SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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Exchange Act of 1934 (Amendment No. )
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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 STOCKHOLDERS
TO BE HELD
SEPTEMBER 8, 2003
To the Stockholders of Universal Security Instruments, Inc.:
The Annual Meeting of Stockholders of Universal Security Instruments,
Inc., a Maryland corporation (the "Company"), will be held at Marriott's Hunt
Valley Inn, 245 Shawan Road, Hunt Valley, Maryland, on Monday, September 8, 2003
at 9:00 a.m., local time, for the following purposes:
1. To elect one director to serve for a term ending in 2006 and until
his successor is duly elected and qualifies;
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 July 21, 2003 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
meeting.
By Order of the Board of Directors
Harvey B. Grossblatt
Secretary
Owings Mills, Maryland
July 24, 2003
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 Stockholders to be held on Monday,
September 8, 2003, or 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 July 21, 2003 as the record date
(the "Record Date") for the determination of stockholders entitled to notice of,
and to vote at, the meeting. On that date, there were outstanding 1,124,795
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 or a duly executed
proxy bearing a later date with the Secretary of the Company 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 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
------------------- ----- --------
Stephen Knepper 151,801(1) 12.9%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Ronald S. Lazarus 128,850(2) 10.7%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Harvey B. Grossblatt 73,396(3) 6.6%
7-A Gwynns Mill Court
Owings Mills, MD 21117
Bruce Paul 104,500 9.3%
One Hampton Road
Purchase, NY 10577
Michael Kovens 285,264 25.4%
6 Regency Court
Baltimore, MD 21208
----------------------------
(1) Includes 52,500 Shares which Mr. Knepper presently has the right to acquire
through the exercise of stock options and 2,170 Shares held by a trust in
which Mr. Knepper has voting control.
(2) Includes 8,750 Shares owned jointly by Mr. Lazarus and his wife, and 82,000
Shares which Mr. Lazarus presently has the right to acquire through the
exercise of stock options.
(3) Includes 64,974 Shares which Mr. Grossblatt presently has the right to
acquire through the exercise of stock options.
3
ELECTION OF DIRECTORS
At the Annual Meeting, the Board of Directors will consist of five
directors. Pursuant to Articles Supplementary filed by the Company on October
14, 2002, directors are divided into three classes and elected for terms of
three years each and until their successors are elected and qualify. The Board
has nominated Ronald A. Seff, M.D. for election as director at the 2003 Annual
Meeting to serve for a term of three years each and until his successor is
elected and qualifies. The terms of office of Cary Luskin and Howard Silverman,
Ph.D. will expire at the 2004 Annual Meeting, and the terms of office of Stephen
C. Knepper and Harvey B. Grossblatt will expire at the 2005 Annual Meeting.
Under the Bylaws of the Company, the affirmative vote of the holders of a
majority of the stock issued and entitled to vote is necessary to elect a
director. 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.
Withholding of a vote will have the same effect as a vote against the director.
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.
Alternatively, the Board of Directors may reduce the size of the Board to
eliminate any vacancy caused by the nominee's inability to serve. At this time,
the Board does not anticipate that the nominee will be unavailable to serve.
The following table sets forth, for the nominee and each continuing
director, his name, age as of the Record Date, the year he first became a
director of the Company, and the expiration of his current term. 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
---- --- -------- ------------
Board Nominees for Term to Expire in 2006
Ronald A. Seff, M.D. 55 2002 2003
Directors Continuing in Office
Cary Luskin 46 2002 2004
Howard Silverman, Ph.D. 61 2002 2004
Stephen C. Knepper 59 1970 2005
Harvey B. Grossblatt 56 1996 2005
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.
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.
Stephen C. Knepper served as Chairman of the Board of the Company from
1970 to 1996, and as Vice Chairman of the Board from 1996 to October 2001. Since
October 2001, Mr. Knepper has served, once again, as Chairman of the Board of
the Company.
4
Harvey B. Grossblatt has been Chief Financial Officer of the Company
since 1983, Secretary and Treasurer of the Company since 1988, President of the
Company since 1996, and Chief Operating Officer of the Company since April 2003.
Committees and Meetings of the Board of Directors
In the fiscal year ended March 31, 2003, the Company did not have any
standing nominating or compensation committees of the Board of Directors, or
committees performing similar functions. Effective June 28, 2002, the Board of
Directors created an Audit Committee consisting of Mr. Luskin and Dr. Silverman,
each of whom is independent as independence is defined in the listing standards
of the American Stock Exchange. The Board of Directors has adopted a charter for
the Audit Committee which is attached to this Proxy Statement as Appendix A.
During the fiscal year ended March 31, 2003, the Board of Directors
held nine meetings and the Audit Committee held one meeting. No incumbent
director attended fewer than 75% of the total number of meetings of the Board of
Directors and the total number of meetings held by all committees on which the
director served during such year.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
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 Securities and
Exchange Commission 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, 2003, other than Michael Kovens, who filed one Form 4 late
with respect to a disposition of shares of Common Stock.
Director Compensation
During the Company's fiscal year ended March 31, 2003, 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, and Mr. Luskin, Dr. Silverman, and Dr. Seff
each received an option to purchase 5,000 Shares at the last bid price as
reported by the Over-the-Counter Bulletin Board on the last trading day prior to
commencement of service as a director, 2,500 Shares of which are exercisable for
a period of four years from and after the first anniversary of his commencement
of service as a director, and 2,500 Shares of which are exercisable for a period
of three years from and after the second anniversary of his commencement of
service as a director. Each of these directors also received an option,
exercisable for three business days, to purchase up to 25,000 Shares at the last
bid price as reported by the Over-the-Counter Bulletin Board on the last trading
day prior to commencement of service as a director. Furthermore, during the
Company's fiscal year ended March 31, 2003, 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 last bid price as reported
by the Over-the-Counter Bulletin Board on the last trading day prior to
commencement of service as a director).
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 Securities Exchange Act of 1934 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.
5
Name of Beneficial Owner Shares Beneficially Owned Percent of Class
------------------------ ------------------------- -----------------
Stephen C. Knepper (1) 151,801 12.9%
Harvey B. Grossblatt (2) 73,396 6.6%
Cary Luskin 30,167 2.7%
Ronald A. Seff, M.D. 39,515 3.5%
Howard Silverman, Ph.D. (3) 6,167 0.3%
Michael L. Kovens 285,795 25.4%
All directors and executive
officers as a group (6 persons) (4) 586,671 47.0%
--------------------
(1) See footnote 1 under "Beneficial Ownership".
(2) See footnote 3 under "Beneficial Ownership".
(3) Includes 2,500 Shares which Dr. Silverman presently has the right to
acquire through the exercise of stock options. (4) See footnote 1-3 under
"Beneficial Ownership".
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, 2003, 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, 2003, 2002 and 2001:
Annual Compensation Long-Term
Name and Other Annual Compensation All Other
Principal Position Year Salary Bonus Compensation Options Compensation
------------------ ---- ------ ----- ------------ ------- ------------
Stephen C. Knepper(1) 2003 $ 97,832 $110,219 $22,271(2) 35,000 $15,024(3)
Chairman and Chief 2002 87,676 13,081 17,503(2) 42,500 12,762(3)
Executive Officer 2001 55,132 --- 15,116(2) --- 846(3)
Harvey B. Grossblatt 2003 $123,928 $120,219 --- 20,000 $15,655(4)
President and Chief 2002 $128,849 13,081 --- 47,750 15,261(4)
Financial Officer 2001 $124,780 --- --- 5,000 2,890(4)
-------------------
(1) On October 23, 2001, Mr. Knepper was elected Chairman and Chief Executive
Officer.
(2) Includes an automobile allowance of $12,000 for the fiscal year ended March
31, 2003, reimbursement of medical expenses in the amount of $11,292 for
the fiscal year ended March 31, 2002, and payment of life insurance
premiums in the amount of $4,861 for the fiscal year ended March 31, 2001.
(3) Represents: payment of term life insurance premiums in the amount of
$1,624, $1,012, and $846 for the fiscal years ended March 31, 2003, 2002
and 2001, respectively; and Company contributions on behalf of the named
officer to the Company's 401(k) Plan in the amount of $12,650 and $12,500
for the fiscal years ended March 31, 2003 and 2002, respectively.
(4) Represents: payment of term life insurance premiums in the amount of
$2,255, $2,761, and $2,890 for the fiscal years ended March 31, 2003, 2002
and 2001, respectively; and Company contributions on behalf of the named
officer to the Company's 401(k) Plan in the amount of $12,650 and $12,500
for the fiscal years ended March 31, 2003 and 2002, respectively.
Option Grants in Last Fiscal Year
The following table sets forth information with respect to the grant
of stock options during the Company's fiscal year ended March 31, 2003 to the
executive officers named in the Summary Compensation Table:
6
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term (1)
--------------------------------------------------------------------------------------- --------------------------------------
% of Total
No. of Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted Fiscal Year ($/Share) Date 0%(2) 5% 10%
---- ------- --------------- ----------- ---------- ----- ---- ------
Stephen Knepper 20,000 (3) 22.47% $4.50 06/27/07 - $4,500 $9,000
Stephen Knepper 15,000 (3) 16.85% $3.75 06/27/07 - $1,875 $3,750
Harvey Grossblatt 20,000 (3) 22.47% $4.50 03/31/07 - $4,500 $9,000
(1) The 5% and 10% assumed rates of compensation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(2) Denotes realizable value at the date of grant which reflected a market
value or higher valuation per share.
(3) Five year option fully exercisable and vested.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth, for each of the executive officers
named in the Summary Compensation Table, information with respect to the
exercise of stock options during the Company's fiscal year ended March 31, 2003
and holdings of unexercised options at the end of the fiscal year:
Shares
Acquired Number of Unexercised Value of Unexercised
in Value Options/SARs in-the-Money Options/SARs
Name Exercise Realized at Fiscal Year End at Fiscal Year End($)(1)
---- -------- -------- ------------------ ------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Stephen C. Knepper............... -- -- 52,500 -- $233,150 --
Harvey B. Grossblatt............. 6,250 18,188 60,312 12,438 $290,868 $58,564
----------------------------------
(1) Based on the excess of (i) the aggregate market value (closing price on the
over-the-counter market) of the underlying Shares on March 31, 2003 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.
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 (iii) revise 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
stockholders' equity as of the start of the fiscal year, as follows: 3% of all
(after the 8% threshold) pre-tax net income up to $1,000,000, 4% of pre-tax net
income from $1,000,000 to $2,000,000, 5% of pre-tax net income from $2,000,000
to $3,000,000, 6% of pre-tax net income from $3,000,000 to $4,000,000, 7% of
pre-tax net income over $4,000,000.
Under the Employment Agreement, Mr. Grossblatt has been granted an
option to purchase 20,000 Shares 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.
If the employment agreement is terminated by the Company other than
for cause or Mr. Grossblatt's death or disability, Mr. Grossblatt is entitled to
receive a lump sum payment equal to Mr. Grossblatt's base salary for the balance
7
of the employment agreement's term plus the amount of Mr. Grossblatt's last
bonus and an additional lump sum payment payable on the date the term of the
employment agreement would have expired equal to two times Mr. Grossblatt's base
salary for the last 12 months plus the amount of Mr. Grossblatt's last bonus. In
addition, Mr. Grossblatt would be entitled to receive the health insurance and
medical reimbursement benefits for the balance of the term and a period of three
years thereafter.
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 Mr. Grossblatt's base salary for
the balance of the employment agreement's term and the amount of Mr.
Grossblatt's last bonus, plus an amount equal to three times Mr. Grossblatt's
base salary for the last 12 months and the amount of Mr. Grossblatt's 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 or disability, Mr. Grossblatt (or his estate) is entitled to
the continuation of the payment of his base salary for the balance of the term,
reduced, in the event of death, by any individual life insurance benefits the
premiums for which are paid for by the Company, and in the event of disability,
by any group or individual disability income insurance benefits the premiums for
which are paid for by the Company. In addition, Mr. Grossblatt (or his estate)
is entitled to the health insurance and medical reimbursement benefits for the
longer of balance of the term or three years following the date of death or
disability.
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.
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, 2003,
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, 2003 for filing
with the Securities and Exchange Commission.
All of the members of the Audit Committee with respect to the
Company's fiscal year ended March 31, 2003 are independent, as independence is
defined in the listing standards of the American Stock Exchange.
THE AUDIT COMMITTEE
Cary Luskin
Howard Silverman, Ph.D.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors 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, 2003
and 2002:
8
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,
2003 and 2002 totaled $69,500 and $42,250, respectively.
Audit Related Fees
Audit related services include due diligence services related to
accounting consultations, internal control reviews, and employee benefit plan
audits. The aggregate fees billed to the Company by the Auditor for audit
related services rendered to the Company for the years ended March 31, 2003 and
2002 totaled $0 and $0, respectively.
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, 2003 and
2002 totaled $5,000 and $5,000, respectively.
All Other Fees
There were no other audit services provided in either year.
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. Effective April 1, 2003, the Audit
Committee must pre-approve all services provided by the Company's independent
auditors and fees charged. The Audit Committee has further mandated that all
independent auditor services strictly adhere to the limitations contained within
the SEC's release, "Strengthening the Commission's Requirements Regarding
Auditor Independence", which was issued in final form in January 2003. The
release restricts engagement of the independent auditors to perform non-audit
services; requires Audit Committee pre-approval of all audit and non-audit
services; addresses the duration of time certain independent auditor partners
can serve on the audit engagement and the manner of the partners' compensation;
restricts employment by the Company of senior engagement team personnel;
requires the independent auditor to report certain matters to the Audit
Committee; and requires certain disclosures to investors of information related
to the nature of audit and non-audit services provided and associated fees. The
Company's senior corporate financial management administers these requirements,
and will report throughout the year to the Audit Committee.
OTHER MATTERS
The Board of Directors is not aware of any other matter which may be
presented for action at the 2003 Annual Meeting of Stockholders, but should any
other matter requiring a vote of the stockholders arise at the 2003 Annual
Meeting, it is intended that the proxies will be voted with respect thereto in
accordance with the discretion 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 nominee for election as director who receives the affirmative vote
of the holders of a majority of the stock issued and entitled to vote at the
Annual Meeting for the election of directors will be elected. In respect of any
other matter, the affirmative vote of the holders of a majority of the stock
issued and entitled to vote in respect of that matter is necessary to approve
the matter.
9
As a matter of policy, the Company will accord confidentiality to the
votes of individual stockholders, 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
stockholders 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 be treated as present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining approval of that matter.
Any stockholder desiring to present a proposal at the 2004 Annual
Meeting of Stockholders 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 March 26, 2004. In addition, the Bylaws of the Company provide
that in order for a stockholder to nominate a candidate for election as a
director at an Annual Meeting of Stockholders or propose business for
consideration at such meeting, notice must be given to the Secretary of the
Company no more than 150 days nor less than 120 days prior to the first
anniversary of the mailing of the notice for the preceding year's Annual
Meeting. As a result, any notice given by or on behalf of a stockholder pursuant
to the provisions of our Bylaws must be delivered to the Secretary of the
Company between February 25, 2004 and March 26, 2004. The persons designated by
the Company to vote proxies given by stockholders in connection with the
Company's 2004 Annual Meeting of Stockholders will not exercise any
discretionary voting authority granted in such proxies on any matter not
disclosed in the Company's 2004 proxy statement with respect to which the
Company has not received written notice between February 25, 2004 and March 26,
2004 that a stockholder (i) intends to present such matter at the 2004 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 stockholder 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 2004 proxy statement
the nature of the proposal and how it intends to exercise its discretionary
voting authority.
Stockholders 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,
HARVEY B. GROSSBLATT
Secretary
Owings Mills, Maryland
July 24, 2003
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 2003, TO EACH STOCKHOLDER WHO FORWARDS
A WRITTEN REQUEST TO THE SECRETARY, UNIVERSAL SECURITY INSTRUMENTS, INC., 7-A
GWYNNS MILL COURT, OWINGS MILLS, MARYLAND 21117.
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APPENDIX A
UNIVERSAL SECURITY INSTRUMENTS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The role of the Audit Committee (the "Committee") is to oversee:
o Management in the performance of its responsibility for the
integrity of the Company's accounting and financial reporting,
and its systems of internal controls;
o The performance and qualifications of the independent auditor
(including the independent auditor's independence);
o The performance of the Company's internal audit function; and
o The Company's compliance with legal and regulatory requirements.
Consistent with this oversight function, the Committee shall authorize
investigations into any matters within the Committee's responsibilities and, in
doing so, the Committee shall have full access to the Company's records,
employees, and independent auditor (with or without the presence of management).
The Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain legal, accounting or other advisors for
advice and assistance. The Company shall pay the costs of retaining any advisors
selected by the Committee.
The Committee shall meet at least four times each year or more
frequently as circumstances dictate. The Committee shall meet with the Company's
independent auditor at least quarterly, and shall meet with the Company's Chief
Financial Officer ("CFO") at least annually or more frequently as circumstances
dictate.
The Committee shall review and reassess the adequacy of this Charter
at least annually. Any proposed changes shall be submitted to the Company's
Board of Directors (the "Board") for its approval. The Committee shall annually
evaluate the processes, activities and effectiveness of the Committee, including
the composition, expertise, and availability of the Committee members.
STRUCTURE AND MEMBER QUALIFICATIONS
The members of the Committee shall be annually appointed by the Board,
and may be replaced by the Board according to the Company's Bylaws.
The Committee shall have at least three members and shall consist
solely of "independent" Directors, consistent with the listing standards of the
American Stock Exchange and applicable legal requirements.
The membership of the Committee shall have the following
qualifications:
o Each member of the Committee shall be able to read and understand
fundamental financial statements, including a company's balance
sheet, income statement, and cash flow statement or will become
able to do so within a reasonable period of time after his or her
appointment to the Committee.
o At least one member of the Committee must have past employment
experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience
or background which results in the individual's financial
sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with
financial oversight responsibilities.
o If the Board determines, at least one member shall qualify as an
"audit committee financial expert" as defined by the Securities
and Exchange Commission ("SEC").
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The Board will assess and determine the qualifications of the
Committee members set forth in this Charter.
The Board shall select the Audit Committee Chair. If a Chair is not
designated or present, a Chair may be designated by a majority vote of the
Committee members present.
RESPONSIBILITIES AND DUTIES
The Committee recognizes that the Company's management is responsible
for the completeness and accuracy of the Company's financial statements and
disclosures and for maintaining effective internal controls. The Committee also
recognizes that the independent auditor is responsible for auditing the
Company's financial statements. Accordingly, management and the independent
auditor have more knowledge and more detailed information about the Company than
do Committee members and the Committee's primary responsibility is oversight. In
carrying out its oversight responsibilities, the Committee will be relying, in
part, on the expertise of management and the independent auditor.
The Committee shall be responsible for the appointment, compensation,
removal, and oversight of the work of the independent auditor. The independent
auditors shall report directly to the Committee and the Committee shall oversee
the resolution of disagreements between management and the independent auditors
in the event that they arise.
To fulfill this oversight responsibility, the Committee should receive
reports from management and the independent auditor, as appropriate, to fulfill
the following duties and responsibilities (which, to the extent permitted by
applicable regulation, may be delegated to one or more members of the
Committee):
Risk Assessment
o Assess the Company's risk management process and the adequacy of
the overall control environment, including controls in selected
areas representing financial reporting, disclosure and
compliance.
o Assess any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Company's internal controls.
o Assess the annual scope and plans of the independent auditors.
Financial Reporting and Disclosure
o Review and discuss with management and the independent auditor
the annual audited and quarterly financial statements, related
footnotes, disclosures made in the Management's Discussion and
Analysis of Financial Condition and Results of Operations section
of the Company's quarterly and annual SEC filings, the opinion of
the independent auditor with respect to the audited financial
statements, and the results of the independent auditor's
quarterly review of the financial statements.
o Review and discuss with management and the independent auditor
any significant events, transactions, changes in accounting
estimates, changes in important accounting principles and their
application, and any major issues as to the adequacy of internal
controls affecting the quality of the Company's financial
reporting.
o Review, in conjunction with its review of the quarterly and
annual reports, the process for the Chief Executive Officer
("CEO") and CFO certifications with respect to the financial
statements and the Company's disclosure and internal controls.
o Evaluate all significant deficiencies in the design or operation
of internal controls which could adversely affect the Company's
ability to record, process, summarize, and report financial data.
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o Review and discuss with management any proposed public release of
earnings information, as well as financial information provided
to analysts and rating agencies.
Independent Auditor Oversight Responsibilities
o Based upon a report from the independent auditor at least
annually, review (a) the auditor's internal quality-control
procedures, (b) any material issues raised by the most recent
quality-control review, or peer review, of the firm, or by any
recent inquiry or investigation by governmental or professional
authorities respecting one or more independent audits carried out
by the firm and (c) any steps taken to address any such issues.
o Ensure that the independent auditor submits, on a periodic basis,
a formal written statement delineating all relationships between
the independent auditor and the Company, as required by the
Independence Standards Board, Standard No. 1; discuss the
statement with the independent auditor and evaluate the
relationships and services that may affect the auditor's
objectivity and independence; take appropriate action to satisfy
itself of the auditor's independence.
o Review matters related to the conduct of the annual audit, which
are required to be communicated by AICPA Statement of Auditing
Standards 61 and other generally accepted auditing standards.
o Conduct the annual discussion with the independent auditor on the
quality and acceptability of the Company's accounting principles
and all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, the potential impact of the use of such
alternative disclosures and treatments, and the treatment
preferred by the independent auditor.
o Review the independent auditor's management letter.
o Review with the independent auditor any audit problems or
difficulties and management's response.
o Approve in advance all audit and non-audit services to be
provided by, and all fees to be paid to, the independent auditor
or devise policies delegating pre-approval authority to one or
more members of the Committee.
Ethical, Legal and Regulatory Compliance Matters
o Assess the Company's processes regarding compliance with
applicable laws, regulations and any code of business ethics
adopted by the Board, including those matters that could have a
significant impact on the financial statements, compliance with
policies, reports from regulators and the provisions of any such
code of business ethics applicable to the CEO and the Company's
senior financial officers as defined by the SEC rules.
o Assess the Committee's procedures for (a) the receipt, retention,
and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and
(b) the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
o Review reports and disclosures of significant conflicts of
interest and related-party transactions.
REPORTS
The Committee shall report to the Board with respect to its activities
as promptly as practicable following each meeting of the Committee. The
Committee shall report to Stockholders in the Company's proxy statement for its
annual meeting, whether the Committee has satisfied its responsibilities under
this Charter.
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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 Stephen C.
Knepper and Harvey B. Grossblatt, and each of them, as proxies, each with the
power of substitution, to attend the Annual Meeting of Stockholders of Universal
Security Instruments, Inc., a Maryland corporation (the "Company"), to be held
at Marriott's Hunt Valley Inn, 245 Shawan Road, Hunt Valley, Maryland, on
September 8, 2003, at 9:00 AM, local time, and any adjournments or postponements
thereof, to cast on behalf of the undersigned all votes that the undersigned is
entitled to cast at such meeting and otherwise to represent the undersigned at
the meeting with all powers possessed by the undersigned if personally present
at the meeting. The undersigned hereby acknowledges receipt of the Notice of the
Annual Meeting of Stockholders and of the accompanying Proxy Statement and
revokes any proxy heretofore given with respect to such meeting.
1. FOR the following nominee for director:
Ronald A. Seff, M.D. ______
WITHHOLD AUTHORITY as to the following nominee for director:
Ronald A. Seff, M.D. ______
The elected Director will serve for a term expiring at the 2006 annual meeting
and until his successor is duly elected and qualifies.
2. In their discretion, the proxies are authorized to vote and otherwise
represent the undersigned on any other matter which properly comes before
the meeting and any adjournments or postponements thereof.
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[REVERSE SIDE OF PROXY CARD]
The votes entitled to be cast by the undersigned will be cast as instructed in
this Proxy. If this Proxy is executed but no instruction is given, the votes
entitled to be cast by the undersigned will be cast "for" the nominee for
director and in the discretion of the proxies on any other matter that may
properly come before the meeting or any adjournments or postponements thereof.
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: __________________________, 2003
Signature______________________________________
DATED: __________________________, 2003
Signature_____________________________________
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