<PAGE>
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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ULTIMATE ELECTRONICS, INC.
(Name of Registrant as Specified in Its Charter)
ALAN E. KESSOCK, CHIEF FINANCIAL OFFICER
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to whom 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:*
. . . . . . . . . . . . . . . . . . . . . . .
4) Proposed maximum aggregate value of transaction:
. . . . . . . . . . . . . . . . . . . . . . .
5) Total fee paid:
. . . . . . . . . . . . . . . . . . . . . . .
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously by written 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>
ULTIMATE ELECTRONICS, INC.
321A W. 84TH AVENUE
THORNTON, COLORADO 80221
April 27, 1998
TO THE STOCKHOLDERS OF
ULTIMATE ELECTRONICS, INC.:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Ultimate Electronics, Inc. (the "Annual Meeting") to be held on Wednesday, June
17, 1998 at the company's office, 321A West 84th Avenue, Thornton, Colorado at
8:30 a.m. (Mountain Daylight Savings Time) for the purpose of electing directors
and ratifying the appointment of Ernst & Young LLP as the Company's independent
auditors for the current year.
Enclosed is a Notice of the Annual Meeting and a Proxy Statement. You are urged
to read the Proxy Statement carefully. A proxy card is also enclosed for your
convenience. Please complete, sign, date and return the proxy card promptly.
If you attend the Annual Meeting, you may vote your shares personally, whether
or not you have previously submitted a proxy card.
Your Board of Directors strongly supports and recommends these actions.
Accordingly, we request that you vote in favor of all proposals. We also urge
you to make plans if at all possible to attend the meeting in person. Thank you
for your consideration.
FOR THE BOARD OF DIRECTORS,
William J. Pearse
Chairman of the Board
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE AND SIGN
THE ENCLOSED PROXY CARD, RETURNING IT PROMPTLY TO ENSURE THAT YOUR SHARES ARE
VOTED. A BUSINESS REPLY ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE
IS REQUIRED IF YOU MAIL THIS PROXY CARD FROM ANYWHERE IN THE UNITED STATES.
<PAGE>
ULTIMATE ELECTRONICS, INC.
321A W. 84TH AVENUE
THORNTON, COLORADO 80221
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1998
TO THE STOCKHOLDERS OF ULTIMATE ELECTRONICS, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of Ultimate
Electronics, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 17, 1998, at 8:30 a.m. (Mountain Daylight Savings Time) at the
Company's office, 321A W. 84th Avenue, Thornton, Colorado 80221, for the
following purposes:
(1) To elect two directors to Class I to serve for a term of three years,
each of whom will serve until his respective successor has been duly
elected and qualified.
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 31, 1999.
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the accompanying
Proxy Statement. The Board of Directors of the Company fixed the close of
business on April 20, 1998 as the record date for the determination of
stockholders entitled to notice of and to vote at the Annual Meeting and at any
adjournment or postponement thereof. Consequently, only holders of the
Company's common stock at the close of business on April 20, 1998 will be
entitled to notice of and to vote at the Annual Meeting. A complete list of
stockholders entitled to vote at the Annual Meeting will be available for
examination during normal business hours by any stockholder, for purposes
related to the Annual Meeting, for a period of ten days prior to the Annual
Meeting at the Company's corporate office located at 321A West 84th Avenue,
Thornton, Colorado 80221.
Whether or not you plan to attend the Annual Meeting in person, please complete,
date and sign the accompanying proxy card and return it promptly in the enclosed
envelope to ensure your representation at the Annual Meeting. You are cordially
invited to attend the Annual Meeting and, if you do so, you may personally vote,
regardless of whether you have signed a proxy.
By order of the Board of Directors,
Alan E. Kessock
Secretary
Thornton, Colorado
April 27, 1998
<PAGE>
ULTIMATE ELECTRONICS, INC.
321A W. 84TH AVENUE
THORNTON, COLORADO 80221
__________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 17, 1998
__________________
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of Ultimate Electronics, Inc., a Delaware corporation (the "Company"),
to be used at the 1998 Annual Meeting of Stockholders of the Company to be held
on Wednesday, June 17, 1998 at 8:30 a.m. (Mountain Daylight Savings Time) at the
Company's office, 321A W. 84th Avenue, Thornton, Colorado 80221, and at any
adjournment or postponement thereof. This Proxy Statement and the accompanying
proxy card are first being mailed to the holders of record of the Company's
common stock, $.01 par value per share (the "Common Stock"), on or about April
27, 1998.
Stockholders of the Company represented at the Annual Meeting will consider and
vote upon (i) the election of two directors to Class I, (ii) the ratification of
the appointment of Ernst & Young LLP as the Company's independent auditors for
the fiscal year ending January 31, 1999 and (iii) such other business as may
properly come before the Annual Meeting. The Company is not aware of any other
business to be presented for consideration at the Annual Meeting.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock at the close of business on April 20,
1998 (the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, 8,139,548 shares of Common Stock were
outstanding. Each stockholder is entitled to one vote for each share held of
record on the Record Date for each proposal submitted for stockholder
consideration at the Annual Meeting. The presence, in person or by proxy, of
the holders of not less than one-third of the shares of Common Stock entitled to
vote at the Annual meeting is necessary to constitute a quorum for the conduct
of business at the Annual meeting. The act of the majority of such quorum will
be the act of the stockholders. Abstentions and broken non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business, but are not tabulated for any purpose in determining
whether a proposal has been approved.
All shares represented by properly executed proxies will, unless such proxies
have previously been revoked, be voted at the Annual Meeting in accordance with
the directions on the proxies. Stockholders may revoke proxies by written
notice to the Secretary of the Company, or by delivery of a proxy bearing a
later date, or by personally appearing at the Annual meeting and casting a
contrary vote. If no direction is indicated, the shares will be voted in favor
of the Board of Directors' nominees for director and for the ratification of
Ernst & Young as independent auditors as listed in this Proxy Statement. The
persons named in the proxies will have discretionary authority to vote all
proxies with respect to additional matters that are properly presented for
action at the Annual Meeting.
1
<PAGE>
The proxy solicitation is made by and on behalf of the Board of Directors.
Solicitation of proxies for use at the Annual Meeting may be made in person or
by mail, telephone or telegram, by directors, officers and regular employees of
the Company. Such persons will receive no additional compensation for any
solicitation activities. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others to forward to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock for their costs of forwarding solicitation materials to
such beneficial owners. The Company will bear the entire cost of solicitation
of proxies, including the preparation, assembly, printing and mailing of this
Proxy Statement, the proxy and any additional information furnished to
stockholders.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors. At the Annual Meeting, Class I directors shall be elected for a
three-year term. At each successive annual meeting of stockholders, successors
to the class of directors whose terms expired at that annual meeting shall be
elected for a three-year term. Vacancies on the Board may be filled by the
affirmative vote of a majority of the remaining directors then in office. A
director elected to fill a vacancy (including a vacancy created by an increase
in the Board of Directors) shall serve for the remainder of the full term of the
new directorship or of the class of directors in which the vacancy occurred.
The shares represented by the proxy card will be voted in favor of the election
of the person named below unless authorization to do so is withheld in the
proxy. If a nominee is unavailable to serve as director, which event is not
presently anticipated, persons named in the proxy card intend to cast votes for
which they hold proxies in favor of the election of such other person as the
Board of Directors may designate.
The Board is presently composed of six members, five members from the previous
year and Mr. McEntire, elected to fill a Class III director position created by
the board in fiscal year ending 1997. Both nominees for election to Class I are
currently directors of the Company. The nominees, who will serve for a
three-year term expiring at the 2001 annual meeting, are Alan E. Kessock and
Robert W. Beale. If elected, each director will serve until his term expires or
until his successor has been duly elected and qualified or until his earlier
resignation or removal. See "Directors and Executive Officers" below for
biographical information for each person nominated as a director .
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
CLASS AND YEAR IN
SERVED AS OFFICER WHICH TERM WILL
NAME AGE POSITIONS OR DIRECTOR SINCE EXPIRE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William J. Pearse 56 Chairman of the Board, Founder and Director 1968 Class III / 2000
J. Edward McEntire 54 Chief Executive Officer and Director 1993 Class III / 2000
David J. Workman 41 President, Chief Operating Officer and Director 1985 Class II / 1999
Alan E. Kessock 38 Vice President - Finance and Administration, 1988 Class I / 1998
Chief Financial Officer, Secretary and Director
Neal A. Bobrick 37 Vice President - Sales and Store Operations 1992 -
Robert W. Beale 61 Director 1993 Class I / 1998
Randall F. Bellows 69 Director 1995 Class II / 1999
</TABLE>
All executive officers hold office at the discretion of the Board of Directors.
WILLIAM J. PEARSE. Mr. Pearse is Chairman of the Board of Directors of the
Company. He founded the Company with his wife, Barbara, in 1968. Mr. Pearse is
a founding member and former president of Progressive Retailers' Organization, a
current member of the Chief Executives Organization, a former member and
chairman of the Rocky Mountain Young Presidents Organization, and presently
serves on various private corporate and charitable boards.
J. EDWARD MCENTIRE. Mr. McEntire was promoted to Chief Executive Officer of the
Company and elected a Director in August of 1997. Mr. McEntire had previously
held the position of Vice President - Operations for the Company since February
1995. He was also a nonemployee Director of the Company from August 1993 to
January 31, 1995. From 1993 to January 31, 1995, Mr. McEntire operated JEM
Enterprises, a private investing and consulting firm. From 1991 until 1993, he
was the President of the Regulatory Products Division of IHS Group, an
information publishing company. From 1989 until 1991, Mr. McEntire was the
Executive Vice President - Investor Services and, from 1981 until 1988, was the
Group Vice President of Standard & Poor's Corporation.
DAVID J. WORKMAN. Mr. Workman has been President and Chief Operating Officer of
the Company since August, 1997 and President and a Director since 1992. He was
promoted to Executive Vice President and General Manager in 1991. From 1985
until 1991, Mr. Workman worked with the Company as Vice President of Sales and
Store Operations. He joined the Company in 1979 as a sales consultant and was
promoted to store manager in 1982. Mr. Workman was part owner of Dakota Sight
and Sound from 1976 until 1979.
ALAN E. KESSOCK. Mr. Kessock has been Secretary and Treasurer and a Director of
the Company since April 1993 and Vice President of Finance and Administration
since 1988. He joined the Company in 1985 as Controller. Mr. Kessock worked
two years with the accounting firm of KPMG Peat Marwick and two years with
American Home Video Corporation DBA Video Concepts prior to joining the Company.
Mr. Kessock is currently a member of the Colorado Society of CPAs, and taught a
national CPA review course from 1983 until 1991.
NEAL A. BOBRICK. Mr. Bobrick has been Vice President of Sales and Store
Operations since 1992. Mr. Bobrick joined the Company in 1981 as a sales
consultant and was promoted to store manager in 1984. He was made Director of
Sales in 1989 and promoted again in 1992 to his current position. Mr. Bobrick
has worked in the consumer electronics industry since 1979.
3
<PAGE>
ROBERT W. BEALE. Mr. Beale has been a Director of the Company since April 1993
and is the President of Beale International, a management consulting firm
specializing in support to mid-sized businesses. Mr. Beale was formerly the
Chief Executive Officer and founder of Management Design Associates, a national
management consulting firm. He was also an employee of IBM in the marketing
division, and a consultant on the staff of Deloitte & Touche.
RANDALL F. BELLOWS. Mr. Bellows became a Director of the Company on January 31,
1995. Mr. Bellows was a co-founder of Cobe Laboratories, Inc. in 1965. He
served as an Executive Vice President of Cobe Laboratories from 1965 until its
acquisition by Gambro A.B. in 1990. Mr. Bellows has also served as a director
of Scimed Life Systems, Inc. from 1992 to the present. Scimed Life Systems,
Inc. was acquired by Boston Scientific Corp. in February 1996. Mr. Bellows
continues to serve as a director for Boston Scientific Corp.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held four meetings during the Company's 1998 fiscal year.
All of the directors attended and participated in at least 75% of all board
meetings held during the period, as well as each meeting for each committee on
which they served. The Board has an Audit Committee and a Compensation
Committee but does not have a Nominating Committee or any committee performing a
similar function.
COMPENSATION COMMITTEE
The principal responsibilities of the Compensation Committee are for the
administration and grant of awards under the Equity Incentive Plan as well as
the recommendation of annual salaries for senior management to the Company's
Board of Directors. The current members of the Compensation Committee are
Messrs. Beale and Bellows. The Compensation Committee held one meeting during
the Company's 1998 fiscal year.
AUDIT COMMITTEE
The principal responsibilities of the Audit Committee are to meet periodically
with representatives of the Company's independent auditors to review the general
scope of audit coverage, including consideration of the Company's accounting
practices and procedures and system of internal accounting controls, and to
report to the Board with respect thereto. The Audit Committee also recommends
to the Board of Directors the appointment of the Company's independent auditors.
The current members of the Audit Committee are Messrs. Beale and Bellows. The
Audit Committee held one meeting during the Company's 1998 fiscal year.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of the Company's equity
securities to file initial reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "Commission") and The Nasdaq Stock
Market. Based solely upon its review of copies of the Section 16(a) reports the
Company has received and written representations for certain reporting persons,
the Company believes that during its fiscal year ended January 31, 1998, all of
its directors, executive officers and greater than 10% beneficial owners were in
compliance with their filing requirements.
COMPENSATION OF DIRECTORS
The Company has adopted compensation and incentive benefit plans to enhance its
ability to continue to attract, retain and motivate qualified persons to serve
as nonemployee directors of the Company. The Company pays its nonemployee
directors $8,000 per year and reimburses each nonemployee director for
reasonable expenses in attending Company meetings. Under the Company's Equity
Incentive Plan, each nonemployee director receives an annual automatic grant of
4,000 non-statutory options ("NSOs") for their Board service. The Company has
two nonemployee directors. Prior to the adoption of the Equity Incentive Plan,
an aggregate of 20,000 shares of Common Stock had been reserved for issuance
under the Company's nonemployee Director's Plan ("Director's Plan") which was
administered by the Board of Directors. To date, the Company has granted
options to purchase
4
<PAGE>
20,000 shares of Common Stock under this plan (4,000 of which have been
canceled) at exercise prices ranging from $2.75 per share to $12.75 per share,
of which 16,000 options are currently exercisable. Each option granted under
the Directors' Plan expires ten years from the date of grant. Upon the
termination of a director's status following his resignation, retirement or a
change in control of the Company, options outstanding under the Directors' Plan
will immediately become fully vested and exercisable for a period of three
months.
The Directors' Plan was discontinued and replaced by the Equity Incentive Plan,
adopted in June 1997 at the 1997 Annual Meeting. Options issued to nonemployee
directors from the Directors' Plan continue to be exercisable and outstanding.
To date, the Company's nonemployee directors have each been granted 4,000
options under the automatic grant provision of the Equity Incentive Plan at an
exercise price of $3.125 per share, none of which options are exercisable at
this time. Stock options issued under the Equity Incentive Plan vest in their
entirety and become exercisable one year from the date of grant.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table (the "Executive Compensation Table") sets forth the
compensation paid by the Company to its Chief Executive Officer, and its four
most highly compensated executive officers whose salary and bonus exceeded
$100,000 other than its Chief Executive Officer, for services rendered for the
fiscal years ended January 31, 1998, 1997, and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------- SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#) ($) (2)
- ---------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
William J. Pearse 1998 312,500(6) - 22,500 -
Chairman of the Board 1997 350,000 500 12,300(3) 9,606
1996 350,000 - - 2,250
J. Edward McEntire 1998 240,000(5) 15,500 152,156 1,118
Chief Executive Officer 1997 115,000 500 47,844(3) 686
1996 115,000 7,000 50,000(4) -
David J. Workman 1998 300,000 15,500 89,732 1,003
President and Chief 1997 250,000 500 110,268(3) 10,445
Operating Officer 1996 250,000 2,000 - 2,346
Alan E. Kessock 1998 165,000 15,500 66,489 1,283
Vice President - Finance 1997 150.000 500 73,511(3) 9,781
and Administration, Chief 1996 150,000 2,000 - 2,308
Financial Officer and
Secretary
Neal A. Bobrick 1998 165,000 15,500 61,323 1,392
Vice President - Sales and 1997 150,000 500 78,677(3) 9,983
Store Operations 1996 150,000 2,000 - 1,863
</TABLE>
_______________
(1) Amounts reflect discretionary bonuses paid under the Company's Bonus Plan.
(2) Consists of the Company's contributions pursuant to the Company's 401(k)
defined contribution plan.
(3) Represents all options granted to the named executive officer in fiscal
1997, including repriced options.
(4) These options were exchanged for repriced options in fiscal 1997.
(5) Includes compensation paid to Mr. McEntire as Chief Executive Officer of
the Company from August 1997 through January 1998.
(6) Includes compensation paid to Mr. Pearse as Chief Executive Officer of the
Company from February 1997 through July 1997.
Under the Company's bonus plan, the executive officers of the Company may be
awarded annual bonuses from a bonus pool and discretionary bonuses at the
election of the Board of Directors. In fiscal 1998, the bonus pool was equal to
15% of pretax earnings in excess of fiscal 1997 pretax earnings. For fiscal
1998, pretax earnings did not exceed fiscal 1997 pretax earnings and, as a
result, no bonuses were paid to the Company's executives from this bonus pool.
In fiscal 1997 and 1996, the calculation of the bonus pool was as follows: if
pretax earnings exceeded 2.5% of sales but did not exceed 3.5% of sales, the
bonus pool was equal to 10% of the pretax earnings in excess of 2.5% of sales.
If pretax earnings exceeded 3.5% of sales, the bonus pool was equal to 15% of
the pretax earnings in excess of 2.5% of sales. For fiscal 1997 and 1996,
pretax earnings did not exceed 2.5% of sales, and as a result, no financial
bonuses were paid to the Company's executives from this bonus pool. The Company
expects to adopt a similar plan in fiscal 1999 based upon revised parameters, as
well as a discretionary plan based upon the meeting of certain goals. All
bonus payments reflected above represent discretionary bonuses.
6
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information regarding options granted to the
executives named in the Summary Compensation Table above during the fiscal year
ended January 31, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS GRANTED STOCK PRICE APPRECIATION
UNDERLYING TO EXERCISE FOR OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED # FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Pearse 22,500(1) 4% 3.025 02/01/02 10,907 31,588
J. Edward McEntire 15,000(2) 3% 2.750 02/01/07 25,942 65,742
137,156(3) 24% 3.375 09/02/07 291,116 737,746
David J. Workman 22,500(2) 4% 2.750 02/01/07 38,913 98,613
67,232(3) 12% 3.375 09/02/07 142,701 361,633
Alan E. Kessock 15,000(2) 3% 2.750 02/01/07 25,942 65,742
51,489(3) 9% 3.375 09/02/07 109,286 276,953
Neal A. Bobrick 15,000(2) 3% 2.750 02/01/07 25,942 65,742
46,323(3) 8% 3.375 09/02/07 98,321 249,166
</TABLE>
- ----------------
(1) These options were granted on February 2, 1997 under the Employee Plan and
will vest in equal annual installments over the three years following
February 3, 1998. Option exercise price is 110% of market price on the
grant date.
(2) These options were granted on February 2, 1997 under the Employee Plan and
will vest in equal annual installments over the three years following the
grant date.
(3) These options were granted on September 2, 1997 under the Equity Incentive
Plan and will vest in equal annual installments over the four years
following the grant date.
(4) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises, will depend on future performances of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding options held
by the executives named in the Summary Compensation Table above as of the fiscal
year ended January 31, 1998. No executive exercised any options during the
fiscal year ending January 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END (#) AT FISCAL YEAR END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------------------------------------------------------
<S> <C> <C>
William J. Pearse 4,100 / 30,700 53 / 6,587
J. Edward McEntire 13,972 / 186,028 4,373 / 19,047
David J. Workman 64,881 / 135,119 20,308 / 26,874
Alan E. Kessock 43,087 / 96,913 13,486 / 17,968
Neal A. Bobrick 34,528 / 105,472 10,807 / 22,264
</TABLE>
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company currently has no employment agreements with any of its officers or
employees. However, in June 1997 the Company entered into agreements (each an
"Agreement") with each of William J. Pearse, J. Edward McEntire, David J.
Workman, Alan E. Kessock and Neal A. Bobrick which establish the terms of the
employment of such individuals with the Company in the event of a change in
control of the Company as defined in the Agreements. In the event of any such
change in control, or the termination of any such executive's employment in
anticipation of a change in control, each executive would, pursuant to the terms
of their Agreement, have the right to remain employed by the Company for a
period of three years from the date of the change in control, at a level of
responsibility and compensation commensurate with their individual
responsibilities and compensation in place prior to the change in control. If
an executive's employment following a change in control is terminated by the
Company for any reasons other than cause (as defined in the Agreements) or
disability, or the executive terminates his employment because the Company has
violated the provision of its Agreement with such executive or because of
certain other specified events, the Company is obligated to pay the executive in
a cash lump sum, within five days following such termination, all salary and
deferred or accrued compensation due the executive, a prorated annual bonus for
the portion of the fiscal year for which the executive was employed and two
additional years' salary and annual bonus, with the bonus to be based upon the
higher of the preceding years' bonus and the annualized bonus for the year in
which employment termination occurs. In the event of any such termination, all
options and restricted stock held by the executive also vest in full, and all
options remain exercisable for a period of twelve months following employment
termination.
Four of the Company's officers, David J. Workman, Alan E. Kessock, Neal A.
Bobrick and J. Edward McEntire have each also entered into a non-compete
agreement with the Company. Each agreement provides that none of Mr. Workman,
Mr. Kessock, Mr. Bobrick or Mr. McEntire, as the case may be, will work for any
competitor in particular geographic areas for two years after he voluntarily
leaves, or is terminated for cause by the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors (the "Committee"). Robert Beale and Randall
Bellows, the Committee's only members, are nonemployee directors. The Committee
recommends the compensation of all executive officers of the Company to the
Board of Directors, including the compensation of the executive officers named
in the Summary Compensation Table. In reviewing the compensation of individual
executive officers, the Committee takes under consideration the recommendations
of management, published compensation surveys and current market conditions.
COMPENSATION PROGRAMS
The Company's compensation programs are aimed at enabling management to attract
and retain the best possible executive talent and rewarding those executives
commensurately with their ability and performance. The Company's compensation
programs consist primarily of base salary, a bonus plan and an employee stock
option plan.
BASE SALARY
Base salaries for executive officers are determined in the same manner as that
of other salaried employees. Salary guidelines are established by comparing the
responsibilities of the individual's position in relation to similar positions
in other retail companies. Individual salaries were again this year determined
by considering the person's performance against objectives set for such officer
for the year, as well as the Company's performance against certain corporate
objectives, such as increases in comparable store sales in comparison to levels
of competition, comparisons of budgeted amounts to actual amounts and overall
profitability of the Company as compared to peers in the industry. Upon Mr.
McEntire's promotion to Chief Executive Officer on August 7, 1997 from Vice
President of Operations, his salary was increased to $325,000. At the same
time, Mr. Pearse's annual salary was reduced to $275,000 based upon his
relinquishment of the Chief Executive Officer's responsibilities.
8
<PAGE>
BONUS PLAN
The Company's bonus program is tied closely to Company performance which the
Board of Directors believes leads to overall increases in stockholder value.
Pursuant to the Company's fiscal 1998 bonus plan, pretax earnings did not exceed
fiscal 1997 pretax earnings, and as a result, no automatic annual bonuses were
paid to the Company's executives. A discretionary bonus was authorized and paid
in the first quarter of fiscal 1998.
EMPLOYEE STOCK OPTIONS
Under the terms of the Company's 1993 Employee Stock Option Plan (the "Employee
Plan"), the Committee was empowered to grant to officers, employees and
consultants awards of restricted stock options, performance awards or other
types of incentive-based awards. There are currently 492,684 outstanding stock
options and 900,000 shares of Common Stock reserved for issuance under the
Employee Plan. The Committee determined the persons to whom awards were
granted, the type of award granted, the number of shares granted, the vesting
schedule and the term of any option (which cannot exceed ten years). The
Employee Plan was replaced by the Equity Incentive Plan following its adoption
by the Company's shareholders at the 1997 Annual Meeting.
On February 3, 1997, 90,000 options were granted to the executives under the
Employee Plan, 67,500 of which were granted at an exercise price of $2.75 per
share and 22,500 options were granted to Mr. Pearse at an option price of $3.025
per share, 10% above market price on February 3, 1997. No additional awards
will be granted under the Employee Plan. On September 2, 1998 an additional
302,200 options were granted under the Equity Incentive Plan at an exercise
price of $3.375 per share to the executives with the exception of Mr. Pearse,
Chairman of the Board. These options were granted to ensure equity incentive
compensation was commensurate with the responsibilities and performance
objectives of each executive, and to enhance the alignment of executive
compensation with returns to stockholders. Options to purchase 160,567 shares
of Common Stock granted under both the Employee Plan and the Equity Incentive
Plan to executive management are currently exercisable. No options have been
exercised and no performance awards or restricted stock awards have been granted
under either Plan.
Robert Beale
Randall Bellows
Compensation Committee Members
9
<PAGE>
PERFORMANCE GRAPH
The following graph provides a comparison of the cumulative total return for the
Nasdaq U.S. Stock Market Index, the Nasdaq Retail Trade Stocks Index and the
Company since the Company's initial public offering on October 15, 1993.
[GRAPH]
* $100 invested October 15, 1993 in the Company's Stock or in the index
indicated, including reinvestment of dividends.
Corresponding index values and Common Stock price values are given below. The
dates in such table are utilized because they correspond with the last trading
day of the Company's fiscal years.
<TABLE>
<CAPTION>
ULTIMATE
ELECTRONICS,
LAST TRADING ULTIMATE NASDAQ U.S. NASDAQ RETAIL INC.
DAY OF ELECTRONICS, STOCK MARKET TRADE STOCKS CLOSING
QUARTERLY PERIOD INC. INDEX INDEX INDEX STOCK PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
October 15, 1993
(IPO date) $ 100.00 $ 100.00 $ 100.00 $ 8.50
January 31, 1994 150.00 103.89 99.53 12.75
January 31, 1995 144.12 99.11 87.75 12.25
January 31, 1996 82.35 140.07 99.17 7.00
January 31, 1997 35.29 183.61 121.94 3.00
January 31, 1998 38.94 217.01 142.61 3.31
</TABLE>
10
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock and stock options exercisable within sixty days of April
20, 1998 held by (i) each person or group of persons known by the Company to own
beneficially five percent (5%) or more of the outstanding shares of Common
Stock, (ii) each director and nominee for director of the Company, (iii) each
executive officer named in the Summary Compensation Table and (iv) all executive
officers and directors of the Company as a group. All information is taken from
or based upon ownership filings made by such persons with the Commission or upon
information provided by such persons to the Company. Unless otherwise
indicated, the stockholders listed below have sole voting and investment power
with respect to the shares reported as owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP PERCENT OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
William J. Pearse (2) 1,135,700 13.9%
Barbara A. Pearse (3) 1,120,000 13.8%
Various family trusts of William
and Barbara Pearse (4) 960,000 11.8%
J. Edward McEntire (5) 28,544 *
David J. Workman (6) 76,257 *
Alan E. Kessock (7) 56,501 *
Neal A. Bobrick (8) 42,893 *
Robert Beale (9) 12,000 *
Randall F. Bellows (10) 18,000 *
All directors and officers as a
group (7 persons) 1,369,895 16.8%
</TABLE>
- -----------------
* less than 1%.
(1) The address of each such persons, unless otherwise noted, is c/o
Ultimate Electronics, Inc., 321A W. 84th Avenue, Thornton, Colorado
80221.
(2) Includes 15,700 shares, 4,100 exercisable at fiscal 1998 year end,
obtainable upon exercise of options and excludes 1,120,000 shares of
Common Stock owned by Mr. Pearse's wife, Barbara A. Pearse, as to
which shares he may be deemed a beneficial owner.
(3) Excludes 1,120,000 shares of Common Stock and 15,700 shares obtainable
upon exercise of options owned by Ms. Pearse's husband, William J.
Pearse, as to which shares she may be deemed a beneficial owner.
(4) Mr. Thomas Hoffman, SKB Business Services, 6530 South Yosemite,
Englewood, Colorado 80111, is the trustee of the various family
trusts with sole voting and dispositive power over the shares held in
the trusts.
(5) Includes 20,944 shares obtainable upon exercise of options.
(6) Includes 75,257 shares obtainable upon exercise of options.
(7) Includes 50,059 shares obtainable upon exercise of options.
(8) Includes 41,500 shares obtainable upon exercise of options.
(9) Includes 10,000 shares obtainable upon exercise of options.
(10) Includes 6,000 shares obtainable upon exercise of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a lease agreement with William J. and Barbara A. Pearse
(the "Lessors") on April 1, 1989 for the lease of the Company's store in
Colorado Springs, Colorado. The lease is for a term of 10 years and three
months, commencing on April 1, 1989, at an annual base rent of $97,500. The
Company paid $112,288 in lease payments during fiscal 1998 for the property. In
addition, the Company is responsible for all real property taxes and insurance
premiums on the property.
11
<PAGE>
The Company entered into a lease agreement with the Lessors on October 13, 1989
for the lease of the Company's store in Fort Collins, Colorado. The lease is
for a term of 15 years, commencing on April 1, 1990, at an annual base rent of
$120,000. Commencing April 1, 1992, the rent increases annually at a rate equal
to the lesser of (i) $6,000 or (ii) an amount based upon the increase, if any,
over the prior year in the DCPI. The Company paid $144,690 in lease payments
during fiscal 1998 for the property. The Company is also responsible for all
real property taxes and insurance premiums on the property.
Although the Company did not obtain independent appraisals in connection with
these transactions, the Company believes that the terms of all of the foregoing
transactions were comparable to the terms that the Company would have reached
with independent third parties. All future transactions with the Lessors or any
other affiliate of the Company will be subject to the approval of the Company's
disinterested directors and will be on terms believed by such directors to be no
less favorable to the Company than those available from unaffiliated third
parties.
Jim Pearse, the son of William J. and Barbara A. Pearse, is employed by the
Company as a Marketing Manager. His total compensation (salary and bonus) in
fiscal 1998 was $84,500. Daniel Workman, the brother of David J. Workman, is
employed by the Company as a Regional Sales Manager. His total compensation
(salary and bonus) in fiscal 1998 was $95,450. David R. Workman, the father of
David J. Workman, is employed by the Company as Director of Service. Total
compensation for Mr. D.R. Workman (salary and bonus) was $77,000 for fiscal
1998.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as independent auditors of the Company for
the year ended January 31, 1998. Upon recommendation of the Audit Committee,
the Board of Directors has appointed Ernst & Young LLP to serve for the current
fiscal year ending January 31, 1999. The Board of Directors is requesting
ratification by the stockholders of Ernst & Young LLP's appointment.
Representatives of Ernst & Young LLP are expected to attend the Annual Meeting.
The representatives will have an opportunity to make a statement and will be
available to respond to appropriate questions.
In the event this proposal is defeated, the vote will be considered as a
direction to the Board of Directors to select other auditors for the next fiscal
year. However, because of the difficulty and expense of making any substitution
of auditors after the beginning of a fiscal year, Ernst & Young LLP's
appointment for the 1999 fiscal year will be permitted to stand unless the Board
of Directors finds other reasons for making a change.
Services to be performed by Ernst & Young LLP for the 1999 fiscal year will
include, among other things, audit of annual statements, limited reviews of
quarterly financial information and consultation in connection with various
financial reporting, accounting and tax matters. Ratification of Ernst & Young
LLP's appointment requires the affirmative vote of the holders of a majority of
the shares of Common Stock present at the Annual Meeting, in person or by proxy,
and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE
RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
12
<PAGE>
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder action
at the Company's Annual Meeting. Such proposals must be received by the Company
not later than February 16, 1999 to be considered for inclusion in the proxy
statement and proxy relating to the 1999 Annual Meeting of Stockholders. Any
such proposals should be addressed to: Corporate Secretary, Ultimate
Electronics, Inc., 321A West 84th Avenue, Thornton, Colorado 80221.
ANNUAL REPORT TO STOCKHOLDERS
The 1998 Annual Report of the Company, as filed with the Commission, is being
mailed to the Company's stockholders with this Proxy Statement. The Annual
Report is not to be considered part of the soliciting material.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except the matters set forth in the Notice and described in this
Proxy Statement. If any other matters properly come before the Annual Meeting,
the persons designated as agents in the enclosed proxy will vote on such matters
in accordance with their best judgment.
By order of the Board of Directors,
Alan E. Kessock
Secretary
Thornton, Colorado
April 27, 1998
13
<PAGE>
PROXY
ULTIMATE ELECTRONICS, INC.
321A W. 84TH AVENUE
THORNTON, COLORADO 80221
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF ULTIMATE ELECTRONICS, INC.
The undersigned holder of shares of common stock of Ultimate Electronics, Inc.
(the "Company") hereby appoints William J. Pearse, J. Edward McEntire, David J.
Workman and Alan E. Kessock, or any of them, each with full power of
substitution, to vote all shares of said stock that the undersigned could vote
if personally present at the 1998 Annual Meeting of Stockholders of the Company
(the "Meeting") to be held on Wednesday, June 17, 1998 at 8:30 a.m. (Mountain
Daylight Savings Time) at the Company's Thornton store, 321A W. 84th Avenue,
Thornton, Colorado 80221, and at any adjournment of postponement thereof.
I. ELECTION OF DIRECTORS:
FOR each nominee listed below WITHHELD AUTHORITY to vote
(except as marked to the contrary) [ ] for the nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
STRIKE A LINE THROUGH THE NOMINEE'S NAME LISTED BELOW).
CLASS 1 (to serve until the 2001 Annual Meeting)
Alan E. Kessock Robert W. Beale
II. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP as the independent
auditors of the Company for the fiscal year ending January 31, 1999.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
(CONTINUED ON OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
III. In their discretion, the Proxies are authorized to vote upon such business
as may properly come before the Meeting.
Whether or not you plan to attend the Meeting, you are urged to execute and
return this Proxy, which may be revoked at any time prior to its use. This
Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR EACH NOMINEE AND PROPOSAL LISTED.
This proxy should be dated and signed by the stockholder or his attorney
authorized in writing or in any other manner permitted by law. If shares are
held by two or more persons, any one may sign. If signing as executor,
administrator, trustee or guardian or as a corporate officer, please give full
title. If a corporation, please sign in full corporate name by the president
or other authorized officer. If a partnership, please sign in partnership
name by an authorized person.
Dated: , 1998
------------------------
-----------------------------------------
Signature of Stockholder
-----------------------------------------
Signature of Stockholder (if held jointly)
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. DATE AND RETURN THIS PROXY IN THE
REPLY ENVELOPE PROVIDED. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN
AND RETURN ALL CARDS RECEIVED.
