<PAGE> 1
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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
UNIVERSAL ELECTRONICS INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
Universal Electronics Logo
April 30, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders of
Universal Electronics Inc. to be held on Tuesday, June 8, 1999 at 9:00 a.m., Los
Angeles local time, at The Courtyard by Marriott, 5865 Katella Avenue, Cypress,
California 90630. We urge you to be present in person or represented by proxy at
this Meeting of Stockholders.
You will be asked to consider and vote upon the election of certain members of
the Company's Board of Directors, the ratification and approval of the Company's
1999 Stock Incentive Plan and the ratification of the Board of Directors'
engagement of the Company's independent auditors for the year ending December
31, 1999. Details of these proposals and a description of the general business,
directors and management of Universal Electronics are set forth in the
accompanying Proxy Statement. The Board of Directors unanimously recommends that
stockholders vote to approve all of the proposals.
Whether or not you plan to attend the Annual Meeting in person, it is important
that your shares are represented. Therefore, please promptly complete, sign,
date, and return the enclosed proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. You are, of course, welcome
to attend the Annual Meeting and vote in person even if you previously returned
your proxy card.
On behalf of the Board of Directors and management of Universal Electronics
Inc., we would like to thank you for all of your support.
Sincerely yours,
/s/ Camille Jayne
Camille Jayne
Chairman and Chief Executive Officer
<PAGE> 3
UNIVERSAL ELECTRONICS INC.
Corporate Headquarters:
6101 Gateway Drive
Cypress, California 90630
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JUNE 8, 1999
The 1999 Annual Meeting of Stockholders of Universal Electronics Inc., a
Delaware corporation ("Universal" or the "Company"), will be held on Tuesday,
June 8, 1999 at 9:00 a.m., Los Angeles, California local time, at The Courtyard
by Marriott, 5865 Katella Avenue, Cypress, California 90630. Doors to the
meeting will be open at 8:00 a.m.
The meeting will be conducted:
1. To consider and to vote upon the following proposals (collectively, the
"Proposals"), each of which is described in more detail in the
accompanying Proxy Statement:
(i) Proposal One: The election of Paul D. Arling and Camille Jayne as
Class I directors and of J. C. Sparkman as a Class II director,
each to serve on the Board of Directors until the next Annual
Meeting of Stockholders to be held in 2000 or until election and
qualification of their successors;
(ii) Proposal Two: Ratification and approval of the Universal
Electronics Inc. 1999 Stock Incentive Plan; and
(iii) Proposal Three: Ratification of the appointment of
PricewaterhouseCoopers LLP, a firm of independent accountants,
as the Company's auditors for the year ending December 31, 1999.
2. To consider and act upon such other matters as may properly come before
the meeting or any and all postponements or adjournments thereof.
Only stockholders of record at the close of business on April 15, 1999 will
be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
/s/ Richard A. Firehammer, Jr.
Richard A. Firehammer, Jr.
Senior Vice President, General
Counsel and Secretary
April 30, 1999
EACH STOCKHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE> 4
UNIVERSAL ELECTRONICS INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held on Tuesday, June 8, 1999
Mailed On or About April 30, 1999
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is being furnished to
stockholders of Universal Electronics Inc., a Delaware corporation ("Universal"
or the "Company"), in connection with the solicitation of proxies by the Board
of Directors of the Company (the "Board" or the "Board of Directors") from
holders of record of the Company's outstanding shares of common stock, par value
$.01 per share (the "Company Common Stock"), as of the close of business on
April 15, 1999 (the "Annual Meeting Record Date") for use at the 1999 Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be held on
Tuesday, June 8, 1999, at 9:00 a.m. (Los Angeles, California local time) at The
Courtyard by Marriott, 5865 Katella Avenue, Cypress, California 90630 and at any
adjournments or postponements thereof. This Proxy Statement and the accompanying
form of proxy are first being mailed to stockholders on or about April 30, 1999.
The world headquarters and principal executive offices of the Company are
located at 6101 Gateway Drive, Cypress, California 90630.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of Company Common Stock as of the close of
business on the Annual Meeting Record Date will be entitled to notice of and to
vote at the Annual Meeting or any adjournments or postponements thereof. Such
holders of shares of Company Common Stock are entitled to one vote per share on
any matter which may properly come before the Annual Meeting. The presence,
either in person or by properly executed and delivered proxy, of the holders of
a majority of the then outstanding shares of Company Common Stock is necessary
to constitute a quorum at the Annual Meeting and to permit action to be taken by
the stockholders at such meeting. Under Delaware law, shares of Company Common
Stock represented by proxies that reflect abstentions or "broker non-votes"
(i.e., shares held by a broker or nominee which are represented at the Annual
Meeting, but with respect to which such broker or nominee is not empowered to
vote on a particular proposal) will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum.
The affirmative vote of a plurality of shares of Company Common Stock
present in person or represented by proxy at the Annual Meeting is required to
elect the directors nominated pursuant to Proposal One. "Plurality" means that
the individuals who receive the largest number of votes cast are elected as
directors up to the maximum number of directors to be chosen at the meeting.
Consequently, any shares not voted (whether by abstention, broker non-vote, or
otherwise) as to Proposal One will have no impact on the election of directors,
except to the extent that the failure to vote for an individual results in
another individual receiving a larger number of votes.
Unless otherwise provided by law or the Company's Certificate of
Incorporation, the affirmative vote of the holders of at least a majority of the
shares of Company Common Stock present in person or represented by proxy at the
Annual Meeting is required to approve all other questions and matters properly
brought before the Annual Meeting, including, without limitation, Proposals Two
and Three. Abstentions as to all such questions and matters, including Proposals
Two and Three, will have the same effect as votes against such proposals. Broker
non-votes, however, will be treated as not voted for purposes of determining
approval of such questions and matters and will not be counted as votes for or
against such questions and matters.
<PAGE> 5
As of April 15, 1999, there were 6,537,995 shares of Company Common Stock
outstanding and entitled to vote at the Annual Meeting. The directors and
executive officers of the Company intend to vote the shares of Company Common
Stock held by them in accordance with the recommendations of the Board with
respect to the Proposals.
All shares of Company Common Stock that are represented at the Annual
Meeting by properly executed and delivered proxies received prior to or at the
Annual Meeting and not revoked will be voted at the Annual Meeting in accordance
with the instructions indicated in such proxies. If no instructions are
indicated for the Proposals, such proxies will be voted in accordance with the
recommendations of the Board as set forth herein with respect to such Proposals.
In the event that a quorum is not present at the time the Annual Meeting is
convened or if for any other reason, the Company believes that additional time
should be allowed for the solicitation of proxies, the Company may adjourn the
Annual Meeting with or without a vote of the stockholders. If the Company
proposes to adjourn the Annual Meeting by a vote of the stockholders, the
persons named in the enclosed form of proxy will vote all shares of Company
Common Stock for which they have voting authority in favor of such adjournment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with Firstar Bank N.A., in its capacity as transfer agent for the Company (the
"Transfer Agent"), at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a subsequent
proxy relating to the same shares of Company Common Stock and delivering it to
the Transfer Agent at or before the Annual Meeting, or (iii) attending the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not, in and of itself, constitute a revocation of a proxy). Any written
notice revoking a proxy should be sent to Firstar Bank, N.A., Corporate Trust,
1555 North Rivercenter Drive, Suite 301, Milwaukee, Wisconsin, 53212.
2
<PAGE> 6
OWNERSHIP OF COMPANY SECURITIES
The Company Common Stock is the only outstanding class of equity security
of the Company.
Ownership as of April 15, 1999 of the Company Common Stock by directors,
nominees, each executive officer named in the Executive Compensation tables
below, as well as by all directors and executive officers of the Company as a
group, and to the Company's knowledge, beneficial holders of more than five
percent of the Company Common Stock, is as follows:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED % OF SHARES
AS OF APRIL 15, OUTSTANDING AS OF
NAME AND ADDRESS(1) 1999(2) APRIL 15, 1999(2)
------------------- -------------------- --------------------
<S> <C> <C>
DIRECTORS AND NOMINEES
Paul D. Arling(3)............................... 61,400(4) *
Peter L. Gartman................................ 8,453 *
Bruce A. Henderson.............................. 8,200 *
Camille Jayne(5)................................ 52,250(6) *
F. Rush McKnight................................ 4,643(7) *
William C. Mulligan............................. 9,103(8) *
J. C. Sparkman(9)............................... 33,964 *
NON-DIRECTOR EXECUTIVE OFFICERS
John S. Ames.................................... 10,750(10) *
Jerry L. Bardin................................. -- 0.00
Paul J. M. Bennett.............................. 22,500(11) *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(11 PERSONS).................................... 213,763(12) 3.27
FORMER DIRECTORS AND/OR EXECUTIVE OFFICERS
Richard A. Firehammer, Jr.(13).................. 17,000(14) *
David M. Gabrielsen(15)......................... 72,000(16) 1.10
Joseph E. Miketo(17)............................ -- 0.00
OTHER BENEFICIAL OWNERS OF MORE THAN 5% OF THE
OUTSTANDING COMPANY STOCK
Geoffrey Nixon and MCM Associates, Ltd.(18)..... 680,000 10.40
Kennedy Capital Management(19).................. 346,000 5.29
</TABLE>
- ---------------
* Less than one percent.
(1) Except as otherwise indicated, the address for all persons shown on this
table is c/o the Company, 6101 Gateway Drive, Cypress, California 90630.
Unless otherwise indicated in the footnotes to this table, and subject to
community property laws where applicable, to the knowledge of the Company,
each of the stockholders named in this table has sole voting and investment
power with respect to the shares shown as beneficially owned by that
stockholder.
(2) The figures hereunder include those shares that the person has the right to
acquire beneficial ownership of within sixty (60) days, as required by Rule
13d-3(d)(1)(i) of the Securities Exchange Act of 1934.
(3) Mr. Arling's employment with the Company was terminated on August 31, 1998
as part of the Company's discontinuation of its North American retail line
of business. The Company rehired Mr. Arling in September 1998. Throughout
this time, Mr. Arling remained on the Company's Board of Directors.
(4) Includes 60,000 shares subject to currently exercisable options. Also
includes 500 shares held by Mr. Arling's wife as to which Mr. Arling
disclaims beneficial ownership.
(5) Ms. Jayne became the Company's Chief Executive Officer on August 4, 1998 and
the Company's Chairman of the Board in December 1998.
3
<PAGE> 7
(6) Includes 43,750 shares subject to currently exercisable options.
(7) Includes 2,500 shares held by Mr. McKnight's wife as to which Mr. McKnight
disclaims beneficial ownership.
(8) Includes 5,000 shares subject to currently exercisable options.
(9) Mr. Sparkman was appointed as a director of the Company on November 9, 1998
to fill one of the vacancies that occurred in early 1998 and is a nominee
for Class II Director.
(10) Includes 10,750 shares subject to currently exercisable options.
(11) Includes 22,500 shares subject to currently exercisable options.
(12) Includes 144,500 shares subject to currently exercisable options. Also
includes 500 shares held by Mr. Arling's wife as to which Mr. Arling
disclaims beneficial ownership and 2,500 shares held by Mr. McKnight's wife
as to which Mr. McKnight disclaims beneficial ownership.
(13) Mr. Firehammer's employment with the Company was terminated on August 31,
1998 as part of the Company's discontinuation of its North American retail
line of business. The Company rehired Mr. Firehammer in February 1999. Mr.
Firehammer is listed here pursuant to Item 402(a)(3)(iii) of Regulation
S-K.
(14) Includes 10,000 shares subject to currently exercisable options.
(15) Mr. Gabrielsen resigned as the Company's Chief Executive Officer on August
4, 1998. On November 3, 1998, he resigned from the Board of Directors of
the Company. Mr. Gabrielsen is listed here pursuant to Item 402(a)(3)(i) of
Regulation S-K. Mr. Gabrielsen's address is 8155 Belle Vernon Street,
Novelty, Ohio 44072.
(16) Includes 44,500 shares subject to currently exercisable options.
(17) Mr. Miketo's employment with the Company was terminated on May 29, 1998 as
part of the Company's discontinuation of its North American retail line of
business. Mr. Miketo is listed here pursuant to Item 402(a)(3)(iii) of
Regulation S-K. Mr. Miketo's address is 18910 Station Road, Columbia
Station, Ohio 44110.
(18) As reported on Schedule 13G as filed with the Securities and Exchange
Commission by Geoffrey Nixon, whose principal business address is 11 West
42nd Street, 19th Floor, New York, New York 10036 ("Nixon"); Mission
Partners, L.P., whose principal business address is 11 West 42nd Street,
19th Floor, New York, New York 10036 ("Mission"); Liberty Nominees Limited,
whose principal business address is P.O. Box 10-246, Wellington, New
Zealand ("Liberty"); Horizon Offshore, Ltd., whose principal business
address is c/o International Management Services, Limited, Harbour Centre,
North Church Street, P.O. Box 616, George Town, Grand Cayman, Cayman
Islands, B.W.I. ("Horizon"); M Partners L.P., whose principal business
address is 42 Pleasant Street, Watertown, Massachusetts 02172 ("M
Partners"); and Mayfair Capital Fund, L.P., whose principal business
address is 11 West 42nd Street, 19th Floor, New York, New York 10036
("Mayfair") reporting ownership as of February 9, 1999. Each of Nixon,
Mission, Liberty, Horizon, M Partners, and Mayfair is the beneficial owner
of approximately 0.11%, 4.16%, 0.85%, 0.86%, 0.39%, and 4.03%,
respectively, of Company Common Stock. Nixon is the sole stockholder and
director of MCM Associates, Ltd., whose principal business address is 11
West 42nd Street, 19th Floor, New York, New York 10036 ("MCM"). MCM (i) is
the sole general partner of Mission, (ii) has sole investment discretion
over the accounts established by each of Liberty and M Partners that
purchased shares of the Company Common Stock, and (iii) is the sole
investment manager with full voting and dispositive power with respect to
all of the securities owned by Horizon, including the Company Common Stock
beneficially owned by Horizon. Nixon is the sole manager and principal
member of MCM Capital Management, LLC, whose principal business address is
11 West 42nd Street, 19th Floor, New York, New York 10036 ("MCM Capital").
MCM Capital is the sole general partner of Mayfair with full voting and
dispositive power with respect to all of the securities owned by Mayfair,
including the Company Common Stock beneficially owned by Mayfair. The other
member of MCM Capital is Mr. Nixon's wife.
4
<PAGE> 8
(19) As reported on Schedule 13G as filed with the Securities and Exchange
Commission by Kennedy Capital Management, Inc., whose principal business
address is 10829 Olive Blvd., St. Louis, Missouri 63141 reporting ownership
as of February 9, 1999.
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
The number of directors of the Company's Board of Directors is presently
set at nine and is divided into two classes. There are currently seven
directors, two of whom are Class I Directors and five of whom are Class II
Directors, and two vacancies. The Class I Directors are directors who are also
employees of the Company and/or any subsidiary of the Company, and are elected
each year at the Annual Meeting of Stockholders to serve a one-year term. The
Class II Directors are directors of the Company who are not also employees of
the Company and/or any subsidiary of the Company, and are elected every
even-numbered year at the Annual Meeting of Stockholders to serve a two-year
term.
Each of the Class I Directors' terms expires at this year's Annual Meeting.
Each of the Class II Directors' terms expires at the 2000 Annual Meeting of
Stockholders.
On November 9, 1998, Mr. J. C. Sparkman was appointed to the Company's
Board of Directors as a Class II Director to fill one of the vacancies that
occurred in early 1998. The remaining two vacancies are as a result of a
resignation that occurred in early 1998 and due to the resignation of David M.
Gabrielsen as an officer and director on November 3, 1998.
The Board has nominated and recommends the reelection of Mr. Arling and Ms.
Jayne as Class I Directors for a one-year term expiring at the 2000 Annual
Meeting of Stockholders. In addition, the Board has nominated and recommends the
election of Mr. Sparkman as a Class II Director for the remaining portion of his
term expiring at the 2000 Annual Meeting of Stockholders (the time at which all
terms of Class II Directors expire).
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR Messrs. Arling and Sparkman, and Ms. Jayne.
If elected, Messrs. Arling and Sparkman, and Ms. Jayne have consented to
serve as directors of the Company for a one-year term and until their respective
successors are elected and qualified. Although it is not contemplated that any
nominee will be unable to serve as director, in such event, the proxies will be
voted by the proxy holders for such other person or persons as may be designated
by the present Board of Directors. Information with respect to each nominee is
set forth below.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
<TABLE>
<S> <C>
Paul D. Arling Mr. Arling is President, Chief Operating Officer and Chief
President, Chief Operating Officer Financial Officer of the Company, positions he has held
and Chief Financial Officer since being rehired by the Company in September 1998. He was
Director since 1996 the Company's Senior Vice President and Chief Financial
Age: 36 Officer from May 1996. Prior to joining the Company, from
1993 through May 1996, he served in various capacities at
LESCO, Inc. (a manufacturer and distributor of profes-
sional turf care products) with the most recent being Acting
Chief Financial Officer. Prior to LESCO, he worked for
Imperial Wallcoverings (a manufacturer and distributor of
wallcovering products) as Director of Planning and The
Michael Allen Company (a strategic management consulting
company) where he was employed as a management consultant.
At the 1998 Annual Meeting of Stockholders, Mr. Arling was
reelected as a Class I Director of the Company to serve
until the 1999 Annual Meeting of Stockholders.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Camille Jayne Ms. Jayne has been Chairman of the Company since December
Chairman and Chief 1998 and has been the Company's Chief Executive Officer
Executive Officer since August 1998. She served as the Company's President and
Director since 1998 Chief Operating Officer from February 2, 1998 to August
Member of the Nominating 1998. Prior to that, she was President and CEO of The Jayne
Committee of the Board of Directors Group (a consulting firm specializing in the development,
Age: 46 introduction and operation of digital cable TV products and
services) and a Senior Partner at BHC Consulting (a business
management and market research firm). Prior to The Jayne
Group and BHC, Ms. Jayne was Senior Vice President in charge
of the digital TV business unit at Tele-Communications, Inc.
(TCI) (a provider of cable television and telecommunication
services). At the 1998 Annual Meeting of Stockholders, Ms.
Jayne, was elected as a Class I Director of the Company to
serve until the 1999 Annual Meeting of Stockholders.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS
J. C. Sparkman Mr. Sparkman became a Class II Director of the Company on
Director since 1998 November 9, 1998 when he was appointed by the Board of
Member of the Nominating Committee Directors to fill one of the vacancies that existed since
of the Board of Directors early 1998. Mr. Sparkman served as Executive Vice President
Age: 66 and Chief Operating Officer of TCI from 1987 until his
retirement in 1995. He is a director of TCI, TCI Music,
Inc., Shaw Communications, Inc., and On Command Corporation.
</TABLE>
VOTE REQUIRED
Approval of the election of the nominees is subject to the affirmative vote
of a plurality of shares of Company Common Stock present in person or
represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
EACH OF THE FOREGOING NOMINEES AS DIRECTORS OF THE COMPANY.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
In 1998, the Board met seven times and acted by unanimous written consent
twice. No director attended less than 75% of the number of meetings of the Board
of Directors and the committees on which he or she served during the period for
which he or she was a member of the Board.
The Board has three standing committees: (i) Audit; (ii) Compensation; and
(iii) Nominating. The members of each committee are appointed by the Board of
Directors and serve at its discretion. A majority of each of the committees
constitutes a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by all of the
members, are acts of any of the respective committees.
The members of the Audit Committee are Peter L. Gartman, and William C.
Mulligan, none of whom are officers or employees of the Company or any of its
subsidiaries. The Audit Committee's functions include meeting with the Company's
independent auditors and management representatives, making recommendations to
the Board regarding the appointment of the independent auditors, approving the
scope of audits and other services to be performed by the independent auditors,
considering whether the performance of any professional service by the auditors
could impair their independence, and reviewing the results of external audits,
the accounting principles applied in financial reporting, and financial and
operational controls. The independent auditors have unrestricted access to the
Audit Committee and vice versa. The Audit Committee met one time during 1998.
The members of the Compensation Committee are Bruce A. Henderson and F.
Rush McKnight, neither of whom is an officer or employee of the Company or any
of its subsidiaries. The Compensation Committee's functions include making
recommendations to the Board on policies and procedures relating to executive
6
<PAGE> 10
officers' compensation and various employee stock plans and approving individual
salary adjustments and stock awards in those areas. The Compensation Committee
acted once by unanimous written consent in 1998.
The members of the Nominating Committee are Camille Jayne, the Chairman and
Chief Executive Officer of the Company, F. Rush McKnight, William C. Mulligan
and J. C. Sparkman. Messrs. McKnight, Mulligan and Sparkman are not officers or
employees of the Company or any of its subsidiaries. This committee considers
nominees for election as directors. The committee utilizes the same procedure to
consider nominees recommended by stockholders made pursuant to procedures
identified in the Company's Amended and Restated By-laws, which are described in
this Proxy Statement in "STOCKHOLDER NOMINATIONS OF DIRECTORS", as is used to
consider nominees recommended by any other source. In addition, the committee
fulfills an advisory function with respect to a range of matters affecting the
Board and its committees, including making recommendations with respect to
qualifications of director candidates, compensation of directors, the selection
of committee assignments and chairs, and related matters affecting the
functioning of the Board. The Nominating Committee did not meet during 1998,
rather, the entire Board considered the appointments of Ms. Jayne and Mr.
Sparkman during 1998.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company or any of its subsidiaries
receive an annual fee of $18,000, $12,000 of which is paid to them in shares of
Company Common Stock, with the balance being paid in cash. Directors who are
also officers of the Company receive no additional compensation for their
services as directors (see "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION"). All directors are also reimbursed for travel expense and other
out-of-pocket costs incurred in attending meetings.
As part of an asset purchase agreement the Company entered into with H&S
Management Corporation ('H&S"), Mr. Sparkman entered into a consulting agreement
with the Company whereby Mr. Sparkman would provide the Company with certain
consulting services for a period of two (2) years commencing on September 1,
1998. Under the consulting agreement the Company is to pay Mr. Sparkman $250,000
per year and reimburse him for all reasonable and fully documented travel,
office, entertainment, and other costs actually incurred in connection with
carrying out his consulting services. Mr. Sparkman has agreed to indemnify,
defend and hold the Company harmless from any claim that any payment made to him
under the consulting agreement is due to any other shareholder, employee or
director of H & S. In addition, Mr. Sparkman has agreed to hold, in confidence,
information regarding the Company that he learns while performing his consulting
services. Finally, as part the consulting agreement, Mr. Sparkman has agreed the
all inventions that he may conceive of or assist in creating while he performs
his consulting services shall belong to the Company and he will assign all
rights to any of such inventions to the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and certain of its officers and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission. Such persons are further required to
furnish the Company with copies of all such forms they file. Based solely on the
Company's review of the copies of such forms it has received, the Company
believes that, except for the late filing of Form 3 reports by each of Camille
Jayne and J. C. Sparkman and of Form 4 reports by each of David M. Gabrielsen,
Peter Gartman, Bruce Henderson, F. Rush McKnight, William C. Mulligan and J. C.
Sparkman, each with respect to the issuance of shares of Company Common Stock
received during 1998 (see "COMPENSATION OF DIRECTORS"), all of the Section 16(a)
filing requirements were satisfied by the Company's directors and executive
officers.
7
<PAGE> 11
EXECUTIVE OFFICER COMPENSATION
SUMMARY OF COMPENSATION
Table I below sets forth a summary of the compensation paid by the Company
to its chief executive officer and the four additional most highly compensated
executive officers of the Company.
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
(1)($) OTHER (#) ALL OTHER
NAME AND ------------------- ANNUAL ------------------- COMPENSATION (11)
PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION STOCK OPTIONS (3) ($)
------------------ ---- ------- --------- ------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Camille Jayne(4).............. 1998 271,154 109,800 43,488(5) 175,000 6,151
Chairman and Chief 1997 N/A N/A N/A N/A N/A
Executive Officer 1996 N/A N/A N/A N/A N/A
Paul D. Arling (6)............ 1998 182,798 76,000 -- 80,000 438,890
President and Chief 1997 156,867 49,500 -- -- 4,410
Operating Officer 1996 89,231 -- -- 80,000 2,502
John S. Ames (7).............. 1998 118,377 45,658 -- 5,000 3,602
Senior Vice President 1997 N/A N/A N/A N/A N/A
of Sales and Marketing 1996 N/A N/A N/A N/A N/A
Jerry Bardin.................. 1998 68,654 32,800 -- 15,000 3,485
Vice President of 1997 N/A N/A N/A N/A N/A
Engineering 1996 N/A N/A N/A N/A N/A
and Operations
Paul J. M. Bennett (7)........ 1998 135,000 34,000 30,000(5) 5,000 8,300
Sr. Vice President and 1997 N/A N/A N/A N/A N/A
Managing Director, Europe 1996 N/A N/A N/A N/A N/A
David M. Gabrielsen (8)....... 1998 217,305 -- -- -- 955,957
Former Chairman and 1997 289,696 124,000 -- -- 6,525
Chief Executive Officer 1996 250,000 -- -- 200,000 5,979
Richard A. Firehammer, Jr.
(9)......................... 1998 95,565 25,000 -- -- 350,062
Senior Vice President, 1997 119,314 37,500 -- -- 4,023
General Counsel and 1996 110,000 -- -- 15,000 3,777
Secretary
Joseph E. Miketo (10)......... 1998 69,129 34,000 -- -- 246,702
Former Vice President 1997 126,403 32,000 -- -- 3,549
of Operations 1996 120,000 -- -- 25,000 3,329
</TABLE>
- ---------------
(1) Excludes certain perquisites and other amounts which for any executive
officer did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus for such executive officer.
(2) Bonus includes the amount of cash bonus earned during the year.
(3) Awards referenced above represent options to purchase shares of the Company
Common Stock granted during the relevant year.
(4) Ms. Jayne was hired as the Company's President and Chief Operating Officer
on February 2, 1998. In August, 1998 she became the Company's CEO and has
been Chairperson of the Board of Directors since December, 1998.
(5) The amount of Other Annual Compensation for Ms. Jayne represents commuting
and housing allowance. The amount for Mr. Bennett represents automobile
allowance.
(6) Mr. Arling's employment with the Company was terminated on August 31, 1998
as part of the Company's discontinuation of its North American retail line
of business. The Company rehired Mr. Arling in September 1998.
(7) Messrs. Ames and Bennett became executive officers of the Company in 1998.
In 1996 and 1997 they served the Company in non-executive capacities.
8
<PAGE> 12
(8) Mr. Gabrielsen resigned as the Company's Chief Executive Officer on August
4, 1998. On November 3, 1998, he resigned from the Board of Directors of the
Company. Mr. Gabrielsen is listed here pursuant to Item 402(a)(3)(i) of
Regulation S-K.
(9) Mr. Firehammer's employment with the Company was terminated on August 31,
1998 as part of the Company's discontinuation of its North American retail
line of business. The Company rehired Mr. Firehammer in February 1999. Mr.
Firehammer is listed here pursuant to Item 402(a)(3)(iii) of Regulation S-K.
(10) Mr. Miketo's employment with the Company was terminated on May 29, 1998 as
part of the Company's discontinuation of its North American retail line of
business. Mr. Miketo is listed here pursuant to Item 402(a)(3)(iii) of
Regulation S-K.
(11) For 1998, All Other Compensation was composed of the following items:
<TABLE>
<CAPTION>
CAMILLE PAUL D. JOHN S. JERRY PAUL J. M. DAVID M. RICHARD A. JOSEPH E.
JAYNE ARLING AMES BARDIN BENNETT GABRIELSEN FIREHAMMER, JR. MIKETO
------- -------- ------- ------ ---------- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
401(k) Company
Contributions...... $2,500 $ 2,500 $2,500 $ -- $8,300 $ 2,500 $ 2,500 $ 2,500
Supplemental Life
Insurance
Premiums........... 3,651 2,802 1,102 3,485 -- 4,804 1,702 1,202
Severance............ -- 330,000 -- -- -- -- 219,941 195,000
Severance 401(k)..... -- 4,588 -- -- -- -- 4,193 --
Severance Bonus...... -- 99,000 -- -- -- -- 65,625 48,000
Covenant Not to
Compete
Agreement(12)...... -- -- -- -- -- 948,653 -- --
Loan Forgiveness..... -- -- -- -- -- -- 56,101 --
------ -------- ------ ------ ------ -------- -------- --------
$6,151 $438,890 $3,602 $3,485 $8,300 $955,957 $350,062 $246,702
====== ======== ====== ====== ====== ======== ======== ========
</TABLE>
(12) On October 12, 1998, the Company entered into a covenant not to compete
agreement with Mr. Gabrielsen.
STOCK OPTIONS
Grant of Stock Options. The following table sets forth details regarding
stock options granted to the Named Officers in 1998. The Company granted no
stock appreciation rights in 1998. In addition, in accordance with Securities
and Exchange Commission ("SEC") rules, the table shows the hypothetical gains or
"option spreads" that would exist for the respective options. These gains are
based on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the options were granted over the full option term. The actual
value, if any, an executive may realize will depend on the spread between the
market price and the exercise price on the date the option is exercised.
TABLE II
STOCK OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
% OF TOTAL OPTIONS APPRECIATION
STOCK OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(4)($)
GRANTED(1) EMPLOYEES PRICE(2) EXPIRATION ---------------------------
NAME (#) IN 1998 ($/SH) DATE(3) 5% 10%
---- ------------- ------------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Camille Jayne(5)..... 175,000 43.5 9.9688 02/02/08 1,097,132 2,780,347
Paul D. Arling....... 80,000 19.9 9.9375 09/22/08 499,971 1,267,025
John S. Ames......... 5,000 1.2 11.6250 08/11/08 36,555 92,636
Jerry Bardin......... 15,000 3.7 12.3750 08/03/08 116,739 295,838
Paul J. M. Bennett... 5,000 1.2 11.6250 08/11/08 36,555 92,636
</TABLE>
9
<PAGE> 13
- ---------------
(1) Under its 1993, 1995, 1996 and 1998 Stock Incentive Plans, the Company may
grant to eligible employees stock options either on a non-qualified tax
basis or as "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). All stock
options granted to Company employees in 1998 were non-qualified stock
options and totaled 402,000 shares.
(2) Under all stock option plans, the option exercise price is equal to the fair
market value at the date of the grant.
(3) Options were granted pursuant to the Universal Electronics Inc. 1993, 1995,
1996 and 1998 Stock Incentive Plans and vest over four years on the
anniversary date of the grant at a rate of 25% per year and have ten year
terms. If an optionee ceases to be an employee, other than by reason of
death or disability, while holding an exercisable option, the option will
generally terminate if not exercised within the time periods specified
within the relevant plans, generally 90 to 180 days following such
termination of employment. If the optionee's employment ceases without
"cause" or as a result of a "constructive termination", each as defined in
the relevant plan, all options shall be immediately exercisable and, if the
optionee's employment ceases within two years of such constructive
termination, then the optionee shall be permitted to exercise the options at
any time until the expiration of the option in accordance with its original
term. Stock options are not transferrable except that if an optionee dies
while an employee of the Company or within one year after becoming disabled,
a legal representative or legatee may exercise the option, to the extent not
already exercised, at any time up to one year from the date of death or
disability or, if shorter, the expiration of the option in accordance with
its original term.
(4) In accordance with SEC rules, these columns show gains that might exist for
the respective options, assuming the market price of the Company's Stock
appreciates from the date of the grant over a period of ten years at the
annualized rates of five and ten percent, respectively. If the stock price
does not increase above the exercise price at the time of the exercise,
realized value to the named officers from these options will be zero. There
can be no assurance that the amounts reflected in this table or the
associated rates of appreciation will be achieved.
(5) The Company granted 80,000 options from the 1993 Stock Incentive Plan,
40,000 options from the 1995 Stock Incentive Plan and 55,000 options from
the 1996 Stock Incentive Plan to Ms. Jayne in 1998.
Aggregated Stock Option Exercises and Year-End Value. Table III below sets
forth, on an aggregated basis, information regarding the exercise during 1998 of
options to purchase Company Common Stock by the Company's named executives and
the value on December 31, 1998 of all unexercised stock options held by such
individuals.
10
<PAGE> 14
TABLE III
AGGREGATED STOCK OPTION EXERCISES DURING THE YEAR ENDED DECEMBER 31, 1998
AND YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY STOCK
STOCK OPTIONS AT OPTIONS
YEAR END AT YEAR END (1)
SHARES ACQUIRED VALUE (#) ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME # ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Camille Jayne................ -- -- -- 175,000 -- 136,710
Paul D. Arling(2)............ 20,000 154,365 60,000 80,000 304,995 64,960
John S. Ames................. -- -- 8,250 13,750 23,906 41,094
Jerry Bardin................. -- -- -- 15,000 -- --
Paul J. M. Bennett........... -- -- 22,500 17,500 105,313 54,688
David M. Gabrielsen(3)....... 125,000 1,018,094 135,000 -- 470,938 --
Richard A. Firehammer,
Jr.(4)..................... 12,000 82,583 30,000 -- 133,630 --
Joseph E. Miketo(5).......... 45,000 337,850 -- -- -- --
Total............... 202,000 $1,592,892 255,750 301,250 $1,038,782 $297,451
</TABLE>
- ---------------
(1) Based on a per share price for Company Common Stock of $10.75, which price
reflects the closing price of the Company Common Stock as reported on The
Nasdaq Stock Market on December 31, 1998, the last trading day of 1998.
(2) Mr. Arling's employment with the Company was terminated on August 31, 1998
as part of the Company's discontinuation of its North American retail line
of business. The Company rehired Mr. Arling in September 1998.
(3) Mr. Gabrielsen resigned as the Company's Chief Executive Officer on August
4, 1998. On November 3, 1998, he resigned from the Board of Directors of the
Company. Mr. Gabrielsen is listed here pursuant to Item 402(a)(3)(i) of
Regulation S-K.
(4) Mr. Firehammer's employment with the Company was terminated on August 31,
1998 as part of the Company's discontinuation of its North American retail
line of business. The Company rehired Mr. Firehammer in February 1999. Mr.
Firehammer is listed here pursuant to Item 402(a)(3)(iii) of Regulation S-K.
(5) Mr. Miketo's employment with the Company was terminated on May 29, 1998 as
part of the Company's discontinuation of its North American retail line of
business. Mr. Miketo is listed here pursuant to Item 402(a)(3)(iii) of
Regulation S-K.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Ms. Jayne. At the time of her hiring in February 1998, the Company entered
into an employment agreement with Ms. Jayne with an initial term of two years
commencing on February 2, 1998 and ending on February 1, 2000. The agreement
provided that unless terminated by either party in accordance with the terms of
the agreement, the term would automatically renew for successive one-year terms.
The agreement also provided for an initial annual base salary of $300,000, with
the opportunity to receive increases (but not decreases) in such annual salary
as determined and set by the Board of Directors' Compensation Committee in
accordance with the plans and policies established by that committee. The
Compensation Committee decided to increase Ms. Jayne's 1999 base salary by 4% to
$312,000. By the agreement, Ms. Jayne was entitled to earn an annual bonus
payable at or near the end of the 1998 fiscal year in an amount equal to a
percentage of her base salary, provided that certain earnings per share targets
were met. In 1998, that bonus was $109,800. The agreement also permitted the
Company to award a discretionary bonus to Ms. Jayne as determined by the Company
and provided for the grant of an option to acquire up to 175,000 shares of
Company Common Stock. The options have an exercise price of $9.9688 per share,
the fair value of the Company Common Stock on her hire date, and vest in equal
increments over four years. The agreement further entitled Ms. Jayne to a
11
<PAGE> 15
commuting allowance and corporate housing during the initial term of the
agreement and for Ms. Jayne's participation in benefits plans of the Company in
effect from time to time and for other customary benefits. On January 28, 1999,
the Company and Ms. Jayne entered into an amended employment agreement that
extended the term of the agreement to February 1, 2001. The agreement, as
amended, will also automatically renew for successive one-year terms unless
terminated by either party upon 120 days notice to the other.
The agreement, as amended, requires Ms. Jayne to devote her full time and
energy to the Company during the term of the agreement, to refrain from
disclosing and/or using any of the Company's trade secrets and proprietary
information and from soliciting any of its customers or employees anytime after
her employment with the Company. The agreement, as amended, continues to entitle
Ms. Jayne the ability to earn an annual bonus payable at or near the end of the
1999 fiscal year in an amount equal to a percentage of her base salary in
accordance with the method established by the Compensation Committee (see
"COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION -- Annual Bonus
Incentives"). The agreement also permits the Company to award a discretionary
bonus to Ms. Jayne as determined by the Company and provides for the grant of an
option to acquire up to 80,000 shares of Company Common Stock. The options have
an exercise price of $15.00 per share, the fair value of the Company Common
Stock on January 28, 1999, and vest in equal increments over three years. The
agreement further entitles Ms. Jayne to a commuting allowance and corporate
housing during the initial term of the agreement (Ms. Jayne has advised the
Company that she intends to relocate her primary residence to Southern
California in the second quarter of the year, and upon completing that
relocation, Ms. Jayne will cease receiving the commuting allowance and corporate
housing, however the cost of that relocation will be borne by the Company) and
for Ms. Jayne's participation in benefits plans of the Company in effect from
time to time and for other customary benefits.
If during the term of the agreement, as amended, Ms. Jayne should resign
for "good reason" (as such term is defined in the agreement), Ms. Jayne will
receive salary, bonus, other incentive compensation and perquisites, and may
continue to participate in Company benefits plans, for an 18-month period
following such resignation (twenty-four (24) months if such resignation is due
to a "friendly acquisition" "Change in Control" (as such terms are defined in
the agreement) or thirty-six (36) months if such resignation is due to a
"hostile acquisition" (as such term is defined in the agreement) Change in
Control ).
Mr. Arling. At the time of his rehiring as the Company's President and
Chief Operating Officer in September 1998, the Company entered into an
employment agreement with Mr. Arling with an initial term of two years
commencing on October 1, 1998 and ending on September 30, 2000. The agreement
provided that unless terminated by either party in accordance with the terms of
the agreement, the term would automatically renew for successive one-year terms.
The agreement also provided for an initial annual base salary of $225,000, with
the opportunity to receive increases (but not decreases) in such annual salary
as determined and set by the Board of Directors' Compensation Committee in
accordance with the plans and policies established by that committee. Mr. Arling
did not receive an increase in the base salary for 1999. By the agreement, Mr.
Arling was entitled to earn an annual bonus payable at or near the end of the
1998 fiscal year in an amount equal to a percentage of his base salary, provided
that certain earnings per share targets were met. In 1998, Mr. Arling was
awarded an annual bonus of $33,000. The agreement also permitted the Company to
award a discretionary bonus to Mr. Arling as determined by the Compensation
Committee. In 1998, to recognize the efforts expended by Mr. Arling, the
Compensation Committee awarded Mr. Arling discretionary bonuses aggregating
$43,000. The agreement further provided for the grant of an option to acquire up
to 80,000 shares of Company Common Stock. The options have an exercise price of
$9.938 per share, the fair value of the Company Common Stock on September 22,
1998 (the date of the grant), and vest in equal increments over four years. The
agreement also entitled Mr. Arling to an interest free, unsecured loan in the
amount of $200,000 to be used solely by him for the acquisition of his primary
residence upon his relocation to Southern California. The agreement further
entitled Mr. Arling to participate in benefits plans of the Company in effect
from time to time and for other customary benefits.
On April 22, 1999, the Company and Mr. Arling entered into an amended
employment agreement that changed the loan from an interest free, unsecured loan
to a non-recourse interest bearing secured loan. The loan may only be used by
Mr. Arling for the acquisition of his primary residence in Southern California.
The loan bears interest at the rate of 5.28% per annum, which interest is
payable annually to the Company on
12
<PAGE> 16
December 15th of each year. The loan is secured by the primary residence
purchased by Mr. Arling and is payable on the earlier of (i) December 15, 2007,
(ii) within twelve (12) months following a demand from the Company in the event
that Mr. Arling shall cease (for whatever reason) being an employee of the
Company or upon the occurrence of an Event of Default (as such term is defined
within the promissory note evidencing the loan) or (iii) on the closing of a
sale or transfer by Mr. Arling or his spouse of all or any part of his and/or
her primary residence in Southern California that secures the loan, including
without limitation any sale or transfer of any interest therein (including any
beneficial interest therein) without the Company's prior written consent.
Further, the agreement, as amended, requires Mr. Arling to devote his full
time and energy to the Company during the term of the agreement, to refrain from
disclosing and/or using any of the Company's trade secrets and proprietary
information and from soliciting any of its customers or employees anytime after
his employment with the Company. The agreement, as amended, continues to entitle
Mr. Arling the ability to earn an annual bonus payable at or near the end of the
1999 fiscal year in an amount equal to a percentage of his base salary in
accordance with the method established by the Compensation Committee (see
"COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION -- Annual Bonus
Incentives"). The agreement also permits the Company to award a discretionary
bonus to Mr. Arling as determined by the Company and provided for the grant of
an option to acquire up to 40,000 shares of Company Common Stock. The options
have an exercise price of $15.00 per share, the fair value of the Company Common
Stock on January 28, 1999, and vest in equal increments over three years. The
agreement further entitles Mr. Arling to participate in benefits plans of the
Company in effect from time to time and for other customary benefits.
If during the term of the agreement, as amended, Mr. Arling should resign
for "good reason" (as such term is defined in the agreement), Mr. Arling will
receive salary, bonus, other incentive compensation and perquisites, and may
continue to participate in Company benefits plans, for an 18-month period
following such resignation (twenty-four (24) months if such resignation is due
to a "friendly acquisition" "Change in Control" (as such terms are defined in
the agreement) or thirty-six (36) months if such resignation is due to a
"hostile acquisition" (as such term is defined in the agreement) Change in
Control ).
Mr. Bennett. On June 16, 1996, the Company's subsidiary, Universal
Electronics B.V. (formerly known as One For All, B.V.) entered into an
employment agreement with Mr. Bennett. The Company believes that the agreement
contains terms and provisions that are typical of these types of agreements in
the Netherlands. By the agreement, Mr. Bennett receives a base salary (paid in
guilders), which salary may be increased as determined and set by the Board of
Directors' Compensation Committee in accordance with the plans and policies
established by that committee. In 1998, Mr. Bennett's base salary was
approximately US$135,000. In 1999, Mr. Bennett's base salary has been set at
approximately US$150,000. By the agreement, Mr. Bennett is entitled to earn an
annual bonus payable at or near the end of the Company's fiscal year in an
amount equal to a percentage of his base salary, provided that certain earnings
targets are met. In 1998, awarded Mr. Bennett an annual bonus equal to
US$34,000. The agreement further entitles Mr. Bennett to participate in benefits
plans of the Company in effect from time to time and for other customary
benefits. Mr. Bennett has also received a salary continuation agreement from the
Company (see "Prediscontinuation Salary Continuation Agreements" below).
Prediscontinuation Salary Continuation Agreements. In 1995 and 1996, the
Company entered into salary continuation agreements with certain of the named
executives and certain other officers of the Company. The salary continuation
agreements were amended in January 1997 (the salary continuation agreements, as
amended are hereinafter referred to as the "SCAs"). The SCAs take effect upon
the occurrence of certain triggering events (as defined within the agreements).
The discontinuation of the Company's North American retail line of business was
a triggering event under certain of the SCAs, including without limitation the
SCAs with Messrs. Gabrielsen, Arling, Firehammer and Miketo. Such an event is
not a triggering event under the SCA with Mr. Ames. A sale or transfer or
disposition by the Company of all or substantially all of the assets or stock of
Universal Electronics B.V. (formerly known as One For All B.V.) to a third party
is a triggering event under Mr. Bennett's SCA. When effective, the SCAs operate
as employment agreements providing for terms of employment with the Company for
periods ranging from twelve (12) to twenty-four (24) months. In addition, the
SCAs provide that the executives and officers would receive
13
<PAGE> 17
increases in salary and bonuses during the term of the SCAs in accordance with
the Company's standard policies and practices, however, in no event would such
base salary and bonuses be less than the base salary and bonuses such executives
and officers received in the year immediately preceding the effective date of
the SCAs. Further, the SCAs provide that each of the executives and officers
would be entitled to receive stock option grants and to otherwise participate in
the Company's incentive compensation and benefits plans and other customary
benefits programs in effect from time to time, but in no event would such
participation be less than that provided such executives and officers
immediately prior to the effective date of the SCAs.
Under the SCAs, in the event the Company terminates the executives' and
officers' employment for reasons other than the executives' or officers' death
or disability or for "cause" (as such term is defined in the SCAs) or the
executives or officers resign for "good reason" (as such term is defined in the
SCAs, which definition includes resigning in connection with the occurrence of a
change in control), the executives and officers will receive, in one lump sum,
an amount equal to salary, bonus and other incentive compensation (including
being paid the cash value of all options held by such executives and officers,
which options become immediately fully vested on the executives' or officer's
termination or resignation date) and to continue all health, disability and life
insurance benefits each for periods ranging from twelve (12) to twenty-four (24)
months (thirty-six (36) months in the event of a hostile acquisition) following
such termination or resignation.
Concurrent with the announcement of the discontinuation of the Company's
North American retail line of business in December 1997, Messrs. Arling,
Firehammer and Miketo and certain other officers of the Company were each
notified that their respective employment with the Company would be terminated
by the Company without "cause" during the second quarter of 1998 and each of
them and certain other officers of the Company would be paid under the severance
provisions of the SCAs. Each of Messrs. Arling, Firehammer and Miketo and the
other applicable officers agreed to accept the continuing right to exercise
their respective options for the thirty month period following such termination
in lieu of receiving the cash value of the options as provided in the SCAs.
1999 Salary Continuation Agreements. In February 1999, the Company entered
into salary continuation agreements with Mr. Firehammer and one other executive
officer of the Company. These salary continuation agreements are substantially
similar to the SCAs (described above) in that they too take effect upon the
occurrence of certain triggering events (as defined within the agreements).
Similarly, when effective, these salary continuation agreements also (i) operate
as employment agreements providing for a term of employment with the Company for
eighteen (18) months following a triggering event (thirty-six (36) months if the
triggering event is results from a "hostile acquisition" (as such term is
defined in the salary continuation agreement)), (ii) provide that the executive
officers would receive increases in salary and bonuses during the term of the
salary continuation agreements in accordance with the Company's standard
policies and practices, however, in no event would such base salary and bonuses
be less than the base salary and bonuses such executives and officers received
in the year immediately preceding the effective date of the salary continuation
agreements, and (iii) entitle the executives to receive stock option grants and
to otherwise participate in the Company's incentive compensation and benefits
plans and other customary benefits programs in effect from time to time, but in
no event would such participation be less than that provided such executives and
officers immediately prior to the effective date of the salary continuation
agreements.
In addition, these salary continuation agreements similarly provide that in
the event the Company terminates the executive officers' employment for reasons
other than the executive officers' death or disability or for "cause" (as such
term is defined in the salary continuation agreements) or the executive officers
resign for "good reason" (as such term is defined in the salary continuation
agreements, which definition includes resigning in connection with the
occurrence of a change in control), the executive officers will receive, in one
lump sum, an amount equal to salary, bonus and other incentive compensation
(including being paid the cash value of all options held by such executive
officers, which options become immediately fully vested on the executive
officer's termination or resignation date) and to continue all health,
disability and life insurance benefits each for a period of eighteen (18) months
(thirty-six (36) months in the event of a hostile acquisition) following such
termination or resignation.
14
<PAGE> 18
Mr. Gabrielsen. On August 12, 1998, Mr. Gabrielsen and the Company entered
into an agreement whereby Mr. Gabrielsen resigned as the Company's Chief
Executive Officer and from all other officer and employee positions with the
Company and any of its subsidiaries. As provided in the agreement, Mr.
Gabrielsen agreed to (i) forego all amounts due him under the SCA (see
"Prediscontinuation Salary Continuation Agreements" above), (ii) not compete
with the Company, directly or indirectly, either alone or in conjunction with
any person or persons or in any other manner whatsoever which is in competition
with the Company's business as existing on the date of the agreement for a
period of five (5) years, (ii) solicit business from or transact business with
any person, firm or corporation to whom the Company has done business in the
past three (3) years prior to the date of the agreement, (iii) directly or
indirectly solicit for employment, offer employment to, hire any person (as an
employee or consultant), or otherwise engage in business any person or persons
who were employed by the Company on the date of the agreement or during the five
(5) year non-compete period, or (iv) take any action which might divert from the
Company any opportunity which would be within the scope of the Company's
business, except with the prior written consent of the Company. Mr. Gabrielsen
may, however, be an owner of not more than five percent (5%) of the issued and
outstanding stock of any class of a publicly traded corporation whose principal
business is competitive with the Company's business so long as he has no active
participation in the business of such corporation. In addition, Mr. Gabrielsen
has agreed to refrain from disclosing and/or using any of the Company's trade
secrets and proprietary information for the five (5) year non-compete period. In
exchange for Mr. Gabrielsen's agreements, the Company (i) paid him $948,653 in
one lump sum, (ii) agreed to the immediate vesting of all options to acquire
shares of Company Common Stock that had been previously granted to him and the
continuing right to exercise such options for the thirty month period following
date of the agreement and (iii) agreed to provide him the right until January
31, 1999, subject to certain limitations, to cause the Company to purchase from
time to time all or any portion of the shares of Company Common Stock acquired
by him as a result of his exercise of the options. On August 18, 1998, Mr.
Gabrielsen exercised his right to cause the Company to buy 125,000 shares of
Company Common Stock that was acquired by him on that date through the partial
exercise of his options. The amount received by Mr. Gabrielsen from the Company
for such sale (net of the exercise price) totaled $1,018,093 (before withholding
for taxes).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As stated above, the Compensation Committee currently consists of Messrs.
Henderson and McKnight, both of whom are non-employees. The Compensation
Committee recommends compensation arrangements for the Company's executive
officers and is also responsible for determining and otherwise administering the
timing, amount, exercise price and other terms of options granted under the
Company's various stock inventive plans. Under certain of those plans, options
may be granted to non-employee directors of the Board of Directors. In all
instances, the recommendations of the Compensation Committee regarding executive
officer compensation, including all stock option grants, is passed upon and
approved by the full Board of Directors, except that neither Ms. Jayne nor Mr.
Arling vote or make decisions on matters involving their own and each other's
compensation. There were no options granted to non-employee directors of the
Board of Directors during 1998.
CERTAIN TRANSACTIONS
In May 1994, the Company entered into agreements with certain of its
executive officers and other employees whereby the Company loaned $484,989 to
them to fund their purchase, on the open market, of shares of the Company Common
Stock. These borrowings are evidenced by secured promissory notes, are due in
five years from the date of the advance together with simple interest calculated
at a local bank's prevailing interest rate for loans of this nature, and are
secured by a pledge of the purchased stock. None of these loans exceeded
$60,000. With the exception of Mr. Firehammer, who received loans amounting to
$42,875, neither the Company's chief executive officer nor any of the other
named officers received loans as declared herein. As a result of the Company's
restructuring efforts and other terminations of certain executive officers and
other employees of the Company, through December 31, 1998, $374,692 of these
loans were forgiven in accordance with the terms of the loans (with the
purchased stock being retained by the borrowers), including
15
<PAGE> 19
Mr. Firehammer's loan which was forgiven in its entirety (together with interest
in the amount of $13,226) during the third quarter of 1998. In accordance with
the terms of the loan, Mr. Firehammer retained the purchased stock. In addition,
through December 31, 1998, $69,782 of these loans were repaid, in accordance
with the terms of the loans.
F. Rush McKnight, is a retired partner of the law firm of Calfee, Halter &
Griswold LLP, which has been retained by the Company in connection with certain
legal matters.
On September 1, 1998, the Company entered into an asset purchase agreement
with H & S Management Corp. ("H&S"), J. C. Sparkman and Steven Helbig in which
the Company acquired all of the assets which were used in H & S's remote control
business. As a result of this transaction, Mr. Sparkman received approximately
22% of the purchase price paid by the Company, which consisted of $1.5 million
in cash and 84,211 shares of Company Common Stock, which at the closing, had a
value of approximately $874,000. Twenty-five thousand dollars of the amount
received by Mr. Sparkman was in exchange for a non-compete agreement that he
entered into with the Company in which he agreed that for seven (7) years from
September 1, 1998, he would not, directly or indirectly, either alone or in
conjunction with any person or persons, or in any other manner whatsoever (i)
carry on or be engaged in the H&S remote control business or any other business
which is in competition with the H&S remote control business as existing on
September 1, 1998, (ii) solicit business from or transact business with any
person, firm or corporation to whom the Company or any of the other parties to
the non-compete agreement has sold products where such solicitation would
involve the sale of products competitive with those of the H&S remote control
business, or (iii) directly or indirectly solicit for employment, offer
employment to, or hire any person (as an employee or consultant), or otherwise
engage in business any person or persons who were employed by the Company
immediately after the consummation of the transactions contemplated by the asset
purchase agreement or during the seven (7) year non-compete period, except with
the prior written consent of the Company. By the non-compete agreement Mr.
Sparkman is not prohibited from (i) carrying on or being engaged in any type of
business, which is not competitive with the H&S remote control business in any
area whatsoever, or (ii) being an owner of not more than 5% of the outstanding
stock of any class of a corporation which is publicly traded whose principal
business is competitive with the H&S remote control business, so long as he has
no active participation in the business of such corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, first established
after the Company's February 1993 initial public offering, acted once by
unanimous written consent in 1998. The members of the Committee are Bruce A.
Henderson and F. Rush McKnight and the Committee recommends compensation
arrangements for the Company's executive officers and administers its various
stock incentive plans.
The Compensation Committee will review the compensation policies of the
Company throughout the coming year. All compensation actions taken during 1998
were consistent with principles previously established by the Board of
Directors. These principles include building a strong relationship between
stockholder return and executive compensation, providing incentives to achieve
both near and long-term goals, and providing an overall level of remuneration
which is fair and reflective of performance. The chief executive officer and
other executive officers are not present at the meetings unless requested by the
Committee. Further, consistent with past practice, the Board has decided that
management of the Company should make decisions with respect to the compensation
of all employees other than the chief executive officer and all other executive
officers of the Company.
Compensation Philosophy and Program. In administering executive officer
compensation, the Compensation Committee's objective is to establish a total pay
program for the Company which appropriately balances compensation costs with
salaries and incentives sufficient to retain and motivate key executives. The
chief executive officer presents proposals and recommendations on executive
officer compensation to the Committee for its review and evaluation. In 1998,
the Compensation Committee used data provided by the Company to establish
compensation targets that reflect overall and individual executive officer
compensation history, the Company's recent and planned performance and, to the
extent available, data reflecting compensation
16
<PAGE> 20
practices of companies who are competitors of the Company (the "Compare Group").
The Compare Group included members of the Company's Peer Group and private
companies. However, because the Company found that the companies comprising the
Compare Group were substantially larger than the Company, the Compensation
Committee discounted such comparison data and relied more on internal
information and criteria in establishing its overall pay program for the
executive officers. In 1999, the Committee will use data provided by the Company
that is obtained from independent consultants. The Committee believes that the
method it has employed in establishing executive compensation appropriately
reflects the labor market for Company executives.
Base Salary. Actual base salaries are based on an assessment of various
factors including position, tenure, experience, salary history, and individual
performance. This assessment is subjective, not subject to weightings or
formulas and only considers Compare Group data to the extent available and
believed by the Compensation Committee to be helpful. Individual base salary
increases reflect what the Compensation Committee believes to be fair and
appropriate after considering the subjective factors and an assessment of the
Company's current and projected labor costs. Based upon the Company's financial
performance for the year ended December 31, 1998, the Committee reassessed the
base salaries of Ms. Jayne and the other executive officers. In this regard, Ms.
Jayne, who has an employment agreement with the Company (see "Employment
Agreements") and is paid in accordance with the provisions of the employment
agreement, received an increase in her base salary of 4% for 1999. The other
executive officers (some of whom also have employment agreements with the
Company or its subsidiaries - see "Employment Agreements") received increases
for 1999 ranging from 0% to approximately 27%. The Committee elected to not
increase Mr. Gabrielsen's base salary for 1998 (but see "Employment Agreements
and Termination of Employment Arrangements - Mr. Gabrielsen").
Annual Bonus Incentives. The Company believes that incentives help motivate
attainment of annual objectives, including the Company's performance relative to
that year's plan and the individual performance of each executive officer. For
1998, individual payouts were based upon a percentage of the executive's base
salary, provided that certain earnings per share targets were met. In certain
circumstances, an additional bonus may be awarded if the Compensation Committee
determines that an executive officer's individual performance warrants such
award. Based on the earnings per share achieved by the Company during 1998, Ms.
Jayne received a bonus for 1998 equal to approximately 40% of her base salary
and, except for Mr. Arling, the other named executive officers received bonuses
in 1998 equal to 25% of their respective base salaries. In 1998, in addition to
being awarded a discretionary bonus of $23,000 due to his individual performance
during the year, Mr. Arling received a bonus in the amount of $99,000, which was
determined in accordance with his separation agreement as part of the Company's
discontinuation of its North American retail line of business. Mr. Gabrielsen
did not receive an annual bonus for 1998, rather upon his termination of
employment with the Company, Mr. Gabrielsen entered into a non-compete agreement
with the Company and was paid in accordance with that agreement (see "Employment
Agreements and Termination of Employment Arrangements - Mr. Gabrielsen"). For
1999, the Compensation Committee, based in part upon data provided by the
Company that was obtained from independent consultants, has established a method
for determining bonuses for the Company's executive officers, including the
chief executive officer, utilizing a combination of financial and strategic
goals. These goals contain both objective and subjective components, and based
upon the level at which those goals are achieved, the executive officers would
be paid a bonus equal to a percentage of the executive's base salary. For the
chief executive officer, the percentage ranges between 0% and 120% of her base
salary. For the other executive officers, the percentages range between 0% and
100% of their respective base salaries.
Common Stock Incentives. In addition to the Company's 401(k) and Profit
Sharing Plan, the Company, through its various stock incentive plans, may grant
options to purchase Company Common Stock, stock appreciation rights or phantom
stock awards to executive officers and employees of the Company and its
subsidiaries with a view toward providing the executive officers and employees a
stake in the Company's future and compensation directly aligned with the
creation of stockholder value. The Compensation Committee may also issue stock
options to attract new executive officers to the Company. The Compensation
Committee generally establishes the terms and conditions of such grants.
Individual awards are determined based on a
17
<PAGE> 21
subjective assessment of individual performance, contribution and potential. In
May 1998, the Board of Directors of the Company authorized and approved the
creation of the Universal Electronics Inc. 1998 Stock Incentive Plan, and
further authorized, subject to stockholder approval, the grant of options to
certain of the Corporation's executive officers, including Ms. Jayne. Upon her
hiring in February 1998, Ms. Jayne received options to acquire up to 175,000
shares of Company Common Stock. Upon his rehiring in September 1998, Mr. Arling
received options to acquire up to 80,000 shares of Company Common Stock. The
other executive officers received stock options under the various plans of the
Company to acquire Company Common Stock ranging from 5,000 shares to 15,000
shares. Mr. Gabrielsen did not receive a stock option grant during 1998, rather
upon his termination of employment with the Company, Mr. Gabrielsen entered into
a non-compete agreement with the Company and was paid in accordance with that
agreement (See "Employment Agreements and Termination of Employment Arrangements
- - Mr. Gabrielsen"). On January 28, 1999, the Board of Directors of the Company
authorized and approved the creation of the Universal Electronics Inc. 1999
Stock Incentive Plan (see "PROPOSAL TWO: RATIFICATION AND APPROVAL OF 1999 STOCK
INCENTIVE PLAN"). For 1999, the Compensation Committee, based in part from data
provided by the Company that was obtained from independent consultants, has
established the number of options to be granted during the year. For the chief
executive officer that annual option grant is up to 80,000 shares of Company
Common Stock. For the other executive officers, the annual grants range from
10,000 shares of Company Common Stock to 40,000 shares of the Company Common
Stock. The Committee also determined to increase the Company's matching
contribution to the Company's 401(k) and Profit Sharing Plan from 25% to 50%.
Perquisites. The Company offers very few perquisites or special benefits to
executive officers. In general, the Compensation Committee believes that the
benefits offered are less than that offered at typical companies of similar
size, and are not material when considering total compensation.
Deductibility. The Compensation Committee does not believe that the
provisions of the Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), will limit the deductibility of compensation expected to
be paid by the Company during 1999. Section 162(m) generally limits the
deductibility for federal tax purposes of certain types of executive
compensation in excess of $1.0 million dollars per year. The Compensation
Committee will continue, however, to evaluate the impact of Section 162(m) of
the Code and any other such provisions, and take such actions as is deemed
appropriate to maximize the deductibility for federal tax purposes of all
elements of compensation. The Company may, however, may from time to time pay or
award compensation to its executive officers that may not be deductible.
Further, because of the ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the efforts of the Company in this area,
that compensation intended by the Company to satisfy the requirements for
deductibility under Section 162(m) does in fact do so.
It is the view of the Compensation Committee that the compensation programs
of the Company are well structured to encourage attainment of objectives, offer
opportunities for a total level of compensation which is consistent with other
companies of similar size, and foster a stockholder perspective in management.
The Compensation Committee believes that the overall levels of compensation
provided by these programs is fair and appropriate for the year just ended, and
that they serve stockholders' long-term interests.
This Compensation Committee Report on Executive Compensation shall not be
deemed incorporated by reference by any general statement incorporating by
references this proxy statement into any filing under the Securities Act of
1933, as amended, or under the Securities Exchange Act of 1934, as amended.
Compensation Committee of the Board of
Directors
Bruce A. Henderson
F. Rush McKnight
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<PAGE> 22
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total stockholder return with respect to the Company Common Stock
versus the cumulative total return of the Peer Group Index used last year (the
"Old Peer Group Index"), the cumulative total return of the Company's Peer Group
Index used this year ("New Peer Group Index"), and the Nasdaq Composite Index
(the "Nasdaq Composite Index") for the five (5) year period commencing December
31, 1993 and ended December 31 1998. The graph and table assume that $100 was
invested on December 31, 1993 in each of the Company Common Stock, the Peer
Group Index and the Nasdaq Composite Index and that all dividends were
reinvested (although no dividends were declared on the Company Common Stock
during the period) and actual market value increases and decreases relative to
the initial investment of $100. This data was furnished by Nasdaq*Amex and is
based on a calendar year.
This year, the companies comprising the Peer Group Index were changed.
Voice Powered Technology, Inc. has been delisted by Nasdaq and Zenith
Electronics Corporation reorganized during 1998. As a result, the Company added
Boston Acoustics, Inc. and Koss Corp. to the Peer Group. The Company believes
that these two newly included companies are comparable to the Company due to
their relative size and SIC industry classification.
The Company believes that the information provided within this performance
chart has only limited relevance to an understanding of the Company's
compensation policies during the indicated periods, does not reflect all matters
appropriately considered by the Company in developing its compensation strategy,
shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, and is not necessarily indicative of future price performance.
[GRAPH]
COMPARISON OF STOCKHOLDER RETURNS AMONG UNIVERSAL ELECTRONICS INC.,
THE NEW PEER GROUP INDEX(1), THE OLD PEER GROUP INDEX(2) AND THE NASDAQ
COMPOSITE INDEX
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Universal Electronics Inc. $100 $ 22 $ 38 $ 28 $ 51 $ 54
New Peer Group Index $100 $112 $116 $134 $128 $136
Old Peer Group Index $100 $120 $118 $150 $116 $102
Nasdaq Composite Index $100 $ 98 $138 $170 $209 $293
</TABLE>
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<PAGE> 23
- ---------------
(1) Companies in the New Peer Group Index are as follows: Harman International
Industries, Inc.; Recoton Corporation; Royal Appliance Manufacturing Co.;
Koss Corporation; and Boston Acoustics, Inc.
(2) Companies in the Old Peer Group Index are as follows: Harmon International
Industries, Inc.; Recoton Corporation; Royal Appliance Manufacturing Co.;
Voice Powered Technology, Inc.; and Zenith Electronics Corporation. Voice
Powered Technology, Inc. and Zenith Electronics Corporation were removed
from the Company's Peer Group Index in 1998 because they were delisted by
Nasdaq and experienced a reorganization during 1998, respectively. At
December 31, 1998, the closing price of the common stock of Voice Powered
Technology, Inc. and Zenith Electronics Corporation was .03 and .26 per
share, respectively.
PROPOSAL TWO: RATIFICATION AND APPROVAL OF 1999 STOCK INCENTIVE PLAN
BACKGROUND
As of December 31, 1998, options to acquire, in the aggregate, 844,447
available shares of Company Common Stock had been granted and are outstanding
under the Company's existing 1993 Stock Incentive Plan, 1995 Stock Incentive
Plan, 1996 Stock Incentive Plan, and 1998 Stock Incentive Plan, leaving, in the
aggregate, 130,754 available for future grants under various plans. As a result,
the Board of Directors, believing that the remaining number of shares available
for future grant under the various plans were insufficient to attract and retain
key employees, authorized the adoption of a new Universal Electronics Inc. 1999
Stock Incentive Plan (the "1999 Plan") to make an additional 315,000 shares of
Company Common Stock (approximately 4.82% of the outstanding shares of Company
Common Stock (as of April 15, 1999)) available for distribution to the Company's
key officers and employees.
Consequently, the stockholders will be asked at the Annual Meeting to vote
on a proposal to ratify and approve the adoption of the 1999 Plan. The 1999 Plan
was approved by the Board of Directors on January 28, 1999, subject to
stockholder approval. To date, the Board, subject to stockholder approval, has
granted an aggregate of 247,000 options under the 1999 Plan to the chief
executive officer, the four additional most highly paid executive officers, and
certain other employees, as set forth below. It is anticipated that additional
options under the 1999 Plan will be granted during 1999; however, the recipients
and the number of shares subject to such additional options have not yet been
determined.
NEW PLAN BENEFITS
UNIVERSAL ELECTRONICS INC.
1999 STOCK INCENTIVE PLAN
AS OF JANUARY 28, 1999
<TABLE>
<CAPTION>
STOCK OPTIONS
GRANTED (1)
NAME (#)
---- -------------
<S> <C>
Camille Jayne............................................... 80,000
Paul D. Arling.............................................. 40,000
John S. Ames................................................ 10,000
Jerry L. Bardin............................................. 5,000
Paul J. M. Bennett.......................................... 10,000
Executive Officers as a Group (6 Persons)................... 150,000
Non-Executive Officers as a Group (43 Persons).............. 97,000
</TABLE>
- ---------------
(1) The stock options set forth in this table have been granted on January 28,
1999 (subject to stockholder approval) at an exercise price of $15.00 per
share, the fair market value of the Company Common Stock at the date of
grant. In addition, all the options have the same vesting schedule,
one-third of which vest on the first anniversary date of the grant,
one-third on the second anniversary date of grant, and the remaining third
on the third anniversary date of the grant.
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<PAGE> 24
The Board of Directors believes that substantial benefits accrue to the
Company from the granting of stock awards under the 1999 Plan to its key
officers and employees. Such awards encourage such persons to acquire a
proprietary interest in the Company through stock ownership and thereby afford
them a greater incentive to enhance the value of the Company Common Stock
through their own efforts in improving the Company's business. The granting of
awards under the 1999 Plan also assists in obtaining and attracting competent
personnel who will contribute to the Company's success by their ability,
ingenuity and industry and to provide incentive to the participating personnel
which will inure to the benefit of all stockholders of the Company. For these
reasons, the Board adopted the 1999 Plan. Accordingly, the Board of Directors
and management believe that ratification and approval of the 1999 Plan is in the
best interests of the Company and recommend that stockholders vote in favor of
the proposal. IN THIS CONNECTION, UNLESS OTHERWISE INSTRUCTED, THE PROXYHOLDERS
WILL VOTE THE PROXIES RECEIVED BY THEM FOR THE RATIFICATION AND APPROVAL OF THE
1999 PLAN.
The following is a summary of the material features of the 1999 Plan and is
qualified in its entirety by reference to it. A copy of the 1999 Plan is
attached hereto as Exhibit A.
GENERAL
The 1999 Plan provides for the issuance of stock options, stock
appreciation rights, performance stock units, restricted stock units or any
combination thereof (each an "Award"). Stock options may be granted to Eligible
Employees (as such term is defined within the 1999 Plan). Eligible Employees may
be granted "incentive stock options" within the meaning of Section 422A of the
Code and non-qualified (for federal income tax purposes) stock options.
Stock appreciation rights, which may be granted to Eligible Employees, give
the grantee of a stock option the right to elect an alternative payment equal to
the appreciation of the stock value instead of exercising a stock option.
Payment of the stock appreciation right may be made in cash, shares of Company
Common Stock or a combination thereof.
Performance stock units and restricted stock units may be granted to
Eligible Employees and represent the right to receive one share of Company
Common Stock. In the case of performance stock units, Company Common Stock would
be received upon the attainment of certain Company performance objectives. Such
performance objectives would be set by the Committee. In the case of restricted
stock units, Company Common Stock would be received upon completion of a
restriction period, the duration of which would be determined by the Committee.
In all cases, Awards are subject to the terms and provisions of the 1999
Plan described below. The maximum number of shares of Company Common Stock
reserved and available for issuance under the 1999 Plan is 315,000 shares, which
constitutes approximately 4.82% of the outstanding shares of Company Common
Stock (as of April 15, 1999).
DURATION AND ADMINISTRATION OF THE 1999 PLAN
The 1999 Plan will terminate on January 27, 2009, unless otherwise
terminated by resolution of the Board of Directors. Initially, the 1999 Plan
will be administered by the Company's Compensation Committee (the "Committee").
The Committee must be composed solely of two or more directors who are
non-employee Directors. The current members of the Committee are Bruce A.
Henderson and F. Rush McKnight (see "THE BOARD OF DIRECTORS AND COMMITTEES OF
THE BOARD"). Subject to the terms and conditions of the 1999 Plan, the Committee
has full and final authority in its absolute discretion to, without limitation:
(i) determine the terms and conditions of the options; (ii) construe and
interpret the 1999 Plan and any agreement or instrument entered into thereunder;
(iii) adopt, amend, or rescind rules and regulations that may be advisable in
the administration of the 1999 Plan; (iv) establish, amend or waive the rules
and regulations and the instruments evidencing Awards granted under the 1999
Plan; and (v) make all other determinations deemed necessary or advisable for
the administration of the 1999 Plan. Any decision made or action taken by the
Committee in connection with the administration, interpretation and
implementation of the 1999 Plan and of its rules and regulations will be, to the
extent permitted by law, conclusive and binding upon all Eligible Employees and
upon any person claiming under or through any of them. Neither the Committee nor
any of its
21
<PAGE> 25
members is liable for any action taken by the Committee pursuant to the 1999
Plan. No member of the Committee is liable for the act of any other member.
SECURITIES SUBJECT TO THE 1999 PLAN
Not more than 315,000 shares of Company Common Stock may be issued pursuant
to the 1999 Plan in the aggregate, subject to the equitable adjustment by the
Committee in the event of stock splits, stock dividends, combinations, exchanges
of shares or similar capital adjustments. If any Award expires without having
been fully exercised, the shares with respect to which such Award has not been
exercised will be available for further Awards.
GRANT AND METHOD OF EXERCISE OF AWARDS
Subject to certain conditions, the duration of each Award granted under the
1999 Plan will be determined by the Committee, provided that no Award shall be
granted after the tenth anniversary of the establishment of the 1999 Plan and no
such Award shall be exercisable or vest, as applicable, later than the tenth
anniversary of the date the Award was granted.
Each stock option granted under the 1999 Plan will have an exercise price
of no less than the fair market value at the date of grant which will be
determined by averaging the highest and lowest sales prices for the Company
Common Stock on The Nasdaq Stock Market on the date of the grant. A stock option
granted under the 1999 Plan will become exercisable in equal increments of
one-third of the shares of Company Common Stock which are covered by the stock
option on each of the first three anniversary dates of the grant.
Shares of the Company Common Stock shall be deliverable upon the vesting of
performance stock unit Awards or restricted stock units Awards for no
consideration other than services rendered or, in the Committee's sole
discretion, the minimum amount of consideration other than services, required to
be received by the Company in order to assure compliance with applicable state
law, which amount shall not, in any case, exceed 10% of the fair market value of
such shares of Company Common Stock on that date of issuance.
Awards may be exercised by the giving of written notice to the Company of
the exercise of the Award accompanied by full payment of the exercise price (if
applicable) in cash or, in the Committee's discretion, its equivalent. The
Committee also may allow cashless exercise as permitted under the Federal
Reserve Board's Regulation T.
EXERCISE OF STOCK OPTIONS UPON TERMINATION OF EMPLOYMENT
Termination due to Death or Disability. If an Eligible Employee's
employment with the Company and all subsidiaries ceases because of death or
disability, the option may be exercised by the Eligible Employee (or, in the
event of death, such person's estate or personal representative) until the
earlier of either (i) the first anniversary of such termination of employment or
(ii) the expiration of the option, but only to the extent the option was
exercisable at the date of such termination of employment.
Termination without cause or due to Constructive Termination. If an
Eligible Employee's employment with the Company and all subsidiaries is
terminated by the Company without "Cause" or in the event of "Constructive
Termination" (including a "Change In Control") (as such terms are defined within
the 1999 Plan) the options become exercisable to the extent the Committee in its
sole discretion may permit.
Termination for any other reason. If an Eligible Employee's employment with
the Company and all subsidiaries ceases for any reason other than death,
disability, without cause or Constructive Termination, the option may be
exercised by the Eligible Employee, subject to the sole discretion of the
Committee, until the earlier of either (i) the 90th day following such
termination of employment or (ii) the expiration of the option, but only to the
extent the option was exercisable at the date of such termination of employment.
22
<PAGE> 26
Subject to certain limitations set forth in the 1999 Plan, the Committee
may waive any restrictions or conditions set forth in an option agreement
concerning an Eligible Employee's right to exercise any stock option and/or the
time and method of exercise.
CANCELLATION OF RESTRICTED STOCK UNITS AWARDS OR PERFORMANCE STOCK UNITS AWARDS
If an Eligible Employee's employment with the Company and all subsidiaries
terminates for any reason, the unvested portion of any restricted stock units
Award or performance stock unit Award will be canceled and the Eligible Employee
shall not be entitled to receive any consideration in respect of such
cancellation; provided, however, that the Committee, subject to certain
limitations set forth in the 1999 Plan, may waive any restrictions or conditions
relating to the vesting of restricted stock units Awards and performance stock
units Awards.
INCOME TAX TREATMENT
The Company has been advised that under current law certain of the income
tax consequences under the laws of the United States to Eligible Employees and
the Company of Awards granted under the 1999 Plan generally should be as set
forth in the following summary. This summary only addresses income tax
consequences for Eligible Employees and the Company.
An Eligible Employee who is granted an incentive stock option which
qualifies under Section 422 of the Code will not recognize income at the time of
grant or exercise of such Award. No federal income tax deduction will be
allowable to the Company upon the grant or exercise of such Award. Upon the
exercise of an incentive option, however, special alternative minimum tax rules
apply for the Eligible Employee. When the Eligible Employee sells such shares
more than one year after the date of exercise of the Award and more than two
years after the date of grant of the incentive option, the employee will
normally recognize a long-term capital gain or loss equal to the difference, if
any, between the sales price of such shares and the option exercise price. If
the Eligible Employee does not hold such shares for this period, when the
employee sells such shares, the employee will recognize ordinary compensation
income and possibly capital gain or loss in such amounts as are prescribed by
the Code and the regulations thereunder. Subject to applicable provisions of the
Code and regulations, the Company generally will be entitled to a federal income
tax deduction in the amount of such ordinary compensation income.
An Eligible Employee to whom a non-qualified option (an option which is not
an incentive stock option) is granted will not recognize income at the time of
grant of such option. When the Eligible Employee exercises such non-qualified
option, such person will recognize ordinary compensation income equal to the
difference, if any, between the option exercise price and the fair market value,
as of the date of the option exercise, of the shares such person receives. The
tax basis of such shares to such person will be equal to the fair market value,
as of the date of the option exercise, of the shares such person receives (or
the exercise price, if greater) and the holding period for such shares will
commence on the day on which such person recognized taxable income in respect to
such shares. Subject to applicable provisions of the Code and regulations, the
Company generally will be entitled to a federal income tax deduction in respect
of non-qualified options in the amount of such ordinary compensation income
recognized by the Eligible Employee.
An Eligible Employee to whom a restricted stock units Award or a
performance stock units Award is granted will not recognize income at the time
of grant of such Award. When such Eligible Employee receives the Company Common
Stock, the Eligible Employee will recognize ordinary compensation income equal
to the fair market value of any shares received. Subject to applicable
provisions of the Code and regulations thereunder, the Company generally will be
entitled to a federal income tax deduction in respect of the Award of Company
Common Stock in an amount equal to the ordinary compensation income recognized
by the Eligible Employee.
The discussion set forth above does not purport to be a complete analysis
of all potential tax consequences relevant to recipients of Awards of the
Company or to describe tax consequences based on particular circumstances. It is
based on the United States federal income tax law and interpretational
authorities as of the date of this Proxy Statement, which are subject to change
at any time. This discussion does not address
23
<PAGE> 27
state or local income tax consequences or income tax consequences for taxpayers
who are not subject to taxation in the United States.
VOTE REQUIRED
The action of the Board of Directors in adopting the 1999 Plan requires the
ratification and approval by an affirmative vote of the holders of a majority of
shares of Company Common Stock present in person or represented by proxy at the
Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION AND APPROVAL OF THE UNIVERSAL ELECTRONICS INC. 1999 STOCK INCENTIVE
PLAN.
PROPOSAL THREE: APPOINTMENT OF AUDITORS
The Board of Directors, acting on the recommendation of its Audit
Committee, has appointed PricewaterhouseCoopers LLP ("PWC"), a firm of
independent public accountants, as auditors, to examine and report to the Board
and to the Company's stockholders on the consolidated financial statements of
the Company and its subsidiaries for 1999. The Board of Directors is requesting
stockholder ratification of such appointment. Representatives of PWC will be
present at the Annual Meeting and will be given an opportunity to make a
statement. They will be available to respond to appropriate questions.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the ratification of the appointment of PWC as the Company's
independent auditors. If the stockholders of the Company reject the nomination,
the Board of Directors will reconsider its selection.
VOTE REQUIRED
The ratification of the Board of Directors' appointment of PWC as the
Company's independent auditors for 1999 requires an affirmative vote of the
holders of a majority of shares of Company Common Stock present in person or
represented by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RATIFICATION OF SUCH APPOINTMENT.
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<PAGE> 28
STOCKHOLDER PROPOSAL FOR 2000 ANNUAL MEETING
Any stockholder who meets the requirements of the proxy rules under the
Exchange Act may submit to the Board of Directors proposals to be considered for
submission to the Annual Meeting of Stockholders to be held in 2000. Any such
proposal should be submitted in writing by notice delivered or mailed by
first-class United States mail, postage prepaid, to the Secretary, Universal
Electronics Inc., 6101 Gateway Drive, Cypress, California 90630 and must be
received no later than December 31, 1999. Any such notice shall set forth: (a)
the name and address of the stockholder and the text of the proposal to be
introduced; (b) the number of shares of stock held of record, owned beneficially
and represented by proxy by such stockholder as of the date of such notice; and
(c) a representation that the stockholder intends to appear in person or by
proxy at the meeting to introduce the proposal specified in the notice. The
chairman of the meeting may refuse to acknowledge the introduction of any
stockholder proposal not made in compliance with the foregoing procedures.
The Company may use its discretion in voting proxies with respect to
Stockholder proposals not included in the Proxy Statement for the fiscal year
ended December 31, 1999, unless the Company receives notice of such proposal
prior to March 17, 2000.
STOCKHOLDER NOMINATION OF DIRECTOR
The Nominating Committee of the Company's Board of Directors will consider
nominees to the Company's Board of Directors to the extent permitted under, and
made pursuant to the procedures established by, Article IV of the Company's
Amended and Restated By-laws.
Any stockholder may recommend any person as a nominee for director of the
Company by writing to the Secretary of the Company, c/o Universal Electronics
Inc., 6101 Gateway Drive, Cypress, California 90630. Recommendations must be
received by December 31, 1999 for the Annual Meeting of Stockholders to be held
in 2000, and must comply with the requirements in the Company's by-laws.
SOLICITATION OF PROXIES
Proxies will be solicited by mail, telephone, or other means of
communication. Solicitation also may be made by directors, officers and other
employees of the Company not specifically employed for this purpose. The Company
will reimburse brokerage firms, custodians, nominees and fiduciaries in
accordance with the rules of the National Association of Securities Dealers,
Inc., for reasonable expenses incurred by them in forwarding materials to the
beneficial owners of shares. The entire cost of solicitation will be borne by
the Company.
FORM 10-K ANNUAL REPORT
All stockholders received a copy of the Company's 1998 Annual Report on
Form 10-K filed with the Securities and Exchange Commission (excluding
exhibits). Stockholders may obtain a copy of the exhibits by addressing a
request to Investor Relations, Universal Electronics Inc., 6101 Gateway Drive,
Cypress, California 90630. A charge equal to the reproduction cost will be made
if the exhibits are requested.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard A. Firehammer, Jr.
Richard A. Firehammer, Jr.
Senior Vice President, General Counsel
and Secretary
April 30, 1999
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EXHIBIT A
UNIVERSAL ELECTRONICS INC.
1999 STOCK INCENTIVE PLAN
TO BE EFFECTIVE JANUARY 28, 1999
A-1
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. General Purpose of Plan; Definitions........................ A-3
Section 2. Administration.............................................. A-4
Section 3. Number of Shares of Stock Subject to Plan................... A-5
Section 4. Eligibility................................................. A-6
Section 5. Stock Options............................................... A-6
Section 6. Stock Appreciation Rights................................... A-8
Section 7. Restricted Stock Units and Performance Stock Units.......... A-9
Section 8. Amendment and Termination................................... A-11
Section 9. Unfunded Status of Plan..................................... A-11
Section 10. General Provisions.......................................... A-11
Section 11. Effective Date of Plan...................................... A-13
Section 12. Term of Plan................................................ A-13
</TABLE>
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UNIVERSAL ELECTRONICS INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this Plan is the Universal Electronics Inc. 1999 Stock
Incentive Plan (the "Plan"). The purpose of this Plan is to enable the
Corporation (as hereinafter defined) and its Subsidiaries (as hereinafter
defined) to obtain and retain competent personnel who will contribute to the
Corporation's success by their ability, ingenuity and industry and to provide
incentives to the participating officers and key employees which are related to
increases in stockholder value and will therefore inure to the benefit of all
stockholders of the Corporation.
For purposes of this Plan, the following terms shall be defined as set
forth below:
(a) "Award" means any grant under this Plan in the form of Stock
Options, Stock Appreciation Rights, Performance Stock Units, Restricted
Stock Units or any combination of the foregoing.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(d) "Committee" means the Compensation Committee or any other
committee the Board may subsequently appoint to administer this Plan. The
Committee shall be composed entirely of directors who meet the
qualifications referred to in Section 2 of this Plan.
(e) "Corporation" means Universal Electronics Inc., a corporation
incorporated under the laws of the State of Delaware (or any successor
corporation).
(f) "Disability" means an event of illness or other incapacity of
Optionee resulting in Optionee's failure or inability to discharge
Optionee's duties as an employee of the Corporation, any Subsidiary or any
Related Entity for ninety (90) or more days during any period of 120
consecutive days.
(g) "Eligible Employee" means an employee of the Corporation, any
Subsidiary or any Related Entity as described in Section 4 of this Plan.
(h) "Fair Market Value" means, as of any given date, with respect to
any Awards granted hereunder, the mean of the high and low trading price of
the Stock on such date as reported on The Nasdaq Stock Market or if the
Stock is not then traded on The Nasdaq Stock Market, on such other national
securities exchange on which the Stock is admitted to trade or, if none, on
the National Association of Securities Dealers Automated Quotation System
if the Stock is admitted for quotation thereon; provided, however, that if
any such system, exchange or quotation system is closed on any day on which
Fair Market Value is to be determined, Fair Market Value shall be
determined as of the first day immediately proceeding such day on which
such system, exchange or quotation system was open for trading; provided,
further, that in all other circumstances, "Fair Market Value" means the
value determined by the Committee after obtaining an appraisal by one or
more independent appraisers meeting the requirements of regulations issued
under Section 170(a)(1) of the Code.
(i) "Incentive Stock Option" means any Stock Option intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Code.
(j) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 ("Rule 16b-3"), as promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended from time
to time (the "Exchange Act"), or any successor definition adopted by the
Securities and Exchange Commission.
(k) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(l) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of this Plan which remains outstanding.
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(m) "Participant" means any Eligible Employee selected by the
Committee, pursuant to the Committee's authority in Section 2 of this Plan,
to receive Awards.
(n) "Performance Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 7 of this Plan.
(o) "Related Entity" means any corporation, joint venture or other
entity, domestic or foreign, other than a Subsidiary, in which the
Corporation owns, directly or indirectly, a substantial equity interest.
(p) "Restricted Stock Unit" means the right to receive one share of
Stock as set forth in an Award granted pursuant to Section 7 of this Plan.
(q) "Retirement" means (i) retirement from active employment under a
retirement plan of the Corporation, any Subsidiary or Related Entity or
under an employment contract with any of them or (ii) termination of
employment at or after age 55 under circumstances which the Committee, in
its sole discretion, deems equivalent to retirement.
(r) "Stock" means the common stock, par value $0.01 per share, of the
Corporation.
(s) "Stock Appreciation Right" means the right pursuant to an Award
granted under Section 6 of this Plan, (i) in the case of a Related Stock
Appreciation Right (as defined in Section 6 of this Plan), to surrender to
the Corporation all or a portion of the related Stock Option and receive an
amount equal to the excess of the Fair Market Value of one share of Stock
as of the date such Stock Option or portion thereof is surrendered over the
option price per share specified in such Stock Option, multiplied by the
number of shares of Stock in respect of which such Stock Option is being
surrendered and (ii) in the case of a Freestanding Stock Appreciation Right
(as defined in Section 6 of this Plan) and receive an amount equal to the
excess of the Fair Market Value of one share of Stock as of the date of
exercise over the price per share specified in such Freestanding Stock
Appreciation Right, multiplied by the number of shares of Stock in respect
of which such Freestanding Stock Appreciation Right is being exercised.
(t) "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5 of this Plan.
(u) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Corporation, if each of the corporations
(other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
This Plan shall be administered by the Committee, composed solely of two or
more directors who are Non-Employee Directors, who shall be appointed by the
Board and who shall serve at the pleasure of the Board. In the event that a
Committee has not been appointed or in the Board's sole discretion, this Plan
shall be administered by the Board which shall have all of the power and
authority of the Committee set forth below. The Committee shall have the power
and authority in its sole discretion to grant Awards pursuant to the terms and
provisions of this Plan.
In particular, the Committee shall have the full authority, not
inconsistent with this Plan:
(a) to select Participants;
(b) to determine whether and to what extent Awards are to be granted
to Participants hereunder;
(c) to determine the number of shares of Stock to be covered by each
such Award granted hereunder, but in no case shall such number be in the
aggregate greater than that allowed under this Plan;
(d) to approve or ratify transactions by Participants involving
acquisitions from the Corporation or dispositions to the Corporation of
equity securities of the Corporation made pursuant to the terms of this
Plan;
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(e) to determine the terms and conditions of any Award granted
hereunder (including, without limitation, (i) the restrictive periods
applicable to Restricted Stock Unit Awards and (ii) the performance
objectives and periods applicable to Performance Stock Unit Awards);
(f) to waive compliance by a Participant with any obligation to be
performed by such Participant under any Award and to waive any term or
condition of any such Award (provided, however, that no such waiver shall
detrimentally affect the rights of the Participant without such
Participant's consent); and
(g) to determine the terms and conditions which shall govern all
written agreements evidencing the Awards.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time deem advisable; to interpret the provisions of this Plan and
the terms and conditions of any Award issued, expired, terminated, canceled or
surrendered under this Plan (and any agreements relating thereto); and to
otherwise supervise the administration of this Plan.
All decisions made by the Committee pursuant to the provisions of this Plan
and as to the terms and conditions of any Award (and any agreements relating
thereto) shall be final and binding on all persons, including the Corporation
and the Optionees.
SECTION 3. NUMBER OF SHARES OF STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under this Plan shall be three hundred and fifteen thousand (315,000). Such
shares of Stock may consist, in whole or in part, of authorized and unissued
shares of Stock or issued shares of Stock reacquired by the Corporation at any
time, as the Board may determine.
To the extent that (a) a Stock Option expires or is otherwise terminated,
canceled or surrendered without being exercised (including, without limitation,
in connection with the grant of a replacement option) or (b) any Restricted
Stock Unit Award or Performance Stock Unit Award granted hereunder expires or is
otherwise terminated or is canceled, the shares of Stock underlying such Stock
Option or subject to such Restricted Stock Unit Award or Performance Stock Unit
Award shall again be available for issuance in connection with future Awards
under this Plan. Upon the exercise of a Related Stock Appreciation Right (as
defined in Section 6 of this Plan), the Stock Option, or the part thereof to
which such Related Stock Appreciation Right is related, shall be deemed to have
been exercised for the purpose of the limitation on the number of shares of
Stock in respect of which the Related Stock Appreciation Right was exercised.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off, or other change in corporate
structure or capitalization affecting the Stock, the Committee shall make an
equitable adjustment or substitution in the number and class of shares reserved
for issuance under this Plan, the number and class of shares covered by
outstanding Awards and the option price per share of Stock Options or the
applicable price per share specified in Stock Appreciation Rights to reflect the
effect of such change in corporate structure or capitalization on the Stock;
provided, however, that any fractional shares resulting from such adjustment
shall be eliminated; provided further, however, that if by reason of any such
change in corporate structure or capitalization a Participant holding a
Restricted Stock Unit Award or Performance Stock Unit Award shall be entitled,
subject to the terms and conditions of such Award, to additional or different
shares of any security, the issuance of such additional or different shares
shall thereupon be subject to all of the terms and conditions (including
restrictions and performance criteria) which were applicable to such Award prior
to such change in corporate structure or capitalization; and, provided, further,
however, that unless the Committee in its sole discretion determines otherwise,
any issuance by the Corporation of shares of stock of any class or securities
convertible into shares of stock of any class shall not affect, and no such
adjustment or substitution by reason thereof shall be made with respect to, the
number or class of shares reserved for issuance under this Plan, the number or
class of shares covered by outstanding Awards or any option price or applicable
price.
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SECTION 4. ELIGIBILITY.
Officers and other key employees of the Corporation, its Subsidiaries and
its Related Entities who are responsible for or contribute to the management,
growth or profitability of the business of the Corporation, its Subsidiaries or
its Related Entities shall be eligible to be granted Awards; provided however,
with respect to an employee of a Related Entity, that such person was an
employee of the Corporation, a Subsidiary or, if originally an employee of the
Corporation or a Subsidiary, of another Related Entity immediately prior to
becoming employed by such Related Entity and accepted employment with such
Related Entity at the request of the Corporation or a Subsidiary. The
Participants under this Plan shall be selected, from time to time, by the
Committee, in its sole discretion, from among those Eligible Employees.
SECTION 5. STOCK OPTIONS.
(a) Grant and Exercise. Stock Options may be granted either alone or in
addition to other Awards granted under this Plan. Any Stock Option granted under
this Plan shall be in such form as the Committee may, from time to time,
approve, and the terms and conditions of Stock Option Awards need not be the
same with respect to each Optionee. Each Optionee shall enter into a Stock
Option agreement ("Stock Option Agreement") with the Corporation, in such form
as the Corporation shall determine, which agreement shall set forth, among other
things, the option price of the option, the term of the option and conditions
regarding exercisability of the option granted thereunder.
(i) Nature of Options. The Committee shall have the authority to
grant any Participant either Incentive Stock Options, Nonqualified Stock
Options or both types of Stock Options (in each case with or without Stock
Appreciation Rights), except that the Committee shall not grant any
Incentive Stock Options to an employee of a Related Entity. Any Stock
Option which does not qualify as an Incentive Stock Option, or the terms of
which at the time of its grant provide that it shall not be treated as an
Incentive Stock Option, shall constitute a Nonqualified Stock Option.
(ii) Exercisability. Subject to such terms and conditions as shall be
determined by the Committee in its sole discretion at or after the time of
grant, Stock Options shall be exercisable from time to time to the extent
of 33% of the number of shares of Stock covered by the Stock Option on and
after the first anniversary and before the second anniversary of the date
of grant of the Stock Option, to the extent of 67% of the number of shares
of Stock covered by the Stock Option on and after the second anniversary
and before the third anniversary of the date of grant of the Stock Option,
and to the extent of 100% of the number of shares of Stock covered by the
Stock Option on and after the third anniversary and before the expiration
of the stated term of the Stock Option (or to such lesser extent as the
Committee in its sole discretion shall determine at the time of grant or to
such greater extent as the Committee in its sole discretion shall determine
at or after the time of grant).
(iii) Method of Exercise. Stock Options may be exercised by giving
written notice of exercise delivered in person or by mail as required by
the terms of any Stock Option Agreement at the Corporation's principal
executive office, specifying the number of shares of Stock with respect to
which the Stock Option is being exercised, accompanied by payment in full
of the option price in cash or its equivalent as determined by the
Committee in its sole discretion. If requested by the Committee, the
Optionee shall deliver to the Corporation the Stock Option Agreement
evidencing the Stock Option being exercised for notation thereon of such
exercise and return thereafter of such agreement to the Optionee. As
determined by the Committee in its sole discretion at or after the time of
grant, payment of the option price in full or in part may also be made in
the form of shares of unrestricted Stock already owned by the Optionee
(based on the Fair Market Value of the Stock on the date the Stock Option
is exercised); provided, however, that in the case of an Incentive Stock
Option, the right to make payment of the option price in the form of
already owned shares of Stock may be authorized only at the time of grant.
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with this Plan's purpose and applicable law. An Optionee shall
generally have the rights to dividends or other rights of a stockholder
with respect to shares of Stock
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subject to the Stock Option when the Optionee has given written notice of
exercise, has paid in full for such shares of Stock, and, if requested, has
made representations described in Section 11(a) of this Plan.
(b) Terms and Conditions. Stock Options granted under this Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem desirable.
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of
grant, but shall be not less than 100% of the Fair Market Value of the
Stock on the date of the grant; provided, however, that if any Participant
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Corporation or any Subsidiary when an Incentive
Stock Option is granted to such Participant, the option price of such
Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be not less than 110% of the Fair Market Value of the Stock on
the date such Incentive Stock Option is granted.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee at the time of grant, but no Stock Option shall be exercisable
more than ten years after the date such Stock Option is granted; provided,
however, that if any Participant owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Corporation or any
Subsidiary when an Incentive Stock Option is granted to such Participant,
such Stock Option (to the extent required by the Code at time of grant)
shall not be exercisable more than five years from the date such Incentive
Stock Option is granted.
(iii) Transferability of Options. Except as otherwise determined by
the Committee, no Stock Options shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution and all
Stock Options shall be exercisable, during the Optionee's lifetime, only by
the Optionee, or in the case of Optionee's legal incompetency, only by
Optionee's guardian or legal representative.
(iv) Option Exercise After Termination by Reason of Death or
Disability. If an Optionee's employment with the Corporation, any
Subsidiary or any Related Entity terminates by reason of death or
Disability, and Stock Option held by such Optionee may thereafter be
exercised for a period of one year (or such shorter period as the Committee
in its sole discretion shall specify at or after the time of grant) from
the date of such termination or until the expiration of the stated term if
such Stock Option, whichever period is shorter, to the extent to which the
Optionee would on the date of termination have been entitled to exercise
the Stock Option (or to such greater or lesser extent as the Committee in
its sole discretion shall determine at or after the time of grant). In the
event of a termination of employment by reason of death or Disability, if
an Incentive Stock Option is exercised after the expiration of the exercise
period that applies for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a Nonqualified Stock Option.
(v) Option Exercise After Termination Without Cause or Constructive
Termination. If an Optionee's employment with the Corporation, any
Subsidiary, or any Related Entity is terminated, by the Corporation or such
Subsidiary or such Related Entity, without "Cause" (as such term is defined
within the Stock Option Agreement) or in the event of "Constructive
Termination" (as such term is defined within the Stock Option Agreement) of
the Optionee's employment with the Corporation or such Subsidiary or such
Related Entity is so terminated the Committee, in its sole discretion, may
permit the Optionee to exercise any Stock Option held by such Optionee, to
the extent not theretofore exercised, in whole or in part with respect to
all remaining shares covered by the Stock Option at any time prior to the
expiration of the Stock Option (or such shorter period as the Committee in
its sole discretion shall specify at or after the time of grant), or to
such greater or lesser extent as the Committee in it sole discretion shall
determine at or after the time of grant. An Optionee's acceptance of
employment, at the request of the Corporation or a Subsidiary, with a
Related Entity (or acceptance of employment, at the request of the
Corporation or a Subsidiary, with any other Related Entity), shall not be
deemed a termination of employment hereunder and any Stock Option held by
Optionee may be exercised
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thereafter to the extent that the Optionee would on the date of exercise
have been entitled to exercise such Stock Option if such Optionee had
continued to be employed by the Corporation or such Subsidiary (or such
initial Related Entity), provided that the Optionee has been in continuous
employ with the Related Entity to which such Optionee has moved from the
date of acceptance of employment therewith until the date of exercise. In
the event of termination of employment by the Corporation, any Subsidiary
or any Related Entity without Cause or in the event of Constructive
Termination of the Optionee's employment or the acceptance of employment
with a Related Entity, if an Incentive Stock Option is exercised after the
expiration of the exercise period that applies for purposes of Section 422
of the Code, such Stock Option will thereafter be treated as a Nonqualified
Stock Option.
(vi) Option Exercise After Termination Due To Resignation. If an
Optionee's employment with the Corporation, any Subsidiary, or any Related
Entity terminates for any reason not set forth in Sections 5(iv) or (v)
above, the Committee, in its sole discretion, may permit the Optionee to
exercise any Stock Option held by such Optionee to the extent such Option
was exercisable on the date of such termination (or to such greater or
lesser extent as the Committee in its sole discretion shall determine at or
after the time of grant) for a period of ninety (90) days from the date of
such termination (or such shorter period as the Committee in its sole
discretion shall specify at or after the time of grant).
(vii) Other Termination. Except as otherwise provided in this Section
5 of this Plan, or as determined by the Committee in its sole discretion,
if an Optionee's employment with the Corporation, any Subsidiary or any
Related Entity terminates, all Stock Options held by the Optionee will
terminate.
(viii) Annual Limit on Incentive Stock Options. To the extent
required for incentive stock option treatment under Section 422 of the
Code, the aggregate Fair Market Value (determined as of the date of
Incentive Stock Option is granted) of the shares of Stock with respect to
which Incentive Stock Options granted under this Plan and all other option
plans of the Corporation or any Subsidiary become exercisable for the first
time by an Optionee during any calendar year shall not exceed $100,000;
provided, however, that if the aggregate Fair Market Value (so determined)
of the shares of Stock covered by such options exceeds $100,000 during any
year in which they become exercisable, such options with a Fair Market
Value in excess of $100,000 will be Nonqualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted either in
conjunction with all or part of any Stock Option granted under this Plan
("Related Stock Appreciation Rights") or alone ("Freestanding Stock Appreciation
Rights") and, in either case, in addition to other Awards granted under this
Plan. Participants shall enter into a Stock Appreciation Rights Agreement with
the Corporation if requested by the Committee, in such form as the Committee
shall determine.
(i) Time of Grant. Related Stock Appreciation Rights related to a
Nonqualified Stock Option may be granted either at or after the time of the
grant of such Nonqualified Stock Option. Related Stock Appreciation Rights
related to such an Incentive Stock Option may be granted only at the time
of the grant of such Incentive Stock Option. Freestanding Stock
Appreciation Rights may be granted at any time.
(ii) Exercisability. Related Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock
Options to which they relate shall be exercisable in accordance with the
provisions of Section 5(a)(ii) of this Plan and Freestanding Stock
Appreciation Rights shall be exercisable, subject to such terms and
conditions as shall be determined by the Committee in its sole discretion
at or after the time of grant, from time to time, to the extent that Stock
Options are exercisable in accordance with the provisions of Section
5(a)(ii) of this Plan. A Related Stock Appreciation Right granted in
connection with an Incentive Stock Option may be exercised only if and when
the Fair Market Value of the Stock subject to the Incentive Stock Option
exceeds the option price of such Stock Option.
(iii) Method of Exercise. Stock Appreciation Rights shall be
exercised by a Participant by giving written notice of exercise delivered
in person or by mail as required by the terms of any agreement
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<PAGE> 37
evidencing the Stock Appreciation Right at the Corporation's principal
executive office, specifying the number of shares of Stock in respect of
which the Stock Appreciation Right is being exercised. If requested by the
Committee, the Participant shall deliver to the Corporation the agreement
evidencing the Stock Appreciation Right being exercised and, in the case of
a Related Stock Appreciation Right, the Stock Option Agreement evidencing
any related Stock Option, for notation thereon of such exercise and return
thereafter of such agreements to the Participant.
(iv) Amount Payable. Upon the exercise of a Related Stock
Appreciation Right, an Optionee shall be entitled to receive an amount in
cash or shares of Stock equal in value to the excess of the Fair Market
Value of one share of Stock on the date of exercise over the option price
per share specified in the related Stock Option, multiplied by the number
of shares of Stock in respect of which the Related Stock Appreciation
Rights shall have been exercised, with the Committee having in its sole
discretion the right to determine the form of payment. Upon the exercise of
a Freestanding Stock Appreciation Right, a Participant shall be entitled to
receive an amount in cash or shares of Stock equal in value to the excess
of the Fair Market Value of one share of Stock on the date of exercise over
the price per share specified in the Freestanding Stock Appreciation Right,
which shall be not less than 100% of the Fair Market Value of the Stock on
the date of Grant, multiplied by the number of shares of Stock in respect
of which the Freestanding Stock Appreciation Rights shall have been
exercised, with the Committee having in its sole discretion the right to
determine the form of payment
(b) Terms and Conditions. Stock Appreciation Rights under this Plan shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions not inconsistent with the terms of this Plan, as
the Committee shall deem desirable.
(i) Terms of Stock Appreciation Rights. The term of a Related Stock
Appreciation Right shall be the same as the term of the related Stock
Option. A Related Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the exercise,
termination, cancellation or surrender of the related Stock Option, except
that, unless otherwise provided by the Committee in its sole discretion at
or after the time of grant, a Related Stock Appreciation Right granted with
respect to less than the full number of shares of Stock covered by a
related Stock Option shall terminate and no longer be exercisable if and to
the extent that the number of shares of Stock covered by the exercise,
termination, cancellation or surrender of the related Stock Option exceeds
the number of shares of Stock not covered by the Related Stock Appreciation
Right.
The term of each Freestanding Stock Appreciation Right shall be fixed
by the Committee, but no Freestanding Stock Appreciation Right shall be
exercisable more than ten years after the date such right is granted.
(ii) Transferability of Stock Appreciation Rights. Stock Appreciation
Rights shall be transferable only when and to the extent that a Stock
Option would be transferable under Section 5(b)(iii) of this Plan.
(iii) Termination of Employment. In the event of the termination of
employment of an Optionee holding a Related Stock Appreciation Right, such
right shall be exercisable to the same extent that the related Stock Option
is exercisable after such termination. In the event of the termination of
employment of the holder of a Freestanding Stock Appreciation Right, such
right shall be exercisable to the same extent that a Stock Option with the
same terms and conditions as such Freestanding Stock Appreciation Right
would have been exercisable in the event of the termination of employment
of the holder of such Stock Option.
SECTION 7. RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS.
(a) Grant. Awards of Restricted Stock Units or Performance Stock Units may
be granted either alone or in addition to other Awards granted under this Plan.
Each Restricted Stock Unit or Performance Stock Unit represents the right to
receive, subject to the terms and provisions of this Plan and any agreements
evidencing such Awards, one share of Stock. If the Committee in its sole
discretion so determines at the time
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of grant, a Participant to whom a Restricted Stock Unit Award or Performance
Stock Unit Award has been granted may be credited with an amount equivalent to
all cash dividends ("Dividend Equivalents") that would have been paid to the
holder of such Restricted Stock Unit Award or Performance Stock Unit Award if
one share of Stock for every Restricted Stock Unit or Performance Stock Unit
awarded had been issued to the holder on the date of grant of such Restricted
Stock Unit Award or Performance Stock Unit Award. The Committee shall determine
the terms and conditions of each Restricted Stock Unit Award and Performance
Stock Unit, including without limitation, the number of Restricted Stock Units
or Performance Stock Units to be covered by such Awards, the restricted period
applicable to Restricted Stock Unit Awards and the performance objectives
applicable to Performance Stock Unit Awards. The Committee in its sole
discretion may prescribe terms and conditions applicable to the vesting of such
Restricted Stock Unit Awards or Performance Stock Unit Awards in addition to
those provided in this Plan. The Committee shall establish such rules and
guidelines governing the crediting of Dividend Equivalents, including the
timing, form of payment and payment contingencies of Dividend Equivalents, as it
may deem desirable. The Committee in its sole discretion may at any time
accelerate the time at which the restrictions on all or any part of a Restricted
Stock Unit Award lapse or deem the performance objectives with respect to all or
any part of a Performance Stock Unit Award to have been attained. Restricted
Stock Units Awards and Performance Stock Unit Awards shall not be transferable
otherwise than by will or by the laws of descent and distribution. Shares of
Stock shall be deliverable upon the vesting of Restricted Stock Unit Awards and
Performance Stock Unit Awards for no consideration other than services rendered
or, in the Committee's sole discretion, the minimum amount of consideration
other than services (such as the par value of Stock) required to be received by
the Corporation in order to assure compliance with applicable state law, which
amount shall not exceed 10% of the Fair Market Value of such shares of Stock on
the date of issuance. Each such Award shall be evidenced by a Restricted Stock
Unit agreement ("Restricted Stock Unit Award Agreement") or Performance Stock
Unit Award agreement ("Performance Stock Unit Award Agreement").
(b) Terms and Conditions. Unless otherwise determined by the Committee in
its sole discretion:
(i) a breach of any term or condition provided in this Plan, the
Restricted Stock Unit Award Agreement or the Performance Stock Unit Award
Agreement or established by the Committee with respect to such Restricted
Stock Unit Award or Performance Stock Unit Award will cause a cancellation
of the unvested portion of such Restricted Stock Unit Award or Performance
Stock Unit Award (including any Dividend Equivalents credited in respect
thereof) and the Participant shall not be entitled to receive any
consideration in respect of such cancellation; and
(ii) termination of such holder's employment with the Corporation, any
Subsidiary or any Related Entity prior to the lapsing of the applicable
restriction period or attainment of applicable performance objectives will
cause a cancellation of the unvested portion of such Restricted Stock Unit
Award or Performance Stock Unit Award (including any Dividend Equivalents
credited in respect thereof) and the Participant shall not be entitled to
receive any consideration in respect of such cancellation.
(c) Completion of Restriction Period and Attainment of Performance
Objectives. To the extent that restrictions with respect to any Restricted Stock
Unit Award lapse or performance objectives with respect to any Performance Stock
Unit Award are attained and provided that other applicable terms and conditions
have been satisfied:
(i) such of the Restricted Stock Units or Performance Stock Units as
to which restrictions have lapsed or performance objectives have been
attained shall become vested and the Committee shall cause to be issued and
delivered to the Participant a stock certificate representing a number of
shares of Stock equal to such number of Restricted Stock Units or
Performance Stock Units, and, subject to Section 11(a) hereof, free of all
restrictions; and
(ii) any Dividend Equivalents credited in respect of such Restricted
Stock Units or Performance Stock Units shall become vested to the extent
that such Restricted Stock Units or Performance Stock Units shall have
become vested and the Committee shall cause such Dividend Equivalents to be
delivered to the Participant.
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Any such Restricted Stock Unit Award or Performance Stock Unit Award
(including any Dividend Equivalents credited in respect thereof) that shall not
have become vested at the end of the applicable restricted period or the period
given for the attainment of performance objectives shall expire, terminate and
be cancelled and the Participant shall not thereafter have any rights with
respect to the Restricted Stock Units or Performance Stock Units (or any
Dividend Equivalents credited in respect thereto) covered thereby.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter, or discontinue this Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the rights of a
Participant under any Award theretofore granted without such Participant's
consent, or which, without the approval of the stockholders of the Corporation
(where such approval is necessary to satisfy then applicable requirements of
Rule 16b-3 under the Exchange Act, any Federal tax law relating to Incentive
Stock Options or applicable state law), would:
(a) except as provided in Section 3 of this Plan, increase the total
number of shares of Stock which may be issued under this Plan;
(b) except as provided in Section 3 of this Plan, decrease the option
price of any Stock Option to less than 100% of the Fair Market Value on the
date of the grant of the Option;
(c) change the class of employees eligible to participate in this
Plan; or
(d) extend (i) the period during which Stock Options may be granted or
(ii) the maximum period of any Award under Sections 5(b)(ii) or 6(b)(i) of
this Plan.
Except as restricted herein with respect to Incentive Stock Options, the
Committee may amend or alter the terms and conditions of any Award theretofore
granted, and of any agreement evidencing such Award, prospectively or
retroactively, but no such amendment or alteration shall impair the rights of
any Optionee under such Award or agreement without such Optionee's consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
This Plan is intended to constitute an "unfunded" plan. With respect to any
payments not yet made and due to a Participant by the Corporation, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general unsecured creditor of the Corporation.
SECTION 10. GENERAL PROVISIONS.
(a) The Committee may require each Optionee purchasing shares of Stock
pursuant to a Stock Option to represent to and agree with the Corporation in
writing that such Optionee is acquiring the shares of Stock without a view to
distribution thereof. All certificates for shares of Stock delivered under this
Plan and, to the extent applicable, all evidences of ownership with respect to
Dividend Equivalents delivered under this Plan, shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed or
quotation system on which the Stock is admitted for trading and any applicable
Federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required, and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of this Plan shall
not confer upon any employee of the Corporation, any Subsidiary or any Related
Entity any right to continued employment with the Corporation, any Subsidiary or
any Related Entity as the case may be, nor shall it interfere in any way with
the right of the Corporation, any Subsidiary or any Related Entity to terminate
the employment of any of its employees at any time.
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(c) Each Participant shall be deemed to have been granted an Award on the
date the Committee took action to grant such Award under this Plan or such later
date as the Committee in its sole discretion shall determine at the time such
grant is authorized.
(d) Unless the Committee otherwise determines, each Participant shall, no
later than the date as of which the value of an Award first becomes includable
in the gross income of the Participant for federal income tax purposes, pay to
the Corporation, or make arrangements satisfactory to the Committee regarding
payment of, any federal, state or local taxes of any kind required by law to be
withheld with respect to the Award. The obligations of the Corporation under
this Plan shall be conditional on such payment or arrangements and the
Corporation (and, where applicable, its Subsidiaries and its Related Entities)
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant. A Participant may
elect to have such tax withholding obligation satisfied, in whole or in part, by
(i) authorizing the Corporation to withhold from shares of Stock to be issued
upon the exercise of a Stock Option or upon the vesting of any Restricted Stock
Unit Award or the Performance Stock Unit Award a number of shares of Stock with
an aggregate Fair Market Value that would satisfy the withholding amount due, or
(ii) transferring to the Corporation shares of Stock owned by the Participant
with an aggregate Fair Market Value that would satisfy the withholding amount
due. With respect to any Participant who is an executive officer, the election
to satisfy the tax withholding obligations relating to the exercise of a Stock
Option or to the vesting of a Restricted Stock Unit Award or Performance Stock
Unit Award in the manner permitted by this subsection (d) shall be made during
the "window period" as described within the Corporation Insider Trading Policy
unless otherwise determined in the sole discretion of the Committee of the
Board.
(e) No member of the Board or the Committee, nor any officer or employee of
the Corporation acting on behalf of the Board or the Committee, shall be
personally liable for any action, failure to act, determination or
interpretation taken or made in good faith with respect to this Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Corporation acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Corporation in respect of any such
action, failure to act, determination or interpretation.
(f) This Plan is intended to satisfy the conditions of Rule 16b-3 under the
Exchange Act, and all interpretations of this Plan shall, to the extent
permitted by law, regulations and rulings, be made in a manner consistent with
and so as to satisfy the conditions of Rule 16b-3 under the Exchange Act. The
term "executive officer" as used in this Plan means any director or officer who
is subject to the provisions of Section 16(b) of the Exchange Act. Any
provisions of this Plan or the application of any provision of this Plan
inconsistent with Rule 16b-3 under the Exchange Act shall be inoperative and
shall not affect the validity of this Plan.
(g) In interpreting and applying the provisions of this Plan, any Stock
Option granted as an Incentive Stock Option pursuant to this Plan shall, to the
extent permitted by law, regulations and rulings be construed as, and any
ambiguity shall be resolved in favor of preserving its status as, an "incentive
stock option" within the meaning of Section 422 of the Code. Once an Incentive
Stock Option has been granted, no action by the Committee that would cause such
Stock Option to lose its status under the Code as an "incentive stock option"
shall be effective as to such Incentive Stock Option unless taken at the request
of or with the consent of the Participant. Notwithstanding any provision to the
contrary in this Plan or in any Incentive Stock Option granted pursuant to this
Plan, if any change in law or any regulation or ruling of the Internal Revenue
Service shall have the effect of disqualifying any Stock Option granted under
this Plan which is intended to be an "incentive stock option" within the meaning
of Section 422 of the Code, the Stock Option granted shall nevertheless continue
to be outstanding as and shall be deemed to be a Nonqualified Stock Option under
this Plan.
(h) Notwithstanding any other provision herein to the contrary, the maximum
number of shares with respect to which Awards may be granted to the same
Participant under this Plan may not exceed, in the aggregate, 266,666 shares,
except to the extent of adjustments authorized by Section 3 of this Plan.
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SECTION 11. EFFECTIVE DATE OF PLAN.
This Plan shall be effective January 28, 1999, subject to the approval by
the affirmative vote of the holders of a majority of the shares of Stock of the
Corporation present in person or by proxy at the meeting of stockholders on that
date.
SECTION 12. TERM OF PLAN.
No Award shall be granted under this Plan on or after the tenth anniversary
of the effective date of this Plan; provided, however, that Awards granted prior
to such tenth anniversary may extend beyond that date.
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PROXY UNIVERSAL ELECTRONICS INC. PROXY
THIS PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS
ON JUNE 8, 1999, 9:00 A.M., LOS ANGELES, CALIFORNIA TIME
The undersigned appoints Camille Jayne and Paul D. Arling as proxy holders.
Each shall have the power to appoint a substitute and is authorized to represent
and vote, as designated hereon, all shares of Universal Electronics Inc. held of
record by the undersigned as of April 15, 1999 at the Annual Meeting of
Stockholders to be held on June 8, 1999, 9:00 a.m., Los Angeles, California
time, or any adjournments or postponements thereof. The Board of Directors
recommends a vote FOR the election of all persons nominated as Directors by the
Board of Directors and FOR proposals 2 and 3.
(continued on reverse side)
<TABLE>
<S> <C> <C> <C>
1. Election of Directors [ ] FOR all nominees listed below
(except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Class I Nominees: Paul D. Arling Class II Nominee: J.C. Sparkman
Camille Jayne
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
------------------------------------------------------------------------------
2. Proposal to ratify and approve Universal Electronics Inc. 1999 Stock
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify appointment of PricewaterhouseCoopers LLP as independent
auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF ALL PERSONS NOMINATED AS DIRECTORS BY THE BOARD OF
DIRECTORS AND FOR PROPOSALS 2 AND 3 AND, AS TO ANY OTHER MATTERS PROPERLY
BROUGHT BEFORE THE MEETING, AS THE PROXIES MAY DIRECT.
Please sign name exactly as name appears on the other side. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
<TABLE>
<S> <C>
- ------------------------------------------------------ ------------------------------------------------------
Signature Date Signature Date
</TABLE>
