<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant[ ]
CHECK THE APPROPRIATE BOX:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ X ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
KOSS CORPORATION
(Name of Registrant as Specified In Its Charter)
RICHARD W. SILVERTHORN, ESQ.
WHYTE HIRSCHBOECK DUDEK S.C.
(Name of Person Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
<TABLE>
<S> <C>
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $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 0-11:1
____________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________
</TABLE>
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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
[KOSS CORPORATION LETTERHEAD]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
OCTOBER 24, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of KOSS
CORPORATION will be held at the offices of the Company at 4129 North Port
Washington Avenue, Milwaukee, Wisconsin, on Thursday, October 24, 1996, at 9:00
a.m. local time to consider and act on the following Proposals:
1. The election of seven (7) directors;
2. The ratification of the appointment of Price Waterhouse
L.L.P., independent accountants, as auditors of the Company for
the fiscal year ending June 30, 1997; and
3. Such other business as may properly be brought before the
Annual Meeting.
The transfer books of the Company will not be closed for the Annual
Meeting. Only stockholders of record at the close of business on September 18,
1996 will be entitled to notice of and to vote at the meeting. Information
regarding the matters to be considered and voted upon at the Annual Meeting is
set forth in the Proxy Statement accompanying this Notice.
You are cordially invited to attend the meeting in person, if possible.
In order to assist us in preparing for the meeting, all stockholders are urged
to promptly sign and date the enclosed proxy and return it in the enclosed
envelope which requires no postage. If you attend the Meeting, you may vote
your shares in person even if you previously submitted a proxy.
By Order of the Board of Directors
Richard W. Silverthorn, Secretary
Milwaukee, Wisconsin
September 27, 1996
<PAGE> 3
[THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 4
KOSS CORPORATION
PROXY STATEMENT
1996 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 24, 1996
INTRODUCTION
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE BOARD OF DIRECTORS OF KOSS CORPORATION (the "Company") for use
at the Company's 1996 Annual Meeting of Stockholders (the "Meeting") and any
adjournment thereof, for the purposes set forth in the foregoing Notice of
Annual Meeting of Stockholders.
DATE, TIME AND LOCATION. The Meeting of Stockholders will be held at the
offices of the Company, 4129 North Port Washington Avenue, Milwaukee,
Wisconsin, 53212, on Thursday, October 24, 1996, at 9:00 a.m. local time
PURPOSES OF THE MEETING. At the Meeting, stockholders will consider and
vote upon two matters: (1) the election of seven (7) directors for one-year
terms; and (2) a proposal to ratify the appointment of Price Waterhouse L.L.P.
("Price Waterhouse"), independent accountants, as independent auditors for the
fiscal year ending June 30, 1997.
PROXY SOLICITATION. The cost of soliciting proxies will be borne by the
Company. Proxies will be solicited primarily by mail and may be made by
directors, officers and employees personally or by telephone or telegraph. The
Company will reimburse brokerage firms, custodians and nominees for their
out-of-pocket expenses incurred in forwarding proxy materials to beneficial
owners. Proxy Statements and proxies will be mailed to stockholders on
approximately September 27, 1996.
QUORUM AND VOTING INFORMATION. Only stockholders of record of the
Company's $.01 par value common stock ("Common Stock") at the close of business
on September 18, 1996 (the "Record Date"), are entitled to vote at the Meeting.
As of the Record Date, there were 3,288,098 shares of Common Stock outstanding
and entitled to vote. A quorum of stockholders is necessary to take action at
the Meeting. A majority of the outstanding shares of Common Stock, represented
in person or by proxy, will constitute a quorum of stockholders at the Meeting.
Votes cast by proxy or in person at the Meeting will be tabulated by the
inspectors of election appointed for the Meeting. The inspectors of election
will determine whether or not a quorum is present at the Meeting. The
inspectors of election will treat abstentions as shares of Common Stock that
are present and entitled to vote for purposes of determining the presence of a
quorum. If a broker indicates on the proxy that it does not have discretionary
authority to vote certain shares of Common Stock on a particular matter (a
"broker non-vote"), those shares will not be considered as present and entitled
to vote with respect to that matter.
<PAGE> 5
The seven nominees receiving the greatest number of votes cast in person
or by proxy at the Meeting shall be elected directors of the Company. The vote
required for the ratification of the appointment of Price Waterhouse as
independent accountants for the year ending June 30, 1997, and the vote
required to approve any other matter to be presented to the Meeting, is the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the Meeting. For purposes of determining the
approval of any matter submitted to the stockholders for a vote, abstentions
and broker non-votes will be treated as shares of Common Stock that have been
withheld for the purpose of electing directors and as voted "against" the
ratification of Price Waterhouse as the Company's auditors for the year ending
June 30, 1997.
PROXIES AND REVOCATION OF PROXIES. A Proxy in the accompanying form,
which is properly executed, duly returned to the Company and not revoked, will
be voted in accordance with instructions contained therein. In the event that
any matter which is not described in this Proxy Statement properly comes before
the Meeting, the accompanying form of Proxy authorizes the persons appointed as
proxies thereby ("Proxyholders") to vote on such matter in their sole
discretion. At the present time, management knows of no other matters which
are to come before the Meeting. See "ITEM 3. TRANSACTION OF OTHER BUSINESS."
If no instructions are given with respect to any particular matter to be acted
upon, a Proxy will be voted "FOR" the election of all nominees for director
named herein and "FOR" the ratification of Price Waterhouse as the Company's
auditors for the year ending June 30, 1997. If matters other than those
mentioned herein properly come before the Meeting, a Proxy will be voted in
accordance with the best judgment of a majority of the Proxyholders named
therein.
Each such Proxy granted may be revoked at any time before it is voted by
filing with the Secretary of the Company a written notice of revocation, by
delivering to the Company a duly executed Proxy bearing a later date, or by
attending the Meeting and voting in person.
STOCKHOLDER PROPOSALS. There are no stockholder proposals on the agenda
for the Meeting. In order to be considered for inclusion in the agenda for the
1997 annual meeting, a stockholder proposal must be received by the Company no
later than May 30, 1997. Stockholder proposals should be sent to the Company's
principal offices, 4129 North Port Washington Avenue, Milwaukee, Wisconsin,
53212, by certified mail, return receipt requested, and should be addressed to
the Secretary of the Company.
ANNUAL REPORT. The Company's Annual Report to Stockholders, including
audited financial statements for the year ended June 30, 1996, although not a
part of this Proxy Statement, is delivered herewith.
ITEM 1. ELECTION OF DIRECTORS
The By-Laws of the Company provide that the number of Directors on the
Board shall be no fewer than six and no greater than twelve. In accordance
with the By-Laws, the Board of Directors has by resolution fixed the current
number of Directors at seven. Given the varied experience of the current
nominees and their contribution to the governing of the corporation, the
current size of the Board has been determined to be advantageous for both the
Company and its stockholders. Proxies cannot be voted for a greater number of
persons than the seven nominees. Each director so elected shall serve until
the next Annual Meeting of Stockholders and until his successor is duly
elected, or until his prior death, resignation or removal.
2
<PAGE> 6
INFORMATION AS TO NOMINEES.
The following identifies the nominees for the seven director positions and
provides information as to their business experience for the past five years.
Each nominee is presently a director of the Company:
JOHN C. KOSS, 66, has served continuously as Chairman of the
Board of the Company or its predecessors since 1958. Previously, he served
as Chief Executive Officer from 1958 until 1991. He is the father of
Michael J. Koss (who is the Company's President, Chief Executive Officer,
Chief Financial Officer, and Chief Operating Officer, and a nominee for
director of the Company), and the father of John Koss, Jr. (the Company's
Vice President - Sales).
THOMAS L. DOERR, 52, has been a director of the Company since 1987.
Mr. Doerr co-founded Leeson Electric Corporation in 1972 and served as its
President and Chief Executive Officer until 1982. The company
manufactures industrial electric motors. In 1983, Mr. Doerr incorporated
Doerr Corporation as a holding company for the purpose of acquiring
established companies involved in distributing products to industrial and
commercial markets. Currently, Mr. Doerr serves as President and Chief
Executive Officer of Doerr Corporation.
VICTOR L. HUNTER, 49, has been a director of the Company since 1987.
Mr. Hunter has been, for more than five years, the President of Hunter
Business Direct, a service company specializing in business-to-business
direct marketing. Mr. Hunter holds an MBA from the Harvard Business
School.
MICHAEL J. KOSS, 42, has held various positions at the Company since
1976, and has been a director of the Company since 1985. He was elected
President, Chief Operating Officer and Chief Financial Officer of Koss
Corporation on July 22, 1987. On August 9, 1991, he was elected Chief
Executive Officer. He is the son of John C. Koss and the brother of John
Koss, Jr. Mr. Koss also serves as a director for Strattec Security
Corporation.
LAWRENCE S. MATTSON, 64, has been a director of the Company since 1978.
Mr. Mattson is the retired President of Oster Company, a division of
Sunbeam Corporation, which manufactures and sells portable household
appliances. Prior to his retirement, Mr. Mattson was, for more than five
years, the President of Oster.
MARTIN F. STEIN, 59, is the Chairman of Eyecare One, Inc., which
includes Stein Optical and Eye Q. Stein Optical operates sixteen optical
centers and a manufacturing lab in Milwaukee, Wisconsin. Eye Q operates
seven optical centers in Chicago, Illinois. Prior to this, Mr. Stein was
the Chairman and Chief Executive Officer of Stein Health Services. He
also serves as a director for the F&M Bank. Mr. Stein has been a director
of the Company since 1987.
JOHN J. STOLLENWERK, 56, has been a director of the Company since 1986.
Mr. Stollenwerk has been, for more than five years, the President of the
Allen-Edmonds Shoe Corporation, an international manufacturer and retailer
of high quality footwear.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE ELECTION OF ALL NOMINEES NAMED ABOVE TO THE
BOARD OF DIRECTORS.
3
<PAGE> 7
BOARD COMMITTEES.
The Board of Directors of the Company has the following standing
committees:
AUDIT COMMITTEE. The Audit Committee, which is composed of Mr.
Mattson, Mr. Doerr, and Mr. Stein, reviews and evaluates the effectiveness of
the Company's financial and accounting functions, including reviewing the scope
and results of the audit work performed by the independent accountants and by
the Company's internal accounting staff. The Audit Committee met twice during
the fiscal year ended June 30, 1996. The independent accountants were present
at both of these meetings to discuss their audit scope and the results of their
audit.
COMPENSATION COMMITTEE. The Compensation Committee, which is
composed of John C. Koss, Mr. Mattson, Mr. Stollenwerk, and Mr. Hunter, has
responsibility for reviewing and recommending adjustment of all employee annual
salaries in excess of $45,000 as well as all bonus and compensation programs.
The Compensation Committee met once during the fiscal year ended June 30, 1996.
See "Executive Compensation and Related Matters -- Compensation Committee Report
on Executive Compensation." The Company's Flexible Incentive Stock Option Plan
is administered by the Compensation Committee. Subject to the express
provisions of the Plan, the Committee has complete authority to (1) determine
when and to whom benefits are granted; (2) determine the terms and provisions of
Benefits granted; (3) interpret the Plan; (4) prescribe, amend and rescind rules
and regulations relating to the Plan; (5) accelerate, purchase, adjust or remove
restrictions from Benefits; and (6) take any other action which it considers
necessary or appropriate for the administration of the Plan.
NOMINATING COMMITTEE. The Board of Directors has no nominating
committee and the Company has no established procedure for the nomination of
persons to serve on the Board of Directors.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS. During the fiscal year
ended June 30, 1996, the Board held four (4) meetings. Every incumbent
director attended 75% or more of the total of (a) all meetings of the Board,
plus (b) all meetings of the committees on which they served during their
respective term of office.
EXECUTIVE OFFICERS.
Information is provided below with respect to the executive officers of
the Company who are not directors. Each executive officer is elected annually
by the Board of Directors and serves for one year or until his or her successor
is appointed.
<TABLE>
<CAPTION>
Current Position
Name Age Positions Held Held Since
- -------------------------- ----- ---------------------------------- --------------------
<S> <C> <C> <C>
John Koss, Jr. 39 Vice President - Sales 1988
Daniel Esposito 63 Vice President - Corporate Systems 1987
Sujata Sachdeva 32 Vice President - Finance 1992
Richard W. Silverthorn* 41 Secretary, General Counsel 1993
Declan Hanley 49 Vice President - Europe 1994
- -------------
</TABLE>
* Mr. Silverthorn is an attorney and shareholder with the law firm
of Whyte Hirschboeck Dudek S.C., Milwaukee, Wisconsin, which law firm
serves as legal counsel to the Company.
4
<PAGE> 8
BENEFICIAL OWNERSHIP OF COMPANY SECURITIES.
SECURITY OWNERSHIP BY NOMINEES AND MANAGEMENT. The following table sets
forth, as of September 18, 1996, for all nominees, for each executive officer
whose annual salary and bonus during fiscal 1996 exceeded $100,000, and for all
directors and executive officers as a group, the number of shares of Common
Stock "beneficially owned" (beneficial ownership is defined under applicable
Securities and Exchange Commission regulations) and the percentage of such
shares to the total number of shares outstanding.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
Name Beneficially Owned (1) Common Stock (2)
- ------------------------------------- -------------------- --------------------
<S> <C> <C>
John C. Koss (3)..................... 1,065,061 32.4%
Michael J. Koss (4), (5)............. 729,578 20.8%
John Koss, Jr. (6)................... 167,757 5.0%
Declan Hanley (7).................... 12,500 *
Thomas L. Doerr...................... 0 *
Victor L. Hunter..................... 4,501 *
Lawrence S. Mattson.................. 0 *
Martin F. Stein...................... 4,500 *
John J. Stollenwerk.................. 4,830 *
All directors and executive
officers as a group (13 persons) (8). 1,800,173 50.3%
</TABLE>
(1) Unless otherwise noted, amounts indicated reflect shares as to which the
beneficial owner possesses sole voting and dispositive powers. Also
included are shares subject to stock options if such options are
exercisable within 60 days of September 18, 1996.
(2) Based on 3,288,098 shares outstanding on September 18, 1996. Asterisk (*)
denotes beneficial ownership of less than 1%. Percentage calculation
assumes, for each individual owning options and for the group, the
exercise of that number of options which are included in the total number
of shares.
(3) Includes the following shares which are deemed to be "beneficially owned"
by John C. Koss: (i) 275,280 shares owned directly or by reason of family
relationships; (ii) 59,517 shares as a result of his position as an
officer of certain foundations; (iii) 612,431 shares as a result of his
position as trustee of the Koss Family Voting Trust -- see "Security
Ownership by Certain Principal Stockholders," below; (iv) 43,125 shares as
a result of his position as co-trustee of the John C. and Nancy Koss
Revocable Trust; and (v) 78,931 shares (by reason of the allocation of
those shares to his account under the Koss Employee Stock Ownership Trust
("KESOT") and his ability to vote such shares pursuant to the terms of the
KESOT -- see "Executive Compensation and Related Matters -- Other
Compensation Arrangements -- Employee Stock Ownership Plan and Trust."
5
<PAGE> 9
(4) Includes the following shares deemed to be "beneficially owned" by Michael
J. Koss: (i) 77,858 shares owned directly or by reason of family
relationships; (ii) 59,000 shares as a result of his beneficial interest
in the Koss Family Voting Trust; (iii) 24,095 shares by reason of the
allocation of those shares to his account under the KESOT and his ability
to vote such shares; (iv) 215,000 shares with respect to which he holds
options which are exercisable within 60 days of September 18, 1996; and
(v) 377,720 shares which are held by the KESOT (see Note (5), below). The
24,095 shares allocated to Michael J. Koss' KESOT account, over which he
holds voting power, are included within the aforementioned 377,720 shares
but are counted only once in his individual total.
(5) The KESOT holds 377,720 shares. Authority to vote these shares is vested
in KESOT participants to the extent shares have been allocated to
individual KESOT accounts. Shares have been allocated to the accounts of
certain individuals named in the above table. Michael J. Koss and Cheryl
Mike (the Company's Director of Human Resources) serve as Trustees of the
KESOT and, as such, they share dispositive power with respect to (and are
therefore each deemed to "beneficially own") all 377,720 KESOT shares.
(6) Includes the following shares deemed to be "beneficially owned" by John
Koss, Jr.: (i) 46,036 shares owned directly or by reason of family
relationships; (ii) 59,000 shares as a result of his beneficial interest
in the Koss Family Voting Trust; (iii) 46,875 shares with respect to which
he holds options which are exercisable within 60 days of September 18,
1996; and (iv) 15,846 shares by reason of the allocation of those shares
to his account under the KESOT and his ability to vote such shares.
(7) Includes 2,500 shares owned directly and 10,000 shares with respect to
which Mr. Hanley holds options which are exercisable within 60 days of
September 18, 1996.
(8) To avoid double-counting: (i) the 377,720 shares deemed to be
"beneficially owned" by Michael J. Koss as result of his position as a
KESOT Trustee (see Note (4), above) include 97,395 shares allocated to the
KESOT accounts of other individuals included in the above total but are
included only once in the total; and (ii) the 612,431 shares deemed to be
"beneficially owned" by John C. Koss as a result of his position as
trustee of the Koss Family Voting Trust (see Note (3), above) include
108,000 shares beneficially owned by Michael J. Koss and John Koss, Jr.
(59,000 shares each) by reason of their beneficial interest in the Koss
Family Voting Trust (see Notes (4), (5) and (6), above) but are included
only once in the total.
6
<PAGE> 10
SECURITY OWNERSHIP BY CERTAIN PRINCIPAL STOCKHOLDERS. The following table
sets forth the name and business address of each person and each group of
persons who, to the knowledge of the Company as of September 18, 1996, were the
only "beneficial owners" (defined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934) of more than 5% of the outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding Common
Name and Address of Beneficial Owner Beneficially Owned Stock (1)
- ------------------------------------ -------------------- --------------------
<S> <C> <C> <C>
John C. Koss (2)
4129 North Port Washington Avenue
Milwaukee, WI 53212 1,065,061 32.4%
Koss Family Voting Trust, John C. Koss, Trustee (3)
4129 North Port Washington Avenue
Milwaukee, WI 53212 612,431 18.6%
Michael J. Koss (4)
4129 North Port Washington Avenue
Milwaukee, WI 53212 729,578 20.8%
Koss Employee Stock Ownership Trust (5)
Michael J. Koss and Cheryl Mike, Trustees
4129 North Port Washington Avenue
Milwaukee, WI 53212 377,720 11.5%
John Koss, Jr.
4129 North Port Washington Avenue
Milwaukee, WI 53212 167,757 5.0%
- --------------------------------------------------------------
</TABLE>
(1) Based on 3,288,098 shares outstanding on September 18, 1996.
(2) Total includes certain shares which are deemed to be "beneficially
owned" by John C. Koss (see Note (3) to the table on page 5 under
"Security Ownership by Nominees and Management"). Certain of the
1,065,061 shares shown above are also included in totals shown in
this table by the Koss Family Voting Trust (612,431 shares -- see
Note (3), below), and by the KESOT (74,708 shares -- see Note (5),
below).
(3) The Koss Family Voting Trust was established by John C. Koss. The
sole Trustee is John C. Koss, 4129 North Port Washington Avenue,
Milwaukee, WI 53212. The term of the Koss Family Voting Trust is
indefinite. Under the Trust Agreement, John C. Koss, as Trustee,
holds full voting and dispositive power over the shares held by the
Koss Family Voting Trust. All of the 612,431 shares are included in
the number of shares shown as beneficially owned by John C. Koss (see
Note (3) to the table on page 5 under "Security Ownership by Nominees
and Management").
(4) Total includes certain shares which are deemed to be "beneficially
owned" by Michael J. Koss (see Note (5) to the table on page 5 under
"Security Ownership by Nominees and Management"). Certain of the
739,578 shares shown above are also included in totals shown in this
table by the Koss Family Voting Trust (59,000 shares -- see Note (3),
above), and by the KESOT (377,720 shares -- see Note (5), below).
(5) 74,708 of these shares are also included in the number of shares shown as
beneficially owned by John C. Koss (see Note (2), above) and 15,848 shares
are also included in the number of shares shown as beneficially owned by
John Koss, Jr.. All 377,720 of these shares are also included in the
number of shares shown as beneficially owned by Michael J. Koss (see Note
(4), above).
7
<PAGE> 11
EXECUTIVE COMPENSATION AND RELATED MATTERS.
SUMMARY COMPENSATION TABLE. The following table presents certain
summary information concerning compensation paid or accrued by the Company for
services rendered in all capacities during the fiscal years ended June 30, 1996,
1995, and 1994 for (i) the Chief Executive Officer ("CEO") of the Company, and
(ii) each of the other two executive officers of the Company (determined as of
the end of the last fiscal year) whose total annual salary and bonus exceeded
$100,000 (collectively, including the CEO, the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Compensation (1)
Awards
Securities
Other Restricted Under-
Fiscal Annual Stock lying All Other
Name Year Compen- Awards Options/ Compen-
and ended Salary Bonus sation (2) (3) SARs (4) sation (5)
Principal June
Position 30, (dollars) (dollars) (dollars) (dollars) (number) (dollars)
--------- --------- --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Koss 1996 $150,000 $120,520 0 0 0 $125,512
Chairman 1995 150,000 127,480 $1,250,000 0 0 137,664
of the Board 1994 150,000 133,056 0 0 0 126,349
Michael J. Koss, 1996 $145,000 $168,727 $ 69,550 0 25,000 $ 10,040
Chief Executive 1995 145,000 178,499 212,275 $178,991 10,000 24,951
Officer 1994 130,000 186,239 621,300 0 0 8,392
John Koss, Jr., 1996 $100,000 $ 65,049 $ 94,550 0 7,500 $ 9,954
Vice President - 1995 100,000 32,500 0 $ 89,495 7,500 4,689
Sales 1994 95,000 30,383 79,895 0 0 3,009
Declan Hanley, 1996 $ 63,588 $ 37,028 $ 9,063 0 5,000 $ 5,000
Vice President- 1995 65,445 31,670 0 0 5,000 5,000
Europe 1994 51,393 24,826 0 0 10,000 5,000
</TABLE>
(1) The above table omits information concerning Long Term Incentive Plans
("LTIPs") (plans, other than restricted stock, stock option, or SAR plans,
which provide for the payment of incentive compensation for performance
expected to occur over more than one fiscal year) because the Company has
no LTIP's.
8
<PAGE> 12
(2) Includes (i) the value realized upon the exercise of stock options
(see "Aggregate Stock Option Exercises During the Fiscal Year") and (ii)
for John Koss, Jr. only for the fiscal year ended June 30, 1994, the
value of perquisites and other benefits (specifically, $10,270 reimbursed
under the Company's Supplemental Medical Care Reimbursement Plan -- see
"Other Compensation Arrangements -- Supplemental Medical Care
Reimbursement Plan") paid during fiscal 1994; in all other cases, the
value of perquisites and other benefits in any fiscal year did not exceed
the lesser of $50,000 or 10% of the total salary and bonus reported and,
under applicable compensation disclosure rules of the Securities and
Exchange Commission, are not required to be included in this column.
(3) On January 6, 1995, 18,358 and 9,159 shares of Restricted Stock
were issued under the Company's 1990 Flexible Incentive Stock Option Plan
to Michael J. Koss and John Koss, Jr., respectively. These options vested
on January 6, 1996 (one year from the date of grant). On June 30, 1996,
the number of shares of restricted stock held and the dollar value of these
restricted stock holdings (based on the $6.50 per share market value of the
Company's Common Stock as of June 30, 1996, which is the average of the
closing prices of the Company common stock on June 28 and July 1, 1996, as
reported on The Nasdaq Stock Market) was 18,358 shares (with a value of
$119,327) for Michael J. Koss and 9,159 shares (with a value of $59,664)
for John Koss, Jr.
(4) Consists of Incentive Stock Options granted to executive officers. For
additional information, see "Stock Options Granted During Fiscal Year" and
"Other Compensation Arrangements -- Stock Option Plans."
(5) "All Other Compensation" consists of the following: (i) Company matching
contributions under the Company's 401k Plan for the accounts of John C.
Koss ($4,626 in 1996, $7,192 in 1995, and $8,697 in 1994), Michael J. Koss
($9,240 in 1996, $10,027 in 1995, and $6,833 in 1994), and John Koss, Jr.
($9,684 in 1996, $4,500 in 1995, and $2,390 in 1994); (ii) Company
contributions to the KESOT for the accounts of John C. Koss ($11,170 in
1996 and $12,226 in 1995), Michael J. Koss ($11,170 in 1996 and $14,386 in
1995), and John Koss, Jr. ($11,170 in 1996 and $5,312 in 1995) (the Company
did not make contributions to the KESOT in 1994); (iii) premiums paid by
the Company for life insurance for John C. Koss ($5,805 in 1996, $3,159 in
1995, and $2,565 in 1994), Michael J. Koss ($800 in 1996, $539 in 1995, and
$l,559 in 1994), and John Koss, Jr. ($270 in 1996, $189 in 1995, and $619
in 1994); (iv) an annual payment to Declan Hanley of $5,000 for retirement
purposes because Mr. Hanley does not participate in the Company's 401(k)
Plan or the KESOT; and (v) an annual accrued expense of $115,087 in
connection with the Company's agreement to continue to pay John C. Koss his
current base salary in the event he becomes disabled prior to age 70 (he is
currently 66 years old) and, after age 70, to continue to pay John C. Koss
his current base salary for the remainder of his life, whether he becomes
disabled or not.
9
<PAGE> 13
STOCK OPTIONS GRANTED DURING FISCAL YEAR. The following table provides
certain information concerning stock options granted to Named Executive
Officers during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
STOCK OPTIONS GRANTED DURING FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE AT
PERCENT OF ASSUMED ANNUAL RATES OF STOCK PRICE
SECURITIES TOTAL APPRECIATION FOR
UNDER- OPTIONS/ EXERCISE OPTION TERM*
LYING SARS OR BASE
OPTIONS/ GRANTED TO PRICE
SARS EMPLOYEES
GRANTED IN FISCAL ($ PER EXPIRATION
NAME (NUMBER) YEAR SHARE) DATE 0% 5% 10%
- ---- -------- ---------- ------- ----------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Koss 25,000 34.5% $5.85 April 18, 2001 ($13,250) $23,495 $67,948
John Koss, Jr. 7,500 10.3% 5.85 April 18, 2001 (3,975) 7,049 20,384
Declan Hanley 5,000 6.9% 5.32 April 18, 2006 -- 7,349 16,240
</TABLE>
* Based on the "fair market value" as determined under the Company's
Flexible Incentive Stock Plan (which provides that the "fair market value"
for purposes thereof is the average of the closing prices on the five
trading days immediately preceding the grant of such option) of $5.32 per
share on April 18, 1996, the date such options were granted. The Exercise
Price for Michael J. Koss and John Koss, Jr. is equal to 110% of the "fair
market value," as so determined, on the date of grant.
AGGREGATE STOCK OPTION EXERCISES DURING THE FISCAL YEAR. The following
table provides certain information about stock option exercises by the Named
Executive Officers during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
ACQUIRED ON VALUE UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL YEAR
EXERCISE REALIZED(1) OPTIONS/SARS AT FISCAL YEAR END (2)
END (DOLLARS)
UNEXER- UNEXER-
NAME (NUMBER) (DOLLARS) EXERCISABLE CISABLE EXERCISABLE CISABLE
- ---- -------- ----------- ----------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Koss 15,000 $69,550 215,000 107,500 $93,750 $63,125
John Koss, Jr. 20,000 94,550 45,875 20,625 28,125 14,250
Declan Hanley 2,500 9,063 10,000 12,500 1,475 14,425
</TABLE>
(1) Based on the closing price of the Company's Common Stock, as reported
on The Nasdaq Stock Market, on the date(s) of exercise.
(2) Based on the $6.50 per share market value of the Company's Common
Stock on June 30, 1996, determined with reference to the closing
prices of the Company's common stock on June 28 and July 1, 1996, as
reported on The Nasdaq Stock Market. Options are "in-the-money" if
the fair market value of the stock on the date indicated exceeds the
exercise price.
10
<PAGE> 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. John C.
Koss, who is the Chairman of the Board and an executive officer of the Company,
serves on the Compensation Committee.
DIRECTOR COMPENSATION. Since May 19, 1993, Directors who are not also
employees of the Company have received compensation of $1,250 per director per
meeting.
OTHER COMPENSATION ARRANGEMENTS. The Company has certain other
compensation plans and arrangements which are available to the CEO and certain
of the Named Executive Officers including the following:
SUPPLEMENTAL MEDICAL CARE REIMBURSEMENT PLAN. Each officer of
the Company is covered by a medical care reimbursement plan for all
medical expenses incurred which are not covered under group health
insurance up to an annual maximum of 10% of salary. Amounts reimbursed
under this Plan are included under the column headed "All Other
Compensation" in the summary compensation table.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST. In December 1975, the
Company adopted the KESOT, which is a form of employee benefit plan
designed to invest primarily in employer securities. The KESOT is
qualified under Section 401(a) of the Internal Revenue Code. All
full-time employees with at least six months' uninterrupted service with
the Company are eligible to participate in the KESOT. Contributions to
the KESOT are allocated to the accounts of participants in proportion to
the ratio that a participant's compensation bears to total compensation
of all participants. Accounts are adjusted each year to reflect the
investment experience of the trust and forfeitures from accounts of
non-vested terminated participants. All unallocated shares will be
voted by the KESOT Trustees as directed by the KESOT Committee. Michael
J. Koss and Cheryl Mike currently serve as KESOT Trustees and as the
members of the KESOT Committee. Voting rights for all allocated shares
are passed through to the participant for whose account such shares are
allocated, and must be voted by the Trustees in accordance with the
participants' direction. As of September 18, 1996, the KESOT held
377,720 shares of Common Stock of the Company (approximately 11.5% of
the total number of shares outstanding).
OFFICER LOAN POLICY. On January 31, 1980, the Board adopted an
Officer Loan Policy. The significant provisions of the policy are: (1)
the maximum amount to be loaned is limited to one-half of the officer's
annual base salary; (2) the first $10,000 bears no interest; (3) in the
event the loan balance exceeds $10,000, interest is charged on the
entire amount at the minimum rate provided by Section 483 of the
Internal Revenue Code; and (4) the loan will be repaid in installments
or in full upon termination of employment. During the fiscal year ended
June 30, 1996, no officer had an officer loan that exceeded $60,000.
DEATH BENEFIT AGREEMENT. In 1980, the Company entered into an
agreement with John C. Koss that provides that if he dies prior to
attaining 70 years of age, the Company will pay to his spouse or other
designated beneficiary the sum of $50,000 every six months until the
total benefit paid equals $700,000. The agreement is null and void if
John C. Koss reaches age 70. Life insurance policies designating the
Company as beneficiary are maintained to fund this contingent liability.
RETIREMENT AGREEMENT. The Board of Directors has by resolution
agreed to continue to pay to John C. Koss his current base salary in the
event he becomes disabled prior to age 70. After age 70, Mr. Koss shall
be eligible to receive his current base salary for the remainder of his
life, whether he becomes disabled or not. The Company is currently
recognizing an annual accrued expense of $115,087 in connection with
this Agreement. Mr. Koss is currently 66 years old and his current base
salary is $150,000 per year.
11
<PAGE> 15
STOCK OPTION PLANS. In 1990, the Board of Directors created,
and the stockholders approved, a new Flexible Incentive Stock Plan.
This Plan is administered by the Compensation Committee and vests the
Compensation Committee with discretionary powers to choose from a
variety of incentive compensation alternatives to make annual
stock-based awards to officers, key employees and other members of the
Company's management team. The Board of Directors recommended, and the
stockholders approved, the reservation of 225,000 shares of Company
Common Stock for issuance pursuant to the Plan in its first year. At
the Company's 1992 Annual Meeting, the stockholders approved an
amendment to the Plan authorizing the reservation of another 250,000
shares of Company Common Stock for issuance to Plan participants. At
the Company's 1993 Annual Meeting, the stockholders approved an
amendment to the Plan authorizing the reservation of an additional
300,000 shares of Company Common Stock for issuance to Plan
participants. John C. Koss is not eligible for any grants since he is a
member of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
Under Securities and Exchange Commission ("SEC") rules, the Company is
required to provide certain information concerning compensation provided to the
Company's Chief Executive Officer and the Named Executive Officers. The
disclosure requirements for these individuals include the use of tables and a
report of the Committee responsible for compensation decisions for these
individuals, explaining the rationale and considerations that led to those
compensation decisions. Therefore, the Compensation Committee of the Board of
Directors has prepared the following report for inclusion in this Proxy
Statement:
The Compensation Committee of the Board of Directors ("Compensation
Committee") is composed of Mr. Stollenwerk, Mr. Mattson, Mr. Hunter and the
Chairman of the Board, John C. Koss. The Compensation Committee is
responsible for the review of all employee salaries in excess of $45,000.
The Compensation Committee also reviews all bonus, commission and stock
option programs. The Compensation Committee meets as a group each spring
and reviews its report with the full board prior to the end of the fiscal
year. This system enables management to plan the following year more
appropriately.
The Company employs a compensation program linked to company-wide
performance and individual achievement. All employees are reviewed twice
each year. Raises in salary are made in July when necessary or when
promotions are announced. The base salaries of individuals are compared
with other light assembly or manufacturing companies. In addition, the
Company has an Employee Stock Ownership Plan and Trust and a 401(k) Plan.
The Company also has a cafeteria benefits plan to provide flexibility to
employees to choose their own health care and associated benefits package
from an array of offerings. The Company shares the cost of medical
insurance with its employees.
The Company's executive officers are paid base salaries commensurate
with their responsibilities. Executive salaries have been compared with
data in an annual national survey.
Executive Officers are also eligible for annual bonuses based upon
individual and overall company performance. Factors relevant to
determining such bonuses include attainment of corporate revenue and
earnings goals and the development of new accounts. The Company's Vice
President-Sales is also entitled to receive a bonus based upon increases in
sales over the prior year, and a bonus for obtaining new accounts from a
predetermined list of potential new accounts and for adding new product
lines to current accounts. The Company's Vice President - Europe is
entitled to receive a bonus based upon the Company's Sales in export
markets.
12
<PAGE> 16
The Compensation Committee annually reviews and determines the
Compensation of Michael J. Koss, President and Chief Executive Officer.
Michael J. Koss' salary is based on his experience, responsibilities,
historical salary levels for himself and other executive officers of the
Company, and the salaries of Chief Executive Officers of other companies
with similar responsibilities. Michael J. Koss is also eligible to receive
a bonus calculated as a percentage of the Company's earnings before
interest and taxes. He also participates in the Company's Stock Option
Plan.
COMPENSATION COMMITTEE
JOHN C. KOSS
JOHN J. STOLLENWERK
LAWRENCE S. MATTSON
VICTOR L. HUNTER
THE REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS PROXY STATEMENT INTO ANY FILING UNDER THE SECURITIES ACT OF 1933 OR UNDER
THE SECURITIES EXCHANGE ACT OF 1934 (TOGETHER, THE "ACTS"), EXCEPT TO THE EXTENT
THAT THE COMPANY SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE, AND
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
RELATED TRANSACTIONS.
The Company leases its main plant and offices in Milwaukee, Wisconsin
from its Chairman, John C. Koss. As of June 25, 1993, the lease was renewed for
a period of ten years, and is being accounted for as an operating lease. The
new lease extension increases the rent from $280,000 per year (plus a Consumer
Price Index increase in 1994) to a fixed rate of $350,000 per year for three
years and $380,000 for the seven years thereafter. The Company is responsible
for all property maintenance, insurance, taxes and other normal expenses related
to ownership. The lease is on terms no less favorable to the Company than those
that could be obtained from unaffiliated parties.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934.
Due to the complexity of the SEC rules under Section 16 of the
Securities Exchange Act of 1934 (the "Act"), which relate to the filing of
reports with the SEC concerning the beneficial ownership of Company securities
by certain management officials, the Company agreed to assist employees in
filing reports pursuant to Section 16 of the Act, including Form 4 monthly
transaction reports, for those reporting persons who so requested and who agreed
to advise the Company of changes in the ownership of the Company's equity
securities. To the best of the Company's knowledge and belief, based solely on
the review of reports filed with the SEC and upon written representations by
certain officers and directors, there were no delinquent Section 16 reports
during the fiscal year ended June 30, 1996.
STOCK PRICE PERFORMANCE INFORMATION.
The graph and table on the next page set forth information comparing the
yearly cumulative total return on the Company's common stock over the past five
years with the yearly cumulative total return on (1) stocks included in the
NASDAQ Stock Market (US Companies) Index, and (2) a group of peer companies
("Peer Group"). The Peer Group, which was selected by the Company, consists of
Boston Acoustics, Inc., Carver Corporation, Polk Audio, Inc., and Recoton
Corporation. For purposes of the graph and table, it is assumed that on June
30, 1991, $100 was invested
13
<PAGE> 17
in the stock of each of (i) the Company, (ii) the companies on the
NASDAQ Stock Market (US Companies) Index, and (iii) the companies in the Peer
Group (the cumulative return for the investment in the stock of companies in the
Peer Group is weighted according to the relative market capitalization of each
company as adjusted at the end of each fiscal year shown on the table). The
graph and table also assume that all dividends paid were reinvested in the stock
of the issuing companies. THE STOCK PRICE PERFORMANCE INFORMATION SHOWN IN THE
GRAPH AND TABLE BELOW SHOULD NOT BE CONSIDERED INDICATIVE OF FUTURE PERFORMANCE.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
June 30, 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Koss Corporation $100.00 $135.45 $554.70 $696.59 $316.05 $348.30
Peer Group $100.00 $114.41 $123.51 $207.10 $212.03 $213.94
NASDAQ Stock Market Index (US Companies) $100.00 $120.13 $151.08 $152.52 $203.59 $261.43
</TABLE>
14
<PAGE> 18
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Price Waterhouse has served the Company as its independent auditors
since September 1992. Representatives of Price Waterhouse are expected to be
present at the Meeting, and will have the opportunity to make a statement if
they desire to do so. The Price Waterhouse representatives are expected to be
available to respond to appropriate questions at the Meeting.
The Board of Directors, following the recommendation of its Audit
Committee, has retained Price Waterhouse as independent accountants to audit the
consolidated financial statements of the Company and its subsidiaries for the
fiscal year ending June 30, 1997. Unless otherwise directed, the proxy will be
voted in favor of the ratification of such appointment.
Although this appointment is not required to be submitted to a vote by
stockholders, the Board believes it appropriate, as a matter of policy, to
request that the stockholders ratify the appointment. If stockholder
ratification (by the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy at the Meeting) is not received,
the Board will reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" RATIFICATION
OF PRICE WATERHOUSE AS INDEPENDENT
ACCOUNTANTS FOR THE YEAR
ENDING JUNE 30, 1997
ITEM 3. TRANSACTION OF OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters
that may come before the meeting. If any other matters are properly presented
to the meeting for action, it is the intention of the persons named as Proxies
in the enclosed form of proxy to vote such proxies in accordance with the best
judgment of a majority of the Proxies on such matters.
By Order of the Board of Directors
Richard W. Silverthorn, Secretary
Milwaukee, Wisconsin
September 27, 1996
15
<PAGE> 19
KOSS(R) CORPORATION
4129 North Port Washington Avenue
Milwaukee, Wisconsin 53212
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John C. Koss and Lawrence S. Maltson as
Proxies, each with full power of substitution for himself, and hereby
authorizes them to represent and to vote, as designated below, all the shares
of common stock of Koss Corporation held as of the record date and which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on October 24, 1996 and any or all adjournments thereof, with like effect
as if the undersigned were personally present and voting.
PROXY
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below (except as marked to the contrary below)
/ / WITHHOLD AUTHORITY to vote for all nominees listed below
JOHN C. KOSS, THOMAS L. DOERR, VICTOR L. HUNTER, MICHAEL J. KOSS,
LAWRENCE S. MATTSON, MARTIN F. STEIN AND JOHN J. STOLLENWERK
(INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- ----------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT
AUDITORS OF THE CORPORATION FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
/ / FOR / / AGAINST / / ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Properly executed proxies received by the Company will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
proxy will be voted for the election of all seven nominees listed for director
and FOR Proposal 2. If no other matters properly come before the meeting, this
proxy will be voted in accordance with the best judgment of the Proxies
appointed.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith.
DATED: ______________________ , 1996
- ----------------------------------------
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executors, administrants,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 20
KOSS(R) CORPORATION
KESOT PARTICIPANTS
4129 North Port Washington Avenue
Milwaukee, Wisconsin 53212
I, the undersigned participant in the Koss Corporation Employee Stock
Ownership Plan and Trust ("KESOT"), having received the Notice of Annual
Meeting of Stockholders of Koss Corporation ("Company") and the Proxy Statement
furnished therewith ("Proxy Statement"), hereby instruct Michael J. Koss and
Cheryl Mike, as Trustees of the Trust created pursuant to the KESOT, to vote
the shares of Common Stock of the Company allocated to my account under the
KESOT as of the record date, on the following proposals to be presented at the
Annual Meeting of Stockholders of the Company to be held on October 24, 1996,
and at any adjournment thereof, in accordance with the following instructions:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed below
JOHN C. KOSS, THOMAS L. DOERR, VICTOR L. HUNTER, MICHAEL J. KOSS,
LAWRENCE S. MATTSON, MARTIN F. STEIN AND JOHN J. STOLLENWERK
(INSTRUCTION To withhold authority to vote for any individual nominee write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. THE PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1997
/ / FOR / / AGAINST / / ABSTAIN
(continued on reverse side)
PROXY NO. NO. OF SHARES
YOUR VOTE IS BEING SOLICITED BY THE COMPANY IN ACCORDANCE WITH THE PROVISIONS
OF THE KESOT. THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
NOMINEES FOR DIRECTOR AND IN FAVOR OF PROPOSAL 2.
IF YOU RETURN THIS CARD PROPERLY SIGNED BUT DO NOT OTHERWISE SPECIFY, SHARES
ALLOCATED TO YOUR KESOT ACCOUNT WILL BE VOTED FOR ALL NOMINEES LISTED FOR
DIRECTOR AND IN FAVOR OF PROPOSAL 2. IF OTHER MATTERS PROPERLY COME BEFORE THE
MEETING, SHARES ALLOCATED TO YOUR KESOT ACCOUNT WILL BE VOTED BY THE TRUSTEES
AS DIRECTED BY THE KESOT COMMITTEE. IF YOU DO NOT RETURN THIS CARD, SHARES
ALLOCATED TO YOUR KESOT ACCOUNT WILL BE VOTED BY THE TRUSTEES AS DIRECTED BY
THE KESOT COMMITTEE.
----------------------------------------
Participant's Signature
----------------------------------------
Date
PLEASE SIGN, DATE AND RETURN THIS CARD PROMPTLY
