UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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(a)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-2
NAPCO SECURITY TECHNOLOGIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
_______________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
(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: __________________
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NAPCO SECURITY TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on December 1, 2009
Dear Fellow Stockholder:
The Annual Meeting of the Stockholders of Napco Security Technologies,
Inc., a Delaware corporation (the "Company"), will be held at the Company's
offices at 333 Bayview Avenue, Amityville, New York, on Tuesday, December 1,
2009, at 11:00 a.m., for the following purposes, as more fully described in the
accompanying Proxy Statement:
1. to elect three directors to serve for a term of three years and
until their successors are elected and qualified; and
2. to transact such other business as may properly come before the
Meeting or any adjournments thereof.
Only stockholders of record at the close of business on October 30, 2009
are entitled to notice and to vote at the Meeting or any adjournment thereof.
By order of the Board of Directors,
Richard L. Soloway, Secretary
October 30, 2009
Important Notice Regarding the Availability of
Proxy Materials for the Stockholder Meeting
To be Held on December 1, 2009
Copies of this proxy statement, form of proxy card and our 2009 annual report
are available at www.napcosecurity.com/2009annualmeeting.pdf. The Board
recommends a vote FOR the nominated state of directors (see page 3).
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING WHETHER
OR NOT YOU ARE PERSONALLY ABLE TO ATTEND. YOU ARE URGED TO COMPLETE,
SIGN AND MAIL THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE.
NAPCO SECURITY TECHNOLOGIES, INC.
333 Bayview Avenue
Amityville, New York 11701
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 1, 2009
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, $.01 par
value per share ("Common Stock") of Napco Security Technologies, Inc. (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for the Annual Meeting following Fiscal Year 2009,
to be held on December 1, 2009, and at any adjournment thereof (the "Meeting"),
pursuant to the accompanying Notice of Annual Meeting of Stockholders. Proxies
in the enclosed form, if properly executed and returned in time, will be voted
at the Meeting. Any stockholder giving a proxy may revoke it prior to its
exercise by attending the Meeting and reclaiming the proxy, by executing a later
dated proxy or by submitting a written notice of revocation to the Secretary of
the Company at the Company's office or at the Meeting. Stockholders attending
the Meeting may vote their shares in person. This Proxy Statement and the form
of proxy will first be mailed to the stockholders on or about November 2, 2009.
A copy of the 2009 Annual Report of the Company, including financial statements,
is being mailed herewith.
Only stockholders of record at the close of business on October 30, 2009
(the "Record Date") are entitled to notice of and to vote at the Meeting. The
outstanding voting securities of the Company on the Record Date consisted of
19,092,473 shares of Common Stock.
On all matters requiring a vote by holders of the Common Stock, each share
of Common Stock entitles the holder of record to one vote. At the Meeting, the
holders of record of Common Stock will vote on Item 1, the election of three
directors; and Item 2, the transaction of any other business as may properly
come before the Meeting and require a vote of the stockholders.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock authorized to vote will constitute a quorum
for the transaction of business at the Meeting.
The affirmative vote of a plurality of the votes cast at the Annual Meeting
is required for the election of directors. A properly executed proxy marked
"WITHHOLD" with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be
counted for purposes of determining whether there is a quorum.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to certain matters. Thus, if you do not give your broker or nominee
specific instructions, your shares may not be voted on those matters. Shares
represented by such "broker non-votes" will, however, be counted in determining
if there is a quorum.
THEREFORE, THE COMPANY URGES YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD.
- 2 -
Item 1: Election of Directors
The Board of Directors is divided into three classes. At the upcoming
Annual Meeting, one class will stand for election for the term ending at the
Annual Meeting of Stockholders following Fiscal Year 2012. The terms of the
other two classes of continuing directors do not expire until the Annual
Meetings of Stockholders after fiscal year end 2010 and 2011, respectively.
Unless otherwise specified, shares represented by the enclosed proxy will
be voted for the election of Messrs. Paul Steven Beeber and Randy B. Blaustein
and Ms. Donna A. Soloway, currently directors, who have been recommended for
nomination by the Nominating Committee of the Board of Directors and nominated
by the Board of Directors for reelection as a director to serve until the Annual
Meeting of Stockholders in 2012 and until his or her successor is elected and
qualified.
Each of Messrs. Beeber and Blaustein and Ms. Soloway have consented to
serve if reelected. In the event that any nominee becomes unable or unwilling to
serve as a director, discretionary authority may be exercised by the proxies to
vote for the election of an alternate nominee of the Board of Directors.
The names of, and certain information concerning, the nominees and the
continuing directors are set forth below:
Principal Occupation; Director
Name and Age Five-Year Employment History Since
------------ ---------------------------- -----
Nominees for election to serve until Annual Meeting
of Stockholders following Fiscal Year 2012:
Paul Stephen Beeber................................. Licensed Attorney in New York State since 1970, 2004
(65) focusing on elder law, estate planning and real estate.
Randy B. Blaustein.................................. Principal of R.B. Blaustein & Co. since December 2000; 1985
(57) Partner of Blaustein, Greenberg & Co. July 1991 -
November 2000; Attorney since October 1980,
specializing in general business and tax matters,
and author of six books and numerous articles.
Donna A. Soloway.................................... Board of Directors of Security Industry Association 2001
(61) (SIA); Chair of Awards Committee since 1993; Director
and Secretary of SAINTS (Safety, Awareness and
Independence Now Through Security) Foundation, Inc.;
Monthly Columnist for SECURITY DEALER magazine since
1992; and Columnist for SECURITY SALES & INTEGRATION
magazine since 2004. Ms. Soloway is the wife of
Richard L. Soloway, the Chairman and President of the
Company.
- 3 -
Principal Occupation; Director
Name and Age Five-Year Employment History Since
------------ ---------------------------- -----
Directors to serve until Annual Meeting of
Stockholders following Fiscal Year 2010:
Richard L. Soloway.................................. Chairman of the Board of Directors since October 1981; 1972
(63) President since 1998; Secretary since 1975.
Kevin S. Buchel..................................... Senior Vice President of Operations and Finance since 1998
(56) April 1995; Treasurer since May 1998.
Directors to serve until Annual Meeting of
Stockholders following Fiscal Year 2011:
Andrew J. Wilder.................................... Officer of Israeloff, Trattner & Co., independent 1995
(58) certified public accountants, since 1990.
Arnold Blumenthal................................... Group Publisher Emeritus, Security Dealer Locksmith 2001
(82) Ledger, Publisher Security Line and Editor of MBFAA
since 2004; V.P. of Government Security News from 2004
through 2007; Group Publisher of Security Group of
Cygnus Publishing, 1999 through 2003.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
THE ELECTION OF MESSRS. BEEBER AND BLAUSTEIN AND MS. SOLOWAY
Other Directorships
Except as set forth below none of the directors or nominees is a director
of any company (other than the Company) which is subject to the reporting
requirements of the Securities Exchange Act of 1934 or which is a registered
investment company under the Investment Company Act of 1940.
Name Director of
--------------------------- -----------------------
Andrew J. Wilder YTB International, Inc.
- 4 -
CORPORATE GOVERNANCE AND BOARD MATTERS
Independence of Directors
The Board currently consists of seven directors, four of whom the Board has
affirmatively determined have no relationship with the Company or its
subsidiaries which would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director and are independent as defined
by the applicable NASDAQ Listing Standards. The four independent directors are
Paul Stephen Beeber, Randy B. Blaustein, Arnold Blumenthal and Andrew J. Wilder.
Board Structure and Committee Composition
The Board maintains three standing committees: Audit, Compensation, and
Nominating. Each Committee is composed entirely of independent directors as
defined in the applicable NASDAQ Listing Standards.
During fiscal 2009, the Board held five meetings. Each director attended at
least 75% of all Board meetings and meetings of committees of which such
director was a member.
Directors are expected to attend the Company's annual meetings of
stockholders. All directors attended the last annual meeting of stockholders on
December 9, 2008.
NAPCO maintains an "Investors" section on its website,
www.napcosecurity.com, setting forth the Company's committee charters for the
Audit, Compensation and Nominating Committees.
Audit Committee
The Audit Committee has been established in accordance with Section
3(a)(58)A of the Securities Exchange Act of 1934 as amended. The Audit Committee
is responsible for retaining, evaluating and, if appropriate, recommending the
termination of the Company's independent auditors. The Audit Committee assists
the Board in oversight of (1) the integrity of the Company's financial
statements, (2) the Company's independent auditor's qualifications and
independence, and (3) the performance of the Company's internal audit function
and independent auditors. In addition, the Committee renders its report for
inclusion in the Company's annual proxy statement.
The Audit Committee has the authority to obtain advice and assistance from
outside legal, accounting or other advisors as the Audit Committee deems
necessary to carry out its duties. The Audit Committee held five meetings in
fiscal year 2009. The current members of the Audit Committee are Andrew J.
Wilder (Chairman), Paul Stephen Beeber and Arnold Blumenthal, each of whom meets
the NASDAQ Listing Standards for the independence of audit committee members.
The Board has determined that Andrew Wilder is an audit committee financial
expert.
The report of the Audit Committee is included in this proxy statement on
page 8.
Compensation Committee
The Compensation Committee assists the Board in discharging its
responsibilities relating to compensation of the Company's Chief Executive
Officer and other executives. The Committee determines individuals to be granted
options under the Employee Stock Option Plans and Non Employee Stock Option
Plan, the number of options awarded and the term of the options and interprets
provisions of such plans. The current members of the Compensation Committee are
Randy B. Blaustein (Chairman), Andrew J. Wilder, and Arnold Blumenthal.
- 5 -
The Compensation Committee held one meeting in fiscal year 2009.
The Compensation Committee's process and procedures for considering and
determining executive compensation are as follows. Messrs. Soloway, Hevia,
Carreri and Marks have employment agreements which provide for a minimum base
salary and a minimum annual cost-of-living adjustment. For fiscal 2009, Messrs.
Soloway, Hevia, Carrieri and Mark's salaries were determined pursuant to such
employment agreements. Mr. Buchel's salary for the 2009 fiscal year was in an
amount recommended by the CEO. The considerations entering into the
determination by the CEO of the salary recommendation for Mr. Buchel were the
CEO's subjective evaluations of the ability and past performance of Mr. Buchel
and the CEO's judgment of Mr. Buchel's potential for enhancing the Company's
profitability.
The Compensation Committee's policy is that named executive officers, other
than the CEO, should receive short term incentive compensation in the form of
bonuses based, in part, on targeted sales and earnings recommended by the CEO.
For fiscal 2009, the Company did not achieve the targeted sales and earnings
levels so recommended. The Committee's policy is generally to grant options to
the named executive officers other than the CEO under the Company's stock option
plans after consideration of the awards recommended by the CEO. In connection
with the acquisition of G. Marks Hardware, Inc. in August 2008, Mr. Marks was
granted options to purchase 100,000 shares of Common Stock of the Company at an
exercise price of $4.25 per share.
The Committee's process includes executive sessions where the Committee
meets without the presence of management.
Nominating Committee
The Nominating Committee reviews and makes recommendation to the Board
regarding potential candidates for nomination as director.
The Nominating Committee held one meeting in fiscal year 2009. The current
members of the Nominating Committee are Arnold Blumenthal (Chairman), Andrew J.
Wilder and Randy B. Blaustein.
Nomination of Directors
The Nominating Committee considers candidates for director nominees
proposed by directors, the Chief Executive Officer and stockholders. Potential
candidates are screened and interviewed by the Nominating Committee. All members
of the Board may interview the final candidates. The same identifying and
evaluating procedures apply to all candidates for director nomination, including
candidates submitted by stockholders.
The Company's general criteria for the nomination of director candidates,
include the following:
- the candidates' personal and professional ethics, integrity and
values,
- mature judgment,
- management, accounting or finance, industry and technical
knowledge,
- demonstrated skills in his/her area of present or past
professional or business responsibility,
- an ability to work effectively with others,
- sufficient time to devote to the affairs of the Company and
- freedom from conflicts of interest.
- 6 -
Stockholder Nominees
The Nominating Committee will consider nominations submitted by
stockholders. Any stockholder nominations proposed for consideration by the
Nominating Committee should include the nominee's name and qualifications for
Board membership and should be addressed to:
Chair - Nominating Committee
Napco Security Technologies, Inc.
333 Bayview Ave.
Amityville, NY 11701
Attention: Kevin Buchel
Communications with the Board
You can contact any Director by writing to such Director:
c/o Napco Security Technologies, Inc.
333 Bayview Ave.
Amityville, NY 11701
Attention: Kevin Buchel
The Secretary will promptly forward any communication unaltered to the
Director.
Policy With Respect to Related Person Transactions
It is the Company's policy, set forth in writing, not to permit any
transaction in which the Company is a party and in which executive officers or
directors, their immediate family members, or 5% shareholders have or will have
a direct or indirect interest unless approved by the Audit Committee of the
Board of Directors, other than
1. transactions available to all employees;
2. transactions involving compensation or business expense
reimbursement approved by the Compensation Committee or by
disinterested members of the Board of Directors; or
3. transactions involving less than $120,000 when aggregated with
all similar transactions.
Any issues as to the application of this policy shall be resolved by the
Audit Committee of the Board of Directors. A copy of our Statement of Policy
with Respect to Related Person Transactions is available at the Company's
website, www.napcosecurity.com, under the "Investors" caption.
- 7 -
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors hereby reports as follows:
1. The Audit Committee has reviewed and discussed the Company's
audited financial statements with the Company's management and
representatives of Holtz Rubenstein Reminick LLP ("HRR");
2. The Audit Committee has discussed with HRR the matters required
to be discussed by the statement on Auditing Standards No. 61, as
amended (AICPA, Professional Standards, Vol. 1. AU section 380),
as adopted by the Public Company Accounting Oversight Board in
Rule 3200T; and
3. The Audit Committee has received the written disclosures and
letter from HRR required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent
accountants' communication with the Audit Committee concerning
independence, and has discussed with HRR, HRR's independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's annual report on Form 10-K for the fiscal year ended
June 30, 2009 filed with the Securities and Exchange Commission.
Date: October 13, 2009
The Audit Committee:
Andrew J. Wilder, Chairman
Paul Stephen Beeber
Arnold Blumenthal
- 8 -
COMPENSATION OF DIRECTORS
The total fiscal year 2009 compensation of non-employee Directors is shown
in the following table.
Director Compensation
Fees Earned or All Other
Paid in Cash Option Awards Compensation Total
Name ($)(1) ($)(2)(3) ($) ($)
----------------------- -------------- ------------- ------------ ----------
Paul Stephen Beeber $22,000 $3,800 - $25,800
Randy B. Blaustein (4) $18,500 $3,800 $10,000 $32,300
Arnold Blumenthal $22,000 $3,800 - $25,800
Donna A. Soloway $14,500 $3,800 - $18,300
Andrew J. Wilder $27,000 $3,800 - $30,800
________________
(1) Each director who is not an employee receives $5,000 for each Board of
Directors meeting attended, an increase from $2,500 per meeting effective
May 2009. Mr. Wilder, as Chairman of the Audit Committee, receives $2,000
for each Audit Committee meeting attended and each of Messrs. Beeber and
Blumenthal receives $1,000 for each Audit Committee meeting attended. Mr.
Blaustein receives $4,000 for serving as Chairman of the Compensation
Committee.
(2) Amounts reflect the share-based compensation expense recognized by the
Company in the year ended June 30, 2009, in accordance with Statement of
Financial Accounting Standards No. 123R. Assumptions used in the
calculation of these amounts are included in footnote 9 to the Notes to
Consolidated Financial Statements contained in the Company's Form 10-K for
the year ended June 30, 2009.
(3) At June 30, 2009, each of Messrs. Beeber, Blaustein, Blumenthal and Wilder
and Ms. Soloway held outstanding options to purchase 30,000 shares of
Common Stock of the Company, of which options to purchase 18,000 shares
were vested and options to purchase 6,000 shares will vest on the
anniversary date of grant in each of fiscal 2010 and 2011.
(4) During the fiscal year ended June 30, 2009, the Company retained Mr.
Blaustein as special counsel for certain general business and tax related
matters. Fees for such services were $10,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the Forms 3, 4 and 5 furnished to the Company
with respect to the most recent fiscal year and written representations of the
reporting person (as defined below), no person, who at any time during such
fiscal year, was an officer, director, beneficial owner of more than ten (10%)
percent of any class of equity securities of the Company or any other person
subject to Section 16 of the Securities Exchange Act of 1934 ("reporting
person"), failed to file on a timely basis one or more reports during such
fiscal year, except that George Marks filed one late Form 4 reporting one grant
of options on August 18, 2008.
- 9 -
INFORMATION CONCERNING EXECUTIVE OFFICERS
Each executive officer of the Company holds office until the annual meeting
of the Board of Directors and his successor is elected and qualified, or until
his earlier death, resignation, or removal by the Board. The Company has adopted
a Code of Ethics for directors and employees, including its executive officers.
There are no family relationships between any director or officer of the
Company, except Richard L. Soloway and Donna A. Soloway, his wife. The following
table sets forth as of the date hereof the names and ages of all executive
officers of the Company, all positions and offices with the Company held by
them, the period during which they have served in these positions and, where
applicable, their positions in any other organizations during the last five
years.
Position and Office with the Company, Term of Office
Name and Age and Five-Year Employment History
------------ --------------------------------
Richard L. Soloway......... Chairman of the Board of Directors since October 1981; President since 1998; and
(63) Secretary since 1975.
Kevin S. Buchel............ Senior Vice President of Operations and Finance since April 1995; Treasurer since
(56) May 1998.
Jorge Hevia................ Senior Vice President of Corporate Sales and Marketing since May 1999; Vice
(51) President of Corporate Sales and Marketing since October 1998.
Michael Carrieri........... Senior Vice President of Engineering Development since May 2000; Vice President of
(51) Engineering Development from September 1999 to May 2000.
George Marks............... President, Marks USA since August 2008; President of G. Marks Hardware, Inc. from
(73) prior to 2004 to August 2008.
- 10 -
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth compensation information
for our Chief Executive Officer, our Chief Financial Officer and our three other
most highly compensated executive officers during fiscal years 2009 and 2008 of
the Company.
Summary Compensation Table
Name and Fiscal Salary Bonus Option Awards All Other Total
Principal Position Year ($) ($) ($)(1) Compensation ($) ($)
------------------ ------ -------- ------- ------------- ---------------- --------
Richard L. Soloway, Chairman(2) of 2009 $572,946 - $106,611 $49,415 $728,972
the Board of Directors, President
and Secretary 2008 549,861 $48,225 115,969 43,149 757,204
Kevin S. Buchel, (3) 2009 249,776 - 26,555 9,065 285,396
Senior Vice President of Operations
and Finance and Treasurer 2008 245,712 25,630 35,216 9,103 315,661
Jorge Hevia, (3) 2009 271,392 - 26,555 11,449 309,396
Senior Vice President of Corporate
Sales and Marketing 2008 266,042 15,630 35,216 12,482 329,370
Michael Carrieri, (3) 2009 245,472 - 26,555 10,441 282,468
Senior Vice President of
Engineering Development 2008 241,113 10,941 35,216 16,096 303,366
George Marks, (4) 2009 258,125 - 123,382 32,727 414,234
President of Marks USA
________________
(1) Amounts reflect the share-based compensation expense recognized by the
Company in the fiscal years ended June 30, 2009 and June 30, 2008, in
accordance with Statement of Financial Accounting Standards No. 123R.
Assumptions used in the calculation of these amounts are included in
footnote 9 to the Notes to Consolidated Financial Statements contained in
the Company's Form 10-K for the year ended June 30, 2009.
(2) All other compensation for Mr. Soloway for fiscal 2009 includes payment of
health and life insurance premiums of $17,101, automobile expenses of
$28,861, and 401(k) match of $3,195. All other compensation for Mr. Soloway
for fiscal 2008 includes payment of health and life insurance premiums of
$16,886, automobile expenses of $20,732 and 401K match of $5,273.
(3) All other compensation for Messrs. Buchel, Hevia and Carrieri includes
payment of life insurance premiums, automobile expenses and 401K matches
and for Mr. Carrieri, includes payment of health insurance premiums.
(4) Mr. Marks was elected President of Marks USA on August 18, 2008. All other
compensation for Mr. Marks for fiscal 2009 includes payment of health and
life insurance premiums of $7,081, automobile expenses of $23,100 and
401(k) match of $2,546.
- 11 -
Grants of Plan-Based Awards
All Other Option Awards: Grant Date Fair
Number of Shares of Stock Exercise or Base Value of Option
or Units Price of Option Awards Awards
Name Grant Date (#)(1) ($/Sh) ($)(2)
---- ---------- ------------------------- ---------------------- ---------------
Richard L. Soloway - - - -
Kevin S. Buchel - - - -
Jorge Hevia - - - -
Michael Carrieri - - - -
George Marks 08/18/08 100,000 $4.25 $198,409
________________
(1) Vest as to one third upon grant and as to an additional one third on the
first two annual anniversary dates of grant.
(2) See footnote (1) to the Summary Compensation Table
Outstanding Equity Awards at Fiscal Year-End
Option Awards
Number of Number of
Securities Underlying Securities Underlying Option
Unexercised Options Unexercised Options Exercise Option
(#) (#) Price Expiration
Name Exercisable Unexercisable ($) Date
---- ---------------------- --------------------- --------- ----------
Richard L. Soloway 135,000 - $1.787 02/27/13
540,000 - 1.881 06/15/13
135,000 - 2.091 03/19/14
56,250 - 5.227 03/15/15
30,000 7,500 (1) 11.160 03/24/16
15,000 10,000 (2) 6.620 10/26/16
10,000 15,000 (3) 5.890 10/09/17
Kevin S. Buchel 27,000 - 1.759 12/20/12
27,000 - 1.900 03/19/14
18,000 4,500 (4) 5.733 11/21/15
3,000 2,000 (5) 6.020 10/26/16
2,000 3,000 (6) 5.350 10/09/17
Michael Carrieri 27,000 - 1.759 12/20/12
27,000 - 1.900 03/19/14
18,000 4,500 (4) 5.733 11/21/15
3,000 2,000 (5) 6.020 10/26/16
2,000 3,000 (6) 5.350 10/09/17
- 12 -
Option Awards
Number of Number of
Securities Underlying Securities Underlying Option
Unexercised Options Unexercised Options Exercise Option
(#) (#) Price Expiration
Name Exercisable Unexercisable ($) Date
---- ---------------------- --------------------- --------- ----------
Jorge Hevia 27,000 - 1.759 12/20/12
27,000 - 1.900 03/19/14
18,000 4,500 (4) 5.733 11/21/15
3,000 2,000 (5) 6.020 10/26/16
2,000 3,000 (6) 5.350 10/09/17
George Marks 33,334 66,666 (7) 4.250 08/18/13
________________
(1) Options as to 7,500 shares vest on 3/24/10.
(2) Options as to 5,000 shares vest on each of 10/26/09 and 10/26/10.
(3) Options as to 5,000 shares vest on each of 10/9/09, 10/9/10 and 10/9/11.
(4) Options as to 4,500 shares vest on 3/24/10.
(5) Options as to 1,000 shares vest on each of 10/26/09 and 10/26/10.
(6) Options as to 1,000 shares vest on each of 10/9/09, 10/9/10 and 10/9/11.
(7) Options as to 33,333 shares vest on each of 8/18/09 and 8/18/10.
Option Exercises
None of Messrs. Soloway, Buchel, Carrieri, Hevia or Marks exercised any
options to purchase Common Stock in the 2009 fiscal year.
Employment Agreements and Potential Payments
Upon Termination or Change in Control
The Company has employment agreements with Richard L. Soloway, Jorge Hevia,
Michael Carrieri and George Marks. The agreement with Mr. Soloway, entered into
on June 26, 2003 for a five year period, and then year to year unless notice of
termination is given at least six months prior to the end of the then applicable
term, provides for a minimum annual salary to be adjusted for inflation and
discretionary annual incentive compensation. Mr. Soloway's agreement contains
non-compete restrictions during his employment and for one year after
termination for any reason. The agreement also provides for termination payments
to Mr. Soloway upon death, disability, termination by the Company other than for
Cause, as defined, termination by Mr. Soloway for Good Reason, as defined, and
termination by Mr. Soloway in the event of a change in control. In the event of
death, the termination payment equals one year's salary payable over one year
plus a bonus calculated on a pro rata basis through the end of the fiscal
quarter immediately preceding death. In the event of disability, the Company
must pay Mr. Soloway an amount equal to 60% of his annual salary through the
term of the agreement plus his bonus on a pro rata basis through the end of the
fiscal quarter preceding the sixth month of his disability. In the event the
Company terminates Mr. Soloway other than for Cause or if Mr. Soloway terminates
for Good Reason, the Company must pay Mr. Soloway, in a lump sum, an amount
equal to three times his annual salary plus the bonus paid to him for the year
prior to his termination. If during the term there should be a change in
control, then Mr. Soloway is entitled to terminate his employment, and the
Company is required to pay him, an amount equal to 299% of the average of the
prior five calendar years' total compensation, subject to certain limitations.
The Company's option plans provide for the accelerated vesting of unvested
options upon a change in control.
- 13 -
Had Mr. Soloway's employment terminated on June 30, 2009 after a change in
control, the Company would have been required to pay him $2,154,249 pursuant to
such agreement. In addition, assuming a change in control on June 30, 2009,
vesting of options to purchase 32,500 shares of Company Common Stock would have
been accelerated. The closing price per share of the Company's Common Stock on
the NASDAQ Global Market on June 30, 2009 ($1.18) was less than the exercise
prices of such accelerated options.
Under such agreement, had Mr. Soloway's employment terminated on June 30,
2009 on account of (i) death, (ii) disability or (iii) by the Company other than
for Cause, or by Mr. Soloway for Good Reason, the Company would have been
required to pay him $572,946, $343,768, and $1,718,838, respectively.
Mr. Hevia's agreement terminates in October 2010. The agreement, as
amended, provides for annual salaries of $274,401 and $288,121 during fiscal
2009 and 2010, respectively, as well as certain bonus provisions based on sales
and profits. Mr. Hevia's agreement provides for payment equal to nine months of
salary and six months of health insurance in the event of a non-voluntary
termination of employment without cause or upon a change in control of the
Company. Had either of such events occurred on June 30, 2009, the Company would
have been required to pay him $212,172.
Mr. Carrieri's agreement terminates in August, 2010. The agreement provides
for annual salaries of $248,212 and $260,623 during fiscal 2009 and 2010,
respectively, as well as certain bonus provisions based on sales and profits.
Mr. Carrieri's agreement provided for payment equal to nine months of salary and
six months of health insurance in the event of a non-voluntary termination of
employment without cause. Had Mr. Carrieri been terminated non-voluntarily
without cause on June 30, 2009, the Company would have been required to pay him
$192,531.
In addition, the Company has a severance agreement with Kevin S. Buchel
providing for payments equal to nine months of salary and six months of health
insurance in the event of a non-voluntary termination of employment without
cause. Had Mr. Buchel's employment been terminated on June 30, 2009
non-voluntarily without cause, the Company would have been required to pay him
$197,203 pursuant to such severance agreement.
In the event of a change in control on June 30, 2009, vesting of options to
purchase 9,500 shares would have been accelerated for each of Messrs. Hevia,
Carrieri and Buchel, and options to purchase 33,333 shares would have been
accelerated for Mr. Marks. The closing price per share of the Company's Common
Stock on the NASDAQ Global Market on June 30, 2009 ($1.18) was less than the
exercise prices of such accelerated options.
Each of the agreements with Messrs. Hevia, Carrieri and Buchel contains
non-compete restrictions for three years after the employee's termination of
employment.
The agreement with Mr. Marks, entered into on August 18, 2008 for a
five-year period, unless earlier termination after the third anniversary by
either party on ten days' notice, provides for an annual salary of $295,000. At
any time after the second anniversary date of the agreement, the Company or Mr.
Marks may elect to convert Employee's employment to that of consultant for which
Mr. Marks shall receive compensation equal to $118,200. The agreement contains
non-compete restrictions for seven years after employee's termination of
employment.
- 14 -
Certain Transactions
On August 18, 2008, pursuant to an Asset Purchase Agreement, the Company
acquired all of the assets and business of G. Marks Hardware, Inc. for $25
million, the repayment of $1 million of bank debt and the assumption of current
liabilities. George Marks, currently a named executive officer of the Company,
owned all of the outstanding capital stock of G. Marks Hardware, Inc.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table, together with the accompanying footnotes, sets
forth information as of October 30, 2009, regarding the beneficial ownership (as
defined by the Securities and Exchange Commission) of Common Stock of the
Company of (a) each person known by the Company to own more than five percent of
the Company's outstanding Common Stock, (b) each director of the Company (c)
each executive officer named in the Summary Compensation Table, and (d) all
executive officers and directors of the Company as a group.
Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Common Stock (2)
---------------- ------------------------ ----------------
Richard L. Soloway 6,917,660 34.6%
c/o the Company
333 Bayview Avenue
Amityville, NY 11701
Epoch Investment Partners, Inc. 989,291 5.2%
640 Fifth Avenue
New York, NY 10019(3)
Kevin S. Buchel 362,183 1.9%
Jorge Hevia 268,750 1.4%
Michael Carrieri 191,000 1.0%
Andrew J. Wilder 114,720 *
Randy B. Blaustein 109,350 *
Donna A. Soloway 32,760 *
Paul Stephen Beeber 10,000 *
Arnold Blumenthal 8,175 *
George Marks 66,666 *
All executive officers and directors as a 8,081,264(4) 42.3%
group (10 in number)
________________
* Less than 1%
(1) This number includes the number of shares that a person has a right to
acquire within sixty (60) days (Soloway - 920,000, Buchel - 83,500, Hevia -
83,500, Carrieri - 83,500, Marks - 66,666, Wilder - 3,600, Blaustein -
3,600, D. Soloway - 3,600, Beeber - 3,600, and Blumenthal - 3,600).
(2) Percentages for each person or the group are computed on the basis of
19,095,713 shares of Common Stock outstanding on October 30, 2009, plus the
number of shares that such person or group has the right to acquire within
sixty (60) days. Except as otherwise noted, persons named in the table and
footnotes have sole voting and investment power with respect to all shares
of Common Stock reported as beneficially owned by them.
(3) Based on information set forth in Form 13F filed with the Securities and
Exchange Commission reporting as of June 30, 2009.
(4) This number of shares includes (i) 6,826,098 shares as to which officers
and directors have sole voting and investment power, and (ii) 1,255,166
shares that officers and directors have the right to acquire within sixty
(60) days.
- 15 -
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of the Company included in the Annual
Report to Stockholders for the 2009 fiscal year were examined by Holtz
Rubenstein Reminick LLP ("HRR"). A representative of HRR will be present at the
Annual Meeting to make a statement if he desires and to respond to appropriate
questions presented at the Meeting. The Company has retained HRR as its
independent registered public accounting firm for fiscal year 2010.
On December 15, 2008, the Company engaged Holtz Rubenstein Reminick LLP
("HRR") as the independent registered pubic accounting firm for the Company and
its subsidiaries replacing Marcum LLP, formerly Marcum & Kliegman LLP ("M&K"),
who were dismissed on the same day. The change was approved by the Audit
Committee of Board of Directors of the Company. The Company had not consulted
with HRR during its two most recent fiscal years nor during any subsequent
interim period prior to its appointment as auditor for the fiscal year 2009
regarding the application of accounting principles to a specified transaction
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's consolidated financial statement or regarding any
matter that was either the subject of a disagreement, within the meaning of Item
304(a)(1)(iv) of Regulation S-K, or any "reportable event," as that term is
defined in Item 304(a)(1)(v) of Regulations S-K.
M&K was engaged as the Company's independent accountants on December 15,
2003. M&K's reports on the Company's financial statements for fiscal 2007 and
2008 did not contain any adverse opinion or disclaimer of opinion and was not
qualified as to uncertainty, audit scope or accounting principles.
During the Company's fiscal year ended June 30, 2008, and any subsequent
interim period, there were no disagreements between the Company and M&K on any
matter of accounting principles or practices, financial statement disclosures or
auditing scope or procedures.
During the Company's fiscal year ending June 30, 2007, there were
disagreements between the Company and M&K relating to Management's estimate of
the reserve required for slow-moving or obsolete inventory, reclassification of
certain inventories to non-current and Management's estimates used to capitalize
certain indirect labor costs into inventory. All of the foregoing disagreements
were resolved to M&K's satisfaction.
As reported in the Auditors Report on Internal Controls over Financial
Reporting included in the Company's Forms 10-K for the fiscal years ended June
30, 2007 and 2008, M&K advised the Company that certain of its internal controls
over financial reporting were not effective.
The Company's Audit Committee discussed the subject matter of each of the
above with M&K.
The Company authorized M&K to respond fully to HRR concerning the subject
matter of each of the above.
Each of HRR and M&K has informed the Company that it does not believe that
the statements made by the Company with respect to the change in accountants are
incomplete or incorrect.
- 16 -
Principal Accountant Fees
The fees billed for professional services for fiscal year 2009 by HRR and
by Marcum & Kliegman LLP ("M&K"), the Company's former independent auditors, and
for fiscal year 2008 by M&K for professional services were as follows:
Fiscal Year 2009 Fiscal Year 2008
---------------- ----------------
Audit Fees (1) $209,625 $377,250
Audit Related Fees (2) 20,000 -
Tax Fees - -
All Other Fees (3) 63,500 14,000
________________
(1) Includes audit of financial statements, SAS 100 reviews and consultations
for 2009 and 2008 and fees for audit of internal controls for 2008.
(2) Includes consent of M&K for inclusion of their audit opinion for fiscal
2008 in the Form 10-K for fiscal 2009.
(3) Includes services related to the audit of the Company's employee benefit
plan for the plan years ended December 31, 2009 and 2008, review of the
Company's Form 8-K filings in for its Marks acquisition in the first
quarter of fiscal 2009 and review of the Company's Form 8-K for the change
in accountants in the second quarter of fiscal 2009.
The Audit Committee has considered whether the provision of the services
described above under the headings "All Other Fees" is compatible with
maintaining the auditor's independence and determined that it is. In fiscal year
2009, 100% of "All Other Fees" were approved by the Audit Committee.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Audit Committee specifically pre-approves all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
Pre-approval may be provided for up to one year. Each pre-approval is detailed
as to the particular service or category of services and is generally subject to
a specific budget. The independent auditors and management are required to
periodically report to the Audit Committee regarding the services provided by
the independent auditors in accordance with this pre-approval, and the fees for
the services performed to date.
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS
AND NOMINATION OF DIRECTORS
From time to time stockholders present proposals that may be proper
subjects for inclusion in the Proxy Statement and for consideration at an annual
meeting. Stockholders who intend to present proposals at the 2010 Annual
Meeting, and who wish to have such proposals included in the Company's Proxy
Statement for the 2010 Annual Meeting, must be certain that such proposals are
received by the Company's Secretary at the Company's executive offices, 333
Bayview Avenue, Amityville, New York 11701, not later than July 2, 2010. Such
proposals must meet the requirements set forth in the rules and regulations of
the Securities and Exchange Commission in order to be eligible for inclusion in
the Proxy Statement. Stockholders who intend to present a proposal at the 2010
Annual Meeting but who do not wish to have such proposal included in the
Company's Proxy Statement for such meeting must be certain that notice of such
proposal is received by the Company's Secretary at the Company's executive
offices not later than September 15, 2010.
Pursuant to the Company's by-laws, any nominations for director by a
stockholder must be delivered or mailed to and received by the principal
executive offices of the Company not less than sixty (60) days prior to the date
of meeting.
- 17 -
EXPENSES OF SOLICITATION
The Company will bear all costs in connection with the solicitation by the
Board of Directors of proxies of the Meeting. The Company intends to request
brokerage houses, custodial nominees and others who hold stock in their names to
solicit proxies from the persons who beneficially own such stock. The Company
will reimburse brokerage houses, custodial nominees and others for their
out-of-pocket expenses and reasonable clerical expenses. It is estimated that
these expenses will be nominal. In addition, officers and employees of the
Company may solicit proxies personally or by telephone, telegram or letter; they
will receive no extra compensation for such solicitation.
Dated: October 30, 2009
By Order of The Board of Directors
Richard L. Soloway, Secretary
Upon the written request of any stockholder of the Company, the Company
will provide to such stockholder a copy of the Company's Annual Report on Form
10-K for 2009, including the financial statements and the schedules thereto,
filed with the Securities and Exchange Commission. Any such request should be
directed to Secretary, Napco Security Technologies, Inc., 333 Bayview Avenue,
Amityville, New York 11701. There will be no charge for such report unless one
or more exhibits thereto are requested, in which case the Company's reasonable
expenses of furnishing such exhibits may be charged.
All stockholders are urged to fill in, sign and mail the enclosed proxy
promptly whether or not you expect to attend the meeting. If you are mailing
your Proxy, kindly do so sufficiently in advance of the meeting date so that it
will be received in time to be counted at the meeting.
- 18 -
NAPCO SECURITY TECHNOLOGIES, INC.
333 Bayview Avenue
Amityville, New York 11701
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of NAPCO SECURITY TECHNOLOGIES, INC. hereby
appoints Messrs. Richard L. Soloway and Kevin S. Buchel, and each or either of
them, the proxy or proxies of the undersigned, with full power of substitution,
to vote as specified on the reverse side all shares of Common Stock of said
Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of said Company, to be held on Tuesday, December 1, 2009 and at all
adjournments of such Meeting, with all powers the undersigned would possess if
personally present.
This Proxy will be voted as specified. IF NO SPECIFICATION IS MADE, THE
PROXY WILL BE VOTED FOR THE ELECTION OF THE THREE (3) DIRECTORS (ITEM 1); AND AS
TO ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, THIS PROXY WILL BE
VOTED IN THE DISCRETION AND IN THE BEST JUDGMENT OF THE PROXIES. This Proxy may
be revoked at any time prior to the voting thereof.
(Please date and sign on the reverse side)
PROXY
The Board of Directors recommends a Vote FOR Item 1.
Item 1. Election of Three Directors:
Paul Stephen Beeber
FOR [ ] WITHHOLD [ ]
Randy B. Blaustein
FOR [ ] WITHHOLD [ ]
Donna A. Soloway
FOR [ ] WITHHOLD [ ]
Dated: ___________________________ ___________________________
Signature or Signatures
Please sign exactly as your name
appears at the left. Executors,
administrators, trustees, guardians,
attorneys and agents should give
their full titles and submit evidence
of appointment unless previously
furnished to the Company or its
transfer agent.
Important Notice Regarding the Availability of
Proxy Materials for the Stockholder Meeting
To be Held on December 1, 2009
Copies of the proxy statement, form of proxy card and our 2009 annual report are
available at www.napcosecurity.com/2009annualmeeting.pdf.