UNIVERSAL SECURITY INSTRUMENTS, INC.
10324 South Dolfield Road
Owings Mills, Maryland 21117
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on November 11, 1999
To the Shareholders of Universal Security Instruments, Inc.:
The Annual Meeting of Shareholders of UNIVERSAL SECURITY INSTRUMENTS, INC.
will be held at Universal Security Instruments, Inc., 10324 South Dolfield Road,
Owings Mills, Maryland 21117, on Thursday, November 11, 1999, at 10:30 a.m. for
the following purposes:
1. To elect a Board of five directors to serve until the next annual
meeting and until their successors have been elected and qualify.
2. To consider and act upon a proposal to amend the Company's
Non-Qualified Stock Option Plan to increase the number of shares available for
the grant of options thereunder.
3. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on September 1, 1999
will be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
HARVEY B. GROSSBLATT
Secretary
DATED: October 11, 1999
IMPORTANT - YOUR PROXY IS ENCLOSED. Shareholders who do not plan to attend the
meeting are requested to complete, date, sign and return promptly the enclosed
proxy in the enclosed envelope. No postage is required for mailing in the
United States.
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Universal
Security Instruments, Inc. (the "Company") in connection with the Annual Meeting
of the Shareholders of the Company to be held on November 11, 1999 or any
adjournments thereof. The proxy is revocable at any time before exercise by
written notice to the Chief Financial Officer of the Company, 10324 South
Dolfield Road, Owings Mills, Maryland 21117.
Only shareholders of record at the close of business on September 1, 1999
(the "Record Date") will be entitled to notice of and to vote at the meeting.
The number of shares of Common Stock, $.01 par value, of the Company (the
"Common Stock") outstanding on September 1, 1999 and entitled to vote at the
meeting is 903,847 shares, each having one vote.
BENEFICIAL OWNERSHIP
The following table reflects the names and addresses of the only persons
known to the Company to be the beneficial owners of 5% or more of the Common
Stock outstanding as of the Record Date:
Name and address Shares beneficially Percent
of beneficial owner owned of class(1)
Michael Kovens 328,2952 33.8%
10324 South Dolfield Road
Owings Mills, Maryland 21117
Stephen C. Knepper 105,3602 10.8%
10324 South Dolfield Road
Owings Mills, Maryland 21117
Bruce Paul 129,400 14.3%
One Hampton Road
Purchase, New York
_________________________________
(1) For the purpose of determining the percentages of stock beneficially owned,
shares of stock subject to options or rights exercisable within 60 days of
September 1, 1999 are deemed to be outstanding.
(2) For information regarding the nature of beneficial ownership of stock owned
by Messrs. Kovens and Knepper, please see footnotes 2 and 3, under
INFORMATION REGARDING STOCK OWNERSHIP OF MANAGEMENT.
ELECTION OF DIRECTORS
At the 1999 Annual Meeting, five directors will be elected to hold office
for the ensuing year and until their successors are elected and qualify. Under
the Company's bylaws, directors are elected by the vote of a majority of the
Company's outstanding shares of Common Stock. Consequently, the withholding
of votes, abstentions and broker non-votes with respect to shares of Common
Stock otherwise present at the Annual Meeting in person or by proxy may have an
effect on the outcome of this vote.
Unless otherwise specified in the proxy, it is the present intention of the
persons named in the accompanying form of proxy to vote such proxy for the
election as directors of the five nominees listed below. Pursuant to the
Company's By-laws, the five nominees were nominated by the Board of Directors.
If, due to unforeseen contingencies, any of the nominees designated below shall
not be available for election, the persons named in the accompanying form of
proxy reserve the right to vote such proxy for such other person or persons as
may be nominated for director by the management of the Company so as to provide
a full Board. Management has no reason to believe that any nominee will be
unable to serve if elected.
Principal occupation Director
Name Age for past five years since
Stephen C. Knepper. .55 Director; Chairman of the Board of the 1970
Company 1970 through July 1996; Vice
Chairman of the Board since August 1996.
Michael Kovens. . . .56 Director; President of the Company 1970 1970
through July 1996; Chairman of the
Board since August 1996.
Harvey Grossblatt . .53 Director since September 1996; President 1996
since July 1996; Chief Financial Officer
since April 1997; Executive Vice President
of the Company from December 1986
through June 1996; Secretary and Treasurer
of the Company since September 1988;
Vice President and Chief Financial Officer
of the Company from October 1983 through
May 1995.
Ronald Frank(1) . . .33 Vice President of Lexington National 1998
Insurance Company since 1993.
Gary Goldberg . . .50 1993 to 1996 President of Ultravision LLC; 1998
1996 to 1997 Independent Consultant;
1997 to present Procurement Agent
for Sierra Military Health Services, Inc.
(1) Mr. Frank is the son-in-law of Mr. Michael Kovens, Director and Chairman of
the Board of the Company.
During the fiscal year ended March 31, 1999, the Board of Directors held one
special meeting at which all of the directors were present and one regular
meeting at which neither Ronald Frank nor Gary Goldberg were present.
2
Committees and Meetings of the Board of Directors
For the fiscal year ended March 31, 1999, the Company did not have a
standing Nominating Committee or Compensation Committee of the Board of
Directors, or committees performing similar functions. The Company appointed
an Audit Committee in February 1998 consisting of independent directors Ronald
Frank and Gary Goldberg. The Audit Committee is to recommend to the Board the
selection of the independent public accountants, review with such accountants
and management the financial statements of the Company, discuss with the
accountants the results of the audit and internal accounting procedures and
controls, and review any proposed related party transactions. The Audit
Committee held one meeting in the fiscal year ending March 31, 1999.
Compensation of Directors
For the fiscal year ended March 31, 1999, directors employed by the Company
received no additional compensation for serving as a director, and those not
employed by the Company (Messrs. Frank and Goldberg) received options to
purchase 2,500 shares of the Company's common stock at $3.00 per share
pursuant to options granted under the Company's Non-Qualified Stock Option Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's directors and executive officers and each person who owns
more than 10% of the outstanding Common Stock file with the Securities and
Exchange Commission an initial report of beneficial ownership and subsequent
reports of changes in beneficial ownership and subsequent reports of changes in
beneficial ownership of Common Stock. To the Company's knowledge, all of the
required persons complied with the filing requirements applicable.
INFORMATION REGARDING STOCK OWNERSHIP OF MANAGEMENT
As of September 1, 1999, the shares of the Company's Common Stock owned
beneficially by each director, by each executive officer and by all directors
and officers as a group were as follows:
Amount and nature of Percent of
Name of beneficial owner beneficial ownership class(1)
Michael Kovens. . . . . . . . . . . . . . . 328,2952 33.8%
Stephen C. Knepper. . . . . . . . . . . . . 105,3603 10.8%
Harvey Grossblatt . . . . . . . . . . . . . 31,2724 3.4%
Ronald Frank. . . . . . . . . . . . . . . . 5,6735 .6%
Gary Goldberg . . . . . . . . . . . . . . . 6256 .0%
All directors and officers as a group (5
persons included) . . . . . . . . . . . 471,225 44.2%
_________________________________
(1) For the purpose of determining the percentages of stock beneficially owned,
shares of stock subject to options or rights exercisable within 60 days of
September 1, 1999 are deemed to be outstanding pursuant to options
granted under the Company's Non-Qualified Stock Option Plan.
(2) Includes 68,750 shares which Mr. Kovens presently has the right to acquire
at prices ranging from $3.00 to $7.50 per share pursuant to options granted
under the Company's Non-Qualified Stock Option Plan.
(3) Includes 68,750 shares which Mr. Knepper presently has the right to acquire
at prices ranging from $3.00 to $7.50 per share pursuant to options granted
under the Company's Non-Qualified Stock Option Plan and 4,487 shares held
by Mr. Knepper's adult children.
(4) Includes 24,000 shares which Mr. Grossblatt presently has the right to
acquire at prices ranging from $3.00 to $7.00 per share pursuant to options
granted under the Company's Non-Qualified Stock Option Plan.
(5) Includes 5,048 shares held by his wife and 625 shares which Mr. Frank
presently has the right to acquire.
(6) Includes 625 shares which Mr. Goldberg presently has the right to acquire.
3
EXECUTIVE COMPENSATION
Table I. Summary Compensation Table
The following table reflects the aggregate amount paid or accrued by the
Company in its three most recent fiscal years, for each executive officer whose
compensation exceeded $100,000 in the fiscal year ended March 31, 1999.
<TABLE>
Long Term Compensation
Name and Awards Payouts
Principal Annual Compensation Stock LTIP All Other
Position Year Salary Bonus Other Awards Options Payouts Compensation(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael
Kovens 1999 $175,000 - - - 12,500 - $ -0-
Chairman
of the
Board 1998 $175,000 - - - 15,000 - $ -0-
1997 $300,000 - - - 17,500 - $3,200
Harvey
Grossblatt 1999 $122,500 - - - 6,250 - $ -0-
President,
Secretary 1998 $122,500 - - - - - $ -0-
and
Treasurer 1997 $142,923 - - - 17,750 - $2,857
_________________________________
(1) Consists of Company contributions to the Company's 401(k) plan.
</TABLE>
Table II. Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values
The following table sets forth information concerning the number and value
of unexercised options held as of March 31, 1999 by each executive officer whose
compensation exceeded $100,000 in the year then ended:
<TABLE>
Number Number
of Unexercised of Unexercised
Options Options
Shares at FY-End at FY-End
Acquired Value Exer- /Unexer- Exer- /Unexer-
Name on Exercise Realized cisable/cisable cisable/cisable
<S> <C> <C> <C> <C> <C> <C>
Michael Kovens - - 68,750/-0- -0-/-0-
Harvey Grossblatt - - 24,000/-0- -0-/-0-
</TABLE>
4
MATTERS PERTAINING TO THE 2000 ANNUAL MEETING
PROPOSAL TO AMEND THE NON-QUALIFIED STOCK OPTION PLAN
The Plan
The Company's Non-Qualified Stock Option Plan (the "Plan"), has been in
effect since April 1978 and, unless extended by the Company's Board of
Directors, will expire on March 31, 2003. A total of 243,750 shares of Common
Stock were reserved for issuance under the Plan. Options may be granted under
the Plan to employees, officers and directors of the Company and its
subsidiaries.
The Plan is administered by the Non-Qualified Stock Option Committee of the
Company's Board of Directors (the "Options Committee"), consisting of Stephen C.
Knepper, Michael Kovens and Harvey Grossblatt. The Options Committee has the
authority, within limitations as set forth in the Plan, to interpret the terms
of the Plan and establish rules and regulations concerning the Plan, to
determine the persons to whom options may be granted, the number of shares of
Common Stock to be covered by each option, and the exercise price and other
terms and provisions of the option to be granted. In addition, the Options
Committee has the authority, subject to the terms of the Plan, to determine
the appropriate adjustments in the terms of each outstanding option in the event
of a change in the Common Stock or the Company's capital structure.
Of the 232,231 shares initially available for option grants under the Plan,
options have been granted to directors and executive officers of the Company
(see "Information Regarding Stock Ownership of Management"). Options to
purchase 51,625 shares at prices ranging from $3.00 to $11.24 per share have
been granted to other employees of the Company. All future grants of options
under the Plan to any of the Company's directors, executive officers, and
other employees will be in the discretion of the Options Committee.
Options granted under the Plan are non-qualified stock options ("NQSOs").
The exercise price of an option will be fixed by the Options Committee on the
date of grant. Any options granted must expire within five years from the
date of grant. Shares subject to options granted under the Plan which expire,
terminate, or are canceled without having been exercised in full become
available again for option grants.
On September 1, 1999, the last sale price per share of Common Stock, as
reported by the OTC Bulletin Board, was $1.968.
The Amendment
As of September 1, 1999, options to purchase 218,125 shares of Common
Stock were outstanding under the Plan, leaving only an additional 14,106 shares
of Common Stock available for options to be granted thereafter under the
Plan (in addition to any options forfeited pursuant to the terms of the Plan
which are then available for re-issuance under the Plan). The Board of
Directors believes that it is in the best long-term interest of the Company
and its shareholders to have available under the Plan a sufficient number of
options to allow broad participation by all of the Company's directors and
employees, thereby providing equity-based incentive compensation to those
personnel whose efforts increase the value of the Common Stock for the Company's
shareholders. Since many of the options granted under the Plan vest over a
period of several years, the Plan also encourages a long-term relationship
between the Company and its employees.
Subject to shareholder approval, the Board of Directors has approved an
increase of 250,000 shares of Common Stock to be available for grants of options
under the Plan, thereby raising the total number of shares presently
available for options under the Plan to 264,106.
5
Federal Income Tax Aspects
Employees and non-employee directors will realize no income upon the grant
of a non-qualified stock option. Generally, however, the holder of a NQSO will
realize taxable ordinary income at the time of the exercise of his/her option
in an amount equal to the excess of the fair market value of the shares acquired
at the time of exercise over the exercise price of the option, and the Company
will be entitled to a deduction for the amount included in the optionee's
income. Upon the sale of the shares acquired upon exercise, the optionee would
realize capital gain or capital loss. Whether such capital gain or capital loss
is long-term or short-term will depend upon the period of time the optionee
holds the shares once they are acquired.
The Board of Directors unanimously recommends that you vote FOR approval of
the proposed amendment to the Plan. The affirmative vote of a majority of the
Company's outstanding shares of Common Stock is needed to approve the proposed
amendment to the Plan. Consequently, the withholding of votes, abstentions and
broker non-votes with respect to shares of Common Stock otherwise present at the
Annual Meeting in person or by proxy may have an effect on the outcome of this
vote.
Any shareholder desiring to present a proposal to be considered by the
shareholders at the Annual Meeting of Shareholders scheduled to be held in
October 2000, and desiring that information concerning such proposal be
included in the proxy statement and form of proxy furnished to shareholders by
the Board of Directors, should submit the proposal in writing, including all
supporting materials, to the Company at its principal executive offices no later
than May 15, 2000.
The Persons designated by the Company to vote proxies given by shareholders
in connection with the Company's 2000 Annual Meeting of Shareholders will not
exercise any discretionary voting authority granted in such proxies on
any matter not disclosed in the Company's 2000 proxy statement and with
respect to which the Company has received written notice no later than
August 1, 2000 that a shareholder (i) intends to present such matter at the
2000 Annual Meeting, and (ii) intends to and does distribute a proxy statement
and proxy card to holders of such percentage of the Company's shares required to
approve the matter. If the shareholder fails to provide evidence that the
necessary steps have been taken to complete a proxy solicitation on such matter,
the Company may exercise its discretionary voting authority if it discloses in
its 2000 proxy statement the nature of the proposal and how it intends to
exercise its discretionary voting authority.
OTHER MATTERS
The solicitation of proxies will be made by mail, at the expense of the
Company, including the charges and expenses of brokerage firms and others for
forwarding solicitation material to beneficial owners of stock. Subsequent
solicitations may be made by mail, telegraph, telephone or any other
appropriate means.
The Board of Directors of the Company is not aware of any other matter
which may be presented for action at the Annual Meeting, but should any such
matter requiring a vote of the shareholders arise, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
of the person or persons voting the proxies, and discretionary authority to do
so is provided for in the proxy.
Grant Thornton LLP is the firm of certified public accountants selected by
the Board of Directors of the Company
<PAGE>
to audit the books and accounts of the
Company for the fiscal year ended March 31, 1999. It is anticipated that
representatives of Grant Thornton LLP will be present at the Annual Meeting to
respond to appropriate questions.
Shareholders who do not plan to attend the Annual Meeting are urged to
complete, date, sign and return the enclosed proxy in the enclosed envelope to
which no postage need be affixed if mailed in the United States. Prompt
response is helpful and your cooperation will be appreciated.
By Order of the Board of Directors,
HARVEY B. GROSSBLATT
Secretary
Dated: October 11, 1999
6
