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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO ________________.
COMMISSION FILE NUMBER: 0-21044
UNIVERSAL ELECTRONICS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0204817
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6101 GATEWAY DRIVE
CYPRESS, CALIFORNIA 90630
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 820-1000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(d) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS)
----------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's outstanding common stock
held by non-affiliates of the Registrant on February 29, 2000, determined using
the per share closing sale price thereof on the National Market of The Nasdaq
Stock Market of $19.75 on that date, was approximately $270,547,000.
As of February 29, 2000, 13,715,499 shares of Common Stock, par value
$.01 per share, of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's definitive Proxy Statement for its 2000
Annual Meeting of Stockholders to be held on June 21, 2000 are incorporated by
reference into Part III of this Form 10-K.
Except as otherwise stated, the information contained in this Form
10-K is as of December 31, 1999.
Exhibit Index appears on page 45.
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UNIVERSAL ELECTRONICS INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
ITEM PAGE
NUMBER NUMBER
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<S> <C> <C>
PART I
1 Business 3
2 Properties 8
3 Legal Proceedings 8
4 Submission of Matters to a Vote of Security Holders 9
PART II
5 Market for Registrant's Common Stock and Related 11
Stockholder Matters
6 Selected Consolidated Financial Data 12
7 Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
7A Quantitative and Qualitative Disclosures about Market Risk 23
8 Financial Statements and Supplementary Data 24
9 Changes in and Disagreements with Accountants on 43
Accounting and Financial Disclosure
PART III
10 Directors and Executive Officers of the Registrant 43
11 Executive Compensation 43
12 Security Ownership of Certain Beneficial Owners 43
and Management
13 Certain Relationships and Related Transactions 43
PART IV
14 Exhibits, Financial Statement Schedules and Reports 43
on Form 8-K
Signatures 44
Exhibit Index 45
</TABLE>
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PART I
ITEM 1. BUSINESS
BUSINESS OF UNIVERSAL ELECTRONICS INC.
Universal Electronics Inc. was incorporated under the laws of Delaware in 1986
and began operations in 1987. The principal executive offices of the Company are
located at 6101 Gateway Drive, Cypress, California 90630. As used herein, the
terms "Universal" and the "Company" refer to Universal Electronics Inc. and its
subsidiaries unless the context indicates to the contrary.
Universal develops and markets easy-to-use, preprogrammed universal wireless
control devices (i.e. remote controls, wireless keyboards, gaming controls,
etc.) and technologies principally for home video and audio entertainment
equipment. The Company sells and licenses its wireless control devices and
proprietary technologies worldwide to original equipment manufacturers ("OEMs"),
private label customers, and companies involved in the cable and satellite
(collectively referred to as "subscription broadcasting") industries. The
Company also sells its wireless control devices internationally under the One
For All(R) brand name. In addition, the Company has licensed certain of its
proprietary technology and its One For All brand name to third parties who in
turn sell products directly to United States retailers. Through 1999, the
Company also marketed a line of home safety and automation products under the
Eversafe(R) brand name through domestic retail, hardware, food and drug, and
mass marketing distribution channels.
GENERAL BUSINESS INFORMATION
Universal has developed a broad line of easy-to-use, preprogrammed universal
wireless control products which are marketed principally for home video and
audio entertainment equipment through various channels of distribution,
including international retail, private label, OEMs, and cable and satellite
service providers. The Company believes that its universal wireless controls can
operate virtually all infrared remote controlled TV's, VCR's, DVD players, cable
converters, CD players, audio components and satellite receivers, as well as
most other infrared remote controlled devices worldwide.
The Company believes its wireless control products incorporate certain
significant technological advantages. First, the Company has compiled an
extensive library of over 82,000 infrared codes that cover over 100,000
individual device functions and over 1,500 individual consumer electronic
equipment brand names. The Company believes its database of infrared codes is
larger than any other existing library of infrared codes for the operation of
home video and audio devices sold worldwide. The Company's library is regularly
updated with new infrared codes used in newly introduced video and audio
devices. All such infrared codes are captured from the original manufacturer's
remote control devices to ensure the accuracy and integrity of the database.
Second, the Company's proprietary software and know-how permit infrared codes to
be compressed before being loaded into a Read Only Memory ("ROM"), Random Access
Memory ("RAM") or an electronically erasable programmable ROM ("E2") chip. This
provides significant cost and space efficiencies that enable the Company to
include more codes and features in the limited memory space of the chip than are
included in similarly priced products of competitors. Third, the Company has
developed a patented technology that provides the capability to easily upgrade
the memory of the remote control by adding codes from its library that were not
originally included. This technology utilizes both RAM and EEPROM ("E2") chip
technologies.
PRODUCTS
Universal Wireless Controls
The Company's family of products include universal standard and touch screen
remote controls, wireless keyboards, antennas, joysticks and other gaming
devices, custom and customizable chips that include the Company's library of
codes and proprietary software, and licensing of the Company's library of codes
and proprietary software. These products cover a broad spectrum of suggested
prices and performance capabilities. The Company sells its customized products
to International retailers, consumer electronic accessory suppliers, private
label customers, OEMs, cable operators and satellite service providers for
resale under their respective brand names. Prior to its restructuring in 1997,
the Company sold its wireless controls directly to a number of domestic
retailers and service centers under the One For All brand name and to cable
operators under the Uniwand(R) brand name. The Company's products are capable of
controlling from one to fifteen video and audio devices, including, but not
limited to, TVs, VCRs, DVD players, cable converters, CD players,
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satellite receivers, laser disc players, amplifiers, tuners, turntables,
cassette players, digital audio tape players, and surround sound systems.
Each of the Company's wireless control devices is designed to simplify the use
of video and audio devices. To appeal to the mass market, the number of buttons
is minimized to include only the most popular functions. The Company's universal
remotes are also designed for ease of initial set-up. For most of the Company's
products, the consumer simply inputs a four-digit code for each video or audio
device to be controlled. Each remote contains either a RAM, a ROM, or a
combination of ROM and E2 chips. The RAM, and the ROM and E2 combination
products allow the remote to be upgraded with additional codes. Another
proprietary ease of use feature the Company offers in several of its universal
remote controls is the user programmable macro key. This feature allows the user
to program a sequence of commands onto a single key, to be played back each time
that key is subsequently pressed.
The Company introduced its first product, the One For All, in 1987. In the
international markets, One For All brand name products accounted for 23.7%,
23.1%, and 18.4% of the Company's sales for the years ended December 31, 1999,
1998, and 1997, respectively. The Company discontinued direct retail operations
in North America in 1997 (see also discussion at "1997 Restructuring").
Many of the Company's products include its patented and highly proprietary
"upgradeability" feature. This feature provides the user with the capability to
easily upgrade the memory of the remote control by adding codes from its library
that were not originally included. Each of these products utilizes the E2 chip
technology and, as a result of other improvements, also retains memory while
changing batteries which eliminates the inconvenience experienced by consumers
of having to set up the remote control each time the batteries are changed.
By providing its wireless control technology in many forms, including finished
products, integrated circuits on which the Company's software is embedded, or
custom software packages, the Company can meet the needs of its customers,
enabling those who manufacture or subcontract their manufacturing requirements
to use existing sources of supply and more easily incorporate the Company's
technology. In addition, the Company's products are easily customized to include
the features that are important to customers. These may include keys to control
electronic program guides, one-button VCR record keys, customized macro set-up
keys, and/or other features.
DISTRIBUTION AND CUSTOMERS
The Company's products are sold to a wide variety of customers in numerous
distribution channels. In the United States, the Company principally sells its
products and/or licenses its proprietary technology to cable operators, private
label customers and consumer electronics accessory manufacturers for resale or
rental under their respective brand names. In addition, the Company sells its
wireless control products and licenses its proprietary technologies to OEMs for
packaging with their products. As a result of its 1997 restructuring, the
Company has also licensed certain of its proprietary technology and its One For
All brand name and Eversafe line of products to third parties who in turn sell
the products directly to certain domestic retailers. Outside of the United
States, the Company sells remotes, other wireless control devices, and certain
accessories under the One For All and certain other brand names to retailers and
to other customers under private labels through its international subsidiaries
and distributors. The Company also sells its products and/or licenses its
proprietary technology to OEMs, cable operators and satellite service providers
internationally.
For the year ended December 31, 1999, sales to Media One and Radio Shack
accounted for approximately 11.6% and 10.3%, respectively, of the Company's net
sales for the year. Also during the year, the Company lost a significant
customer when Primestar, a satellite service provider, was acquired by a third
party in early 1999. While management considers the Company's relationships with
each of its customers to be good, the loss of any one key customer could have a
material adverse effect on the Company's results of operations.
Subscription Broadcasting and OEM
The Company provides subscription broadcasters, namely cable operators or
multiple system operators ("MSOs") and satellite service providers both
domestically and internationally, with universal wireless control devices,
integrated circuits on which the Company's software is embedded, and/or
customized software packages to support the increased demand associated with the
launch of digital services, and increased cable and satellite household
penetration.
The Company also sells its universal wireless control devices, integrated
circuits on which the Company's software is embedded, and/or customized software
packages to OEMs which manufacture cable converters and satellite receivers for
resale with their products. Growth in this business line is driven by the same
factors noted for subscription broadcasting. Also during 1999, the Company
continued pursuing a further penetration of the more traditional consumer
electronics/OEM markets. Customers in these markets generally package the
Company's wireless control devices for resale with their audio and video home
entertainment products (i.e. TVs, DVD and CD players, VCRs, personal digital
recorders, etc.). The Company also sells customized chips which include the
Company's software and/or customized software packages to these customers.
Growth in this line of business has been driven by the proliferation of home
entertainment equipment, the emerging digital technology, the increase in
multimedia and interactive internet applications, and the increase in the number
of OEMs.
The Company continues to place significant emphasis on expanding its sales and
marketing efforts to subscription broadcasters and OEMs in Asia and Europe. In
1999, the Company hired a direct sales representative dedicated to expanding the
Company's customer base in Asia. Additional sales support staff were also added
in Europe to support the significant growth in the European markets. In
addition, the Company continues to improve on its manufacturing process to
increase cost savings and to provide more timely delivery of its products to its
customers.
Private Label
As a supplier of technology to private label customers, the Company is able to
achieve greater distribution of its proprietary technology. During 1999, the
Company continued its efforts to improve product cycles and planning to better
meet the needs of its customers.
International Retail
Throughout 1999, the Company continued its retail sales and marketing efforts in
Europe, Australia, New Zealand, South Africa, Mexico and selected countries in
Asia and Latin America. The Company has five international subsidiaries,
Universal Electronics B.V., established in the Netherlands, One For All GmbH and
Ultra Control Consumer Electronics Gmbh, both established in Germany, One for
All Iberia S.L., established in Spain, and One For All Ltd. (UK), established in
the United Kingdom. In the first quarter of 1998, the Company acquired
substantially all of the remote control business of one of its distributors in
the United Kingdom (One For All Ltd. (UK)). In the third quarter of 1999, the
Company completed its acquisition of a remote control distributor in Spain (One
For All Iberia S.L.). The Company also utilizes third party distributors in all
of the areas noted above where it does not have subsidiaries.
North American Retail
In December 1997, the Company announced its decision to discontinue its North
American Retail line of business. As the Company anticipated when it made its
announcement, the discontinuation occurred primarily during the first half of
1998 and was completed during the third quarter of 1998. During this transition,
the Company continued to support its retail customers by selling its remaining
inventory of North American Retail remote control products. Thereafter, in
accordance with the Company's plan, the Company licensed certain of its
proprietary technology and its One For All trademark to a third party
overseas manufacturer, to enable them to supply certain domestic retailers with
a limited number of remote control products on a direct import basis. See also
discussion at "1997 Restructuring".
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CONSUMER SERVICE AND SUPPORT
Throughout 1999, the Company continued its strategy to review its consumer
support program and modify its "help line" service such that the majority of
calls received are directed through its automated "Conversant" system. Live
agent help is also available through certain programs. The Company continues to
review its programs to determine their value in enhancing and improving the
sales of the Company's products. As a result of this continued review, some or
all of these programs may be modified or discontinued in the future and new
programs may be added. In addition, the Company provides consumer telephone
support services to several customers and is actively marketing these services
to other companies.
RAW MATERIALS AND DEPENDENCE ON SUPPLIERS
The Company utilizes third-party manufacturers and suppliers in the Far East,
Mexico and the United States to produce its wireless control products. The
number of third party manufacturers or suppliers that provided the Company in
excess of 10% of the Company's manufacturing services and/or components were
two, three and four for 1999, 1998, and 1997, respectively. In 1999, Philips and
Motorola exceeded the 10% threshold. Motorola, Philips and Jetta exceeded the
threshold
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in 1998. In 1997, Computime, Kimex, Jetta and Philips exceeded the 10%
threshold. As in the past, the Company continues to evaluate alternative and
additional third-party manufacturers and sources of supply.
During 1999, the Company continued its program of diversification of suppliers
and maintenance of duplicate tooling for its products. The purpose of this
program is to allow the Company to stabilize its source for products and
negotiate more favorable terms with its suppliers. In addition, the Company
generally uses standard parts and components, which are available from multiple
sources. The Company continues to seek other sources for integrated circuit
chips to reduce the potential for manufacturing and shipping delays and to
maintain additional inventory of these component parts as safety stock by
purchasing some of its chips from a variety of sources.
PATENTS, TRADEMARKS AND COPYRIGHTS
The Company owns a number of United States and international patents relating to
its products and technology, has filed applications for other patents that are
pending, and has obtained copyright registration for various of its proprietary
software and libraries of infrared codes. The lives of the Company's patents
range from seven to 17 years. While the Company follows the practice of
obtaining patents or copyright registration on new developments whenever
advisable, in certain cases, the Company has elected common law trade secret
protection in lieu of obtaining such protection. In the Company's opinion,
engineering and production skills, and experience are of more importance to its
market position than are patents and copyrights. The Company further believes
that none of its business is dependent to any material extent upon any single
patent or trade secret, or group of patents or trade secrets. The names of most
of the Company's products are registered or are being registered as trademarks
in the United States Patent and Trademark Office and in most of the other
countries in which such products are sold. These registrations are valid for a
variety of terms ranging from ten to 20 years, which terms are renewable as long
as the trademarks continue to be used. Management regularly renews those
registrations deemed by them to be important to the Company's operations.
SEASONALITY
Prior to the discontinuation of the Company's North American Retail line, the
majority of the Company's sales were to retailers either directly under its One
For All brand name or indirectly through its private label and OEM customers.
The Company has, accordingly, in the past but to a lesser extent going forward,
experienced stronger demand for its products in the third and fourth calendar
quarters rather than in the first half of the year as retailers purchase
products prior to the holiday selling season. Retail, private label and to a
lesser degree OEM customers generally commit to carry new and existing products
for the year in the first and second quarters and initial manufacturing and
deliveries take place in the second and third quarters. Generally, sales to
private label customers peak in the third quarter and branded product sales to
international retailers peak in the fourth quarter.
With the discontinuation of the Company's North American Retail line and the
increasing significance of the Company's other lines of business including
subscription broadcasting and OEM, the seasonality effect on the Company's
business has lessened. See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA-Notes to Consolidated Financial Statements-Note 17" for further details
regarding the quarterly results of the Company.
COMPETITION
The Company's principal competitors in the international retail and private
label markets for universal wireless controls are currently Philips, Thomson and
Sony, as well as various manufacturers of wireless controls in Asia. The
Company's primary competitors in the OEM market are the original equipment
manufacturers themselves and remote control manufacturers in Asia. In the
subscription broadcasting business, the Company competes with various
distributors in the United States and several of the larger set-top
manufacturers, including General Instrument Corp. and Scientific-Atlanta, Inc.
The Company competes in its markets on the basis of product quality, product
features, price, and customer and consumer support. The Company believes that it
will need to continue to introduce new and innovative products to remain
competitive and to obtain and retain competent personnel to successfully
accomplish its future objectives. Certain of the Company's competitors have
significantly larger financial, technical, marketing and manufacturing resources
than the Company, and there can be no assurance that the Company will remain
competitive in the future.
ENGINEERING, RESEARCH AND DEVELOPMENT
During 1999, the Company's engineering efforts focused on modifying existing
products and technology to improve their features and lower their costs, and to
develop measures to protect the Company's proprietary technology and general
know-
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how. In addition to taking steps in an attempt to control costs by improving the
efficiency of its activities and systematizing its operations, the Company
continued to regularly update its library of infrared codes to include codes for
features and devices newly introduced both in the United States and
internationally and for uncommon devices. New infrared codes are identified by
the Company through many of its activities. The Company also continues to
explore ways to improve its software to preprogram more codes into its memory
chips and to simplify the upgrading of its wireless control products.
Also during 1999, the Company's research and development efforts continued to
focus on the development of new and innovative wireless control devices with
enhanced capabilities, as well as new applications of wireless control
technology. Work on new applications to be used in combination with personal
computers and the internet continued as the Company increased the number of
customers with whom it worked with in this area.
The Company is also exploring various opportunities to supply wireless control
devices for the operation of additional electronic and other devices in the home
using infrared signals, as well as combinations of infrared signals, radio
frequencies, household electrical circuits and telephone lines. Company
personnel are actively involved with various industry organizations and bodies,
which are in the process of setting standards for infrared, radio frequency,
power line, telephone and cable communications and networking in the home. There
can be no assurance that any of the Company's research and development projects
will be successfully completed.
The Company's engineering, research and development departments, located in
Cypress, California, had approximately 51 full-time employees at December 31,
1999. The Company's expenditures on engineering, research and development in
1999, 1998 and 1997 were $3.9 million, $4.0 million, and $5.1 million,
respectively, of which approximately $2,391,000, $2,712,000, and $2,950,000,
respectively, was for research and development.
ENVIRONMENTAL MATTERS
The Company believes it has materially complied with all currently existing
federal, state and local statutes and regulations regarding environmental
standards and occupational safety and health matters to which it is subject.
During the years ended December 31, 1999, 1998 and 1997, the amounts incurred in
complying with federal, state and local statutes and regulations pertaining to
environmental standards and occupational safety and health laws and regulations
did not materially affect the Company's earnings or financial condition.
However, future events, such as changes in existing laws and regulations or
enforcement policies, may give rise to additional compliance costs that could
have a material adverse effect upon the capital expenditures, earnings or
financial condition of the Company.
EMPLOYEES
At December 31, 1999, the Company employed approximately 232 employees, of whom
51 were in engineering, research and development, 50 in sales and marketing, 63
in consumer service and support, 23 in operations and warehousing and 45 in
executive and administrative staff. None of the Company's employees is subject
to a collective bargaining agreement or is represented by a union. The Company
considers its employee relations to be good.
INTERNATIONAL OPERATIONS
Financial information relating to the Company's international operations for the
years ended December 31, 1999, 1998 and 1997, is included in "ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA-Notes to Consolidated Financial
Statements-Note 14".
1997 RESTRUCTURING
In December 1997, the Company announced its decision to discontinue its North
American One For All Retail line of business and the domestic retail
distribution channel supported by the operations in the Twinsburg, Ohio
facility. The Company continues to supply a limited line of remote control
products indirectly to several domestic retailers on a direct import basis. The
Company closed the Twinsburg, Ohio facility, with the exception of its consumer
service phone center, and moved its headquarters to Cypress, California,
formerly the site of the Company's Technology Center, during the second quarter
of 1998. The pre-tax restructuring charge of $8,419,000 taken in the fourth
quarter of fiscal year 1997 was composed of severance and employee benefit
costs, a write-down of fixed assets to be disposed of to their estimated fair
market value, a write-down of intangibles by the amount for which no future
benefit existed, a write-off of prepaid advertising and other prepaid assets to
their estimated fair market value, certain of the Company's consumer service and
support costs, and other costs related to the discontinuation of the North
American Retail business. The restructuring was completed
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during 1998. See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-Notes to
Consolidated Financial Statements-Note 16".
In connection with the discontinuation of the North American Retail product
line, the Company increased the allowance for doubtful accounts by $2.5 million
in the fourth quarter of 1997. This increase primarily related to certain
customer accounts of the Company that were deemed significantly at risk due to
the Company's exit from this business. See "ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA-Notes to Consolidated Financial Statements-Note 3".
In 1997, the North American Retail product inventories were written down by
$3.9 million to a carrying value of approximately $7.0 million from a carrying
value prior to the write down of approximately $10.9 million. The purpose of
this write down was to carry this inventory at what management believed its
estimated net realizable value was as a result of the discontinuation of this
business. See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-Notes to
Consolidated Financial Statements-Note 4".
ITEM 2. PROPERTIES
The Company's headquarters are located in Cypress, California. The Company
utilizes the following office and warehouse facilities:
<TABLE>
<CAPTION>
Square
Location Purpose or Use Feet Status
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<S> <C> <C> <C>
Twinsburg, Ohio Consumer and customer call center 8,509 Leased, expires
July 17, 2002
Cypress, California Corporate headquarters, 30,768 Leased, expires
warehouse, engineering, December 31, 2002
research and development
Enschede, Netherlands European headquarters and 9,149 Leased, expires
consumer support August 2002
</TABLE>
The Company believes its existing facilities will be adequate to meet the
Company's needs for the foreseeable future. See "ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA - Notes to Consolidated Financial Statements - Note 11"
for additional information regarding the Company's obligations under leases.
ITEM 3. LEGAL PROCEEDINGS
On November 8, 1998, SKR Resources, Inc. filed suit against the Company in the
United States District Court for the Northern District of Ohio, Eastern
Division, SKR Resources, Inc. v. Universal Electronics Inc., Case No. 1:98CV
2561, alleging the Company has breached a Sales Agreement alleged to have been
made in December 1997 with the plaintiff. The plaintiff was seeking damages in
excess of $630,000 and was also seeking specific performance on the Agreement.
On January 15, 1999, the Company filed its answer denying plaintiff's
allegations and also filed a counterclaim asserting that SKR breached a Sales
Agreement entered into in April 1996 with the Company and in addition the
Company has claimed that SKR was unjustly enriched. The Company was seeking
damages in excess of $1,600,000. On December 17, 1999, the parties entered into
a confidential Full and Final Release of all Claims and Settlement Agreement
and, on December 28, 1999, these matters were dismissed with prejudice.
On May 10, 1999, Kelly Temporary Services filed suit against the Company in the
Court of Common Pleas, Summit County, Ohio, Kelly Temporary Services v.
Universal Electronics, Case No. CV-1999-04-1721, alleging that the Company
failed to pay certain past amounts due Kelly Temporary Services. On August 4,
1999, the parties entered into a Settlement Agreement and on September 2, 1999,
this matter was dismissed with prejudice.
On July 7, 1999, The Chamberlain Group, Inc. filed suit against the Company, The
Chamberlain Group, Inc. v. Universal Electronics Inc. a/k/a One For All, Inc.,
Civil Action No. 99C-4471, alleging that by selling its garage door opener line
of products, the Company infringed and contributed to the infringement of one of
The Chamberlain Group's patents. On March 17, 2000, the parties entered into a
confidential Settlement and Patent License Agreement and on that date, this
matter was dismissed with prejudice.
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There are no other material pending legal proceedings, other than litigation
that is incidental to the ordinary course of business, to which the Company or
any of its subsidiaries is a party or of which any of their property is subject.
As is typical in the Company's industry and the nature and kind of business in
which the Company is engaged, from time to time, various claims, charges and
litigation are asserted or commenced by third parties against the Company
arising from or related to product liability, infringement of patent or other
intellectual property rights, breach of warranty, contractual relations, or
employee relations. The amounts claimed may be substantial but may not bear any
reasonable relationship to the merits of the claims or the extent of any real
risk of court awards. In the opinion of management, final judgments, if any,
which might be rendered against the Company in potential or pending litigation,
would not have a material adverse effect on the Company's financial condition or
results of operations. Moreover, management believes that the Company's products
do not infringe any third parties' patent or other intellectual property rights.
The Company maintains directors' and officers' liability insurance which insures
individual directors and officers of the Company against certain claims such as
those alleged in the above lawsuits, as well as attorney's fees and related
expenses incurred in connection with the defense of such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year through the solicitation of proxies or
otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT*
The following table sets forth certain information concerning the executive
officers of the Company as of February 29, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
Camille Jayne 47 Chairman and Chief Executive Officer
Paul D. Arling 37 President and Chief Operating Officer
Paul J.M. Bennett 44 Managing Director and Senior Vice President
J. Stewart Ames 41 Senior Vice President
Richard A. Firehammer, Jr. 42 Senior Vice President, General Counsel
and Secretary
Jerry L. Bardin 61 Senior Vice President
Mark Z. Belzowski 41 Vice President, Corporate Controller and
Chief Financial Officer
</TABLE>
* Included pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
Camille Jayne has been Chairman of the Company since December 1998 and has been
the Company's Chief Executive Officer since August 1998. She was the Company's
President and Chief Operating Officer of the Company since February 1998. Prior
to that, she was President and CEO of The Jayne Group (a consulting firm
specializing in the development, introduction and operation of digital cable TV
products and services) and a Senior Partner at BHC Consulting (a business
management and market research firm). Prior to The Jayne Group and BHC, Ms.
Jayne was Senior Vice President in charge of the digital TV business unit at
Tele-Communications, Inc (TCI). She holds both a BA and Masters degree from
Stanford and an MBA from the University of Michigan.
Paul D. Arling has been President and Chief Operating Officer of the Company
since being rehired by the Company in September 1998. He was the Company's
Senior Vice President and Chief Financial Officer from May 1996 until August
1998. From 1993 through May 1996, he served in various capacities at LESCO, Inc.
(a manufacturer and distributor of professional turf care products) with the
most recent being Acting Chief Financial Officer. Prior to LESCO, he worked for
Imperial Wallcoverings (a manufacturer and distributor of wallcovering products)
as Director of Planning and The Michael Allen Company (a strategic management
consulting company) where he was employed as a management consultant. He
9
<PAGE> 10
obtained a BS degree from the University of Pennsylvania and an MBA from the
Wharton School of the University of Pennsylvania.
Paul J.M. Bennett has been Managing Director and Senior Vice President
responsible for international retail and European OEM, Cable and Satellite
business lines. Prior to Universal Electronics, Mr. Bennett held various
positions at Philips Consumer Electronics over a seven year period, first as
Product Marketing Manager for the Accessories Product Group, initially set up to
support Philip's Audio division, and then as head of that division. Mr. Bennett
was educated at Terenure College and the College of Commerce in Dublin and
completed his studies at University College, where he gained a Bachelor of
Commerce Degree.
J. Stewart Ames has been Senior Vice President of Sales, Product Development and
Marketing of Universal Electronics Inc., managing the marketing and sales
efforts for North America and Japan. Prior to this position at UEI, Ames served
as the Company's Vice President of Cable Sales, directing the United States
based sales force in selling universal wireless control products to multiple
system operators. Before joining UEI in January 1991, Mr. Ames worked for three
years as Sales Manager for Calmold, a plastic injection molder in Southern
California, managing its sales force and selling injection molding capacity for
three factories to a variety of OEM businesses. Prior to Calmold, Mr. Ames held
sales and sales management positions at Spirol International, a manufacturer of
specialty metal fasteners, assembly equipment and metal stampings, over a period
of seven years. Mr. Ames received a B.S. Degree in Biology from Bates College in
Lewiston, Maine.
Richard A. Firehammer, Jr., Esq. has been Senior Vice President of the Company
since being rehired by the Company in February 1999. He has been the Company's
General Counsel since October 1993 and Secretary since February 1994, positions
he continued to hold after his employment with the Company ceased as part of the
1997 restructuring. He was the Company's Vice President from May 1997 until
August 1998. From November 1992 to September 1993, he was associated with the
Chicago, Illinois law firm, Shefsky & Froelich, Ltd. From 1987 to 1992, he was
with the law firm, Vedder, Price, Kaufman & Kammholz in Chicago, Illinois. He is
admitted to the Bars in the State of Illinois and the State of Ohio. Mr.
Firehammer is also a certified public accountant. He received a BS degree from
Indiana University and a JD degree from Whittier College School of Law.
Jerry L. Bardin has been Senior Vice President of Engineering and Operations
since August 1998. Prior to UEI, Mr. Bardin was with Science Applications
International Corp. (SAIC), a high technology research and engineering company
for 15 years serving in several executive, management and consulting positions.
Most recently, as a Senior Systems Engineer, Mr. Bardin was part of a contract
consulting team providing engineering and management expertise on several
product development and rollout projects as well as business process
re-engineering projects. From 1983 to 1994, Mr. Bardin managed the study and
development of undersea systems for acoustic propagation and reception at SAIC.
Mr. Bardin earned his Bachelor of Science and Master of Science in Electrical
Engineering at the University of Texas at Austin.
Mark Z. Belzowski has been the Chief Financial Officer of the Company since
January 2000. He has been a Vice President and the Corporate Controller of the
Company since May 1998 when he joined the Company. From February 1997 through
April 1998, he was a financial management consultant for various companies
including a cellular reseller and a local area network switch manufacturer. From
September 1994 through January 1997, he was Vice President Controller in the
Turner Entertainment Group, a division of Turner Broadcasting Systems, Inc. From
September 1988 through August 1994, he served in various capacities at Orion
Pictures Corporation with the most recent being Vice President Corporate
Controller. Prior to that, Mr. Belzowski was a Senior Auditor with Ernst and
Young, Certified Public Accountants. He is a certified public accountant in the
state of California. Mr. Belzowski obtained a BS degree from California State
University at Fullerton.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the National Market of The Nasdaq Stock
Market under the symbol "UEIC".
The following table sets forth, for the periods indicated, the high and low last
reported sale prices for the Company's common stock, as reported on the National
Market of The Nasdaq Stock Market:
<TABLE>
<CAPTION>
1999 1998
-------------------- ------------------
High Low High Low
-------- -------- ------- -------
<S> <C> <C> <C> <C>
First Quarter $ 7.7500 $ 5.1250 $5.9375 $4.8125
Second Quarter 15.0000 6.3125 6.6250 5.0625
Third Quarter 15.6875 10.0000 7.2500 5.0000
Fourth Quarter 23.0000 10.5000 5.8750 4.1250
</TABLE>
Stockholders of record on December 31, 1999 numbered approximately 146.
On December 20, 1999, the Company's Board of Directors authorized a two-for-one
split of its common stock effective January 31, 2000, in the form of a stock
dividend for stockholders of record at the close of business on January 10,
2000. All share and per-share amounts have been restated to give retroactive
effect to the stock split.
The Company has never paid cash dividends on its common stock and does not
intend to pay cash dividends on its common stock in the foreseeable future. The
Company intends to retain its earnings, if any, for the future operation and
expansion of its business. In addition, the terms of the Company's revolving
credit facility limit the Company's ability to pay cash dividends on its common
stock. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS-Liquidity and Capital Resources" and "ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-Notes to Consolidated Financial
Statements-Note 6."
RECENT SALES OF UNREGISTERED SECURITIES
On September 1, 1998, in connection with the Company's acquisition of H&S
Management Corp., the Company issued 168,422 shares of Common Stock, valued at
$5.1875 per share, as well as $1.5 million in cash to H&S Management Corp. as
consideration for the purchase price. Registration under the Securities Act of
1933 was not effected with respect to the transaction described above in
reliance upon the exemption from registration contained in Section 4(2) of the
Securities Act of 1933.
On November 9, 1998, the Company issued a warrant to purchase Company common
stock to General Instrument Corporation as consideration for entering into an
exclusive supply agreement with the Company. The warrant is contingent upon
General Instrument Corporation purchasing a specified minimum number of units of
products from the Company for each of the calendar years 1999, 2000 and 2001.
Assuming such minimum purchase requirements are met, the warrant allows General
Instrument Corporation to purchase up to 600,000 shares of Company common stock
at an exercise price of $6.3125 per share (both the number of shares and the
exercise price have been adjusted due to the stock split previously discussed in
this ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS). Registration under the Securities Act of 1933 was not effected with
respect to the warrant in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act of 1933. In 1999, General
Instrument Corporation failed to purchase the minimum requirement for that year.
As such, General Instrument Corporation forfeited its right to acquire up to
200,000 shares of Company common stock and may not recoup such forfeited shares
through the purchase of products in any subsequent years.
11
<PAGE> 12
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
-------- ------- -------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $105,091 $96,123 $114,338 $98,589 $105,090
Operating income (loss) $ 12,968 $ 9,505 $ (9,289) $(4,098) $ 1,179
Net income (loss) $ 7,740 $ 5,638 $ (6,518) $(2,295) $ 320
Net income (loss) per share:
Basic $ 0.58 $ 0.44 $ (0.52) $ (0.17) $ 0.02
Diluted $ 0.55 $ 0.43 $ (0.52) $ (0.17) $ 0.02
Weighted average common stock outstanding:
Basic 13,312 12,772 12,564 13,322 13,488
Diluted 14,126 13,200 12,564 13,322 13,556
Gross margin 41.3% 37.7% 27.7% 24.9% 29.3%
Operating margin (loss) 12.4% 9.9% (8.1%) (4.2%) 1.1%
Selling, general and administrative
expenses as a % of sales 28.9% 27.8% 26.3% 29.0% 27.3%
Net income (loss) as a % of sales 7.4% 5.9% (5.7%) (2.3%) 0.3%
Return on average assets 11.5% 9.3% (10.8%) (3.5%) 0.4%
Working capital $ 45,506 $26,921 $ 29,350 $36,515 $ 43,996
Ratio of current assets to current
liabilities 4.0 2.7 2.3 4.4 3.2
Total assets $ 73,751 $60,677 $ 61,138 $59,451 $ 70,105
Cash and cash equivalents $ 13,286 $ 1,489 $ 1,097 $ 510 $ 872
Long-term debt $ 240 -- -- $ 3,183 --
Stockholders' equity $ 58,511 $44,532 $ 38,887 $45,627 $ 50,238
Book value per share $ 4.40 $ 3.49 $ 3.10 $ 3.42 $ 3.71
Ratio of liabilities to liabilities and
stockholders' equity 20.7% 26.6% 36.4% 23.3% 28.3%
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the statement of operations data of the Company
expressed as a percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net sales
On-going business 100.0% 92.6% 74.5%
Discontinued North American Retail
business -- 7.4 25.5
----- ----- -----
100.0 100.0 100.0
Cost of sales
On-going business 58.7 54.8 48.3
Discontinued North American Retail
business -- 7.5 20.5
Inventory write-down -- -- 3.5
----- ----- -----
58.7 62.3 72.3
----- ----- -----
Gross profit 41.3 37.7 27.7
Selling, general and administrative
expenses 28.9 27.8 26.3
Discontinued North American Retail
business bad debt expenses -- -- 2.2
Restructuring expense -- -- 7.3
----- ----- -----
Operating income (loss) 12.4 9.9 (8.1)
Interest expense (income) (0.1) 0.5 0.6
Other expense (income) 0.0 0.1 (0.1)
----- ----- -----
Income (loss) before income taxes 12.5 9.3 (8.6)
Provision (benefit) for income taxes 5.1 3.4 (2.9)
----- ----- -----
Net income (loss) 7.4% 5.9% (5.7%)
===== ===== =====
</TABLE>
13
<PAGE> 14
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales for the twelve months ended December 31, 1999 were $105.1 million, an
increase of 18.0% over the net sales of $89.0 million for the same period last
year (after excluding net sales of $7.1 million related to the Company's
discontinued North American Retail business). Net income for 1999 was $7.7
million or $0.58 per share (basic) and $0.55 per share (diluted), compared to
$5.6 million or $0.44 per share (basic) and $0.43 per share (diluted) for the
same period last year.
Net sales in the Company's technology businesses (subscription broadcasting, OEM
and private label) in 1999 increased by $15.4 million, or 24.5%, to $78.2
million from $62.8 million in 1998. Net sales in the Company's technology
businesses were approximately 74.4% of net sales in 1999 compared to 65.3% in
1998. Sales to subscription broadcasting providers and OEMs increased by $11.3
million, or 20.3%, from $55.9 million in 1998 to $67.2 million in 1999 driven
primarily by increased demand for digital technology and related services,
growth in cable and satellite household penetration, the proliferation of home
entertainment equipment, and the increase in the number of OEMs. The Company
lost a significant customer in early 1999 when Primestar, a satellite service
provider, was acquired by DirectTV. Excluding sales to Primestar, sales to
subscription broadcasting providers and OEMs increased by 43.9% from 1998 to
1999. Private label sales increased by $4.2 million, or 61.8%, from $6.8 million
in 1998 to $11.0 million in 1999 due to strong demand for a new line of products
introduced in 1999.
Net sales from the continuing retail businesses (One For All(R) international
retail, Eversafe and direct import) increased $.7 million, or 2.7%, from $26.2
million in 1998 to $26.9 million in 1999 due to growth in international retail
sales offset by reduced sales of Eversafe product and reduced chip sales in the
direct import business. Net sales from the continuing retail businesses
accounted for approximately 25.6% of total 1999 net sales compared to 27.3% in
1998. One For All(R) international retail sales grew by $2.7 million, or 12.2%,
from $22.2 million in 1998 to $24.9 million in 1999 primarily due to increased
demand in the larger European countries including Spain and France, as well as
increased growth in Australia, New Zealand and South America. Revenue in the
Eversafe line of products decreased by $1.3 million, or 69.1%, from $1.8 million
for the year ended 1998 to $.6 million in 1999 as the Company focused less on
this remaining domestic direct retail line. Direct import sales decreased by $.8
million or 35.2% from $2.2 million in 1998 to $1.4 million in 1999, due to
higher initial chip sales in 1998 to fill the pipeline. There were no sales from
the discontinued North American Retail business line during 1999 and none are
expected in the future.
Gross margins for the year ended December 31, 1999 were 41.3% compared to 37.7%
for the same period last year. This increase can be attributed to the sale by
the Company of substantially all of its remaining inventory in the discontinued
North American Retail business at average selling prices that approximated book
value during the first half of 1998. In the Company's continuing businesses,
gross margins increased to 41.3% in 1999 compared to 40.8% in 1998. This
increase can be attributed to higher margins in the Company's technology
businesses due to the introduction of new products in 1999, and cost reductions
in certain component parts in late 1998 and throughout 1999.
Selling, general and administrative expenses increased to $30.4 million in 1999,
compared to $26.7 million in 1998. As a percentage of net sales, selling,
general and administrative expenses was 28.9% in 1999 compared to 27.8% in 1998.
The increase in selling, general and administrative expenses was primarily due
to increases in payroll and bonus related costs, increased bad debt expense, and
increased depreciation and amortization expense, offset by lower telephone
costs. Employee payroll and bonus, and related fringe costs were $12.7 million
in 1999 compared to $11.3 million in 1998, an increase of $1.4 million due to
increases in headcount, and higher management bonuses and employee profit
sharing payments based on the Company's stronger performance in 1999. For the
year ended December 31, 1999, bad debt expense increased by $1.2 million from
the year ended December 31, 1998 due to increased reserves on certain domestic
and international accounts.
14
<PAGE> 15
Depreciation and amortization expense increased by $1.0 million in 1999.
Depreciation expense increased as a result of the $1.4 million increase in fixed
assets with a shorter useful life during 1999. The increase in amortization
expense can be attributed to a full year of amortization expense in 1999 on
goodwill from acquisitions and non-compete agreements entered into in 1998
compared to a partial year of amortization expense in 1998 on such intangibles
as well as additional amortization expense on the goodwill associated with the
acquisition of a Spanish distributor in 1999. Telephone costs decreased by $.4
million in 1999 compared to 1998 due primarily to rate reductions in Europe as a
result of increased provider competition, and cost efficiencies from the
elimination of unused toll free lines and the implementation of more efficient
telephone systems and consumer support programs.
Interest expense (income) decreased by $564,000 in 1999 to $108,000 of interest
income from $456,000 of interest expense for the same period in 1998 due to
reduced borrowing under the Company's revolving credit agreement and interest
earned on accumulated cash balances in 1999.
Other expense (income) increased by $143,000 in 1999 when compared to 1998. This
is primarily attributed to favorable changes in currency rates in Europe
resulting in a gain on currency exchange transactions of $30,000 in 1999
compared to a $127,000 loss on currency exchange transactions in 1998.
The Company recorded income tax expense of $5.4 million for the year ended 1999
compared to approximately $3.3 million for the same period of 1998. The increase
was due to increased income in 1999. In 1999, the Company's effective tax rate
was 41% compared to an effective tax rate of 37% in 1998. The difference in the
1999 rate as compared to the 1998 rate was primarily due to differences in NOL
carryforward limitations in California versus Ohio due to the relocation of the
Company's headquarters from Ohio to California and a decrease in the valuation
allowance during 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales for the twelve months ended December 31, 1998 were $89.0 million, an
increase of 4.5% over the net sales of $85.2 million for the same period last
year (after excluding net sales of $7.1 million in 1998 and $29.1 million in
1997 related to the Company's discontinued North American Retail business). Net
income for 1998 was $5.6 million or $0.44 per share (basic) and $0.43 per share
(diluted), compared to a net loss of $6.5 million or $0.52 loss per share
(basic and diluted) for the same period last year.
Net sales in the Company's technology businesses (subscription broadcasting, OEM
and private label) were approximately 65.3% of net sales in 1998 compared to
53.0% in 1997. Net sales in the Company's technology businesses for 1998
increased by $2.2 million or 3.6%, from $60.6 million in 1997 to $62.8 million
in 1998. Sales to subscription broadcasting providers and OEMs increased by $6.5
million or 13.1%, from $49.4 million in 1997 to $55.9 million in 1998 driven
primarily by continued strong demand in new remote control business with the
providers of cable and satellite broadcast services. Delayed customer orders in
anticipation of a new line of remotes in combination with increased competition
resulted in reduced shipments in the private label business and accounted for a
decrease of $4.4 million or 39.5%, from $11.2 million in 1997 to $6.8 million in
1998.
Net sales from the continuing retail businesses (One For All international
retail, Eversafe and direct import) accounted for approximately 27.3% of total
1998 net sales compared to 21.5% in 1997. The Company's net sales from its
continuing retail businesses increased by $1.6 million or 6.5% in 1998 from
$24.6 million in 1997 to $26.2 million in 1998. One For All international retail
revenues (the largest component of the continuing retail business group)
increased $1.2 million or 5.8%, from $21.0 million in 1997 to $22.2 million in
1998. This change can be attributed to the growth in universal remote control
business in Europe. Net sales of Eversafe products decreased by $1.9 million or
49.7%, from $3.7 million in 1997 to $1.8 million in 1998 primarily due to weaker
demand. The direct import business line began during the first quarter of 1998,
with royalty income and significant initial chip sales of $2.2 million for 1998.
Net sales in 1998 from the discontinued North American Retail business (One For
All US and Canada) were approximately 7.4% of overall net sales compared to
25.5% in 1997. Net sales in 1998 of the Company's discontinued North American
Retail product line decreased 75.7% from $29.1 million to $7.1 million as the
Company sold off its remaining inventory for this business line at an amount
just below its carrying value.
15
<PAGE> 16
The Company's overall gross margin in 1998 was 37.7% compared to a gross margin
of 27.7% in 1997. In the Company's continuing businesses, the gross margin
increased to 40.8% in 1998 compared to 35.2% in 1997. This increase can be
attributed to improved margins in the Company's subscription broadcasting and
One For All international businesses due primarily to reduced product costs. In
the Company's discontinued North American Retail business, the gross margin
decreased from $5.7 million or 19.4% in 1997 to a negative gross margin of
$75,000 in 1998 as the Company sold the remaining product in this line at
average selling prices just below its carrying value. In 1997, the North
American Retail product inventories were written down by $3.9 million to a
carrying value of approximately $7.0 million from a carrying value prior to the
write down of approximately $10.9 million. The purpose of this write down was to
carry this inventory at what management believed its estimated net realizable
value was as a result of the discontinuation of this business.
As a percentage of net sales, selling, general and administrative expenses
increased to 27.8% in 1998 from 26.3% in 1997. In dollars, the Company's
selling, general and administrative expenses decreased 11.1% during 1998 to
$26.7 million from $30.1 million in 1997. Advertising and payroll expenses
decreased during 1998 by approximately $2.0 and $1.3 million, respectively,
which were partially offset by an increase in amortization expense of $.6
million. The reductions in advertising costs were attributable to the
elimination of retail-related advertising programs for the Company's
discontinued North American Retail product line. The payroll decreases were a
result of headcount reductions associated with the discontinuation of the North
American Retail product line. The increase in amortization expense was due to
the amortization of additional goodwill from businesses acquired and non-compete
covenants entered into in 1998.
In connection with the discontinuation of the North American Retail product
line, the Company increased the allowance for doubtful accounts by $2.5 million
in the fourth quarter of 1997. This increase primarily related to certain
customer accounts of the Company that were deemed at risk due to the Company's
exit from this business.
In December 1997, the Company announced its decision to discontinue its North
American One For All Retail business. As part of that announcement, the Company
advised its employees, stockholders and the investment community generally that
it would recognize a pre-tax charge of $8.4 million during the fourth quarter of
1997.
The table below depicts the costs associated with this action:
<TABLE>
<CAPTION>
Type of Cost Amount
-------------------------------------------- ----------
<S> <C>
Severance and related employee benefit costs $3,260,000
Prepaid advertising for retail products 2,129,000
Fixed assets 1,738,000
Intangible assets - trademarks 460,000
Consumer support and service 393,000
Prepaid assets 163,000
Other retail business exit costs 276,000
----------
$8,419,000
==========
</TABLE>
Severance and related employee benefits were determined by adding such estimated
amounts for each of the 105 employees of the Company that were terminated in the
restructuring. Prepaid advertising amounts represent trade credits for various
types of advertising that were obtained by the Company in 1994 and 1996 in
exchange for remote control product. These prepaid advertising credits were
recorded by the Company at the carrying value of the inventory exchanged. The
advertising obtained in these arrangements was exclusively geared toward retail
products. Therefore, these credits were written off as part of the
discontinuation of the Company's North American One For All Retail business.
Fixed asset charges consisted primarily of the Company's Twinsburg facility,
tooling associated with the Company's North American One For All Retail product,
and equipment dedicated to the Company's North American One For All Retail line.
The book value of the plant and leasehold improvements for the Company's
Twinsburg facility was compared to the estimated market value of the building
pursuant to an existing purchase offer received from a non-affiliated third
party to determine the necessary charge. The Company's Twinsburg facility was
sold in August 1998 at a value approximating the book value after the write-down
16
<PAGE> 17
with no material gain or loss. Charges for all other fixed assets and prepaid
assets were determined by comparing net book values to estimated fair market
values. The fair market values used in these comparisons represent the Company's
estimates based on an assessment of the usefulness of each item within the other
business lines of the Company. Gains or losses resulting from the dispositions
of these adjusted fixed assets in 1998 were not material. The unamortized value
of the trademarks used solely on products that were discontinued and determined
by the Company to not be usable in its on-going businesses were written off in
their entirety. Consumer support and service costs relate to on-going
contractual obligations of the Company to provide telephonic support for certain
of its products that were discontinued as part of this restructuring.
Under the Company's plan, the Company anticipated that the discontinuation would
(i) reduce its annual overhead by approximately $5.0 million as a result of
significantly reducing the advertising associated with the retail business,
eliminating the costs associated with owning and operating the Twinsburg
facility, terminating 105 employees during the first half of 1998, reducing the
Company's amortization expense as a result of writing off certain of the
Company's trademarks used solely on products that were discontinued and
determined by the Company to not be usable in its on-going businesses, and
eliminating costs associated with obtaining and holding an inventory of products
for sale to its retail customers; and (ii) create a profitable new marketing and
distribution channel for certain of its technology and trademarks by licensing
them to third party distributors and manufacturers for their use in the domestic
retail markets.
As the Company anticipated when it made its December 1997 announcement, the
discontinuation occurred primarily during the first half of 1998 and was
completed during the 1998 third quarter. During this transition, the Company
continued to support its retail customers by selling through its remaining
inventory of North American Retail remote control products. Thereafter, in
accordance with the Company's plan, the Company licensed certain of its
proprietary technology and its One For All trademark to a third party overseas
manufacturer, to enable them to supply several of these customers with a limited
number of remote control products on a direct import basis.
During the first half of 1998, the Company relocated its headquarters from its
Twinsburg, Ohio facility to its Technology Center in Cypress, California. In
connection with this move, all of the Company's operations and administrative
functions were moved to its new headquarters, with the exception of its customer
service phone center, which remained in the Company's Twinsburg facility. In the
third quarter of 1998, the Company sold its Twinsburg facility to a third party
at a price of $1.7 million and leased back a portion of it to house its customer
service phone center on terms which the Company believed to be competitive. The
carrying value of the building at the time of the sale was approximately $1.7
million and the Company recognized a loss on the sale of the building of
approximately $34,000.
A reserve for expected cash expenditures of $3.9 million was established as part
of the Company's 1997 fourth quarter restructuring. During 1998, the Company
completed this restructuring and used the reserve in its entirety. The
restructuring proceeded according to the Company's plan and was completed
without any significant changes to the plan. The following table details the
type and amount of costs charged against the reserve during 1998.
<TABLE>
<CAPTION>
Type of Cost Amount
------------------------------ ----------
<S> <C>
Severance and related employee
benefit costs $3,180,000
Consumer support and service 393,000
Other retail business exit costs 356,000
----------
$3,929,000
==========
</TABLE>
Interest expense decreased by $172,000 in 1998 to $455,000 from $627,000 in 1997
due to reduced borrowing under the Company's revolving letter agreement and
lower average borrowing costs. Other expense increased to $100,000 in 1998 from
$1,000 in 1997. This occurred as a result of higher net currency exchange losses
from the Company's international operations.
The Company had an effective income tax rate for 1998 of 37% as compared to
34.3% in 1997. The difference in the 1998 rate as compared to the 1997 rate was
primarily due to differences in NOL carryforward limitations in California
versus Ohio due to the relocation of the Company's headquarters from Ohio to
California.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds are its operations and bank credit
facilities. Cash provided by operating activities for 1999 was $17.5 million as
compared to cash provided by operating activities during 1998 of $9.7 million
and cash used for operating activities during 1997 of $186,000. The improvement
in 1999 cash flow from operating activities is principally due to the
significant increase in income before taxes, depreciation and amortization in
1999 and the effect of cash payments incurred during 1998 to complete the
discontinuation of the North American Retail product line and restructuring
announced in late 1997.
On October 23, 1998, the Company paid off its outstanding credit line with The
Provident Bank and entered into a $15 million revolving credit agreement with
Bank of America National Trust and Savings Association ("B of A"). Under the
revolving credit agreement with B of A, the Company can choose from several
interest rate options at its discretion. The interest rate in effect as of
December 31, 1999 using the Fixed Rate option as defined in the agreement, which
is intended to approximate B of A's cost of funds, plus an applicable margin was
7.08%. The applicable margin varies with a range from 1.25% to 2.00% per annum
depending on the Company's net income before interest, taxes, depreciation and
amortization. At December 31, 1999, the applicable margin was 1.25 percent. The
revolving credit facility, which expires October 23, 2001, is secured by a first
priority security interest in the Company's cash and cash equivalents, accounts
receivable, inventory, equipment, and general intangibles of the Company. The
Company pays a commitment fee of a maximum rate of 3/16 of 1% per year on the
unused portion of the credit line. Under the terms of this revolving credit
agreement, the Company's ability to pay cash dividends on its common stock is
restricted and the Company is subject to certain financial covenants and other
restrictions that are standard for these types of agreements. However, the
Company has authority under this credit facility to acquire up to 1,000,000
shares of its common stock in market purchases and, since the date of this
agreement, the Company has acquired approximately 109,000 shares of stock, at a
cost of approximately $564,500, which it holds as treasury shares and are
available for reissue by the Company. Amounts available for borrowing under this
credit facility are reduced by the outstanding balance of the Company's import
letters of credit. As of December 31, 1999, no amounts were outstanding under
this credit facility. The Company had no outstanding import letters of credit as
of December 31, 1999.
Open market purchases of the Company's common stock under a program announced in
1996 amounted to zero in 1999, approximately $3.5 million during 1998 and
$700,000 in 1997. The Company holds all of these shares as treasury stock and
they are available for reissue by the Company. Presently, except for using a
small number of these treasury shares to compensate its outside board members,
the Company has no plans to distribute these shares although the Company may
change these plans if necessary to fulfill its on-going business objectives. In
addition, during 1999, the Company received proceeds of approximately $3.0
million from the exercise of stock options granted to the Company's current and
former employees, as compared to approximately $1.5 million in 1998 and $264,000
in 1997. The primary reason for the significant increase in stock option
exercises during 1999 and 1998 was that the Company's stock began to trade at
relatively high levels towards the second half of 1998 and into 1999 and many
employees, as well as former employees who were terminated during 1998 as part
of the Company's restructuring (principally the Company's former Chairman of the
Board), elected to exercise their options.
Capital expenditures in 1999, 1998 and 1997 were approximately $1.4 million,
$2.4 million, and $2.7 million, respectively. These expenditures related
primarily to acquiring product tooling in each year and relocating the Company's
headquarters from Twinsburg, Ohio to Cypress, California during 1998. The
Company has currently budgeted approximately $2.2 million for capital
expenditures in 2000 primarily for acquiring product tooling.
Effective July 1, 1999, the Company completed its acquisition of a remote
control distributor in Spain for $750,000 in cash. During the third quarter of
1998, the Company acquired a remote control company in the United States for
$2.4 million, for which 168,422 shares of newly issued Company common stock
valued at $874,000 were issued and $1.5 million was paid in cash. During the
first quarter of 1998, the Company acquired a remote control distributor in the
United Kingdom for $3.0 million in cash, of which $1.7 million was paid in 1998
and the remaining $1.3 million was paid in 1999.
Historically, the Company's working capital needs have typically been greatest
during the third and fourth quarters when accounts receivable and inventories
increase in connection with the fourth quarter holiday selling season.
18
<PAGE> 19
However, due to the discontinuation of the Company's North American Retail line
and the increasing significance of the Company's other lines of business
including subscription broadcasting and OEM, the Company expects that this
seasonality will be lessened. At December 31, 1999, the Company had $45.5
million of working capital compared to $26.9 million at December 31, 1998. The
increase in working capital is principally due to increases in accumulated cash
and cash equivalents and higher accounts receivable balances due from customers
at December 31, 1999.
It is the Company's policy to carefully monitor the state of its business, cash
requirements and capital structure. The Company believes that funds generated
from operations and available from its borrowing capacity will be sufficient to
fund current business operations as well as anticipated growth at least through
the end of 2000, however, there can be no assurances that this will occur.
YEAR 2000 READINESS DISCLOSURES
As previously reported, over the past several years the Company developed and
implemented a plan to address the anticipated impacts of the so-called Year 2000
problem on its information technology (IT) systems and non-IT systems. The
Company also surveyed selected third parties to determine the status of their
Year 2000 compliance programs. In addition, contingency plans were developed
specifying what the Company would do if it or important third parties
experienced disruptions to critical business activities as a result of the Year
2000 problem.
The Company's Year 2000 plan was completed in all material respects prior to the
anticipated Year 2000 failure dates. As of March 24, 2000, the Company has not
experienced any materially important business disruptions or system failures as
a result of Year 2000 issues, nor is it aware of any Year 2000 issues that have
impacted its customers, suppliers or other significant third parties to an
extent significant to the Company. However, Year 2000 compliance has many
elements and potential consequences, some of which may not be foreseeable or may
be realized in future periods. Consequently, there can be no assurance that
unforeseen circumstances may not arise, or that the Company will not in the
future identify equipment or systems which are not Year 2000 compliant.
As of December 31, 1999, the Company's total incremental costs of addressing
Year 2000 issues were approximately $165,000. This amount has been incurred and
was funded through operating cash flow.
In addition, the Company has performed a full internal evaluation of its
non-information technology systems and products. Based upon that evaluation and
certain ongoing tests that the Company performs from time to time, it believes
that its non-information technology systems and products are Year 2000
compliant. Because of these ongoing evaluations, the Company sells its products
with Year 2000 compliance warranties. Although the Company strongly believes
that its products are Year 2000 compliant and provides Year 2000 compliance
warranties with its products, there can be no assurance that the Company has
identified all possible Year 2000 product issues and that any such issues would
not have an adverse financial impact on the Company.
RISK FACTORS
Forward Looking Statements
The Company cautions that the following important factors, among others
(including but not limited to factors discussed below, in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as those discussed elsewhere in this Annual Report of the Form 10-K, and as
mentioned from time to time in the Company's other reports filed with the
Securities and Exchange Commission), could affect the Company's actual results
and could cause or contribute to the Company's actual consolidated results to
differ materially from those expressed in any forward-looking statements of the
Company made by or on behalf of the Company. The factors included here are not
exhaustive. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances
after the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any
19
<PAGE> 20
forward-looking statements. Therefore, forward-looking statements should not be
relied upon as a prediction of actual future results.
While management believes that the forward looking statements made in this
report are based on reasonable assumptions, the actual outcome of such
statements is subject to a number of risks and uncertainties, including
continued acceptance of the Company's technology and products, the impact of
competitive pressures, including products and pricing, locating and finalizing
acceptable acquisition targets and/or strategic partners, the availability of
financing for acquisitions on terms acceptable to the Company, fluctuations in
currency exchange rates, the consolidation of and new competition experienced by
members in the cable industry, principally from satellite and other similar
broadcast providers, general economic and stock market conditions and other
risks which are otherwise set forth in this Annual Report on Form 10-K and the
Company's other filings with the Securities and Exchange Commission.
Dependence Upon Key Suppliers
Most of the components used in the Company's products are available from
multiple sources; however, the Company has elected to purchase integrated
circuit components used in the Company's products, principally its wireless
control products, and certain other components used in the Company's products,
from two main sources, each of which provide in excess of ten percent (10%) of
the Company's microprocessors for use in its products. The Company has developed
alternative sources of supply for these integrated circuit components. However,
there can be no assurance that the Company will be able to continue to obtain
these components on a timely basis. The Company generally maintains inventories
of its integrated chips, which could be used in part to mitigate, but not
eliminate, delays resulting from supply interruptions. An extended interruption,
shortage or termination in the supply of any of the components used in the
Company's products, or a reduction in their quality or reliability, or a
significant increase in prices of components, would have an adverse effect on
the Company's business and results of operations.
Dependence on Foreign Manufacturing
Third-party manufacturers located in foreign countries manufacture all of the
Company's wireless controls. The Company's arrangements with its foreign
manufacturers are subject to the risks of doing business abroad, such as import
duties, trade restrictions, work stoppages, political instability and other
factors which could have a material adverse effect on the Company's business and
results of operations. The Company believes that the loss of any one or more of
its manufacturers would not have a long-term material adverse effect on the
Company's business and results of operations because numerous other
manufacturers are available to fulfill the Company's requirements, however, the
loss of any of the Company's major manufacturers could adversely effect the
Company's business until alternative manufacturing arrangements are secured.
Potential Fluctuations in Quarterly Results
The Company's quarterly financial results may vary significantly depending
primarily upon factors such as the timing of significant orders, the timing of
new product offerings by the Company and its competitors and product
presentations and the loss or acquisition of any significant customers. In
addition, historically the Company's business has been seasonal, with the
largest proportion of sales occurring in September, October and November of each
calendar year. Factors such as quarterly variations in financial results could
adversely affect the market price of the Common Stock and cause it to fluctuate
substantially. In addition, the Company (i) may from time to time increase its
operating expenses to fund greater levels of research and development, increase
its sales and marketing activities, develop new distribution channels, improve
its operational and financial systems and broaden its customer support
capabilities and (ii) may incur significant operating expenses associated with
any new acquisitions. To the extent that such expenses precede or are not
subsequently followed by increased revenues, the Company's business, operating
results and financial condition will be materially adversely effected.
The Company may experience significant fluctuations in future quarterly
operating results that may be caused by many factors, including demand for the
Company's products, introduction or enhancement of products by the Company and
its competitors, the loss or acquisition of any significant customers, market
acceptance of new products, price reductions by the Company or its competitors,
mix of distribution channels through which products are sold, level of product
returns, mix of customers and products sold, component pricing, mix of
international and
20
<PAGE> 21
domestic revenues, and general economic conditions. In addition, as a strategic
response to changes in the competitive environment, the Company may from time to
time make certain pricing or marketing decisions or acquisitions that could have
a material adverse effect on the Company's business, results of operations or
financial condition. As a result, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as any indication of future performance. Due to all of
the foregoing factors, it is likely that in some future quarters the Company's
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Company's common stock would likely
be materially adversely effected.
Dependence on Consumer Preference
The Company is susceptible to fluctuations in its business based upon consumer
demand for its products. The Company believes that its success depends in
substantial part on its ability to anticipate, gauge and respond to such
fluctuations in consumer demand. However, it is impossible to predict with
complete accuracy the occurrence and effect of any such event that will cause
such fluctuations in consumer demand for the Company's products. Moreover, the
Company cautions that any increases in sales or growth in revenue that it
achieves may be transitory and should by no means be construed to mean that such
increases or growth will continue.
Dependence Upon Timely Product Introduction
The Company's ability to remain competitive in the wireless control products
market will depend in part upon its ability to successfully identify new product
opportunities and to develop and introduce new products and enhancements on a
timely and cost effective basis. There can be no assurance that the Company will
be successful in developing and marketing new products or in enhancing its
existing products, or that such new or enhanced products will achieve consumer
acceptance, and if acquired, will sustain that acceptance, that products
developed by others will not render the Company's products non-competitive or
obsolete or that the Company will be able to obtain or maintain the rights to
use proprietary technologies developed by others which are incorporated in the
Company's products. Any failure by the Company to anticipate or respond
adequately to technological developments and customer requirements, or any
significant delays in product development or introduction, could have a material
adverse effect on the Company's financial condition and results of operations.
In addition, the introduction of new products which the Company may introduce in
the future may require the expenditure of a significant amount of funds for
research and development, tooling, manufacturing processes, inventory and
marketing. In order to achieve high volume production of any new product, the
Company may have to make substantial investments in inventory and expand its
production capabilities.
Dependence on Major Customers
The Company's performance is affected by the economic strength and weakness of
its worldwide customers. The Company sells its wireless control products and
proprietary technologies to private label customers, original equipment
manufacturers ("OEMs"), and companies involved in the subscription broadcasting
industry. The Company also supplies its products to its wholly-owned, non-U.S.
subsidiaries and to independent foreign distributors, who in turn distribute the
Company's products worldwide, with Europe, Australia, New Zealand, Mexico and
selected countries in Asia and Latin America currently representing the
Company's principal foreign markets. In 1999, the Company lost a significant
customer in its subscription broadcasting business due to that customer being
acquired by a third party. During 1999, the Company had two customers that
acquired more than ten percent of the Company's products and the loss of either
of these customers or any of the Company's other key customers either in the
United States or abroad due to the financial weakness or bankruptcy of any such
customer or the inability of the Company to obtain orders or maintain its order
volume with its major customers may have an adverse effect on the Company's
financial condition or results of operations.
Competition
The wireless control industry is characterized by intense competition based
primarily on product availability, price, speed of delivery, ability to tailor
specific solutions to customer needs, quality and depth of product lines. The
Company's competition is fragmented across its product lines, and accordingly,
the Company does not compete
21
<PAGE> 22
with any one company across all product lines. The Company competes with a
variety of entities, some of which have greater financial and other resources
than the Company. The Company's ability to remain competitive in this industry
depends in part on its ability to successfully identify new product
opportunities and develop and introduce new products and enhancements on a
timely and cost effective basis as well as its ability to identify and enter
into strategic alliances with entities doing business within the industries the
Company serves. There can be no assurances that the Company and its product
offerings will be and/or remain competitive or that any strategic alliances, if
any, which the Company enters into will achieve the type, extent and amount of
success or business that the Company expects or hopes to achieve.
Potential for Litigation
As is typical in the Company's industry and the nature and kind of business in
which the Company is engaged, from time to time, various claims, charges and
litigation are asserted or commenced by third parties against the Company or by
the Company against third parties arising from or related to product liability,
infringement of patent or other intellectual property rights, breach of
warranty, contractual relations, or employee relations. The amounts claimed may
be substantial but may not bear any reasonable relationship to the merits of the
claims or the extent of any real risk of court awards. While it is the opinion
of management that the Company's products do not infringe any third parties'
patent or other intellectual property rights, the costs associated with
defending or pursuing any such claims or litigation could be substantial and
amounts awarded as final judgments, if any, in any such potential or pending
litigation, could have a significant and material adverse effect on the
Company's financial condition or results of operations.
General Economic Conditions
General economic conditions, both domestic and foreign, have an impact on the
Company's business and financial results. From time to time the markets in which
the Company sells its products experience weak economic conditions that may
negatively affect the sales of the Company's products. To the extent that
general economic conditions affect the demand for products sold by the Company,
such conditions could have an adverse effect on the Company's business.
1997 Restructuring Efforts
The Company believes that the discontinuation of its North American Retail
business and its subsequent restructuring favorably impacted the Company's
ongoing operations due to (i) reductions in the Company's annual overhead which
were a result of closing the Company's Twinsburg, Ohio facility, (ii)
eliminating employee and other costs associated with operating this business,
and (iii) generating revenues from licensing certain of its technology and
trademarks. There can be no assurance that any such cost savings or revenues
will continue to occur and if they do, that they will be significant or
maintained.
Effects on the Company Due to International Operations
By operating its business in countries outside of the United States, the Company
is exposed to fluctuations in foreign currency exchange rates, exchange ratios,
nationalization or expropriation of assets, import/export controls, political
instability, variations in the protection of intellectual property rights,
limitations on foreign investments and restrictions on the ability to convert
currency. These risks are inherent in conducting operations in geographically
distant locations, with customers speaking different languages and having
different cultural approaches to the conduct of business, any one of which alone
or collectively, may have an adverse affect on the Company's international
operations, and consequently on the Company's business, operating results and
financial condition. While the Company will continue to work toward minimizing
any adverse affects of conducting its business abroad, no assurance can be made
that the Company will be successful in minimizing any such affects.
OUTLOOK
The Company's focus in 2000 is to continue to seek ways to increase its customer
base worldwide, particularly in the areas of subscription broadcasting, OEM, and
its One For All international retail business. In addition, the Company will
increase its focus on creating new applications for its proprietary and/or
patented technologies in the
22
<PAGE> 23
consumer electronics/OEM market, and computer/internet control markets.
The Company will also continue in 2000 to control its overall cost of doing
business. Management believes that through product design changes and its
purchasing efforts, improvements in the Company's gross margins and efficiencies
in its selling, general and administrative expenses can be accomplished,
although there can be no assurances that there will be any improvements to the
Company's gross margin or that the Company will achieve any cost savings through
these efforts and if obtained, that any such improvements or savings will be
significant or maintained.
In addition, during 2000, management will continue to pursue its overall
strategy of seeking out ways to operate all aspects of the Company more
profitably. This strategy will include looking at acceptable acquisition targets
and strategic partnership opportunities. The Company cautions, however, that no
assurances can be made that any suitable acquisition targets or partnership
opportunities will be identified and, if identified, that a transaction can be
consummated. Moreover, if consummated, no assurances can be made that any such
acquisition or partnership will profitably add to the Company's operations.
While management believes that the forward looking statements made in this
report are based on reasonable assumptions, the actual outcome of such
statements is subject to a number of risks and uncertainties, including
continued acceptance of the Company's technology and products, the impact of
competitive pressures, including products and pricing, locating and finalizing
acceptable acquisition targets and/or strategic partners, the availability of
financing for acquisitions on terms acceptable to the Company, fluctuations in
currency exchange rates, the consolidation of and new competition experienced by
members in the cable industry, principally from satellite and other similar
broadcast providers, general economic and stock market conditions and other
risks which are otherwise set forth in this Annual Report on Form 10-K and the
Company's other filings with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to various market risks, including interest rate and
foreign currency exchange rate fluctuations. The Company has established
policies, procedures and internal processes governing its management of market
risks and the use of financial instruments to manage its exposure to such risks.
The interest payable under the Company's revolving credit agreement with its
bank is variable and generally based on either the bank's cost of funds, or the
IBOR rate, and is affected by changes in market interest rates. At December 31,
1999, the Company had no borrowings on its credit line. The interest rate in
effect on the credit line using the bank's cost of funds rate as the base as of
December 31, 1999 was 7.08%. The Company has wholly owned subsidiaries in the
Netherlands, United Kingdom, Germany and Spain. Sales from these operations are
typically denominated in local currencies including Euros, British Pounds,
German Marks, and Spanish Pesetas thereby creating exposures to changes in
exchange rates. Changes in the local currencies/U.S. Dollars exchange rate may
positively or negatively affect the Company's sales, gross margins and retained
earnings. The Company, from time to time, enters into foreign currency exchange
agreements to manage its exposure arising from fluctuating exchange rates
related to specific transactions, primarily foreign currency forward contracts
for inventory purchases. The Company had a number of forward exchange contracts
outstanding at December 31, 1999 with an aggregate notional value of
approximately $9.1 million. The Company does not enter into any derivative
transactions for speculative purposes. The sensitivity of earnings and cash
flows to variability in exchange rates is assessed by applying an approximate
range of potential rate fluctuations to the Company's assets, obligations and
projected results of operations denominated in foreign currencies. Based on the
Company's overall foreign currency rate exposure at December 31, 1999, the
Company believes that movements in foreign currency rates should not materially
affect the financial position of the Company, although no assurance can be made
that any such foreign currency rate movements in the future will not have a
material affect.
23
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants 25
Consolidated Balance Sheets at December 31, 1999 and 1998 26
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997 27
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997 29
Notes to Consolidated Financial Statements 30
Financial Statement Schedule:
Schedules for the years ended December 31, 1999, 1998 and 1997
II - Valuation and Qualifying Accounts and Reserves 42
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
24
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Universal Electronics Inc.
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Universal Electronics Inc. and its subsidiaries at December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. In addition, in our opinion,
the financial statement schedule listed in the accompanying index present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Costa Mesa, California
January 21, 2000
25
<PAGE> 26
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,286,219 $ 1,488,672
Accounts receivable, net 27,932,794 23,639,054
Inventories 13,493,813 14,834,058
Prepaid expenses and other current assets 1,887,367 1,835,035
Deferred income taxes 3,906,102 1,268,924
------------ ------------
Total current assets 60,506,295 43,065,743
Equipment, furniture and fixtures, net 3,696,906 4,439,947
Goodwill and other intangible assets, net 6,264,603 6,158,135
Other assets 1,661,867 1,547,641
Deferred income taxes 1,621,795 5,465,424
------------ ------------
Total assets $ 73,751,466 $ 60,676,890
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ -- $ 4,786,293
Accounts payable 8,824,212 7,756,515
Accrued income taxes 793,902 331,395
Accrued compensation 1,928,110 1,090,149
Other accrued taxes 830,953 439,729
Other accrued expenses 2,623,271 1,740,335
------------ ------------
Total current liabilities 15,000,448 16,144,416
Notes payable 239,821 --
------------ ------------
Total liabilities 15,240,269 16,144,416
Commitments and contingencies (note 15)
Stockholders' equity:
Preferred stock, $.01 par value, 624,512 shares
authorized; none issued or outstanding -- --
Common stock, $.01 par value, 20,000,000 shares
authorized; 15,317,304 and 14,453,214 shares issued at
December 31, 1999 and 1998, respectively 153,173 144,532
Paid-in capital 64,299,603 57,899,173
Currency translation adjustment (236,778) (121,753)
Retained earnings/(accumulated deficit) 1,086,760 (6,653,322)
Unamortized value of restricted stock grants (83,117) --
------------ ------------
65,219,641 51,268,630
Less cost of common stock in treasury, 1,652,384 and
1,659,210 shares in 1999 and 1998, respectively 6,708,444 6,736,156
------------ ------------
Total stockholders' equity 58,511,197 44,532,474
------------ ------------
Total liabilities and stockholders' equity $ 73,751,466 $ 60,676,890
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales
On-going business $ 105,091,183 $ 89,035,707 $ 85,231,450
Discontinued North American Retail
business -- 7,086,912 29,106,970
------------- ------------- -------------
105,091,183 96,122,619 114,338,420
Cost of sales
On-going business 61,714,724 52,717,177 55,275,357
Discontinued North American Retail
business -- 7,161,912 23,451,789
Inventory write-down -- -- 3,892,215
------------- ------------- -------------
61,714,724 59,879,089 82,619,361
Gross profit 43,376,459 36,243,530 31,719,059
Selling, general and administrative expenses 30,408,321 26,738,845 30,089,673
Discontinued North American Retail
business bad debt expenses -- -- 2,500,000
Restructuring expense -- -- 8,418,742
------------- ------------- -------------
Operating income (loss) 12,968,138 9,504,685 (9,289,356)
Interest expense (income) (107,594) 455,577 627,495
Other expense (income) (43,051) 100,355 587
------------- ------------- -------------
Income (loss) before income taxes 13,118,783 8,948,753 (9,917,438)
Provision (benefit) for income taxes 5,378,701 3,311,103 (3,399,076)
------------- ------------- -------------
Net income (loss) $ 7,740,082 $ 5,637,650 $ (6,518,362)
============= ============= =============
Net income (loss) per share:
Basic $ 0.58 $ 0.44 $ (.52)
============= ============= =============
Diluted $ 0.55 $ 0.43 $ (.52)
============= ============= =============
Weighted average common stock outstanding:
Basic 13,311,594 12,772,796 12,564,062
============= ============= =============
Diluted 14,126,210 13,199,814 12,564,062
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock in
Common Stock Issued Treasury
Shares Amount Shares Amount
---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996
as previously reported 6,787,025 $ 67,870 (415,000) $(2,593,750)
2-for-1 stock split effective
January 31, 2000 6,787,025 67,870 (415,000) --
---------- -------- ---------- -----------
Balance at December 31, 1996 13,574,050 135,740 (830,000) (2,593,750)
---------- -------- ---------- -----------
Additional shares issued for
employee retirement plan 41,520 415 -- --
Stock options exercised 93,250 933 -- --
Purchase of treasury shares -- -- (273,200) (736,048)
Shares issued to Directors -- -- 18,778 58,681
Repayment of loans by
employees for purchases of
Common Stock -- -- -- --
Net loss -- -- -- --
Currency translation adjustment -- -- -- --
---------- -------- ---------- -----------
Balance at December 31, 1997 13,708,820 137,088 (1,084,422) (3,271,117)
---------- -------- ---------- -----------
Additional shares issued for
employee retirement plan 16,274 163 -- --
Issuance of warrant to customer -- -- -- --
Stock options exercised 559,698 5,597 -- --
Purchase of treasury shares -- -- (583,600) (3,492,576)
Shares issued to Directors -- -- 8,812 27,537
Net income -- -- -- --
Shares issued in connection
with business acquired 168,422 1,684 -- --
Currency translation adjustment -- -- -- --
---------- -------- ---------- -----------
Balance at December 31, 1998 14,453,214 144,532 (1,659,210) (6,736,156)
---------- -------- ---------- -----------
Additional shares issued for
employee retirement plan 20,222 202 -- --
Stock options exercised 835,918 8,359 -- --
Shares issued to Directors -- -- 6,826 27,712
Restricted stock grants 7,950 80 -- --
Amortization of restricted
stock grants -- -- -- --
Income tax benefit related to
the exercise of non-qualified
stock options -- -- -- --
Net income -- -- -- --
Currency translation adjustment -- -- -- --
---------- -------- ---------- -----------
Balance at December 31, 1999 15,317,304 $153,173 (1,652,384) $(6,708,444)
---------- -------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
Unamortized
Retained Value of
Currency Earnings/ Restricted Total
Paid in Translation (Accumulated Stock Stockholders'
Capital Adjustment Deficit) Grants Equity
----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996
as previously reported $53,950,430 $ (25,084) $(5,772,610) $ -- $45,626,856
2-for-1 stock split effective
January 31, 2000 (67,870) -- -- -- --
----------- --------- ----------- --------- -----------
Balance at December 31, 1996 53,882,560 (25,084) (5,772,610) -- 45,626,856
----------- --------- ----------- --------- -----------
Additional shares issued for
employee retirement plan 128,826 -- -- -- 129,241
Stock options exercised 263,556 -- -- -- 264,489
Purchase of treasury shares -- -- -- -- (736,048)
Shares issued to Directors 1,319 -- -- -- 60,000
Repayment of loans by
employees for purchases of
Common Stock 109,235 -- -- -- 109,235
Net loss -- -- (6,518,362) -- (6,518,362)
Currency translation adjustment -- (48,177) -- -- (48,177)
----------- --------- ----------- --------- -----------
Balance at December 31, 1997 54,385,496 (73,261) (12,290,972) -- 38,887,234
----------- --------- ----------- --------- -----------
Additional shares issued for
employee retirement plan 88,520 -- -- -- 88,683
Issuance of warrant to customer 1,006,000 -- -- -- 1,006,000
Stock options exercised 1,524,820 -- -- -- 1,530,417
Purchase of treasury shares -- -- -- -- (3,492,576)
Shares issued to Directors 22,332 -- -- -- 49,869
Net income -- -- 5,637,650 -- 5,637,650
Shares issued in connection
with business acquired 872,005 -- -- -- 873,689
Currency translation adjustment -- (48,492) -- -- (48,492)
----------- --------- ----------- --------- -----------
Balance at December 31, 1998 57,899,173 (121,753) (6,653,322) -- 44,532,474
----------- --------- ----------- --------- -----------
Additional shares issued for
employee retirement plan 194,719 -- -- -- 194,921
Stock options exercised 3,027,862 -- -- -- 3,036,221
Shares issued to Directors 23,313 -- -- -- 51,025
Restricted stock grants 107,633 -- -- (107,713) --
Amortization of restricted
stock grants -- -- -- 24,596 24,596
Income tax benefit related to
the exercise of non-qualified
stock options 3,046,903 -- -- -- 3,046,903
Net income -- -- 7,740,082 -- 7,740,082
Currency translation adjustment -- (115,025) -- -- (115,025)
----------- --------- ----------- --------- -----------
Balance at December 31, 1999 $64,299,603 $(236,778) $ 1,086,760 $ (83,117) $58,511,197
----------- --------- ----------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
UNIVERSAL ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash provided by (used for) operating activities:
Net income (loss) $ 7,740,082 $ 5,637,650 $ (6,518,362)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization 3,616,267 2,600,514 2,131,179
Provision for doubtful accounts 1,504,275 342,661 2,850,000
Inventory write-down -- -- 3,892,215
Restructuring expense -- -- 8,418,742
Deferred income taxes 4,253,354 2,944,948 (3,531,008)
Other 246,914 138,552 189,242
Changes in operating assets and liabilities:
Accounts receivable (5,518,015) 2,067,594 (8,736,334)
Inventory 1,340,245 1,805,336 676,397
Prepaid expenses and other assets (369,755) (841,762) (3,660)
Accounts payable and accrued expenses 3,808,594 (1,258,126) 541,938
Accrued restructuring expense -- (3,928,933) --
Accrued income and other taxes 853,731 230,766 (96,648)
------------ ------------ ------------
Net cash provided by (used for)
operating activities 17,475,692 9,739,200 (186,299)
Cash used for investing activities:
Acquisition of fixed assets (1,441,601) (2,395,498) (2,739,028)
Sale of building and other assets -- 1,862,711 --
Payments for businesses acquired (2,050,000) (3,200,000) --
Employee loan repayments for common stock -- -- 109,235
Acquisition of intangible assets (321,447) (1,153,228) (131,322)
------------ ------------ ------------
Net cash used for investing activities (3,813,048) (4,886,015) (2,761,115)
------------ ------------ ------------
Cash provided by (used for) financing activities:
Short-term bank borrowing 10,810,000 49,931,280 46,766,476
Short-term bank payments (15,596,293) (52,381,753) (42,713,186)
Proceeds from stock options exercised 3,036,221 1,530,417 264,489
Treasury stock purchased -- (3,492,576) (736,048)
------------ ------------ ------------
Net cash provided by (used for)
financing activities (1,750,072) (4,412,632) 3,581,731
Effect of exchange rate changes on cash (115,025) (48,492) (48,177)
------------ ------------ ------------
Net increase in cash and cash equivalents 11,797,547 392,061 586,140
Cash and cash equivalents at beginning of year 1,488,672 1,096,611 510,471
------------ ------------ ------------
Cash and cash equivalents at end of year $ 13,286,219 $ 1,488,672 $ 1,096,611
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 30
UNIVERSAL ELECTRONICS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS
Business
Universal Electronics develops and markets easy-to-use, pre-programmed universal
wireless control devices and technologies principally for home video and audio
entertainment equipment. The Company sells its wireless control products and
proprietary technologies to private label customers, original equipment
manufacturers ("OEMs"), retail businesses, and companies involved in the
subscription broadcasting industry. In December 1997, the Company decided to
discontinue its North American One For All Retail business. During 1998 and
1999, the Company continued to sell its wireless control products
internationally under the One for All(R) brand name. The Company also marketed a
line of home automation products under the Eversafe(R) brand name, principally a
universal garage door opener.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All intercompany accounts and significant transactions have
been eliminated in the consolidated financial statements.
Revenue Recognition
Product revenues are recognized upon product shipment. The Company provides
allowances for estimated returns of defective or damaged product and other sales
promotions and discounts at the time of product shipment.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated to U.S.
dollars using the exchange rates in effect at the balance sheet date. Results of
operations are translated using the average exchange rates during the period.
Resulting translation adjustments are recorded in a separate component of
stockholders' equity, "Currency Translation Adjustment".
Cash and Cash Equivalents
Cash and cash equivalents include cash accounts and all investments purchased
with initial maturities of three months or less.
Inventories
Inventories consist of wireless control devices, including universal remote
controls, wireless keyboards, antennas, and related component parts, and home
safety and automation devices and are valued at the lower of cost or market.
Cost is determined using the first-in, first-out method.
Equipment, Furniture and Fixtures
Fixed assets are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Tooling and
equipment are depreciated over two to 7 years. Furniture and fixtures are
depreciated over five to 7 years. Leasehold improvements are amortized over
the terms of the related leases. When fixed assets are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the
appropriate accounts and any gain or loss is included in current income.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are stated on the basis of cost and are
amortized on a straight-line basis over the estimated future periods to be
benefited. The amortization periods range from five to 10 years. Goodwill and
other intangible assets are periodically reviewed for impairment based on an
assessment of undiscounted future cash flows to ensure that they are
appropriately valued. At December 31, 1999, 1998 and 1997, accumulated
amortization was $2,098,780, $962,178 and $225,331, respectively. Amortization
expense was $1,339,799, $737,497 and $128,805 for the years ended December 31,
1999, 1998 and 1997, respectively.
30
<PAGE> 31
Income Taxes
Deferred income taxes are provided utilizing an asset and liability method that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. A valuation allowance is established to
reduce deferred tax assets if it is more likely than not that all, or some
portion, of the deferred tax assets will not be realized.
Research and Development
Research and development expenditures are expensed as incurred. Research and
development expense was $2,391,000, $2,712,000 and $2,950,000 for the years
ended December 31, 1999, 1998 and 1997, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $1,263,344,
$1,511,065, and $3,536,835 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding. Diluted net income
(loss) per share is computed by dividing net income (loss) by the weighted
average number of common shares and dilutive potential common shares which
includes the dilutive effect of stock options. Dilutive potential common shares
for all periods presented are computed utilizing the treasury stock method.
Stock Split
On December 20, 1999, the Board of Directors declared a two-for-one split of the
Company's common stock effective January 31, 2000, in the form of a stock
dividend for stockholders of record at the close of business on January 10,
2000. All share and per-share amounts in the accompanying consolidated financial
statements and notes to consolidated financial statements have been restated to
give retroactive effect to the stock split.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and display of
comprehensive income and its components in the Company's consolidated financial
statements. Comprehensive income consists of net income and other gains and
losses affecting stockholders' equity that, under generally accepted accounting
principles, are excluded from net income. SFAS No. 130 did not have a material
effect on the Company's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information", which amends the disclosure requirements of
SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise". The
Company adopted the provisions of SFAS No. 131 in the year ended December 31,
1998 and has added certain disclosures for all periods presented.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities". The statement is effective for fiscal years
beginning after June 15, 2000. The Company is assessing the impact this
statement will have on the consolidated financial statements and has not yet
adopted the provisions of SFAS No. 133 as of December 31, 1999.
Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
31
<PAGE> 32
Reclassifications
Certain prior year amounts have been reclassified to conform with the
presentation utilized in the year ended December 31, 1999.
NOTE 2 - ACQUISITIONS
Effective July 1, 1999, the Company completed its acquisition of a remote
control distributor in Spain for $750,000 in cash. On September 1, 1998 the
Company acquired a domestic remote control company for approximately $2.4
million. The acquisition was funded by $1.5 million in cash and 168,422 shares
of the Company's newly issued common stock valued at $874,000. During the first
quarter of 1998, the Company acquired a remote control distributor in the United
Kingdom for $3.0 million, of which $1.7 million was paid in 1998 and the
remaining $1.3 million was paid in 1999.
The excess of the aggregate purchase prices for these acquisitions over the fair
market value of net assets acquired is recorded as goodwill and is being
amortized over periods ranging from five to 10 years.
Pro forma results for 1999 and 1998, assuming the acquisitions had occurred at
the beginning of the periods, would not have been materially different from the
Company's historical results for the periods presented.
On October 12, 1998, the Company entered into a covenant not to compete
agreement with a former officer of the Company at a cost of $949,000 in cash,
which is recorded as an intangible asset and is being amortized over the five
year duration of the contract.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Accounts receivable, gross $29,812,725 $25,250,522
Allowance for doubtful accounts (1,879,931) (1,611,468)
----------- -----------
27,932,794 $23,639,054
=========== ===========
</TABLE>
In connection with the discontinuation of the Company's North American Retail
business as discussed in Note 16, the Company increased the allowance for
doubtful accounts by $2,500,000 in 1997. This increase primarily related to
certain customer accounts of the Company that were deemed at risk due to the
Company's exit from the North American Retail business. As of December 31, 1999
and 1998, accounts receivable for the Company's North American Retail business
were $678,000 and $2,011,000, respectively. Write-offs in 1999 and 1998
attributable to the accounts receivable for the Company's North American Retail
business were $1,226,000 and $1,320,000, respectively.
NOTE 4 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Components $ 5,710,349 $ 5,993,160
Finished goods 7,783,464 8,840,898
----------- -----------
$13,493,813 $14,834,058
=========== ===========
</TABLE>
The Company carries some additional amounts of inventory in order to satisfy
certain of its customers' inventory requirements on a timely basis. New product
innovations and technological advances may shorten a given product's life cycle.
Management continually monitors the inventory status to control inventory levels
and dispose of any excess or obsolete inventories on hand. Management believes
an adequate provision has been made in the financial statements for any loss on
disposition of inventory.
32
<PAGE> 33
In 1997, the North American Retail product inventories were written down by
$3,892,000 to their estimated net realizable value as a result of the
discontinuation of the Company's North American Retail business as discussed in
Note 16.
NOTE 5 - EQUIPMENT, FURNITURE AND FIXTURES
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Tooling $ 4,564,749 $ 3,679,610
Equipment 4,214,863 3,752,150
Furniture and fixtures 762,343 779,126
Leasehold improvements 889,140 858,040
----------- -----------
10,431,095 9,068,926
Accumulated depreciation (6,734,189) (4,628,979)
----------- -----------
3,696,906 $ 4,439,947
=========== ===========
</TABLE>
Depreciation expense was $2,276,468, $1,863,667 and $2,018,979 for the years
ended December 31, 1999, 1998 and 1997, respectively.
In 1997, all fixed assets related to the North American Retail business to be
disposed of in connection with the discontinuation discussed in Note 16
(including the Company's Twinsburg, Ohio facility), were written down to their
estimated fair market value. The Company's Twinsburg, Ohio building was
classified as held for sale in the consolidated balance sheet as of December 31,
1997. In August 1998, the Company sold the building for $1,695,000, a price
approximating the book value.
NOTE 6 - REVOLVING CREDIT LINE
On October 23, 1998, the Company paid off its outstanding credit line with The
Provident Bank and entered into a $15 million revolving credit agreement with
Bank of America National Trust and Savings Association ("B of A"). Under the
revolving credit agreement with B of A, the Company can choose from several
interest rate options at its discretion. The interest rate in effect as of
December 31, 1999 using the Fixed Rate option as defined in the agreement, which
is intended to approximate B of A's cost of funds, plus an applicable margin,
was 7.08%. The applicable margin varies with a range from 1.25% to 2.00% per
annum depending on the Company's net income before interest, taxes, depreciation
and amortization. At December 31, 1999, the applicable margin for the Company
was 1.25 percent. The revolving credit facility, which expires on October 23,
2001, is secured by a first priority security interest in the Company's cash and
cash equivalents, accounts receivable, inventory, equipment, and general
intangibles of the Company. The Company pays a commitment fee of a maximum rate
of 3/16 of 1% per year on the unused portion of the credit line. Under the terms
of this revolving credit agreement, the company's ability to pay cash dividends
on its common stock is restricted and the Company is subject to certain
financial covenants and other restrictions. However, the Company has authority
under this credit facility to acquire up to 1,000,000 shares of its common stock
in market purchases and, since the date of this agreement, the Company has
acquired approximately 109,000 shares of stock which it holds as treasury shares
and are available for reissue by the Company. Amounts available for borrowing
under the credit facility are reduced by the outstanding balance of the
Company's import letters of credit.
On November 22, 1995, the Company entered into a $22 million revolving credit
agreement with The Provident Bank that expired on April 30, 1998. The interest
rate on the borrowing was modified periodically based on formulas specified in
the agreement and was based on the bank's prime rate (8.50% at December 31,
1997) plus one-quarter percent. Effective in January 1997, the agreement was
amended to modify certain of the financial covenants and adjust the interest
rate to be equal to the bank's prime rate plus one-quarter of one percent. Under
the terms of this revolving credit facility, the Company's ability to pay cash
dividends on its common stock was restricted and the Company was subject to
certain financial covenants with limits on its ability to repurchase its stock
and other restrictions. Further, amounts available for borrowing under this
credit facility were reduced by the outstanding balance of the Company's import
letters of credit. The Company paid a commitment fee of a maximum rate of 1/8 of
1% per year on the unused portion of the credit line. The revolving credit
facility was secured by a
33
<PAGE> 34
first priority security interest in the accounts receivable, inventory,
equipment and general intangibles of the Company.
The Company had approximately $0, $4.8 and $7.2 million at December 31, 1999,
1998 and 1997, respectively, outstanding under the revolving credit facilities
and approximately $0, $0, and $0.5 million of import letters of credit
outstanding at December 31, 1999, 1998 and 1997, respectively. The weighted
average interest rate was 6.56%, 8.07% and 8.30% for the years ended December
31, 1999, 1998 and 1997, respectively. Interest paid on the revolving credit
facilities amounted to $28,422, $488,144 and $616,239 for the years ended
December 31, 1999, 1998 and 1997, respectively.
NOTE 7 - FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of investments in cash and
cash equivalents, accounts receivable and accounts payable, as well as
obligations under the credit facility described above. The carrying values of
these instruments approximate fair value because of their short maturity.
The Company enters into forward exchange contracts to hedge foreign currency
transactions on a continuing basis for periods consistent with its committed
exposures. These contracts are with major financial institutions and the risk of
loss due to the financial institutions' nonperformance is considered remote. The
gains and losses on these forward contracts are recognized in net income when
the underlying foreign currency gain and loss is recognized. The Company had a
number of forward exchange contracts outstanding at December 31, 1999 with an
aggregate notional value of approximately $9.1 million.
NOTE 8 - STOCKHOLDERS' EQUITY
Loans to Employees for Common Stock Purchases
During 1994, the Company loaned $484,989 to certain of its officers and key
employees to enable them to purchase 148,818 shares of the Company's Common
Stock on the open market. The principal amount of the loans was due five years
from the inception date, with interest on the loans accruing at the minimum rate
required per annum by the Internal Revenue Code and payable at maturity. These
loans are reflected as a reduction of Stockholders' Equity and are secured by
the Common Stock purchased in accordance with the corresponding Stock Pledge
Agreement. The Stock Pledge Agreement in certain instances accelerates debt
repayment and provides for the forgiveness of the debt. During 1999, 1998 and
1997, $0, $42,875 and $109,235, respectively, in loan principal was forgiven
under the terms of these agreements.
Fair Price Provisions and Other Anti-Takeover Measures
The Company's Restated Certificate of Incorporation, as amended, contains
certain provisions restricting business combinations with interested
stockholders under certain circumstances and imposing higher voting requirements
for the approval of certain transactions ("fair price" provision). Any of these
provisions could delay or prevent a change in control of the Company.
The "fair price" provisions require that holders of at least two-thirds of the
outstanding shares of voting stock approve certain business combinations and
significant transactions with interested stockholders.
Treasury Stock
No treasury stock was purchased by the Company during 1999. During 1998, 583,600
shares of common stock were purchased by the Company on the open market at a
cost of approximately $3.5 million. During 1997, 273,200 shares were purchased
for an approximate cost of $0.7 million. These shares are recorded as shares
held in treasury at cost. The shares will generally be held by the Company for
future use as management and the Board of Directors shall deem appropriate. In
addition, some of these shares will be used by the Company to compensate the
outside directors of the Company. During 1999, 1998 and 1997, 6,826, 8,812 and
18,778 shares, respectively, were issued to the outside directors.
Warrant Issued to Customer
On November 9, 1998, the Company entered into an exclusive supply agreement with
a customer. As a result of this agreement, the Company issued a warrant
entitling the customer to purchase up to 600,000 shares of the Company's common
stock at $6.3125 per share.
34
<PAGE> 35
Based on the expected number of shares to be issued, the fair value of this
warrant of $1,006,000 was recorded as additional paid in capital of the Company
with a corresponding increase in other assets. The fair value of the warrant was
determined using the Black-Scholes Model. The following assumptions were used
for the warrant: risk-free interest rate of approximately 4.84%; expected
volatility of approximately 48.11%; and expected life of five years. This asset
is amortized on a straight-line basis over the five year term of the agreement.
Subject to achieving the minimum purchase requirements of the warrant, the
warrant will vest 50% on January 1, 2003 and the remaining 50% will vest on
January 1, 2004.
Stock Split
On December 20, 1999, the Company's Board of Directors declared a two-for-one
stock split effected in the form of a 100 percent stock dividend to be
distributed on January 31, 2000 to shareholders of record on January 10, 2000.
Shareholders' equity has been restated to give retroactive recognition to the
stock split for all periods presented by reclassifying the par value of the
additional shares arising from the split from paid-in capital to common stock.
In addition, all references in the financial statements and in the notes to the
financial statements to number of shares, per share amounts, stock option data,
and market prices of the Company's common stock have been restated.
Restricted Stock Awards
During the year ended December 31, 1999, a total of 7,950 restricted shares of
the Company's common stock were reserved for issuance to certain employees. The
restricted shares vest over a two year period and had a market value of $107,713
at that date. These awards have been recorded as a separate component of
stockholders' equity. The carrying value of the restricted stock grants is being
amortized to expense over the two year vesting period. Amortization expense
amounted to $24,596 in 1999.
NOTE 9 - STOCK OPTIONS
1993 Stock Incentive Plan
On January 19, 1993, the 1993 Stock Incentive Plan ("1993 Plan") was approved.
Under the 1993 Plan, 400,000 shares of Common Stock are reserved for the
granting of incentive and other stock options to officers, key employees and
non-affiliated directors. The 1993 Plan provides for the granting of incentive
and other stock options through January 19, 2003. All options outstanding at the
time of termination of the 1993 Plan shall continue in full force and effect in
accordance with their terms. The option price for incentive stock options and
non-qualified stock options will not be less than the fair market value at the
date of grant. The Compensation Committee shall determine when each option is to
expire, but no option shall be exercisable more than ten years after the date
the option is granted. The 1993 Plan also provides for the award of stock
appreciation rights subject to terms and conditions specified by the
Compensation Committee. No stock appreciation rights have been awarded under
this 1993 Plan.
1995 Stock Incentive Plan
On May 19, 1995, the 1995 Stock Incentive Plan ("1995 Plan") was approved. Under
the 1995 Plan, 800,000 shares of Common Stock are available for distribution to
the Company's key officers, employees and non-affiliated directors. The 1995
Plan provides for the issuance of stock options, stock appreciation rights,
performance stock units, or any combination thereof through May 19, 2005, unless
otherwise terminated by resolution of the Board of Directors. The option price
for the stock options will be equal to the fair market value at the date of
grant. The Compensation Committee shall determine when each option is to expire,
but no option shall be exercisable more than ten years after the date the option
is granted. No stock appreciation rights or performance stock units have been
awarded under this 1995 Plan.
1996 Stock Incentive Plan
On December 1, 1996, the 1996 Stock Incentive Plan ("1996 Plan") was approved.
Under the 1996 Plan, 800,000 shares of Common Stock are available for
distribution to the Company's key officers and employees. The 1996 Plan provides
for the issuance of stock options, stock appreciation rights, performance stock
units, or any combination thereof through November 30, 2007, unless otherwise
terminated by the resolution of the Company's Board of Directors. The option
price for the stock options will be equal to the fair market value
35
<PAGE> 36
at the date of grant. The Compensation Committee shall determine when each
option is to expire, but no option shall be exercisable more than ten years
after the date the option is granted. No stock appreciation rights or
performance stock units have been awarded under this 1996 Plan.
1998 Stock Incentive Plan
On May 27, 1998, the 1998 Stock Incentive Plan ("1998 Plan") was approved. Under
the 1998 Plan, 630,000 shares of Common Stock are available for distribution to
the Company's key officers and employees. The 1998 Plan provides for the
issuance of stock options, stock appreciation rights, performance stock units,
or any combination thereof through May 27, 2008, unless otherwise terminated by
resolution of the Company's Board of Directors. The option price for the stock
options will not be less than the fair market value at the date of grant. The
Compensation Committee shall determine when each option is to expire, but no
option shall be exercisable more than ten years after the date the option is
granted. No stock appreciation rights or performance stock units have been
awarded under this 1998 Plan.
1999 Stock Incentive Plan
On January 27, 1999, the 1999 Stock Incentive Plan ("1999 Plan") was approved.
Under the 1999 Plan, 630,000 shares of Common Stock are available for
distribution to the Company's key officers and employees. The 1999 Plan provides
for the issuance of stock options, stock appreciation rights, performance stock
units, or any combination thereof through January 27, 2009, unless otherwise
terminated by resolution of the Company's Board of Directors. The option price
for the stock options will not be less than the fair market value at the date of
grant. The Compensation Committee shall determine when each option is to expire,
but no option shall be exercisable more than ten years after the date the option
is granted. No stock appreciation rights or performance stock units have been
awarded under this 1999 Plan.
1999A Stock Incentive Plan
On October 7, 1999, the 1999A Nonqualified Stock Plan ("1999A Plan") was
approved and on February 1, 2000, the 1999A Plan was amended. Under the 1999A
Plan, 1,000,000 shares of Common Stock are available for distribution to the
Company's key officers and employees. The 1999A Plan provides for the issuance
of stock options, stock appreciation rights, performance stock units, or any
combination thereof through October 7, 2009, unless otherwise terminated by
resolution of the Company's Board of Directors. The option price for the stock
options will not be less than the fair market value at the date of grant. The
Compensation Committee shall determine when each option is to expire, but no
option shall be exercisable more than ten years after the date the option is
granted. No stock appreciation rights or performance stock units have been
awarded under this 1999A Plan.
The Company applies the provisions of APB Opinion No. 25 in accounting for
stock-based employee compensation; therefore, no compensation expense has been
recognized for its fixed stock option plans as options generally are granted at
fair market value on the date of the grant. In October 1995, Statement of
Financial Accounting No. 123 "Accounting for Stock-Based Compensation" ("SFAS
No. 123"), was issued. The Company adopted the disclosure requirements of this
Statement in 1996 and accordingly, had compensation expense been determined
consistent with SFAS No. 123, the Company's 1999 net income and basic and
diluted income per share would have been $6,627,088, $0.50 and $0.47,
respectively. The Company's 1998 net income and basic and diluted income per
share would have been $5,080,578, $0.40 and $0.38, respectively. The Company's
1997 net loss and basic and diluted loss per share would have been $6,904,381,
$0.55 and $0.55, respectively.
The fair value of options at date of grant was estimated using the Black-Scholes
model. The following assumptions were used for the grants in 1999, 1998 and
1997, respectively: risk-free interest rate of approximately 5.56%, 5.28% and
6.38%; expected volatility of approximately 51.75%, 45.26% and 49.38%; expected
life of five years for 1999, 1998 and 1997; and the common stock will pay no
dividends. The weighted average grant date fair value of the options granted in
1999, 1998 and 1997 was $9.95, $4.97 and $2.74.
36
<PAGE> 37
The following table summarizes the changes in the number of shares of Common
Stock under option:
<TABLE>
<CAPTION>
1997 1998 1999
-------------------------- -------------------------- --------------------------
Shares Weighted-Average Shares Weighted-Average Shares Weighted-Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,606 3.24 1,452 3.18 1,688 4.29
Granted 190 3.00 804 5.22 1,352 9.58
Exercised (92) 2.87 (560) 2.74 (836) 3.63
Expired and/or forfeited (252) 3.53 (8) 3.47 (62) 4.31
----- ---- ----- -----
Outstanding at end of year 1,452 3.18 1,688 4.29 2,142 7.89
===== ==== ===== =====
Options exercisable at year-end 730 788 181
</TABLE>
Significant option groups outstanding at December 31, 1999 and related weighted
average price and life information follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Weighted-Average Weighted-Average Number Weighted-Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices At 12/31/99 Contractual Life Price At 12/31/99 Price
- --------------- ----------- ------------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$2.09 to 3.84 109,800 6.79 2.94 61,300 2.97
4.97 to 5.97 631,850 8.35 5.21 90,850 5.19
6.19 to 7.50 578,600 8.77 7.40 28,600 6.53
9.91 to 13.00 822,000 9.77 10.93 -- --
--------- -------
$2.09 to 13.00 2,142,250 8.93 7.88 180,750 4.65
========= =======
</TABLE>
NOTE 10 - SIGNIFICANT CUSTOMERS AND SUPPLIERS
The Company had annual sales to two customers in 1999, two customers in 1998,
and one customer in 1997 that individually exceeded 10% of total Company sales
in the years ended December 31, 1999, 1998 and 1997. The sales amounted to $12.2
million and $10.8 million in 1999, $11.8 million and $10.6 million in 1998, and
$14.8 million in 1997. Trade receivables with the previously mentioned customers
amounted to $2.1 million, $5.3 million and $3.3 million at December 31, 1999,
1998 and 1997, respectively.
Trade receivables subject the Company to a concentration of credit risk. The
risk is limited due to the large number of customers comprising the Company's
customer base, the relative size and strength of most of the Company's customers
and the Company's performance of ongoing credit evaluations.
The Company utilizes third-party manufacturers in the Far East, Mexico and the
United States to produce its wireless control products. The number of third
party manufacturers or suppliers that provided the Company in excess of 10% of
the Company's wireless control products and/or components were two, three and
four for 1999, 1998, and 1997, respectively.
The Company currently purchases a significant portion of its integrated circuit
chips from two vendors. Although there are a limited number of manufacturers of
this component part, management believes that other suppliers could provide
similar parts on comparable terms. A change in suppliers, however, could cause a
delay in manufacturing and a possible loss of sales, which would affect
operating results adversely.
37
<PAGE> 38
NOTE 11 - LEASES
The Company leases office and warehouse space and certain office equipment under
operating leases. Rental expense under operating leases was $953,475, $837,976
and $914,712, for the years ended December 31, 1999, 1998 and 1997,
respectively.
The following summarizes future minimum non-cancellable operating lease payments
at December 31, 1999:
<TABLE>
<CAPTION>
Year ending December 31: AMOUNT
----------
<S> <C>
2000 $1,067,754
2001 700,622
2002 518,874
2003 96,053
2004 and beyond 0
----------
Total lease commitments $2,383,303
==========
</TABLE>
NOTE 12 - EMPLOYEE BENEFIT PLANS
The Company maintains a retirement and profit sharing plan under Section 401(k)
of the Internal Revenue Code for all of its domestic employees that meet certain
qualifications. Participants in the plan may elect to contribute from 1% to 15%
of their annual salary to the plan. The Company may, at its discretion, make
contributions to the plan. The Company's match was 25% of participants'
contributions for the years ended December 31, 1998 and 1997 and the expense
recorded amounted to $123,332 and $123,911, respectively. The Company's match
was increased from 25% to 50% of participants' contributions effective April 22,
1999 and the expense recorded for the year ended December 31, 1999 amounted to
$200,236. The Company's match in 1999, 1998 and 1997 was in the form of newly
issued shares of common stock of the Company.
NOTE 13 - INCOME TAXES
In 1999, 1998 and 1997, pretax income (loss) was attributed to the following
jurisdictions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Domestic operations $13,032,767 $ 8,210,501 $(10,174,279)
Foreign operations 86,016 738,252 256,841
----------- ----------- ------------
Total $13,118,783 $ 8,948,753 $ (9,917,438)
=========== =========== ============
</TABLE>
The provision (benefit) for income taxes charged to operations was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Current tax expense:
U.S. federal $3,458,002 $ -- $ --
State and local 685,003 114,999 72,720
Foreign 29,245 251,156 59,531
---------- ---------- -----------
Total current 4,172,250 366,155 132,251
---------- ---------- -----------
Deferred tax expense (benefit):
U.S. federal 1,004,848 2,521,779 (3,406,385)
State and local 201,603 423,169 (124,942)
Foreign -- -- --
---------- ---------- -----------
Total deferred 1,206,451 2,944,948 (3,531,327)
---------- ---------- -----------
Total provision (benefit) $5,378,701 $3,311,103 $(3,399,076)
========== ========== ===========
</TABLE>
38
<PAGE> 39
Net deferred tax assets (liabilities) comprised the following at December 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Capitalized packaging costs $ 37,188 $ 72,365 $ 68,897
Advertising allowance 38,935 41,570 256,447
Inventory reserves 660,310 256,441 317,573
Allowance for doubtful
accounts 738,390 256,440 984,244
Sales return reserve 64,882 57,885 128,216
Capitalized inventory costs 218,855 259,983 255,304
NOL and credit carry forwards 2,983,469 6,278,675 5,265,390
Discontinuation reserves -- -- 2,324,297
Other 971,264 234,593 844,952
------------ ------------ ------------
Gross deferred tax assets 5,713,293 7,457,952 10,445,320
------------ ------------ ------------
Depreciation (185,396) (723,604) (591,825)
Gross deferred tax liabilities (185,396) (723,604) (591,825)
------------ ------------ ------------
Less Valuation allowance -- -- (174,199)
------------ ------------ ------------
$ 5,527,897 $ 6,734,348 $ 9,679,296
============ ============ ============
</TABLE>
In management's opinion, future taxable income will be sufficient to utilize the
tax benefit recognized as deferred tax assets. The decrease in the valuation
allowance in 1998 was due to the Company's assessment that benefits from
alternative minimum tax and other credit carryforwards will more likely than not
be realized prior to their expiration.
The provision for income taxes differs from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to pre-tax
income from operations as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Tax provision (benefit) at statutory U.S. rate $ 4,460,386 $ 3,042,704 $(3,371,235)
Increase (decrease) in tax provision resulting from:
State and local taxes, net 782,280 423,169 (76,947)
Nondeductible items 28,763 28,763 35,908
Reduction in valuation allowance -- (174,199) --
Other 107,272 (9,334) 13,198
----------- ----------- -----------
Tax provision (benefit), as above $ 5,378,701 $ 3,311,103 $(3,399,076)
=========== =========== ===========
</TABLE>
The Company has federal and state net operating loss carryforwards of
$4,773,969 and $494,029, respectively, that begin to expire in 2010 and an
alternative minimum tax credit carryforward of $473,573 which does not expire.
The Company also has a research and development credit carryforward of $744,207
that begins to expire in 2006.
No income taxes have been provided on the undistributed earnings of foreign
subsidiaries as the earnings are expected to be permanently reinvested in the
foreign operations. Determination of the amount of unrecognized deferred tax
liability for temporary differences related to the undistributed earnings of the
Company's foreign operations is not practicable.
NOTE 14 - BUSINESS SEGMENTS AND FOREIGN OPERATIONS
The Company operates in a single industry segment and is engaged in the
development, manufacturing and marketing of universal wireless controls and
related products principally for video and audio entertainment equipment. In
1997 the Company's customers consisted primarily of domestic and international
retailers, private label customers, original equipment manufacturers and
subscription broadcasting operators. Beginning in 1998
39
<PAGE> 40
and going forward, the Company's customers remained the same although the number
of domestic retail customers decreased as the Company exited its North American
Retail business line.
The Company's operations by geographic area are presented below:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales
United States $ 70,067,412 $ 70,667,968 $ 92,149,517
United Kingdom 8,889,076 8,807,684 5,818,232
Germany 6,467,420 5,865,240 4,958,049
All Other 19,667,275 10,781,727 11,412,622
------------ ------------ ------------
Total Net Sales 105,091,183 96,122,619 114,338,420
============ ============ ============
Identifiable Assets
United States 7,617,945 8,344,489 4,236,717
All Other Countries 4,005,430 3,801,234 647,884
------------ ------------ ------------
Total Identifiable Assets 11,623,375 12,145,723 4,884,601
============ ============ ============
</TABLE>
Specific identification was the basis used for attributing revenues from
external customers to individual countries. Foreign currency exchange gains
(losses) of $30,344, $(97,066) and $(27,364), were included in the determination
of net income for the years ended December 31, 1999, 1998 and 1997,
respectively.
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
The Company is a party to lawsuits and claims arising in the normal course of
its business. In the opinion of management, the Company's liability or recovery,
if any, under pending litigation and claims would not materially adversely
affect its results of operations, cash flows, or financial condition.
NOTE 16 - RESTRUCTURING
In December 1997, the Company announced its decision to discontinue its North
American One For All Retail line of business and the distribution channel
supported by the operations in the Twinsburg, Ohio facility. The Company
licensed certain of its proprietary technology and its One For All trademark to
a third party overseas manufacturer, to enable them to supply certain domestic
retailers with a limited number of remote control products on a direct import
basis. The Company closed the Twinsburg, Ohio facility, with the exception of
its consumer service phone center, and moved its headquarters to its Technology
Center in Cypress, California during the second quarter of 1998. The pre-tax
restructuring charge of $8,419,000 taken in the fourth quarter of fiscal year
1997 primarily related to severance and employee benefit costs ($3,260,000), the
write-down of fixed assets to be disposed of to their estimated fair market
value ($1,738,000), the write-down of intangibles by the amount for which no
future benefit existed ($460,000), consumer support and service costs relating
to contractual obligations of the Company to provide telephonic support for
certain of its products that were discontinued as part of the restructuring
($393,000), write-off of prepaid advertising and other prepaid assets to their
estimated fair market value ($2,129,000 and $163,000, respectively), and other
costs related to the discontinuation of the North American Retail business
($276,000). Severance and related employee benefit costs were determined by
estimating such amounts for each of the 105 employees of the Company that were
terminated in the restructuring. Charges for prepaid advertising, other prepaid
assets and fixed assets were determined by comparing net book values to the
estimated fair market values. Intangibles consisting of trademark costs were
evaluated for future benefits and an estimate was made of the amount for which
no future benefits existed. Other costs related to the disposition of assets
were primarily related to operating expenses associated with the liquidation of
the North American Retail business. After an income tax benefit of $2,863,000,
the restructuring charge reduced fiscal year 1997 earnings by $5,556,000 or
$0.44 per share. See also Note 3 - Accounts Receivable and Note 4 - Inventories
for explanation of additional expenses related to the restructuring. The
restructuring was completed during 1998.
40
<PAGE> 41
NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended December 31, 1999, 1998,
and 1997.
<TABLE>
<CAPTION>
1999
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales
On-going business $20,941,528 $22,756,972 $28,115,949 $33,276,734
Discontinued North
American Retail business -- -- -- --
----------- ----------- ----------- -----------
20,941,528 22,756,972 28,115,949 33,276,734
Gross profit
On-going business 8,282,374 9,167,183 11,787,577 14,139,324
Discontinued North American
Retail business -- -- -- --
----------- ----------- ----------- -----------
8,282,374 9,167,183 11,787,577 14,139,324
Operating income 831,221 2,021,426 3,852,979 6,262,512
Net income $ 448,763 $ 1,199,413 $ 2,338,057 $ 3,753,849
----------- ----------- ----------- -----------
Net income per share:
Basic $ 0.03 $ 0.09 $ 0.17 $ 0.28
----------- ----------- ----------- -----------
Diluted $ 0.03 $ 0.08 $ 0.16 $ 0.26
----------- ----------- ----------- -----------
Weighted average common stock outstanding:
Basic 12,997,000 13,262,000 13,446,000 13,537,000
----------- ----------- ----------- -----------
Diluted 13,402,000 14,112,000 14,299,000 14,667,000
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales
On-going business $ 18,575,778 $ 22,272,821 $ 23,731,761 $ 24,455,346
Discontinued North
American Retail business 4,356,540 2,446,099 284,274 --
------------ ------------ ------------ ------------
22,932,318 24,718,920 24,016,035 24,455,346
Gross profit (loss)
On-going business 7,249,639 9,073,208 9,567,461 10,428,222
Discontinued North
American Retail business -- -- (75,000) --
------------ ------------ ------------ ------------
7,249,639 9,073,208 9,492,461 10,428,222
Operating income 646,875 2,116,671 2,655,658 4,085,481
Net income $ 343,903 $ 1,313,777 $ 1,609,322 $ 2,370,648
------------ ------------ ------------ ------------
Net income per share:
Basic $ 0.03 $ 0.10 $ 0.12 $ 0.18
------------ ------------ ------------ ------------
Diluted $ 0.03 $ 0.10 $ 0.12 $ 0.18
------------ ------------ ------------ ------------
Weighted average common stock outstanding:
Basic 12,676,000 12,732,000 12,876,000 12,836,000
------------ ------------ ------------ ------------
Diluted 13,300,000 13,446,000 13,384,000 13,162,000
------------ ------------ ------------ ------------
</TABLE>
41
<PAGE> 42
<TABLE>
<CAPTION>
1997
------------ ------------ ------------ ------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales
On-going business $ 16,538,559 $ 17,152,545 $ 26,095,641 $ 25,444,705
Discontinued North
American Retail business 5,841,691 6,778,502 7,403,283 9,083,494
------------ ------------ ------------ ------------
22,380,250 23,931,047 33,498,924 34,528,199
Gross profit (loss)
On-going business 5,606,265 5,662,342 8,527,383 10,163,271
Discontinued North
American Retail business 1,151,149 1,620,637 1,763,268 1,116,959
Inventory write-down -- -- -- (3,892,215)
------------ ------------ ------------ ------------
6,757,414 7,282,979 10,290,651 7,388,015
Operating income (loss) (313,909) 548,511 1,958,168 (11,482,127)
Net income (loss) $ (280,786) $ 288,488 $ 1,187,387 $ (7,713,452)
------------ ------------ ------------ ------------
Net income (loss) per share:
Basic $ (0.02) $ 0.02 $ 0.09 $ (0.61)
------------ ------------ ------------ ------------
Diluted $ (0.02) $ 0.02 $ 0.09 $ (0.61)
------------ ------------ ------------ ------------
Weighted average common stock outstanding:
Basic 12,626,000 12,532,000 12,522,000 12,592,000
------------ ------------ ------------ ------------
Diluted 12,626,000 12,598,000 12,718,000 12,592,000
------------ ------------ ------------ ------------
</TABLE>
The Company has restated the presentation of certain information for the first
three quarters of 1998. The net effect of the restatement was to reclassify 1998
sales and cost of sales associated with the discontinued North American Retail
business from accrued restructuring expenses to net sales and cost of sales. In
1997, the North American Retail product inventories were written down by
$3,892,000 to their estimated net realizable value as a result of the
discontinuation discussed in Note 16. The 1997 write down amounted to $0.31 per
share for the full year on a pretax basis.
UNIVERSAL ELECTRONICS INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO WRITE-OFFS BALANCE AT
BEGINNING OF COSTS AND AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Valuation account for accounts receivable:
Year Ended December 31, 1999 $1,611,468 $1,504,275 $1,235,812 $1,879,931
Year Ended December 31, 1998 $2,950,548 $ 342,661 $1,681,741 $1,611,468
Year Ended December 31, 1997 $ 359,480 $2,850,000 $ 258,932 $2,950,548
</TABLE>
(1) Includes reclassification of North American Retail return reserve of
$280,000 as of December 31, 1998 to the allowance for doubtful accounts.
42
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 401 of Regulation S-K with respect to the directors
of the Company will be contained in and is hereby incorporated by reference to
the Company's definitive Proxy Statement for its 2000 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Information regarding executive officers of the Company is set forth in Part I
of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 402 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 403 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 404 of Regulation S-K will be contained in and is
hereby incorporated by reference to the Company's definitive Proxy Statement for
its 2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) LIST OF FINANCIAL STATEMENTS
See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-Index to
Consolidated Financial Statements" for a list of the consolidated
financial statements included herein.
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES
See "ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA-Index to
Consolidated Financial Statements" for a list of the consolidated
financial statement schedules included herein.
(a)(3) LIST OF EXHIBITS REQUIRED TO BE FILED BY ITEM 601(a) OF THE REGULATION
S-K ARE INCLUDED AS EXHIBITS TO THIS REPORT:
See EXHIBIT INDEX at page 45 to Item 601(a) of this Regulation S-K.
(b) No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1999.
43
<PAGE> 44
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Cypress, State of
California on the 30th day of March, 2000.
UNIVERSAL ELECTRONICS INC.
By: /s/ Camille Jayne
Camille Jayne
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Camille Jayne
and Paul D. Arling as true and lawful attorneys-in-fact and agents, each acting
alone, with full powers of substitution, for her/him and in her/his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Annual Report on Form 10-K, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully for all
intents and purposes as she/he might or could do in person, thereby ratifying
and confirming all that said attorneys-in-fact and agents, each acting alone, or
her/his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on the 30th day of March, 2000, by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
NAME & TITLE SIGNATURE
- ------------ ---------
<S> <C>
Paul D. Arling
President, Chief Operating Officer
and Director /s/ Paul D. Arling
------------------
Camille Jayne
Chairman, Chief Executive Officer
and Director /s/ Camille Jayne
(Principal Executive Officer) -----------------
Mark Belzowski
Vice President, Corporate Controller /s/ Mark Belzowski
and Chief Financial Officer ------------------
(Principal Financial and Accounting Officer)
David Beddow /s/ David Beddow
Director ----------------
Bruce A. Henderson /s/ Bruce A. Henderson
Director ----------------------
William C. Mulligan /s/ William C. Mulligan
Director -----------------------
J.C. Sparkman /s/ J.C. Sparkman
Director -----------------
</TABLE>
44
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
2.1 Asset Purchase Agreement dated September 1, 1998 by and among
Universal Electronics Inc., H&S Management Corp., J.C. Sparkman
and Steven Helbig (Incorporated by reference to Exhibit 2.1 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998 filed on March 31, 1999 (File No. 0-21044))
2.2 Contract for Sale of Participations of Unimand Espana, S.L. dated
June 30, 1999 by and among Universal Electronics, BV and Diffusion
Artistique et Musicale D.A.M. S.A. and Mr. Francisco Muro (filed
herewith)
3.1 Restated Certificate of Incorporation of Universal Electronics
Inc., as amended (Incorporated by reference to Exhibit 3.1 to the
Company's Form S-1 Registration filed on or about December 24,
1992 (File No. 33-56358))
3.2 Amended and Restated By-laws of Universal Electronics Inc.
(Incorporated by reference to Exhibit 3.2 to the Company's Form
S-1 Registration filed on or about December 24, 1992 (File No.
33-56358))
3.3 Certificate of Amendment to Restated Certificate of Incorporation
of Universal Electronics Inc. (Incorporated by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 filed on April 1, 1996 (File No.
0-21044))
*10.1 Form of Universal Electronics Inc. 1993 Stock Incentive Plan
(Incorporated by reference to Exhibit 10.13 to Amendment No. 1 to
the Company's Form S-1 Registration filed on or about January 21,
1993 (File No. 33-56358))
10.2 Standard Industrial Lease dated January 24, 1992 by and between
Universal Electronics Inc. and RREEF USA Fund II, Inc.
(Incorporated by reference to Exhibit 10.24 to the Company's Form
S-1 Registration filed on or about June 25, 1993 (File No.
33-65082))
10.3 Form of Secured Promissory Note by and between Universal
Electronics Inc. and certain employees used in connection with
loans made to the employee to enable them to make open market
purchases of shares of Universal Electronics Inc. Common Stock
(Incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
(File No. 0-21044))
10.4 Form of Stock Pledge Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
loans made to the employees to enable them to make open market
purchases of shares of Universal Electronics Inc. Common Stock
(Incorporated by reference to Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
(File No. 0-21044))
10.5 Loan and Security Agreement dated November 21, 1995 by and between
Universal Electronics Inc. and The Provident Bank (Incorporated by
reference to Exhibit 10.20 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 filed on April 1, 1996
(File No. 0-21044))
10.6 Copy of Promissory Note dated November 21, 1995 by and between
Universal Electronics Inc. and The Provident Bank (Incorporated by
reference to Exhibit 10.21 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 filed on April 1, 1996
(File No. 0-21044))
10.7 Commercial Letters of Credit Master Agreement dated November 21,
1995 by and between Universal Electronics Inc. and The Provident
Bank (Incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
filed on April 1, 1996 (File No. 0-21044))
10.8 Intercreditor Agreement dated November 21, 1995 by and between The
Provident Bank and Society National Bank and acknowledged and
agreed to by Universal Electronics Inc. (Incorporated by reference
to Exhibit 10.23 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995 filed on April 1, 1996 (File No.
0-21044))
10.9 Lockbox Service Contract dated November 10, 1995 by and between
Universal Electronics Inc. and The Provident Bank (Incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 filed on April 1, 1996
(File No. 0-21044))
*10.10 Form of Universal Electronics Inc. 1995 Stock Incentive Plan
(Incorporated by reference to Exhibit B to the Company's
Definitive Proxy Materials for the 1995 Annual Meeting of
Stockholders of Universal Electronics Inc. filed on May 1, 1995
(File No. 0-21044))
*10.11 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1995 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.20 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996 filed on March 28, 1997
(File No. 0-21044))
*10.12 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain non-affiliated directors used in
connection with options granted to the non-affiliated directors
pursuant to the Universal Electronics Inc. 1995 Stock Incentive
Plan (Incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996
filed on March 28, 1997 (File No. 0-21044))
10.13 First Amendment to Loan and Security Agreement dated July 31, 1996
by and between Universal Electronics Inc. and The Provident Bank
(Incorporated by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996
filed on March 28, 1997 (File No. 0-21044))
*10.14 Form of Universal Electronics Inc. 1996 Stock Incentive Plan
(Incorporated by reference to Exhibit 4.5 to the Company's Form
S-8 Registration Statement filed on March 26, 1997 (File No.
333-23985))
*10.15 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employers used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1996 Stock Incentive Plan (Incorporated by
reference to Exhibit 4.6 to the Company's Form S-8 Registration
Statement filed on March 26, 1997 (File No. 333-23985))
10.16 Sublease dated January 10, 1997 by and between Universal
Electronics Inc. and Edgemont Sales Company, a division of IKON
Office Solutions, Inc. (Incorporated by reference to Exhibit 10.25
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 filed on March 28, 1997 (File No. 0-21044))
*10.17 Form of Salary Continuation Agreement by and between Universal
Electronics Inc. and certain employees (Incorporated by reference
to Exhibit 10.25 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, filed on March 30, 1998 (File
No. 0-21044))
*10.18 Form of Amendment to Salary Continuation Agreement by and between
Universal Electronics Inc. and certain employees (Incorporated by
reference to Exhibit 10.26 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997, filed on March 30, 1998
(File No. 0-21044))
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
10.19 Second Amendment to Loan and Security Agreement dated January 24,
1997 by and between Universal Electronics Inc. and The Provident
Bank (Incorporated by reference to Exhibit 10.27 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997,
filed on March 30, 1998 (File No. 0-21044))
10.20 Lease dated November 1, 1997 by and between Universal Electronics
Inc. and Warland Investments Company (Incorporated by reference to
Exhibit 10.28 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, filed on March 30, 1998 (File No.
0-21044))
10.21 Letter Agreement in Principal dated March 18, 1998 by and between
Universal Electronics Inc. and The Provident Bank further amending
that certain Loan and Security Agreement (Incorporated by
reference to Exhibit 10.29 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997, filed on March 30, 1998
(File No. 0-21044))
*10.22 Form of Universal Electronics Inc. 1998 Stock Incentive Plan
(Incorporated by reference to Exhibit A to the Company's
Definitive Proxy Materials for the 1998 Annual Meeting of
Stockholders of Universal Electronics Inc. filed on April 20, 1998
(File No. 0-21044))
*10.23 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.24 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998 filed on March 31, 1999
(File No. 0-21044))
10.24 Agreement for Purchase and Sale of Property dated May 29, 1998 by
and between Universal Electronics Inc., and Duke Realty Limited
Partnership (Incorporated by reference to Exhibit 10.25 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998 filed on March 31, 1999 (File No. 0-21044))
10.25 Agreement dated August 12, 1998 by and between Universal
Electronics Inc., and David M. Gabrielsen (Incorporated by
reference to Exhibit 10.26 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998 filed on March 31, 1999
(File No. 0-21044))
10.26 Stock Acquisition Representations and Covenants Certificate dated
September 1, 1998 from H & S Management Corp., J.C. Sparkman and
Steven Helbig (Incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998 filed on March 31, 1999 (File No. 0-21044))
10.27 Non-Compete Agreement dated September 1, 1998 by and among
Universal Electronics Inc., H & S Management Corp., J.C. Sparkman
and Steven Helbig (Incorporated by reference to Exhibit 10.28 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 31, 1999 (File No. 0-21044))
10.28 Consulting Agreement dated September 1, 1998 by and between
Universal Electronics Inc. and J.C. Sparkman (Incorporated by
reference to Exhibit 10.29 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998 filed on March 31, 1999
(File No. 0-21044))
*10.29 Form of Executive Officer Employment Agreement dated September 29,
1998 by and between Universal Electronics Inc. and Paul D. Arling
(Incorporated by reference to Exhibit 10.30 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
filed on March 31, 1999 (File No. 0-21044))
10.30 Revolving Loan and Security Agreement dated October 2, 1998 by and
between Universal Electronics Inc. and Bank of America National
Trust and Savings Association (Incorporated by reference to
Exhibit 10.31 to the Company's Annual Report on Form 10-K for the
year
</TABLE>
47
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
ended December 31, 1998 filed on March 31, 1999 (File No.
0-21044))
10.31 Copy of Revolving Note dated October 2, 1998 by and between
Universal Electronics Inc. and Bank of America National Trust and
Savings Association (Incorporated by reference to Exhibit 10.32 to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on March 31, 1999 (File No. 0-21044))
10.32 Patent and Trademark Collateral Assignment dated October 2, 1998
by and between Universal Electronics Inc. and Bank of America
National Trust and Savings Association (Incorporated by reference
to Exhibit 10.33 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 filed on March 31, 1999 (File No.
0-21044))
10.33 Purchase Agreement dated November 8, 1998 by and between Universal
Electronics Inc. and General Instrument Corporation (Incorporated
by reference to Exhibit 10.34 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 filed on March 31,
1999 (File No. 0-21044))
10.34 Warrant dated November 9, 1998 by and between Universal
Electronics Inc. and General Instrument Corporation (Incorporated
by reference to Exhibit 10.35 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 filed on March 31,
1999 (File No. 0-21044))
10.35 Agreement dated January 30, 1998, as amended on December 30, 1998
by and among Universal Electronics BV, a wholly owned subsidiary
of Universal Electronics Inc. and Euro quality Assurance Ltd. And
T. Maeizumi (Incorporated by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998 filed on March 31, 1999 (File No. 0-21044))
10.36 Agreement dated February 3, 1998, as amended on December 30, 1998
by and among Universal Electronics BV, a wholly owned subsidiary
of Universal Electronics Inc., Strand Europe Ltd. and Ashok Suri
(Incorporated by reference to Exhibit 10.37 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1998
filed on March 31, 1999 (File No. 0-21044))
*10.37 Form of Universal Electronics Inc. 1999 Stock Incentive Plan
(Incorporated by reference to Exhibit A to the Company's
Definitive Proxy Materials for the 1999 Annual Meeting of
Stockholders of Universal Electronics Inc. filed on April 29, 1999
(File No. 0-21044))
*10.38 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1999 Stock Incentive Plan (Incorporated by
reference to Exhibit A to the Company's Definitive Proxy Materials
for the 1999 Annual Meeting of Stockholders of Universal
Electronics Inc. filed on April 29, 1999 (File No. 0-21044))
*10.39 Form of Salary Continuation Agreement by and between Universal
Electronics Inc. and certain employees (filed herewith)
*10.40 Form of Executive Officer Amended Employment Agreement dated
January 29, 1998 by and between Universal Electronics Inc. and
Camille Jayne (filed herewith)
*10.41 Form of First Amendment to Executive Officer Employment Agreement
dated April 22, 1999 by and between Universal Electronics Inc. and
Paul D. Arling, together with Exhibit C attached thereto (filed
herewith)
*10.42 Form of Universal Electronics Inc. 1999A Nonqualified Stock Plan
effective October 7, 1999 and subsequently amended February 1,
2000 (filed herewith)
*10.43 Form of Stock Option Agreement by and between Universal
Electronics Inc. and certain employees used in connection with
options granted to the employees pursuant to the Universal
Electronics Inc. 1999A Nonqualified Stock Plan (filed herewith)
11.1 Statement re: computation of per share earnings (filed herewith)
21.1 List of Subsidiaries of the Registrant (filed herewith)
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------ --------------------
<S> <C>
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
24.1 Power of Attorney (filed as part of the signature page hereto)
27.1 Financial Data Schedule (filed herewith)
</TABLE>
* Management contract or compensation plan or arrangement identified pursuant
to Item 14(c) of the Form 10-K.
49
<PAGE> 1
EXHIBIT 2.2
CONTRACT FOR SALE OF PARTICIPATIONS
OF UNIMAND ESPANA, S.L.
Made in Barcelona, on this 30 day of June 1999.
I
PARTIES
Of the one part,
Mr. DIDIER PATRICK ANDRE BRIAUD, of full age, French national, domiciled at
Saint Martin en Biere, 6 Rue des Plantes, Macherin (France), and bearer of
Passport number 98LZ22358.
Mr. FRANCISCO MURO, of full age, French national, domiciled at Gava (Barcelona),
C/ Cadaques number 3, 1(o) 1(a), and bearer of French Passport number 88DP56899.
And of the other part,
Mr. PAUL JOSEPH BENNETT, of full age, Irish national, domiciled at Dr.
Benthemstraat 107, 7514 CL Enschede, The Netherlands, and bearer of Passport
number .
II
THEY ACT
Mr. Briaud for and on behalf of DIFFUSION ARTISTIQUE ET MUSICALE D.A.M, S.A.
(hereinafter DAM), a registered company, whose registered office is 17 Rue Paul
Seramy, 77300 Fontainebleau, filed into the Chamber of Commerce of Montereau
with number K BIS B.303.952.519. He states that he is duly empowered to sign
the present Contract by his position as President and Managing Director of the
Company.
Mr. Francisco Muro, on his own name and behalf.
<PAGE> 2
The second party, for and on behalf of UNIVERSAL ELECTRONICS, BV a Dutch
registered company, whose registered office is Javastraat 92, 7512ZK Enschede,
The Netherlands, filed into the Commercial Register of the Chamber of Commerce
and Industries for Veluwe en Twente with number 06067125, who is empowered to
sign the present Contract.
The parties by mutual agreement, for the better understanding of this Contract,
subscribe to the following:
III
DEFINITIONS AND ABBREVIATIONS
The following definitions are applicable to the terms used in this Contract and
in its APPENDICES.
The Contract The present Contract, its appendices, and any documents
which may amend or novate it.
The Company The Spanish company UNIMAND ESPANA, S.L., whose
registered office is at calle Las Torres n(o) 58, Sant
Joan Despi, Barcelona, registered in the Mercantile
Register of Barcelona, on folio 98, volume 26.372, page
B-101.622, holder of C.I.F. number B-60-419.124.
The Participations EIGHT THOUSAND (8,000) participations of nominal value
1,000 Pesetas each, no. 1 to 8,000, both inclusive, of
the company of UNIMAND ESPANA, S.L., which correspond to
the 100% of the share capital of this company
The Sellers DAM and Mr. FRANCISCO MURO, which appears in Section II
of this Contract.
The Purchaser The company UNIVERSAL ELECTRONICS, BV, which appears in
Section II of this Contract.
The Signature Date Today's date, on which there shall take place the
effective purchase of the Participations by UNIVERSAL
ELECTRONICS, BV.
Having made the preceding definitions, the parties:
2
<PAGE> 3
IV
DECLARE
I. Whereas DAM is owner of 5,600 participations numbers 1,501 to 7,100 both
inclusive of the Company, which represents 70% of the total sharecapital.
II. Whereas Mr. FRANCISCO MURO is owner of 2,400 participants numbers 1 to
1,500 and 7,101 to 8,000, all inclusive of the Company, which represents
30% of the total sharecapital.
III. Whereas the Participants the subject of the present Contract are free of
all charges and encumbrances, and are not subject to any pledge or
guarantee, and they are not affected by any purchase option right.
IV. Whereas THE SELLERS are prepared to warrant the truthfulness of the
representations with regards the status and assets of UNIMAND ESPANA,
S.L., in the terms and subject to the limits herein.
V. Whereas THE SELLERS are interested to sell the Participations to THE
PURCHASER and THE PURCHASER is interested to purchase them.
VI. Whereas the present transaction can not be executed before Spanish Public
Notary on today's date due to the individual acting on behalf of DAM has
not his representation documents officially granted and apostilled
according to the Hague Convention. For this reason, the parties agree to
grant this transaction as a private document on today's date, subject to
resolutory condition that the public deed of transfer is granted before
July 20, 1999 before Spanish Public Notary, as set forth below.
IN PURSUANCE WHEREOF, the parties mutually and reciprocally recognising their
respective legal capacity to contract and bind themselves, and in particular as
to the execution of the presents, hereby execute the present CONTRACT FOR SALE
OF PARTICIPATIONS, subject to the following:
<PAGE> 4
V
CLAUSES
1.-OBJECT
Subject to the terms and conditions set forth in this Contract, THE SELLERS
sell and transfer the EIGHT THOUSAND (8,000) Participations which represents
100% of the sharecapital of the Company to THE PURCHASER, which buys and
acquires them free of charges and encumbrances.
The total respective dividends corresponding to such holding from the Signature
Date shall be attributed to THE PURCHASER as of the Signature Date. THE SELLERS
declares that there are no dividends pending payment corresponding to periods
prior to said date and expressly renounces and waives any right to such said
dividends.
2.-PRICE AND MANNER OF PAYMENT
2.1 PURCHASE PRICE.
The Purchase Price for the Participations is established at 724,600 Euros. This
Price has been freely fixed by the contracting parties.
2.2 MANNER OF PAYMENT
THE PURCHASER advance the payment of the total Purchase Price to THE SELLERS,
with the resolutory condition that this transaction is executed before Spanish
Public Notary determined by THE PURCHASER before July 20, 1999. In case that
the transfer is not formalised before Public Notary before such date, this
transaction will be resolved and THE SELLERS shall return the advanced payment
immediately to the PURCHASER.
The advanced payment of the total Purchase Price is distributed as follows:
- - THE PURCHASER pays 507.220 Euros to DAM by way of wire transfer to the
account number 14806 00088 280 570 84000 51, of the French Bank CREDIT
AGRICOLE, Swift code AGRI FR PP 848.
- - THE PURCHASER pays 217.380 Euros to Mr. FRANCISCO MURO by way of wire
transfer to the account number 2013 0049 15 0201089064 of the Spanish Bank
CAIXA DE CATALUNYA, Swift code CESCESBB.
The execution of this Contract of Sale constitutes the most effective receipt
for the Purchase Price which is paid.
<PAGE> 5
2.3 COMPLETION.
In accordance with the Spanish Law in force, the present transaction shall be
executed in a public document before a Spanish Notary Public determined by THE
PURCHASER before July 20, 1999. It shall be also fulfilled the following
condition precedent:
- - Delivery to the satisfaction of THE SELLER of Minutes and Certificate of
the General Shareholders Meeting of the company, dated June 30, 1999,
whereby the resignation of Mr. DIDIER PATRICK ANDRE BRIAUD as Sole
Administrator of the Company, and the appointment of UNIVERSAL
ELECTRONICS, BV as Sole Administrator of the Company, are agreed.
If the transfer is not formalised before Public Notary before such
date, this transaction will be resolved and THE SELLERS will be obliged to
return the advanced payment of the total Purchase Price immediately to the
PURCHASER.
3.-REPRESENTATIONS AND WARRANTIES BY THE PARTIES
3.1. BY THE SELLERS
THE SELLERS confirm to THE PURCHASER that all the representations and warranties
attached as APPENDIX 1 and all contained in this agreement are true and
accurate, and accepts in the terms established in Clause 4, all liability
arising from any misrepresentation or inaccuracy therein. THE SELLERS also
confirm that none of the representations and warranties contained in this
Contract contains a misrepresentation which could materially affect THE
PURCHASER as potential investor.
3.2. BY MR. DIDIER PATRICK ANDRE BRIAUD.
Mr. Briaud represents and warrants that he is duly empowered to represent DAM in
this transaction by his post as President and managing Director of DAM, and that
his appointment is in force today and will be in force until the public deed of
transaction is executed as set forth above. Mr. Briaud also represents and
warrants that the document of his appointment will be recorded in the Company's
Register where DAM is recorded and that he will obtain the necessary
documentation notarised and apostilled according to the Hague Convention before
July 20, 1999.
3.3. BY THE PURCHASER
THE PURCHASER represents and warrants to THE SELLERS:
5
<PAGE> 6
a) That THE PURCHASER is a lawfully constituted company and that it has
sufficient power and capacity to enter into and sign the present Contract
and conduct all the acts, actions, businesses and transactions which should
be conducted by virtue of the present document and that it has all
requisite and sufficient company resolutions and agreements in that respect
and does not require any other authorisation.
b) That the execution and development by THE PURCHASER of the purchase herein
and the communication of the transactions shall not in any way give rise to
a conflict or violation of its Articles of Association, or agreements of
any type or legislation or regulations thereto applicable.
In the event that any of the representations of THE PURCHASER or THE SELLERS is
incorrect or untrue, or in the event of non compliance, in whole or in part of
any of the substantial acts or obligations of THE PURCHASER or THE SELLERS
under this Contract, that could materially affect THE SELLERS or THE PURCHASER,
these may, at their own election, chose to proceed with execution of the
present Contract or may resolve the Contract, without prejudice to any other
rights and claims available under law.
4.-LIABILITIES BY THE SELLERS
4.1 THE SELLERS shall be jointly and severally, personally and unlimitedly
liable under the terms established in this Clause, for any
misrepresentation and/or inaccuracy contained in this Contract and in
particular representations and warranties set out in Clause 3 and attached
as APPENDIX 1, and shall be jointly and severally, personally and
unlimitedly liable to the Company and THE PURCHASER in relation to any
possible claim by THE PURCHASER and/or the Company as a consequence of the
application of the present Contract, including, by way of illustration, the
liability which may derive from any misrepresentation or inaccuracy in the
representations and warranties given by THE SELLERS.
4.2 THE SELLERS shall be jointly and severally, personally and unlimitedly
liable to THE PURCHASER and the Company with respect to any liability, known or
unknown, including of a tax, social security, administrative, commercial or of
any other nature which is claimed against the Company and which derive from any
administrative or judicial actions or procedures which may be derived from any
acts or omissions prior to Signature Date, which the Company may have to meet.
In particular, without prejudice to other liabilities, THE SELLERS shall be
jointly and severally, personally and unlimitedly liable to THE PURCHASER and
the Company, with respect to the following contingencies which may arise in the
Company:
6
<PAGE> 7
a) Liabilities of a tax nature, in relation to all taxes, rates or
levies, including fiscal license taxes/trading licenses and taxes
which may derive from any acts or omissions or periods prior to the
Signature Date, although these may be claimed subsequent to said date.
b) Labour or Social Security liabilities, which may derive from any act
or omissions prior to the Signature Date.
c) Administrative proceedings and authorisations which are required for
the Company.
The compensation for all matters included herein shall be the total
liability which the Company may have to meet, together with interest, fines
and expenses incurred including the costs of defence which the Company
and/or THE PURCHASER may have to meet.
4.3 The responsibilities and guarantees of THE SELLERS described in the present
Contract and the appendices thereto, regarding claims, events,
contingencies as a result of incidents prior to the Signature Date shall
expire in accordance with their statutory/legal prescription period.
4.4 No claim under this contract related with the balance sheet dated March 31,
1999, attached as Appendix 2, may be presented if the total claimed is less
than TEN THOUSAND EURO (10,000 Euro). Such total may consist in one sole
claim or the total of various. Once such level of claim against THE VENDORS
is reached, all claims will be payable.
5.-PROCEDURE TO BE FOLLOWED IN THE EVENT OF CLAIMS
5.1 In case the Company should be officially claimed for any obligation or
responsibility incurred prior to today's date and included in the previous
clause, the latter should be duly notified to THE SELLERS and THE
PURCHASER. Said communication should take place within the seven (7)
working days following its reception.
5.2 The Company will be the one dealing with the exercise or formulation of
actions, appeals or opposition to the obligation or responsibility thereby
claimed.
5.3 Any cost and expenses including deposits, previous payments or consignments
that derive or are necessary for such opposition or claim will be directly
charged to the Company.
7
<PAGE> 8
5.4 Should the final resolution or sentence from the competent authority, or
agreement reached by both parties, establish an obligation or
responsibility, THE SELLERS shall pay the amount claimed or, in case the
Company has already paid, reimburse within a maximum of 30 days 100% of
the corresponding amount, in addition, if applicable, the amounts borne
for concepts outlined in the previous paragraph, together with interests,
fines and expenses incurred.
6.-JOINT AND SEVERAL LIABILITY AND SUBROGATION
THE SELLERS shall be jointly and severally, personally and unlimitedly liable
to the Company, THE PURCHASER and/or any other person or entity which in the
future might acquire all or part of the Participations, for all obligations for
which the former are liable by virtue of this Contract.
The liability extends in particular to the liability which might derive from
the misrepresentation or inaccuracy of the representations and warranties for
which THE SELLERS are liable, established in this Contract.
In the event of the subrogation of a said third party in the present Contract,
THE SELLERS shall be notified of the same.
7.-COSTS AND TAXES
Except as may otherwise be expressly provided in this Contract, the taxes
arising from the performance and execution hereof shall be borne by such party
as is specified by Law. The expenses arising from such performance and execution
shall be borne and payable by the party which causes them. The expenses
corresponding to the protocol registration of the transactions foreseen in the
present document shall be borne by THE PURCHASER.
8.-COMMITMENT NOT TO SELL THE PARTICIPATIONS AND RESOLUTION
Since THE SELLERS will have the title deeds of the Participations until the
execution of the present transaction before Spanish Public Notary, THE SELLERS
individually and personally commit, represent and warrant to THE PURCHASER that
they will not sell the Participations to third parties in any case.
In the event of any of the parties being in breach of its obligations,
including the non fulfillment of the granting of the public deed of transfer,
the other party may demand the performance or rescission of same, according to
Article 1.124 of the Spanish Civil Code.
8
<PAGE> 9
All the above is without prejudice to any actions and claims which are
available under law.
9.-ARBITRATION AND LAW
The parties declare their wish to settle amicably and by way of appropriate
negotiations any differences or disagreements which may arise in the
performance and execution of this Contract.
This notwithstanding, if no amicable settlement is reached, both parties agree
to refer their differences to legal arbitration by a sole arbitrator, and for
such purposes submit the appointment of the arbitrator and administration
thereof to the ARBITRATION COURT OF BARCELONA, and covenant to comply with the
decision of such arbitration.
Should judicial formalization or execution of the arbitration award be
necessary, the parties expressly submit themselves to the Courts of Barcelona,
expressly renouncing any other jurisdiction that may correspond to them.
This Contract is to be governed in all respects by Spanish Law.
10.-NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed duly given if and when delivered personally or sent
by certified mail (return receipt requested, postage prepaid) to the other
party at its respective address first above written, or as subsequently changed
by notice duly given.
11.-PRIOR AGREEMENTS
This Contract replaces and renders void any antecedent agreement and contract
signed between the parties.
12.-MODIFICATIONS AND ADDENDA
Any amendment or addenda to the present Contract will be valid only if the
effect thereof is expressly stated and signed by both parties. In such event,
apart from the Clauses expressly modified, the remaining Clauses of the
Contract will remain valid, and, therefore, fully enforceable.
9
<PAGE> 10
13.-VOID CLAUSES
If any of the Clauses of the present Contract should be void or inapplicable,
the validity of the remaining provisions shall not be effected and shall remain
in force.
This Agreement is executed in THREE (3) original parts in English language.
IN WITNESS WHEREOF, the parties sign this Agreement in the place and the date
first above written.
THE SELLERS:
/s/ Francisco Muro
- -----------------------------------------------
Signed: Mr. Francisco Muro
- -----------------------------------------------
Signed: DIFFUSION ARTISTIQUE ET MUSICALE D.A.M, S.A.
Represented by Mr. Didier Patrick Andre Briaud
THE PURCHASER:
- ------------------------------------------------
Signed: Mr. UNIVERSAL ELECTRONICS, BV
Represented by Mr. Paul Joseph Bennett
10
<PAGE> 11
APPENDIX I
REPRESENTATIONS AND WARRANTIES
DAM and Mr. FRANCISCO MURO (hereinafter, "the Sellers") confirm to UNIVERSAL
ELECTRONICS, BV (hereinafter, "the Purchaser") that the following
representations and warranties are true and correct, and accepts any liability
which may arise from their untrueness. No representation or warranty expressed
in the present document contains a misrepresentation which could materially
affect the Purchaser as a potential investor. The present representations and
warranties are an essential part of the Contract for Sale of Participations,
forming with it a unity.
The Sellers represent and warrant to the Purchaser in respect of the Company
its business and assets the following:
1. AUTHORITY
The Sellers have the right, power and authority to enter into and perform
their obligations under this Agreement and this Agreement constitutes
obligations binding on the Seller in accordance with its terms.
2. THE COMPANY
The Company UNIMAND ESPANA, S.L. has full legal personality under the laws
of Spain, and holds all the permits and licenses needed in order to pursue
and develop its business activities, with the exception set forth in point
8 below, together with full power to deal with its properties and assets.
UNIMAND ESPANA, S.L. is a Spanish registered company, whose registered
office is at Calle Las Torres number 58, Sant Joan Despi (Barcelona), and
was incorporated before the Notary Public of Barcelona, Mr. Antonio
Lopez-Ceron y Ceron, executed on November 15, 1993, and is registered in
the Mercantile Register of Barcelona, on folio 98, volume 26.372, page
B-101.622, holder of C.I.F. number B-60/419.124.
3. QUALIFICATION TO DO BUSINESS
The Company has the complete power to own or to lease its property and to
carry on the business as now being conducted by it under the laws of the
jurisdiction in which it is incorporated, being the only jurisdiction in
which the nature of the business conducted by it or the property owned or
leased by it makes such qualification necessary.
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<PAGE> 12
4. SHARE CAPITAL
The issued and outstanding participations of the Company have been
authorised and are validly issued and fully paid, and all such
participations are owned directly by the Sellers free and clear of any and
all liens, pledges, charges, claims, restrictions or agreements of any
kind.
The share capital of the Company is 8,000,000 Pesetas fully paid up,
represented by 8,000 participations, numbered from 1 to 8,000, inclusive,
with a nominal value of 1,000 Pesetas each, all enjoying the voting and
financial rights, proportional to their respective nominal value.
The participations held by the Sellers are free of all charges and
encumbrances, and no purchase option rights have been created over the
same. No person has a right to call for the allotment or transfer of any
participation in the Company.
All the participations issued enjoy the financial rights corresponding to
its nominal value, and therefore, with respect to the distribution of
company profits and to the resulting net assets of the company on
liquidation and to the preferential subscription right on the issue of new
participations.
All the participations have the voting rights corresponding to its nominal
value and there are no preference participations which grant any benefit
over the ordinary participations. All the participations belong to the same
class and have the same political and economical rights.
5. NO OPTIONS
The Company is not party to any agreement or commitment or has outstanding
any option, warrant or convertible security that would require it, at some
future date or upon the happening of some event, to issue any additional
participations or any other participations or debentures, nor does it have
the right or option to require any holder of its outstanding participations
to make any further contributions to its capital or to purchase any
additional participations.
6. BYLAWS
The Bylaws of the Company are up to date and are those filed in the
Mercantile Register.
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<PAGE> 13
7. CORPORATE RECORDS
The corporate records and minute books (or their equivalent) of the Company
contain complete and accurate minutes of all meetings of and copies of all
resolutions passed by the directors and members of the Company since its
incorporation. All such meetings were duly called and held, all such
resolutions were duly passed and the members registers, registers of
transfers and other corporate registers of the Company are complete and
accurate in all material respects.
8. LICENSES AND COMPLIANCES
The Company has obtained all licences, permissions, authorisations and
consents (referred to collectively as "Licenses") required in order to
conduct the businesses now carried on, except for the licence of activity
of the City Council, which has not been applied yet, due to the fact that
the company has recently moved to new premises. All such licences are in
full force and effect and not subject to any onerous conditions and all
reports, returns and information required by law or as a condition have
been duly made or given to the appropriate authority and no notice has been
received that any Licence is likely to be revoked. The Company has
concluded and is conducting its business in compliance in all respects with
all applicable laws, rules and regulations of the jurisdiction in which its
business is carried on and has not been and is not now in breach of any
such laws, rules or regulations.
9. LITIGATION
Except as plaintiff in the collection of debts rising in the ordinary
course of business and the proceeding and claim with regards MEL GROUP,
S.L./RAYTEL SOUND VISIONS, S.L. (65/1999 file of the Alcorcon Courts), the
Company is not a plaintiff or defendant in or otherwise a party to any
litigation, arbitration or administrative proceedings which are in
progress, nor have such proceedings been threatened by or against the
Company or any of its assets nor, are there any fact or circumstances
likely to give rise to any such litigation, arbitration or administrative
proceedings.
10. INSOLVENCY
No receiver or trustee (or the equivalent thereof) has been appointed of
the whole or any part of the assets or undertaking of the Company. No
petition has been presented, no order has been made and no resolution has
been passed for the winding-up (or the equivalent thereof) of the Company
in the jurisdiction where it is incorporated. The Company has not stopped
payment of its debts and is not insolvent or unable to pay its debts within
3
<PAGE> 14
the meaning of the insolvency or bankruptcy legislation in its jurisdiction
of incorporation.
11. FAIR TRADING
11.1 The Company is not party to any agreement, arrangement or concerted
practice which is or must be registered under any legislation in any
jurisdiction in which it carries on business or which contravenes any
cartel or fair trading legislation.
11.2 The Company does not conduct any business or is party to any
agreement, arrangement or transaction which contravenes any legal
limitation on prices, is required in whole or in part to be
registered, filed or recorded in any jurisdiction in order to be
valid and has not been so registered, filed or recorded.
12. NO DEFECTIVE SERVICES
The Company has not supplied Services which are, or were or will become in
any respect faulty or defective or which do not comply in any material
respect with any warranties and representations expressly or implicitly
made by the Company or with all applicable regulations, standards and
requirements in respect thereof.
13. ACCURACY OF BOOKS AND RECORDS
The Company possesses and maintains up to date the statutory accounting
books, together with all auxiliary books necessary for the proper
development of the activity of the Company.
It has also duly complied with and is up to date in relation to the Minute
book, Tax and Social Security Returns, and other documents which the
Company is legally obliged to maintain.
It has also filed it annual accounts in the Barcelona Mercantile Register
within the period established under current legislation.
The books and records, financial and otherwise, of the Company fairly and
correctly set out and disclose in all respects the financial position of
the Company as of the date hereof and all financial transactions of the
Company have been fully and accurately recorded in such books and records.
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<PAGE> 15
14. ACCOUNTS
The Company Accounts:
14.1 Were prepared in accordance with the statutory and other accounting
principles and practices applicable thereto in Spain and, subject to
the foregoing, give a true and fair view of the Company as of the
date on which they were prepared and of the results of the Company;
14.2 set out completely and accurately the assets and liabilities of the
Company and contain adequate provision for bad and doubtful debts,
for all social security dues and Taxation (including deferred
taxation) relating to any period ending on or before the date as of
which they were prepared, and for all actual and contingent
liabilities incurred or accruing before that date to the extent
required by such statutory and other accounting principles and
practices;
14.3 were prepared on a basis consistent with that on which such Accounts
of the Company were prepared for at least the three preceding years.
15. BALANCE SHEET AND COMPANY EQUITY
15.1 THE SELLERS guarantee that the assets shown in the balance sheet of
the Company closed at 31 March 1999, attached to this document as
APPENDIX 2 thereof, and in the Accounting Books of the Company, are
not overvalued, and have been valued in accordance with the valuation
rules applicable in Spain and with generally accepted accounting
principles.
15.2 THE SELLERS guarantee that the liabilities shown in the balance sheet
of the Company closed at 31 March 1999, attached to this document as
APPENDIX 2, thereof, and in the Accounting Books of the Company, are
the only liabilities of the Company and are not undervalued, and have
been valued in accordance with the valuation rules applicable in Spain
and with generally accepted accounting principles. Full provision or
reserve has been made for all liabilities and commitments of the
Company when required.
5
<PAGE> 16
Furthermore, THE SELLERS guarantee that the Company has no other
obligations which were derived prior to the close of such balance
sheet, except those shown and duly provisioned as liabilities in the
balance sheet.
15.3 THE SELLERS state that since the date of close of the balance sheet
(30 March 1999), the Company has not conducted any operations which
are not in the normal course of business, and, in particular:
- it has not granted any loans or guarantees to any of its
shareholders, directors or employees, other than advance
payments of salary and commission to nonshareholder employees or
representatives.
- it has not made nor shall it make any investments nor acquired
nor shall acquire any commitments to invest in fixed assets
which exceed in total TWO MILLION PESETAS (ptas. 2,000,000.).
- it has not entered into any agreement or contract whatsoever,
other than contracts for maintenance and purchases and sales
arising from the normal course of operations, in which cases,
where these have been with related companies, the prices have
not been substantially different from habitual prices.
- in general, it has not performed any action nor contracted any
obligation which could materially vary the situation of the net
assets nor the business perspectives of the Company.
16. ASSETS
16.1 The Company is owner of all its assets, and no purchase option,
encumbrance or charge whatsoever affects the same.
16.2 All Assets which are subject to registration in Public Registers are
duly registered.
17. WORKING CAPITAL AND STOCK
The Company has sufficient working capital for the purposes of continuing
to carry on its business in its present form and at its present level of
turnover for the foreseeable future and for the purposes of executing,
carrying out and fulfilling in accordance with their terms all orders,
projects
6
<PAGE> 17
and contractual obligations which have been placed with or undertaken by
the Company.
All the stocks of the Company are in good and marketable condition, and
comply with all the legal requisites applicable to its process and sale.
In particular, goods deposited at the premises of customers, fulfil such
requirements, and the Company possesses sufficient documentation to
support their recovery or payment. Likewise, all stocks in deposit with
customers are in good condition, and no claim may be made with respect to
them.
All the stocks of the Company within its product line are in marketable
conditions and saleable at market price, subject to normal and appropriate
stock provision as stated below.
Due provision has been made in respect of stocks which may be affected by
a loss of value in accordance with current valuation rules, on the basis
of the prudence principle, all consistent with the principles applied in
the accounts of the Company.
The parties agree that an inventory of all the stocks at June 30, 1999
will be done in the company premises, at THE PURCHASER request, being the
PURCHASER able to assist with a representative of Price Waterhouse.
18. ABSENCE OF CONFLICTS
The execution and delivery of this Agreement by the Seller will not
conflict with or result in any breach of, or constitute an event of
default or give rise to a right of termination or accelerate the time for
performance required under any agreement entered into by the Company or
result in the creation or imposition of any lien, charge or encumbrance
upon any assets of the Company or the loss of any right, privilege,
franchise, licence or permit which is material to the business of the
Company or result in the violation by the Company of any applicable writ,
order, injunction or decree of any local, national or supra-national
government or governmental body or of any court of competent jurisdiction
or give rise to or trigger any right of preemption.
19. INSURANCE
The Company has taken out and maintains fire, use and occupancy and other
forms of insurance with reputable and sound insurers covering its property
and assets and protecting its business in amounts and against such losses
and claims as are generally maintained for comparable businesses and
properties and:
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<PAGE> 18
19.1 there are no circumstances which might lead to any liability under
such insurance policies being avoided by the insurers, according to
standards of preventions;
19.2 no material claims have been made under any such insurance policies
which remain outstanding and no event has occurred which may give
rise to a claim;
19.3 such policies of insurance will not lapse on the change of ownership
of participations resulting from the performance of this Agreement.
20. SUFFICIENCY OF ASSETS
The assets and rights of the Company at Signature Date are sufficient to
enable it to continue business as now carried on.
21. PERSONAL OR MOVEABLE PROPERTY
The Company is the owner of all of its personal or moveable property with
good and marketable title thereto free an clear of any lien, charge,
security interest, adverse claim or other encumbrance whatsoever. The uses
to which such personal or moveable property have been put are not in
breach in any material respect of any statute, by-law, ordinance,
regulation or governmental restriction. The Company is not a party to any
conditional sales contract, hire purchase agreement, security agreement or
other title retention agreement.
22. MATERIAL COMMITMENTS AND LIABILITIES
The Company does not have:
22.1. Outstanding borrowing, guarantee, indemnity or indebtedness in the
nature of borrowing including any liability under acceptances (otherwise
than in respect of normal trade bills) or any loans to third parties with
the following exceptions:
The company has granted a loan to French company S.A. DAM, subject to the
following conditions:
Amount of credit: 2,000,000 French Francs.
Destination: Financing of working capital.
Term: Between 31 July 1998 and 31 July 2003 (five-year term), the latter
date being that on which the loan shall be definitively due and payable.
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<PAGE> 19
Nominal interest rate per year is fixed at 5.25% (5.28% TAE). The
interest shall accrue at the end of each month and the monthly amount is
37,971.97 FF.
22.2 mortgage, charge, lien or pledge or any obligation to create a mortgage,
charge, loan or pledge or to secure any obligation or the performance of
an obligation;
22.3 any contract or obligation which cannot readily be performed by it on
time and without exceptional expenditure of money or effort.
23. ACCOUNTS RECEIVABLE
The accounts receivable of the Company are bona fide and collectible within the
usual period for payment without any set-off or other claim.
Client receivable accounts shown as assets in the balance sheet and registered
up to the date hereof correspond to sums truly due from solvent creditors, and
THE SELLERS shall be liable for the solvency of same, except for such creditors
and to the extent for which due provision has been made.
THE SELLERS are not aware of any reason why the level of sales to or purchases
from any such customer or supplier should reduce after closing or why any such
person would not deal with the Company under the new ownership.
The SELLERS represent that the usual average period for payments is 155 days
from date of shipment to customers.
24. INTELLECTUAL AND INDUSTRIAL PROPERTY RIGHTS
The company has no intellectual property rights (trademarks, patents, designs,
commercial names, etc.).
25. REAL PROPERTY LEASE AGREEMENTS
The company does not own any real state. The activity of the company is carried
out in the offices leased by the company, copy of the lease agreement dated 1
March 1999 is attached as APPENDIX 3. The address of such offices is C/ Las
Torres number 58, Sant Joan Despi (Barcelona).
25.1 No event has occurred or right has arisen (whether or not the same has
subsequently lapsed) under a lease agreement of any lease property
entitling the lessor to terminate the same prematurely;
<PAGE> 20
25.2 there are no circumstances which would entitle or require any third
person to exercise any power of entry upon or of taking possession
of the whole or part of any property leased by the Company or which
would otherwise restrict or terminate the continued possession or
occupation of any thereof;
25.3 no third party rights are being infringed by the current use of any
property leased by the Company the consequences of which
infringement are material for the Company;
25.4 no repairs to any property leased by the Company are outstanding;
26. CONDITION OF EQUIPMENT, ETC
All stock, facilities, machinery and equipment owned and used by the
Company in connection with its businesses are in good operating
condition, in a state of good repair and maintenance (reasonable wear and
tear excepted) and valued in the Accounts in accordance with generally
accepted accounting principles.
27. CONTRACTS
No contracts has been entered into by the Company in any way other than
in the ordinary course of business (or are known to be likely to result
in a loss on completion of performance) and the Company is not in breach
of any contract.
28. INSIDER CONTRACTS
There is not any material contract or arrangement to which the Company
is, or was, a party and in which the Company or any person beneficially
interested in any part of the share capital of the Company or any
Partner, or director of the Company is, or has been, interested either
directly or indirectly and the Company is not a party to, nor has its
profits or financial position been affected by, any contract or
arrangement which was not of an entirely arm's length nature.
29. INDEBTEDNESS
The Company has not received any notice to repay under any agreement
relating to any borrowing (or indebtedness in the nature of borrowing)
which is repayable on demand; nor has the Company received notice that
there has occurred any event of default under any agreement relating to
any borrowing or indebtedness in the nature or borrowing or other credit
facility to which the Company is a party.
<PAGE> 21
30. GUARANTEES
The Company is not a party or bound by any agreement of guarantee,
indemnification, assumption or endorsement or any like commitment of the
obligations, liabilities (contingent or otherwise) or indebtedness.
31. EMPLOYEES, AGENTS AND DIRECTORS
The employees set out in the list of employees of the Company set forth
in APPENDIX 4 hereto are the only employees who have a contract of
employment with the Company. The Company has not entered into any
unusual labour agreements and no pension plans or other plan providing
any retirement benefits or similar rights have been created or entered
into with respect to the employees. The Company is up to date in the
payment of wages.
The company and its officers have complied with all applicable laws and
regulations, including health and safety.
The Company has not entered into any contract or agreement granting a
share of profits to employees, nor has it granted nor guaranteed any
loans in favour of employees.
The Company has not signed any agreements with its employees which
contain special compensation clauses in the event of the resolution of
such contract by the Company. "Special compensation clauses" shall be
deemed to be such clauses which provide for compensation greater than
the minimum established by Law or which, being permitted by Law, provide
for compensation greater than that statutorily payable, in the absence
of an express agreement thereto. Any claim made in this respect shall be
the liability of THE SELLERS.
The said APPENDIX 4 contains the category, salary and other
remunerations together with service and types of contracts of the
employees of the Company. The Company does not have any other corporate
or labour obligations other than those specified in APPENDIX 4 hereto,
to the extent that these are stated in the said Appendix and the balance
sheet closed at 30 May 1999.
The Company is affected the Collective Wage Agreement of the metal
trading, reference D.O:G.C. 30.09.1997. No other collective bargaining
agreement affects the Company's employees.
Attached as APPENDIX 5 are listed all the Company's agents and
distributors, affiliated and non-affiliated, including their commissions
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<PAGE> 22
levied and their periods of service, and no contracts for such agents and
distributors have been granted in writing.
There is not in existence any written or unwritten contract of employment
with a director or an employee of the Company which cannot be terminated by
less than three months notice without giving rise to a claim for damages or
compensation (other than a statutory redundancy payment or statutory
compensation for unfair dismissal). There is not outstanding any agreement
or arrangement to which the Company is a party for profit-sharing or for
payment to any of its directors or employees of bonuses or for incentive
payments or other similar matters. No dispute has arisen within the last
one year between the Company and a material number or category of its
employees. None of the contracts of employment of the employees of the
Company contain terms outside those which would reasonably be regarded as
being granted in the ordinary course of business for the Company.
32. TAX RETURNS AND SOCIAL SECURITY
The Company has duly filed in a timely manner all Tax Returns required to
be filed by it, has made complete and accurate disclosure in such returns
and has paid all Taxes shown on such returns as being due and payable and
has also paid all assessments and re-assessments and all other Taxes,
governmental charges, penalties, interest and fines due and payable by the
Company up to the date hereof. There are no agreements, waivers or other
arrangements providing for an extension of time with respect to the
assessment or re-assessment of Taxes or filing of any Tax Return by or
payment of any Tax by, or levying of any governmental charge against the
Company. There are no actions, audits, assessments, re-assessments, suits,
proceedings, investigations or claims now threatened or pending against the
Company in respect of taxes or governmental charges asserted by any such
authority. The Company has withheld from each payment made by it the amount
of all Taxes and other deductions required to be withheld therefrom and
have paid the same to the proper taxing or other authority within the time
prescribed under any applicable legislation or regulation.
The Company is up to date in respect of all Labour or Social Security
obligations, accrued prior to the date of the present document.
33. SUBSIDIARIES
The Company has no Subsidiaries nor any interest in the participations or
right to participate in the profits or obligation to bear the losses of any
other company, consortium, joint venture or partnership.
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<PAGE> 23
34. MATERIAL DISCLOSURE
All information and circumstances relating to the Company which are
material to be known by a willing purchaser of the Participations have been
accurately and completely disclosed by the Sellers to the Purchaser.
35. CLIENTS
No client of the Company has given any indication to the Seller that they
will or may cease to be a client of the Company by reason of the
transactions anticipated by this Agreement and the Seller has reason to
believe that any client will so cease to be a client.
36. SELLERS CONFLICTS
The Sellers are not involved in any business which is in competition with
that carried out by the Company.
37. REGISTRATION
The Company does not require any specific registration of its products for
its activity.
38. POWERS
The Company has not granted any general powers or specific powers of
attorney other than those set out in Mercantile Register at the Date of the
Signature.
39. BANKS
The credit institutions with which the Company maintains relations as a
client, are set out in APPENDIX 6 hereto, indicating the type or types of
operations contracted, the persons authorized to draw funds and make
decisions, and the amounts of same as of June 30, 1999, and THE SELLERS
state that since these dates, no movements have been made which do not
correspond to normal operations of the activity of the Company.
40. "BONA FIDE"
All the information provided by THE SELLERS has been correct and there has
not been omitted any matter of vital or material importance, which if known
beforehand, would have caused THE PURCHASER not to proceed with this
purchase.
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<PAGE> 24
APPENDIX 2
UNIMAND ESPANA SL
BALANCE SITUATION 31 - 03 - 1999
ASSETS
IMMOBILIZED
ESTABLISHMENT EXPENSES
201. Establishment expenses of the premises
202. Capital amplification expenses
IMMOBILIZED IMMATERIAL
215. Computing applications
281. Accumulated amortization
IMMOBILIZED MATERIAL
226. Furniture
227. Computing equipment
229. Others immobilized
281. Accumulated amortization
239. Advance for immobilized
IMMOBILIZED FINANCIAL
260. Constituted finances
CIRCULATING ASSETS
EXISTENCES
300. Goods
DEBTORS
430. Customers
440. Other debtors
473. Retention and payments
474. Anticipated taxes
TREASURY
566. Factoring SFF deposits
57. Saving funds and banks
TOTAL ASSETS
<PAGE> 25
UNIMAND ESPANA SL
BALANCE SITUATION 31 - 03 - 1999
LIABILITIES
OWN FUNDS
100. Capital
121. Results of previous exercises
129. Period results (benefits)
DEBTS TO LONG TERM
160. Loans to long term to the group's companies
DEBTS TO SHORT TERM
400. Suppliers
410. Other creditors
465. Pending remuneration to the personnel
475. Public Treasury fiscal creditor
476. Social Security creditor
521. Expired short term debt
555. Application of pending consignment
TOTAL LIABILITIES
UNIMAND ESPANA S.L.
RESULTS FROM 31 - 03 - 1999
SALES
700. Sales
709. Rapels over the sales
<PAGE> 26
SALES COSTS
600. Purchases
608. Purchases devolution
610. Stock changes
GROSS MARGIN
OTHER EXPLOITATION REVENUES
759. Advertising participation
75. Other revenues
PERSONNEL EXPENSES
640. Wages and salaries
642. Social charges
6231. Commissions
EXTERNAL SERVICES
621. Rents
623. Professional services
624. Transports
625. Insurance premiums
626. Banking services
627. Advertising and propaganda
628. Supplies
629. Other expenses (inc. Traveling)
631. Other tributes
EXPLOITATION RESULTS
FINANCIAL REVENUES
769. Financial revenues
768. Positive exchange difference
FINANCIAL EXPENSES
662. Long term debts interests
663. Short term debts interests
664. Consignment expenses and SFF
665. Discounts over sales p.p.
668. Negative exchange difference
669. Other financial expenses
ORDINARY ACTIVITIES RESULT
EXTRAORDINARY REVENUES
EXTRAORDINARY EXPENSES
PERIOD RESULT (BENEFITS)
<PAGE> 27
APPENDIX 3
RENTING CONTRACT OF THE BUSINESS PREMISES 6364
RENTING OBJECT
<TABLE>
<S> <C> <C> <C>
On the premises.....Bajos -1..............approximate area.........250 m2
Placed in.........Calle Las Torres....................Nr. 58
City of ...............San Juan Despi.....Province.........Barcelona
</TABLE>
San Juan Despi, March 1, 1999, brought together:
Mr. Francisco Muro born in Valencia, province of Valencia, of __ years of age,
marital status divorced and of profession business manager, resident at Calle
Cadaques, 3 - Gava, with D.N.I. number (ID number) X - 1287463 - S, issued in
Barcelona on July 4, 1997, C.I.F number (Tax code) B60419124, acting as Unimand
Espana S.L.administrator ON A LEASEHOLDER CONCEPT AND,
Mr. Joaquin Jimenez Trivino
Born in Cornella, province Barcelona of 74 years of age, with D.N.I number (ID
number) 36737973, issued in San Feliu de Llobregat on April 23, 1990, C.I.F
number (Tax code) 36737973G as owner,
AGREE ON
1. Renting the premises mentioned above for ONE YEAR, for the price of EIGHTY
FIVE THOUSAND pesetas every month, and also agree on the conditions
explained on the next page attached to this contract, which are part of the
same.
2. This lease is subject to the VAT, and its subscription will include all
those concepts, which integrate the quantity to pay by the leaseholder,
appearing by separate on the rent receipts.
And to put this on record, both parts sign on the indicated place and date.
LEASEHOLDER OWNER
<PAGE> 28
ADDITIONAL CONDITIONS ATTACHED TO THE RENTING CONTRACT
On regard to the premises at Bajos Primera on Calle Ls Torres 58, In San Juan
Despi, extended on a contract of the class/ serial number 6346.
1st. The length of the term of this contract is of ONE YEAR, and it will
start from today. After this term of ONE YEAR, the contract will be
automatically considered extended month by month for a maximum of TWELVE MONTHS,
both for leaseholder and owner, as long as any of the parts does not report
anything two months before.
To have the right of the successive extensions, the leaseholder will
have to be up to date with the payment of the rent, and to finish the contract
during the extensions period, the tenant will have to notify in writing his
intentions to the owner and minimum sixty days before.
2nd. Both parts, with the explicit resignation to what it is established
by the article 34 of the L.A.U., the agreement states that after the extinction
of the contract due to the passing of the established period, the tenant will
not have the right to ask the owner for any compensations.
3rd. The premises object of this contract, will be used exclusively to
the DISTRIBUTION OF UNIVERSAL REMOTE CONTROLS. In the case that other activities
are developed, even though similar to the one mentioned, the owner would have
the right to terminate the contract for considering this as an offence.
4th. The object of the renting is exclusively the surface placed within
the wall of the premises, being specially excluded the face, the sides of the
entrance, the attic, the lobby and its stairway. Consequently, the leasing to
which this contract is referred will not give the right to neither enter nor use
the attic or terrace of the property.
5th. In the case of the tenant's decease, the heir or legate that
continues the activity, will be able to have the rights and obligations until
the end of the contract.
Expressly, it will be agreed as an amplification of what it is foreseen
in the article 33 of the L.A.U., that this continuation should be notified on a
irrefutable way to the owner, for his efficiency, within two months after the
date of decease of the leaseholder; and the owner would have the right to rise
the rent on a fifteen percent.
6th. Both parts, with their explicit resignation of what it is
established by the article 31 of the L.A.U, it is agreed that in the case that
the premises is sold as an independent property, the leaseholder will not have
the right to have preference over the purchase of the same.
7th. The tenant, with the explicit resignation of what it is established
by the article 32 of the L.A.U., will be obligated to not to rent entirely or
partially or to hand over the premise rented, without the explicit permission
and in writing of the owner. In the case that the tenant does not carry out this
condition, the owner would be able to terminate the contract.
8th. The leaseholder declares that knows the characteristics and the
conditions of the premises and accepts them; as well as its urbanistic qualities
and the allowed administrative uses.
9th. The purchase, conservation, repair or substitution of the supplies
meters and their consume cost, are the tenant's exclusive responsibility.
The premises are rented in its actual state with the general mains and
connections or existent lines for the supplies available in the building.
The leaseholder will be able to make arrangements with the correspondent supply
companies for all or some of the supplies available in the building.
If modifications are needed in the property or in the rented premises, the
tenant will be entirely in charge of the costs as long as he is interested on
these modifications or in the continuity of a particular supply. Previously he
will have to consult with the owner for his approval and report him about the
project on the changes that may be done or that is being required by the
supplying company.
10th. On the same way the tenant will take care of the costs caused by
damage on glass windows, locks and other implements or tools within the
installations, conservation and repair costs of water, gas, heating, sanitary
and services systems, water heater, TV antenna, particularly drains,
<PAGE> 29
blockages, kitchen repairs, sinks, laundry rooms, air conditioning and pipes, as
well as the repair and conservation of blinds. All this as long as these
implements are available in the building.
11th. The owner of the property and its administrator are exempt of all
responsibility of any supply.
12th. The owner will not be held responsible if, for some reason the
competent organizations do not authorize the tenant to open his business. The
correspondent taxes or contribution must be the tenant's responsibility.
13th. If there is no supply of direct water through individual meters,
the administrator in order to precede to authorize such an installation, will
sign on behalf of the tenant's name as many documents as necessary obligating
himself to formalize the correspondent policy, and getting the respective meter.
This installation will be considered as an improvement of the premises.
14th. The leaseholder will be responsible of any damaged caused to
objects or people by the installation of these services on the rented premises.
15th. The tenant will not make alterations of any kind in the premises
without a previous permission of the administrator or the owner. The tenant will
pay the costs of the authorized alterations, and they will be a benefit for the
property, not having the right to any compensation at any moment. The
leaseholder will also pay the costs of the town council permits.
16th. The tenant, with the explicit resignation of what it is
established by the article 21 of the L.A.U., will be responsible of the premises
and he is obliged to its preservation for its right used. This will not give the
right to have any compensation nor to finish the contract during this period nor
to stop or reduce the rent payments.
17th. Both parts, with the explicit resignation to what it is
established by the article 22 and 26 of the L.A.U., agreed that in the case that
the owner wants to make repairs or alterations in the property, this one will
have to notify within three months in advance of his intentions to the
leaseholder. The tenant will not have the right to disagree with the owner
unless he notifies him within a month that these alterations affect him
directly. The tenant will resign to any reduction of the rent affecting the part
of the premises that he cannot use while the alterations are being made and will
not receive any compensation for the costs that will have to carry.
18th. The leaseholder is obliged to:
A) Not installing transmissions, engines, machines etc. that may produce
annoying vibrations to other neighbors of the building or other
buildings in the area, or that may affect the consistency and
preservation of the building.
B) Not to store or manipulate within the premises any kind of explosive,
flammable, uncomfortable or unhealthy materials and will have to
respect the relevant regulations.
C) Allow the access into the premises to the owner, administrator and to
those workers that have been sent for any of them to inspect or
repair damages that could affect the building.
D) In the case that these premises are integrated, within a building, on
a Community Regime of Horizontal Property, the tenant will have to
follow all the statutory rules and the agreements of the Property
Community, in order to use the services and common elements to have a
good relationship with other members of the building
19th. Both parts agree that the total rent, paid by the leaseholder
during the contract period or its extensions, will fit the percentile variations
that take place every year and that are regulated by the national Institute of
Statistics, applying this way over that rent, the percentile which represents
the existent difference between the indexes that correspond to this period.
February 1999 will be the reference month for the application of the first
update and for the following ones the one that corresponds to the last update.
The updated rent will be required to the tenant from the following first month
being this notified by the interested part, mentioning the applied alteration.
In any case the delay of this application will mean that is no longer valid.
20th. The leaseholder is also obliged to:
A) Pay the rent, legal rising and the costs and services of the building
in advance in the administrator's office and within the first seven
days of each agreed period. The rent can be also payable by standing
order, which will be done from a bank or saving fund. The delay on
the payment of the rent will produce automatically interests in favor
of the owner part. These interests are relative to the legal money
interest and to the date from which those debts are current until the
day that these have been paid. All this without counting on
<PAGE> 30
judicial or extrajudicial actions that need to be taken to obtain the
performance of the obligations and/ or dismissal which costs will be
carried by the tenant.
B) Pay the costs originated by this same contract such as the stamp,
management, registry, administrator honorary for his work and process
and inscription on the Registry of Property.
C) Pay the increase of the Fire Insurance or Risk fee of the building.
D) Pay the total amount of the real state taxes that belongs to the
rented premises. When this fee is not individualized, it will be
divided in proportion to the surface of each premises.
E) The payment of the VAT (art.11, nr.2, section 2 of the Tax Law
37/1992) and also of the total amount of each rent receipt which
specifies, depending on the legal type applied in its right moment
and automatically, de correspondent VAT fee, which it will be
mentioned apart from other concepts, and being each receipt as an
invoice.
F) By the Real Decreto 113/1998 January 30th., this rent has deductions
depending on the type applied in each moment. The deduction will
mentioned apart from other concepts of the receipt and it will be
paid three -monthly by the leaseholder. The tenant is obliged also to
issue, at the on of each period, a credited certificate of the
deductions and deposits that have been done.
G) Pay, independently of the agree rent, the general costs for the right
preservation of the building, as well as its services, taxes, and
responsibilities that are not individual and that correspond to the
rented premises or its accessories if it has them. This costs, will
be updated every year having repercussions for the leaseholder the
variations that may be performed and that will be specified as a
different concept and apart from the rent, but both included in the
same rent receipt.
21st. The leaseholder will hands over in this act the sum of ONE HUNDRED
AND SIXTY THOUSAND pesetas as deposit concept. The administrator is in charge of
handing over this amount to the owner of the property.
After five years, the deposit will be updated every year, including it into the
amount of the rent that is received every two months. The existence of this
deposit will not be used as an excuse to delay the payment of the rent or any of
the amounts assumed by the tenant.
22nd. Both parts will be able to submit under the supervision of the
correspondent legal organizations, any disagreement, law suit or question that
may occur due to the interpretation of this document, which in this case they
will agree to do what is said by the law.
23rd. The tenant will enjoy of a lack of the rent payment for fifteen
days, from today, as compensation for the alteration work and conditioning of
the premises, which costs are paid by the tenant. These alterations will be a
benefit for the property at the end of the contact, and will not give any right
to the leaseholder to have any kind of compensation for them.
24th. The water and electricity supplies are arranged by the property.
The tenant will be responsible of the consume, maintenance and change of name
costs on behalf of the supplying companies.
25th. The premises, object of this contract, have available lowered kerb
which is legalized. The leaseholder is responsible of the payment of the
correspondent municipal taxes.
San Juan Despi, March 1st, 1999
THE LEASEHOLDER OWNER
<PAGE> 31
APPENDIX 4
1. WORKER
2. ANTIQUITY
3. ANNUAL GROSS SALARY:
3.1 SALARY
3.2 EXTRA PAYMENTS
4. SALARY UNTIL 31 - 05 - 99
4.1 PERMANENT
4.2 VARIABLE
4.2.1 COMMISSIONS
4.2.2 ASSISTANCE
4.2.3 LANGUAGES
5. PROFESSIONAL CATEGORIES
5.1 GENERAL MANAGER
5.2 SALESMAN
5.3 OFFICE CLERK
5.4 UPGRADE & EXCHANGE DEPARTMENT
6. CONTRACT TYPE
6.1 INDEFINITE
6.2 INDEFINITE WITH BONUS
6.3 ORDINARY INDEFINITE
APPENDIX 5
NAME
ADDRESS
INITIAL DATE
<PAGE> 32
APPENDIX 6
ACCOUNT BALANCE OF UNIMAND ESPANA S.L. JUNE 29, 1999
BANK: CAIXA DE CATALUNYA
SANT JOAN DESPI - VERDAGUER
- ACCOUNT NUMBER 0201063174
5.670.407 PESETAS
- SAVING FUNDS ACCOUNT NUMBER 0101447688
4.844.449 PESETAS
- FACTORCAT ACCOUNT NUMBER 0201163927
327.667 PESETAS
BANK: GENERALE BANK
PASEO DE GRACIA 85
BARCELONA
- ACCOUNT NUMBER 0214001087
659.037 PESETAS
PERSON AUTHORISED: MR. FRANCISCO MURO
<PAGE> 1
EXHIBIT 10.39
SALARY CONTINUATION AGREEMENT
THIS AGREEMENT is made as of this ___ day of _____________, 1999, by and
between Universal Electronics Inc., a Delaware corporation (the "Corporation")
and __________________ (the "Executive").
WITNESSETH:
WHEREAS, the Corporation, on behalf of itself and its subsidiaries,
wishes to attract and retain well-qualified executive and key personnel and to
assure both itself and the Executive of continuity of management in the event of
any actual or threatened Change in Control (as defined in Paragraph 2) of the
Corporation; and
WHEREAS, to achieve this purpose, the Board of Directors of the
Corporation considered and approved this Agreement to be entered into with the
Executive as being in the best interests of the Corporation and its
stockholders;
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree a follows:
1. Operation of Agreement. The "effective date of this Agreement" shall be
the date on which a Change in Control occurs, and this Agreement shall
not have any force or effect whatsoever prior to that date.
2. Change in Control. For the purposes of this Agreement, a "Change in
Control" shall be deemed to occur when and only when the first of the
following events occurs:
a. Any "person" or "group" (as such terms are used in Sections 3(a),
3(d), and 14(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder
(the "1934 Act"), other than (i) a trustee or other fiduciary
holding securities under any employee benefit plan of the
Corporation or any of its subsidiaries or (ii) a corporation
owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their
ownership of stock in the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934
Act)), directly or indirectly, of securities of the Corporation
representing 20% or more of the total voting power of the then
outstanding securities of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"); or
1
<PAGE> 2
b. Individuals who are members of the Incumbent Board, cease to
constitute a majority of the Board of Directors of the
Corporation; or
c. (i) The merger or consolidation of the Corporation with any other
corporation or entity, other than a merger or consolidation which
would result in the Voting Stock outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented by the
Voting Stock or the voting securities of such surviving entity
outstanding immediately after such merger or consolidation, (ii)
the sale, transfer or disposition of all or substantially all of
the Corporation's assets to any other corporation or entity,
and/or (iii) the dissolution or liquidation of the Corporation.
The term "Incumbent Board" shall mean (i) the members of the Board of
Directors on February 1, 1999, and (ii) any individual who becomes a
member of the Board of Directors after February 1, 1999, if his or her
election or nomination for election as a director was approved by the
affirmative vote of a majority of the then Incumbent Board. For purposes
of this Agreement, a Change in Control approved by the Incumbent Board
will be deemed a "friendly acquisition" and a Change in Control not
approved by the Incumbent Board will be deemed a "hostile acquisition."
3. Employment. The Corporation hereby agrees to continue the Executive in
its employ and/or the employ of one or more of its subsidiaries and the
Executive hereby agrees to remain in the employ of the Corporation
and/or such subsidiaries, for the period commencing on the effective
date of this Agreement and ending on the earlier to occur of eighteen
months after such date in the case of a friendly acquisition, or the
third anniversary of such date in the case of a hostile acquisition (the
"employment period"), to exercise such authority and perform such
executive duties as are commensurate with the authority being exercised
and duties being performed by the Executive immediately prior to the
effective date of this Agreement, which services shall be performed at a
location within the metropolitan area in which the Executive was
employed immediately prior to the effective date of this Agreement.
During the employment period, the Executive agrees to devote Executive's
full business time exclusively to such executive duties and shall
perform such duties faithfully.
4. Compensation, Compensation Plans, Benefits and Perquisites. During the
employment period, the Executive shall be compensated as follows:
a. Executive shall receive an annual salary at a rate which is not
less than Executive's rate of annual salary immediately prior to
the effective date of this Agreement, with the opportunity for
increases from time to time thereafter which are in accordance
with the Corporation's regular practices.
2
<PAGE> 3
b. Executive shall be eligible to participate on a reasonable basis
in the Corporation's stock option plans, annual incentive bonus
programs and any other bonus and incentive compensation plans
(whether now or hereinafter in effect) in which executives with
comparable authority and duties are eligible to participate,
which plans must provide opportunities to receive compensation
which are at least as great as the opportunities under the plans
in which the Executive was participating immediately prior to the
effective date of this Agreement.
c. Executive shall be entitled to receive employee benefits and
perquisites which are the greater of the employee benefits and
perquisites provided by the Corporation to executives with
comparable duties or the employee benefits and perquisites to
which Executive was entitled immediately prior to the effective
date of this Agreement. Such benefits and perquisites shall
include, but not be limited to, the benefits and perquisites
included under the Universal Electronics Inc. 401(K) and Profit
Sharing Plan, the Universal Electronics Inc. 1993 Stock Incentive
Plan, the Universal Electronics Inc. 1995 Stock Incentive Plan,
the Universal Electronics Inc. 1996 Stock Incentive Plan, the
Universal Electronics Inc. 1998 Stock Incentive Plan, the
Universal Electronics Inc. 1999 Stock Incentive Plan, the
Salaried Employee Cash Incentive Program, and the Universal
Electronics Inc. group health insurance program, which includes
comprehensive medial insurance, group disability, group life
insurance, and executive bonus (supplemental life) and such other
plans as shall be developed and implemented from time to time.
5. Termination Following Change in Control
a. For purposes of this Agreement, the term "termination" shall mean
(i) termination by the Corporation of the employment of the
Executive with the Corporation and all of its subsidiaries for
any reason other than death, disability or "cause" (as defined
below), or (ii) resignation of the Executive for "good reason"
(as defined below).
b. The term "good reason" shall mean (i) a significant change in the
nature or scope or the location for the exercise or performance
of the Executive's authority or duties from those referred to in
Section 3, a reduction in total compensation, compensation plans,
benefits or perquisites from those provided in Section 4, or the
breach by the Corporation of any other provision of this
Agreement; or (ii) a reasonable determination by the Executive
that, as a result of a Change in Control and a change in
circumstances thereafter significantly affecting Executive's
position, Executive is unable to exercise the authorities, power,
function or duties attached to Executive's position and
contemplated by Section 3 of the Agreement.
c. The term "cause" means (i) the willful and continued failure by
the Executive to substantially perform Executive's duties with
the Corporation and/or, if applicable,
3
<PAGE> 4
one or more of its subsidiaries (other than any such failure
resulting from Executive's incapacity due to physical or mental
illness) after a demand for substantial performance is delivered
to Executive by the Board of Directors of the Corporation which
specifically identifies the manner in which the Board believes
the Executive has not substantially performed Executive's duties,
(ii) the willful engaging by the Executive in gross misconduct
materially and demonstrably injurious to the property or business
of the Corporation or any of its subsidiaries, or (iii)
Executive's commission of fraud, misappropriation or a felony.
For purposes of this paragraph, no act or failure to act on the
Executive's part will be considered "willful" unless done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that Executive's action or omission was in the
interests of the Corporation or not opposed to the interests of
the Corporation.
6. Confidentiality. The Executive agrees that during and after the
employment period, Executive shall retain in confidence any confidential
information known to Executive concerning the Corporation and its
subsidiaries and their respective business for as long as such
information is not publicly disclosed.
7. No Obligation to Mitigate Damages. The Executive shall not be obligated
to seek other employment in mitigation of amounts payable or
arrangements made under the provisions of this Agreement and the
obtaining of any such other employment shall in no event effect any
reduction of the Corporation's obligations under this Agreement.
8. Severance Allowance
a. In the event of the termination of the Executive during the
employment period, the Executive shall be entitled to receive a
lump sum severance allowance within five days of such
termination, in an amount which is equal to the sum of the
following:
(i) The amount equivalent to salary payments for 18 calendar
months, in the case of a friendly acquisition, or 36 calendar
months, in the case of a hostile acquisition, at the rate
required by paragraph 4(a) and in effect immediately prior to
termination, plus a pro rata share of the estimated amount of any
bonus which would have been payable for the bonus period which
includes the termination date; and
(ii) The amount equivalent to 18 calendar months of bonus in
the case of a friendly acquisition, or 36 calendar months of
bonus in the case of a hostile acquisition, at the greater of (A)
the monthly rate of the bonus payment for the bonus period
immediately prior to Executive' s termination date, or (B) the
estimated amount of the bonus for the period which includes
Executive's termination date.
4
<PAGE> 5
b. In addition to such amount under paragraph (a) above, the
Executive shall also receive in cash the value of the incentive
compensation (including, but not limited to, employer
contributions to the Universal Electronics Inc. 401(K) and Profit
Sharing Plan and the rights to receive stock awards and to
exercise stock options and other bonus and similar incentive
compensation benefits) to which Executive would have been
entitled under all incentive compensation plans maintained by the
Corporation if Executive had remained in the employ of the
Corporation for 18 months after such termination in the case of a
friendly acquisition, or 36 months after such termination in the
case of a hostile acquisition. The amount of such payment shall
be determined as of the date of termination and shall be paid as
promptly as practicable and in no event later than 30 days after
such termination.
c. The Corporation shall maintain in full force and effect for the
Executive's continued benefit (and, to the extent applicable, the
continued benefit of Executive's dependents) all of the employee
benefits (including, not limited to, coverage under any medical
and insurance plans, programs or arrangements) to which Executive
would have been entitled under all employee benefit plans,
programs or arrangements maintained by the Corporation if
Executive had remained in the employ of the Corporation for 18
calendar months after Executive's termination in the case of a
friendly acquisition, or 36 calendar months after Executive's
termination in the case of a hostile acquisition, or if such
continuation is not possible under the terms and provisions of
such plans, programs or arrangements, the Corporation shall
arrange to provide benefits substantially similar to those which
the Executive (and, to the extent applicable, Executive's
dependents) would have been entitled to receive if the Executive
had remained a participant in such plans, programs or for such
18-month or 36-month period, as the case may be.
9. Adjustments in Case of "Excess Parachute Payments. In the event that the
aggregate present value (determined in accordance with applicable
federal, state and local income tax law, rules and regulations) of all
payments to be made and benefits to be provided to the Executive under
this Agreement and/or under any other plan, program or arrangement
maintained or entered into by the Corporation or any of its subsidiaries
shall result in "excess parachute payments" to the Executive within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any comparable provision of successor legislation,
which subject the Executive to the Excise Tax under Section 4999 of the
Code or any comparable provision of successor legislation, the
Corporation shall pay to the Executive an additional amount (the
"gross-up payment") calculated so that the net amount received by
Executive after deduction of the Excise Tax and of all federal, state,
and
5
<PAGE> 6
local income taxes upon the gross-up payment shall equal the payments to
be made and the benefits to be provided to the Executive under this
Agreement. For purposes of determining the amount of the gross-up
payment, the Executive shall be deemed to pay federal, state, and local
income taxes at the highest marginal rates thereof in the calendar year
in which the gross-up payment is to be made, net of the maximum
reduction in federal income taxes obtainable from deduction of such
state and local taxes. The computations required by this Section 9 shall
be made by the independent public accountants then regularly retained by
the Corporation, in consultation with tax counsel selected thereby and
acceptable to the Executive. Said accountants' and tax counsel's fees
shall be paid by the Corporation.
10. Interest; Indemnification
a. In the event any payment to Executive under this Agreement is not
paid within five business days after it is due, such payment
shall thereafter bear interest at the prime rate from time to
time in effect at Bank of America, Los Angeles, California.
b. The Corporation hereby indemnifies the Executive for all legal
and accounting fees and expenses incurred by Executive in
contesting any action of the Corporation with respect to this
Agreement, including the termination of Executive's employment
hereunder, or incurred by Executive in seeking to obtain or
enforce any right or benefit provided by this Agreement.
11. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if
sent by registered or certified mail to the Executive at the last
address Executive has filed in writing with the Corporation or, in the
case of the Corporation, at its principal executive offices.
12. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts
provided under this Agreement; and no benefits payable hereunder shall
be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or the laws of
descent and distribution.
13. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of California, without regard to
its conflict of laws provisions.
14. Amendment. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other
person and, so long as the Executive lives, no person, other than the
parties hereto, shall have any rights under or interest in this
Agreement or the subject matter hereof.
15. Successor to the Corporation. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the
Corporation and any successor of the Corporation.
6
<PAGE> 7
16. Partial Invalidity. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations of the parties hereto. Should any covenant
or provision of this Agreement be determined to be void and
unenforceable, in whole or in part, to any party hereto or in any
circumstance, it shall not be deemed to affect or impair the validity of
any other covenant or provision of part thereof, and shall continue in
effect to the extent valid, enforceable and applicable in other
circumstances and to the other party, and such covenant or provision of
part thereof shall be deemed modified but only to such a minimum extent
required to permit it to remain valid, enforceable and applicable to
such party or circumstance. Without limiting the generality of the
foregoing, if the scope of any covenant, provision or part thereof
contained in this Agreement is too broad to permit enforcement to its
full extent, such covenant, provision or part thereof shall be enforced
to the maximum extent permitted by law, and the parties hereto agree
that such scope may be judicially modified accordingly.
IN WITNESS WHEREOF, the Executive has executed this Agreement and, pursuant to
the authorization from its Board of Directors, the Corporation has caused this
Agreement to be executed in its name on its behalf, and attested by its
Secretary, all as of the day and year first above written.
____________________________________
Executive
UNIVERSAL ELECTRONICS INC.,
a Delaware corporation
By: ________________________________
Camille Jayne, Chairman and Chief
Executive Officer
ATTEST:
______________________________________
Richard A. Firehammer, Jr., Secretary
7
<PAGE> 1
EXHIBIT 10.40
EXECUTIVE OFFICER
AMENDED EMPLOYMENT AGREEMENT
THIS AMENDED EXECUTIVE OFFICER EMPLOYMENT AGREEMENT (the "Agreement") is
made and entered into this 24th day of March 1999 by and between UNIVERSAL
ELECTRONICS INC. (the "Employer") and CAMILLE JAYNE ("Executive").
RECITALS:
WHEREAS, the Employer is presently headquartered in Cypress, California,
and is engaged in the business of developing and marketing easy to use,
pre-programmed universal remote control products primarily for home video and
audio entertainment equipment and home security and home automation devices; and
WHEREAS, Employer wishes to retain Executive as one of its key
executives and avail itself of Executive's expertise, experience and capability
in Employer's business, and in this connection has Executive, in addition to
being Employer's Chief Executive Officer and performing those duties and
assuming those responsibilities as set forth in this Agreement and as identified
and outlined in Employer's Amended and Restated By-Laws, and undertaking such
other duties and assuming such other responsibilities commensurate with
Executive's designated position(s) as may be reasonably assigned to Executive
from time to time by the Board of Directors of Employer, has recently been named
Employer's Chairman of the Board and has agreed to perform those duties and
assume those responsibilities as identified and outlined in Employer's Amended
and Restated By-Laws, and to undertake such other duties and to assume such
other responsibilities commensurate with Executive's designated position(s) as
may be reasonably assigned to Executive from time to time by the Board of
Directors of Employer; and
WHEREAS, Executive and Employer each desires to enter into this
Agreement to reflect fully the terms and conditions of Executive's employment
with Employer.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained herein, and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
1. EMPLOYMENT
Subject to all of the terms and conditions of this Agreement, effective
on the date of this Agreement as set forth in the preamble (the "Effective Date
of this Agreement"), Employer hereby employs Executive and Executive hereby
accepts employment with Employer.
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<PAGE> 2
2. TITLE, AUTHORITY AND DUTIES
(a) TITLE(S) AND POSITION(S). On the Effective Date of this
Agreement, Executive shall be employed in the position(s) of and shall
have the title(s) of Chairman of the Board and Chief Executive Officer
of Employer, until this Agreement is terminated as provided herein.
(b) AUTHORITY AND DUTIES. Executive will, during the term of this
Agreement, perform those duties and assume those responsibilities as set
forth in this Agreement and as identified and outlined in Employer's
Amended and Restated By-Laws, as amended as of the date of this
Agreement, and to undertake such other duties and to assume such other
responsibilities commensurate with Executive's designated position(s) as
may be reasonably assigned to Executive from time to time by the Board
of Directors of Employer.
(c) EXCLUSIVE SERVICES AND EFFORTS OF EXECUTIVE. During the term
of this Agreement, Executive shall serve the Employer, under the
direction of the Board of Directors of Employer, and shall faithfully,
diligently, competently and, to the best of her ability, exclusively
devote her full time, energy and attention (unless otherwise agreed to
by the parties) to the business of the Employer and to the promotion of
its interest. Executive recognizes that Employer's organization,
business and relationship with clients, prospective clients and others
having business dealings with Employer are and will be the sole property
of Employer and Executive shall have no separate interests or rights
with respect thereto, except as an employee of Employer.
(d) OTHER ACTIVITIES AND INTERESTS. Employer shall be entitled to
all of the benefits, emoluments, profits, discoveries or other issues
arising from, incident to and related to any and all work, services and
advice of Executive to Employer in carrying out her duties and
responsibilities hereunder. Executive shall not, without the written
consent of Employer, directly or indirectly, render services to or for
any person, firm, corporation or other entity or organization, whether
or not in exchange for compensation, regardless of the form in which
such compensation, if any, is paid and whether or not it is paid
directly or indirectly to her if the rendering of such service would
interfere with the performance of her duties and responsibilities to
Employer hereunder. Notwithstanding the foregoing sentence, Executive
may spend time and attention to personal investment and community
activity matters and such other personal matters consistent with
Employer's policies and procedures set forth within Employer's policy
manual in effect from time to time which are equally applicable to all
of Employer's executive employees, so long as the spending of such time
and attention does not substantially interfere with the performance of
her duties and responsibilities to Employer hereunder.
3. TERM OF EMPLOYMENT AND TERMINATION
2
<PAGE> 3
(a) TERM. Unless earlier terminated as provided herein, the term
of this Agreement shall commence at the start of business on the
Effective Date of this Agreement and shall continue through the end of
business on February 1, 2001 (the "Initial Term"). Unless terminated by
either party by giving the other party written notice of an intent not
to renew this Agreement at least one hundred twenty (120) days prior to
the end of the Initial Term or any successive one (1) year term, this
Agreement shall automatically extend for one (1) additional year after
the Initial Term and then again for a one (1) year term after each
successive year.
(b) TERMINATION.
(i) BY EMPLOYER FOR JUST CAUSE. Employer may terminate the
employment of Executive under this Agreement for Just Cause (as
defined herein) at any time upon delivery of written notice to
her setting forth, in reasonable specificity, such Just Cause.
For purposes of this Agreement, and particularly this subsection
3(b)(i), "Just Cause" shall mean:
(1) The continued failure by or refusal of
Executive to substantially perform her duties and
responsibilities as set forth herein; or
(2) Executive's indictment for, conviction of or a
guilty plea to a felony or of any crime involving moral
turpitude, whether or not affecting the Employer; or
(3) The engagement by Executive of personal illegal
conduct which, in the reasonable judgment of Employer, by
association with her, is materially and demonstrably
injurious to the property and/or business of Employer; or
(4) Any material breach by Executive of the terms
and conditions contained herein, including without
limitation, those certain confidentiality provisions set
forth in Section 16; or
(5) The commission of any act opposed to the best
interests of Employer for which Executive would not be
entitled to indemnification under Employer's Restated
Certificate of Incorporation and Amended and Restated
By-Laws, each as amended as of the date of this Agreement;
or
(6) The failure by Executive to protect the best
interests of Employer through Executive's gross neglect of
duty.
(ii) BY EXECUTIVE FOR GOOD REASON. Executive may terminate
her employment with Employer under this Agreement for Good Reason
(as defined
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herein) at any time upon delivery of written notice to Employer
setting forth, in reasonable specificity, such Good Reason(s).
For purposes of this Agreement, and particularly this subsection
3(b)(ii), "Good Reason" shall mean:
(1) The attempted discontinuance or reduction in
Executive's "Base Cash Salary" (as defined herein); or
(2) The attempted discontinuance or reduction in
Executive's bonuses and/or incentive compensation award
opportunities under plans or programs applicable to her,
unless such discontinuance or reduction is a result of
Employer's policy applied equally to all executive
employees of Employer; or
(3) The attempted discontinuance or reduction in
Executive's stock option and/or stock award opportunities
under plans or programs applicable to her, unless such
discontinuance or reduction is a result of Employer's
policy applied equally to all executive employees of
Employer; or
(4) The attempted discontinuance or reduction in
Executive's perquisites from those historically provided
her during her tenure with the Employer and generally
applicable to executive employees of Employer; or
(5) The relocation of Executive to an office (other
than Employer's headquarters) located more than fifty (50)
miles from her then current office location; or
(6) The significant reduction in Executive's
responsibilities and status within the Employer or change
in her title(s) or position(s); or
(7) The attempted discontinuance of Executive's
participation in any benefit plans maintained by Employer
unless such plans are discontinued by reason of law or
loss of tax deductibility to the Employer with respect to
the contributions to or payments under such plans, or are
discontinued as a matter of the Employer's policy applied
equally to all participants; or
(8) The attempted reduction of Executive's paid
vacation to less than that as provided in this Agreement;
or
(9) The failure by Employer to obtain an assumption
of Employer's obligations under this Agreement by any
assignee of or successor to
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Employer, regardless of whether such entity becomes a
successor to Employer as a result of merger,
consolidation, sale of assets of Employer or other form of
reorganization; or
(10) The occurrence of any of the items set forth
in paragraphs (1) through (9) of this subsection 3(b)(ii),
if, in the reasonable determination by the Executive, such
occurrence happens as a result of and within the shorter
of six (6) months or the remaining term of this Agreement
following a "Change in Control" (as such term is defined
below). For the purposes of this Agreement, a "Change in
Control" shall be deemed to occur when and only when the
first of the following events occurs:
a. Any "person" or "group" (as such terms
are used in Sections 3(a), 3(d), and 14(d) of the
Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder
(the "1934 Act"), other than (i) a trustee or other
fiduciary holding securities under any employee
benefit plan of the Corporation or any of its
subsidiaries or (ii) a corporation owned directly
or indirectly by the stockholders of the
Corporation in substantially the same proportions
as their ownership of stock in the Corporation, is
or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act)), directly or
indirectly, of securities of the Corporation
representing 20% or more of the total voting power
of the then outstanding securities of the
Corporation entitled to vote generally in the
election of directors (the "Voting Stock"); or
b. Individuals who are members of the
Incumbent Board, cease to constitute a majority of
the Board of Directors of the Corporation. The term
"Incumbent Board" shall mean (i) the members of the
Board of Directors on the effective date of this
Agreement, and (ii) any individual who becomes a
member of the Board of Directors after the
effective date of this Agreement, if his or her
election or nomination for election as a director
was approved by the affirmative vote of a majority
of the then Incumbent Board; or
c. (i) The merger or consolidation of the
Corporation with any other corporation or entity,
other than a merger or consolidation which would
result in the Voting Stock outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) at least
80% of the total voting power represented by the
Voting Stock or the voting securities of such
surviving entity outstanding immediately after such
merger or consolidation, (ii) the sale, transfer or
disposition of all or substantially all of the
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Corporation's assets to any other corporation or
entity, or (iii) the dissolution or liquidation of
the Corporation.
For purposes of this Agreement, a Change in Control
approved by the Incumbent Board will be deemed a "friendly
acquisition" and a Change in Control not approved by the
Incumbent Board will be deemed a "hostile acquisition."
(iii) AUTOMATICALLY IN ACCORDANCE WITH SUBSECTION 3(a). In
addition to the rights to terminate this Agreement as set forth
in subsections 3(b)(i) and 3(b)(ii), this Agreement may also
terminate automatically in accordance with subsection 3(a).
(iv) DISAGREEMENTS. Any disagreement concerning whether
there has been Just Cause for termination by Employer or Good
Reason for termination by Executive will be resolved by binding
arbitration in accordance with the provisions of Section 18 of
this Agreement.
(c) EFFECT OF TERMINATION. Upon termination of Executive's
employment with Employer:
(i) BY EMPLOYER FOR JUST CAUSE. Executive shall not be
entitled to receive payment of any salary, bonus, expenses, or
other benefits beyond the date of termination and, subject to
this subsection 3(c)(i) and Section 17, this Agreement shall
become null and void effective as of the date of termination and
Employer and Executive shall have no further obligation hereunder
toward the other except for the payment of salary, bonus,
expenses and benefits, if any, which have accrued but remain
unpaid prior to and as of the termination date.
(ii) BY EXECUTIVE FOR GOOD REASON.
(1) Executive shall be paid by Employer in a lump
sum within twenty (20) business days of such termination,
an amount which is equal to the sum of the following:
(A) The amount equivalent to salary payments
for eighteen (18) months (twenty-four (24) months
if such termination is pursuant to subsection
3(b)(ii)(10) and such Change in Control is deemed a
"friendly acquisition" or thirty-six (36) months if
such termination is pursuant to subsection
3(b)(ii)(10) and such Change in Control is deemed a
"hostile acquisition"), at that rate of pay which
is not less than Executive's rate of Base Cash
Salary in effect immediately prior to the effective
date of such termination (without regard to any
attempted reduction or discontinuance of such
salary); and
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(B) The amount equivalent to eighteen (18)
months (twenty-four (24) months if such termination
is pursuant to subsection 3(b)(ii)(10) and such
Change in Control is deemed a "friendly
acquisition" or thirty-six (36) months if such
termination is pursuant to subsection 3(b)(ii)(10)
and such Change in Control is deemed a "hostile
acquisition"), multiplied by the greater of (i) the
monthly rate of the bonus payment for the bonus
period in the year immediately prior to Executive's
termination date or (ii) the estimated amount of
the bonus for the period which includes Executive's
termination date (without regard to any attempted
reduction or discontinuance of such bonus).
(2) In addition to such amount under subsection
3(c)(ii)(1) above, Executive shall also receive, (i) in
cash, the value of the incentive compensation (including,
but not limited to, employer contributions to the
Universal Electronics Inc. 401(K) and Profit Sharing Plan)
and (ii) the rights to receive grants of stock options and
stock awards to which she would have been entitled under
all incentive compensation and stock option and stock
award plans maintained by Employer if Executive had
remained in the employ of Employer for eighteen (18)
months (twenty-four (24) months if such termination is
pursuant to subsection 3(b)(ii)(10) and such Change in
Control is deemed a "friendly acquisition" or thirty-six
(36) months if such termination is pursuant to subsection
3(b)(ii)(10) and such Change in Control is deemed a
"hostile acquisition"), without regard to any attempted
reduction or discontinuance of such incentive
compensation. The amount of such payment and/or grants
shall be determined as of the date of termination and
shall be paid and/or issued as promptly as practicable and
in no event later than 30 days after such termination.
(3) Employer shall also maintain in full force and
effect for the Executive's continued benefit (and, to the
extent applicable, the continued benefit of her
dependents) all of the employee benefits (including, not
limited to, coverage under any medical and insurance
plans, programs or arrangements) to which she would have
been entitled under all employee benefit plans, programs
or arrangements maintained by Employer if Executive had
remained in the employ of Employer for eighteen (18)
months (twenty-four (24) months if such termination is
pursuant to subsection 3(b)(ii)(10) and such Change in
Control is deemed a "friendly acquisition" or thirty-six
(36) months if such termination is pursuant to subsection
3(b)(ii)(10) and such Change in Control is deemed a
"hostile acquisition"), without regard to any attempted
reduction or discontinuance of such benefits, or if such
continuation is not possible under the terms and
provisions of such
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plans, programs or arrangements, Employer shall arrange to
provide benefits substantially similar to those which
Executive (and, to the extent applicable, her dependents)
would have been entitled to receive if she had remained a
participant in such plans, programs or for such eighteen
(18) month (twenty-four (24) months if such termination is
pursuant to subsection 3(b)(ii)(10) and such Change in
Control is deemed a "friendly acquisition" or thirty-six
(36) months if such termination is pursuant to subsection
3(b)(ii)(10) and such Change in Control is deemed a
"hostile acquisition") period.
(4) Subject to this subsection 3(c)(ii) and Section
17, this Agreement shall become null and void effective as
of the date of termination and Employer and Executive
shall have no further obligation hereunder toward the
other.
(ii) PURSUANT TO SUBSECTION 3(b)(III). Executive
acknowledges and agrees that in the event that this Agreement
terminates in accordance with subsection 3(b)(iii), that Employer
and Executive shall have no further obligation hereunder toward
the other except for the payment of salary, bonus, expenses and
benefits, if any, which have accrued but remain unpaid prior to
and as of the termination date.
(iv) SUBMISSION OF RESIGNATIONS BY EXECUTIVE. Upon
termination of this Agreement by either Employer or Executive as
set forth herein and the receipt by Executive of (1) all cash
amounts due her as set forth herein and (2) a written
representation signed by an authorized representative of Employer
that all non-cash obligations of Employer as set forth herein
have been fulfilled or, as the case may be, have been commenced,
Executive shall immediately submit Executive's resignation for
any and all offices or directorships of Employer and/or any and
all subsidiaries and affiliates of Employer which resignation
shall have retroactive application and effect to such termination
date; provided however that during such time period from the
effective date of such termination to the date Executive submits
her resignation, Executive acknowledges and agrees that she does
not have authority to bind Employer to any contracts or
commitments and agrees not to create any obligation for Employer
or bind or attempt to bind Employer in any manner whatsoever.
Executive also acknowledges that she shall have no supervisory or
managerial responsibility or authority from and after the
effective date of her termination, regardless of whether she
submits the resignation or not, and agrees not to involve herself
in any activities of Employer, except as may be requested by the
an authorized officer of Employer.
4. TOTAL COMPENSATION
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While employed under this Agreement and in consideration of the
services to be rendered by Executive pursuant hereto, Executive shall receive
the following amounts/benefits as the sole and total compensation for the
performance of her duties and obligations under this Agreement:
(a) BASE CASH SALARY. A salary at the rate of Three Hundred
Thousand Dollars (US$300,000) per annum (the "Base Cash Salary"), which
shall be deemed to accrue from day to day, payable in accordance with
Employer's standard payroll practices and procedures;
(b) BONUS. A bonus calculated in accordance with the plans or
programs established by Employer from time to time; provided that the
bonus for the 1999 calendar year shall be calculated in accordance with
the Bonus Plans attached hereto as Exhibit A, payable in accordance with
Employer's standard payroll practices and procedures; and provided
further, that any such bonuses whenever earned and paid shall be
determined without regard to any material gains and losses which occur
outside of the scope of Employer's ordinary operating business unless
any such plans or programs explicitly include such material gains and
losses within the determination of any such bonuses;
(c) STOCK OPTIONS. Stock options granted or stock awards in
accordance with the plans or programs established by Employer from time
to time; provided that the stock options and/or stock awards granted for
the 1999 calendar year shall be determined in accordance with the Stock
Option Plans attached hereto as Exhibit B;
(d) INCENTIVE COMPENSATION. Participation in Employer's incentive
compensation plans and/or programs, including, but not limited to,
receipt of employer contributions to the Universal Electronics Inc.
401(K) and Profit Sharing Plan and the right to receive stock awards and
to exercise stock options under the Universal Electronics Inc. 1993
Stock Incentive Plan, the Universal Electronics Inc. 1995 Stock
Incentive Plan, the Universal Electronics Inc. 1996 Stock Incentive
Plan, the Universal Electronics Inc. 1998 Stock Incentive Plan, the
Salaried Employee Cash Incentive Program, and such other plans and/or
programs which are established from time to time;
(e) BENEFITS. The benefits provided by Employer to its executive
employees generally, including without limitation, the benefits and
perquisites included under the Universal Electronics Inc. group family
health insurance program, which includes comprehensive medical
insurance, dental insurance, group disability, group life insurance, and
executive bonus (supplemental life); provided that the benefits provided
to Executive shall be no less extensive than that provided her
immediately prior to the date of this Agreement;
(f) VACATION. Three (3) weeks (fifteen (15) working days)
vacation with pay, determined and carried over in accordance with the
policies and procedures set forth within Employer's policy manual in
effect from time to time which are equally applicable to all of
Employer's executive employees;
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(g) OTHER PERQUISITES. Such other employee benefits and
perquisites which are provided by Employer to executives generally,
provided that the other perquisites provided to Executive shall be no
less extensive than the most extensive perquisites provided to any other
executive employee of the Employer;
(h) D&O INSURANCE. Director and Officer Liability insurance in a
reasonably sufficient amount;
(i) DISCRETIONARY BONUS. Such other amounts of compensation
and/or bonus which is determined by Employer from time to time;
(j) REVIEWS. The total amount of compensation to be paid and/or
provided to Executive shall be reviewed by the Board of Directors, or
such committee thereof, of Employer as of the first day of each calendar
year while this Agreement is in force and effect. In no event shall such
review result in a reduction or discontinuance of the amount of
compensation paid and/or provided to Executive hereunder except if such
reduction or discontinuance occurs by reason of law or loss of tax
deductibility to the Employer with respect to the contributions to such
plans, or are discontinued as a matter of the Employer's policy applied
equally to all participants;
(k) ENTITLEMENT TO EMPLOYER'S EXECUTIVE RELOCATION POLICY.
Effective of the date of this Agreement, Executive has agreed to change
her principal place of residence from Northern California to Southern
California. In this connection, Employer acknowledges and agrees that
such change by Executive will benefit the Corporation. Therefore,
Employer agrees that in connection with such relocation by Executive,
Executive shall be entitled to receive such assistance as set forth in
Employer's Executive Relocation Policy Number 4.10, effective date
August 1, 1995.
5. ADJUSTMENTS IN CASE OF EXCESS PARACHUTE PAYMENTS
In the event that the aggregate present value (determined in accordance
with applicable federal, state and local income tax law, rules and regulations)
of all payments to be made and benefits to be provided to Executive under this
Agreement and/or under any other plan, program or arrangement maintained or
entered into by Employer or any of its subsidiaries shall result in "excess
parachute payments" to her within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), or any comparable provision of
successor legislation, which subject her to the Excise Tax under Section 4999 of
the Code or any comparable provision of successor legislation, Employer shall
pay to Executive an additional amount (the "gross-up payment") calculated so
that the net amount received by her after deduction of the Excise Tax and of all
federal, state and local income taxes upon the gross-up payment shall equal the
payments to be made and the benefits to be provided to her under this Agreement.
For purposes of determining the amount of the gross-up payment, Executive shall
be deemed to pay federal, state and local income taxes at the
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highest marginal rates thereof in the calendar year in which the gross-up
payment is to be made, net of the maximum reduction in federal income taxes
obtainable from deduction of such state and local taxes. The computations
required by this Section 5 shall be made by the independent public accountants
then regularly retained by Employer, in consultation with tax counsel selected
by and acceptable to Executive. Employer shall pay all of its accountants' fees
and the lesser of (i) one-half of Executive's tax counsel's fees or (ii) $2,500.
6. REIMBURSEMENT FOR BUSINESS RELATED EXPENSES
Employer shall reimburse Executive for all reasonable expenses incurred
and paid by her in connection with Employer's business in accordance with
Employer's policy manual in effect from time to time.
7. INTEREST
In the event any payment to Executive under this Agreement is not paid
within five (5) business days after it is due, such payment shall thereafter
bear interest at the prime rate from time to time in effect at Bank of America,
Los Angeles, California; provided however, that this provision shall not excuse
the timely payment of such sums required by this Agreement.
8. NOTICES
Written notices to be given under this Agreement shall be personally
delivered or sent by overnight courier (such as Federal Express, DHL or UPS and
the like) or by registered or certified mail, return receipt requested, to the
addresses set forth below:
To Employer:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn.: Corporate Secretary
With a required copy to:
Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630
Attn: The Board of Directors
To Executive:
Ms. Camille Jayne
At her last known address as reflected in Employer's records
9. SEVERABILITY
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If any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect under applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be ineffective or impaired thereby.
10. GOVERNING LAW
This Agreement shall be governed by the law of the state of California
and not the law of conflicts of the state of California.
11. WAIVER
The failure of either party to insist in any one or more instances on
strict performance of any of this Agreement's provisions, or to exercise or
enforce any right, remedy or obligation under this Agreement, shall not be
construed as a waiver or relinquishment of any right, remedy or obligation, and
the right, remedy or obligation shall continue in full force and affect.
12. ENTIRE AGREEMENT AND MODIFICATION
This Agreement sets forth the entire agreement of the parties concerning
the employment of Executive by the Employer and any oral or written statements,
representations, agreements or understandings made or entered into prior to or
contemporaneously with the execution of this Agreement are hereby rescinded,
revoked, and rendered null and void by the parties. The parties hereto further
acknowledge and agree that the terms of that certain (a) Offer Letter dated
November 5, 1997 and (b) Executive Officer Employment Agreement dated January
29, 1998 have each been incorporated in this Agreement and such Offer Letter and
Executive Officer Employment Agreement has each been superseded by this
Agreement and therefore, each is hereby terminated in its entirety and shall be
of no further force and effect. This Agreement may be modified only by a written
instrument duly executed by each party hereto.
13. ASSIGNMENT
This Agreement shall be binding upon the parties hereto, their
respective heirs, personal representatives, executors, administrators,
successors and assigns. Any such assignee or successor of Employer shall, within
ten (10) business days after receipt of a written request by Executive, send to
Executive its acknowledgment and agreement that such assignee or successor
expressly assumes all of Employer's obligations under this Agreement as if such
assignee or successor was the original employer and the term "Employer" as used
herein as include any such assignee or successor.
14. INTERPRETATION OF AGREEMENT
The parties have cooperated in the drafting and preparation of this
Agreement. Therefore, the parties hereto agree that, in any construction to be
made of the Agreement the same shall not be
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construed against any of the parties. Each of the parties hereto has carefully
read this Agreement and has been given the opportunity to have it reviewed by
legal counsel and negotiate its terms.
15. SPECIFIC OBLIGATIONS OF THE EXECUTIVE
In addition to the general duties set forth herein, Executive shall use
her reasonable efforts for the benefit of Employer by whatever activities
Employer finds reasonably appropriate to maintain and improve Employer's
standing in the community generally and among current and prospective customers,
including such entertainment for professional purposes as Executive and Employer
mutually consider appropriate. Executive shall undertake business development
endeavors as reasonably directed by Employer.
16. NONDISCLOSURE AND NONAPPROPRIATION OF INFORMATION
(a) Executive recognizes and acknowledges that while employed by
Employer, she has and will have access to, learn, be provided with and,
in some cases, prepare and create certain confidential, proprietary
business information and/or trade secrets for Employer, including, but
not limited to, lists, files and forms, (hereinafter collectively
referred to as the "trade secrets"), all of which are of substantial
value to Employer and its business. In this connection, Executive
expressly covenants and agrees, during her employment with Employer and
continuing thereafter, to:
(i) Hold in a fiduciary capacity and not reveal,
communicate, use or cause to be used for her own benefit or
divulge any trade secrets, or other proprietary right now or
hereafter owned by the Employer;
(ii) Not sell, exchange or give away, or otherwise dispose
of any trade secrets now or hereafter owned by Employer, whether
the same shall or may have been originated or discovered by
Employer or otherwise;
(iii) Not reveal, divulge or make known to any person,
firm, corporation or other entity any trade secrets of Employer;
(iv) Not reveal, divulge or make known to any person
(other than her spouse, attorney and/or accountant), firm,
company or corporation any of the terms of this Agreement;
(v) Not solicit, interfere with or endeavor to entice away
from Employer any person, firm, company or corporation in the
habit of dealing with Employer; and
(vi) Not interfere with or solicit for hire or hire any
other executive employee of Employer.
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(b) Executive further covenants and agrees to return to Employer
either before or immediately upon her termination of employment with
Employer any and all written information, material or equipment that
constitutes, contains or relates to Employer's proprietary information
trade secrets and which relate to Employer's business which are in
Executive's possession, custody and control, whether confidential or
not, including any and all copies thereof which may have been made by or
for Executive. Executive shall maintain no copies thereof after
termination of her employment.
17. SURVIVAL OF OBLIGATIONS
In addition to those specific provisions of Section 3, which by their
express terms, survive the termination of this Agreement under certain
circumstances, the terms and conditions and obligations of the parties as
contained Sections 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, and 18 shall
survive the termination of this Agreement and, notwithstanding such termination,
shall remain fully binding on the parties hereto.
18. ARBITRATION
Except for any claim or dispute in which equitable relief under this
Agreement is sought, any disagreement, dispute or controversy concerning whether
there has been Just Cause, Good Reason or breach of any of the terms of this
Agreement shall be settled exclusively and finally by arbitration. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in effect from time to time (the
"AAA Rules"). The arbitration shall be conducted in Los Angeles, California, or
in such other city as the parties to the dispute may designate by mutual
consent. The arbitral tribunal shall consist of three arbitrators (or such
lesser number as may be agreed upon by the parties) selected according to the
procedure set forth in the AAA Rules, with the chairman of the arbitral tribunal
selected in accordance with the AAA Rules. Except as otherwise set forth in this
Agreement, the fees and expenses of the arbitral tribunal in connection with
such arbitration shall be borne by the parties to the dispute as shall be
determined by the arbitral tribunal.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
Effective Date of this Agreement.
Signed and acknowledged in UNIVERSAL ELECTRONICS INC.
the presence of:
By:
- ------------------------------ -----------------------------------
An Authorized Member of the Board
of Directors
CAMILLE JAYNE
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- --------------------- -----------------------------------
Signature
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EXHIBIT A
BONUS PLAN
PURSUANT TO SECTION 4(b) FOR 1999
If Minimum, Bonus shall equal Thirty percent (30%) of Executive's Base Salary.
If Target, Bonus shall equal Sixty percent (60%) of Executive's Base Salary.
If Maximum, Bonus shall equal One Hundred and Twenty percent (120%) of
Executive's Base Salary.
The determination shall be made in accordance with criteria established by the
Compensation Committee of Employer's Board of Directors which shall use the
following percentage ranges:
Financial Percentage Range -- 0% to 150%
Strategic Percentage Range -- 75% to 133%
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EXHIBIT B
STOCK OPTION AWARD
PURSUANT TO SECTION 4(c) FOR 1999
Options to acquire up to 80,000 shares of the common stock of Employer with an
exercise price determined as market price of the average of the beginning and
the end of business on January 28, 1999. These options shall vest at a rate of
33.3% per year for three years, but all in accordance with the terms and
conditions of the Stock Option Agreement and Stock Option Plans of Employer.
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EXHIBIT 10.41
FIRST AMENDMENT TO
EXECUTIVE OFFICER
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EXECUTIVE OFFICER EMPLOYMENT AGREEMENT (the
"Agreement") is made and entered into this 22nd day of April, 1999 by and
between UNIVERSAL ELECTRONICS INC. (the "Employer") and PAUL D. ARLING
("Executive").
RECITALS:
WHEREAS, the Employer and Executive are parties to that certain
Executive Employment Agreement dated September 29, 1998; and
WHEREAS, the parties wish to amend the Executive Employment Agreement by
replacing Paragraph 19 to the Executive Employment Agreement.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Paragraph 19 of the Executive Employment Agreement is hereby
deleted in its entirety and replaced with the following:
"19. RELOCATION LOAN MADE TO EXECUTIVE
At such time as demanded by Executive, Employer shall loan
Two Hundred Thousand Dollars ($200,000) to Executive which
Executive shall use solely for relocating his home and family
from his present place of residence in Shaker Heights, Ohio to a
new residence located in Southern California and in this
connection the Executive shall execute and deliver to Employer a
Nonrecourse Secured Promissory Note in favor of Employer in the
form attached to this Agreement as Exhibit C, the terms and
conditions of which are incorporated into this Agreement by this
reference. On each December 15 during the term of such Note and
on the payment of principal of the Note, Employer shall pay to
Executive an amount equal to 1.045 times the amount of interest
due by Executive under the Note as of each of such dates (the
"Interest Compensation"), regardless of whether Executive is
employed by Employer on such dates. Such loan and such Interest
Compensation is in addition to all amounts to be paid and/or
reimbursed to Executive pursuant to Employer's Executive
Relocation Policy."
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2. Except as specifically modified as set forth in this First
Amendment to Executive Employment Agreement, the Executive Employment Agreement
shall be and remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed the Agreement as of this
22nd day of April, 1999.
Signed and acknowledged in UNIVERSAL ELECTRONICS INC.
the presence of:
By:
- ------------------------------ -----------------------------------
Its:
----------------------------
PAUL D. ARLING
- ------------------------------ ---------------------------------------
Signature
2
<PAGE> 3
EXHIBIT C
NONRECOURSE SECURED PROMISSORY NOTE
AMOUNT: $200,000 APRIL 22, 1999
CYPRESS, CALIFORNIA
FOR VALUE RECEIVED, the undersigned, Paul D. Arling, (hereinafter
referred to as "Maker"), promises to pay to the order of Universal Electronics
Inc., a Delaware corporation, 6101 Gateway Drive, Cypress, California 90630
(hereinafter referred to as "Payee"), the principal sum of Two Hundred Thousand
Dollars ($200,000), together with interest at the rate of 5.28% per annum from
the date hereof, payable as follows: (a) accrued interest shall be paid on each
December 15 during the term of this Note and at the time of full payment of this
Note (to the extent accrued from the last interest payment); and (b) the entire
principal balance is due on the earlier of (i) December 15, 2007, (ii) within
twelve (12) months following a demand from Payee, which demand may only be made
by Payee in the event that Maker shall cease (for whatever reason) being an
employee of Payee or upon the occurrence of an Event of Default or (iii) on the
closing of a sale or transfer by Maker or Maker's spouse of all or any part of
his and/or her primary residence in Southern California that secures this Note
(the "Property"), including without limitation any sale or transfer of any
interest therein (including any beneficial interest therein) without Payee's
prior written consent, which consent shall not be unreasonably withheld. An
Event of Default shall occur hereunder if Maker (1) fails to render payment of
principal (or, if applicable, interest under this Note) when said payment is due
and payable, or (2) breaches any material provision of this Note or any material
provision of the Executive Employment Agreement.
This Note is secured by a deed of trust of even date herewith ("Deed of Trust").
In the event Maker fails to make any payments under this Note, a late payment
charge equal to 5% of the amount due and owing will be assessed from the date
such payment was due. All amounts of interest not paid when due, shall accrue
and be added to and considered principal of this Note.
This Note shall be nonrecourse. In the event of a default by Maker under the
terms of this Note, Payee's recourse shall be limited to the Property. In no
event shall Payee have any recourse against, nor shall Payee be able to recover
from, any of Maker's assets other than the Property.
Maker hereby agrees to be bound by all the terms contained in this Note.
This Note is given to Payee by Maker to evidence a loan from Payee to Maker made
for the reason set forth in Section 19 of that certain Executive Employment
Agreement dated September 29, 1998, as amended on April 22, 1999 (the "Executive
Employment Agreement"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Executive Employment
Agreement.
Payment upon this Note shall be made by check or checks payable to Payee at the
address set forth herein, or such other place as Payee or a subsequent holder of
this Note shall designate to Maker in writing, in lawful money of the United
States of America.
This Note may be prepaid by the Maker, in whole or in part, at any time without
premium or penalty.
Maker hereby waives any defenses based upon, and specifically assents to, any
and all extensions and postponements of the time of payment and all other
indulgences or forbearances which may be granted to any party liable hereon by
Payee or any subsequent holder of this Note.
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<PAGE> 4
Maker hereby waives presentment, demand for payment, notice of protest, notice
of nonpayment, protest, and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
No delay or omission on the part of Payee or any subsequent holder of this Note
in exercising any right hereunder shall operate as a waiver of such right or of
any other right of Payee or such holder, nor shall any delay, omission or waiver
on any one occasion be deemed a bar to or waiver of the same or any other right
on any other occasion.
No single or partial exercise by Payee or any subsequent holder hereof of any
power hereunder shall preclude any other or future exercise thereof or the
exercise of any other power.
Maker shall pay on demand of Payee or any subsequent holder of this Note all
costs of collection, including reasonable attorneys' fees incurred by Payee or
such holder in enforcing collection of this Note on default.
No provision of this Note shall be modified except by a written instrument
executed by Maker and by Payee or a subsequent holder hereof expressly referring
to this Note and to the provision modified.
THE MAKER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST IT
UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT, THE NOTES, OR
ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY COURT OF THE STATE OF
CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
CALIFORNIA - LOS ANGELES. THE MAKER EXPRESSLY AND IRREVOCABLY ASSENTS AND
SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING. THE MAKER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY
COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR
PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED
FOR IN SECTION 8 OF THE EXECUTIVE EMPLOYMENT AGREEMENT. THE MAKER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR
PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS OR ANY SIMILAR BASIS. THE MAKER SHALL NOT BE ENTITLED IN
ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED UNDER THE
LAWS OF ANY STATE OTHER THAN THE STATE OF CALIFORNIA UNLESS SUCH DEFENSE IS ALSO
GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF CALIFORNIA. NOTHING IN THIS
PARAGRAPH SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF THE
PAYEE TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE MAKER IN
ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
MAKER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN MAKER, PAYEE, OR ANY
OTHER PARTY HERETO ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG THE PARTIES HERETO IN CONNECTION WITH THIS
LOAN OR ANY OTHER AGREEMENT AMONG THEM.
THIS NOTE SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF MAKER AND
PAYEE DETERMINED, IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE STATE OF
CALIFORNIA.
This Note and the provisions hereof are to be binding on the assigns or
successors of Maker and Payee.
If from any circumstances whatsoever, fulfillment of any obligation of this Note
or of any other instrument evidencing or securing the indebtedness evidenced
hereby, at the time performance of such obligation shall be due, shall violate
the lawful limit of any applicable usury statute or any other applicable law
with regard to obligations of like character and amount, then the obligation to
be fulfilled shall be reduced to such lawful limit, so that in no event shall
there occur,
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<PAGE> 5
under this Note or under any other instrument evidencing or securing the
indebtedness evidenced hereby any violation of such lawful limit, but such
obligation shall be fulfilled to the lawful limit. If any sum is collected in
excess of the lawful limit, such excess shall first be applied to reduce the
principal debt, and then to the extent any such excess exceeds the principal
debt such excess shall be returned to Maker.
The provisions of this Note are hereby declared to be severable, and if any
clause or provision or the application of any clause or provision to any entity
or in any circumstances shall be held to be invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction and
shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision in this Note in any jurisdiction.
Each of the covenants, agreements, and conditions contained in this Note is
independent and compliance by the Maker with any of them shall not excuse
non-compliance by the Maker within the other. Maker shall not take any action,
the affect of which shall constitute a breach or violation of any clause or
provision of this Note
IN WITNESS WHEREOF, this Note has been duly executed by Maker as of the
date first above written.
By:
--------------------------------
Paul D. Arling, Individually
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
I, _________________________, a Notary Public in and for the State and
County aforesaid, do hereby certify that before me this day personally appeared
Paul D. Arling, an individual, known to me and he acknowledged to me that he
executed and delivered the above and foregoing Nonrecourse Secured Promissory
Note as his free and voluntary act in his individual capacity for the uses and
purposes set forth herein.
GIVEN under my hand and notarial seal this _____ day of April, 1999.
- -----------------------------------
Notary Public
My Commission Expires:
5
<PAGE> 1
EXHIBIT 10.42
UNIVERSAL ELECTRONICS INC.
1999A NONQUALIFIED STOCK PLAN
EFFECTIVE OCTOBER 7, 1999
(AS SUBSEQUENTLY AMENDED FEBRUARY 1, 2000)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
Section 1. General Purpose of Plan; Definition ........................................... 1
Section 2. Administration................................................................ 2
Section 3. Number of Shares of Stock Subject to Plan..................................... 3
Section 4. Eligibility................................................................... 4
Section 5. Stock Options................................................................. 4
(a) Grant and Exercise ....................................................... 4
(i) Nature of Options.................................................... 4
(ii) Exercisability....................................................... 4
(iii) Method of Exercise................................................... 4
(b) Terms and Conditions...................................................... 4
(i) Option Price......................................................... 5
(ii) Option Term.......................................................... 5
(iii) Transferability of Options........................................... 5
(iv) Option Exercise after Termination by Reason of Death or Disability... 5
(v) Option Exercise after Termination without Cause or
Constructive Termination............................................. 5
(vi) Option Exercise after Termination to Resignation..................... 5
(vii) Other Termination.................................................... 5
Section 6. Stock Appreciation Rights..................................................... 6
(a) Grant and Exercise........................................................ 6
(i) Time of Grant........................................................ 6
(ii) Exercisability....................................................... 6
(iii) Method of Exercise................................................... 6
(iv) Amount Payable....................................................... 6
(b) Terms and Conditions...................................................... 6
(i) Terms of Stock Appreciation Rights................................. 6
(ii) Transferability of Stock Appreciation Rights....................... 7
(iii) Termination of Employment.......................................... 7
Section 7. Restricted Stock Units and Performance Stock Units............................ 7
(a) Grant......................................................................... 7
(b) Terms and Conditions.......................................................... 7
(c) Completion of Restriction Period and Attainment of Performance Objectives..... 8
Section 8. Amendment and Termination..................................................... 8
Section 9. Unfunded Status of Plan....................................................... 8
Section 10. General Provisions........................................................... 8
Section 11. Effective Date of Plan....................................................... 9
Section 12. Term of Plan................................................................. 9
</TABLE>
<PAGE> 3
UNIVERSAL ELECTRONICS INC.
1999A NONQUALIFIED STOCK PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this Plan is the Universal Electronics Inc. 1999A NonQualified Stock
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 that 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) "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.
(j) "Optionee" means a Participant granted a Stock Option pursuant to
Section 5 of this Plan, which remains outstanding.
(k) "Participant" means any Eligible Employee selected by the Committee,
pursuant to the Committee's authority in Section 2 of this Plan, to
receive Awards.
(l) "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.
<PAGE> 4
(m) "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.
(n) "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.
(o) "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.
(p) "Stock" means the common stock, par value $0.01 per share, of the
Corporation.
(q) "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), 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.
(r) "Stock Option" means a nonqualified stock option (i.e., a Stock Option
that does not qualify as an "incentive stock option" within the meaning
of Section 422 of the Code) to purchase shares of Stock granted pursuant
to Section 5 of this Plan.
(s) "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;
(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);
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<PAGE> 5
(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 one million (1,000,000). 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.
SECTION 4. ELIGIBILITY.
All full-time employees of the Corporation, its Subsidiaries and 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.
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<PAGE> 6
(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. Under this Plan, the Committee shall have the
authority to grant any Participant Stock Options with or without
Stock Appreciation Rights.
(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 25% 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 50% 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, to the extent of 75% of the number of
shares of Stock covered by the Stock Option on and after the
third anniversary and before the fourth 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 fourth anniversary of the date of grant of the Stock
Option and before 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). 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 that 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 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 10(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 Fair Market Value at the time of
grant, unless otherwise determined by the Committee in its sole
discretion.
(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.
(iii) TRANSFERABILITY OF OPTIONS. Except as otherwise set forth in a
Stock Option Agreement, 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
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<PAGE> 7
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, any 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 of 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).
(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 (a) 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 and/or (b) accelerate the vesting schedule of such
Stock Option. 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 an Optionee may be exercised 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.
(vi) OPTION EXERCISE AFTER TERMINATION 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 such period as designated by
the Committee.
(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.
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 may be granted
either at or after the time of the grant of the Stock Option to
which it is related. Freestanding Stock Appreciation Rights may
be granted at any time.
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<PAGE> 8
(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.
(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
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.
6
<PAGE> 9
(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 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
7
<PAGE> 10
shall have become vested and the Committee shall cause such
Dividend Equivalents to be delivered to the Participant.
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 canceled
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 that would impair the rights of a
Participant under any Award theretofore granted without such Participant's
consent. 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.
(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
8
<PAGE> 11
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) 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.
(g) 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, Three
Hundred Thirty-three thousand (333,333) shares, except to the extent of
adjustments authorized by Section 3 of this Plan.
SECTION 11. EFFECTIVE DATE OF PLAN.
This Plan, effective as of October 7, 1999, was subsequently amended as of
February 1, 2000.
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 the vesting and
exercisability of Awards granted prior to such tenth anniversary may extend
beyond that date.
9
<PAGE> 1
EXHIBIT 10.43
NONQUALIFIED STOCK OPTION AGREEMENT
THIS NONQUALIFIED STOCK OPTION AGREEMENT is made as of the date set forth on the
signature page hereof by and between Universal Electronics Inc., a Delaware
corporation (the "Corporation") and the undersigned Optionee (the "Optionee").
As used in this Agreement, the term "Corporation" shall include, where
applicable, any and all of its subsidiaries.
WHEREAS, the Board of Directors of the Corporation (the "Board") has approved
the Universal Electronics Inc. 1999A NonQualified Stock Plan (the "Plan"); and
WHEREAS, the Corporation desires to grant to the Optionee an option ("Option")
to purchase shares of the Corporation's common stock, par value $0.01 per share
(the "Stock"), upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the parties, intending to be legally bound, hereto agree as
follows:
1. GRANT AND DESIGNATION OF OPTION. Upon the execution and delivery of this
Agreement and the related Stock Option Certificate of even date herewith
(the "Certificate"), the Corporation hereby grants to the Optionee the
Option to purchase the aggregate number of shares of Stock set forth on
the Certificate at the price per share ("Option Price") further set
forth on the Certificate. The Option granted hereunder shall not be
treated as an incentive stock option within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISE OF OPTION. Subject to earlier termination,
acceleration or cancellation of the Option as provided herein, the term
of the Option shall be for that period of time also set forth on the
Certificate (the "Option Period") and, subject to the provisions of this
Agreement, the Option shall be exercisable at such times and as to such
number of shares as determined on the schedule set forth on the
Certificate.
3. METHOD OF EXERCISE. The Option may be exercised by written notice to the
Corporation (the "Exercise Notice") at its offices at 6101 Gateway
Drive, Cypress, California 90630 to the attention of the Secretary of
the Corporation. The Exercise Notice shall state (i) the election to
exercise the Option, (ii) the total number of full shares in respect to
which it is being exercised, and (iii) shall be signed by the person or
persons exercising the Option. The Exercise Notice shall be accompanied
by the Certificate and a certified or cashier's check for the full
amount of the purchase price of such shares, or as may be permitted by
the Board, by certificates for shares of Stock which have been owned by
the Optionee for more than six months prior to the date of exercise and
which have a fair market value of the date of exercise equal to the
purchase price, or by a combination of such methods of payment. Upon
receipt of the foregoing, the Corporation shall issue the shares of
Stock as to which the Option has been duly exercised and shall return
the Certificate, duly endorsed to reflect such exercise, to the
Optionee.
<PAGE> 2
4. OPTIONEE'S REPRESENTATIONS.
(a) Optionee represents and warrants that any and all shares acquired
through the exercise of rights under the Option granted pursuant to this
Agreement will be acquired for Optionee's own account and not with a
view to, or present intention of, distribution thereof in violation of
the Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "1933 Act") and will not be disposed of in
contravention of the 1933 Act.
(b) Optionee acknowledges that Optionee is able to bear the economic
risk of the investment in any and all shares of Stock acquired through
the exercise of rights under the Option for an indefinite period of time
because the Stock may not be registered under the 1933 Act and, if not,
cannot be sold unless subsequently registered under the 1933 Act or an
exemption from such registration is available.
(c) Optionee has reviewed this Agreement and has had an opportunity to
ask questions and receive answers concerning the terms and conditions of
the offering of Stock and has had full access to such other information
concerning the Corporation as Optionee has requested.
5. RESTRICTION ON EXERCISE. This Option may not be exercised if the
issuance of such shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Corporation may require
Optionee to make any representation and warranty to the Corporation as
may be required by any applicable law or regulation. All exercises of
the Option must be for full shares of Stock only.
6. EFFECT OF TERMINATION OF EMPLOYMENT. Except as set forth in
Paragraphs 7, 8 and 9 below, in the event that Optionee's employment
with the Corporation ceases for any reason, Optionee may (or Optionee's
estate or representative, in the event of Optionee's death during the
applicable exercise period as set forth in this Paragraph 6), during the
earlier of (i) the 180 day period following such cessation of employment
or (ii) the remaining term of the Option Period, exercise the Option to
the extent such Option was exercisable on the date such employment
ceased and, on such date, that portion of the Option which was not
exercisable shall automatically terminate without further action by the
parties hereto and, in all events, to the extent not exercised, the
Option shall terminate in its entirety at the end of business on the
applicable exercise period as set forth in this Paragraph 6.
7. EFFECT OF TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR DUE TO CONSTRUCTIVE
TERMINATION.
(a) In the event that Optionee's employment with the Corporation is
terminated by the Corporation without "Cause" (as such term is defined
in subparagraph 7(b) below) or in the event of "Constructive
Termination" (as such term is defined in subparagraph 7(c)
<PAGE> 3
below), Optionee shall become immediately fully vested in the Option
without further action by the parties hereto, and, to the extent not
previously exercised, shall be exercisable in whole or in part with
respect to all remaining shares of Stock covered by the Option and may
be exercised by Optionee (or Optionee's estate or representative, in the
event of Optionee's death) at any time prior to the expiration of the
Option Period.
(b) For purposes of this Agreement, "Cause" shall mean (i) the willful
and continued failure by Optionee to substantially perform Optionee's
duties with the Corporation (other than a failure resulting from
Optionee's death or "Total Disability," as such term is defined in
subparagraph 7(e) below) after a demand for substantial performance is
delivered to Optionee by the Corporation which specifically identifies
the manner in which it is believed that Optionee has not substantially
performed Optionee's duties; (ii) the willful engaging by Optionee in
gross misconduct materially and demonstrably injurious to the property
or business of the Corporation; or (iii) Optionee's commission of fraud,
misappropriation or a felony. For purposes of this definition of
"Cause", no act or failure to act on Optionee's part will be considered
"willful" unless done, or omitted to be done, by Optionee not in good
faith and without reasonable belief that Optionee's action or omission
was in the interests of the Corporation or not opposed to the interests
of the Corporation.
(c) For purposes of this Agreement, "Constructive Termination" shall
occur on that date on which Optionee resigns from employment with the
Corporation, if such resignation occurs within eighteen (18) months
after the occurrence of (i) the failure of Optionee to be elected or
re-elected or appointed or reappointed to such office which Optionee
holds (other than as a result of a termination for "Cause") if Optionee
is an officer of the Corporation and the office which Optionee holds is
one to which Optionee is elected according to the Corporation's By-laws;
(ii) a change in Optionee's functions, duties, or responsibilities such
that Optionee's position with the Corporation becomes substantially less
in responsibility, importance, or scope; or (iii) a "Change in Control"
(as such term is defined in subparagraph 7(d) below).
(d) For purposes of this Agreement, a "Change in Control" shall be
deemed to occur when (i) any "person" or "group" (as such terms are used
in Sections 3(a), 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder
(the "1934 Act")), other than (1) a trustee or other fiduciary holding
securities under any employee benefit plan of the Corporation or (2) a
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership of
Stock in the Corporation immediately prior to any such occurrence, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the total voting power of the then
outstanding securities of the Corporation entitled to vote generally in
the election of directors (the "Voting Stock"); (ii) individuals who are
members of the Board on the date of this Agreement and any individual
who becomes a member of the Board hereafter whose nomination for
election as a director was approved by the affirmative vote of a
majority of such Directors, cease to constitute a majority of the
members of the Board; (iii) there
<PAGE> 4
occurs a merger or consolidation of the Corporation with any other
corporation or entity, other than a merger or consolidation which would
result in the Voting Stock of the Corporation immediately outstanding
prior thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) at
least 80% of the total voting power represented by the Voting Stock or
the voting securities of such surviving entity outstanding immediately
after such merger or consolidation; (iv) there occurs a sale or transfer
or disposition of all or substantially all of the Corporation's assets
to any other corporation or entity, other than a corporation owned
directly or indirectly by the stockholders of the Corporation in
substantially the same proportions as their ownership of Stock in the
Corporation immediately prior to such sale, transfer or disposition; or
(v) the dissolution or liquidation of the Corporation.
(e) For purposes of this Agreement, "Total Disability" shall mean 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 for ninety (90) or more days during any period of 120
consecutive days.
8. EFFECT OF TERMINATION OF EMPLOYMENT DUE TO DEATH OR TOTAL DISABILITY. In
the event that Optionee's employment with the Corporation ceases or is
terminated due to Optionee's death or Total Disability, Optionee (or
Optionee's estate or representative, in the event of Optionee's death)
may during the earlier of (i) the one (1) year period following such
cessation or termination of employment or (ii) the remaining term of the
Option Period, exercise the Option to the extent such Option was
exercisable on the date such employment ceased or was terminated and, on
such date, that portion of the Option which was not exercisable shall
automatically terminate without further action by the parties hereto
and, in all events, to the extent not exercised, the Option shall
terminate in its entirety at the end of business on the applicable
exercise period as set forth in this Paragraph 8; provided, however, the
Board, in its sole discretion, may approve the full vesting to Optionee
(or Optionee's estate or representative, in the event of Optionee's
death) in the Option and, in such event, to the extent not previously
exercised, the Option shall be exercisable in whole or in part with
respect to all remaining shares of Stock covered the Option and may be
exercised by Optionee (or Optionee's estate or representative, in the
event of Optionee's death) at any time prior to the expiration of the
Option Period.
9. EFFECT OF TERMINATION OF EMPLOYMENT FOR CAUSE. In the event that
Optionee's employment with the Corporation is terminated by the
Corporation for Cause, the Option, to the extent not then exercised (and
whether or not then exercisable in whole or in part) shall automatically
and immediately terminate in its entirety as of the date of such
termination of employment, without further action by Optionee or the
Corporation, and Optionee thereafter shall have no rights whatsoever
with respect to the Option.
10. RIGHT OF A STOCKHOLDER. Optionee shall not have any rights as a
stockholder with respect to any shares of Stock unless and until
legended certificates for such shares of such Stock are issued or unless
the Optionee has been granted additional applicable rights under the
Plan.
<PAGE> 5
11. WITHHOLDING OF TAXES. Whenever the Corporation is required to issue
shares of Stock upon exercise hereunder, the Corporation shall have the
right to require the recipient to remit in cash (or with the consent of
the Board, shares of Stock previously owned by the recipient or issuable
upon such exercise) to the Corporation an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares of
Stock.
12. ADJUSTMENTS. In the event of any change in the outstanding shares of
Stock of the Corporation by reason of a stock dividend or distribution,
recapitalization, spin-off, merger, consolidation, split-up,
combination, exchange of shares or the like, the Board shall adjust the
number of shares of Stock which may be issued under the Plan and shall
provide for an equitable adjustment to (a) the number of shares of Stock
subject to this Agreement and (b) the option price of this Stock Option.
13. COMPLIANCE WITH CERTAIN LAWS AND REGULATIONS. If the Board shall
determine, in its sole discretion, that the listing, registration or
qualification of the shares subject to the Option upon any securities
exchange or under any law or regulation, or that the consent or approval
of any governmental regulatory body is necessary or desirable in
connection with the granting of the Option or the acquisition of shares
thereunder, the Optionee shall supply the Board or the Corporation, as
the case may be, with such certificates, representations and information
as the Board or the Corporation, as the case may be, may request and
shall otherwise cooperate with the Corporation in obtaining any such
listing, registration, qualification, consent or approval.
14. TRANSFERABILITY OF OPTION. The Option is not transferable by the
Optionee other than (i) by will or by the laws of descent and
distribution or (ii) by gift or domestic relations order to a family
member of the Optionee (a "Permitted Transferee"), and is exercisable,
during the Optionee's lifetime, only by a Permitted Transferee, the
Optionee, or in the case of Optionee's legal incompetency, by Optionee's
guardian or legal representative.
15. ADDITIONAL RESTRICTIONS ON TRANSFER. The certificates representing the
Stock purchased upon the exercise of the Option will bear the following
legend until such shares of Stock have been registered under an
effective registration statement under the 1933 Act:
The securities represented by this certificate were originally
issued on _____________________, 19___, have not been registered
under the Securities Act of 1933, as amended, or under the
securities laws of any state or other jurisdiction (together, the
"Securities Laws") and may not be offered for sale, sold or
otherwise transferred or encumbered in the absence of compliance
with such Securities Laws and until the issuer hereof shall have
received from counsel acceptable to issuer a written opinion
reasonably satisfactory to issuer that the proposed transaction
will not violate any applicable Securities Laws.
<PAGE> 6
16. NOTICES. Any notice or demand provided for in this Agreement must be in
writing and must be either personally delivered, delivered by overnight
courier, or mailed by first class mail, to the Optionee at Optionee's
most recent address on file in the records of the Corporation, to the
Corporation at the address set forth or established pursuant to
Paragraph 3 or to such other address or to the attention of such other
person as the recipient party shall have specified by prior written
notice to the sending party. Any notice or demand under this Agreement
will be deemed to have been given when received.
17. SEVERABILITY. This Agreement and each provision hereof shall be valid
and enforced to the fullest extent permitted by law. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision. Without limiting the
generality of the foregoing, if the scope of any provision contained in
this Agreement is too broad to permit enforcement to its fullest extent,
such provision shall be enforced to the maximum extent permitted by law,
and the parties hereby agree that such scope may be judicially modified
accordingly.
18. COMPLETE AGREEMENT. This Agreement and those documents expressly
referred to herein embody the complete agreement and understanding among
the parties and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral,
which may have related to the subject matter hereof in any way.
19. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original and all of which taken
together shall constitute one and the same agreement.
20. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Optionee, the Corporation and their
respective permitted successors and assigns (including personal
representatives, heirs and legatees), and is intended to bind all
successors and assigns of the respective parties, except that Optionee
may not assign any of Optionee's rights or obligations under this
Agreement except to the extent and in the manner expressly permitted
hereby.
21. REMEDIES. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages
by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. The parties hereto
agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party
may, in its sole discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief
in order to enforce or prevent any violations of the provisions of this
Agreement, without the necessity of posting bond or any other security.
22. WAIVER OR MODIFICATION. Any waiver or modification of any of the
provisions of this Agreement shall not be valid unless made in writing
and signed by the parties hereto. A
<PAGE> 7
waiver by either party of any breach of this Agreement shall not operate
as a waiver of any subsequent breach.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
____ day of ______________, ____.
OPTIONEE UNIVERSAL ELECTRONICS INC.
By:
------------------------- ---------------------------------
Signature Its: Chairman and Chief
Executive Officer
Print Name
<PAGE> 8
Certificate Number: ____
UNIVERSAL ELECTRONICS INC.
1999A NONQUALIFIED STOCK PLAN
STOCK OPTION CERTIFICATE
THIS CERTIFIES THAT ____________has been awarded an OPTION to purchase ________
shares of common stock, par value $0.01 per share, of UNIVERSAL ELECTRONICS INC.
at a price per share of $____. This Certificate is issued in accordance with and
is subject to the terms and conditions of the related NonQualified Stock Option
Agreement of even date herewith (the "Agreement").
THIS OPTION is not transferable except in accordance with the terms and
conditions of the Agreement.
THIS OPTION shall expire [ten (10)] years from the date of this Certificate.
THIS OPTION shall be exercisable as to all or a portion of the number of shares
set forth above as follows:
<TABLE>
<CAPTION>
On and After the Following Maximum Percentage Taking
Dates, But Prior to Expiration Into Account Prior Exercises
<S> <C>
__/__/__ 25%
__/__/__ 50%
__/__/__ 75%
__/__/__ 100%
</TABLE>
IN WITNESS WHEREOF, UNIVERSAL ELECTRONICS INC. has caused this Stock Option
Certificate to be signed by its duly authorized officer as of the ____ day of
______, _____.
UNIVERSAL ELECTRONICS INC.
By:
---------------------------------
Its:
--------------------------------
<PAGE> 1
Exhibit 11.1
UNIVERSAL ELECTRONICS INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Common stock outstanding,
beginning of period 13,463,000 12,924,000 12,794,000 12,624,000
Weighted average common stock
outstanding from exercise of stock
options, treasury stock purchases and
employee benefit plan 74,000 (88,000) 518,000 149,000
Weighted average common stock
outstanding 13,537,000 12,836,000 13,312,000 12,773,000
=========== =========== =========== ===========
Stock options 1,130,000 326,000 814,000 427,000
----------- ----------- ----------- -----------
Weighted average common stock
and common stock equivalents
outstanding 14,667,000 13,162,000 14,126,000 13,200,000
=========== =========== =========== ===========
Net income attributable to
common stockholders $ 3,753,849 $ 2,370,648 $ 7,740,082 $ 5,637,650
Net income per common stock
and common stock equivalents:
Basic $ 0.28 $ 0.18 $ 0.58 $ 0.44
=========== =========== =========== ===========
Diluted $ 0.26 $ 0.18 $ 0.55 $ 0.43
=========== =========== =========== ===========
</TABLE>
<PAGE> 1
Exhibit 21.1
UNIVERSAL ELECTRONICS INC.
LIST OF SUBSIDIARIES OF THE REGISTRANT
Universal Electronics B.V. (organized under the laws of the Netherlands)
One For All GmbH (organized under the laws of Germany)
Ultra Control Consumer Electronics GmbH (organized under the laws of Germany)
One For All (UK) Ltd. (organized under the laws of the United Kingdom)
One For All Iberia S.L. (organized under the laws of Spain)
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 No. 33-66426 filed on or about July 23, 1993, No.
333-09021 filed on July 26, 1996, No. 333-23985 filed on March 26, 1997, No.
333-91101 filed on November 17, 1999, and No. 333-95715 filed on January 31,
2000 of Universal Electronics Inc. of our report dated January 21, 2000,
relating to the financial statements and financial statement schedules, which
appears in this Form 10-K.
PricewaterhouseCoopers LLP
Costa Mesa, California
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,286,219
<SECURITIES> 0
<RECEIVABLES> 29,812,725
<ALLOWANCES> (1,879,931)
<INVENTORY> 13,493,813
<CURRENT-ASSETS> 60,506,295
<PP&E> 10,431,095
<DEPRECIATION> (6,734,189)
<TOTAL-ASSETS> 73,751,466
<CURRENT-LIABILITIES> 15,000,448
<BONDS> 0
0
0
<COMMON> 153,173
<OTHER-SE> 58,358,024
<TOTAL-LIABILITY-AND-EQUITY> 73,751,466
<SALES> 105,091,183
<TOTAL-REVENUES> 105,091,183
<CGS> 61,714,724
<TOTAL-COSTS> 29,184,046
<OTHER-EXPENSES> (43,051)
<LOSS-PROVISION> 1,224,275
<INTEREST-EXPENSE> (107,594)
<INCOME-PRETAX> 13,118,783
<INCOME-TAX> 5,378,701
<INCOME-CONTINUING> 7,740,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,740,082
<EPS-BASIC> .58
<EPS-DILUTED> .55
</TABLE>
