<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 [X]
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))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KOSS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Richard W. Silverthorn, Esq.
Whyte Hirschboeck Dudek S.C.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
KOSS CORPORATION
4129 NORTH PORT WASHINGTON AVENUE
MILWAUKEE, WISCONSIN 53212
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
OCTOBER 21, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
Meeting) of Koss Corporation will be held at the offices of the Company at 4129
North Port Washington Avenue, Milwaukee, Wisconsin, on Thursday, October 21,
1999, 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 PricewaterhouseCoopers LLP,
independent accountants, as auditors of the Company for the fiscal
year ending June 30, 2000; and
3. Such other business as may properly be brought before the Meeting.
The transfer books of the Company will not be closed for the Meeting. Only
stockholders of record at the close of business on August 25, 1999 will be
entitled to notice of and to vote at the Meeting. Information regarding the
matters to be considered and voted upon at the 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
/s/ Richard W. Silverthorn
Richard W. Silverthorn, Secretary
Milwaukee, Wisconsin
September 20, 1999
<PAGE> 3
NOTE TO PRINTER: LEAVE THIS PAGE (INSIDE
FRONT COVER) BLANK
<PAGE> 4
KOSS CORPORATION
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 21, 1999
------------------------------------
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 1999 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 will be held at the offices of the
Company, 4129 North Port Washington Avenue, Milwaukee, Wisconsin, 53212, on
Thursday, October 21, 1999, at 9:00 a.m. local time.
PURPOSES OF THE MEETING. At the Meeting, stockholders will consider and
vote upon the following: (i) the election of seven (7) directors for one-year
terms; (ii) a proposal to ratify the appointment of PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), independent accountants, as independent auditors for
the fiscal year ending June 30, 2000; and (iii) such other business as may
properly be brought before the Meeting.
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 20, 1999.
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 August
25, 1999 (the "Record Date"), are entitled to vote at the Meeting. As of the
Record Date, there were 2,682,669 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
inspector of elections appointed for the Meeting. The inspector of elections
will determine whether or not a quorum is present at the Meeting. The inspector
of elections 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 (although those shares are considered entitled to
vote for quorum purposes and may be entitled to vote on other matters).
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 PricewaterhouseCoopers as
independent accountants for the year ending June 30, 2000, and the vote
<PAGE> 5
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 have no effect on the election of directors and will be treated
as having voted "against" the ratification of PricewaterhouseCoopers as the
Company's auditors for the year ending June 30, 2000.
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 PricewaterhouseCoopers as the Company's auditors
for the year ending June 30, 2000. 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 eligible for inclusion in the Company's proxy
materials for its 2000 annual meeting, a stockholder proposal must be received
by the Company no later than May 20, 2000 and must otherwise comply with the
applicable rules of the Securities and Exchange Commission (the "SEC").
Appropriate stockholder proposals intended to be presented at the Company's 2000
annual meeting without inclusion in the Proxy Statement must be received by the
Company no later than August 3, 2000. 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, 1999, although not a
part of this Proxy Statement, is delivered herewith.
2
<PAGE> 6
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 number of
Directors at seven. Given the varied experience of the current nominees and
their contribution to the governing of the Company, the current size of the
Board has been determined to be advantageous for both the Company and its
stockholders. Shares cannot be voted for a greater number of persons than seven
vacant positions. 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.
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, 69, 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). Mr. Koss is also director of Strattec Security Corporation.
THOMAS L. DOERR, 55, 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, 52, has been a director of the Company since 1987. Mr.
Hunter is the President of Hunter Business Group, LLC, a service company
specializing in business-to-business direct marketing. Mr. Hunter holds an
MBA from the Harvard Business School.
MICHAEL J. KOSS, 45, 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 the
Company in 1987, Chief Executive Officer in 1991, and Vice-Chairman in
1998. He is the son of John C. Koss and the brother of John Koss, Jr.
LAWRENCE S. MATTSON, 67, 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.
MARTIN F. STEIN, 62, Mr. Stein has been a director of the Company since
1987. He is the former Chairman of Eyecare One, Inc., which includes Stein
Optical and Eye Q optical centers and a manufacturing lab in Illinois and
Wisconsin. Prior to that, Mr. Stein was the Chairman and Chief Executive
Officer of Stein Health Services. He is also a director of Northwestern
Mutual Series Fund, Inc., Mason Street Funds, Inc., and Vision Twenty-One,
Inc.
JOHN J. STOLLENWERK, 59, has been a director of the Company since 1986. Mr.
Stollenwerk is the President and Chief Executive Officer of the
Allen-Edmonds Shoe Corporation, an international manufacturer and retailer
of high quality footwear. He is also a director of Allen-Edmonds Shoe
Corporation, Badger Meter, Inc., Firstar Corporation, and Northwestern
Mutual Life Insurance Company.
3
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF ALL NOMINEES NAMED ABOVE TO THE BOARD OF DIRECTORS.
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, 1999. 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 adjustments for all employees
whose annual salaries exceed $45,000, as well as all bonuses, commissions, and
stock option awards. Beginning with the fiscal year ending June 30, 2000, the
Compensation Committee will review and recommend adjustments for employees whose
annual salaries exceed $75,000 or who report directly to the Company's Chief
Executive Officer. The Compensation Committee met once during the fiscal year
ended June 30, 1999. See "Executive Compensation and Related Matters --
Compensation Committee Report on Executive Compensation." The Company's 1990
Flexible Incentive Plan (the "Plan") is administered by the Compensation
Committee. Subject to the express provisions of the Plan, the Committee has
complete authority to (i) determine when and to whom benefits are granted; (ii)
determine the terms and provisions of benefits granted; (iii) interpret the
Plan; (iv) prescribe, amend and rescind rules and regulations relating to the
Plan; (v) accelerate, purchase, adjust or remove restrictions from benefits; and
(vi) 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, 1999, the Board held four meetings. Every incumbent director
attended 75% or more of the total of (i) all meetings of the Board, plus (ii)
all meetings of the committees on which they served during their respective
terms 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> <S> <C>
John Koss, Jr. 42 Vice President - Sales 1988
Sujata Sachdeva 35 Vice President - Finance 1992
Richard W. Silverthorn* 44 Secretary, General Counsel 1993
</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 1, 1999, the number of shares of Common Stock
"beneficially owned" (as defined under applicable SEC regulations) and the
percentage of such shares to the total number of shares outstanding for all
nominees, for each executive officer named in the Summary Compensation Table
(see "Executive Compensation and Related Matters -- Summary Compensation
Table"), for all directors and executive officers as a group, and for each
person and each group of persons who, to the knowledge of the Company as of
September 1, 1999, based solely on the review of Schedule 13D or 13G information
statements of such beneficial owner filed with the SEC, were the beneficial
owners of more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Percent of
Number of Shares Outstanding
Beneficially Owned Common
Name and Business Address (1) (2) Stock (3)
- ------------------------------------------------------------------------ ----------------------------- ------------------
<S> <C> <C>
John C. Koss (4)................................................. 1,013,437 37.8%
Michael J. Koss (5) ............................................. 574,665 21.1%
John Koss, Jr. (6) .............................................. 124,443 4.6%
Thomas L. Doerr.................................................. 0 *
Victor L. Hunter................................................. 1 *
Lawrence S. Mattson.............................................. 0 *
Martin F. Stein.................................................. 4,500 *
John J. Stollenwerk.............................................. 4,500 *
All directors and executive
officers as a group (10 persons) (7)............................ 1,514,491 56.3%
Koss Family Voting Trust, John C. Koss, Trustee (8).............. 568,431 21.2%
Koss Employee Stock Ownership Trust ("KESOT") (9)................ 347,218 12.9%
FMR Corp. (10)................................................... 210,000 7.8%
Dimensional Fund Advisors Inc. (11).............................. 209,400 7.8%
</TABLE>
- ------------------------------------------------
(1) Unless otherwise noted, the business address of all persons named in the
above table is c/o Koss Corporation, 4129 North Port Washington Avenue,
Milwaukee, WI 53212.
(2) 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 1, 1999.
(3) Based on 2,682,669 shares outstanding on September 1, 1999. Asterisk (*)
denotes beneficial ownership of less than 1%. Percentage calculation
assumes, for each individual owning options and for directors and
executive officers as a group, the exercise of that number of options
which are included in the total number of shares.
(4) Includes the following shares which are deemed to be "beneficially owned"
by John C. Koss: (i) 276,620 shares owned directly or by his spouse; (ii)
59,517 shares as a result of his position as an officer of the Koss
Foundation; (iii) 568,431 shares as a result of his position as trustee
of the Koss Family Voting Trust; (iv) 28,125 shares as a result of his
position as co-trustee of the John C. and
5
<PAGE> 9
Nancy Koss Revocable Trust; and (v) 80,744 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) Includes the following shares which are deemed to be "beneficially owned"
by Michael J. Koss: (i) 155,947 shares owned directly or by reason of
family relationships; (ii) 54,000 shares as a result of his beneficial
interest in the Koss Family Voting Trust; (iii) 29,059 shares by reason
of the allocation of those shares to his account under the KESOT and his
ability to vote such shares; (iv) 17,500 shares with respect to which he
holds options which are exercisable within 60 days of September 1, 1999;
and (v) 347,218 shares which are held by the KESOT (see Note (9), below).
The 29,059 shares allocated to Michael J. Koss' KESOT account, over which
he holds voting power, are included within the aforementioned 347,218
shares but are counted only once in his individual total.
(6) Includes the following shares which are deemed to be "beneficially owned"
by John Koss, Jr.: (i) 31,507 shares owned directly or by his daughter;
(ii) 54,000 shares as a result of his beneficial interest in the Koss
Family Voting Trust; (iii) 19,375 shares with respect to which he holds
options which are exercisable within 60 days of September 1, 1999; and
(iv) 19,561 shares by reason of the allocation of those shares to his
account under the KESOT and his ability to vote such shares.
(7) This group includes ten people, eight of whom are listed on the
accompanying table, plus Sujata Sachdeva (Vide President -Finance) and
Richard W. Silverthorn (Secretary and General Counsel). To avoid
double-counting: (i) the 347,218 total shares held by the KESOT and
deemed to be beneficially owned by Michael J. Koss as result of his
position as a KESOT Trustee (see Note (5), above) include 129,364 shares
allocated to the KESOT accounts of John C. Koss, Michael J. Koss, and
John Koss, Jr. in the above table but are included only once in the
total; and (ii) the 568,431 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 (4), above) include 108,000 shares beneficially
owned by Michael J. Koss and John Koss, Jr. (54,000 shares each) by
reason of their beneficial interest in the Koss Family Voting Trust (see
Notes (5) and (6), above) but are included only once in the total.
(8) 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 568,341 shares are included in the number of shares shown as
beneficially owned by John C. Koss (see Note (4), above).
(9) The KESOT holds 347,218 shares. Authority to vote these shares is vested
in KESOT participants to the extent shares have been allocated to
individual KESOT accounts. All 347,218 of these KESOT shares are also
included in the number of shares shown as beneficially owned by Michael
J. Koss (see Note (5), above). 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 347,218 KESOT shares.
(10) 82 Devonshire Street, Boston MA 02109.
(11) 1299 Ocean Ave., 11th Floor, Santa Monica, CA 90401. The following is
qualified in its entirety by reference to a Schedule 13G statement dated
February 11, 1999 by Dimensional Fund Advisors (the "Schedule 13G"):
Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the
"Portfolios"). In its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over the
securities of the Issuer described in this schedule that are owned by the
Portfolios. All securities reported in this schedule are owned by the
Portfolios, and Dimensional disclaims beneficial ownership of such
securities.
6
<PAGE> 10
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, 1999, 1998,
and 1997 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
$100,000 (collectively, including the CEO, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION (1)
-------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------------------
FISCAL SECURITIES
YEAR OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
ENDED COMPENSATION STOCK OPTIONS/ COMPENSATION
NAME AND PRINCIPAL JUNE SALARY BONUS (2) AWARDS SARS (3) (4)
POSITION 30, ($) ($) ($) ($) (#) ($)
- -------------------------- ----- ------------- ----------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Koss 1999 $ 150,000 $ 206,012 $ 0 $ 0 0 $ 140,461
Chairman of the Board 1998 150,000 262,547 0 0 0 135,458
1997 150,000 182,414 0 0 0 144,219
- --------------------------
Michael J. Koss 1999 $ 165,000 $ 288,417 $ 0 $ 0 50,000 $ 23,559
Chief Executive Officer 1998 165,000 367,565 1,632,813 0 10,000 16,683
1997 150,000 255,379 0 0 10,000 26,156
- --------------------------
John Koss, Jr. 1999 $ 125,000 $ 22,165 $ 0 $ 0 25,000 $ 16,526
Vice President - Sales 1998 120,000 47,000 343,750 0 10,000 12,117
1997 110,000 44,577 0 0 7,500 20,987
</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 LTIPs.
(2) This column consists of the value realized upon the exercise of stock
options for the fiscal years indicated. For more information, see
"Aggregate Stock Option Exercises During the Fiscal Year". In all 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) This column consists of Incentive Stock Options granted to executive
officers for the fiscal years indicated. For additional information, see
"Stock Options Granted During Fiscal Year" and "Other Compensation
Arrangements -- Stock Option Plans."
7
<PAGE> 11
(4) "All Other Compensation" consists of the following: (i) Company matching
contributions under the Company's 401k Plan for the accounts of John C.
Koss ($7,486 in 1999, $7,625 in 1998, and $12,080 in 1997), Michael J.
Koss ($9,964 in 1999, $10,000 in 1998, and $14,080 in 1997), and John
Koss, Jr. ($3,917 in 1999, $7,255 in 1998, and $9,330 in 1997); (ii)
Company contributions to the KESOT for the accounts of John C. Koss
($12,090 in 1999, $4,239 in 1998, and $11,247 in 1997), Michael J. Koss
($12,090 in 1999, $4,239 in 1998, and $11,243 in 1997), and John Koss,
Jr. ($12,090 in 1999, $3,728 in 1998, and $11,243 in 1997); (iii)
premiums paid by the Company for life insurance for John C. Koss ($5,805
in 1999, $8,514 in 1998, and $5,805 in 1997), Michael J. Koss ($1,505 in
1999, $2,444 in 1998, and $828 in 1997), and John Koss, Jr. ($519 in
1999, $1,134 in 1998, and $414 in 1997); and (iv) an annual accrued
expense of $115,080 in connection with the Company's agreement to
continue to pay John C. Koss his current base salary in the event he
becomes disabled prior to age 70 (he is currently 69 years old) and,
after age 70, to continue to pay John C. Koss his current base salary for
the remainder of his life, whether or not he becomes disabled.
STOCK OPTIONS GRANTED DURING FISCAL YEAR. The following table provides
certain information concerning stock options granted to Named Executive Officers
during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
SECURITIES PERCENT OF POTENTIAL REALIZABLE VALUE AT
UNDER TOTAL ASSUMED ANNUAL RATES OF STOCK
LYING OPTIONS/ EXERCISE PRICE APPRECIATION FOR
OPTIONS/ SARS OR BASE OPTION TERM*
SARS GRANTED TO PRICE -----------------------------------------
GRANTED EMPLOYEES
IN FISCAL ($ PER EXPIRATION
NAME (#) YEAR SHARE) DATE 0% 5% 10%
---- --- ---- ------ ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
John C. Koss n/a n/a n/a n/a n/a n/a n/a
Michael J. Koss 50,000 50% $ 11.83 April 29, 2004 $ (54,000) $ 94,501 $ 274,149
John Koss, Jr. 25,000 25% $ 11.83 April 29, 2004 $ (27,000) $ 47,251 $ 137,075
</TABLE>
* Based on the "fair market value" as determined under the Company's 1990
Flexible Incentive 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 $10.75 per share
on April 29, 1999, 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.
8
<PAGE> 12
AGGREGATE STOCK OPTION EXERCISES DURING THE FISCAL YEAR. The following
table provides certain information about stock options exercised by the Named
Executive Officers during Fiscal 1999 and held by the Named Executive Officers
on June 30, 1999.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN THE
MONEY OPTIONS AT FISCAL YEAR
SHARES NUMBER OF SECURITIES UNDERLYING END (1)
ACQUIRED UNEXERCISED OPTIONS/SARS AT
ON VALUE FISCAL YEAR END (DOLLARS)
EXERCISE REALIZED ----------------------------------- --------------------------------
NAME (#) (DOLLARS) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Koss 0 $ 0 n/a n/a n/a n/a
Michael J. Koss 0 $ 0 36,250 68,750 $163,350 $60,450
John Koss, Jr. 0 $ 0 19,375 38,125 $ 69,663 $24,282
</TABLE>
(1) Based on the $12.13 per share market value of the Company's Common
Stock on June 30, 1999, determined with reference to the closing price
of the Company's Common Stock on June 30, 1999, as reported on The
Nasdaq Stock Market. Options are "in-the-money" if the fair market
value of the stock on June 30, 1999 exceeds the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. John C.
Koss, who is the Chairman of the Board and executive officer of the Company,
serves on the Compensation Committee.
DIRECTOR COMPENSATION. Directors who are not also employees of the
Company receive an annual retainer of $5,000, plus $1,250 per director for each
meeting and $500 per director for each committee 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 August 25, 1999,
the KESOT held
9
<PAGE> 13
347,218 shares of Common Stock of the Company (approximately 12.9% 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: (i) the
maximum amount to be loaned is limited to one-half of the officer's
annual base salary; (ii) the first $10,000 bears no interest; (iii) 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 (iv) the loan will be repaid in
installments or in full upon termination of employment. During the
fiscal year ended June 30, 1999, 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 $115,080 in
connection with this Agreement. Mr. Koss is currently 69 years old and
his current base salary is $150,000 per year.
STOCK OPTION PLANS. In 1990, the Board of Directors created, and the
stockholders approved, a Flexible Incentive Plan (the "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 an additional
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. At the Company's 1997 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.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Board of Directors has by
resolution entered into a Supplemental Executive Retirement Plan with
Michael J. Koss which calls for Mr. Koss to receive annual cash
compensation following his retirement from the Company ("Retirement
Payments") in an amount equal to 2% of the base salary of Mr. Koss,
multiplied by his number of years of service to the Company (example,
if Mr. Koss had worked 25 years, then 2% multiplied by 25 years would
amount to 50% of base salary). The base salary shall be calculated
using the average base salary of Mr. Koss during the three years
preceding his retirement. The Retirement Payments are to be paid to
Mr. Koss monthly until his death, and after his death shall continue
to be paid monthly to his surviving spouse until her death.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
Under 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
10
<PAGE> 14
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.
Beginning with the fiscal year ending June 30, 2000, the Compensation
Committee will review employees whose annual salaries exceed $75,000 or who
report directly to the Company's Chief Executive Officer. 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 executive officers are reviewed
twice each year. Raises in base salaries are made in July when necessary or
when promotions are announced. In addition, the Company has a Flexible
Incentive Plan, 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, after comparison with base salaries of
executive officers of other light assembly or manufacturing companies taken
from data in an annual national survey.
Executive officers are also eligible for annual bonuses based upon
individual performance 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 Chairman
is eligible to receive a bonus calculated as a percentage of the Company's
earnings before interest and taxes. The Company's Vice President-Sales is
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.
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 light
assembly or manufacturing companies. 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 Flexible
Incentive Plan.
COMPENSATION COMMITTEE
JOHN C. KOSS
LAWRENCE S. MATTSON
JOHN J. STOLLENWERK
VICTOR L. HUNTER
11
<PAGE> 15
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.
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 (i) stocks included in The
Nasdaq Stock Market (US Companies) Index, and (ii) a group of peer companies
("Peer Group"). The Peer Group, which was selected by the Company, consists of
Boston Acoustics, Inc., Digital Video Systems, Inc., Phoenix Gold International,
Inc., and Sensory Science Corporation. For purposes of the graph and table, it
is assumed that on June 30, 1994, $100 was invested 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 Peer
Group used in this year's graph and table has been changed due to the following
events which have affected three of the four companies that previously made up
the Company's original Peer Group (the "Original Peer Group"): first, Recoton
Corporation has become a much larger company and is no longer considered a
"peer" of the Company; second, Carver Corporation filed for bankruptcy on May
12, 1999; and third, Polk Audio, Inc. was delisted from the American Stock
Exchange effective May 24, 1999. As a result of these events, it became
necessary to revise the members of the Original Peer Group. The members of the
"New Peer Group" consist of Boston Acoustics Inc. (which was included in the
Original Peer Group), Digital Video Systems Inc., Phoenix Gold International
Inc., and Sensory Science Corporation. THE STOCK PRICE PERFORMANCE INFORMATION
SHOWN IN THE GRAPH AND TABLE ON THE NEXT PAGE SHOULD NOT BE CONSIDERED
INDICATIVE OF FUTURE PERFORMANCE.
12
<PAGE> 16
[STOCK PRICE PERFORMANCE INFORMATION LINE GRAPH]
<TABLE>
<CAPTION>
JUNE 30 1994 1995 1996 1997 1998 1999
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Koss Coporation $ 100.00 $ 45.37 $ 50.00 $ 64.81 $ 75.00 $ 89.36
NASDAQ 100.00 133.48 171.38 208.43 274.43 $ 392.16
New Peer Group 100.00 132.47 143.30 97.00 93.67 $ 82.45
Original Peer Group 100.00 102.38 103.31 86.14 182.90 $ 70.22
</TABLE>
13
<PAGE> 17
RELATED TRANSACTIONS.
BUILDING LEASE. The Company leases its main plant and offices in Milwaukee,
Wisconsin from its Chairman, John C. Koss, under a lease which expires on June
30, 2003 (subject to renewal) at a current rent of $380,000 per year. The
Company is responsible for all property maintenance, insurance, taxes and other
normal expenses related to ownership. The Company believes that the lease is on
terms no less favorable to the Company than those that could be obtained from
unaffiliated parties.
STOCK REPURCHASES. The Company has previously announced its intention to
repurchase shares of Common Stock in the open market or in private transactions
as such shares become available from time to time, because the Company believes
that its stock is undervalued in the current market and that such repurchases
enhance the value to stockholders. Consistent with this policy, the Company
repurchased 488,650 shares during the fiscal year ended June 30, 1999. These
488,650 shares were automatically retired and returned to the status of
authorized but unissued shares. The Company believes that purchases of Common
Stock enhance stockholder value and will continue from time to time to engage in
such transactions either on the open market or in private transactions.
As part of this stock repurchase program, on April 14, 1999, the Company
purchased 15,000 shares of Common Stock from John Koss, Jr. at a price of
$11.875 per share, and on May 7, 1999, the Company purchased 10,000 shares of
the Company's Common Stock from John Koss, Jr. at a price of $12.625 per share,
with both purchases being at the prior day's closing price reported on The
Nasdaq Stock Market. The value realized by John Koss, Jr., in these transactions
was $178,125 and $126,250, respectively. These 25,000 shares were automatically
retired and returned to the status of authorized but unissued shares.
The Company has an agreement with its Chairman, John C. Koss, to repurchase
stock from his estate in the event of his death. The repurchase price is 95% of
the fair market value of the common stock on the date that notice to repurchase
is provided to the Company. The total number of shares to be repurchased shall
be sufficient to provide proceeds which are the lesser of $2,500,000 or the
amount of estate taxes and administrative expenses incurred by his estate. The
Company is obligated to pay in cash 25% of the total amount due and to execute a
promissory note at the prime rate of interest for the balance. The Company
maintains a $1,150,000 life insurance policy to fund a substantial portion of
this obligation. At June 30, 1999, $1,490,000 has been classified as a
Contingently Redeemable Equity Interest reflecting the estimated obligation in
the event of execution of the agreement.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the SEC and
with The Nasdaq Stock Market reports of ownership and changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of such reports furnished to the Company or
representations that no other reports were required, the Company believes that,
during the 1999 fiscal year, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were satisfied.
14
<PAGE> 18
ITEM 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, following the recommendation of its Audit
Committee, has retained PricewaterhouseCoopers as independent accountants to
audit the consolidated financial statements of the Company and its subsidiaries
for the fiscal year ending June 30, 2000. PricewaterhouseCoopers has served the
Company as its independent auditors since September 1992. Representatives of
PricewaterhouseCoopers are expected to be present at the Meeting, and will have
the opportunity to make a statement if they desire to do so. The
PricewaterhouseCoopers representatives are expected to be available to respond
to appropriate questions at the Meeting.
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. Unless otherwise directed, the proxy
will be voted in favor of the ratification of such appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" RATIFICATION OF
PRICEWATERHOUSECOOPERS AS INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING JUNE 30, 2000
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 their best
judgment on such matters.
By Order of the Board of Directors
/s/ Richard W. Silverthorn
Richard W. Silverthorn, Secretary
Milwaukee, Wisconsin
September 20, 1999
15
<PAGE> 19
KOSS CORPORATION
4129 NORTH PORT WASHINGTON AVENUE
MILWAUKEE, WISCONSIN 53212
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
This undersigned hereby appoints John C. Koss and Lawrence S. Mattson 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 21, 1999, and any or all adjournments thereof, with like effect
as if the undersigned were personally present and voting.
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 any 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.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
KOSS CORPORATION 1999 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS: 1-John C. Koss 2-Thomas L. Doerr 3-Victor L. Hunter [ ] FOR all [ ] WITHHOLD AUTHORITY
4-Michael J. Koss 5-Lawrence S. Mattson nominees listed to to vote for all
6-Martin F. Stein 7-John J. Stollenwerk the left (except as nominees listed
specified below). to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write the [ ]
numbers(s) of the nominee(s) in the box provided to the right). [ ]
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS OF THE CORPORATION FOR THE FISCAL YEAR ENDING JUNE 30, [ ] FOR [ ] AGAINST [ ] ABSTAIN
2000.
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
Check appropriate box Date , 1999 NO. OF SHARES
Indicate changes below: ------------
Address Change? [ ] Name Change? [ ] [ ]
[ ]
[ ]
Signature(s) in Box
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executors, administrators, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
</TABLE>
<PAGE> 20
KOSS CORPORATION
KESOT PARTICIPANTS
4129 NORTH PORT WASHINGTON AVENUE
MILWAUKEE, WISCONSIN 53212
PROXY
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 21, 1999,
and at any or all adjournments thereof, in accordance with the following
instructions below.
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 FOR PROPOSAL 2. IF ANY 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.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
\/ DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED \/
KOSS CORPORATION 1999 ANNUAL MEETING
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS: 1-John C. Koss 2-Thomas L. Doerr 3-Victor L. Hunter [ ] FOR all [ ] WITHHOLD AUTHORITY
4-Michael J. Koss 5-Lawrence S. Mattson nominees listed to to vote for all
6-Martin F. Stein 7-John J. Stollenwerk the left (except as nominees listed
specified below). to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write the [ ]
numbers(s)of the nominee(s) in the box provided to the right). [ ]
2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS OF THE CORPORATION FOR THE FISCAL YEAR ENDING JUNE 30, [ ] FOR [ ] AGAINST [ ] ABSTAIN
2000.
Check appropriate box Date , 1999 NO. OF SHARES
Indicate changes below: -----------
Address Change? [ ] Name Change? [ ] [ ]
[ ]
[ ]
Signature(s) in Box
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executors, administrators,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
</TABLE>
