to attract people of
experience and ability. Officers and other full time employees of the Company
and its subsidiaries are eligible to receive incentive stock options under the
Incentive Option Plan. Directors who are not employees of the Company or its
subsidiaries are not eligible to receive awards under the Incentive Option Plan.
The following is a summary of the material features of the Incentive Option
Plan.
The Incentive Option Plan authorizes the granting of incentive stock
options for 200,000 shares of Common Stock to such officers and full time
employees of the Company and its subsidiaries as the Committee (the "Committee")
may determine. The Committee consists of members of the Company's Compensation
Committee who are outside directors, none of whom are eligible to receive
options under the Incentive Option Plan. The Committee selects the officers and
employees to whom options are to be granted and the number of shares to be
granted. All awards of options by the Committee are subject to the approval of
the Board of Directors.
Pursuant to Section 422 of the Internal Revenue Code, options granted under
the Incentive Option Plan afford tax benefits upon compliance with certain
conditions and do not result in tax deductions to the Company. Shareholder
approval of the Incentive Option Plan is required for stock options granted
under this plan to qualify for incentive stock option treatment under the Code.
Incentive stock options granted under the Incentive Option Plan expire six
years from the date of grant and such exercise prices may not be less than 100%
of the fair market value on the date the option is granted or in the case of an
employee owning more than 10% of the Common Stock of the Company not less than
110% of the fair market value on the date the option is granted. Further, the
fair market value of stock with respect to which incentive stock options are
exercisable for the first time by any employee in any given calendar year may
not exceed $100,000, such value being determined at the time the options are
granted.
Options granted under the Incentive Option Plan may be exercised to the
extent of 30% of the shares covered after two years from the date of grant; an
additional 30% after three years from the date of grant and the remaining 40%
after four years from the date of grant.
Incentive stock options granted in connection with the Incentive Option
Plan must be exercised within three months after the date on which the optionee
ceases to perform services for the Company, except in the event of death, the
foregoing restriction does not apply. In the event of disability, options may be
exercised for up to one year after the optionee ceases to perform services.
Stock purchased through the exercise of options granted under the Incentive
Option Plan may be paid in whole or in part through the surrender of previously
held shares of Common Stock at the fair market value thereof. No options may be
granted under the Incentive Option Plan after ten years from the effective date
of the Incentive Option Plan.
The Board of Directors may amend the Incentive Option Plan in any respect,
provided, however, that stockholder approval shall be required for any amendment
which: (i) increases the maximum number of shares for which options may be
granted under the Incentive Option Plan; (ii) reduces the exercise price at
which incentive stock options may be granted; (iii) extends the period during
which options may be granted or exercised beyond the periods originally
prescribed; or (iv) changes the persons eligible to participate in the Incentive
Option Plan.
An optionee shall have no right as a stockholder with respect to any shares
covered by an option until the date of issuance of a stock certificate of such
shares. Nothing in the Incentive Option Plan or in any award of options granted
confers on any person any right to continue in the employ of the Company or its
subsidiaries, or to continue to perform services for the Company or its
subsidiaries, or interferes in any way with the right of the Company or its
subsidiaries to terminate such person's services as an officer or other employee
at any time.
Under current federal income tax regulations, income generated from the
sale of shares of common stock exercised under the plan will be afforded capital
gains treatment provided that the shares are held by the optionee for at least
one year after the date of exercise and two years after the date of grant. No
income tax deduction may be taken by the Company as a result of the grant,
exercise or sale of incentive stock option shares. However, should the shares be
sold prior to the required holding periods, the Company will be afforded an
income tax deduction equal to the amount by which the lesser of the selling
price or fair market value at exercise exceeds the exercise price of such option
shares. The resulting income will be treated as ordinary income to the optionee.
An optionee will not be deemed to have received taxable income upon the grant or
exercise of any incentive stock option. However, upon exercise of such options,
any unrealized gain measured by the excess of the then fair market value over
the cost basis in such exercised shares, is subject to inclusion in federal
income tax alternative minimum tax computations.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the approval of the 2002 Incentive Stock Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 2002 INCENTIVE STOCK OPTION PLAN.
PROPOSAL 4. APPROVAL OF THE VICON INDUSTRIES, INC.
2002 NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors of the Company has adopted the Vicon Industries,
Inc. 2002 Non-Qualified Stock Option Plan (the "Non-Qualified Option Plan"). The
purpose of the Non-Qualified Option Plan is to advance the interests of the
Company and its shareholders by providing Directors, Officers and other key
employees of the Company, whose judgment, initiative and efforts are key to the
successful conduct of the business of the Company and its subsidiaries, with an
additional incentive to perform in a superior manner as well as to attract
people of experience and ability. Directors, Officers and other full time
employees of the Company and its subsidiaries are eligible to receive stock
options under the Non-Qualified Option Plan. The following is a summary of the
material features of the Non-Qualified Option Plan.
The Non-Qualified Option Plan authorizes the granting of non-qualified
options for a total of 200,000 shares of Common Stock to Directors, Officers and
full time employees of the Company and its subsidiaries as the Committee may
determine. The Committee consists of members of the Company's Compensation
Committee who are outside directors. Options granted to directors under this
plan must be ratified by the Board of Directors.
The exercise price per share of each option will be equal to the fair
market value of the shares of Common Stock on the date the option is granted.
All options granted under the Non-Qualified Option Plan expire upon the earlier
of six years following the date of grant or three months following the date the
optionee ceases to provide services to the Company. Upon retirement or death,
all options previously granted become exercisable within one year.
Options under the Non-Qualified Option Plan granted to officers and key
employees may be exercised to the extent of 30% of the shares covered after two
years from the date of grant; an additional 30% after three years from the date
of grant and the remaining 40% after four years from the date of grant. Options
under the Plan granted to directors may be exercised 100% after one year from
date of grant.
Upon exercise of the stock option, an optionee will be deemed to have
received income in an amount equal to the amount by which the exercise price is
exceeded by the fair market value of the Common Stock. The amount of any
ordinary income deemed to have been received by an optionee upon the exercise of
a non-qualified stock option will be a deductible expense of the Company for tax
purposes.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the approval of the 2002 Non-Qualified Stock
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 2002 NON-QUALIFIED STOCK OPTION PLAN
PROPOSAL 5. APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed KPMG LLP as auditors
for the fiscal year ending September 30, 2002, and further directed that
management submit the Board's selection of auditors to the shareholders at the
Annual Meeting for ratification. KPMG LLP, an internationally known firm of
independent certified public accountants, has audited the Company's financial
statements since 1973.
Fees Billed to the Company by KPMG LLP for Fiscal 2001
Audit Fees. The aggregate fees billed by KPMG LLP for professional services
for the audit of the Company's consolidated financial statements for fiscal 2001
and the review of the consolidated financial statements included in the
Company's Forms 10-Q for fiscal 2001 were approximately $130,000.
Financial Information Systems Design and Implementation Fees. There were no
fees billed by KPMG LLP for financial information systems design and
implementation for fiscal 2001.
All Other Fees. The aggregate fees billed to the Company for all other
professional services rendered by KPMG LLP during fiscal 2001 were approximately
$115,000, consisting of tax compliance and related services.
The Audit Committee has considered whether the non-audit services provided
by KPMG LLP are compatible with maintaining their independence.
KPMG LLP will have a representative at the Annual Meeting of Shareholders,
who will have an opportunity to make a statement, if they should so desire, and
will be available to respond to appropriate questions.
Unless marked to the contrary, the shares represented by the enclosed
proxy will be voted FOR the ratification of KPMG LLP as the independent
auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of this date, management is not aware of any matters to be presented for
action at the Annual Meeting, other than those referred to in the Notice of
Annual Meeting of Shareholders, but the proxy form included with this proxy
statement, if executed and returned, gives discretionary authority to management
with respect to any other matters that may come before the meeting.
MISCELLANEOUS
Solicitation of proxies is being made by mail and may also be made in
person or by telephone or fax by officers, directors and regular employees of
the Company.
The cost of the solicitation will be borne by the Company.
By order of the Board of Directors
Hauppauge, New York Arthur D. Roche
March 22, 2002 Secretary