<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ Filed by the Registrant
/ / Filed by a Party other than the Registrant
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MACKIE DESIGNS INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies: ___________________________________________________________
(2) Aggregate number of securities to which transaction
applies: ___________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): __________
(4) Proposed maximum aggregate value of transaction: ___________________
(5) Total fee paid: ____________________________________________________
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________
(2) Form, Schedule or Registration Statement No.: ______________________
(3) Filing Party: ______________________________________________________
(4) Date Filed: ________________________________________________________
<PAGE>
MACKIE DESIGNS INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1998
--------------------
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of MACKIE
DESIGNS INC., a Washington corporation (the "Company"), will be held on Tuesday,
May 19, 1998, at 9:00 a.m., local time, at the Columbia Winery, 14030 N.E. 145th
Street, Woodinville, Washington, for the following purposes:
1. To elect one director to serve a three-year term and until his
successor is elected.
2. To approve amendments to the Company's Amended and Restated 1995 Stock
Option Plan.
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the fiscal year ending December 31, 1998.
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on March 23, 1998
are entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof.
All shareholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the meeting may vote in person even if he or she returned a proxy.
By Order of the Board of Directors
Greg C. Mackie
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Woodinville, Washington
April 9, 1998
- -------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE
OF REISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING, AND SO DESIRE,
YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
- -------------------------------------------------------------------------------
<PAGE>
MACKIE DESIGNS INC.
16220 WOOD-RED ROAD, N.E.
WOODINVILLE, WASHINGTON 98072
(206) 487-4333
-------------------------------
PROXY STATEMENT
-------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Mackie Designs Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held on Tuesday, May 19, 1998, at 9:00 a.m., local time, or
at any postponement or adjournment thereof (the "Meeting"), for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders.
The Meeting will be held at the Columbia Winery, 14030 N.E. 145th Street,
Woodinville, Washington (telephone number (425) 488-2776).
These proxy solicitation materials will be mailed on or about April 9, 1998
to all shareholders entitled to vote at the Meeting.
RECORD DATE
Shareholders of record of the Company's Common Stock at the close of
business on March 23, 1998 are entitled to notice of, and to vote at, the
Meeting. On March 23, 1998, 12,662,650 shares of the Company's Common Stock
were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING
Holders of shares of Common Stock are entitled to one vote per share on all
matters. A majority of the shares issued and outstanding as of March 23, 1998
must be present in person or represented by proxy at the Meeting for the
transaction of business. Nominees for election of directors are elected by
plurality vote of all votes cast at the Meeting. Approval of certain amendments
to the Company's Amended and Restated 1995 Stock Option Plan and ratification of
Ernst & Young LLP as the independent public accountants require the affirmative
vote of a majority of the shares present at the Meeting in person or by proxy
and entitled to vote. Abstentions and broker non-votes are counted for purposes
of determining whether a quorum exists at the Meeting. Abstentions and broker
non-votes (i.e., shares held by brokers that are present but not voted because
the brokers were prohibited from exercising authority) are not counted and have
no effect in determining whether a plurality exists with respect to a given
nominee but do have the effect of a "no" vote in determining whether other
proposals, including approval of certain amendments to the Company's Amended and
Restated 1995 Stock Option Plan and ratification of appointment of Ernst &
Young LLP, are approved.
1
<PAGE>
SOLICITATION
The Company bears the cost of soliciting proxies. In addition to use of
the mails, proxies may be solicited personally or by telephone by directors,
officers and employees of the Company, who will not be specially compensated for
such activities. Such solicitations may be made personally, or by mail,
facsimile, telephone, telegraph or messenger. The Company will also request
persons, firms and companies holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy materials
to and obtain proxies from such beneficial owners. The Company will reimburse
such persons for their reasonable expenses incurred in that connection.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders that are intended to be presented by such
shareholders at the Company's 1999 Annual Meeting must be received by the
Company no later than December 9, 1998 in order that such proposals may be
included in the proxy statement and form of proxy relating to that meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Bylaws provide that the Company shall have not less than
three nor more than 10 directors, with the exact number set by the Board of
Directors. The size of the Board of Directors is currently set at five
directors.
The directors of the Company are divided into three classes. One class of
directors is elected each year and the members of such class will hold office
for a three-year term and until their successors are duly elected and qualified
or until their death, resignation or removal from office. Class 1 consists of
Walter Goodman and David M. Tully, whose terms will expire at the 1999 Annual
Meeting of Shareholders; Class 2 consists of Raymond B. Ferguson and C. Marcus
Sorenson, whose terms will expire at the 2000 Annual Meeting of Shareholders;
and Class 3 consists of Greg C. Mackie, whose term will expire at the 1998
Annual Meeting of Shareholders.
At the Meeting, one Class 3 director will be elected, to serve a three-year
term until the 2001 Annual Meeting and until his successor is elected and
qualified. The nominee for Class 3 director is Greg C. Mackie (the "Nominee"),
who is currently a member of the Board of Directors of the Company. The Board
of Directors recommends a vote FOR the Nominee. The persons named on the
enclosed proxy (the proxy holders) will vote for election of the Nominee unless
you have withheld authority for them to do so on your proxy card. If the
Nominee is unable or declines for good cause to serve as a director at the time
of the Meeting, the proxies will be voted for any nominee named by the current
Board of Directors to fill the vacancy. As of the date of this Proxy Statement,
the Board of Directors is not aware that the Nominee is unable and/or will
decline to serve as a director. There is no cumulative voting for election of
directors.
The Company's directors, including the Nominee, executive officers and key
employees are as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------ ------ -----------------------------------------------------------
<S> <C> <C>
NOMINEE:
Greg C. Mackie(1)(2) 48 President, Chief Executive Officer and Director (Class 3)
CONTINUING DIRECTORS:
Raymond B. Ferguson(1)(2)(3) 52 Director (Class 2)
Walter Goodman(1)(3) 74 Director (Class 1)
C. Marcus Sorenson(3) 50 Director (Class 2)
David M. Tully(2) 54 Secretary, Treasurer and Director (Class 1)
OTHER EXECUTIVE OFFICERS AND
KEY EMPLOYEES:
Roy D. Wemyss 47 Executive Vice President and Chief Operating Officer
William A. Garrard 43 Vice President and Chief Financial Officer
Patric L. Wiesmann 36 Vice President--Marketing and Business Development
David E. Firestone 46 Vice President--Product Development
Robert A. May 44 Vice President--Manufacturing
Ron M. Koliha 47 Director of Marketing and Communications
</TABLE>
- --------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Option Committee
NOMINEE
GREG C. MACKIE founded the Company in 1988 and since then has served as
its President and Chief Executive Officer and as a director. From 1978 to
1985, he was President of Audio Control Corporation ("Audio Control"), a
company he co-founded, which specialized in equalizers and analyzers for the
home consumer electronics market. From 1970 to 1978, Mr. Mackie was
President of Technical Audio Products Company (TAPCO), also a company he
co-founded, which is generally credited with pioneering the professional
multi-channel live music mixer as a discrete product.
CONTINUING DIRECTORS
RAYMOND B. "BUCK" FERGUSON has been a director of the Company since March
1997. Since 1994, Mr. Ferguson has been a consultant regarding business and
real estate matters. From 1983 to 1994, he held various positions at Microsoft
Corporation, including Senior Director of Administration and Senior Director of
Investor Relations. Mr. Ferguson received his J.D. degree from Duke University
School of Law in 1970.
WALTER GOODMAN has been a director of the Company since 1995. Since 1993,
Mr. Goodman has acted as consultant to companies in the audio industry. From
1967 to 1993, he held various positions with Harman International ("Harman"), an
audio company that owns several of the Company's major competitors including
Soundcraft Ltd., Allen & Heath Brenell Ltd., and DOD Electronics Corporation.
Mr. Goodman was Chairman and Chief Executive Officer of Harman from 1977 to 1980
and was President of its International Division from 1972 to 1977 and from 1980
to 1993. Mr. Goodman served on the Board of Governors of the Electronic
Industries Association from 1963 to 1980, was President of the Institute of High
Fidelity from 1970 to 1972 and was inducted into the Audio Hall of Fame in 1979.
C. MARCUS SORENSON has been a director of the Company since 1990. Since
1975, he has been President and owner, together with his wife, Judith B.
Sorenson, of C.M. Sorenson Company, Inc., dba Calwest Marketing South, a
manufacturers' representative and distributor of consumer and professional
electronics which acted as the Company's exclusive representative for southern
California and southern Nevada through January 1997.
3
<PAGE>
Mr. Sorenson is also a partner in Blacker-Sorenson Audio Group which has
acted since January 1997 as the Company's exclusive representative for
southern California and southern Nevada.
DAVID M. TULLY has been Secretary, Treasurer and a director of the Company
since its inception in 1988. From 1975 to 1994, Mr. Tully was the owner and
President of Priebe Electronics, a major supplier of components to the Company
and a division of Quadra Investment Ltd. He is currently President of SMB
Corporation, a holding company.
OTHER EXECUTIVE OFFICERS AND KEY EMPLOYEES
ROY D. WEMYSS was appointed Executive Vice President and Chief Operating
Officer of the Company in April 1997; he served as the Company's interim Chief
Operating Officer from November 1996 until his appointment. From 1993 to 1996,
Mr. Wemyss was involved in several start-up operations, primarily engaged in
product development. From 1990 to 1993, Mr. Wemyss served as Senior Vice
President of James Hardie Building Boards Inc., a gypsum and fiber cement
company. From 1987 to 1990, he served as James Hardie Gypsum Inc.'s Vice
President--General Manager and, from 1985 to 1987, served as general manager of
Norwest Gypsum. From 1983 to 1984, Mr. Wemyss was Financial Controller, then
Production Manager, of Sauder Industries, Limited (Trufit Division). From 1972
to 1983, he was on the professional staff of Price Waterhouse, a public
accounting firm, at various international locations.
WILLIAM A. GARRARD has served as Vice President and Chief Financial Officer
of the Company since June 1997. During May and June 1997, he served as a
consultant to the Company. Mr. Garrard holds the professional designation of
Chartered Accountant, granted by the Institute of Chartered Accountants of
British Columbia. From 1993 until he joined the Company, he operated an
independent public accounting business. From 1978 to 1993, Mr. Garrard was on
the professional staff of Price Waterhouse.
PATRIC L. WIESMANN was appointed Vice President--Marketing and Business
Development of the Company in January 1997. From 1992 to 1996, Mr. Wiesmann was
Vice President of Sales & Marketing of Lang Manufacturing Company, a
manufacturer of commercial and marine cooking equipment sold worldwide. From
1988 to 1992, Mr. Wiesmann was Regional Manager and Corporate Sales Manager of
Baxter Healthcare Corporation and, from 1984 to 1988, was a Regional Manager and
sales representative for American Hospital Supply Corporation.
DAVID E. FIRESTONE served as Vice President--Sales and Marketing of the
Company from 1992 until January 1997 at which time he was appointed Vice
President--Product Development. From 1987 to 1992, he held sales and product
development positions with JBL Professional, a subsidiary of Harman, and was
Sales Manager for Audio Control from 1982 to 1987.
ROBERT A. MAY has served as Vice President-Manufacturing of the Company
since July 1997. From 1995 until he joined the Company, Mr. May was Vice
President-Manufacturing at Physio-Control Corporation, the leading developer and
manufacturer of cardiac defibrillators ("Physio-Control"). He held other
positions with Physio-Control in Manufacturing and Quality Assurance from 1991
to 1994. Prior to joining Physio-Control, Mr. May was involved in the
development and manufacture of ophthalmic devices, holding positions in the
areas of Product Development, Research and Development, Business Development,
and Manufacturing.
RON M. KOLIHA has been employed by the Company since 1992; he currently
serves as Director of Marketing and Communications. From 1989 to 1992, he
served as a marketing and advertising consultant to the Company. From 1984 to
1989, he was Communications Director of Rogersound Lab Inc., a consumer
electronics retail chain. From 1980 to 1984, Mr. Koliha was Director of
Marketing at Audio Control. Mr. Koliha has also been Assistant Creative
Director and Senior Copywriter at several New York and Seattle advertising
agencies and is the recipient of numerous advertising awards.
4
<PAGE>
BOARD MEETINGS, NOMINATIONS BY SHAREHOLDERS AND COMMITTEES
The Board of Directors of the Company held a total of 10 meetings during
the year ended December 31, 1997.
The Board of Directors acts as a nominating committee for selecting
nominees for election as directors. The Company's bylaws also permit
shareholders to make nominations for the election of directors, if such
nominations are made pursuant to timely notice in writing to the Company's
Secretary. To be timely, notice must be delivered to, or mailed to and
received at, the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the date of the meeting, provided that at
least 60 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders. If less than 60 days' notice or prior
public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be received by the
Company not later than the close of business on the tenth day following the
date on which such notice of the meeting was mailed or such public disclosure
was made. Public disclosure of the date of the Meeting was made in a press
release on March 18, 1998. A shareholder's notice of nomination must also
set forth certain information specified in Section 2.3.2 of the Company's
bylaws concerning each person the shareholder proposes to nominate for
election and the nominating shareholder.
The Company's Board of Directors currently has an Audit Committee, a
Compensation Committee and an Option Committee. The Audit Committee
recommends engagement of the Company's independent certified public
accountants, reviews the scope of the audit, considers comments made by the
independent certified public accountants with respect to accounting
procedures and internal controls and the consideration given thereto by
management, and reviews internal accounting procedures and controls with the
Company's financial and accounting staff; the Audit Committee, which
currently consists of Messrs. Ferguson, Goodman and Mackie, held one meeting
in 1997. The Compensation Committee reviews executive compensation and
establishes executive compensation levels; the Compensation Committee, which
currently consists of Messrs. Ferguson, Mackie and Tully, met twice in 1997.
The Option Committee administers the Company's Amended and Restated 1995
Stock Option Plan and currently consists of Messrs. Ferguson and Goodman;
during 1997, the Option Committee held four meetings.
During 1997, no director attended fewer than 75% of the aggregate of (i)
the total number of meetings of the Board of Directors and (ii) the total
number of meetings of all committees of the Board of Directors on which such
director served (during the period he served).
DIRECTOR COMPENSATION
For serving as directors of the Company, each director who is not an
employee of the Company ("Outside Director") is paid (i) an annual fee of
$7,500, payable in quarterly payments of $1,875; (ii) a $1,000 fee for each
Board meeting attended in person ($500 if attended by telephone); and (iii) a
$500 fee for each Board committee meeting attended in person ($250 if
attended by telephone). The Company also reimburses travel and lodging
expenses incurred in connection with attending meetings of the Board and its
committees. Each newly appointed Outside Director is entitled to receive
10,000 non-qualified stock options pursuant to the terms of the Company's
Amended and Restated 1995 Stock Option Plan (the "Option Plan"). In
addition, each director is entitled to receive 5,000 non-qualified stock
options pursuant to the terms of the Option Plan in recognition of his or her
service on the Board during the preceding year, which awards are made each
December; no director, however, who was otherwise awarded options for service
on the Board during the same fiscal year would be eligible to receive such an
award.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid by the Company to its Chief Executive Officer and the three
other most highly compensated executive officers (collectively, the "Named
Executives") during the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------- ------------------
AWARDS
------------------
OTHER ANNUAL SHARES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION UNDERLYING OPTIONS
- ------------------------------------------------------------------------------------------------- ------------------
<S> <C> <C> <C> <C> <C>
Greg C. Mackie 1995 $ 91,999 $254,805 -- --
President and Chief Executive 1996 175,000 200,732 -- --
Officer 1997 175,000 74,828 -- 255,000
Roy D. Wemyss 1996 -- -- $ 25,752(1) --
Executive Vice President and 1997 118,686 28,641 122,343(1) 200,000
Chief Operating Officer
Patric L. Wiesmann(2) 1997 143,750 41,906 -- 150,000
Vice President--Marketing and
Business Development
David E. Firestone 1995 85,000 75,631 500(3) 140,500
Vice President--Product 1996 90,000 75,691 500(3) --
Development 1997 90,000 26,364 400(3) --
</TABLE>
- --------------------
(1) Mr. Wemyss served as the Company's interim Chief Operating Officer
from November 1996 through April 1997 and during that period was paid
as a consultant. These amounts consist of consulting fees paid to a
corporation owned by Mr. Wemyss.
(2) Mr. Wiesmann joined the Company in January 1997.
(3) Consists of matching contributions made by the Company under its
401(k) profit-sharing plan. Salary deferrals into the 401(k) plan are
included in the Salary column.
The following table provides information with respect to the Named
Executives concerning the grants of options during the year ended December 31,
1997.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ACCRUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
---------------------------------------------------------------- -------------------------------
PERCENT OF
TOTAL
OPTIONS
GRANTED TO
NUMBER OF SHARES EMPLOYEES EXERCISE
UNDERLYING IN FISCAL PRICE PER EXPIRATION
NAME OPTIONS GRANTED YEAR SHARE DATE 5% 10%
- ----------------- --------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg C. Mackie 255,000 26.6% $6.50 12/17/97 $1,042,950 $2,641,800
Roy D. Wemyss 200,000 20.8 6.00 04/28/07 754,000 1,912,000
Patric L. Weismann 150,000 15.6 6.00 04/28/97 565,500 1,434,000
David E. Firestone -- -- -- -- -- --
</TABLE>
- --------------------
(1) The potential realizable value is calculated based upon the term of the
option at its time of grant (10 years) and is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for
the appreciated price. The 5% and 10% assumed rates of appreciation are
derived from the rules of the Securities and Exchange Commission and do
not represent the Company's estimates or projection of the future Common
Stock price. There can be no assurance that the Common Stock will
appreciate at any particular rate or at all in future years.
The following table provides information with respect to the Named
Executives concerning the exercise of options during the last fiscal year and
unexercised options held as of December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
OPTIONS AT FY-END MONEY OPTIONS AT FY-END(1)
SHARES ACQUIRED VALUE ------------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Greg C. Mackie -- -- -- 255,000 -- --
Roy D. Wemyss -- -- -- 200,000 -- $50,000
Patric L. Weismann -- -- -- 150,000 -- 37,500
David E. Firestone -- -- 140,500 -- $98,305 --
</TABLE>
- --------------------
(1) Amounts reflected are based upon the market value of the Common Stock as
of December 31, 1997 ($6.25) minus the applicable exercise price,
multiplied by the number of shares underlying the options.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(*)
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors, composed of
Raymond B. Ferguson, Greg C. Mackie and David M. Tully, is responsible for
setting and administering the policies and programs that govern compensation
for the executive officers of the Company. The Board of Directors' Option
Committee ("Option Committee"), composed of Raymond B. Ferguson and Walter
Goodman, administers the Company's Amended and Restated 1995 Stock Option
Plan (the "Option Plan"). The goal of the Company's executive compensation
policy is to ensure that an appropriate relationship exists between
compensation and corporate performance, while at the same time attracting,
motivating and retaining executive officers.
The key components of the Company's compensation program are base salary
and cash bonuses, as well as potential long-term compensation through stock
options. These components are administered with the goal of providing total
compensation that is competitive in the marketplace, rewards successful
financial performance and aligns executive officers' interests with those of
stockholders. The Compensation Committee reviews executive compensation on
an annual basis, or more often if necessary, and determines, subject to the
Board's approval, base salary and cash bonuses for executive officers. The
Option Committee makes all decisions with respect to stock option grants.
MANAGEMENT INCENTIVE PLAN
The Compensation Committee believes that a significant proportion of
total cash compensation for executive officers should be a function of the
Company's performance. This approach creates a direct incentive for
executive officers to achieve desired performance goals and places a
significant percentage of each executive officer's compensation at risk.
Consequently, the Compensation Committee has established and administers the
Company's Management Incentive Plan (the "Management Incentive Plan"), a
bonus program based on the Company's achievement of certain earnings criteria
which is available to executive officers and key employees the Committee
designates from time to time. Each participant is entitled to receive a
percentage of a bonus pool, with the amount and timing of the pool and each
individual's percentage participation established by the Compensation
Committee. The Management Incentive Plan shall continue from year to year
until terminated by the Board of Directors.
For 1997, the Compensation Committee set the monthly bonus pool at 6.4%
of the Company's post-bonus operating income up to a maximum amount each
month and subject to certain minimum performance levels. In 1997, bonuses
aggregating $222,764 were paid to seven executive officers and one key
employee of the Company.
For 1998, the Compensation Committee has adopted a plan that provides
for quarterly and annual bonuses payable once predetermined minimum earnings
levels are achieved by the Company.
EQUITY PARTICIPATION
The Company uses stock options granted under its Option Plan both to
reward past performance and to motivate future performance, especially
long-term performance. The Compensation Committee believes that through the
use of stock options, executive interests are directly tied to enhancing
shareholder value. Stock options under the Option Plan have a term of 10
years and generally vest 25% per year, beginning on the first anniversary
date of the grant. Under the Option Plan as it is proposed to be amended at
the 1998 Annual Meeting of Shareholders, a maximum of 3,500,000 shares of the
Company's Common Stock may be issued.
- --------------------
(*) 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 either the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended
(together, the "Acts"), except to the extent that the Company specifically
incorporates such report by reference; and further, such report shall not
otherwise be deemed filed under the Acts.
8
<PAGE>
The stock options provide value to the recipients only when the market
price of the Company's Common Stock increases above the option grant price
and only as the shares vest and become exercisable. While option grants are
made by the Option Committee, the Compensation Committee considers these
grants in making its cash compensation decisions.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation is set using the Compensation
Committee's general philosophy as described above and consequently is subject
in large part to the Company's performance. In 1997, Mr. Mackie received a
base salary of $175,000 and bonuses totaling $74,828 pursuant to the bonus
program described above. In 1997, he was also granted options to purchase
255,000 shares of Common Stock under the Option Plan.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Compensation Committee has considered the impact of Section 162(m)
of the Internal Revenue Code adopted under the Omnibus Budget Reconciliation
Act of 1993, which section disallows a deduction for any publicly held
corporation for individual compensation exceeding $1 million in any taxable
year for the CEO and the four other most highly compensated executive
officers, unless such compensation meets certain exceptions to the general
rule. Compensation paid by the Company to each of its executive officers in
1997 was well below $1 million, and therefore Section 162(m) did not affect
the tax deductions available to the Company. The Committee will continue to
monitor the applicability of the section to the Company's compensation
programs and will determine at a later date what actions, if any, the Company
should take to qualify for available tax deductions.
COMPENSATION COMMITTEE
Raymond B. Ferguson
Greg C. Mackie
David M. Tully
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since its formation in 1995, the Compensation Committee has consisted of
Greg C. Mackie, David M. Tully and a third outside director. Mr. Mackie is
President and Chief Executive Officer of the Company and Mr. Tully is its
Secretary/Treasurer. No member of the Compensation Committee or executive
officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of January 31, 1998, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each of the Company's Named
Executives, (iii) each director and (iv) all current executive officers and
directors as a group.
9
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT OF OUTSTANDING
DIRECTORS, NAMED EXECUTIVES AND 5% SHAREHOLDERS BENEFICIALLY OWNED(1) SHARES BENEFICIALLY OWNED
- ------------------------------------------------------- --------------------- --------------------------
<S> <C> <C>
Greg C. Mackie(2)(3) 5,310,000 41.9%
C. Marcus Sorenson and Judith B. Sorenson(2)(4) 2,550,000 20.1%
David M. Tully(2)(5) 2,415,000 19.1%
Roy D. Wemyss 6,400 *
Patric L. Weismann -- --
David E. Firestone(6) 140,500 1.1%
Walter Goodman(7) 40,000 *
Raymond B. Ferguson(8) 8,000 *
All directors and executive officers as a group 10,469,900 81.7%
(ten persons)(9)
</TABLE>
- --------------------
* Less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of January 31, 1998, the date of
this table, upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are
held by such person (but not those held by another person) and that are
exercisable within 60 days of January 31, 1998 have been exercised.
Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
(2) The address of the shareholder is care of Mackie Designs Inc., 16220
Wood-Red Road, N.E., Woodinville, Washington 98072.
(3) Includes 232,200 shares held by four trusts for the benefit of Mr.
Mackie's immediate family. Mr. Mackie serves as trustee of each of
these trusts.
(4) C. Marcus Sorenson and Judith B. Sorenson are husband and wife.
Includes 480,000 shares held by six trusts for the benefit of the
Sorensons' children and grandchildren. The Sorensons serve as
co-trustees of each of these trusts. Mrs. Sorenson has granted Mr.
Sorenson a proxy to vote the 2,020,000 shares they jointly own, which
proxy expires in July 2000 or upon earlier revocation by Mrs. Sorenson.
(5) Includes 405,400 shares held by two trusts for the benefit of Mr.
Tully's children. Mr. Tully serves as trustee of both of these trusts.
(6) Consists of shares subject to options exercisable within 60 days of
January 31, 1998.
(7) Includes 5,000 shares subject to options exercisable within 60 days of
January 31, 1998.
(8) Consists of shares held jointly with Mr. Ferguson's wife.
(9) Includes 145,500 shares subject to options exercisable within 60 days of
January 31, 1998.
CERTAIN TRANSACTIONS
Blacker-Sorenson Audio Group ("Blacker-Sorenson"), a company in which C.
Marcus Sorenson is a partner, acted as the Company's exclusive manufacturers'
representative for southern California and southern Nevada in 1997.
Blacker-Sorenson received payments from the Company pursuant to this
arrangement of $291,621 in 1997.
In December 1994, the Company entered into a lease with Mackie Holdings,
L.L.C. ("Mackie Holdings"), a limited liability company beneficially owned by
Greg C. Mackie, C. Marcus Sorenson, Judith B. Sorenson and David M. Tully,
that expires December 31, 2004 for office and manufacturing facilities. The
monthly rent under
10
<PAGE>
this lease is $56,613, adjusted annually for changes in the consumer price
index. Taxes, insurance, utilities and maintenance are the responsibility of
the Company. During 1997, Mackie Holdings was paid a total of $679,359 in
rent pursuant to this lease. The Company believes that the lease is on terms
at least as favorable to the Company as might have been obtained from
unaffiliated parties.
Prior to being appointed Chief Operating Officer of the Company in April
1997, Roy D. Wemyss acted as a consultant to the Company. From January 1
through April 27, 1997, the Company paid LaPanache Corporation, a company
partly owned by Mr. Wemyss, a total of $122,343 in consulting fees.
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return for
the Company's stock at December 31, 1997 since August 18, 1995 (the date on
which the Company's stock was first traded on the Nasdaq National Market
System after its initial public offering) to the cumulative return over such
period of (i) the Total Return Index of the Nasdaq Stock Market - US and (ii)
the Total Return Index of the Nasdaq Stock Market - Electronic Components.
The graph assumes that on August 18, 1995 $100 was invested in the Common
Stock of the Company and in each of the comparative indices. The stock price
performance on the following graph is not necessarily indicative of future
stock price performance.
[graph inserted here in physical document]
<TABLE>
<CAPTION>
8/18/95 12/31/95 12/31/96 12/31/97
----------------------------------------------
<S> <C> <C> <C> <C>
Mackie Designs Inc. ................ $100.00 $ 78.95 $ 45.61 $ 43.86
Nasdaq - US ........................ 100.00 102.43 126.00 154.60
Nasdaq - Electronic Components...... 100.00 82.21 142.12 149.00
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's directors,
its officers and any persons holding more than 10% of the Company's Common
Stock must report their initial ownership to the Securities and Exchange
Commission ("SEC"). Specific filing deadlines of these reports have been
established, and the Company must disclose in this Proxy Statement any
failure to file by these dates during the fiscal year ended December 31,
1997. The Company believes that all of these filing requirements have been
satisfied. In making this statement the Company has relied solely on written
representations of its directors and officers and any 10% holders and copies
of the reports that they filed with the SEC.
12
MACKIE DESIGNS INC.
SECOND
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
<PAGE>
MACKIE DESIGNS INC.
SECOND AMENDED AND RESTATED
1995 STOCK OPTION PLAN
1. Purposes. The purposes of this Mackie Designs Inc. Second Amended and
Restated 1995 Stock Option Plan ("Plan") are to:
1.1 Closely associate the interests of the management of Mackie
Designs Inc. ("Company") and its subsidiaries with the shareholders of the
Company by reinforcing the relationship between participants' rewards and
shareholder gains;
1.2 Provide management with an equity ownership in the Company
commensurate with the Company's and its subsidiaries' performance as
reflected in increased value of the Company's common shares;
1.3 Maintain competitive compensation levels;
1.4 Provide a means whereby the Company can continue to attract,
motivate, and retain key employees who can contribute materially to the
Company's and its subsidiaries' growth and success; and
1.5 Provide a means whereby the Company and its subsidiaries can
continue to attract, motivate and retain the services of selected
non-employee agents, consultants, advisors, persons involved in the sale or
distribution of the Company's and its subsidiaries' products and
independent contractors of the Company and its subsidiaries.
2. Administration. This Plan shall be administered by the Board of
Directors of the Company ("Board") or, in the event the Board shall appoint
and/or authorize a committee to administer this Plan, by a committee of the
Board consisting of at least two (2) non-employee directors ("Committee"). The
administrator of this Plan, whether the Board or Committee, shall hereinafter be
referred to as the "Plan Administrator." The Plan Administrator shall administer
the Plan in accordance with the following:
2.1 Incapacity of Plan Administrator. No member of the Board or the
Committee shall vote with respect to the granting of an option created
under this Plan ("Option(s)") to himself or herself. Any Option granted to
a director for his or her services as such shall not be effective until
approved by the full Board.
2.2 Registration Under The Securities Act. If the Company registers
any of its equity securities pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") and any
officers or directors are eligible to receive Options, the following
provisions shall apply to the administration of this Plan with respect to
grants made to directors, officers or other Optionees (as hereinafter
defined) affected by Section 16(b) of the Exchange Act. The Plan
Administrator shall be
<PAGE>
constituted at all times so as to meet the requirements of Section 16(b) of
the Exchange Act, as amended from time to time. The members of any
committee serving as Plan Administrator shall be appointed by the Board for
such term as the Board may determine. The Board may from time to time
remove members from, or add members to, the committee. Vacancies on the
committee, however caused, may be filled by the Board. Currently, the Plan
Administrator is a Committee, of which all members are disinterested. If,
at any time, an insufficient number of disinterested non-employee directors
is available to serve on such committee, interested non-employee directors
may serve on the committee; however, during such time, no Options shall be
granted to any person if the granting of such Option would not meet the
requirements of Section 16(b) of the Exchange Act. For purposes of this
Section 2, a disinterested director shall be a member of the Board who
meets the definition of "disinterested person" as set forth in the rules
and regulations promulgated under Section 16(b) of the Exchange Act, as
amended from time to time (the "16(b) Rules"). Currently, a disinterested
director for purposes of this Section 2 is a member of the Board who for
one (1) year prior to service as an administrator of this Plan has not been
(and during service as a Plan Administrator, will not be) granted or
awarded equity securities, including options for equity securities pursuant
to this Plan or any other plan of the Company or its affiliates, except for
certain exclusions described in Rule 16b-3. For purposes of this Section 2,
a non-employee director shall be a member of the Board who meets the
definition of "non-employee director" as set forth in the 16(b) Rules.
Currently, a non-employee director is a member of the Board who (i) is not
currently an officer of the Company or a parent or subsidiary of the
Company, or otherwise currently employed by the Company or a parent or
subsidiary of the Company; (ii) does not receive compensation, either
directly or indirectly, from the Company or a parent or subsidiary of the
Company, for services rendered as a consultant or in any capacity other
than as a director, except for an amount that does not exceed the dollar
amount for which disclosure would be required pursuant to Item 404(a) of
Regulation S-K promulgated under the Exchange Act (("S-K"); (iii) does not
possess an interest in any other transaction for which disclosure would be
required pursuant to Item 404(b) of S-K; and (iv) is not engaged in a
business relationship for which disclosure would be required pursuant to
Item 404(b) of S-K.
2.3 Procedures. The Board may designate one of the members of the Plan
Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum
exists, or acts reduced to or approved in writing by all Plan Administrator
members, shall be valid acts of the Plan Administrator.
2.4 Responsibilities. Except for the terms and conditions explicitly
set forth in this Plan, the Plan Administrator shall have the authority, in
its discretion, to determine all matters relating to the Options, including
selection of the individuals to be granted Options, the number of shares to
be subject to each Option, the exercise price for such Option ("Exercise
Price"), and all other terms and conditions of the Options. The
<PAGE>
interpretation and construction by the Plan Administrator of any terms or
provisions of this Plan or any Option, or of any rule or regulation
promulgated in connection with this Plan, shall be conclusive and binding
on all interested parties, so long as such interpretation and construction
with respect to incentive stock options correspond to the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended ("Code"), and
the regulations issued thereunder, and any amendment or successor sections
or regulations.
2.5 Section 16(b) Compliance and Bifurcation of Plan. If the Company
registers any of its equity securities pursuant to Sections 12(b) and 12(g)
of the Exchange Act, it is the intention of the Company that this Plan then
comply in all respects with Rule 16b-3 under the Exchange Act and, if any
Plan provision is later found not to be in compliance with such Section,
the provision shall be deemed null and void. In all events, the Plan shall
be construed in favor of its meeting the requirements of Rule 16b-3.
Notwithstanding anything in the Plan to the contrary, the Board, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are
officers and directors subject to Section 16(b) of the Exchange Act without
so restricting, limiting or conditioning the Plan with respect to other
participants.
3. Stock Subject to This Plan. The stock subject to this Plan shall be the
Company's common stock ("Common Stock"). The Company shall have authorized and
have in reserve for issuance at the time of exercise of any Option a sufficient
number of shares of Common Stock to meet the Company's obligation. The maximum
number of shares of Common Stock which may be issued under the Plan shall be
three million five hundred thousand (3,500,000). If any Option expires or is
surrendered, exchanged for another Option, cancelled or terminated for any
reason without having been exercised in full, the unpurchased shares subject to
such Option shall again be available for purposes of this Plan, including for
replacement Options which may be granted in exchange for such expired,
exchanged, surrendered, cancelled or terminated Options.
4. Eligibility. An incentive stock option in accordance with Section 422 of
the Code ("Incentive Option") may be granted only to an individual who, at the
time the option is granted, is an employee of the Company or a related
corporation, as defined below, and who the Plan Administrator may from time to
time select for participation in this Plan. Members of the Board shall not be
eligible for grants of Incentive Options unless they are also employees of the
Company or any of its related corporations. At the discretion of the Plan
Administrator, employees, officers, directors of the Company or any of its
related corporations (including non-employee directors), selected non-employee
agents, consultants, advisors, persons involved in the sale or distribution of
the Company's or related corporations' products and independent contractors of
the Company or any of its related corporations also may receive stock options
which are not qualified under Section 422 of the Code ("Nonqualified Option")
(Qualified and Nonqualified Options are included collectively within the term
"Options" as used in this Plan). Any party to whom an Option is granted shall be
referred to as an "Optionee."
<PAGE>
As used in this Plan, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of one of the
other corporations in such chain. When referring to a parent corporation, the
term "related corporation" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of one of the other corporations in such chain.
5. Terms and Conditions of Options. Options granted under this Plan shall
be evidenced by written agreements which shall contain such terms, conditions,
limitations and restrictions as the Plan Administrator shall deem advisable and
which are not inconsistent with this Plan. Notwithstanding the foregoing, Option
agreements shall include or incorporate by reference the following terms and
conditions:
5.1 Number of Shares. Each Option agreement shall state the number of
shares of stock subject to the Option;
5.2 Option Price. The Option agreement shall state the Exercise Price
per share, and the Plan Administrator shall act in good faith to establish
the Exercise Price as follows:
5.2.1 Incentive Options. Subject to subsection 5.2.3, the
Exercise Price of Incentive Options shall be not less than the fair
market value per share of the Common Stock at the time the Incentive
Option is granted;
5.2.2 Incentive Options to Greater than 10% Shareholders. With
respect to Incentive Options granted to shareholders then holding
greater than ten percent (10%) of the then-issued and outstanding
shares of voting stock of the Company, the Exercise Price shall be as
required by Section 6;
5.2.3 Fair Market Value. With respect to Incentive Options, the
fair market value per share of the Common Stock shall be determined by
the Plan Administrator in good faith at the time the Incentive Option
is granted;
5.2.4 Nonqualified Options. The Exercise Price of Nonqualified
Options shall be as is determined by the Plan Administrator in good
faith at the time of their issuance.
5.3 Term, Maturity and Vesting. Subject to the restrictions contained
in Sections 5.8 and 6, the term of each Incentive Option shall be ten (10)
years from the date it is granted unless a shorter period of time is
established by the Plan
<PAGE>
Administrator, but in no event shall the term of any Incentive Option
exceed ten (10) years. The term of each Nonqualified Option shall also be
ten (10) years from the date it is granted unless a shorter period of time
is established by the Plan Administrator. The Plan Administrator shall
specify which Options granted hereunder are Incentive Options and which are
Nonqualified Options.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at
the time of grant; provided, that if no vesting schedule is specified at
the time of grant, the Option shall vest according to the following
schedule:
<TABLE>
<CAPTION>
Number of Years Percentage of
Following Date of Grant Total Option Vested
- ------------------------------------------------- ----------------------
<S> <C>
One ............................... 25%
Two ............................... 50%
Three .............................. 75%
Four ............................... 100%
</TABLE>
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services
related to the achievement of the performance objectives. Performance
objectives shall be expressed in terms of one or more of the following:
return on equity, return on assets, share price, market share, sales,
earnings per share, costs, net earnings, net worth, inventories, cash and
cash equivalents, gross margin or the Company's performance relative to its
internal business plan. Performance objectives may be in respect of the
performance of the Company as a whole (whether on a consolidated or
unconsolidated basis), a related corporation, or a subdivision, operating
unit, product or product line of either of the foregoing. Performance
objectives may be absolute or relative and may be expressed in terms of a
progression or a range. An option which is exercisable (in whole or in
part) upon the achievement of one or more performance objectives may be
exercised only following written notice to the Optionee and the Company by
the Plan Administrator that the performance objective has been achieved.
5.4 Exercise. Subject to the limitations on exercise described in
subsection 5.3 above and any additional holding period required by
applicable law, each Option may be exercised in whole or in part; provided,
however, that only whole shares will be issued pursuant to the exercise of
any Option. During an Optionee's lifetime, any Options granted under this
Plan are personal to him or her and are exercisable solely by such
Optionee. Options shall be exercised by delivery to the Company of a
written notice of the number of shares with respect to which the Option is
to be exercised, together with payment of the Exercise Price in accordance
with Section 5.5.
<PAGE>
5.5 Payment of Exercise Price. Payment of the Exercise Price shall be
made in full at the time the written notice of exercise of an Option is
delivered to the Company, and shall be in cash, bank certified or cashier's
check or personal check (unless at the time of exercise the Plan
Administrator in a particular case determines not to accept a personal
check) for the Common Stock being purchased. The Plan Administrator can
determine in its discretion (i) at the time an Incentive Option is granted,
or (ii) at any time before exercise of Nonqualified Options, that
additional forms of payment will be permitted, including installment
payments on such terms and over such period as the Plan Administrator may
determine. To the extent permitted by the Plan Administrator and applicable
laws and regulations (including, but not limited to, federal tax and
securities laws and regulations and state corporate law), an option may be
exercised by:
5.5.1 Delivery of Common Stock. Delivery of shares of Common
Stock held by an Optionee having a fair market value equal to the
Exercise Price, such fair market value to be determined in good faith
by the Plan Administrator;
5.5.2 Delivery of Promissory Note. Delivery of a full-recourse
promissory note executed by the Optionee; provided that (i) such note
if delivered in connection with an Incentive Option shall, and such
note if delivered in connection with a Nonqualified Option may, bear
interest at a rate specified by the Plan Administrator, but in no case
less than the rate required to avoid imputation of interest (taking
into account any exceptions to the imputed interest rules) for federal
income tax purposes; (ii) the Plan Administrator shall specify the
term and other provisions of such note at the time an Incentive Option
is granted or at any time prior to exercise of a Nonqualified Option;
(iii) the Plan Administrator may require that the Optionee pledge the
Optionee's shares to the Company for the purpose of securing the
payment of such note, and may require that the certificate
representing such shares be held in escrow to perfect the Company's
security interest; (iv) the note provides that ninety (90) days
following the Optionee's termination of employment with the Company or
a related Corporation, the entire outstanding balance under the note
shall become due and payable, if not previously due and payable; and
(v) the Plan Administrator in its sole discretion may at any time
after granting an Option restrict or rescind the right to pay using a
promissory note upon written notification to any Optionee;
5.5.3 Delivery of Sale Proceeds. Delivery of a properly executed
written exercise notice, together with irrevocable instructions to a
broker, all in accordance with the regulations of the Federal Reserve
Board, to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price and any federal, state or local
withholding tax obligations that may arise in connection with the
exercise; provided, that the Plan Administrator may at any time
determine that this section 5.5.3, to the extent the instructions to
the broker call for an immediate sale of the shares, shall not be
available to any Optionee
<PAGE>
who is subject to Section 16(b) of the Exchange Act if such
transaction would result in a violation of Section 16(b), or if such
Optionee is not an employee at the time of exercise;
5.5.4 Delivery of Withholding Notice. Delivery of a properly executed
written exercise notice together with instructions to the Company to
withhold upon exercise, from the shares that would otherwise be
issued, that number of shares having a fair market value equal to the
Exercise Price.
5.6 Withholding Tax Requirement. The Company or any related entity
shall have the right to retain and withhold from any payment of cash or
Common Stock under this Plan the amount of taxes required by any government
to be withheld or otherwise deducted and paid with respect to such payment.
At its discretion, the Company may require an Optionee receiving shares of
Common Stock to reimburse the Company for any such taxes required to be
withheld by the Company, and may withhold any distribution in whole or in
part until the Company is so reimbursed. In lieu of such withholding or
reimbursement, the Company shall have the right to withhold from any other
cash amounts due or to become due from the Company to the Optionee an
amount equal to such taxes or to retain and withhold a number of shares
having a market value not less than the amount of such taxes required to be
withheld by the Company to reimburse the Company for any such taxes and
cancel (in whole or in part) any such shares so withheld. If required by
Section 16(b) of the Exchange Act, the election to pay withholding taxes by
delivery of shares held by any person who at the time of exercise is
subject to Section 16(b) of the Exchange Act, shall be made during the
quarterly 10-day window period required under Section 16(b) of the Exchange
Act for exercises of stock appreciation rights.
5.7 Non-assignability of Option. Options and the rights and privileges
conferred by this Plan shall not be transferred, assigned or pledged in any
manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, except that the Plan
Administrator may also in its discretion allow transferability of
Nonqualified Options only by gift to members of the Optionee's family,
including grandparents, parents, spouses, siblings, children, grandchildren
and great-grandchildren, or trusts or partnerships for the benefit of such
family members, or to charitable organizations. Options and the rights and
privileges conferred by this Plan shall not be subject to execution,
attachment or similar process. Any attempt to transfer, assign, pledge or
otherwise dispose of any Option or of any right or privilege conferred by
this Plan, contrary to the Code or to the provisions of this Plan, or the
sale or levy or any attachment or similar process upon the rights and
privileges conferred by this Plan shall be null and void. Notwithstanding
the foregoing, an Optionee may, during the Optionee's lifetime, designate a
person who may exercise the Option after the Optionee's death by giving
written notice of such designation to the Plan Administrator. Such
designation may be changed from time to time by the Optionee giving written
notice to the Plan Administrator revoking any earlier designation and
making a new designation. In the event that no such designation is
<PAGE>
made, the executor or personal representative of the Optionee's estate
shall have any rights then remaining to the Optionee or his estate under
this Plan.
5.8 Duration of Option. Vested Options shall terminate, to the extent
not previously exercised, upon the occurrence of the first of the following
events: (i) the expiration of the Option, as designated by the Plan
Administrator in accordance with Section 5.3 above; (ii) the date of an
Optionee's termination of employment with the Company or any related
corporation for cause (as determined in the sole discretion of the Plan
Administrator); (iii) the expiration of ninety (90) days from the date of
an Optionee's termination of employment with the Company or any related
corporation for any reason whatsoever other than cause, death or Disability
(as defined below) unless the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the
Option; or (iv) the expiration of one year from (A) the date of death of
the Optionee or (B) cessation of an Optionee's employment by reason of
Disability (as defined below) unless, the exercise period is extended by
the Plan Administrator until a date not later than the expiration date of
the Option. If an Optionee's employment is terminated by death, any Option
held by the Optionee shall be exercisable only by the person or persons to
whom such Optionee's rights under such Option shall pass by the Optionee's
will or by the laws of descent and distribution of the state or county of
the Optionee's domicile at the time of death. For purposes of the Plan,
unless otherwise defined in the Agreement, "Disability" shall mean any
physical, mental or other health condition which substantially impairs the
Optionee's ability to perform his or her assigned duties for one hundred
twenty (120) days or more in any two hundred forty (240) day period or that
can be expected to result in death. The Plan Administrator shall determine
whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination
of Disability, the Plan Administrator shall, for purposes of the Plan,
determine the date of an Optionee's termination of employment.
Unless accelerated in accordance with Section 7, unvested Options
shall terminate immediately upon termination of employment of the Optionee
by the Company for any reason whatsoever, including death or Disability.
For purposes of this Plan, transfer of employment between or among the
Company and/or any related corporation shall not be deemed to constitute a
termination of employment with the Company or any related corporation. For
purposes of this subsection with respect to Incentive Stock Options,
employment shall be deemed to continue while the Optionee is on military
leave, sick leave or other bona fide leave of absence (as determined by the
Plan Administrator). The foregoing not withstanding, employment shall not
be deemed to continue beyond the first ninety (90) days of such leave,
unless the Optionee's re-employment rights are guaranteed by statute or by
contract.
5.9 Status of Shareholder. Neither the Optionee nor any party to which
the Optionee's rights and privileges under the Option may pass shall be, or
shall have any of the rights or privileges of, a shareholder of the Company
with respect to any of the
<PAGE>
shares issuable upon the exercise of any Option unless and until such
Option has been exercised.
5.10 Right to Terminate Employment. Nothing in this Plan or in any
Option shall confer upon any Optionee any right to continue in the employ
of the Company or of a related entity, or to interfere in any way with the
right of the Company or of any related corporation to terminate, at will,
his or her employment or other relationship with the Company at any time.
5.11 Modification and Amendment of Option. Subject to the requirements
of Code Section 422 with respect to Incentive Options and to the terms,
conditions and limitations of this Plan, the Plan Administrator may modify
or amend outstanding Options. The modification or amendment of an
outstanding Option shall not, without the consent of the Optionee, impair
or diminish any of his or her rights or any of the obligations of the
Company under such Option. Except as otherwise provided in this Plan, no
outstanding Option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding Incentive Options shall be made in such a manner so as not to
constitute a "modification" as defined in Code Section 424(h) and so as not
to cause any Incentive Option to fail to continue to qualify as an
"incentive stock option" as defined in Code Section 422(b).
5.12 Limitation on Value for Incentive Options. As to all Incentive
Options, to the extent that the aggregate fair market value of the Common
Stock with respect to which Incentive Options are exercisable for the first
time by the Optionee during any calendar year (under this Plan and all
other incentive stock option plans of the Company, a related corporation or
a predecessor corporation) exceeds $100,000, those Options (or the portion
of an Option) beyond the $100,000 threshold shall be treated as
Nonqualified Options. If the Internal Revenue Service publicly rules,
issues a private ruling to the Company, any Optionee, or any legatee,
personal representative or distributee of an Optionee or issues regulations
changing or eliminating such annual limit, the dollar limitation in the
preceding sentence shall be adjusted correspondingly.
6. Greater Than 10% Shareholders. In the case of Incentive Options granted
to employees who own at the time of their grant ten percent (10%) or more of the
then-issued and outstanding voting stock of the Company, the following rules
shall apply:
6.1 Exercise Price and Term of Incentive Options. If Incentive Options
are granted to employees who own more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any related
corporation, the term of such individual's Incentive Options shall not
exceed five (5) years and the Exercise Price shall be not less than one
hundred ten percent (110%) of the fair market value of the Common Stock at
the time the Incentive Option is granted. This provision shall control
notwithstanding any contrary terms contained in an Option agreement or any
other document.
<PAGE>
6.2 Attribution Rule. For purposes of subsection 6.1, in determining
stock ownership, an employee shall be deemed to own such shares as are
owned by those persons or entities defined in Code Section 424. For
purposes of this Section 6, stock owned by an employee shall include all
stock actually issued and outstanding immediately before the grant of the
Incentive Option to the employee.
7. Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares for which Options may be granted under this Plan, the number and
class of shares covered by each outstanding Option and the Exercise Price per
share thereof (but not the total price), and each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend.
7.1 Effect of Liquidation, Reorganization or Change in Control.
7.1.1 Cash, Stock or Other Property for Stock. Except as provided
in subsection 7.1.2, upon a merger (other than a merger of the Company
in which the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition
of property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation
of the Company, as a result of which the shareholders of the Company
receive cash, stock or other property in exchange for or in connection
with their shares of Common Stock, any Option granted under this Plan
shall terminate, but the Optionee shall have the right immediately
prior to any such merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation to exercise such
Option in whole or in part, to the extent the vesting requirements set
forth in the Option agreement have been satisfied, unless stated
otherwise in the Optionee's individual Option agreement.
7.1.2 Conversion of Options on Stock for Stock Exchange. If the
shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common
Stock in any transaction involving a merger (other than a merger of
the Company in which the holders of Common Stock immediately prior to
the merger have the same proportionate ownership of Common Stock in
the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation or
reorganization (other than a mere reincorporation or the creation of a
holding company), all Options granted under this Plan shall be
converted into options to purchase shares of Exchange Stock unless the
Company and the Corporation issuing the Exchange Stock, in their sole
discretion, determine that any or all such Options shall not be
converted into options to purchase shares of Exchange Stock, but
instead shall terminate in accordance with the provisions of
subsection 7.1.1. The amount and price of converted options shall be
<PAGE>
determined by adjusting the amount and price of the Options in the
same proportion as used for determining the number of shares of
Exchange Stock the holders of the Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation or
reorganization. Unless accelerated by the Board, the exercise
limitations set forth in the Option agreement and the Plan shall
continue to apply for the Exchange Stock.
7.1.3 Change in Control. In the event of a "Change in Control",
as defined below, of the Company, unless otherwise determined by the
Board prior to the occurrence of such Change in Control, any Options
or portions of such Options outstanding as of the date such Change in
Control is determined to have occurred that are not yet fully vested
on such date shall become immediately exercisable in full.
7.1.4 Definition of "Change in Control". For purposes of this
Plan, a "Change in Control" shall mean (a) the first approval by the
Board or by the stockholders of the Company of an Extraordinary Event,
(b) a Purchase, or (c) a Board Change. For purposes of the Plan such
terms shall have the following meanings:
7.1.4.1an "Extraordinary Event" shall mean any of the
following actions: (i) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be
converted into cash, securities or other property, other than a
merger of the Company in which the holders of Common Stock
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger; (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of the
Company; or, (iii) the adoption of any plan or proposal for
liquidation or dissolution of the Company.
7.1.4.2a "Purchase" shall mean the acquisition by any person
(as such term is defined in Section 13(d) of the Exchange Act) of
any shares of Common Stock or securities convertible into Common
Stock without the prior approval of a majority of the Continuing
Directors (as defined below) of the Company, if after making such
acquisition such person is the beneficial owner (as such term is
defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of Securities of the Company representing twenty
percent (20%) or more of the combined voting power of the
Company's then outstanding securities (calculated as provided in
paragraph (d) of such Rule 13d-3).
7.1.4.3a "Board Change" shall have occurred if individuals
who constitute the Board of the Company at the time of adoption
of this Plan
<PAGE>
(the "Continuing Directors") cease for any reason to
constitute at least a majority of the Board, provided that any
person becoming a Director subsequent to the date of adoption of
this Plan whose nomination for election was approved by a vote of
at least a majority of the Continuing Directors (other than a
nomination of an individual whose initial assumption of office is
in connection with an actual threatened election contest relating
to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A under the Exchange Act)
shall be deemed to be a Continuing Director.
7.2 Fractional Shares. In the event of any adjustment in the
number of shares covered by any Option, any fractional shares
resulting from such adjustment shall be disregarded and each such
Option shall cover only the number of full shares resulting from such
adjustment.
7.3 Determination of Board to Be Final. All Section 7 adjustments
shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent of such adjustments, shall
be final, binding and conclusive. Unless an Optionee agrees otherwise,
any change or adjustment to an Incentive Option shall be made in such
a manner so as not to constitute a "modification" as defined in Code
Section 424(h) and so as not to cause his or her Incentive Option to
fail to continue to qualify as an incentive stock option as defined in
Code Section 422(b).
8. Securities Regulation. Shares shall not be issued with respect to an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant to the exercise of such Option shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance,
including the availability of an exemption from registration for the issuance
and sale of any shares under this Plan. Inability of the Company to obtain from
any regulatory body having jurisdiction, the authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares under
this Plan or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan shall relieve the Company of any
liability in respect of the non-issuance or sale of such shares as to which such
requisite authority shall not have been obtained.
As a condition to the exercise of any Option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws. At the option of the Company, a stop-transfer order against
any shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise
<PAGE>
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
HEREUNDER. Should any of the Company's capital stock of the same class as the
stock subject to Options be listed on a national securities exchange, all stock
issued under this Plan if not previously listed on such exchange shall be
authorized by that exchange for listing on such exchange prior to the issuance
of such stock.
9. Amendment and Termination. This Plan may be amended from time to time as
follows:
9.1 Board Action. The Board may at any time suspend, amend or
terminate this Plan; provided, that except as set forth in Section 7, the
approval of the Company's shareholders is necessary within twelve (12)
months before or after the adoption by the Board of any amendment which
will:
9.1.1 increase the number of shares which are to be reserved for
the issuance of Options;
9.1.2 permit the granting of stock options to a class of persons
other than those presently permitted to receive Options; or,
9.1.3 require shareholder approval under applicable law,
including Section 16(b) of the Exchange Act.
Any amendment made to this Plan which would constitute a
"modification" to Incentive Options outstanding on the date of such
amendment, shall not be applicable to such outstanding Incentive Options,
but shall have prospective effect only, unless the Optionee agrees
otherwise.
10. Automatic Termination. Unless sooner terminated by the Board, this Plan
shall terminate ten (10) years from the earlier of (i) the date on which this
Plan is adopted by the Board or (ii) the date on which this Plan is approved by
the shareholders of the Company. No Option may be granted after such termination
or during any suspension of this Plan. The amendment or termination of this Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option previously granted under this Plan.
11. Effectiveness of This Plan. This Plan shall become effective upon
adoption by the Board so long as it is approved by the Company's shareholders
any time within twelve (12) months before or after the adoption of this Plan.
<PAGE>
<PAGE>
MACKIE DESIGNS INC.
PROXY
16220 WOOD-RED ROAD, N.E.
WOODINVILLE, WASHINGTON 98072
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 19, 1998
The undersigned hereby appoints Greg C. Mackie and David M. Tully, or
each of them, as proxies, each with power of substitution, to vote for and on
behalf of the undersigned at the Annual Meeting of Shareholders of the
Company to be held on May 19, 1998, and at any adjournment thereof, upon
matters properly coming before the Meeting, as set forth in the related
Notice of Annual Meeting and Proxy Statement, both of which have been
received by the undersigned. Without otherwise limiting the general
authorization given hereby, said proxies are instructed to vote as follows:
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
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<PAGE>
<TABLE>
<S><C>
Please mark
your votes as / X /
indicated in
this example
FOR the nominee WITHHOLD AUTHORITY (THE BOARD OF DIRECTORS RECOMMENDS
listed below to vote for the nominee listed below A VOTE "FOR" PROPOSALS 1, 2 AND 3)
1. Election of / / / /
the following FOR AGAINST ABSTAIN
nominee for 2. To approve amendments to the / / / / / /
Director: Company's Amended and Restated
1995 Stock Option Plan.
Greg C. Mackie. FOR AGAINST ABSTAIN
3. Ratification of the selection / / / / / /
of Ernst & Young, LLP as the
independent auditors of the
Company for the fiscal year
ending December 31, 1998.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned holder.
If no direction is made, this proxy will be voted for Proposals 1, 2 and 3.
Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. 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 authorized person.
--------------------------------------------------------------
Signature
--------------------------------------------------------------
Signature if held jointly
Dated: , 1998
-------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
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</TABLE>
