SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
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by Rule 14a-6(e)(2))
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Rule 14a-11(c) or Rule 14a-12
Universal Security Instruments, Inc.
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1
UNIVERSAL SECURITY INSTRUMENTS, INC.
7-A GWYNNS MILL COURT
OWINGS MILLS, MARYLAND 21117
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
OCTOBER 3, 2005
To the Shareholders of Universal Security Instruments, Inc.:
The Annual Meeting of Shareholders of Universal Security Instruments,
Inc., a Maryland corporation (the "Company") will be held at the Pikesville
Hilton, 1726 Reisterstown Road, Baltimore, Maryland, on October 3, 2005 at 9:00
a.m., local time, for the following purposes:
1. To elect one director to serve until the Annual Meeting of
Shareholders to be held in 2008 and until their successors are duly
elected and qualify;
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed August 5, 2005 as the record date for the
determination of shareholders entitled to notice of, and to vote at, the
meeting.
By Order of the Board of Directors
James B. Huff
Secretary
Owings Mills, Maryland
August 30, 2005
IMPORTANT - YOUR PROXY IS ENCLOSED
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE,
SIGN, AND MAIL THE ACCOMPANYING FORM OF PROXY TO THE COMPANY AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES.
2
UNIVERSAL SECURITY INSTRUMENTS, INC.
7-A GWYNNS MILL COURT
OWINGS MILLS, MARYLAND 21117
(410) 363-3000
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Universal
Security Instruments, Inc., a Maryland corporation (the "Company"), in
connection with the Annual Meeting of Shareholders to be held on Monday October
3, 2005, or at any adjournments or postponements thereof, for the purposes set
forth in the accompanying notice of the meeting. The Board of Directors has
fixed the close of business on August 5, 2005 as the record date (the "Record
Date") for the determination of shareholders entitled to notice of, and to vote
at, the meeting. On that date, there were outstanding 1,673,498 shares of the
Company's Common Stock par value $.01 per share (the "Shares").
Each record holder of Shares on the Record Date is entitled to one vote
for each Share held on all matters to come before the meeting, including the
election of directors. Shares may be voted in person or by proxy. The
accompanying proxy may be revoked by the person giving it at any time prior to
its being voted by filing a written notice of such revocation with the Secretary
of the Company, by executing a proxy bearing a later date or by attending the
meeting and voting in person.
BENEFICIAL OWNERSHIP
The following table reflects the names and addresses of the only persons
known to the Company to be the beneficial owners of 5% or more of the Shares
outstanding as of the Record Date. For purposes of calculating beneficial
ownership, Rule 13d-3 of the Securities Exchange Act of 1934, as amended
("Exchange Act") requires inclusion of Shares that may be acquired within sixty
days of the Record Date. Unless otherwise indicated in the footnotes to this
table, beneficial ownership of shares represents sole voting and investment
power with respect to those Shares.
Name and Address Shares Beneficially Percent
of Beneficial Owner Owned of Class
------------------------- ------------------- ---------
Estate of Stephen Knepper 98,341 5.88%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Ronald S. Lazarus 98,798(1) 5.67%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Harvey B. Grossblatt 117,967(2) 6.65%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Michael Kovens 332,719(3) 19.88%
6 Regency Court
Baltimore, MD 21208
----------
(1) Includes 28,466 shares owned jointly by Mr. Lazarus and his wife,
and 70,332 shares which Mr. Lazarus presently as the right to
acquire through the exercise of stock options.
(2) Includes 100,332 shares which Mr. Grossblatt presently has the right
to acquire through the exercise of stock options.
(3) Pursuant to the terms of a Settlement Agreement, the Company has
filed a registration statement with respect to the sale by Mr.
Kovens of these shares. Mr. Kovens has undertaken to use his
reasonable efforts to sell all of his shares during the effective
period of the registration statement.
3
ELECTION OF DIRECTORS
The Board of Directors currently consists of four directors. The Company's
directors are divided into three classes and are elected for terms of three
years each and until their successors are elected and qualify. The Board has
nominated Harvey B. Grossblatt for election as director at the 2005 Annual
Meeting to serve for terms of three years and until his successor is elected and
qualifies. A quorum for the Annual Meeting consists of a majority of the issued
and outstanding Shares present in person or by proxy and entitled to vote. Under
Maryland law, unless a corporation's charter or bylaws provide otherwise,
directors are elected by a plurality of all votes cast at a meeting at which a
quorum is present. The Company's Bylaws provide that the affirmative vote of a
majority of the Shares issued and outstanding and entitled to vote is necessary
for the election of directors. If no nominee receives the requisite vote, Mr.
Grossblatt will continue to serve as director until his successor is duly
elected and qualifies. Consequently, withholding of votes, abstentions and
broker non-votes with respect to Shares otherwise present at the Annual Meeting
in person or by proxy will have the effect of a vote withheld.
Unless contrary instruction is given, the persons named in the proxies
solicited by the Board of Directors will vote each such proxy for the election
of the named nominee. If the nominee is unable to serve, the shares represented
by all properly executed proxies which have not been revoked will be voted for
the election of such substitute as the Board of Directors may recommend or the
Board of Directors may reduce the size of the Board to eliminate the vacancy. At
this time, the Board does not anticipate that the nominee will be unavailable to
serve.
The following table sets forth, for the nominees and each continuing
director, his name, age as of the Record Date, the year he first became a
director of the Company, the expiration of his current term, and whether such
individual has been determined by the Board to be "independent" as defined in
Section 121A of the American Stock Exchange (Amex) Company Guide. There are no
known arrangements or understandings between any director or nominee for
director of the Company and any other person pursuant to which such director or
nominee has been selected as a director or nominee.
Director Current Term
Name Age Since to Expire Independent
---- --- ----- --------- -----------
Board Nominees for Term to
Expire in 2008
Harvey B. Grossblatt 59 1996 2005 No
Directors Continuing in Office
Ronald A. Seff, M.D. 57 2002 2006 Yes
Cary Luskin 48 2002 2007 Yes
Howard Silverman, Ph.D. 63 2002 2007 Yes
Presented below is certain information concerning the nominees and directors
continuing in office. Unless otherwise stated, all directors and nominees have
held the positions indicated for at least the past five years.
Harvey B. Grossblatt was Chief Financial Officer of the Company from 1983
until August 2004, Secretary and Treasurer of the Company from 1988 until
October 2004, President of the Company since 1996, Chief Operating Officer of
the Company since April 2003, and Chief Executive Officer since August 2004.
Ronald A. Seff, M.D. has been in the private practice of ophthalmology
since 1977. From 1977 until 1998, Dr. Seff practiced with, and was a senior
executive of, a large medical practice with four offices in Maryland.
Cary Luskin has been in the retail electronic business since 1978. Since
1998, Mr. Luskin has been President of The Big Screen Store, Inc., a chain of
large-screen television retail stores.
Howard Silverman, Ph.D. has been in the mental health field for over 30
years. From 1990 to 2001, Dr. Silverman was Vice President of Magellan Health
Service, and since 2001 he has served as a consultant in the field.
4
CORPORATE GOVERNANCE
The Board of Directors periodically reviews its corporate governance
policies and procedures to ensure that the Company meets the highest standards
of ethical conduct, reports results with accuracy and transparency, and
maintains full compliance with the laws, rules and regulations which govern the
Company's operations.
Meetings and Committees of the Board of Directors
Board of Directors. During the fiscal year ended March 31, 2005, the Board
met five times. No incumbent director attended fewer than 75% of the total
number of meetings of the Board of Directors of the Company held during the year
and the total number of meetings held by all committees on which the director
served during such year. Board members are expected to attend the Annual Meeting
of Shareholders, and three incumbent directors attended the 2004 Annual Meeting
of Shareholders.
Audit Committee. The Audit Committee operates under a written charter
adopted in July 2003. The Audit Committee is appointed by the Board to assist
the Board in its duty to oversee the Company's accounting, financial reporting
and internal control functions and the audit of the Company's financial
statements. The Committee's responsibilities include, among others, direct
responsibility for hiring, firing, overseeing the work of and determining the
compensation for the Company's independent auditors, who report directly to the
Audit Committee. The members of the Audit Committee are Mr. Luskin (Chairman),
Dr. Seff and Dr. Silverman, none of whom is an employee of the Company and each
of whom is independent under existing Amex and Securities and Exchange
Commission (SEC) requirements. The Board has examined the SEC's definition of
"audit committee financial expert" and determined that Mr. Luskin satisfies this
definition. Accordingly, Mr. Luskin has been designated by the Board as the
Company's audit committee financial expert. During the fiscal year ended March
31, 2005, the Audit Committee met four times.
Nominations. The Company's full Board of Directors acts as a nominating
committee for the annual selection of its nominees for election as directors.
The Board of Directors held one meeting during the 2005 fiscal year in order to
make nominations for directors. The Board of Directors believes that the
interests of the Company's shareholders are served by relegating the nominations
process to the full Board, the majority of which are independent from
management. While the Board of Directors will consider nominees recommended by
shareholders, it has not actively solicited recommendations from the Company's
shareholders for nominees, nor established any procedures for this purpose. In
considering prospective nominees, the Board of Directors will consider the
prospect's relevant financial and business experience, the integrity and
dedication of the prospect, his independence and other factors the Board deems
relevant. The Board of Directors will apply the same criteria to nominees
recommended by shareholders as those recommended by the full Board. Nominations
for director may be made by shareholders, provided such nominations comply with
certain timing and informational requirements set forth in the Company's Bylaws.
See "Other Matters" elsewhere in this Proxy Statement.
Compensation Committee. Effective April 1, 2004, the Board created a
Compensation Committee, the membership of which consists of Mr. Luskin
(Chairman), Dr. Seff and Dr. Silverman, none of whom is an employee of the
Company and each of whom is independent under existing Amex and SEC
requirements. The Compensation Committee is charged with reviewing and
determining the compensation of the Chief Executive Officer and the other
executive officers of the Company. The Compensation Committee did not meet
during the fiscal year ended March 31, 2005.
Director Compensation
During the Company's fiscal year ended March 31, 2005, those directors who
were employed by the Company received no additional compensation for serving as
a director. Directors are eligible to participate in the Company's Non-Qualified
Stock Option Plan. During the Company's fiscal year ended March 31, 2005, the
Company paid to each of Mr. Luskin, Dr. Silverman, and Dr. Seff a $10,000 fee
for annual service as a director, payable in cash or Shares (computed at the
closing price as reported by the Amex on the date of the payment). On March 23,
2005, each outside Director received a 7,000 stock option at an exercise price
of $15.02 issued in accordance with the Company's Non-Qualified Stock Option
Plan.
5
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics that is
designed to promote the highest standards of ethical conduct by the Company's
directors, executive officers and employees.
Communications with the Board
Any shareholder desiring to contact the Board, or any specific
director(s), may send written communications to: Board of Directors (Attention:
(Name(s) of director(s), as applicable)), c/o the Company's Secretary, 7-A
Gwynns Mill Court, Owings Mills, Maryland 21117. Any proper communication so
received will be processed by the Secretary. If it is unclear from the
communication received whether it was intended or appropriate for the Board, the
Secretary will (subject to any applicable regulatory requirements) use his
judgment to determine whether such communication should be conveyed to the Board
or, as appropriate, to the member(s) of the Board named in the communication.
INFORMATION REGARDING SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of the Shares as of the Record Date by (i) each executive officer of
the Company named in the Summary Compensation Table included elsewhere in this
Proxy Statement, (ii) each current director and each nominee for election as a
director and (iii) all directors and executive officers of the Company as a
group. For purposes of calculating beneficial ownership, Rule 13d-3 of the
Exchange Act requires inclusion of Shares that may be acquired within sixty days
of the Record Date. Unless otherwise indicated in the footnotes to this table,
beneficial ownership of shares represents sole voting and investment power with
respect to those Shares.
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
------------------------------------ ------------------------- -----------------
Harvey B. Grossblatt (1) 117,967 6.65%
Cary Luskin (2) 51,312 3.05%
Ronald A. Seff, M.D. (3) 64,752 3.85%
Howard Silverman, Ph.D. (4) 16,455 0.98%
All directors and executive officers
as a group (5 persons) (5) 253,486 14.02%
----------
(1) See footnote 2 under "Beneficial Ownership".
(2) Includes 10,333 shares which Mr. Luskin has the right to acquire
through the exercise of stock options.
(3) Includes 7,000 shares which Dr. Seff has the right to acquire
through the exercise of stock options.
(4) Includes 13,666 shares which Dr. Silverman presently has the right
to acquire through the exercise of stock options.
(5) See footnote 1-4 above.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires that the Company's directors
and executive officers and each person who owns more than 10% of the Company's
Shares, file with the SEC an initial report of beneficial ownership and
subsequent reports of changes in beneficial ownership of the Shares. To the
Company's knowledge, based solely upon the review of the copies of such reports
furnished to us, all of these reporting persons complied with the Section 16(a)
filing requirements applicable to them with respect to transactions during the
fiscal year ended March 31, 2005.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table reflects, with respect to the Chief Executive Officer
and each executive officer of the Company whose annual compensation exceeded
$100,000 in the fiscal year ended March 31, 2005, the aggregate amounts paid to
or accrued for such officers as compensation for their services in all
capacities during the fiscal years ended March 31, 2005, 2004 and 2003:
6
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Options Compensation
------------------ ---- ------ ----- ------------ ------- ------------
Stephen C. Knepper(1) 2005 $39,078 0 0 0 $ 5,621(3)
Chairman and Chief 2004 $99,937 $ 84,000 0 0 $16,406(3)
Executive Officer 2003 $97,832 $110,219 $22,271(2) 35,000 $15,024(3)
Harvey B. Grossblatt 2005 $186,886 $ 98,196 0 10,000 $18,109(4)
President and Chief 2004 $180,752 $ 84,000 0 20,000 $17,592(4)
Executive Officer 2003 $123,928 $120,219 0 47,750 $15,655(4)
----------
(1) Mr. Knepper served as Chairman and Chief Executive Officer from October
23, 2001 until his passing on August 4, 2004.
(2) Includes an automobile allowance of $12,000 for the fiscal year ended
March 31, 2003.
(3) Represents payment of term life insurance premiums in the amount of $697,
$726 and $1,624 for the fiscal years ended March 31, 2005, 2004 and 2003,
respectively; and Company contributions on behalf of the named officer to
the Company's 401(k) Plan in the amount of $5,424 and $14,295 for the
fiscal years ended March 31, 2005 and 2004, respectively.
(4) Represents payment of term life insurance premiums in the amount of
$1,404, $1,153 and $2,255 for the fiscal years ended March 31, 2005, 2004
and 2003, respectively; and Company contributions on behalf of the named
officer to the Company's 401(k) Plan in the amount of $16,705 and $14,295
for the fiscal years ended March 31, 2005 and 2004, respectively.
Option Grants in Last Fiscal Year
Potential Realizable Value at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term (1)
----------------- --------------------------------
% of Total Exercise
No. of Options Granted Or Base
Options to Employees Price Epiration
Name Granted in Fiscal Year ($/Share) Date 5% 10%
---- ------- ---- --------- ---- -- ---
Harvey B. Grossblatt 10,000 18.35% $15.02 03/22/10 $7,510 $15,020
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth, for each of the executive officers named
in the Summary Compensation Table, information with respect to the exercise of
stock options during the Company's fiscal year ended March 31, 2005 and holdings
of unexercised options at the end of the fiscal year:
Shares Value of Unexercised
Acquired Number of Unexercised in-the-Money Options/SARs
on Value Options/SARs at Fiscal Year
Name Exercise Realized at Fiscal Year End End($)(1)
---- -------- -------- ------------------ ---------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Stephen C. Knepper 69,999 357,662 -0- -- $ -0- --
Harvey B. Grossblatt 6,666 90,458 100,332 -- $1,201,247 --
----------
(1) Based on the excess of (i) the aggregate market value (closing price on
the American Stock Exchange) of the underlying shares on March 31, 2005
over (ii) the aggregate exercise price of the options.
Executive Employment Agreements
Harvey Grossblatt entered into an employment agreement with the Company
effective April 1, 2002. The employment agreement provides that Mr. Grossblatt
is employed for a term ending June 30, 2005 at an initial base annual salary of
$122,500, subject to automatic annual cost of living increases and further
subject to increases in the Board's discretion. Additionally, Mr. Grossblatt is
entitled to bonus compensation for each fiscal year of the Company in which the
Company earned pre-tax net income of at least $100,000, in an amount equal to 5%
of pre-tax net income up to $1,000,000, 4% of pre-tax net income over $1,000,000
up to $2,000,000, 3% of pre-tax net income over $2,000,000 up to $3,000,000, and
1% of pre-tax net income over $3,000,000.
7
Effective April 1, 2003, Mr. Grossblatt's Employment Agreement was amended
to: (i) extend the term until July 31, 2008; (ii) increase the annual base
salary to $180,000 subject to automatic annual cost of living increases up to 4%
and further subject to increases in the Board's discretion; and (iii) revising
the annual bonus compensation to provide that the bonus is paid on pre-tax net
income in excess of an amount equal to 8% of shareholders' equity as of the
start of the fiscal year, as follows: 3% of all (after the 8% threshold) pre-tax
net income up to $1 million, 4% of pre-tax net income from $1-$2 million, 5% of
pre-tax net income from $2-$3 million, 6% of pre-tax net income from $3-$4
million, 7% of pre-tax net income over $4 million.
Under the Employment Agreement, Mr. Grossblatt has been granted an option
to purchase 20,000 shares of common stock at an exercise price of $4.50 per
share pursuant to the Company's Non-Qualified Stock Option Plan, and is also
entitled to life, health and disability insurance benefits, medical
reimbursement, automobile allowance, and Company paid retirement plan
contributions.
Effective July 18, 2005, Mr. Grossblatt's Employment Agreement was amended
to reflect his new duties as Chief Executive Officer following Mr. Knepper's
passing on August 4, 2004. The amended agreement provides that Mr. Grossblatt's
base annual salary beginning July 18, 2005 is $300,000, increasing to $325,000
on August 1, 2006, and to $350,000 on August 1, 2007. The amended agreement did
not change the calculation of Mr. Grossblatt's bonus compensation or materially
change the terms of Mr. Grossblatt's benefits.
If the Employment Agreement is not renewed by the Company or is terminated
by Mr. Grossblatt for good reason, Mr. Grossblatt is entitled to receive his
compensation through any balance of the employment term plus a lump sum payment
equal to his last 12 months base salary and bonus, health benefits for three
years, and an additional lump sum payment payable on each of the first three
anniversaries of the termination equal to the 401(k) plan contribution the
Company would have made on behalf of the Company had he remained employed by the
Company.
If Mr. Grossblatt's employment is terminated following or in anticipation
of a "change of control" of the Company, Mr. Grossblatt will be entitled to
receive a lump sum payment equal to his base salary for the balance of the
Employment Agreement's term and the amount of Mr. Grossblatt's last bonus. In
addition, Mr. Grossblatt is entitled to receive health benefits for three years,
and an additional lump sum payment payable on the anniversary of the termination
equal to the 401(k) plan contribution the Company would have made on behalf of
the Company had he remained employed by the Company. Furthermore, Mr. Grossblatt
will receive an amount equal to three times his base salary for the last 12
months and the amount of his last bonus, limited to 2.99 times Mr. Grossblatt's
average annual taxable compensation from the Company which is included in his
gross income for the five taxable years of the Company ending before the date on
which the change of control occurs.
If the Employment Agreement is terminated by the Company due to Mr.
Grossblatt's death, Mr. Grossblatt's estate is entitled to receive a lump sum
payment equal to his base salary for the greater of the balance of the
Employment Agreement's term or one year, reduced by any individual life
insurance benefits the premiums for which are paid for by the Company, plus the
amount of his last bonus and the amount of the Company's last 401(k) plan
contribution made on behalf of Mr. Grossblatt. In addition, Mr. Grossblatt's
estate is entitled to the health insurance and medical reimbursement benefits
for the longer of the balance of the term or three years following the date of
death, or the cash equivalent thereof.
If the Employment Agreement is terminated by the Company due to Mr.
Grossblatt's disability, Mr. Grossblatt is entitled to the continuation of the
payment of his base salary for the balance of the term, reduced by any group or
individual disability income insurance benefits the premiums for which are paid
for by the Company and Social Security disability benefits paid to Mr.
Grossblatt. In addition, Mr. Grossblatt is entitled to the health insurance and
medical reimbursement benefits and a payment equal to the 401(k) plan
contribution the Company would have made on behalf of the Company had he
remained employed by the Company, for the longer of the balance of the term or
three years following the date of disability, or the cash equivalent thereof.
The Employment Agreement generally prohibits Mr. Grossblatt from competing
with the Company during the term and during any subsequent period during which
he receives compensation from the Company.
Equity Compensation Plan Information
The following table provides information, as of March 31, 2005, with
respect to all compensation arrangements maintained by the Company under which
Shares may be issued:
8
----------------------------------- ------------------------- ---------------------- ----------------------------------------
Plan Category Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance under
of outstanding options, outstanding options, equity compensation plans (excluding
warrants and rights warrants and rights securities reflected in column (a)
----------------------------------- ------------------------- ---------------------- ----------------------------------------
(a) (b) (c)
----------------------------------- ------------------------- ---------------------- ----------------------------------------
Equity compensation plans
approved by security holders 235,496* $5.73 48,675
----------------------------------- ------------------------- ---------------------- ----------------------------------------
Equity compensation plans not
approved by security holders 0 0 0
----------------------------------- ------------------------- ---------------------- ----------------------------------------
Total 235,496 $5.73 48,675
----------------------------------- ------------------------- ---------------------- ----------------------------------------
* Does not include options to purchase 20,000 shares which were contested in the
litigation filed by Michael Kovens against the Company. On July 12, 2005, as
part of the settlement of the litigation, the Company recognized the 2002
exercise of those options by Mr. Kovens.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with management the annual
audited financial statements of the Company and its subsidiaries.
The Audit Committee has discussed with Grant Thornton LLP, the independent
auditors for the Company for the fiscal year ended March 31, 2005, the matters
required to be discussed by Statement on Auditing Standards 61. The Board of
Directors has received the written disclosures and the letter from the
independent auditors required by Independent Standards Board Standard No. 1 and
has discussed with the independent auditors the independent auditors'
independence.
Based on the foregoing review and discussions, the Board of Directors
approved the inclusion of the audited financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2005 for filing
with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Cary Luskin
Howard Silverman, Ph.D.
Ronald A. Seff, M.D.
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee has selected the firm of Grant Thornton LLP as the
Company's independent public accountants for the current fiscal year. Grant
Thornton LLP has served as the Company's independent public accountants since
1999. Representatives of Grant Thornton LLP are expected to be present at the
meeting, and will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions.
The following is a description of the fees billed to the Company by Grant
Thornton LLP (the "Auditor") during the fiscal years ended March 31, 2005 and
2004:
Audit Fees
Audit fees include fees paid by the Company to the Auditor in connection
with the annual audit of the Company's consolidated financial statements, and
review of the Company's interim financial statements. Audit fees also include
fees for services performed by the Auditor that are closely related to the audit
and in many cases could only be provided by the Auditor. Such services include
consents related to Securities and Exchange Commission and other regulatory
filings. The aggregate fees billed to the Company by the Auditor for audit
services rendered to the Company for the years ended March 31, 2005 and 2004
totaled $114,000 and $78,000, respectively.
Audit Related Fees
Audit related services include due diligence services related to
accounting consultations, internal control reviews and employee benefit plan
audits. There were no audit related services provided in either year.
9
Tax Fees
Tax fees include corporate tax compliance, counsel and advisory services.
The aggregate fees billed to the Company by the Auditor for the tax related
services rendered to the Company for the years ended March 31, 2005 and 2004
totaled $6,000 and $5,500, respectively.
All Other Fees
The Auditor billed the Company, $0, for the year ended March 31, 2005, and
$6,395, for the year ended March 31, 2004, for research in connection with a
proposed initial public offering by the Company's 50%-owned Hong Kong Joint
Venture.
Approval of Independent Auditor Services and Fees
The Company's Audit Committee reviews all fees charged by the Company's
independent auditors, and actively monitors the relationship between audit and
non-audit services provided. The Audit Committee must pre-approve all audit and
non-audit services provided by the Company's independent auditors and fees
charged.
OTHER MATTERS
The Board of Directors is not aware of any other matter which may be
presented for action at the 2005 Annual Meeting of Shareholders, but should any
other matter requiring a vote of the shareholders arise at the 2005 Annual
Meeting, it is intended that the proxies will be voted with respect thereto in
accordance with the best judgment of the person or persons voting the proxies,
discretionary authority to do so being included in the proxy.
The cost of soliciting proxies will be borne by the Company. Arrangements
will be made with brokerage firms and other custodians, nominees and fiduciaries
to forward solicitation materials to the beneficial owners of the Shares held of
record by such persons, and the Company will reimburse them for their reasonable
out-of-pocket expenses. Officers and directors may also solicit proxies.
The nominees for directors who receive a majority of the votes entitled to
be cast for the election of directors at the Annual Meeting will be elected. In
respect of any other matter, the affirmative vote of the holders of a majority
of the Shares entitled to vote on the issue, in person or by proxy, is necessary
to approve the matter.
As a matter of policy, the Company will accord confidentiality to the
votes of individual shareholders, whether submitted by proxy or ballot, except
in limited circumstances, including any contested election, or as may be
necessary to meet legal requirements. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the Company and will determine whether or
not a quorum is present. Abstentions will be treated as shares that are present
and entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
shareholders for a vote. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote with
respect to that matter.
Any shareholder desiring to present a proposal at the 2006 Annual Meeting
of Shareholders and wishing to have that proposal included in the proxy
statement for that meeting must submit the same in writing to the Secretary of
the Company at 7-A Gwynns Mill Court, Owings Mills, Maryland 21117, in time to
be received by May 3, 2006. In addition, if a shareholder desires to bring
business (including director nominations) before the 2006 Annual Meeting of
Shareholders that is not the subject of a proposal timely submitted for
inclusion in the Company's Proxy Statement, written notice of such business, as
currently prescribed in the Company's Bylaws, must be received by the Company's
Secretary between April 3, 2006 and May 3, 2006. For additional requirements, a
shareholder should refer to Article I, Section 8 of the Company's Bylaws,
"Advance Notice of Stockholder Nominees for Director and Other Stockholder
Proposals," a copy of which may be obtained from the Company's Secretary or from
the Company's SEC filings. If the Company does not receive timely notice
pursuant to the Bylaws, the nomination or proposal will be excluded from
consideration at the meeting.
The persons designated by the Company to vote proxies given by
shareholders in connection with the Company's 2006 Annual Meeting of
Shareholders will not exercise any discretionary voting authority granted in
such proxies on any matter not disclosed in the Company's 2006 proxy statement
10
with respect to which the Company has received written notice no later than July
16, 2006 that a shareholder (i) intends to present such matter at the 2006
Annual Meeting, and (ii) intends to and does distribute a proxy statement and
proxy card to holders of such percentage of the Shares required to approve the
matter. If a shareholder fails to provide evidence that the necessary steps have
been taken to complete a proxy solicitation on such matter, the Company may
exercise its discretionary voting authority if it discloses in its 2006 proxy
statement the nature of the proposal and how it intends to exercise its
discretionary voting authority.
Shareholders who do not plan to attend the Annual Meeting are urged to
complete, date, sign and return the enclosed proxy in the enclosed envelope, to
which no postage need be affixed if mailed in the United States. Prompt response
is helpful and your cooperation will be appreciated.
By Order of the Board of Directors,
JAMES B. HUFF
Secretary
Owings Mills, Maryland
August 30, 2005
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED MARCH 31, 2005, TO EACH SHAREHOLDER WHO FORWARDS A
WRITTEN REQUEST TO THE SECRETARY, UNIVERSAL SECURITY INSTRUMENTS, INC., 7-A
GWYNNS MILL COURT, OWINGS MILLS, MARYLAND 21117.
To the extent the rules and regulations adopted by the SEC state that
certain information included in this Proxy Statement is not deemed "soliciting
material" or "filed" with the SEC or subject to Regulation 14A promulgated by
the SEC or to the liabilities of Section 18 of the Exchange Act, such
information shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933, as amended, or under the Exchange Act.
11
PROXY
UNIVERSAL SECURITY INSTRUMENTS, INC.
7-A Gwynns Mill Court
Owings Mills, Maryland 21117
This Proxy is Solicited on Behalf of the Board of Directors of Universal
Security Instruments, Inc. The undersigned hereby appoints Harvey B. Grossblatt
and Ronald A. Seff M.D., and each of them, as proxies, each with the power of
substitution, to vote as designated below all of the shares the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at the
Pikesville Hilton, 1726 Reisterstown Road, Baltimore, Maryland, on October 3,
2005 at 9:00 a.m., prevailing local time, and any adjournments or postponements
thereof, and otherwise to represent the undersigned at the meeting, with all
powers possessed by the undersigned if personally present at the meeting.
1. ELECTION OF DIRECTORS: FOR all nominees listed below [ ]
(except as set forth to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below [ ]
Harvey B. Grossblatt
The terms of the elected Directors expire at the 2008 annual meeting and when
their successors are elected and qualify.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
-------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon any other
business which properly comes before the meeting and any adjournments or
postponements thereof.
[REVERSE SIDE OF PROXY CARD]
This proxy, when properly executed, will be voted in the manner directed hereby
by the undersigned shareholders. If no direction is made, this proxy will be
voted in favor of all nominees and in the discretion of the proxies upon any
other business which properly comes before the meeting.
Please sign exactly as your name appears on your proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
PLEASE MARK, SIGN, DATE AND MAIL
THE CARD IN THE ENCLOSED ENVELOPE.
DATED: __________________________, 2005
Signature______________________________
DATED: __________________________, 2005
Signature______________________________