<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(s) Filing Proxy Statement, if other than the Registrant)
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)(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>
ULTIMATE ELECTRONICS, INC.
321 WEST 84TH AVENUE, SUITE A
THORNTON, COLORADO 80221
April 30, 1999
TO THE STOCKHOLDERS OF
ULTIMATE ELECTRONICS, INC.:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders of
Ultimate Electronics, Inc. (the "Annual Meeting") to be held on Tuesday, June
15, 1999 at the Company's headquarters, 321 West 84th Avenue, Suite A, Thornton,
Colorado at 8:30 a.m. (Mountain Daylight Savings Time) for the purpose of
electing two Class II 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.
321 WEST 84TH AVENUE, SUITE A
THORNTON, COLORADO 80221
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 1999
TO THE STOCKHOLDERS OF ULTIMATE ELECTRONICS, INC.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders of Ultimate
Electronics, Inc., a Delaware corporation (the "Company"), will be held on
Tuesday, June 15, 1999, at 8:30 a.m., (Mountain Daylight Savings Time), at the
Company's headquarters, 321 West 84th Avenue, Suite A, Thornton, Colorado 80221,
for the following purposes:
(1) To elect two Class II directors 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, 2000.
(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 16, 1999 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 16, 1999 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 321 West 84th Avenue, Suite
A, 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 30, 1999
<PAGE>
ULTIMATE ELECTRONICS, INC.
321 WEST 84TH AVENUE, SUITE A
THORNTON, COLORADO 80221
------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 1999
------------------
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 1999 Annual Meeting of Stockholders of the Company to be held
on Tuesday, June 15, 1999 at 8:30 a.m. (Mountain Daylight Savings Time) at the
Company's headquarters, 321 West 84th Avenue, Suite A, 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 (the "Common Stock") on or about April 30, 1999.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, holders of record of the Company's Common Stock will be
asked to consider and vote upon (i) the election of two Class II directors, (ii)
the ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 31, 2000 and (iii) such
other business as may properly come before the Annual Meeting. As of the date
of this Proxy Statement, the Board 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 16,
1999 (the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, 8,163,862 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, either in person or by
properly executed 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 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 II directors shall be elected for a
three year term. Directors hold office for staggered terms of three years or
until their successors have been duly elected and qualified. Directors in one
of the three classes will be elected each year at the Annual Meeting of
Stockholders to succeed the directors whose terms are expiring. 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.
Both nominees for election to Class II are currently directors of the Company.
The nominees, who will serve for a three year term expiring at the 2002 annual
meeting, are David J. Workman and Randall F. Bellows. 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
SERVED AS YEAR IN
OFFICER OR WHICH TERM
NAME AGE POSITIONS DIRECTOR SINCE WILL EXPIRE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William J. Pearse 57 Chairman of the Board, Founder and 1968 Class III / 2000
Director
J. Edward McEntire 55 Chief Executive Officer and Director 1993 Class III / 2000
David J. Workman 42 President, Chief Operating Officer and 1985 Class II / 1999
Director
Alan E. Kessock 39 Vice President - Finance and 1988 Class I / 2001
Administration, Chief Financial Officer,
Secretary and Director
Neal A. Bobrick 38 Vice President - Sales and Store 1992 -
Operations
Robert W. Beale 62 Director 1993 Class I / 2001
Randall F. Bellows 70 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, Chief Operating Officer of
the Company 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. Prior to joining the
Company, Mr. Kessock worked two years with the accounting firm of KPMG Peat
Marwick and two years with American Home Video Corporation. 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 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 fiscal year. All of the
directors attended at least 75% of the board meetings held during the fiscal
year ended January 31, 1999, and at least 75% of the meetings of 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 Compensation Committee administers and grants awards to officers under the
Equity Incentive Plan (the "New 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 1999 fiscal year.
AUDIT COMMITTEE
The Audit Committee meets 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 1999 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, 1999, 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 New
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 New Plan, an aggregate of
20,000 shares of Common Stock had been reserved for issuance under the Company's
nonemployee Directors' Plan ("Directors' Plan") which was administered by the
Board of Directors. The Company had granted options to purchase 20,000 shares
of Common
4
<PAGE>
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 were
exercisable at January 31, 1999. 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 New Plan, adopted in June 1997 at the 1997
Annual Meeting. Options issued under the Directors' Plan continue to be
exercisable and outstanding. As of January 31, 1999, the Company's nonemployee
directors have been granted 8,000 options under the automatic grant provision of
the New Plan at an exercise price of $3.125 per share, none of which options
were exercisable at January 31, 1999. Stock options issued to nonemployee
directors under the New Plan vest in their entirety and become exercisable one
year from the date of grant.
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
$100,000 other than its Chief Executive Officer, for services rendered for the
fiscal years ended January 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------- ---------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#) ($) (2)
- ----------------------------------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
William J. Pearse 1999 236,538 229,282 - -
Chairman of the Board 1998 312,500 2,000 22,500 -
1997 350,000 500 12,300(3) 9,606
J. Edward McEntire 1999 286,538 246,059 - 784
Chief Executive Officer 1998 240,500(4) 17,000 152,156 1,118
1997 115,000 500 47,844(3) 686
David J. Workman 1999 276,923 222,285 - 737
President and Chief 1998 300,000 17,000 89,732 1,003
Operating Officer 1997 250,000 500 110,268(3) 10,445
Alan E. Kessock 1999 165,000 153,910 - 422
Vice President - Finance 1998 165,000 17,000 66,489 1,283
and Administration, Chief 1997 150,000 500 73,511(3) 9,781
Financial Officer and
Secretary
Neal A. Bobrick 1999 165,000 153,910 - 422
Vice President - Sales 1998 165,000 17,000 61,323 1,392
and Store Operations 1997 150,000 500 78,677(3) 9,983
</TABLE>
- -------------------
(1) Amounts reflect 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) Mr. McEntire was promoted from Vice President of Operations to Chief
Executive Officer of the Company in August 1997.
Under the Company's bonus plan, the executive officers of the Company may be
awarded bonuses from an annual bonus pool, quarterly performance bonuses and
discretionary bonuses determined by the Board of Directors. In fiscal 1999, the
bonus pool was equal to 15% of pretax earnings in excess of the previous fiscal
year pretax earnings. The amounts stated above include the bonuses paid under
this plan. For fiscal 1998 and 1997, no bonuses were paid to the Company's
executives from the annual bonus pool. The Company expects to adopt a similar
plan
5
<PAGE>
in fiscal 2000 based upon revised parameters, as well as a discretionary plan
based upon the meeting of certain goals.
OPTION GRANTS IN THE LAST FISCAL YEAR
There were no options granted to the named executive officers during the fiscal
year ended January 31, 1999.
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, 1999. No executive exercised any options during the
fiscal year ending January 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END (#) AT FISCAL YEAR END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------------------------------------------------------------------
<S> <C> <C>
William J. Pearse 15,699 / 19,101 92,536 / 114,204
J. Edward McEntire 55,233 / 144,767 323,269 / 841,647
David J. Workman 107,558 / 92,442 647,696 / 545,317
Alan E. Kessock 73,205 / 66,795 440,265 / 392,997
Neal A. Bobrick 58,217 / 81,783 349,877 / 485,322
</TABLE>
6
<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, J. Edward McEntire, David J. Workman, Alan E.
Kessock and Neal A. Bobrick have each also entered into a non-compete agreement
with the Company. Each agreement provides that none of Mr. McEntire, Mr.
Workman, Mr. Kessock or Mr. Bobrick, 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.
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 1999 bonus plan, pretax earnings
7
<PAGE>
exceeded fiscal 1998 pretax earnings, and as a result, automatic annual bonuses
were paid to the Company's executives.
EMPLOYEE STOCK OPTIONS
Under the terms of the Company's 1993 original stock option plan (the "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 481,517 outstanding stock options
under the 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 Plan
was replaced by the New 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
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 can be
granted under the Plan. On September 2, 1998, 302,200 options were granted
under the New 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. No
options were granted to the executives during fiscal 1999. Options to purchase
309,912 shares of Common Stock granted under both the Plan and the New Plan to
executive management were exercisable at January 31, 1999. No options have been
exercised and no performance awards or restricted stock awards have been granted
under either Plan.
Robert W. Beale
Randall F. Bellows
Compensation Committee Members
8
<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.
[CHART]
* $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
LAST TRADING ULTIMATE NASDAQ U.S. NASDAQ RETAIL ELECTRONICS, 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
January 31, 1999 106.62 331.72 174.17 9.06
</TABLE>
9
<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 16, 1999 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) 1,147,300 14.1%
Barbara A. Pearse (3) 1,120,000 13.7%
Various family trusts of William and
Barbara Pearse (4) 960,000 11.8%
J. Edward McEntire (5) 85,811 1.1%
David J. Workman (6) 121,392 1.5%
Alan E. Kessock (7) 92,904 1.1%
Neal A. Bobrick (8) 73,674 *
Robert Beale (9) 16,000 *
Randall F. Bellows (10) 22,000 *
All directors and officers as a group
(7 persons) 1,559,081 19.1%
STOCKHOLDERS
- -------------
Dimensional Fund Advisors, Inc. (11) 487,100 6.0%
- --------------------
* less than 1%.
</TABLE>
(1) The address of each such persons, unless otherwise noted, is c/o
Ultimate Electronics, Inc., 321 West 84th Avenue, Suite A, Thornton,
Colorado 80221.
(2) Includes 27,300 shares 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 27,300 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 68,211 shares obtainable upon exercise of options.
(6) Includes 117,938 shares obtainable upon exercise of options.
(7) Includes 80,181 shares obtainable upon exercise of options.
(8) Includes 71,195 shares obtainable upon exercise of options.
(9) Includes 14,000 shares obtainable upon exercise of options.
(10) Includes 10,000 shares obtainable upon exercise of options.
(11) According to Form 13G dated February 11, 1999, Dimensional Fund
Advisors, an investment advisor, organized under the laws of the state
of Delaware, located at 1299 Ocean Avenue, Santa Monica, California
90401, holds 487,100 shares of Company Common Stock.
10
<PAGE>
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 was for a term of 10 years and three
months and was set to expire on April 30, 1999. The Company renewed the lease
on the property for 2 years at an annual base rent of $122,400 with a
six-month termination notice. The Company paid $114,238 in lease payments
during fiscal 1999 for the property. In addition, the Company is responsible
for all real property taxes and insurance premiums on the property.
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 $146,670
in lease payments during fiscal 1999 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 1999 was $119,759. 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 1999 was $118,359.
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, 1999. 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, 2000. The Board of Directors
is requesting ratification by the stockholders of Ernst & Young LLP's
appointment. Representatives of Ernst & Young LLP will be present at the
Annual Meeting and will be available to respond to any questions that might
arise.
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 2000 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 2000 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
11
<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, 2000 to be considered for inclusion in the proxy
statement and proxy relating to the 2000 Annual Meeting of Stockholders. Any
such proposals should be addressed to: Corporate Secretary, Ultimate
Electronics, Inc., 321 West 84th Avenue, Suite A, Thornton, Colorado 80221.
ANNUAL REPORT TO STOCKHOLDERS
The 1999 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 30, 1999
12
<PAGE>
PROXY
ULTIMATE ELECTRONICS, INC.
321 WEST 84TH AVENUE, SUITE A
THORNTON, COLORADO 80221
THIS PROXY IS SOLICATED 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 1999 Annual Meeting of Stockerholders of
the Company (the "Annual Meeting") to be held on Tuesday, June 15, 1999 at
8:30 a.m. (Mountain Daylight Savings Time) at the Company's Thornton store,
321 West 84th Avenue, Suite A, Thornton, Colorado 80221, and at any
adjournment or postponement thereof.
1. ELECTION OF DIRECTORS: 01 David J. Workman 02 Randall F. Bellows
/ / Vote FOR / / Vote WITHHELD
all nominees from all nominees
(Instructions: To withhold authority to vote for any indicated nominee,
write the number(s) of the nominee(s) in the box provided to the right.)
---------------------------------------------
2. Proposal to ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending January 31, 2000
/ / For / / Against / / Abstain
3. In their discretion, the Proxies are authorized to vote upon such business
as may properly come before the Annual Meeting. Whether or not you plan to
attend the Annual 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.
Address Change? Mark Box / / Date:
Indicate changes below: -------------------------------------
-------------------------------------
Signature(s) in Box
(If there are co-owners both must sign)
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.
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.
