SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
UNIVERSAL ELECTRONICS INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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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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Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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[LOGO] UNIVERSAL ELECTRONICS
Putting You in Control of Technology(R)
April 28, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders of
Universal Electronics Inc. to be held on Wednesday, June 21, 2000 at 9:00 a.m.,
Los Angeles local time, at The Courtyard by Marriott, 5865 Katella Avenue,
Cypress, California 90630. We urge you to be present in person or represented by
proxy at this Meeting of Stockholders.
You will be asked to consider and vote upon the election of certain members of
the Company's Board of Directors, an amendment to the Company's Restated
Certificate of Incorporation to approve an increase in the aggregate number of
shares of stock the Company is authorized to issue, and the ratification of the
Board of Directors' engagement of the Company's independent auditors for the
year ending December 31, 2000. Details of these proposals and a description of
the general business, directors and management of Universal Electronics are set
forth in the accompanying Proxy Statement. The Board of Directors unanimously
recommends that stockholders vote to approve all of the proposals.
Whether or not you plan to attend the Annual Meeting in person, it is important
that your shares are represented. Therefore, please promptly complete, sign,
date, and return the enclosed proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. You are, of course, welcome
to attend the Annual Meeting and vote in person even if you previously returned
your proxy card.
On behalf of the Board of Directors and management of Universal Electronics
Inc., we would like to thank you for all of your support.
Sincerely yours,
Camille Jayne
Chairman and Chief Executive Officer
UNIVERSAL ELECTRONICS INC.
6101 Gateway Drive
Cypress, California 90630
714-820-1000
714-820-1010 Facsimile
UNIVERSAL ELECTRONICS INC.
Corporate Headquarters:
6101 Gateway Drive
Cypress, California 90630
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 21, 2000
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The 2000 Annual Meeting of Stockholders of Universal Electronics Inc., a
Delaware corporation ("Universal" or the "Company"), will be held on Wednesday,
June 21, 2000 at 9:00 a.m., Los Angeles, California local time, at The Courtyard
by Marriott, 5865 Katella Avenue, Cypress, California 90630. Doors to the
meeting will be open at 8:00 a.m.
The meeting will be conducted:
1. To consider and to vote upon the following proposals (collectively,
the "Proposals"), each of which is described in more detail in the
accompanying Proxy Statement:
(i) Proposal One: The election of Paul D. Arling and Camille
Jayne, each as a Class I director to serve on the Board of
Directors until the next Annual Meeting of Stockholders to be
held in 2001 or until election and qualification of their
successors; and the election of David Beddow, Bruce A.
Henderson, William C. Mulligan, and J. C. Sparkman, each as a
Class II director to serve on the Board of Directors until the
Annual Meeting of Stockholders to be held in 2002 or until
election and qualification of their successors;
(ii) Proposal Two: An amendment to the Company's Restated
Certificate of Incorporation to approve an increase in the
aggregate number of shares of stock the Company is authorized
to issue; and
(iii) Proposal Three: Ratification of the appointment of
PricewaterhouseCoopers LLP, a firm of independent accountants,
as the Company's auditors for the year ending December 31,
2000.
2. To consider and act upon such other matters as may properly come
before the meeting or any and all postponements or adjournments
thereof.
Only stockholders of record at the close of business on April 24, 2000
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
April 28, 2000
Richard A. Firehammer, Jr.
Senior Vice President, General Counsel
and Secretary
EACH STOCKHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE.
UNIVERSAL ELECTRONICS INC.
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
To be held on Wednesday, June 21, 2000
Mailed On or About April 28, 2000
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is being furnished to
stockholders of Universal Electronics Inc., a Delaware corporation ("Universal"
or the "Company"), in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board" or the "Board of Directors") from
holders of record of the Company's outstanding shares of common stock, par value
$.01 per share (the "Company Common Stock"), as of the close of business on
April 24, 2000 (the "Annual Meeting Record Date") for use at the 2000 Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
Wednesday, June 21, 2000, at 9:00 a.m. (Los Angeles, California local time) at
The Courtyard by Marriott, 5865 Katella Avenue, Cypress, California 90630 and at
any adjournments or postponements thereof. This Proxy Statement and the
accompanying form of proxy are first being mailed to stockholders on or about
April 28, 2000. The world headquarters and principal executive offices of the
Company are located at 6101 Gateway Drive, Cypress, California 90630.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of Company Common Stock as of the close
of business on the Annual Meeting Record Date will be entitled to notice of and
to vote at the Annual Meeting or any adjournments or postponements thereof. Such
holders of shares of Company Common Stock are entitled to one vote per share on
any matter that may properly come before the Annual Meeting. The presence,
either in person or by properly executed and delivered proxy, of the holders of
a majority of the then outstanding shares of Company Common Stock is necessary
to constitute a quorum at the Annual Meeting and to permit action to be taken by
the stockholders at such meeting. Under Delaware law, shares of Company Common
Stock represented by proxies that reflect abstentions or "broker non-votes"
(i.e., shares held by a broker or nominee which are represented at the Annual
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
The affirmative vote of a plurality of shares of Company Common Stock
present in person or represented by proxy at the Annual Meeting is required to
elect the directors nominated pursuant to Proposal One. "Plurality" means that
the individuals who receive the largest number of votes cast are elected as
directors up to the maximum number of directors to be chosen at the meeting.
Consequently, any shares not voted (whether by abstention, broker non-vote, or
otherwise) as to Proposal One will have no impact on the election of directors,
except to the extent that the failure to vote for an individual results in
another individual receiving a larger number of votes. Thus, the withholding of
a vote with respect to the election of any nominee for director will have the
practical effect of a vote against that nominee.
The affirmative vote of the holders of at least a majority of the issued
and outstanding shares of Company Common Stock is required to approve Proposal
Two. Passage of Proposal Three and any other question or matter properly brought
before the Annual Meeting requires the approval of a majority of the shares of
Company Common Stock present in person or represented by proxy at the Annual
Meeting. An abstention with respect to any share will have the practical effect
of a vote against Proposal Two, Proposal Three or any other question or matter
properly brought before the Annual Meeting. A broker non-vote with respect to
any share will have the practical effect of a vote against Proposal Two, but, if
a quorum exists, a broker non-vote with respect to any share
will not affect the passage of Proposal Three or any other question or matter
properly brought before the Annual Meeting, since the share is not considered
present for voting purposes.
As of April 24, 2000, there were [XX,XXX,XXX] shares of Company Common
Stock outstanding and entitled to vote at the Annual Meeting. The directors and
executive officers of the Company intend to vote in accordance with the
recommendations of the Board with respect to the Proposal One, Two and Three and
any other question or matter properly brought before the Annual Meeting.
All shares of Company Common Stock that are represented at the Annual
Meeting by properly executed and delivered proxies received prior to or at the
Annual Meeting and not revoked will be voted at the Annual Meeting in accordance
with the instructions indicated in such proxies. If no instructions are
indicated for any Proposal, such proxies will be voted in accordance with the
recommendations of the Board as set forth herein with respect to such Proposal.
In the event that a quorum is not present at the time the Annual Meeting
is convened or if for any other reason the Company believes that additional time
should be allowed for the solicitation of proxies, the Company may adjourn the
Annual Meeting with or without a vote of the stockholders. If the Company
proposes to adjourn the Annual Meeting by a vote of the stockholders, the
persons named in the enclosed form of proxy will vote all shares of Company
Common Stock for which they have voting authority in favor of such adjournment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with Firstar Bank N.A., in its capacity as transfer agent for the Company (the
"Transfer Agent"), at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a subsequent
proxy relating to the same shares of Company Common Stock and delivering it to
the Transfer Agent at or before the Annual Meeting, or (iii) attending the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not, in and of itself, constitute a revocation of a proxy). Any written
notice revoking a proxy should be sent to Firstar Bank, N.A., Corporate Trust,
1555 North Rivercenter Drive, Suite 301, Milwaukee, Wisconsin, 53212.
2
OWNERSHIP OF COMPANY SECURITIES
The Company Common Stock is the only outstanding class of equity security
of the Company.
Ownership as of March 31, 2000 of the Company Common Stock by directors,
nominees, each executive officer named in the Executive Compensation tables
below, as well as by all directors and executive officers of the Company as a
group, and to the Company's knowledge, beneficial holders of more than five
percent of the Company Common Stock, is as follows:
Shares of
Common Stock
Beneficially % of Shares
Owned Outstanding
As of as of
Name and Address(1) March 31, 2000 March 31, 2000
- ------------------- -------------- --------------
Directors and Nominees
Paul D.Arling ..................................... 99,466(2) *
David Beddow (3) .................................. 260 *
Bruce A. Henderson ................................ 17,500 *
Camille Jayne ..................................... 168,333(4) *
William C. Mulligan ............................... 20,618(5) *
J.C. Sparkman ..................................... 88,000 *
Non-Director Executive Officers
John S. Ames ...................................... 16,667(6) *
Jerry L. Bardin ................................... 3,333(7) *
Richard A. Firehammer, Jr. ........................ 20,000(8) *
All Directors and Executive Officers as
a Group (11 persons) .............................. 468,677(9) 3.33
Other Beneficial Owners of More than 5% of
The Outstanding Company Stock
Geoffrey Nixon and MCM Associates, Ltd.(10) ....... 1,173,400(11) 8.54
John S. Osterweis, Osterweis Capital Management, .. 935,380(11) 6.81
LLC and Osterweis Capital Management, Inc. (12)
Berger LLC(13) .................................... 1,101,860 8.02
Seneca Capital Management LLC(14) ................. 907,940(11) 6.61
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* Less than one percent.
(1) Except as otherwise indicated, the address for all persons shown on this
table is c/o the Company, 6101 Gateway Drive, Cypress, California 90630.
Unless otherwise indicated in the footnotes to this table, and subject to
community property laws where applicable, to the knowledge of the Company,
each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned by
that stockholder.
(2) Includes 96,666 shares subject to currently exercisable options. Also
includes 1,000 shares held by Mr. Arling's wife as to which Mr. Arling
disclaims beneficial ownership.
(3) Mr. Beddow was appointed as a director of the Company on October 7, 1999
to fill one of the vacancies that occurred in early 1998 and is nominated
this year as a director.
(4) Includes 168,333 shares subject to currently exercisable options.
(5) Includes 10,000 shares subject to currently exercisable options.
(6) Includes 16,667 shares subject to currently exercisable options.
(7) Includes 3,333 shares subject to currently exercisable options.
(8) Includes 20,000 shares subject to currently exercisable options.
(9) Includes 324,500 shares subject to currently exercisable options.
(10) As reported on Amendment No. 3 to Schedule 13G as filed with the
Securities and Exchange Commission by Geoffrey Nixon, whose principal
business address is 11 West 42nd Street, 19th Floor, New York, New York
10036 ("Nixon"); Mission Partners, L.P., whose principal business address
is 11 West 42nd Street, 19th Floor, New York, New York 10036 ("Mission");
Liberty Nominees Limited, whose principal business address is P.O. Box
10-246, Wellington, New Zealand ("Liberty"); Horizon Offshore, Ltd., whose
principal business address is c/o International Management Services,
Limited, Harbour Centre, North Church Street, P.O. Box 616, George Town,
Grand Cayman, Cayman Islands, B.W.I. ("Horizon"); M Partners L.P., whose
principal business address is 42 Pleasant Street, Watertown, Massachusetts
02172 ("M Partners"); and Mayfair Capital Fund, L.P., whose principal
business address is 11 West 42nd Street, 19th Floor, New York, New York
3
10036 ("Mayfair") reporting ownership as of February 26, 1999. Each of
Nixon, Mission, Liberty, Horizon, M Partners, and Mayfair is the
beneficial owner of approximately 0.04%, 3.12%, 0.64%, 0.66%, 0.14%, and
3.85%, respectively, of Company Common Stock. Nixon is the sole
stockholder and director of MCM Associates, Ltd., whose principal business
address is 11 West 42nd Street, 19th Floor, New York, New York 10036
("MCM"). MCM (i) is the sole general partner of Mission, (ii) has sole
investment discretion over the accounts established by each of Liberty and
M Partners that purchased shares of the Company Common Stock, and (iii) is
the sole investment manager with full voting and dispositive power with
respect to all of the securities owned by Horizon, including the Company
Common Stock beneficially owned by Horizon. Nixon is the sole manager and
principal member of MCM Capital Management, LLC, whose principal business
address is 11 West 42nd Street, 19th Floor, New York, New York 10036 ("MCM
Capital"). MCM Capital is the sole general partner of Mayfair with full
voting and dispositive power with respect to all of the securities owned
by Mayfair, including the Company Common Stock beneficially owned by
Mayfair. The other member of MCM Capital is Mr. Nixon's wife.
(11) On December 20, 1999, the Board of Directors declared a two-for-one split
of the Company Common Stock, to be paid January 31, 2000, in the form of a
stock dividend for stockholders of record at the close of business on
January 10, 2000. The number of shares of Company Common Stock as reported
by the Reporting Persons has been adjusted to reflect the two-for-one
stock split.
(12) As reported on Schedule 13G as filed with the Securities and Exchange
Commission by John S. Osterweis ("Osterweis"), Osterweis Capital
Management, LLC ("OCMLLC") and Osterweis Capital Management, Inc.
("OCMInc") reporting ownership as of February 10, 1999. The principal
business address for each of Osterweis, OCMLLC and OCMInc is 1 Maritime
Plaza, Suite 800, San Francisco, California 94111. Osterweis is the
control person of OCMLLC and OCMInc.
(13) As reported on Amendment No. 1 to Schedule 13G as filed with the
Securities and Exchange Commission by Berger LLC ("Berger"), Berger Small
Company Growth Fund, a Portfolio of the Berger Investment Portfolio Trust
("BSCGF"), Kansas City Southern Industries, Inc. ("KCSI"), Stilwell
Financial, Inc. ("SFI") and Stilwell Management, Inc. ("SMI") reporting
ownership as of February 15, 2000. The principal business address for
Berger, BSCGF and SMI is 210 University Boulevard, Suite 900, Denver,
Colorado 80206. The principal business address for KCSI and SFI is 114
West 11th Street, Kansas City, Missouri 64105. KSCI is the parent holding
company of SFI. SFI owns 100% of SMI. SMI owns approximately 86% of
Berger. All of the Company Common Stock reported by Berger have been
acquired by Berger's mutual fund clients and as such Berger has reported
such ownership as a result of being potentially deemed the beneficial
owner of securities held by the mutual funds and institutional clients to
whom it provides investment advice. Each of KCSI, SFI and SMI specifically
disclaims beneficial ownership over any of the Company Common Stock. Each
of Berger, BSCGF, KCSI, SFI, and SMI is the beneficial owner of
approximately 4.15%, 3.87%, 0%, 0%, and 0%, respectively, of Company
Common Stock.
(14) As reported on Schedule 13G as filed with the Securities and Exchange
Commission by Seneca Capital Management LLC, whose principal business
address is 909 Montgomery Street, #500, San Francisco, California 94133,
reporting ownership as of February 14, 2000.
PROPOSAL ONE: ELECTION OF DIRECTORS
General
The number of directors of the Company's Board of Directors is presently
set at nine and is divided into two classes. There are currently six directors,
two of whom are Class I Directors and four of whom are Class II Directors, and
three vacancies. The Class I Directors are directors who are also employees of
the Company and/or any subsidiary of the Company, and are elected each year at
the Annual Meeting of Stockholders to serve a one-year term. The Class II
Directors are directors of the Company who are not also employees of the Company
and/or any subsidiary of the Company, and are elected every even-numbered year
at the Annual Meeting of Stockholders to serve a two-year term.
Each of the Class I and Class II Directors' terms expires at this year's
Annual Meeting.
On October 7, 1999, Mr. David Beddow was appointed to the Company's Board
of Directors as a Class II Director to fill one of the vacancies that occurred
in early 1998. The remaining three vacancies are as a result of a resignation
that occurred in early 1998 and due to the resignations of Messrs. F. Rush
McKnight and Peter L. Gartman as Class II Directors in 1999.
The Board has nominated and recommends the reelection of each of Mr.
Arling and Ms. Jayne as a Class I Director for a one-year term expiring at the
next Annual Meeting of Stockholders to be held in 2001. In addition, the Board
has nominated and recommends the election of Mr. Beddow and the reelection of
each of Messrs. Henderson, Mulligan and Sparkman as a Class II Director for the
two year term expiring at the Annual Meeting of Stockholders to be held in 2002.
4
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR Ms. Jayne and Messrs. Arling, Beddow, Henderson, Mulligan
and Sparkman.
If elected, Ms. Jayne and Mr. Arling have consented to serve as directors
of the Company for a one-year term and until their respective successors are
elected and qualified. If elected, Messrs. Beddow, Henderson, Mulligan and
Sparkman have consented to serve as directors of the Company for a two-year term
and until their respective successors are elected and qualified. Although it is
not contemplated that any nominee will be unable to serve as director, in such
event, the proxies will be voted by the proxy holders for such other person or
persons as may be designated by the present Board of Directors. Information with
respect to each nominee is set forth below.
Nominees for Election as Class I Directors
Paul D. Arling Mr. Arling is President and Chief Operating
President and Chief Officer of the Company, positions he has held
Operating Officer since being rehired by the Company in
Director since 1996 September 1998. He was the Company's Senior
Age: 37 Vice President and Chief Financial Officer
from May 1996 until his termination by the
Company on August 31, 1998. Prior to joining
the Company, from 1993 through May 1996, he
served in various capacities at LESCO, Inc.
(a manufacturer and distributor of
professional turf care products) with the
most recent being Acting Chief Financial
Officer. Prior to LESCO, he worked for
Imperial Wallcoverings (a manufacturer and
distributor of wallcovering products) as
Director of Planning and The Michael Allen
Company (a strategic management consulting
company) where he was employed as a
management consultant. At the 1999 Annual
Meeting of Stockholders, Mr. Arling was
reelected as a Class I Director of the
Company to serve until the 2000 Annual
Meeting of Stockholders.
Camille Jayne Ms. Jayne has been Chairman of the Company
Chairman and Chief Executive since December 1998 and has been the
Officer Company's Chief Executive Officer since
Director since 1998 August 1998. She was the Company's President
Member of the Nominating and Chief Operating Officer from February 2,
Committee of the Board of 1998. Prior to that, From July 1997 to March
Directors 1998, she was President and CEO of The Jayne
Age: 47 Group (a consulting firm specializing in the
development, introduction and operation of
digital cable TV products and services) and a
Senior Partner at BHC Consulting (a business
management and market research firm). Prior
to The Jayne Group and BHC, Ms. Jayne was
Senior Vice President in charge of the
digital TV business unit at
Tele-Communications, Inc. ("TCI") from
November 1995 to July 1997. From January 1994
to November 1995, she was a partner at BHC
Consulting. At the 1999 Annual Meeting of
Stockholders, Ms. Jayne, was elected as a
Class I Director of the Company to serve
until the 2000 Annual Meeting of
Stockholders.
5
Nominees for Election as Class II Directors
David Beddow Mr. Beddow became a Class II Director of the
Director since 1999 Company on October 7, 1999 when he was
Member of the Audit and appointed by the Board of Directors to fill
Acquisition Advisory one of the vacancies that existed since early
Committees of the Board 1998. Mr. Beddow is Vice President/Technology
Of Directors of Liberty Media Corp., which position he has
Age: 66 held since April 1999. Prior to that, from
June 1993 to April 1999, he was Executive
Vice President of TCI Communications, Inc.
("TCI") and President and CEO of TCI's
National Digital Television Center, Inc. He
is a director TCI Satellite, Inc.
Bruce A. Henderson Mr. Henderson is Chief Executive of Invensys
Director since 1996 Intelligent Automation, a division of Invensys
Member of the Compensation PLC (a producer of automation and control
Committee of the Board systems), which position he has held since
of Directors October 1999. Prior to that, from February
Age: 49 1999 to September 1999, he held the position
of Chief Executive of Invensys Controls (also
a division of Invensys PLC). Prior to that,
he was President and Chief Operating Officer
of Robertshaw Controls Company, a division of
Siebe, PLC (a manufacturer of electronics
controls for the automotive industry), which
position he has held since 1995. From 1983 to
1995, he served in various capacities with
TRW Inc. At the 1998 Annual Meeting of
Stockholders, Mr. Henderson was elected as a
Class II Director of the Company to serve
until the 2000 Annual Meeting of
Stockholders.
William C. Mulligan Mr. Mulligan is Managing Partner with Primus
Director since 1992 Venture Partners (a Cleveland-based venture
Member of the Audit, capital partnership), which position he has
Nominating and Acquisition held since 1987. At the 1998 Annual Meeting of
Advisory Committees of the Stockholders, Mr. Mulligan was elected as a
Board of Directors Class II Director of the Company to serve
Age: 46 until the 2000 Annual Meeting of
Stockholders.
J. C. Sparkman Mr. Sparkman served as Executive Vice
Director since 1998 President and Chief Operating Officer of
Member of the Tele-Communications, Inc. ("TCI") from 1987
Compensation, Nominating until his retirement in 1995. He is a
and Acquisition Advisory director of Shaw Communications, Inc. and On
Committees of the Board of Command Corporation. At the 1999 Annual
of Directors Meeting Stockholders, Mr. Sparkman was
Age: 67 elected as a Class II Director of the Company
to serve until the 2000 Annual Meeting of
Stockholders (the time at which all terms of
Class II Directors expire).
Vote Required
Approval of the election of the nominees is subject to the affirmative
vote of a plurality of shares of Company Common Stock present in person or
represented by proxy at the Annual Meeting.
The Board of Directors of the Company unanimously recommends a vote FOR
each of the foregoing nominees as directors of the Company.
6
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
In 1999, the Board met five times and acted by unanimous written consent
once. No director attended less than 75% of the number of meetings of the Board
of Directors and the committees on which he or she served during the period for
which he or she was a member of the Board.
The Board has four standing committees: (i) Acquisition Advisory (ii)
Audit; (iii) Compensation; and (iv) Nominating. The members of each committee
are appointed by the Board of Directors and serve at its discretion. A majority
of each of the committees constitutes a quorum, and the acts of a majority of
the members present at any meeting at which a quorum is present, or acts
approved in writing by all of the members, are acts of any of the respective
committees.
The members of the Acquisition Advisory Committee are David Beddow,
William C. Mulligan and J. C. Sparkman, none of who are officers or employees of
the Company or any of its subsidiaries. The Acquisition Advisory Committee
serves to assist management in the development of the Company's acquisition and
disposition strategies and in the analysis of potential acquisition targets.
During 1999, the Acquisition Advisory Committee met with management on an
informal basis regularly throughout the year and acted twice by unanimous
written consent.
The members of the Audit Committee are David Beddow (who replaced Mr.
Gartman after Mr. Gartman resigned from the Board) and William C. Mulligan,
neither of who is an officer or employee of the Company or any of its
subsidiaries. The Audit Committee's functions include meeting with the Company's
independent auditors and management representatives, making recommendations to
the Board regarding the appointment of the independent auditors, approving the
scope of audits and other services to be performed by the independent auditors,
considering whether the performance of any professional service by the auditors
could impair their independence, and reviewing the results of external audits,
the accounting principles applied in financial reporting, and financial and
operational controls. The independent auditors have unrestricted access to the
Audit Committee and vice versa. During 1999, the Audit Committee met twice.
The members of the Compensation Committee are Bruce A. Henderson and J.C.
Sparkman (who is Chairman of the Committee), neither of whom is an officer or
employee of the Company or any of its subsidiaries. The Compensation Committee's
functions include making recommendations to the Board on policies and procedures
relating to executive officers' compensation and various employee stock plans
and approving individual salary adjustments and stock awards in those areas.
During 1999, the Compensation Committee met once and acted three times by
unanimous written consent.
The members of the Nominating Committee are Camille Jayne, the Chairman
and Chief Executive Officer of the Company, William C. Mulligan and J. C.
Sparkman. Messrs. Mulligan and Sparkman are not officers or employees of the
Company or any of its subsidiaries. This committee considers nominees for
election as directors. The committee utilizes the same procedure to consider
nominees recommended by stockholders made pursuant to procedures identified in
the Company's Amended and Restated By-laws, which are described in this Proxy
Statement in "STOCKHOLDER NOMINATIONS OF DIRECTORS", as is used to consider
nominees recommended by any other source. In addition, the committee fulfills an
advisory function with respect to a range of matters affecting the Board and its
committees, including making recommendations with respect to qualifications of
director candidates, compensation of directors, the selection of committee
assignments and chairs, and related matters affecting the functioning of the
Board. The Nominating Committee did not meet during 1999, rather, it acted
informally in advising the entire Board with respect to the appointment of Mr.
Beddow in October 1999.
COMPENSATION OF DIRECTORS
On April 28, 1999, the Compensation Committee recommended to the entire
Board of Directors that the annual fee paid to Directors who are not officers of
the Company or any of its subsidiaries be increased to $25,000 from $18,000. On
July 8, 1999 the Board of Directors approved this recommendation. As with
previous years, this fee was paid in a combination of Company Common Stock (2/3)
and cash (1/3). Directors who are also officers of the Company receive no
additional compensation for their services as directors (see "COMPENSATION
7
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"). All directors are also
reimbursed for travel expense and other out-of-pocket costs incurred in
attending meetings.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and certain of its officers and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission and The Nasdaq Stock Market. Such persons
are further required to furnish the Company with copies of all such forms they
file. Based solely on the Company's review of the copies of such forms it has
received, the Company believes that, except for the late filing of Form 5
reports by each of Paul Arling, Camille Jayne, Paul J. M. Bennett, Jerry Bardin,
and J. Stewart Ames with respect to the issuance of options to acquire shares of
the Company Common Stock and, and of Form 5 by each of Bruce A. Henderson,
William C. Mulligan and J. C. Sparkman with respect to the issuance of shares of
Company Common Stock as outside director compensation received during 1999 (see
"COMPENSATION OF DIRECTORS"), all of the Section 16(a) filing requirements were
satisfied by the Company's directors and executive officers.
EXECUTIVE OFFICER COMPENSATION
Summary of Compensation
Table I below sets forth a summary of the compensation paid by the Company
to its chief executive officer and the four additional most highly compensated
executive officers of the Company ("Named Executive Officers").
TABLE I
Summary Compensation Table For the Year Ended December 31, 1999
Long-Term
Annual Compensation
Compensation(1) Awards
($) (#)
--------------------- Other -------------
Annual All Other
Compensation Stock Compensation(5)
Name and Principal Position Year Salary Bonus(2) ($) Options(3),(4) ($)
- --------------------------- ---- ------ -------- ------------ -------------- ---------------
Camille Jayne(6) ................ 1999 311,077 327,600 9,856(7) 320,000 157,159
Chairman and Chief 1998 271,154 109,800 43,488(7) 350,000 6,151
Executive Officer 1997 N/A N/A N/A N/A N/A
Paul D. Arling(8) ............... 1999 225,750 195,000 -- 180,000 97,069
President and Chief 1998 182,798 76,000 -- 160,000 438,890
Operating Officer 1997 156,867 49,500 -- -- 4,410
Jerry Bardin(9) ................. 1999 176,277 76,286 -- 30,000 11,717
Senior Vice President of 1998 68,654 32,800 -- 30,000 3,485
Engineering and Operations 1997 N/A N/A N/A N/A N/A
John S. Ames(10) ................ 1999 148,758 64,723 -- 40,000 3,602
Senior Vice President of 1998 118,377 45,658 -- 10,000 3,602
Sales and Marketing 1997 N/A N/A N/A N/A N/A
Richard A. Firehammer, Jr.(11) .. 1999 135,577 64,723 -- 140,000 5,909
Sr. Vice President and 1998 95,565 25,000 -- -- 350,062
General Counsel 1997 119,314 37,500 -- -- 4,023
- --------------
(1) Excludes certain perquisites and other amounts that for any executive
officer did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus for such executive officer.
(2) Bonus includes the amount of cash bonus earned during the relevant year.
Actual pay out of bonuses occurred in the following year.
8
(3) Awards referenced above represent options to purchase shares of the
Company Common Stock granted during the relevant year.
(4) On December 20, 1999, the Board of Directors declared a two-for-one split
of the Company Common Stock, to be paid January 31, 2000, in the form of a
stock dividend for stockholders of record at the close of business on
January 10, 2000. All share amounts in this table have been restated to
give effect to the stock split.
(5) For 1999, All Other Compensation was composed of the following items:
401(k) Supplemental
Company Life Insurance
Contributions Premiums Relocation Totals
------------- -------- ---------- ------
Camille Jayne ............... 2,500 7,302 147,357 157,159
Paul D. Arling .............. 4,219 3,152 89,698 97,069
John S. Ames ................ 2,500 1,102 -- 3,602
Jerry Bardin ................ 4,748 6,969 -- 11,717
Richard A. Firehammer, Jr. .. 4,207 1,702 -- 5,909
(6) Ms. Jayne joined the Company on February 2, 1998.
(7) The amount of Other Annual Compensation for Ms. Jayne represents commuting
and housing allowance. SEE Employment Agreements and Termination of
Employment Arrangements - Ms. Jayne.
(8) Mr. Arling's employment with the Company was terminated on August 31, 1998
as part of the Company's discontinuation of its North American retail line
of business. The Company rehired Mr. Arling in September 1998.
(9) Mr. Ames became an executive officer of the Company in 1998. In 1997, he
served the Company in non-executive capacities.
(10) Mr. Bardin joined the Company on August 3, 1998.
(11) Mr. Firehammer's employment with the Company was terminated on August 31,
1998 as part of the Company's discontinuation of its North American retail
line of business. The Company rehired Mr. Firehammer in February 1999.
Stock Options
Grant of Stock Options. The following table sets forth details regarding
stock options granted to the Named Executive Officers in 1999. The Company has
never granted stock appreciation rights. In addition, in accordance with
Securities and Exchange Commission ("SEC") rules, the table shows the
hypothetical gains or "option spreads" that would exist for the respective
options. These gains are based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term. The actual value, if any, an executive may realize will depend on
the spread between the market price and the exercise price on the date the
option is exercised.
9
TABLE II
Grants During The Year Ended December 31, 1999
Potential Realizable Value
At Assumed Annual Rates
Of Stock Price Appreciation
% of Total for Option Term (4)
Stock Options Options ($)
Granted (1) Granted to Exercise ---------------------------
Employees Price(2) Expiration
Name (#) In 1999 ($/Sh) Date(3) 5% 10%
- ---- ------------- ---------- -------- ---------- -- ---
Camille Jayne ................. 160,000(5) 11.83 7.5000 01/28/10 754,674 1,912,491
Camille Jayne ................. 160,000(6) 11.83 11.0157 10/07/10 1,108,424 2,808,990
Paul D. Arling ................ 80,000(5) 5.92 7.5000 01/28/10 377,337 956,245
Paul D. Arling ................ 100,000(6) 7.40 11.0157 10/07/10 692,771 1,755,619
Jerry Bardin .................. 10,000(5) 0.74 7.5000 01/28/10 47,167 119,531
Jerry Bardin .................. 20,000(6) 1.48 11.0157 10/07/10 138,554 351,124
John S. Ames .................. 20,000(5) 1.48 7.5000 01/28/10 94,334 239,061
John S. Ames .................. 20,000(6) 1.48 11.0157 10/07/10 138,554 351,124
Richard A. Firehammer, Jr. .... 60,000(5) 4.44 7.5000 01/28/10 283,003 717,184
Richard A. Firehammer, Jr. .... 60,000(5) 4.44 11.0600 10/07/10 417,334 1,057,607
Richard A. Firehammer, Jr. .... 20,000(6) 1.48 11.0157 10/07/10 138,554 351,124
- ----------
(1) Under its 1993, 1995, 1996, 1998 and 1999 Stock Incentive Plans, the
Company may grant to eligible employees stock options either on a
non-qualified tax basis or as "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Under its 1999A Nonqualified Stock Plan, the Company may only
grant stock options to eligible employees on a non-qualified tax basis. In
1999, the Company granted a total of 1,352,100 option to employees.
(2) Under all stock option plans, the option purchase price is equal to the
fair market value at the date of the grant.
(3) If an optionee ceases to be an employee, other than by reason of death or
disability, while holding an exercisable option, the option will generally
terminate if not exercised within the following 180 days. If the
optionee's employment ceases without "cause" or as a result of a
"constructive termination", each as defined in the Plan, all options shall
be immediately exercisable and, if the optionee's employment ceases within
two years of such constructive termination (18 months in the case of
options granted under the 1999A Plan), then the optionee shall be
permitted to exercise the options at any time until the expiration of the
option in accordance with its original term. Stock options are not
transferable except that under all Plans if an optionee dies while an
employee of the Company or within one year after becoming disabled, a
legal representative or legatee may exercise the option, to the extent not
already exercised, at any time up to one year from the date of death or,
if shorter, the expiration of the option in accordance with its original
term and in addition, under the 1999A Plan stock options may be
transferred (i) by will or by the laws of descent and distribution or (ii)
by gift or domestic relations order to a family member of the Optionee, (a
"Permitted Transferee"), but in such cases, such options may only be
exercised during the Optionee's lifetime by a Permitted Transferee, the
Optionee, or in the case of Optionee's legal incompetency, by Optionee's
guardian or legal representative.
(4) In accordance with SEC rules, these columns show gains that might exist
for the respective options, assuming the market price of the Company's
Stock appreciates from the date of the grant over a period of ten years at
the annualized rates of five and ten percent, respectively. If the stock
price does not increase above the exercise price at the time of the
exercise, realized value to the named officers from these options will be
zero. There can be no assurance that the amounts reflected in this table
or the associated rates of appreciation will be achieved.
(5) Options were granted pursuant to the Universal Electronics Inc. 1999 Stock
Incentive Plan and vest over three years on the anniversary date of the
grant at a rate of 33-1/3% per year and have ten year terms.
(6) Options were granted pursuant to the Universal Electronics Inc. 1999A
Nonqualified Stock Plan and vest over four years on the anniversary date
of the grant at a rate of 25% per year and have ten year terms.
Aggregated Stock Option Exercises and Year-End Value. Table III below sets
forth, on an aggregated basis, information regarding the exercise during 1999 of
options to purchase Company Common Stock by the Company's Named Executive
Officers and the value on December 31, 1999 of all unexercised stock options
held by such individuals.
10
TABLE III
Aggregated Stock Option Exercises During The Year Ended December 31, 1999
and Year-End Stock Option Values
Number of Securities Value of Unexercised
Shares Underlying Unexercised Stock In-the-Money Stock Options
Acquired Options at Year End (1) at Year End (2)
on Value (#) ($)
Exercise Realized ---------------------------- ----------------------------
Name # ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
Camille Jayne ............ 30,000 461,750 27,500 582,500 495,429 9,126,583
Paul D. Arling ........... 45,000 1,207,188 70,000 300,000 1,325,928 4,602,150
Jerry Bardin ............. 3,750 86,281 -- 52,500 90,859 772,967
John S. Ames ............. 10,750 195,766 5,000 57,500 -- 879,686
Richard A. Firehammer, Jr 30,000 401,018 -- 140,000 -- 1,886,086
Total .................... 119,500 2,352,002 102,500 1,132,500 1,912,216 17,267,472
- --------------
(1) On December 20, 1999, the Board of Directors declared a two-for-one split
of the Company Common Stock, to be paid January 31, 2000, in the form of a
stock dividend for stockholders of record at the close of business on
January 10, 2000. All share amounts in this table have been restated to
give effect to the stock split.
(2) Based on a per share price for Company Common Stock of $23.00, which price
reflects the closing price of the Company Common Stock as reported on The
Nasdaq Stock Market on December 31, 1999, the last trading day of 1999.
The price per share has been adjusted to reflect the two-for0one stock
split.
Employment Agreements and Termination of Employment Arrangements
Ms. Jayne. At the time of her hiring in February 1998, the Company entered
into an employment agreement with Ms. Jayne with an initial term of two years
commencing on February 2, 1998 and ending on February 1, 2000. On January 28,
1999, the Company and Ms. Jayne entered into an amended employment agreement
that changed the term of the agreement to end on February 1, 2001. The
agreement, as amended, will also automatically renew for successive one-year
terms unless terminated by either party upon 120 days written notice to the
other. The agreement, as amended, requires Ms. Jayne to devote her full working
time and energy to the Company during the term of the agreement, to refrain from
disclosing and/or using any of the Company's trade secrets and proprietary
information and from soliciting any of its customers or employees anytime after
her employment with the Company. The agreement, as amended, provides for an
annual base salary of $312,000, with the opportunity to receive increases (but
not decreases) in such annual salary as determined and set by the Board of
Directors' Compensation Committee in accordance with plans and policies
established by that committee. The Compensation Committee decided to increase
Ms. Jayne's 2000 base salary by 27% to $395,000. Ms. Jayne also may earn an
annual bonus payable at or near the end of each fiscal year in an amount equal
to a percentage of her base salary in accordance with the method established by
the Compensation Committee (see "COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION -- Annual Bonus Incentives"). Ms. Jayne received an annual bonus of
$327,600 for 1999. Although the agreement also permits the Company to award a
discretionary bonus to Ms. Jayne as determined by the Compensation Committee,
Ms. Jayne received no discretionary bonus during 1999. The agreement further
provides for the grant of options to acquire shares of Company Common Stock as
determined by the Compensation Committee. On January 28, 1999, Ms Jayne received
an option to acquire up to 160,000 shares of Company Common Stock at an exercise
price of $7.50 per share, equal to the average of the high and low prices of the
Company Common Stock on January 28, 1999, and which vest in equal increments
over three years and on October 7, 1999, Ms. Jayne received an option to acquire
up to 160,000 shares of Company Common Stock at an exercise price of $11.0157
per share, equal to the average of the high and low prices of the Company Common
Stock on October 7, 1999, and which vest in equal increments over four years.
The agreement further entitled Ms. Jayne to a commuting allowance and corporate
housing until such time as she relocated her primary residence to Southern
California. During the second quarter of the year, Ms. Jayne completed such
relocation and at such time she ceased receiving the commuting allowance and
corporate
11
housing. The agreement further entitles Ms. Jayne to participate in benefits
plans of the Company in effect from time to time and for other customary
benefits.
If during the term of the agreement, as amended, Ms. Jayne should resign
for "good reason" (as such term is defined in the agreement), Ms. Jayne will
receive salary, bonus, other incentive compensation and perquisites, and may
continue to participate in Company benefits plans, for an 18-month period
following such resignation (twenty-four (24) months if such resignation is due
to a "friendly acquisition" "Change in Control" (as such terms are defined in
the agreement) or thirty-six (36) months if such resignation is due to a
"hostile acquisition" (as such term is defined in the agreement) Change in
Control).
Mr. Arling. At the time of his rehiring as the Company's President and
Chief Operating Officer in September 1998, the Company entered into an
employment agreement with Mr. Arling with an initial term of two years
commencing on October 1, 1998 and ending on September 30, 2000. On April 22,
1999, the Company and Mr. Arling entered into an amended employment agreement.
The agreement, as amended, provides that Mr. Arling is to devote his full
working time and energy to the Company during the term of the agreement, to
refrain from disclosing and/or using any of the Company's trade secrets and
proprietary information and from soliciting any of its customers or employees
anytime after his employment with the Company and that, unless terminated by
either party in accordance with the terms of the agreement, the term would
automatically renew for successive one-year terms. The agreement also provided
for a 1999 annual base salary of $225,000 (which reflected no increase over his
1998 annual salary), with the opportunity to receive increases (but not
decreases) in such annual salary as determined and set by the Board of
Directors' Compensation Committee in accordance with plans and policies
established by that committee. The Compensation Committee decided to increase
Mr. Arling's 2000 base salary by 11% to $250,000. Mr. Arling also may earn an
annual bonus payable at or near the end of the each fiscal year in an amount
equal to a percentage of his base salary in accordance with the method
established by the Compensation Committee (see "COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION -- Annual Bonus Incentives"). Mr. Arling received an
annual bonus of $195,000 for 1999. Although the agreement also permits the
Company to award a discretionary bonus to Mr. Arling as determined by the
Compensation Committee, Mr. Arling did not receive a discretionary bonus during
1999. The agreement further provides for the grant of options to acquire shares
of Company Common Stock as determined by the Compensation Committee. On January
28, 1999, Mr. Arling received an option to acquire up to 80,000 shares of
Company Common Stock at an exercise price of $7.50 per share, equal to the
average of the high and low prices of the Company Common Stock on January 28,
1999, and which vest in equal increments over three years and on October 7,
1999, Mr. Arling received an option to acquire up to 100,000 shares of Company
Common Stock at an exercise price of $11.0157 per share, equal to the average of
the high and low prices of the Company Common Stock on October 7, 1999, and
which vest in equal increments over four years. The agreement also entitles Mr.
Arling to a non-recourse interest bearing secured loan. The loan may only be
used by Mr. Arling for the acquisition of his primary residence in Southern
California. The loan bears interest at the rate of 5.28% per annum, which
interest is payable annually to the Company on each December 15th. The loan is
secured by the primary residence purchased by Mr. Arling and the principal is
payable on the earlier of (i) December 15, 2007, (ii) within twelve (12) months
following a demand from the Company in the event that Mr. Arling shall cease
(for whatever reason) being an employee of the Company or upon the occurrence of
an Event of Default (as such term is defined within the promissory note
evidencing the loan) or (iii) on the closing of a sale or transfer by Mr. Arling
or his spouse of all or any part of his and/or her primary residence in Southern
California that secures the loan, including without limitation any sale or
transfer of any interest therein (including any beneficial interest therein)
without the Company's prior written consent, which consent will not be
unreasonably withheld. The agreement further entitles Mr. Arling to participate
in benefits plans of the Company in effect from time to time and for other
customary benefits.
If during the term of the agreement, as amended, Mr. Arling should resign
for "good reason" (as such term is defined in the agreement), Mr. Arling will
receive salary, bonus, other incentive compensation and perquisites, and may
continue to participate in Company benefits plans, for an 18-month period
following such resignation (twenty-four (24) months if such resignation is due
to a "friendly acquisition" "Change in Control" (as such terms are defined in
the agreement) or thirty-six (36) months if such resignation is due to a
"hostile acquisition" (as such term is defined in the agreement) Change in
Control).
12
Mr. Bennett. On June 16, 1996, the Company's subsidiary, Universal
Electronics B.V. (formerly known as One For All, B.V.) entered into an
employment agreement with Mr. Bennett. The Company believes that the agreement
contains terms and provisions that are typical of these types of agreements in
The Netherlands. By the agreement, Mr. Bennett receives a base salary (paid in
guilders), which salary may be increased as determined and set by the Board of
Directors' Compensation Committee in accordance with plans and policies
established by that committee. In 1999, Mr. Bennett's base salary was
approximately US$150,000. By the agreement, Mr. Bennett is entitled to earn an
annual bonus payable at or near the end of the Company's fiscal year in an
amount equal to a percentage of his base salary, provided that certain earnings
targets are met. In 1999, the Company awarded Mr. Bennett an annual bonus equal
to US$43,000. The agreement further entitles Mr. Bennett to receive a use of
Company paid automobile, participate in benefits plans of the Company in effect
from time to time and for other customary benefits. Mr. Bennett has also
received a salary continuation agreement from the Company (see "Pre1999 Salary
Continuation Agreements" below).
Pre1999 Salary Continuation Agreements. In 1995 and 1996, Messrs. Ames and
Bennett and certain officers of the Company received salary continuation
agreements with the Company (each, an "SCAs"). Each SCAs takes effect upon the
occurrence of certain triggering events (as defined in the agreements). In
January 1997, Mr. Bennett's SCA was amended by providing that a triggering event
under his SCA would include a sale or transfer or disposition by the Company of
all or substantially all of the assets or stock of Universal Electronics B.V.
(formerly known as "One For All. B.V.") to a third party. When effective, each
SCA operates as an employment agreement providing for a term of employment with
the Company for a period ranging from twelve (12) to eighteen (18) months
(thirty-six (36) months in the event of a hostile acquisition). In addition,
each SCA provides that the executive or officer would receive increases in
salary and bonuses during the term of the SCA in accordance with the Company's
standard policies and practices; however, in no event would such base salary and
bonus be less than the base salary and bonus such executive or officer received
in the year immediately preceding the effective date of the SCA. Further, each
SCA provides that the executive or officer will be entitled to receive stock
option grants and to otherwise participate in the Company's incentive
compensation and benefits plans and other customary benefits programs in effect
from time to time, but in no event would such participation be less than that
provided such executive or officer immediately prior to the effective date of
the SCA.
Under each SCA, in the event the Company terminates the executive's or
officer's employment for reasons other than the executive's or officer's death
or disability or for "cause" (as such term is defined in each SCA) or the
executive or officer resigns for "good reason" (as such term is defined in each
SCA, which definition includes resigning in connection with the occurrence of a
change in control), the executive or officer would receive, in one lump sum, an
amount equal to salary, bonus and other incentive compensation (including being
paid the cash value of all options held by such executive or officer, which
options become immediately fully vested on the executive's or officer's
termination or resignation date) and to continue all health, disability and life
insurance benefits for periods ranging from twelve (12) to eighteen (18) months
(thirty-six (36) months in the event of a hostile acquisition) following such
termination or resignation.
1999 Salary Continuation Agreements. In February 1999, the Company entered
into salary continuation agreements with Messrs. Firehammer and Belzowski. These
salary continuation agreements are substantially similar to the SCAs (described
above) in that they too take effect upon the occurrence of certain triggering
events (as defined in the agreements). Similarly, when effective, each salary
continuation agreement also (i) operates as employment agreements providing for
a term of employment with the Company for eighteen (18) months following a
triggering event (thirty-six (36) months if the triggering event is a "hostile
acquisition" (as such term is defined in the salary continuation agreement)),
(ii) provides that the executive would receive increases in salary and bonuses
during the term of his salary continuation agreement in accordance with the
Company's standard policies and practices -- however, in no event would such
base salary and bonuses be less than the base salary and bonuses such executives
and officers received in the year immediately preceding the effective date of
the salary continuation agreements, and (iii) entitles the executive to receive
stock option grants and to otherwise participate in the Company's incentive
compensation and benefits plans and other customary benefits programs in effect
from time to time, but in no event would such participation be less than that
provided such executive immediately prior to the effective date of his salary
continuation agreement.
13
In addition, each of these salary continuation agreements similarly
provides that in the event the Company terminates the executive's employment for
reasons other than his death or disability or for "cause" (as such term is
defined in the salary continuation agreement) or he resigns for "good reason"
(as such term is defined in each salary continuation agreement, which definition
includes resigning in connection with the occurrence of a change in control),
the executive would receive, in one lump sum, an amount equal to salary, bonus
and other incentive compensation (including being paid the cash value of all
options held by him, which options become immediately fully vested on the
executive's termination or resignation date) and to continue all health,
disability and life insurance benefits for a period of eighteen (18) months
(thirty-six (36) months in the event of a hostile acquisition) following such
termination or resignation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As stated above, the Compensation Committee currently consists of Messrs.
Sparkman and Henderson, both of whom are non-employees. The Compensation
Committee recommends compensation arrangements for the Company's executive
officers and is also responsible for determining and otherwise administering the
timing, amount, exercise price and other terms of options granted under the
Company's various stock incentive plans. Under certain of those plans, options
may be granted to non-employee directors of the Board of Directors. In all
instances, the recommendations of the Compensation Committee regarding executive
officer compensation, including all stock option grants, are passed upon and
approved by the full Board of Directors, except that neither Ms. Jayne nor Mr.
Arling vote or make decisions on matters involving their own and each other's
compensation. There were no options granted to non-employee directors of the
Board of Directors during 1999. Pursuant to one of the Company's stock option
plans previously approved by the stockholders, on February 1, 2000, the full
Board of Directors authorized a grant of options to each of Messrs. Beddow,
Henderson, Mulligan and Sparkman, each an outside director of the Company, in
the respective amounts of 10,000, 20,000, 20,000 and 20,000, with each option
vesting ratably over three years and having an exercise price of $18.5625 per
share, the then fair market value as determined in accordance with the plan.
CERTAIN TRANSACTIONS
On September 1, 1998, the Company entered into an asset purchase agreement
with H & S Management Corp. ("H&S"), J. C. Sparkman and Steven Helbig in which
the Company acquired all of the assets that were used and useful in the H & S
remote control business. Mr. Sparkman received approximately 22% of the purchase
price for H&S paid by the Company. The amount received by Mr. Sparkman was $1.5
million in cash and 84,211 shares of Company Common Stock, which had a value of
approximately $874,000 on the closing date of the acquisition. Twenty-five
thousand dollars ($25,000) of the amount received by Mr. Sparkman was in
exchange for a non-compete agreement that he entered into with the Company in
which he agreed that for seven (7) years from September 1, 1998, he would not,
directly or indirectly, either alone or in conjunction with any person or
persons, or in any other manner whatsoever (i) carry on or be engaged in the H&S
remote control business or any other business which is in competition with the
H&S remote control business as existing on September 1, 1998, (ii) solicit
business from or transact business with any person, firm or corporation to whom
the Company or any of the other parties to the non-compete agreement has sold
products where such solicitation would involve the sale of products competitive
with those of the H&S remote control business, or (iii) directly or indirectly
solicit for employment, offer employment to, or hire any person (as an employee
or consultant), or otherwise engage in business any person or persons who is or
are employed by the Company immediately after the closing date of the
acquisition or during the seven (7) year non-compete period, except with the
prior written consent of the Company. The non-compete agreement does not
prohibit Mr. Sparkman from (i) carrying on or being engaged in any type of
business, which is not competitive with the H&S remote control business in any
area whatsoever, or (ii) being an owner of not more than 5% of the outstanding
stock of any class of a corporation which is publicly traded whose principal
business is competitive with the H&S remote control business, so long as he has
no active participation in the business of such corporation.
In connection with the acquisition, Mr. Sparkman also entered into a
consulting agreement with the Company whereby Mr. Sparkman would provide the
Company with certain consulting services for a period of two years commencing on
September 1, 1998 in exchange for which the Company would pay Mr. Sparkman
$250,000 per
14
year and reimburse him for all reasonable and fully documented travel, office,
entertainment, and other costs actually incurred in connection with carrying out
his consulting services. During 1999, Mr. Sparkman received $250,000 under this
agreement. Mr. Sparkman has agreed to indemnify, defend and hold the Company
harmless from any claim that any payment made to him under the consulting
agreement should have been made to any other shareholder, employee or director
of H & S. In addition, Mr. Sparkman has agreed to hold, in confidence,
information regarding the Company that he learns while performing his consulting
services. Finally, Mr. Sparkman has agreed that all inventions that he may
conceive of or assist in creating while performing consulting services under the
agreement belong to the Company and that he will assign all rights to each such
invention to the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, first established
after the Company's February 1993 initial public offering, met once and acted
three times by unanimous written consent in 1999. The members of the Committee
are J. C. Sparkman (Chairman of the Committee) and Bruce A. Henderson. The
Committee recommends compensation arrangements for the Company's executive
officers and administers its various stock incentive plans.
The Compensation Committee will review the compensation policies of the
Company throughout the coming year. All compensation actions taken during 1999
were consistent with principles previously established by the Board of
Directors. These principles include building a strong relationship between
stockholder return and executive compensation, providing incentives to achieve
both near and long-term goals, and providing an overall level of remuneration
that is fair and reflective of performance. The chief executive officer and
other executive officers are not present at the meetings unless requested by the
Committee. Further, consistent with past practice, the Board has decided that
management of the Company should make decisions with respect to the compensation
of all employees other than the chief executive officer and all other executive
officers of the Company.
Compensation Philosophy and Program. In administering executive officer
compensation, the Compensation Committee's objective is to establish a total pay
program for the Company that appropriately balances compensation costs with
salaries and incentives sufficient to retain and motivate key executives. The
chief executive officer presents proposals and recommendations on executive
officer compensation to the Committee for its review and evaluation. In 1999,
the Compensation Committee used data and reports obtained from independent
consultants, and to a lesser extent, data provided by the Company to establish
compensation targets that reflect overall and individual executive officer
compensation history, the Company's recent and planned performance and, to the
extent available, data reflecting compensation practices of companies who are
competitors of the Company (the "Compare Group"). The Compare Group included
members of the Company's Peer Group and private companies. However, because the
Company found that the companies comprising the Compare Group were substantially
larger than the Company, the Compensation Committee discounted such comparison
data and relied more on internal information and criteria in establishing its
overall pay program for the executive officers. In 2000, the Committee will
continue to employ a similar method to establish executive compensation. The
Committee believes that the method it has employed in establishing executive
compensation appropriately reflects the labor market for Company executives.
Base Salary. Base salaries are determined from an assessment of various
factors including position, tenure, experience, salary history and individual
performance. This assessment is generally subjective, not subject to weightings
or formulas and only considers Compare Group data to the extent available and
believed by the Compensation Committee to be helpful; however, it does include
data received from an independent consultant. Individual base salary increases
reflect what the Compensation Committee believes to be fair and appropriate
after considering the subjective factors, an assessment of the Company's current
and projected labor costs and the data it received from the independent
consultant. Based upon the Company's financial performance for the year ended
December 31, 1999, the Committee reassessed the base salaries of Ms. Jayne and
the other executive officers. In this regard, Ms. Jayne, who has an employment
agreement with the Company (see "Employment Agreements") and is paid in
accordance with the provisions of the employment agreement, received an increase
in her base salary of 27% for 2000. The other executive officers (some of whom
also have employment agreements with the Company or its subsidiaries - see
"Employment Agreements") received increases for 2000 ranging from 4% to
approximately 20%.
15
Annual Bonus Incentives. The Company believes that incentives help
motivate attainment of annual objectives, including the Company's performance
relative to that year's plan and the individual performance of each executive
officer. Based in part on data provided by the Company that was obtained from
independent consultants, the Compensation Committee has established a method for
determining bonuses for the Company's executive officers, including the chief
executive officer, utilizing a combination of financial and strategic goals.
These goals contain both objective and subjective components and based upon the
level at which those goals are achieved, each executive officer is paid a bonus
equal to a percentage of the executive's base salary. For the chief executive
officer, the percentage ranges between 30% and 120% of her base salary. For the
other executive officers, the percentages range between 20% and 100% of their
respective base salary. In certain circumstances, an additional bonus may be
awarded if the Compensation Committee determines that an executive officer's
individual performance warrants such award. Based on the achievement of the
financial and strategic goals during 1999, Ms. Jayne received a bonus for 1999
equal to approximately 105% of her base salary and each other executive officers
received a bonus in 1999 ranging from 43% to 87% of such executive's base
salary. During 1999, none of the Named Executive Officers received a
discretionary bonus.
Common Stock Incentives. In addition to the Company's 401K and Profit
Sharing Plan, the Company, through its various stock incentive plans, may grant
options to purchase Company Common Stock, stock appreciation rights or phantom
stock awards to executive officers and employees of the Company and its
subsidiaries with a view toward providing the executive officers and employees a
stake in the Company's future and compensation directly aligned with the
creation of stockholder value. The Compensation Committee may also issue stock
options to attract new executive officers to the Company. The Compensation
Committee generally establishes the terms and conditions of such grants.
Individual awards are determined based on a subjective assessment of individual
performance, contribution and potential. The Compensation Committee, based in
part on the number of options granted to the Named Executive Officers during
1999, has determined that there will be no annual grant of options made to the
Named Executive Officers during 2000. However, the Compensation Committee
retains the discretion to make individual grants that it deems appropriate under
the circumstances, including to any or all of the Named Executive Officers.
During 1999, the Committee increased the Company's matching contribution to the
Company's 401K and Profit Sharing Plan from 25% to 50%. No changes in the
Company's 401K and Profit Sharing Plan are anticipated during 2000.
Perquisites. The Company offers very few perquisites or special benefits
to executive officers. In general, the Compensation Committee believes that the
benefits offered are less than those offered at typical companies of similar
size, and are not material when considering total compensation.
Deductibility. The Compensation Committee does not believe that the
provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), will limit the deductibility of compensation expected to be paid
by the Company during 2000. Section 162(m) generally limits the deductibility
for federal tax purposes of certain types of executive compensation in excess of
$1.0 million dollars per year. The Compensation Committee will continue,
however, to evaluate the impact of Section 162(m) of the Code and any other such
provisions and take any action deemed appropriate to maximize the deductibility
for federal tax purposes of all elements of compensation. The Company, however,
may from time to time pay or award compensation to its executive officers that
may not be deductible. Further, because of the ambiguities and uncertainties as
to the application and interpretation of Section 162(m) and the regulations
issued thereunder, no assurance can be given, notwithstanding the efforts of the
Company in this area, that compensation intended by the Company to satisfy the
requirements for deductibility under Section 162(m) does in fact do so.
It is the view of the Compensation Committee that the compensation
programs of the Company are well structured to encourage attainment of
objectives, offer opportunities for a total level of compensation that is
consistent with other companies of similar size, and foster a stockholder
perspective in management. The Compensation Committee believes that the overall
levels of compensation provided by these programs are fair and appropriate for
the year just ended and that they serve stockholders' long-term interests.
Compensation Committee of the Board of Directors
J. C. Sparkman - Chairman
Bruce A. Henderson
16
PERFORMANCE CHART
The following line graph compares the yearly percentage change in the
cumulative total stockholder return with respect to Company Common Stock versus
the cumulative total return of the Company's Peer Group Index (the "Peer Group
Index") and the Nasdaq Composite Index (the "Nasdaq Composite Index") for the
five (5) year period commencing December 31, 1994 and ended December 31, 1999.
The graph and table assume that $100 was invested on December 31, 1994 in each
of Company Common Stock, the Peer Group Index and the Nasdaq Composite Index and
that all dividends were reinvested (although no dividends were declared on
Company Common Stock during the period) and actual market value increases and
decreases relative to the initial investment of $100. This data was furnished by
Nasdaq*Amex and is based on a calendar year.
The Company believes that the information provided within this performance
chart has only limited relevance to an understanding of the Company's
compensation policies during the indicated periods and does not reflect all
matters appropriately considered by the Company in developing its compensation
strategy. This information shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, and is not necessarily indicative of future
price performance.
[The following table was represented as a line chart in the printed material.]
Comparison of Stockholder Returns Among Universal Electronics Inc.,
the Peer Group Index(1) and the Nasdaq Composite Index
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
Universal Electronics Inc. $ 100 $ 171 $ 126 $ 229 $ 246 $1,051
Peer Group Index $ 100 $ 116 $ 114 $ 110 $ 112 $ 136
Nasdaq Composite Index $ 100 $ 174 $ 213 $ 300 $ 542 $ 293
12/31/1994 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
---------- ---------- ---------- ---------- ---------- ----------
UNIVERSAL ELECTRONICS INC. .. $ 100.00 $ 171.43 $ 125.71 $ 228.57 $ 245.71 $ 1,051.43
PEER GROUP INDEX ............ $ 100.00 $ 103.54 $ 115.65 $ 114.31 $ 110.20 $ 111.97
NASDAQ COMPOSITE INDEX ...... $ 100.00 $ 141.33 $ 173.89 $ 213.07 $ 300.25 $ 542.43
- ----------
(1) Companies in the Peer Group Index are as follows: Harman International
Industries, Inc.; Recoton Corporation; Royal Appliance Manufacturing Co.;
Koss Corporation.; and Boston Acoustics Inc.
17
PROPOSAL TWO: RATIFICATION AND APPROVAL OF AN AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO APPROVE AN INCREASE IN THE
AGGREGATE NUMBER OF SHARES OF STOCK THE COMPANY IS AUTHORIZED TO ISSUE
Background
The Board of Directors has unanimously approved for submission to a vote
of the stockholders of the Company an amendment to the Company's Restated
Certificate of Incorporation to modify Part I to Article FOURTH to increase the
aggregate number of shares of stock the Company has authority to issue to
55,000,000 shares (consisting of 5,000,000 shares of Preferred Stock, par value
$.01 per share and 50,000,000 shares of Common Stock, par value $.01 per share)
from 21,000,000 shares (consisting of 1,000,000 shares of Preferred Stock, par
value $.01 per share and 20,000,000 shares of Common Stock, par value $.01 per
share).
The last time the Company increased its authorized capital stock was in
March 1992, prior to the Company going public. In December 1999, the Board of
Directors approved a two-for-one stock split, in the form of a stock dividend.
This dividend was paid in January 2000, effectively doubling the number of
shares of the Company Common Stock outstanding. The Board believes that the
increase in the authorized stock is necessary for the continued growth of the
Company.
The foregoing summary description is not intended to be complete and is
qualified in its entirety by reference to Exhibit A, which contains the complete
text of Part I to Article FOURTH of the Company's Restated Certificate of
Incorporation, as proposed to be amended.
Vote Required
The proposed amendment must be adopted by the affirmative vote of the
holders of a majority of the issued and outstanding shares of Company Common
Stock.
The Board of Directors of the Company unanimously recommends a vote FOR
the proposed amendment to the Company's Certificate of Incorporation.
PROPOSAL THREE: APPOINTMENT OF AUDITORS
The Board of Directors, acting on the recommendation of its Audit
Committee, has appointed PricewaterhouseCoopers LLP ("PWC"), a firm of
independent public accountants, as auditors, to examine and report to the Board
and to the Company's stockholders on the consolidated financial statements of
the Company and its subsidiaries for 2000. The Board of Directors is requesting
stockholder ratification of such appointment. Representatives of PWC will be
present at the Annual Meeting, will be given an opportunity to make a statement
and will be available to respond to appropriate questions.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the ratification of the appointment of PWC as the Company's
independent auditors. If the stockholders of the Company reject the nomination,
the Board of Directors will reconsider its selection.
Vote Required
The ratification of the Board of Directors' appointment of PWC as the
Company's independent auditors for 2000 requires an affirmative vote of the
holders of a majority of shares of Company Common Stock present in person or
represented by proxy at the Annual Meeting.
The Board of Directors of the Company unanimously recommends a vote FOR
the ratification of such appointment.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder who meets the requirements of the proxy rules under the
Exchange Act may submit to the Board of Directors proposals to be considered for
submission to the Annual Meeting of Stockholders to be held in
18
2001. Any such proposal should be submitted in writing by notice delivered or
mailed by first-class United States mail, postage prepaid, to the Secretary of
the Company, Universal Electronics Inc., 6101 Gateway Drive, Cypress, California
90630 and must be received no later than January 29, 2001. Any such notice shall
set forth: (a) the name and address of the stockholder and the text of the
proposal to be introduced; (b) the number of shares of stock held of record,
owned beneficially and represented by proxy by such stockholder as of the date
of such notice; and (c) a representation that the stockholder intends to appear
in person or by proxy at the meeting to introduce the proposal specified in the
notice. The chairman of the meeting may refuse to acknowledge the introduction
of any stockholder proposal not made in compliance with the foregoing
procedures.
Proxy holders will use their discretion in voting proxies with respect to
any stockholder proposal properly presented from the floor and not included in
the Proxy Statement for the 2001 Annual Meeting, unless specific voting
instructions are received with respect to any such proposal prior to March 12,
2001.
STOCKHOLDER NOMINATION OF DIRECTOR
The Nominating Committee of the Company's Board of Directors will consider
nominees to the Company's Board of Directors to the extent permitted under, and
made pursuant to the procedures established by, Article IV of the Company's
Amended and Restated By-laws.
Any stockholder may recommend any person as a nominee for director of the
Company by writing to the Secretary of the Company, c/o Universal Electronics
Inc., 6101 Gateway Drive, Cypress, California 90630. Recommendations must be
received by January 29, 2001 for the Annual Meeting of Stockholders to be held
in 2001, and must comply with the requirements in the Company's Amended and
Restated By-laws.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, or other means of
communication. Solicitation also may be made by directors, officers and other
employees of the Company not specifically employed for this purpose. The Company
has also retained Corporate Investor Communications, Inc. ("CIC"), a
professional proxy solicitation firm, to aid in the solicitation of proxies in
connection with this Annual Meeting. The Company will pay CIC a fee of
approximately $5,500, plus reimbursement of out-of-pocket expenses. The Company
will reimburse brokerage firms, custodians, nominees and fiduciaries in
accordance with the rules of the National Association of Securities Dealers,
Inc., for reasonable expenses incurred by them in forwarding materials to the
beneficial owners of shares. The entire cost of solicitation will be borne by
the Company.
FORM 10-K ANNUAL REPORT
All stockholders received a copy of the Company's 1999 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (excluding
exhibits). Stockholders may obtain a copy of the exhibits by addressing a
request to Investor Relations, Universal Electronics Inc., 6101 Gateway Drive,
Cypress, California 90630. A charge equal to the reproduction cost will be made
if the exhibits are requested.
BY ORDER OF THE BOARD OF DIRECTORS
Richard A. Firehammer, Jr
Senior Vice President, General Counsel
and Secretary
April 28, 2000
19
Exhibit A
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
UNIVERSAL ELECTRONICS INC.
Pursuant to Section 242 of the
Delaware General Corporation Law
The undersigned, Paul D. Arling and Richard A. Firehammer, Jr., President
and Secretary, respectively, of Universal Electronics Inc., a Delaware
corporation (the "Corporation"), hereby certify as follows:
1. The name of the Corporation is Universal Electronics Inc.
2. The Board of Directors of the Corporation at a meeting held February
1, 2000, adopted the following resolution proposing and declaring
advisable the following amendment to the Restated Certificate of
Incorporation of the Corporation and directing that the amendment
should be considered at the next annual meeting of the stockholders:
RESOLVED, that Article FOURTH, Part I of the Corporation's Restated
Certificate of Incorporation, as amended, be amended to read in its entirety as
follows:
Part I. Aggregate Number of Shares. The aggregate number of shares of
stock which the Corporation has authority to issue is 55,000,000 shares,
consisting of:
1. 5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"); and
2. 50,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock").
3. At the annual meeting of stockholders held June 21, 2000, the
foregoing amendment was duly adopted in accordance with Section 242
of the Delaware Corporation Law.
IN WITNESS WHEREOF, Universal Electronics Inc. has caused this Certificate
of Amendment to be signed by Paul D. Arling, its President, and attested by
Richard A. Firehammer, Jr., its Secretary, this ___ day of ____________, 2000
UNIVERSAL ELECTRONICS INC.
By: /s/ Paul D. Arling, President
-----------------------------------
Paul D. Arling, President
ATTEST:
Richard A. Firehammer, Jr.
Secretary
