UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
December 27, 2005
COMPUDYNE CORPORATION
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(Exact name of registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
0-29798 23-1408659
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(Commission File Number) (I.R.S. employer identification number)
2530 Riva Road, Suite 201
Annapolis, Maryland 21401
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(Address of principal executive office) (Zip code)
(410) 224-4415
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Registrant's telephone number, including area code
N/A
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On December 27, 2005, the Compensation Committee and the Audit Committee of the
Board of Directors of CompuDyne Corporation (the "Company") approved the
acceleration of vesting of certain "underwater" unvested stock options held by
employees, including executive officers in accordance with the provisions of the
Company's 1996 Employee Stock Option Plan and 2005 Stock Incentive Plan for
Employees. Stock options which had been awarded under the non-employee directors
plan were not included in such acceleration. A stock option was considered
"underwater" if the option exercise price was greater than or equal to $9.00 per
share.
The table attached as Exhibit 99.1 summarizes the outstanding options subject to
accelerated vesting.
The decision to accelerate vesting of these underwater stock options was made
primarily to avoid recognizing compensation cost in the Consolidated Statement
of Operations in future financial statements upon the adoption of Statement of
Financial Accounting Standards No. 123(R), "Share-Based Payment" ("SFAS
123(R)"), which, when effective, will require all share-based payments to
employees, including grants of employee stock options, to be recognized on the
Company's financial statements based on their fair values. SFAS 123(R) will
become effective as to the Company beginning January 1, 2006. Additionally, the
Company believes these significant, underwater stock options may not be offering
the affected employees sufficient incentive when compared to the potential
future compensation expense that would have been attributable to these stock
options.
The Compensation Committee has evaluated a number of alternatives available to
the Company with respect to stock-based awards to employees. In addition to the
acceleration of vesting of underwater options described in this Form 8-K, the
Committee is considering such actions as reducing the term of stock options
granted, reducing the number of shares underlying stock option awards granted,
reducing the number of employees to whom stock option grants will be made, and
granting alternative forms of equity-based awards, such as performance-based
awards.
The 166,600 stock options affected by this accelerated vesting represent
approximately 11% of the outstanding stock options awarded to employees. The
Company will report the avoided future compensation expense in its fourth
quarter fiscal 2005 financial statements as pro forma footnote disclosure, as
permitted under the transition guidance provided by the Financial Accounting
Standards Board.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. Description
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99.1 Summary of Options Subject to Acceleration
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Date: January 3, 2006
COMPUDYNE CORPORATION
By: /s/ Geoffrey F. Feidelberg
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Name: Geoffrey F. Feidelberg
Title: Chief Financial Officer