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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.   )
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Universal Electronics Inc.
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April 23, 2021
Dear Stockholder:
You are cordially invited to attend the 2021 Annual Meeting of Stockholders of Universal Electronics Inc., to be held at our corporate office, 15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254, on Tuesday, June 8, 2021 at 1:00 p.m., local time in Scottsdale, Arizona.
The following Notice of Annual Meeting of Stockholders and Proxy Statement includes information about the matters to be acted upon by stockholders at the Annual Meeting. We hope that you will exercise your right to vote, either by attending the Annual Meeting and voting in person or by voting through other acceptable means as promptly as possible. You may vote through the Internet, by telephone or by mailing your completed proxy card (or voting instruction form, if you hold your shares through a broker).
Important Notice Regarding the Availability of Proxy Materials
for the 2021 Annual Meeting of Stockholders:
We are mailing many of our stockholders a Notice Regarding the Availability of Proxy Materials rather than a full set of our proxy materials. The Notice contains instructions on how to access our proxy materials on the Internet, as well as instructions on how to obtain a paper copy of the full set of proxy materials if a stockholder so desires. This process is more environmentally friendly and reduces our costs to print and distribute these materials to stockholders. All stockholders who do not receive the Notice Regarding the Availability of Proxy Materials will receive a full set of our proxy materials.
On behalf of the Board of Directors and management of Universal Electronics Inc., we thank you for all of your support.
Sincerely yours,
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Paul D. Arling
Chairman and Chief Executive Officer
 

UNIVERSAL ELECTRONICS INC.
15147 N. Scottsdale Road, Suite H300
Scottsdale, Arizona 85254
480-530-3000
www.uei.com


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TABLE OF CONTENTS
 


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UNIVERSAL ELECTRONICS INC.
Corporate Headquarters
15147 N. Scottsdale Road, Suite H300
Scottsdale, Arizona 85254
Notice of Annual Meeting of Stockholders
to be Held on Tuesday, June 8, 2021
The 2021 Annual Meeting of Stockholders of Universal Electronics Inc., a Delaware corporation ("Universal," "UEI," the "Company," "we," "us" or "our"), will be held at our corporate office, 15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254, on Tuesday, June 8, 2021 at 1:00 p.m., local time in Scottsdale, Arizona.
The meeting will be conducted for the following purposes:
Proposal One:
To elect Paul D. Arling as a Class I Director to serve on the Board of Directors until the next Annual Meeting of Stockholders to be held in 2022 or until the election and qualification of his successor;
Proposal Two:
To approve, on an advisory basis, the compensation of our named executive officers;
Proposal Three:
To adopt and approve an amendment to our 2018 Equity and Incentive Compensation Plan;
Proposal Four:To ratify the appointment of Grant Thornton LLP, an independent registered public accounting firm, as our auditors for the year ending December 31, 2021; and
To consider and act upon such other matters as may properly come before this Annual Meeting or any and all postponements or adjournments thereof.
All holders of record of shares of our common stock (NASDAQ: UEIC) at the close of business on Monday, April 12, 2021 are entitled to vote at the meeting and at any postponements or adjournments of the meeting. To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the meeting in person. We encourage you to vote via the Internet at www.AALVote.com/UEIC. It is convenient, and may save us postage and processing costs. In addition, when you vote via the Internet, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted. If you do not vote via the Internet, please vote by telephone or by completing, signing, dating and returning the accompanying proxy card in the enclosed return envelope. Voting early will help avoid additional solicitation costs and will not prevent you from attending the Annual Meeting.
IF YOU PLAN TO ATTEND THE MEETING:
Registration and seating will begin at 12:30 p.m. (local time in Scottsdale, Arizona) on the day of the meeting. Each stockholder will need to bring valid picture identification, such as a driver’s license or passport, for admission to the meeting. Stockholders holding stock in brokerage accounts ("street name" holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS' MEETING TO BE HELD ON TUESDAY, JUNE 8, 2021.
As part of our contingency planning regarding the COVID-19 pandemic, we are preparing for the possibility that the Annual Meeting may be held solely by means of remote communication. If we take that step, we will announce the decision to do so in advance through a public filing with the Securities and Exchange Commission, and the details will be available at www.uei.com/investor-relations/.
UEI's Proxy Statement and our 2020 Annual Report on Form 10-K are available online at http://www.viewproxy.com/ueinc/2021 and through the "Investor Relations" section of our website, www.uei.com.        

By Order of the Board of Directors,
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Richard A. Firehammer, Jr.
Senior Vice President, General Counsel
and Secretary
April 23, 2021
Scottsdale, Arizona


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UNIVERSAL ELECTRONICS INC.
15147 N. Scottsdale Road, Suite H300
Scottsdale, Arizona 85254
PROXY OVERVIEW                                                                        

This proxy statement contains information concerning our Annual Meeting of Stockholders to be held at our corporate office, 15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254, on Tuesday, June 8, 2021, at 1:00 p.m., local time in Scottsdale, Arizona, and at any adjournments or postponements of the meeting. Holders of the Company’s common stock at the close of business on Monday, April 12, 2021, the record date for our Annual Meeting, may vote their shares at the Annual Meeting. Each share owned on the record date is entitled to one vote. At the close of business on the record date, 13,773,815 shares of common stock were outstanding.

Your proxy for the meeting is being solicited by our Board of Directors. This proxy statement and our annual report are being mailed to stockholders beginning on or about Friday, April 23, 2021.

At our annual meeting, stockholders will act upon the matters outlined in the notice of meeting provided with this proxy statement, including the following:
Proposal Board Recommendation
Proposal 1Election of DirectorFOR
Proposal 2
Approval, on an advisory basis, of named executive officer compensation
FOR
Proposal 3Adoption and approval of an amendment to our 2018 Equity and Incentive Compensation PlanFOR
Proposal 4Ratification of the appointment of Grant Thornton LLP, an independent registered public accounting firm, as our auditors for the year ending December 31, 2021
FOR

In addition, management will respond to questions from stockholders, if any. We are not aware of any other matters that will be brought before our annual meeting for action.

Corporate Governance Highlights

We believe we have a long history of effective corporate governance practices that have greatly aided our long-term success. The Board of Directors and management have recognized for many years the need for sound corporate governance practices in fulfilling their duties and responsibilities to our stockholders. Included below are certain corporate governance highlights, including policies we have implemented and other notable governance achievements.
Independent Directors6 of 7Fully Independent Board CommitteesYes
Independent Directors Meet Without ManagementYes
Board meetings held in 20209Director Attendance (Board and Committee)>75%
Stock Ownership Guidelines for Outside Directors (1)
Yes
Minimum Ownership Requirement Met or Exceeded (1)
100%
Board and Committee Self-assessmentsYesCode of Conduct for Directors, Officers & EmployeesYes
Executive Sessions of Outside DirectorsYesRisk Management ReviewYes
Anti-pledging PolicyYesInside Director Elected AnnuallyYes

(1)Average actual ownership among outside directors was $2,346,781, including time-based restricted stock units, as of December 31, 2020, which exceeded the minimum ownership guideline of $250,000 by $2,096,781. New outside directors have five years from the date of joining the Board of Directors of the Company to meet these minimum requirements.

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Director Nominee and Board Summary

You are being asked to vote on the election of the following director nominee. Summary biographical information and the committee memberships and leaderships of the director nominee and the other directors not up for election at this meeting are set forth below. Additional information about the director nominee can be found on page 5.

Director nominee:
NameAgeIndependentAuditCompensationCorporate Governance and NominatingOther
Public
Company
Boards
Paul D. Arling
Chairman and Chief Executive Officer
58

Directors not up for election:
NameAgeIndependentAuditCompensationCorporate Governance and NominatingOther
Public
Company
Boards
Satjiv S. Chahil
Innovations Advisor and Social Entrepreneur
70þ££1
Sue Ann R. Hamilton (1)
Founder and Owner,
Hamilton Media LLC
60þø£1
William C. Mulligan
Senior Advisor,
Primus Capital Funds
67þ£ø1
Gregory P. Stapleton
Founder and Chairman,
Falcon One Enterprises
74þ£
Carl E. Vogel (2)
Industry Advisor,
KKR & Co., LP
63þ£4
Edward K. Zinser
Financial Consultant
63þø
ø Chair £ Member
(1) Ms. Hamilton was appointed to these roles in December 2020.
(2) Mr. Vogel is a member of the board of directors of Progress Acquisition Corp., Shaw Communications, Inc., Sirius/XM Corporation, AMC Networks Inc., and DISH Network Corporation. Effective April 30, 2021, Mr. Vogel will cease being a member of the board of directors of DISH Network Corporation.

Executive Compensation Program Highlights

We strongly believe that executive compensation, both pay opportunities and pay actually realized, should be tied to Company performance and long-term stockholder returns. In 2020, over 77% of our CEO's total compensation was in the form of annual and long-term incentives that were tied to the Company's operating results or stock price. Our other NEOs, on average, received approximately 64% of their total 2020 compensation pursuant to the same annual and long-term incentives. Furthermore, the great majority of named executive officer compensation is not guaranteed but subject to annual financial and performance goals or the Company's stock price. The following chart demonstrates the close link between Company performance (measured as cumulative total return of the Company’s common stock for the five-year period beginning January 1, 2016) and our CEO’s annual compensation over that same five-year period:
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We believe this alignment of executive and stockholder interests is best advanced by observing the following principles in developing compensation programs and implementing compensation decisions:

Long-term commitment - The program should be designed to gain a long-term commitment from the proven, accomplished executives that lead our success. Our named executive officers have a combined total of approximately 83 years with the Company, during which they have held different positions and have been promoted to increasing levels of responsibility due to their exceptional contributions.
Pay-for-performance - A high proportion of total compensation should be at risk and tied to achievement of annual operating and strategic goals and increases in stockholder value.
Equity emphasis - Long-term incentives should be provided annually in Company equity to encourage executives to plan and act with the perspective of long-term stockholders.
Sustainable performance orientation - The mix of incentives provided should motivate sustainable growth in the value of the Company.
Focus on total compensation - Compensation opportunities should be considered in the context of total compensation relative to the pay practices of similar technology companies that compete with us for talent.

Finally, we believe that designing our compensation programs to reward long-term value creation as well as the achievement of annual financial performance goals protects the Company against inappropriate risk taking and conflicts of interest.
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What We DoWhat We Don't Do
üTie the vast majority of our executive compensation to achievement of annual operating and strategic goals and increases in stockholder value.
ýBack-date or reprice options.
üCompetitive and reasonable post-employment and change in control provisions.ýDefined benefit or supplemental executive retirement plans.
üStock ownership requirements (4x base salary for CEO; 1x base salary for other named executive officers).ýTax gross-ups on employee benefits or perquisites.
üBroad clawback policy.ýMargin accounts and pledging stock.
üIndependent compensation consultant.ýNo full vesting of equity awards upon retirement.
Our stockholders have expressed broad approval of our compensation programs. At our 2020 Annual Meeting of Stockholders, approximately 92% of the votes cast on the say-on-pay proposal were in favor of our named executive officer compensation.

 Performance Highlights, Initiatives and Other Achievements

Historically, we have operated in a highly competitive pricing environment. This past year was no different. It was also a year in which we were impacted by the worldwide COVID-19 pandemic, with temporary factory shutdowns, supply chain and transportation issues, and reductions in sales to our customers. At the same time, we continued to invest in new products that we believe will drive strong results in key financial metrics that correlate with long-term stockholder value.
(in millions, except per share amounts and percentages)20162017201820192020
Net Sales$651.4 $695.8 $680.2 $753.5 $614.7 
Net Income/(Loss)$20.4 $(10.3)$11.9 $3.6 $38.6 
Diluted EPS$1.38 $(0.72)$0.85 $0.26 $2.72 
Cash Flow from Operations$49.5 $13.8 $12.9 $85.3 $73.4 
Gross Margin %25.2 %23.8 %20.8 %22.6 %28.7 %
Operating Margin %3.9 %1.5 %(0.2)%2.0 %6.1 %
Return on Average Assets4.0 %(1.8)%2.0 %0.6 %7.2 %
Closing Y/E Stock Price$64.55 $47.25 $25.28 $52.26 $52.46 
Over the five-year period from 2016 to 2020, the Company generated a total of $234.9 million in cash flow from operations.

Key strategic initiatives and related achievements for 2020 are listed below:
Strategic InitiativesRelated Achievements
üContinue to develop industry-leading technologies and products.
üResearch and development expenditures increased 6.9% in 2020 compared to 2019 as we continued to develop advanced technologies designed to improve and simplify set-up and control features.
üContinue to broaden our home control and automation product offerings.üBroadened our product portfolio and updated our library of device codes for new features and devices introduced worldwide.
üFurther penetrate international subscription broadcasting markets and increase our share with existing customers.üIncreased sales with new and existing customers in international and domestic markets.
üAcquire new customers in historically strong regions.üAcquired new customers in North America and Europe.
ü
Seek acquisitions that compliment and strengthen our existing business.ü
Continued our search for acceptable acquisition candidates.
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Proposal 1 - Election of Director                                         

Nominee for Election at the Annual Meeting

Paul D. Arling is nominated for election as a Class I director to serve a one-year term expiring at our 2022 Annual Meeting of Stockholders.

Director Background
Paul D. Arling
Chairman and Chief Executive Officer
Director since 1996
Age: 58
Paul D. Arling is our Chairman and Chief Executive Officer. He joined us in May 1996 as Chief Financial Officer and was named to our Board of Directors in August 1996. He was appointed President and Chief Operating Officer in September 1998, was promoted to Chief Executive Officer in October 2000 and appointed as Chairman in July 2001.
Mr. Arling earned a Bachelor of Science degree and an MBA from The Wharton School of the University of Pennsylvania.
At the 2020 Annual Meeting of Stockholders, Mr. Arling was reelected as Chairman of the Company to serve until the 2021 Annual Meeting of Stockholders.
Mr. Arling, who has spent over 25 years with UEI and who currently serves as Chairman and Chief Executive Officer, has an extensive, in-depth knowledge of the Company’s business, operations, opportunities and strategies. His wide-ranging roles throughout his career at UEI also provide him with significant leadership, corporate strategy, manufacturing, retail, marketing and international experience in the wireless controls industry.


THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NOMINEE.
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CORPORATE GOVERNANCE                                        

We believe we have a long history of effective corporate governance practices that have greatly aided our long-term success. The Board of Directors and management have recognized for many years the need for sound corporate governance practices in fulfilling their duties and responsibilities to our stockholders. We describe below our key corporate governance policies that enable us to manage our business in accordance with high ethical standards and in the best interests of our stockholders.

Business Ethics — Code of Conduct

Our Code of Conduct applies to each member of our Board of Directors and to all officers and employees of UEI and our subsidiaries wherever located. Our Code of Conduct contains the general guidelines and principles for conducting UEI's business consistent with the highest standards of business ethics. Under our Code of Conduct, our chief executive officer and chief financial officer and principal accounting officer are responsible for creating and maintaining a culture of high ethical standards and of commitment to compliance throughout our Company to ensure the fair and timely reporting of UEI's financial results and condition.

We encourage our employees to report all violations of Company policies and the law, including incidents of harassment, discrimination or foreign corrupt practices. To assist our employees in complying with their ethical and legal obligations and in reporting suspected violations of laws, policies and procedures, management, at the direction of the Board of Directors, has established an independent, third-party "Ethics Hotline".

Our Code of Conduct is posted on the Corporate Governance page of our website at www.uei.com. Any amendment to the Code of Conduct or waiver of its provisions with respect to our principal executive officer, principal financial officer or principal accounting officer or any member of our Board of Directors will be promptly posted on our website www.uei.com.

Director Independence

The Board has adopted Director Independence Standards to assist in determining the independence of each director. In order for a director to be considered independent, the Board must affirmatively determine that the director has no material relationship with UEI. In each case, the Board broadly considers all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable and family relationships and such other criteria as the Board may determine from time to time. These Director Independence Standards are published on our Corporate Governance page at www.uei.com. The Board has determined that each of the six current Class II Directors, namely, Satjiv S. Chahil, Sue Ann R. Hamilton, William C. Mulligan, Gregory P. Stapleton, Carl E. Vogel and Edward K. Zinser, meets these standards and thus is independent and, in addition, satisfies the independence requirements of the NASDAQ Stock Market. Additionally, the Board determined that J.C. Sparkman, who served as a Class II Director until his passing in July 2020, met these standards and thus was independent and, in addition, satisfied the independence requirements of the NASDAQ Stock Market. To our knowledge, none of the independent directors has any direct or indirect relationships with our Company or its subsidiaries and affiliates, other than serving as a director and being a stockholder.

All members of the Audit, Compensation and Corporate Governance and Nominating Committees must be independent as defined by the Board’s Director Independence Standards. Members of the Audit and Compensation Committees must also satisfy additional independence requirements, which, among other things, provide that they may not accept, directly or indirectly, any consulting, advisory or other compensatory fees from UEI or any of its subsidiaries other than their director compensation.

Leadership Structure

Combined Chairman and CEO. The Board’s current leadership structure is characterized by:
a combined Chairman of the Board and CEO;
a robust committee structure with oversight of various types of risks; and
engaged independent Board members.

Mr. Arling has served as our Chairman and CEO since July 2001. The Board believes that combining the roles of Chairman and CEO contributes to an efficient and effective Board. The CEO, with his in-depth knowledge and understanding of the Company, is best able to chair regular Board meetings by bringing key business issues and stockholder interests to the Board’s
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attention. In addition, the Board believes that combining these roles maximizes our CEO’s effectiveness. Within the Company, the CEO is primarily responsible for effectively leading significant change, improving operational efficiency, driving growth, managing the Company’s day-to-day business, managing the various risks facing the Company, and reinforcing the expectation for all employees of uncompromising honesty and integrity. Our Board believes that combining the roles of Chairman and CEO gives management clarity of leadership and a consistent and effective means of communicating directions to management from the Board of Directors. Because of this, management knows that when the CEO is speaking, it is with the voice of the Board and not merely that of an executive officer. Coupled with our independent directors, this combined structure provides independent oversight while avoiding unnecessary confusion regarding the Board’s oversight responsibilities and the day-to-day management of business operations.

Other Leadership Components. Another key component of our leadership structure is our strong governance practices to ensure that the Board effectively carries out its responsibility for the oversight of management. All directors, with the exception of our Chairman, are independent, and all committees are made up entirely of independent directors. We do not have a lead independent director. Non-management directors meet in regularly scheduled executive sessions at the end of every regularly scheduled board meeting. The non-management directors may schedule additional executive sessions as appropriate. Members of management do not attend these executive sessions. The Board has full access to our management team at all times. In addition, the Board or any committee may retain, at such times and on such terms as determined by the Board or committee in its sole discretion, independent legal, financial and other consultants and advisors to advise and assist the Board or committee in discharging its oversight responsibilities.

Risk Management

Management is responsible for assessing and managing UEI’s exposure to various risks while the Board of Directors has responsibility for the oversight of risk management. Management has an enterprise risk management process to identify, assess and manage the most significant risks facing UEI, including financial, strategic, operational, litigation, compliance and reputational risks.

The Audit Committee has oversight responsibility to review management’s risk management process, including the policies and guidelines used by management to identify, assess and manage UEI’s exposure to risk, including cyber-security risks. The Audit Committee also has oversight responsibility for financial risks. The Board has oversight responsibility for all other risks. Management reviews financial risks with the Audit Committee at least quarterly and reviews its risk management process with the Audit Committee on an ongoing basis. Management reviews various significant risks with the Board throughout the year, as necessary and/or appropriate, and conducts a formal review of its assessment and management of the most significant risks with the Board on an annual basis.

Our internal auditor ("Internal Auditor") has direct access to the Audit Committee and is responsible for leading the formal risk assessment and management process within the Company. The Internal Auditor, through consultation with the Company’s senior management, periodically assesses the major risks facing the Company and works with those executives responsible for managing each specific risk. The Internal Auditor periodically, no less than quarterly, reviews with the Audit Committee the major risks facing the Company and the steps management has taken to monitor and mitigate those risks. The Internal Auditor’s risk management report, which is provided in advance of the regularly scheduled Audit Committee meetings, is reviewed by the entire Audit Committee. The executive responsible for managing a particular risk may also report to the Audit Committee or full Board on how the risk is being managed and mitigated. Throughout the year, the Chair of the Audit Committee provides the Internal Auditor with performance and development-based feedback.

Management’s role to identify, assess and manage risk, and the Board’s role in risk oversight, have been well defined for many years. The Board’s role in risk oversight has had no significant effect on the Board’s leadership structure. However, we believe that the Board’s leadership structure, with Mr. Arling serving as Chairman and Chief Executive Officer, enhances the Board’s effectiveness in risk oversight due to Mr. Arling’s extensive knowledge of the Company’s operations and the industries in which we conduct business.

In addition, the Board has delegated to other committees the oversight of risks within their areas of responsibility and expertise. For example, the Compensation Committee oversees the risks associated with the Company’s compensation practices, including a periodic review of the Company’s compensation policies and practices for its employees. The Company has determined there are no risks arising from its compensation policies that are reasonably likely to have a material adverse effect on the Company. The Corporate Governance and Nominating Committee oversees the risks associated with the Company’s overall governance and its succession planning process to understand that the Company has a slate of future, qualified candidates for key management positions.
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Communications with Directors

The Board has adopted a process by which stockholders and other interested parties may communicate with members of the Board, committee chairs or the non-management directors as a group by regular mail. Any communication by regular mail should be sent to Universal Electronics Inc., 15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254, to the attention of the applicable director or directors with a copy to the Secretary.

Board and Committee Self-Assessments

The Board of Directors has instituted self-assessments of the Board, as well as of the Audit, Compensation, and Corporate Governance and Nominating Committees, to assist in determining whether the Board and its committees are functioning effectively. During 2020, the Audit Committee completed its self-evaluation and reviewed and discussed the results with the full Board.

Board Committee Charters and Other Corporate Governance Materials

The Board of Directors has adopted written charters for the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee. Each committee reviews and evaluates the adequacy of its charter at least annually and recommends any proposed changes to the Board for approval. You may access all committee charters, our Code of Conduct, our Corporate Governance Guidelines, our Director Independence Standards, and other corporate governance materials through the "Investor Relations" section of our website, www.uei.com.

Stock Ownership Guidelines

The Board of Directors believes strongly that its directors and executive officers should have meaningful share ownership in UEI. Accordingly, the Board has established minimum share ownership requirements. Each Board of Director member is expected to own, at a minimum, that number of shares of common stock equal in value to $250,000, and each executive officer is expected to own, at a minimum, that number of shares of common stock equal in value to a multiple of his or her base salary ranging from a low of one times for certain executive officers to a high of four times for our Chairman and Chief Executive Officer. Any new director or executive officer will have five years from the date they join the Company to meet these minimum ownership requirements. Presently, all of our directors and named executive officers meet these guidelines. For purposes of meeting this minimum share ownership requirement, each equivalent share of common stock held under our benefit plans and each time-based restricted stock unit is considered as a share of common stock. Stock options and unvested performance-based restricted stock units are not considered towards meeting this requirement. More information pertaining to executive officer stock ownership guidelines is set forth under the heading "Executive Officer Stock Ownership Guidelines" in the "Compensation Discussion and Analysis" section. In addition, more information pertaining to Board of Director stock ownership guidelines is set forth under the heading "Director Stock Ownership Guidelines" in the "Director Compensation and Stock Ownership Guidelines" section.

Board Structure and Committee Membership

Board Composition

We currently have seven directors: one is a Class I Director and six are Class II Directors. A Class I Director is a director who is also an employee of UEI and is elected each year at the Annual Meeting of Stockholders to serve a one-year term and a Class II Director is a director who is not an employee and is elected every even-numbered year at the Annual Meeting of Stockholders to serve a two-year term.

Board of Directors Meetings Held During 2020

During 2020, the Board formally met five times and acted four times by unanimous written consent. Each director is expected to attend each meeting of the Board and those committees on which he or she serves. During 2020, no director attended less than 75% of the aggregate of all Board meetings and meetings of committees on which the director served. We encourage each director to attend every Annual Meeting of Stockholders; however, since attendance by our stockholders at these meetings has historically been via proxy and not in person, our outside directors have not regularly attended these meetings. Moreover, due to the COVID-19 pandemic, no board members attended last year's Annual Meeting of Stockholders.
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Role of Primary Board Committees

The Board has three standing committees - Audit, Compensation, and Corporate Governance and Nominating. Each committee is composed entirely of independent directors, as determined by the Board in accordance with applicable NASDAQ listing standards and the Board’s Director Independence Standards. In addition, Audit Committee and Compensation Committee members meet additional heightened independence criteria applicable to Audit Committee and Compensation Committee members under applicable NASDAQ and Securities and Exchange Commission ("SEC") independence requirements. The table below provides information about the current membership of the committees and the number of meetings held in 2020.
Name/ItemAudit
Committee
Compensation
Committee
Corporate
Governance and
Nominating
Committee
Satjiv S. ChahilXX
Sue Ann R. Hamilton (1)
ChairX
William C. MulliganXChair
Gregory P. StapletonX
Carl E. VogelX
Edward K. ZinserChair
Number of Meetings4*2**2***
.(1) Ms. Hamilton was appointed to these roles in December 2020.
*The Audit Committee also acted once by unanimous written consent.
**The Compensation Committee also acted once by unanimous written consent.
*** The Corporate Governance and Nominating Committee also acted once by unanimous written consent.

Audit Committee

The Audit Committee is primarily concerned with the integrity of our financial statements, our compliance with legal and regulatory requirements, the independence, qualification, and performance of the independent registered public accounting firm and the performance of our Internal Auditor. The Audit Committee’s functions include:
monitoring the Company’s major risk exposures, including financial risk, and the steps management has taken to control such exposures;
meeting with our independent registered public accounting firm and management representatives;
making recommendations to the Board regarding the appointment of the independent registered public accounting firm;
approving the scope of audits and other services to be performed by the independent registered public accounting firm;
establishing pre-approval policies and procedures for all audit, audit-related, tax and other fees to be paid to the independent registered public accounting firm;
considering whether the performance of any professional service by the registered public accountants may impair their independence;
reviewing the results of external audits, the accounting principles applied in financial reporting, and financial and operational controls; and
meeting with the Internal Auditor and approving the scope and review of audits performed by the Internal Auditor.

The independent registered public accountants and the Internal Auditor each have unrestricted access to the Audit Committee, and the members of the Audit Committee have unrestricted access to each of the independent registered public accountants and the Internal Auditor.

All of the Audit Committee members are financially literate. The Board has determined that Mr. Zinser is qualified as an "audit committee financial expert" within the meaning of applicable SEC regulations.

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Audit Committee Report

The Audit Committee reviews our financial reporting process on behalf of the Board of Directors and while management has the primary responsibility for the financial statements and the reporting process, our independent registered public accountants are responsible for expressing an opinion on the conformity of our audited financial statements to accounting principles generally accepted in the United States, in all material respects.

In this context, the Audit Committee hereby reports as follows:
1.The Audit Committee has reviewed and discussed our audited financial statements for the year ended December 31, 2020 with management and the independent registered public accountants.
2.The Audit Committee has discussed the matters required to be discussed by the applicable standards of the Public Company Accounting Oversight Board ("PCAOB") and the SEC with the independent registered public accounting firm.
3.The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm its independence.
4.The Audit Committee has considered whether the independent registered public accountants’ provision of non-audit services provided to us, if any, is compatible with the registered public accountants’ independence.

Relying on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that our financial statements for the year ended December 31, 2020, as presented to the Audit Committee, be included in our Annual Report on Form 10-K for the year ended December 31, 2020 to be filed with the SEC in accordance with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder.
Audit Committee of the Board of Directors
Edward K. Zinser — Chair
William C. Mulligan
Carl E. Vogel
Compensation Committee

The Compensation Committee assists the Board in discharging its responsibilities relating to the compensation of the chief executive officer and other executive officers (including "NEOs" as such term is defined below in the "Compensation Discussion and Analysis"). Among other things, the Compensation Committee:
reviews the corporate goals and objectives approved by the Board relevant to the compensation of our chief executive officer and other executive officers, evaluates their performance in light of such goals and objectives and, based on its evaluations and appropriate recommendations, reviews and approves the compensation of our chief executive officer and other executive officers, each on an annual basis;
monitors potential risks relating to the Company's compensation policies and practices;
reviews and discusses with management the Compensation Discussion and Analysis required by SEC rules, recommends to the Board whether the Compensation Discussion and Analysis should be included in the Company’s Annual Report and Proxy Statement and prepares the Compensation Committee Report required by SEC rules for inclusion in the Company’s Annual Report and Proxy Statement;
reviews periodically compensation for non-management directors of the Company and recommends changes to the Board as appropriate;
reviews and approves compensation packages for new executive officers and severance packages for executive officers whose employment terminates with the Company;
reviews and makes recommendations to the Board with respect to the adoption or amendment of incentive and other stock-based compensation plans;
administers the Company’s stock incentive plans; and
assesses the independence of any outside compensation consultant of the Company.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves or has served on the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee.
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Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee assists the Board in identifying qualified individuals to become board and committee members, considers matters of corporate governance and assists the board in evaluating the Board’s effectiveness. Among other things, the Corporate Governance and Nominating Committee:
develops and recommends to the Board criteria for board membership;
identifies, reviews the qualifications of and recruits candidates for election to the Board and to fill vacancies or new positions on the Board as directed by the Board;
reviews candidates recommended by the Company’s stockholders, if any, for election to the Board;
reviews annually our corporate governance principles and recommends changes to the Board as appropriate;
recommends to the Board changes to our Code of Conduct;
reviews and makes recommendations to the Board with respect to the Board’s and each committee’s size, structure, composition and functions;
assists the Board in developing and evaluating potential candidates for executive positions and in overseeing the development of executive succession plans; and
oversees the process for evaluating the Board and its committees.

The Corporate Governance and Nominating Committee will consider director candidates recommended by our stockholders. Stockholders recommending candidates for consideration by the Corporate Governance and Nominating Committee should send their recommendations to our Secretary at Universal Electronics Inc., 15147 N. Scottsdale Road, Suite H300, Scottsdale, Arizona 85254. The recommendation must include the candidate’s name, biographical data and qualifications.

Any such recommendation should be accompanied by:
a written statement from the candidate of his or her consent to be named as a candidate and, if nominated and elected, willingness to serve as a director in accordance with our policies and bylaws;
a completed written questionnaire in form and substance to be provided by the Secretary of UEI, covering matters including the background and qualifications of the candidate to serve on the Board; and
a written representation and agreement in form and substance to be provided by the Secretary of UEI, regarding any agreement, arrangement or understanding to which the candidate is a party relating to any voting commitment or assurance made by the candidate, and certain other matters as more particularly described in our bylaws.

The Corporate Governance and Nominating Committee will evaluate director candidates recommended by stockholders, if any, based on the same criteria used to evaluate candidates from other sources. The Corporate Governance and Nominating Committee may employ professional search firms (for which we would pay a fee) to assist in identifying potential Board members with the desired skills and disciplines.

Diversity

The Board is committed to be comprised of a diverse selection of individuals who bring their personal and professional experiences to bear in order to create a constructive debate of competing views and opinions in the boardroom. The Board recognizes that it is through this diversity, not only in skills and experience, but also in personal characteristics, such as gender, race, ethnicity, national origin, and age, that will help ensure that the Board best performs its oversight function and more completely represents the interests of all of our stockholders.

As a result of this, the Corporate Governance and Nominating Committee developed specific selection criteria that it employs to assist in identifying candidates for potential admission to the Board with an emphasis on seeking qualified female and other diverse candidates. These criteria include, among other things, candidates possessing:
the highest personal and professional ethics, character, integrity and values;
the appropriate characteristics, skills, and experience in the following areas, product development/technology, operations, video services, finance, and/or sales and marketing to make a significant contribution to the Board;
an inquisitive and objective perspective, practical wisdom and mature judgment; and
a commitment to represent the interests of all of our stockholders and demonstrate a commitment to long-term service on the Board.

As a result of this process, Sue Ann R. Hamilton was appointed as a member of the Board of Directors in November 2019 and re-elected by our stockholders at our Annual Meeting of Stockholders held in 2020.
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Information About Our Directors

Experiences, Qualifications, Skills and Attributes of Directors

In considering each director and the composition of the Board of Directors as a whole, the Corporate Governance and Nominating Committee utilizes a diverse group of experiences, qualifications, skills and attributes, including diversity in gender, ethnicity and race, that the Corporate Governance and Nominating Committee believes enables a director to make a significant contribution to the Board, UEI and our stockholders.

Satjiv S. Chahil
Compensation Committee
Corporate Governance and
Nominating Committee
Director since 2002
Age: 70
Mr. Chahil is a Silicon Valley-based innovations advisor and social entrepreneur and global marketing consultant since 2011. Mr. Chahil is a member of the board of directors of New Providence Acquisition Corp. III, a newly organized blank-check company formed to effect mergers, stock exchanges, reorganizations, and similar business combinations. At various dates until April 2011, Mr. Chahil was an executive adviser to several global high-tech companies, including Apple Corp, Hewlett-Packard, Beats Electronics, Blackberry (RIM), BMW, Starkey Hearing Technologies, and Sony Electronics. He also serves on the council of Trustees of the American India Foundation (www.aif.org).
Mr. Chahil earned a bachelor's degree in commerce from Punjab University in Chandigarh, India and a master's degree from the American (Thunderbird) Graduate School of International Management in Arizona.
Mr. Chahil has been a Class II Director of the Company since 2002. He also serves as a member of our Compensation and Corporate Governance and Nominating Committees. At the 2020 Annual Meeting of Stockholders, Mr. Chahil was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
Mr. Chahil provides our Board with proven leadership and business experience in the areas of digital convergence, new media and global marketing gained from serving in various executive management positions with multinational information technology, computing and wireless control companies and the extensive management and corporate governance experience gained from those roles.
Sue Ann R. Hamilton Compensation Committee (Chair)
Corporate Governance and Nominating Committee
Director since 2019
Age: 60
Ms. Hamilton is Founder and Principal of Hamilton Media LLC, which advises and represents major and emerging media and technology companies since 2007. In this role, Ms. Hamilton has served as Executive Vice President - Distribution and Business Development for AXS TV LLC, a partnership between founder Mark Cuban, AEG, Ryan Seacrest Media, Creative Artists Agency, and CBS. Prior to launching Hamilton Media, she served as Executive Vice President of Programming for Charter Communications (a cable and internet provider) from 2003 until 2007. Before her work at Charter, she held numerous management positions at AT&T Broadband LLC and its predecessor, TCI between 1993 and 2002. Early in her career, Ms. Hamilton was a partner at Chicago-based law firm Kirkland & Ellis, specializing in complex commercial transactions.
Ms. Hamilton also serves as member of the board of directors of Liberty Broadband Corporation (since December 2020). She previously served as a member of the board of directors of GCI Liberty, Inc.(merged into Liberty Broadband Corporation in December 2020) and of FTD Companies, Inc. As representative of Mark Cuban Companies/Radical Ventures, she has been a board observer since 2012 for Philo, Inc., a privately held technology company.
Ms. Hamilton graduated magna cum laude with a Bachelor of Arts from Carleton College and earned a Juris Doctorate from Stanford Law School, where she was Associate Managing Editor of the Stanford Law Review and Editor of the Stanford Journal of International Law.
Ms. Hamilton has been a Class II Director of the Company since 2019. She also serves as Chair of our Compensation Committee and as a member of our Corporate Governance and Nominating Committee. At the 2020 Annual Meeting of Stockholders, Ms. Hamilton was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
Ms. Hamilton’s background as an executive in and advisor to the cable television industry for over 26 years enable her to contribute extensive knowledge and strategic insights in technology, media and telecommunications to our Board. In addition, her financial and legal experience strengthen our Board’s collective qualifications, skills and attributes. Her experience gained from membership on the boards of public and privately-held companies gives the Company the benefit of observed best practices in corporate governance.
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William C. Mulligan
Audit Committee
Corporate Governance and
Nominating Committee (Chair)
Director since 1992
Age: 67
Mr. Mulligan has over 30 years of experience in private equity, having joined Primus Capital Funds in 1985 from McKinsey & Company, Inc. Mr. Mulligan currently serves as Senior Advisor to Primus. Mr. Mulligan serves as a member of the board of directors of TFS Financial Corporation (TFSL) and serves as chair of TFS' audit, compensation, and executive committees. He also serves on the board of directors of several portfolio companies. Mr. Mulligan is also a trustee of The Cleveland Clinic Foundation, the Land Trust Alliance, and the Western Reserve Land Conservancy.

Mr. Mulligan earned a Bachelor of Arts in economics from Denison University and an MBA from the University of Chicago.
Mr. Mulligan has been a Class II Director of the Company since 1992. He also serves as Chair of our Corporate Governance and Nominating Committee and as a member of our Audit Committee. At the 2020 Annual Meeting of Stockholders, Mr. Mulligan was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
Mr. Mulligan’s extensive knowledge in the fields of financial services, investment banking, and accounting, risk management and his experience in legal and corporate governance areas and audit oversight gained from his membership on the boards and audit committees of other public companies contribute significantly to our Board and the Committees on which he serves.
Gregory P. Stapleton
Compensation Committee
Director since 2008
Age: 74
Mr. Stapleton is the Founder and Chairman of Falcon One Enterprises LLC, a private equity firm that invests in early stage technology companies, since 2005. Prior to that, Mr. Stapleton was the President of Harman International where, he also served as its Chief Operating Officer. He was a director of Harman International from 1997 until his retirement in 2004. Prior to joining Harman, Mr. Stapleton held various leadership positions, including Senior Vice President Venture Capital at General Electric.
Mr. Stapleton earned a Bachelor of Science in aerospace engineering from Penn State University.
Mr. Stapleton has been a Class II Director of our Company since 2008. He also serves as a member of our Compensation Committee. At the 2020 Annual Meeting of Stockholders, Mr. Stapleton was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
Mr. Stapleton provides the Board with extensive management experience, which includes his former role as President and COO of a multinational provider of premium audio and infotainment solutions, and his extensive management, finance and corporate governance experience gained from that role.
Carl E. Vogel
Audit Committee
Director since 2009
Age: 63
Mr. Vogel is a private investor and an industry advisor focused on media and communications for Kohlberg Kravis Roberts & Co. L.P., a global investment company. In addition, in February 2021, he became Non-Executive Chairman of Progress Acquisition Corp. (NASDAQ:PGRW), a special purpose acquisition company primarily focused on the media and technology sector. Mr. Vogel is also Senior Advisor to the Chairman of DISH Network Corporation (NASDAQ:DISH), a leading satellite television provider and since May 2005, has served as a member of its Board of Directors until April 30, 2021 at which time, he will no longer serve as Senior Advisor to the Chairman of DISH and cease being a member of DISH's Board of Directors. From September 2006 until February 2008, Mr. Vogel served as President of DISH and as the Vice-Chairman of the Board of Directors of and as a Senior Advisor to DISH Network Corporation (formerly Echostar Communications Corporation, a satellite delivered digital television services provider) and Echostar Corp. (a developer of set-top boxes and other electronic technology). From 2001 to 2005, he was President, Chief Executive Officer and a director of Charter Communications, Inc. (NASDAQ:CHTR), a broadband service provider. Before joining Charter, Mr. Vogel served in various executive capacities with Liberty Media Corporation affiliated companies. Mr. Vogel is the sole shareholder of Bulldog Capital Partners, Inc., providing advisory services and strategic consulting for media companies and media and telecom focused private equity investors.
Mr. Vogel is also a member of the Board of Directors of Shaw Communications, Inc. (since 2006), Sirius/XM Corporation (since 2011), and AMC Networks Inc. (since 2013). Mr. Vogel serves as a chair of the audit committee and as a member of the executive committee of Shaw; chair of the compensation committee of Sirius/XM; and chair of the audit committee of AMC Networks.
Mr. Vogel received his Bachelor of Science degree from St. Norbert College, located in DePere, Wisconsin with an emphasis in finance and accounting, and was a former active Certified Public Accountant.
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Mr. Vogel has been a Class II Director of our Company since 2009. He also serves as a member of our Audit Committee. At the 2020 Annual Meeting of Stockholders, Mr. Vogel was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
As a result of his background, including his various high-level executive roles at DISH, Charter, and Liberty Media, Mr. Vogel brings to the Board demonstrated executive leadership capability and extensive knowledge of complex financial and operational issues facing large subscription broadcasting companies, as well as broad senior management, corporate governance and strategic planning experience gained from those roles and from his membership on the various boards of public and privately-held companies. Mr. Vogel also has substantial experience in reviewing financial statements as a result of his background as a certified public accountant and his roles as a chief executive and senior finance executive of public companies.
Edward K. Zinser
Audit Committee
(Chair)
Director since 2006
Age:63
Mr. Zinser is a financial consultant since 2017. From May 2014 until July 2016, he was Executive Vice President and Chief Financial Officer of United Online, Inc. (UNTD) a provider of consumer services and products over the internet. From January 2008 until November 2012, Mr. Zinser served as Chief Financial Officer of Boingo Wireless, a leading Wi-Fi software and services provider. Prior to that, Mr. Zinser served as Executive Vice President and Chief Financial Officer of THQ, Inc., a worldwide publisher of interactive entertainment software. Prior to joining THQ, Mr. Zinser served as Executive Vice President and Chief Financial Officer of Vivendi Universal Games, a global publisher of entertainment and education software. Mr. Zinser has also served as President and Chief Operating Officer of Styleclick, Inc., Senior Vice President and Chief Financial Officer of Internet Shopping Network LLC, Executive Vice President and Chief Financial Officer of Chromium Graphics, Inc., and in various senior financial positions with The Walt Disney Company.
Mr. Zinser earned a Bachelor of Science in business management from Fairfield University and an MBA in finance from the University of Chicago.
Mr. Zinser has been a Class II Director of our Company since 2006. He also serves as Chair of our Audit Committee. At the 2020 Annual Meeting of Stockholders, Mr. Zinser was reelected as a Class II Director of the Company to serve until the 2022 Annual Meeting of Stockholders.
Mr. Zinser provides our Board and our Audit Committee, of which he is Chair, with extensive knowledge in the fields of finance and accounting, investment banking, and legal, corporate governance, and audit oversight experience gained from his positions as chief financial officer of other public companies.
These experiences, qualifications, skills and attributes relate directly to the management and operations of UEI. Success in each of these categories is a key factor in UEI’s overall operational success and creating stockholder value. The Corporate Governance and Nominating Committee believes that directors who possess these experiences, qualifications, skills and attributes are better able to provide oversight of UEI’s management and our long-term and strategic objectives.

Each director is required to notify the Chairman and the Chair of the Corporate Governance and Nominating Committee upon a change in principal professional responsibilities. The Corporate Governance and Nominating Committee may consider such change of status in recommending to the Board whether the director should continue serving as a member of the Board. The Board encourages, and we will reimburse the costs associated with, directors participating in continuing director education. The Board believes that term limits may result in the loss of long-serving directors who over time have developed unique and valuable insights into our business and therefore can provide a significant contribution to the Board.
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES            

Non-Management Director Compensation    

We compete primarily with technology companies in attracting and retaining our non-management directors. The advice of our non-management directors has been instrumental in our success. As noted in the overview of director backgrounds above, our current directors have deep experience in technology industries, Silicon Valley innovations and global marketing, telecommunications and subscription services TV, electronic devices manufacturing and marketing, private equity investments in technology, and internet-based consumer services and products. And each time our non-management directors have been up for re-election, our stockholders have recognized their value by overwhelmingly approving their re-election.

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Consistent with this technology industry context, our Board of Directors has long held the belief that its compensation for serving as a member of our Board of Directors should be closely tied to the interests of our stockholders, meaning the vast majority of the non-management directors’ compensation be in equity as opposed to cash, yet be positioned to attract and retain qualified members. When the Compensation Committee last studied non-management directors’ compensation, it focused on the Company’s Peer Group, which is used for assessing executive compensation. The Peer Group consists of companies in the Electronic Equipment & Instruments, Electronic Manufacturing Services, Electronic Components/Household Appliances, and Consumer Electronics industries (see page 30 below for details of the Peer Group). The Compensation Committee also considered recent developments in law, corporate governance, shareholder activism and pay practices regarding board compensation programs generally, compensation trends and best practices, competitive pay levels, stockholder view of non-management director compensation practices, effects of recent legal interpretations, and proxy disclosure.

Based upon this study and the conclusions reached by the Compensation Committee, the structure of the non-management directors’ compensation was modified (effective July 1, 2018) to use retainers and eliminate meeting fees (both Board and Committee meetings) and to place a cap on the dollar value of the annual award of common stock. As such, the non-management directors’ annual compensation was set as follows:
1.A Board membership cash retainer equal to $50,000 ($12,500 paid quarterly);
2.A Committee membership cash retainer as follows:
a.Audit Committee membership - $10,000 ($2,500 paid quarterly),
b.Compensation Committee membership - $10,000 ($2,500 paid quarterly),
c.Corporate Governance and Nominating Committee membership - $5,000 ($1,250 paid quarterly);
3.A cash retainer for each committee chaired as follows:
a.Audit Committee Chair - $11,250 ($2,812.50 paid quarterly)
b.Compensation Committee Chair - $10,000 ($2,500 paid quarterly),
c.Corporate Governance and Nominating Chair - $6,000 ($1,500 paid quarterly); and
4.An award of 5,000 shares of our common stock (which number of shares may be reduced when determined by the Board to be necessary and appropriate), but in no event may the dollar value of such share award exceed $500,000, which vests ratably each quarter during the fiscal year awarded.

In addition to their annual compensation, non-management directors may receive a periodic stock option grant when warranted (for example, upon their initial appointment to the Board of Directors) to compensate them for stellar past performance or to incentivize them to continue as members of our Board of Directors.
Non-Management Director Compensation Table 
Name of DirectorYear
Fees Earned or Paid in Cash (1)
($)
Stock
Awards (2)
($)
Option
Awards ($)
Total
Compensation ($)
Satjiv S. Chahil202065,000231,450296,450
Sue Ann R. Hamilton 202051,597231,450283,047
William C. Mulligan202071,000231,450302,450
J.C. Sparkman (3)
202040,76140,761
Gregory P. Stapleton202060,000231,450291,450
Carl E. Vogel202060,000231,450291,450
Edward K. Zinser202071,250231,450302,700
 
(1)This column represents the cash compensation earned in 2020 for Board and committee service. See the "Additional Information about Fees Earned or Paid in Cash During 2020" table below.
(2)This column represents the grant date fair value of stock awards granted to Class II Directors as part of their compensation. For additional information regarding stock-based compensation and the assumptions used in calculating the grant date fair value, please refer to Note 15 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC. See "Additional Information about Non-Management Director Equity Awards" for further information related to stock awards granted in 2020.
(3)Mr. Sparkman was awarded stock on July 1, 2020; however, due to his passing, all stock awards were forfeited.

Mr. Arling, who is the Company's Chief Executive Officer and the Company’s only Class I Director, received no additional compensation for his service as a director during 2020. All directors are reimbursed for travel expenses and other out-of-pocket costs incurred to attend meetings.
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Additional Information about Fees Earned or Paid in Cash During 2020

The following table provides additional information about fees earned or paid in cash to non-management directors during 2020:
Name of DirectorYear
Annual Retainers
($)
Committee
Chair Fees (1)
($)
Committee
Membership Fees

($)
Total
($)
Satjiv S. Chahil202050,00015,00065,000
Sue Ann R. Hamilton (2)
202050,00063995851,597
William C. Mulligan202050,0006,00015,00071,000
J.C. Sparkman202027,1745,4358,15240,761
Gregory P. Stapleton202050,00010,00060,000
Carl E. Vogel202050,00010,00060,000
Edward K. Zinser202050,00011,25010,00071,250

(1)Mr. Mulligan, Ms. Hamilton, and Mr. Zinser chaired the Corporate Governance and Nominating Committee, Compensation Committee, and Audit Committee, respectively, in 2020.
(2)Ms. Hamilton became a Member and Chair of the Compensation Committee in December 2020 and as such, her membership and Chair fees were prorated from that date through December 31, 2020.

Additional Information about Non-Management Director Equity Awards
The following table provides additional information about equity awards made to non-management directors during 2020 and outstanding awards at the end of the year:
 
Name of DirectorRestricted Stock Unit Awards
Granted During 2020
(#)
Option Awards
Granted During 2020
(#)
Grant Date
Fair Value of Stock Awards Granted During 2020 (1)
($)
Stock Awards
Outstanding at Year End
(#)
Option Awards
Outstanding at Year End
(#)
Satjiv S. Chahil5,000231,4503,750
Sue Ann R. Hamilton (2)
5,000231,4503,75020,000
William C. Mulligan 5,000231,4503,750
J.C. Sparkman (3)
Gregory P. Stapleton5,000231,4503,750
Carl E. Vogel5,000231,4503,750
Edward K. Zinser5,000231,4503,750
 
(1)Represents the grant date fair value of stock awards granted during 2020. This number is calculated by multiplying the fair market value of our common stock on the date of grant by the number of shares awarded. For additional information regarding the assumptions used in calculating the grant date fair value, please refer to Note 15 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
(2)Outstanding stock options issued to Ms. Hamilton were comprised of 20,000 stock options granted on November 1, 2019 (upon her appointment to the Board of Directors) that vest ratably over a three-year period and will expire on November 1, 2029.
(3)Mr. Sparkman was awarded stock on July 1, 2020; however, due to his passing, all stock awards were forfeited.

Director Stock Ownership Guidelines
The Company requires each of our independent, Class II Directors to own at least $250,000 worth of our common stock (with new members having five years from the date they join the Board of Directors to meet the guidelines). These guidelines are designed to align the Class II Directors' long-term financial interests with those of stockholders. As of December 31, 2020, all of our independent directors satisfied the stock ownership guidelines.

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For the purposes of meeting this minimum stock ownership requirement, each time-based restricted stock unit is considered as a share of common stock. Stock options and unvested performance-based restricted stock units are not considered towards meeting this requirement.

The Compensation Committee reviews ownership levels of our Directors annually. The requirements for our independent Directors, as well as the average actual ownership levels at December 31, 2020 of our independent directors, are set forth in the table below.
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Anti-Pledging and Hedging Policies                                
The Company has an anti-pledging policy prohibiting all non-management Directors and executive officers of the Company from holding any shares of the Company’s stock in a margin account and from pledging any such stock as collateral for any loan. Hedging the Company's stock is generally permitted within prescribed trading windows and otherwise in accordance with the Company's Insider Trading Policy.

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Proposal 2 - Approval, on an Advisory Basis, of Named Executive Officer Compensation

As required by Section 14A of the Exchange Act, the Company seeks approval, on an advisory basis, from its stockholders of the compensation of its named executive officers as described in the Compensation Discussion and Analysis section beginning on page 19 and the Summary Compensation Table and supporting tables and information beginning on page 33. The Company designed its compensation programs to help recruit, retain and motivate key executives to deliver the successful operating, financial, and stockholder value performance expected by its investors. The Compensation Committee strongly believes that executive compensation, both pay opportunities and pay actually realized, should be tied to Company performance. In 2020, over 77% of our CEO's total compensation was in the form of annual and long-term incentives that were tied to the Company's operating results and stock price. Our other NEOs, on average, received approximately 64% of their total 2020 compensation pursuant to the same annual and long-term incentives. At last year’s Annual Meeting of Stockholders held on June 9, 2020, the say-on-pay advisory vote was overwhelmingly favorable, with approximately 92% of all votes cast in favor of approving our named executive officer compensation program. At the June 5, 2017 Annual Meeting of Stockholders, 83% of the votes cast were in favor of holding future advisory votes on executive compensation every year. Accordingly, we will include an advisory vote on executive compensation in our proxy materials ever year at least until the next "Say on Frequency" vote.

In deciding how to vote on this proposal, the Board encourages you to read the Compensation Discussion and Analysis section for a detailed description of our executive compensation philosophy and programs, the compensation decisions the Compensation Committee has made under those programs and the factors considered in making those decisions. In particular, you should consider the following factors, which are more fully discussed in the Compensation Discussion and Analysis:
Historically we have operated in a highly competitive pricing environment. This past year was no different. It was also a year in which we were impacted by the worldwide COVID-19 pandemic with temporary factory shutdowns, supply chain and transportation issues and reductions in sales to our customers. At the same time, we continued to invest in new products that we believe will drive strong results in key financial metrics that correlate with long-term stockholder value.
The great majority of executive pay is not guaranteed. The Company sets clear annual financial goals for corporate and business unit performance and differentiates its bonus awards based on individual achievement. Pay for performance is evident in the charts on pages 19 and 20 of this proxy statement.

Accordingly, we are asking our stockholders to vote "FOR" the following resolution:
"RESOLVED, that Universal Electronics Inc.'s stockholders hereby approve, on an advisory basis, the compensation of the named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the "Compensation Discussion and Analysis," the compensation tables and any related material disclosed in Universal Electronic Inc.'s proxy statement."

This advisory vote on named executive officer compensation is not binding on us. However, the Board and the Compensation Committee value the opinion of our stockholders. To the extent there is a significant vote against this proposal, we will seek to determine the reasons for our stockholders' concerns, and the Compensation Committee will evaluate whether any actions are necessary to address those concerns when making future named executive officer compensation decisions.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2 RELATING TO THE APPROVAL, ON AN ADVISORY BASIS, OF NAMED EXECUTIVE OFFICER COMPENSATION.
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COMPENSATION DISCUSSION AND ANALYSIS                            

This section provides a description of our executive compensation philosophy, programs and practices, the compensation decisions the Compensation Committee made under those programs and the factors considered in making those decisions. This Compensation Discussion and Analysis focuses on the following executives who were our named executive officers ("NEOs") in 2020:
NameTitle
Paul D. ArlingChairman and Chief Executive Officer
Bryan M. HackworthChief Financial Officer and Senior Vice President
Ramzi S. AmmariSenior Vice President, Corporate Planning and Strategy
Menno V. KoopmansSenior Vice President, Global Sales
Joseph E. MiketoSenior Vice President, Operations

Pay for Performance                                                

Our compensation programs and practices are designed to help recruit, retain and motivate key executives so that they may deliver the successful operating, financial and stockholder value performance expected by our investors.

Performance-Based Compensation

The Compensation Committee believes that our compensation program and practices have been instrumental in supporting achievement of our operating success and performance for stockholders. The program emphasizes annual and long-term performance-based incentives so that the vast majority of our NEOs' total compensation is tied to the Company's financial or long-term stock price performance.

In 2020, over 77% of our CEO's total compensation was in the form of annual and long-term incentives that were tied to the Company's operating results or stock price. Our other NEOs, on average, received approximately 64% of their total 2020 compensation in the same annual and long-term incentives.
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The Compensation Committee strongly believes that executive compensation pay opportunities and pay actually realized should be tied to Company performance on an absolute basis, relative to similar technology companies and on competitive pay standards. In addition, realized executive pay should be tied to performance in two key ways: (1) the Company's operating and financial performance and (2) the return to stockholders over time.

Operating Performance

Historically we have operated in a highly competitive pricing environment. This past year was no different. It was also a year in which we were impacted by the worldwide COVID-19 pandemic with temporary factory shutdowns, supply chain and transportation issues and reductions in sales to our customers. At the same time, we continued to invest in new products that we believe will drive strong results in key financial metrics that correlate with long-term stockholder value.
(in millions, except per share amounts and percentages)20162017201820192020
Net Sales$651.4 $695.8 $680.2 $753.5 $614.7 
Net Income (Loss)$20.4 $(10.3)$11.9 $3.6 $38.6 
Diluted EPS$1.38 $(0.72)$0.85 $0.26 $2.72 
Cash Flow from Operations$49.5 $13.8 $12.9 $85.3 $73.4 
Gross Margin %25.2 %23.8 %20.8 %22.6 %28.7 %
Operating Margin %3.9 %1.5 %(0.2)%2.0 %6.1 %
Return on Average Assets4.0 %(1.8)%2.0 %0.6 %7.2 %
Closing Y/E Stock Price$64.55 $47.25 $25.28 $52.26 $52.46 

Over the 5-year period from 2016 to 2020, the Company has generated $234.9 million in cash flow from operations.
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Key strategic initiatives and related achievements for 2020 are listed below:
Continue to develop industry-leading technologies and products.Research and development expenditures increased 6.9% in 2020 compared to 2019 as we continued to develop advanced technologies designed to improve and simplify set-up and control features.
Continue to broaden our home control and automation product offerings.
Broadened our product portfolio and updated our library of device codes for new features and devices introduced worldwide.
Further penetrate international subscription broadcasting markets and increase our share with existing customers.
Increased sales with new and existing customers in international and domestic markets.
Acquire new customers in historically strong regions.
Acquired new customers in North America and Europe.
Seek acquisitions that compliment and strengthen our existing business.
Continued our search for acceptable acquisition candidates.

Return to Stockholders

The following chart shows how our total stockholder return compares to the S&P Small Cap 600 Index, the Nasdaq Composite
Index and a consumer electronics peer group(1). The companies in the consumer electronics peer group compete in markets similar to those of the Company.
https://cdn.kscope.io/25db3975314701b4011ed2b5e65617e9-chart-0655d06c581b41aa8001a.jpg
(1) Companies in the consumer electronics peer group are as follows: Xperi Corporation (formerly TiVo Corporation), Logitech International, Dolby Laboratories, Inc., and VOXX International Corp.



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Alignment between Executive Pay and Company Performance

The Compensation Committee believes that there should be a strong correlation between executive pay and Company performance. As indicated above, the Company’s executive compensation program included many features designed to maintain this alignment, while also protecting the Company against inappropriate risk taking and conflicts among the interests of the Company, its stockholders and its executives.

As explained above, approximately 77% of our CEO’s total 2020 compensation was tied to performance in the form of annual cash incentives and long-term equity incentives. The following chart shows the historical alignment between our Chief Executive Officer's total annual compensation ("CEO Annual Compensation") and the Company's performance (measured as total stockholder return ("TSR")) for the past five years.

CEO Annual Compensation for each year is the sum of salary received, actual annual incentive earned, all other compensation received (as set forth in the Summary Compensation Table), and year-end values of equity awards granted during the year. Equity award balances are valued at the year-end closing price of the Company’s stock in the respective year of grant and include restricted stock units and "in-the-money" stock options. TSR reflects the stock price appreciation since year-end 2015.

The Compensation Committee believes that the relationship of our CEO’s Compensation to Total Stockholder Return demonstrates effective pay for performance in our executive compensation program.
https://cdn.kscope.io/25db3975314701b4011ed2b5e65617e9-chart-ac35948424ce4c79aa71a.jpg
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2020 Pay Decisions

The Compensation Committee makes decisions for executive officer base salary and long-term incentive grants in January each year. At that time, final annual incentive awards are also confirmed based on prior year results relative to targets. In consideration of our performance, the Compensation Committee made the following decisions related to compensation for NEOs in 2020:
Messrs. Hackworth, Ammari and Miketo received an increase to their respective base salaries based upon the compensation study completed in January 2020 (please see the section titled "Base Salary" on page 26).
Based on Company performance and our incentive plan funding schedule, annual incentives were paid to our Chief Executive Officer and our NEOs for 2020 (please see the 2020 Performance Incentive Plan calculation chart on page 28).
Made annual grants of stock options and restricted stock units on February 12, 2020 and March 9, 2020 at grant values that increased in value by 62% and 23% when compared to the 2019 grant for our Chief Executive Officer and certain of our other NEOs, respectively. See also table contained in the section titled "Long Term Incentives" on page 29.

Say on Pay

At our June 9, 2020 Annual Meeting of Stockholders, approximately 92% of the votes cast were in favor of the advisory vote to approve executive compensation. The Compensation Committee was pleased with this overwhelming favorable outcome and believes it conveyed our stockholders' support of the Compensation Committee's decisions and our existing executive compensation programs. Consistent with this support, the Compensation Committee did not make any changes as a direct result of this vote and decided to retain the core design of our executive compensation programs for the remainder of 2020 and in 2021, as it believes the programs continue to attract, retain and appropriately incent senior management.

We also welcomed input on executive compensation as we interacted with stockholders on a number of matters throughout the year. The Board of Directors and the Compensation Committee duly consider stockholder input as well as the other factors discussed in this Compensation Discussion and Analysis and routinely review our executive compensation programs and practices.

In addition, at the June 5, 2017 Annual Meeting of Stockholders, 83% of the votes cast were in favor of holding future advisory votes on executive compensation every year. Accordingly, we will include an advisory vote on executive compensation in our proxy materials every year at least until the next "Say-on-Frequency" vote, which will be no later than our 2023 Annual Meeting of Stockholders.

Summary of Executive Compensation Practices                                

Below we list executive compensation practices that we have implemented to appropriately structure our executive rewards and practices that we have not implemented because we do not believe they would serve our stockholders' long-term interests.

Corporate Governance and Best Practices

Consistent with our commitment to executive compensation best practices, the Company continued the following executive compensation practices for 2020:
Pay for performance by tying the vast majority of our executive compensation to achievement of annual operating and strategic goals and increases in stockholder value.
No back-dating or repricing stock options.
No defined benefit pension plan.
No supplemental executive retirement plan.
No tax gross-ups on employee benefits or perquisites.
Competitive and reasonable post-employment and change in control provisions.
Subject executives to stock ownership guidelines.
Subject executives to clawback requirements.
Prohibit executives from holding Company stock in margin accounts or pledging such stock as collateral for loans.
Monitor potential risks relating to the Company's compensation policies and practices.
Committee retention of an independent compensation consultant.
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Philosophy and Overview of Our Compensation Program                        

This section describes our executive compensation philosophy and provides an overview of our compensation program and the rationale for each component of the program.

Philosophy and Objectives

The Compensation Committee believes that stockholder interests are best advanced by attracting and retaining a high-performing management team. To promote this objective, the Compensation Committee was guided by the following underlying principles in developing our executive compensation program:
Long-term commitment - The program should be designed to gain a long-term commitment from the proven, accomplished executives that lead our success. Our NEOs have a combined total of approximately 83 years with the Company, during which they have held different positions and have been promoted to increasing levels of responsibility due to their exceptional contributions.
Pay-for-performance - A high proportion of total compensation should be at risk and tied to achievement of annual operating and strategic goals or increases in stockholder value.
Equity emphasis - Long-term incentives should be provided annually in Company equity to encourage executives to plan and act with the perspective of long-term stockholders.
Sustainable performance orientation - The mix of incentives provided should motivate sustainable growth in the value of Company.
Focus on total compensation - Compensation opportunities should be considered in the context of total compensation relative to the pay practices of similar technology companies that compete with us for talent.

The Compensation Committee regularly evaluates the Company's compensation arrangements to assess whether they are appropriately structured to support these objectives and are effective in enabling the Company to attract and retain top talent in key leadership positions.

Program Overview

Our executive compensation program is simple in design and limited in scope. We provide only one low-cost executive benefit and no perquisites to our NEOs located in the United States. Each program component and the rationale for it are highlighted below.
ElementRole and Purpose
Base salary
Provide competitive foundation for total compensation.
Annual incentives
Motivate and reward achievement of annual financial targets, which drive the valuation of our stock.
Enforce accountability for individual performance through discretionary increases or reductions in awards as deemed appropriate.
Long-term incentives
Align executives with stockholders.
Retirement savings
Permit executives to participate in the Company's 401(k) plan to facilitate retirement saving.
Executive benefits
Provide for executives' families through supplemental life insurance policies.
Non-U.S. benefitsConsistent with competitive practice in the Netherlands, provided Mr. Koopmans with a pension and automobile prior to his move to the United States in 2019.
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How We Make Pay Decisions                                            

This section describes the participants and process for setting executive compensation at the Company.

Role of Executive Officers in Setting Compensation

Each year management and the Board identify operating objectives that we believe need to be achieved for the Company to be successful. These objectives are derived largely from the Company's financial and strategic planning sessions led by the Chief Executive Officer, during which the Company's growth opportunities are analyzed and goals are established for the upcoming year. In addition to financial targets, the goals include qualitative strategic and operational objectives that are aimed at creating long-term stockholder value. Achievement of these objectives is considered in making pay decisions for the Chief Executive Officer and our other executive officers.

The Compensation Committee reviews all elements of compensation for the Chief Executive Officer based upon consideration of his contribution to the development and operating performance of the Company and competitive pay practices. The Compensation Committee develops and recommends pay changes for the Chief Executive Officer to the full Board of Directors for their approval. The Compensation Committee considers the recommendations of the Chief Executive Officer in establishing compensation for all other NEOs. Throughout the process, the Compensation Committee also considers input from our independent compensation consultant as it deems necessary and advisable.

Compensation Consultant

The Compensation Committee has the authority to retain compensation consulting firms exclusively to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Pay Governance LLC, a nationally-recognized independent compensation consulting firm, to assist in performing its duties. In January 2020, Pay Governance LLC advised the Company with respect to compensation trends, benchmarking and best practices, stockholder view of compensation practices, and proxy disclosure. In addition, the Compensation Committee sought and obtained guidance from other sources as it deemed appropriate. While our adviser periodically consults with management in performing work requested by the Compensation Committee, Pay Governance LLC did not perform any separate additional services for management during 2020.

The Compensation Committee has determined that Pay Governance LLC is independent and there was no conflict of interest resulting from retaining Pay Governance LLC. In reaching these conclusions, the Compensation Committee also considered the factors set forth in Rule 10C-1 of the Exchange Act and applicable listing standards.

Setting Executive Compensation

In determining base salary, target annual incentives and guidelines for equity awards, the Compensation Committee reviews total compensation using the NEOs' current level of compensation as the starting point. Decisions to change compensation consider:
the scope and complexity of the functions each executive oversees;
the contribution of those functions to our overall performance;
individual capability and maturity in role;
individual performance;
role criticality and difficulty to replace the executive; and
compensation practices of our peers.

The Chief Executive Officer assesses individual performance of each NEO against established goals and expectations using criteria identified by the Compensation Committee. The Chief Executive Officer also provides the Compensation Committee with a self-assessment using the same criteria, including the following:
results on key financial metrics;
achievement of strategic operating objectives such as mergers and acquisitions, technological innovations, and global expansion;
advancement of commercial excellence through new or improved products and services, market leadership, and customer attraction and retention;
achieving operational goals in areas such as productivity, efficiency and risk management;
improving organizational excellence through employee practices and organization structure; and
support of Company values such as integrity and high ethical standards.
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The Compensation Committee reviews the Chief Executive Officer's assessments and approves an overall rating for the Chief Executive Officer and each of the other NEOs. The overall rating indicates the warranted placement of the individual executive in the lower, middle or upper third of the competitive market ranges for base salary, target annual incentive, guideline long-term incentive opportunity, and target total direct compensation (base salary, target annual incentive and guideline long-term equity award value).

Competitive market ranges are based on benchmark pay data for comparable positions. For an individual executive the midpoint of the range is anchored to the market 50th percentile, the low end of the range reflects the market 25th percentile, and the high end of the range reflects the market 75th percentile. This approach to setting pay is consistent with our intent of offering compensation that is contingent on performance and contributions to the Company yet competitive within the marketplace. In 2020, the compensation of our CEO and other Named Executive Officers ranged between -8% and 18% of the median compensation of our peer group.

2020 Total Direct Compensation Opportunity

Based on the Compensation Committee's review, the 2020 Total Direct Compensation opportunities of our NEOs were:
ExecutiveBase
Salary
Target Annual Incentive as a % of Base Salary Target Cash (Base Salary + Annual Incentives)Long-Term IncentivesTarget Total Direct Compensation
Paul D. Arling$830,000 100%$1,660,000 $2,100,000 $3,760,000 
Bryan M. Hackworth$400,000 70%$680,000 $600,000 $1,280,000 
Ramzi S. Ammari$400,000 60%$640,000 $550,000 $1,190,000 
Menno V. Koopmans $315,000 50%$473,000 $400,000 $873,000 
Joseph E. Miketo$330,000 50%$495,000 $300,000 $795,000 

Elements of Executive Compensation                                    

We generally allocate among the principal elements of our total compensation program (base salary, annual performance incentives, and long-term equity awards) based on market practices. This ensures that our compensation program is effective for attracting and retaining key leaders.

Base Salary

We review base salaries annually, and change them from time to time in consideration of performance, increased responsibilities, benchmark studies and market competitiveness. During 2020, Messrs. Hackworth, Ammari and Miketo received base salary increases of 18%, 23% and 17%, respectively. These increases were made to more closely align their base salaries to the median salaries of our peer group.
Executive2020 Base Salary2019 Base SalaryPercent Change
Paul D. Arling$830,000 $830,000 0%
Bryan M. Hackworth$400,000 $340,000 18%
Ramzi S. Ammari$400,000 $325,000 23%
Menno V. Koopmans (1)
$315,000 $315,280 0%
Joseph E. Miketo$330,000 $282,692 17%
(1)Menno V. Koopmans transitioned from our Netherlands office to our Scottsdale office in August 2019 due to his change in position from Managing Director, EMEA to Senior Vice President, Global Sales. His base salary while residing in the Netherlands was converted to U.S. Dollars using 1.120 USD/EUR.

Annual Incentives

Our NEOs participate in the Universal Electronics Inc. Annual Performance Incentive Plan (the "Performance Incentive Plan"). Within 90 days after the commencement of the year, the Compensation Committee identifies the executive officers who will participate in the Performance Incentive Plan for that year and establishes the annual performance criteria.
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In 2020, the Performance Incentive Plan payment for NEOs was determined in two steps. First, the Preliminary Annual Incentive was calculated using the following formula:

Base Salary x Target Annual Incentive % x Company Performance Factor

The Preliminary Annual Incentive may be modified in the discretion of the Compensation Committee in consideration of individual performance.

Company Performance Factor. For 2020, the Compensation Committee selected Adjusted Non-GAAP Diluted Earnings Per Share ("EPS") as the appropriate performance measure for the Performance Incentive Plan. Adjusted Non-GAAP Diluted EPS may be found in our press releases related to our quarterly and annual earnings releases and excludes the following items:
Amortization and depreciation expense relating to acquired assets;
Stock-based compensation;
Excess manufacturing overhead and factory transition costs;
Impact of the additional Section 301 U.S. tariffs on products manufactured in China and imported into the U.S. and the costs of implementing countermeasures to mitigate this impact;
Loss on sale of the Company's Ohio call center;
Litigation costs;
Reversal of accrued social insurance adjustment;
Employee related restructuring costs;
Changes in the value of contingent consideration;
Foreign currency gains and losses; and
Tax effects of the above adjustments.

Adjusted Non-GAAP Diluted EPS is a reflection on the operating performance of the Company and directly influences return to stockholders. In addition, management and stockholders use Adjusted Non-GAAP Diluted EPS to value the Company.

Given the challenging economic environment and after taking into consideration that the actual Adjusted Non-GAAP Diluted EPS for 2019 was $3.55, the Compensation Committee established an Adjusted Non-GAAP Diluted EPS of $3.90 for Performance Incentive Plan funding at target levels for 2020. In the course of determining the Adjusted Non-GAAP Diluted EPS target, the Compensation Committee concluded that its achievement was substantially uncertain. Actual 2020 Adjusted Non-GAAP Diluted EPS of $3.76 resulted in a Company Performance Factor of 76.7% (as shown below) and therefore annual incentives were paid under the Performance Incentive Plan.

The following table shows the percentage of target funding for the various levels of performance and shows, for each NEO, the amount of his annual incentive as a percentage of base salary paid at each performance level:
ThresholdTargetMaximumActual
EPS(1)
$3.60$3.90$4.20$3.76
Percent of Target Funding50%100%200%76.7%
Paul D. Arling50%100%200%
Bryan M. Hackworth35%70%140%
Ramzi S. Ammari30%60%120%
Menno V. Koopmans25%50%100%
Joseph E. Miketo25%50%100%
(1)Adjusted Non-GAAP diluted EPS targets are inclusive of Performance Incentive Plan amounts funded.

Individual Performance Factor. The Compensation Committee also evaluates individual performance in determining the final incentive awards for our NEOs. In making this evaluation, the Chief Executive Officer provides his assessment of the other NEOs as input to the Compensation Committee's evaluations. This assessment is described above in "Setting Executive Compensation."

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The 2020 Performance Incentive Plan award calculations for our NEOs are indicated in the following table:
ExecutiveBase SalaryTarget Annual Incentive %Target Annual IncentiveCompany Performance FactorIndividual Performance RatingActual Annual Incentive Award
Paul D. Arling (1)
$830,000 100%$830,000 76.7%99.9%$636,000 
Bryan M. Hackworth (1)
$400,000 70%$280,000 76.7%100.1%$215,000 
Ramzi S. Ammari (1)
$400,000 60%$240,000 76.7%100.0%$184,000 
Menno V. Koopmans (2)
$315,000 50%$158,000 76.7%88.3%$107,000 
Joseph E. Miketo (3)
$330,000 50%$165,000 76.7%110.6%$140,000 

(1)Each of Messrs. Arling, Hackworth and Ammari achieved their individual performance goals during 2020. Please refer to the goals included in "Setting Executive Compensation" on page 25.
(2)Mr. Koopmans' individual performance rating reflects not achieving sales targets during 2020 after considering the effects of the COVID-19 pandemic.
(3)Mr. Miketo's individual performance rating reflects strong operational performance and achievements after considering the effects of the COVID-19 pandemic.

Long-Term Incentives

The Compensation Committee sets guideline award levels for long-term equity compensation for participating executives including our NEOs. The 2020 guidelines were expressed as grant values and in determining such values, the Committee members used a survey of our Peer Group's pay practices. The guidelines were established to generally reflect the median grant values of our Peer Group. During 2020, Messrs. Arling, Ammari, Koopmans and Miketo received a long-term incentive increase of 62%, 38%, 50% and 50%, respectively (excluding Mr. Koopmans' 2020 promotional grant of $100,000 and Mr. Miketo's 2019 new hire grant of $100,000). These increases were made to more closely align their long-term incentives to the median long-term incentives of our peer group.

Each executive's actual grant value of long-term equity compensation relative to the guideline value is individually determined at the discretion of the Compensation Committee, after considering:
the executive's skills, experience, long-term contributions, and potential; and
individual and Company performance in the prior year.

Existing stock ownership levels are not a factor in award determination, as we do not want to discourage executives from holding our stock beyond the level of the established stock ownership guidelines.

Once the value of the long-term equity compensation award is determined, the Compensation Committee uses a mix of stock options and restricted stock units when making the annual long-term equity awards. The Compensation Committee believes that the use of these equity vehicles strikes an appropriate balance between rewarding increases in the market value of our Common Stock (stock options) and motivating retention with the Company (restricted stock units). In addition, restricted stock units provide executives the benefits of stock price increases while still carrying the risks that other stockholders assume for stock price declines.

The grant price of stock options and restricted stock units granted to our employees under our stock incentive plans is the average of the high and low trades of our stock on the grant date. The grant price of our 2020 equity grants to our NEO's was $46.17 and the stock option Black-Scholes fair value was $17.70. The grant price of our second 2020 equity grant to Mr. Koopmans was $36.99. We prohibit the re-pricing or backdating of stock options. Due to rounding in the number of shares granted, the amounts reported in the Summary Compensation Table may not reflect the exact same proportion of stock options and restricted stock units.
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Our 2020 equity awards are indicated in the table below:
Target Grant Value of all Equity AwardsRestricted Stock Units (Rounded)Stock Options (Rounded)Final Award Value
ExecutiveRestricted Stock UnitsStock OptionsActual Grant Value
Paul D. Arling$2,100,000 22,740 59,320 $1,049,905 $1,049,965 $2,099,870 
Bryan M. Hackworth$600,000 6,500 16,950 $300,105 $300,015 $600,120 
Ramzi S. Ammari$550,000 5,955 15,535 $274,940 $274,970 $549,910 
Menno V. Koopmans$400,000 5,953 8,475 $250,025 $150,010 $400,035 
Joseph E. Miketo$300,000 3,250 8,475 $150,055 $150,010 $300,065 

Stock Option Features. Our 2020 stock option awards granted to our NEOs have a maximum seven-year term and are subject to a three-year vesting period (33.33% on February 12, 2021 and 8.33% each quarter thereafter). We believe that this vesting schedule aids us in retaining executives and motivating long-term performance. Under the terms of our stock incentive plans, unvested stock options are forfeited if the executive voluntarily leaves the Company.

Restricted Stock Unit Features. We determine the vesting schedule of each award after considering our performance, alignment, and retention objectives, as well as the financial impact of the award. Our 2020 restricted stock units granted to our NEO's are subject to a three-year vesting period (33.33% on February 12, 2021 and 8.33% each quarter thereafter). Our second 2020 restricted stock units award granted to Mr. Koopmans is subject to a three-year vesting period (33.33% per year beginning March 9, 2021). This second grant was in recognition of his promotion to Senior Vice President, Global Sales. Under the terms of our stock incentive plans, unvested restricted stock units are forfeited if the executive voluntarily leaves the Company.

Post-Employment Compensation

We provide our named executive officers with certain post-employment benefits, including change in control severance benefits, which are described below in the section entitled Potential Payments upon Termination or Change in Control. These change in control severance benefits are provided so that executives may focus on change in control transactions without concern for their personal financial situation.

Other Compensation

We provide certain executives who reside in the United States, including the NEOs, only one benefit beyond those in which all full-time employees in the United States participate. We believe this approach is reasonable and consistent with our overall executive compensation philosophy that emphasizes pay for performance.

These executives receive imputed income for company-paid supplemental life insurance policies above IRS limits for non-taxation. The Company does not provide a tax gross-up on the premiums paid on behalf of the NEOs for their supplemental life insurance policies.

Executive Officer Stock Ownership Guidelines

The Company maintains stock ownership guidelines for our executive officers, including the NEOs. These guidelines are designed to align the executives' long-term financial interests with those of stockholders. The ownership guidelines are as follows:
PositionValue of Common Stock to be Owned
Chief Executive OfficerFour times base salary
Other NEOsOne times base salary

For the purposes of meeting this minimum stock ownership requirement, each equivalent share of common stock held under our benefit plans and each time-based restricted stock unit is considered as a share of common stock. Stock options and unvested performance-based restricted stock units are not considered towards meeting this requirement.
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The Compensation Committee reviews ownership levels of our NEOs annually. The requirements for our NEOs, as well as their actual ownership levels at December 31, 2020, are set forth in the table below. All five of our NEOs have met the required guidelines.
https://cdn.kscope.io/25db3975314701b4011ed2b5e65617e9-chart-58ad2000844640c795f1a.jpg

Anti-Pledging and Hedging Policies

The Company has an anti-pledging policy prohibiting all non-management Directors and executive officers of the Company from holding any shares of the Company’s stock in a margin account and from pledging any such stock as collateral for any loan. Hedging the Company's stock is generally permitted within prescribed trading windows and otherwise in accordance with the Company's Insider Trading Policy.

Peer Group                                                        

The Compensation Committee believes that it is appropriate to offer competitive total compensation packages to our executive officers in order to attract and retain top executive talent. The compensation peer group (the "Peer Group") allows the Compensation Committee to monitor the compensation practices of our primary competitors for executive talent. The Compensation Committee utilizes this information to establish pay ranges for our NEOs and each individual's pay is targeted within those market-based pay ranges in consideration of a range of factors as described earlier in this disclosure.

The Compensation Committee reviews and approves the Peer Group each year. The 2020 peer group consisted of the same 17 companies as the prior year's peer group.

The Compensation Committee believes that these companies are an appropriate peer group for comparison, as well as a group that is large and diverse enough so that any one company does not alter the overall analysis.
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Universal Electronics 2020 Executive Compensation Peer Group
Electronic Equipment &
Instruments
Electronic Manufacturing
Services
Electronic Components/
Household Appliances
Consumer Electronics
Cognex CorporationCTS CorporationDolby Laboratories, Inc.GoPro, Inc.
Coherent, Inc.Kimball Electronics, Inc.II-VI IncorporatedZAGG Inc.
Daktronics Inc.Method Electronics, Inc.iRobot Corporation
FARO Technologies Inc.Littelfuse, Inc.
MTS Systems CorporationRogers Corporation
Novanta Inc.
OSI Systems, Inc.

The 17 companies in the Peer Group generally had 2020 revenue, market capitalization and total enterprise value (as of December 31, 2020) in a relevant range around those of the Company as set forth below.
(in millions)RevenueMarket
Capitalization
Industry
Company
II-VI Incorporated$2,380 $7,888 Electronic Components
Littelfuse, Inc.$1,446 $6,207 Electronic Components
iRobot Corporation$1,430 $2,258 Household Appliances
Coherent, Inc.$1,229 $3,666 Electronic Equipment and Instruments
Kimball Electronics, Inc.$1,201 $402 Electronic Manufacturing Services
OSI Systems, Inc.$1,166 $1,671 Electronic Equipment and Instruments
Dolby Laboratories, Inc.$1,162 $9,804 Electronic Components
Methode Electronics, Inc.$1,024 $1,437 Electronic Manufacturing Services
GoPro, Inc.$892 $1,248 Consumer Electronics
MTS Systems Corporation$829 $1,123 Electronic Equipment and Instruments
Cognex Corporation$811 $14,020 Electronic Equipment and Instruments
Rogers Corporation$803 $2,900 Electronic Components
Novanta Inc.$626 $4,157 Electronic Equipment and Instruments
Universal Electronics Inc.$615 $721 Consumer Electronics
Daktronics Inc.$609 $288 Electronic Equipment and Instruments
ZAGG Inc.$522 $124 Consumer Electronics
CTS Corporation$424 $1,108 Electronic Manufacturing Services
FARO Technologies, Inc.$304 $1,260 Electronic Equipment and Instruments
Peer Group Median$860 $1,554 
Data source: Standard & Poors Capital IQ.

Tax Deductibility of Compensation                                        

Section 162(m) of the Code generally limits a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to certain "covered employees". Prior to January 1, 2018, there was an exception to this deductibility limitation for compensation that qualified as "performance-based" compensation under the Section 162(m) of the Code. However, the Tax Cuts and Jobs Act of 2017 ("TCJA") eliminated the performance-based exception and expanded the definition of "covered employee" to include the chief financial officer and other NEOs of a Company. TCJA includes a transition rule under which the changes to Code Section 162(m) will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017, and is not materially modified after that date. The Company historically intended for certain awards to qualify for the performance-based exception, and while some of those awards may be grandfathered under this transition rule, the Company cannot guarantee that such awards will qualify for the transition relief or will ultimately be deductible by the Company. Potential tax deductibility of compensation under Section 162(m) of the Code is just one factor among many that the Compensation Committee considers when making compensation decisions.
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Clawback Policy- Potential Impact on Compensation from Executive Misconduct        

Pursuant to our clawback policy applicable to our executive officers, if the Board determines that an executive officer has engaged in fraudulent or intentional misconduct, the Board will take action to remedy the misconduct, prevent its recurrence, and impose discipline on the wrongdoer as appropriate. Discipline may vary depending on the facts and circumstances, and may include, without limit, (i) termination of employment, (ii) initiating an action for breach of fiduciary duty, and (iii) if the misconduct resulted in a significant restatement of the Company's financial results, seeking reimbursement of any portion of performance-based or incentive compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the restated financial results. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

Compensation Committee Report                                        

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis should be included in our Annual Report on Form 10-K for 2020 and in our 2021 Proxy Statement. This report is provided by the following independent directors, who comprise the Compensation Committee:
Compensation Committee of the Board of Directors
Sue Ann R. Hamilton — Chair
Satjiv S. Chahil
Gregory P. Stapleton
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Summary Compensation Table                                        
 
Name and Principal PositionYearSalary
($)
Stock
 Awards (1)
($)
Option
Awards (2)
($)
Non-Equity Incentive Plan Compensation (3)
($)
All Other
Compensation (4)
($)
Total
($)
Paul D. Arling2020830,0001,049,9051,049,965636,00026,7753,592,645
Chairman of the Board and 2019830,000649,965650,0051,660,00026,2753,816,245
Chief Executive Officer2018830,000749,990750,00523,0252,353,020
Bryan M. Hackworth2020400,000300,105300,015215,00029,0051,244,125
Senior Vice President and2019340,000300,015300,020476,00024,9131,440,948
Chief Financial Officer2018340,000300,040300,03011,855951,925
Ramzi S. Ammari2020400,000274,940274,970184,00044,3301,178,240
Senior Vice President, 2019325,000200,010199,995390,00013,8651,128,870
Corporate Planning and Strategy2018317,500220,20010,615548,315
Menno V. Koopmans(5)
2020315,000250,025150,010107,000822,035
Senior Vice President,2019315,280199,985235,00017,010767,275
Global Sales2018236,240149,910150,01531,120567,285
Joseph E. Miketo2020330,000150,055150,010140,00013,000783,065
Senior Vice President, 2019282,692299,980330,0006,000918,672
Operations2018
 
(1)This column represents the total grant date fair value of restricted stock unit awards granted during 2020, 2019 and 2018 and the amounts were computed in accordance with FASB ASC Topic 718, "Stock Compensation". For additional information regarding stock-based compensation and the assumptions used in calculating the grant date fair value, please refer to Note 15 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
(2)This column represents the total grant date fair value of stock options granted during 2020, 2019 and 2018 and the amounts were computed in accordance with FASB ASC Topic 718, "Stock Compensation". For additional information regarding stock-based compensation and the assumptions used in calculating the grant date fair value, please refer to Note 15 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC.
(3)This column represents cash amounts earned under the Company's Performance Incentive Plan.
(4)See the "All Other Compensation Table" for additional information.
(5)Mr. Koopmans transitioned from our Netherlands office to our Scottsdale office in August 2019 due to his change in position from Managing Director, EMEA to Senior Vice President, Global Sales. His salary and other compensation was paid in Euros while residing in the Netherlands and was converted into U.S. Dollars using the average rate of 1.120 USD and 1.181 USD per Euro for 2019, and 2018, respectively.
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All Other Compensation Table

The following table describes each component of the All Other Compensation column in the Summary Compensation Table.
 
Name of ExecutiveYear
Premiums
for Life
Insurance(1)
($)
Contributions
to Retirement
Plan
($)
Leased
Vehicle
($)
Other
Benefits
($)
Total All
Other
Compensation
($)
Paul D. Arling202013,77513,00026,775
201913,77512,50026,275
201813,7759,25023,025
Bryan M. Hackworth (2)
20202,60513,00013,40029,005
20192,60512,5009,80824,913
20182,6059,25011,855
Ramzi S. Ammari (3)
20201,33013,00030,00044,330
20191,36512,50013,865
20181,3659,25010,615
Menno V. Koopmans (4)
2020
20197,9659,04517,010
201814,75516,36531,120
Joseph E. Miketo202013,00013,000
20196,0006,000
2018
 
(1)This column represents taxable payments made for supplemental life insurance premiums for the current year NEOs. The aggregate face value was $2,740,000, $2,585,000, and $2,585,000 as of December 31, 2020, 2019 and 2018, respectively.
(2)Mr. Hackworth's other benefits received during 2020 and 2019 represents a buyout of vacation hours due to reaching the maximum allowed vacation accrual under company policy.
(3)Mr. Ammari's other benefits received during 2020 represents a moving allowance due to his relocation from our Santa Ana, California location to our headquarters in Scottsdale, Arizona.
(4)Mr. Koopmans transitioned from our Netherlands office to our Scottsdale office in August 2019 due to his change in position from Managing Director, EMEA to Senior Vice President, Global Sales. His salary and other compensation was paid in Euros while residing in the Netherlands and was converted into U.S. Dollars using the average rate of 1.120 USD and 1.181 USD per Euro for 2019 and 2018, respectively. Consistent with competitive practice in the Netherlands, Mr. Koopmans was provided with a pension and automobile in 2018 and 2019 prior to moving to the United States.
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Grants of Plan-Based Awards in Fiscal 2020                                

The following table provides information about equity and non-equity compensation granted to our NEOs during 2020. 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (2)
Stock Awards: Number of Shares of Stock or Units
(#)
Option Awards: Number of Securities Underlying Options
(#)
Option Exercise or Base Price of Option Awards(3)
($/Share)
Closing
Market
Price on
Option
Grant Date
($/Share)
Grant Date Fair Value of Stock and Option Awards
($)
Name of Executive
Grant
Date (1)
Threshold
($)
Target
($)
Maximum
($)
Paul D. Arling415,000 830,000 1,660,000
2/12/202022,7401,049,905
2/12/202059,32046.1745.911,049,965
Bryan M. Hackworth140,000 280,000 560,000
2/12/20206,500300,105
2/12/202016,95046.1745.91300,015
Ramzi S. Ammari120,000 240,000 480,000
2/12/20205,955274,940
2/12/202015,53546.1745.91274,970
Menno V. Koopmans79,000 158,000 316,000
2/12/20203,250150,055 
2/12/20208,47546.1745.91150,010 
3/9/20202,70399,970 
Joseph E. Miketo82,500 165,000 330,000
2/12/20203,250150,055 
2/12/20208,47546.1745.91150,010 

(1)The restricted stock unit and stock option awards granted on February 12, 2020 are subject to a 3-year vesting period (33.33% on February 12, 2021 and 8.33% each quarter thereafter). The restricted stock unit awards granted on March 9, 2020 are subject to a 3-year ratable annual vesting period.
(2)This column represents the threshold, target and maximum grant date values of the annual incentive awards under the Performance Incentive Plan based on achievement of the Company's performance measures. The amounts are subject to further adjustment based on individual performance at the discretion of the Compensation Committee.
(3)The option exercise price is based upon the average of the high and low trades on the grant date.
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Outstanding Equity Awards at Fiscal 2020 Year-End                            

The following table provides information on the stock options and restricted stock unit awards held by the NEOs at December 31, 2020: 
 Option AwardsRestricted Stock Unit Awards
Name of ExecutiveGrant Date
Number of Securities Underlying Unexercised Options
(#)
Exercisable (1)
Number of Securities Underlying Unexercised Options
(#)
Unexercisable (1)
 
Option Exercise
Price (2)
($)
Option
Expiration
Date(3)
Number of Shares or Units of Stock That Have Not Vested (4)
(#)
Market Value of Shares or Units of Stock That Have Not Vested (5)
($)
Paul D. Arling2/8/201232,200*20.0852/8/2022
2/13/201357,800*19.2452/13/2023
2/12/201532,295**65.5402/12/2022
1/1/201639,915**51.3851/1/2023
2/8/201738,245**62.7002/8/2024
2/8/201848,2134,382**44.9502/8/2025
2/13/201936,88526,345**27.0652/13/2026
2/12/202059,320**46.1702/12/2027
Various (6)
34,1351,790,722
Bryan M. Hackworth2/13/201322,000*19.2452/13/2023
2/12/201510,095**65.5402/12/2022
1/1/201613,305**51.3851/1/2023
2/8/201715,300**62.7002/8/2024
2/8/201819,2871,753**44.9502/8/2025
2/13/201917,02512,160**27.0652/13/2026
2/12/202016,950**46.1702/12/2027
Various (7)
11,674612,418
Ramzi S. Ammari2/13/201911,3498,106**27.0652/13/2026
2/12/202015,535**46.1702/12/2027
Various (8)
10,666559,538
Menno V. Koopmans2/8/201710,200**62.7002/8/2024
2/8/20189,644876**44.9502/8/2025
2/12/20208,475**46.1702/12/2027
Various (9)
10,886571,080
Joseph E. Miketo2/12/20208,475**46.1702/12/2027
Various (10)
10,243537,348

(1)The stock options marked with a (*) vest at a rate of 8.33% per quarter with full vesting on the third anniversary of the date of grant. The stock options marked with a (**) vest at a rate of 33.33% on the first anniversary of the date of grant and 8.33% each quarter thereafter with full vesting on the third anniversary of the date of grant.
(2)The option exercise prices are based upon the average of the high and low trades on the grant dates.
(3)Stock options granted prior to 2014 have a ten-year term. Beginning in 2014, stock options granted have a seven-year term.
(4)Please see "Compensation Discussion and Analysis" under the heading "Long-Term Incentives" for further information related to our restricted stock unit awards.
(5)The market value of unvested restricted stock unit awards is calculated based on the $52.46 closing price of UEIC common stock on December 31, 2020, which was the last business day of 2020.
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(6)Mr. Arling's restricted stock unit award dated February 8, 2018 vests as follows: 1,390 shares on February 8, 2021. Mr. Arling's restricted stock unit award dated February 13, 2019 vests as follows: 2,001 shares on February 13, 2021 and each quarterly anniversary thereafter until the final vesting on February 13, 2022. Mr. Arling's restricted stock unit award dated February 12, 2020 vests as follows: 7,580 shares on February 12, 2021, 1,895 shares on May 12, 2021 and each quarterly anniversary thereafter until the final vesting on February 12, 2023.
(7)Mr. Hackworth's restricted stock unit award dated February 8, 2018 vests as follows: 556 shares on February 8, 2021. Mr. Hackworth's restricted stock unit award dated February 13, 2019 vests as follows: 924 shares on February 13, 2021 and each quarterly anniversary thereafter until August 13, 2021, and 923 shares each on November 13, 2021 and February 13, 2022. Mr. Hackworth's restricted stock award dated February 12, 2020 vests as follows: 2,167 shares on February 12, 2021, 542 shares on May 12, 2021 and each quarterly anniversary thereafter until May 12, 2022 and 541 shares on August 12, 2022 and each quarterly anniversary thereafter until the final vesting on February 12, 2023.
(8)Mr. Ammari's restricted stock unit award dated February 21, 2018 vests as follows: 1,632 shares on February 21, 2021. Mr. Ammari's restricted stock unit award dated February 13, 2019 vests as follows: 616 shares on February 13, 2021 and each quarterly anniversary thereafter until November 13, 2021 and 615 shares on February 13, 2022. Mr. Ammari's restricted stock unit award dated February 12, 2020 vests as follows: 1,985 shares on February 12, 2021, 497 shares on May 12, 2021, 497 shares on August 12, 2021 and 496 shares on November 12, 2021 and each quarterly anniversary thereafter until the final vesting on February 12, 2023.
(9)Mr. Koopmans' restricted stock unit award dated February 8, 2018 vests as follows: 277 shares on February 8, 2021. Mr. Koopmans' restricted stock unit award dated February 19, 2019 vests as follows: 2,328 shares on February 19, 2021 and 2,328 shares on February 19, 2022. Mr. Koopmans' restricted stock unit award dated February 12, 2020 vests as follows: 1,083 shares on February 12, 2021, 271 shares on May 12, 2021 and each quarterly anniversary thereafter until November 12, 2022 and 270 shares on February 12, 2023. Mr. Koopmans' restricted stock unit award dated March 9, 2020 vests as follows: 901 shares on March 9, 2021 and each annual period until the final vesting on March 9, 2023.
(10)Mr. Miketo's restricted stock unit award dated January 7, 2019 vests as follows: 1,169 shares on January 7, 2021 and 1,168 shares on January 7, 2022. Mr. Miketo's restricted stock unit award dated February 19, 2019 vests as follows: 2,328 shares on February 19, 2021 and 2,328 shares on February 19, 2022. Mr. Miketo's restricted stock unit award dated February 12, 2020 vests as follows: 1,083 shares on February 12, 2021, 271 shares on May 12, 2021 and each quarterly anniversary thereafter until November 12, 2022 and 270 shares on February 12, 2023.

Option Exercises and Stock Vested

The following table provides information about options exercised and restricted stock units vested for the NEOs during the year ended December 31, 2020:
 Option AwardsRestricted Stock Unit Awards
Name of ExecutiveNumber of Shares Acquired on Exercise
(#)
Value Realized on Exercise
($)
Number of Shares Acquired on Vesting
(#)
Value Realized on Vesting (1)
($)
Paul D. Arling51,320856,01820,566906,299
Bryan M. Hackworth16,130269,0489,089400,913
Ramzi S. Ammari7,103324,265
Menno V. Koopmans3,705165,047
Joseph E. Miketo3,497168,403

(1)Represents the amounts realized based on the fair market value of UEI stock on the vesting date, which is defined as the average of the high and low trades on that date.
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Compensation Agreements                                            

Paul D. Arling Employment Agreement

On April 23, 2003, the Company and Mr. Arling entered into an employment agreement with a three-year term that, unless terminated by either party in accordance with the terms of the agreement, automatically renews for successive one-year terms. In October 2005, the parties agreed to extend the expiration date of this employment agreement to April 30, 2009. In February 2008, the parties agreed to extend the expiration date of this employment agreement, to April 30, 2011 with an automatic renewal feature unless the Company elects otherwise in accordance with the terms of the agreement. As a result of the renewal feature of this agreement, Mr. Arling's employment agreement was allowed to renew and is presently set to expire on April 30, 2022.

This agreement requires that, during its term, Mr. Arling must (i) devote his full working time and energy to us, (ii) refrain from disclosing and/or using any of our trade secrets and proprietary information, and (iii) during the term of the agreement and for a period of two years thereafter, refrain from soliciting certain of our large customers or any key employees. The agreement also provides Mr. Arling the opportunity to receive increases (but not decreases) in his annual salary as determined and set by the Compensation Committee in accordance with its established plans and policies.

If, during the term of the agreement, Mr. Arling should resign for "good reason" (as defined in the agreement), Mr. Arling will receive (i) an amount equal to 18 months of salary payments (or 24 months if such resignation is in connection with a "Change in Control" as defined in the agreement), (ii) an amount equal to (x) 18 months (or 24 months if such resignation is in connection with a "Change in Control") multiplied by (y) the greater of (1) the monthly rate of his bonus payment for the bonus period in the year immediately prior to the termination date or (2) the estimated amount of the bonus for the period which includes his termination date (without regard to any attempted reduction or discontinuance of such bonus), (iii) the value of incentive compensation and rights to receive grants of stock options and stock awards to which he would have been entitled under all incentive compensation and option/stock plans maintained by the Company if he had remained employed for 18 months (or 24 months if such resignation is in connection with a "Change in Control", and (iv) continued participation in our benefit plans for 18 months following such resignation (or 24 months if such resignation is in connection with a "Change in Control") (see "Potential Payments upon Termination or Change in Control" below).

Salary Continuation Agreements 

Messrs. Hackworth and Ammari and certain other executive officers and other officers of the Company have salary continuation agreements ("SCA"). For Mr. Hackworth, the SCA was entered into in December 2006. For Mr. Ammari, the SCA was entered into in November 1999. The SCAs were entered into as part of an employment hiring and retention practice. There have been no SCAs entered into since 2010 and the Company no longer offers SCAs to its employees. Each SCA represents a binding obligation of the Company that takes effect upon the occurrence of a "Change in Control." When effective, each SCA operates as an employment agreement providing for a term of employment with us for a period ranging from 12 to 18 months (12 to 36 months in the event of a hostile acquisition). In addition, each SCA provides that the executive or other officer receive increases in salary and bonuses during the term of the SCA in accordance with our standard policies and practices; however, in no event would this base salary and bonus be less than the base salary and bonus the executive or other officer received in the year immediately preceding the effective date of the SCA. Furthermore, each SCA provides that the executive or other officer be entitled to receive stock option grants and to otherwise participate in our incentive compensation and benefits plans and other customary benefit programs in effect from time to time, but in no event would such participation be less than that provided to the executive or other officer immediately prior to the effective date of the SCA.

Under each SCA, if we terminate the executive or other officer's employment for reasons other than the executive's or other officer's death or disability or "for cause" (as defined in each SCA) or if the executive or other officer resigns for "good reason" (as defined in each SCA which includes resignation in connection with a "Change in Control"), the executive or other officer would receive, in one lump sum, an amount equal to (i) an amount equal to between 12 and 18 months of salary payments (or between 12 and 36 months if such resignation is in connection with a "hostile acquisition" as defined in the agreement), (ii) an amount equal to (x) 12 and 18 months (or between 12 and 36 months if such resignation is in connection with a "hostile acquisition") multiplied by (y) the greater of (1) the monthly rate of his bonus payment for the bonus period in the year immediately prior to the termination date or (2) the estimated amount of the bonus for the period which includes his termination date (without regard to any attempted reduction or discontinuance of such bonus), (iii) the value of incentive compensation and rights to receive grants of stock options and stock awards to which he would have been entitled under all
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incentive compensation and option/stock plans maintained by the Company if he had remained employed for 12 and 18 months (or between 12 and 36 months if such resignation is in connection with a "hostile acquisition", and (iv) continued participation in our benefit plans for between 12 and 18 months following such resignation (or between 12 and 36 months if such resignation is in connection with a "hostile acquisition").

Potential Payments upon Termination or Change in Control                        

Severance Plan for Executive Officers

Except for the severance benefits provided to Mr. Arling as part of his employment agreement and to Messrs. Hackworth and Ammari and certain other executive officers of the Company under the SCAs, we do not have a written severance benefits program for our executive officers. However, the Company’s practice has been to provide severance packages to certain executives and in the future we will continue to provide such benefits in accordance with our past practice.

Definitions of Termination Scenarios

"For Cause" Termination - Generally speaking, "cause" is defined in Mr. Arling's employment agreement and the SCAs as (i) the willful and continued failure by the executive to substantially perform his or her duties after a demand for substantial performance is delivered by the Company which specifically identifies the manner in which it is believed that the executive has not substantially performed his duties; (ii) the willful engaging by the executive in gross misconduct materially and demonstrably injurious to the property or business of the Company; or (iii) the executive's commission of fraud, misappropriation or a felony.

 "Constructive Termination" - In general, "constructive termination" is defined in Mr. Arling's employment agreement and the SCAs to occur on that date on which the executive resigns from employment with the Company, if such resignation occurs within eighteen months after the occurrence of (i) the failure of the executive to be elected or re-elected or appointed or reappointed to such office that the executive holds (other than as a result of a termination for "cause") if the executive is an officer of the Company and the office which the executive holds is one to which they are elected according to the Company's By-laws; (ii) a change in the executive's functions, duties, or responsibilities such that the executive's position with the Company becomes substantially less in responsibility, importance, or scope; or (iii) a "Change in Control."

"Change in Control" - A "Change in Control" is defined in Mr. Arling's employment agreement and the SCAs to occur when (i) anyone acquires 20% or more of the total voting power of the outstanding securities of the Company which are entitled to vote in the election of directors; (ii) a majority of our directors is replaced, other than by those approved by existing directors; (iii) a merger occurs where the voting stock of the Company outstanding immediately prior to the merger does not continue to represent at least 80% of the total voting power immediately after the merger; or (iv) the Company is dissolved or liquidated.

"Good Reason" - For Mr. Arling, a termination for "good reason" is defined in his employment agreement and includes his resignation as a result of one or more of the following:
the attempted discontinuance or reduction in his "base cash salary";
the attempted discontinuance or reduction in his bonuses and/or incentive compensation award opportunities under plans or programs applicable to him, unless the discontinuance or reduction is a result of the Company's policy applied equally to all executive employees of the Company;
the attempted discontinuance or reduction in his stock option and/or stock award opportunities under plans or programs applicable to him, unless the discontinuance or reduction is a result of the Company's policy applied equally to all executive employees of the Company;
the attempted discontinuance or reduction in his perquisites from those historically provided during his employment with the Company and generally applicable to executive employees of the Company;
his relocation to an office (other than the Company's headquarters) located more than fifty miles from his current office location;
the significant reduction in his responsibilities and status within the Company or a change in his titles or positions;
the attempted discontinuance of his participation in any benefit plans maintained by the Company unless the plans are discontinued by reason of law or loss of tax deductibility to the Company with respect to the contributions to or payments under the plans, or are discontinued as a matter of the Company's policy applied equally to all participants;
the attempted reduction of his paid vacation to less than that provided in his agreement;
the failure by the Company to obtain an assumption of Company's obligations under his agreement by any
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assignee of or successor to the Company, regardless of whether the entity becomes a successor to the Company as a result of merger, consolidation, sale of assets of the Company or other form of reorganization; or
the occurrence of a "Change in Control."

For Messrs. Hackworth and Ammari and certain other executive officers, the terms (a) "Good Reason" is defined in the SCAs as (i) a significant change in the nature or scope or the location for the exercise or performance of the Executive's authority or duties from those referred to in the SCA, a reduction in total compensation, compensation plans, benefits or perquisites from those provided in the SCA, or the breach by the Corporation of any other provision of the SCA; or (ii) a reasonable determination by the Executive that, as a result of a "Change in Control" and a change in circumstances thereafter significantly affecting the Executive's position, the Executive is unable to exercise the authorities, power, function or duties attached to the Executive's position and contemplated by the SCA., (b) "hostile acquisition" is defined in the SCAs as a Change in Control that has not been approved by the Incumbent Board, and (c) "Incumbent Board" is defined in the SCA as (i) the members of the Board of Directors on February 1, 1999, and (ii) any individual who becomes a member of the Board of Directors after February 1, 1999, if his or her election or nomination for election as a director was approved by the affirmative vote of a majority of the then Incumbent Board.

Stock Option and RSU Acceleration

As provided in the applicable stock option plans and corresponding award agreements, in the event that an executive's employment with the Company is terminated without cause or in the event of constructive termination (through a Change in Control, for example), the executive will become immediately fully vested in his equity incentive compensation grants, to the extent not previously vested.

Tax Gross-Up

As provided in Mr. Arling's employment agreement and the SCAs, in the event it is determined that any compensation payment or distribution as the result of a change in control would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties with respect to the excise tax (together the "excise tax"), the Company will pay to the participant an additional payment (a "gross-up payment") in an amount such that after payment by the participant of all taxes, including any excise tax imposed on any gross-up payment, the participant retains an amount of the gross-up payment equal to the excise tax imposed upon the payment.


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Compensation Upon Termination

The amounts in the following table assume that the NEOs terminated employment effective December 31, 2020. The closing price of UEI common stock was $52.46 on the last business day of 2020. These amounts are in addition to benefits generally available to U.S. employees upon termination of employment, such as distributions from our 401(k) Plan and the payment of accrued vacation. All amounts would be paid in one lump sum payment.
(In thousands)
NameMonths
of
payment
Termination
Scenario
Total
($)
Salary
($)
Bonus
($)
Other (1)
($)
Aggregate Value of Vested Stock
Options
($)
Aggregate Value of Acceler-
ation of Unvested Stock
Options
($)
Aggregate Value of Vested Restricted Stock Units
($)
Aggregate Value of Acceler-
ation of Unvested Restricted Stock Units
($)
Tax Gross-Up (2)
($)
Paul D.
Arling
18Without Cause12,560 1,245 954 3,191 4,304 1,075 — 1,791 — 
18Good Reason12,560 1,245 954 3,191 4,304 1,075 — 1,791 — 
24Change 
in Control
18,117 1,660 1,272 4,254 4,304 1,075 — 1,791 3,761 
24Hostile Acquisition18,117 1,660 1,272 4,254 4,304 1,075 — 1,791 3,761 
Bryan M.
Hackworth
Without Cause(3)
2,930 567 — — 1,322 429 — 612 — 
Good Reason2,363 — — — 1,322 429 — 612 — 
12Change in
Control
3,594 400 215 616 1,322 429 — 612 — 
24Hostile Acquisition4,825 800 430 1,232 1,322 429 — 612 — 
Ramzi S. Ammari
Without Cause(3)
1,952 800 — — 288 304 — 560 — 
Good Reason1,152 — — — 288 304 — 560 — 
12Change in
Control
2,300 400 184 564 288 304 — 560 — 
12Hostile Acquisition2,300 400 184 564 288 304 — 560 — 
Menno V. Koopmans
Without Cause(3)
1,097 394 — — 72 60 — 571 — 
Good Reason703 — — — 72 60 — 571 — 
Change in
Control
703 — — — 72 60 — 571 — 
Hostile Acquisition703 — — — 72 60 — 571 — 
Joseph E. Miketo
Without Cause(3)
645 55 — — — 53 — 537 — 
Good Reason590 — — — — 53 — 537 — 
Change in
Control
590 — — — — 53 — 537 — 
Hostile Acquisition590 — — — — 53 — 537 — 
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(1)This column represents the estimated amount due for (1) the value of rights to receive grants of stock options and stock awards to which he would have been entitled under all incentive compensation and option/stock plans maintained by the Company and (2) continued participation in our benefit plans if he had remained employed for the applicable period.
(2)As described above, the NEOs may be entitled to an excise tax gross up with respect to certain payments made upon their termination of employment in connection with a Change in Control or Hostile Acquisition. Amounts included in the table have been estimated; the actual excise tax and amount of any gross-up would be determined based on the circumstances at the time of the Change in Control or Hostile Acquisition.
(3)There is no formal agreement related to the salary to be paid upon termination without cause for the respective employees. It has been Company practice in previous years to pay one month of the most current year's base salary for every year worked.

CEO Pay Ratio Disclosure                                             

For fiscal 2020, the ratio of the annual total compensation of Paul D. Arling, our Chief Executive Officer ("CEO Compensation"), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries (other than our CEO) ("Median Annual Compensation"), was 461 to 1. This pay ratio disclosure is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K using the data and assumptions described below. In this summary, we refer to the employee who received the Median Annual Compensation as the "Median Employee." For purposes of this disclosure, the date used to identify the Median Employee was December 31, 2019 (the "Determination Date"). As permitted by the SEC, we used the same Median Employee identified in 2019 because we determined that there had not been any changes to our employee population or compensation programs since the Determination Date that would result in a significant change to the pay ratio disclosure for fiscal 2020.

For purposes of this pay ratio disclosure, CEO Compensation was determined to be $3,592,645, the total compensation reported for Mr. Arling under the "Summary Compensation Table" for 2020. In addition, Median Annual Compensation was determined to be $7,787, and was calculated by totaling for our Median Employee all applicable elements of compensation for 2020 in accordance with Item 402(c)(2)(x) of Regulation S-K.

We identified the Median Employee as of the Determination Date from the 4,347 U.S. and non-U.S. employees, representing our full-time, part-time, seasonal and temporary employees as of that date. This number did not include any independent contractors or "leased" workers, as permitted by the applicable SEC rules. In addition, this number excluded 182 non-U.S. employees (consisting of 3 employees in Argentina, 4 employees in France, 7 employees in Germany, 5 employees in Italy, 15 employees in Japan, 8 employees in Korea, 7 employees in Spain, 10 employees in the United Kingdom and 123 employees in Brazil, or collectively 4.2% of our total workforce). The compensation measurement was calculated by totaling, for each employee, base cash compensation received during 2019, which represents the consistently applied compensation measure that we used for our pay ratio determination. Specifically excluded from the consistently applied compensation measure were expense reimbursements, incentive pay and bonuses, stock-based compensation, and fringe compensation such as pension payments and other retirement benefits, company provided transportation, food and housing subsidies, etc. Further, we did not utilize any statistical sampling or cost-of-living adjustments for purposes of this pay ratio disclosure.
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Proposal 3 - Adoption and Approval of an Amendment to our 2018 Equity and Incentive Compensation Plan

At the 2018 Annual Meeting of Stockholders held on June 4, 2018, the Stockholders adopted and approved the Company’s 2018 Equity and Incentive Compensation Plan (the “2018 Plan”). On April 16, 2021, acting on the recommendation of the Compensation Committee, the Board of Directors unanimously adopted and approved amending the Company’s 2018 Equity and Incentive Compensation Plan (“Amended 2018 Plan”) for the sole purpose of increasing the number of shares available for grant under the 2018 Plan by 1,100,000 shares, and is submitting the Amended 2018 Plan to stockholders for their adoption and approval at the Annual Meeting. In all other respects, the Amended 2018 Plan remains the same as the 2018 Plan. The Board believes the Company’s interests are best advanced by stimulating the efforts of employees, officers, and non-employee Directors, consultants, and advisors, in each case who are selected to be participants, by heightening the desire of such persons to continue working toward and contributing to the success and progress of the Company. The Amended 2018 Plan allows grants of stock options (including options intended to qualify as incentive stock options (“incentive stock options”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and options not intended to qualify as incentive stock options (“nonqualified stock options” and together, “options”), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), other stock-based awards and cash-based awards (collectively, “awards”), any of which may be performance-based. The Board has adopted and approved the Amended 2018 Plan to permit the Company to continue to use stock-based compensation to align stockholder and participant interests to the Company.

Why You Should Vote For the Amended 2018 Plan

The Board recommends that the Company’s stockholders approve the Amended 2018 Plan because it believes the Company’s ability to grant equity-based awards continues to be crucial in allowing the Company to effectively compete for, retain and appropriately motivate and reward key talent. It is in the long-term interest of both the Company and its stockholders to strengthen the Company’s ability to attract, motivate and retain employees, officers, and non-employee directors, consultants, and advisors and to provide additional incentive for those persons through stock ownership and other incentives to improve financial performance, increase profits and strengthen the mutuality of interest between those persons and the Company’s stockholders.

Promotion of Good Corporate Governance Practices

The Board believes the use of stock-based incentive awards promotes best practices in corporate governance by maximizing stockholder value. By providing participants in the Amended 2018 Plan with a stake in the Company’s success, the interests of the participants are aligned with those of the Company’s stockholders. Specific features of the Amended 2018 Plan that are consistent with good corporate governance practices include, but are not limited to:
Options and stock awards may not be granted with exercise prices lower than the fair market value of the underlying shares on the grant date;
There generally may be no repricing of options or other awards without stockholder approval, including no cancellation and replacement of any outstanding option or SAR with a new option or SAR or another award or cash or amendment or modification that reduces the exercise price of an option or strike price of a SAR;
“Liberal” share recycling is prohibited – meaning that shares used to pay the exercise price or withholding taxes related to an outstanding award will not be recycled back into the Amended 2018 Plan for future grants;
The Amended 2018 Plan does not contain a liberal change in control definition; and
Options and stock awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the Committee, to certain family members, trusts, partnerships or limited liability companies or other transferees as approved by the Board or the Compensation Committee or provided in the award agreement evidencing the grant of the award.

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Key Data

The following table includes information regarding (i) all of the Company’s outstanding equity awards (consisting only of options and restricted stock unit awards) and (ii) shares available for future awards under the Company’s 2018 Plan, each as of April 1, 2021 (and without giving effect to the additional 1,100,000 shares requested in this proposal 3):
Total shares underlying all outstanding options359,850
Weighted average exercise price of outstanding options$41.50
Weighted average remaining contractual life of outstanding options5.83 years
Total shares underlying all outstanding and unvested restricted stock awards318,468
Shares available for future awards that may be issued under the 2018 Plans30,672

Overhang. The total shares of Common Stock subject to outstanding awards as of April 1, 2021 (678,318 shares), plus the shares of Common Stock currently available for issuance under the 2018 Plan (30,672 shares), represent a total current overhang of 708,990 shares (5.1%), and together with the additional 1,100,000 shares requested under the amendment to the 2018 Plan, would represent a total overhang percentage of 13.1% (in other words, the maximum potential straight dilution of our stockholders represented by the Amended 2018 Plan).

Burn Rate. In 2018, 2019 and 2020, we granted awards under the 2018 Plan covering 30,850, 439,977 and 346,631 shares of Common Stock, respectively. Based on our basic weighted average shares of Common Stock outstanding for those three years of 13,948,000, 13,879,000, and 13,893,000, respectively, for the three-year period 2018-2020, our average yearly burn rate under the 2018 Plan, not taking into account forfeitures, was 2.0% (our individual years’ burn rates were 0.2% for 2018, 3.2% for 2019 and 2.5% for 2020).

Based on the closing price of a share of the Company’s Common Stock on April 1, 2021 of $56.00, the aggregate market value as of April 1, 2021 of the new 1,100,000 shares of Common Stock requested under the Amended 2018 Plan was $61,600,000.

Plan Summary

The following summary of the material terms of the Amended 2018 Plan are qualified in their entirety by reference to the complete statement of the Amended 2018 Plan, which is set forth in Appendix A to this Proxy Statement. The Amended 2018 Plan will become effective on June 8, 2021, after obtaining approval by the Company’s stockholders.

Purpose. The purpose of the Amended 2018 Plan is to continue to provide a means through which the Company may attract and retain key personnel and to provide a means whereby non-employee Directors, officers, employees, consultants and advisors of the Company and its subsidiaries (the “Company Group”) can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may (but need not) be measured by reference to the value of the shares of the Company’s common stock, par value $0.01 per share (“Common Stock”).

Eligibility. Non-employee Directors, executive and non-executive officers, employees, consultants and advisors of the Company Group will be eligible for awards; provided, that, incentive stock options may be granted only to employees. A written agreement between the Company and each participant will evidence the terms of each award granted under the Amended 2018 Plan other than any cash-based award. As of April 1, 2021, there were approximately 6 non-employee Directors, 7 executive officers, 26 non-executive officers, 3,684 other employees, no consultants and no other advisors eligible to receive awards. The basis for participation in the Amended 2018 Plan is being eligible and selected by the administrator to receive a grant thereunder.

Number of Shares Authorized. Pursuant to the Amended 2018 Plan, the Company has reserved an aggregate of two million one hundred thousand (2,100,000) shares of Common Stock for issuance of awards to be granted thereunder (all of which may be issued as Incentive Stock Options), plus the number of shares of Common Stock underlying an award granted under any Prior Plan (as defined in the 2018 Plan) that expires, terminates or is canceled or forfeited for any reason or settled in cash or is unearned under the terms of the applicable Prior Plan. This is an increase of 1,100,000 shares over the amount authorized under the current 2018 Plan. Each year, each participant who is a non-employee Director will be granted an award covering the lesser of (i) 5,000 shares of Common Stock (which number of shares may be reduced when determined by the Board to be necessary and appropriate) or (ii) shares of Common Stock with an aggregate maximum value at the date of grant of $500,000 (the “Annual Award”). In addition to the Annual Award, as an inducement to commence service with the Company as a non-employee Director or, from time to time, to reward extraordinary service rendered by an existing non-employee
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Director, a participant who is or becomes a non-employee Director may be granted awards of options covering up to 20,000 shares of Common Stock for each grant.

If any award granted under the Amended 2018 Plan expires unexercised, is canceled, forfeited, settled in cash or unearned, shares of our Common Stock subject to such award will again be made available for future grants. Use of shares of Common Stock to pay the required exercise price or tax obligations, or shares not issued in connection with settlement of an option or SAR, reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of an option, or that are used or withheld to satisfy tax obligations of the participant will, notwithstanding anything herein to the contrary, not be available again for other awards under the Amended 2018 Plan. In addition, if a participant elects to give up the right to receive compensation in exchange for shares of Common Stock based on fair market value, such shares of Common Stock will not be available again for awards under the Amended 2018 Plan. In general, any fractional shares due on exercise or payment in respect of an award will be settled in cash.

Administration. The Compensation Committee will administer the Amended 2018 Plan. Among other responsibilities, the Compensation Committee will select participants and determine the type of awards to be granted to participants, the number of shares of Common Stock to be covered by awards and the terms and conditions of awards, interpret the Amended 2018 Plan and awards granted thereunder, establish, amend, suspend or waiver rules and may accelerate the vesting or exercisability of, or the lapse of restrictions on, awards, and make any other determination and take any other action that it deems necessary or desirable to administer the Amended 2018 Plan.

Amendment or Termination. Unless earlier terminated, the expiration date of the Amended 2018 Plan will remain June 4, 2028, which is the tenth (10th) anniversary of the original effective date of the 2018 Plan; provided, however, that such expiration shall not affect awards then outstanding, and the terms and conditions of the Amended 2018 Plan shall continue to apply to all such awards. The Board may amend or terminate the Amended 2018 Plan at any time; provided, that, no such amendment or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Amended 2018 Plan and that any such amendment or termination that would materially and adversely affect the rights of any participant or any holder or beneficiary of any award granted will not to that extent be effective without the consent of the affected participant, holder or beneficiary. The Compensation Committee may, to the extent consistent with the terms of any applicable award agreement, amend or terminate, any award granted under the Amended 2018 Plan or the associated award agreement; provided, that, any such amendment or termination that would materially and adversely affect the rights of any participant with respect to any award granted under the Amended 2018 Plan will not to that extent be effective without the consent of the affected participant and that, in general, without stockholder approval to the extent required by the rules of any applicable national securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, (i) no amendment or modification may reduce the exercise price of any option or the strike price of any SAR, (ii) the Compensation Committee may not cancel any outstanding option or SAR and replace it with a new option or SAR, another award or cash and (iii) the Compensation Committee may not take any other action that is considered a “repricing” for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system.

Options. The Compensation Committee may, in its discretion, grant incentive stock options and nonqualified stock options to participants. All options granted under the Amended 2018 Plan will be nonqualified stock options unless the award agreement states that the option is an incentive stock option. Non-employee Directors, officers, employees, consultants and advisors may be granted nonqualified stock options, but only employees may be granted incentive stock options. The Compensation Committee will determine the exercise price of options granted under the Amended 2018 Plan. Subject to certain exceptions, the exercise price of an incentive or nonqualified stock option shall be at least 100% (and in the case of an incentive stock option granted to a more than 10% stockholder, 110%) of the fair market value of the Common Stock subject to the option on the date the option is granted. The Compensation Committee will determine, in its sole discretion, the terms of each option (the “option period”). Options may not be exercisable for more than ten years from the date they are granted (five years in the case of an incentive stock option granted to a more than 10% stockholder).

Acceptable consideration for the purchase of the Common Stock issued upon the exercise of an option and the payment of any taxes due upon any such ex