<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant / /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COBRA ELECTRONICS CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[COBRA ELECTRONICS CORP. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1995
To the Shareholders:
The Annual Meeting of Shareholders of Cobra Electronics Corporation (the
"Company") will be held at the offices of Sidley & Austin, One First National
Plaza, 55th Floor, Room 5-6 C, Chicago, Illinois on Tuesday, May 9, 1995 at
11:00 a.m. to:
1. Elect two Class III directors of the Company to hold office until the
1998 Annual Meeting of Shareholders;
2. Consider and vote upon a proposal to approve the 1995 Stock Option
Plan; and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on April 7, 1995 are
entitled to notice of and to vote at the meeting or any adjournments thereof. A
complete, alphabetic list of such shareholders showing their addresses and the
number of shares registered for each will be kept open at the offices of the
Company, 6500 West Cortland Street, Chicago, Illinois 60635, for examination by
any shareholder during ordinary business hours for a period of ten days prior to
the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
A copy of the Annual Report for the year ended December 31, 1994, a Proxy
Statement and Proxy Card accompany this notice.
By order of the Board of Directors,
GERALD M. LAURES
Secretary
Chicago, Illinois
April 10, 1995
<PAGE> 3
COBRA ELECTRONICS CORPORATION
6500 WEST CORTLAND STREET
CHICAGO, ILLINOIS 60635
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 1995
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with a solicitation of
proxies by the Board of Directors of Cobra Electronics Corporation (the
"Company") to be voted at the Company's 1995 Annual Meeting of Shareholders to
be held on Tuesday, May 9, 1995 at the offices of Sidley & Austin, One First
National Plaza, 55th Floor, Room 5-6 C, Chicago, Illinois at 11:00 a.m. The
principal executive offices of the Company are located at 6500 West Cortland
Street, Chicago, Illinois 60635. This Proxy Statement, the accompanying Proxy
Card and the 1994 Annual Report were first mailed to shareholders on or about
April 10, 1995.
RECORD DATE AND OUTSTANDING VOTING SECURITIES
Only shareholders of record at the close of business on April 7, 1995 are
entitled to notice of and to vote at the meeting. On that date the Company had
outstanding 6,226,648 shares of Common Stock, par value $.33 1/3 per share.
Owners of Common Stock are entitled to one vote for each share held. The Company
has no other outstanding voting securities.
REVOCATION OF PROXIES AND OTHER VOTING INFORMATION
Proxies given pursuant to this solicitation may be revoked at any time
prior to the voting thereof (by written notice to the Secretary of the Company,
execution of a proxy bearing a later date which is voted at the meeting or
attending the 1995 Annual Meeting of Shareholders and voting in person); once
voted, however, proxies may not be retroactively revoked.
With respect to the election of directors, a shareholder may (i) vote for
the election of both nominees designated below as Class III directors, (ii)
withhold authority to vote for both director nominees or (iii) vote for the
election of such director nominees other than a nominee with respect to whom the
shareholder withholds authority to vote by striking a line through the nominee's
name on the proxy. With respect to the proposal to approve the 1995 Stock Option
Plan, a shareholder may (i) vote for the proposal, (ii) vote against the
proposal or (iii) abstain from voting on the proposal. All outstanding shares of
Common Stock represented by properly executed and unrevoked proxies received in
time for the meeting will be voted as instructed in the accompanying proxy. If
no instructions are given, the shares will be voted for the election of both
nominees designated below to serve as Class III directors and for approval of
the 1995 Stock Option Plan.
A proxy submitted by a shareholder may indicate that all or a portion of
the shares represented by such proxy are not being voted by such shareholder
with respect to a particular matter (the "non-voted shares"). Non-voted shares
will be considered shares not present and entitled to vote on such matter,
although such shares may be considered present and entitled to vote on the other
matter and will count for purposes of determining the presence of a quorum. The
affirmative vote of a plurality of the shares of Common Stock present in person
or by proxy at the meeting and entitled to vote in the election of directors is
required to elect directors. Thus, if a quorum is present at the meeting, the
two persons receiving the greatest number of votes will be elected to serve as
Class III directors. Accordingly, non-voted shares and withholding authority to
vote for a director nominee will not affect the outcome of the election of
directors. If a quorum is present at the meeting, approval of the 1995 Stock
Option Plan requires the affirmative vote of a majority of the shares of Common
Stock present in person or by proxy at the meeting and entitled to vote on such
matter. An abstention with respect to the proposal to approve the 1995 Stock
Option Plan has the legal effect of a vote
1
<PAGE> 4
against such proposal. Non-voted shares with respect to such proposal will not
affect the determination of whether the 1995 Stock Option Plan is approved.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Company's Certificate of Incorporation classifies the Board of
Directors into three classes, as nearly equal in number as possible, each of
whom serves for three years. The term of office of one class of directors
expires each year in rotation so that one class is elected at each annual
meeting for a full three-year term. The terms of two of the present directors
will expire at the 1995 Annual Meeting of Shareholders. Mr. Carl Korn, Chairman
of the Board since 1961, and Mr. William P. Carmichael, appointed a director in
1994, have been nominated for election as Class III directors for three-year
terms expiring at the 1998 Annual Meeting of Shareholders and until their
successors are elected and qualified. The terms of the other four directors will
continue as indicated below.
Unless otherwise specified in the proxy, it is the present intention of the
persons named in the accompanying proxy to vote such proxy for the election of
Carl Korn and William P. Carmichael, the two nominees designated below, to serve
as Class III directors. Management is not aware of any nominee for director to
be proposed by others. If on account of death or unforeseen contingencies,
either of Messrs. Korn or Carmichael should not be available for election, the
persons named in the accompanying proxy reserve the right to vote such proxy for
such other person or persons as may be nominated to serve as a Class III
director by the management of the Company. Management has no reason to believe
that any Class III nominee will be unable to serve if elected.
The names of the Company's directors and director nominees, their principal
occupations and certain biographical information relating to such persons are
set forth below.
<TABLE>
<CAPTION>
NOMINEES AND DIRECTORS AGE PRINCIPAL OCCUPATION
- ------------------------------ ---- ---------------------------------------------------
<S> <C> <C>
William P. Carmichael, Class III 51 Senior Vice President & Chief Accounting Officer,
(Nominee, term, if elected, Sara Lee Corporation, 1991-1993; retired 1993;
expiring 1998) Senior Vice President & Chief Financial Officer,
Beatrice Company, 1988-1990. Director since 1994.
Samuel B. Horberg, Class II 68 Vice President, Secretary and Treasurer of the
(Term expiring in 1997) Company, 1985-1986; retired 1986; Vice
President-Finance, Secretary and Treasurer of the
Company, 1961-1985. Director since 1961.
Jerry Kalov, Class I 59 President and Chief Executive Officer of the
(Term expiring in 1996) Company, August 1986 to present; President and
Chief Operating Officer of the Company, April 1985
to August 1986; President, Kalov & Associates,
Inc., management consultants, 1983-1985; President,
Harman International Industries, Inc., 1980-1983.
Director since 1985.
Carl Korn, Class III 73 Chairman of the Board of the Company, 1961 to
(Nominee, term, if elected, present; President and Chief Executive Officer of
expiring in 1998) the Company, 1961-1985. Director since 1961.
Gerald M. Laures, Class II 47 Vice President-Finance of the Company, since March,
(Term expiring in 1997) 1994; Corporate Secretary of the Company, 1989 to
present; Corporate Controller of the Company
1988-1994. Director since 1994.
Harold D. Schwartz, Class I 69 President, Chez & Schwartz, Inc., marketing and
(Term expiring in 1996) sales consultants, 1973 to present. Director since
1983.
</TABLE>
2
<PAGE> 5
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held six meetings during fiscal year
1994. Each member of the Board of Directors attended at least 75% of all
meetings of the Board of Directors and committees of which they are members. The
Board of Directors has two committees: the Audit and Finance Committee and the
Compensation Committee. During fiscal year 1994, these committees met five and
three times, respectively.
The members of the Audit and Finance Committee are: Harold D. Schwartz
(Chairman), William P. Carmichael, Samuel B. Horberg and Carl Korn. The Audit
and Finance Committee assists the Board of Directors in fulfilling its
responsibility for the accounting practices of the Company, reviews the
selection of, and recommendations by, the Company's independent auditors and
reviews and recommends financing plans and agreements.
The members of the Compensation Committee are: Samuel B. Horberg
(Chairman), Jerry Kalov, Carl Korn and Harold D. Schwartz. The Compensation
Committee reviews the salaries of the Company's executive officers.
The Company has no nominating or similar committee.
COMPENSATION OF DIRECTORS
Effective July 1, 1994, Mr. Korn retired as an active employee of the
Company. For the first six months of 1994, Mr. Korn received $52,500 in salary.
For continuing in his capacity as Chairman of the Board of the Company, Mr. Korn
will receive an annual retainer of $25,000. Messrs. Carmichael, Horberg and
Schwartz, who are not employees of the Company, currently receive annual
retainers of $10,000 and a fee of $1,000 for each Board meeting and $500 for
each committee meeting attended, not to exceed one Board meeting and one
committee meeting or two committee meetings on any one day. When a committee
meeting occurs on the same day as a Board meeting or another committee meeting,
the fee for the committee meeting or meetings is reduced to $400 for each such
meeting. In addition, Messrs. Horberg and Schwartz, each of whom serves as a
chairman of a committee of the Board, receives a $1,000 annual retainer. At the
present time, the other directors of the Company who serve on the Board or any
committee thereof receive no compensation for doing so.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the members of the Compensation Committee are: Samuel
B. Horberg (Chairman), Jerry Kalov, Carl Korn and Harold D. Schwartz. Mr.
Horberg served as Vice President, Secretary and Treasurer of the Company from
1961 until his retirement in 1986. Mr. Kalov is the President and Chief
Executive Officer of the Company. Mr. Korn is Chairman of the Board of the
Company.
During 1990, pursuant to Jerry Kalov's employment agreement dated January
1, 1988, the Company loaned him $1.25 million for the exercise of options on
375,000 shares of Common Stock. Mr. Kalov signed a promissory note with
recourse, which is secured by the related shares. The promissory note was
amended during 1994 to extend the due date to December 30, 1997 and to change
the interest rate to the appropriate applicable federal rate, to be adjusted
monthly. The interest rate was retroactively changed to conform the promissory
note to the variable interest rate specified in the employment agreement. From
the inception of the loan through December 31, 1994, accrued interest of
$362,804 has been added to the loan balance reflecting an average interest rate
of 6.6%. During fiscal 1994, the largest amount outstanding under the loan was
$1,612,804 and, as of March 31, 1995, the amount outstanding was approximately
$1,645,000.
3
<PAGE> 6
PROPOSAL 2 -- APPROVAL OF 1995 STOCK OPTION PLAN
GENERAL
The Board of Directors is proposing for shareholder approval the Cobra
Electronics Corporation 1995 Stock Option Plan (the "Plan"). The Board of
Directors, recognizing that insufficient shares are available to provide further
grants of stock options under existing Company plans, believes that it is in the
interest of the Company to continue its longstanding practice of making stock
options available to those officers and other key employees responsible for
significant contributions to the Company's business. The Board of Directors
believes that the equity stake in the growth and success of the Company afforded
by stock options provides such employees with an incentive to continue to put
forth maximum efforts in applying their talents within the Company. Accordingly,
on March 7, 1995, the Board of Directors unanimously approved the Plan and
directed that it be submitted for approval by the shareholders of the Company.
The purposes of the Plan are (i) to align the interests of the Company's
shareholders and the recipients of options under the Plan by increasing the
proprietary interest of such recipients in the Company's growth and success and
(ii) to advance the interests of the Company by attracting and retaining
officers and other key employees. Under the Plan, the Company may grant
non-qualified stock options and "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
Approximately 30 officers and other key employees are eligible to participate in
the Plan. On March 28, 1995, the closing sale price of a share of Common Stock
on The Nasdaq Stock Market was $1.75. Reference is made to Exhibit A to this
Proxy Statement for the complete text of the Plan which is summarized below.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR approval of the Plan. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF THE COBRA ELECTRONICS CORPORATION 1995 STOCK OPTION PLAN.
DESCRIPTION OF THE PLAN
Administration. The Plan will be administered by a committee of the Board
of Directors (the "Committee") consisting of at least two members who are not
eligible to receive discretionary awards of equity securities of the Company
under any plan of the Company and who are "outside directors" within the meaning
of Section 162(m) of the Code.
Section 162(m) of the Code generally limits to $1 million the amount that a
publicly held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's chief executive officer and the corporation's
four most highly compensated executive officers other than the chief executive
officer. However, "qualified performance-based compensation" is not subject to
the $1 million deduction limit. In order for a stock option to qualify as
performance-based compensation, the following requirements must be satisfied:
(i) the option must be granted by a committee consisting solely of two or more
"outside directors", (ii) the material terms under which the compensation is to
be paid are approved by a majority of the corporation's shareholders, (iii) the
plan under which the option is granted must state the maximum number of shares
with respect to which options may be granted during a specified period to any
employee and (iv) the exercise price per share of the option must not be less
than the fair market value of a share on the date of grant of the option. The
Committee which will administer the Plan will consist solely of "outside
directors" as defined for purposes of Section 162(m) of the Code. As a result,
and based on certain proposed regulations issued by the United States Department
of the Treasury, compensation under the Plan that is payable with respect to
options is not expected to be subject to the $1 million deduction limit under
Section 162(m) of the Code.
Subject to the express provisions of the Plan, the Committee has the
authority to select eligible officers and other key employees who will receive
options and determine all of the terms and conditions of each option. All
options will be evidenced by a written agreement containing such provisions not
inconsistent with the Plan as the Committee shall approve. The Committee will
also have authority to prescribe rules and regulations for administering the
Plan and to decide questions of interpretation or application of any provision
of the Plan. Except with respect to options granted to executive officers of the
Company, the Committee may delegate
4
<PAGE> 7
some or all of its power and authority to administer the Plan to the Chief
Executive Officer or other executive officer of the Company.
Available Shares. Under the Plan, 300,000 shares of Common Stock are
available for grants of options to officers and other key employees, subject to
adjustment in the event of a stock split, stock dividend, recapitalization,
reorganization, merger, spin-off or other similar event or change in
capitalization. To the extent shares subject to an outstanding option are not
issued or delivered by reason of the expiration, termination, cancellation or
forfeiture of such option or by reason of the delivery or withholding of shares
of Common Stock to pay all or a portion of the exercise price of such option, or
to satisfy all or a portion of the tax withholding obligations relating to such
option, then such shares of Common Stock will again be available under the Plan.
The maximum number of shares of Common Stock with respect to which options may
be granted during any calendar year to any person is 100,000, subject to
adjustment as described above.
Effective Date, Termination and Amendment. If approved by shareholders, the
Plan will become effective as of March 7, 1995 (the date the Plan was approved
by the Board of Directors) and will terminate on March 7, 2005, unless
terminated earlier by the Board of Directors. The Board of Directors may amend
the Plan at any time, subject to any requirement of shareholder approval
required by applicable law, rule or regulation.
Exercise of Stock Options. The period for the exercise of a non-qualified
stock option will be determined by the Committee. The exercise price of a
non-qualified option will not be less than the fair market value of the Common
Stock on the date of grant of such option. No incentive stock option will be
exercisable more than ten years after its date of grant, unless the recipient of
the incentive stock option owns greater than ten percent of the voting power of
all shares of capital stock of the Company (a "ten percent holder"), in which
case the option will be exercisable for no more than five years after its date
of grant. The exercise price of an incentive stock option will not be less than
the fair market value of the Common Stock on the date of grant of such option,
unless the recipient of the incentive stock option is a ten percent holder, in
which case the option exercise price will be the price required by the Code,
currently 110% of fair market value. Upon exercise of an option, the purchase
price may be paid in cash or by delivery of previously owned whole shares of
Common Stock.
Termination of Employment. In the event of termination of employment by
reason of death, each non-qualified stock option will be exercisable only to the
extent that such option is exercisable on the date of death, and may thereafter
be exercised for a period of no more than one year (or such other period as
determined by the Committee) after the date of death, but in no event after the
expiration of such option. In the event of termination of employment for any
reason other than death, each non-qualified stock option will be exercisable
only to the extent that such option is exercisable on the date of such
termination of employment, and may thereafter be exercised for a period of no
more than six months (or such other period as determined by the Committee) after
the date of such termination of employment, but in no event after the expiration
of such option. If an optionee dies during the six-month period (or such other
period as determined by the Committee) following termination of employment for
any reason other than death, each non-qualified stock option will be exercisable
only to the extent that such option is exercisable on the date of death, and may
thereafter be exercised for a period of no more than six months (or such other
period as determined by the Committee) after the date of death, but in no event
after the expiration of such option.
In the event of a termination of employment by reason of death or permanent
and total disability (as defined in Section 22(e)(3) of the Code), each
incentive stock option will be exercisable only to the extent that such option
is exercisable on the date of such termination of employment, and may thereafter
be exercised for a period of no more than one year (or such shorter period as
determined by the Committee) after such termination of employment, but in no
event after the expiration of the incentive stock option. In the event of a
termination of employment for any reason other than death or permanent and total
disability, each incentive stock option will be exercisable only to the extent
that such option is exercisable on the date of such termination of employment,
and may thereafter be exercised for a period of no more than three months after
such termination of employment, but in no event after the expiration of the
incentive stock option. If the holder of an incentive stock option dies during
the one-year period (or such shorter period as determined by
5
<PAGE> 8
the Committee) following termination of employment by reason of permanent and
total disability, or during the three-month period following termination of
employment for any other reason, each incentive stock option will be exercisable
only to the extent that such option is exercisable on the date of death, and may
thereafter be exercised for a period of no more than six months (or such shorter
period as determined by the Committee) after the date of death, but in no event
after expiration of the incentive stock option.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. federal income tax
consequences generally arising with respect to options granted under the Plan.
A participant will not recognize any income upon the grant of an option. A
participant will recognize compensation taxable as ordinary income (and subject
to income tax withholding) upon exercise of a non-qualified stock option equal
to the excess of the fair market value of the shares purchased over their
exercise price, and the Company will be entitled to a corresponding deduction. A
participant will not recognize income (except for purposes of the alternative
minimum tax) upon exercise of an incentive stock option. If the shares acquired
by exercise of an incentive stock option are held for the longer of two years
from the date the option was granted and one year from the date it was
exercised, any gain or loss arising from a subsequent disposition of such shares
will be taxed as long-term capital gain or loss, and the Company will not be
entitled to any deduction. If, however, such shares are disposed of within the
above-described period, then in the year of such disposition the participant
will recognize compensation taxable as ordinary income equal to the excess of
the lesser of (i) the amount realized upon such disposition and (ii) the fair
market value of such shares on the date of exercise over the exercise price, and
the Company will be entitled to a corresponding deduction.
6
<PAGE> 9
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as to the beneficial ownership
of Common Stock, as of February 28, 1995, of each of the Company's directors,
director nominees, and each executive officer of the Company who is not a
director and whose annual salary and bonus exceeded $100,000 during fiscal year
1994 and the Company's directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME OWNERSHIP(1) COMMON STOCK
------------------------------------------- ----------------- ------------
<S> <C> <C>
William P. Carmichael....................... 10,000 *
Samuel B. Horberg........................... 16,500 *
Jerry Kalov................................. 753,746(2) 11.4%
Carl Korn................................... 267,183(3) 4.3%
Gerald M. Laures............................ 18,525(4) *
Harold D. Schwartz.......................... 37,354(5) *
Fred Hackendahl............................. 110,375(6) 1.7%
All directors, director nominees and
executive officers as a group (8 persons).. 1,253,683(7) 18.7%
</TABLE>
- ------------
* Less than 1% of the outstanding Common Stock.
(1) Except as otherwise disclosed, beneficial ownership includes both sole
investment and voting power with respect to the shares indicated.
(2) The amount includes 363,746 shares, which Mr. Kalov may acquire pursuant to
the exercise of stock options.
(3) The amount shown includes 57,785 shares held by the Carl and Frances Korn
Foundation with respect to which Mr. Korn has sole investment and voting
power.
(4) The amount includes 14,125 shares, which Mr. Laures may acquire pursuant to
the exercise of stock options.
(5) The amount shown represents 30,195 shares owned by Chez & Schwartz, Inc.
Profit Sharing Trust and 2,000 shares held by the Chez & Schwartz Pension
Plan, as to both of which Mr. Schwartz is the sole beneficiary, and 159
shares owned by Chez & Schwartz, Inc., of which Mr. Schwartz is President
and sole shareholder.
(6) The amount includes 95,375 shares, which Mr. Hackendahl may acquire pursuant
to the exercise of stock options. Effective December 31, 1994, Mr.
Hackendahl left the employ of the Company.
(7) The amount includes 473,246 shares, which such directors and executive
officers may acquire pursuant to the exercise of stock options.
Other than Mr. Kalov, 6500 West Cortland Street, Chicago, Illinois 60635,
to the knowledge of the Company, as of December 31, 1994, the only beneficial
owners of more than 5% of the outstanding shares of Common Stock are as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OWNERSHIP(1) COMMON STOCK
- ------------------------------ ----------------- ------------
<S> <C> <C>
Dimensional Fund Advisors..... 426,750 6.9%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Brinson Partners, Inc. ....... 334,600 5.4%
Three First National Plaza
Chicago, IL 60602
Heartland Advisors, Inc. ..... 325,000 5.2%
790 N. Milwaukee St.
Milwaukee, WI 53202
</TABLE>
- ------------
(1) Beneficial ownership includes both sole investment and voting power with
respect to the shares indicated.
7
<PAGE> 10
EXECUTIVE COMPENSATION
ANNUAL AND LONG-TERM COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended December
31, 1994, 1993 and 1992 for (i) the chief executive officer of the Company and
(ii) each other executive officer of the Company whose annual salary and bonus
exceeded $100,000 during fiscal year 1994 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (2)($) (#) (3)($)
- ---------------------------------- ---- ------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jerry Kalov....................... 1994 300,000 -0- 5,500 170,986 3,883
President and Chief Executive 1993 311,519 -0- 5,500 -0- 2,312
Officer 1992 345,074 -0- 169,443 -0- 11,616
Fred Hackendahl(1)................ 1994 134,461 -0- 2,750 -0- 3,466
Vice President 1993 175,210 -0- 5,500 29,500 1,541
1992 190,000 -0- 5,500 15,000 9,422
Gerald M. Laures.................. 1994 102,404 -0- -0- 25,000 2,549
Vice President-Finance and 1993 94,615 -0- -0- 14,500 848
Corporate Secretary 1992 98,995 5,000 -0- -0- 5,043
</TABLE>
- ------------
(1) Effective December 31, 1994, Mr. Hackendahl left the employ of the Company.
(2) All amounts indicated for Named Officers relate to reimbursements for taxes
owed for certain perquisites. For Mr. Kalov, in addition to such similar tax
reimbursements in 1994, 1993 and 1992, 1992's figure also includes a
reimbursement of $163,943 for taxes owed by him resulting from the vesting
and exercise of options to purchase 375,000 shares of Common Stock granted
to him when he joined the Company in April 1985. Under the terms of this
grant, the Company was obligated to pay any taxes owed by him resulting from
the vesting and exercise of the options.
(3) The amounts represent the Company's contributions under The Cobra
Electronics Corporation Profit Sharing and 401(k) Incentive Savings Plan.
For 1994 and 1993, these amounts represent only the Company's required
matching contribution to the Plan in an amount equal to a certain percentage
of the amount contributed by the Named Officers. In addition to required
matching contributions, the 1992 amounts include profit sharing
contributions made by the Company pursuant to the Plan.
8
<PAGE> 11
STOCK OPTION/SAR GRANTS IN 1994
Shown below is information with respect to grants during fiscal year 1994
to the Named Officers of options to purchase Common Stock of the Company. No
stock appreciation rights ("SARs") were granted in 1994.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES OF STOCK
PERCENTAGE OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS/ FOR
UNDERLYING SARS GRANTED EXERCISE OR OPTION TERM
OPTIONS/SARS TO EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#) 1994 ($/SHARE) DATE 5%($) 10%($)
- ------------------------ ------------ --------------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Jerry Kalov............. 70,986(1) 16.5% $ 2.875 12/31/97 $40,616 $ 86,847
100,000(1) 23.3% 2.625 5/08/98 56,570 121,826
Fred Hackendahl(2)...... -- -- -- -- -- --
Gerald M. Laures........ 25,000(3) 5.8% 2.50 3/01/99 17,268 38,157
</TABLE>
- ------------
(1) Option is exercisable on the date of grant as to 25% of the shares subject
to such option. Thereafter, option becomes exercisable in annual 25%
increments commencing twelve months after the date of grant.
(2) Effective December 31, 1994, Mr. Hackendahl left the employ of the Company.
(3) Option becomes exercisable in annual 25% increments commencing twelve months
after the date of grant.
FISCAL YEAR-END OPTION/SAR VALUES
Shown below is information with respect to unexercised options to purchase
Common Stock of the Company held by the Named Officers. None of the Named
Officers exercised any stock options during fiscal year 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
DECEMBER 31, 1994(#) AT DECEMBER 31, 1994($)(2)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jerry Kalov............................... 299,546 192,440 $ -- $ --
Fred Hackendahl(1)........................ 95,375 29,625 -- --
Gerald M. Laures.......................... 14,125 35,875 -- --
</TABLE>
- ------------
(1) Effective December 31, 1994, Mr. Hackendahl left the employ of the Company.
All unexercisable options terminated upon Mr. Hackendahl's cessation of
employment.
(2) Based on the closing price on The Nasdaq Stock Market on that date.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
As members of the Compensation Committee, it is our duty to administer the
Company's various incentive plans, including its stock incentive plans and
annual bonus plan. In addition, the Committee reviews with the Board of
Directors in detail all aspects of compensation for the Named Officers.
The compensation policy of the Company, which is endorsed by the Committee,
is designed to align the interests of the Company's executive officers and key
employees with that of the Company's shareholders and to advance the interests
of the Company and its shareholders by attracting and retaining well-qualified
executive officers and key employees. Therefore, it is the Company's policy that
a substantial portion of the incentive compensation of each Named Officer
relates to and must be contingent upon the performance of the
9
<PAGE> 12
Company, as well as the individual contribution of each officer. When
considering the compensation of the Company's executive officers, the Committee
considers the following factors: (a) Company performance; (b) the individual
performance of each executive officer; (c) compensation levels for similar
positions at comparable companies; (d) the recommendations of the Chief
Executive Officer; and (e) in the case of Mr. Kalov, the terms of his ten-year
employment agreement with the Company dated January 1, 1988, as amended (the
"Employment Agreement").
Mr. Kalov's salary is determined pursuant to his Employment Agreement
described below. For the other Named Officers, base salaries are set at
competitive levels. Salary increases and bonuses are paid based upon both the
performance of the entire Company and individual performance. The Committee does
not assign any specific weight to any measure of Company or individual
performance. For 1994, performance objectives were based primarily on the
Company's 1994 net income. Primarily because the Company incurred a net loss in
1994, no bonuses were awarded to the Named Officers for 1994.
Also, from time to time, the Committee may recommend to the Board of
Directors that certain key employees be granted options to purchase the
Company's Common Stock. The exercise price of each option granted is generally
equal to 100% of the fair market value of the shares on the date of grant and
options granted are generally exercisable in part from time to time commencing
twelve months after the grant date, generally in an amount equal to 25% of the
total number of shares covered during each successive twelve-month period. The
Committee believes that such grants are an important way to link directly the
financial interests of key employees with those of the Company's shareholders.
In fiscal year 1994, Mr. Kalov received options to purchase 70,986 shares of
Common Stock at the exercise price of $2.875 per share and options to purchase
100,000 shares of Common Stock at the exercise price of $2.625 per share. Mr.
Laures received an option to purchase 25,000 shares of Common Stock at the
exercise price of $2.50 per share.
The 70,986 option shares were granted to Mr. Kalov pursuant to the
Employment Agreement. This requires the Company to grant options to compensate
Mr. Kalov for additional income taxes that may be payable by him upon the future
exercise of options granted to him under the terms of the Employment Agreement,
resulting from an increase in Mr. Kalov's marginal income tax rate--due to
changes in Federal, state and local tax rates--above the marginal rate set forth
in the Employment Agreement.
The 100,000 option shares were granted to Mr. Kalov in lieu of future
salary increases as stipulated in the Employment Agreement. Under the terms of
the Employment Agreement, Mr. Kalov is entitled to annual increases in salary
equal to the annual percentage increase for the prior year in the Consumer Price
Index For All Items For All Urban Consumers Respecting Chicago, Illinois. Mr.
Kalov waived his rights to the January 1, 1992, 1993 and 1994 increases and
requested that the Company amend the Employment Agreement to lower his annual
salary for 1994 and future years to the $300,000 annual salary in effect as of
January 1, 1988, the effective date of the Employment Agreement.
With respect to bonus awards, the Employment Agreement requires that Mr.
Kalov be paid an annual bonus equal to 4% of the Company's consolidated pretax
accounting income, if any. The bonus percentage was increased from 1.5% in lieu
of future salary increases as discussed above.
The foregoing report has been furnished by:
Mr. Horberg (Chairman) Mr. Kalov
Mr. Korn Mr. Schwartz
10
<PAGE> 13
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change in
the Company's cumulative total shareholder return on the Company's Common Stock
for the five-year period, December 31, 1989 to December 31, 1994, with the
percentage change in the cumulative total return for The Nasdaq Stock Market
(U.S. Companies), which includes the Company, and a peer group of companies
selected by the Company (the "Peer Group").
Companies used to construct the Peer Group index include the following:
Cincinnati Microwave, Inc., Code Alarm, Koss Corporation and Zenith Electronics
Corporation. In selecting companies for the Peer Group, the Company focused on
publicly traded companies that design and market electronics products, which
have characteristics similar to that of the Company's in terms of one or more of
the following: type of product, end market, distribution channels, sourcing or
sales volume.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) COBRA NASDAQ PEER GROUP
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 41.270 84.918 41.950
1991 42.859 136.277 47.349
1992 55.558 158.579 43.661
1993 33.335 180.933 69.469
1994 23.811 176.916 84.544
</TABLE>
The graph assumes $100 invested on December 31, 1989 in each of the
Company's Common Stock, The Nasdaq Stock Market (U.S. Companies) and the Peer
Group. Reinvestment of dividends, if any, has been assumed and, with respect to
each Company in the Peer Group, the returns of such Company have been weighted
to reflect stock market capitalization at the beginning of each period indicated
on the Performance Graph. The graph was plotted using the following data:
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
-------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cobra............................ $100.000 $41.270 $ 42.859 $ 55.558 $ 33.335 $ 23.811
NASDAQ........................... 100.000 84.918 136.277 158.579 180.933 176.916
Peer Group....................... 100.000 41.950 47.349 43.661 69.469 84.544
</TABLE>
Note: Sources include The Nasdaq Stock Market, CDA Investment Technologies,
Inc. and Standard & Poor's Corporation.
11
<PAGE> 14
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Jerry Kalov and
Fred Hackendahl.
The Company's employment agreement with Jerry Kalov provides that, subject
to certain conditions, Mr. Kalov will be entitled to a lump sum payment equal to
450 percent of Mr. Kalov's base salary for the calendar year immediately
preceding a change of control of the Company in addition to certain provisions
with respect to the performance of the Company. In addition, under the terms of
Mr. Kalov's agreement, the Company is obligated to make payments to him or his
designated beneficiary beginning at the earlier of the date on which Mr. Kalov
reaches age 62 or his employment with the Company is terminated. In either such
event, the Company is to make payments for a period of 15 years in an amount
equal to 60% of the average of Mr. Kalov's salary (including bonus) for the five
years during which he received the highest compensation within the ten-year
period preceding the earlier of Mr. Kalov's attaining age 62 or termination of
employment. The deferred payments are limited to a minimum of $252,272 and a
maximum of $326,477. The obligation of the Company to make such payments is
irrevocable in the case of death, permanent disability or termination following
a change of control of the Company. Otherwise, Mr. Kalov's interest in such
payments is not fully vested until 1997. Mr. Kalov's agreement also requires the
Company to pay him an annual salary of $300,000 and an annual bonus equal to 4%
of the Company's pretax accounting income, if any. Under the terms of the
deferred compensation arrangement described above and based upon actual
compensation paid through fiscal year 1994, Mr. Kalov would be entitled to
annual payments of $252,272 upon attaining age 62.
The Company also has an employment agreement with Fred Hackendahl that
ended with his resignation effective December 31, 1994. The agreement contained
a deferred compensation arrangement with terms similar to those for Mr. Kalov
except the proposed payments for Mr. Hackendahl are for a period of 10 years and
based on 50% of average base salary and bonus. Upon attaining age 62, Mr.
Hackendahl will receive annual payments of $67,885.
AUDITORS
As a result of a bidding process to select an auditor for fiscal year 1994,
on July 19, 1994, the Company's Board of Directors informed Arthur Andersen &
Co. ("Andersen"), the Company's independent accountants for fiscal year 1993,
that Andersen would not be retained for fiscal year 1994. The decision to change
independent accountants was recommended to the Board of Directors by its Audit
and Finance Committee. Andersen's report on the Company's financial statements
for fiscal years 1993 and 1992 did not contain an adverse opinion or disclaimer
of opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.
Andersen informed the Company that Andersen believed that two disagreements
occurred in connection with its audit of the Company's financial statements for
the year ended December 31, 1993, that if not resolved to Andersen's
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in its auditor's report on the Company's financial statements.
These two disagreements were as follows:
1) In connection with Andersen's audit of the Company's December 31, 1993
financial statements, Andersen observed conditions that raised a
question about the Company's ability to continue in existence as a going
concern. As part of its audit procedures, consistent with Statement of
Auditing Standards No. 59, Andersen requested the Company's 1994
financial plan ("Plan"). Andersen was provided with the Company's Plan
but requested that the Company provide a revised Plan. A revised Plan
was provided promptly; however, the Company questioned Andersen's need
for a revised Plan in light of all of the other information the Company
provided to Andersen. As a result, Andersen viewed this matter as a
disagreement as defined under Item 304 of Regulation S-K adopted by the
Securities and Exchange Commission. The matter was resolved to
Andersen's satisfaction prior to the issuance of the Company's December
31, 1993 financial statements.
12
<PAGE> 15
2) In connection with Andersen's audit of the Company's December 31, 1993
financial statements, Andersen disagreed with the Company regarding its
classification of the Company's debt as non-current. Andersen indicated
that because of various factors, including the existence of a material
adverse change clause in the debt agreement, current classification of
the Company's bank debt as of December 31, 1993 would be appropriate. At
that time, the Company believed that its bank debt could be classified
as non-current with appropriate financial statement disclosure. After
reviewing the information presented by Andersen with respect to the
effect of the material adverse change clause on debt classification, the
Company agreed with Andersen. Andersen viewed this discussion as a
disagreement as defined under Item 304 of Regulation S-K. The
disagreement was resolved to Andersen's satisfaction prior to the
issuance of the Company's December 31, 1993 financial statements in
which the debt was classified as a current liability.
Both of these matters were discussed between Andersen and the Audit
Committee of the Board of Directors. The Company believes that there were no
disagreements with Andersen within the meaning of Item 304 of Regulation S-K
because Instruction 4 of Item 304 specifically excludes as disagreements
"initial differences of opinion based on incomplete facts or preliminary
information that were later resolved to the former accountant's satisfaction by,
and providing the Company and the accountant do not continue to have a
difference of opinion upon, obtaining additional relevant facts or information."
The Company believes that each disagreement identified by Andersen was resolved
to the satisfaction of Andersen, that there was no continuing difference of
opinion between the Company and Andersen and that each "disagreement" was
resolved upon the Company's obtaining additional relevant facts and information
from Andersen.
On August 15, 1994, the Company engaged Deloitte & Touche LLP as its
independent accountant for fiscal year 1994. The decision to engage Deloitte &
Touche LLP was recommended to the Board of Directors by the Company's Audit and
Finance Committee. Deloitte & Touche LLP has also been selected by the Board of
Directors to serve as the Company's independent accountants for 1995. A
representative of Deloitte & Touche LLP will be present at the 1995 Annual
Meeting of Shareholders and will be given an opportunity to make a statement and
to respond to appropriate questions from shareholders.
SECTION 16(A) REPORTS
Based solely on a review of copies of reports of ownership, reports of
changes of ownership and written representations under Section 16(a) of the
Securities Exchange Act of 1934 which were furnished to the Company by persons
who were, at any time during 1994, directors or executive officers of the
Company or beneficial owners of more than 10% of the outstanding shares of
Common Stock, no such persons failed to file on a timely basis reports required
by such Section 16 during or with respect to 1994, except that: William P.
Carmichael failed to file on a timely basis an initial statement on Form 3, upon
his appointment as a director of the Company, and a statement on Form 4 relating
to one transaction; and Stephen M. Yanklowitz failed to file on a timely basis
an initial statement on Form 3 upon his appointment as chief operating officer.
SHAREHOLDER PROPOSALS FOR THE 1996 ANNUAL MEETING
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders, currently scheduled for May 14, 1996, must be received
by the Secretary of the Company not later than December 12, 1995, in order to be
considered for inclusion in the proxy statement and proxy relating to that
meeting.
REQUEST TO VOTE, SIGN AND RETURN PROXIES
Whether or not you plan to attend the Annual Meeting of Shareholders on May
9, 1995, please mark, sign, date and return the enclosed proxy as soon as
possible in the enclosed postage-paid envelope.
13
<PAGE> 16
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors is not aware of
any matters, other than the election of Class III directors and the vote on the
1995 Stock Option Plan, that may be brought before the 1995 Annual Meeting.
However, if any other matters properly come before the Meeting, it is the
intention of the persons named in the enclosed proxy to vote such proxy in
accordance with their judgment on such matters. In addition to use of the mails,
the Company may also solicit proxies by telephone, telegraph or similar means.
The Company's registrar and transfer agent, American Stock Transfer & Trust
Company, will assist the Company in its solicitation of proxies and will not
receive any additional fee for its services. Other than American Stock Transfer
& Trust Company, no specially engaged employees or paid solicitors will be used
in this solicitation, the expenses of which will be paid by the Company (such
expenses are not expected to exceed the amount normally expended for an
uncontested solicitation in connection with an election of directors). Officers
and other regular employees of the Company will not receive any additional
compensation in connection with this solicitation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1994 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE REQUIRED FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULE AND INFORMATION CONCERNING EXECUTIVE
OFFICERS OF THE COMPANY, WILL BE FURNISHED WITHOUT CHARGE, BY FIRST CLASS MAIL,
UPON THE WRITTEN OR ORAL REQUEST OF ANY SHAREHOLDER, INCLUDING ANY BENEFICIAL
OWNER ENTITLED TO VOTE AT THE MEETING DIRECTED TO THE ATTENTION OF GERALD M.
LAURES, THE COMPANY'S SECRETARY, 6500 WEST CORTLAND STREET, CHICAGO, ILLINOIS
60635, TELEPHONE: (312) 889-8870.
By order of the Board of Directors,
GERALD M. LAURES
Secretary
Cobra Electronics Corporation
Chicago, Illinois
April 10, 1995
14
<PAGE> 17
EXHIBIT A
COBRA ELECTRONICS CORPORATION
1995 STOCK OPTION PLAN
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1995 Stock Option Plan (the "Plan") of Cobra
Electronics Corporation (the "Company") and its subsidiaries from time to time
(individually a "Subsidiary" and collectively the "Subsidiaries") are to align
the interests of the Company's stockholders and the recipients of options under
this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success and to advance the interests of the Company by
attracting and retaining officers and other key employees. For purposes of this
Plan, references to employment by the Company shall also mean employment by a
Subsidiary.
1.2 ADMINISTRATION. This Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the Company (the "Board")
consisting of at least two members of the Board, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), subject to any transition rules applicable to the
definition of outside director.
The Committee shall, subject to the terms of this Plan, select eligible
officers and other key employees for participation in this Plan and determine
the number of shares of common stock, $.33 1/3 par value, of the Company
("Common Stock") subject to each option granted hereunder, the exercise price of
such option, the time and conditions of exercise of such option and all other
terms and conditions of such option, including, without limitation, the form of
the option agreement. The Committee shall, subject to the terms of this Plan,
interpret this Plan and the application thereof, establish rules and regulations
it deems necessary or desirable for the administration of this Plan and may
impose, incidental to the grant of an option, conditions with respect to the
grant, such as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties. Each option hereunder shall be evidenced by a written
agreement (an "Agreement") between the Company and the optionee setting forth
the terms and conditions applicable to such option.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the grant of an option under
this Plan to any person who is a "covered employee" within the meaning of
Section 162(m) of the Code or who, in the Committee's judgment, is likely to be
a covered employee at any time during the period an option granted hereunder to
such employee would be outstanding or (ii) the selection for participation in
this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an option grant to
such an officer or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.3 ELIGIBILITY. Participants in this Plan shall consist of such officers or
other key employees of the Company and its Subsidiaries as the Committee in its
sole discretion may select from time to time. The Committee's selection of a
person to participate in this Plan at any time shall not require the Committee
to select such person to participate in this Plan at any other time.
1.4 SHARES AVAILABLE. Subject to adjustment as provided in Section 3.7, 300,000
shares of Common Stock shall be available for grants of options under this Plan.
To the extent that shares of Common Stock subject to an outstanding option are
not issued or delivered by reason of the expiration, termination, cancellation
or
<PAGE> 18
forfeiture of such option or by reason of the delivery of shares of Common Stock
to pay all or a portion of the exercise price of such option or to satisfy all
or a portion of the tax withholding obligations relating to such option, then
such shares of Common Stock shall again be available under this Plan.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise, or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options may be granted during any calendar year to any person
shall be 100,000, subject to adjustment as provided in Section 3.7.
II. STOCK OPTIONS
2.1 GRANTS OF STOCK OPTIONS. The Committee may, in its discretion, grant options
to purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof, that is not an incentive
stock option, shall be a non-qualified stock option. An incentive stock option
shall mean an option to purchase shares of Common Stock that meets the
requirements of Section 422 of the Code, or any successor provision, which is
intended by the Committee to constitute an incentive stock option. Each
incentive stock option shall be granted within ten years of the effective date
of this Plan. To the extent that the aggregate Fair Market Value (determined as
of the date of grant) of shares of Common Stock with respect to which options
designated as incentive stock options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or Subsidiary) exceeds the amount (currently $100,000)
established by the Code, such options shall constitute non-qualified stock
options. "Fair Market Value" shall mean the closing price of a share of Common
Stock on the NASDAQ National Market System on the date as of which such value is
being determined or, if there shall be no closing price on such date, on the
next preceding date for which a closing price was reported; provided, however,
that if Fair Market Value for any date cannot be determined as above provided,
Fair Market Value shall be determined by the Committee by whatever means or
method as the Committee, in the good faith exercise of its discretion, shall at
such time deem appropriate.
2.2 TERMS OF STOCK OPTIONS. Options 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 advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of any option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option; provided
further, that if an incentive stock option shall be granted to any person who,
at the time such option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any parent or Subsidiary) (a "Ten Percent Holder"), the
purchase price per share of Common Stock shall be the price (currently 110% of
Fair Market Value) required by the Code in order to constitute an incentive
stock option.
(b) Option Period and Exercisability. The period during which an option may
be exercised shall be determined by the Committee; provided, however, that no
incentive stock option shall be exercised later than ten years after its date of
grant; provided further, that if an incentive stock option shall be granted to a
Ten Percent Holder, such option shall not be exercised later than five years
after its date of grant. The Committee may, in its discretion, establish
performance measures which shall be satisfied or met as a condition to the grant
of an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock.
A-2
<PAGE> 19
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock to
be purchased and accompanied by payment therefor in full (or arrangement made
for such payment to the Company's satisfaction) either (A) in cash, (B) by
delivery of previously owned whole shares of Common Stock (which the optionee
has held for at least six months prior to the delivery of such shares and for
which the optionee has good title, free and clear of all liens and encumbrances)
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (C) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (D) a combination of (A) and (B), in each case
to the extent set forth in the Agreement relating to the option and (ii) by
executing such documents as the Company may reasonably request. The Committee
shall have sole discretion to disapprove of an election pursuant to any of
clauses (B)-(D) and in the case of an optionee who is subject to Section 16 of
the Exchange Act, the Company may require that the method of making such payment
be in compliance with Section 16 and the rules and regulations thereunder. Any
fraction of a share of Common Stock which would be required to pay such purchase
price shall be disregarded and the remaining amount due shall be paid in cash by
the optionee. No certificate representing Common Stock shall be delivered until
the full purchase price therefor has been paid.
2.3 TERMINATION OF EMPLOYMENT.
(a) Death. Subject to paragraph (d) below and unless otherwise specified in
the Agreement relating to an option, if an optionee's employment by the Company
terminates by reason of death, each option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person, as
the case may be, until and including the earliest to occur of (i) the date which
is one year (or such other period as set forth in the Agreement relating to such
option) after the date of death and (ii) the expiration date of the term of such
option.
(b) Other Termination. Subject to paragraph (d) below and unless otherwise
specified in the Agreement relating to an option, if an optionee's employment
with the Company terminates for any reason other than death, each option held by
such optionee shall be exercisable only to the extent that such option is
exercisable on the effective date of such optionee's termination of employment
and may thereafter be exercised by such optionee (or such optionee's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is six months (or such other period as set forth in the
Agreement relating to such option) after the effective date of such optionee's
termination of employment and (ii) the expiration date of the term of such
option.
(c) Death Following Termination of Employment. Subject to paragraph (d)
below and unless otherwise specified in the Agreement relating to an option, if
an optionee dies during the six-month period (or such other period as set forth
in the Agreement relating to such option) following termination of employment
for any other reason other than death, each option held by such optionee shall
be exercisable only to the extent that such option is exercisable on the date of
such optionee's death and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person, as
the case may be, until and including the earliest to occur of (i) the date which
is six months (or such other period as set forth in the Agreement relating to
such option) after the date of death and (ii) the expiration date of the term of
such option.
(d) Termination of Employment--Incentive Stock Options. If the employment
with the Company of a holder of an incentive stock option terminates by reason
of death or Permanent and Total Disability (as defined in Section 22(e)(3) of
the Code), each incentive stock option held by such optionee shall be
exercisable only to the extent that such option is exercisable on the date of
such optionee's death or on the effective date of such optionee's termination of
employment by reason of Permanent and Total Disability, as the case may be, and
may thereafter be exercised by such optionee (or such optionee's executor,
administrator, legal representative, beneficiary or similar person) until and
including the earliest to occur of (i) the date which is one year (or such
shorter period as set forth in the Agreement relating to such option)
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after the date of death or the effective date of such optionee's termination of
employment by reason of Permanent and Total Disability, as the case may be, and
(ii) the expiration date of the term of such option.
If the employment with the Company of a holder of an incentive stock option
terminates for any reason other than death or Permanent and Total Disability,
each incentive stock option held by such optionee shall be exercisable only to
the extent such option is exercisable on the effective date of such optionee's
termination of employment, and may thereafter be exercised by such optionee (or
such optionee's legal representative or similar person) until and including the
earliest to occur of (i) the date which is three months after the effective date
of such optionee's termination of employment and (ii) the expiration date of the
term of such option.
If the holder of an incentive stock option dies during the one-year period
following termination of employment by reason of Permanent and Total Disability
(or such shorter period as set forth in the Agreement relating to such option),
or if the holder of an incentive stock option dies during the three-month period
following termination of employment for any reason other than death or Permanent
and Total Disability, each incentive stock option held by such optionee shall be
exercisable only to the extent such option is exercisable on the date of the
optionee's death and may thereafter be exercised by the optionee's executor,
administrator, legal representative, beneficiary or similar person, as the case
may be, until and including the earliest to occur of (i) the date which is six
months (or such shorter period as set forth in the Agreement relating to such
option) after the date of death and (ii) the expiration date of the term of such
option.
III. GENERAL
3.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1995 Annual Meeting of Stockholders, shall become
effective as of the date of approval by the Board. This Plan shall terminate ten
years after its effective date unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any option
granted prior to termination.
Options may be granted hereunder at any time prior to the termination of
this Plan, provided that no option may be granted later than ten years after the
effective date of this Plan. In the event that this Plan is not approved by the
stockholders of the Company, this Plan and any options granted hereunder shall
be void and of no force or effect.
3.2 AMENDMENTS. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Rule 16b-3 under the Exchange Act and Section
162(m) of the Code. No amendment may impair the rights of a holder of an
outstanding option without the consent of such holder.
3.3 AGREEMENT. No option shall be valid until an Agreement is executed by the
Company and the optionee and, upon execution by the Company and the optionee and
delivery of the Agreement to the Company, such option shall be effective as of
the effective date set forth in the Agreement.
3.4 NON-TRANSFERABILITY. No option shall be transferable other than (i) by will
or the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company or (ii) as otherwise permitted under Rule
16b-3 under the Exchange Act as set forth in the Agreement relating to an
option. Each option may be exercised during the optionee's lifetime only by the
optionee or the optionee's legal representative or similar person. Except as
permitted by the second preceding sentence, no option shall be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option, such option
and all rights thereunder shall immediately become null and void.
3.5 TAX WITHHOLDING. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the optionee of
any Federal, state, local or other taxes which may be
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required to be withheld or paid in connection with an option hereunder. An
Agreement may provide that the optionee may satisfy any obligation to withhold
or pay taxes arising on any date (the "Tax Date") in connection with the option
in the amount necessary to satisfy any such obligation by any of the following
means: (A) a cash payment to the Company, (B) delivery to the Company of
previously owned whole shares of Common Stock (which the optionee has held for
at least six months prior to the delivery of such shares and for which the
optionee has good title, free and clear of all liens and encumbrances) having an
aggregate Fair Market Value, determined as of the Tax Date, equal to the amount
necessary to satisfy any such obligation, (C) a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (D) a combination of (A) and (B), in each case to the
extent set forth in the Agreement relating to the option; provided, however,
that the Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(D) and that in the case of an optionee who is
subject to Section 16 of the Exchange Act, the Company may require that the
method of satisfying any such obligation be in compliance with Section 16 and
the rules and regulations thereunder. An Agreement may provide for shares of
Common Stock to be delivered having an aggregate Fair Market Value in excess of
the minimum amount required to be withheld, but not in excess of the amount
determined by applying the optionee's maximum marginal tax rate. Any fraction of
a share of Common Stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
optionee.
3.6 RESTRICTIONS ON SHARES. Each option hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any option bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
3.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option and the
purchase price per security shall be appropriately adjusted by the Committee,
such adjustments to be made in the case of outstanding options without an
increase in the aggregate purchase price. The decision of the Committee
regarding any such adjustment shall be final, binding and conclusive. If any
adjustment would result in a fractional security being (i) available under this
Plan, such fractional security shall be disregarded, or (ii) subject to an
option under this Plan, the Company shall pay the optionee, in connection with
the first exercise of the option in whole or in part, occurring after such
adjustment, an amount in cash determined by multiplying (A) the fraction of such
security (rounded to the nearest hundredth) by (B) the excess, if any, of (x)
the Fair Market Value on the exercise date over (y) the exercise price of the
option.
3.8 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any right to
participate in this Plan. Neither this Plan nor any option granted hereunder
shall confer upon any person any right to continued employment by the Company,
any Subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
3.9 RIGHTS AS STOCKHOLDER. No person shall have any right as a stockholder of
the Company with respect to any shares of Common Stock which are subject to an
option hereunder until such person becomes a stockholder of record with respect
to such shares of Common Stock.
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3.10 GOVERNING LAW. This Plan, each option hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Delaware and construed in accordance
therewith without giving effect to principles of conflicts of laws.
ADOPTED BY BOARD OF DIRECTORS ON MARCH 7, 1995.
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<S><C>
PROXY
COBRA ELECTRONICS CORPORATION
6500 WEST CORTLAND, CHICAGO, IL 60635
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerry Kalov and Gerald M. Laures as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated on the reverse side, all the shares of common stock of Cobra
Electronics Corporation held of record by the undersigned on April 7, 1995 at the Annual Meeting of Shareholders to be held on May
9, 1995, or any adjournments thereof.
(TO BE SIGNED ON REVERSE SIDE)
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD AUTHORITY
FOR TO VOTE
VOTE FOR FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of 1995 Stock Option Plan. [ ] [ ] [ ]
Directors.
3. In their discretion, the Proxies are authorized to vote upon such
NOMINEES: Carl Korn other business as may properly come before the meeting.
William P. Carmichael
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER THIS PROXY, WHEN PROPERLY EXECUTED BELOW, WILL BE VOTED IN THE
PERSON, STRIKE A LINE THROUGH THE NOMINEE'S NAME.) MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED IN ITEM (1) AND FOR ITEM (2).
THE DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF THE BOARD'S
NOMINEES TO THE BOARD OF DIRECTORS AND FOR APPROVAL OF THE 1995
STOCK OPTION PLAN.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
SIGNATURE
SIGNATURE _________________________________ DATE ______________ (if held jointly) _________________________________ DATE __________
NOTE: Please sign exactly as name appears above. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or as guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized person. If a partnership, please sign in the partnership name by an
authorized person.
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