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
Filed by the Registrant [X]
Filed by a Party other than the Registration [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mace Security International, 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] 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.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO] 1000 Crawford Place, Suite 400
Mt. Laurel, New Jersey 08054
(856) 778-2300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: September 12, 2002
Time: 10:00 AM, Eastern Time
Location
The DoubleTree Hotel
Cypress Room
515 Fellowship Road North
Mt. Laurel, New Jersey 08054
To Mace Security International, Inc. Stockholders:
We invite you to attend our 2002 Annual Meeting of Stockholders. At this
meeting, you and the other stockholders will be able to vote on the following
proposals, together with any other business that may properly come before the
meeting:
1. Election of seven directors to the Board of Directors for one-year
terms. The Board has nominated for election Louis D. Paolino, Jr., Mark
S. Alsentzer, Jon E. Goodrich, Robert M. Kramer, Richard B. Muir,
Matthew J. Paolino and Constantine N. Papadakis, Ph.D.
2. Ratification of the Board's appointment of Grant Thornton LLP as Mace's
independent auditors for fiscal year 2002.
You may vote on these proposals in person by attending the Annual Meeting or
by proxy. The attached proxy statement provides details on voting by proxy. If
you cannot attend the Annual Meeting, we urge you to complete and return the
enclosed proxy promptly in the enclosed self-addressed stamped envelope so that
your shares will be represented and voted at the Annual Meeting in accordance
with your instructions. Of course, if you attend the Annual Meeting, you may
withdraw your proxy and vote your shares.
Only stockholders of record at the close of business on August 2, 2002, can
vote at the Annual Meeting and any adjournment or postponement of the Annual
Meeting.
By Order of the Board of Directors,
/s/ ROBERT M. KRAMER
Mt. Laurel, New Jersey Robert M. Kramer
August 7, 2002 Secretary
TABLE OF CONTENTS
Page
----
Introduction.............................................................. 1
About This Proxy Solicitation.......................................... 1
About the Annual Meeting............................................... 2
Voting at the Annual Meeting........................................... 2
How To Vote Your Shares................................................ 3
The Proposals............................................................. 4
Proposal 1. Election of Directors...................................... 4
Proposal 2. Ratification of the Board's appointment of Independent
Auditors............................................................. 7
About the Board of Directors and Executive Officers....................... 8
About the Board and its Committees..................................... 8
Director Compensation.................................................. 8
Executive Officers and Directors....................................... 9
Compensation of Certain Executive Officers............................. 9
Equity Compensation Plan Information................................... 10
Option and Warrant Grants in Last Fiscal Year.......................... 11
Aggregated Option and Warrant Exercises in Last Fiscal Year............ 11
Employment Agreements.................................................. 11
Biographical Information for Non-Director Executive Officers........... 12
Section 16(a) Beneficial Ownership Reporting Compliance................ 12
Compensation Committee Interlocks and Insider Participation............ 13
Compensation Committee Report on Executive Compensation................ 13
Performance Graph...................................................... 15
Audit Committee Report................................................. 16
Audit Fees and Related Matters......................................... 17
The Principal Stockholders of Mace........................................ 18
Beneficial Ownership................................................... 18
Irrevocable Proxies Granted to Louis D. Paolino, Jr.................... 19
Additional Information.................................................... 20
Certain Relationships and Related Party Transactions................... 20
Deadline for Stockholder Proposals..................................... 21
Mace's Annual Report................................................... 21
Appendix A--Amended Audit Committee Charter............................... A-1
[LOGO] 1000 Crawford Place, Suite 400
Mt. Laurel, New Jersey 08054
(856) 778-2300
-----------------
PROXY STATEMENT
-----------------
INTRODUCTION
The Board of Directors is soliciting proxies to be used at the 2002 Annual
Meeting of Stockholders of Mace Security International, Inc. ("Mace" or the
"Company"). Mace will begin mailing this proxy statement and the enclosed form
of proxy to its stockholders on or about August 7, 2002.
The Board of Directors is soliciting your proxy to encourage you to vote on
proposals at the Annual Meeting and to obtain your support for the proposals.
You are invited to attend the Annual Meeting and vote your shares directly. If
you do not attend, you may vote by proxy, which allows you to direct another
person to vote your shares at the Annual Meeting on your behalf, using the
accompanying proxy card. Even if you plan to attend the Annual Meeting, it is
a good idea to complete, sign and return the proxy card in case your plans
change. You can always vote in person at the Annual Meeting, even if you have
already returned the proxy card.
About This Proxy Solicitation
This proxy solicitation has two parts: the proxy card and this proxy
statement.
The Proxy Card The proxy card permits you to vote by proxy, whether or not
you attend the Annual Meeting. When you sign the proxy card, you appoint
certain individuals as your representatives at the Annual Meeting. They will
vote your shares of Mace common stock at the Annual Meeting as you have
instructed on the proxy card. If a proposal comes up for a vote that is not on
the proxy card, they will vote your shares as they deem appropriate.
This Proxy Statement This proxy statement contains important information
for you to consider when deciding how to vote on the proposals. Please read it
carefully. It is divided into four sections following this Introduction:
Section Page Number
------- -----------
The Proposals...................................... 4
About the Board of Directors and Executive Officers 8
The Principal Stockholders of Mace................. 18
Additional Information............................. 20
Mace will pay for soliciting these proxies. In addition to use of the mails,
Mace's directors, officers and employees may solicit proxies in person, by
telephone, facsimile or by other means, in all cases without additional
compensation. Mace will reimburse brokers, nominees, custodians and fiduciaries
for their reasonable out-of-pocket expenses in forwarding proxy materials to
the beneficial owners of Mace common stock.
1
About the Annual Meeting
When And Where Mace will hold the Annual Meeting on September 12, 2002, at
10:00 AM, Eastern Time, at The DoubleTree Hotel, Cypress Room, 515 Fellowship
Road North, Mt. Laurel, New Jersey 08054.
Quorum Requirement Mace's bylaws require that a majority of outstanding
shares of Mace common stock must be represented at the Annual Meeting, whether
in person or by proxy, constituting a quorum in order to transact business.
Abstentions and broker non-votes will be counted in determining whether or not
there is a quorum at the Annual Meeting.
The Proposals Stockholders will vote on the following proposals at the
Annual Meeting:
. election of seven directors to one-year terms; and
. ratification of the Board's appointment of Mace's independent auditors.
Other Matters There were no stockholder proposals submitted for the Annual
Meeting. Neither Mace nor its Board intend to bring any other matters before
the Annual Meeting. The Board has no present knowledge that any other matters
will be presented by others for action at the Annual Meeting. However,
stockholders will be able to vote on any other matters that properly come
before the Annual Meeting.
Presence of Independent Auditors Representatives of Grant Thornton LLP,
Mace's independent auditors since January 10, 2000, are expected to be present
at the Annual Meeting. They will have the opportunity to make a statement at
the Annual Meeting, if they choose, and they are expected to be available to
respond to stockholder questions.
Representatives of Ernst & Young LLP, Mace's independent auditors from May
1999 through January 10, 2000, are not expected to be present at the Annual
Meeting and will not make a statement or respond to stockholder questions.
The Stockholders As of the record date of August 2, 2002, there were
25,349,027 shares of Mace common stock issued and outstanding. Only
stockholders of record at the close of business on August 2, 2002, are entitled
to vote at the Annual Meeting and any adjournment or postponement of the
meeting. A complete list of stockholders entitled to vote at the Annual Meeting
will be available for inspection by any stockholder for any purpose relating to
the Annual Meeting for ten days prior to the meeting during ordinary business
hours at Mace's headquarters located at 1000 Crawford Place, Suite 400, Mt.
Laurel, New Jersey 08054.
Voting at the Annual Meeting
You are entitled to one vote for each share of Mace common stock that you
owned of record at the close of business on August 2, 2002. The presence, in
person or by proxy, of the holders of a majority of the stock issued and
outstanding and entitled to vote at the Annual Meeting is necessary to
constitute a quorum. Abstentions are counted as "shares present" at the meeting
for purposes of determining whether a quorum exists. Abstentions have the
effect of a vote "against" any matter as to which they are specified. Proxies
submitted by brokers that do not indicate a vote for some or all of the
proposals because they do not have discretionary voting authority and have not
received instructions as to how to vote on those proposals (so-called "broker
non-votes") are considered "shares present" at the meeting for purposes of
determining whether a quorum exists. Broker non-votes will not affect the
outcome of the vote on any matter unless the matter requires the affirmative
vote of a majority of the outstanding shares and in such case will have the
effect of a vote "against" that matter.
The seven nominees for director receiving the highest number of affirmative
votes shall be elected as directors. Stockholders do not have the right to
cumulate their votes in the election of directors. The other proposal is to be
approved by the affirmative vote of a majority of all shares of Mace common
stock entitled to vote for such proposal that are represented at the Annual
Meeting in person or by proxy.
2
How To Vote Your Shares
You may vote in one of two ways:
. return your completed, signed and dated proxy card before the Annual
Meeting; or
. cast a written ballot in person at the Annual Meeting (you will need a
legal proxy from your stockbroker if you hold your shares in street name).
Voting By Proxy The proxy card has simple instructions. By returning a
completed proxy card before the Annual Meeting, you will direct the appointed
persons (known as "proxies") to vote your shares at the Annual Meeting in
accordance with your instructions. Gregory M. Krzemien and Eduardo Nieves, Jr.,
will serve as your proxies for the Annual Meeting. If you complete all of the
proxy card except for the voting instructions, then the proxies will vote your
shares for the election of the nominated directors, and for the ratification of
Grant Thornton LLP as Mace's independent auditors. If any nominee for election
to the Board is unable to serve, which is not anticipated, then the designated
proxies will vote your shares for any substitute nominee chosen by the Board.
If any other matters properly come before the Annual Meeting, then the
designated proxies will vote your shares in their discretion on such matters.
How To Revoke Your Proxy You may revoke your proxy at any time before it is
exercised at the Annual Meeting by any of the following means:
. notifying Mace's Secretary in writing (notice to be sent to Mace's
executive offices, the address for which is located on the first page of
this proxy statement);
. submitting another proxy card with a later date; or
. attending the Annual Meeting and voting by written ballot (mere
attendance at the Annual Meeting will not by itself revoke your proxy).
3
THE PROPOSALS
- --------------------------------------------------------------------------------
Proposal 1. Election of Directors
- --------------------------------------------------------------------------------
Election of seven directors to the Board of Directors for one-year terms.
Nominees
Louis D. Paolino, Jr. Mark S. Alsentzer Jon E. Goodrich Robert M. Kramer
Richard B. Muir Matthew J. Paolino Constantine N. Papadakis, Ph.D.
- --------------------------------------------------------------------------------
About the Nominees
Each of Mace's nominees currently serves on the Board of Directors. Each
nominee indicated that he will serve on the Board if elected. Biographical
information for each nominee appears below.
Louis D. Paolino, Jr.
- ---------------------
Age: 46
Director Since: May 24, 1999
Principal Occupation:
May 24, 1999-Present President and Chief Executive Officer of
Mace
July 1, 1999-Present Chairman of the Board of Mace
Recent Business Experience:
June 1996-December 1998 Chairman of the Board, President and
Chief Executive Officer of Eastern
Environmental Services, Inc. (a waste
management company)
Mark S. Alsentzer
- -----------------
Age: 47
Director Since: December 15, 1999
Principal Occupation:
December 1996-Present Chairman of the Board, President and
Chief Executive Officer of US Plastic
Lumber Corporation (a plastic lumber and
recycling company)
Recent Business Experience:
1992-December 1996 Vice President of Republic Environmental
Systems, Inc. (an environmental services
company)
Other Directorships: US Plastic Lumber Corporation
4
Jon E. Goodrich
- ---------------
Age: 57
Director Since: December 14, 1987
Principal Occupation:
May 1, 2002-Present General Manager of Mace's Security
Products Division
January 1, 2000-Present President and Owner of Vermont Mill
Properties (a real estate company), and
Vermont Mill Plastics (a plastic bag
manufacturing company)
Recent Business Experience:
January 1, 2000-April 30, 2002 President and Owner of Mark Sport, Inc.
March 1997-May 1999 President and Chief Executive Officer of
Mace
January 1996-March 1997 Chairman of the Board of Mace
June 1987-January 1996 President and Chief Executive Officer of
Mace
June 1987-June 1995 Chairman of the Board of Mace
November 1985-January 1997 Vice President of Gould & Goodrich
Leather, Inc. (a leather products
manufacturer)
November 1985-January 1997 President of G & G Realty, Inc. (a real
estate management company)
Robert M. Kramer
- ----------------
Age: 49
Director Since: July 1, 1999
Principal Occupation:
May 24, 1999-Present Executive Vice President, General
Counsel, and Secretary of Mace
September 2000-Present Chief Operating Officer of Mace
Recent Business Experience:
1989-August 2000 Sole partner of Robert M. Kramer &
Associates, P.C.
June 1996-December 1998 Executive Vice President, General
Counsel, and Secretary of Eastern
Environmental Services, Inc. (a waste
management company)
Richard B. Muir
- ---------------
Age: 47
Director Since: December 15, 1999
Principal Occupation:
1998-Present Vice Chairman of Price Legacy Corporation
(a real estate investment trust), and
President of its subsidiaries, Excel
Legacy Corporation and Excel Legacy
Holdings, Inc. (real estate development
companies)
1982-Present President of Warner Beck, Inc.
(securities broker/dealer firm)
Recent Business Experience:
1989-May 1999 Executive Vice President and Secretary of
New Plan Excel Realty Trust, Inc. (a real
estate development company)
Other Directorships: Price Legacy Corporation, Excel
Interfinancial Corporation and Warner
Beck, Inc.
5
Matthew J. Paolino
- ------------------
Age: 37
Director Since: July 1, 1999
Principal Occupation:
July 1, 1999-Present Vice President of Risk Management and
Asset Management of Mace
1994-Present President of Premier Concrete, Inc. (a
general contractor)
Recent Business Experience:
1996-December 1998 Vice President of Risk Management, Asset
Management and Special Waste Divisions of
Eastern Environmental Services, Inc. (a
waste management company)
Other Information: Mr. Paolino is the brother of Louis D.
Paolino, Jr., Mace's Chairman of the
Board, President and Chief Executive
Officer
Constantine N. Papadakis, Ph.D.
- -------------------------------
Age: 56
Director Since: May 24, 1999
Principal Occupation:
1995-Present President of Drexel University
Recent Business Experience:
1986-1995 Dean of the College of Engineering, Geier
Professor of Engineering Education and
Professor of Civil Engineering at the
University of Cincinnati
Other Directorships: The Philadelphia Stock Exchange
Recommendation
The Board of Directors recommends that you vote FOR the election of Louis D.
Paolino, Jr., Mark S. Alsentzer, Jon E. Goodrich, Robert M. Kramer, Richard B.
Muir, Matthew J. Paolino and Constantine N. Papadakis, Ph.D., to Mace's Board.
6
Proposal 2. Ratification of the Board's appointment of Independent Auditors
- --------------------------------------------------------------------------------
Ratification of the Board's appointment of Grant Thornton LLP as Mace's
independent auditors for fiscal 2002.
The Audit Committee of the Board of Directors selects the independent public
accountants to audit Mace's books of account and other corporate records. The
Audit Committee's selection of Grant Thornton LLP to audit Mace's books of
account and other corporate records for 2002, which has been approved by the
Board of Directors, is being submitted to you for ratification.
About Prior Audits
The rules and regulations of the SEC require Mace to make the following
disclosures to you:
The reports of Grant Thornton LLP on Mace's consolidated financial
statements for the fiscal years ended December 31, 2001, 2000 and 1999, did not
contain any adverse opinion or disclaimer of opinion, or modification or
qualification as to uncertainty, audit scope or accounting principles. In
connection with its audits for each of the last three fiscal years, there have
been no disagreements between Mace and Grant Thornton LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Grant Thornton LLP, would have caused them to refer to any such disagreements
in their report on Mace's consolidated financial statements for such years.
Prior to Grant Thornton LLP's engagement, Ernst & Young LLP had served as
Mace's independent auditors from May 1999 until January 10, 2000. Ernst & Young
LLP resigned on January 10, 2000 as a result of a business conflict. Ernst &
Young LLP issued an opinion with respect to the audit of the consolidated
balance sheet of Mace as of December 31, 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1998, as restated for three "pooling
of interest" acquisitions completed in 1999. The reports of Ernst & Young LLP
on Mace's consolidated financial statements as restated for the two years ended
December 31, 1998, did not contain any adverse opinion or disclaimer of
opinion, or modification or qualification as to uncertainty, audit scope or
accounting principles. In connection with its audits for those two years, there
were no disagreements between Mace and Ernst & Young LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
Ernst & Young LLP, would have caused them to refer to any such disagreements in
their report on Mace's consolidated financial statements for such years.
Presence of Independent Auditors
Representatives of Grant Thornton LLP will be at the Annual Meeting, will
have the opportunity to make a statement at the Annual Meeting if they desire
to do so, and will be available to respond to appropriate questions.
Representatives of Ernst & Young LLP are not expected to be present at the
Annual Meeting.
Recommendation
The Board of Directors recommends that you vote FOR the ratification of
Grant Thornton LLP as Mace's independent auditors for fiscal year 2002.
7
ABOUT THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
About the Board and its Committees
Mace's Board is comprised of seven directors. Unless a director earlier
resigns or is removed, each director serves a one-year term, holding office
until the next Annual Meeting of Stockholders and until his successor is
elected and qualified. At Mace's 1999 Annual Meeting, each of the present
directors was elected to the Board. Each director was re-elected to another
term at Mace's 2000 Annual Meeting, and each was again re_elected to his
present term at Mace's 2001 Annual Meeting of Stockholders on December 12, 2001.
Mace's Board held seven formal meetings during 2001. During 2001, all
directors, other than Mark S. Alsentzer and Dr. Constantine N. Papadakis,
Ph.D., attended at least 92% of Mace's Board meetings and the meetings of the
committees of the Board on which they served. Mark S. Alsentzer and Dr.
Constantine N. Papadakis, Ph.D., attended 80% and 43%, respectively, of Mace's
Board meetings and meetings of the committees of the Board on which they serve.
Mace's Board has standing Audit, Compensation, and Acquisition Committees. The
following chart describes the composition and functions of the Committees.
BOARD COMMITTEES
No. of
Meetings
Committee Members Held in 2001 Functions
- --------- ------- ------------ ---------
Audit Mark S. Alsentzer 3 . Recommends selection of independent
Constantine N. Papadakis, Ph.D. auditors to the Board.
Richard B. Muir . Confers with independent auditors and
internal personnel on the scope of
auditor's examinations.
. Reviews internal audit controls and
procedures.
. Reviews related party transactions.
Compensation Constantine N. Papadakis, Ph.D. 3 . Recommends executive compensation.
Richard B. Muir . Administers Mace's Nonqualified Stock
Louis D. Paolino, Jr. Option Plan.
. Administers Mace's 1999 Stock Option
Plan.
Acquisition Louis D. Paolino, Jr. 1 . Reviews and approves acquisitions
Robert M. Kramer having a value of $5,000,000 or less.
Matthew J. Paolino . Reviews and approves loans and
financing arrangements having a value
of $5,000,000 or less.
Director Compensation
Until July 1, 1999, directors who were not employees of Mace received fees
of $500 per Board or Committee meeting attended. Such directors also were
entitled to receive reasonable travel and out-of-pocket expenses relating to
their attendance at such meetings. Commencing on July 1, 1999, Mace ceased
paying fees to directors, but continues to pay non-employee directors
reasonable travel and out-of-pocket expenses relating to their attendance at
meetings.
On October 18, 2000, Mace granted options to purchase 20,000 shares of Mace
common stock at $1.2813 per share to each of Mace's outside directors, Richard
B. Muir, Mark S. Alsentzer and Constantine N. Papadakis, Ph.D., for their
service on the Board of Directors during 2000. Additionally, on October 18,
2000, Mace granted
8
options to purchase 10,000 shares of Mace common stock at $1.2813 per share to
each of Mace's directors, Louis D. Paolino, Jr., Robert M. Kramer, Matthew J.
Paolino, Jon E. Goodrich, Richard B. Muir, Mark S. Alsentzer and Constantine N.
Papadakis, Ph.D., for agreeing to serve on the Board of Directors for 2001.
Additionally, on April 4, 2002, Mace's outside directors, Richard B. Muir, Mark
S. Alsentzer and Constantine N. Papadakis, Ph.D., were each granted options to
purchase 25,000 shares of Mace common stock at $1.18 per share for their
service on the Board of Directors in 2002.
Executive Officers and Directors
Set forth below is certain information concerning the executive officers and
directors of Mace.
Name Age Position
- ---- --- --------
Louis D. Paolino, Jr........... 46 Director, Chairman of the Board, President, and Chief Executive
Officer
Robert M. Kramer............... 49 Director, Chief Operating Officer, Executive Vice President,
General Counsel, and Secretary
Gregory M. Krzemien............ 43 Chief Financial Officer and Treasurer
Ronald R. Pirollo.............. 43 Chief Accounting Officer and Controller
Matthew J. Paolino............. 37 Director and Vice President
Mark S. Alsentzer.............. 47 Director
Jon E. Goodrich................ 57 Director
Richard B. Muir................ 47 Director
Constantine N. Papadakis, Ph.D. 56 Director
Compensation of Certain Executive Officers
The following table provides summary information concerning cash and certain
other compensation paid or accrued by Mace to or on behalf of Mace's Chief
Executive Officer and each of the other most highly compensated executive
officers of Mace whose compensation exceeded $100,000 (the "Named Executive
Officers") for the three years ended December 31, 2001, 2000, and 1999.
SUMMARY COMPENSATION TABLE (1)
Annual Compensation
------------------- Long-term Compensation Awards:
Name and Principal Positions Year Salary Bonus Securities Underlying Options (#)
- ---------------------------- ---- -------- ------- ---------------------------------
Louis D. Paolino, Jr............................ 2001 $320,000 -- --
Chairman of the Board, President and 2000 $320,001 -- 10,000
Chief Executive Officer (2) 1999 $201,565 -- --
Robert M. Kramer................................ 2001 $137,500 -- 100,000
Chief Operating Officer, Executive Vice 2000 $125,000 -- 10,000
President, General Counsel and Secretary (3) 1999 $ 76,953 -- 237,209
Gregory M. Krzemien............................. 2001 $121,000 -- 100,000
Chief Financial Officer 2000 $110,001 -- --
and Treasurer (3) 1999 $ 67,723 -- 125,000
Ronald R. Pirollo............................... 2001 $112,500 -- 60,000
Chief Accounting Officer 2000 $ 91,845 $10,000 10,000
and Controller (3) 1999 $ 38,854 -- 50,000
- --------
(1) The columns captioned "Annual Compensation--Other Annual Compensation,"
"Long-term Compensation--restricted Stock Awards," and "All other
Compensation" have been omitted because, in the
9
first case, none of the Named Officers received other annual compensation
exceeding either $50,000 or 10% of such officer's total annual salary and
bonus and, in the other cases, because Mace (i) made no restricted stock
awards, (ii) maintained no long-term incentive plan, and (iii) paid no other
compensation to the Named Officers, in each case during the fiscal year
ended December 31, 2001. Additionally, Mace has not issued any stock
appreciation rights (SARs) in any of the past three years.
(2) Mr. Louis D. Paolino, Jr. has served as President and Chief Executive
Officer since May 24, 1999, and Chairman of the Board since July 1, 1999.
(3) Employment commenced on March 26, 1999. A partial year's base compensation
was paid in the fiscal year ended December 31, 1999.
Equity Compensation Plan Information
Stock options are issued periodically to employees at an exercise price of
no less than the then current market price of the Common Stock and generally
expire ten years from the date of grant. Allocation of available options and
vesting schedules are at the discretion of the Compensation Committee and are
determined by potential contribution to, or impact upon, the overall
performance of the Company by the executives and employees. Stock options are
also issued periodically to members of the Board of Directors. These options
may have similar terms as those issued to officers or may vest immediately. The
purpose of the Stock Option Plan, which has been approved by the stockholders
of the Company, is to provide a means of performance-based compensation in
order to provide incentive for the Company's employees. Warrants have been
issued in connection with the purchase and sale of certain businesses and to a
director. The terms of the warrants have been established by the Board of
Directors of the Company. Certain of the warrants have been approved by
stockholders.
The following table sets forth certain information regarding the Company's
Stock Option Plan and warrants as of December 31, 2001.
(c)
(b) Number of securities
(a) Weighted average remaining available for
Number of securities to exercise price of future issuance under equity
be issued upon exercise outstanding compensation plans
of outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (a))
- ------------- ----------------------- ----------------- ----------------------------
Equity compensation plans approved by
stockholders........................... 3,465,113 $2.79 12,942,791
Equity compensation plans not approved by
stockholders........................... 889,100 $3.46 N/A
10
Option and Warrant Grants in Last Fiscal Year
The following table sets forth certain information concerning individual
grants of stock options to the Named Executive Officers during the fiscal year
ended December 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR (1)
(Individual Grants)
Potential Realizable
% of Total Value at Assumed
Number of Options Rates of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term
Options in Fiscal Price Expiration --------------------
Name Granted Year (1) Per Share Date 5% 10%
- ---- ---------- ---------- --------- ---------- ------- --------
Louis D. Paolino, Jr.... -- -- -- -- -- --
Gregory M. Krzemien..... 100,000(2) 28.7% $.6875 3/30/11 $43,237 $109,570
Robert M. Kramer........ 100,000(2) 28.7% $.6875 3/30/11 $43,237 $109,570
Ronald R. Pirollo....... 60,000(2) 17.2% $.6875 3/30/11 $25,942 $ 65,730
- --------
(1) The Company granted options and warrants to employees to purchase a total
of 348,500 shares of common stock during the fiscal year ended December 31,
2001. All of these grants were made at fair market value.
(2) Options vest at the rate of 25% every six months from March 30, 2001, the
date of grant.
Aggregated Option and Warrant Exercises in Last Fiscal Year
The following table sets forth certain information regarding stock options
of the Named Executive Officers during the fiscal year ended December 31, 2001,
including the number and value of exercisable and unexercisable stock options
as of December 31, 2001. No options were exercised by any of the Named
Executive Officers during the fiscal year ended December 31, 2001. In-the-money
options are those for which the fair market value of the underlying securities
exceeds the exercise price of the option. The closing transaction price of the
Company's common stock on December 31, 2001, was $0.86 per share.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-money Options/
Year End 2001 SARs at Year End
- - ------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Louis D. Paolino, Jr.... 10,000 -- -- --
Gregory M. Krzemien..... 120,737 104,263 $4,313 $12,938
Robert M. Kramer........ 146,629 163,371 $4,313 $12,938
Ronald R. Pirollo....... 56,250 63,750 $2,588 $ 7,763
Employment Agreements
Louis D. Paolino, Jr., Employment Agreement
Mace currently employs Louis D. Paolino, Jr., as its President and Chief
Executive Officer under a four-year employment agreement dated May 24, 1999.
The principal terms of the employment agreement include: annual salary of
$350,000; provision of certain medical and other employee benefits; prohibition
against competing with Mace during employment and for a three month period
following a termination of employment; and a $7,000,000 payment in the event
that Mr. Paolino's employment is terminated for any reason, except for death or
disability.
11
Other Executive Employment Agreements
Mace currently employs Robert M. Kramer, Gregory M. Krzemien, Ronald R.
Pirollo and Matthew J. Paolino under four-year employment agreements dated
March 26, 1999, expiring on March 26, 2003. Each employment agreement provides
for annual salary, certain medical and other employee benefits, and a
prohibition against competing with Mace during employment and for a three month
period following a termination of employment. In addition, Mace granted to each
of these executive officers options to purchase shares of Mace common stock at
$2.6875 per share that vest over a period of four years, except in the event of
a change of control or employment termination without cause, in which case such
options vest immediately. The table below discloses the current salary and
initial option grants for these executive officers.
Current Initial
Annual Option
Name Office Salary Grant
- ---- ------ -------- -------
Robert M. Kramer...... Chief Operating Officer, Executive Vice $156,250 200,000
President, General Counsel, and
Secretary
Gregory M. Krzemien... Chief Financial Officer and Treasurer $135,500 125,000
Ronald R. Pirollo..... Chief Accounting Officer and Controller $118,500 50,000
Matthew J. Paolino.... Vice President of Risk Management and $ 45,000 125,000
Asset Management
Biographical Information for Non-Director Executive Officers
Set forth below is certain biographical information about the executive
officers of Mace who are not nominees to the Board:
Gregory M. Krzemien
- -------------------
Age: 43
Principal Occupation:
May 24, 1999-Present Chief Financial Officer and Treasurer of Mace
Recent Business Experience:
August 1992-December 1998 Chief Financial Officer and Treasurer of
Eastern Environmental Services, Inc.
Ronald R. Pirollo
- -----------------
Age: 43
Principal Occupation:
July 1, 1999-Present Chief Accounting Officer and Controller of
Mace
Recent Business Experience:
July 1997-December 1998 Controller of Eastern Environmental
Services, Inc.
1995-June 1997 Vice President-Finance of Envirite
Corporation
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon Mace's review of copies of such reports furnished to it and upon
representations of covered persons that no other reports were required, to
Mace's knowledge, all of the Section 16(a) filings required to be made by the
covered persons with respect to 2001 were made on a timely basis, except that a
Form 4 relating to two Mace stock transactions in December 2001 for Mark S.
Alsentzer was filed on February 8, 2002 rather than by January 10, 2002.
12
Compensation Committee Interlocks and Insider Participation
Throughout fiscal 2001, the Compensation Committee of the Company's Board of
Directors consisted of directors Louis D. Paolino, Jr., Richard B. Muir and
Constantine N. Papadakis, Ph.D. Louis D. Paolino, Jr. is the Company's
Chairman, Chief Executive Officer, and President. No executive officer of Mace
served as a director or compensation committee member of any entity of which
Messrs. Paolino, Muir or Papadakis was an executive officer or director.
In August 1999, Mace entered into a month-to-month lease arrangement with
Bluepointe, Inc., a corporation controlled by Louis D. Paolino, Jr., Mace's
Chairman, Chief Executive Officer and President, for Mace's executive offices
in Mt. Laurel, New Jersey. The lease arrangement provided for monthly rental
payments of $10,000. This monthly lease payment was considered to be more
favorable than could be obtained on the open market for similar facilities.
Effective August 1, 2000, after a survey of local real estate market pricing
and upon the approval of the Audit Committee, Mace entered into a five year
lease with Bluepointe, Inc. which provides for an initial monthly rental
payment of $15,962, which increases by 5% per year in the third through fifth
years of the lease. Mace believes that the terms of this lease (based on an
annual rate of $19.00 per square foot ) are competitive when compared to
similar facilities in the Mt. Laurel, New Jersey area. Mace has also entered
into a three_year furniture lease/purchase agreement with Bluepointe, Inc.,
dated January 1, 2001, which provided for an initial payment of $20,000 and
monthly rental payments thereafter of $4,513, for the use of the furnishings in
Mace's executive offices. The rental rates were based upon a third-party
valuation of the furnishings, and Mace believes that the terms of the furniture
lease are competitive with similar leasing arrangements available in the local
area.
Mace purchased charter airline services from Air Eastern, Inc., and LP
Learjets, LLC, charter airline companies owned by Louis D. Paolino, Jr., Mace's
Chairman, Chief Executive Officer and President. Mace paid $60,000 in fiscal
2001 and $25,544 through July 1, 2002, for such services. In 2001, an
additional $15,000 was paid to Aeroways, Inc., a chartered air service company
not affiliated with Louis D. Paolino, Jr., for the direct costs of flying the
Learjet 31A owned by LP Learjets, LLC. Mace believes that the rates charged are
competitive when compared with similar services provided by independent airline
charter companies. On November 6, 2001, the Audit Committee approved an
arrangement subject to quarterly review under which the Company pays
LP Learjets, LLC $5,109 per month for the right to use a Learjet 31A for 100
hours per year. Additionally, when the Learjet 31A is used, the Company pays to
Aeroways, Inc., the direct costs of the Learjet's per-hour use, which include
fuel, pilot fees, engine insurance and landing fees.
Compensation Committee Report on Executive Compensation
Throughout fiscal 2001, the Compensation Committee of the Company's Board of
Directors consisted of directors Louis D. Paolino, Jr., Richard B. Muir and
Constantine N. Papadakis, Ph.D.
The following report of the Compensation Committee is required by the rules
of the Commission to be included in this proxy statement and addresses the
Company's executive compensation policies for the fiscal year ended December
31, 2001. This report shall not be deemed incorporated by reference into any
filing under the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by virtue
of any general statement in such filing incorporating this proxy statement by
reference, except to the extent that the Company specifically incorporates the
information contained in this section by reference, and shall not otherwise be
deemed filed under either the Securities Act or the Exchange Act.
General. The Company's compensation policies for executives are intended to
further the interests of the Company and its stockholders by encouraging growth
of its business through securing, retaining, and motivating management
employees of high caliber who possess the skills necessary to the development
and growth of the Company.
13
The Company's compensation package consists of three major components: base
compensation, stock options, and performance bonuses. Together these elements
comprise total compensation value. The total compensation paid to the Company's
executive officers is influenced significantly by the need (i) to attract
management employees with a high level of expertise and (ii) to motivate and
retain key executives for the long-term success of the Company and its
stockholders.
The fiscal year ended December 31, 2001, was an important year for the
Company. In the first year following the change of control of the Company in
June 1999, the Company's executive management team pursued an aggressive
acquisition and growth strategy. The implementation and management of this
strategy required unusual amounts of time, attention, and effort from the
Company's executive officers. Subsequently, in 2001, Mace has focused its
management efforts on consolidating and streamlining the acquired operations in
order to maximize operating profits and improve its operating results when
compared to fiscal 2000. Additionally, the financing and re-financing of the
Company's long-term debt demanded significant time and attention. The
Compensation Committee considered these numerous factors in formulating its
executive compensation policies and practices for fiscal 2001. The Committee
also considered the Deloitte & Touche study of compensation levels dated
November 28, 2000 for each executive position when determining compensation.
Base Compensation. The Committee established annual base salary levels for
its executives based on competitive data, level of experience, position,
responsibility, and individual and Company performance. The Company has sought
to maintain total cash compensation levels for executives other than the Chief
Executive Officer below the median in the range of survey data, which included
companies providing consumer services on a national basis. The Committee has
used comparative data provided by Deloitte & Touche.
Stock Options. The Company grants stock options to its executive management
under its employee stock option plans. Option grants are intended to offer
significant returns if the Company is successful and, therefore, create
significant incentives to devote the effort called for in order to implement
the Company's strategic plan. The Compensation Committee believes that
executives' interests are directly tied to enhanced stockholder value. Thus,
stock options are used to provide the executive management team with a strong
incentive to perform in a manner that should result in the long_term success of
the Company.
Performance Bonuses and Stock Options. The Company maintains the option to
supplement base compensation with awards of performance bonuses in the form of
cash and stock options to reward efforts undertaken by its key executive
officers which are extraordinary in nature.
Chief Executive Officer Compensation. Mr. Paolino, in his capacity as
Chairman of the Board, Chief Executive Officer, and President, participates in
the same compensation programs as the other executive officers. The Committee
did not increase Mr. Paolino's compensation from his contracted-for
compensation. The Committee believes that Mr. Paolino's compensation is
competitive with the amount paid by companies in similar industries and
competitive situations, as supported by a competitive compensation analysis
conducted by Deloitte & Touche and the Compensation Committee's review of Mr.
Paolino's salary in the context of (i) the Company's performance and growth,
and (ii) compensation packages of chief executive officers at comparable
companies.
The Compensation Committee of the Board
of Directors
Louis D. Paolino, Jr.
Richard B. Muir
Constantine N. Papadakis, Ph.D.
14
Performance Graph
The following line graph and table compare, for the five most recently
concluded fiscal years, the yearly percentage change in the cumulative total
stockholder return, assuming reinvestment of dividends, on the Company's Common
Stock with the cumulative total return of companies on the NASDAQ and an index
comprised of certain companies in similar service industries (the "Selected
Peer Group Index")./(1)/
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MACE SECURITY INTERNATIONAL, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[CHART]
ASSUMES $100 INVESTED ON JAN. 1, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2001
- --------
(1) The Selected Peer Group Index is comprised of securities of Lo-Jack
Corporation and Precision Auto Care, Inc.
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted by the graph above.
The Company neither makes nor endorses any predictions as to future stock
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG MACE SECURITY
INTERNATIONAL, INC., THE NASDAQ MARKET INDEX, AND SELECTED PEER GROUP
December 31,
-----------------------------------------
1996 1997 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
Mace Security International, Inc. 100.00 70.00 135.00 330.00 72.48 68.80
Nasdaq Market Index.............. 100.00 122.32 172.52 304.29 191.25 152.46
Selected Peer Group.............. 100.00 147.50 107.41 60.70 66.00 47.67
The Performance Graph set forth above shall not be deemed incorporated by
reference into any filing under the Securities Act or the Exchange Act by
virtue of any general statement in such filing incorporating this proxy
statement by reference, except to the extent that the Company specifically
incorporates the information contained in this section by reference, and shall
not otherwise be deemed filed under either the Securities Act or the Exchange
Act.
15
Audit Committee Report
The Audit Committee of Mace's Board of Directors is composed of three
independent directors, as defined by Nasdaq rules, and operates under a written
charter adopted by the Board of Directors, which is included as amended in this
proxy statement as Appendix A.
Mace's management is responsible for the Company's internal controls and the
financial reporting process. Grant Thornton LLP, Mace's independent auditors,
is responsible for performing an independent audit of Mace's consolidated
financial statements in accordance with auditing standards generally accepted
in the United States and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes and review all related
party transactions. In this context, the Audit Committee has met and held
discussions with management and Grant Thornton LLP. Management has represented
to the Audit Committee that Mace's consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the
United States, and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and Grant Thornton LLP. The
Audit Committee discussed with Grant Thornton LLP matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication With Audit
Committees). Grant Thornton LLP also provided to the Audit Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions With Audit Committees), and the Audit Committee
discussed with Grant Thornton LLP that firm's independence.
Based on the Audit Committee's discussion with management and Grant Thornton
LLP, and the Audit Committee's review of management's representation and Grant
Thornton LLP's report to the Audit Committee, the Audit Committee recommended
that the Board of Directors include the audited consolidated financial
statements in Mace's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001.
The Audit Committee of the Board of
Directors
Mark S. Alsentzer, Chairman
Richard B. Muir
Constantine N. Papadakis, Ph.D.
16
Audit Fees and Related Matters
Audit Fees. Mace was billed $89,660 by Grant Thornton LLP for the audit of
Mace's annual financial statements for the fiscal year ended December 31, 2001,
and for the review of the financial statements included in Mace's Quarterly
Reports on Forms 10-Q filed during 2001.
Financial Information Systems Design and Implementation Fees. Grant
Thornton LLP did not render professional services to Mace relating to financial
information systems design and implementation during 2001.
All Other Fees. Mace was billed $8,737 for non-audit services, principally
tax and SEC compliance services, rendered by Grant Thornton LLP during 2001.
Other Matters. The Audit Committee of the Board of Directors has considered
whether the provision of information technology services and other non-audit
services is compatible with maintaining the independence of Mace's independent
auditors, Grant Thornton LLP.
17
THE PRINCIPAL STOCKHOLDERS OF MACE
Beneficial Ownership
The following beneficial ownership table sets forth information as of July
31, 2002, regarding beneficial ownership of shares of Mace common stock by the
following persons:
. each person who is known to Mace to own beneficially more than 5% of the
outstanding shares of Mace common stock, based upon Mace's records or the
records of the Securities and Exchange Commission;
. each director and director-nominee of Mace;
. each Named Executive Officer; and
. all directors and executive officers of Mace as a group.
Unless otherwise indicated, to Mace's knowledge, all persons listed on the
beneficial ownership table below have sole voting and investment power with
respect to their shares of Mace common stock. Shares of Mace common stock
subject to options or warrants exercisable within 60 days of July 31, 2002, are
deemed outstanding for the purpose of computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
computing the percentage ownership of any other person.
Shares of Percentage of
Common Common
Stock Stock
Name and Address of Beneficial Owner Owned Owned (1)
- ------------------------------------ ---------- -------------
Louis D. Paolino, Jr............................................... 6,529,364(2) 24.6%
1000 Crawford Place, Suite 400
Mt. Laurel, NJ 08054
Excel Legacy Holdings, Inc......................................... 3,812,500(3) 15.0
16955 Via Del Campo
San Diego, CA 92127
Mark S. Alsentzer.................................................. 1,105,000(4) 4.3
Jon E. Goodrich.................................................... 861,049(5) 3.4
Matthew J. Paolino................................................. 524,078(6) 2.1
Robert M. Kramer................................................... 499,650(7) 1.9
Gregory M. Krzemien................................................ 275,500(8) 1.1
Ronald R. Pirollo.................................................. 118,750(9) *
Constantine N. Papadakis, Ph.D..................................... 95,000(10) *
Richard B. Muir.................................................... 58,000(11) *
All current directors and executive officers as a group (9 persons) 10,066,391(12) 36.4
- --------
* Less than 1% of the outstanding shares of Mace common stock.
(1) Percentage calculation is based on 25,349,027 shares outstanding on July
31, 2002.
(2) Includes (i) warrants to acquire 1,136,364 shares, (ii) options to
purchase 68,334 shares, and (iii) 1,162,750 shares for which Louis D.
Paolino, Jr., has been granted irrevocable proxies to vote such shares.
See "Irrevocable Proxies Granted to Louis D. Paolino, Jr." below.
(3) Includes (i) 3,500,000 shares and (ii) warrants to purchase 62,500 shares,
all held by Millennia Car Wash LLC, a limited liability company wholly
owned by Excel Legacy Holdings, Inc.
(4) Includes (i) warrants to purchase 50,000 shares and (ii) options to
purchase 55,000 shares.
(5) Includes (i) options to purchase 10,000 shares and (ii) 15,500 shares held
by Jon Goodrich's wife. Jon Goodrich disclaims beneficial ownership of the
shares owned by his wife.
18
(6) Includes options to purchase 120,369 shares.
(7) Includes (i) warrants to acquire 75,000 shares and (ii) options to
purchase 285,001 shares.
(8) Includes options to purchase 225,000 shares.
(9) Includes options to purchase 108,750 shares.
(10) Represents options to purchase 95,000 shares.
(11) Includes options to purchase 55,000 shares.
(12) See Notes 2, 4, 5, 6, 7, 8, 9, 10 and 11 above.
Irrevocable Proxies Granted to Louis D. Paolino, Jr.
The following stockholders have granted to Louis D. Paolino, Jr.,
irrevocable proxies for the sole power to vote, but not to dispose of, the
1,162,750 aggregate shares of Mace common stock owned by such stockholders
until the expiration date of such proxies:
Stockholder Shares Expiration Date of Proxies
- ----------- --------- --------------------------
D. Nagelberg & B. Nagelberg, Trustees
of Nagelberg family trust............. 581,375 10-05-03
Joyce Heller............................ 236,000 10-05-03
Ronald I. Heller IRA.................... 345,375 10-05-03
---------
1,162,750
=========
19
ADDITIONAL INFORMATION
Certain Relationships and Related Party Transactions
In August 1999, Mace entered into a month-to-month lease arrangement with
Bluepointe, Inc., a corporation controlled by Louis D. Paolino, Jr., Mace's
Chairman, Chief Executive Officer and President, for Mace's executive offices
in Mt. Laurel, New Jersey. The lease arrangement provided for monthly rental
payments of $10,000. This monthly lease payment was considered to be more
favorable than could be obtained on the open market for similar facilities.
Effective August 1, 2000, after a survey of local real estate market pricing
and upon the approval of the Audit Committee, Mace entered into a five year
lease with Bluepointe, Inc. which provides for an initial monthly rental
payment of $15,962, which increases by 5% per year in the third through fifth
years of the lease. Mace believes that the terms of this lease (based on an
annual rate of $19.00 per square foot ) are competitive when compared to
similar facilities in the Mt. Laurel, New Jersey area. Mace has also entered
into a three_year furniture lease/purchase agreement with Bluepointe, Inc.,
dated January 1, 2001, which provided for an initial payment of $20,000 and
monthly rental payments thereafter of $4,513, for the use of the furnishings in
Mace's executive offices. The rental rates were based upon a third-party
valuation of the furnishings, and Mace believes that the terms of the furniture
lease are competitive with similar leasing arrangements available in the local
area.
The Company purchased charter airline services from Air Eastern, Inc., and
LP Learjets, LLC, charter airline companies owned by Louis D. Paolino, Jr., the
Company's Chairman, Chief Executive Officer and President. The Company paid
$60,000 in fiscal 2001 and $25,544 through July 1, 2002 for such services. An
additional $15,000 was paid in 2001 to Aeroways, Inc., a chartered air service
company not affiliated with Louis D. Paolino, Jr., for the direct costs of
flying the Learjet 31A owned by LP Learjets, LLC. The Company believes that the
rates charged are competitive when compared with similar services provided by
independent airline charter companies. On November 6, 2001, the Audit Committee
approved an arrangement subject to quarterly review under which the Company
pays LP Learjets, LLC $5,109 per month for the right to use a Learjet 31A for
100 hours per year. Additionally, when the Learjet 31A is used, the Company
pays to Aeroways, Inc., the direct costs of the Learjet's per-hour use, which
include fuel, pilot fees, engine insurance and landing fees.
Until September 2000, Robert M. Kramer, the Company's Chief Operating
Officer, Executive Vice President, General Counsel, Secretary and a director,
was engaged in the part-time practice of law through Robert M. Kramer &
Associates, P.C., a professional corporation owned by Mr. Kramer. Robert M.
Kramer & Associates, P.C., had rendered legal services to the Company from
April 1999 to August of 2000. The Company paid such corporation approximately
$15,000 in 2001. The Company has not paid such corporation for legal services
since January 2001 and does not anticipate any future payments.
In 2001, the Company hired Premier Concrete, Inc., a company controlled by
Matthew J. Paolino, the Company's Vice President and a director, to assist with
underground tank removal and complete pavement re-surfacing at one of the
Company's car wash locations. Premier Concrete, Inc., the lowest responsible
bidder for the contract, was paid $34,450 for its services in 2001. The Company
believes that the rates charged are competitive when compared with similar
service provided by independent contractors.
In February 2000, the Company entered into a Management Agreement with Mark
Sport, Inc. ("Mark Sport"), a Vermont corporation controlled by Jon E.
Goodrich, a director of the Company. The Management Agreement entitled Mark
Sport to operate the Company's Security Products Division and receive all
profits or losses for a seven-month term beginning January 1, 2000. The
Management Agreement was extended several times through amendments with the
most recent through July 22, 2002. The Management Agreement required Mark Sport
to pay the Company $20,000 per month beginning February 2000 and continuing
through the term of the Management Agreement as extended. Additionally, Mark
Sport was required to pay the Company an amount equal to the amortization and
depreciation on the assets of the division at the end of the term of the
Management Agreement. During the term of the Management Agreement, Mark Sport
was required to operate the division in substantially the same manner as it was
operated prior to the Management Agreement. On February 21, 2002,
20
Mark Sport and the Company amended the Management Agreement. The amendment
extended the term of the Management Agreement through April 30, 2002, and
reconciled the amount owed by Mark Sport to the Company under the Management
Agreement from February 2000 through December 31, 2001. Mark Sport and the
Company agreed in the amendment that Mark Sport, as of December 31, 2001, owes
the Company $126,847, resulting in a resolution of certain disputes and a
reduction of the amounts owed by Mark Sport of approximately $92,000. The
Management Agreement expired on April 30, 2002 and was further amended on July
22, 2002 to reconcile the amount owed by Mark Sport to Mace under the
Management Agreement for the period January 1, 2002 through April 30, 2002.
Mark Sport and Mace agreed in their final amendment that Mark Sport owes the
Company $100,000 for this period, resulting in a resolution of certain disputes
and a reduction of the amounts recorded by the Company as owed by Mark Sport of
approximately $39,000. At August 1, 2002, Mark Sport owes the Company $127,000.
The Company's Security Products Division leases manufacturing and office
space under a five-year lease with Vermont Mill, which provides for monthly
lease payments of $6,667 beginning November 15, 1999. Vermont Mill is
controlled by Jon E. Goodrich, a director of the Company. On February 25, 2002,
the Company and Vermont Mill amended the lease. The original lease provided
that Vermont Mill could increase the lease payment $0.50 per square foot upon
demonstration that Vermont Mill had a higher paying third party tenant for the
space occupied by the Company. The lease amendment clarifies that the Company
occupies 44,000 square feet in Vermont Mill at a rental rate of $2.50 per
square foot per year. The Company believes that the revised lease rate is lower
than lease rates charged for similar properties in the Bennington, Vermont
area. On July 22, 2002, the lease was further amended to provide Mace the
option and right to cancel the lease with proper notice and a payment equal to
six months of the then current rent for the leased space occupied by Mace.
Vermont Mill borrowed a total of $228,671 from the Company through December
31, 2001. On February 22, 2002, Vermont Mill executed a three year promissory
note with monthly installments of $7,061 including interest at a rate of 7%.
The Company's Lease Agreement with Vermont Mill provides for a right of offset
of lease payments against this promissory note in the event monthly payments
are not made by Vermont Mill. At July 31, 2002, the balance owed on this
promissory note was $199,701.
Deadline For Stockholder Proposals
April 9, 2003, is the deadline for stockholders to submit proposals pursuant
to Rule 14a-8 of the Exchange Act for inclusion in Mace's Proxy Statement for
Mace's 2003 Annual Meeting of Stockholders. A notice of a stockholder proposal
submitted outside of the processes of Rule 14a-8 of the Exchange Act is
considered untimely after June 23, 2003, and Mace's proxy for the 2003 Annual
Meeting of Stockholders may confer discretionary authority to vote on such
matter without any discussion of such matter in the proxy statement for such
meeting.
Mace's Annual Report
A copy of Mace's 2001 Annual Report to Stockholders (including its Annual
Report on Form 10-K, with financial statements and schedules, but excluding
exhibits) accompanies this proxy statement, but it is not to be regarded as
proxy solicitation material. Upon request and with the payment of a reasonable
fee, Mace will furnish to record and beneficial holders of its common stock
copies of exhibits to the Form 10-K. Direct all requests for copies of the
above materials to Eduardo Nieves, Jr., Investor Relations, at the offices of
Mace set forth on page 1 of this proxy statement.
By Order of the Board of Directors,
/s/ ROBERT M. KRAMER
Mt. Laurel, New Jersey Robert M. Kramer
August 7, 2002 Secretary
21
APPENDIX A
MACE SECURITY INTERNATIONAL, INC.
AMENDED AUDIT COMMITTEE CHARTER
I. Purpose
The purpose of the Audit Committee (the "Committee") is to provide
assistance to the Board of Directors (the "Board") of Mace Security
International, Inc. (the "Company"), in fulfilling the Board's oversight
responsibilities regarding the Company's accounting and system of internal
controls and the quality and integrity of the Company's independent
auditors. In so doing, the Committee should endeavor to maintain free and
open means of communication between the members of the Committee, the other
members of the Board, the independent auditors and the management of the
Company.
In the exercise of its oversight, it is not the duty of the Committee to
plan or conduct audits or to determine that the Company's financial
statements fairly present the Company's financial position and results of
operations in accordance with generally accepted accounting principles.
Instead, such duties remain under the oversight of management and the
independent auditors.
II. Membership
The Committee shall be composed of three or more members of the Board. The
members shall be appointed by action of the Board and shall serve at the
discretion of the Board. Each Committee member shall be "financially
literate" as determined by the Board in its business judgement and shall
satisfy the "independence" requirements of the New York Stock Exchange and
NASDAQ. At least one member of the Committee shall have "accounting or
related financial management expertise," as determined by the Board in its
business judgement.
III. Committee Organization and Procedures
A. The members of the Committee shall appoint a Chair of the Committee by
majority vote. The Chair (or in his or her absence, a member designated
by the Chair) shall preside at all meetings of the Committee.
B. The Committee shall have the authority to establish its own rules and
procedures consistent with the bylaws of the Company for notice and
conduct of its meetings, should the Committee, in its discretion, deem
it desirable to do so.
C. The Committee may, in its discretion, include in its meetings members of
the Company's financial management, representatives of the independent
auditors, representatives of the internal auditor and other financial
personnel employed or retained by the Company. The Committee may meet
with the independent auditors or internal auditors in separate executive
sessions to discuss any matters that the Committee believes should be
addressed privately, without management's presence. The Committee may
likewise meet privately with management, as it deems appropriate.
D. The Committee may, at its discretion, utilize the services of the
Company's regular corporate legal counsel with respect to legal matters
or, at its discretion, retain outside legal counsel if it determines
that such counsel is necessary or appropriate under the circumstances.
Should the Committee exercise its authority under this provision, then
during any calendar year the expenses the Committee is authorized to
incur, without the approval of the Board, shall be limited to $25,000.
The incurrence of expenses in excess of $25,000 per calendar year must
be approved by a majority of the Board of Directors.
A-1
IV. Key Functions
The Committee and the Board recognize that the Company's management is
responsible for preparing the Company's financial statements and that the
independent auditors are responsible for auditing those financial
statements. Additionally, the Committee and the Board recognize that
financial management, including the internal accounting staff, as well as
the independent auditors, has more time and knowledge and more detailed
information concerning the Company than do Committee members; consequently,
in carrying out its responsibilities, the Committee is not providing any
expert or special assurance as to the Company's financial statements or any
professional certificate as to the independent auditors' work. It is not the
duty of the Committee to plan or conduct audits or to determine whether the
Company's financial statements are complete and accurate and are in
accordance with generally accepted accounting principles.
The following functions shall be the common recurring activities of the
Committee in carrying out its responsibilities. These functions are set
forth as a guide with the understanding that the Committee may diverge from
this guide as it considers appropriate given the circumstances.
A. Oversight Responsibilities
(i) The independent auditors shall be ultimately accountable to the
Committee and the Board in connection with the audit of the Company's annual
financial statements and related services. In this regard, the Committee
shall select and periodically evaluate the performance of the auditors and,
if necessary, recommend that the Board replace the independent auditors. As
appropriate, the Committee shall recommend to the Board the nomination of
the independent auditors for stockholder approval at any meeting of
stockholders.
(ii) The Committee and the corporate chief financial officer shall
approve the fees to be paid to the independent auditors and any other terms
of the engagement of the independent auditors. The Chair (or in his or her
absence, a member designated by the Chair) may represent the entire
Committee for purposes of this discussion.
(iii) The Committee shall receive from the independent auditors, at least
annually, a written statement delineating all relationships between the
independent auditors and the Company, consistent with Independence Standards
Board Standard No. 1. The Committee shall actively engage in a dialogue with
the independent auditors with respect to any disclosed relationships or
services that, in the view of the Committee, may affect the objectivity and
independence of the independent auditors. If the Committee determines that
further inquiry is advisable, the Committee shall recommend that the Board
take any appropriate action in response to the independent auditors'
independence.
B. Annual Audit
(i) The Committee shall meet with the independent auditors, chief
financial officer and other management personnel in connection with each
annual audit to discuss the scope of the audit and the procedures to be
followed. The Chair (or in his or her absence, a member designated by the
Chair) may represent the entire Committee for purposes of this discussion.
(ii) The Committee shall review(1) and discuss the audited financial
statements with the management of the Company.
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(1) Auditing Literature, particularly, Statement of Accounting Standards No.
71, defines the term "review" to include a particular set of required
procedures to be undertaken by independent accountants. The members of the
Audit Committee are not independent accountants, and the term "review" as
used in this Audit Committee Charter is not intended to have this meaning.
Consistent with footnote 47 of the SEC Release No. 34-42266, any use in
this Audit Committee Charter of the term "review" should not be interpreted
to suggest that the Committee members can or should follow the procedures
required of auditors performing review of interim financial statements.
A-2
(iii) The Committee shall discuss with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
as then in effect including, among others: (i) the methods used to account
for any significant unusual transaction reflected in the audited financial
statements; (ii) the effect of significant accounting policies in any
controversial or emergent areas for which there is a lack of authoritative
guidance or a consensus to be followed by the independent auditors; (iii)
the process used by management in formulating particularly sensitive
accounting estimates and the basis for the auditors' conclusions regarding
the reasonableness of those estimates; and (iv) any disagreements with
management over the application of accounting principles, the basis for
management's accounting estimates, or the disclosures in the financial
statements.
(iv) The Committee shall, based on the review and discussion in paragraph
B (iii) above, and based on the disclosures received from the independent
auditors regarding its independence and discussions with the auditors
regarding such independence, conclude whether the audited financial
statements should be included in the Company's Annual Report on Form 10-K
for the fiscal year subject to the audit.
C. Quarterly Review
(i) The independent auditors are required to review the interim financial
statements to be included in Form 10-Q of the Company using professional
standards and procedures for conducting such reviews, as established by
generally accepted auditing standards as modified or supplemented by the
Securities and Exchange Commission, prior to the filing of the Form 10-Q.
The Committee, in its discretion, may discuss with management and the
independent auditors in person, at a meeting, or by conference telephone
call, the results of the quarterly review including such matters as
significant adjustments, management judgements, accounting estimates,
significant new accounting policies and disagreements with management. The
Chair (or in his or her absence, a member designated by the Chair) may
represent the entire Committee for purposes of this discussion.
(ii) The Committee shall review the Company's quarterly and annual
financial statements with the Company's chief financial officer before they
are released publicly. The review of annual financial statements shall be
conducted prior to publication.
D. Internal Controls
(i) The Committee shall discuss with the independent auditors, at least
annually, the adequacy and effectiveness of the accounting and financial
controls of the Company, and consider any recommendations for improvement of
such internal control procedures.
(ii) The Committee shall discuss with the independent auditors and with
management any letter of recommendation provided by the independent auditors
and any other significant matters brought to the attention of the Committee
by the independent auditors as a result of its annual audit. The Committee
should allow management adequate time to consider any such matters raised by
the independent auditors.
E. Other Responsibilities
(i) The Committee shall review and reassess the Committee's Charter at
least annually and submit any recommended changes to the Board for its
consideration.
(ii) The Committee shall provide the report for inclusion in the
Company's Annual Proxy Statement required by Item 306 of Regulation S-K of
the Securities and Exchange Commission.
(iii) The Committee, through its Chair, shall report periodically, as
deemed necessary or desirable by the Committee, but at least annually, to
the full Board regarding the Committee's actions and recommendations, if any.
(iv) The Committee may institute investigations of suspected
improprieties on any material matter selected by the Committee and is
authorized to engage on behalf of the Company special counsel, independent
auditors or outside experts when necessary. With respect to this provision
the limitation on expenses shall apply, as set forth in Section III,
Paragraph D.
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(v) The Committee shall annually disclose amounts received by Audit
Committee members from the Company and its affiliates and any other
transactions with the Company or its affiliates to which they are a party,
other than amounts received for service as a Director or Board Committee
member. Such disclosure shall be noted in the minutes of the appropriate
Committee meeting.
(vi) The Committee shall annually review all existing related party
transactions or other conflicts of interest that exist between
employees/directors and the Company. The Committee shall review all proposed
related party transactions. The Company shall not enter into any related
party transactions unless first approved of by the Committee. The Committee
may also make recommendations to the full Board of Directors on actions to
be taken that relate to any proposed or existing related party transactions.
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MACE SECURITY INTERNATIONAL, INC.
1000 CRAWFORD PLACE, SUITE 400
MT. LAUREL, NEW JERSEY 08054
PROXY - Annual Meeting of Stockholders - September 12, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eduardo Nieves, Jr., and Gregory M.
Krzemien severally as proxies, each with the power to appoint his substitute,
and hereby authorizes either or both of them to represent and to vote, as
designated on the reverse side hereof, all the shares of common stock of Mace
Security International, Inc. ("Mace") held of record by the undersigned on
August 2, 2002, at the Annual Meeting of Stockholders to be held on September
12, 2002, and at any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED FOR ELECTION OF DIRECTORS UNDER PROPOSAL 1; IN
FAVOR OF PROPOSAL 2; AND IN ACCORDANCE WITH THE PROXIES' JUDGEMENT UPON OTHER
MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
(Continued, and to be signed, on Reverse Side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] Please mark
your vote
as in this
example
1. ELECTION OF DIRECTORS Nominees:
FOR all nominees WITHHOLD Louis D. Paolino, Jr.
listed (except as AUTHORITY Mark S. Alsentzer
marked to the To vote for all nominees Jon E. Goodrich
contrary below) listed at right Robert M. Kramer
Richard B. Muir
[_] [_] Matthew J. Paolino
Constantine N. Papadakis, Ph.D.
(INSTRUCTIONS: To withhold authority to vote for any
individual nominee, write the nominee's name below)
- ------------------------------------------------------
2. Ratification of the Board's appointment of Grant Thornton LLP as Mace's
independent auditors for fiscal year ending December 31, 2002.
FOR AGAINST ABSTAIN
[_] [_] [_]
In their discretion, the Proxies are authorized, to the extent permitted by the
rules of the Securities and Exchange Commission, to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE DATE SIGNATURE DATE
--------------- -------- --------------- --------
NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign with full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.