VICON INDUSTRIES, INC.
89 Arkay Drive
Hauppauge, NY 11788
(631) 952-2288 (CCTV)
Notice of Annual Meeting of Shareholders
To Be Held on May 26, 2004
To the Shareholders of Vicon Industries, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Vicon
Industries, Inc. (the "Company"), a New York corporation, will be held at the
Company's corporate headquarters located at 89 Arkay Drive, Hauppauge, New York
11788, on May 26, 2004 at 10:00 a.m. local time for the following purposes, all
of which are more completely described in the accompanying proxy statement:
1. To elect two directors for terms expiring in 2007;
2. To ratify the appointment of BDO Seidman, LLP, as the Company's
independent auditors for the fiscal year ending September 30, 2004;
and
3. To receive the reports of officers and to transact such other business
as may properly come before the meeting.
Shareholders entitled to notice of and to vote at the Annual Meeting are
shareholders of record at the close of business on April 9, 2004 fixed by action
of the Board of Directors.
The Company's proxy statement is submitted herewith. The Annual Report to
Shareholders for the year ended September 30, 2003 is included with the proxy
statement.
By Order of the Board of Directors,
Hauppauge, New York Joan L. Wolf
April 9, 2004 Secretary
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YOUR VOTE IS IMPORTANT
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You are urged to date, sign and promptly return your proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional proxy solicitation. The giving of such proxy does not affect your
right to vote in person in the event you attend the meeting.
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PROXY STATEMENT FOR 2004 ANNUAL MEETING OF SHAREHOLDERS
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy, for use only at the Annual Meeting of Shareholders to
be held on May 26, 2004 at 10:00 a.m., and any and all adjournments thereof, is
solicited on behalf of the Board of Directors of Vicon Industries, Inc. (the
"Company").
Any shareholder executing a proxy retains the right to revoke it by notice
in writing to the Secretary of the Company at any time prior to its use. The
cost of soliciting the proxy will be borne by the Company.
PURPOSES OF ANNUAL MEETING
The Annual Meeting has been called for the purposes of electing two
directors whose terms of office expire in 2007; ratifying the appointment of
independent auditors; receiving the reports of officers; and transacting such
other business as may properly come before the meeting.
The persons named in the enclosed proxy have been selected by the Board of
Directors and will vote shares represented by valid proxies. They have indicated
that, unless otherwise specified in the proxy, they intend to vote FOR the
election of two directors whose terms of office expire in 2007; and FOR
ratification of the appointment of independent auditors.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received at the Company's principal executive
office no later than November 1, 2004, and must comply with all other legal
requirements in order to be included in the Company's proxy statement and form
of proxy for that meeting. Proposals of security holders not meeting the
requirements of Rule 14a-8 of Regulation 14A must comply with the requirements
set forth in the Company's Bylaws relating to business conducted at the Annual
Meeting of Shareholders.
This proxy statement and the enclosed proxy card are being furnished to
shareholders on or about April 26, 2004.
VOTING SECURITIES
The Company has one class of capital stock, consisting of common stock, par
value $.01 per share, of which each outstanding share entitles its holder to one
vote. Cumulative voting is not provided under the Company's Certificate of
Incorporation or Bylaws. Shareholders entitled to vote or to execute proxies are
shareholders of record at the close of business on April 9, 2004. As of March
15, 2004, there were 4,605,524 shares outstanding.
The presence, in person or by proxy, of at least a majority of the total
number of shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. In the event that there are insufficient votes for
a quorum or to approve any proposal at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit the further solicitation of
proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a shareholder to vote "FOR" the election of the nominees
proposed by the Board, or to "WITHHOLD" authority to vote for the nominees being
proposed. Directors are elected by a plurality of shares voted, without regard
to either (i) broker non-votes, or (ii) proxies as to which authority to vote
for one or more of the nominees being proposed is withheld.
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As to the ratification of independent auditors, a shareholder may: (i) vote
"FOR" the ratification; (ii) vote "AGAINST" the ratification; or (iii) "ABSTAIN"
from voting on the ratification. The ratification of independent auditors shall
be determined by a majority of the votes cast affirmatively or negatively,
without regard to broker non-votes or proxies marked "ABSTAIN" as to the matter.
Proxies solicited hereby will be returned to the Board and will be
tabulated by the inspector of election designated by the Board of Directors.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth information as to each person, known to the
Company to be a "beneficial owner" (as defined in regulations of the Securities
and Exchange Commission) of more than five percent of the Company's outstanding
Common Stock as of March 15, 2004 and the shares beneficially owned by the
Company's Executive Officers and Directors and by all Executive Officers and
Directors as a group.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned (1) of Class
- ------------------- ---------------------- --------
CBC Co., Ltd.
and Affiliates
2-15-13 Tsukishima
Chuo-ku
Tokyo, Japan 104 543,715 11.4%
Leviticus Partners, L.P.
30 Park Avenue, Suite 12F
New York, NY 10016 300,000 6.3%
Dimensional Fund Advisors
1299 Ocean Avenue
Santa Monica, CA 90401 272,300 (7) 5.7%
Al Frank Asset Management, Inc.
32392 Coast Highway, Suite 260
Laguna Beach, CA 92651 271,250 (8) 5.7%
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C/O Vicon Industries, Inc.
Kenneth M. Darby 266,502 (2) 5.6%
Arthur D. Roche 141,601 (3) 3.0%
Peter F. Neumann 27,072 (4) *
W. Gregory Robertson 23,847 (5) *
Milton F. Gidge 23,698 (5) *
Total all Executive Officers
and Directors as a group (5 persons) 482,720 (6) 10.1%
* Less than 1%.
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(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment control over the shares of stock
owned.
(2) Includes currently exercisable options to purchase 16,410 shares.
(3) Includes 50,000 shares held by Mr. Roche's wife and currently exercisable
options to purchase 11,947 shares.
(4) Includes currently exercisable options to purchase 10,000 shares.
(5) Includes currently exercisable options to purchase 11,947 shares.
(6) Includes currently exercisable options to purchase 62,251 shares.
(7) Dimensional Fund Advisors had voting and investment control over 272,300
shares as investment advisor and manager for various mutual funds and other
clients. These shares are beneficially owned by such mutual funds or other
clients.
(8) Al Frank Asset Management, Inc. had voting control over 106,600 shares and
investment control over 271,250 shares.
EQUITY COMPENSATION PLAN INFORMATION
At September 30, 2003
Number of securities
remaining available
for future
Number of securities Weighted average issuance under
to be issued upon exercise price equity compensation
exercise of out- of outstanding plans (excluding
standing options, options, warrants securities reflected
warrants and rights and rights in column (a))
(a) (b) (c)
Plan category
- ------------------ -------------- -------------- --------------
Equity compensation
plans approved by
security holders 562,537 $3.34 85,179
Equity compensation
plans not approved
by security holders __ __ __
Total 562,537 $3.34 85,179
Equity Compensation Grant Not Approved by Security Holders
Through September 30, 2003, the Company had granted certain of its officers with
deferred compensation benefits aggregating 97,337 shares of common stock
currently held by the Company in treasury. Such shares vest upon retirement or,
in the case of 70,647 shares, the expiration of the Chief Executive Officer's
employment agreement in October 2005. All shares vest earlier under certain
occurrences including death, involuntary termination or a change in control of
the Company.
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PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board is comprised of five directors; two directors whose terms expire
in 2005; one director whose term expires in 2006; and two directors to be
elected for a term expiring in 2007. Directors serve for a term of three years
or until their successors are elected and qualified. No person being nominated
as a director is being proposed for election pursuant to any agreement or
understanding between any person and the Company.
The nominees proposed for election to a term expiring in 2007 at the Annual
Meeting is Mr. Clifton H. W. Maloney and Mr. W. Gregory Robertson. In the event
that such nominee is unable or declines to serve for any reason, the Board of
Directors shall elect a replacement to fill the vacancy. The Board of Directors
has no reason to believe that the persons named will be unable or unwilling to
serve.
Mr. Milton F. Gidge, a current member of the Board since 1987, will retire
from the Board after the expiration of his current term on May 26, 2004 since he
reached the age limitation under Board guidelines.
Unless authority to vote for the nominee is withheld, it is intended that the
shares represented by the enclosed proxy will be voted FOR the nominees named in
the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
---
IN THIS PROXY STATEMENT
Information with Respect to Nominee and Continuing Directors
The following sets forth the name of the nominees and continuing directors,
their ages, a brief description of their recent business experience, including
present occupations and employment, certain directorships held by each and the
year in which each became a director of the Company.
Nominee and Director
Principal Occupation Since Age
- -------------------- -------- -----
Clifton H. W. Maloney
President
C. H. W. Maloney & Co., Inc. - 67
W. Gregory Robertson
President
TM Capital Corp. 1991 60
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Name and Director
Principal Occupation Since Age
- -------------------- -------- -----
Continuing Directors whose Term of Office Expires in 2005
- ---------------------------------------------------------
Kenneth M. Darby
Chairman and CEO
Vicon Industries, Inc. 1987 58
Arthur D. Roche
Retired Executive Vice President
Vicon Industries, Inc.
Retired Partner
Arthur Andersen & Co. 1992 65
Continuing Director whose Term of Office Expires in 2006
- --------------------------------------------------------
Peter F. Neumann
Retired President
Flynn-Neumann Agency, Inc. 1987 69
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Mr. Maloney is the President of C.H.W. Maloney & Co., Inc., a private
investment firm which he founded in 1981. From 1974 to 1984, he was a Vice
President in investment banking at Goldman, Sachs & Co. Mr. Maloney is a
Director of Interpool, Inc., Chromium Industries, Inc. and The Wall Street Fund.
Mr. Robertson is the President of TM Capital Corporation, a financial
services company which he founded in 1989. From 1985 to 1989, he was employed by
Thompson McKinnon Securities Inc., as head of investment banking and public
finance. Mr. Robertson's current term on the Board ends in May 2004.
Mr. Darby has served as Chairman of the Board since April 1999, as Chief
Executive Officer since April 1992 and as President since October 1991. Mr.
Darby also served as Chief Operating Officer and as Executive Vice President,
Vice President, Finance and Treasurer of the Company. He joined the Company in
1978 as Controller after more than nine years at Peat Marwick Mitchell & Co., a
public accounting firm. Mr. Darby's current term on the Board ends in May 2005.
Mr. Roche served as Executive Vice President and co-participant in the
Office of the President of the Company from August 1993 until his retirement in
November 1999. For the six months prior to that time, Mr. Roche provided
consulting services to the Company. In October 1991, Mr. Roche retired as a
partner of Arthur Andersen & Co., an international accounting firm which he
joined in 1960. Mr. Roche's current term on the Board ends in May 2005.
Mr. Neumann is the retired President of Flynn-Neumann Agency, Inc., an
insurance brokerage firm. Mr. Neumann's current term on the Board ends in May
2006.
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MEETINGS OF THE BOARD AND COMMITTEES OF THE BOARD
The Board of Directors has a number of committees including the Executive
Committee, the Compensation Committee, the Audit Committee and the Nominating
Committee.
The Executive Committee consists of Messrs. Darby (Chairman), Gidge,
Neumann, and Roche. The Committee meets in special situations when the full
Board cannot be convened. The Committee met twice during the last fiscal year.
The Compensation Committee consists of Messrs. Neumann (Chairman), Gidge,
Robertson and Roche, all of whom are non-employee directors. The function of the
Compensation Committee is to establish and approve the appropriate compensation
for Mr. Darby, recommend the award of stock options, and to review the
recommendations of the CEO with respect to the compensation of all other
officers. The Committee met once during the last fiscal year.
The Audit Committee consists of Messrs. Roche (Chairman), Gidge, Neumann,
and Robertson, each of whom is an "independent director" as defined by American
Stock Exchange Listing Standards. The primary function of the Audit Committee is
to assist the Board of Directors in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including
review of the financial reports and other financial information of the Company,
the Company's system of internal accounting controls, the Company's compliance
with legal and regulatory requirements, the qualifications and independence of
the Company's independent auditors and the performance of the Company's
independent auditors. The Audit Committee has sole authority to appoint, retain,
compensate, evaluate and terminate the independent auditors and to approve all
engagement fees and terms for the independent auditors. The Board has determined
that Mr. Roche is an "Audit Committee financial expert" under the rules of the
Securities and Exchange Commission. The Board of Directors has recently amended
its previously adopted charter for the Audit Committee. A copy of the revised
charter is included as Appendix A to this Proxy Statement and is available on
the Company's website at HTTP://www.vicon-cctv.com. The Audit Committee will
periodically review the Audit Committee Charter in light of new developments in
applicable regulations and may make additional recommendations to the Board of
Directors for further revision of the Audit Committee Charter to reflect
evolving best practices. The Committee met five times during the last fiscal
year.
The Nominating Committee consists of Messrs. Roche (Chairman), Gidge and
Neumann. The primary function of the Nominating Committee is to recommend
individuals qualified to serve as directors and on committees of the Board; to
advise the Board with respect to Board composition, procedures and committees;
and to evaluate the overall Board and Committee effectiveness. All director
candidates, including those recommended by stockholders, are evaluated on the
same basis. In its evaluation of director candidates, the Nominating Committee
considers a variety of characteristics, including, but not limited to, core
competencies, experience, independence, level of commitment, board and company
needs and considerations, and personal characteristics. The Nominating Committee
may engage a third party to assist it in identifying potential director
nominees. The Committee has generally identified nominees based upon
recommendations from existing directors and will consider candidates recommended
by stockholders if submitted to the Committee in writing and complying with
shareholder proposal requirements outlined elsewhere in this proxy statement.
The Board of Directors approved the Committee's selection of Mr. Maloney as
nominee for election to the Company's Board in this Proxy Statement. Mr. Maloney
was introduced to the Nominating Committee by a director of the
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Company. The Board of Directors has determined that each member of the
Nominating Committee meets the definition of an "independent director" as
defined by American Stock Exchange Listing Standards. The Committee did not meet
during the last fiscal year, and in January 2004 met to select Mr. Maloney as
nominee for election to the Company's Board. The Board has not yet adopted a
written charter for the Nominating Committee, which is expected to be adopted by
the date of the Annual Meeting.
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company. Outside
members of the Board are kept informed of the Company's business through various
reports and documents sent to them, as well as through operating and financial
reports made at Board and committee meetings by Mr. Darby and other officers.
The Board of Directors held five meetings in the Company's 2003 fiscal
year, including all regularly scheduled and annual meetings. No Board member
attended fewer than 75% of the aggregate of (1) the total number of meetings of
the Board (held during the period for which he was a director) and (2) the total
number of meetings held by all committees on which he served (during the periods
that he served). The Company has a policy to request that all directors attend
its annual meetings. The prior year annual meeting was attended by all of the
current directors.
The directors are each compensated at the rate of $16,000 per year retainer
and $1,000 per Committee meeting attended in person or by teleconference. The
Chairman of the Audit Committee receives an additional annual retainer of
$8,000. Employee directors are not compensated for Board or committee meetings.
Directors may not stand for re-election after 70, except that any director may
serve one additional three-year term after age 70 with the unanimous consent of
the Board of Directors.
Certain Relationships and Related Transactions
The Company and CBC Company, Ltd. (CBC), a Japanese corporation which
beneficially owns 11.4% of the outstanding shares of the Company, have been
conducting business with each other for approximately twenty-four years. During
this period, CBC has served as a lender, a product supplier and sourcing agent,
and a private label reseller of the Company's products. CBC has also acted as
the Company's sourcing agent for the purchase of certain video products. In
fiscal 2003, the Company purchased approximately $832,000 of products and
components from or through CBC. CBC competes with the Company in various
markets, principally in the sale of video products and systems. Sales of all
products to CBC were $370,000 in 2003. In fiscal 2003, the Company recognized
$180,000 of revenues received from CBC pursuant to the completion of a contract
to develop certain new product technology.
Code of Ethics and Business Conduct
The Company has adopted a Code of Ethics and Business Conduct that applies
to all its employees, including its chief executive officer, chief financial and
accounting officer, controller, and any persons performing similar functions.
Such Code of Ethics and Business Conduct is published on the Company's internet
website at HTTP://www.vicon-cctv.com.
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Ability of Stockholders to Communicate with the Board of Directors
Shareholders may contact the Board of Directors or a specified individual
director by sending a written communication addressed to the Board of Directors
or such individual director(s) in care of the Secretary of the Company at Vicon
Industries, Inc., 89 Arkay Drive, Hauppauge, NY 11788. The Company's Corporate
Secretary will relay all such communications to the Board of Directors, or
individual members, as appropriate.
Report of the Audit Committee
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal control.
In fulfilling its oversight responsibilities, the Committee reviewed and
discussed with management the audited consolidated financial statements as of
and for the fiscal year ended September 30, 2003. Additionally, the Committee
has reviewed and discussed with management and the independent auditors the
Company's unaudited interim financial statements as of and for the end of each
fiscal quarter. Such discussions occur prior to issuance of news releases
reporting quarterly results.
The Committee discussed with the independent auditors the matters required
to be discussed by the Statement on Auditing Standards No. 61, Communication
with Audit Committees, as amended, of the Auditing Standards Board of the
American Institute of Certified Public Accountants.
The Committee received and reviewed the written disclosures and the letter
from the independent auditors required by Standard No. 1, Independence
Discussions with Audit Committees, as amended, of the Independence Standards
Board, and discussed with the auditors their firm's independence.
Based on the reviews and discussions referred to above, the Committee
recommends to the Board of Directors that the audited fiscal year-end financial
statements referred to above be included in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2003.
Submitted by the Audit Committee,
Arthur D. Roche, Chairman Milton F. Gidge
Peter F. Neumann W. Gregory Robertson
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OTHER OFFICERS OF THE COMPANY
In addition to Mr. Darby, the Company has six other officers. They are:
John M. Badke, age 44 Vice President, Finance
and Chief Financial Officer
Peter A. Horn, age 48 Vice President, Operations
Bret M. McGowan, age 38 Vice President, Marketing
Yacov A. Pshtissky, age 52 Vice President, Technology and Development
John F. Whiteman, Jr, age 45 Vice President, Sales
Joan L. Wolf, age 49 Executive Administrator and Corporate Secretary
Mr. Badke has been Chief Financial Officer since December 1999 and Vice
President, Finance since October 1998. Previously, he served as Controller since
joining the Company in 1992. Prior to joining the Company, Mr. Badke was the
Controller for NEK Cable, Inc. and an audit manager with the international
accounting firms of Arthur Andersen & Co. and Peat Marwick Main & Co.
Mr. Horn has been Vice President, Operations since June 1999. From 1995 to
1999, he was Vice President, Compliance and Quality Assurance. Prior to that
time, he served as Vice President in various capacities since his promotion in
May 1990.
Mr. McGowan has been Vice President, Marketing since October 2001.
Previously, he served as Director of Marketing since 1998 and as Marketing
Manager since 1994. He joined the Company in 1993 as a Marketing Specialist.
Mr. Pshtissky has been Vice President, Technology and Development since May
1990. Previously, he was Director of Electrical Product Development from March
1988 through April 1990.
Mr. Whiteman joined the Company in December 2002 as Director of Sales and
was promoted to Vice President, Sales in March 2003. Prior to joining the
Company, Mr. Whiteman was Sr. Vice President-Sales and marketing for Sentry
Technology Corporation, an electronic security products manufacturer with whom
he was employed for 16 years.
Ms. Wolf has been Executive Administrator since she joined the Company in
1990 and was appointed to the non-operating officer position of Corporate
Secretary in May 2002.
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EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or paid
for all services rendered to the Company during 2003, 2002 and 2001 by the Chief
Executive Officer and the Company's most highly compensated executive officers
whose total annual salary and bonus exceeded $100,000 during any such year.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
------------------------------------------
Awards Payouts
Annual Compensation ---------------------------- ---------
----------------------------------------- Restricted Securities
Name and All Other Stock Underlying LTIP
Principal Position Year Salary ($) Bonus ($) Compensation Award Options Payouts
- ------------------ ---- ---------- --------- ------------ ----- --------- -------
Kenneth M. Darby 2003 $ 310,000 $ 75,000 (1) $ 3,000 (2) $ - 100,000 -
Chairman and 2002 310,000 75,000 (1) 3,000 (2) - - -
Chief Executive Officer 2001 285,000 75,000 (1) 3,000 (2) - - -
Henry B. Murray 2003 $ - $ - $ - - - -
Executive Vice President 2002 - - - - - -
2001 184,615 - 87,179 (3) - - -
(1) Represents cash bonus which was approved by the Board of Directors upon the
recommendation of its Compensation Committee.
(2) Represents life insurance policy payment.
(3) Represents lump-sum severance payout pursuant to Mr. Murray's separation
from the Company effective August 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value at Assumed
------------------------------------ Annual Rates of Stock
% of Total Price Appreciation
No. of Granted to Exercise for Option Term
Options Employees in Price Expiration ---------------------------
Name Granted Fiscal Year Per Share Date 5% 10%
- ---------------- ------- ------------ --------- ---------- -------- --------
Kenneth M. Darby 1,683 0.4% 2.80 11/07 $ 1,302 $ 2,877
48,317 12.0% 2.80 11/08 $ 46,011 $ 104,383
9,678 2.4% 3.95 8/08 $ 10,562 $ 23,339
40,322 10.1% 3.95 8/09 $ 54,168 $ 122,888
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Options granted in the year ended September 30, 2003 were issued under the
following stock option plans: (1) the 1994 Non-Qualified Stock Option Plan; (2)
the 1996 Incentive Stock Option Plan; (3) the 1996 Non-Qualified Stock Option
Plan; (4) the 1999 Incentive Stock Option Plan; (5) the 2002 Incentive Stock
Option Plan and (6) the 2002 Non-Qualified Stock Option Plan. The options
granted under the first three above listed plans are exercisable as follows: up
to 30% of the shares on the grant date, an additional 30% of the shares on the
first anniversary of the grant date and the balance of the shares on the second
anniversary of the grant date, except that no option is exercisable after the
expiration of five years from the date of grant. The options granted under the
last three above listed plans are exercisable as follows: up to 30% of the
shares on the second anniversary of the grant date, an additional 30% of the
shares on the third anniversary of the grant date, and the balance of the shares
on the fourth anniversary of the grant date, except that no option is
exercisable after the expiration of six years from the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
At September 30, 2003
------------------------------
Number of Value of
Securities Unexercised
Underlying In-the-money
Unexercised Options (2)
Options
----------- ------------
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(1) Unexercisable Unexercisable
- ---------------- ----------- ----------- -------------- ---------------
Kenneth M. Darby -0- -0- 15,905/105,634 $13,775/$85,671
(1) Calculated based on the difference between the closing quoted market prices
per share at the dates of exercise and the exercise prices.
(2) Calculated based on the difference between the closing quoted market price
($4.16) and the exercise price.
Employment Agreements
Mr. Darby is a party to an employment agreement with the Company that
provides for an annual salary of $310,000 through fiscal 2005. This agreement
provides for payment in an amount up to three times his average annual
compensation for the previous five years if there is a change in control of the
Company without Board of Director approval (as defined in the agreement). It
also provides him a payment in the amount of two times his base annual
compensation and a deferred compensation benefit of 70,647 shares of common
stock upon termination or expiration of his contract.
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Report of the Compensation Committee
The Compensation Committee's compensation policies applicable to the
Company's officers for 2003 were to pay a competitive market price for the
services of such officers, taking into account the overall performance and
financial capabilities of the Company and the officer's individual level of
performance.
Mr. Darby makes recommendations to the Compensation Committee as to the
base salary and incentive compensation of all officers other than himself. The
Committee reviews these recommendations with Mr. Darby, and after such review,
determines compensation. In the case of Mr. Darby, the Compensation Committee
makes its determination after direct negotiation with him. For each officer, the
Committee's determinations are based on its conclusions concerning each
officer's performance and comparable compensation levels in the Long Island area
for similarly situated officers at comparable companies. The overall level of
performance of the Company is taken into account but is not specifically related
to the base salary of these officers. The Company also has established an
incentive compensation plan for officers, which provides a specified bonus to
each officer based upon the Company's achievement of certain annual sales and
profitability targets.
The Compensation Committee grants options to officers to link compensation
to the performance of the Company. Options are exercisable in the future at the
fair market value at the time of grant, so that an officer granted an option is
rewarded by the increase in the price of the Company's stock. The Committee
grants options to officers based on significant contributions of such officers
to the performance of the Company. In addition, in determining Mr. Darby's
salary for service as Chief Executive Officer, the Committee considers the
responsibility assumed by him in formulating, implementing and managing the
operational and strategic objectives of the Company.
Submitted by the Compensation Committee,
Peter F. Neumann, Chairman W. Gregory Robertson
Milton F. Gidge Arthur D. Roche
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STOCK PERFORMANCE GRAPH
The following graph compares the return of $100 invested in the Company's
stock on October 1, 1998, with the cumulative total return on the same
investment in the AMEX U.S. Market Index and the AMEX Technology Index.
Date Vicon Industries, Inc. AMEX U.S. Market Index AMEX Technology Index
10/1/98 100 100 100
10/1/99 98 129 170
10/1/00 46 159 199
10/1/01 48 115 161
10/1/02 44 101 99
10/1/03 58 130 144
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On February 3, 2004, the Audit Committee of the Board of Directors of the
Company engaged BDO Seidman, LLP as its independent auditors for fiscal year
ending September 30, 2004, replacing KPMG LLP who had been engaged as the
Company's auditors since 1973.
The audit reports of KPMG on the Company's consolidated financial
statements as of and for the years ended September 30, 2003 and 2002 did not
contain any adverse opinion or a disclaimer of opinion nor were they qualified
or modified as to uncertainty, audit scope, or accounting principles, except
that their report, dated January 14, 2004, contains an explanatory paragraph
relating to the Company's adoption of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets", effective October 1,
2002.
In connection with the audits of the two fiscal years ended September 30,
2003 and 2002, there were no disagreements between the Company and KPMG on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which
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disagreement, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the disagreement in connection
with their reports, nor were there any "Reportable Events" within the meaning of
Item 304 (a) (1) (v) of Regulation S-K. However, KPMG communicated to the Audit
Committee a matter it considered to be a weakness in the Company's internal
controls relating to the adequacy of staffing of its finance department. The
Company is addressing this concern and is in the process of further enhancing
its finance staff.
The Company has not consulted with BDO Seidman, LLP during its two most
recent fiscal years nor during any subsequent interim period prior to its
appointment as independent auditors for the fiscal year ended September 30, 2004
regarding 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 consolidated financial statements, or any matter that
was either the subject of a disagreement.
The Audit Committee of the Company has directed that management submit the
Committee's appointment of BDO Seidman, LLP as independent auditors for fiscal
year ending September 30, 2004 to the shareholders at the Annual Meeting for
ratification.
Audit Fees
The aggregate fees billed by KPMG LLP for professional services rendered
for the audit of the Company's consolidated annual financial statements and the
review of the financial statements included in the Company's quarterly reports
on Form 10-Q for fiscal years 2003 and 2002 were approximately $352,000 and
$155,000, respectively.
Tax Fees
The aggregate fees billed by KPMG LLP for tax compliance, tax advice and
tax planning during fiscal years 2003 and 2002 were approximately $50,000 and
$40,000, respectively. All these fees were pre-approved by the Audit Committee.
Audit Related Fees
Fees billed by KPMG LLP for professional services on audit related matters
were $8,500 during fiscal year 2003.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit related services, tax services and other services. The Audit
Committee has adopted a policy for the pre-approval of services provided by the
independent auditors. Under the policy, pre-approval generally is provided for
an annual period and any pre-approval is detailed as to the particular service
or category of services and is subject to a specific limit. In addition, the
Audit Committee may also pre-approve particular services on a case-by-case
basis, which must be accompanied by a detailed explanation for each proposed
service. The Audit Committee may delegate pre-approval authority to one or more
of its members. Such member must report any decisions to the Audit Committee at
the next scheduled meeting.
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The Audit Committee has considered whether the non-audit services provided
by KPMG LLP were compatible with maintaining their independence.
BDO Seidman, LLP will have a representative at the Annual Meeting of
Shareholders, who will have an opportunity to make a statement, if they should
so desire. KPMG LLP will not have a representative at the Annual Meeting and
will not be available to respond to questions regarding their past services
provided.
Unless marked to the contrary, the shares represented by the enclosed proxy will
be voted FOR the ratification of the appointment of BDO Seidman, LLP as the
Company's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
BDO SEIDMAN LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of this date, management is not aware of any matters to be presented for
action at the Annual Meeting, other than those referred to in the Notice of
Annual Meeting of Shareholders, but the proxy form included with this proxy
statement, if executed and returned, gives discretionary authority to management
with respect to any other matters that may come before the meeting.
MISCELLANEOUS
Solicitation of proxies is being made by mail and may also be made in
person or by telephone or fax by officers, directors and regular employees of
the Company.
The cost of the solicitation will be borne by the Company.
By Order of the Board of Directors,
Hauppauge, New York Joan L. Wolf
April 9, 2004 Secretary
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Appendix A
VICON INDUSTRIES, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary purpose of the Audit Committee of Vicon Industries, Inc. (the
"Company") is to assist the Board of Directors in fulfilling its oversight
responsibilities by reviewing: the financial reports and other financial
information provided by the Company to any governmental body or the public; the
Company's systems of internal controls regarding finance and accounting that
management and the Board have established; and the Company's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Company's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Company's independent
accountants.
Provide an open avenue of communication among the independent accountants,
financial and senior management and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors, each of
whom shall be independent directors, and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. The members of the Audit
Committee shall each satisfy the applicable membership requirements under the
rules of the American Stock Exchange.
At least one member shall also be financially sophisticated, in that he or
she has past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication, including
but not limited to being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities.
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The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board and shall serve for a term of one
year or until their successors shall be duly elected and qualified. Unless a
Chair is elected by the full Board, the members of the Committee may designate a
Chair by majority vote of the full Committee membership.
III. MEETINGS
The Audit Committee shall meet at least four times annually or more
frequently as circumstances dictate. At any meeting, a simple majority shall
constitute a quorum.
As part of its function to foster open communication, the Audit Committee
should meet at least annually with management and the independent accountants in
separate executive sessions to discuss any matters that the Audit Committee or
each of these groups believe should be discussed privately. In addition, the
Audit Committee should meet with the independent accountants and management
quarterly to review the Company's financials.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review in consultation with the independent auditor the scope of the annual
audit, along with any items of special attention.
2. Review the Company's annual financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification, report, opinion, or review rendered by the
independent accountants.
3. Review such reports of audits of member reimbursements, director and
officer expense assumed and management perquisites.
4. Review with financial management and the independent accountants the 10-Q
and other related quarterly financial statements prior to their filing or
prior to the release of earnings.
Independent Accountants
5. Retain and, where warranted in the Audit Committee's judgment, terminate
the Company's independent accountants to audit its financial statements. On
an annual basis, the Audit Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Company to determine the accountants' independence.
6. Approve audit and non-audit services of the independent accountants as
detailed in the attached pre-approval policies and procedures.
7. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fairness and accuracy of the
Company's financial statements.
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Financial Reporting Processes
8. In consultation with the independent accountants, review the integrity of
the Company's financial reporting processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles, as applied in its
financial reporting.
10. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants or management.
11. Review and discuss the audited financial statements with management.
Discuss with the independent auditors the matters required to be discussed
by SAS 61. Obtain from the independent accountants the written disclosures
and letter required by Independence Standards Board Standard No. 1.
12. The Audit Committee shall make regular reports to the Board of Directors.
The Audit Committee shall review and reassess the adequacy of this charter
annually and recommend any proposed changes to the Board for approval. The
Audit Committee will see that the Charter is published at least every three
years in the proxy statement. The Committee shall also submit to the Board
a written report for inclusion in the annual proxy statement.
Process Improvement
13. Establish regular and separate systems of reporting to the Audit Committee
by each of management and the independent accountants regarding any
significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
14. Following completion of the annual audit, review separately with each of
management and the independent accountants any disagreements or significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
15. Receive reports of internal auditors concerning their reviews of internal
controls and other matters and management's responses thereto.
Ethical and Legal Compliance
16. The Audit Committee may retain, at the Company's expense, special legal,
accounting, or other consultants or experts it deems necessary in the
performance of its duties.
17. Perform any other activities consistent with this Charter, the Company's
by-laws and governing law, as the Audit Committee or the Board deems
necessary or appropriate.
18. The Audit Committee shall establish procedures for:
o The receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or
auditing matters from internal or external sources.
o The confidential, anonymous submission by Company employees of
concerns regarding questionable accounting or auditing matters.
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19. Consult with management to ensure that appropriate ethical standards
for business conduct are communicated to Company employees generally,
and review compliance with such standards.
V. PROPOSED MEETING SCHEDULES
a) Review of quarterly and annual financial reports with independent
auditors and management prior to public release of said
documents.
b) Annual meeting with Company's accountants to review scope of
current audit and to discuss fee arrangement.
c) Meet annually with the Director of Internal Audit to review the
annual internal audit plan and more frequently as the Committee
deems appropriate.
d) Any other meetings that might deem to be appropriate from time to
time.
VI. CLARIFICATION OF AUDIT COMMITTEE'S ROLE
The Audit Committee's Role is one of oversight. While the Audit Committee
has the responsibilities and powers set forth in this Charter, it is not the
duty of the Audit 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 auditor. Therefore, each member of the Audit Committee, in
exercising his business judgment, shall be entitled to rely on the statements
and submissions of management and the independent auditor.
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Attachment
VICON INDUSTRIES, INC.
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICIES AND PROCEDURES
I. GENERAL PRINCIPLES
The Audit Committee of Vicon Industries, Inc. is required to pre-approve
the audit and non-audit services performed by the independent auditors in order
to assure that the services provided do not impair the auditor's independence.
Unless a type of service to be provided by the independent auditors has
received general pre-approval pursuant to this policy, it will require separate
pre-approval by the Audit Committee.
Annually, the Audit Committee reviews and pre-approves the categories and
related services along with an estimated fee for each category. Separate
pre-approval is required in those circumstances where the estimated actual fee
for the approved category exceeds the pre-approved fee.
The Audit Committee will annually review and revise as needed the list of
pre-approved categories and related services.
II. DELEGATION
The Audit Committee may delegate pre-approval authority to one or more of
its members. Such member(s) will report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
The Audit Committee will not delegate its responsibilities to pre-approve
services performed by the independent auditors to management.
III. SERVICES TO BE PROVIDED
The annual audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee. Any changes in terms, conditions
and fees resulting from a change in scope, company organization or other
matters, will require pre-approval of the Audit Committee.
In addition to the annual audit services engagement, the Audit Committee
may grant pre-approval of all other services when the independent auditors are
deemed to be the best provider of the service. These may include audit related
services, tax services, and all other services. The Audit Committee may add to
or subtract from the list of general pre-approved services from time to time,
based on subsequent determinations. The independent auditors have reviewed this
policy and believe that implementation of the policy will not adversely affect
the auditor's independence.
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IV. APPROVAL PROCEDURES
Requests or applications to obtain pre-approval for services or to provide
services that require separate approval by the Audit Committee will be submitted
directly to the Audit Committee or any of its member designees. The request must
include an explanation of services in detail in order for the Audit Committee to
determine that the request or application is consistent with the Securities and
Exchange Commission's rules on auditor independence.
V. PROHIBITED NON-AUDIT SERVICES
Approval will not be granted for prohibited services as defined by the
Securities and Exchange Commission and identified as follows.
o Bookkeeping or other services related to the accounting records
or financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
o Actuarial services
o Internal audit outsourcing services
o Management functions
o Human resources
o Broker-dealer, investment adviser or investment banking services
o Legal services
o Expert services unrelated to the audit
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