SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
COMTREX SYSTEMS CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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/X/ No fee required
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1) Title of each class of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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COMTREX SYSTEMS CORPORATION
102 EXECUTIVE DRIVE
MOORESTOWN, NEW JERSEY 08057
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 12, 1999
---------------------------------------------
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders (the "Annual Meeting") of Comtrex
Systems Corporation, a Delaware corporation (the "Company"), will be held at the
Radisson Hotel (formerly the Clarion Hotel), Route 73, Mount Laurel, New Jersey,
at 2:00 P.M., local time, on Thursday, August 12, 1999, for the following
purposes:
(1) To elect 7 directors of the Company to hold office
until the next Annual Meeting of Shareholders or
until their respective successors are duly elected
and shall qualify;
(2) To consider and act upon a proposal to adopt the
Company's 1999 Stock Option Plan;
(3) To consider and act upon a proposal to amend the
Company's Certificate of Incorporation to increase
the number of authorized shares of the Company's
common stock, par value $.001, from 5,000,000 to
10,000,000; and
(4) To transact such other business as may properly come
before the Annual Meeting or any adjournment or
postponement thereof.
The Proxy Statement accompanying this Notice provides detailed
information concerning matters to be considered and acted upon at the Annual
Meeting. Please read it carefully.
The Board of Directors of the Company unanimously recommends that the
Shareholders vote in favor of the proposal for the election of directors, for
the adoption of the 1999 Stock Option Plan and for the proposed amendment to the
Company's Certificate of Incorporation.
The Board of Directors has fixed the close of business on July 1, 1999
as the record date for determining those shareholders who will be entitled to
notice of and to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend the meeting, please complete, date and sign the enclosed
proxy card and return it promptly in the enclosed envelope. Your proxy may be
revoked at any time prior to the time it is voted.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1999 is enclosed with this Notice.
By Order of the Board of Directors,
ANTHONY S. MALADRA
Secretary
Moorestown, New Jersey
July 15, 1999
COMTREX SYSTEMS CORPORATION
102 Executive Drive
Moorestown, New Jersey 08057-4224
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 12, 1999
These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of Comtrex Systems Corporation, a Delaware
corporation ("Comtrex" or the "Company"), for the Annual Meeting of Shareholders
of Comtrex (the "Annual Meeting") to be held at 2:00 P.M. on Thursday, August
12, 1999, at the Radisson Hotel (formerly the Clarion Hotel), Route 73, Mount
Laurel, New Jersey, and any adjournments or postponements of such meeting. These
proxy materials were first mailed to shareholders on or about July 15, 1999. The
address of the principal executive office of Comtrex is 102 Executive Drive,
Moorestown, New Jersey 08057-4224.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized below:
(l) To elect seven (7) directors to serve until the next Annual Meeting
of Shareholders or until their respective successors are duly elected and shall
qualify;
(2) To approve the adoption of the Comtrex Systems Corporation 1999
Stock Option Plan;
1
(3) To authorize an amendment (the "Charter Amendment") to the
Company's Certificate of Incorporation to increase the number of authorized
shares of Company common stock, par value $.001 per share, from 5,000,000 to
10,000,000; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
COMMON STOCK AND PRINCIPAL HOLDERS THEREOF
Shares of the common stock, par value $.001 per share (the "Common
Stock"), of Comtrex, represented by proxies in the accompanying form which are
properly executed and returned to Comtrex before the Annual Meeting, will be
voted at the meeting in accordance with the shareholders' instructions contained
in such proxies. In the absence of contrary instructions, shares represented by
such proxies will be voted for the election of the nominees listed herein to
serve as directors of the Company; for the adoption of the 1999 Stock Option
Plan; for the proposed amendment of the Company's Certificate of Incorporation;
and in the discretion of the proxy holders on such other matters as may properly
come before the Annual Meeting.
Any shareholder has the power to revoke his proxy at any time before it
is voted. A proxy may be revoked by a shareholder, if it has not been exercised,
by filing with the Secretary of the Company a written notice of such revocation,
by a later dated proxy delivered to the Secretary of the Company at any time
prior to the voting of the shares represented by such proxy, by oral revocation
given by a shareholder in person at the Annual Meeting or any adjournment
thereof prior to the exercise of such proxy, or by the shareholder voting the
shares represented by the proxy by written ballot at the Annual Meeting or any
adjournment thereof.
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The close of business on July 1, 1999 was the record date (the "Record
Date") for shareholders entitled to notice of and to vote at the Annual Meeting.
Shares of Common Stock outstanding on the Record Date are entitled to vote at
the Annual Meeting, and the holders of record thereof will have one vote for
each share so held on the matters to be voted upon at the Annual Meeting. The
presence in person or by proxy of the holders of a majority of the outstanding
shares of Common Stock of the Company entitled to vote at the Annual Meeting
will constitute a quorum. Abstentions and broker non-votes are counted for the
purpose of determining the presence or absence of a quorum for the transaction
of business at the meeting. Abstentions are counted in the tabulations of the
votes cast on proposals presented to stockholders and have the same effect as
negative votes. Broker non-votes are not counted for purposes of determining the
election of directors or whether a proposal has been approved.
As of the close of business on July 1, 1999, there were 3,749,072
outstanding shares of Common Stock. The following table lists the shareholders
known to the Company to be beneficial owners of more than five percent (5%) of
the Common Stock as of July 1, 1999:
Name and Number of Approximate
Address Shares Owned(1)(2) Percentage Owned
- ------- ------------------ ----------------
Irene Maladra, 543,447(3) 14.5%
individually and as
Trustee of the Anthony
Maladra Residuary Trust
c/o Comtrex Systems
Corporation
102 Executive Drive
Moorestown, NJ 08057
Jeffrey C. Rice 416,200(4) 11.0%
c/o Comtrex Systems
Corporation
102 Executive Drive
Moorestown, NJ 08057
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Name and Number of Approximate
Address Shares Owned(1)(2) Percentage Owned
- ------- ------------------ ----------------
Norman and Shirley Roberts 300,000(5) 7.4%
c/o Comtrex Systems
Corporation LTD
2 Gatwick Metro Centre
Balcombe Road
Horley, Surrey RH6 9GA
Steven D. Roberts 402,000(6) 10.7%
c/o Comtrex Systems
Corporation LTD
2 Gatwick Metro Centre
Balcombe Road
Horley, Surrey RH6 9GA
- ------------------------
(1) Each person has sole voting and investment power with respect
to the shares unless otherwise indicated.
(2) Cede & Co., nominee for The Depository Trust Company, has
informed the Company that as of the close of business on June
21, 1999 it held 2,397,763 shares (64%) of the Common Stock of
the Company. The Depository Trust Company acts as central
depository or "clearing house" for certificates of the shares
of numerous corporations held for the account of banks and
brokerage houses. The amount of shares held by Cede & Co.
changes daily.
(3) Anthony Maladra, an individual owning in excess of five
percent (5%) of the capital stock of the Company, died on May
6, 1990. Pursuant to the terms and provisions of Anthony
Maladra's Last Will and Testament, the shares of the capital
stock of the Company owned by the deceased have been
distributed to the Anthony Maladra Residuary Trust (the
"Trust"). Irene Maladra is a co-trustee and the lifetime
beneficiary of the Trust, and in such capacity she is deemed
to be the beneficial owner of the shares of the capital stock
of the Company held by the Trust.
(4) Includes 10,000 shares subject to stock options granted
pursuant to the 1992 Non-Qualified Stock Option Plan; stock
options pertaining to 2,000 shares became exercisable on July
1, 1994, stock options pertaining to 2,000 shares became
exercisable on July 1, 1995, stock options pertaining to 2,000
shares became exercisable on July 1, 1996, stock options
pertaining to the remaining 2,000 shares became exercisable on
July 1, 1997, and stock options pertaining to 2,000 shares
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became exercisable on August 1, 1998. Also includes 30,000
shares subject to stock options granted pursuant to the 1995
Incentive Stock Option Plan, which became exercisable on July
28, 1997.
(5) Includes 300,000 shares issuable pursuant to the conversion
terms of a certain Subordinated Convertible Debenture, dated
October 2, 1997, issued by the Company to Norman and Shirley
Roberts in connection with the acquisition by the Company of
all of the outstanding capital stock of Data Systems Terminals
Limited, a corporation formed and existing under the laws of
England.
(6) Includes 2,000 shares subject to stock options granted
pursuant to the 1992 Non-Qualified Stock Option Plan, which
became exercisable on August 1, 1998.
CERTAIN INFORMATION WITH RESPECT TO DIRECTORS
AND EXECUTIVE OFFICERS
Election of Directors.
The Board of Directors currently consists of seven (7) directors, all
of whom are to be elected at the 1999 Annual Meeting to serve until the 2000
Annual Meeting. Management's nominees for election as directors are listed
below. The proxy holders intend to vote all proxies received by them in the
accompanying form for such nominees unless otherwise directed. In the
unanticipated event that any nominee is unable or unwilling to accept the
nomination or to serve as a director at the time of the 1999 Annual Meeting, the
proxies will be voted for the remaining nominees and for a substitute nominee
who shall be designated by the present Board of Directors to fill the vacancy.
As of the date of this Proxy Statement, management is not aware of any nominee
who is unable or unwilling to serve as a director.
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Director of
Comtrex
Name Since Age
---- ----- ---
Sidney Dworkin 1982 78
Larry Irwin 1992 51
Nathan I. Lipson 1996 72
Anthony S. Maladra 1992 34
Jeffrey C. Rice 1989 49
Steven D. Roberts 1997 37
Alan G. Schwartz 1982 67
Biographies of Directors and Nominees.
SIDNEY DWORKIN is currently Chairman of the Board of Advanced Modular Systems,
Inc. He is also a Director of CCA Industries, Inc., Paragon Mortgage Company,
Marbledge Group, Inc., Northern Technologies International, Consolidated Health
Care, Inc., Viragen, Inc., Q.E.P. Inc., and Interactive Technologies, Inc. Mr.
Dworkin has been Chairman of the Board of the Company since 1990.
LARRY IRWIN has been Chairman of Worldscape, Inc. since founding the company in
1987. Worldscape is a private company which provides commercial landscaping
services. Prior to founding Worldscape, Mr. Irwin owned and operated a similar
business for more than fifteen years. Mr. Irwin is also President and owner of
NPC Systems Inc., a private company which provides consulting and installation
services for computer systems and local-area-networks.
NATHAN I. LIPSON is currently a Director of HALIS, L.L.C., an Atlanta, Georgia
based company, which is a provider of computerized information systems and
networking services. Mr. Lipson is a private investor in various other
companies. He has had ownership and management interests in companies in the
food service industry, including Squirrel Companies, Inc. prior to its
acquisition in March of 1992 by Sulcus Hospitality Technologies Corp., and in
the carpet industry.
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ANTHONY S. MALADRA has been a principal of AM Transportation, a New Jersey based
company engaged in freight and transportation services, since 1985. From
November of 1990 to August of 1995, he served as Treasurer of Comtrex Systems
and has served as Secretary since August of 1995. Mr. Maladra had been a full
time employee of Comtrex Systems from 1986 to August of 1996, and served in
various capacities, including Director of Operations, purchasing agent and
manufacturing supervisor.
JEFFREY C. RICE has been President, Chief Executive Officer and a Director of
the Company since February 1, 1989. From May of 1985 through January 1989 he was
a Director of American Business Computers Corporation, and served as its
President and Chief Executive Officer from May 1, 1985 through April 30, 1986
and as President of a wholly owned subsidiary, ABC/SEBRN TechCorp, from November
1986 through January 1989. American Business Computers is a public company which
sells computerized equipment and systems to the food service industry. From 1977
through January 1985, Mr. Rice served as Director, President and Chief Executive
Officer of MICROS Systems, Inc., a public corporation which supplies POS systems
to the hospitality industry.
STEVEN D. ROBERTS has been Managing Director of Comtrex Systems Corporation LTD.
(formerly known as Data Systems Terminals Limited ("DSTL")), the Company's
wholly-owned U.K. subsidiary, since its acquisition in October of 1997, and has
served on the Company's Board of Directors since November of 1997. He had served
as Managing Director of DSTL since 1990, and has been an employee of DSTL since
1984. From 1985 to 1987, Mr. Roberts served as President of Electronic Cash
Registers, Inc. ("ECR") in Cincinnati, Ohio. ECR was a wholly-owned subsidiary
of DSTL, engaged in the distribution of point-of-sale systems for dry cleaning
establishments in the United States.
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ALAN G. SCHWARTZ has been Chairman of the Board and CEO of Tennis Corporation of
America, which builds, owns and operates commercial recreational facilities, and
a partner in Gifford Investment Company, a partnership which invests in real
estate, for more than the past five years. He is currently a Director of Firstar
Illinois Bank Corporation.
Cumulative Voting Rights.
The Company's By-laws provide that directors shall be elected by a
plurality of the votes cast. There is no provision for cumulative voting under
the Company's Certificate of Incorporation or By-laws.
Board of Directors' Meetings and Committees.
During the fiscal year ended March 31, 1999, five (5) meetings of the
Board of Directors were held. In such year, all of the incumbent directors
attended at least seventy-five percent (75%) of the aggregate of all meetings of
the Board of Directors and the committees on which they served held during the
year.
The following is a brief description of the functions of the committees
of the Board of Directors and the identity of their members:
Executive Committee. The Board of Directors has designated an Executive
Committee of the Board, comprised of three (3) directors. The Executive
Committee's current members are Sidney Dworkin, Jeffrey C. Rice, and Alan G.
Schwartz. The Executive Committee met in separate session six (6) times during
the fiscal year ended March 31, 1999. The Executive Committee meets
8
regularly between meetings of the Company's Board of Directors and reviews the
Company's business activities in relation to the Company's business plan.
Audit Committee. The Board of Directors has also designated an Audit
Committee of the Board, comprised of two (2) directors. The Audit Committee's
current members are Nathan Lipson and Sidney Dworkin. The Audit Committee met in
separate session one (1) time during the fiscal year ended March 31, 1999. The
Audit Committee meets with the Company's independent accounting firm to review
the Company's internal policies, procedures, and controls.
The Company does not have a standing nominating committee or
compensation committee of the Board of Directors.
Executive Officers of the Company.
- ----------------------------------
Name Age Position
- ---- --- --------
Jeffrey C. Rice 49 President and Chief Executive Officer
Steven D. Roberts 37 Managing Director, Comtrex U.K.
Brian C. Moseley 52 Vice President of Engineering
Lisa J. Mudrick 37 Treasurer and Chief Financial Officer
JEFFREY C. RICE For Mr. Rice's biographical information, please refer to the
discussion regarding nominees for election as directors in "Election of
Directors" above.
STEVEN D. ROBERTS For biographical information on Mr. Roberts, please refer to
the discussion regarding nominees for election as directors in "Election of
Directors" above.
BRIAN C. MOSELEY was promoted to Vice President of Engineering of the Company in
August of 1997. Mr. Moseley has been an employee of the Company since 1985, and
has been actively
9
involved in both hardware and software design, in addition to project
management. Prior to his association with Comtrex, he worked as a Project
Engineer for Management Information Concepts. Mr. Moseley is a graduate of Old
Dominion University.
LISA J. MUDRICK has been Vice President of Finance and Administration of the
Company since February of 1994 and Treasurer since August of 1995. Ms. Mudrick
has been a full-time employee of the Company since September of 1989 and served
as Controller and Chief Accounting Officer until her appointment as Chief
Financial Officer in 1994, and as corporate Secretary from 1990 to August of
1995. From 1986 to 1989, Ms. Mudrick was General Accounting Supervisor of
Avant-Garde Computing, Inc., a public company which designs and sells systems to
provide for secure, computer network communications for the financial and
brokerage communities. Prior to her association with Avant-Garde, she held a
position of cost accountant with Sybron Chemicals from 1985 to 1986. Ms. Mudrick
is a graduate of the University of Dayton, with a Bachelor of Science degree in
Business Administration.
Security Ownership of Management.
The following table sets forth the beneficial ownership of Common Stock
of Comtrex as of July 1, 1999 by each director and nominee, the Company's Chief
Executive Officer, and all directors, nominees and the Company's executive
officers as a group.
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Number of Approximate
Name Shares Owned(1) Percentage Owned
- ---- --------------- ----------------
SIDNEY DWORKIN 36,300(2) 1.0%
LARRY IRWIN 27,800(2) 0.7%
NATHAN I. LIPSON 64,000(3)(4) 1.7%
ANTHONY S. MALADRA 14,900(2) 0.4%
JEFFREY C. RICE 416,200(2)(5) 11.0%
STEVEN D. ROBERTS 402,000(6) 10.7%
ALAN G. SCHWARTZ 139,941(2) 3.7%
ALL EXECUTIVE OFFICERS,
DIRECTORS AND NOMINEES
AS A GROUP (9 people) 1,165,141(7) 30.0%
- -------------------
(1) Each person has sole voting and investment power with respect
to the shares unless otherwise indicated.
(2) Includes 10,000 shares subject to stock options granted
pursuant to the 1992 NonQualified Stock Option Plan; stock
options pertaining to 2,000 shares became exercisable on July
1, 1994, stock options pertaining to 2,000 shares became
exercisable on July 1, 1995, stock options pertaining to 2,000
shares became exercisable on July 1, 1996, stock options
pertaining to the remaining 2,000 shares became exercisable on
July 1, 1997, and stock options pertaining to the remaining
2,000 shares became exercisable on August 1, 1998. None of
such options had been exercised as of the date hereof.
(3) Includes 4,000 shares subject to stock options granted
pursuant to the 1992 NonQualified Stock Option Plan, stock
options pertaining to 2000 shares became exercisable on July
1, 1997, and stock options pertaining to 2000 shares became
exercisable on August 1, 1998. None of such options had been
exercised as of the date hereof.
(4) Includes 20,000 shares subject to options granted pursuant to
the 1992 Non-Qualified Stock Option Plan, all of which have
been exercisable since April 16, 1996. None of such options
had been exercised as of the date hereof.
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(5) Includes 30,000 shares subject to options granted pursuant to
the 1995 Incentive Stock Option Plan, which became exercisable
on July 28, 1997. None of such options had been exercised as
of the date hereof.
(6) Includes 2,000 shares subject to stock options granted
pursuant to the 1992 NonQualified Stock Option Plan which
became exercisable on August 1, 1998. None of such options had
been exercised as of the date hereof.
(7) Includes (a) a total of 76,000 shares subject to options
granted pursuant to the provisions of the 1992 Non-Qualified
Stock Option Plan, as detailed in footnotes 2, 3, 4 and 6
above, (b) a total of 39,500 shares owned by all other
executive officers of the Company who are not directors, (c) a
total of 5,000 shares subject to incentive stock options
granted to all other executive officers of the Company who are
not directors under the Amended and Restated 1985 Incentive
Stock Option Plan, which options became exercisable on
February 20, 1995, (d) a total of 19,500 shares subject to
incentive stock options, granted to all other executive
officers of the Company who are not directors, under the 1995
Incentive Stock Option Plan, which shares became exercisable
between March 29, 1996 and August 13, 1996, and (e) a total of
30,000 shares subject to options granted under the 1995
Incentive Stock Option Plan, as detailed in footnote 5 above.
None of the options described in this footnote had been
exercised as of the date hereof. The number of shares
indicated as owned by executive officers and directors as a
group does not reflect options which are not exercisable
within sixty (60) days after the date hereof.
Section 16(a) Beneficial Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent (10%) of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"). Officers, directors and greater than ten percent (10%) shareholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Form 5s were
required for those persons, the
12
Company believes that during the period from March 31, 1998 through March 31,
1999 all Section 16(a) filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with in
a timely manner.
Executive Compensation.
Cash Remuneration of Executive Officers.
The following table provides certain summary information concerning
compensation paid by the Company to the Company's Chief Executive Officer for
the fiscal years ended March 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
Annual Long Term Compensation
Compensation Award
------------ -----------------------------
(a) (b) (c) (d) (e)
Name Securities All
and Underlying Other
Principal Options Compen-
Position Year Salary Granted sation
- ------------------------------------------- -----------------------------
Jeffrey 1999 $143,000 2,000 $2,680(1)
C. Rice, 1998 $143,000 32,000 $2,658(2)
Chief 1997 $141,000 2,000 $2,616(3)
Executive
Officer
- -------------------------------------------
(1) Consists of premium payments made by the Company on term life
insurance policy and $2,142 of Company matching funds, at a
rate of 25% of the employee's contribution under the Company
401(k) plan.
(2) Consists of premium payments made by the Company on term life
insurance policy and $2,120 of Company matching funds, at a
rate of 25% of the employee's contribution, under the Company
401(k) plan.
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(3) Consists of premium payments made by the Company on term life
insurance policy and $2,115 of Company matching funds, at a
rate of 25% of the employee's contribution, under the Company
401(k) plan.
Stock Options Granted.
The following table provides information concerning stock options
granted to the Company's Chief Executive Officer during the fiscal year of the
Company ended March 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
(a) (b) (c) (d) (e)
No. of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or Base
Name Granted in Fiscal Year Price($/Sh) Expiration Date
- ---- ------- -------------- ----------- ---------------
Jeffrey 2,000 50% $1.00 July 31, 2003
C. Rice
Option Exercises and Holdings
The following table sets forth certain information regarding the
exercise of options by the Company's Chief Executive Officer during the fiscal
year of the Company ended March 31, 1999 and stock options held by the Company's
Chief Executive Officer as of March 31, 1999.
14
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised Options In-The-Money Options
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ -------------------- -------------
Jeffrey C. 2,000 $740.00 40,000/0 $28,160.00
Rice
Compensation of Directors.
Outside directors who are not members of the Executive Committee
receive $750 per Board of Directors' meeting attended and are reimbursed for
their out-of-pocket expenses incurred in connection with their performance as
members of the Board of Directors. Members of the Executive Committee receive a
yearly fee of $5,000, in addition to any other fees received as a member of the
Board of Directors. The Chairman of the Board, who is also a member of the
Executive Committee, receives a yearly fee of $5,000, in addition to any other
fees he receives as a member of the Board of Directors. Members of the Board who
are executive officers of the Company receive no additional cash compensation
for serving as directors of the Company.
Pursuant to the Company's 1992 Non-Qualified Stock Option Plan (the
"1992 Non-Qualified Plan"), each director receives annually (on July 1 of each
year) a non-discretionary grant of options to purchase 2,000 shares of Common
Stock at an exercise price equal to the lowest reported bid price for a share of
the Common Stock during the four-week period immediately preceding the date of
the grant. Such options are exercisable in full one (1) year after the date of
grant and expire on the earliest to occur of (a) five (5) years following the
date of grant, (b) three (3) months following the
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individual's ceasing to be a director of the Company, (c) twelve (12) months
following termination of service due to disability or death, or (d) thirty (30)
days following the optionee's receipt of written notice of the proposed
dissolution or liquidation of the Company. The exercise price may be paid in
cash or shares of the Common Stock.
Under the 1999 Stock Option Plan, if approved by the shareholders as
discussed hereinafter, the directors would continue to receive annual
non-discretionary option grants. The annual non-discretionary award of options
to directors under the 1992 Non-Qualified Plan would cease upon approval of the
1999 Stock Option Plan, since the 1992 Non-Qualified Plan would automatically
terminate upon the approval of the 1999 Stock Option Plan.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed an amendment to the Company's
Certificate of Incorporation (the "Amendment") and directed that the Amendment
be submitted to the shareholders for approval. The Amendment would increase the
number of authorized shares of the Common Stock from 5,000,000 to 10,000,000.
The full text of the proposed resolution and Amendment is as follows:
"RESOLVED, that Article Fourth of the Certificate of
Incorporation of the Company be amended and restated to read
in its entirety as follows:
'FOURTH: The total number of shares of all classes of stock
that the Corporation is authorized to issue is ELEVEN MILLION
(11,000,000) shares, consisting of ten million (10,000,000)
shares of Common Stock, par value $.001 per share, and one
million (1,000,000) shares of Preferred Stock, par value $1.00
per share. The designations, preferences, privileges and
voting powers of the shares of each class and the restrictions
and qualifications shall be the same in all respects as though
shares of one class, except as follows:
16
(a) Shares of the Preferred Stock may be issued from
time-to-time in one or more series, each of such series to
have such powers, designations, preferences and relative
participating or optional or other special rights and such
qualifications, limitations or restrictions thereon, as
expressly provided herein, or to the extent provided by law,
or in a resolution or resolutions providing for the issuance
of such series, adopted by the board of directors, which is
hereby vested with such authority in respect thereof. Without
limiting the generality of the foregoing, the board of
directors is hereby expressly empowered to provide for the
issuance of shares of Preferred Stock at any time and from
time-to-time in one or more series, and to fix as to each such
shares, by resolutions providing for the issuance of such
series:
(i) the number of shares to constitute such
series, and the designation thereof;
(ii) the voting power of each share of such
series, if any, and without limitation, the vote or
fraction of vote to which each such share may be
entitled, the events upon the occurrences of which
such shares may be entitled to vote, and including
any and all restrictions or eliminations entirely of
the right of such shares to vote;
(iii) the rate of dividend, if any, and the
extent of further participation in dividend
distribution, if any, and whether dividends shall be
cumulative or non-cumulative;
(iv) whether or not such series shall be
redeemable, and if so, the terms and conditions upon
which shares shall be redeemable;
(v) the extent, if any, to which such series
shall have the benefit of any sinking fund provision
for the redemption or purchase of shares;
(vi) the rights, if any, of such series, in
the event of dissolution of the Corporation, or upon
any distribution of the assets of the Corporation;
(vii) whether or not the shares of such
series shall be convertible, and if so, the terms and
conditions of which shares of such series shall be
convertible; and
(viii) such other powers, designations,
preferences and relative, participating, optional or
other special rights and qualifications, limitations
or restrictions thereon as to the extent permitted by
law.
(b) Except as otherwise provided by law, the board of
directors shall have full authority to issue at any time and
from time-to-time shares of Common Stock or shares of
Preferred Stock in any manner and amount and for such
consideration as it in its absolute discretion shall
determine.' "
17
On July 1, 1999, there were 3,749,072 shares of Common Stock issued and
outstanding and no shares of the Preferred Stock issued and outstanding. The
number of outstanding shares of the Common Stock does not include 598,450 shares
reserved for issuance under outstanding options and warrants to purchase shares
of Common Stock and debentures convertible into shares of Common Stock. As of
such date, therefore, there were 652,478 shares of authorized Common Stock not
reserved for such purposes and available for issuance. Holders of Common Stock
have no preemptive rights to acquire additional issuances of shares of Common
Stock.
The Board of Directors of the Company has deemed it advisable and in
the best interests of the Company to amend Article Four of the Company's
Certificate of Incorporation to increase the authorized number of shares of
Common Stock from 5,000,000 to 10,000,000. The purpose of such increase is to
place the Company in a position where it will continue to have a sufficient
number of shares of authorized and unissued Common Stock which can be issued for
or in connection with such corporate purposes as may, from time to time, be
considered advisable by the Board of Directors. Having such shares available for
issuance in the future will give the Company greater flexibility and will allow
such shares to be issued as determined by the Board of Directors of the Company
without the expense and delay of a special shareholders' meeting to approve such
additional authorized capital stock. Such corporate purposes could include,
without limitation: (a) issuance in connection with any desirable acquisitions
which may be presented to the Company, (b) the payment of stock dividends or
issuance pursuant to stock splits, (c) the issuance of Common Stock upon
exercise of options granted under the Company's various stock option plans or in
connection with other employee benefit plans, (d) the issuance of Common Stock
upon the exercise of warrants or the conversion of other securities convertible
into Common Stock which may be outstanding from time to time, and (e) issuance
in connection with an offering to raise capital for the Company.
18
The authorized shares of Common Stock in excess of those presently
issued will be available for issuance at such times and for such purposes as the
Board of Directors may deem advisable without further action by the Company's
shareholders, except as may be required by the Certificate of Incorporation and
applicable laws and regulations. The potential future issuance of shares of
Common Stock by the Company, as authorized by the Amendment, may adversely
affect the rights and interests of the shareholders of the Company. The
shareholders of the Company may experience substantial voting dilution upon the
issuance of the shares of Company Common Stock authorized by the Amendment.
The Amendment, if adopted, may have the result of making it more
difficult for any person or group of persons, other than the current principal
shareholders and management, to acquire control of the Company by expanding the
ability of the Company to issue shares and thereby dilute the voting power of
any person or group that might accumulate shares in order to attempt to effect a
change in control. Although the Amendment might have such effect, the Amendment
has been proposed by the Board of Directors for the reasons set forth above and
not for anti-takeover reasons. The Company is not aware of any present effort to
accumulate shares of Common Stock or to attempt to change control of the
Company.
The Company has no present plans to issue additional shares of Common
Stock, either to the current principal shareholders, the directors, the
executive officers or any other person or entity, except under the Company's
stock option plans or pursuant to the conversion or exercise of outstanding
warrants and debentures. However, the Company is from time to time engaged in
discussions relating to potential acquisitions, some of which could result in
agreements requiring the issuance of certain of the additional shares of Common
Stock to be authorized.
19
If approved by the shareholders as hereinafter provided, the Amendment
will become effective upon the filing of articles of amendment relating thereto
with the Secretary of State of Delaware, which will occur as soon as reasonably
practicable following such approval. The approval of the Amendment requires a
majority of the votes entitled to be cast on the Amendment by the holders of
Common Stock. Each outstanding share of Common Stock is entitled to one vote.
Consequently, any shares not voted on the Amendment (whether by abstention or
broker non-votes) will have the same effect as votes against the Amendment.
The Board of Directors unanimously recommends a vote "FOR" approval of
the Amendment.
APPROVAL OF THE 1999 STOCK OPTION PLAN
The Board of Directors has adopted the Company's 1999 Stock Option Plan
(the "1999 Plan") and directed that the 1999 Plan be submitted to the
shareholders for approval. The 1999 Plan will become effective only if the
shareholders approve the 1999 Plan at the 1999 Annual Meeting. A copy of the
1999 Plan is attached as Exhibit A to this Proxy Statement and the following
description of the 1999 Plan is qualified in its entirety by reference to
Exhibit A.
As of July 1, 1999, approximately 202,000 additional shares remain
available for future awards under the Company's existing stock option plans,
plus any shares underlying any of the 178,450 outstanding options, which
terminate, expire or are surrendered without being exercised in full, and
thereupon become available for grant. The purpose of the 1999 Plan is to provide
additional incentive to certain valued and trusted directors and employees of
the Company and its subsidiaries or other affiliates, and other persons
responsible for making significant contributions to the Company's business, by
encouraging them to acquire shares of Common Stock of the Company
20
through options to purchase Common Stock granted pursuant to the 1999 Plan,
thereby increasing such key individuals' proprietary interest in the Company and
providing them with an increased personal interest in the continued success and
progress of the Company, the result of which will promote both the interests of
the Company and its shareholders. If the 1999 Plan is approved, the existing
stock option plans (other than the 1992 Non-Qualified Plan) will remain in
effect for future awards. The 1992 Non-Qualified Plan would be terminated as to
future grants available thereunder, 58,000 additional shares at the present
time.
The following is a brief summary of certain significant provisions of
the 1999 Plan:
1. Maximum Number of Shares Authorized for Issuance. The 1999
Plan provides for the granting of options to purchase up to 200,000 shares of
the Common Stock. The number and kind of shares subject to the 1999 Plan would
be appropriately adjusted in the event of any change in the capital structure of
the Company. Both incentive stock options and non-qualified stock options may be
granted under the 1999 Plan. Shareholders have no preemptive rights with regard
to shares allotted to the 1999 Plan.
2. Administration. The Plan is administered by the Stock
Option Committee which is appointed by the Company's Board of Directors and is
to consist of not less than two (2) Directors of the Company who are not then
employees of the Company. The current members of the Stock Option Committee are
Sidney Dworkin and Alan Schwartz. The Stock Option Committee interprets the 1999
Plan and has discretion to select participants, establish the manner in which
options are granted and exercised, cancel and modify options in certain
situations and otherwise prescribe all of the terms and provisions of options
granted under the 1999 Plan. Any authority granted to the Stock Option Committee
under the 1999 Plan may also be exercised by the Company's Board of Directors.
21
3. Participants. Eligible participants in the Plan include the
Company's directors who are also employees of the Company or its Affiliates (as
such term is defined hereinafter), presently two (2) individuals, and all other
employees of the Company or its Affiliates, presently fifty-nine (59) additional
individuals, in the case of incentive stock options, and, in the case of
non-qualified stock options, also include the Company's directors who are not
employees of the Company (presently five (5) individuals) and other individuals
who provide services to, or otherwise have a relationship with, the Company or
its Affiliates. Optionees are to be selected on the basis of demonstrated
ability to contribute substantially to the success of the Company. The term
"Affiliates" means any "parent" or "subsidiary" corporation of the Company, as
each such term is defined in Section 424 of the Internal Revenue Code of 1986,
as amended (the "Code").
4. Option Grants. The Stock Option Committee has the authority
to authorize the grant of options ("Discretionary Grants") pursuant to the 1999
Plan to one or more persons (other than directors of the Company who are not
also full-time employees of the Company or any of its Affiliates) eligible to
participate in the 1999 Plan.
Each individual who is a member of the Company's Board of
Directors on July 1 of each year, commencing on July 1, 2000, will automatically
be granted an option ("Fixed Grants") to acquire 2,000 shares of the Company's
Common Stock at an exercise price equal to the lowest reported bid price for the
Common Stock during the four (4) week period immediately preceding the date of
such grant.
5. Amendments to the 1999 Plan. The Board of Directors is able
to amend the Plan without further approval by the shareholders of the Company,
except insofar as such approval is required by law, or the Code in the case of
incentive stock options.
22
6. Term of Options. No options can be granted under the 1999
Plan later than June 30, 2009. Incentive stock options can have a maximum
exercise period of ten (10) years (five (5) years for optionees who own more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or its Affiliates). Non-qualified stock options can have a
maximum exercise period of five (5) years from the date of grant. Within these
maximum exercise periods, the 1999 Plan permits the Stock Option Committee to
establish, in its discretion, the time period within which any individual option
can be exercised. In its discretion, the Stock Option Committee can accelerate
the vesting of options held by employees who are retiring from the Company.
The 1999 Plan provides that, upon (a) termination of
employment of an optionee for a cause other than death or disability, the
employee's right to exercise any option granted under the 1999 Plan will
terminate within three (3) months following cessation of employment or, (b) in
the case of a director, if the director ceases to be a director of the Company
(other than as a result of death or disability), the director's right to
exercise any option granted under the 1999 Plan will terminate within three (3)
months following the date on which the director ceases to serve as a director of
the Company. In the event of termination of employment or service as a director
due to death or disability, the same provisions apply except that the period of
time for exercise is one (1) year.
7. Transferability. Options granted under the 1999 Plan are
not transferable except in the event of death.
8. Exercise Price. The exercise price per share for each
non-qualified stock option granted under the 1999 Plan cannot be less than the
lowest reported bid price for the Common Stock during the four (4) week period
immediately preceding the date the option is granted. The exercise price per
share for each incentive stock option granted under the 1999 Plan cannot be less
than the
23
fair market value of a share of the Common Stock on the date of grant, except in
the case of optionees who own more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or its parent or subsidiary
corporation or corporations, in which case the exercise price cannot be less
than one hundred ten percent (110%) of the fair market value of a share of the
Common Stock on the date of grant. Fair market value will be determined by rules
prescribed by the Code and regulations promulgated thereunder.
The aggregate fair market value (determined as of the time
such option is granted) of the Common Stock for which any employee may have
incentive stock options which become exercisable for the first time in any
calendar year may not exceed $100,000.
9. Payment of Exercise Price. The entire option price must be
paid at the time the option is exercised, by certified or official bank check,
or such other equivalent as may be acceptable to the Company.
10. Use of Proceeds. Proceeds received from optioned shares
will be used for general corporate purposes.
11. Federal Income Tax Matters. The Company believes that
under currently applicable provisions of the Code, an optionee will not be
deemed to receive any income for Federal tax purposes upon the grant of an
option under the 1999 Plan, nor will the Company be entitled to a tax deduction
at that time because the incentive stock options are so treated under the Code
and the non-qualified stock options will not have a "readily ascertainable fair
market value" at the time of grant. However, upon the exercise of an option, the
tax consequences are as follows:
(a) Upon the exercise of a non-qualified stock
option, the optionee will have ordinary income in an amount
equal to the excess of the value of the shares on the
24
exercise date over the exercise price. The Company will be
allowed an income tax deduction at that time in the same
amount.
(b) Upon the exercise of an incentive stock option,
there is no income recognized by the optionee at the time of
exercise. If the stock is held at least one (1) year following
the date of transfer of the stock to him and at least two (2)
years from the date of grant of the option, the optionee will
realize a long-term capital gain or loss upon a sale of the
underlying stock, measured by the difference between the
option exercise price and the sale price. If either of these
holding period requirements is not satisfied, and thus a
"disqualifying disposition" has occurred, ordinary income tax
treatment will apply to the difference between the option
exercise price and the fair market value of the stock on the
date of exercise of the option. If the actual gain on the
disposition exceeds the amount of ordinary income, the excess
will be considered short-term or long-term capital gain
depending on how long the shares were actually held. No income
tax deduction will be allowed to the Company with respect to
shares purchased by an optionee upon the exercise of an
incentive stock option, if such shares are held for the
required periods as described above. If a disqualifying
disposition occurs, the Company will be allowed an income tax
deduction equal to the amount of ordinary income recognized by
the optionee upon the disposition. If the amount which the
optionee realizes on the disqualifying disposition would
result in a loss if the rules regarding disqualifying
dispositions applied, the amount of ordinary income which the
optionee would recognize (and the amount of the Company's
deduction) is limited to the excess of the amount realized on
the sale over the basis of such stock.
25
Each optionee should consult his or her tax advisor as to
alternative minimum tax consequences or other specific tax issues created with
respect to the options as they may apply to his or her particular situation.
12. Expiration and Termination of the 1999 Plan. The 1999 Plan
may be abandoned or terminated at any time by the Board of Directors except with
respect to any option then outstanding under the 1999 Plan. No options may be
granted pursuant to the 1999 Plan after its termination date of June 30, 2009.
The Board of Directors of the Company believes that a stock option plan
is of substantial value in creating additional incentive for key individuals to
promote the success of the Company by increasing their proprietary interest in
the Company, encouraging key individuals to remain in the Company's employ, and
assisting in the recruitment of personnel of outstanding ability. In light of
the Company's efforts to strengthen its position in the marketplace, the ability
to attract, motivate and retain highly qualified employees and consultants is of
particular importance to the Company.
The closing price of a share of the Common Stock as reported on the
NASDAQ Small Cap Market for June 24, 1999 was $0.875.
A majority of the affirmative votes cast by the holders of record of
the shares of Common Stock, represented in person or by proxy at the 1999 Annual
Meeting where a quorum is present, is required to approve the 1999 Plan. A
majority of the votes entitled to be cast on the matter constitutes a quorum.
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present but as not voted. Shares as to which a broker
indicates it lacks authority to vote on adoption of the 1999 Plan will be
considered not present for purposes of determining the existence of a quorum and
will not be voted for or against the adoption of the 1999 Plan.
The Board of Directors recommends a vote "FOR" approval of the 1999
Plan.
26
INDEPENDENT ACCOUNTANTS
The Board of Directors, by resolution, has selected Drucker, Math &
Whitman, P.C., independent certified public accountants, to audit the books,
records and accounts of the Company for the fiscal year ending March 31, 2000.
It is anticipated that representatives of Drucker, Math & Whitman, P.C. will be
present at the meeting to respond to appropriate questions and, if they desire,
to make a statement.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be considered at the 2000 Annual
Meeting of Stockholders must be received at the principal executive offices of
the Company no later than March 17, 2000. Such proposals may be included in next
year's proxy statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
In accordance with Rule 14a-4(c) promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended,
the holders of proxies solicited by the Board of Directors in connection with
the 2000 Annual Meeting of Shareholders may vote such proxies in their
discretion on certain matters as more fully described in such rule, including
without limitation on any matter coming before the meeting as to which the
Corporation does not have notice on or before June 2, 2000.
COSTS OF SOLICITATION
The entire cost of soliciting proxies will be borne by Comtrex.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy
27
materials to the beneficial owners of stock, and reimbursement for expenses may
be made. Proxies may be solicited in person or by telephone or telegraph by
directors, officers or regular employees of Comtrex, none of whom will receive
additional compensation therefor.
MANNER IN WHICH PROXIES WILL BE VOTED
All properly executed proxies received by the Board of Directors will
be voted. The Board proposes to vote all such proxies, unless otherwise
directed, for the election of the above nominees to the Board of Directors, for
adoption of the Company's 1999 Stock Option Plan, and for the proposed amendment
of the Company's Certificate of Incorporation. The Board knows of no other
matters which may be presented for action at the meeting. However, if any other
matter properly comes before the meeting, the proxy holders will vote in
accordance with their best judgment on such matter.
Stockholders are urged to vote, sign and return the enclosed form of
proxy promptly in the enclosed envelope.
By Order of the Board of Directors,
ANTHONY S. MALADRA
July 15, 1999
28
EXHIBIT A
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COMTREX SYSTEMS CORPORATION
1999 STOCK OPTION PLAN
1. Purpose
The purpose of the 1999 Stock Option Plan (referred to herein as the
"Plan") of Comtrex Systems Corporation (the "Company") is to provide a means by
which certain employees and directors of, and others providing services to or
having a relationship with, the Company and its Affiliates (as such term is
defined hereinafter) may be given an opportunity to purchase common stock of the
Company ("Common Stock"). The Plan is intended to promote the interests of the
Company by encouraging stock ownership on the part of such individuals, by
enabling the Company and its Affiliates to secure and retain the services of
highly qualified persons, and by providing such individuals with an additional
incentive to advance the success of the Company and its Affiliates. For purposes
of this Plan, the term "Affiliate" shall mean any "parent" or "subsidiary"
corporation of the Company, as each such term is defined in Section 424 of the
Internal Revenue Code of 1986, as amended (hereinafter the "Code").
2. Administration
(a) The Plan shall be administered by a Committee consisting of not
less than two directors (the "Committee") to be appointed from time to time by
the Board of Directors. Membership on the Committee shall in any event be
limited to those members of the Board who are "Non-Employee Directors" as
defined in the regulations promulgated by the Securities Exchange Commission
pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Board of Directors may, from time to time, remove
members from or add members to the Committee. Vacancies in the Committee,
however caused, shall be filled by the Board of Directors. The Committee shall
select one of its members chairman and shall hold meetings at such times and
places as it may determine. The Committee may appoint a secretary and, subject
to the provisions of the Plan and to policies determined by the Board of
Directors, may make such rules or regulations for the conduct of its business as
it shall deem advisable. The majority of the Committee shall constitute a
quorum. All action of the Committee shall be taken by a majority of its members.
Any action may be taken by written instrument signed by a majority of the
members of the Committee, and an action so taken shall be fully effective as if
it had been taken by a vote of the majority of the members of the Committee at a
meeting duly called and held.
(b) The Committee shall have the power to select optionees, to
establish the number of shares and other terms applicable to each option granted
pursuant to the Plan, to construe the provisions of the Plan, and to adopt rules
and regulations governing the administration of the Plan. All power and
authority granted hereunder to the Committee may, at the discretion of the Board
of Directors, be exercised by the Board.
A-1
(c) The members of the Board of Directors or the Committee shall not be
liable for any action or determination made in good faith with respect to the
Plan or to any option granted pursuant thereto.
3. Eligibility; Grant of Options
(a) Participants. The persons who shall be eligible to participate in
this Plan and receive options hereunder shall be the Company's and each
Affiliate's directors and such employees and other individuals who provide
services to or otherwise have a relationship with the Company or any Affiliate
as the Committee shall from time to time determine to be key individuals to the
success of the Company or its Affiliates.
(b) Discretionary Grants. The Committee shall from time to time
authorize the grant of options pursuant to this Plan to one or more persons
eligible to participate in the Plan, and each such option grant shall be on such
terms and conditions, consistent with this Plan, as may be specified by the
Committee; provided that directors of the Company or any Affiliate (other than
directors who are full-time employees of the Company or any of Affiliate) shall
not be granted any options pursuant to this Plan except as otherwise provided in
subparagraph 3(c) below.
(c) Fixed Grants to Directors. Each individual who is a member of the
Company's Board of Directors on July 1 of each calendar year, commencing on July
1, 2000, shall automatically be granted a Non-Qualifying Option (as such term is
defined hereinafter) to acquire 2,000 shares of the Common Stock of the Company
at an exercise price equal to the lowest reported bid price for the Common Stock
during the four (4) week period immediately preceding the date of the grant.
Such options shall expire five (5) years from the date of grant unless
terminated as provided herein, and otherwise shall be on such terms and
provisions as are specified in paragraph 6 below.
4. Allotment of Shares
A maximum of Two Hundred Thousand (200,000) authorized but unissued
shares of the Common Stock, $0.001 par value, of the Company will be allotted to
the Plan, provided that the number of options that may be granted to any
employee under the Plan shall be reasonable in relation to the purpose of the
Plan. Shares that by reason of the expiration of an option or otherwise are no
longer subject to purchase pursuant to an option granted under the Plan may be
re-optioned under the Plan. The Company shall not be required upon the exercise
of any option to issue or deliver any shares of stock prior to the completion of
such registration or other qualification of such shares under any state or
federal law, rule or regulation as the Company shall determine to be necessary
or desirable.
A-2
5. Effective Date and Term of Plan
The effective date of the Plan is July 1, 1999. The Plan shall
terminate on June 30, 2009, but the Board of Directors may terminate the Plan at
any time prior thereto. Termination of the Plan shall not alter or impair,
without the consent of the optionee, any of the rights or obligations of any
option theretofore granted under the Plan.
6. Terms and Conditions
A. All Options
Stock options granted pursuant to this Plan shall be evidenced
by agreements in such form as the Committee shall from time to time approve.
Nothing in this Plan or any option granted hereunder shall govern the employment
rights and duties between the optionee and the Company or any Affiliate. Neither
this Plan, nor any grant or exercise pursuant thereto, shall constitute an
employment agreement among such parties. The following shall also apply to all
options granted under the Plan:
(i) Time of Exercise of Option
Except as otherwise set forth herein, the Committee shall
establish the option period and time or times within the option period
when the stock option may be exercised in whole or in such parts as may
be specified from time to time by the Committee. Each non-qualified
stock option granted to directors pursuant to subparagraph 3(c) hereof
shall be exercisable in full one (1) year after the date of grant. No
other option granted pursuant to this Plan shall be exercisable until
after the expiration of six (6) months from the date of grant. With
respect to an optionee whose employment with the Company is about to
terminate (for whatever reason), the Committee may in its discretion
accelerate the time or times when any particular stock option held by
said optionee may be so exercised so that such time or times are
earlier than those originally provided in said option. In all cases
exercise of a stock option granted to an employee or a Director shall
be subject to the provisions of subparagraphs 6(A)(iv) and 6(A)(v),
respectively.
(ii) Payment and Manner of Exercise
The entire option price shall be paid at the time the option
is exercised. To the extent that the right to purchase shares has
accrued hereunder, options may be exercised from time to time by
written notice to the Company stating the full number of shares with
respect to which the option is being exercised and the time of delivery
thereof, in accordance with such administrative procedures as may from
time to time be specified by the Committee. Such notice of exercise
shall be accompanied by full payment for the shares by: (1) certified
or official bank check or the equivalent thereof acceptable to Company;
(2) by tendering to the Company shares of Common Stock, or requesting
the Company to accept shares to be acquired by exercising the option,
having an aggregate fair market value, determined by the Company at the
date of payment, equal to the option price; or (3) any combination of
the
A-3
foregoing. Upon exercise, the Company shall deliver to the optionee (or
other person entitled to exercise the option), at the principal office
of the Company, or such other place as shall be mutually agreed upon, a
certificate or certificates for such shares; provided, however, that
the time of delivery may be postponed by the Company for such periods
as may be required for it with reasonable diligence to comply with any
requirements of law; and provided further that in the event the Common
Stock issuable upon exercise is not registered under the Securities Act
of 1933 (the "Act"), then the Company may require that the registered
owner deliver an investment representation in form acceptable to the
Company and its counsel and the Company will place a legend on the
certificate for such Common Stock restricting the transfer of same.
There shall be no obligation or duty for the Company to register under
the Act at any time the Common Stock issuable upon exercise of the
options. If the optionee (or other person entitled to exercise the
option) fails to accept delivery, the optionee's payment shall be
returned and the right to exercise the option with respect to such
undelivered shares shall be terminated.
(iii) Non-Transferability of Option
An option, by its terms, shall not be transferable by the
optionee otherwise than by will or by the laws of descent and
distribution.
(iv) Rights after Termination of Employment
In the event of termination of an optionee's employment due to
any cause other than death or disability, the right to exercise any
stock option granted pursuant to the Plan shall terminate three (3)
months following cessation of employment. In the event of termination
of an optionee's employment due to permanent and total disability
(within the meaning of Section 22(e)(3) of the Code) or death, such
optionee (or the executor, administrator or devisee of the optionee)
shall have the right to exercise such option (to the extent otherwise
exercisable) at any time within one (1) year after cessation of
employment by reason of such disability or death.
(v) Effect of Termination of Directorship
In the event of the termination of an optionee's service as a
Director of the Company due to any cause other than death or permanent
and total disability, then the right to exercise any stock option grant
pursuant to the Plan shall terminate three (3) months following the
date on which such optionee's service as a Director of the Company
terminates. In the event of the termination of a Director's service due
to permanent and total disability (within the meaning of Section
22(e)(3) of the Code) or death, such optionee (or the executor,
administrator or devisee of the optionee) shall have the right to
exercise such option (to the extent otherwise exercisable) at any time
within one (1) year after cessation of service as a Director of the
Company by reason of such disability or death.
A-4
(vi) Adjustment in Event of Recapitalization of the
Company
The aggregate number of shares of Common Stock for which
options may be granted to persons participating under the Plan, the
number of shares covered by each outstanding option and the exercise
price per share for each such option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common
Stock of the Company resulting from the subdivision or consolidation of
shares, or the payment of a stock dividend after the effective date of
this Plan, or other increase or decrease in such shares affected
without the receipt of consideration by the Company; provided, however,
that any options to purchase fractional shares resulting from any such
adjustment shall be eliminated; and provided further, that any such
adjustment shall be made in a manner so as not to constitute a
modification as defined in Section 424(h)(3) of the Code.
(vii) Adjustment of Options upon Reorganization
(a) If the Company shall at any time merge or
consolidate with or into another corporation or entity and (1)
the Company is not the surviving entity or (2) the Company is
the surviving entity and the shareholders of Company Common
Stock are required to exchange their shares for property
and/or securities, the holder of each option will thereafter
receive, upon the exercise thereof, the securities and/or
property to which a holder of the number of shares of Common
Stock then deliverable upon the exercise of such option would
have been entitled upon such merger or consolidation, and the
Company shall take such steps in connection with such merger
or consolidation as may be necessary to assure that the
provisions of this Plan shall thereafter be applicable, as
nearly as reasonably may be, in relation to any securities or
property thereafter deliverable upon the exercise of such
option, provided, however, that under no circumstances shall
any option exercise date be accelerated in contemplation of
such action. The sale of all or substantially all of the
assets of the Company for consideration (apart from the
assumption of obligations) consisting primarily of securities
shall be deemed a merger or consolidation for the foregoing
purposes. Notwithstanding any of the foregoing, the provisions
of this Section 6(A)(vii) shall be subject to all of the other
applicable terms and provisions of this Plan.
(b) The surviving entity in any reorganization may,
at any time, in its sole discretion, tender substitute options
as it may deem appropriate. However, in no event may the
substituted options entitle the optionee to any fewer shares
(or at any greater aggregate price) or any less other property
than the optionee would be entitled to under the immediately
preceding paragraph upon an exercise of the options held prior
to the substitution of the new option. Any substitution made
under this paragraph shall be made in a manner so as not to
constitute a modification as defined in Section 424(h)(3) of
the Code.
(c) With respect to options to acquire stock of any
Affiliate of optionee's then present employer, if optionee's
then present employer ceases to be affiliated with
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the Company, then the Company shall give the optionee written
notice of such fact within thirty (30) days after the date on
which optionee's employer ceases to be an Affiliate and the
option shall expire and terminate within thirty (30) days
after the receipt of such notice by optionee.
B. Non-Qualified Stock Options
The Committee may, in its discretion, grant options under the
Plan which, in whole or in part, do not qualify as incentive stock options under
Section 422 of the Code ("Non-Qualifying Options"). The terms and conditions of
the Non-Qualifying Options shall be governed by Section 6A above.
C. Incentive Stock Options
The Committee may, in its discretion, grant options under the
Plan which qualify, in whole or in part, as incentive stock options under
Section 422 of the Code. In addition to the terms and conditions set forth in
Section 6A above, the following terms and conditions shall govern any incentive
stock option issued under the Plan:
(i) Maximum Fair Market Value of Incentive Stock Options
No optionee may have incentive stock options which become
exercisable for the first time in any calendar year (under all
incentive stock option plans of the Company and its subsidiary
corporations) with an aggregate fair market value (determined as of the
time such option is granted) in excess of One Hundred Thousand Dollars
($100,000).
(ii) Option Price
The option price per share for each incentive stock option
shall be 100% of the fair market value of the Common Stock on the date
the option is granted; except, in the case of the grant to an optionee
who owns Common Stock of the Company possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or its subsidiaries, the option price of such option shall be
at least 110% of the fair market value of the Common Stock on the date
the option is granted. The fair market value shall be determined as
prescribed by the Code and regulations promulgated thereunder.
(iii) Period of Option
Each incentive stock option shall expire ten (10) years from
the date it is granted or at the end of such shorter period as may be
designated by the Committee on the date of grant; except, in the case
of the grant of an incentive stock option to an optionee who owns
Common Stock of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
or its subsidiaries, such option shall not be exercisable after the
expiration of five (5) years from the date it is granted.
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(iv) Eligible Participants
Incentive stock options may be issued only to employees of the
Company or its parent or subsidiary corporation or corporations.
7. Amendment of Plan
The Board, within its discretion, shall have authority to amend the
Plan and the terms of any option issued hereunder; provided, that no such action
of the Board of Directors, without the approval of the Shareholders of the
Company, shall:
(a) materially increase the benefits accruing to optionees
under the Plan;
(b) increase the number of securities which may be issued
under the Plan; or
(c) materially modify the requirements as to eligibility for
participation under the Plan.
A-7
COMTREX SYSTEMS CORPORATION
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints JEFFREY C. RICE, with full power of
substitution, the proxy of the undersigned (the "Proxy") to represent the
undersigned at the Annual Meeting of Stockholders of Comtrex Systems Corporation
(the "Company") to be held on Thursday, August 12, 1999, or any adjournment or
postponement thereof, and to vote the number of shares of the Common Stock of
the Company which the undersigned would be entitled to vote if personally
present:
(1) Election of Directors
FOR the nominees WITHHOLD AUTHORITY
listed below to vote for the
(except as marked nominees listed
to the contrary below) /__/ below /__/
(Instruction: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.)
Sidney Dworkin Larry Irwin Nathan I. Lipson Anthony S. Maladra
Jeffrey C. Rice Steven D. Roberts Alan G. Schwartz
(2) Proposal to adopt the Comtrex Systems Corporation 1999 Stock Option Plan
_________ For _________ Against _________ Abstain
(3) Proposal to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of the Company's common stock, par value $.001 per
share, from 5,000,000 to 10,000,000
_________ For _________ Against _________ Abstain
(4) In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, the shares represented
hereby will be voted FOR the election of the nominees listed above, FOR the
adoption of the 1999 Stock Option Plan, FOR the proposed amendment of the
Company's Certificate of Incorporation, and as the Proxy deems advisable on such
other matters as may properly come before the meeting. This proxy may be revoked
at any time prior to the time it is voted.
MARK HERE FOR ADDRESS CHANGE
AND NOTE AT LEFT /___/
MARK HERE IF YOU PLAN TO
ATTEND THE MEETING /___/
Whether or not you plan to attend the meeting in person, you are urged to sign
and return your proxy without delay in the return envelope provided for that
purpose which requires no postage if mailed in the United States.
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Signature(s) of Stockholder(s)
When signing the proxy, please date it and take care to have the signature
conform to the stockholder's name as it appears on this side of the proxy. If
shares are registered in the names of two or more persons, each person should
sign. Executors, administrators, trustees and guardians should so indicate when
signing.
Dated: ________________, 1999