Filed
by the Registrant
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T
|
Filed
by a Party other than the Registrant
|
¨
|
Check
the appropriate box:
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¨
|
Preliminary
Proxy Statement
|
¨
|
Confidential,
For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
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T
|
Definitive
Proxy Statement
|
¨
|
Definitive
Additional Materials
|
¨
|
Soliciting
Material Pursuant to § 240.14a-12
|
|
T
|
No
fee required
|
¨
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
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(1)
|
Title
of each class of securities to which transaction applies: N/A
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(2)
|
Aggregate
number of securities to which transaction applies: N/A
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(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
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(4)
|
Proposed
maximum aggregate value of transaction: N/A
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(5)
|
Total
fee paid: N/A
|
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¨
|
Fee
paid previously with preliminary
materials.
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid: N/A
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|
(2)
|
Form,
Schedule or Registration Statement No.: N/A
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(3)
|
Filing
Party: N/A
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(4)
|
Date
Filed: N/A
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1.
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Electing
seven directors to hold office until the next annual meeting of
stockholders;
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|
2.
|
Considering
and voting upon a proposal to ratify Freed Maxick & Battaglia, CPAs PC
as the Company’s independent registered public accountants for the fiscal
year ending December 31, 2010; and
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3.
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Transacting
such other business as may properly come before the
meeting.
|
By
Order of the Board of Directors
|
|
Robert
Fagenson
|
|
Chairman
of the Board
|
|
—
|
as
you instruct, and
|
|
—
|
according
to the best judgment of the proxies if a proposal comes up for a vote at
the annual meeting that is not on the proxy
card.
|
|
If
you return a signed card, but do not provide voting instructions, your
shares will be voted:
|
|
—
|
for
the seven (7) nominees to the board, all of whom are presently serving on
the board;
|
|
—
|
to
approve the ratification of the Company’s independent registered public
accountants for the fiscal year ending December 31, 2010;
and
|
|
—
|
according
to the best judgment of either Mr. Wicker or Mr. White, if a proposal
comes up for a vote at the annual meeting that is not on the proxy
card.
|
—
|
sending
a written notice to the Secretary of the Company stating that you would
like to revoke your proxy of a particular
date;
|
—
|
signing
another proxy card with a later date and returning it before the polls
close at the annual meeting; or
|
—
|
attending
the annual meeting and voting in
person.
|
(1)
|
FOR
the election of the persons named herein as nominees for directors of the
Company, for a term expiring at the 2010 annual meeting of stockholders
(or until successors are duly elected and
qualified);
|
(2)
|
FOR
ratification of Freed Maxick & Battaglia, CPAs, PC as the Company’s
independent registered public accountants for the year ending December 31,
2010; and
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(3)
|
According
to their judgment, on the transaction of such other business as may
properly come before the meeting or any adjournments
thereof.
|
Percentage of
Outstanding
|
||||||||
Name
|
Common Stock Owned
|
Common Stock Owned
(1)
|
||||||
Robert
B. Fagenson
|
1,029,000 | (2) | 5.8 | % | ||||
c/o
Document Security Systems
|
||||||||
28
Main St. East, Suite 1525
|
||||||||
Rochester,
NY 14614
|
||||||||
Martin
Vegh
|
1,000,000 | (3) | 5.6 | % | ||||
c/o
Document Security Systems
|
||||||||
28
Main St. East, Suite 1525
|
||||||||
Rochester,
NY 14614
|
(1)
|
The
calculations for these columns are based upon 17,760,324 shares of Common
Stock issued and outstanding on April 15, 2010, plus the number of shares
of Common Stock deemed outstanding pursuant to SEC Rule 13d-3(d)(1).
Shares of Company Common Stock subject to options exercisable within 60
days of April 15, 2010 are deemed outstanding for purposes of computing
the percentage of the person holding such option but are not deemed
outstanding for computing the percentage of any other
person.
|
(2)
|
Includes
29,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days, 100,000 shares of common stock held by Mr.
Fagenson’s wife and an aggregate of 100,000 shares of common stock held in
trusts for Mr. Fagenson’s two adult children. Mr. Fagenson
disclaims beneficial ownership of the 100,000 shares of common stock held
by his wife and the 100,000 shares of common stock held in trusts for Mr.
Fagenson’s two adult children.
|
(3)
|
Based
solely on a Schedule 13G filed by Martin Vegh, filed September 17, 2002,
Martin Vegh has sole voting and disposition power over the
shares.
|
Percentage of
Outstanding
|
||||||||
Name
|
Common Stock Owned
|
Common Stock Owned
(1)
|
||||||
Patrick
White
|
801,600 | 4.5 | % | |||||
David
Wicker
|
248,166 | (2) | 1.4 | % | ||||
Philip
Jones
|
112,333 | (3) |
Less
than 1
|
% | ||||
Timothy
Ashman
|
34,100 | (4) |
Less
than 1
|
% | ||||
Robert
B. Fagenson
|
1,029,000 | (5) | 5.8 | % | ||||
Ira
A. Greenstein
|
39,000 | (6) |
Less
than 1
|
% | ||||
Alan
E. Harrison
|
40,000 | (7) |
Less
than 1
|
% | ||||
Robert
Bzdick
|
735,437 | 4.1 | % | |||||
All
Executive Officers and Directors (8 persons) as a Group
|
3,039,636 | (8) | 16.8 | % |
(1)
|
The
calculations for these columns are based upon the number of shares of
Common Stock issued and outstanding on April 15, 2010, plus the number of
shares of Common Stock deemed outstanding pursuant to SEC Rule
13d-3(d)(1). Shares of Company Common Stock subject to options exercisable
within 60 days of April 20, 2010 are deemed outstanding for purposes of
computing the percentage of the person holding such option but are not
deemed outstanding for computing the percentage of any other
person.
|
(2)
|
Includes
83,333 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days.
|
(3)
|
Includes
88,333 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days and 25,000 shares of restricted stock that
vests only upon a change in control of the Company or certain other
material events to the Company.
|
(4)
|
Includes
29,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days.
|
(5)
|
Includes
29,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days, 100,000 shares of common stock held by Mr.
Fagenson’s wife and an aggregate of 100,000 shares of common stock held in
trusts for Mr. Fagenson’s two adult children. Mr. Fagenson
disclaims beneficial ownership of the 100,000 shares of common stock held
by his wife and the 100,000 shares of common stock held in trusts for Mr.
Fagenson’s two adult children.
|
(6)
|
Includes
29,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days.
|
(7)
|
Includes
30,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days.
|
(8)
|
Includes
all shares of common stock and common stock issuable upon the exercise of
stock options exercisable within 60 days held by the persons listed in the
table above.
|
Name
|
Age
|
Positions
|
||
Robert
B. Fagenson
|
61
|
Chairman
of the Board of Directors
|
||
Patrick
White
|
57
|
Chief
Executive Officer and Director
|
||
David
Wicker
|
50
|
Vice
President of Operations and Director
|
||
Robert
B. Bzdick
|
55
|
President,
Chief Operating Officer and Director
|
||
Timothy
Ashman
|
67
|
Director
|
||
Ira
A. Greenstein
|
49
|
Director
|
||
Alan
E. Harrison
|
60
|
Director
|
Name
|
Fees Earned or
Paid in Cash
|
Stock
Awards
|
Option Awards (1)
|
Non-Equity
Incentive Plan
Compensation
|
Total
|
|||||||||||||||
($)
|
($)
|
($)
|
($)
|
($)
|
||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(h)
|
|||||||||||||||
Timothy
Ashman
|
12,000 | - | 7,000 | - | 19,000 | |||||||||||||||
Robert
B Fagenson
|
3,500 | - | 7,000 | - | 10,500 | |||||||||||||||
Ira
A. Greenstein
|
12,000 | - | 7,000 | - | 19,000 | |||||||||||||||
Alan
E. Harrison
|
12,000 | - | 7,000 | - | 19,000 |
|
(1)
|
Represents the total grant date
fair value of option awards computed in accordance with FASB ASC Topic
718.
|
Name and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock Awards
|
Option
Awards
|
All Other
Compen-
sation
|
Total
|
|||||||||||||||||||
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|||||||||||||||||||||
(2)
|
(1)
|
|||||||||||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(i)
|
(j)
|
|||||||||||||||||||
Patrick
White,
Chief
Executive Officer
|
2009
|
200,129 | - | - | - | 35,190 | 235,319 | |||||||||||||||||||
|
||||||||||||||||||||||||||
2008
|
199,650 | - | - | - | 30,435 | 230,085 | ||||||||||||||||||||
Philip
Jones
Chief
Financial Officer
|
2009
|
113,100 | - | - | 20,500 | - | 133,600 | |||||||||||||||||||
2008
|
120,000 | - | - | - | - | 120,000 | ||||||||||||||||||||
Peter
Ettinger (3)
|
||||||||||||||||||||||||||
President
|
2009
|
- | - | - | - | - | - | |||||||||||||||||||
2008
|
72,250 | - | 212,000 | - | - | 284,250 |
(1)
|
The
All Other Compensation column represents the value perquisites for
interest payments on notes provided by Executive to the Company, club
fees, and automobile expenses.
|
(2)
|
Represents
the total grant date fair value of option awards computed in accordance
with FASB ASC Topic 718.
|
(3)
|
In
May 2008, the Company entered into a Separation Agreement with its former
President that, among other things, accelerated the vesting of 33,333
shares of restricted common stock of the Company that were previously
awarded to the former President pursuant to the Company’s 2004 Employee
Stock Option Plan so that such shares vested in equal monthly installments
during the immediately following ten months. The Separation
Agreement further provided that if the former President did not realize at
least $212,000 in gross proceeds from the sale of such 33,333 shares of
restricted stock upon their vesting, then the Company would pay the former
President the amount that such proceeds is less than $212,000 in cash or
additional shares of common stock of the Company. As of June
30, 2009, all 33,333 shares had vested generating gross proceeds of
approximately $99,000. The Company has agreed to issue up to
30,000 shares of stock to pay the remaining amount due of
$113,000. As of December 31, 2009, $74,000 remains due under
the agreement and is recorded in accrued expenses as of December 31,
2009. Any remaining amounts due under the agreement after the
shares are issued, if any, can be paid in cash or additional
shares.
|
Name
|
Change in Control
|
Severance
|
||||||
|
($)
|
($)
|
||||||
Patrick
White
|
$ | 299,475 | $ | 299,475 | ||||
Philip
Jones
|
312,500 | (1) | - |
(1)
|
Amount based on grant date fair
value of 25,000 shares of restricted stock that vest only upon a change in control of the
Company or certain other material events to the
Company.
|
Name
|
Grant Date
|
All Other Option
Awards:
|
Exercise or Base
Price of Option
Awards
|
Grant Date
|
|||||||||||
(a)
|
(b)
|
Number of Shares
Underlying
Options
|
($/Sh)
|
Fair Value of
Stock and Option
Awards
|
|||||||||||
(#)
|
(k)
|
($)
|
|||||||||||||
(j)
|
(l)
|
||||||||||||||
Philip Jones
|
2/12/2009
|
50,000 | 4.00 | $ | 0.41 |
Name
|
Number of
Securities
Underlying
Unexercised
Options
|
Number of
Securities
Underlying
Unexercised
Options
|
Number of
Securities
Underlying
Unearned
Equity
Awards
|
Option
Exercise
Price
|
Option
Expiration
Date
|
||||||||||||
(#)
|
(#)
|
(#)
|
($)
|
||||||||||||||
Exercisable
|
Un-exercisable
|
||||||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
||||||||||||
Philip
Jones
|
30,000 | - | - | 6.00 |
7/14/2010
|
||||||||||||
25,000 | - | 6.00 |
5/2/2012
|
||||||||||||||
50,000 | (1) | 4.00 |
2/11/2014
|
||||||||||||||
25,000 | (2) |
(1)
|
Vest
pro-ratably on 02/12/2010, 02/12/2011, and 02/12/2012,
respectively.
|
(2)
|
Vests only upon a change in control of the
Company or certain other material events to the
Company.
|
Restricted
stock to be
issued
upon
vesting
|
Number of
securities
to be issued
upon
exercise of
outstanding
options,
warrants
and rights
|
Weighted
average
exercise price of
outstanding
options,
warrants and
rights
|
Number of
securities
remaining
available
for future
issuance (under
equity
compensation
Plans (excluding
securities
reflected in
column (a & b))
|
|||||||||||||
Plan Category
|
(a)
|
(b)
|
(c)
|
(d)
|
||||||||||||
Equity
compensation plans approved by security
holders
|
||||||||||||||||
2004
Employee Stock Option Plan
|
85,000 | 639,000 | $ | 6.29 | 840,981 | |||||||||||
2004
Non-Executive Director Plan
|
132,000 | 6.74 | 68,000 | |||||||||||||
Equity
compensation plans not approved by security holders
|
||||||||||||||||
Contractual
warrant grants for services
|
411,760 | 6.17 | - | |||||||||||||
Total
|
85,000 | 1,182,760 | $ | 6.30 | 908,981 |
By
Order of the Board of Directors
|
|
Robert
Fagenson
|
|
Chairman
of the Board
|
|
I
|
Election
of Directors
|
FOR all Nominees listed
below (except as marked to the contrary below)
|
WITHHOLD
AUTHORITY
to
vote for all nominees listed below
|
Patrick
White
|
David
Wicker
|
Robert
B. Bzdick
|
|||
Timothy
Ashman
|
Robert
B. Fagenson
|
Ira
A. Greenstein
|
Alan
E. Harrison
|
Dated:
______________________, 2010
|
|
_______________________________
|
|
Signature
|
_______________________________
|
|
Print
Name
|