SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __ )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
VICON INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
VICON INDUSTRIES, INC.
89 Arkay Drive
Hauppauge, NY 11788
(631) 952-2288 (CCTV)
Notice of Annual Meeting of Shareholders
To Be Held on May 18, 2007
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 18, 2007 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 2010;
2. To approve the 2007 Stock Incentive Plan covering 500,000 shares of Common
Stock;
3. To ratify the appointment of BDO Seidman, LLP, as the Company's independent
registered public accountants for the fiscal year ending September 30,
2007; and
4. 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 April 5, 2007 fixed by action
of the Board of Directors.
The Annual Report to Shareholders for the year ended September 30, 2006 is
included with this proxy statement.
By Order of the Board of Directors,
Hauppauge, New York Joan L. Wolf
April 20, 2007 Secretary
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YOUR VOTE IS IMPORTANT
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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 2007 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 18, 2007 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 terms of office expire in 2010; approving the 2007 Stock
Incentive Plan; ratifying the appointment of independent registered public
accountants; 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 expire in 2010; FOR the approval
of the 2007 Stock Incentive Plan; and FOR ratification of the appointment of
independent registered public accountants.
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, 2007, 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 April 20, 2007.
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 April 5, 2007. As of March
15, 2007, there were 4,750,745 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 the nominees being
proposed. 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 proposals 2 and 3, a shareholder may (i) vote "FOR" the proposal;
(ii) vote "AGAINST" the proposal; or (iii) "ABSTAIN" with respect to the
proposal. The adoption of the stock incentive plan and the ratification of
independent registered public accountants 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.
Proxies solicited hereby will be returned to the Board and will be
tabulated by the inspector of election designated by the Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 15, 2007 by (i) those persons known by the Company to
be beneficial owners of more than 5% of the Company's outstanding Common Stock;
(ii) each current executive officer named in the Summary Compensation Table;
(iii) each director; and (iv) all directors and executive officers 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 11.0%
Dimensional Fund Advisors
1299 Ocean Avenue
Santa Monica, CA 90401 315,837 (9) 6.4%
Al Frank Asset Management, Inc.
32392 Coast Highway, Suite 260
Laguna Beach, CA 92651 268,274 (8) 5.4%
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C/O Vicon Industries, Inc.
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Kenneth M. Darby 319,373 6.4%
Arthur D. Roche 124,654 (3) 2.5%
John M. Badke 40,819 (2) *
Peter F. Neumann 37,072 (3) *
W. Gregory Robertson 31,900 (3) *
Christopher Wall 28,300 (4) *
Yigal Abiri 16,000 *
Bret McGowan 15,154 (5) *
Clifton H.W. Maloney 15,000 (6) *
Total all Executive Officers
and Directors as a group (12 persons) 719,913 (7) 14.5%
* 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) Includes currently exercisable options to purchase 27,500 shares.
(3) Includes currently exercisable options to purchase 20,000 shares.
(4) Includes currently exercisable options to purchase 16,000 shares.
(5) Includes currently exercisable options to purchase 15,154 shares.
(6) Includes currently exercisable options to purchase 15,000 shares.
(7) Includes currently exercisable options to purchase 160,654 shares.
(8) Al Frank Asset Management, Inc. had voting control over 177,822 shares and
investment control over 268,274 shares.
(9) Dimensional Fund Advisors had voting and investment control over 315,837
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.
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during the year ended September 30, 2006, no person who
at any time during the year ended September 30, 2006 was a director, officer or
beneficial owner of more than 10 percent of any class of equity securities of
the Company registered pursuant to Section 12 of the Exchange Act failed to file
on a timely basis, as disclosed in the above forms, reports required by Section
16(a) of the Exchange Act during the year ended September 30, 2006.
EQUITY COMPENSATION PLAN INFORMATION
At September 30, 2006
Number of securities
remaining available for
Number of securities Weighted average future issuance under
to be issued upon exercise price equity compensation
exercise of out- of outstanding plans (excluding
standing options, options, warrants securities reflected
warrants and rights and rights in column (a))
Plan category (a) (b) (c)
Equity compensation
plans approved by
security holders 545,283 $3.28 73,933
Equity compensation
plans not approved
by security holders __ __ __
Total 545,283 $3.28 73,933
Equity Compensation Grants Not Approved by Security Holders
Through September 30, 2006, the Company had granted certain of its officers
with deferred compensation benefits aggregating 103,898 shares of common stock
held by the Company in treasury. Such shares vest upon retirement except that
70,647 of such shares vested upon the expiration Mr. Darby's employment
agreement on September 30, 2006. Such shares were distributed to Mr. Darby in
November 2006. All shares vest earlier under certain occurrences including
death, involuntary termination or a change in control of the Company.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF TWO DIRECTORS
The Board is comprised of five directors; two directors whose terms expire
in 2008; one director whose term expires in 2009 and two directors to be elected
for terms expiring in 2010. 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 2010 at the Annual
Meeting are Mr. Clifton H. W. Maloney and Mr. W. Gregory Robertson. In the event
that either 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 Nominees and Continuing Directors
The following sets forth the name of the 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.
Nominees and Director
Principal Occupation Since Age
- -------------------- ----- ---
Clifton H. W. Maloney
President
C. H. W. Maloney & Co., Inc. 2004 69
W. Gregory Robertson
President
TM Capital Corp. 1991 63
Continuing Directors whose Term of Office Expires in 2008
- ---------------------------------------------------------
Kenneth M. Darby
Chairman and CEO
Vicon Industries, Inc. 1987 61
Arthur D. Roche
Retired Executive Vice President
Vicon Industries, Inc.
Retired Partner
Arthur Andersen & Co. 1992 68
Continuing Director whose Term of Office Expires in 2009
- --------------------------------------------------------
Peter F. Neumann
Retired President
Flynn-Neumann Agency, Inc. 1987 72
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Mr. Maloney is the President of C.H.W. Maloney & Co., Inc., a private
investment firm that he founded in 1981. From 1974 to 1984, he was a Vice
President in investment banking at Goldman, Sachs & Co.. Mr. Maloney is a
Director of Interpool, Inc., Chromium Industries, Inc. and The Wall Street Fund.
Mr. Maloney's current term on the Board ends in May 2007.
Mr. Robertson is the 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 May 2007.
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 May 2008.
Mr. Roche served as Executive Vice President 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. Mr. Roche's current term on the Board ends in May 2008.
Mr. Neumann is the retired President of Flynn-Neumann Agency, Inc., an
insurance brokerage firm. Mr. Neumann's current term on the Board ends in May
2009.
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. All independent directors are members of each of the Committees.
The Executive Committee is chaired by Mr. Darby and 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), Maloney,
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. Roche (Chairman), Maloney, Neumann,
and Robertson, each of whom is an "independent director" as defined by American
Stock Exchange Listing Standards. The primary function of the Audit Committee is
to assist the Board of Directors in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including
review of the financial reports and other financial information of the Company,
the Company's system of internal accounting controls, the Company's compliance
with legal and regulatory requirements and the qualifications, independence and
performance of the Company's independent registered public accountants. The
Audit Committee has sole authority to appoint, retain, compensate, evaluate and
terminate the independent registered public accountants. The Board has
determined that Mr. Roche is an "Audit Committee financial expert" under the
rules of the Securities and Exchange Commission. The Audit Committee will
periodically review the Audit Committee Charter in light of new developments in
applicable regulations and may make additional recommendations to the Board of
Directors for further revision of the Audit Committee Charter to reflect
evolving best practices. A copy of the Company's Charter is available on its
website at HTTP://www.vicon-cctv.com. The Committee met four times during the
last fiscal year.
The Nominating Committee consists of Messrs. Roche (Chairman), Maloney,
Neumann and Robertson. The primary function of the Nominating Committee is to
recommend individuals qualified to serve as directors and on committees of the
Board; to advise the Board with respect to Board composition, procedures and
committees; and to evaluate the overall Board and Committee effectiveness. All
director candidates, including those recommended by stockholders, are evaluated
on the same basis. In its evaluation of director candidates, the Nominating
Committee considers a variety of characteristics, including, but not limited to,
core competencies, experience, independence, level of commitment, Board and
company needs and considerations, and personal characteristics. The Nominating
Committee may engage a third party to assist it in identifying potential
director nominees. The Committee has generally identified nominees based upon
recommendations from existing directors and will consider candidates recommended
by stockholders if submitted to the Committee in writing and complying with
shareholder proposal requirements outlined elsewhere in this proxy statement.
The Board of Directors has determined that each member of the Nominating
Committee meets the definition of an "independent director" as defined by
American Stock Exchange Listing Standards. The Committee does not have a formal
written charter and did not meet 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 seven meetings in the Company's 2006 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 prior year annual meeting was attended by all of the
current directors.
The directors are each compensated at the rate of $20,000 per year retainer
and $1,200 per Committee meeting attended in person or by teleconference. The
Chairman of the Audit Committee receives an additional annual retainer of
$8,000. 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 11.0% of the outstanding shares of the Company, have been
conducting business with each other for approximately twenty-seven 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 2006, the Company purchased approximately $404,000 of products and
components from or through CBC. CBC competes with the Company in various
markets, principally in the sale of video products and systems. Sales of all
products to CBC were $205,000 in 2006.
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies
to all its employees, including its chief executive officer, chief financial and
accounting officer, controller, and any persons performing similar functions.
Such Code of Ethics and Business Conduct is published on the Company's internet
website at HTTP://www.vicon-cctv.com.
Ability of Stockholders to Communicate with the Board of Directors
Shareholders may contact the Board of Directors or a specified individual
director by sending a written communication addressed to the Board of Directors
or such individual director(s) in care of the Secretary of the Company at Vicon
Industries, Inc., 89 Arkay Drive, Hauppauge, NY 11788. The Company's Corporate
Secretary will relay all such communications to the Board of Directors, or
individual members, as appropriate.
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, 2006. Additionally, the Committee
has reviewed and discussed with management and the independent registered public
accountants 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 registered public accountants
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 the American Institute of Certified Public Accountants.
The Committee received and reviewed the written disclosures and the letter
from the independent registered public accountants required by Standard No. 1,
Independence Discussions with Audit Committees, as amended, of the Independence
Standards Board, and discussed with the accountants 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, 2006.
Submitted by the Audit Committee,
Arthur D. Roche, Chairman Clifton H.W. Maloney
Peter F. Neumann W. Gregory Robertson
OTHER OFFICERS OF THE COMPANY
In addition to Mr. Darby, the Company has six other officers. They are:
John M. Badke, age 47 Sr. Vice President, Finance and
Chief Financial Officer
Peter A. Horn, age 52 Vice President, Operations
Bret M. McGowan, age 41 Vice President, U.S. Sales and Marketing
Yacov A. Pshtissky, age 55 Vice President, Technology
and Development
Christopher J. Wall, age 53 Managing Director, Vicon Industries, Ltd.
Yigal Abiri, age 57 General Manager, Vicon Systems Ltd.
Mr. Badke has been Senior Vice President, Finance since May 2004 and Chief
Financial Officer since December 1999. Previously, he was Vice President,
Finance since October 1998 and 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. 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 has been Vice President, U.S. Sales and Marketing since April
2005. From 2001 to 2005, he served as Vice President, Marketing. Previously, he
served as Director of Marketing since 1998 and as Marketing Manager since 1994.
He joined the Company in 1993 as a 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.
Mr. Wall has been Managing Director, Vicon Industries Ltd., since February
1996. Previously, he served as its Financial Director since joining the Company
in 1989. Prior to joining the Company, Mr. Wall held a variety of senior
financial positions within Westland plc, a UK aerospace company.
Mr. Abiri has been General Manager, Vicon Systems Ltd. since becoming a
member of management through acquisition of his company, QSR, Ltd. in August
1999. Previously, Mr. Abiri had been President of QSR, Ltd., a developer and
manufacturer of remote video surveillance equipment.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by,
or paid for all services rendered to the Company during 2006, 2005 and 2004 by
the Chief Executive Officer and the Company's most highly compensated executive
officers whose total annual salary and bonus exceeded $100,000 during any such
year.
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Other All
Annual Restricted Securities Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Position Year Salary ($) Bonus ($) sation Award Options (#) Payouts sation
- ------------------ ---- ---------- ----------- ------ --------- ------------- ------- ------
Kenneth M. Darby 2006 $310,000 $ 75,000 (1) - - - - -
Chairman and Chief 2005 298,462 75,000 (1) - - - - -
Executive Officer 2004 310,000 75,000 (1) - - - - -
John M. Badke 2006 $171,923 $ 35,000 (1) - - 5,000 - -
Senior Vice President 2005 165,000 35,000 (1) - - 5,000 - -
and Chief Financial 2004 152,000 35,000 (1) - - - - -
Officer
Christopher J. Wall 2006 $171,000 $ 35,300 (2) - - 5,000 - -
Managing Director 2005 176,000 14,000 (2) - - 5,000 - -
Vicon Industries Ltd. 2004 148,000 113,000 (2) - - - - -
Bret M. McGowan 2006 $151,923 $ 32,601 (1) - - 5,000 - -
Vice President, U.S. 2005 132,917 20,831 (6) - - 5,000 - -
Sales and Marketing 2004 112,000 25,000 (1) - - - - -
Yigal Abiri 2006 $160,000 $ - - - - - $ -
General Manager 2005 160,000 - - - - - 90,000 (5)
Vicon Systems Ltd. 2004 160,000 10,725 (3) - - - - 66,946 (4)
(1) Represents discretionary cash bonus approved by the Board of Directors upon
the recommendation of its Compensation Committee.
(2) Represents sales and profit related bonus based on financial results of
Vicon Industries, Ltd.
(3) Represents discretionary bonus.
(4) Represents $43,938 of severance pay paid into a management insurance policy
and $23,008 paid as compensation for accrued vacation.
(5) Represents performance based compensation associated with the introduction
of the Company's new digital video product line.
(6) Represents sales related commission.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value at Assumed
----------------- Annual Rates of Stock
% of Total Price Appreciation
No. of Granted to Exercise for Option Term
Options Employees in Price Expiration --------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ----------------------- ------- -------------- ---------- ------------ -------- -------
John Badke 5,000 12.5% $3.17 12/10 $ 4,379 $9,677
Christopher Wall 5,000 12.5% $3.17 12/11 $ 5,391 $12,229
Bret McGowan 5,000 12.5% $3.17 12/11 $ 5,391 $12,229
Options granted in the year ended September 30, 2006 were issued under the
1996 Incentive Stock Option Plan, the 1999 Non-Qualified Stock Option Plan and
the 2002 Non-Qualified Stock Option Plan. Options issued under the 1996
Incentive Stock Option Plan are exercisable as follows: up to 30% on the grant
date, an additional 30% on the first anniversary of the grant date, and the
balance on the second anniversary of the grant date, except that no option is
exercisable after the expiration of five years from the date of grant. Options
issued under the 1999 and 2002 Non-Qualified Stock Option Plans are exercisable
as follows: up to 30% of the shares on the second anniversary of the grant date,
an additional 30% of the shares on the third anniversary of the grant date, and
the balance of the shares on the fourth anniversary of the grant date, except
that no option is exercisable after the expiration of six years from the date of
grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
At September 30, 2006
---------------------
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- 64,545 / 35,455 $15,030/$9,470
John M. Badke -0- -0- 32,500 / 18,500 8,430/ 4,810
Christopher J. Wall -0- -0- 12,000 / 18,000 2,940/ 4,010
Bret M. McGowan -0- -0- 15,077 / 14,423 3,954/ 3,451
Yigal Abiri -0- -0- 26,000 / 4,000 7,600/ -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
($3.29) and the exercise price.
Compensation Arrangements
On November 10, 2006, the Company entered into a new one-year employment
agreement with Kenneth M. Darby, the Company's Chief Executive Officer, to
expire on September 30, 2007. The terms of the new agreement provide for a
$15,000 increase in Mr. Darby's annual base salary to $325,000 effective October
1, 2006. In conjunction with his new employment agreement, Mr. Darby entered
into a stock lock-up agreement whereby he agreed not to sell more than 100,000
shares (50,000 per year) of his Company stock holdings at the time of his
signing such agreement through September 30, 2008 without Board of Director
approval. Such lock-up agreement provisions terminate under certain conditions,
including Mr. Darby's death, disability, termination without cause and a Company
change in control as defined. Mr. Darby's previous employment agreement, which
expired on September 30, 2006, entitled him to receive a $620,000 severance
benefit and deferred compensation in the form of 70,647 shares of the Company's
Common Stock upon its expiration. Such amounts were earned by Mr. Darby over his
many years of service with the Company in varying capacities and were paid
subsequent to year end.
In addition, the Compensation Committee of the Board of Directors ("the
Committee") approved a performance-based bonus plan for Mr. Darby for fiscal
year 2007, whereby he can earn a minimum of $175,000 for achievement of a
certain minimum annual profit target as set by the Board. For fiscal year 2006,
the Committee approved a $75,000 discretionary bonus for Mr. Darby. The Company
also granted Mr. Darby 10,000 stock options at the closing market price on
October 25, 2006.
On November 13, 2006, the Company executed an amendment to the January 1,
2006 employment agreement with John M. Badke, the Company's Chief Financial
Officer, to provide him with a $5,000 increase in annual base salary to $180,000
effective October 1, 2006 and includes provisions to comply with the
requirements of Section 409A of the Internal Revenue Code. The agreement, which
expires on December 31, 2007, provides Mr. Badke a lump sum payment in the
amount of 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. The agreement also provides Mr. Badke a
severance/retirement benefit of $350,000 payable under certain occurrences. In
addition, a performance based bonus plan for fiscal year 2007 was adopted for
Mr. Badke whereby he will receive a bonus equal to 3% of a certain minimum
annual profit target as set by the Committee. For the fiscal year 2006, the
Committee approved a $35,000 discretionary bonus for Mr. Badke. The Company also
granted Mr. Badke 15,000 stock options at the closing market price on October
25, 2006.
On November 1, 2006, the Company entered into a new employment agreement
with Christopher J. Wall, Managing Director of Vicon Industries Ltd. (Europe),
to expire on September 30, 2007. The new agreement provides Mr. Wall with a
$5,000 increase in annual base salary to approximately $185,000 (97,850 Pounds
Sterling) and provides a performance based bonus plan for fiscal year 2007
whereby he will receive an amount equal to between 2% and 6% (based on
achievement levels) of the pretax operating profit (as defined) of Vicon
Industries Ltd. For fiscal year 2006, Mr. Wall received a bonus of approximately
$35,300 based upon his achievement of certain sales and profit targets. The new
agreement also provides Mr. Wall a severance/retirement benefit of approximately
$190,000 (100,000 Pounds Sterling) under certain occurrences. The Company also
granted Mr. Wall 5,000 stock options at the closing market price on October 25,
2006.
On August 7, 2006, the Company entered into an employment agreement with
Mr. Bret M. McGowan, the Company's Vice President of U.S. Sales and Marketing,
providing him an annual base salary of $155,000. The agreement, which expires on
September 30, 2007, provides Mr. McGowan a lump sum payment in the amount of
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. The agreement also provides Mr. McGowan a severance/retirement benefit
of $290,000 payable under certain occurrences. Effective October 1, 2006, Mr.
McGowan's annual base salary was increased to $170,000.
In addition, a performance based bonus plan for fiscal year 2007 was
established for Mr. McGowan whereby he earns variable compensation upon
achieving certain U.S. sales targets. For the fiscal year 2006, the Committee
approved a $30,000 discretionary bonus for Mr. McGowan. The Company also granted
Mr. McGowan 13,500 stock options at the closing market price on October 25,
2006.
Report of the Compensation Committee
The Compensation Committee's compensation policies applicable to the
Company's officers for 2006 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 for 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. Also, the Company has established an incentive compensation
plan for certain officers, which provides for a specified bonus upon the
Company's achievement of certain annual sales and/or 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 officer to
the performance of the Company. In addition, in determining Mr. Darby's salary
and bonus for service as Chief Executive Officer, the committee considers the
responsibility assumed by him in formulating, implementing and managing the
operational and strategic objectives of the Company.
Submitted by the Compensation Committee,
Peter F. Neumann, Chairman Clifton H.W. Maloney
W. Gregory Robertson Arthur D. Roche
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors consists of Messrs.
Maloney, Neumann, Robertson and Roche, none of whom has ever been an officer of
the Company except for Mr. Roche, who served as Executive Vice President from
August 1993 until his retirement in November 1999.
STOCK PERFORMANCE GRAPH
This graph compares the return of $100 invested in the Company's stock on
October 1, 2001, with the return on the same investment in the AMEX U.S. Market
Index and the AMEX Technology Index.
(The following table was represented by a chart in the printed material)
Vicon AMEX U.S. AMEX Technology
Date Industries, Inc. Market Index Index
10/01/01 100 100 100
10/01/02 91 88 62
10/01/03 122 113 89
10/01/04 138 131 102
10/01/05 91 155 104
10/01/06 97 168 113
PROPOSAL 2. APPROVAL OF THE 2007 STOCK INCENTIVE PLAN
On March 23, 2007, the Board of Directors adopted the Company's 2007 Stock
Incentive Plan (the "Incentive Plan"), under which 500,000 shares of Common
Stock were reserved for issuance. The purpose of the Incentive Plan is to
promote the long-term financial success of the Company by enhancing the ability
of the Company to attract, retain and reward individuals who can and do
contribute to such success and to further align the interests of the Company's
key personnel with its stockholders. The Company is seeking stockholder approval
of the Incentive Plan in order to comply with the requirements of Sections
162(m) and 422 of the Internal Revenue Code and the requirements of the American
Stock Exchange.
The following summary of the Incentive Plan is qualified in its entirety by
express reference to the text of the Incentive Plan, a copy of which has been
filed with the Securities and Exchange Commission as an Exhibit to this Proxy
Statement. Under the Incentive Plan, stock options may be granted which are
qualified as "Incentive Stock Options" within the meaning of Section 422 of the
Code ("ISO") and which are Non-Qualified (collectively and individually referred
to herein as "Options"). In addition, restricted shares of Common Stock
("Restricted
Stock") and other Common Stock-based awards may be granted (collectively or
individually, "Awards") The maximum number of shares of Common Stock issuable
upon the exercise of ISO grants is 250,000 and under Restricted Stock awards is
100,000.
ELIGIBILITY
Officers, key employees and directors of the Company and its subsidiaries
are eligible to receive Awards under and participate in the Incentive Plan,
except that only employees of the Company and its subsidiaries may receive
Incentive Stock Option Awards. No eligible individual may receive Awards under
the Incentive Plan with respect to more than 100,000 shares of Common Stock in
any one year.
ADMINISTRATION
The Incentive Plan is administered by the Compensation Committee of the
Board of Directors (the "Board") or such other Committee of the Board appointed
by the Board of Directors from among its members (hereafter called the
"Committee"). The Committee, in its sole discretion, determines which
individuals may participate in the Incentive Plan and the type, extent and terms
of the Awards to be granted. In addition, the Committee interprets the Incentive
Plan and makes all other determinations with respect to the administration of
the Incentive Plan.
AWARDS
The Incentive Plan allows for the discretionary grant of Options,
Restricted Stock and other stock-based Awards. The terms and conditions of
Awards granted under the Incentive Plan are set forth in agreements between the
Company and the individuals receiving such Awards.
OPTIONS. The Committee may grant Options to any eligible person, except
that grants to non-employee directors must be made by the Board. The exercise
price of the Options will not be less than the fair market value of the Common
Stock on the date of grant. Options will vest and become exercisable within such
period or periods (not to exceed 10 years) as determined by the Committee and
set forth in the Stock Option Agreement. Unless otherwise set forth in the Stock
Option Agreement, all exercisable Options expire on the earliest of (i) ten
years after grant, (ii) five business days after termination of employment or
service with the Company for any reason other than death or retirement (except
that in the case of an Incentive Stock Option, if the employment terminates
because of permanent and total disability, the period shall be one year instead
of five business days), (iii) three months after the retirement of the optionee,
(iv) twelve months after the death of the optionee while still employed, or (v)
the expiration date set forth in the Stock Option Agreement. Unless otherwise
set forth in the Stock Option Agreement, Options will vest and become
exercisable only during the period of employment or service with the Company and
its subsidiaries such that upon such termination of employment or service, the
unvested portion of any outstanding Option will expire. Options that have become
exercisable may be exercised by delivery of written notice of exercise to the
Company accompanied by full payment of the Option exercise price and any
applicable withholding. The Option exercise price may be paid in the form of (i)
cash, (ii) bank check, (iii) shares of Common Stock valued at the fair market
value at the time of exercise, (iv) an approved brokered exercise, (v) any
combination of these methods of payment.
REPRICING PERMITTED. The Committee may permit the voluntary surrender of
all or any portion of any Nonqualified Stock Option issued to be conditioned
upon the granting to the Holder of a new Option for the same or a different
number of shares as the Option
surrendered or require such voluntary surrender as a condition precedent to a
grant of a new Option to such Participant. Such new Option shall be exercisable
at an Option Price, during an Option Period, and in accordance with the terms or
conditions specified by the Committee at the time the new Option is granted.
RESTRICTED STOCK. The Committee may grant shares of Restricted Stock to
eligible persons and may establish terms, conditions and restrictions applicable
thereto, except that grants to non-employee directors must be made by the Board.
Shares of Restricted Stock will be subject to restrictions on
transferability set forth in the Award agreement and will be subject to
forfeiture as set forth below. To the extent such shares are forfeited, all
rights of the holder will terminate.
The restricted period for Restricted Stock will commence on the date of
grant and will expire from time to time as to that part of the Restricted Stock
Award indicated in a schedule established by the Committee and set forth in the
respective Award Agreement. The Committee, in its sole discretion, may remove
any or all restrictions on the Restricted Stock whenever it determines that such
action is appropriate.
In the event the recipient of such Award resigns or is discharged from
employment or service with the Company or a subsidiary, the non-vested portion
of the Award will be completely forfeited. If the recipient of such an Award
dies, the non-vested portion of the Award will be prorated for service during
the restricted period and distributed to the recipient's beneficiary as soon as
practicable following death.
OTHER STOCK AWARDS. The Committee may grant any other stock or
stock-related Awards to any eligible participant under the Incentive Plan that
the Committee deems appropriate, including, but not limited to, stock
appreciation rights, limited stock appreciation rights, phantom stock Awards and
Common Stock bonuses, except that grants to non-employee directors must be made
by the Board. Any such Award will have such terms and conditions as the
Committee, in its sole discretion, so determines.
ADJUSTMENTS FOR RECAPITALIZATION OF THE COMPANY AND OTHER CIRCUMSTANCES.
Awards granted under the Incentive Plan and any agreements evidencing such
Awards, the maximum number of shares of Common Stock subject to all such Awards
under the Incentive Plan, the number of shares of Common Stock subject to
outstanding Awards and the maximum number of shares of Common Stock with respect
to which any one person may be granted Awards during any year may be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Common Stock or other
consideration subject to such Awards or as otherwise determined by the Committee
to be equitable (i) in the event of changes in the outstanding Common Stock or
in the capital structure of the Company by reason of stock dividends, stock
splits, reverse stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitalization occurring after the date of grant of any such Award or (ii) in
the event of any change in applicable laws or any change in circumstances which
results in or would result in any substantial dilution or enlargement of the
rights granted to, or available for, participants in the Incentive Plan, or
which otherwise warrants equitable adjustment because it interferes with the
intended operation of the Incentive Plan. The Company shall give each
participant notice of an adjustment under the Incentive Plan and, upon notice,
such adjustment
shall be conclusive and binding for all purposes. In addition, in certain merger
situations or upon the sale of all or substantially all of the assets of the
Company or the liquidation of the Company, the Committee may, in its sole
discretion, cancel any or all outstanding Awards and pay to the holders the
value of the Awards in cash.
EFFECT OF CHANGE IN CONTROL
In the event of a Change in Control (as defined below), notwithstanding any
vesting schedule provided for in the Incentive Plan or by the Committee with
respect to an Award of Options, such Options shall become immediately
exercisable with respect to 100 percent of the shares subject to such Option,
and the restricted period for Restricted Stock shall expire immediately with
respect to 100 percent of the shares of Restricted Stock subject to
restrictions.
In the event of a Change in Control, all other Awards shall become fully
vested and or payable to the fullest extent of any Award or portion thereof that
has not then expired and any restrictions with respect thereto shall expire. The
Committee has full authority and discretion to interpret and implement such
accelerated vesting.
"Change in Control" will, unless the applicable Award agreement states
otherwise, be deemed to occur if (i) any "person" (as that term is used in
Sections 13 and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner
(as that term is used in Section 13(d) of the Exchange Act), directly or
indirectly, of 50% or more of either the outstanding shares of Common Stock or
the combined voting power of the Company's then outstanding voting securities
entitled to vote generally, or (ii) during any period of two consecutive years,
individuals who constitute the Board of Directors at the beginning of such
period cease for any reason to constitute at least a majority thereof, unless
the election or the nomination for election by the Company's stockholders of
each new director was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the beginning of the period
or (iii) the Company undergoes a liquidation or dissolution or a sale of all or
substantially all of its assets.
AMENDMENT AND TERMINATION
The Board of Directors may at any time terminate the Incentive Plan. With
the express written consent of an individual participant (subject to any other
allowable adjustments under the Incentive Plan to outstanding Awards without the
consent of any participant), the Board may cancel or reduce or otherwise alter
the outstanding Awards thereunder if, in its judgment, the tax, accounting, or
other effects of the Incentive Plan or potential payouts thereunder would not be
in the best interest of the Company. The Board may, at any time, or from time to
time, amend or suspend and, if suspended, reinstate, the Incentive Plan in whole
or in part, subject to any limitations set forth in the Incentive Plan;
provided, however, that the Board may not, without stockholder approval, make
any amendment to the Incentive Plan that would increase the maximum number of
shares of Common Stock issued pursuant to Awards, except as provided under
"Adjustments for Recapitalization of the Company and Other Circumstances",
extend the maximum Option period, extend the termination date of the Incentive
Plan or change the class of persons eligible to receive Awards.
FEDERAL TAX CONSEQUENCES
The following is a brief discussion of the federal income tax consequences
of transactions with respect to Options under the Incentive Plan in effect as of
the date of this
summary. This discussion is not intended to be exhaustive and does not describe
any state or local tax consequences.
Under current federal income tax regulations, income generated from the
sale of Incentive Stock Option 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 an 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.
Upon exercise of a Non-Qualified 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 2007 Stock
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 2007 STOCK INCENTIVE PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTANTS
The Board of Directors of the Company has appointed BDO Seidman, LLP as its
independent registered public accountants for fiscal year ending September 30,
2007 and further directed that management submit the Board's selection of public
accountants to the shareholders at the Annual Meeting for ratification.
The following table details: the aggregate fee arrangements with BDO
Seidman, LLP for professional services rendered for the audit of the Company's
consolidated annual financial statements and review of the financial statements
included in the Company's quarterly reports on Form 10-Q; the aggregate fees
billed by BDO Seidman, LLP for audit related matters and; the aggregate fees
billed by BDO Seidman, LLP for tax compliance, tax advice and tax planning
during fiscal years ended September 30, 2006 and 2005:
2006 2005
---- ----
Audit fees $171,000 $158,000
Audit related fees $ 4,000 $ -
Tax fees $ 39,000 $ 46,000
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Registered Public Accountants
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent registered public accountants. These
services may include audit services, audit related services, tax services and
other services. The Audit Committee has adopted a policy for the pre-approval of
services provided by the independent registered public accountants. Under the
policy, pre-approval generally is provided for an annual period and any
pre-approval is detailed as to the particular service or category of services
and is subject to a specific limit. In addition, the Audit Committee may also
pre-approve particular services on a case-by-case basis, which must be
accompanied by a detailed explanation for each proposed service. The Audit
Committee may delegate pre-approval authority to one or more of its members.
Such member must report any decisions to the Audit Committee at the next
scheduled meeting.
The Audit Committee has considered whether the non-audit services provided
by BDO Seidman, LLP were compatible with maintaining their independence.
BDO Seidman, 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.
Unless marked to the contrary, the shares represented by the enclosed proxy
will be voted FOR the ratification of the appointment of BDO Seidman, LLP
as the Company's independent registered public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS.
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. However, 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, fax or e-mail 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 Joan L. Wolf
April 20, 2007 Secretary
EXHIBIT A
VICON INDUSTRIES, INC. 2007 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of the Plan is to provide a means through which the Company and
its Subsidiaries may attract able persons to become and remain directors and
employees of the Company and its Subsidiaries and to provide a means whereby
employees and directors of the Company and its Subsidiaries can acquire and
maintain Common Stock ownership, or be paid incentive compensation measured by
reference to the value of Common Stock, thereby strengthening their commitment
to the welfare of the Company and its Subsidiaries and promoting an identity of
interest between stockholders and these employees and directors.
So that the appropriate incentive can be provided, the Plan allows for the
grant of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock
Awards, and other Stock-based Awards, or any combination of the foregoing.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" of any individual or entity means an individual or
entity that is directly or indirectly through one or more intermediaries
controlled by or under common control with the individual or entity
specified.
(b) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Restricted Stock Award, or other
Stock-based Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" shall be deemed to occur if (i) any "person"
(as that term is used in Sections 13 and 14(d)(2) of the Exchange Act) is
or becomes the beneficial owner (as that term is used in Section 13(d) of
the Exchange Act), directly or indirectly, of 50% or more of either the
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally,
(ii) during any period of two consecutive years, individuals who constitute
the Board at the beginning of such period cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for election by the Company's stockholders of each new director
was approved by a vote of at least three-quarters of the directors then
still in office who were directors at the beginning of the period or (iii)
the Company undergoes a liquidation or dissolution or a sale of all or
substantially all of its assets.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(f) "Committee" means the Compensation Committee of the Board or such
other committee consisting of two or more Disinterested Persons appointed
by the Board to administer this Plan.
(g) "Common Stock" means shares of the Common Stock, par value $.01
per share, of the Company.
(h) "Company" means Vicon Industries, Inc., a New York corporation,
and it's Subsidiaries and Affiliates or any successor corporation.
(i) "Date of Grant" means the date on which the granting of an Award
is authorized or such other date as may be specified in such authorization.
(j) "Director Compensation" means compensation of one or more
directors for serving on the Board or any committee.
(k) "Disability", with respect to any particular Participant, means
disability as defined in such Participant's employment, consulting or other
relevant agreement with the Company or a Subsidiary or, in the absence of
any such agreement, disability as defined in the long-term disability plan
of the Company or a Subsidiary, as may be applicable to the Participant in
question, or, in the absence of such a plan, the complete and permanent
inability by reason of illness or accident to perform the duties of the
occupation at which the Participant was employed or served when such
disability commenced.
(l) "Disinterested Person" means a person who is (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation, and (ii) an "outside director" within the
meaning of Section 162(m) of the Code.
(m) "Eligible Person" means any (i) person regularly employed by the
Company or a Subsidiary; PROVIDED, HOWEVER, that no such employee covered
by a collective bargaining agreement shall be an Eligible Person unless and
to the extent that such eligibility is set forth in such collective
bargaining agreement or in an agreement or instrument relating thereto; or
(ii) director of the Company or a Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934.
(o) "Fair Market Value" on a given date means the closing market price
of the Common Stock on the American Stock Exchange or any other exchange on
which the Common Stock is then listed on the date or, if there is no such
sale on that date, then on the last preceding date on which such a sale was
reported or in accordance with the Treasury Regulations applicable to
incentive stock options under Section 422 of the Code.
(p) "Holder" means a Participant who has been granted an Award.
(q) "Incentive Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
(r) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.
(s) "Option" means a stock option to purchase shares of Stock granted
under Section 7 of the Plan.
(t) "Option Period" means the period described in Section 7(c).
(u) "Option Price" means the exercise price set for an Option
described in Section 7(a).
(v) "Participant" means an Eligible Person who has been selected by
the Committee to participate in the Plan and to receive an Award.
(w) "Plan" means the Company's 2007 Stock Incentive Plan.
(x) "Restricted Period" means, with respect to any share of Restricted
Stock, the period of time determined by the Committee during which such Award is
subject to the restrictions set forth in Section 8.
(y) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth in
Section 8.
(z) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 8 of the Plan.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as from time to time may be authorized for use under
the Plan.
(cc) "Stock Option Agreement" means the agreement between the Company
and a Participant who has been granted an Option pursuant to Section 7
which defines the rights and obligations of the parties as required in
Section 7(d).
(dd) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan was adopted by the Board on March 23, 2007 and becomes effective
upon shareholder approval.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be March 22, 2017; PROVIDED, HOWEVER, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. Unless otherwise determined by the
Board, each member of the Committee shall, at the time he takes any action with
respect to an Award under the Plan, be a Disinterested Person. The majority of
the members of the Committee shall constitute a quorum. The acts of a majority
of the members present at any meeting at which a quorum is present or acts
approved in writing by a majority of the Committee shall be deemed the acts of
the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive
power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards to be made to each
Eligible Person;
(c) Determine the time or times when Awards will be made to Eligible
Persons;
(d) Determine the duration of each Option Period and Restricted
Period;
(e) Determine the terms and conditions to which Awards may be subject;
(f) Prescribe the form of Stock Option Agreement or other form or
forms evidencing Awards; and
(g) Cause records to be established in which there shall be entered,
from time to time as Awards are made to Participants, the date of each
Award, the number of Incentive Stock Options, Nonqualified Stock Options,
shares of Restricted Stock and other Stock-based Awards granted by the
Committee to each Participant, the expiration date, the Option Period and
the duration of any applicable Restricted Period.
The Committee shall have the authority to interpret the Plan and, subject
to the provisions of the Plan, to establish, adopt or revise such rules and
regulations and to make all such determinations relating to the Plan as it may
deem necessary or advisable for the administration of the Plan. The Committee's
interpretation of the Plan or any documents evidencing Awards granted pursuant
thereto and all decisions and determinations by the Committee with respect to
the Plan shall be final, binding and conclusive on all parties unless otherwise
determined by the Board.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options, Restricted
Stock and other Stock-based Awards to one or more Eligible Persons, except that
grants of Director Compensation must be made by the Board; PROVIDED, HOWEVER,
that:
(a) Subject to Section 11, the aggregate number of shares of Stock
reserved and available for issuance pursuant to Awards under the Plan is
500,000. Notwithstanding any other provision of this plan, in any event the
maximum aggregate number of shares which may be issued upon the exercise of
Incentive Stock Options is 250,000 and the maximum aggregate number
issuable as Restricted Stock is 100,000;
(b) Except as set forth in Section 5(d), such shares shall be deemed
to have been used in payment of Awards only to the extent they are actually
delivered and not where the Fair Market Value equivalent of such shares for
a Stock-based Award is paid in cash. In the event any Award shall be
surrendered, terminate, expire or be forfeited, the number of shares of
Stock no longer subject thereto shall thereupon be released and shall
thereafter be available for new Awards under the Plan;
(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private purchase.
Any such Stock may be restricted and legended; and
(d) No Participant may receive Awards under the Plan with respect to
more than 100,000 shares of Stock in any one year.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan.
7. STOCK OPTION AWARDS
The Committee is authorized to grant one or more Incentive Stock Options or
Nonqualified Stock Options to any Eligible Person, except that grants of
Director Compensation must be made by the Board; PROVIDED, HOWEVER, that no
Incentive Stock Options shall be granted to any Eligible Person who is not an
employee of the Company or a Subsidiary. Each Option so granted shall be subject
to the following conditions, or to such other conditions as may be reflected in
the applicable Stock Option Agreement.
(a) OPTION PRICE. The exercise price ("Option Price") per share of
Stock for each Option shall not be less than the Fair Market Value of a
share of Stock at the time of Grant.
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become
exercisable may be exercised by delivery of written notice of exercise to
the Company in care of its Secretary at 89 Arkay Drive, Hauppauge, New York
11788 or at its then principal administrative office address. Said notice
shall specify the number of Shares for which the Option is being exercised
and shall be accompanied by payment of the aggregate Option Price. The
Option Price may be payable in the form of (i) cash in the form of
currency, wire transfer, bank check payable to the order of the Company or
other cash equivalent acceptable to the Company, (ii) the delivery to the
Company of issued and outstanding shares of Stock owned by the Option
Holder for at least six months, which have a Fair Market value at the time
of Option exercise that is equal to the aggregate Option Price, (iii) by
delivering to the Company (a) irrevocable instructions to deliver the stock
certificates representing the shares for which the Option is being
exercised to a brokerage house acceptable to the Company and (b) a copy of
irrevocable instructions to and confirmation from a brokerage house
acceptable to the Company to deliver to the Company within 48 hours of
receiving stock certificates an amount of sale or loan proceeds sufficient
to pay the aggregate Option Price, (iv) any combination of these methods of
payment. The Committee or Board may authorize the Chief Executive Officer,
Chief Financial Officer and or the Secretary of the Company to execute and
administrate the provisions of this paragraph.
(c) OPTION PERIOD AND EXPIRATION. Options shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years, as
may be determined by the Committee (the "Option Period"); PROVIDED,
HOWEVER, that notwithstanding any vesting dates set by the Committee, the
Committee may in its sole discretion accelerate the exercisability of any
Option, which acceleration shall not affect the terms and conditions of any
such Option other than with respect to exercisability. Unless otherwise
specifically determined by the Committee, the vesting of an Option shall
occur only while the Participant is employed or rendering services to the
Company or its Subsidiaries and all vesting shall cease upon a Holder's
termination of employment or services for any reason. If an Option is
exercisable in installments, such installments or portions thereof which
become exercisable shall remain exercisable until the Option expires.
Unless otherwise stated in the applicable Option Agreement, the Option
shall expire earlier than the end of the Option Period in the following
circumstances:
(i) In the event an Option Holder ceases to be an employee of the
Company or a Subsidiary or perform services for the Company or a
Subsidiary for any reason other than death or retirement, any vested
and exercisable Option held by such Holder at the time must be
exercised by the earlier of (a) the date that is five (5) business
days after the date on which the Holder ceases to be an employee or
perform services, except that in the case of an Incentive Stock
Option, if the Holder ceases employment because of permanent and total
disability within the meaning of Internal Revenue Code section
22(e)(3), the period shall be one year instead of five business days
or (b) the Option Period expiration date.
(ii) In the event an Option Holder ceases to be an employee of
the Company or a Subsidiary or perform services for the Company due to
retirement, any vested and exercisable Option held by such Holder at
the time must be exercised by the earlier of (a) the date that is
three months (90 days) after the date of retirement of the Holder or
(b) the option period expiration date.
(iii) In the event an Option Holder dies prior to the end of the
Option Period and while still in the employ or service of the Company
or a Subsidiary, any vested and exercisable Option held by such Holder
at the time must be exercised by the earlier of (a) the date that is
twelve months (365 days) after the date of death of the Holder or (b)
the option period expiration date. In such event, the Option shall
remain exercisable by the person or persons to whom the Holder's
rights under the Option pass by will or the applicable laws of descent
and distribution until its expiration, but only to the extent the
Option was vested and exercisable by the Holder at the time of death.
(d) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement,
which shall contain such provisions as may be determined by the Committee
and, except as may be specifically stated otherwise in such Stock Option
Agreement, which shall be subject to the following terms and conditions:
(i) Each Option issued pursuant to this Section 7 or portion
thereof that is exercisable shall be exercisable for the full amount
or for any part thereof.
(ii) Each share of Stock purchased through the exercise of an
Option issued pursuant to this Section 7 shall be paid for in full at
the time of the exercise. Each Option shall cease to be exercisable,
as to any share of Stock, when the Holder purchases the share or when
the Option expires or is forfeited.
(iii) Options issued pursuant to this Section 7 shall not be
transferable by the Holder except by will or the laws of descent and
distribution and shall be exercisable during the Holder's lifetime
only by him or her. Any purported transfer that violates this clause
(iii) shall be void.
(iv) Each Option issued pursuant to this Section 7 shall vest and
become exercisable by the Holder in accordance with the vesting
schedule established by the Committee and set forth in the Stock
Option Agreement.
(v) Each Stock Option Agreement may contain a provision that,
upon demand by the Committee for such a representation, the Holder or
a person or persons to whom the Holder's rights under the Option pass
by will or the applicable laws of descent and distribution pursuant to
Section 7(c)(iii) shall deliver to the Committee at the time of any
exercise of an Option issued pursuant to this Section 7 a written
representation that the shares to be acquired upon such exercise are
to be acquired for investment and not for resale or with a view to the
distribution thereof.
(vi) Each Incentive Stock Option Agreement shall contain a
provision requiring the Holder or a person or persons to whom the
Holder's rights under the Option pass by will or the applicable laws
of descent and distribution pursuant to Section 7(c)(iii) to notify
the Company in writing immediately after the Holder makes a
disqualifying disposition of any Stock acquired pursuant to the
exercise of such Incentive Stock Option. A disqualifying disposition
is any disposition (including any sale) of such Stock before the later
of (a) two years after the Date of Grant of the Incentive Stock Option
and (b) one year after the date the Holder acquired the Stock by
exercising the Incentive Stock Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option is
granted to a Holder who owns stock representing more than 10% of the voting
power of all classes of stock of the Company or of a Subsidiary at the
time, the Option Period shall not exceed five years from the Date of Grant
of such Option and the Option Price shall be at least 110% of the Fair
Market Value (on the Date of Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant)
of Stock for which Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all plans of the
Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock
Options shall be treated as Nonqualified Stock Options.
(g) REPRICING PERMITTED. The Committee may permit the voluntary
surrender of all or any portion of any Nonqualified Stock Option issued
pursuant to this Section 7 to be conditioned upon the granting to the
Holder of a new Option for the same or a different number of shares as the
Option surrendered or require such voluntary surrender as a condition
precedent to a grant of a new Option to such Participant. Such new Option
shall be exercisable at an Option Price, during an Option Period, and in
accordance with any other terms or conditions specified by the Committee at
the time the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the Option Price, Option Period,
or any other terms and conditions of the Nonqualified Stock Option
surrendered.
8. RESTRICTED STOCK AWARDS
(a) AWARD OF RESTRICTED STOCK.
(i) The Committee shall have the authority to (1) grant, issue or
transfer Restricted Stock to Eligible Persons, except that grants of
Director Compensation must be made by the Board, and (2) establish
terms, conditions and restrictions applicable to such Restricted
Stock, including the Restricted Period, which may differ with respect
to each grantee, the time or times at which Restricted Stock shall be
granted or become vested and the number of shares to be covered by
each grant. Any grant or the vesting thereof may be further
conditioned upon the attainment of performance objectives established
by the Committee.
(ii) The Holder of a Restricted Stock Award shall execute and
deliver to the Company an Award agreement with respect to the
Restricted Stock setting forth the restrictions applicable to such
Restricted Stock. If the Committee determines that the Restricted
Stock shall be held in escrow, the Holder additionally shall execute
and deliver to the Company (i) an escrow agreement satisfactory to the
Committee and (ii) the appropriate blank stock powers with respect to
the Restricted Stock covered by such agreements.
(iii) Upon the Award of Restricted Stock, the Committee shall
cause a stock certificate registered in the name of the Holder to be
issued and, if it so determines, deposited together with the stock
powers with an escrow agent designated by the Committee. If an escrow
arrangement is used, the Committee shall cause the escrow agent to
issue to the Holder a receipt evidencing any stock certificate held by
it registered in the name of the Holder.
(b) RESTRICTIONS.
(i) Restricted Stock awarded to a Participant shall be subject to
the following restrictions until the expiration of the Restricted
Period, and to such other terms and conditions as may be set forth in
the applicable Award agreement: (1) the shares shall be subject to the
restrictions on transferability set forth in the Award agreement; (2)
the shares shall be subject to forfeiture to the extent provided in
Section 8(d) and the Award Agreement. During the Restricted Period,
the Holder shall not have any rights of ownership in the Restricted
Stock and shall not have any right to vote such shares.
(ii) The Committee shall have the authority to remove any or all
of the restrictions on the Restricted Stock whenever it may determine
that, by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Restricted Stock Award,
such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock shall
commence on the Date of Grant and shall expire from time to time as to that
part of the Restricted Stock indicated in a schedule established by the
Committee and set forth in a written Award agreement.
(d) FORFEITURE PROVISIONS. Except to the extent determined by the
Committee and reflected in the underlying Award agreement, in the event a
Holder terminates employment with the Company and all Subsidiaries during a
Restricted Period, that portion of the Award with respect to which
restrictions have not expired ("Non-Vested Portion") shall be treated as
follows:
(i) Upon the voluntary resignation of a Participant or discharge
by the Company or a Subsidiary, the Non-Vested Portion of the Award
shall be completely forfeited.
(ii) Upon death, the Non-Vested Portion of the Award shall be
prorated for service during the Restricted Period and shall be
distributed free of all restrictions to the Participant's beneficiary
as soon as practicable following death.
(e) DELIVERY OF RESTRICTED STOCK. Upon the expiration of the
Restricted Period with respect to any shares of Stock covered by a
Restricted Stock Award, the restrictions set forth in Section 8(b) and the
Award agreement shall be of no further force or effect with respect to
shares of Restricted Stock which have not then been forfeited. If an escrow
arrangement is used, upon such expiration, the Company shall deliver to the
Holder, or his beneficiary, without charge, the stock certificate
evidencing the shares of Restricted Stock which have not then been
forfeited and with respect to which the Restricted Period has expired (to
the nearest full share).
9. OTHER STOCK-BASED AWARDS
The Committee may grant any other stock or stock-related Awards to any
Eligible Person under this Plan that the Committee deems appropriate, including,
but not limited to, stock appreciation rights, limited stock appreciation
rights, phantom stock Awards and Stock bonuses except that any grants of
Director Compensation must be made by the Board. Any such benefits and any
related agreements shall contain such terms and conditions as the Committee
deems appropriate. Such Awards and agreements need not be identical. With
respect to any benefit under which shares of Stock are or may in the future be
issued for consideration other than prior services, the amount of such
consideration shall not be less than the amount (such as the par value of such
shares) required to be received by the Company in order to comply with
applicable state law.
10. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the
benefit awarded to any other Participant) as the Committee determines
appropriate including, without limitation, provisions to assist the
Participant in financing the purchase of Stock upon the exercise of
Options, provisions for the forfeiture of or restrictions on resale or
other disposition of shares of Stock acquired under any Award, provisions
giving the Company the right to repurchase shares of Stock acquired under
any Award in the event the Participant elects to dispose of such shares,
and provisions to comply with Federal and state securities laws and Federal
and state tax withholding requirements. Any such provisions shall be
reflected in the applicable Award agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of
stock ownership in respect of shares of Stock which are subject to Awards
hereunder until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any terms or
conditions of any Award to the contrary, the Company shall be under no
obligation to offer to sell or to sell and shall be prohibited from
offering to sell or selling any shares of Stock pursuant to an Award unless
such shares have been properly registered for sale pursuant to the
Securities Act with the Securities and Exchange Commission or unless the
Company has received an opinion of counsel, satisfactory to the Company,
that such shares may be offered or sold without such registration pursuant
to an available exemption there from and the terms and conditions of such
exemption have been fully complied with. The Company shall be under no
obligation to register for sale under the Securities Act any of the shares
of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may
restrict the transfer of such shares and may legend the Stock certificates
representing such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
(d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan,
the Company or a Subsidiary, as appropriate, shall have the right to deduct
from all Awards cash and/or Stock, valued at Fair Market Value on the date
of payment, in an amount necessary to satisfy all Federal, state and local
taxes as required by law to be withheld with respect to such Awards and, in
the case of Awards paid in Stock, the Holder or other person receiving such
Stock may be required to pay to the Company or a Subsidiary, as
appropriate, prior to delivery of such Stock, the amount of any such taxes,
if any, which the Company or Subsidiary is required to withhold with
respect to such Stock. Subject in particular cases to the disapproval of
the Committee, the Company may accept shares of Stock of equivalent Fair
Market Value in payment of such withholding tax obligations if the Holder
of the Award elects to make payment in such manner.
(e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No individual shall have
any claim or right to be granted an Award under the Plan or, having been
selected for the grant of an Award, to be selected for a grant of any other
Award. Neither the Plan nor any action taken hereunder shall be construed
as giving any individual any right to be retained in the employ or service
of the Company or a Subsidiary.
(f) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee
shall find that any person to whom any amount is payable under the Plan is
unable to care for his affairs because of illness or accident, or is a
minor, or has died, then any payment due to such person or his estate
(unless a prior claim therefore has been made by a duly appointed legal
representative) may, if the Committee so directs the Company, be paid to
his spouse, child, relative, an institution maintaining or having custody
of such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and
the Company.
(g) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee
shall be personally liable by reason of any contract or other instrument
executed by such member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless to the maximum extent permitted
by governing law each member of the Committee and each other employee,
officer or director of the Company to whom any duty or power relating to
the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim) arising out of
any act or omission to act in connection with the Plan unless arising out
of such person's own fraud or willful bad faith; PROVIDED, HOWEVER, that
approval of the Board shall be required for the payment of any amount in
settlement of a claim against any such person. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them
harmless.
(h) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
principles of conflicts of law thereof.
(i) FUNDING. No provision of the Plan shall require the Company, for
the purpose of satisfying any obligations under the Plan, to purchase
assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence
of the existence of a segregated or separately maintained or administered
fund for such purposes. Holders shall have no rights under the Plan other
than as unsecured general creditors of the Company, except that insofar as
they may have become entitled to payment of additional compensation by
performance of services, they shall have the same rights as other employees
under general law.
(j) NONTRANSFERABILITY. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, transferred
or otherwise disposed of, mortgaged, pledged or encumbered except, in the
event of a Holder's death, by will or the laws of descent and distribution.
(k) RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act,
and shall not be liable for having so relied, acted or failed to act in
good faith, upon any report made by the independent public accountant of
the Company and its Subsidiaries and upon any other information furnished
in connection with the Plan by any person or persons other than himself.
(l) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the
Company or any Subsidiary except as otherwise specifically provided in such
other plan.
(m) EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Subsidiaries in such proportions as the Committee shall
determine.
(n) PRONOUNS. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
(o) TITLES AND HEADINGS. The titles and headings of the sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
(p) TERMINATION OF EMPLOYMENT. For all purposes herein, a person who
transfers from employment or service with the Company to employment or
service with a Subsidiary or vice versa shall not be deemed to have
terminated employment or service with the Company or a Subsidiary.
11. ADJUSTMENTS FOR RECAPITALIZATION AND OTHER CIRCUMSTANCES
Awards granted under the Plan and any agreements evidencing such Awards,
the maximum number of shares of Stock subject to all Awards under the Plan, the
number of shares of Stock subject to outstanding Awards and the maximum number
of shares of Stock with respect to which any one person may be granted Awards
during any year may be subject to adjustment or substitution, as determined by
the Committee in its sole discretion, as to the number, price or kind of a share
of Stock or other consideration subject to such Awards or as otherwise
determined by the Committee to be equitable (i) in the event of changes in the
outstanding Stock or in the capital structure of the Company by reason of stock
dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such
Award or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or (iii) for any other reason which the Committee, in its sole discretion,
determines otherwise warrants equitable adjustment because it interferes with
the intended operation of the Plan. Any adjustment to Incentive Stock Options
under this Section 11 shall take into account that adjustments which constitute
a "modification" within the meaning of Section 424(h)(3) of the Code may have an
adverse tax impact on such Incentive Stock Options and the Committee may, in its
sole discretion, provide for a different adjustment or no adjustment in order to
preserve the tax effects of Incentive Stock Options. Unless otherwise determined
by the Committee, in its sole discretion, any adjustments or substitutions under
this Section 11 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, such adjustments or substitutions shall, unless
otherwise determined by the Committee in its sole discretion, be made only to
the extent that the Committee determines that such adjustments or substitutions
may be made without a loss of deductibility for such Awards under Section 162(m)
of the Code. The Company shall give each Participant notice of an adjustment
hereunder and, upon notice, such adjustment shall be conclusive and binding for
all purposes.
12. EFFECT OF CHANGE IN CONTROL
Except to the extent reflected in a particular Award agreement:
(a) In the event of a Change in Control, notwithstanding any vesting
schedule with respect to an Award of Options or Restricted Stock, such
Option shall become immediately exercisable with respect to 100% of the
shares subject to such Option, and the Restricted Period shall expire
immediately with respect to 100% of such shares of Restricted Stock.
(b) In the event of a Change in Control, all other Awards shall become
fully vested and or payable to the fullest extent of any Award or portion
thereof that has not then expired and any restrictions with respect thereto
shall expire. The Committee shall have full authority and discretion to
interpret this Section 12 and to implement any course of action with
respect to any Award so as to satisfy the intent of this provision.
(c) The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets
and business of the Company.
13. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable.
14. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan. Subject to Section 11, with
the express written consent of an individual Participant, the Board may cancel
or reduce or otherwise alter outstanding Awards if, in its judgment, the tax,
accounting, or other effects of the Plan or potential payouts there under would
not be in the best interest of the Company. The Board may, at any time, or from
time to time, amend or suspend and, if suspended, reinstate, the Plan in whole
or in part; PROVIDED, HOWEVER, that without further stockholder approval neither
the Board shall make any amendment to the Plan which would:
(a) Increase the maximum number of shares of Stock which may be issued
pursuant to Awards, except as provided in Section 11;
(b) Extend the maximum Option Period;
(c) Extend the termination date of the Plan; or
(d) Change the class of persons eligible to receive Awards under the
Plan.
* * *
As adopted by the Board of Directors of Vicon Industries, Inc. as of March 23,
2007