UNIVERSAL DISPLAY
CORPORATION
375 Phillips Boulevard
Ewing, New Jersey
08618
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PROXY STATEMENT FOR
2010 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24,
2010
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INFORMATION
CONCERNING THIS SOLICITATION
The Board of Directors of Universal Display
Corporation (we, us or the “Company”) is soliciting proxies for the 2010 Annual
Meeting of Shareholders to be held on Thursday, June 24, 2010, at 4:00 p.m.,
Eastern Time, at the Crowne Plaza Hotel (formerly the Holiday Inn on City Line
Avenue), 4010 City Avenue, Philadelphia, Pennsylvania 19131 (the “Annual
Meeting”). This proxy statement contains
important information for shareholders to consider when deciding how to vote on
the matters brought before the Annual Meeting.
Please read it carefully.
At the Annual Meeting,
our shareholders will be asked to vote upon:
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(1)
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the election of seven
members of our Board of Directors to hold one-year terms;
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(2)
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a proposal to approve an amendment to our Amended and Restated Articles of
Incorporation to increase the authorized shares of capital stock of the
Company from 55,000,000 to 105,000,000;
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(3)
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a proposal to ratify the
appointment of KPMG LLP as our independent registered public accounting firm
for 2009; and
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(4)
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such other business as
may properly come before the shareholders at the Annual Meeting.
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Voting materials, which
include the proxy statement, a proxy card and our 2009 Annual Report to
Shareholders, will be mailed to all registered shareholders beginning on or
about April 26, 2010. Shareholders
holding their shares in “street name” should receive the proxy statement and a
voting instruction form from their broker, bank or other custodian, nominee or
fiduciary. We will pay the expenses of
these solicitations. In addition to
solicitation by mail, proxies may be solicited by telephone or in person by
some of our officers, directors and regular employees or independent contractors
who will not be specially engaged or compensated for such services.
Our principal executive
offices are located at 375 Phillips Boulevard, Ewing, New Jersey 08618. Our general telephone number is (609)
671-0980.
VOTING
AT THE ANNUAL MEETING
Our Board of Directors has
set April 8, 2010 as the record date for the Annual Meeting (the “Record
Date”). As of the Record Date, we had
outstanding 37,565,808 shares of common stock and 200,000 shares of Series A
Nonconvertible Preferred Stock. Each holder
of our common stock or Series A Nonconvertible Preferred Stock is entitled to
one vote per share on all matters to be voted on at the Annual Meeting. Holders of our common stock and Series A
Nonconvertible Preferred Stock vote together as a single class on all matters.
Only shareholders of record
as of the close of business on the Record Date may attend and vote at the
Annual Meeting. The presence, in person
or by proxy, of shareholders entitled to cast at least a majority of the votes
that all shareholders are entitled to cast on a particular matter to be acted
upon at the Annual Meeting will constitute a quorum for purposes of that
matter. Shareholders of record who
return a proxy card but abstain from voting or fail to vote on a particular
matter will be considered “present” for quorum purposes with respect to the
matter. In addition, shares held by
brokers or nominees who have notified us on a proxy card or otherwise in
accordance with industry practice that they have not received voting instructions
with respect to a particular matter and that they lack or have declined to
exercise voting authority with respect to such matter (referred to in this
proxy statement as “uninstructed shares”), will be considered “present” for
quorum purposes with respect to the matter.
Votes not cast by brokers or
nominees with respect to uninstructed shares are referred to in this proxy
statement as “broker non-votes.”
The persons named in the
enclosed proxy will vote the shares represented by each properly executed proxy
as directed therein. In the absence of
such direction on a properly executed proxy card, the persons named in the
enclosed proxy will vote “FOR” the persons nominated by our Board of Directors
for election as directors and “FOR” the proposals to amend our Amended and Restated Articles of Incorporation to
increase the authorized shares of capital stock of the Company and to
ratify the appointment of KPMG LLP as our independent registered public
accounting firm. As to other items of
business that may properly be presented at the Annual Meeting for action, the
persons named in the enclosed proxy will vote the shares represented by the
proxy in accordance with their best judgment.
A shareholder of record may
revoke his or her proxy at any time before its exercise by giving written
notice of such revocation to our Corporate Secretary. In addition, any shareholder of record may
vote by ballot at the Annual Meeting, even if he or she has already returned a
proxy card.
The preliminary voting
results will be announced at the Annual Meeting. The final results will be reported in a
Current Report on Form 8-K to be filed within four business days following the
date of the Annual Meeting.
Your vote is
important. Please complete, sign and
return the accompanying proxy card or voting instruction form whether or not
you plan to attend the Annual Meeting.
If you plan to attend the Annual Meeting to vote in person and your
shares are registered with our transfer agent in the name of a broker, bank or
other custodian, nominee or fiduciary, you must secure a proxy from that person
or entity assigning you the right to vote your shares of common stock.
Important Notice Regarding the Availability of
Proxy Materials for the Annual Meeting of Shareholders to be Held on June 24,
2010
This
proxy statement and our 2009 Annual Report to Shareholders are available at www.universaldisplay.com in the “For Shareholders
– SEC Documents” section.
PROPOSAL
1
ELECTION
OF DIRECTORS
Our Board of Directors has
fixed the number of directors at seven, all of whom are to be elected at the
Annual Meeting. Each director elected
will serve until our next annual meeting of shareholders and such time as a
successor has been selected and qualified, or until the director’s earlier
death, resignation or removal. Each
nominee has consented to being nominated and to serve if elected. If any nominee should subsequently decline or
be unable to serve, the persons named in the proxy will vote for the election
of such substitute nominee as shall be determined by them in accordance with
their best judgment.
Pursuant to our Amended and
Restated Articles of Incorporation, the holder of our Series A Nonconvertible
Preferred Stock is entitled to nominate and elect two of the members of our
Board of Directors. The holder of the
Series A Nonconvertible Preferred Stock has waived this right with respect to
the election of directors at the Annual Meeting.
All nominees are presently members of our Board of
Directors whose terms expire at the Annual Meeting. The nominees for election are set forth
below. The descriptions of the nominees
for election set forth the experience, qualifications, attributes and skills
that have led our Board of Directors to conclude that these nominees should
serve as members of our Board of Directors.
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NOMINEES FOR
ELECTION AS DIRECTORS
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Year First Became Director,
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Name of Director
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Age
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Principal Occupations and Certain Directorships
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Sherwin I. Seligsohn
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74
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Mr. Seligsohn is our
Founder and has been the Chairman of our Board of Directors since June
1995. He also served as our Chief Executive Officer from June 1995
through December 2007, and as our President from June 1995 through May
1996. Mr. Seligsohn serves as the sole Director, President and
Secretary of American Biomimetics Corporation, International Multi-Media
Corporation, and Wireless Unified Network Systems Corporation. He
is also Chairman of the Board of Directors, President and Chief Executive
Officer of Global Photonic Energy Corporation. From June 1990 to
October 1991, Mr. Seligsohn was Chairman Emeritus of InterDigital
Communications, Inc. (InterDigital), formerly International Mobile Machines
Corporation. He founded InterDigital and from August 1972 to June
1990 served as its Chairman of the Board of Directors. Mr.
Seligsohn is a member of the Industrial Advisory Board of the Princeton
Institute for the Science and Technology of Materials (PRISM) at Princeton
University.
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Steven V. Abramson
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Mr. Abramson is our
President and Chief Executive Officer, and has been a member of our Board of
Directors since May 1996. Mr. Abramson served as our President and
Chief Operating Officer from May 1996 through December 2007. From
March 1992 to May 1996, Mr. Abramson was Vice President, General Counsel,
Secretary and Treasurer of Roy F. Weston, Inc., a worldwide environmental
consulting and engineering firm. From December 1982 to December
1991, Mr. Abramson held various positions at InterDigital, including General
Counsel, Executive Vice President and General Manager of the Technology
Licensing Division. Mr. Abramson has
also been a member of the Board of Directors of the OLED Association since
its inception in 2008.
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Sidney D. Rosenblatt
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62
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Mr. Rosenblatt is an
Executive Vice President and has been our Chief Financial Officer, Treasurer
and Secretary since June 1995. He also
has been a member of our Board of Directors since May 1996. Mr.
Rosenblatt is the owner of and served as the President of S. Zitner Company
from August 1990 through December 1998. From May 1982 to August
1990, Mr. Rosenblatt served as the Senior Vice President, Chief Financial
Officer and Treasurer of InterDigital.
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Leonard Becker
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86
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Mr. Becker has been
a member of our Board of Directors since February 2001. For the last
40 years, Mr. Becker has been a general partner of Becker
Associates, which is engaged in real estate investments and management. He
served on the Board of Directors of American Business Financial Services,
Inc. (OTCBB: “ABFIQ.PK”), as well as on its compensation and audit
committees, until March 2007. He also previously served as a director of
Eagle National Bank and Cabot Medical Corporation.
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Elizabeth H. Gemmill
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64
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Ms. Gemmill has been
a member of our Board of Directors since April 1997. Since
March 1999, she has been Managing Trustee and, more recently, President
of the Warwick Foundation. From February 1988 to March 1999,
Ms. Gemmill was Vice President and Secretary of Tasty Baking Company.
Ms. Gemmill is the former Chairman of the Board of Philadelphia
University (1998-2009) and serves on the Boards of Beneficial Mutual Bancorp,
Inc., the Philadelphia College of Osteopathic Medicine, and the YMCA of
Philadelphia and Vicinity. She previously served as a director of American
Water Works Company, Inc. (NYSE: “AWK”) until it was sold in early 2003, and
as a director of Philadelphia Consolidated Holdings Corporation (NASDAQ:
“PHLY”) until it was sold in December 2008.
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C. Keith Hartley
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67
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Mr. Hartley has been
a member of our Board of Directors since September 2000. Since June
2000, he has been the President of Hartley Capital Advisors, a merchant
banking firm. From August 1995 to May 2000, he was the managing
partner of Forum Capital Markets LLC, an investment banking company. In the
past, Mr. Hartley held the position of managing partner for Peers &
Co. and Drexel Burnham Lambert, Inc. He also serves as a director of Idera
Pharmaceuticals, Inc. (NASDAQ: “IDRA”) and Swisher International Group, Inc.
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Lawrence Lacerte
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Mr. Lacerte has been
a member of our Board of Directors since October 1999. Since July 1998,
he has been Chairman of the Board of Directors and Chief Executive Officer of
Exponent Technologies, Inc., a company specializing in technology and
Internet-related ventures. Prior to that time, he was the founder, Chairman
of the Board of Directors and Chief Executive Officer of Lacerte Software
Corp., which was sold to Intuit Corporation in June 1998.
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Vote Required and
Recommendation of our Board of Directors
Directors are elected by a
plurality and the seven nominees who receive the most votes will be
elected. Shareholders may vote for or
withhold their vote from each nominee, or the entire group of nominees as a
whole. Broker non-votes are not
considered “votes cast” with respect to this proposal and will have no effect
on the outcome of the election of directors.
Shareholders do not have cumulative voting rights with regard to the
election of members of our Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES FOR DIRECTOR.
Director Independence
Our Board of Directors has
determined that a majority of its members are “independent directors” within
the meaning of applicable NASDAQ listing requirements. Our independent directors are Mr. Becker, Ms.
Gemmill, Mr. Hartley and Mr. Lacerte. In
addition, based on these listing requirements, our Board of Directors has
determined that Mr. Seligsohn, Mr. Abramson and Mr. Rosenblatt are not
independent directors because they are all officers of the Company.
Our independent directors
meet in executive session on a periodic basis in connection with
regularly-scheduled meetings of the full Board of Directors, as well as in
their capacity as members of our Audit Committee and Compensation Committee.
Board Meetings and
Committees; Annual Meeting Attendance
In 2009, our Board of
Directors held eight meetings. Each
member of the Board attended all of these meetings. Our Audit Committee held six meetings in
2009. Three members of the committee
attended all of these meetings and one member of the committee attended five of
the meetings. Our Compensation Committee
held seven meetings in 2009. Each member
of the committee attended all of these meetings.
All incumbent directors and
nominees for election as director are encouraged, but not required, to attend
our annual meetings of shareholders. All
but one of the current members of our Board of Directors attended our annual
meeting of shareholders in 2009.
Director
Nominations
Our
Board of Directors has not established a standing committee to nominate
candidates for election as directors.
Instead, a majority of our independent directors recommend, and our full
Board of Directors selects, the candidates that will be nominated to stand for
election as directors at our annual meeting of shareholders. Our Board of Directors believes that this
process is appropriate given the relatively small size of our Board of Directors
and the fact that each independent director already serves on both the Audit
Committee and the Compensation Committee.
Since we do not have a nominating committee, our Board of Directors has
not adopted a nominating committee charter.
In
nominating candidates for election as directors, both our independent directors
and our full Board of Directors consider the skills, experience, character,
commitment and diversity of background of each potential nominee, all in the
context of the requirements of our Board of Directors at that point in time. With respect to their consideration of
diversity of background, neither our independent directors nor our full Board
of Directors has a formal policy of assessing diversity with respect to any
particular qualities or attributes. Each
candidate should be an individual who has demonstrated integrity and ethics,
has an understanding of the elements relevant to the success of a
publicly-traded company, and has established a record of professional
accomplishment in such candidate’s chosen field. Each candidate also should be prepared to
participate in all Board and committee meetings that he or she attends, and
should not have other personal or professional commitments that might
reasonably be expected to interfere with or limit such candidate’s ability to do
so. Additionally, in determining whether
to recommend a director for re-election, the director’s past attendance at
Board and committee meetings is considered.
Our
Board of Directors has no stated specific, minimum qualifications that must be
met by candidates for election as directors.
However, in accordance with SEC rules and applicable NASDAQ listing
requirements, at least one member of our Board of Directors is expected to meet
the criteria for an “audit committee financial expert” as defined by SEC rules,
and a majority of the members of the Board are expected to meet the definition
of “independent director” within the meaning of SEC rules and applicable NASDAQ
listing requirements.
Any
shareholder of record entitled to vote in the election of directors at an
annual or special meeting of our shareholders may nominate one or more persons
to stand for election to the Board at such meeting in accordance with the
requirements of our Amended and Restated Bylaws. In order to be considered by our Board of
Directors in connection with the nominations process for our 2011 annual
meeting of shareholders, all such director nominations must be received by our
Corporate Secretary at our principal executive offices by February 24, 2011. Each such submission must be in writing and
must comply with the notice, information and consent provisions contained in
our Amended and Restated Bylaws. In
addition, each such submission must include any other information required by
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Submissions should be
addressed to our Corporate Secretary at the following address: Universal
Display Corporation, 375 Phillips Boulevard, Ewing, New Jersey 08618.
Our
independent directors and the full Board of Directors will consider all
candidates identified by shareholders through the processes described above,
and will evaluate each of them, including incumbent directors, based on the
same criteria. Although we have no
formal policy regarding shareholder nominees, our Board of Directors believes
that shareholder nominees should be viewed in substantially the same manner as
other nominees. The consideration of any
candidate for director will be based on an assessment of the individual’s
background, skills and abilities, together with an assessment of whether such
characteristics qualify the individual to fulfill the needs of our Board of
Directors at that time.
Board
Leadership Structure
Since
December 2007, when Mr. Abramson became our Chief Executive Officer and Mr.
Seligsohn took the title Founder and Chairman of the Board, our Board of
Directors has had a leadership structure in which the Board’s chair and our
Chief Executive Officer are different persons.
Prior to that time, Mr. Seligsohn served both as Chief Executive Officer
and Chairman of the Board. However, since
Mr. Seligsohn remains an officer of the Company, a member of our management team
continues to serve as the leader of our Board.
We
believe that the overlap between our Board and executive management has been
advantageous to us, in that we have benefited from strong, clear, consistent
and cohesive leadership, with a senior executive setting the tone and having
ultimate responsibility for all of our operating and strategic functions, thus
providing unified leadership and direction for our Board of Directors and our
operational functions. While our Board of
Directors has never concluded that the role of Chairman must always be held by
a senior executive, and reserves the right to reconsider this matter, it
intends to continue the current arrangement for the foreseeable future.
Our
Board of Directors does not have a lead independent director, but receives
strong leadership from all of its independent members. Additionally, as discussed above, our
independent directors meet in executive session on a periodic basis in
connection with regularly-scheduled meetings of the full Board of Directors, as
well as in their capacity as members of our Audit Committee and Compensation
Committee. All of our directors take
active roles in the activities of our Board of Directors at meetings of the
full Board. The Board believes that this
open structure, as compared to a system in which there is a designated lead
independent director, facilitates a strong sense of responsibility among our directors,
as well as active and effective oversight by the independent directors of our operations
and strategic initiatives, including the risks that may be attendant
thereto. All members of our Board are
able to propose items for inclusion on Board meeting agendas, and our Board
meetings include time for discussion of items not on the formal agenda.
Our
Board is comprised of four independent directors and three directors who are
executive officers of the Company. Each
of our directors is a sophisticated and seasoned business person, experienced
in board processes and knowledgeable regarding matters of corporate governance,
and has substantial leadership experience in his or her field. For additional information about the
backgrounds and qualifications of our directors, see above under the heading “Proposal
1 – Election of Directors.”
Audit Committee
Our Board of Directors has
established a standing Audit Committee.
The members of our Audit Committee are Mr. Becker, Ms. Gemmill, Mr.
Hartley and Mr. Lacerte. Ms. Gemmill is
the Chairperson of our Audit Committee.
Our Audit Committee
operates pursuant to a written charter that complies with the applicable
provisions of the Sarbanes-Oxley Act of 2002 and related rules of the
Securities and Exchange Commission (the “SEC”) and NASDAQ listing standards. The Audit Committee Charter was last reviewed
by our Board of Directors on April 6, 2010, and a copy of the charter is
publicly available through the “For Investors” section of our website at www.universaldisplay.com.
According to its charter,
our Audit Committee is responsible for, among other things:
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reviewing our financial
statements and discussing these statements and other relevant financial
matters with management and our independent registered public accounting
firm;
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selecting and evaluating
our independent registered public accounting firm and approving all audit
engagement fees and terms;
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pre-approving all audit
and non-audit services provided to us, including the scope of such services,
the procedures to be utilized and the compensation to be paid;
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assessing the
effectiveness of our internal control system and discussing this assessment
with management and our independent registered public accounting firm;
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reviewing our financial
reporting and accounting standards and principles, significant changes in
these standards and principles, or in their application, and key accounting
decisions affecting our financial statements, including alternatives to, and
the rationale for, these decisions;
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discussing with
management and our independent registered public accounting firm, as
appropriate, our risk assessment and risk management policies, including our
major exposures to financial risk and the steps taken by management to
monitor and mitigate these exposures; and
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reviewing and
investigating any matters pertaining to the integrity of management,
including any actual or potential conflicts of interest or allegations of
fraud, and the adherence of management to our standards of business conduct.
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Each member of our Audit
Committee meets the financial knowledge and independence criteria of the NASDAQ
listing requirements. Our Board of
Directors has determined that Ms. Gemmill is an “audit committee financial expert”
as such term is defined under SEC regulations, and that Ms. Gemmill meets the
financial sophistication and independence standards mandated by the NASDAQ
listing requirements.
Report of the Audit Committee
The Audit Committee has
reviewed and discussed with Company management the audited financial statements
of the Company for the fiscal year ended December 31, 2009, as well as
management’s assessment of the Company’s internal control over financial
reporting as of December 31, 2009. In
addition, the Audit Committee has discussed with the Company’s independent
registered public accounting firm, KPMG LLP, the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1 AU § 380), as adopted by the Public Company
Accounting Oversight Board (PCAOB) in Rule 3200T, including the opinion
regarding internal control over financial reporting pursuant to PCAOB Auditing
Standard No. 5. The Audit Committee also
has received the written disclosures and the letter from KPMG LLP required by the
PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning
independence, and has discussed the independence of KPMG LLP with that
firm. Based on the Audit Committee’s
review of the matters noted above and its discussions with management and the
Company’s independent registered public accounting firm, the Audit Committee
recommended to the Company’s Board of Directors that the audited financial
statements be included in the Company’s Annual Report on Form 10-K for the
period ended December 31, 2009.
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Respectfully submitted by
the Audit Committee
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Elizabeth H. Gemmill (Chairperson)
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Leonard Becker
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C. Keith Hartley
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Lawrence Lacerte
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Compensation Committee
Our
Board of Directors has established a standing Compensation Committee. The members of our Compensation Committee are
Mr. Becker, Ms. Gemmill, Mr. Hartley and Mr. Lacerte. Ms. Gemmill is the Chairperson of our
Compensation Committee.
Our
Compensation Committee, which does not operate pursuant to a written charter,
is responsible for, among other things:
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recommending
to the full Board of Directors the base salary, incentive compensation and
any other compensation for the Company’s Chief Executive Officer, Chief
Financial Officer and other executive officers;
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recommending
to the full Board of Directors the compensation for service as a member of
the Board of Directors or any Board committees;
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reviewing
and approving or ratifying management’s recommendations for equity
compensation awards to other employees and consultants of the Company;
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administering
and discharging the duties imposed on the Committee under the terms of the
Company’s Equity Compensation Plan, Employee Stock Purchase Plan and
Supplemental Executive Retirement Plan; and
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performing
such other functions and duties as are deemed appropriate by the full Board
of Directors.
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Our
Compensation Committee has historically determined the compensation for the
Company’s executive officers in two stages.
Base salary adjustments and perquisites and other benefits (life
insurance coverage, automobile allowance, etc.) have been approved to coincide
with the annual employment anniversaries of these individuals with the
Company. Annual bonus equity
compensation awards, long-term incentive equity compensation awards, and any special
cash or non-cash awards have been granted shortly after year-end. This enables the Committee to review the
Company’s fiscal performance for the year in determining these grants.
For
2009, compensation for non-employee members of our Board of Directors was
recommended by our Compensation Committee and approved in December 2008. This compensation was paid in quarterly
installments shortly following the end of each quarter during the year. No separate compensation is awarded for
committee service, and directors who are employees or officers of the Company
do not receive compensation for their service on the Board.
In
order to facilitate the Compensation Committee’s activities, Company management
recommends to the Committee compensation for the Company’s executive officers
and directors. However, the Committee exercises
independent judgment in determining compensation for the Company’s executive
officers and directors, and in recommending this compensation to the full Board
of Directors for approval. As part of
this process, the Committee meets in executive session to review and ultimately
finalize its recommendations.
In
2009, the Compensation Committee engaged Hay Group, Inc. (Hay Group) as
consultants to review compensation for the Company’s Chief Executive Officer
and Chief Financial Officer. Hay Group
was asked to assess the competitiveness of the current compensation to these
executive officers and to assess proposed equity retention grants to these
officers. Hay Group provided the
Committee with reports comparing the total compensation for each of the Chief
Executive Officer and Chief Financial Officer to that of comparable officers in
a number of peer group companies.
The
Compensation Committee also engaged Hay Group in 2009 to provide estimates of the
financial impact of adopting a proposed supplemental retirement plan for
certain of the Company’s executive officers.
The Committee had previously engaged Hay Group to provide a report
outlining various design alternatives for the proposed plan, the prevalence of
benefits offered by other companies with similar plans, projected cost
estimates for implementation of the plan and a summary of other design and
accounting considerations.
Compensation
Committee Interlocks and Insider Participation
Each member of our
Compensation Committee is an independent director under the NASDAQ listing
requirements. None of the members of our
Compensation Committee were officers or employees of the Company or its
subsidiary during 2009, were formerly officers of the Company or its
subsidiary, or had any relationship with the Company since the beginning of
2009 that requires disclosure under Item 404 of Regulation S-K. Nor have there been, since the beginning of
2009, any compensation committee interlocks involving our directors and
executive officers that require disclosure under Item 407 of Regulation
S-K.
In evaluating director
independence, the Board of Directors considered our relationship with Exponent
Technologies, Inc. (Exponent). Exponent
is, a provider of information system services for payroll, benefits and human
resources management. Mr. Lacerte is
Chairman of the Board of Directors and Chief Executive Officer of Exponent. For 2009, we paid a total of $14,593 to
Exponent in connection with its provision of these services to us. This amount is well below the threshold for
director independence under the NASDAQ listing requirements. There being no other factors suggesting that
this relationship might impair Mr. Lacerte’s independence, our Board of
Directors concluded that Mr. Lacerte should be treated as an independent
director.
Report of the Compensation Committee
The Compensation Committee
of the Company has reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to
the Board that the Compensation Discussion and Analysis be included in this
Proxy Statement.
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Respectfully submitted by
the Compensation Committee
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Elizabeth H. Gemmill (Chairperson)
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Leonard Becker
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C. Keith Hartley
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Lawrence Lacerte
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Shareholder
Communications
Shareholders
may send communications to our Board of Directors, or to individual members of
our Board of Directors, care of our Corporate Secretary at the following
address: Universal Display Corporation, 375 Phillips Boulevard, Ewing, New
Jersey 08618. In general, all
shareholder communications sent to our Corporate Secretary for forwarding to
our Board of Directors, or to specified Board members, will be forwarded in
accordance with the sender’s instructions.
However, our Corporate Secretary reserves the right to not forward to
members of our Board of Directors any abusive, threatening or otherwise
inappropriate materials. Information on
how to submit complaints to our Audit Committee regarding accounting, internal
accounting controls or auditing matters can be found on the “For Investors”
section of our website at www.universaldisplay.com. The information on our website referenced in
this proxy statement is not and should not be considered a part of this proxy
statement.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Compensation Philosophy and Objectives
Compensation and benefits
programs are an important part of the relationship between our Company and its
executive officers. Compensation for our
executive officers is intended to be competitive, thereby allowing us to
attract, motivate and retain talented personnel. We also seek to reward our executive officers
for accomplishments and contributions to the Company’s long-term strategic and
short-term business goals.
How We Determine Executive Compensation
Each year, our Compensation
Committee reviews and approves the compensation for our executive
officers. This process begins with a
review of the compensation paid to our executive officers in recent prior
years. We use prior compensation as a
starting point because we believe, as a general matter, that executive
compensation should remain relatively consistent from year-to-year. The market for our OLED technologies and
materials is still at an early stage, which poses risks for our business. By keeping executive compensation relatively
constant year-to-year, we provide a stable pay environment for our executive
officers while they work to grow our business and revenues.
With prior compensation as
a baseline, we then consider the extent to which we have achieved our business
goals for the current year, including our goals for revenue growth, expense
management, balance sheet stability, technical progress, new and expanded
business relationships and increased shareholder value. We also evaluate the individual performance
of our executive officers in relation to the achievement of our business
goals. As part of this process, we
reassess our business goals in relation to the actual growth of the OLED market
over the past year. Since many of our
business goals depend on dynamic market factors outside of the control of our
executive officers, we want to ensure that we measure our Company’s and their
individual performance against goals that are realistic.
In addition, we consider
the expected contributions of each individual executive officer to the future
of our business. This helps us determine
the value of long-term incentive compensation awards to our executive officers,
such as shares of restricted stock. In
determining these awards, we also consider the level of compensation that would
be appropriate for motivating each individual executive officer to remain
committed to our Company and its future success. Since the OLED market is still at an early
stage, our executive officers face a risk that our business might not
ultimately succeed. We believe that
long-term incentive compensation awards to our executive officers help offset
that risk.
Finally, we consider other
factors that may be relevant. With
respect to 2009 compensation decisions, for example, we considered whether the
downturn in the general economy should have any impact on compensation
decisions respecting our executive officers.
Executive management makes
recommendations to our Compensation Committee regarding all aspects of
compensation for our executive officers.
However, final decisions on any major element of compensation, as well
as total compensation for our executive officers, are made by our Compensation
Committee. Awards to our executive
officers are then approved by our full Board of Directors. Our Chief Executive Officer does not
participate in Compensation Committee or Board deliberations regarding his
compensation. Also, meetings of our
Compensation Committee are scheduled well in advance of the proposed meeting
date, and the Committee does not establish equity grant dates in order to
affect the value of any particular award.
In making compensation
decisions, we consider publicly available information regarding the
compensation paid to executives at other companies. However, this information is not tabulated or
summarized, and we do not engage in any form of compensation benchmarking. Instead, comparisons are more generally based
on industry norms and compensation packages as reported by the public news
media.
In determining executive
compensation, we consider the current value to our executive officers of
compensation paid or issued to them for prior years. However, we have not focused on gains or
losses from prior option grants or other awards because we believe that those
gains or losses are not particularly significant in relation to overall
compensation, and that gains or losses from prior awards do not have a
substantial effect on the future performance of our executive officers. We also do not use tally sheets in
determining compensation for our executive officers.
From
time to time, we utilize external consultants to assist it in determining
executive compensation. In 2009, the
Compensation Committee of our Board of Directors engaged Hay Group as
consultants to review compensation for the Company’s Chief Executive Officer
and Chief Financial Officer, and to estimate the financial impact of adopting a
proposed supplemental retirement plan for certain of the Company’s executive
officers.
Elements of Compensation
For 2009, total
compensation to our executive officers consisted of the following elements:
|
|
Base salaries;
|
|
|
Annual bonus equity
compensation awards;
|
|
|
Long-term incentive
equity compensation awards;
|
|
|
Special cash and non-cash
awards; and
|
|
|
Perquisites and other
benefits.
|
Our executive officers
receive both cash and non-cash, or equity, compensation. Equity compensation is further broken down
into annual bonus awards that vest immediately, long-term incentive awards that
typically vest with continued service over time, and special non-cash awards
tied to particular events. We utilize
annual bonus awards and special cash and non-cash awards to reward our
executive officers for their performance during the past year. We use long-term incentive awards that vest
over time largely to motivate our executive officers to perform in future
years. Beginning in 2010, we will also use
supplemental retirement benefits to incentivize our executive officers to
continue to provide valuable leadership to the Company. We believe that each of these components is
an important and necessary element of executive compensation.
Actual compensation amounts
are determined by our Compensation Committee in its discretion. However, the mix of compensation components
has remained relatively consistent year-to-year, in large part because there
are few similarly situated companies with which we compare ourselves, and because
our executive officers have come to expect an element of consistency in their
compensation over time.
Should unusual events or
circumstances occur which have a material impact on our Company, we would
expect the Compensation Committee to consider them in deciding whether to make
any significant changes in executive compensation. With respect to 2009, the Committee
considered whether general economic conditions should have any impact on our
executive compensation. Ultimately, the
Committee determined that there is, at present, a limited connection between
the Company’s growth and development and the current state of the overall
economy.
Base salaries
We believe that
there is a general expectation by our executive officers that their base
salaries will remain relatively consistent year-to-year, subject to limited
merit-based adjustments. We also believe
that this relatively simple approach is commonly used to determine the base
salaries of executives at other small companies. More substantial adjustments in the base
salaries of our executive officers may be warranted in the future when the
market for our OLED technologies and materials matures, or under circumstances
different from those in our current environment.
In 2009, the base salaries
of our executive officers were moderately increased over the prior year. This was consistent with prior year base
salary increases for these executive officers, and with increases in the base
salaries of our other employees during 2009.
The increases were primarily merit-based and intended to reward our
executive officers for their overall performance on behalf of the Company. To a lesser extent, the increases were
intended to offset increases in the cost of living, although no actual survey
of cost of living indices was conducted.
The base salaries of Mr.
Seligsohn, Mr. Abramson and Mr. Rosenblatt were adjusted effective as of
July 1, 2009, the traditional salary adjustment date for each of these
individuals. Dr. Brown’s base salary was
adjusted effective as of June 22, 2009, her annual employment anniversary
date. Ms. Mahon’s base salary was
adjusted effective as of January 1, 2009, her annual employment anniversary
date.
Consistent with previous
years, all adjustments to the salaries of our executive officers were
recommended by executive management and approved by our Compensation Committee
at meetings held on April 7, 2009 (Ms. Mahon) and June 25, 2009 (Mr.
Seligsohn, Mr. Abramson, Mr. Rosenblatt and Dr. Brown).
As in the past, each of Mr.
Abramson and Mr. Rosenblatt received the same base salary in 2009. This reflects our historic practice of
treating these two individuals equally based on their longstanding dedication
and commitment to the Company, their shared responsibility for overall
management of the Company, and the comparable value that each of them has
provided and continues to provide to our business success.
As in prior years, Mr.
Seligsohn’s base salary for 2009 was set taking into account his shared duties
and responsibilities for other companies that he previously founded. Most notable in this regard is Global Photonic Energy Corporation
(GPEC), a privately-held corporation of which Mr. Seligsohn and his family are
the largest shareholders, and for which Mr. Seligsohn serves as Chairman
of the Board of Directors and Chief Executive Officer.
Annual bonus equity
compensation awards
Bonus equity compensation
awards are typically awarded to our executive officers on an annual basis at or
shortly after the end of each calendar year.
These awards have historically taken the form of immediately-vesting
shares of our common stock, and this practice continued with the awards made
for 2009. The awards are determined
based on both Company and individual performance during the prior year. They are recommended by executive management
and approved by our Compensation Committee and full Board of Directors.
Our Compensation Committee
did not set formal performance goals and corresponding awards for the Company’s
executive officers for 2009. As it had
in prior years, the Committee determined that the awards to the Company’s
executive officers for 2009 would be recommended by the Committee in its
discretion, taking into consideration the Company’s financial results, business
performance and other relevant factors, at year-end. With
respect to these considerations, for 2009 the Committee evaluated the Company’s
performance with respect to total revenues and expenses compared to prior years
and compared to the Company’s operating budget for 2009. The Committee also considered the progress of
the Company in entering into license, supply and other revenue-producing
commercial agreements with potential customers or joint venture partners. In making these evaluations, particularly
with respect to revenue performance and the entry into commercial agreements,
the Committee considered general economic factors and the overall state of the
OLED market, analyzing how these factors may have influenced the Company’s
performance in a manner not anticipated at the outset of the year.
The Committee concluded that this approach was
appropriate in light of the early stage of the OLED market and the difficulty
in assessing the Company’s performance by traditional financial metrics.
Bonus equity compensation
awards to our executive officers for 2009 were recommended by our Compensation
Committee and approved by our full Board of Directors at meetings held on
January 6, 2010. On that date, the
closing price of our common stock on the NASDAQ Global Market was $14.17 per
share. The awards took the form of
immediately vesting shares of our common stock in the following amounts: Mr. Seligsohn – 12,702 shares; Mr. Abramson –
22,230 shares; Mr. Rosenblatt – 22,230 shares; Dr. Brown – 14,608 shares; and
Ms. Mahon – 5,398 shares. Portions of
the shares awarded were withheld in consideration of the Company’s payment of
associated payroll taxes on behalf of these individuals. The number of shares so withheld were as
follows: Mr. Seligsohn – 4,176 shares;
Mr. Abramson – 9,175 shares; Mr. Rosenblatt – 9,174 shares; Dr. Brown – 4,730
shares; and Ms. Mahon – 2,290 shares.
Based on the closing price
of our common stock on each respective grant date, the value of the bonus
equity compensation awards to Mr. Seligsohn, Mr. Abramson, Mr. Rosenblatt, Dr.
Brown and Ms. Mahon for 2009 were 10% lower than the corresponding awards that
these individuals received for 2008. Our
executive management recommended, and the Committee agreed, that this was
appropriate given our current business and financial situation. In recommending the awards, executive
management noted that the Company’s performance in 2009, although very good
considering prevailing economic conditions, did not meet all of management’s
expectations.
For the reasons indicated
earlier, Mr. Abramson and Mr. Rosenblatt again received the same bonus equity
compensation awards for 2009, and Mr. Seligsohn’s award was set taking into
account his shared duties and responsibilities for GPEC and other companies.
Long-term incentive
equity compensation awards
Long-term incentive equity
compensation awards are typically granted to our executive officers on an
annual basis in conjunction with the grant of annual bonus equity compensation
awards to these individuals. These
awards previously were issued in the form of options to purchase shares of our
common stock. However, due to changes in
the financial accounting rules based on the adoption of SFAS No. 123R, this
practice was discontinued for years after 2005.
Since then, long-term incentive equity compensation awards to our
executive officers have taken the form of restricted shares of our common
stock. The shares vest over a period of
time and vesting is contingent on the officer continuing to be employed by us
on the vesting date.
We use long-term incentive
equity compensation awards to link the compensation paid to our executive
officers with their future performance and the future performance of our common
stock. We believe that this helps align
the interests of our executive officers with those of our shareholders. We also use these awards to encourage our
executive officers to remain with the Company through the applicable vesting
period. As with other compensation to
our executive officers, long-term incentive equity compensation awards are
recommended by executive management and approved by our Compensation Committee
and full Board of Directors.
Long-term incentive equity
compensation awards to our executive officers were approved at meetings of our
Compensation Committee and full Board of Directors on January 6, 2009. These awards took the form of restricted
shares of our common stock as follows:
Mr. Seligsohn – 19,762 shares; Mr. Abramson – 29,644 shares; Mr.
Rosenblatt – 29,644 shares; Dr. Brown – 21,739 shares; and Ms. Mahon – 6,225
shares. The shares vest in equal
increments of one-third each on the next three anniversaries of the grant date,
provided that the officer is an employee of the Company on the applicable
vesting date. As with other compensation, Mr. Abramson and Mr. Rosenblatt received
the same long-term incentive equity compensation awards, and Mr. Seligsohn’s
award was set taking into account his shared duties and responsibilities for
GPEC and other companies.
The first
one-third of the restricted share awards granted to our executive officers on
January 6, 2009 vested on January 6, 2010.
This resulted in the issuance of shares of common stock to our executive
officers as follows: Mr. Seligsohn – 6,587
shares; Mr. Abramson – 9,881 shares; Mr. Rosenblatt – 9,881 shares; Dr. Brown –
7,246 shares; and Ms. Mahon – 2,075 shares.
As with other equity
awards that we grant, portions of the vesting shares were withheld in
consideration of the Company’s payment of associated payroll taxes on behalf of
these officers. The number of shares so
withheld were as follows: Mr. Seligsohn
– 1,944 shares; Mr. Abramson – 3,904 shares; Mr. Rosenblatt – 3,904 shares; Dr.
Brown – 2,139 shares; and Ms. Mahon – 824 shares.
The second one-third of
restricted share awards previously granted to our executive officers on January
9, 2008, and the final one-third of restricted share awards previously granted
to our executive officers on January 9, 2007, vested on January 9, 2010. This resulted in the issuance of additional
shares of common stock to our executive officers as follows: Mr. Seligsohn – 8,198 shares; Mr. Abramson –
12,296 shares; Mr. Rosenblatt – 12,296 shares; Dr. Brown – 8,198 shares; and
Ms. Mahon – 2,458 shares. For these
awards, the number of shares withheld in consideration of the Company’s payment
of associated payroll taxes on behalf of these officers were as follows: Mr. Seligsohn – 2,419 shares; Mr. Abramson –
4,859 shares; Mr. Rosenblatt – 4,859 shares; Dr. Brown – 2,419 shares; and Ms.
Mahon – 849 shares.
In addition, special
restricted share awards were approved by our Compensation Committee and Board
of Directors on March 18, 2010 for Mr. Abramson and Mr. Rosenblatt. For each of Mr. Abramson and Mr. Rosenblatt,
the award relates to 250,000 shares of our common stock. The Company determined that it was in the
best interests of our shareholders to grant these special retention awards to
induce Mr. Abramson and Mr. Rosenblatt to continue to remain in the service of
the Company and to promote the development of the Company, ensuring that the
Company continues to benefit from their valuable leadership and vision. Consistent with other executive compensation
decisions, Mr. Abramson and Mr. Rosenblatt received the same award amount.
Each special retention
award for Mr. Abramson and Mr. Rosenblatt will vest ratably over a five-year
period beginning on the first anniversary of the date of grant, subject to
continued employment with the Company through the applicable vesting date. The awards are subject to accelerated vesting
in the event of a change in control of the Company. Mr. Abramson and Mr. Rosenblatt are required
to retain the shares for five years after vesting.
Supplemental
Retirement Benefits
On March 18, 2010, our
Compensation Committee and our Board of Directors approved and adopted the
Universal Display Corporation Supplemental Executive Retirement Plan (the
“SERP”), effective April 1, 2010. The
SERP is a nonqualified deferred compensation plan under the Internal Revenue
Code of 1986, as amended (the “IRC”), and
is unfunded. Participants include
management or highly compensated employees of the Company who are selected by
the Compensation Committee to receive benefits under the SERP. Mr. Abramson, Mr. Rosenblatt, Dr. Brown and
Ms. Mahon have all been designated as participants in the SERP.
We adopted the SERP to
incentivize our executive officers to remain with the Company through
retirement age. Under the SERP, if a
participant resigns or is terminated without cause at or after age 65 and with
at least 20 years of service, he or she will be eligible to receive a SERP
benefit. The benefit is based on a
percentage of the participant’s annual base salary for the life of the
participant. This percentage is 50%, 25%
or 15%, depending on the participant’s benefit class. If a participant resigns at or after age 65
and with at least 15 years of service, he or she will be eligible to receive a
prorated SERP benefit. If a participant
is terminated without cause or on account of a disability after at least 15
years of service, he or she will be eligible to receive a prorated SERP benefit
regardless of age. The prorated benefit
in either case will be based on the participant’s number of years of service
(up to 20), divided by 20. In the event a participant is terminated for cause,
his or her SERP benefit and any future benefit payments are subject to
immediate forfeiture.
In the event of a change in
control of the Company, each participant in the SERP will become immediately
vested in his or her benefit thereunder.
Unless the participant’s benefit has already fully vested, if the
participant has less than 20 years of service at the time of the change in
control, he or she will receive a prorated benefit based on his or her number
of years of service (up to 20), divided by 20.
If the change in control qualifies as a “change in control event” for
purposes of Section 409A of the IRC, then each participant (including former
employees who are entitled to SERP benefits) will receive a lump sum cash
payment equal to the present value of the benefit immediately upon the change
in control.
Mr. Abramson, Mr.
Rosenblatt, Dr. Brown and Ms. Mahon are designated participants in the 50%
benefit class. Their ages and respective
years of service at present are set forth in the table below:
|
Name
|
Age
|
Years
of Service
|
|
|
58
|
|
|
|
62
|
|
|
|
49
|
|
|
|
52
|
|
As individuals with special
expertise and institutional knowledge that the Company considers to be highly
valuable to the Company’s continued success, Mr. Abramson and Mr. Rosenblatt
are designated as special participants under the SERP. If either of them resigns or is terminated
without cause after 20 years of service, or at or after age 65 and with at least
15 years of service, he will be eligible to receive a SERP benefit. If either of them is terminated without cause
or on account of a disability, he will be eligible to receive a prorated SERP
benefit regardless of age. The prorated
benefit will be based on his number of years of service (up to 20), divided by
20.
The SERP benefit for each
of Mr. Abramson and Mr. Rosenblatt is based on 50% of his annual base salary
for his life and the life of his surviving spouse, if any. Payments are based on a present value
calculation of the benefit amount for the actuarial remaining life expectancies
of him and his surviving spouse, if any.
If either of them dies before reaching age 65, the benefit is not
forfeited if his surviving spouse, if any, lives until he would have reached
age 65. If his spouse also dies before
he would have reached age 65, the benefit is forfeited.
Except as described above,
Mr. Abramson and Mr. Rosenblatt are subject to the same treatment as other
participants in the SERP.
Special cash and non-cash
awards
From
time to time, we issue special cash and non-cash awards to our employees,
including our executive officers. For
example, we have historically awarded a small amount of equity compensation to
our employees in connection with the filing and issuance of U.S. patents on
which they are named inventors. From
time to time, we have also issued cash awards to our employees in connection
with their having achieved special recognition in their field or in the
industry. We believe that these awards
are a small but important component of compensation intended to recognize our
employees for special individual accomplishments that are likely to benefit us
and our business.
Our
executive management recommended, and our Compensation Committee approved, a
special non-cash award of $500 to Dr. Brown during 2009. This award was granted in recognition of the
filing of a U.S. patent application on which Dr. Brown was a named inventor. The actual number of shares was determined
based on the closing price of the common stock on the NASDAQ Global Market on
the date of grant, with the remaining amount after the issuance of a whole
number of shares being paid to Dr. Brown in cash. As with other equity awards, some of the
shares were withheld in consideration of the Company’s payment of associated
payroll taxes on behalf of Dr. Brown.
These
share awards to Dr. Brown were granted consistent with our historical practice
of awarding equity compensation based on the filing and issuance of U.S.
patents on which our employees are named inventors. We did not issue any other special cash or
non-cash awards to our executive officers in 2009.
Perquisites and
other benefits
We
provide benefits to all of our employees, including our executive
officers. These include paid time off,
paid sick time, Company-sponsored life, short-term and long-term disability
insurance, individual and family medical and dental insurance, 401(k) plan
matching contributions, and other similar benefits. We believe that these benefits are an
important factor in helping us maintain good relations with our employees and
in creating a positive work environment.
For some of these employee benefits, the actual amount provided
depends on the employee’s salary, such that our higher-salaried employees,
including our executive officers, receive total benefits that are greater than
those of other employees. For example, matching contributions under our 401(k)
plan were the maximum permissible amount of $7,350 for each of our executive
officers in 2009.
We
also made life and disability insurance premium payments on behalf of our
executive officers in 2009. Again, the actual amount of these payments depends in part
on the employee’s age and salary, such that payments made on behalf of our
older or higher-salaried employees, which includes our executive officers, will
be greater than those made on behalf of other employees. These life insurance premium payments
were also higher for our executive officers because they are entitled to a
benefit equal to two times their annual base salary, as compared to our other
employees who are entitled to a benefit equal to their annual base salary. In addition, we made premium payments for
supplemental disability insurance coverage for Mr. Abramson and Mr.
Rosenblatt. However,
the dollar value of all of these payments was relatively small compared to the
total compensation paid to our executive officers for the year, and in any
event we consider these type of benefits to be standard components of executive
compensation at most companies.
In
2009, we provided an automobile allowance of $500 per month to each of Mr.
Abramson and Mr. Rosenblatt, and we attributed $416 in income to Mr.
Seligsohn’s for his use of a Company-owned automobile. In addition, we reimbursed Mr. Abramson and
Mr. Rosenblatt for reasonable expenses associated with the automobiles they
used to commute to our offices in Ewing, New Jersey, such as expenses for
automobile repairs and insurance. Both
of these individuals live a considerable distance from our offices in Ewing,
New Jersey, such that we believe it is appropriate to partially compensate them
for their work-related automobile usage.
Again, we do not consider this additional benefit to be a substantial
component of executive compensation.
Our
executive officers have been receiving the benefits described above for the
past several years. Our Compensation
Committee approved continuation of these benefits for our executive officers at
a meeting held on June 25, 2009. This
approval occurred in conjunction with the Committee’s approval of annual base
salary increases for our executive officers.
Stock Ownership Guidelines
We
do not have any stock ownership guidelines for our executive officers. However, all of our executive officers are
major shareholders in the Company, and all have substantial holdings of outstanding
stock and vested stock options or stock purchase warrants. The special retention awards granted to Mr.
Abramson and Mr. Rosenblatt are required to be retained by them for five years
after vesting. We believe that the current
holdings of our executive officers and the restrictions imposed on these
special retention awards are sufficient to ensure that our executive officers
remain committed to our Company and its business.
Recovery of Bonuses
We
do not have any formal policy respecting the recovery of bonuses or other
amounts from our executive officers due to the restatement or adjustment of any
performance measures on which they were based.
Since bonus and other equity compensation awards to our executive
officers have not been based on any specific or measurable performance
objectives, we do not believe that such a policy is appropriate at this time.
Change in Control Payments
In
April 2003, we entered into change in control agreements with our executive
officers. These agreements were amended
and restated in November 2008 in order to bring them into compliance with the strict timing and documentary requirements of
Section 409A of the IRC and the regulations issued thereunder. Both the original agreements and the amended
and restated agreements were approved by our Board of Directors.
The
change in control agreements provide for certain cash payments and other
benefits to our executive officers in the event that their employment is
terminated, or their responsibilities are substantially reduced, in connection
with a change in control of the Company.
We believe that these agreements help to reinforce and encourage the
continued attention and dedication of our executive officers to the Company in
the event they are asked to help facilitate a change in control.
Under
the change in control agreements, our executive officers would receive benefits
equal to two times their base salaries and annual bonuses, plus ancillary benefits
relating to life and disability insurance, medical and dental coverage and
employment outplacement services. The
change in control agreements utilize a “double-trigger” mechanism because we
believe that our executive officers should only receive these benefits if they
suffer a reduction in employment status associated with a change in
control. The agreements also include
“gross-up” provisions that would compensate our executive officers for any
taxes they might owe in connection with receipt of these benefits.
We
believe that the terms of the change in control agreements for our executive
officers are reasonable and appropriate for a small company with new and
exciting technologies such as ours. More
detailed information about these agreements and the specific benefits and
compensation payable to our executive officers in connection with a change in
control are set forth elsewhere in this proxy statement.
In
addition, in the event of a change in control of the Company, each SERP
participant will become immediately vested in his or her SERP benefit. Unless the participant’s benefit has already
fully vested, if the participant has less than 20 years of service at the time
of the change in control, he or she will receive a prorated benefit based on his
or her number of years of service (up to 20), divided by 20. If the change in control qualifies as a
“change in control event” for purposes of Section 409A of the IRC, then each
participant (including former employees who are entitled to SERP benefits) will
receive a lump sum cash payment equal to the present value of the benefit
immediately upon the change in control.
Tax Consequences of Our Compensation Program
Internal Revenue
Code §162(m)
In determining the total compensation payable to our
executive officers, we considered the potential impact of Section 162(m) of the
IRC. Section 162(m) disallows any publicly-held corporation from taking a
tax deduction for compensation in excess of $1 million paid to its executive
officers in any taxable year, unless that compensation is
performance-based. Our policy is that executive compensation qualify for
deductibility under applicable tax laws to the extent consistent with our
overall compensation objectives. We believe that, in certain
circumstances, factors other than tax deductibility take precedence in
determining the amount and form of compensation, and we retain the flexibility
to authorize compensation that may not be deductible if we believe it is in the
best interests of the Company.
Internal Revenue
Code §409A
Section 409A of
the IRC provides that nonqualified deferred compensation benefits are includible
in an employee’s income when vested, unless certain requirements are met. If these requirements are not met, employees
are also subject to an additional income tax and interest. Our compensation plans and arrangements are
drafted to meet any applicable requirements of Section 409A. Change in control agreements with our
executive officers were amended in November 2008 to ensure compliance with
these requirements. The SERP, as
adopted, is intended to comply with the requirements of Section 409A. As a result, all of our executive officers
will be taxed when any deferred compensation is actually paid to them, and we
will be entitled to a tax deduction at that time.
Internal Revenue
Code §280G
Section 280G of
the IRC disallows a company’s tax deduction for “excess parachute
payments.” Additionally, Section 4999 of
the IRC imposes a 20% excise tax on any person who receives excess parachute
payments. Presently, all of our
executive officers are entitled to payments upon the termination of their
employment following a change in control of the Company, some of which may
qualify as “excess parachute payments.”
Accordingly, our tax deduction for any such excess parachute payments
would be disallowed under Section 280G of the IRC. Moreover, we are required to make additional payments to these individuals to cover any
excise taxes imposed on them by reason of the payments they receive in
connection with a change in control. As
previously indicated, we believe that this tax “gross-up” obligation is
reasonable and appropriate given our current size and status.
New Executive Officer
Effective
January 1, 2010, Dr. Michael G. Hack became an executive officer of our
Company. Dr. Hack is our Vice President
of Strategic Product Development and the General Manager of our OLED Lighting
and Custom Displays Business.
Summary Compensation Table
The following table
provides information on the compensation of our Chief Executive Officer, our
Chief Financial Officer, and our other three highest-paid executive officers
for services in all capacities to the Company and its subsidiaries for 2009,
2008 and 2007. This group is referred to
in this proxy statement as the “Named Executive Officers.”
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus ($)
|
Stock Awards
($)
|
Option
Awards ($)
|
All Other Compensation
($)
|
Total ($)
|
|
Sherwin
I. Seligsohn…………..
Founder and Chairman of the Board (1)
|
2009
|
306,464
|
–––
|
399,983(2)
|
–––
|
21,811(3)
|
728,258
|
|
2008
|
295,931
|
–––
|
399,995(4)
|
–––
|
20,573(5)
|
716,499
|
|
2007
|
279,404
|
–––
|
399,993(6)
|
–––
|
19,673(7)
|
699,070
|
|
Steven
V. Abramson…………..
President and Chief Executive Officer(1)
|
2009
|
506,552
|
–––
|
649,987(2)
|
–––
|
31,210(8)
|
1,187,749
|
|
2008
|
489,149
|
–––
|
649,970(4)
|
–––
|
25,303(9)
|
1,164,422
|
|
2007
|
461,829
|
–––
|
649,984(6)
|
–––
|
28,418(10)
|
1,140,231
|
|
Sidney
D. Rosenblatt…………..
Executive Vice President and Chief Financial Officer
|
2009
|
506,552
|
–––
|
649,987(2)
|
–––
|
37,080(11)
|
1,193,620
|
|
2008
|
489,149
|
–––
|
649,970(4)
|
–––
|
34,166(12)
|
1,173,285
|
|
2007
|
461,829
|
–––
|
649,984(6)
|
–––
|
32,984(13)
|
1,144,797
|
|
Julia
J. Brown, Ph.D…………...
Senior Vice President and Chief Technical Officer
|
2009
|
356,125
|
–––
|
450,488(2)(14)
|
–––
|
9,796(15)
|
816,409
|
|
2008
|
326,553
|
–––
|
426,972(4)(16)
|
–––
|
9,023(17)
|
762,548
|
|
2007
|
289,002
|
–––
|
399,993(6)
|
1,790(18)
|
8,283(19)
|
699,068
|
|
Janice
K. Mahon…………...
Vice President of Technology Commercialization and General Manager of
Material Supply Business
|
2009
|
249,367
|
–––
|
147,995(2)
|
–––
|
9,720(20)
|
407,081
|
|
2008
|
243,032
|
–––
|
139,989(4)
|
–––
|
9,106(21)
|
392,127
|
|
2007
|
–––
|
–––
|
–––
|
–––
|
–––
|
–––
|
_______________
|
(1)
|
Effective as of January 1,
2008, Mr. Seligsohn was appointed to the newly-created officer position of
Founder and Chairman of the Board, and Mr. Abramson was named our President
and Chief Executive Officer.
|
|
|
|
|
(2)
|
This amount is based on
the aggregate grant date fair value of all stock awards to the Named
Executive Officer in 2009. The
amount includes both restricted and unrestricted shares of common stock
granted to the Named Executive Officer on January 6, 2009. With respect to the unrestricted awards,
shares of common stock were withheld for the payment of associated payroll
taxes. These awards are
discussed in greater detail in the section of this proxy statement entitled
“Compensation Discussion and Analysis,” under the headings “Annual bonus
equity compensation awards” and “Long-term incentive equity compensation
awards.”
|
|
|
|
|
(3)
|
Based on (a) auto expense
reimbursements and allowance of $416; (b) life and disability insurance
premium payments of $14,046; and (c) 401(k) plan contributions of $7,350.
|
|
|
|
|
(4)
|
This amount, which differs
from the amount reported in our proxy statement for 2009 due to a change in
SEC regulations, is based on the aggregate grant date fair value of all stock
awards to the Named Executive Officer in 2008. The amount includes both restricted and
unrestricted shares of common stock granted to the Named Executive Officer on
January 9, 2008. With respect to the
unrestricted awards, shares of common stock were withheld for the payment of
associated payroll taxes. These awards
are discussed in greater detail in the section of this proxy statement entitled
“Compensation Discussion and Analysis,” under the headings “Annual bonus
equity compensation awards” and “Long-term incentive equity compensation
awards.”
|
|
|
|
|
(5)
|
Based on (a) auto expense
reimbursements and allowance of $1,064; (b) life and disability insurance
premium payments of $12,609; and (c) 401(k) plan contributions of $6,900.
|
|
|
|
|
(6)
|
This amount, which differs
from the amount reported in our proxy statements for 2009 and 2008 due to a
change in SEC regulations, is based on the aggregate grant date fair value of
all stock awards to the Named Executive Officer in 2007. The amount includes both restricted and
unrestricted shares of common stock granted to the Named Executive Officer on
January 9, 2007. With respect to the
unrestricted awards, shares of common stock were withheld for the payment of
associated payroll taxes. These awards
are discussed in greater detail in the section of this proxy statement
entitled “Compensation Discussion and Analysis,” under the heading “Annual
bonus equity compensation awards.”
|
|
|
|
|
(7)
|
Based on (a) auto expense
reimbursements and allowance of $919; (b) life and disability insurance
premium payments of $12,004; and (c) 401(k) plan contributions of $6,750.
|
|
|
|
|
(8)
|
Based
on (a) auto expense reimbursements and allowance of $10,228; (b) life and
disability insurance premium payments of $13,632; and (c) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(9)
|
Based on (a) auto expense
reimbursements and allowance of $7,045; (b) life and disability insurance
premium payments of $11,358; and (c) 401(k) plan contributions of $6,900.
|
|
|
|
|
(10)
|
Based on (a) auto expense
reimbursements and allowance of $7,927; (b) life and disability insurance
premium payments of $13,741; and (c) 401(k) plan contributions of $6,750.
|
|
|
|
|
(11)
|
Based on (a) auto expense
reimbursements and allowance of $10,610; (b) life and disability insurance
premium payments of $19,121; and (c) 401(k) plan contributions of $7,350.
|
|
|
|
|
(12)
|
Based on (a) auto expense reimbursements
and allowance of $7,559; (b) life and disability insurance premium payments
of $19,707; and (c) 401(k) plan contributions of $6,900.
|
|
|
|
|
(13)
|
Based on (a) auto expense
reimbursements and allowance of $8,743; (b) life and disability insurance
premium payments of $17,491; and (c) 401(k) plan contributions of $6,750.
|
|
|
|
|
(14)
|
Also based on (a) the
grant date fair value of 35 shares of common stock granted on June 25, 2009
as a bonus for the filing of a U.S. patent application that was assigned to
the Company; and (d) 14 shares of common stock withheld for payment of $141
in associated payroll taxes.
|
|
|
|
|
(15)
|
Based on (a) life and
disability insurance premium payments of $2,446; and (c) 401(k) plan contributions
of $7,350.
|
|
|
|
|
(16)
|
Also based on (a) the
grant date fair value of 24 shares of common stock granted on June 19, 2008
as a bonus for the issuance of a U.S. patent application that was assigned to
the Company; (b) the grant date fair value of 64 shares of common stock
granted on November 4, 2008 as a bonus for the issuance of two U.S. patent
applications that were assigned to the Company; (c) the grant date fair value
of 39 shares of common stock granted on December 18, 2008 as a bonus for the issuance
of a U.S. patent application that was assigned to the Company; and (d) 51
shares of common stock withheld for payment of $569 in associated payroll
taxes.
|
|
|
|
|
(17)
|
Based on (a) life and
disability insurance premium payments of $2,123; and (b) 401(k) plan
contributions of $6,900.
|
|
|
|
|
(18)
|
Based on the grant date fair
value of 250 stock options, with an exercise price of $14.16 per share,
granted on January 15, 2007 as a bonus for the issuance of a U.S. patent
that was assigned to the Company.
|
|
|
|
|
(19)
|
Based on (a) life and
disability insurance premium payments of $1,533; and (b) 401(k) plan
contributions of $6,750.
|
|
|
|
|
(20)
|
Based on (a) life and
disability insurance premium payments of $2,370; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(21)
|
Based on (a) life and
disability insurance premium payments of $2,206; and (b) 401(k) plan
contributions of $6,900.
|
Compensation to each
of the named executive officers in 2009, 2008 and 2007 consisted of the
following:
|
|
Base salary, paid in
cash;
|
|
|
|
|
|
Discretionary awards
of unrestricted common stock granted as performance bonuses on January 6,
2009, January 9, 2008, and January 9, 2007;
|
|
|
|
|
|
Discretionary awards of
restricted common stock granted as long-term incentive equity compensation on
January 6, 2009, January 9, 2008 and January 9, 2007;
|
|
|
|
|
|
In the case of Mr.
Seligsohn and Dr. Brown, unrestricted stock and/or stock option awards
granted as bonuses for the filing of U.S. patent applications or the issuance
of U.S. patents on which they are named inventors, and with respect to which
the Company is the assignee; and
|
|
|
|
|
|
Perquisites in the
form of auto expense allowances and reimbursements, life and disability
insurance premium payments, and 401(k) plan matching contributions.
|
Grants of Plan-Based Awards Table
The following table
summarizes each grant of an award made to a Named Executive Officers in 2009. These awards were made as discussed above
under “Annual bonus equity compensation awards” and are not associated with any
pre-established targets for minimum, threshold or maximum awards.
|
Name
|
Grant Date
|
All Other
Stock Awards: Number of Shares of Stock (#)
|
All Other
Option Awards: Number of Securities Underlying Options (#)
|
Exercise
or Base Price of Option Awards ($/Share)
|
Grant Date
Fair Value of Stock and Option Awards ($)
|
|
Sherwin
I. Seligsohn….
|
1/6/2009
|
39,524(1)
|
–––
|
–––
|
399,983
|
|
Steven
V. Abramson….
|
1/6/2009
|
64,228(2)
|
–––
|
–––
|
649,987
|
|
Sidney
D. Rosenblatt….
|
1/6/2009
|
64,228(2)
|
–––
|
–––
|
649,987
|
|
Julia
J. Brown, Ph.D…..
|
1/6/2009
|
44,466(3)
|
–––
|
–––
|
449,996
|
|
Janice
K. Mahon….......
|
1/6/2009
|
14,624(4)
|
–––
|
–––
|
147,995
|
|
Julia
J. Brown, Ph.D…..
|
6/25/2009
|
49(5)
|
–––
|
–––
|
492
|
_______________
|
(1)
|
Consists of (a) an award
of 19,762 immediately vesting shares of common stock, with a certificate for 13,329
of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; and (b) an award of 19,762
shares of restricted common stock, which shares vest in equal increments over
the first three anniversaries of the grant date, provided that the grantee is
an employee of the Company at such time.
|
|
|
|
|
(2)
|
Consists of (a) an award
of 34,584 immediately vesting shares of common stock, with a certificate for 20,369
of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; and (b) an award of 29,644
shares of restricted common stock, which shares vest in equal increments over
the first three anniversaries of the grant date, provided that the grantee is
an employee of the Company at such time.
|
|
|
|
(3)
|
Consists of (a) an award
of 22,727 immediately vesting shares of common stock, with a certificate for 15,430
of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; and (b) an award of 21,739
shares of restricted common stock, which shares vest in equal increments over
the first three anniversaries of the grant date, provided that the grantee is
an employee of the Company at such time.
|
|
|
|
|
(4)
|
Consists of (a) an award
of 8,399 immediately vesting shares of common stock, with a certificate for 4,869
of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; and (b) an award of 6,225
shares of restricted common stock, which shares vest in equal increments over
the first three anniversaries of the grant date, provided that the grantee is
an employee of the Company at such time.
|
|
|
|
|
(5)
|
Consists of an award of 49
immediately vesting shares of common stock, with a certificate for 35 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
Grants of plan-based
awards to each of the named executive officers in 2009 consisted of the
following:
|
|
Discretionary awards of unrestricted
common stock granted as performance bonuses for 2008;
|
|
|
|
|
|
Discretionary awards
of restricted common stock granted as long-term incentive equity
compensation, with the award vesting in equal increments over the first three
anniversaries of the grant date; and
|
|
|
|
|
|
In the case of Dr.
Brown, a stock award granted as a bonus for the filing of a U.S. patent
application on which she is a named inventor, and with respect to which the
Company is the assignee.
|
Outstanding Equity Awards at Fiscal Year-End
Table
The following table
summarizes the outstanding equity awards to the Named Executive Officers as of
December 31, 2009.
|
Name
|
Option Awards
|
Stock Awards
|
|
Number of
Securities Underlying Unexercised Options (#)
Exercisable
|
Option
Exercise Price ($)
|
Option Expiration
Date
|
Number of
Shares of Stock that Have Not Vested (#)
|
Market
Value of Shares of Stock that Have Not Vested ($)
|
|
Sherwin I. Seligsohn……...
|
15,000
|
9.4375
|
12/14/2010
|
|
|
|
|
20,000
|
10.3125
|
3/30/2011
|
|
|
|
|
40,250
|
8.56
|
12/17/2011
|
|
|
|
|
40,000
|
5.45
|
9/23/2012
|
|
|
|
|
250
|
6.65
|
1/24/2013
|
|
|
|
|
40,000
|
16.94
|
1/20/2014
|
|
|
|
|
50,000
|
8.14
|
1/18/2015
|
|
|
|
|
50,000
|
10.51
|
12/30/2015
|
|
|
|
|
250
|
12.40
|
6/20/2016
|
|
|
|
|
|
|
|
31,595
|
390,514
|
|
|
|
|
|
|
|
|
Steven V. Abramson……...
|
15,000(1)
|
9.4375
|
12/14/2010
|
|
|
|
|
20,000(2)
|
10.3125
|
3/30/2011
|
|
|
|
|
40,000(3)
|
8.56
|
12/17/2011
|
|
|
|
|
18,400
|
5.45
|
9/23/2012
|
|
|
|
|
40,000(3)
|
16.94
|
1/20/2014
|
|
|
|
|
50,000(4)
|
8.14
|
1/18/2015
|
|
|
|
|
50,000(4)
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
29,804
|
368,377
|
|
|
|
|
|
|
|
|
Sidney D. Rosenblatt……..
|
15,000
|
9.4375
|
12/14/2010
|
|
|
|
|
20,000
|
10.3125
|
3/30/2011
|
|
|
|
|
40,000
|
8.56
|
12/17/2011
|
|
|
|
|
40,000
|
5.45
|
9/23/2012
|
|
|
|
|
40,000
|
16.94
|
1/20/2014
|
|
|
|
|
50,000
|
8.14
|
1/18/2015
|
|
|
|
|
50,000
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
47,392
|
585,765
|
|
|
|
|
|
|
|
|
Julia J. Brown, Ph.D……...
|
90,000
|
16.75
|
4/18/2010
|
|
|
|
|
10,000
|
24.375
|
6/21/2010
|
|
|
|
|
10,000
|
9.4375
|
12/14/2010
|
|
|
|
|
250
|
10.375
|
2/15/2011
|
|
|
|
|
20,000
|
10.3125
|
3/30/2011
|
|
|
|
|
500
|
13.90
|
4/19/2011
|
|
|
|
|
30,000
|
8.56
|
12/17/2011
|
|
|
|
|
250
|
9.10
|
4/15/2012
|
|
|
|
|
30,000
|
5.45
|
9/23/2012
|
|
|
|
|
250
|
9.94
|
11/18/2012
|
|
|
|
|
250
|
9.60
|
6/16/2013
|
|
|
|
|
30,000
|
16.94
|
1/20/2014
|
|
|
|
|
500
|
13.28
|
4/20/2014
|
|
|
|
|
250
|
10.07
|
11/23/2014
|
|
|
|
|
40,250
|
8.14
|
1/18/2015
|
|
|
|
|
500
|
9.43
|
6/7/2015
|
|
|
|
|
40,000
|
10.51
|
12/30/2015
|
|
|
|
|
250
|
11.89
|
1/17/2016
|
|
|
|
|
250
|
14.16
|
1/15/2017
|
|
|
|
|
|
|
|
33,572
|
414,950
|
|
|
|
|
|
|
|
|
Janice K. Mahon……...…..
|
7,500(5)
|
9.4375
|
12/14/2010
|
|
|
|
|
15,000(5)
|
10.3125
|
3/30/2011
|
|
|
|
|
17,500
|
8.56
|
12/17/2011
|
|
|
|
|
17,500
|
5.45
|
9/23/2012
|
|
|
|
|
10,000
|
13.92
|
12/23/2013
|
|
|
|
|
15,000
|
8.14
|
1/18/2015
|
|
|
|
|
20,000
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
9,773
|
120,794
|
|
(1)
|
Mr. Abramson has a
pecuniary interest in only 6,900 of these stock options.
|
|
|
|
|
(2)
|
Mr. Abramson has a
pecuniary interest in only 9,200 of these stock options.
|
|
|
|
|
(3)
|
Mr. Abramson has a
pecuniary interest in only 18,400 of these stock options.
|
|
|
|
|
(4)
|
Mr. Abramson has a
pecuniary interest in only 23,000 of these stock options.
|
|
|
|
|
(5)
|
Ms. Mahon has a pecuniary
interest in only one-half of these stock options.
|
Option
Exercises and Stock Vested Table
The following table
summarizes the exercises of stock options, SARs and other similar instruments,
and the vesting of stock, including restricted stock, restricted stock units
and similar instruments, for the Named Executive Officers during 2009.
|
Name
|
Number of
Shares Acquired on Exercise (#)
|
Value
Realized on Exercise(1) ($)
|
Number of
Shares Acquired on Vesting (#)
|
Value
Realized on Vesting(2) ($)
|
|
Sherwin
I. Seligsohn……….
|
30,000
|
255,750
|
8,198
|
76,815
|
|
Steven
V. Abramson……….
|
13,800
|
117,645
|
12,297
|
115,223
|
|
Sidney
D. Rosenblatt……….
|
30,000
|
255,750
|
|
