UNIVERSAL DISPLAY
CORPORATION
375 Phillips Boulevard
Ewing, New Jersey
08618
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PROXY STATEMENT FOR
2012 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 21,
2012
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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 2012 Annual
Meeting of Shareholders to be held on Thursday, June 21, 2012, at 4:00 p.m.,
Eastern Time, at the Crowne Plaza Philadelphia West 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 amend our Amended
and Restated Articles of Incorporation to implement a majority vote standard
in uncontested elections of Directors;
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(3)
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a
proposal to approve an advisory resolution regarding executive officer
compensation;
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(4)
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a
proposal to ratify the appointment of KPMG LLP as our independent registered
public accounting firm for 2012; and
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(5)
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such other business as may properly come before the
meeting or any postponements or adjournments thereof.
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Voting materials, which
include the proxy statement, a proxy card and our 2011 Annual Report to
Shareholders, will be mailed to all registered shareholders beginning on or
about April 26, 2012. 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 10, 2012 as the record date for the Annual Meeting (the “Record Date”). As of the Record Date, we had outstanding 46,340,345
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; “FOR” the proposal to amend our Articles of
Incorporation to implement a majority vote standard for uncontested elections
of Directors; “FOR” the proposal to approve, on an advisory basis, the
compensation of our executive officers; and “FOR” ratification of the
appointment of KPMG LLP as our independent registered public accounting firm
for 2012. 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 21,
2012
This
proxy statement and our 2011 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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76
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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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64
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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 was the owner of S. Zitner
Company from August 1990 through August 2010 and served as its President 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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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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Leonard Becker
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88
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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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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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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.
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 2011, we paid a
total of $16,006 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.
Board Meetings and Committees; Annual Meeting
Attendance
In 2011, our Board of Directors held six meetings, our
Audit Committee held four separate meetings, and our Compensation Committee met
twice to approve matters involving executive compensation. In addition,
during meetings of our full Board of Directors, members of our Audit Committee
approved various audit and non-audit services, and members of our Compensation
Committee approved various matters relating to equity compensation. All
members of the Board attended at least 75% of these meetings in the aggregate.
All incumbent directors and nominees for election as
director are encouraged, but not required, to attend our annual meetings of
shareholders. All current members of our Board of Directors attended our
Annual Meeting of Shareholders in 2011.
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 2013 annual
meeting of shareholders, all such director nominations must be received by our
Corporate Secretary at our principal executive offices by February 21, 2013. 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 10, 2012, 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, 2011, as well as
management’s assessment of the Company’s internal control over financial reporting
as of December 31, 2011. 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, 2011.
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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.) traditionally 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 typically 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
2011, compensation for non-employee members of our Board of Directors was
recommended by our Compensation Committee and approved in March 2011. This compensation was paid in quarterly
installments shortly following the end of each quarter during the year. No separate compensation was awarded for
committee service, and directors who are employees or officers of the Company
did 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.
Since
2009, the Compensation Committee has consulted from time to time as to
compensation matters with Hay Group, Inc. (“Hay Group”), which it first engaged
in 2009 as consultants to review compensation for the Company’s Chief Executive
Officer and Chief Financial Officer.
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 2011, were formerly officers of the Company or its
subsidiary, or had any relationship with the Company since the beginning of
2011 that requires disclosure under Item 404 of Regulation S-K. Nor have there been, since the beginning of
2011, any compensation committee interlocks involving our directors and
executive officers that require disclosure under Item 407 of Regulation
S-K.
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 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 organic light emitting diode
(“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 a relatively 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 2011 compensation decisions, for example, we considered whether the
state of 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 whether the proposed compensation to our executive
officers is within the range of compensation generally known to be paid to
executives at other companies. Other
than in any data provided by Hay Group, information on the compensation paid to
executives at other companies is not tabulated or summarized, and we do not
engage in any formal form of compensation benchmarking.
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 in determining
executive compensation. As discussed
above, 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. The
Compensation Committee has continued to consult with Hay Group over time, and while
Hay Group did not provide specific advice regarding 2011 compensation,
information provided by Hay Group with respect to compensation matters in
general, which the Compensation Committee may factor into compensation
decisions regarding future years, was taken into account by the Committee with
respect to 2011 compensation.
In its review of the overall
compensation of our Chief Executive Officer and Chief Financial Officer, Hay
Group compared the total direct compensation of these officers, on a combined
basis, to total direct combined compensation paid to the top two executive
officers at the following peer group of 15 companies, chosen by Hay Group in 2009
based on their similarity to us in market value and industry:
|
Diodes Incorporated
|
PLX Technology, Inc.
|
|
DTS, Inc.
|
Rogers Corporation
|
|
Exar Corporation
|
Standard Microsystems
Corporation
|
|
InterDigital, Inc.
|
Supertex, Inc.
|
|
Kopin Corporation
|
Tessera Technologies,
Inc.
|
|
Littelfuse, Inc.
|
Volterra Semiconductor
Corporation
|
|
MIPS Technologies, Inc.
|
Zoran Corporation
|
|
Monolithic Power Systems,
Inc.
|
|
Elements of Compensation
For 2011, total
compensation to our executive officers consisted of the following elements:
|
|
Base salaries;
|
|
|
Annual cash bonus awards;
|
|
|
Long-term incentive
equity compensation awards;
|
|
|
Supplemental retirement
benefits;
|
|
|
Special event awards; and
|
|
|
Perquisites and other
benefits.
|
Our executive officers
receive both cash and non-cash, or equity,
compensation. Equity compensation is in
the form of long-term incentive stock awards that typically vest with continued
service over time, and immediately vesting stock awards associated with special
events. We utilize annual cash bonus awards
and special event 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 also started using 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 2011, 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, though we have not conducted
independent research to verify this.
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 2011, 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 2011. 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.
Abramson and Mr. Rosenblatt were adjusted effective as of July 1, 2011,
the traditional salary adjustment date for each of these individuals. The base salaries of Dr. Brown, Ms. Mahon and
Dr. Hack were adjusted effective as of their annual employment anniversary
dates of June 22, 2011, January 2, 2011 and October 11, 2011,
respectively.
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 March 10, 2011 (Ms. Mahon) and June 23, 2011 (Mr.
Abramson, Mr. Rosenblatt, Dr. Brown and Dr. Hack).
As in the past, each of Mr.
Abramson and Mr. Rosenblatt received the same base salary in 2011. 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.
Annual cash bonus
awards
Bonus 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; however, for 2011 these awards were instead paid in cash. The awards are determined on a retrospective
basis 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 pre-establish performance goals or compensation targets for bonus
awards to the Company’s executive officers for 2011. As it had in prior years, the Committee
determined that bonus awards to the Company’s executive officers for 2011, if
any, would be recommended by the Committee in its discretion and on a
retrospective basis, taking into account both the Company’s performance with
respect to revenues and expenses, and the overall performance of the individual
executive officers, and considering other factors such as the general economic
environment, the state of the industry in which the Company operates, and the
progress of the Company over the past year in terms of advancing the mission of
the Company.
With respect to these considerations, for 2011 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 2011. 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.
Cash bonus awards to our executive
officers for 2011 were recommended by our Compensation Committee and approved
by our full Board of Directors at a meeting held on March 8, 2012. The awards were in the following
amounts: Mr. Abramson – $438,750; Mr.
Rosenblatt – $438,750; Dr. Brown – $317,240; Ms. Mahon – $130,018; and Dr. Hack
– $130,018. These payments were then
subject to customary tax withholding consistent with applicable requirements.
The value of the cash bonus
awards to Mr. Abramson and Mr. Rosenblatt for 2011 were approximately 25%
higher than the corresponding awards that these individuals received for 2010,
the cash bonus award to Dr. Brown for 2011 was approximately 27% higher than the
corresponding award that Dr. Brown received for 2010, and the cash bonus awards
to Ms. Mahon and Dr. Hack for 2011 were approximately 30% higher than the
corresponding awards that these individuals received for 2010. Our executive management recommended, and the
Committee agreed, that this was appropriate given the Company’s strong
financial performance in 2011 relative to 2010.
For the reasons indicated
earlier, Mr. Abramson and Mr. Rosenblatt again received the same bonus equity
compensation awards for 2011.
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 awards to these
individuals. Long-term incentive equity
compensation awards to our executive officers take 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 March 8, 2012. These awards took the form of restricted
shares of our common stock as follows:
Mr. Abramson – 10,954 shares; Mr. Rosenblatt – 10,954 shares; Dr. Brown
– 7,921 shares; Ms. Mahon – 3,245 shares; and Dr. Hack – 3,245 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.
The first
one-third of the restricted share awards granted to our executive officers on
January 6, 2011, the second one-third of restricted share awards previously
granted to our executive officers on January 6, 2010, and the third one-third
of restricted share awards previously granted to our executive officers on
January 6, 2009, vested on January 6, 2012.
This resulted in the vesting of shares of common stock previously issued
to our executive officers as follows:
Mr. Abramson – 19,815 shares; Mr. Rosenblatt – 19,815 shares; Dr. Brown
– 14,061 shares; Ms. Mahon – 4,516 shares; and Dr. Hack – 4,516 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.
Abramson – 7,933 shares; Mr. Rosenblatt – 7,932 shares; Dr. Brown – 4,260
shares; Ms. Mahon – 1,734 shares; and Dr. Hack – 1,734 shares.
In addition, special five-year
restricted share awards for Mr. Abramson and Mr. Rosenblatt were approved by
our Compensation Committee and Board of Directors on March 18, 2010. The first 50,000 shares of the special
retention awards granted to each of Mr. Abramson and Mr. Rosenblatt vested on
March 18, 2012. 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. For
each of Mr. Abramson and Mr. Rosenblatt, the number of shares so withheld was
19,760.
Special one-year restricted
share awards, similar to those granted to Mr. Abramson and Mr. Rosenblatt in
2010, were also approved by our Compensation Committee and Board of Directors
on January 6, 2011 for Dr. Brown, Ms. Mahon and Dr. Hack. For Dr. Brown, the award relates to 10,780
shares of our common stock; for Ms. Mahon, the award relates to 7,428 shares of
our common stock; and for Dr. Hack, the award relates to 7,417 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 Dr. Brown, Ms. Mahon and Dr. Hack 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.
The special one-year
restricted share awards for each of Dr. Brown, Ms. Mahon and Dr. Hack all
vested on January 6, 2012. This
resulted in the vesting of shares of common stock previously issued to these
officers as follows: Dr. Brown – 10,780
shares; Ms. Mahon – 7,428 shares; and Dr. Hack – 7,417 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:
Dr. Brown – 3,182 shares; Ms. Mahon – 2,692 shares; and Dr. Hack – 2,687
shares.
Also on January 6, 2011, our Compensation Committee
and Board of Directors approved grants of cash-settled stock appreciation
rights (SARs) to Dr. Brown, Ms. Mahon and Dr. Hack in the amounts of 10,000,
7,000 and 7,000, respectively. The SARs
represented the right to receive, for each SAR, a cash payment equal to the
amount, if any, by which the fair market value of a share of the common stock
of the Company on the vesting date exceeded the base price of the SAR
award. The base price of each SAR award
was $34.78 per share, and the SARs were to vest on the first anniversary of the
date of grant, subject to continued employment with the Company through such
date.
The SARs granted to Dr. Brown, Ms. Mahon and Dr. Hack were intended to further incentivize these executive
officers to remain employed by and committed to the success of the
Company. Each of these executive
officers has been employed by the Company for over 10 years and is essential to
the Company’s business in his or her areas of expertise.
The SARs granted to each of
Dr. Brown, Ms. Mahon and Dr. Hack all vested on January 6, 2012. On that date, the closing price of the
Company’s common stock on the NASDAQ Global Market was $36.84 per share. This resulted in cash payments to these
officers as follows: Dr. Brown – $20,600;
Ms. Mahon – $14,420; and Dr. Hack – $14,420.
These payments were then subject to customary tax withholding consistent
with applicable requirements.
Finally, special four-year restricted
share awards for Dr. Brown, Ms. Mahon and Dr. Hack were approved by our
Compensation Committee and Board of Directors on March 8, 2012. These awards were intended to supplement the special
one-year restricted share awards granted to these officers in 2011, resulting
in total special retention awards that correspond to the five-year special
restricted share awards granted to Mr. Abramson and Mr. Rosenblatt in 2010.
The amount of each special
four-year restricted share award was determined in relation to the individual
officer’s annual salary. For Dr. Brown,
the award was based on approximately five times her annual salary, and for Ms.
Mahon and Dr. Hack the award was based on approximately four times their
respective annual salaries. On the grant
date, the closing price of the Company’s common stock on the NASDAQ Global
Market was $40.05 per share. Based on
this price, the special retention awards related to 46,807 shares for Dr.
Brown; 25,804 shares for Ms. Mahon, and 25,765 shares for Dr. Hack.
These special retention
awards for Dr. Brown, Ms. Mahon and Dr. Hack vest ratably over a four-year
period on each 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. Dr. Brown, Ms. Mahon and Dr. Hack are required
to retain the shares for two years after vesting, except in the event of death
or a change in control of the Company.
Supplemental
retirement benefits
In 2010, our Compensation
Committee and our Board of Directors approved and adopted the Universal Display
Corporation Supplemental Executive Retirement Plan (the “SERP”). 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, Ms. Mahon and Dr. Hack have all
been designated as participants in the SERP.
The SERP became effective on April 1, 2010.
As
discussed previously, the Compensation Committee engaged Hay Group to provide a
report outlining various design alternatives for the SERP, the prevalence of
similar benefits offered by other companies of various sizes, based on a survey
by Hay Group that received over 800 responses, projected cost estimates for
implementation of the SERP, and a summary of other design and accounting
considerations for the SERP. The Committee considered Hay Group’s recommendations
in structuring and adopting the SERP.
The SERP was adopted 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, Ms. Mahon and Dr. Hack are designated participants in
the 50% benefit class. Their ages and
respective years of service as of the Record Date are set forth in the table
below:
|
Name
|
Age
|
Years
of Service
|
|
|
60
|
|
|
|
64
|
|
|
|
51
|
|
|
|
54
|
|
|
|
55
|
|
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 event
awards
From
time to time, we issue cash and non-cash awards to our employees, including our
executive officers, relating to the occurrence of special events. For example, we have historically awarded a
small amount of equity compensation to our employees in connection with the
filing and issuance of new 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, special
non-cash awards of $3,874 to Dr. Brown and $2,421 to Dr. Hack during 2011. These awards, granted in the form of
unrestricted shares of our common stock, were granted in recognition of the
filing of patent applications and the issuance of patents on which Dr. Brown or
Dr. Hack 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
or Dr. Hack 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 and Dr.
Hack.
These
share awards to Dr. Brown and Dr. Hack 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 event
awards, cash or non-cash, to our executive officers in 2011.
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 all of our executive
officers in 2011.
We
also made life and disability insurance premium payments on behalf of our
executive officers in 2011. 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
2011, we provided an automobile allowance of $500 per month to each of Mr.
Abramson and Mr. Rosenblatt. 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 23, 2011. This
approval occurred in conjunction with the Committee’s approval of annual base
salary increases for certain of 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 five-year equity retention awards
granted to Mr. Abramson and Mr. Rosenblatt are required to be retained by them
for five years after vesting. The
special retention awards granted to Dr. Brown, Ms. Mahon and Dr. Hack are
required to be retained by them for five years after vesting in the case of
their one-year special equity retention awards, and two years after vesting in
the case of their four-year special equity retention awards. 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.
On
December 15, 2011, the Board of Directors of the Company approved stock
ownership guidelines for members of the Board who are not officers of the
Company. These guidelines require such
individuals to own a number of shares of the Company’s common stock equal in
value to ten (10) times their annual cash compensation for Board service,
excluding additional compensation for Committee service or based on Board
meeting attendance. Individuals are
allowed five years from the date they are first elected to the Board to comply
with these guidelines, and once an individual is determined to be in compliance
with these guidelines, that individual will not be considered out of compliance
with these guidelines at any future time due solely to a decrease in the share
price of the Company’s common stock since the last compliance measurement date.
Compliance
with the stock ownership guidelines for these Board members is measured as of
the first business day of each calendar year using (1) the highest closing
price of the Company’s common stock on the NASDAQ Global Market during the
immediately preceding calendar year, and (2) the annual cash compensation to
the individual for Board service for the immediately preceding calendar year. The highest closing price of the Company’s
common stock on the NASDAQ Global Market in 2011 was $60.07 per share. The annual cash compensation to each member
of the Board who is not an officer of the Company was $40,000 for 2011. On this basis, on the first business day of
2012 (January 3, 2012), each such individual was required to own, and did in
fact own, at least 6,658 shares of the Company’s common stock.
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. The change in control agreement with Dr. Hack
was further amended and restated in January 2010 to enable him to receive change
in control benefits commensurate with those offered to our other executive
officers. 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.
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 2011,
2010 and 2009. This group is referred to
in this proxy statement as the “Named Executive Officers.”
|
Name and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards ($)
|
Option
Awards ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All Other Compensation
($)
|
Total ($)
|
|
Steven
V. Abramson…………..
President and Chief Executive Officer
|
2011
|
542,487
|
649,969(1)
|
–––
|
607,315(2)
|
29,311(3)
|
1,829,082
|
|
2010
|
524,212
|
3,797,492(4)
|
–––
|
2,011,254(5)
|
29,799(6)
|
6,362,757
|
|
2009
|
506,552
|
649,987(7)
|
–––
|
–––
|
31,210(8)
|
1,187,749
|
|
Sidney
D. Rosenblatt…………..
Executive Vice President and Chief Financial Officer
|
2011
|
542,487
|
649,969(1)
|
–––
|
–––(2)(9)
|
35,296(10)
|
1,227,751
|
|
2010
|
524,212
|
3,797,492(4)
|
–––
|
3,319,980(5)
|
35,283(11)
|
7,676,967
|
|
2009
|
506,552
|
649,987(7)
|
–––
|
–––
|
37,081(12)
|
1,193,620
|
|
Julia
J. Brown, Ph.D…………..
Senior Vice President and Chief Technical Officer
|
2011
|
381,389
|
848,785(1)(13)
|
74,900(14)
|
411,312
(2)
|
9,676(15)
|
1,726,061
|
|
2010
|
368,541
|
411,415(4)(16)
|
–––
|
917,461(5)
|
9,778(17)
|
1,707,194
|
|
2009
|
356,125
|
450,488(7)(18)
|
–––
|
–––
|
9,796(19)
|
816,409
|
|
Janice
K. Mahon…………........
Vice President of Technology Commercialization and General Manager, PHOLED Material
Sales Business
|
2011
|
267,058
|
458,331(1)
|
52,430(20)
|
338,498(2)
|
9,582(21)
|
1,125,899
|
|
2010
|
258,061
|
139,489(4)
|
–––
|
774,465(5)
|
9,675(22)
|
1,181,690
|
|
2009
|
249,367
|
147,995(7)
|
–––
|
–––
|
9,720(23)
|
407,081
|
|
Michael
G. Hack, Ph.D.…….....
General Manager, OLED Lighting and Custom Displays, Vice President
|
2011
|
259,677
|
460,369(1)(24)
|
52,430(20)
|
286,107(2)
|
10,139(25)
|
1,068,722
|
|
2010
|
241,343
|
142,943(4)(26)
|
–––
|
739,053(5)
|
9,950(27)
|
1,133,289
|
|
2009
|
230,738
|
147,995(7)
|
–––
|
–––
|
8,748(28)
|
387,481
|
______________________________________
|
(1)
|
This amount is based on
the aggregate grant date fair value of all stock awards to the Named
Executive Officer in 2011. The
amount includes both restricted and unrestricted shares of common stock
granted to the Named Executive Officer on January 6, 2011. 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 “Long-term
incentive equity compensation awards,” and below under the section “Grants of
Plan Based Awards.”
|
|
|
|
|
(2)
|
Based
on the difference between the actuarial present value of the accrued benefit
under the SERP adopted by the Company on March 18, 2010 as of December 31,
2010, using a discount rate of 5.44%, and the actuarial present value of the
accrued benefit under the SERP as of December 31, 2011, using a discount rate
of 4.44%.
|
|
|
|
|
|
(3)
|
Based on (a) auto expense
reimbursements and allowance of $8,095; (b) life and disability insurance
premium payments of $13,866; and (c) 401(k) plan contributions of $7,350.
|
|
|
|
|
|
|
(4)
|
This amount is based on
the aggregate grant date fair value of all stock awards to the Named
Executive Officer in 2010. The amount
includes both restricted and unrestricted shares of common stock granted to
the Named Executive Officer on January 6, 2010. In the case of Mr. Abramson and Mr.
Rosenblatt, the amount also includes restricted shares of common stock
granted to them on March 18, 2010. With
respect to the unrestricted awards, shares of common stock were withheld for
the payment of associated payroll taxes.
|
|
|
|
|
|
(5)
|
Based on the actuarial
present value of the accrued benefit under the SERP as of December 31, 2010,
using a discount rate of 5.44%.
|
|
|
|
|
|
|
(6)
|
Based on (a) auto expense
reimbursements and allowance of $8,646; (b) life and disability insurance
premium payments of $13,803; and (c) 401(k) plan contributions of $7,350.
|
|
|
|
|
|
|
(7)
|
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.
|
|
|
|
|
(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)
|
The actual difference was
a negative amount of $136,039, due to a change in Mr. Rosenblatt’s benefit
from joint and survivor to a single life annuity.
|
|
|
|
|
(10)
|
Based on (a) auto expense
reimbursements and allowance of $8,284; (b) life and disability insurance
premium payments of $19,662; and (c) 401(k) plan contributions of $7,350.
|
|
|
|
|
(11)
|
Based
on (a) auto expense reimbursements and allowance of $8,469; (b) life and
disability insurance premium payments of $19,464; and (c) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(12)
|
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.
|
|
|
|
|
(13)
|
Also based on (a) the
grant date fair value of 69 shares of common stock granted to Dr. Brown in
2011 as a bonus for the filing of patent applications and the issuance of
patents that were assigned to the Company; and (b) 32 shares of common stock
withheld for the payment of associated payroll taxes.
|
|
|
|
|
(14)
|
Based on 10,000
cash-settled SARs, valued using the Black-Scholes option pricing model, the
fair value per SAR being $7.49 as of the grant date of January 6, 2011.
|
|
|
|
|
(15)
|
Based on (a) life and
disability insurance premium payments of $2,326; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(16)
|
Also based on (a) the
grant date fair value of 178 shares of common stock granted to Dr. Brown in
2010 as a bonus for the filing of patent applications and the issuance of
patents that were assigned to the Company; and (b) 72 shares of common stock
withheld for the payment of associated payroll taxes.
|
|
|
|
|
(17)
|
Based on (a) life and
disability insurance premium payments of $2,428; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(18)
|
Also based on (a) the
grant date fair value of 35 shares of common stock granted to Dr. Brown in
2009 as a bonus for the filing of a patent application that was assigned to
the Company; and (b) 14 shares of common stock withheld for the payment of
associated payroll taxes.
|
|
|
|
|
(19)
|
Based on (a) life and
disability insurance premium payments of $2,446; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(20)
|
Based on 7,000
cash-settled SARs, valued using the Black-Scholes option pricing model, the
fair value per SAR being $7.49 as of the grant date of January 6, 2011.
|
|
|
|
|
(21)
|
Based on (a) life and
disability insurance premium payments of $2,232; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(22)
|
Based on (a) life and
disability insurance premium payments of $2,325; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(23)
|
Based on (a) life and
disability insurance premium payments of $2,370; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(24)
|
Also based on (a) the
grant date fair value of 38 shares of common stock granted to Dr. Hack in
2011 as a bonus for the filing of patent applications and the issuance of
patents that were assigned to the Company; and (b) 22 shares of common stock
withheld for the payment of associated payroll taxes.
|
|
|
|
|
(25)
|
Based on (a) life and
disability insurance premium payments of $2,789; and (b) 401(k) plan
contributions of $7,350.
|
|
|
|
|
(26)
|
Also based on (a) the
grant date fair value of 128 shares of common stock granted to Dr. Hack in
2010 as a bonus for the filing of patent applications and the issuance of patents
that were assigned to the Company; and (b) 62 shares of common stock withheld
for the payment of associated payroll taxes.
|
|
|
|
|
(27)
|
Based on (a) life and
disability insurance premium payments of $2,888; and (b) 401(k) plan
contributions of $7,062.
|
|
|
|
|
(28)
|
Based on (a) life and
disability insurance premium payments of $1,826; and (b) 401(k) plan
contributions of $6,922.
|
Compensation to each
of the Named Executive Officers in 2011, 2010 and 2009 consisted of the
following:
|
|
Base salary, paid in cash;
|
|
|
|
|
|
Discretionary awards
of unrestricted common stock granted as performance bonuses on January 6,
2011, January 6, 2010, and January 6, 2009;
|
|
|
|
|
|
Discretionary awards of
restricted common stock granted as long-term incentive equity compensation on
January 6, 2011, January 6, 2010 and January 6, 2009;
|
|
|
|
|
|
Special equity retention
awards of restricted common stock granted as long-term incentive equity
compensation to Mr. Abramson and Mr. Rosenblatt on March 18, 2010, and to Dr.
Brown, Ms. Mahon and Dr. Hack on January 6, 2011;
|
|
|
|
|
|
Cash-settled SARs granted
to Dr. Brown, Ms. Mahon and Dr. Hack on January 6, 2011;
|
|
|
|
|
|
SERP benefits granted
effective as of April 1, 2010;
|
|
|
|
|
|
In the case of Dr. Brown
and Dr. Hack, unrestricted stock awards granted as bonuses for the filing of
patent applications and the issuance of patents on which they are named
inventors, and with respect to which the Company is the assignee; and
|
|
|
|
|
|
Perquisites in the
form of auto expense allowances and reimbursements, life and disability
insurance premium payments, and 401(k) plan matching contributions.
|
Grants of Plan-Based Awards
The following table
summarizes each grant of an award made to Named Executive Officers in 2011. These awards were made on a retrospective
basis as discussed above under the headings “Annual bonus equity compensation
awards” and “Long-term incentive equity compensation awards,” and are not
associated with any pre-established targets for minimum, threshold or maximum
awards.
|
Name
|
Grant Date
|
All Other
Stock Awards: Number of Shares of Stock (#)
|
All Other
Option Awards: Number of Securities Underlying Options (#)
|
Exercise
or Base Price of Option Awards ($/Share)
|
Grant Date
Fair Value of Stock and Option Awards ($)
|
|
Steven
V. Abramson……
|
1/6/2011
|
18,688(1)
|
–––
|
–––
|
649,969
|
|
Sidney
D. Rosenblatt……
|
1/6/2011
|
18,688(1)
|
–––
|
–––
|
649,969
|
|
Julia J. Brown, Ph.D…….
|
1/6/2011
|
24,293(2)
|
–––
|
–––
|
844,911
|
|
1/6/2011
|
–––
|
10,000(3)
|
34.78
|
74,900
|
|
3/10/2011
|
50(4)
|
–––
|
–––
|
1,970
|
|
6/23/2011
|
14(5)
|
–––
|
–––
|
476
|
|
9/14/2011
|
8(6)
|
–––
|
–––
|
454
|
|
12/15/2011
|
29(7)
|
–––
|
–––
|
974
|
|
Janice
K. Mahon…..........
|
1/6/2011
|
13,178(8)
|
–––
|
–––
|
458,331
|
|
1/6/2011
|
–––
|
7,000(9)
|
34.78
|
52,430
|
|
Michael
G. Hack, Ph.D…
|
1/6/2011
|
13,167(10)
|
–––
|
–––
|
457,948
|
|
1/6/2011
|
–––
|
7,000(9)
|
34.78
|
52,430
|
|
6/23/2011
|
29(11)
|
–––
|
–––
|
985
|
|
9/14/2011
|
17(12)
|
–––
|
–––
|
965
|
|
12/15/2011
|
14(13)
|
–––
|
–––
|
470
|
______________________________________
|
(1)
|
Consists of (a) an award
of 10,063 immediately vesting shares of common stock, with a certificate for
5,979 of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; and (b) an award of 8,625
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 7,188 immediately vesting shares of common stock, with a certificate for
4,951 of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; (b) an award of 6,325
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; and (c) a special equity retention
award of 10,780 shares of restricted common stock, which shares vest on the
first anniversary of the grant date, provided that the grantee is an employee
of the Company at such time.
|
|
|
|
(3)
|
Consists of 10,000
cash-settled SARs, valued using the Black-Scholes option pricing model.
|
|
|
|
|
(4)
|
Consists of an award of 50
immediately vesting shares of common stock, with a certificate for 36 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
|
|
|
|
(5)
|
Consists of an award of 14
immediately vesting shares of common stock, with a certificate for 10 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
|
|
|
|
(6)
|
Consists of an award of
eight immediately vesting shares of common stock, with a certificate for five
of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes.
|
|
|
|
|
(7)
|
Consists of an award of 29
immediately vesting shares of common stock, with a certificate for 18 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
|
|
|
|
(8)
|
Consists of (a) an award
of 2,875 immediately vesting shares of common stock, with a certificate for
1,716 of these shares having been issued and the remaining shares having been
withheld for payment of associated payroll taxes; (b) an award of 2,875
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; and (c) a special equity retention
award of 7,428 shares of restricted common stock, which shares vest on the
first anniversary of the grant date, provided that the grantee is an employee
of the Company at such time.
|
|
|
|
|
(9)
|
Consists of 7,000
cash-settled SARs, valued using the Black-Scholes option pricing model.
|
|
|
|
|
(10)
|
Consists
of (a) an award of 2,875 immediately vesting shares of common stock, with a
certificate for 1,716 of these shares having been issued and the remaining
shares having been withheld for payment of associated payroll taxes; (b) an
award of 2,875 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; and (c) a
special equity retention award of 7,417 shares of restricted common stock,
which shares vest on the first anniversary of the grant date, provided that
the grantee is an employee of the Company at such time.
|
|
|
|
|
(11)
|
Consists of an award of 29
immediately vesting shares of common stock, with a certificate for 20 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
|
|
|
|
(12)
|
Consists of an award of 17
immediately vesting shares of common stock, with a certificate for 10 of
these shares having been issued and the remaining shares having been withheld
for payment of associated payroll taxes.
|
|
|
|
|
(13)
|
Consists of an award of 14
immediately vesting shares of common stock, with a certificate for eight 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 2011 consisted of the
following:
|
|
Discretionary awards of
unrestricted common stock granted as performance bonuses for 2010;
|
|
|
|
|
|
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;
|
|
|
|
|
|
Special equity retention
awards of restricted common stock granted as long-term incentive equity
compensation to Dr. Brown, Ms. Mahon and Dr. Hack, with the awards vesting on
the first anniversary of the grant date;
|
|
|
|
|
|
Cash-settled SARs granted
to Dr. Brown, Ms. Mahon and Dr. Hack on January 6, 2011; and
|
|
|
|
|
|
In the case of Dr. Brown
and Dr. Hack, unrestricted stock awards granted as bonuses for the filing of
patent applications and the issuance of patents on which they are named
inventors, 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, 2011.
|
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(1) ($)
|
|
Steven V. Abramson……...
|
18,400
|
5.45
|
9/23/2012
|
|
|
|
|
18,400
|
16.94
|
1/20/2014
|
|
|
|
|
23,000
|
8.14
|
1/18/2015
|
|
|
|
|
33,000(2)
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
229,953
|
8,436,976
|
|
|
|
|
|
|
|
|
Sidney D. Rosenblatt……..
|
40,000
|
5.45
|
9/23/2012
|
|
|
|
|
40,000
|
16.94
|
1/20/2014
|
|
|
|
|
50,000
|
8.14
|
1/18/2015
|
|
|
|
|
50,000
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
232,621
|
8,534,864
|
|
|
|
|
|
|
|
|
Julia J. Brown, Ph.D……...
|
10,000(3)
|
34.78
|
1/6/2012
|
|
|
|
|
500
|
9.43
|
6/7/2015
|
|
|
|
|
40,000
|
10.51
|
12/30/2015
|
|
|
|
|
250
|
11.89
|
1/17/2016
|
|
|
|
|
250
|
14.16
|
1/15/2017
|
|
|
|
|
|
|
|
33,761
|
1,238,691
|
|
|
|
|
|
|
|
|
Janice K. Mahon……...…..
|
7,000(3)
|
34.78
|
1/6/2012
|
|
|
|
|
2,817
|
13.92
|
12/23/2013
|
|
|
|
|
2,715
|
8.14
|
1/18/2015
|
|
|
|
|
20,000
|
10.51
|
12/30/2015
|
|
|
|
|
|
|
|
15,342
|
562,898
|
|
|
|
|
|
|
|
|
Michael G. Hack, Ph.D…...
|
7,000(3)
|
34.78
|
1/6/2012
|
|
|
|
|
|
|
|
15,331
|
562,494
|
______________________________________
|
(1)
|
Based on the closing price
of the Company’s common stock on the NASDAQ Global Market on December 31,
2011.
|
|
|
|
|
(2)
|
Mr. Abramson has a
pecuniary interest in all but 10,000 of these stock options.
|
|
|
|
|
(3)
|
Cash-settled SARs.
|
Option
Exercises and Stock Vested Table
The following table
summarizes the exercises of stock options, SARs and other similar instruments,
and the vesting of stock, including restricted stock, restricted stock units
and similar instruments, for the Named Executive Officers during 2011.
|
Name
|
Number of
Shares Acquired on Exercise (#)
|
Value
Realized on Exercise(1) ($)
|
Number of
Shares Acquired on Vesting (#)
|
Value
Realized on Vesting(2) ($)
|
|
Steven
V. Abramson……….
|
18,400
|
887,064
|
72,390(3)
|
3,106,188(3)
|
|
Sidney
D. Rosenblatt……….
|
55,000
|
2,288,042
|
72,390
|
3,106,188
|
Julia
J. Brown, Ph.D………..
|
81,750
|
2,031,808
|
15,586
|
541,390
|
|
Janice
K. Mahon…………...
|
54,468
|
2,106,984
|
4,647
|
161,416
|
|
Michael
G. Hack, Ph.D…….
|
31,500
|
1,206,603
|
4,647
|
161,416
|
______________________________________
|
(1)
|
Based on the difference
between the closing price of our common stock on the NASDAQ Global Market on
the date of exercise and the exercise price of the stock options or warrants
exercised.
|
|
|
|
|
(2)
|
Based on the closing price
of our common stock on the NASDAQ Global Market on the date of vesting.
|
|
|
|
|
(3)
|
Mr. Abramson has a
pecuniary interest in all but 2,508 of these shares, the value of those
shares on vesting being $87,228.
|
Potential Payments Upon
Termination or Change in Control
In April 2003, the Company
entered into Change in Control Agreements with the Named Executive Officers (the
“Original CIC Agreements”). These
agreements provided for certain cash payments and other benefits to the Named
Executive Officers in the event of an effective termination of these
individuals’ employment in connection with a “Change in Control” of the
Company.
In November 2008, the Original CIC
Agreements were amended and restated to bring them into compliance with Section
409A of the Internal Revenue Code of 1986, as amended, and regulations issued
thereunder. At the same time, the
Original CIC Agreement with Ms. Mahon was amended to ensure that she would be
treated the same as our other Named Executive Officers in the event of a
termination of her employment for a Change in Control. The amended CIC Agreement with Dr. Hack was
amended a second time in January 2010 to ensure that he would also be treated
the same as our other Named Executive Officers in the event of such a
termination.
Under the Amended and Restated CIC
Agreements with Mr. Abramson, Mr. Rosenblatt, Dr. Brown and Ms. Mahon, and the
Second Amended and Restated CIC Agreement with Dr. Hack (collectively, “Amended
CIC Agreements”), the benefits to which our Named Executive Officers would be
entitled in the event of a termination of employment for a Change in Control include the following:
|
|
a lump-sum payment equal
to two times the sum of the average annual base salary and the annual bonus
to the individual, including any authorized deferrals, salary reduction
amounts and any car allowance, and including the fair market dollar value
equivalent of any bonus amounts paid in the form of stock options, SARs,
warrants, stock awards or performance units;
|
|
|
|
|
|
a lump-sum payment equal to the estimated after-tax
premium cost to the individual of continuing any Company-sponsored life,
travel or accident insurance and disability insurance coverage for the
individual (and where applicable, his or her spouse and dependents), based on
coverage levels in effect immediately prior to the termination date (less any
contributions that would have been required by the individual), for two
years;
|
|
|
|
|
|
a lump-sum payment
equal to the Company-provided contributions to which the individual would be
entitled under the Company’s 401(k) savings and retirement plans, assuming
the individual continued working for the Company for two years at his or her
annual base salary;
|
|
|
|
|
|
effective immediately
preceding the Change in Control (but contingent upon the consummation of the Change
in Control), full vesting of all outstanding, unvested equity awards held by
the individual immediately preceding the Change in Control that have not yet
become vested (and exercisable to the extent applicable), except that awards
which vest based on the attainment of performance criteria would not
automatically vest but would instead be governed by the terms of the plan or
agreement evidencing the award;
|
|
|
|
|
|
continued group
hospitalization, health and dental care coverage, at the level in effect as
of the termination date (or generally comparable coverage) for the individual
and, where applicable, the individual’s spouse and dependents, for two years
assuming the individual continued working for the Company;
|
|
|
|
|
|
a lump-sum payment equal
to $10,000 for outplacement assistance services for two years; and
|
|
|
|
|
an additional payment to cover any excise tax imposed
on the individual by reason of the individual receiving the payments and
benefits specified above.
|
For each of the Named
Executive Officers, the estimated payments and benefits that would be provided
by the Company under the Amended CIC Agreements are set forth in the following
table, based on the assumption that a triggering event took place on December
31, 2011.
|
Estimated Payments and
Benefits on Termination in Connection With a Change in Control
|
|
Name
|
Lump Sum
Payment of Two Times Annual Base Salary(1) ($)
|
Lump Sum
Payment of Two Times Annual Bonus(2)
($)
|
Lump Sum
Payment for Accrued and Unused Paid Time Off and Sick Time ($)
|
Lump Sum
Payment of Estimated After-Tax Cost to Continue Life, Travel and Disability
Insurance for Two Years ($)
|
Lump Sum
Payment of Estimated Contribu-tions Under 401(k) Savings and Retirement
Plans for Two Years ($)
|
Estimated
Value of Ongoing Payments to Continue Group Hospitaliza-tion, Health and
Dental Coverage for Two Years ($)
|
Estimated
Value of Unvested Stock Options and Stock Awards Subject to Accelerated Vesting(3) ($)
|
Payment
for Outplace-ment Assistance Services ($)
|
Value of
Tax Reimburse-ment Payments on Account of Excise or Other Taxes ($)
|
Total
Payments and Benefits ($)
|
|
Steven
V. Abramson
|
1,116,951
|
1,299,975
|
99,209
|
28,391
|
15,000
|
22,165
|
8,436,976
|
10,000
|
4,197,905
|
15,226,572
|
|
Sidney
D. Rosenblatt
|
1,116,951
|
1,299,975
|
83,745
|
39,665
|
15,000
|
22,165
|
8,534,864
|
10,000
|
4,327,171
|
15,449,536
|
|
Julia
J. Brown, Ph.D.
|
776,103
|
1,689,822
|
79,028
|
4,705
|
15,000
|
27,118
|
1,238,691
|
10,000
|
1,318,901
|
5,159,368
|
|
Janice
K. Mahon
|
534,812
|
916,697
|
62,268
|
4,547
|
15,000
|
27,118
|
562,898
|
10,000
|
750,138
|
2,883,478
|
|
Michael G. Hack, Ph.D.
|
534,009
|
915,921
|
19,109
|
5,655
|
15,000
|
35,175
|
562,494
|
10,000
|
715,989
|
2,813,352
|
______________________________________
|
(1)
|
Under the Amended CIC
Agreements, this is to be based on the highest monthly base salary paid or payable
to the employee during the twenty-four (24) months prior to December 31,
2011, including any amounts earned but deferred. It is also to include any annual car
allowance. For purposes of this
calculation, the employee’s bi-weekly salary as of the payment period ended
on December 31, 2011 was utilized.
Also, an annual car allowance of $6,000 is included for each of Mr.
Abramson and Mr. Rosenblatt.
|
|
|
|
|
(2)
|
Under the Amended CIC
Agreements, this is to be based on the highest annual bonus to the employee
for the last three full fiscal years prior to December 31, 2011, and is
to include the fair market dollar value equivalent of any stock, restricted
stock or stock options issued as bonus consideration, determined as of the
date of issuance and without regard to any restrictions or vesting
conditions. The annual bonuses for 2008
and 2010, granted on January 6, 2009 and 2011, respectively, were
utilized for purposes of this calculation.
|
|
|
|
|
(3)
|
Assumes
all unvested or restricted stock options and stock awards automatically vest
on a Change of Control. Does not
include restricted stock bonuses awarded on March 8, 2012.
|
In consideration of
receiving these payments and benefits, each Named Executive Officer has agreed
not to compete with the Company for six months following his or her termination
in connection with a Change in Control.
Each Named Executive Officer has further agreed that, for two years
following his or her termination he or she will not knowingly (i) solicit or
recruit any of the Company’s employees to compete with the Company, or (ii)
divert or unreasonably interfere with the Company’s business relationships with
any of its suppliers, customers, partners or joint venturers with whom the
individual had any involvement. In
addition, each Named Executive Officer is required to execute a general release
of all employment-related claims he or she may have against the Company in
order to receive the payments and benefits specified under the Amended CIC
Agreements.
As used in the Amended CIC
Agreements, a Change in Control of the Company would occur if:
|
|
any
person first becomes the beneficial owner of securities of the Company (not
including securities previously owned by such persons or any securities
acquired directly from the Company) representing 30% or more of the
then-outstanding voting securities of the Company;
|
|
|
|
|
the
individuals who constitute our Board of Directors at the beginning of any
24-month period cease, for any reason other than death, to constitute at
least a majority of our Board of Directors;
|
|
|
|
|
|
the Company consummates a merger or consolidation with any other
corporation, except where the voting securities of the Company outstanding
immediately prior to the merger or consolidation continue to represent at
least 50% of the voting securities of the Company (or the surviving entity of
the merger or consolidation or its parent), or where no person first becomes
the beneficial owner of securities of the Company representing 30% or more of
the then-outstanding voting securities of the Company;
|
|
|
|
|
|
the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company, or an agreement is consummated for the sale or
disposition by the Company of all or substantially all of its assets,
excluding a sale or disposition by the Company of all or substantially all of
its assets to an entity, at least 50% of the voting securities of which are
owned by persons in substantially the same proportion as their ownership of
the Company immediately prior to the sale; or
|
|
|
|
|
|
any person consummates a tender offer or exchange for
voting stock of the Company and, directly or indirectly, becomes (in one or
more transactions) the “beneficial owner” of securities of the Company
representing a majority of the voting securities of the Company.
|
As used in the Amended CIC
Agreements, a termination of a Named Executive Officer in connection with a Change
in Control of the Company would include a termination of the individual’s
employment:
|
|
by
the Company at the time of or within two years after a Change in Control,
other than for the individual’s death or incapacity for a period of 12
consecutive months, or for cause;
|
|
|
|
|
|
by the individual within two years after a Change in Control for (i) the
Company’s breach of the Amended CIC Agreement or any other material
obligation of the Company to the individual, (ii) any significant reduction
by the Company of the individual’s authority, duties or responsibilities,
(iii) any demotion or removal of the individual from his or her employment
grade, compensation level or officer positions, or (iv) a relocation by more
than 50 miles of the offices of the Company at which the individual
principally works; and
|
|
|
|
|
|
by either the Company or the individual during the
one year period immediately preceding a Change in Control, unless the Company
establishes by clear and convincing evidence that the termination was for
good faith business reasons not related to the Change in Control.
|
Compensation of Directors
The following table
provides information on the compensation of members of our Board of Directors
(who are not Named Executive Officers) in 2011.
|
Name
|
Fees Earned or Paid in Cash ($)
|
Stock Awards ($)
|
Option Awards(1) ($)
|
All Other Compensation ($)
|
Total ($)
|
|
Leonard Becker……….
|
42,096
|
364,950(2)
|
–––
|
–––
|
407,046
|
|
Elizabeth H. Gemmill...
|
49,596(3)
|
364,950(2)
|
–––
|
–––
|
414,546
|
|
C. Keith Hartley………
|
42,096
|
364,950(2)
|
–––
|
–––
|
407,046
|
|
Lawrence Lacerte……..
|
42,096
|
364,950(2)
|
–––
|
–––
|
407,046
|
______________________________________
|
(1)
|
The aggregate numbers of
shares issuable to each independent director upon the exercise of options outstanding
as of December 31, 2011 were as follows:
Mr. Becker – 0 shares; Ms. Gemmill – 100,000 shares; Mr. Hartley – 100,000
shares; and Mr. Lacerte – 0 shares.
There were no restricted stock awards to any of our independent
directors outstanding as of December 31, 2011.
|
|
|
|
|
(2)
|
Aggregate grant date fair
value of (a) 5,000 shares issued as compensation for 2011, the closing price
of the Company’s common stock being $39.40 per share on the grant approval
date of March 10, 2011 (for a total amount of $197,000); and (b) 5,000 shares
approved for issuance as compensation for 2012, the closing price of the
Company’s common stock being $33.59 per share on the grant approval date of
December 15, 2011 (for a total amount of $167,950).
|
|
|
|
|
(3)
|
Includes additional cash
compensation to Ms. Gemmill for her service as Chairperson of the Audit
Committee and Compensation Committee of the Board of Directors.
|
Compensation to each
independent member of the Board of Directors in 2011 consisted of director
fees, paid in cash and, in the case of Ms. Gemmill, additional cash for her
service as Chairperson of the Audit Committee and Compensation Committee of the
Board of Directors. In addition, we
reimbursed members of our Board of Directors for their reasonable travel
expenses to attend all Board and committee meetings in 2011.
Compensation to each
independent Board member also includes annual share awards. These awards have historically been approved
in December prior to the year in which the shares are issued. Annual share awards to our independent
directors for 2011 were approved on March 10, 2011, and thus appeared in the
Compensation of Directors table of our proxy statement for the 2011 Annual
Meeting of Shareholders. Annual share
awards to our independent directors for 2012 were approved on December 15, 2011,
and thus also appear in the table above.
For 2011, our Compensation
Committee and Board of Directors approved additional fees of $5,000 in cash to
each committee chairperson. Accordingly,
as Chairperson of the Audit Committee and the Compensation Committee, Ms.
Gemmill will receive an additional cash payment of $10,000 for her service in
this capacity, said amounts being prorated based on the applicable grant date.
Equity Compensation Plans
The following table
includes information on our equity compensation plans (including individual
compensation arrangements), both those previously approved and not approved by
our shareholders, as of December 31, 2011:
|
Plan Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights (#)
|
Weighted-average
exercise price of outstanding options, warrants and rights ($)
|
Number
of securities remaining available for future issuance under equity
compensation plans(1) (#)
|
|
Equity compensation plans approved by
security holders………
|
1,079,223
|
10.54
|
2,490,141(2)
|
|
Equity compensation plans not approved by security
holders………
|
–––
|
–––
|
–––
|
|
Total………………………………..
|
1,079,223
|
10.54
|
2,490,141(2)
|
______________________
|
(1)
|
Excludes securities
reflected in the column entitled “Number
of securities to be issued upon exercise of outstanding options, warrants and
rights.”
|
|
|
|
|
(2)
|
Includes
955,830 shares remaining available under the Company’s Employee Stock
Purchase Plan. No more than 12,500
shares are subject to purchase by each participant during any three-month
purchase period under the Plan.
|
PROPOSAL
2
APPROVAL
OF AN AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION TO
IMPLEMENT A MAJORITY VOTE STANDARD IN UNCONTESTED ELECTIONS OF DIRECTORS
On April 10, 2012, the
Board of Directors unanimously approved an amendment to our Amended and Restated
Articles of Incorporation to implement a majority voting standard for the
election of directors in uncontested elections.
If the amendment is approved by the shareholders, a new Section 7 will
be added to our Amended and Restated Articles of Incorporation that will read
in its entirety as set forth below, and current Section 7 of our Amended and
Restated Articles of Incorporation will be renumbered Section 8. The proposed new Section 7 will read:
“Except as provided in Section 5.C(7) of these Amended
and Restated Articles of Incorporation, each director of the Corporation shall
be elected by a vote of the majority of the votes cast with respect to that
director at any meeting for the election of directors at which a quorum is
present, in accordance with Section 2-5(d) of the Amended and Restated Bylaws
of the Corporation; provided, that if the number of nominees exceeds the number
of directors to be elected, the directors shall be elected by the vote of a
plurality of the votes cast and entitled to vote on the election of directors
in person or by proxy at any such meeting. For purposes of this Section 7, a vote of the
majority of the votes cast means that the number of shares voted ‘for’ a
director must exceed 50% of the votes cast with respect to that director.”
The Pennsylvania
Business Corporation Law (the “PBCL”) provides that, unless otherwise specified
in a company’s articles of incorporation, a director is elected by a plurality
of the votes cast by the shares entitled to vote in the election at a meeting
at which a quorum is present. Our
Amended and Restated Articles of Incorporation do not specify the voting
standard required in director elections, so our directors are currently elected
by a plurality vote. Under plurality
voting, only “for” votes are counted, not any “against” votes or abstentions,
so in an uncontested election (i.e., an election where the only nominees are
those proposed by the board) a director could be elected with only one “for”
vote, despite an overwhelming number of “against” votes.
Over the past several
years, the majority vote standard has been an evolving concept for many public
companies. We have been monitoring best
practices in this area, and are aware that an increasing number of public
companies have amended their charter or bylaws to provide for a majority voting
standard rather than a plurality standard. After careful consideration, the Board has
concluded that it is in the best interests of the Company and our shareholders
to amend our Amended and Restated Articles of Incorporation to provide for
majority voting in uncontested director elections.
Under a majority
voting standard in uncontested director elections, each vote is required to be
counted “for” or “against” the director’s election. In order to be elected, the
votes cast “for” such nominee’s election must exceed the number of votes cast
“against” such nominee’s election. Shareholders
will also be entitled to abstain with respect to the election of a director,
although abstentions will have no effect in determining whether the required
affirmative majority vote has been obtained. In contested elections, directors will be
elected by a plurality of the votes cast.
Under the PBCL, an
incumbent director who is not re-elected may remain in office until his or her
successor is selected and qualified, continuing as a “holdover” director until
the director resigns, his or her position is filled by a subsequent shareholder
vote, or the director is removed by the shareholders. If the amendment to the Amended and Restated
Articles of Incorporation is approved by our shareholders, the Board intends to
adopt a director resignation policy to address the continuation in office of a
“holdover” director, so that an incumbent director who did not receive the
requisite affirmative majority of the votes cast for his or her re-election
must tender his or her irrevocable resignation to the Board. The independent members of the Board
(excluding the nominee in question if applicable) would then consider the
resignation offer and make a recommendation to the Board as to whether to
accept the director’s resignation. Within
90 days following certification of the shareholder vote, the independent
members of the Board (excluding the nominee in question if applicable) would
make a final determination as to whether to accept the director’s resignation. The Board’s explanation of its decision then
would be promptly disclosed in a Current Report on Form 8-K filed with the SEC.
If approved by our
shareholders, this amendment will become effective upon the filing of Articles
of Amendment to our Amended and Restated Articles of Incorporation with the
Secretary of State of the Commonwealth of Pennsylvania, which we would make
promptly after the annual meeting. The
new majority voting standard would then be applicable to an uncontested
election of directors at our 2013 annual meeting of shareholders.
No Dissenters’ Rights
Under Pennsylvania law,
shareholders are not entitled to dissenters’ rights of appraisal with respect
to this proposal.
Vote Required and Recommendation of our
Board of Directors
This proposal will be
approved if a majority of the votes cast by all shareholders, voting as a
single class, are FOR approval. Abstentions
on this proposal are not considered “votes cast” and will have no effect on the
outcome of the vote. Similarly, broker
non-votes are not considered “votes cast” with respect to this proposal and,
therefore, will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” ADOPTION OF THIS
PROPOSAL 2.
PROPOSAL
3
ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION
Under the Dodd-Frank Wall
Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and
Section 14A of the Exchange Act, our shareholders are now entitled to vote
to approve, on a non-binding, advisory basis, the compensation of our Named
Executive Officers as disclosed in this Proxy Statement in accordance with SEC
rules. This vote is not intended to
address any specific item of compensation, but rather the overall compensation
of our Named Executive Officers and the philosophy, policies and practices
described in this Proxy Statement.
The compensation of our
Named Executive Officers subject to the vote is disclosed in the Compensation
Discussion and Analysis, the compensation tables, and the related narrative
disclosure contained in this Proxy Statement.
As discussed in the Compensation Discussion and Analysis, we believe
that our compensation policies and decisions are focused on pay-for-performance
principles and strongly aligned with our shareholders’ interests, consistent
with current market practices.
Compensation of our Named Executive Officers is designed to enable us to
attract and retain talented and experienced executives to lead us successfully
in a competitive environment.
Accordingly, our Board of
Directors is asking our shareholders to indicate their support for the
compensation of our Named Executive Officers as described in this Proxy
Statement by casting a non-binding, advisory vote “FOR” the following
resolution:
“RESOLVED, that the
compensation paid to the Company’s Named Executive Officers, as disclosed in
this Proxy Statement pursuant to Item 402 of Regulation S-K,
including the Compensation Discussion and Analysis, compensation tables and
narrative discussion, is hereby APPROVED.”
Because the vote is
advisory, it is not binding on the Board of Directors or our Company. Nevertheless, the views expressed by the shareholders,
whether through this vote or otherwise, are important to Company management and
the Board and, accordingly, the Board and the Compensation Committee intend to
consider the results of this vote in making determinations in the future
regarding executive compensation arrangements.
Vote Required and
Recommendation of our Board of Directors
This proposal will be
approved if a majority of the votes cast by all shareholders, voting as a
single class, are FOR approval.
Abstentions on this proposal are not considered “votes cast” and will
have no effect on the outcome of the vote.
Similarly, broker non-votes are not considered “votes cast” with respect
to this proposal and, therefore, will have no effect on the outcome of the
vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR”
ADOPTION OF THE RESOLUTION PROPOSED UNDER THIS PROPOSAL 3.
PROPOSAL
4
RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2012
At its March 8, 2012 meeting,
our Audit Committee recommended and approved the appointment of KPMG LLP (“KPMG”)
as the Company’s independent registered public accounting firm to audit the
consolidated financial statements of the Company for the year ending
December 31, 2012. KPMG has served
in this capacity since being engaged by us on July 30, 2002. We are seeking the ratification of our
appointment of KPMG as our independent registered public accounting firm for
2012 at the Annual Meeting of Shareholders.
We expect that a representative
of KPMG will be present at the Annual Meeting and will be available to respond
to appropriate questions. If this
representative desires to do so, he or she will have the opportunity to make a
statement at the Annual Meeting.
Vote Required and
Recommendation of our Board of Directors
This proposal will be
approved if a majority of the votes cast by all shareholders, voting as a
single class, are FOR approval.
Abstentions on this proposal are not considered “votes cast” and will
have no effect on the outcome of the vote.
Similarly, broker non-votes are not considered “votes cast” with respect
to this proposal and, therefore, will have no effect on the outcome of the
vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
“FOR”
ADOPTION OF THIS PROPOSAL 4.
Fees Billed by the Company’s Independent Auditors
The audit and tax fees to
us from KPMG for 2011 and 2010 are set forth in the table below:
|
Fee Category
|
2011
|
2010
|
|
Audit Fees
|
$343,000(1)
|
$214,000(2)
|
|
Audit-Related Fees
|
–––
|
–––
|
|
Tax Fees
|
$60,000(3)
|
$8,000(3)
|
|
All Other Fees
|
–––
|
–––
|
______________________________________
|
(1)
|
Consisted of fees relating
to the audit of consolidated financial statements, the audit of internal
control over financial reporting, quarterly reviews, the issuance of a
comfort letter and consent relating to a March 2011 common stock offering,
and a statutory audit of the Company’s subsidiary in Hong Kong.
|
|
|
|
|
(2)
|
Consisted of fees relating
to the audit of consolidated financial statements, the audit of internal
control over financial reporting, quarterly reviews, the issuance of consents
relating to registration statements filed with the SEC, and a statutory audit
of the Company’s subsidiary in Hong Kong.
|
|
|
|
|
(3)
|
Consisted of fees relating
to tax consultation for assisting with tax issues associated with
business operations outside of the United States.
|
|
|
|
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee
currently approves all engagements to provide both audit and non-audit
services, and has not established formal pre-approval policies or
procedures. During 2011, our Audit
Committee approved non-audit services, as defined by Rule 2-01(c)(7)(i)(C) of
Regulation S-X, relating to tax consultation for assisting with tax issues
associated with business operations outside of the United States.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The
table below sets forth certain information, as of the Record Date, with respect
to persons known by the Company to beneficially own more than five percent (5%)
of any class of our voting securities.
|
Title of Class
|
Name and Address
of Beneficial Owner(1)
|
Number of Shares Beneficially Owned(2)
(#)
|
Percentage Ownership(2)
|
|
Common Stock
|
|
|
|
|
|
Scott Seligsohn(3)(4)……………………..
|
3,407,200
|
7.4%
|
|
|
Lori S. Rubenstein(3)(5)…………………
|
3,254,000
|
7.0%
|
|
|
Steven G. Winters(3)(6)………………….
|
3,176,000
|
6.9%
|
|
|
FMR LLC(7)…………………………….
|
4,569,106
|
9.9%
|
|
|
Discovery Capital Management, LLC(8)..
|
6,008,115
|
13.0%
|
|
|
Artisan Partners Holdings LP(9)..
|
3,224,300
|
7.0%
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
|
|
|
|
American Biomimetics Corporation(6)(10)
|
200,000
|
100%
|
|
|
Sherwin I. Seligsohn(10)………………...
|
200,000
|
100%
|
______________________________________
|
(1)
|
Unless otherwise
indicated, the address of each beneficial owner is 375 Phillips Boulevard,
Ewing, New Jersey 08618.
|
|
|
|
|
(2)
|
Unless otherwise
indicated, we believe that all persons named in the table have sole voting
and investment power with respect to all shares of our common stock and
Series A Preferred Stock beneficially owned by them. The percentage ownership for each beneficial
owner listed above is based on 46,340,345 shares of our common stock and
200,000 shares of our Series A Preferred Stock outstanding as of the Record
Date. In accordance with SEC rules,
options or warrants to purchase shares of our common stock that were
exercisable as of the Record Date, or would become exercisable within 60 days
thereafter, are deemed to be outstanding and beneficially owned by the person
holding such options or warrants for the purpose of computing such person’s
percentage ownership, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person.
|
|
|
|
|
(3)
|
Includes (a) 1,500,000
shares of our common stock owned by the Sherwin I. Seligsohn Irrevocable
Indenture of Trust dated July 29, 1993, FBO Lori S. Rubenstein (the “Rubenstein
Trust”), of which Lori S. Rubenstein, Scott Seligsohn and Steven G. Winters
are co-trustees; (b) 1,500,000 shares of our common stock owned by the
Sherwin I. Seligsohn Irrevocable Indenture of Trust dated July 29, 1993, FBO
Scott Seligsohn (the “Seligsohn Trust”), of which Lori S. Rubenstein, Scott
Seligsohn and Steven G. Winters are co-trustees; and (c) 176,000 shares of
our common stock owned by American Biomimetics Corporation, of which the
Rubenstein Trust and Seligsohn Trust are the principal shareholders. Ms. Lori S. Rubenstein is Mr. Sherwin I.
Seligsohn’s adult daughter, and Mr. Scott Seligsohn is Mr. Sherwin I.
Seligsohn’s adult son.
|
|
|
|
|
(4)
|
Includes 13,000 options to
purchase shares of our common stock and 218,200 shares of
our common stock owned directly by Mr. Scott Seligsohn.
|
|
|
|
|
(5)
|
Includes 78,000 shares of
our common stock owned directly by Ms. Rubenstein.
|
|
|
|
|
(6)
|
The address of these
beneficial owners is c/o Cozen O'Connor, 1900 Market Street, Philadelphia, PA
19103.
|
|
|
|
|
(7)
|
Based
solely on a Schedule 13G/A filed by FMR LLC and Edward C. Johnson 3d,
Chairman of FMR LLC, on February 14, 2012. The reported address for each of FMR
LLC and Edward C. Johnson 3d is 82 Devonshire
Street, Boston, Massachusetts 02109.
|
|
|
|
|
(8)
|
Based
solely on a Schedule 13G/A filed by Discovery Capital Management, LLC and Robert
K. Citrone on February 14, 2012, and a Statement of Changes in Beneficial
Ownership on Form 4 filed by Discovery Capital Management, LLC and Robert K.
Citrone on March 12, 2012. The
reported address for each of Discovery Capital Management, LLC and Robert K.
Citrone is 20 Marshall Street, South Norwalk, Connecticut 06854.
|
|
|
|
|
(9)
|
Based
solely on a Schedule 13G filed by Artisan Partners Holdings LP, Andrew A.
Ziegler and Carlene M. Ziegler on February 7, 2012. The reported address for each of Artisan
Partners Holdings LP, Andrew A. Ziegler and Carlene M. Ziegler is 875 East
Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202.
|
|
|
|
(10)
|
Mr. Sherwin I. Seligsohn,
our Founder and Chairman of the Board, is the sole Director, Chairman,
President and Secretary of American Biomimetics Corporation, which owns all
200,000 shares of our Series A Preferred Stock.
|
Security Ownership of Management
The table below sets forth
certain information, as of the Record Date, with respect to the beneficial
ownership of any class of our equity securities beneficially owned by all
directors, nominees for director and Named Executive Officers of the Company.
|
Title of Class
|
Name and Address
of Beneficial Owner(1)
|
Number of Shares Beneficially Owned(2)
(#)
|
Percentage Ownership(2)
|
|
Common Stock
|
|
|
|
|
|
Sherwin I. Seligsohn.…………………
|
647,312(3)
|
1.4%
|
|
|
Steven V. Abramson…………………
|
439,216
|
*
|
|
|
Sidney D. Rosenblatt………………...
|
619,239(4)
|
1.3%
|
|
|
Julia J. Brown, Ph.D…………………
|
240,909
|
*
|
|
|
Janice K. Mahon……………………..
|
89,523
|
*
|
|
|
Michael G. Hack, Ph.D.……………..
|
36,197
|
*
|
|
|
Leonard Becker……………………...
|
31,250
|
*
|
|
|
Elizabeth H. Gemmill………………..
|
185,620
|
*
|
|
|
C. Keith Hartley……………………...
|
179,077(5)
|
*
|
|
|
Lawrence Lacerte……………………
|
883,002(6)
|
1.9%
|
|
|
All directors and executive officers
as a group (10 persons)……………
|
3,351,345
|
7.1%
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
|
|
|
|
Sherwin I. Seligsohn.…………………
|
200,000(7)
|
100%
|
_______________
|
*
|
Represents less than 1% of
our outstanding common stock.
|
|
|
|
|
(1)
|
Unless otherwise
indicated, the address of each beneficial owner is 375 Phillips Boulevard, Ewing,
New Jersey 08618.
|
|
|
|
|
(2)
|
Unless otherwise
indicated, we believe that all persons named in the table have sole voting
and investment power with respect to all shares of our
common stock beneficially owned by them. The percentage ownership for each
beneficial owner listed above is based on 46,340,345 shares of our common
stock and 200,000 shares of our Series A Preferred Stock outstanding as of
the Record Date. In accordance with
SEC rules, options or warrants to purchase shares of our common stock that
were exercisable as of the Record Date, or would become exercisable within 60
days thereafter, are deemed to be outstanding and beneficially owned by the
person holding such options or warrants for the purpose of computing such
person’s percentage ownership, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. The numbers of shares of common stock
listed include the following number of shares issuable upon the exercise of
outstanding warrants or options: Sherwin I. Seligsohn – 180,500; Steven V.
Abramson – 82,800; Sidney D. Rosenblatt – 180,000; Julia J. Brown – 41,000; Janice
K. Mahon – 25,532; Michael G. Hack – 0; Leonard Becker – 0;
Elizabeth H. Gemmill – 100,000; C. Keith Hartley – 100,000; and Lawrence
Lacerte – 0.
|
|
|
|
|
(3)
|
Includes 176,000 shares of
our common stock owned by American Biomimetics Corporation, of which Mr.
Sherwin I. Seligsohn is the sole Director, Chairman, President and
Secretary. Also includes 21,000 shares
of our common stock owned by The Seligsohn Foundation, of which Mr. Sherwin
I. Seligsohn is the sole trustee. Does
not include (i) 1,500,000 shares of our common stock owned by the Rubenstein
Trust; (ii) 1,500,000 shares of our common stock owned by the Seligsohn
Trust; (iii) 78,000 shares of our common stock owned by Ms. Lori S.
Rubenstein; and (iv) 13,000 options to purchase shares of our common stock
and 218,200 shares of our common stock owned by Mr. Scott Seligsohn, as to
which in each case Mr. Sherwin I. Seligsohn disclaims beneficial ownership.
|
|
|
|
|
(4)
|
Includes 3,250 shares of
our common stock held by Mr. Rosenblatt’s children and being reported as
beneficially owned by him.
|
|
|
|
|
(5)
|
Includes 23,528 shares of
our common stock owned by Mr. Hartley’s Defined Benefit Pension Plan.
|
|
|
|
|
(6)
|
Includes 16,000 shares of
our common stock held by Mr. Lacerte’s children and being reported as
beneficially owned by him.
|
|
|
|
(7)
|
Mr. Sherwin I. Seligsohn
is the sole Director, Chairman, President and Secretary of American
Biomimetics Corporation, which owns all 200,000 shares of our Series A
Preferred Stock.
|
CERTAIN TRANSACTIONS WITH RELATED PERSONS
Our Relationship with Global Photonic Energy
Corporation
Global Photonic Energy
Corporation (“GPEC”) is a private company that was formed by Sherwin I.
Seligsohn, our Founder and Chairman of the Board, at about the same time we
began operating in 1994. GPEC’s business
focuses on organic photovoltaic solar cell technologies. These technologies are related to our OLED
technologies, in that similar processes and materials used to emit light from
an OLED may be useful for converting solar energy into electricity in an
organic photovoltaic device.
Sherwin I. Seligsohn
currently serves as Chairman of the Board, Chief Executive Officer and
President of GPEC. Certain other of our
employees who are not directors or executive officers of the Company also are
employed by and/or serve on the Board of Directors of GPEC. Mr. Seligsohn and these other individuals receive
separate salaries, bonuses and other compensation from GPEC for their work in
these various capacities.
For many years, we and GPEC
have both funded research in the laboratories of Dr. Stephen R. Forrest,
formerly at Princeton University and now at the University of Michigan, and Dr.
Mark E. Thompson at the University of Southern California. Our funded research relates to OLEDs and
other organic opto-electronic devices, and GPEC’s funded research relates to organic
photovoltaic solar cells. On occasion,
inventions arising from this funded research have application to both our and
GPEC’s fields of interest.
To address this potential
overlap of interest, we reached an understanding with GPEC, memorialized in a
letter dated June 4, 2004, that patent rights derived from research funded
under the research agreements after that date would be licensed to each of the
Company and GPEC exclusively in its respective field of interest. For GPEC, this field is organic photovoltaic
cell for solar energy conversion. For
us, this field is thin film organic electronics for displays, lasers, lighting,
organic thin film transistors, organic memories and other thin-film organic
devices, but not including thin film organic photovoltaic cells for solar
energy conversion. We and GPEC each pay
a portion of the legal fees and other costs for patent filings claiming
inventions that have application to both parties’ fields of interest, which
filings are made in agreed upon countries.
If only one of the parties wishes to make a patent filing in a
particular country, that party bears the entire cost of the filing. Otherwise, the parties exchange no money or
other consideration on account of this arrangement.
Our Relationship with Scott Seligsohn
We employ Scott Seligsohn,
son of Sherwin I. Seligsohn, as an executive assistant to Sherwin I. Seligsohn
in his capacity as our Founder and Chairman of the Board of Directors. In 2011, we paid Scott Seligsohn base salary
and bonus compensation of $100,020.
Policies and
Procedures for Approval of Related Person Transactions
Consistent with applicable
NASDAQ listing requirements, the Audit Committee of our Board of Directors is
responsible for reviewing all transactions between us and related persons for
potential conflicts of interest on an ongoing basis, and for approving all such
transactions. Related persons include
any of our directors or nominees for director, any of our executive officers,
any shareholders owning more than 5% of any class of our equity securities, and
immediate family members of any of these persons.
To help identify
transactions with related persons, each year, we submit and require our
directors and executive officers to complete Director and Officer
Questionnaires identifying any transactions with us in which they or their
family members have an interest.
Responses to these Director and Officer Questionnaires are reviewed and
transactions that might reasonably pose a conflict of interest are brought to
the attention of the Audit Committee for consideration.
The transactions with the
related persons identified above were all reviewed with our Audit Committee at
a meeting on April 10, 2012. At this
meeting, the Audit Committee ratified each of these transactions following its
consideration of the potential conflicts of interest.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the
Exchange Act requires our executive officers and directors, as well as persons
beneficially owning more than 10% of any class of our equity securities, to
file with the SEC reports of beneficial ownership and reports of changes in
beneficial ownership of these equity securities. Based solely on our review of these reports
as furnished to us during or with respect to 2011, we believe that our
executive officers, directors and holders of more than 10% of any class of our
equity securities met all applicable filing requirements.
RISK
OVERSIGHT BY OUR BOARD OF DIRECTORS
The role of our Board of
Directors in our risk oversight process includes receiving regular reports from
members of management on areas of material risk to us, including operational,
financial, legal and strategic risks.
Our Board of Directors also works to oversee risk through its
consideration and authorization of significant matters, such as major
strategic, operational and financial initiatives and its oversight of
management’s implementation of those initiatives.
In particular, our Audit
Committee is tasked pursuant to its charter “to discuss with management and the
Company’s independent auditor, as appropriate, the Company’s risk assessment
and risk management policies, including the Company’s major exposures to
financial risk and the steps taken by management to monitor and mitigate such
exposures.” As appropriate, the
Chairperson of the Audit Committee reports to the full Board of Directors on
the activities of the Audit Committee in this regard, allowing the Audit
Committee and the full Board to coordinate their risk oversight activities.
In its risk oversight
capacity, our Board of Directors and Audit Committee engage in various
practices, including, without limitation:
|
|
reviewing and considering
reports from and information provided by management to the Board and its
committees on topics relating to the risks that we face, including, without
limitation, the status of current and anticipated developments of our
technology, access to debt and equity capital markets, existing and potential
legal claims against us and various other matters relating to our business;
|
|
|
|
|
|
the direct oversight
of specific areas of our business by our Compensation Committee and Audit
Committee; and
|
|
|
|
|
|
reviewing and considering reports from, and information
provided by, our auditors and other outside consultants regarding various
areas of potential risk, including, among others, those relating to our
compensation practices and our internal control over financial reporting.
|
As
one component of our risk oversight and anti-fraud program, our Audit Committee
has established complaint reporting procedures described in the “For Investors” section of
our website at www.universaldisplay.com.
These procedures indicate how to submit complaints to our Audit
Committee regarding accounting, internal accounting controls or auditing
matters. Once received, grievances are
reviewed by our President and General Counsel and then forwarded to the
Chairperson of the Audit Committee for consideration. Questions or concerns may also be submitted
anonymously to the Audit Committee in writing, via an unsigned letter, or
through a name-protected email process administered by a third-party service provider.
ETHICS AND BUSINESS CONDUCT
Code of Ethics and Code of Conduct for Employees
We have adopted Corporate
Policies and Procedures applicable to all of our officers and other employees, which we last updated in December 2006 and which was
ratified by our Board of Directors on January 15, 2007. A portion of these policies and procedures
(our “Code of Conduct for Employees”) constitutes our “code of ethics” for the
Chief Executive Officer, Chief Financial Officer and Controller within the meaning
of applicable SEC rules. Our Code of
Conduct for Employees also serves as our “code of conduct” applicable to all
officers and employees of the Company as required by applicable NASDAQ listing
standards. In December 2011, all of our
employees were asked to review and affirm their knowledge and understanding of
the Code of Conduct for Employees. Our
Code of Conduct for Employees is publicly available through the “For Investors”
section of our website at www.universaldisplay.com.
If we make any further
amendments to our Code of Conduct for Employees (other than technical,
administrative, or other non-substantive amendments), or if we grant any
waivers of the Code of Conduct for Employees (including implicit waivers) in
favor of our Chief Executive Officer, Chief Financial Officer or Controller, we
will disclose the nature of the amendment or waiver, its effective date and to
whom it applies in that same location on our website, or in a current report on
Form 8-K that we file with the SEC. In
addition, any waiver of our Code of Conduct for Employees with respect to our
executive officers must be approved by our Board of Directors.
Code of Conduct for
Directors
Our Board of Directors has
adopted a “Code of Conduct for Directors” that serves as our “code of conduct”
applicable to all of our directors as required by applicable NASDAQ listing
requirements. The Code of Conduct for
Directors was last ratified by our Board of Directors at a meeting held on
April 10, 2012. Our Code of Conduct for
Directors is publicly available through the “For Investors” section of our
website at www.universaldisplay.com.
Any waiver of our Code of Conduct for Directors must be approved by our
Board of Directors and will be disclosed as required under applicable
regulations.
SHAREHOLDER
PROPOSALS
Shareholders may submit
proposals to us on matters appropriate for shareholder action at our next
annual meeting of shareholders in accordance with regulations adopted by the
SEC. Proposals must be received by
December 27, 2012, to be considered for inclusion in the proxy statement
and form of proxy for our next annual meeting of shareholders. Shareholder
proposals received by us after March 12, 2013, will be deemed “untimely,”
and proxy holders will have the right to exercise discretionary voting
authority with respect to such proposals.
All shareholder proposals
must be in writing and must comply with the notice, information and consent
provisions contained in our Amended and Restated Bylaws. Proposals should be directed to the attention
of our Corporate Secretary at Universal Display Corporation, 375 Phillips
Boulevard, Ewing, New Jersey 08618.
ANNUAL
REPORT TO SHAREHOLDERS
A copy of our 2011 Annual
Report to Shareholders, containing financial statements for the year ended
December 31, 2011, is being transmitted with this proxy statement. A copy of our Annual Report on Form 10-K for the
year ended December 31, 2011, including the financial statements and any
financial statement schedules, may be obtained, without charge, by writing to
us at Universal Display Corporation, 375 Phillips Boulevard, Ewing, New Jersey
08618, Attn: Corporate Secretary.
|
|
Sincerely,
|
|
|
|
|
|
Sidney D. Rosenblatt
|
|
|
Executive Vice President, Chief Financial Officer,
|
|
|
Treasurer and Secretary
|
Ewing, New Jersey
April 26, 2012