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 Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 14a-11(c) or 14a-12
Mace Security International, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number 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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(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.
[_] 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:
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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:
[LOGO] MSI(R) 1000 Crawford Place, Suite 400
Mt. Laurel, New Jersey 08054
(856) 778-2300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: December 12, 2001
Time: 10:00 AM, Eastern Time
Location
The DoubleTree Hotel
Birch Room
515 Fellowship Road North
Mt. Laurel, New Jersey 08054
To Mace Security International, Inc. Stockholders:
We invite you to attend our 2001 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 2001.
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 November 2, 2001,
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
November 7, 2001 Secretary
TABLE OF CONTENTS
Page
----
Introduction ..................................................................... 1
About This Proxy Solicitation ................................................... 1
About the Annual Meeting ........................................................ 2
Voting at the Annual Meeting .................................................... 3
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 ..... 6
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
Option and Warrant Grants in Last Fiscal Year ................................... 10
Aggregated Option and Warrant Exercises in Last Fiscal Year ..................... 10
Employment Agreements ........................................................... 11
Biographical Information for Non-Director Executive Officers .................... 11
Section 16(a) Beneficial Ownership Reporting Compliance ......................... 12
Compensation Committee Interlocks and Insider Participation ..................... 12
Compensation Committee Report on Executive Compensation ......................... 13
Performance Graph ............................................................... 15
Audit Committee Report .......................................................... 16
Audit Fees and Related Matters .................................................. 16
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 - Charter of the Audit Committee of the Board of Directors ............ A-1
1000 Crawford Place, Suite 400
Mt. Laurel, New Jersey 08054
[LOGO] MSI(R) (856) 778-2300
_______________
PROXY STATEMENT
_______________
INTRODUCTION
The Board of Directors is soliciting proxies to be used at the 2001
Annual Meeting of Stockholders of Mace Security International, Inc. ("Mace").
Mace will begin mailing this proxy statement and the enclosed form of proxy to
its stockholders on or about November 7, 2001.
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.
About the Annual Meeting
When And Where Mace will hold the Annual Meeting on December 12, 2001, at 10:00
--------------
AM, Eastern Time, at The DoubleTree Hotel, Birch 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.
Representatives of Urbach Kahn & Werlin PC, Mace's independent auditors until
May 26, 1999, are not expected to be presented at the Annual Meeting and will
not make a statement or be available to respond to stockholder questions.
The Stockholders As of the record date of November 2, 2001, there were
----------------
25,428,427 shares of Mace common stock issued and outstanding. Only stockholders
of record at the close of business on November 2, 2001, 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.
2
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 November 2, 2001. 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.
How To Vote Your Shares
You may vote in 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 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
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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: 45
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: 46
Director Since: December 15, 1999
Principal Occupation:
December 1996-Present President and Chief Executive
Officer of US Plastic Lumber
Corporation (a 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
Jon E. Goodrich
---------------
Age: 56
Director Since: December 14, 1987
Principal Occupation:
May 24, 1999-Present President and Owner of Mark Sport,
Inc. (a security products company),
Vermont Mill Properties (a real
estate company), and Vermont Mill
Plastics (a manufacturing company)
Recent Business Experience:
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)
4
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 General Counsel, Secretary and
Executive Vice President of Eastern
Environmental Services, Inc. (a
waste management company)
Richard B. Muir
---------------
Age: 46
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)
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 and Excel
Interfinancial Corporation Warner
Beck, Inc. (securities broker/dealer
firm)
Matthew J. Paolino
------------------
Age: 37
Director Since: July 1, 1999
Principal Occupation:
July 1, 1999-Present Vice President of Mace
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,
President and Chief Executive
Officer
Constantine N. Papadakis, Ph.D.
-------------------------------
Age: 55
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.
5
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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 2001.
--------------------------------------------------------------------------------
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 2001, which has been approved by the
Board of Directors, is being submitted to you for ratification.
Mace's Auditors
Ernst & Young LLP served as Mace's independent auditors from May 1999 until
January 10, 2000. On January 10, 2000, Ernst & Young LLP resigned as a result of
a business conflict. On recommendation of the Audit Committee, the Board
appointed Grant Thornton LLP to serve as Mace's new independent auditors.
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, 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 two 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. 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.
Prior to Ernst & Young LLP's engagement, Mace had engaged Urbach Kahn & Werlin
PC as Mace's independent auditors. On May 26, 1999, Urbach Kahn & Werlin PC
resigned. The reports of Urbach Kahn & Werlin PC on Mace's consolidated
financial statements for the two years ended December 31, 1998 and 1997, did not
contain any adverse opinion or disclaimer of opinion, or modification or
qualification as to
6
uncertainty, audit scope or accounting principles. In connection with its audits
for those two years, there were no disagreements between Mace and Urbach Kahn &
Werlin PC 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 Urbach Kahn & Werlin PC, 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 neither Ernst & Young LLP nor Urbach Kahn & Werlin PC are 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 2001.
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 of Stockholders on December 15, 1999,
each of the present directors was elected to the board, and each was re-elected
to his present term at Mace's 2000 Annual Meeting of Stockholders on December
12, 2000.
Mace's Board held 16 formal meetings during 2000. During 2000, all directors
other than Dr. Papadakis attended at least 75% of Mace's Board meetings, as well
as the meetings of the committees of the Board on which they served. Dr.
Papadakis attended 69% of Mace's Board meetings. 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
Held in
Committee Members 2000 Functions
--------- ------------- ----------- ---------------------
Audit Constantine N. Papadakis, Ph.D. 3 . Recommends selection of independent auditors to
Mark S. Alsentzer 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. 1 . Recommends executive compensation.
Richard B. Muir . Administers Mace's Nonqualified Stock Option Plan.
Louis D. Paolino, Jr. . Administers Mace's 1999 Stock Option Plan.
Acquisition Louis D. Paolino, Jr. 1 . Reviews and approves acquisitions having a value
Robert M. Kramer 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 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
options to purchase 10,000 shares of Mace common stock at $1.2813 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.
8
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. 45 Director, Chairman of the Board, President, and Chief Executive
Officer
Gregory M. Krzemien 42 Chief Financial Officer and Treasurer
Robert M. Kramer 49 Director, Chief Operating Officer, Executive Vice President,
General Counsel, and Secretary
Ronald R. Pirollo 42 Chief Accounting Officer and Controller
Matthew J. Paolino 37 Director and Vice President
Mark S. Alsentzer 46 Director
Jon E. Goodrich 56 Director
Richard B. Muir 46 Director
Constantine N. Papadakis, Ph.D. 55 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, 2000, 1999, and 1998.
SUMMARY COMPENSATION TABLE
NAME AND Annual Compensation Awards: Securities
PRINCIPAL POSITIONS Year Salary Bonus Underlying Options
------------------- ---- ------ ----- ------------------
Louis D. Paolino, Jr., 2000 $320,001 -- 10,000
President, Chief Executive Officer and 1999 $201,565 -- --
Chairman of the Board (1) 1998 -- -- --
Robert M. Kramer, 2000 $125,000 -- 10,000
Chief Operating Officer, 1999 $ 76,953 -- 237,209
Executive Vice President, General 1998 -- -- --
Counsel and Secretary (2)
Gregory M. Krzemien, 2000 $110,001 -- --
Chief Financial Officer and 1999 $ 67,723 -- 125,000
Treasurer (2) 1998 -- -- --
Ronald R. Pirollo, 2000 $ 91,845 $10,000 10,000
Chief Accounting Officer 1999 $ 38,854 -- 50,000
and Controller (2) 1998 -- -- --
(1) 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. Mr. Paolino's employment contract provides for an annual salary
of $350,000. In 2000, Mr. Paolino voluntarily took less than his
contractual salary.
(2) Employment commenced on March 26, 1999. A partial year's base
compensation was paid in the fiscal year ended December 31, 1999 and no
base compensation was paid in the fiscal year ended December 31, 1998.
9
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, 2000.
OPTION GRANTS IN LAST FISCAL YEAR (1)
(Individual Grants)
% of Total Options
Number of Securities Granted to Employees in Exercise
Underlying Options Fiscal Price Per
Name Granted (1)Year Share Expiration Date
---- ---------- --------------- -------- ---------------
Louis D. Paolino, Jr. 10,000 (2) 3.0% $1.28 10/18/10
Gregory M. Krzemien - - - -
Robert M. Kramer 10,000 (2) 3.0 1.28 10/18/10
Ronald R. Pirollo 10,000 (3) 3.0 4.31 2/24/10
(1) The Company granted options and warrants to employees to purchase a
total of 330,325 shares of common stock during the fiscal year ended
December 31, 2000. All of these grants were made at fair market value.
(2) Options to purchase 10,000 shares will vest on December 12, 2001.
(3) Options to purchase 10,000 shares vested on August 24, 2000.
During 2000, Louis D. Paolino, Jr., and Robert M. Kramer received grants of
options to purchase 10,000 shares of Mace common stock at a price of $1.28 per
share in connection with their agreements to serve as directors of the Company
during 2001. Additionally, during 2000, Ronald R. Pirollo received a grant of
options to purchase 10,000 shares of Mace common stock at a price of $4.3125 per
share.
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, 2000. No
options were exercised by any of the Named Executive Officers during the fiscal
year ended December 31, 2000. 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, 2000, was $0.9062 per share. No options were in-the-money at December 31,
2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
Number of Securities Underlying Unexercised
Options at Fiscal Year End 2000
---------------------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Louis D. Paolino, Jr. - 10,000
Gregory M. Krzemien 81,105 43,895
Robert M. Kramer 93,024 116,976
Ronald R. Pirollo 35,000 25,000
10
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 and
disability. Other than options to purchase 10,000 shares of Mace common stock
granted to Mr. Paolino and each of Mace's other directors on October 18, 2000,
for agreeing to serve on the Board of Directors for 2001, Mace has not granted
options to purchase Mace common stock to Louis D. Paolino, Jr., as compensation
for his services to Mace, under his employment agreement or otherwise.
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
Name Office Annual Salary Option Grant
---- ------ ------------- ------------
Robert M. Kramer Chief Operating Officer, Executive $137,500 200,000
Vice President, General Counsel,
and Secretary
Gregory M. Krzemien Chief Financial Officer $121,500 125,000
and Treasurer
Ronald R. Pirollo Chief Accounting Officer $112,500 50,000
and Controller
Matthew J. Paolino Vice President $ 45,000 125,000
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: 42
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.
11
Ronald R. Pirollo
-----------------
Age: 42
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 on Mace's records and other information, Mace believes that all filing
requirements with the Securities and Exchange Commission applicable to its
directors and executive officers were complied with for 2000, except for the
following instance: Reports on Form 4 due on January 10, 2000, on behalf of Mark
S. Alsentzer, Jon E. Goodrich, Robert M. Kramer, Louis D. Paolino, Jr., and
Matthew J. Paolino, for events which occurred in December 1999, were filed on
January 20, 2000.
Compensation Committee Interlocks and Insider Participation
Throughout fiscal 2000, 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
of the Board, 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 of the Board, 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 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, 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
of the Board, Chief Executive Officer and President. Mace paid $84,000 in fiscal
2000 and $45,902 through October 31, 2001, for such services. 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. Mace's Audit Committee is considering a proposal that the
company enter into an arrangement with LP Learjets, LLC, whereby Mace would pay
$5,109 per month to LP Learjets, LLC for the right to use a Learjet 31A for 100
hours per year. Additionally, when the Learjet 31A is used, Mace
12
would also pay to Aeroways, Inc., the direct costs of the Learjet's per-hour
use, which include fuel, pilot fees, engine insurance and landing fees. The
direct costs are approximately $1,100 per flight hour.
Compensation Committee Report on Executive Compensation
Throughout fiscal 2000, 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,
2000. 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.
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, 2000, 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, Mace has focused its management efforts on consolidating
and streamlining the acquired operations in order to maximize operating profits.
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 2000. The Compensation Committee also considered that the
Company did not achieve its anticipated growth targets. The Committee
commissioned Deloitte & Touche to conduct a study of compensation levels in
comparable companies for each executive position.
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
13
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 discussed above, 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
(GRAPH)
ASSUMES $100 INVESTED ON JAN, 1. 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2000
(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,
-------------------------------------------------------
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
Mace Security International, Inc. 100.00 111.11 77.78 150.00 366.67 80.53
Selected Peer Group 100.00 89.89 132.59 96.96 54.81 59.68
Nasdaq Market Index 100.00 124.27 152.00 214.39 378.12 237.66
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 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,
are 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-KSB for the fiscal year ended
December 31, 2000.
The Audit Committee of the Board of Directors
Mark S. Alsentzer, Chairman
Richard B. Muir
Constantine N. Papadakis, Ph.D.
Audit Fees and Related Matters
Audit Fees. Mace was billed $120,475 by Grant Thornton LLP for the audit of
Mace's annual financial statements for the fiscal year ended December 31, 2000,
and for the review of the financial statements included in Mace's Quarterly
Reports on Forms 10-QSB filed during 2000.
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 2000.
All Other Fees. Mace was billed $16,477 for non-audit services, principally tax
and SEC compliance services, rendered by Grant Thornton LLP during 2000.
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.
16
Of the time expended by Grant Thornton LLP to audit Mace's financial statements
for the fiscal year ended December 31, 2000, less than 50% of such time involved
work performed by persons other than full-time, permanent employees of Grant
Thornton LLP.
17
THE PRINCIPAL STOCKHOLDERS OF MACE
Beneficial Ownership
The following beneficial ownership table sets forth information as of October
31, 2001, 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 October 31, 2001,
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.
Name and Address of Shares of Common Percentage of
Beneficial Owner Stock Owned Common Stock Owned (1)
---------------- ----------- ----------------------
Louis D. Paolino, Jr. 6,471,030 (2) 24.4%
1000 Crawford Place, Suite 400
Mt. Laurel, NJ 08054
Excel Legacy Corporation 3,812,500 (3) 15.0
16955 Via Del Campo
San Diego, CA 92127
Mark S. Alsentzer 1,130,000 (4) 4.4
Jon E. Goodrich 874,049 (5) 3.4
Matthew J. Paolino 509,446 (6) 2.0
Robert M. Kramer 361,278 (7) 1.4
Constantine N. Papadakis, Ph.D. 70,000 (8) *
Richard B. Muir 33,000 (9) *
Gregory M. Krzemien 171,237 (10) *
Ronald R. Pirollo 66,250 (11) *
All current directors and executive 9,686,290 (12) 35.5
officers as a group (9 persons)
* Less than 1% of the outstanding shares of Mace common stock.
(1) Percentage calculation is based on 25,428,427 shares outstanding on
October 31, 2001.
(2) Includes (i) warrants to acquire 1,136,364 shares, (ii) options to
purchase 10,000 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.
18
(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 30,000 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.
(6) Includes options to purchase 105,737 shares.
(7) Includes (i) warrants to acquire 75,000 shares and (ii) options to
purchase 146,629 shares.
(8) Represents options to purchase 70,000 shares.
(9) Includes options to purchase 30,000 shares.
(10) Includes options to purchase 120,737 shares.
(11) Includes options to purchase 56,250 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 581,375 10-05-03
Nagelberg family trust
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 of the Board, 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
of the Board, Chief Executive Officer and President. Mace paid $84,000 in fiscal
2000 and $45,902 through October 31, 2001, for such services. 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. Mace's Audit Committee is considering a proposal that the
company enter into an arrangement with LP Learjets, LLC, whereby Mace would pay
$5,109 per month to LP Learjets, LLC for the right to use a Learjet 31A for 100
hours per year. Additionally, when the Learjet 31A is used, Mace would also pay
to Aeroways, Inc., the direct costs of the Learjet's per-hour use, which include
fuel, pilot fees, engine insurance and landing fees. The direct costs are
approximately $1,100 per flight hour.
Until September 2000, Robert M. Kramer, Mace'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 Mace from April 1999 to August of 2000.
Mace paid such corporation approximately $145,000 during 2000, and $15,390 in
January 2001 for services provided in 2000. Mace has not paid such corporation
for legal services since the January 2001 payment and does not anticipate any
future payments.
In 2001, Mace hired Premier Concrete, Inc., a company controlled by Matthew J.
Paolino, Mace's Vice President and a director, to assist with underground tank
removal and complete pavement re-surfacing at one of Mace's car wash locations.
Premier Concrete, Inc., the lowest responsible bidder for the contract, has been
paid $34,450 for its services through October 31, 2001. Mace believes that the
rates charged are competitive when compared with similar service provided by
independent contractors.
Mace purchased car wash parts, equipment and related services from Sonny's
Enterprises, Inc., a car wash parts and equipment company owned by Paul G.
Fazio, the brother of Michael Fazio, Mace's Vice President of Operations until
June 2000. Payments for such purchases totaled $391,000 in fiscal year 1999 and
approximately $558,000 in fiscal year 2000. Mace contracted with Sonny's
Enterprises based on the competitive prices and quality of such parts, equipment
and services offered by Sonny's Enterprises, Inc.
20
In February 2000, Mace entered into a Management Agreement with Mark Sport,
Inc., a Vermont corporation controlled by Jon E. Goodrich, a director of the
Company. The Management Agreement entitled Mark Sport, Inc. to operate Mace's
Safety and Security Devices Division and receive all profits or losses for a
seven-month term beginning January 1, 2000. The Agreement was extended for
several six-month periods through January 31, 2002, as provided for in the
original Management Agreement. In exchange, the Agreement requires Mark Sport,
Inc. 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, Inc. must 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
agreement. During the term of the Agreement, Mark Sport, Inc. must operate the
division in substantially the same manner as it has been operated prior to the
Management Agreement. Mace's Safety and Security Devices Division leases
manufacturing and office space under a five-year lease with Vermont Mill
Properties, Inc., which provides for monthly lease payments of $6,667 beginning
November 15, 1999. Vermont Mill Properties, Inc. is also controlled by Jon E.
Goodrich.
Deadline For Stockholder Proposals
July 1, 2002, 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 2002 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 September 6, 2002, and Mace's proxy for the 2002
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 2000 Annual Report to Stockholders (including its Annual Report
on Form 10-KSB, 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-KSB. 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
November 7, 2001 Secretary
21
APPENDIX A
MACE SECURITY INTERNATIONAL, INC.
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 outside auditor. 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 outside auditor 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 operation and are in
accordance with generally accepted accounting principles. Instead, such duties
remain under the oversight of management and the outside auditor.
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 outside
auditor, representatives of the internal auditor and other financial
personnel employed or retained by the Company. The Committee may meet with
the outside 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
outside auditor is 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 outside auditor, 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 outside
auditor's 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 outside auditor 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 auditor and, if necessary,
recommend that the Board replace the outside auditor. As appropriate, the
Committee shall recommend to the Board the nomination of the outside auditor 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 outside auditor and any other terms of the
engagement of the outside auditor. 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 outside auditor, at least
annually, a written statement delineating all relationships between the outside
auditor and the Company, consistent with Independence Standards Board Standard
No. 1. The Committee shall actively engage in a dialogue with the outside
auditor with respect to any disclosed relationships or services that, in the
view of the Committee, may affect the objectivity and independence of the
outside auditor. If the Committee determines that further inquiry is advisable,
the Committee shall recommend that the Board take any appropriate action in
response to the outside auditor's independence.
B. Annual Audit
------------
(i) The Committee shall meet with the outside auditor, 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.
A-2
(ii) The Committee shall review/1/ and discuss the audited financial
statements with the management of the Company.
(iii) The Committee shall discuss with the outside auditor 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 outside auditor; (iii) the process used by
management in formulating particularly sensitive accounting estimates and the
basis for the auditor's 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 outside
auditor regarding its independence and discussions with the auditor 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 outside auditor is 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 outside
auditor 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 outside auditor, 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 outside auditor and with
management any letter of recommendation provided by the outside auditor and any
other significant matters brought to the attention of the Committee by the
outside auditor as a result of its annual audit. The Committee should allow
management adequate time to consider any such matters raised by the outside
auditor.
_________________
/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-3
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.
(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 material related
party transactions or other conflicts of interest that exist between
employees/directors and the Company. The Committee shall review all proposed
material related party transactions, prior to the Company entering into any
agreement. The committee may make recommendations to the full Board of Directors
on actions to be taken that relate to any proposed or existing related party
transactions.
A-4
MACE SECURITY INTERNATIONAL, INC.
1000 CRAWFORD PLACE, SUITE 400
MT. LAUREL, NEW JERSEY 08054
PROXY - Annual Meeting of Stockholders - December 12, 2001
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 November 2, 2001, at the Annual Meeting of Stockholders to
be held on December 12, 2001, 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
FOR all nominees WITHHOLD
listed (except as AUTHORITY
marked to the To vote for all nominees
contrary below) listed at right Nominees: FOR AGAINST ABSTAIN
Louis D. Paolino Jr.
1. ELECTION OF [_] [_] Mark S. Alsentzer 2. Ratification of the [_] [_] [_]
DIRECTORS Jon E. Goodrich Board's appointment of Grant
Robert M. Kramer Thornton LLP as Mace's
Richard B. Muir independent auditors for fiscal
Matthew J. Paolino year ending December 31, 2001.
Constantine N. Papadakis, Ph.D.
(INSTRUCTIONS: To withhold authority to
vote for any individual nominee, write the
nominee's name below)
_______________________
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 inpartnership name by authorized person.