-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HLoMnHwAqYRCrAfpv51ft7injjP1WSGhsuigXu7QkfFpnCiaFHOTOulvTPNZoD42 urwNOIpy2nAxmOmpCGdzhg== 0001157523-08-009252.txt : 20081112 0001157523-08-009252.hdr.sgml : 20081111 20081112170830 ACCESSION NUMBER: 0001157523-08-009252 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20080630 FILED AS OF DATE: 20081112 DATE AS OF CHANGE: 20081112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAPCO SECURITY SYSTEMS INC CENTRAL INDEX KEY: 0000069633 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 112277818 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-10004 FILM NUMBER: 081181692 BUSINESS ADDRESS: STREET 1: 333 BAYVIEW AVE CITY: AMITYVILLE STATE: NY ZIP: 11701 BUSINESS PHONE: 5168429400 MAIL ADDRESS: STREET 1: 333 BAYVIEW AVE STREET 2: XXXXXXXXXXXXXXXXXXX CITY: AMITYVILLE STATE: NY ZIP: 11701 10-K/A 1 a5826033.txt NAPCO SECURITY SYSTEMS, INC. 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-K / A-1 (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended June 30, 2008 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition period from ______ to ______ Commission File Number 0-10004 NAPCO SECURITY SYSTEMS, INC. (Exact name of Registrant as specified in its charter) Delaware 11-2277818 (State or other jurisdiction of (I.R.S. Employer I.D. Number) incorporation or organization) 333 Bayview Avenue, Amityville, New York 11701 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (631) 842-9400 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 per share (Title of Each Class) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ___ No _X_ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ___ No _X_ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of "Large accelerated filer", "Accelerated filer" and "Smaller accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ___ Accelerated filer _X_ Non-accelerated filer ___ Smaller reporting company ___ Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ___ No _X_ As of December 31, 2007, the aggregate market value of the common stock of Registrant held by non-affiliates based upon the last sale price of the stock on such date was $81,898,250. PART III Items 10, 11 12, 13 and 14 are amended to read in their entirety as follows: Item 10. DIRECTOR, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ----------------------------------------------------- The Board of Directors is divided into three classes, the terms of which expire at the Annual Meetings of Stockholders after fiscal year end 2008, 2009 and 2010, respectively. The names of, and certain information concerning, the directors are set forth below:
Principal Occupation; Director Name and Age Five-Year Employment History Since - --------------------------------------- ---------------------------- ----- Directors to serve until Annual Meeting of Stockholders following Fiscal Year 2008: Andrew J. Wilder............................. Officer of Israeloff, Trattner & Co., independent 1995 (57) certified public accountants, since 1990. Arnold Blumenthal............................ Group Publisher Emeritus, Security Dealer 2001 (81) Locksmith Ledger, Publisher Security Line and Editor of MBFAA since 2004; V.P. of Government Security News from 2004 through 2007; Group Publisher of Security Group of Cygnus Publishing, 1999 through 2003. Directors to serve until Annual Meeting of Stockholders following Fiscal Year 2009: Paul Stephen Beeber.......................... Licensed Attorney in New York State since 1970, 2004 (64) focusing on elder law, estate planning and real estate. Randy B. Blaustein........................... Principal of R.B. Blaustein & Co. since December 1985 (56) 2000; Partner of Blaustein, Greenberg & Co. July 1991 - November 2000; Attorney since October 1980, specializing in general business and tax matters, and author of six books and numerous articles. Donna A. Soloway............................. Board of Directors of Security Industry 2001 (60) Association (SIA); Chair of Awards Committee since 1993; Director and Secretary of SAINTS (Safety, Awareness and Independence Now Through Security) Foundation, Inc.; Monthly Columnist for SECURITY DEALER magazine since 1992; and Columnist for SECURITY SALES & INTEGRATION magazine since 2004. Ms. Soloway is the wife of Richard L. Soloway, the Chairman and President of the Company. Directors to serve until Annual Meeting of Stockholders following Fiscal Year 2010: Richard L. Soloway........................... Chairman of the Board of Directors since October 1972 (62) 1981; President since 1998; Secretary since 1975. Kevin S. Buchel.............................. Senior Vice President of Operations and Finance 1998 (55) since April 1995; Treasurer since May 1998.
2 Other Directorships Except as set forth below none of the directors is a director of any company (other than the Company) which is subject to the reporting requirements of the Securities Exchange Act of 1934 or which is a registered investment company under the Investment Company Act of 1940. Name Director of ------------------------- -------------------------- Andrew J. Wilder YTB International, Inc. Section 16(a) Beneficial Ownership Reporting Compliance Based solely on a review of the Forms 3, 4 and 5 furnished to the Company with respect to the most recent fiscal year and written representations of the reporting person (as defined below), no person, who at any time during such fiscal year, was an officer, director, beneficial owner of more than ten (10%) percent of any class of equity securities of the Company or any other person subject to Section 16 of the Securities Exchange Act of 1934 ("reporting person"), failed to file on a timely basis one or more reports during such fiscal year except that each of Messrs. Soloway, Buchel, Hevia and Carrieri filed one late Form 4 reporting one grant of options on October 9, 2007. Information Concerning Executive Officers Each executive officer of the Company holds office until the annual meeting of the Board of Directors and his successor is elected and qualified, or until his earlier death, resignation, or removal by the Board. There are no family relationships between any director or officer of the Company, except Richard L. Soloway and Donna A. Soloway, his wife. The following table sets forth as of the date hereof the names and ages of all executive officers of the Company, all positions and offices with the Company held by them, the period during which they have served in these positions and, where applicable, their positions in any other organizations during the last five years. 3
Position and Office with the Company, Term of Office Name and Age and Five-Year Employment History - ------------ -------------------------------- Richard L. Soloway......... Chairman of the Board of Directors since October 1981; President since 1998; (62) and Secretary since 1975. Kevin S. Buchel............ Senior Vice President of Operations and Finance since April 1995; Treasurer (55) since May 1998. Jorge Hevia................ Senior Vice President of Corporate Sales and Marketing since May 1999; Vice (50) President of Corporate Sales and Marketing since October 1998. Michael Carrieri........... Senior Vice President of Engineering Development since May 2000; Vice (50) President of Engineering Development from September 1999 to May 2000. George Marks............... President, Marks USA since August 2008; President of G. Marks Hardware, Inc. (72) from prior to 2004 to August 2008.
Code of Ethics The Company has adopted a Code of Ethics which applies to its senior executive and financial officers, among others. The Code is posted on the Company's website, www.napcosecurity.com under the "Investors - Other" captions. The Company intends to make all required disclosures regarding any amendment to, or waiver of, a provision of the Code of Ethics for senior executive and financial officers by posting such information on our website. Audit Committee The Audit Committee has been established in accordance with Section 3(a)(58)A of the Securities Exchange Act of 1934 as amended. The Audit Committee is responsible for retaining, evaluating and, if appropriate, recommending the termination of the Company's independent auditors. The Audit Committee assists the Board in oversight of (1) the integrity of the Company's financial statements, (2) the Company's independent auditor's qualifications and independence, and (3) the performance of the Company's internal audit function and independent auditors. In addition, the Committee renders its report for inclusion in the Company's annual proxy statement. The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties. The current members of the Audit Committee are Andrew J. Wilder (Chairman), Paul Stephen Beeber and Arnold Blumenthal, each of whom meets the NASDAQ Listing Standards for the independence of audit committee members. The Board has determined that Andrew Wilder is an audit committee financial expert. Item 11. EXECUTIVE COMPENSATION ---------------------- The Summary Compensation Table below sets forth compensation information for the Company's Chief Executive Officer, Chief Financial Officer and the two other most highly compensated executive officers during fiscal year 2008 and 2007 of the Company. 4
Summary Compensation Table All Other Name and Fiscal Salary Bonus Option Awards Compensation Total Principal Position Year ($) ($) ($)(1) ($)(2)(3) ($) - --------------------------- --------- --------- --------- --------- --------- --------- Richard L. Soloway, Chairman 2008 $598,086 $48,225 $115,969 $43,149 $805,429 of the Board of Directors, President and Secretary 2007 532,171 159,159 227,916 44,265 963,511 Kevin S. Buchel, 2008 245,712 25,630 35,216 9,103 315,661 Senior Vice President of Operations and Finance and Treasurer 2007 228,250 51,585 35,235 9,444 324,514 Jorge Hevia, 2008 266,042 15,630 35,216 12,482 329,370 Senior Vice President of Corporate Sales and Marketing 2007 245,562 51,585 35,235 11,680 344,062 Michael Carrieri, 2008 241,113 10,941 35,216 16,096 303,366 Senior Vice President of Engineering Development 2007 223,610 36,109 35,235 8,710 303,664
- ----------------------- (1) Amounts reflect the share-based compensation expense recognized by the Company in the fiscal years ended June 30, 2007 and June 30, 2008, in accordance with Statement of Financial Accounting Standards No. 123R. Assumptions used in the calculation of these amounts are included in footnote 7 to the Notes to Consolidated Financial Statements contained in the Company's Form 10-K for the year ended June 30, 2008. (2) All Other Compensation for Mr. Soloway for fiscal 2007 includes payment of health and life insurance premiums of $17,311, automobile expenses of $21,599 and 401K match of $5,322. All other compensation for Mr. Soloway for fiscal 2008 includes payment of health and life insurance premiums of $16,886, automobile expenses of $20,732 and 401K match of $5,273. (3) All other compensation for Messrs. Buchel, Hevia and Carrieri includes payment of life insurance premiums, automobile expenses and 401K matches and for Mr. Carrieri, includes payment of health insurance premiums.
Grants of Plan-Based Awards All Other Option Awards: Exercise or Base Grant Date Fair Number of Shares of Price of Option Value of Option Grant Stock or Units Awards Awards Name Date (#)(1) ($/Sh) ($)(2) - ------------------ -------- ------------------------ ---------------- ---------------- Richard L. Soloway 10/09/07 25,000 $5.89 $101,980 Kevin S. Buchel 10/09/07 5,000 5.35 18,950 Jorge Hevia 10/09/07 5,000 5.35 18,950 Michael Carrieri 10/09/07 5,000 5.35 18,950
- ----------------------- (1) Vest as to 20% upon grant and as to an additional 20% on the first four annual anniversary dates of grant. (2) See footnote (1) to the Summary Compensation Table 5
Outstanding Equity Awards Option Awards Number of Number of Securities Underlying Securities Underlying Option Unexercised Options Unexercised Options Exercise Option (#) (#) Price Expiration Name Exercisable Unexercisable ($) Date - ------------------- --------------------- ---------------------- -------- ---------- Richard L. Soloway 135,000 - $1.787 02/27/13 540,000 - 1.881 06/15/13 135,000 - 2.091 03/19/14 45,000 11,250 (1) 5.227 03/15/15 22,500 15,000 (2) 11.160 03/24/16 10,000 15,000 (3) 6.620 10/26/16 5,000 20,000 (4) 5.890 10/09/17 Kevin S. Buchel 27,000 - 1.759 12/20/12 27,000 - 1.900 03/19/14 13,500 9,000 (5) 5.733 11/21/15 2,000 3,000 (6) 6.020 10/26/16 1,000 4,000 (7) 5.350 10/09/17 Michael Carrieri 27,000 - 1.759 12/20/12 27,000 - 1.900 03/19/14 13,500 9,000 (5) 5.733 11/21/15 2,000 3,000 (6) 6.020 10/26/16 1,000 4,000 (7) 5.350 10/09/17 Jorge Hevia 27,000 - 1.759 12/20/12 27,000 - 1.900 03/19/14 13,500 9,000 (5) 5.733 11/21/15 2,000 3,000 (6) 6.020 10/26/16 1,000 4,000 (7) 5.350 10/09/17
- ----------------------- (1) Options as to 11,250 shares vest on 3/15/09. (2) Options as to 7,500 shares vest on each of 3/24/09 and 3/24/10. (3) Options as to 5,000 shares vest on each of 10/26/08, 10/26/09 and 10/26/10. (4) Options as to 5,000 shares vest on each of 10/9/08, 10/9/09, 10/9/10 and 10/9/11. (5) Options as to 4,500 shares vest on each of 3/24/09 and 3/24/10. (6) Options as to 1,000 shares vest on each of 10/26/08, 10/26/09 and 10/26/10. (7) Options as to 1,000 shares vest on each of 10/9/08, 10/9/09, 10/9/10 and 10/9/11. Option Exercises None of Messrs. Soloway, Buchel, Carrieri or Hevia exercised any options to purchase Common Stock in the 2008 fiscal year. 6 Employment Agreements and Potential Payments Upon Termination or Change in Control The Company has employment agreements with Richard L. Soloway, Jorge Hevia and Michael Carrieri. The agreement with Mr. Soloway, entered into on June 26, 2003 for a five year period, and then year to year unless notice of termination is given at least six months prior to the end of the then applicable term, provides for a minimum annual salary to be adjusted for inflation and discretionary annual incentive compensation. Mr. Soloway's agreement contains non-compete restrictions during his employment and for one year after termination for any reason. The agreement also provides for termination payments to Mr. Soloway upon death, disability, termination by the Company other than for Cause, as defined, termination by Mr. Soloway for Good Reason, as defined, and termination by Mr. Soloway in the event of a change in control. In the event of death, the termination payment equals one year's salary payable over one year plus a bonus calculated on a pro rata basis through the end of the fiscal quarter immediately preceding death. In the event of disability, the Company must pay Mr. Soloway an amount equal to 60% of his annual salary through the term of the agreement plus his bonus on a pro rata basis through the end of the fiscal quarter preceding the sixth month of his disability. In the event the Company terminates Mr. Soloway other than for Cause or if Mr. Soloway terminates for Good Reason, the Company must pay Mr. Soloway, in a lump sum, an amount equal to three times his annual salary plus the bonus paid to him for the year prior to his termination. If during the term there should be a change in control, then Mr. Soloway is entitled to terminate his employment, and the Company is required to pay him, an amount equal to 299% of the average of the prior five calendar years' total compensation, subject to certain limitations. The Company's option plans provide for the accelerated vesting of unvested options upon a change in control. Had Mr. Soloway's employment terminated on June 30, 2008 after a change in control, the Company would have been required to pay him $2,027,279 pursuant to such agreement. In addition, assuming a change in control on June 30, 2008, vesting of options to purchase 72,500 shares of Company Common Stock would have been accelerated. The closing price per share of the Company's Common Stock on the NASDAQ Global Market on June 30, 2008 ($4.53) was less than the exercise prices of such accelerated options. Under such agreement, had Mr. Soloway's employment terminated on June 30, 2008 on account of (i) death, (ii) disability or (iii) by the Company other than for Cause, or by Mr. Soloway for Good Reason, the Company would have been required to pay him $621,171, $391,993, and $1,863,513, respectively. Mr. Hevia's agreement terminates in October 2010. The agreement, as amended, provides for annual salaries of $274,401 and $288,121 during fiscal 2009 and 2010, respectively, as well as certain bonus provisions based on sales and profits. Mr. Hevia's agreement provides for payment equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause or upon a change in control of the Company. Had either of such events occurred on June 30, 2008, the Company would have been required to pay him $202,410. Mr. Carrieri's agreement terminates in August, 2010. The agreement provides for annual salaries of $248,212 and $260,623 during fiscal 2009 and 2010, respectively, as well as certain bonus provisions based on sales and profits. Mr. Carrieri's agreement provided for payment equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause. Had Mr. Carrieri been terminated non-voluntarily without cause on June 30, 2008, the Company would have been required to pay him $183,704. In addition, the Company has a severance agreement with Kevin S. Buchel providing for payments equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause. Had Mr. Buchel's employment been terminated on June 30, 2008 non-voluntarily without cause, the Company would have been required to pay him $188,149 pursuant to such severance agreement. 7 In the event of a change in control on June 30, 2008, vesting of options to purchase 16,000 shares would have been accelerated for each of Messrs. Hevia, Carrieri and Buchel. The closing price per share of the Company's Common Stock on the NASDAQ Global Market on June 30, 2008 ($4.53) was less than the exercise prices of such accelerated options. Each of the agreements with Messrs. Hevia, Carrieri and Buchel contains non-compete restrictions for three years after the employee's termination of employment. Compensation Discussion & Analysis Compensation Program Objective The objective of our executive compensation program is to allow us to successfully retain and motivate executives who enable us to achieve short and long term growth and operational excellence. Oversight of Our Executive Compensation Program The Compensation Committee of the Board of Directors (the "Committee") assists the Board in discharging its responsibilities relating to compensation of the Chief Executive Officer and other executive officers. The Committee's responsibilities are detailed in its charter, which can be found at www.napcosecurity.com The Committee's process includes executive sessions where the Committee meets alone, without the presence of management. Components of the Executive Compensation Program-Description of Elements and Evaluation Process The named executive officers, including our Chief Executive Officer, have a compensation program that includes the following components: -- Base salary -- Annual incentives -- Long-term incentives in the form of stock options awards -- Employee benefits -- Perquisites Compensation Mix. We do not have policies that define specific percentage allocations for fixed and variable compensation, or cash and non-cash compensation. We do, however, intend to deliver a portion of total compensation in the form of performance-based cash incentives and in awards of stock options, to achieve our objective of offering rewards for successful business results and shareholder value creation. Base Salaries. Base salaries are used to compensate each of our executives for their positions and levels of responsibility. Each of Messrs. Soloway, Hevia and Carreri have employment agreements, which provide for a minimum base salary and a minimum annual cost-of-living adjustment. For fiscal 2008 Messrs. Soloway, Hevia and Carrieri's salaries were determined pursuant to such Employment Agreements. Mr. Buchel's salary for the 2008 fiscal year was in an amount recommended by the CEO. The considerations entering into the determination by the CEO of the salary recommendation for Mr. Buchel were the CEO's subjective evaluations of the ability and past performance of Mr. Buchel and the CEO's judgment of Mr. Buchel's potential for enhancing the Company's profitability. 8 Annual Cash Incentives. The Committee's policy is that named executive officers, other than the CEO, should receive short term incentive compensation in the form of bonuses based, in part, on targeted sales and earnings recommended by the CEO. For fiscal 2008, the Company did not achieve targeted sales and earnings. Based on the CEO's recommendation, each named executive officer (including the CEO) received a cash bonus determined using a formula comparing actual operating income against budgeted operating income and multiplying that formula by each NEO's targeted bonus. In addition, Mr. Buchel's bonus reflects his work in overseeing the consummation of the successful Marks USA acquisition. Long-term Incentive Awards. The purpose of the granting of stock options is to retain the services of the named executive officers and our key employees, and encourage them to improve our operating results and to become shareholders of the Company, all of which is intended to result in increased shareholder value. The Committee's policy is generally to grant options to the named executive officers other than the CEO under the Company's Stock Option Plans after consideration of the amounts recommended periodically by the CEO. The recommendations of the CEO for option grants reflect the subjective judgment of the CEO of the performance of such executives and the potential benefit to the Company from the grant of this form of incentive compensation. Based upon the recommendation of the CEO, each of Messrs. Hevia, Carrieri and Buchel were granted options in fiscal 2008 to purchase 5,000 shares at an exercise price of $5.35 per share. Mr. Soloway was granted options to purchase 25,000 in fiscal 2008 at an exercise price of $5.89 per share. Employee Benefits, Perquisites and Other Personal Benefits. As a general rule, we do not provide special benefits to senior executives and the named executive officers participate in the same plans - including term life insurance, health and disability insurance - available to all salaried employees. We do, however, pay the premiums on additional health and life insurance policies for the benefit of each of the named executive officers and on additional health insurance policies for the benefit of Messrs. Soloway and Carrieri. See footnote to the Summary Compensation Table. We offer one retirement plan, a qualified profit sharing 401(k) plan to all employees, including the named executive officers. We have provided certain perquisites to the named executive officers, as summarized in footnote 2 to the "Summary Compensation Table." Employment Agreements Change in Control, Severance Agreements. Under Mr. Soloway's Employment Agreement, if during its term there should be a change in control, then Mr. Soloway is entitled to terminate his employment and is entitled to receive a termination payment equal to 299% of the average of the prior five calendar years' compensation, subject to certain limitations. If the Company terminates Mr. Soloway's employment other than for Cause, as defined, or if Mr. Soloway terminates his employment with the Company for Good Reason, as defined, the Company shall pay a lump sum payment equal to (i) Mr. Soloway's annual base salary plus the bonus paid for the prior fiscal year multiplied by (ii) the greater of the number of years or portion thereof remaining in the term of the Agreement or three years. 9 Each of the agreements with Mr. Hevia and Mr. Carrieri provide for payment equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment of the officer without cause. In addition, the Company has a severance agreement with Kevin S. Buchel providing for payments equal to nine months of salary and six months of health insurance in the event of a non-voluntary termination of employment without cause. We believe these changes in control and severance arrangements help to retain these executive talents by providing them with a sense of commitment by the Company to them. Material Tax Implications Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to the CEO and other named executive officers. Because of the range of compensation paid to its executive officers, the Committee has not established any policy regarding annual compensation to such executive officers in excess of $1,000,000. Compensation Committee Report The Compensation Committee of the Board of Directors hereby reports as follows: 1. The Compensation Committee has reviewed, and discussed with Management, the Company's Compensation Discussion & Analysis. 2. Based on the review and discussions referred to in paragraph 1 above, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the proxy statement and incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2008 filed with the Securities and Exchange Commission. Date: October 30, 2008 The Compensation Committee: Randy B. Blaustein Andrew J. Wilder Arnold Blumenthal Compensation of Directors The total fiscal year 2008 compensation of non-employee Directors is shown in the following table. 10
Director Compensation Fees Earned or All Other Paid in Cash Option Awards Compensation Total Name ($)(1) ($)(2)(3) ($) ($) - ---------------------- -------- --------- ------- ----- Paul Stephen Beeber $17,500 $3,792 - $21,292 Randy B. Blaustein (4) 17,500 3,792 $6,000 27,292 Arnold Blumenthal 17,500 3,792 - 21,292 Donna A. Soloway 7,500 3,792 - 11,292 Andrew J. Wilder 22,500 3,792 - 26,292
- ----------------------- (1) Each director who is not an employee receives $2,500 for each Board of Directors meeting attended. Mr. Wilder, as Chairman of the Audit Committee, receives $2,000 for each Audit Committee meeting attended and each of Messrs. Beeber and Blumenthal receives $1,000 for each Audit Committee meeting attended. Mr. Blaustein receives $4,000 for serving as Chairman of the Compensation Committee. (2) Amounts reflect the share-based compensation expense recognized by the Company in the year ended June 30, 2008, in accordance with Statement of Financial Accounting Standards No. 123R. Assumptions used in the calculation of these amounts are included in footnote 7 to the Notes to Consolidated Financial Statements contained in the Company's Form 10-K for the year ended June 30, 2008. (3) At June 30, 2008, each of Messrs. Beeber, Blaustein, Blumenthal, Wilder and Ms. Soloway held outstanding options to purchase 6,000 shares of Common Stock of the Company, of which options to purchase 2,400 shares were vested and options to purchase 1,200 shares will vest on the anniversary date of grant in each of fiscal 2009, 2010 and 2011. (4) During the fiscal year ended June 30, 2008, the Company retained Mr. Blaustein as special counsel for certain general business and tax related matters. Fees for such services were $6,000. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND ------------------------------------------------------------------ RELATED STOCKHOLDERS MATTERS ---------------------------- The following table, together with the accompanying footnotes, sets forth information as of November 3, 2008, regarding the beneficial ownership (as defined by the Securities and Exchange Commission) of Common Stock of the Company of (a) each person known by the Company to own more than five percent of the Company's outstanding Common Stock, (b) each director of the Company (c) each executive officer named in the Summary Compensation Table, and (d) all executive officers and directors of the Company as a group. 11 Amount and Nature of Percent of Beneficial Owner Beneficial Ownership (1) Common Stock (2) - -------------------------- ------------------------ ---------------- Richard L. Soloway 6,900,160 34.51% c/o the Company 333 Bayview Avenue Amityville, NY 11701 Rutabaga Capital 1,281,771 6.71% 64 Broad Street, 3rd Floor Boston, MA 02109 (3) Kevin S. Buchel 355,683 1.86% Jorge Hevia 262,250 1.37% Michael Carrieri 184,500 0.96% Andrew J. Wilder 112,020 0.59% Randy B. Blaustein 108,150 0.57% Donna A. Soloway 31,560 0.17% Paul Stephen Beeber 7,800 0.04% Arnold Blumenthal 3,975 0.02% George Marks - - All executive officers and directors 7,966,098 (4) 39.36% as a group (10 in number) - ----------------------- (1) This number includes the number of shares that a person has a right to acquire within sixty (60) days (Soloway - 902,500, Buchel - 77,000, Hevia -77,000, and Carrieri - 77,000, Wilder - 2,400, Blaustein - 2,400, D. Soloway - 2,400, Beeber - 2,400, Blumenthal - 2,400). (2) Percentages for each person or the group are computed on the basis of 19,092,473 shares of Common Stock outstanding on November 3, 2008, plus the number of shares that such person or group has the right to acquire within sixty (60) days. Except as otherwise noted, persons named in the table and footnotes have sole voting and investment power with respect to all shares of Common Stock reported as beneficially owned by them. (3) Based on information set forth in Form 13F filed with the Securities and Exchange Commission reporting as of June 30, 2008. (4) This number of shares includes (i) 6,820,598 shares as to which officers and directors have sole voting and investment power, and (ii) 1,145,500 shares that officers and directors have the right to acquire within sixty (60) days. Item 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS AND DIRECTOR ---------------------------------------------------------- INDEPENDENCE ------------ Independence of Directors The Board currently consists of seven directors, four of whom the Board has affirmatively determined have no relationship with the Company or its subsidiaries which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and are independent as defined by the applicable NASDAQ Listing Standards. The four independent directors are Paul Stephen Beeber, Randy B. Blaustein, Arnold Blumenthal and Andrew J. Wilder. The Board maintains three standing committees: Audit, Compensation, and Nominating. Each Committee is composed entirely of independent directors as defined in the applicable NASDAQ Listing Standards. Policy With Respect to Related Person Transactions It is the Company's policy, set forth in writing, not to permit any transaction in which the Company is a party and in which executive officers or directors, their immediate family members, or 5% shareholders have or will have a direct or indirect interest unless approved by the Audit Committee of the Board of Directors, other than 12 1. transactions available to all employees; 2. transactions involving compensation or business expense reimbursement approved by the Compensation Committee or by disinterested members of the Board of Directors; or 3. transactions involving less than $120,000 when aggregated with all similar transactions. Any issues as to the application of this policy shall be resolved by the Audit Committee of the Board of Directors. A copy of our Statement of Policy with Respect to Related Person Transactions is available at the Company's website, www.napcosecurity.com, under the "Investors" caption. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES -------------------------------------- The fees billed by Marcum & Kleigman LLP ("M&K"), the Company's independent auditors for professional services for 2008 and 2007 fiscal years were as follows: Fiscal Year 2008 Fiscal Year 2007 ---------------- ---------------- Audit Fees (1) $377,250 $228,000 Audit Related Fees -- -- Tax Fees -- -- All Other Fees (2) 14,000 12,000 - ----------------------- (1) Includes audit of financial statements, SAS 100 reviews and consultations for 2008 and 2007 and fees for audit of internal controls for 2008 and 2007. (2) Includes services related to the audit of the Company's employee benefit plan for 2008 and 2007. 100% of "All Other Fees" were approved by the Audit Committee. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee specifically 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. Pre-approval may be provided for up to one year. Each pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. PART IV ITEM 15(c) EXHIBITS -------- Ex-31.1 Section 302 Certification of Chief Executive Officer Ex-31.2 Section 302 Certification of Chief Financial Officer 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. November 11, 2008 NAPCO SECURITY SYSTEMS, INC. (Registrant) By: /s/ Kevin S. Buchel --------------------------- Kevin S. Buchel Senior Vice President of Operations and Finance and Treasurer and Director 14 EX-31.1 2 a5826033ex31_1.txt EXHIBIT 31.1 Exhibit 31.1 SECTION 302 CERTIFICATION I, Richard Soloway certify that: 1. I have reviewed this Form 10-K / A-1 of Napco Security Systems, Inc.; and 2. Based on my knowledge, this Form 10-K / A-1 does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. Date: November 11, 2008 /s/ Richard Soloway ------------------------------ Richard Soloway Chief Executive Officer (Principal Executive Officer) 15 EX-31.2 3 a5826033ex31_2.txt EXHIBIT 31.2 Exhibit 31.2 SECTION 302 CERTIFICATION I, Kevin S. Buchel certify that: 1. I have reviewed this Form 10-K / A-1 of Napco Security Systems, Inc.; and 2. Based on my knowledge, this Form 10-K / A-1 does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. Date: November 11, 2008 /s/ Kevin S. Buchel ------------------------------ Kevin S. Buchel Chief Financial Officer (Principal Financial Officer) 16 -----END PRIVACY-ENHANCED MESSAGE-----