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 ss. 240.14a-12
Command Security Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
COMMAND SECURITY CORPORATION
P.O. Box 340, 1133 Route 55, Suite D,
Lagrangeville, New York 12540
July 29, 2005
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2005 Annual Meeting of Shareholders of Command Security Corporation which will
be held on September 22, 2005 at 12:00 p.m., local time, at the offices of
Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New
York 10036.
The matters to be acted upon at the meeting are described in the attached
Notice of Annual Meeting of Shareholders and proxy statement.
Your vote is important. After reading the proxy statement, please mark,
date, sign and return the enclosed proxy card in the prepaid envelope to ensure
that your shares will be represented at the meeting in case you are unable to
attend in person. If you attend the meeting, you may vote your shares in person,
even if you have signed and returned the proxy card.
We have enclosed a copy of the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 2005.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
/s/ Barry I. Regenstein
------------------------------------------------
Barry I. Regenstein
Executive Vice President, Chief Operating Officer
and Chief Financial Officer
COMMAND SECURITY CORPORATION
P.O. Box 340, 1133 Route 55, Suite D
Lagrangeville, New York 12540
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 22, 2005
-------------------
TO THE SHAREHOLDERS OF COMMAND SECURITY CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the
"Annual Meeting") of Command Security Corporation, a New York corporation (the
"Company"), will be held on September 22, 2005 at 12:00 p.m., local time, at the
offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New
York, New York 10036, for the following purposes:
1. To elect three (3) Class I directors to serve on the Company's Board
of Directors;
2. To approve the adoption of the Company's 2005 Stock Option Plan;
3. To ratify the selection of D'Arcangelo & Co., LLP as the Company's
independent accountants for the fiscal year ending March 31, 2006;
and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment thereof. The Board of Directors
is not presently aware of any other matter that may be raised for
consideration at the Annual Meeting.
All of the foregoing is more fully set forth in the proxy statement
accompanying this notice.
The Company's Annual Report on Form 10-K for the fiscal year ended March
31, 2005 is being mailed to shareholders along with the attached proxy
statement.
The Board of Directors has fixed the close of business on August 5, 2005
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and any adjournment of the Annual Meeting. All
holders of record of shares of the Company's common stock as of the record date
will be entitled to attend and vote at the Annual Meeting.
A complete list of shareholders entitled to vote will be available for
examination by any shareholder of the Company for any purpose germane to the
Annual Meeting during normal business hours at the offices of the Company at
1133 Route 55, Suite D, Lagrangeville, New York for the 10-day period prior to
the Annual Meeting.
Shareholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the Annual Meeting, please mark, date, sign
and return the enclosed proxy card to ensure that your shares are represented at
the Annual Meeting. Shareholders who attend the Annual Meeting may vote their
shares personally, even though they have sent in a proxy.
July 29, 2005
Lagrangeville, New York
By Order of the Board of Directors
/s/ Barry I. Regenstein
-----------------------------------------
Barry I. Regenstein
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
--------------------------------------------------------------------------------
IMPORTANT: Please mark, date, sign and return the enclosed proxy card as soon as
possible. The proxy is revocable and it will not be used if you (i) give written
notice of revocation to the Secretary of the Company, P.O. Box 340, 1133 Route
55, Suite D, Lagrangeville, New York 12540, prior to the vote to be taken at the
Annual Meeting, (ii) submit a later-dated proxy or (iii) attend and vote at the
Annual Meeting.
--------------------------------------------------------------------------------
2
COMMAND SECURITY CORPORATION
P.O. Box 340, 1133 Route 55, Suite D
Lagrangeville, New York 12540
-------------------
PROXY STATEMENT
FOR 2005 ANNUAL MEETING OF SHAREHOLDERS
-------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
The proxy accompanying this proxy statement is solicited by the Board of
Directors of Command Security Corporation, a New York corporation (the
"Company"), for use at the Annual Meeting of Shareholders to be held on
September 22, 2005 at 12:00 p.m., local time, at the offices of Kramer Levin
Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York, and at
any adjournment or adjournments thereof (the "Annual Meeting").
These proxy solicitation materials were first mailed on or about August
10, 2005 to all shareholders entitled to vote at the Annual Meeting.
WE HAVE INCLUDED WITH THIS PROXY STATEMENT A COPY OF OUR ANNUAL REPORT ON
FORM 10-K, TOGETHER WITH THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES REQUIRED TO BE PROVIDED WITH THE ANNUAL REPORT. ADDITIONAL COPIES OF
OUR ANNUAL REPORT ARE AVAILABLE UPON THE REQUEST OF A SHAREHOLDER MADE IN
WRITING TO COMMAND SECURITY CORPORATION, P.O. Box 340, 1133 Route 55, Suite D,
LAGRANGEVILLE, NEW YORK 12540, ATTN: BARRY REGENSTEIN OR BY CALLING (845)
454-3703.
VOTING AND SOLICITATION OF PROXIES
Number of Shares Outstanding; Record Date. Only holders of record of the
Company's common stock, par value $0.0001 per share ("Common Stock"), at the
close of business on August 5, 2005 (the "Record Date"), are entitled to notice
of and to vote at the Annual Meeting. As of the close of business on the Record
Date, 8,700,459 shares of Common Stock were issued and outstanding. Except as
described below, shareholders present in person or by proxy at the Annual
Meeting will be entitled to one vote on each proposal for each share of Common
Stock held by such shareholder on that date. All votes will be tabulated by the
inspector of election appointed for the meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker non-votes.
Quorum Requirement for the Annual Meeting. Our By-laws provide that the
holders of record of a majority of the shares of Common Stock issued and
outstanding on the Record Date, present in person or represented by proxy,
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be counted as present for the purpose of
determining the presence of a quorum at the Annual Meeting. Abstentions are
counted in tabulations of the vote cast on proposals presented to the
shareholders, whereas broker non-votes are not counted in tabulations of the
votes cast. Neither are counted as votes cast "for" a proposal.
Voting Rights in the Election of Directors. Members of our Board will be
elected by a plurality of the affirmative votes cast by those shares present in
person or represented by proxy and entitled to vote at the Annual Meeting.
Accordingly, the three nominees for Class I director receiving the highest
number of affirmative votes for such class will be elected. A shareholder may,
with respect to the election of directors, (i) vote for the election of all of
the nominees, (ii) withhold authority to vote for any one or more of the
nominees or (iii) withhold authority to vote for all of the nominees by so
indicating in the appropriate spaces on the enclosed proxy card. Since the
nominees will be elected by a plurality vote, neither broker non-votes nor
shares abstaining from the vote on the proposal to elect the slate of nominees
will have an effect on the outcome of the vote on Proposal One. IF YOU ARE IN
FAVOR OF THE SLATE OF NOMINEES, YOU ARE URGED TO VOTE "FOR" EACH NOMINEE
IDENTIFIED IN PROPOSAL ONE.
Voting Rights with respect to the Approval of Other Matters. Approval of
any matter other than the election of directors requires the affirmative vote of
a majority of the votes of the holders of the Common Stock entitled to be cast
in person or by proxy at the Annual Meeting. With respect to the approval of the
Company's 2005 Stock Option Plan and the ratification of the appointment of the
independent accountants, abstentions are considered to be shares present and
entitled
3
to be cast and will have the effect of a negative vote on the matter, and broker
"non-votes" are not counted as shares eligible to vote and will have no effect
on the outcome of the matter. IF YOU ARE IN FAVOR OF THE APPROVAL OF OUR 2005
STOCK OPTION PLAN AND THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
ACCOUNTANTS, YOU ARE URGED TO VOTE "FOR" EACH PROPOSALS TWO AND THREE.
Special Note about the Ratification of the Appointment of Independent
Accountants. Shareholder ratification of the selection of D'Arcangelo & Co., LLP
as our independent public accountants is not required by our By-laws or other
applicable legal requirement. However, the Board is submitting the selection of
D'Arcangelo & Co., LLP to the shareholders for ratification as a matter of good
corporate governance. If the shareholders fail to ratify the selection, the
audit committee of the Board of Directors (the "Audit Committee") will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee at its discretion may direct the appointment of a
different independent accounting firm at any time during the year if it
determines that such a change would be in our and our shareholders' best
interests.
Proxies. Whether or not you are able to attend the Annual Meeting, you are
urged to complete and return the enclosed proxy card, which is solicited by the
Board, and which will be voted as you direct on your proxy when properly
completed. In the event no directions are specified, properly executed and
delivered proxies will be voted FOR Proposals 2 and 3 and FOR each nominee
identified in Proposal 1. As to other matters that may properly come before the
Annual Meeting, properly executed and delivered proxies with no specified
directions will be voted in our discretion. You may also revoke or change your
proxy at any time before the Annual Meeting. To do this, send a written notice
of revocation or another signed proxy with a later date to our principal
executive offices, attention: Secretary, before the beginning of the Annual
Meeting. You may also automatically revoke your proxy by attending the Annual
Meeting and voting in person. All shares represented by a valid proxy received
prior to the Annual Meeting and not thereafter revoked or superseded will be
voted.
Special Procedures for Shares Held of Record by Brokers. If your shares
are held in the name of a broker, then only your broker can execute a proxy and
vote your shares and only after receiving your specific instructions. Remember
that your shares cannot be voted unless you return a signed and executed proxy
card to your broker. However, please be advised that broker non-votes with
respect to any matter to be voted on at the Annual Meeting will not be voted but
will be counted as present to determine whether there is a quorum for voting
purposes on such matters at the Annual Meeting. Broker non-votes occur when a
broker, bank or other nominee holding shares for a beneficial owner does not
vote on a particular proposal because the broker, bank or other nominee does not
have discretionary voting power for that particular proposal and has not
received instructions from the beneficial owner of the shares. PLEASE SIGN, DATE
AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED BY YOUR
BROKER.
Solicitation. Proxies may be solicited by mail, advertisement, telephone,
via the Internet or in person. Solicitations may be made by directors, officers,
investor relations personnel and other employees of the Company, none of whom
will receive additional compensation for such solicitations. Banks, brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward the Company's solicitation material to their customers for whom they
hold shares. The Company will reimburse brokerage firms and others for their
reasonable expenses in forwarding proxy materials to the beneficial owners of
the Common Stock and obtaining voting instructions from beneficial owners of the
Common Stock.
As of July 29, 2005, executive officers and directors of the Company
beneficially own, in the aggregate, approximately 58.4% of the outstanding
Common Stock. They have indicated that they intend to vote in the manner
recommended by the Board of Directors.
The entire expense of printing, preparing, assembling and mailing proxy
materials and the cost of soliciting proxies will be borne by the Company.
--------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE MARK,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO THAT YOUR SHARES OF COMMON
STOCK WILL BE VOTED. THIS WILL NOT LIMIT YOUR RIGHT TO REVOKE YOUR PROXY OR TO
ATTEND OR VOTE AT THE ANNUAL MEETING.
--------------------------------------------------------------------------------
4
PROPOSAL ONE
ELECTION OF DIRECTORS
Our Board is currently comprised of six (6) members divided into two
classes of directors serving staggered two-year terms. Class I currently
consists of three directors, Peter T. Kikis, Martin R. Wade, III and Martin C.
Blake. Class II currently consists of three directors, Bruce R. Galloway, Robert
S. Ellin and Thomas R. Kikis.
The Class II directors of the Company will continue in office for their
existing terms, which expire at the 2006 annual meeting of shareholders and when
their respective successors are elected and have qualified, the Class I
directors of the Company to be elected at the Annual Meeting will serve for a
term of two years, expiring at the annual meeting of shareholders in 2007 and
when their respective successors are elected and have qualified.
Unless authority to vote for directors is withheld, the Company intends
that the shares represented by the enclosed proxy will be voted for the election
of the nominees listed below. In the event the nominees become unable or
unwilling to accept nomination or election, the shares represented by the
enclosed proxy will be voted for the election of such persons as the Board of
Directors may select. The Board of Directors has no reason to believe that the
nominees will be unable or unwilling to serve.
Directors are elected by a plurality vote of the aggregate voting power of
the shares of outstanding Common Stock, present in person or represented by
proxy, voting together as a single class.
Directors
Set forth below is certain information regarding the Company's directors,
including information furnished by them as to their principal occupations and
business experience for the past five years, certain directorships held by each,
their respective ages as of July 29, 2005 and the year in which each became a
director of the Company. Each director has served continuously with the Company
since his first election as indicated below.
Position with
Name Age the Company Director Since
Bruce R. Galloway............. 47 Chairman of the Board 2004
of Directors
Robert S. Ellin............... 40 Director 2004
Thomas P. Kikis............... 44 Director 2004
Martin R. Wade, III........... 56 Director 2004
Peter T. Kikis................ 82 Director 2004
Martin C. Blake............... 51 Director 2004
Nominees for Class I Directors.
Peter T. Kikis has been a director of the Company since August 2004. Since
1950, Mr. Kikis has been the President and a principal in Spencer Management
Company, a real estate development and management company in New York.
Previously he was an investor and a director of the Company from February 1995
to September 2000. He is a director of Deltec International S.A. and Atlas
Capital Group Holdings, S.A. Mr. Kikis is the father of Thomas P. Kikis.
Martin C. Blake has over twenty-eight years of experience in aviation
security services. Prior to joining the Company in 1995, Mr. Blake retired as a
Major in the United States Air Force, where he served in a variety of senior
management positions. Mr. Blake's last assignment was as the Program Manager for
Electronic Security Systems, Electronic Systems Division. In this capacity he
managed a $20 million annual program responsible for global marketing,
procurement, and deployment of electronic security systems. He was responsible
for integrating security systems and programs at international airports in
Germany, Turkey, and the United Kingdom. Previously, Mr. Blake was the Director
of Security at the Department of Defense's largest classified air flight
facility, incorporating over 1,200 square miles of restricted air space.
Establishing aviation security programs for major aircraft defense contractors
was an integral responsibility of his position. Mr. Blake also served as the
Security Program Manager for Air Force space programs, including security for
the Space Shuttle and expendable space launch vehicles. He also led the effort
to integrate a shared automated entry control system for use at Cape Canaveral,
Kennedy Space Center, and the Johnson Space Center.
Martin R. Wade, III has served as one of our directors since August 2004.
Mr. Wade has been the Chief Executive Officer of International Microcomputer
Software, Inc. since 2001. Prior to joining IMSI, Mr. Wade served from 1998 to
2000 as a merger and acquisition banker at Prudential Securities, and from 1996
to 1998 as a managing director in mergers and acquisitions at Salomon Brothers
Inc. From 1991 to 1996, Mr. Wade was National Head of Investment Banking at C.J.
5
Lawrence, Morgan Grenfell, where he was member of the Board of Directors. Prior
to that, Mr. Wade was the National Head of investment banking for Price
Waterhouse. Mr. Wade also spent six years in the mergers and acquisitions
department at Bankers Trust and eight years at Lehman Brothers Kuhn Loeb. Mr.
Wade is credited with participating in over 200 merger and acquisition
transactions involving various clients such as, Nike, Cornerstone National Gas
Company, Handmark Graphics and Redken Laboratories, Inc. Mr. Wade has a B.S. in
Business Administration from West Virginia University, and an M.B.A. in Finance
from the University of Wyoming. Mr. Wade is a member of the Board of Directors
of DiMon, NexMed, Inc., Energy Transfer Group.
Incumbent Class II Directors.
Bruce R. Galloway has served as Chairman of the Board and one of our
directors since August 2004. Mr. Galloway is currently a Managing Director in
the Galloway Division at Burnham Securities, Inc., an investment bank based in
New York City. He has been employed there since 1993. Prior to joining Burnham,
from 1991 to 1993, Mr. Galloway was a Senior Vice President at Oppenheimer &
Company, a New York - based investment bank, a broker-dealer. Mr. Galloway has a
B.A. in economics from Hobart College and a M.B.A. in finance from the New York
University Stern Graduate School of Business. Mr. Galloway is also a member of
each of the Board of Directors of International Microcomputer Software, Inc.,
DataMetrics Corporation, Forward Industries, Inc., GVI Security Solutions, Inc.
and Waiter.Com, Inc.
Robert S. Ellin has served as one of our directors since August 2004. Mr.
Ellin is a Managing Member of Trinad Capital L.P., a hedge fund dedicated to
investing in micro-cap public companies. Prior to joining Trinad Capital, Mr.
Ellin was the founder and President of Atlantis Equities, Inc. ("Atlantis"), a
personal investment company. Founded in 1990, Atlantis has actively managed an
investment portfolio of small capitalization public companies as well as select
private company investments. Mr. Ellin frequently played an active role in
Atlantis investee companies including board representation, management
selection, corporate finance and other advisory services. Through Atlantis and
related companies Mr. Ellin spearheaded investments into ThQ, Inc., Grand Toys,
Forward Industries, Inc. and completed a leveraged buyout of S&S Industries,
Inc., where he also served as President from 1996 to 1998. Prior to founding
Atlantis, Mr. Ellin worked in Institutional Sales at LF Rothschild, and prior to
that he was Manager of Retail Operations at Lombard Securities. Mr. Ellin has a
B.A. from Pace University. Mr. Ellin is also a member of the Board of Directors
of Shells Seafood, Inc.
Thomas P. Kikis has served as one of our directors since August 2004. Mr.
Kikis is the managing member of Arcadia Securities, LLC, a New York based
registered broker-dealer which he organized in 1998. He is also the President of
Kikis Asset Management, a New York - based money management firm he started in
1991. Prior to that, he was Vice President in charge of trading and a Portfolio
Manager at Deltec Securities, the New York subsidiary of an international
investment bank. Previously he was an investor and a director of the Company
from October 1997 to September 2000. Mr. Kikis has a B.A. from Princeton
University and an Executive M.B.A. in Finance from New York University Stern
School of Business.
Peter T. Kikis is the father of Thomas P. Kikis. There are no other family
relationships among any of our directors or executive officers.
The Board of Directors unanimously recommends a vote FOR the Class I
nominees for director listed above.
6
PROPOSAL TWO
APPROVAL OF 2005 STOCK OPTION PLAN
Background and Reasons for Adoption
The Board of Directors has, subject to approval by the Company's
shareholders at the Annual Meeting, adopted the Command Security Corporation
2005 Stock Incentive Plan (the "Plan"). The purpose of the Plan is to enable the
Company to provide certain key individuals, upon whose judgment, initiative and
efforts the Company will largely depend for the successful conduct of its
business, with incentives to enter into and remain in the service of the Company
(or a Company subsidiary), to acquire or increase their proprietary interest in
the success of the Company, to maximize their performance, and thereby enhance
the long-term performance of the Company. It is anticipated that providing such
persons with a direct stake in the Company will assure a close identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf. The following description of the Plan is qualified in its
entirety by reference to the full text of such Plan, which is set forth in the
attached Exhibit A.
To date, no options have been granted under the Plan.
General Description of the Plan
Options. The Plan authorizes the grants of non-qualified stock options
("NQOs") and incentive stock options ("ISOs"). NQOs and ISOs are collectively
referred to as "Options." Under the Plan, the Company may deliver authorized but
unissued shares of Common Stock, treasury shares of Common Stock, and shares of
Common Stock acquired by the Company for the purposes of the Plan.
Maximum Number of Shares. A maximum of 1,000,000 shares of Common Stock
are available for grants pursuant to Options under the Plan. Any shares subject
to an Option under the Plan that remain unissued upon the cancellation or
termination of the Option for any reason shall again become available for
Options under the Plan. The maximum number of shares of Common Stock with
respect to which any individual may be granted Options during any one calendar
year is 500,000 shares.
Administration. The Plan is administered by the compensation committee of
the Board of Directors (the "Compensation Committee"), or such other committee
or subcommittee of the Board of Directors as the Board of Directors appoints or
as is formed by abstention or recusal of one or more members of the Compensation
Committee. The Compensation Committee will consist of at least two individuals,
both of whom meet the definition of an "outside director" (within the meaning of
Section 162(m) of the Internal Revenue Code (the "Code")) and a "non-employee
director" (as defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934). However, Options under the Plan will not be invalidated if the
Compensation Committee includes members who do not meet such definitions. If the
Compensation Committee does not exist, or for any other reason determined by the
Board of Directors, the Board of Directors may act as the Compensation
Committee. The Compensation Committee or the Board of Directors may delegate to
one or more officers of the Company the authority to designate the individuals
(from among those eligible to receive Options, other than such officer(s)
themselves) who will receive Options under the Plan, to the fullest extent
permitted by the New York Business Corporation Law (or any successor provision
thereto). The Compensation Committee determines the key persons who will receive
Options, the type of Options granted, and the number of shares subject to each
Option. The Compensation Committee also determines the exercise prices,
expiration dates and other material features of Options. No Option may be
granted under the Plan after September 30, 2015. The Compensation Committee has
the authority to interpret and construe any provision of the Plan and to adopt
such rules and regulations for administering the Plan as it deems necessary or
appropriate. All decisions and determinations of the Compensation Committee are
final and binding on all parties. No member of the Compensation Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option.
Eligibility. Officers, non-employee directors, and executive, managerial,
professional or administrative employees of, and consultants to, the Company and
its subsidiaries, as the Compensation Committee in its sole discretion shall
select, are eligible to receive Options under the Plan. As of July 29, 2005, the
Company believes approximately 26 individuals are eligible to participate in the
Plan. However, the granting of Options is discretionary and it is not possible
to determine how many individuals actually will receive Options under the Plan.
Power to Amend. The Board of Directors may, at any time, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever. However,
no amendment shall be effective without the approval of the shareholders of the
Company if it would increase the number of shares of Common Stock that may be
granted as ISOs under the Plan, materially increase the benefits under the Plan
or if the Board determines that shareholder approval is necessary and
7
appropriate under stock exchange rules or so that Options under the Plan may
comply with Sections 422 or 162(m) of the Code. The Compensation Committee may,
in its sole discretion, without amending the Plan, amend any Option to (i)
accelerate the date on which any option becomes exercisable or otherwise adjust
any of the terms of such option , (ii) accelerate the date on which any Option
vests, (iii) waive any condition imposed with respect to any Option, or (iv)
otherwise adjust any of the terms of any Option; provided, however, that no such
amendment may lower the exercise price of an option granted under the Plan. No
amendment or modification to the Plan or any Option may reduce the grantee's
rights under any previously granted and outstanding Option without the consent
of the grantee, except to the extent that the Board of Directors determines that
such amendment is necessary or appropriate to prevent such Options from being
subject to the deduction limit of Section 162(m) of the Code or from being
subject to tax under Section 409A of the Code.
Summary of Options Under the Plan
General. The exercise price per share of each Option granted under the
Plan is determined by the Compensation Committee on the grant date and will not
be less than the fair market value of a share of Common Stock on the grant date.
Each Option is exercisable for a term, not to exceed ten years, established by
the Compensation Committee on the grant date. The exercise price shall be paid
in cash or, subject to the approval of the Compensation Committee, in shares of
Common Stock valued at their fair market value on the date of exercise or by
such other method as the Compensation Committee may from time to time prescribe.
Unless the Compensation Committee provides otherwise in connection with an
Option, an Option will become exercisable in four equal installments on each of
the first four anniversaries of the grant date and will remain exercisable until
the tenth anniversary of the grant date.
The Plan contains provisions applicable to the exercise of Options
subsequent to a "termination of employment," as the result of a dismissal for
"cause," termination of employment other than for "cause," "disability" (as each
such term is defined in the Plan), or death. These provisions apply unless the
Compensation Committee establishes alternative provisions with respect to an
Option in an option grant agreement, employment agreement or similar agreement
between the Company and the grantee. In general, these provisions provide that
Options that are not exercisable at the time of such termination shall expire
upon the termination of employment and Options that are exercisable at the time
of such termination shall remain exercisable until the earlier of the expiration
of their original term and (i) the expiration of three months after termination
of employment and (ii) in the event of a grantee's disability or death, the
first anniversary of such termination. In the event of a dismissal for cause,
all Options held by the grantee, whether or not then exercisable, terminate
immediately as of the commencement of business on the termination of employment
date. In addition, if a grantee dies subsequent to a termination of employment
but before the expiration of the exercise period, then the grantee's Options
shall remain exercisable until the first anniversary of the grantee's death (or
the expiration of the original exercise period, if earlier).
Specific Provisions for Incentive Stock Options. Generally, ISOs are
options that may provide certain federal income tax benefits to a grantee not
available with NQOs. A grantee must hold the shares acquired upon exercise of an
ISO for at least two years after the grant date and at least one year after the
exercise date in order to obtain these income tax benefits. The aggregate fair
market value of shares of Common Stock (determined on the ISO grant date) with
respect to which ISOs are exercisable for the first time by a grantee during any
calendar year (whether issued under the Plan or any other plan of the Company or
its subsidiaries) may not exceed $100,000. An ISO granted to any individual who
owns shares of Common Stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company is subject to the
following additional limitations: the exercise price per share of the ISO must
be at least 110% of the fair market value of a share of Common Stock at the time
any such ISO is granted, and the ISO cannot be exercisable more than five years
from the grant date.
An option cannot be treated as an ISO if it is exercised more than three
months following the grantee's termination of employment for any reason other
than death or disability, or more than one year after the grantee's termination
of employment for disability, unless the grantee died during such three-month or
one-year period. ISOs are not transferable other than by will or by the laws of
descent and distribution.
Transferability
No Option is transferable other than by will or the laws of descent and
distribution, except to the extent an agreement with respect to an NQO permits
certain transfers to a grantee's family members or trusts.
8
Certain Corporate Changes
The Plan provides that in the event of a change in the capitalization of
the Company, a stock dividend or split, a merger or combination of shares and
certain other similar events, there will be an adjustment in the number of
shares of Common Stock available to be delivered under the Plan, the number of
shares subject to Options, and the exercise prices of certain Options. The Plan
also provides for the adjustment or termination of Options upon the occurrence
of certain corporate events.
Tax Withholding
The Plan provides that a grantee may be required by the Compensation
Committee to meet certain tax withholding requirements by remitting to the
Company cash or through the withholding of shares otherwise payable to the
grantee. In addition, the grantee may meet such withholding requirements,
subject to certain conditions, by remitting previously acquired shares of Common
Stock.
Performance-Based Compensation
A federal income tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to each of the Chief Executive Officer
and the next four most highly compensated officers of a public corporation.
However, amounts that constitute "performance-based compensation" under Section
162(m) of the Code are not counted toward the $1 million limit. If the Company's
shareholders approve the Plan, grants of NQOs and ISOs generally would be
eligible for this exception to the $1 million limit. In addition, the Plan
authorizes the Compensation Committee to defer until after the grantee's
termination of employment the exercise of Options that do not qualify as
performance-based compensation.
New Plan Benefits
Since no Options have been granted under the Plan and since Options under
the Plan are wholly discretionary, amounts payable under the Plan are not
determinable at this time.
Summary of Federal Tax Consequences
The following is a brief description of the federal income tax treatment
that will generally apply to Options granted under the Plan based on current
federal income tax rules.
Non-Qualified Options. The grant of an NQO will not result in taxable
income to the grantee. Except as described below, the grantee will realize
ordinary income at the time of exercise in an amount equal to the excess of the
fair market value of the shares of Common Stock acquired over the exercise price
for those shares, and the Company will be entitled to a corresponding deduction.
Gains or losses realized by the grantee upon disposition of such shares will be
treated as capital gains and losses, with the basis in such shares of Common
Stock equal to the fair market value of such shares at the time of exercise.
Incentive Stock Options. The grant of an incentive stock option will not
result in taxable income to the grantee. The exercise of an incentive stock
option will not result in taxable income to the grantee provided that the
grantee was, without a break in service, an employee of the Company or a
subsidiary during the period beginning on the date of the grant of the option
and ending on the date three months prior to the date of exercise (one year
prior to the date of exercise if the grantee is disabled, as that term is
defined in the Code). The excess of the fair market value of the shares of
Common Stock at the time of the exercise of an incentive stock option over the
exercise price is an adjustment that is included in the calculation of the
grantee's alternative minimum taxable income for the tax year in which the
incentive stock option is exercised.
If the grantee does not sell or otherwise dispose of the shares of Common
Stock within two years from the date of the grant of the incentive stock option
or within one year after the transfer of such shares of Common Stock to the
grantee, then, upon disposition of such shares of Common Stock, any amount
realized in excess of the exercise price will be taxed to the grantee as capital
gain and the Company will not be entitled to a corresponding deduction. A
capital loss will be recognized to the extent that the amount realized is less
than the exercise price. If the foregoing holding period requirements are not
met, the grantee will generally realize ordinary income at the time of the
disposition of the shares, in an amount equal to the lesser of (i) the excess of
the fair market value of the shares of Common Stock on the date of exercise over
the exercise price, or (ii) the excess, if any, of the amount realized upon
disposition of the shares over the exercise price and the Company will be
entitled to a corresponding deduction. If the amount realized exceeds the value
of
9
the shares on the date of exercise, any additional amount will be capital gain.
If the amount realized is less than the exercise price, the grantee will
recognize no income, and a capital loss will be recognized equal to the excess
of the exercise price over the amount realized upon the disposition of the
shares. The Company will be entitled to a deduction to the extent that the
grantee recognizes ordinary income because of a disqualifying disposition.
Withholding of Taxes. The Company may withhold amounts from grantees to
satisfy withholding tax requirements. Subject to guidelines established by the
Compensation Committee, grantees may have shares of Common Stock withheld from
Options or may tender shares of Common Stock to the Company to satisfy tax
withholding requirements.
$1 Million Limit. Section 162(m) of the Code disallows a federal income
tax deduction for certain compensation in excess of $1 million per year paid to
each of the Company's chief executive officer and its four other most highly
compensated executive officers. Compensation that qualifies as
"performance-based compensation" is not subject to the $1 million limit. The
Plan has been structured so that the Options will qualify as performance-based
compensation.
Section 409A. Section 409A of the Code, which was enacted in October 2004,
imposes significant new restrictions on deferred compensation and may impact on
Options under the Plan. If the Section 409A restrictions are not followed, a
grantee could be subject to accelerated liability for tax on the non-complying
award, as well as a 20% penalty tax. The Plan is structured to comply with the
requirements of Section 409A. The Company anticipates that it will amend the
Plan and/or any Option to the extent that future additional administrative
guidance indicates that the amendment is necessary to ensure that grantees are
not subject to the Section 409A tax penalties.
Tax Advice. The preceding discussion is based on federal tax laws and
regulations presently in effect, which are subject to change, and the discussion
does not purport to be a complete description of the federal income tax aspects
of the Plan. A grantee may also be subject to state and local taxes in
connection with the grant of Options under the Plan.
10
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT OF D'ARCANGELO & CO., LLP
AS INDEPENDENT ACCOUNTANTS
The Audit Committee has selected D'Arcangelo & Co., LLP as the independent
accountants to audit the books, records and accounts of the Company for the
current fiscal year ending March 31, 2006, subject to ratification by the
shareholders at the Annual Meeting. D'Arcangelo & Co., LLP has audited the
Company's financial statements since 1996. Although shareholder ratification is
not required by our By-laws or any other applicable legal requirement, the Board
is submitting the selection of D'Arcangelo & Co., LLP to the shareholders for
ratification as a matter of good corporate governance. Our Board recommends that
shareholders vote for ratification of such appointment. In the event of a
negative vote on ratification, our Board may reconsider its selection. A
representative of D'Arcangelo & Co., LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement and will be available to
answer questions from shareholders.
The Audit Committee has responsibility for the appointment, compensation
and oversight of the work of the independent accountant. As part of this
responsibility, the Audit Committee must pre-approve all permissible services to
be performed by the independent accountant.
Pursuant to the Audit Committee charter, the Audit Committee is required
to pre-approve all auditing services and the terms thereof (which may include
providing comfort letters in connection with securities underwritings) and
non-audit services (other than non-audit services prohibited under Section
10A(g) of the Exchange Act of 1934, as amended, or the applicable rules of the
Securities and Exchange Commission ("SEC") or the Public Company Accounting
Oversight Board) to be provided to the Company by the independent auditor;
provided, however, the pre-approval requirement is waived with respect to the
provision of non-audit services for the Company if the "de minimus" provisions
of Section 10A(i)(1)(B) of the Exchange Act are satisfied. This authority to
pre-approve non-audit services may be delegated to one or more members of the
Audit Committee, who shall present all decisions to pre-approve an activity to
the full Audit Committee at its first meeting following such decision.
During the fiscal years ended March 31, 2005 and 2004 and the interim
period between April 1, 2005 and July 29, 2005, neither the Company nor anyone
acting on its behalf consulted D'Arcangelo & Co., LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, or any other matters or reportable events
listed in Item 304(a)(2)(i) or (ii) of Regulation S-K.
Approval of Proposal Three will require the affirmative vote of a majority
of the shares of Common Stock present or represented by proxy at the Annual
Meeting and entitled to vote.
The following table sets forth the aggregate fees billed by D'Arcangelo &
Co., LLP for audit and non-audit services rendered to the Company in our fiscal
years ended March 31, 2004 and 2005. These fees are categorized as audit fees,
audit related fees, tax fees and all other fees. The nature of the services
provided in each category is described following the table.
Fiscal Fiscal
Fee Category 2004 2005
Audit Fees $144,007 $131,174
Audit-Related Fees - -
Tax Fees 15,578 13,325
All Other Fees 3,645 3,357
-------- --------
$163,230 $147,856
======== ========
Audit fees. These fees generally consist of professional services rendered
for the audits of the financial statements of the Company and its internal
control over financial reporting, quarterly reviews, consents, income tax
provision procedures and assistance with and review of documents filed with the
SEC.
Audit-related fees. These fees generally consist of assurance and other
services related to the performance of the audit or review of the Company's
financial statements or that are traditionally performed by the independent
registered public accounting firm, issuance of consents, due diligence related
to acquisitions, internal control reviews, attest services that are not required
by statute or regulation and consultations concerning financial accounting and
reporting standards.
11
Tax fees. These fees generally relate primarily to tax compliance,
including review and preparation of corporate tax returns, assistance with tax
audits, review of the tax treatment for certain expenses and tax due diligence
relating to acquisitions. They also include fees for state and local tax
planning and consultations with respect to various tax matters.
All other fees. These fees generally consist of reviews for compliance
with various government regulations, risk management and treasury reviews and
assessments and audits of various contractual arrangements.
The Board of Directors has determined that the services rendered by
D'Arcangelo & Co., LLP are compatible with maintaining their independence, as
the Company's principal accountants and independent auditors.
The Board of Directors unanimously recommends a vote "FOR" ratification of
the appointment of D'Arcangelo & Co., LLP as the Company's independent
accountants.
12
OTHER INFORMATION
Information Concerning Executive Officers
The executive officers of the Company, along with their respective ages
and positions with the Company, as of April 1, 2005, are set forth below. We
refer to these individuals as our "Named Executive Officers."
Name Age Position with the Company
Barry I. Regenstein........... 48 Executive Vice President, Chief
Operating Officer and Chief Financial
Officer
Martin C. Blake............... 51 Vice President - Aviation and Director
Jeffrey S. Edmiston........... 40 Senior Vice President - Guard Division
See "Proposal 1-Election of Directors--Directors" for information relating to
Mr. Blake.
Barry I. Regenstein has served as our Executive Vice President and Chief
Operating Officer since August 2004, and also as our Chief Financial Officer
since October 2004. Mr. Regenstein has over 25 years of experience including 21
years in operations and finance of contract services companies. Most recently,
Mr. Regenstein rendered consulting services for Trinad Capital, L.P., a
shareholder of the Company, and its affiliates, from February 2004 until August
2004. Prior to that period, Mr. Regenstein served as a Senior Vice President and
the Chief Financial Officer of GlobeGround North America LLC (formerly Hudson
General Corporation), an airport services company from 2001 until 2003. Mr.
Regenstein also served as Vice President and Chief Financial Officer of
GlobeGround North America LLC from 1997 to 2001 and was employed in various
capacities with GlobeGround North America LLC since 1982. Prior to joining
Hudson General Corporation, he was with Coopers & Lybrand in Washington, D.C.
Mr. Regenstein is a Certified Public Accountant and received a B.S. in
Accounting from the University of Maryland and an M.S. in Taxation from Long
Island University.
Jeffrey S. Edmiston has served as our Senior Vice President - Guard
Division since June 2003. Prior to that Mr. Edmiston served as our Northeast
Regional Vice President from 2001 to 2003. Prior to that period Mr. Edmiston
worked for US Security Associates/Atlantic Security from 1993 to 2000. Mr.
Edmiston has nine years of professional law enforcement experience with 10 years
of experience in managerial positions in the security industry. . He is a former
law enforcement officer with six years of experience in the narcotics and patrol
divisions. He has also worked as a security manager with a jewelry company and
specialized in employee theft investigation. In addition, Mr. Edmiston served
three years as a military police officer in the U.S. Army in the Nuclear
Security and Executive Protection areas. Mr. Edmiston is a member of the
American Society for Industrial Security.
Security Ownership of Certain Beneficial Owners and Management
The following table presents information with respect to beneficial
ownership of the Common Stock as of July 29, 2005 by:
o each person known by us to beneficially own more than 5% of the
outstanding shares of the Common Stock;
o individuals serving as our Named Executive Officers;
o each of our directors and nominees for director; and
o all executive officers and directors as a group.
Except as otherwise noted, the address of each person/entity listed in the
table is c/o Command Security Corporation, P.O. Box 340, 1133 Route 55, Suite D,
Lagrangeville, New York 12540. The table includes all shares of the Common Stock
issuable within 60 days of July 29, 2005 upon the exercise of options and other
rights beneficially owned by the indicated shareholders on that date. Beneficial
ownership is determined in accordance with the rules of the SEC and includes all
shares of Common Stock as to which such persons have voting and investment
power. To our knowledge, except under applicable community property laws or as
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all shares of Common Stock stated as being
beneficially owned. The applicable percentage of ownership for each shareholder
is based on 8,700,459 shares of Common Stock outstanding as of July 29, 2005,
together with applicable options or warrants exercisable for shares of Common
Stock held by such shareholder. Shares of Common Stock issuable upon exercise of
options and other rights beneficially owned are deemed outstanding for the
purpose of computing the percentage ownership of the person holding those
options and other rights, but are not deemed outstanding for computing the
percentage ownership of any other person.
13
Amount and Nature of
Name Beneficial Ownership (1) Percent of Class (2)
---- ------------------------ --------------------
Certain Beneficial Owners
Trinad Capital, L.P.(3) 2,261,090 26.0%
153 East 53rd Street
48th Floor
New York, New York 10022
Management
Named Executive Officers
Barry I. Regenstein(4) 200,000 2.2%
Martin C. Blake, Jr.(5) 130,000 1.5%
Directors and Nominees
Robert S. Ellin(6) 2,261,090 26.0%
153 East 53rd Street
48th Floor
New York, New York 10022
Bruce Galloway(7) 1,248,809 13.4%
c/o Galloway Capital Management, LLC
1325 Avenue of the Americas
26th Floor
New York, New York 10019
Thomas P. Kikis(8) 668,294 7.5%
Arcadia Securities
720 Fifth Avenue
9th Floor
New York, New York 10019
Peter T. Kikis(9) 1,572,675 17.0%
Arcadia Securities
720 Fifth Avenue
9th Floor
New York, New York 10019
Martin R. Wade, III -- --
All Officers and Directors 6,080,868 58.4%
(including Nominees) as a Group
(7 Persons)
(1) Except as otherwise indicated below, each named person has voting and
investment powers with respect to the securities owned by them.
(2) Based on 8,700,459 shares of Common Stock outstanding at July 29, 2005
calculated in accordance with Rule 13d-3(d)(1)(I) as promulgated under the
Exchange Act.
(3) Robert S. Ellin, one of our directors, is a managing member of Trinad
Advisors GP, LLC, the general partner of Trinad Capital, L.P. and a limited
partner of Trinad Capital, L.P. Mr. Ellin expressly disclaims any beneficial
ownership of such shares except to the extent of his pecuniary interest therein.
(4) Consists of options exercisable within 60 days of July 29, 2005 to purchase
200,000 shares of Common Stock at an exercise price of $1.35 per share.
14
(5) Consists of options exercisable within 60 days of July 29, 2005 to purchase
80,000 shares of Common Stock at an exercise price of $1.35 per share as well as
50,000 shares of Common Stock issuable upon the exercise of warrants at an
exercise price of $0.75 per share.
(6) Consists of 2,261,090 shares of Common Stock held by Trinad Capital, L.P.
Mr. Ellin is a managing member of Trinad Advisors GP, LLC, the general partner
of Trinad Capital, L.P. and a limited partner of Trinad Capital, L.P. Mr. Ellin
expressly disclaims any beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
(7) Consists of 439,828 shares of Common Stock and 228,465 shares of Common
Stock issuable upon the exercise of warrants at an exercise price of $1.25 per
share held by Bruce Galloway IRA Rollover and 408,015 shares of Common Stock
issuable upon the exercise of warrants at an exercise price of $1.25 per share
held by Galloway Capital Management, LLC. Mr. Galloway is a managing member of
Galloway Capital Management, LLC.
(8) Includes 228,465 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.25 per share. Mr. Thomas Kikis is the son of
Mr. Peter Kikis. Mr. Thomas Kikis expressly disclaims any beneficial ownership
of securities of the Company held by Mr. Peter Kikis.
(9) Includes 537,566 shares of Common Stock issuable upon the exercise of
warrants at an exercise price of $1.25 per share. Mr. Peter Kikis is the father
of Mr. Thomas Kikis. Mr. Peter Kikis expressly disclaims any beneficial
ownership of securities of the Company held by Mr. Thomas Kikis.
15
Board Meetings and Committees
During the fiscal year ended March 31, 2005, our Board held a total of
four meetings, and all incumbent directors attended at least 75% of the meetings
of our Board or the meetings of committees, if any, upon which such directors
served. Our Board has determined that each of our directors other than Martin C.
Blake, the Company's Vice President-Aviation, qualifies as independent under the
listing standards of the Nasdaq National Market ("Nasdaq").
Our Board has three committees: the Audit Committee, the nominating and
corporate governance committee (the "Nominating and Corporate Governance
Committee") and the Compensation Committee. All committees are comprised solely
of independent directors.
Audit Committee.
The Audit Committee currently consists of Martin R. Wade, III (Chairman),
Thomas P. Kikis and Bruce R. Galloway. The Board has determined that each member
is independent under the NASD's listing standards and the applicable rules of
the SEC, that each member is "financially literate" under the Nasdaq listing
standards and that Mr. Wade qualifies as an Audit Committee Financial Expert
under the applicable rules of the SEC.
The Audit Committee hires the Company's independent accountants and is
charged with the responsibility of overseeing the financial reporting process of
the Company. In the course of performing its functions, the Audit Committee
reviews, with management and the independent accountants, the Company's internal
accounting controls, the annual financial statements, the report and
recommendations of the independent accountants, the scope of the audit and the
qualifications and independence of the auditors. The report of the Audit
Committee is set forth later in this proxy statement. The Audit Committee held
three meetings during the fiscal year ended March 31, 2005. A copy of the Audit
Committee charter as adopted by the Board on April 27, 2005 is attached to this
proxy statement as Exhibit B.
Nominating and Corporate Governance Committee.
The Nominating and Corporate Governance Committee currently consists of
Thomas P. Kikis (Chairman), Peter T. Kikis and Martin R. Wade. The Board has
determined that each member of this committee is independent under the Nasdaq
listing standards. The Nominating and Corporate Governance Committee is
responsible for identifying individuals who are qualified to become directors,
recommending nominees for membership on the Board and committees of the Board,
promulgating minimum qualifications that it believes must be met by director
nominees, establishing policies for considering director candidates recommended
by shareholders, implementing procedures for shareholders in submitting
recommendations for director candidates and developing and recommending to the
Board corporate governance guidelines.
The Nominating and Corporate Governance Committee has established the
following minimum qualifications for prospective nominees: (1) high
accomplishments in his or her respective field, with superior credentials and
recognition, (2) if applicable, a demonstrated history of actively contributing
at board meetings, (3) high personal and professional integrity, exceptional
ability and judgment, and effectiveness, in conjunction with the other nominees
to the Board, in serving the long-term interests of the shareholders and (4)
sufficient time and availability to devote to the affairs of the Company,
particularly in light of the number of boards on which the nominee may serve. In
addition, the Nominating and Corporate Governance Committee may consider a
variety of other qualities and skills, including whether the nominee has direct
experience in the industry or in the markets in which the Company operates and
the definition of independence within the meaning of the Nasdaq listing
standards. Nominees must also meet any applicable requirements of the SEC's
regulations, state law and the Company's Certificate of Incorporation and
By-laws.
The Nominating and Corporate Governance Committee has established a
process for identifying and evaluating nominees for director. The Nominating and
Corporate Governance Committee may solicit recommendations from any or all of
the following sources: non-management directors, executive officers, third-party
search firms or any other source it deems appropriate. The Nominating and
Corporate Governance Committee
16
will then, without regard to the source of the initial recommendation of such
proposed director candidate, review and evaluate the qualifications of any such
proposed director candidate, and conduct inquiries it deems appropriate. Upon
identifying individuals qualified to become members of the Board, consistent
with the minimum qualifications and other criteria approved by the Board from
time to time, and provided that the Company is not legally required to provide
third parties with the ability to nominate individuals for election as a member
of the Board, the Nominating and Corporate Governance Committee will then
recommend that the Board select the director nominees for election at each
annual meeting of shareholders.
The Nominating and Corporate Governance Committee will consider director
candidates recommended by the Company's shareholders. A shareholder wishing to
propose a nominee should submit a recommendation in writing to the Company's
Secretary not less than 120 days nor more than 150 days in advance of the date
that the Company's proxy statement was mailed to shareholders in connection with
the previous year's annual meeting of shareholders; provided that if the date of
this year's annual meeting of shareholders has been changed by more than 30 days
from the date contemplated at the time of the previous year's proxy statement,,
such proposal must be received by the Company a reasonable time before the
Company solicits proxies for the election of directors. Proposing shareholders
are also required to provide information with regard to the nominees, including
their full names and residence and business addresses; business experience for
the most recent five years; including principal occupations and employment, the
number of shares of the Company's stock owned by the proposed nominees and a
description of legal or administrative proceedings or order or decree any
nominee is or has been a party to or is or was subject to during the past five
years, the name and residence and business address of the shareholder who makes
the nomination, the number of shares of the Company's capital stock owned
directly or indirectly by the shareholder who makes the nomination and any other
information regarding each of the nominees required by Schedule 14A of the
Securities Exchange Act of 1934. A copy of the full text of the By-laws
provision and the procedures established by the Nominating and Corporate
Governance Committee may be obtained by writing to our Secretary. All notices of
proposals by shareholders, whether or not included in our proxy materials,
should be sent to Command Security Corporation, P.O. Box 340, 1133 Route 55,
Suite D, Lagrangeville, New York 12540, Attention: Barry Regenstein.
The Nominating and Corporate Governance Committee was formed in April 2005
and consequently did not hold any meetings during the fiscal year ended March
31, 2005. Prior to the creation of the Nominating and Corporate Governance
Committee, the Board performed the functions of a nominating committee. A copy
of the Nominating and Corporate Governance Committee charter as adopted by the
Board on April 27, 2005 is attached to this proxy statement as Exhibit C.
Compensation Committee.
The Compensation Committee currently consists of Peter T. Kikis (Chairman)
Bruce R. Galloway and Robert S. Ellin. The Board has determined that each member
is independent under the Nasdaq listing standards. The Compensation Committee
sets the compensation of the other senior executives of the Company, administers
the stock option plans and the executive compensation programs of the Company,
determines eligibility for, and awards under, such plans and programs, and makes
recommendations to the Board with regard to the adoption of new employee benefit
plans, stock option plans and executive compensation plans. The report of the
Compensation Committee is set forth later in this proxy statement. The
Compensation Committee did not meet during the fiscal year ended March 31, 2005.
A copy of the Compensation Committee charter as adopted by the Board on April
27, 2005 is attached to this proxy statement as Exhibit D.
17
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is currently composed of independent,
non-employee directors. No interlocking relationships exist among our Board,
Compensation Committee or executive officers and the Board, Compensation
Committee or executive officers of any other company, nor has an interlocking
relationship existed in the past.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics which
applies to directors, officers, senior management and certain other employees of
the Company, including its principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing
similar functions. The Company will provide a copy of its Code of Business
Conduct and Ethics to any person without charge, upon request. Requests for a
copy of the Code of Business Conduct and Ethics can be made in writing to the
following address: Command Security Corporation, P.O. Box 340, 1133 Route 55,
Suite D, Lagrangeville, New York 12540, Attention: Barry Regenstein.
Communications with Directors.
The Board has established a process to receive communications from
shareholders. Shareholders and other interested parties may contact any member
(or all members) of the Board, or the independent directors as a group, any
Board committee or any Chair of any such committee by mail or electronically. To
communicate with the Board of Directors, any individual directors or any group
or committee of directors, correspondence should be addressed to the Board of
Directors or any such individual directors or group or committee of directors by
either name or title. All such correspondence should be sent to Command Security
Corporation, P.O. Box 340, 1133 Route 55, Suite D, Lagrangeville, New York
12540, Attention: Gary Herman. To communicate with any of our directors
electronically, a shareholder should send an email to the Company's Secretary:
gherman@gallowaycap.com.
All communications received as set forth in the preceding paragraph will
be opened by the Corporate Secretary for the sole purpose of determining whether
the contents represent a message to our directors. Any contents that are not in
the nature of advertising, promotions of a product or service, patently
offensive material or matters deemed inappropriate for the Board of Directors
will be forwarded promptly to the addressee. In the case of communications to
the Board or any group or committee of directors, the Company's Secretary will
make sufficient copies (or forward such information in the case of e-mail) of
the contents to send to each director who is a member of the group or committee
to which the envelope or e-mail is addressed.
It is the Company's policy that its directors are invited and encouraged
to attend the Annual Meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and
directors and persons who beneficially own more than 10% of the outstanding
shares of Common Stock to file reports of ownership and changes in ownership
with the SEC and to furnish copies to us.
Based upon a review of the reports furnished to us and representations
made to us, we believe that, during the fiscal year ended March 31, 2005, all
reports required by Section 16(a) of the Exchange Act to be filed by our
officers and directors and 10% beneficial owners were filed on a timely basis,
except for one late report by each of Martin C. Blake, Barry I. Regenstein,
Thomas P. Kikis, Martin R. Wade, III and Robert S. Ellin.
18
Executive Compensation
The following table provides information as to compensation paid by the
Company to our Named Executive Officers for the fiscal year ended March 31, 2005
for services rendered for the periods indicated below.
--------------------------------------- -----------------------------------------------------------------------------------
Annual Compensation Long Term Compensation Awards
--------------------------------------- -----------------------------------------------------------------------------------
Name and Principal Position Fiscal Year ended Restricted Number of
March 31, Salary($) Bonus($) Stock Awards($) Options(#)
--------------------------------------- ----------------- ------------ -------- --------------- ---------
Barry I. Regenstein 2005 250,000 -- -- 500,000
Executive Vice President and Chief
Operating Officer*
--------------------------------------- ----------------- ------------ -------- --------------- --------
Martin C. Blake 2005 175,000 63,534 -- 200,000
Vice President - Aviation Division 2004 150,000 94,200 -- --
2003 187,417 150,000 -- --
--------------------------------------- ----------------- ------------ -------- --------------- --------
Jeffrey S. Edmiston 2005 132,500 -- -- --
Senior Vice President - Guard Division 2004 115,000 41,500 -- --
2003 92,400 -- -- --
--------------------------------------- ----------------- ------------ -------- --------------- --------
________________
*Mr. Regenstein commenced employment with the Company on August 30, 2004.
Option Grants in the Fiscal Year ended March 31, 2005
The following table contains information concerning the grant of stock
options under our stock option plan and otherwise to the Named Executive
Officers during the fiscal year ended March 31, 2005. No stock appreciation
rights were granted during the fiscal year ended March 31, 2005.
Option/SAR Grants in the Fiscal Year ended March 31, 2005
-------------------------------------------------------------------------------------------- ----------------------------------
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
----------------------- --------------- ----------------- ----------------- ---------------- ----------------------------------
Number of
Securities % of Underlying
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date 5%($) 10%($)
----------------------- --------------- ----------------- ----------------- ---------------- ----------------- --------------
Barry I. Regenstein 500,000 71.4% $1.35 8/30/14 $351,204 $959,058
----------------------- --------------- ----------------- ----------------- ---------------- ----------------- --------------
Martin C. Blake 200,000 28.6% $1.35 8/30/14 $140,481 $383,623
----------------------- --------------- ----------------- ----------------- ---------------- ----------------- --------------
Jeffrey S. Edmiston -- -- -- -- -- --
----------------------- --------------- ----------------- ----------------- ---------------- ----------------- --------------
Aggregate Option Exercises in the Fiscal Year ended March 31, 2005 and Fiscal
Year End Option Values
The following table contains information concerning the exercise of stock
options during the fiscal year ended March 31, 2005 and the year-end value of
unexercised options for the Named Executive Officers. None of the Named
Executive Officers exercised any stock options during the fiscal year ended
March 31, 2005.
19
----------------------- -------------- ------------- ------------------------------------ ------------------------------------
Value of Unexercised In-the-Money
Shares Options/SARs at FY-End (Market price
Acquired Value No. of Securities Underlying of shares at FY-End less exercise
Name on Exercise Realized Unexercised Options at FY-End (#) price) ($)(1)
------------------ ----------------- ------------------- ---------------
Exercisable Unexercisable Exercisable Unexercisable
----------------------- -------------- ------------- ------------------ ----------------- ------------------- ---------------
Barry I. Regenstein -- -- 200,000 300,000 $134,000 $201,000
----------------------- -------------- ------------- ------------------ ----------------- ------------------- ---------------
Martin C. Blake -- -- 130,000 120,000 $117,100 $80,400
----------------------- -------------- ------------- ------------------ ----------------- ------------------- ---------------
Jeffrey S. Edmiston -- -- -- -- -- --
----------------------- -------------- ------------- ------------------ ----------------- ------------------- ---------------
(1) Based on the fair market value of one share of Common Stock on March
31, 2005 of $2.02 per share, the closing sales price per share on
that date on the Over-the-Counter Bulletin Board.
Employment Agreements
The Company is a party to an employment agreement with Mr. Regenstein
which provides for his services as Executive Vice President and Chief Operating
Officer until September 7, 2007. The term of the employment agreement will be
automatically extended for successive one-year periods unless either party
provides to the other party notice 60 days prior to such date, or any
anniversary thereof, that the notifying party does not wish to renew the
employment agreement. During the term of the employment agreement, Mr.
Regenstein will receive a base annual salary of $250,000, which may be from time
to time increased by the Company's Compensation Committee and an annual bonus as
determined in accordance with the terms of any incentive plan the Compensation
Committee may have in effect from time to time, based on the attainment of
performance targets established by the Compensation Committee. Mr. Regenstein is
also entitled to participate in other benefit plans that the Company may have in
effect from time to time.
On the effective date of the employment agreement, which is August 30,
2004, Mr. Regenstein was granted 500,000 options exercisable at $1.35 per share,
200,000 of which vested immediately upon grant. After August 30, 2005, the
remaining options will vest at a rate 12,500 per month, during the term of the
employment agreement.
The Company is also a party to an employment agreement with Mr. Blake
which provides for his services as Vice President -- Aviation until March 31,
2006. During the term of the employment agreement, Mr. Blake will receive a base
annual salary of $150,000, subject to review by the Compensation Committee or
the Board of Directors on certain designated dates and an annual bonus as
determined in accordance with the terms of any incentive plan the Compensation
Committee may have in effect from time to time, based on the attainment of
performance targets established by the Compensation Committee. Pursuant to
review of Mr. Blake's base annual salary by the Board of Directors, Mr. Blake's
base annual salary was increased to $175,000, effective as of April 1, 2004 and
then increased to $200,000, effective as of April 1, 2005. Mr. Blake is also
entitled to participate in other benefit plans that the Company may have in
effect from time to time.
On August 30, 2004, the Company issued stock options to Mr. Blake to
purchase 200,000 shares of Common Stock at an exercise price of $1.35 per share,
80,000 of which vested immediately. After August 30, 2005, the remaining options
will vest at a rate of 5,000 per month through August 2007.
Each of Messrs. Regenstein, Blake and Edmiston is eligible to participate
in any employee benefit plan and fringe benefit programs, if any, as the Company
may from time to time provide to its senior employees generally. The Company
offers basic health, major medical, dental and travel insurance to its Named
Executive Officers.
Director Compensation
Each of our non-employee directors receives from the Company an annual
cash fee of $10,000, paid quarterly in arrears. Non-employee directors are also
paid $1,000 per meeting of the Board attended during their
20
term of service. In addition non-employee directors are granted a fully vested
option to purchase 10,000 shares of Common Stock on each anniversary of becoming
a director during their term of service.
Board Compensation Committee Report
on Executive Compensation
Report of the Compensation Committee of the Board of Directors on
Executive Compensation(1)
The Compensation Committee is responsible for discharging the Board of
Director's responsibilities relating to the compensation of the executive
officers and directors as well as oversight of the Company's overall
compensation programs.
The Compensation Committee has established a compensation philosophy
around the principle of having compensation reflect and reinforce our strategic
and operational goals and enhance long-term shareholder value. The Compensation
Committee's philosophy is to:
o Set compensation levels to attract, retain, reward and motivate
executive officers and employees;
o Align compensation with business objectives and performance and with
the interests of the shareholders;
o Position compensation to reflect the individual's performance as
well as the level of responsibility, skill and strategic value of
the employee; and
o Recognize the evolving organizational structure of the Company and
directly motivate executives to accomplish results as well as foster
a company-wide team spirit.
The Compensation Committee attempts to target its compensation programs to
provide compensation opportunities that are perceived by its officers and
employees to justify continued service to the Company. Compensation decisions
for the fiscal year ended March 31, 2005 were determined as follows:
Base Salary. The initial annual base salary for Barry I. Regenstein, the
Company's Executive Vice President and Chief Operating Officer who was the only
executive officer hired by the Company during fiscal 2005, was reviewed and
approved by the Board of Directors. When reviewing his base salary, the Board
considered, among other things, the level of responsibility, breadth of
knowledge and prior experience as well as publicly available compensation
information and informal survey information obtained with respect to other
small-capitalization, publicly traded companies. No specific weight is given to
any of these factors in the evaluation of an executive officer's base salary.
Bonuses. In fiscal 2005, the Compensation Committee did not establish
bonus targets for the executive officers and only one bonus payout was made in
fiscal 2005 pursuant to the terms of an employee's employment agreement. In
prior years, the Company's executive officers were eligible to receive a cash
bonus of up to a specified percentage of their base salary based on the extent
to which business and individual performance objectives, approved by the Board
of Directors for each such person, were achieved. These objectives consisted of
operating, strategic and/or financial goals that are considered to be important
to the Company's fundamental long-term goal of building shareholder value.
Stock Options. In addition to salary and bonus, the Compensation
Committee, from time to time, grants options to executive officers. The
Compensation Committee views option grants as an important component of its
long-term, performance-based compensation philosophy. Since the value of an
option bears a direct relationship to our stock price, the Compensation
Committee believes that options motivate executive officers to manage us in a
manner that will also benefit shareholders. As such, the specific number of
stock options granted to an executive
------------------------
(1) To be reviewed by the Compensation Committee.
21
officer is determined on an individual basis by the Compensation Committee's
perception of relative contributions or anticipated contributions to overall
corporate performance. The Compensation Committee also reviews the total number
of options already held by individual executive officers at the time of grant.
In fiscal 2005, we granted options to purchase 500,000 shares of Common Stock to
Barry I. Regenstein and options to purchase 200,000 shares of Common Stock to
Martin C. Blake.
COMPENSATION COMMITTEE
Peter T. Kikis (Chairman)
Bruce R. Galloway
Robert S. Ellin
THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE DEEMED TO BE
"SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION BE
INCORPORATED BY REFERENCE INTO ANY PAST OR FUTURE FILING UNDER THE SECURITIES
ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE IT BY
REFERENCE INTO SUCH FILING.
Performance Graph
The graph below compares the cumulative total shareholder return on shares
of Common Stock with the cumulative total return of (1) the Nasdaq Stock Market
Index (U.S.) (the "Nasdaq Index") and (2) an index of publicly traded companies
with a Standard Industrial Classification Code ("SIC Code") of between 7380 and
7389 (the "SIC Code Index"). The graph assumes that $100 was invested in each of
shares of Common Stock, the Nasdaq Index and the SIC Code Index on March 31,
2000 and reflects the return through March 31, 2005 and assumes the reinvestment
of dividends, if any. The comparisons in the graph below are based on historical
data and are not indicative of, or intended to forecast, possible future
performance of the Common Stock.
22
[GRAPHIC OMITTED][GRAPHIC OMITTED]
THE INFORMATION CONTAINED IN THE STOCK PERFORMANCE GRAPH SHALL NOT BE DEEMED TO
BE "SOLICITING MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION
BE INCORPORATED BY REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OR
THE EXCHANGE ACT, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE IT BY
REFERENCE INTO SUCH FILING.
23
Report of the Audit Committee of the Board
The following is a report of the Audit Committee of the Company's Board of
Directors with respect to the Company's audited financial statements for the
fiscal year ended March 31, 2005.
In connection with its function of overseeing and monitoring the financial
reporting process, the Audit Committee has, among other things, done the
following:
o reviewed and discussed the Company's audited financial statements
for the year ended March 31, 2005 with the Company's management and
the Company's independent auditors;
o discussed with the Company's independent auditors those matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communications with Audit Committees", as amended by the Statement
on Auditing Standards No. 90 "Audit Committee Communications"; and
o received and reviewed the written disclosures and the letter from
the Company's independent auditors required by Independence Standard
No. 1, "Independence Discussions with Audit Committees," and
discussed with the Company's independent auditors their independence
from the Company.
Based upon the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements referred to above be included in
the Company's Annual Report on Form 10-K for the year ended March 31, 2005 for
filing with the SEC.
AUDIT COMMITTEE
Martin R. Wade, III (Chairman)
Thomas P. Kikis
Bruce R. Galloway
THE FOREGOING AUDIT COMMITTEE REPORT SHALL NOT BE DEEMED TO BE "SOLICITING
MATERIAL" OR TO BE FILED WITH THE SEC, NOR SHALL SUCH INFORMATION BE
INCORPORATED BY REFERENCE INTO ANY PAST OR FUTURE FILING UNDER THE SECURITIES
ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE IT BY
REFERENCE INTO SUCH FILING.
24
Certain Relationships and
Related Transactions
Peter T. Kikis is the father of Thomas P. Kikis. There are no other
family relationships among any of our directors or executive officers.
Deadline for Receipt of Shareholder Proposals
Pursuant to Rule 14a-8 under the Exchange Act, shareholders may present
proper proposals for inclusion in a company's proxy statement and for
consideration at the next annual meeting of its shareholders by submitting their
proposals to us in a timely manner.
Although we have not yet determined the date in order to be included in
the Company's proxy statement for our annual meeting of shareholders in 2006,
shareholder proposals or other business to be brought before an annual meeting
by a shareholder must be received by us at least 120 days prior to the
anniversary date of the mailing of this proxy statement for the Annual Meeting
and must otherwise comply with the requirements of Rule 14a-8. All shareholder
proposals should be marked for the attention of the Secretary, Command Security
Corporation, P.O. Box 340, 1133 Route 55, Suite D, Lagrangeville, New York,
12540.
As to shareholder proposals intended to be presented without inclusion in
our proxy statement for our next annual meeting, the people named next year as
proxies will be entitled to vote as they think best on such proposals unless we
have received notice of that matter at least 120 days before the date on which
we mailed our proxy materials for the prior year's annual meeting of
shareholders. However, even if such notice is timely received, the people named
next year as proxies may nevertheless be entitled to vote as they think best on
such proposals to the extent permitted by the SEC.
OTHER MATTERS
There is no reason to believe that any other business will be presented at
the 2005 Annual Meeting; however, if any other business should properly and
lawfully come before the 2005 Annual Meeting, the proxies will vote in
accordance with the best judgment of the Board of Directors.
BY ORDER OF THE BOARD OF DIRECTORS
July 29, 2005
Lagrangeville, New York
25
PROXY CARD
COMMAND SECURITY CORPORATION
P.O. Box 340, 1133 Route 55, Suite D
Lagrangeville, New York 12540
(845) 454-3703
The undersigned hereby appoints ____________ and ___________, or either of
them, as proxies with full powers of substitution, to vote all shares of the
Common Stock, par value $0.0001 per share, of Command Security Corporation (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held on September 22, 2005 and at any
adjournment thereof, upon the items described in the proxy statement. The
undersigned acknowledges receipt of notice of the meeting and the proxy
statement.
1. Election of Peter T. Kikis, Martin C. Blake and Martin R. Wade, III as Class
I Directors (PROPOSAL ONE):
FOR ALL NOMINEES (except WITHHOLD AUTHORITY FOR
as written to the ALL NOMINEES
contrary below)
|_| |_|
FOR, except vote withheld
from the following
nominee(s):
-------------------------
2. Proposal to approve the Company's 2005 Stock Option Plan (PROPOSAL TWO):
FOR AGAINST ABSTAIN
|_| |_| |_|
3. Proposal to ratify the appointment of D'Arcangelo & Co., LLP as independent
accountants of the Company for the fiscal year ending March 31, 2006
(PROPOSAL THREE):
FOR AGAINST ABSTAIN
|_| |_| |_|
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting:
FOR AGAINST ABSTAIN
|_| |_| |_|
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
26
This Proxy, when properly executed will be voted as directed herein. If no
instructions are given, the shares represented by this proxy will be voted "FOR"
the nominees set forth in PROPOSAL ONE, "FOR" PROPOSAL TWO and "FOR" PROPOSAL
THREE and in the discretion of the proxy holders as to other business.
Please date and sign this proxy exactly as your name appears hereon.
------------------------------------- ------------------------------------
Date Signature of Owner
------------------------------------
Additional Signature of Joint Owner
(if any)
If stock is jointly held, each
joint owner should sign. When
signing as attorney-in-fact,
executor, administrator, trustee,
guardian, corporate officer or
partner, please give full title.
27
Exhibit A
COMMAND SECURITY CORPORATION
2005 STOCK INCENTIVE PLAN
ARTICLE I
General
1.1 Purpose
The Command Security Corporation 2005 Stock Incentive Plan (the
"Plan") is designed to provide certain key persons, on whose initiative and
efforts the successful conduct of the business of Command Security Corporation
(the "Company") depends, and who are responsible for the management, growth and
protection of the business of the Company, with incentives to: (a) enter into
and remain in the service of the Company or a Company subsidiary, (b) acquire a
proprietary interest in the success of the Company, (c) maximize their
performance and (d) enhance the long-term performance of the Company (whether
directly or indirectly through enhancing the long-term performance of a Company
subsidiary ). The Plan is also designed to provide certain "performance-based"
compensation to these key persons.
1.2 Administration
(a) Administration by Committee; Constitution of Committee. The Plan
shall be administered by the compensation committee of the Board of
Directors of the Company (the "Board") or such other committee or
subcommittee as the Board may designate or as shall be formed by the
abstention or recusal of a non-Qualified Member (as defined below)
of such committee (the "Committee"). The members of the Committee
shall be appointed by, and serve at the pleasure of, the Board.
While it is intended that at all times that the Committee acts in
connection with the Plan, the Committee shall consist solely of
Qualified Members, the number of whom shall not be less than two,
the fact that the Committee is not so comprised will not invalidate
any grant hereunder that otherwise satisfies the terms of the Plan.
A "Qualified Member" is both a "non-employee director" within the
meaning of Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act") and an "outside
director" within the meaning of section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Committee does
not exist, or for any other reason determined by the Board, the
Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
(b) Committee's Authority. The Committee shall have the authority (i) to
exercise all of the powers granted to it under the Plan, (ii) to
construe, interpret and implement the Plan and any Option
Certificates executed pursuant to Section 2.1, (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (iv) to make all
determinations necessary or advisable in administering the Plan, (v)
to correct any defect, supply any omission and reconcile any
inconsistency in the Plan, and (vi) to amend the Plan to reflect
changes in applicable law.
(c) Committee Action; Delegation. Actions of the Committee shall be
taken by the vote of a majority of its members. Any action may be
taken by a written instrument signed by a majority of the Committee
members, and action so taken shall be fully as effective as if it
had been taken by a vote at a meeting. Notwithstanding the foregoing
or any other provision of the Plan, the Committee or, pursuant to
Section 1.2(a), the Board, may delegate to one or more officers of
the Company the authority to designate the individuals (other than
such officer(s)), among those eligible to receive options pursuant
to the terms of the Plan, who will receive options under the Plan
and the size of each such option, to the fullest extent permitted
under the New York Business Corporation Law (or any successor
provision thereto).
A-1
(d) Determinations Final. The determination of the Committee on all
matters relating to the Plan or any Option Certificate shall be
final, binding and conclusive.
(e) Limit on Committee Members' Liability. No member of the Committee
shall be liable for any action or determination made in good faith
with respect to the Plan or any award thereunder.
1.3 Persons Eligible for Awards
The persons eligible to receive awards under the Plan are those
officers, directors (whether or not they are employed by the Company), and
executive, managerial, professional or administrative employees of, and
consultants to, the Company and its subsidiaries (collectively, "key persons")
as the Committee in its sole discretion shall select. No incentive stock option
may be granted to a person who is not an employee of the Company on the date of
grant.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options and (b) non-qualified stock options, as more fully set forth in Article
II. The terms "award" and "option" mean either of the foregoing.
1.5 Shares Available for Awards
(a) Aggregate Number Available; Certificate Legends. The total number of
shares of common stock of the Company ("Common Stock") with respect
to which awards may be granted pursuant to the Plan shall not exceed
the sum of 1,000,000 shares. Shares issued pursuant to the Plan may
be authorized but unissued Common Stock, authorized and issued
Common Stock held in the Company's treasury or Common Stock acquired
by the Company for the purposes of the Plan. The Committee may
direct that any stock certificate evidencing shares issued pursuant
to the Plan shall bear a legend setting forth such restrictions on
transferability as may apply to such shares.
(b) Adjustment Upon Changes in Common Stock. Upon certain changes in
Common Stock, the number of shares of Common Stock available for
issuance with respect to awards that may be granted under the Plan
pursuant to Section 1.5(a), shall be adjusted pursuant to Section
3.5(a).
(c) Certain Shares to Become Available Again. Any shares of Common Stock
that are subject to an award under the Plan and that remain unissued
upon the cancellation or termination of such award for any reason
whatsoever shall again become available for awards under the Plan.
(d) Individual Limits. Except for the limits set forth in this Section
1.5(d) and in Section 2.2(e), no provision of this Plan shall be
deemed to limit the number or value of shares with respect to which
the Committee may make awards to any eligible person. Subject to
adjustment as provided in Section 3.5(a), the total number of shares
of Common Stock with respect to which awards may be granted to any
one employee of the Company or a subsidiary during any one calendar
year shall not exceed 500,000shares. Stock options granted and
subsequently canceled or deemed to be canceled in a calendar year
count against this limit even after their cancellation.
1.6 Definitions of Certain Terms
(a) The "Fair Market Value" of a share of Common Stock on any day shall
be the closing price as reported for such day in The Wall Street
Journal or, if no such price is reported for such day, the average
of the high bid and low asked price of Common Stock as reported for
such day. If no quotation is made for the applicable day, the Fair
Market Value of a share of Common
A-2
Stock on such day shall be determined in the manner set forth in the
preceding sentence using quotations for the next preceding day for
which there were quotations, provided that such quotations shall
have been made within the ten (10) business days preceding the
applicable day. Notwithstanding the foregoing, if deemed necessary
or appropriate by the Committee, the Fair Market Value of a share of
Common Stock on any day shall be determined by the Committee. In no
event shall the Fair Market Value of any share of Common Stock be
less than its par value.
(b) The term "incentive stock option" means an option that is intended
to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code as now constituted or subsequently
amended, or pursuant to a successor provision of the Code, and which
is so designated in the applicable Option Certificate. Any option
that is not specifically designated as an incentive stock option
shall under no circumstances be considered an incentive stock
option. Any option that is not an incentive stock option is referred
to herein as a "non-qualified stock option."
(c) A grantee shall be deemed to have a "termination of employment" upon
(i) the date the grantee ceases to be employed by, or to provide
consulting services for, the Company or any Company subsidiary, or
any corporation (or any of its subsidiaries) which assumes the
grantee's award in a transaction to which section 424(a) of the Code
applies; or (ii) the date the grantee ceases to be a Board member,
provided, however, that in the case of a grantee (x) who is, at the
time of reference, both an employee or consultant and a Board
member, or (y) who ceases to be engaged as an employee, consultant
or Board member and immediately is engaged in another of such
relationships with the Company or any Company subsidiary, the
grantee shall be deemed to have a "termination of employment" upon
the later of the dates determined pursuant to subparagraphs (i) and
(ii) above. For purposes of clause (i) above, a grantee who
continues his or her employment or consulting relationship with a
Company subsidiary subsequent to its sale by the Company shall have
a termination of employment upon the date of such sale. The
Committee may in its discretion determine whether any leave of
absence constitutes a termination of employment for purposes of the
Plan and the impact, if any, of any such leave of absence on awards
theretofore made under the Plan.
(d) The terms "parent corporation" and "subsidiary corporation" shall
have the meanings given them in sections 424(e) and (f) of the Code,
respectively.
(e) The term "employment" shall be deemed to mean an employee's
employment with, or a consultant's provision of services to, the
Company or any Company subsidiary and each Board member's service as
a Board member.
(f) The term "cause" in connection with a termination of employment by
reason of a dismissal for cause shall mean:
(i) to the extent that there is an employment, severance or other
agreement governing the relationship between the grantee and the
Company or a Company subsidiary, which agreement contains a
definition of "cause," cause shall consist of those acts or
omissions that would constitute "cause" under such agreement;
and otherwise,
(ii) the grantee's termination of employment by the Company or an
affiliate on account of any one or more of the following:
A. grantee's willful and intentional repeated failure or refusal,
continuing after notice that specifically identifies the breach(es)
complained of, to perform substantially his or her material duties,
responsibilities and obligations (other than a failure resulting from
grantee's incapacity due to physical or mental illness or other reasons
beyond the control
A-3
of grantee), and which failure or refusal results in demonstrable direct
and material injury to the Company;
B. any willful and intentional act or failure to act involving fraud,
misrepresentation, theft, embezzlement, dishonesty or moral turpitude
(collectively, "Fraud") which results in demonstrable direct and
material injury to the Company; and
C. conviction of (or a plea of nolo contendere to) an offense which is a
felony in the jurisdiction involved or which is a misdemeanor in the
jurisdiction involved but which involves Fraud.
For purposes of determining whether cause exists, no act, or failure to
act, on grantee's part shall be deemed "willful" or "intentional" unless done,
or omitted to be done, by grantee in bad faith, and without reasonable belief
that his or her action or omission was in the best interests of the Company.
Any rights the Company may have hereunder in respect of the events giving
rise to cause shall be in addition to the rights the Company may have under any
other agreement with a grantee or at law or in equity. Any determination of
whether a grantee's employment is (or is deemed to have been) terminated for
cause for purposes of the Plan or any award hereunder shall be made by the
Committee in its discretion. If, subsequent to a grantee's voluntary termination
of employment or involuntary termination of employment without cause, it is
discovered that the grantee's employment could have been terminated for cause,
the Committee may deem such grantee's employment to have been terminated for
cause. A grantee's termination of employment for cause shall be effective as of
the date of the occurrence of the event giving rise to cause, regardless of when
the determination of cause is made.
ARTICLE II
Awards Under the Plan
2.1 Certificates Evidencing Options
Each award granted under the Plan shall be evidenced by a written
certificate ("Option Certificate") which shall contain such provisions as the
Committee may in its sole discretion deem necessary or desirable. By accepting
an award pursuant to the Plan, a grantee thereby agrees that the award shall be
subject to all of the terms and provisions of the Plan and the applicable Option
Certificate.
2.2 Grant of Stock Options
(a) Stock Option Grants. The Committee may grant incentive stock options
and non-qualified stock options (collectively, "options") to
purchase shares of Common Stock from the Company, to such key
persons, and in such amounts and subject to such vesting and
forfeiture provisions and other terms and conditions, as the
Committee shall determine in its sole discretion, subject to the
provisions of the Plan.
(b) Option Exercise Price. Each Option Certificate shall set forth the
amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the option evidenced thereby. The option
exercise price per share shall be determined by the Committee in its
sole discretion; provided, however, that the option exercise price
shall be at least 100% of the Fair Market Value of a share of Common
Stock on the date the option is granted, and provided further that
in no event shall the option exercise price be less than the par
value of a share of Common Stock.
(c) Exercise Period. Each Option Certificate shall set forth the periods
during which the option evidenced thereby shall be exercisable,
whether in whole or in part. Such periods shall be determined by the
Committee in its sole discretion; provided, however, that no stock
option
A-4
shall be exercisable more than 10 years after the date of grant.
(See the default exercise period provided for under Sections 2.3(a)
and (b).)
(d) Reload Options. The Committee may in its sole discretion include in
any Option Certificate with respect to an option (the "original
option") a provision that an additional option (the "reload option")
shall be granted to the grantee if, pursuant to Section 2.3(e)(ii),
the grantee delivers shares of Common Stock in partial or full
payment of the exercise price of the original option. The reload
option shall be for a number of shares of Common Stock equal to the
number thus delivered, shall have an exercise price equal to the
Fair Market Value of a share of Common Stock on the date of exercise
of the original option, and shall have an expiration date no later
than the expiration date of the original option. In the event that a
Option Certificate provides for the grant of a reload option, such
Option Certificate shall also provide that any shares that are
delivered pursuant to Section 2.3(e)(ii) in payment of such exercise
price shall have been held for at least six months (or such other
period as the Committee may from time to time determine).
(e) Incentive Stock Option Limitation: $100,000 Limitation. To the
extent that the aggregate Fair Market Value (determined as of the
time the option is granted) of the stock with respect to which
incentive stock options are first exercisable by any employee during
any calendar year shall exceed $100,000, or such other amount as may
be specified from time to time under section 422 of the Code, such
options shall be treated as non-qualified stock options.
(f) Incentive Stock Option Limitation: 10% Owners. Notwithstanding the
provisions of paragraphs (d) and (e) of this Section 2.2, an
incentive stock option may not be granted under the Plan to an
individual who, at the time the option is granted, owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of his or her employer corporation or of its parent
or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b)(6) of the Code) unless (i) at the time
such incentive stock option is granted the option exercise price is
at least 110% of the Fair Market Value of the shares subject thereto
and (ii) the incentive stock option by its terms is not exercisable
after the expiration of 5 years from the date it is granted.
2.3 Exercise of Options
Subject to the other provisions of this Article II, each option granted
under the Plan shall be exercisable as follows:
(a) Beginning of Exercise Period. Unless the applicable Option
Certificate otherwise provides, an option shall become exercisable
with respect to one quarter (1/4) of the shares subject to such
option on each of the first four anniversaries of the date of grant.
(b) End of Exercise Period. Unless the applicable Option Certificate
otherwise provides, once an installment becomes exercisable, it
shall remain exercisable until the earlier of (i) the tenth
anniversary of the date of grant of the award or (ii) the
expiration, cancellation or termination of the award.
(c) Timing and Extent of Exercise. Unless the applicable Option
Certificate otherwise provides, an option may be exercised from time
to time as to all or part of the shares as to which such award is
then exercisable.
(d) Notice of Exercise. An option shall be exercised by the filing of a
written notice with the Company or the Company's designated exchange
agent (the "exchange agent"), on such form and in such manner as the
Committee shall in its sole discretion prescribe.
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(e) Payment of Exercise Price. Any written notice of exercise of an
option shall be accompanied by payment for the shares being
purchased. Such payment shall be made: (i) by certified or official
bank check (or the equivalent thereof acceptable to the Company or
its exchange agent) for the full option exercise price; or (ii) with
the consent of the Committee, by delivery of shares of Common Stock
owned by the grantee (whether acquired by option exercise or
otherwise, provided that if such shares were acquired pursuant to
the exercise of a stock option, they were acquired at least six
months prior to the option exercise date or such other period as the
Committee may from time to time determine) having a Fair Market
Value (determined as of the exercise date) equal to all or part of
the option exercise price and a certified or official bank check (or
the equivalent thereof acceptable to the Company or its exchange
agent) for any remaining portion of the full option exercise price;
or (iii) at the discretion of the Committee and to the extent
permitted by law, by such other provision, consistent with the terms
of the Plan, as the Committee may from time to time prescribe.
(f) Delivery of Certificates Upon Exercise. Promptly after receiving
payment of the full option exercise price, the Company or its
exchange agent shall, subject to the provisions of Section 3.2,
deliver to the grantee or to such other person as may then have the
right to exercise the award, certificate or certificates for the
shares of Common Stock for which the award has been exercised. If
the method of payment employed upon option exercise so requires, and
if applicable law permits, a grantee may direct the Company, or its
exchange agent, as the case may be, to deliver the stock
certificate(s) to the grantee's stockbroker.
(g) No Shareholder Rights. No grantee of an option (or other person
having the right to exercise such award) shall have any of the
rights of a shareholder of the Company with respect to shares
subject to such award until the issuance of a stock certificate to
such person for such shares. Except as otherwise provided in Section
1.5(b), no adjustment shall be made for dividends, distributions or
other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is
prior to the date such stock certificate is issued.
2.4 Termination of Employment; Death Subsequent to a Termination of
Employment
(a) General Rule. Except to the extent otherwise provided in paragraphs
(b), (c) or (d) of this Section 2.4, a grantee who incurs a
termination of employment may exercise any outstanding option on the
following terms and conditions: (i) exercise may be made only to the
extent that the grantee was entitled to exercise the award on the
termination of employment date; and (ii) exercise must occur within
three months after termination of employment but in no event after
the original expiration date of the award.
(b) Dismissal for Cause; Resignation. If a grantee incurs a termination
of employment as the result of a dismissal for cause, all options
not theretofore exercised shall terminate upon the commencement of
business on the date of the grantee's termination of employment.
(c) Disability. If a grantee incurs a termination of employment by
reason of a disability (as defined below), then any outstanding
option shall be exercisable on the following terms and conditions:
(i) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the termination of employment
date; and (ii) exercise must occur by the earlier of (A) the first
anniversary of the grantee's termination of employment, or (B) the
original expiration date of the award. For this purpose "disability"
shall mean: (x) except in connection with an incentive stock option,
any physical or mental condition that would qualify a grantee for a
disability benefit under the long-term disability plan maintained by
the Company or, if there is no such plan, a physical or mental
condition that prevents the grantee from performing the essential
functions of the grantee's position (with or without reasonable
accommodation) for a period of six consecutive months and (y) in
connection with an incentive stock option, a disability described in
section 422(c)(6) of the Code. The existence of a disability shall
be determined by the Committee in its absolute discretion.
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(d) Death.
(i) Termination of Employment as a Result of Grantee's Death. If a
grantee incurs a termination of employment as the result of
death, then any outstanding option shall be exercisable on the
following terms and conditions: (A) exercise may be made only
to the extent that the grantee was entitled to exercise the
award on the date of death; and (B) exercise must occur by the
earlier of (1) the first anniversary of the grantee's death,
or (2) the original expiration date of the award.
(ii) Death Subsequent to a Termination of Employment. If a grantee
dies subsequent to incurring a termination of employment but
prior to the expiration of the exercise period with respect to
a stock option (as provided by paragraphs (a) or (c) above),
then the award shall remain exercisable until the earlier to
occur of (A) the first anniversary of the grantee's death or
(B) the original expiration date of the award.
(iii) Restrictions on Exercise Following Death. Any such exercise of
an award following a grantee's death shall be made only by the
grantee's executor or administrator or other duly appointed
representative reasonably acceptable to the Committee, unless
the grantee's will specifically disposes of such award, in
which case such exercise shall be made only by the recipient
of such specific disposition. If a grantee's personal
representative or the recipient of a specific disposition
under the grantee's will shall be entitled to exercise any
award pursuant to the preceding sentence, such representative
or recipient shall be bound by all the terms and conditions of
the Plan and the applicable Option Certificate which would
have applied to the grantee including, without limitation, the
provisions of Sections 3.2.
(e) Special Rules for Incentive Stock Options. No option that remains
exercisable for more than three months following a grantee's
termination of employment for any reason other than death (including
death within three months after the termination of employment or
within one year after a termination due to disability) or
disability, or for more than one year following a grantee's
termination of employment as the result of disability, may be
treated as an incentive stock option.
(f) Committee Discretion. The Committee may waive or modify the
application of the foregoing provisions of this Section 2.4.
2.5 Transferability of Options
Except as otherwise provided in an applicable Option Certificate
evidencing an option, during the lifetime of a grantee, each option granted to a
grantee shall be exercisable only by the grantee and no option shall be
assignable or transferable otherwise than by will or by the laws of descent and
distribution. The Committee may, in any applicable Option Certificate evidencing
an option (other than an incentive stock option to the extent inconsistent with
the requirements of section 422 of the Code applicable to incentive stock
options), permit a grantee to transfer all or some of the options to (A) the
grantee's spouse, children or grandchildren ("Immediate Family Members"), (B) a
trust or trusts for the exclusive benefit of such Immediate Family Members, or
(C) other parties approved by the Committee in its absolute discretion.
Following any such transfer, any transferred options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer.
2.6 Right of Recapture
If at any time after the date on which a grantee has been granted or
become vested in an award pursuant to the achievement of performance goals , the
Committee determines that the earlier determination as to the
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achievement of the performance goals was based on incorrect data and that in
fact the performance goals had not been achieved or had been achieved to a
lesser extent than originally determined, then (i) any award or portion of an
award granted based on such incorrect determination shall be forfeited, and (ii)
any award or portion of an award that became vested based on such incorrect
determination shall be deemed to be not vested.
ARTICLE III
Miscellaneous
3.1 Amendment of the Plan; Modification of Awards
(a) Amendment of the Plan. Subject to Section 3.1(b), the Board may from
time to time suspend, discontinue, revise or amend the Plan in any
respect whatsoever, except that no such amendment shall materially
impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the
grantee (or, upon the grantee's death, the person having the right
to exercise the award). For purposes of this Section 3.1, any action
of the Board or the Committee that in any way alters or affects the
tax treatment of any award or that in the sole discretion of the
Board is necessary to prevent an award from being subject to tax
under Section 409A of the Code shall not be considered to materially
impair any rights of any grantee.
(b) Shareholder Approval Requirement. Shareholder approval shall be
required with respect to any amendment to the Plan (i) which
increases the aggregate number of shares which may be issued
pursuant to incentive stock options or changes the class of
employees eligible to receive such options, (ii) which otherwise
materially increases the benefits under the Plan, (iii) to the
extent required by stock exchange rules, or (iv) to the extent the
Board determines that shareholder approval is necessary to enable
awards under the Plan to comply with Sections 422 or 162(m) of the
Code.
(c) Modification of Awards. The Committee may cancel any award under the
Plan. The Committee also may amend any outstanding Option
Certificate, including, without limitation, by amendment which
would: (i) accelerate the time or times at which the award becomes
vested and exercisable; (ii) waive or amend any goals, restrictions
or conditions set forth in the Option Certificate; or (iii) waive or
amend the operation of Section 2.4 with respect to the termination
of the award upon termination of employment, provided however, that
no such amendment may lower the exercise price of an outstanding
option. However, any such cancellation or amendment (other than an
amendment pursuant to Section 3.5) that materially impairs the
rights or materially increases the obligations of a grantee under an
outstanding award shall be made only with the consent of the grantee
(or, upon the grantee's death, the person having the right to
exercise the award). Under no circumstances may the Committee modify
an award in a manner that would cause the award to be subject to tax
under Section 409A of the Code.
3.2 Consent Requirement
(a) No Plan Action without Required Consent. If the Committee shall at
any time determine that any Consent (as hereinafter defined) is
necessary or desirable as a condition of, or in connection with, the
granting of any award under the Plan, the issuance or purchase of
shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a
"Plan Action"), then such Plan Action shall not be taken, in whole
or in part, unless and until such Consent shall have been effected
or obtained to the full satisfaction of the Committee.
(b) Consent Defined. The term "Consent" as used herein with respect to
any Plan Action means (i) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or
under any federal, state or local law, rule or regulation, (ii) any
and all written agreements and representations by the grantee with
respect to the disposition of shares, or
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with respect to any other matter, which the Committee shall deem
necessary or desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be
made and (iii) any and all consents, clearances and approvals in
respect of a Plan Action by any governmental or other regulatory
bodies.
3.3 Requirement of Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code
Each grantee of an incentive stock option shall notify the Company of any
disposition of shares of Common Stock issued pursuant to the exercise of such
option under the circumstances described in section 421(b) of the Code (relating
to certain disqualifying dispositions), within 10 days of such disposition.
3.4 Withholding Taxes
The Company shall be entitled to require as a condition of delivery of
shares of Common Stock upon exercise of an option that the grantee remit to the
Company an amount sufficient, in the opinion of the Company, to satisfy all
federal, state and other governmental tax withholding requirements related
thereto. With the approval of the Committee, which the Committee shall have sole
discretion whether or not to give, the grantee may satisfy the foregoing
condition by electing to have the Company withhold from delivery shares having a
value equal to the amount of tax to be withheld. Such shares shall be valued at
their Fair Market Value as of the date on which the amount of tax to be withheld
is determined. Fractional share amounts shall be settled in cash. Such a
withholding election may be made with respect to all or any portion of the
shares to be delivered pursuant to an award.
3.5 Adjustment Upon Changes in Common Stock
(a) Shares Available for Options. In the event of any change in the
number of shares of Common Stock outstanding by reason of any stock
dividend or split, reverse stock split, recapitalization, merger,
consolidation, combination or exchange of shares or similar
corporate change, the maximum number of shares of Common Stock with
respect to which the Committee may grant awards under Article II
hereof, as described in Section 1.5(a), and the individual annual
limit described in Section 1.5(d), shall be appropriately adjusted
by the Committee. In the event of any change in the number of shares
of Common Stock outstanding by reason of any other event or
transaction, the Committee may, but need not, make such adjustments
in the number and class of shares of Common Stock with respect to
which awards: (i) may be granted under Article II hereof and (ii)
granted to any one employee of the Company or a subsidiary during
any one calendar year, in each case as the Committee may deem
appropriate.
(b) Outstanding Options -- Increase or Decrease in Issued Shares Without
Consideration. Subject to any required action by the shareholders of
the Company, in the event of any increase or decrease in the number
of issued shares of Common Stock resulting from a subdivision or
consolidation of shares of Common Stock or the payment of a stock
dividend (but only on the shares of Common Stock), or any other
increase or decrease in the number of such shares effected without
receipt of consideration by the Company, the Committee shall
proportionally adjust the number of shares of Common Stock subject
to each outstanding option and the exercise price-per-share of
Common Stock of each such option.
(c) Outstanding Options -- Certain Mergers. Subject to any required
action by the shareholders of the Company, in the event that the
Company shall be the surviving corporation in any merger or
consolidation (except a merger or consolidation as a result of which
the holders of shares of Common Stock receive securities of another
corporation), each option outstanding on the date of such merger or
consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Common Stock subject to such
option would have received in such merger or consolidation.
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(d) Outstanding Options -- Certain Other Transactions. In the event of
(i) a dissolution or liquidation of the Company, (ii) a sale of all
or substantially all of the Company's assets, (iii) a merger or
consolidation involving the Company in which the Company is not the
surviving corporation or (iv) a merger or consolidation involving
the Company in which the Company is the surviving corporation but
the holders of shares of Common Stock receive securities of another
corporation and/or other property, including cash, the Committee
shall, in its absolute discretion, have the power to:
A. cancel, effective immediately prior to the occurrence of such
event, each option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of
such cancellation, pay to the grantee to whom such option was
granted an amount in cash, for each share of Common Stock
subject to such option equal to the excess of (x) the value, as
determined by the Committee in its absolute discretion, of the
property (including cash) received by the holder of a share of
Common Stock as a result of such event over (y) the exercise
price of such option; or
B. provide for the exchange of each option outstanding immediately
prior to such event (whether or not then exercisable) for an
option on some or all of the property which a holder of the
number of shares of Common Stock subject to such option would
have received and, incident thereto, make an equitable
adjustment as determined by the Committee in its absolute
discretion in the exercise price of the option, or the number of
shares or amount of property subject to the option or, if
appropriate, provide for a cash payment to the grantee to whom
such option was granted in partial consideration for the
exchange of the option.
(e) Outstanding Options -- Other Changes. In the event of any change in
the capitalization of the Company or a corporate change other than
those specifically referred to in Sections 3.5(b), (c) or (d)
hereof, the Committee may, in its absolute discretion, make such
adjustments in the number and class of shares subject to options
outstanding on the date on which such change occurs and in the
per-share exercise price of each such option as the Committee may
consider appropriate to prevent dilution or enlargement of rights.
In addition, if and to the extent the Committee determines it is
appropriate, the Committee may elect to cancel each option
outstanding immediately prior to such event (whether or not then
exercisable), and, in full consideration of such cancellation, pay
to the grantee to whom such option was granted an amount in cash,
for each share of Common Stock subject to such option equal to the
excess of (i) the Fair Market Value of Common Stock on the date of
such cancellation over (ii) the exercise price of such option.
(f) No Other Rights. Except as expressly provided in the Plan, no
grantee shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any
dividend, any increase or decrease in the number of shares of stock
of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of
Common Stock subject to an award or the exercise price of any
option.
3.6 Limitations Imposed by Section 162(m)
Notwithstanding any other provision hereunder, if and to the extent that
the Committee determines the Company's federal tax deduction in respect of an
award may be limited as a result of section 162(m) of the Code, the Committee
may take the following actions: The Committee may delay the exercise of such
options and, in lieu of such exercise, the Committee shall credit the Fair
Market Value of the Common Stock that would be payable to the grantee upon such
exercise to a book account. The Committee may credit additional amounts to such
book account as it may determine in its sole discretion. The amounts credited to
any such book account shall be paid to the grantee on the date that is six
months after the grantee's termination of employment. Any book account created
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hereunder shall represent only an unfunded, unsecured promise by the
Company to pay the amount credited thereto to the grantee in the
future. The amount credited to any such book account shall not be
transferable by the grantee other than by will or laws of descent
and distribution.
3.7 Right of Discharge Reserved
Nothing in the Plan or in any Option Certificate shall confer upon any
grantee the right to continue employment with the Company or a subsidiary of the
Company or affect any right which the Company or a subsidiary of the Company may
have to terminate such employment.
3.8 Nature of Payments
(a) Consideration for Services Performed. Any and all grants of awards
and issuances of shares of Common Stock under the Plan shall be in
consideration of services performed for the Company by the grantee.
(b) Not Taken into Account for Benefits. All such grants and issuances
shall constitute a special incentive payment to the grantee and
shall not be taken into account in computing the amount of salary or
compensation of the grantee for the purpose of determining any
benefits under any pension, retirement, profit-sharing, bonus, life
insurance or other benefit plan of the Company or under any
agreement between the Company and the grantee, unless such plan or
agreement specifically otherwise provides.
3.9 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and may
be made by it selectively among persons who receive, or who are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Option Certificates,
as to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of absence
pursuant to Section 1.6(c).
3.10 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.11 Headings
Any section, subsection, paragraph or other subdivision headings contained
herein are for the purpose of convenience only and are not intended to expand,
limit or otherwise define the contents of such subdivisions.
3.12 Effective Date and Term of Plan
(a) Adoption; Shareholder Approval. The Plan was adopted by the Board as
of July 29, 2005, subject to approval by the Company's shareholders.
All awards under the Plan prior to such shareholder approval are
subject in their entirety to such approval. If such approval is not
obtained prior to the first anniversary of the date of adoption of
the Plan, the Plan and all awards thereunder shall terminate on that
date.
(b) Termination of Plan. Unless sooner terminated by the Board or
pursuant to paragraph (a) above, the Plan shall terminate on the
tenth anniversary of the adoption of the Plan by the Board, and no
such options shall thereafter be granted under the Plan. All options
granted under the Plan prior to the termination of the Plan shall
remain in effect until such options
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have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Option Certificates.
3.13 Restriction on Issuance of Stock Pursuant to Awards
The Company shall not permit any shares of Common Stock to be issued
pursuant to Awards granted under the Plan unless such shares of Common Stock are
fully paid and non-assessable, within the meaning of the New York Business
Corporation Law.
3.14 Deferred Compensation
The Plan is intended to comply with the requirements of Section 409A of
the Code so as not to be subject to tax under Section 409A, and shall be
interpreted accordingly. After final guidance is issued by the Internal Revenue
Service with respect to Section 409A, the Board will amend the Plan as necessary
to ensure compliance with Section 409A.
3.15 Governing Law
Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the State of
New York, without giving effect to principles of conflict of laws.
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Exhibit B
COMMAND SECURITY CORPORATION
AUDIT COMMITTEE CHARTER
I. Purpose
The primary purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Command Security Corporation (the "Company") is to
assist the Board in fulfilling its oversight responsibilities with respect to:
(i) the Company's accounting, auditing, and financial reporting processes; (ii)
the integrity of the Company's financial statements; (iii) the Company's
internal controls and procedures designed to promote compliance with accounting
standards and applicable laws and regulations; and (iv) the appointment, and
evaluation of the qualifications and independence, of the Company's independent
auditors.
II. Membership and Organization
The Committee shall be comprised of three or more members of the Board, each of
whom shall satisfy the independence and financial literacy requirements of The
Nasdaq Stock Market, Inc. ("Nasdaq") and the Securities and Exchange Commission
(the "SEC"). At least one member of the Committee shall meet the requirements of
Rule 4350(d)(2)(A)(i) of the Nasdaq Marketplace Rules and, unless the Board
shall otherwise determine, shall also be an "Audit Committee Financial Expert",
as defined by SEC regulations. Each member shall be free from any relationship
that, in the opinion of the Board, would interfere with his or her exercise of
independent judgment. The Board must determine that each member of the
Committee: (i) qualifies as an "independent director" under Rule 4200 of the
Nasdaq Marketplace Rules, unless the Board determines that an exemption to such
qualification is available under Nasdaq Rule 4350(d)(2)(B), (ii) meets the
"independence" requirements under Section 10A of the Securities Exchange Act of
1934 (the "Exchange Act") and (iii) satisfies the other requirements of Rule
4350(d)(2) of the Nasdaq Marketplace Rules.
The members of the Committee and the Chairman of the Committee shall be
appointed annually by the Board on the recommendation of the Nominating and
Corporate Governance Committee of the Board. Members shall serve at the pleasure
of the Board and for such term or terms as the Board may determine.
The Committee shall meet at least four times annually, or more frequently as the
Committee may determine. Members of management, the Company's independent
auditors and others shall attend meetings to provide pertinent information, as
necessary. As part of its goal of fostering open communication, during its
regularly scheduled meetings the Committee shall meet in separate executive
sessions with management and with the independent auditors to discuss any
matters that the Committee or any of these groups believes should be discussed
privately. The Chairman of the Committee shall report to the Board regularly
regarding the Committee's activities and actions, including at the first Board
meeting following any Committee meeting.
The Chairman or, in the event of his absence from any meeting, another member of
the Committee designated by vote of the members in attendance at such meeting,
will chair all meetings of the Committee and set the agendas for such meetings.
Any other member of the Committee shall have the right to submit items to be
included on the agenda for any Committee meeting.
The Committee shall keep regular minutes of its meetings and report the same to
the Board from time to time and upon request.
III. Duties and Responsibilities
The Committee shall have and may exercise the following responsibilities and
duties:
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Independent Auditors - Appointment and Oversight
------------------------------------------------
1. The Committee shall be directly responsible for the appointment,
compensation, retention, termination and oversight of the work of the
Company's independent auditors (including resolution of disagreements
between management and the independent auditors regarding financial
reporting). The independent auditors shall report directly to the Committee.
2. The Committee shall approve in advance all auditing services (including
comfort letters and statutory audits) performed by the independent auditors.
The Committee shall approve in advance all non-audit services performed by
the independent auditors as permitted under Section 10A of the Exchange Act.
The Committee may delegate to one or more members the authority to grant
pre-approvals required by this section, in which case the decision of such
member or members shall be presented to the Committee at the next scheduled
meeting of the Committee. All approvals shall be in accordance with the
Committee's Auditor Pre-Approval Policy, as amended from time to time.
3. The Committee shall annually review and discuss with the independent
auditors all relationships the independent auditors have with the Company in
order to evaluate their continued independence. In this regard, the
Committee shall (i) review on an annual basis a written statement from the
independent auditors (consistent with Independent Standards Board Standard
No. 1) that discloses all relationships and services that may impact the
objectivity and independence of the independent auditors; (ii) discuss with
the independent auditors any disclosed relationships or services that may
impact their objectivity and independence; and (iii) satisfy itself as to
the independence of the independent auditors.
4. The Committee shall annually obtain and review a report by the independent
auditors describing: (i) the independent auditors' internal quality-control
procedures; and (ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the audit firm, or by any inquiry
or investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out
by the audit firm, and any steps taken to deal with such issues.
5. The Committee shall confirm compliance by the independent auditors with laws
and regulations relating to audit partner rotation.
6. The Committee shall obtain, review and discuss quarterly reports from the
independent auditors to the Committee with respect to critical accounting
policies and practices, alternative treatments of financial information
within generally accepted accounting principles that have been discussed
with management, including ramifications of the use of such alternative
disclosure and treatments, and the treatment preferred by the independent
auditors and the impact of each on the quality and reliability of the
Company's financial reporting, and other material communications with
management, such as any management letter or schedule of unadjusted
differences. All material communications shall be promptly provided to each
member of the Committee.
7. The Committee shall review with the independent auditors and management the
scope of the proposed audit plan for the current year, and at the conclusion
thereof review such audit and any comments and recommendations of the
independent auditors.
8. The Committee shall discuss with management and the independent auditors any
accounting adjustments that were noted or proposed by the independent
auditors but not adopted or reflected.
9. The Committee shall regularly review with the independent auditors any audit
problems or difficulties encountered in the course of the audit work,
including any restrictions on the scope of the independent auditors'
activities or access to requested information and any significant
disagreements with management and management's response thereto.
10. The Committee shall annually review the qualifications, performance and
independence of the independent auditors and the senior members of the
independents auditors' audit engagement team.
B-2
11. The Committee shall annually prepare the report required by the proxy rules
promulgated by the SEC to be included in the Company's annual proxy
statement.
Financial Statements
--------------------
12. The Committee shall review and discuss with management and the independent
auditors the Company's annual audited financial statements and the Company's
quarterly financial statements (including disclosures made in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" portion thereof) prior to issuance or filing.
13. The Committee shall discuss with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61 relating
to the conduct of the audit.
14. The Committee shall recommend to the Board, if appropriate, that the
Company's annual audited financial statements be included in the Company's
annual report on Form 10-K for filing with the SEC.
Accounting and Financial Reporting Processes and Risk Assessment
----------------------------------------------------------------
15. The Committee shall periodically discuss with the independent auditors,
without management being present, their judgments about the quality,
appropriateness and acceptability of the Company's accounting principles and
financial disclosure practices, as applied in its financial reporting, and
the completeness and accuracy of the Company's financial statements.
16. The Committee shall review with management and the independent auditors any
legal, regulatory or compliance matters that could have a significant impact
on the Company's financial statements, including any correspondence with
regulators or government agencies and any employee complaints or published
reports that raise material issues regarding the Company's financial
statements or accounting policies and any significant changes in accounting
standards or rules promulgated by the Financial Standards Board, the SEC or
other regulatory authorities.
17. The Committee shall discuss generally the types of information to be
disclosed and the presentation to be made in press releases regarding the
Company's earnings, including the use of non-GAAP financial data, and in
financial information and earnings guidance (if any) otherwise publicly
announced or given to ratings agencies or other third parties.
18. The Committee shall review with management and, if necessary, the
independent auditors and Company counsel, press releases announcing
quarterly and annual financial results and other financial reporting
information prior to their release.
19. The Committee shall review any off-balance sheet transactions, arrangements
and obligations (including contingent obligations) and any other
relationships of the Company with unconsolidated entities that may have a
current or future effect on the Company's financial statements.
20. The Committee shall review and discuss with management, and to the extent
the Committee deems necessary or appropriate, the independent auditors, the
Company's disclosure controls and procedures that are designed to ensure
that the reports the Company files with the SEC comply with the SEC's rules
and forms.
21. The Committee shall review the Company's major financial risk exposures, the
Company's system of internal controls and policies relating to risk
assessment and management and the steps management has taken to monitor and
control such exposures.
B-3
Internal Controls
-----------------
22. The Committee shall establish procedures for the receipt, retention, and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters, and the confidential,
anonymous submission by employees of concerns regarding questionable
accounting or auditing matters.
23. The Committee shall review the reports of the Chief Executive Officer and
Chief Financial Officer (in connection with their required certifications
for the Company's filings with the SEC) regarding any significant
deficiencies or material weaknesses in the design or operation of internal
controls, and any fraud that involves management or other employees who have
a significant role in the Company's internal controls.
Other
-----
24. The Committee shall take steps to ensure that the Company shall not hire any
person to perform a financial reporting oversight role who has provided more
than ten hours of audit, review or attest services as part of the
independent auditors' audit engagement team within the past year. A
financial reporting oversight role refers to a role in which an individual
has direct responsibility for or oversight of those who prepare the
Company's financial statements and related information which will be
included in the Company's filings with the SEC, and also includes members of
the Board who may have significant interaction with the independent
auditors' audit engagement team.
25. The Committee shall, prior to the Company entering into any related party
transaction required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated by the SEC (such transaction being a "Related Party
Transaction"), review and approve such transaction and recommend to the
Board that it approve such transaction; however, the Company may only enter
into a Related Party Transaction approved by the Committee if the Board also
approves such transaction. The Committee shall report to the Board any
proposed Related Party Transaction that it does not approve. The Committee
shall also review and report to the Board any questions of possible conflict
of interest involving Board members, members of senior management or their
immediate families.
26. The Committee shall oversee the Company's internal audit function, including
(i) the appointment, replacement, dismissal and compensation of the
Company's senior most internal auditor and (ii) reviewing the internal audit
department's staffing, budget and responsibilities.
27. The Committee shall annually review and evaluate the performance of the
Committee, including compliance by the Committee with this Charter.
28. The Committee shall annually review and assess the adequacy of this Charter
and submit any proposed changes to the Board for approval.
29. The Committee shall perform any other activities consistent with this
Charter, and the Company's Bylaws and Certificate of Incorporation, as the
Committee may deem necessary or appropriate for the fulfillment of its
responsibilities under this Charter or as required by applicable law or
regulation, or as may be determined by the Board.
IV. Committee Resources and Advisors
The Committee shall have the authority to retain, at the expense of the Company,
such independent legal and other advisors as it shall deem necessary to carry
out its duties, without Board or management approval.
The Committee members will be provided with continuing education opportunities
in financial reporting and other areas relevant to the Committee.
The Company shall provide for appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board, for payment of: (i)
compensation to any registered public accounting firm engaged for the purpose of
B-4
preparing or issuing an audit report or performing other audit, review or attest
services for the Company; (ii) compensation to any advisors engaged by the
Committee as provided above; and (iii) ordinary administrative expenses of the
Committee that are necessary or appropriate in carrying out its duties.
V. Limitation of Committee's Role
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete
and accurate and are in accordance with generally accepted accounting principles
and applicable rules and regulations. These are the responsibilities of
management and the independent auditors.
B-5
Exhibit C
COMMAND SECURITY CORPORATION
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
I. Purpose
The purpose of the Nominating and Corporate Governance Committee (the
"Committee") of the Board of Directors (the "Board") of Command Security
Corporation (the "Company") is to (i) identify individuals who are qualified to
become directors; (ii) select or assist in selecting nominees for membership on
the Board and committees of the Board; and (iii) assist the Board with oversight
of corporate governance matters.
II. Membership and Organization
A. The Committee shall be comprised of three or more members of the Board, each
of whom, except as otherwise permitted, shall satisfy the independence
requirements of The Nasdaq Stock Market, Inc. ("Nasdaq").
B. The members of the Committee and the Chairman of the Committee shall be
appointed by the Board. Members shall serve at the pleasure of the Board for
such term or terms as the Board may determine.
C. The Committee shall meet at least twice annually, or more frequently as the
Committee may determine. The Chairman of the Committee shall report to the
Board regularly regarding the Committee's activities and actions, including
at the first Board meeting following any Committee meeting.
D. The Chairman or, in the event of his absence from any meeting, another
member of the Committee designated by vote of the members in attendance at
such meeting, will chair all meetings of the Committee and set the agendas
for such meetings. Any other member of the Committee shall have the right to
submit items to be included on the agenda for any Committee meeting.
E. The Committee shall keep regular minutes of its meetings and report the same
to the Board from time to time and upon request.
III. Duties and Responsibilities Relating to Nominations
A. The Committee shall lead the search for individuals qualified to become
members of the Board and shall select director nominees to be presented for
stockholder approval. In the case of a vacancy in the office of a director
(including a vacancy created by an increase in the size of the Board), the
Committee shall select a nominee to fill such vacancy either through
appointment by the Board or through election by stockholders. In setting
nomination criteria and evaluating candidates, the Committee shall take into
consideration such factors as it deems appropriate. These factors may
include judgment, skill, experience with businesses and other organizations
of comparable size or in related industries, the ability to act on behalf of
stockholders, the interplay of the candidate's experience with the
experience of other Board members, and the extent to which the candidate
would be a desirable addition to the Board and any committees of the Board.
B. The Committee shall conduct the appropriate and necessary inquiries into the
backgrounds and qualifications of possible candidates.
C. The Committee shall receive nominations for director and evaluate all
prospective director nominees, including nominees recommended by a
stockholder. The Committee may consider candidates proposed by management,
but is not required to do so.
D. The Committee shall review the Board's committee structure and shall
recommend to the Board for its approval directors to serve as members of
each committee. The Committee shall review and make
C-1
recommendations regarding membership of Board committees annually and shall
recommend additional committee members to fill vacancies as needed.
IV. Duties and Responsibilities Relating to Corporate Governance
A. The Committee shall recommend to the Board a code or codes of conduct
applicable to employees, officers and directors of the Company and the
process for consideration and disclosure of any requested waivers of such
code or codes in the case of directors or executive officers of the Company.
B. The Committee shall review and reassess the adequacy of such code or codes
of conduct at least annually, and make recommendations to the Board as
appropriate.
C. The Committee shall recommend for approval by the majority of directors who
are deemed independent in accordance with the applicable requirements of
Nasdaq a process for collecting and organizing communications to the Board
from security holders of the Company and deciding which communications will
be relayed to the Board.
D. The Committee shall review and report to the Board regarding any questions
of possible conflicts of interest and related party transactions involving
Board members or members of senior management of the Company, including but
not limited to related party transactions required to be disclosed pursuant
to Item 404 of Regulation S-K promulgated by the Securities and Exchange
Commission.
E. The Committee shall periodically review the functions of the senior officers
of the Company and make recommendations to the Board regarding changes as it
may deem necessary.
F. The Committee shall annually review with the Chief Executive Officer the job
performance of elected corporate officers and such other senior executives
of the Company as it deems appropriate.
G. The Committee shall periodically review with the Chief Executive Officer the
succession plans relating to positions held by elected corporate officers
and such other senior executives of the Company as it deems appropriate, and
make recommendations to the Board with respect to individuals to occupy
these positions.
V. Additional Responsibilities and Authority
A. The Committee shall have authority to retain, at the expense of the Company,
any search firm or similar consultant to assist in identifying and
appropriately investigating director candidates as it shall deem necessary
to carry out its duties, without Board or management approval.
B. The Committee shall annually conduct and present to the Board an evaluation
of the performance of the Board and the other committees of the Board.
C. The Committee shall annually review and evaluate the performance of the
Committee, including compliance by the Committee with this Charter.
D. The Committee shall annually review and assess the adequacy of this Charter
and recommend any proposed changes to the Board for approval.
C-2
Exhibit D
COMMAND SECURITY CORPORATION
COMPENSATION COMMITTEE CHARTER
I. Purpose
The purpose of the Compensation Committee (the "Committee") of the Board of
Directors (the "Board") of Command Security Corporation (the "Company") is to
(i) discharge the Board's responsibilities relating to executive compensation;
(ii) produce an annual report regarding executive compensation; and (iii)
discharge any other responsibilities provided for in this Charter.
II. Membership and Organization
A. The Committee shall be comprised of three or more members of the Board, each
of whom, except as otherwise permitted, shall satisfy the independence
requirements of The Nasdaq Stock Market, Inc. ("Nasdaq"). Each member of the
Committee shall also qualify, in the determination of the Board (1) as a
"non-employee director for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and (2) as an "outside director" for
purposes of Section 162(m) of the Internal Revenue Code.
B. The members of the Committee and the Chairman of the Committee shall be
appointed by the Board on the recommendation of the Nominating and Corporate
Governance Committee of the Board. Members shall serve at the pleasure of
the Board for such term or terms as the Board may determine.
C. The Committee shall meet at least three times annually, or more frequently
as the Committee may determine. The Committee shall meet in executive
session at least on an annual basis. The Chairman of the Committee shall
report to the Board regularly regarding the Committee's activities and
actions, including at the first Board meeting following any Committee
meeting.
D. The Chairman or, in the event of his absence from any meeting, another
member of the Committee designated by vote of the members in attendance at
such meeting, will chair all meetings of the Committee and set the agendas
for such meetings. Any other member of the Committee shall have the right to
submit items to be included on the agenda for any Committee meeting.
E. The Committee may, to the extent consistent with maintaining the
confidentiality of compensation discussions, invite the Company's Chief
Executive Officer ("CEO") to participate in all or a portion of any meetings
of the Committee, but if present during any deliberations of the Committee,
the CEO may not vote. The CEO may not be present during any discussions and
deliberations of the Committee regarding the CEO's compensation.
F. The Committee shall keep regular minutes of its meetings and report the same
to the Board from time to time and upon request.
III. Duties and Responsibilities
A. The Committee shall produce annually a report to be included in the
Company's proxy statement disclosing compensation policies for the Company's
CEO and officers, including the specific relationship of corporate
performance to executive compensation with respect to compensation reported
in the last completed fiscal year. This disclosure shall be made over the
names of all members of the Committee. If the Board modified or rejected in
any material way any action or recommendation by the Committee with respect
to decisions in the last completed fiscal year, the disclosure shall so
indicate and explain the reasons for the Board's actions, and shall be made
over the names of all members of the Board.
D-1
B. The Committee shall on an annual basis discuss its bases for the CEO's
compensation reported for the last completed fiscal year, including the
factors and criteria upon which the CEO's compensation was based. The
Committee shall specifically discuss the relationship of the Company's
performance to the CEO's compensation for the last completed fiscal year,
describing each measure of the Company's performance, whether qualitative or
quantitative, on which the CEO's compensation was based. The Committee shall
have the sole authority to set the CEO's compensation level based on this
evaluation. The CEO shall not be permitted to participate in any discussions
or processes of the Committee concerning his compensation.
C. The Committee shall on an annual basis review and approve Company goals and
objectives relevant to the compensation of each executive officer of the
Company, and evaluate the executive officer's performance in light of those
goals and objectives, and shall have the sole authority to set the executive
officer's compensation level based on this evaluation.
D. To the extent, if any, that the Company may determine, with such shareholder
or other approval as may be required for such action, to adjust or amend the
exercise price of stock options or stock appreciation rights ("SARs")
previously awarded to the CEO or any named executive officer (as defined in
Item 402(a)(3) of Regulation S-K promulgated by the Securities and Exchange
Commission ("Regulation S-K")), whether through amendment, cancellation or
replacement grant, or other means (a "repricing"), the Committee shall
explain in reasonable detail any such repricing of options or SARs held by
the CEO or any named executive officer in the last completed fiscal year, as
well as the basis for each such repricing.
E. The Committee shall, in consultation with management, oversee regulatory
compliance with respect to compensation matters, including overseeing the
Company's policies on structuring compensation programs to preserve tax
deductibility, and, as and when required, establishing performance goals and
certifying that performance goals have been attained for purposes of Section
162(m) of the Internal Revenue Code.
F. The Committee shall review and recommend actions to the Board regarding
director and officer indemnification and insurance matters, on the advice of
the Company's Chief Legal Officer.
G. In the event the Company includes comparisons using performance measures in
the performance graph required by Rule 402(l) of Regulation S-K, the
Committee shall describe the link between that measure and the level of
executive compensation in the report of the Committee included in the
Company's proxy statement.
H. The Committee shall approve the establishment or material amendment of any
tax qualified, non-discriminatory employee benefit plans or parallel
nonqualified plans or other equity compensation arrangements, pursuant to
which stock of the Company may be acquired by its officers, directors,
employees or consultants.
I. The Committee shall perform any other activities consistent with this
Charter, and the Company's Bylaws and Certificate of Incorporation, as may
be determined by the Board.
IV. Additional Responsibilities and Authority
A. The Committee shall have authority to retain, at the expense of the Company,
any compensation or similar consultant as it shall deem necessary to carry
out its duties, without Board or management approval.
B. The Committee shall annually review and evaluate the performance of the
Committee, including compliance by the Committee with this Charter.
C. The Committee shall annually review and assess the adequacy of this Charter
and recommend any proposed changes to the Board for approval.
D-2