===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
INTERLINK ELECTRONICS INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
[LOGO]
INTERLINK
April 25, 2002 ELECTRONICS
Dear Stockholder,
You are cordially invited to the Annual Meeting of the Stockholders of Interlink
Electronics, Inc. to be held on June 11, 2002 at 11:00 a.m. Pacific Daylight
Time at the Company's corporate offices located at 546 Flynn Road, Camarillo,
California. Your attendance will provide you an opportunity to hear management's
report on operations and meet with directors and representatives of the Company.
As you are undoubtedly aware, 2001 was a challenging year for all technology
companies. The pressures brought about by the ever-worsening global economy
combined with the unprecedented acts of terrorism created tremendous
uncertainties. As an original equipment manufacturer, our revenue performance
generally mirrors the performance of our world-class customers. Overall, I am
proud of the Company's ability to quickly respond to this new environment. We
implemented numerous innovative programs that resulted in more streamlined
operation and improved overall productivity. We remain financially sound and
appear to be on track to achieve our strategic and financial objectives.
In the first quarter of 2002, we reported improved revenue and operating
results. Most of our OEM customers appear to be rebounding and we continue to
make consistent advances in numerous new markets. I look forward to sharing
these successes with you in more detail at our upcoming Stockholder Meeting.
The Secretary's Notice of the Meeting and Proxy Statement attached discuss the
matters on which action will be taken at the Stockholder Meeting. It is
important that your views are represented at the meeting whether or not you are
able to attend.
The vote of every stockholder is important. You can assure that your shares will
be represented and voted at the meeting by signing and returning the enclosed
proxy card, by voting by telephone or on the Internet. We have enclosed a
postage-paid, pre-addressed envelope as well as detailed instructions on the
proxy card for shareholders voting by telephone or Internet to make it
convenient for you to vote your shares.
On behalf of the directors and employees of the Company, we value and appreciate
your continued support of Interlink Electronics, Inc.
Best regards,
/s/ E. Michael Thoben
E. Michael Thoben
Chairman, CEO & President
INTERLINK ELECTRONICS, INC.
546 Flynn Road
Camarillo, California 93012
_________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 11, 2002
_________________________
To the Stockholders of Interlink Electronics, Inc.:
You are invited to attend the Annual Meeting of Stockholders of Interlink
Electronics, Inc., a Delaware corporation. The meeting will be held at the
Company's corporate offices at 546 Flynn Road, Camarillo, California on June 11,
2002, at 11:00 a.m., Pacific Daylight Time, for the following purposes:
1. To elect two directors to serve a term of three years;
2. To transact any other business that properly comes before the meeting
or any adjournment of the meeting.
Only stockholders of record at the close of business on April 17, 2002 are
entitled to notice of and to vote at the Annual Meeting.
Your vote is important. You may vote by written proxy, by telephone, or
over the Internet. Instructions for voting by telephone and over the Internet
are printed on the proxy card. If you choose to vote in writing, please date and
sign the enclosed proxy card and return it in the enclosed postage-paid envelope
as soon as possible. If you attend the meeting, you may, if you wish, revoke the
proxy and vote personally on all matters brought before the meeting.
By Order of the Board of Directors
/s/ Paul D. Meyer
Paul D. Meyer
Secretary
Camarillo, California
April 25, 2002
INTERLINK ELECTRONICS, INC.
546 Flynn Road
Camarillo, California 93012
_________________________
PROXY STATEMENT
_________________________
A proxy in the form accompanying this proxy statement is solicited on
behalf of the Board of Directors of Interlink Electronics, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders to be
held at the Company's corporate offices at 546 Flynn Road, Camarillo, California
93012 on June 11, 2002, at 11:00 a.m., Pacific Daylight Time. This proxy may
also be used at any adjournment of the meeting. We are sending this statement
and the enclosed proxy form to you on or about April 25, 2002.
Record Date
Only stockholders of record at the close of business on April 17, 2002 (the
"Record Date") are entitled to notice of, and to vote at, the meeting.
Shares Outstanding and Voting Rights
At the close of business on the Record Date, the Company had 9,758,872
shares of its Common Stock outstanding. Each share of Common Stock issued and
outstanding is entitled to one vote on each matter properly presented at the
Annual Meeting. There are no cumulative voting rights.
Proxy Procedure
You may vote by proxy by completing a proxy card and mailing it in the
postage-paid envelope, by using a toll-free telephone number, or by voting over
the Internet. Please refer to your proxy card or the information forwarded to
you by your bank, broker, or other holder of record to see which options are
available to you. Your ability to vote by telephone or by the Internet will
close at 5:00 p.m. Pacific Daylight Time on June 10, 2002.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. You have three ways to
revoke your proxy. First, you may do so in writing by notifying Paul Meyer, the
Secretary of the Company, at the Company's address listed above prior to our
exercise of the proxy at the Annual Meeting or any adjournment of the meeting.
Secondly, you can cast another valid proxy in writing, by telephone or over the
Internet. Your vote will be cast in accordance with the latest valid proxy.
Finally, the proxy may also be revoked by affirmatively electing to vote in
person while attending the meeting. If you choose to vote in person, please let
our personnel know that you are revoking a previously given proxy and are now
voting in person. A stockholder who attends the meeting need not revoke the
proxy and vote in person unless the stockholder wishes to do so, however. All
valid, unrevoked proxies will be voted at the Annual Meeting in accordance with
the instructions given. If a signed proxy is returned without instructions, it
will be voted for the nominee for director and in accordance with the
recommendations of management on any other business that may properly come
before the meeting or matters incident to the conduct of the meeting.
1
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of five directors. Pursuant to
the Company's Bylaws, the Board of Directors is divided into three classes, each
class serving a three-year term with the term of office of one class expiring
each year. Messrs. George Gu and E. Michael Thoben, III are the nominees for
re-election at this meeting for a three-year term expiring in 2005. If Messrs.
Gu and Thoben become unavailable for election for any reason, we will name a
suitable substitute as authorized by your proxy.
The following table briefly describes the Company's nominee for director
and the directors whose terms will continue. Except as otherwise noted, each has
held his principal occupation for at least five years.
Director Term
Name, Principal Occupation, Age and Other Directorships Since Expires
- ------------------------------------------------------- ----- -------
Nominees
- --------
George Gu 54 ................................................. 1991 2002
Chairman of GTM (Asia) Investment Holding Limited, a
privately owned investment company. Mr. Gu holds a B.S.
degree from North Carolina State University and an M.B.A.
degree from Columbia University.
E. Michael Thoben, III 48 .................................... 1990 2002
President, Chief Executive Officer and Chairman of the
Board of Directors of the Company. Prior to joining Interlink
Electronics in 1990, Mr. Thoben held numerous senior
management positions at Polaroid Corporation for eleven
years. Mr. Thoben formerly served on the Board of
Directors of the American Electronics Association and is
currently a member of the boards of two privately held
companies. Mr. Thoben holds a B.S. degree from St. Xavier
University and has taken graduate management courses at the
Harvard Business School and The Wharton School of Business.
Continuing Directors
- --------------------
Eugene F. Hovanec 50 ......................................... 1994 2004
Vice President and Chief Financial Officer of Vitesse
Semiconductor Corporation, a manufacturer of digital gallium
arsenide integrated circuits. Mr. Hovanec is a member of the
AICPA in New York and holds a B.D.A. degree from Pace
University.
2
Director Term
Name, Principal Occupation, Age and Other Directorships Since Expires
- ------------------------------------------------------- ----- -------
Merritt M. Lutz 59 ........................................... 1994 2003
Chairman of Morgan Stanley Technology Holdings, Inc.
Mr. Lutz manages the strategic technology investments and
partnerships for Morgan Stanley Technology Holdings, Inc.
Previously, he was President of Candle Corporations, a
worldwide supplier of systems software from 1989 to
November 1993. Mr. Lutz also sits on the boards of four
privately held software companies: Algorithmics, Business
Engine, ThruPoint and Beacon International. He is a former
director of the Information Technology Association of
America and the NASD Industry Advisory Committee. He
holds a bachelors and masters degree from Michigan State
University.
John Buckett II 53 ......................................... 2000 2003
Vice President, Corporate Development at Scientific-Atlanta,
Inc., a leading supplier of broadband communications systems,
satellite-based video, voice and data communications networks
and worldwide customer service and support, since 1998. He
is also a member of the Corporate Management Committee of
Scientific-Atlanta, Inc. From 1995 to 1998, Mr. Buckett
served as president of the International Division and, before
that, as vice president, marketing strategies, for all
operating units of Scientific-Atlanta, Inc. He is a member
of the Society of Cable Television Engineers and the Cable
Television Administration and Marketing Society. Mr. Buckett
holds a B.S. degree in electrical engineering from the
Georgia Institute of Technology.
Board Committees and Meetings
The Board of Directors acted by meeting and by unanimous written consent in
lieu of meetings nine times during the last fiscal year. The Board of Directors
has three standing committees. Each director participated in at least 75% of the
aggregate number of meetings and actions by unanimous written consent of the
Board of Directors and at least 75% of each of the meetings of each of the
committees of which he was a member.
The Board maintains a standing Audit Committee, which, in 2001, consisted
of Messrs. Hovanec, Buckett and Gu. In 2001, the committee held one meeting in
person and three telephonic meetings. All of the members attended each of the
four meetings. The Company believes that all three members of the Audit
Committee are "independent directors" within the meaning of Rule 4200(a)(14) of
the listing standards of the National Association of Securities Dealers.
Pursuant to the written charter adopted by the Board of Directors, the Audit
Committee assists the Board in fulfilling its oversight responsibilities
relating to corporate accounting, the Company's reporting practices and the
quality and integrity of the Company's financial statements; compliance with law
and the maintenance of ethical standards by the Company; and the Company's
maintenance of effective internal controls. For additional information about the
Audit Committee, see "Audit Committee Matters."
3
The Board of Directors' Compensation Committee, which is currently
comprised of Messrs. Hovanec, Lutz and Gu, reviews the compensation levels of
the Company's executive officers and makes recommendations to the Board
regarding changes in compensation. The Compensation Committee also administers
the Company's stock option plans and recommends grants under the plans to the
Board of Directors. See "Compensation of Executive Officers - Report of the
Compensation Committee on Executive Compensation" and "- Option Grants in Last
Fiscal Year." The Compensation Committee held three meetings during the last
fiscal year.
The Board also maintains a Nominating Committee which is comprised of
Messrs. Thoben, Buckett and Lutz. The Nominating Committee makes recommendations
to the Board of Directors concerning nominees to the Board of Directors. The
Nominating Committee had one meeting in 2001. The Nominating Committee will
consider nominees recommended by stockholders of the Company. Recommendations
for nominees should be sent to 546 Flynn Road, Camarillo, California 93012,
Attention: Corporate Secretary.
Director Compensation
Directors are paid a fee of $500 for each Board meeting and committee
meeting attended in person and $100 per hour (up to a maximum of $500 per
meeting) for each Board meeting attended telephonically. They are also
reimbursed for costs incurred attending Board meetings. Any director who is not
an employee of the Company and has not, within one year, been an employee of the
Company (a "Non-Employee Director") is eligible to receive options under our
1996 Stock Incentive Plan, as amended (the "1996 Plan"). The option price for
all options granted to Non-Employee Directors under the 1996 Plan is not less
than the fair market value of the Common Stock on the date the option is
granted. Each person who becomes a Non-Employee Director is automatically
granted an option to purchase 30,000 shares of Common Stock at the time he or
she becomes a Non-Employee Director. The 1996 Plan also provides for the
automatic, non-discretionary annual grant to all continuing Non-Employee
Directors of options to purchase up to 7,500 shares of the Company's Common
Stock. The options granted to Non-Employee Directors have a five-year term from
the date of grant. Each option becomes exercisable for 33 1/3% of the number of
shares covered by the option at the end of each of the first three years of the
option term. Options may be exercised while the optionee is a director of the
Company, within 30 days after the date the optionee's service as a director is
terminated for any reason other than death or disability or prior to the
expiration of the options, whichever comes first, or if the optionee's service
as a director is terminated as a result of death or disability, within one year
after the date of termination or prior to the expiration of the options,
whichever comes first. Options are subject to adjustment in the event of certain
changes in capital structure of the Company.
Recommendation by the Board of Directors
The Board of Directors recommends that stockholders vote "for" the election
of the nominees named in this proxy statement. If a quorum of stockholders is
present at the meeting, the nominees for director who receive the greatest
number of votes cast at the meeting will be elected director. We will treat
abstentions and broker non-votes as present but not voting.
INDEPENDENT AUDITORS
Arthur Andersen LLP audited the Company's financial statements for the
fiscal year ended December 31, 2001 and has been appointed to act as auditors
for the review of the Company's first quarter 2002 results. As a result of the
criminal indictment against Arthur
4
Andersen LLP in connection with the Enron matter and the possibly negative
consequences the indictment could have on Andersen's ability to provide audit
services, the Audit Committee and the Board of Directors have chosen to delay
the decision to choose an auditor for the fiscal year ended December 31, 2002.
The Audit Committee is interviewing other auditing firms and plans to make a
recommendation to the Board of Directors as soon as possible, but in any event
by June 30, 2002.
Representatives of Arthur Andersen LLP have been invited to attend the
Annual Meeting, will be given the opportunity to make a statement if they wish
and will be available to respond to appropriate questions.
COMPENSATION OF EXECUTIVE OFFICERS
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three non-employee directors. Pursuant to authority delegated by the
Board, the Committee initially determines the compensation to be paid to the
Chief Executive Officer and to each of the other executive officers of the
Company. Following such determination by the Committee, issues concerning
officer compensation are submitted to the Board of Directors for approval.
Directors who are also officers of the Company do not participate in this
approval process. The Committee also is responsible for developing and making
recommendations to the Board with respect to the Company's executive
compensation policies.
Report of the Compensation Committee on Executive Compensation
The Company's compensation policies for officers (including the named
executive officers) are designed to compensate the Company's executives fairly
and to provide incentives for the executives to manage the Company's business
effectively for the benefit of its stockholders.
The key objectives of the Company's executive compensation policies are to
attract and retain key executives who are important to the long-term success of
the Company, and to provide incentives for these executives to achieve high
levels of job performance and to strive to enhance stockholder value. The
Company seeks to achieve these objectives by paying its executives a competitive
level of base compensation for companies of similar size and in similar
industries and by providing its executives an opportunity for further reward for
outstanding performance in both the short term and the long term. It is the
current policy of the Committee to set base salaries conservatively and to
emphasize opportunities for performance-based rewards through annual cash
bonuses and stock option grants.
Options granted to employees, including executive officers, under the
Company's 1996 Stock Incentive Plan generally are intended to qualify as
incentive stock options. To the extent, however, that the aggregate fair market
value of the stock with respect to which options are exercisable for the first
time during any calendar year exceeds $100,000, the options will be treated as
nonqualified stock options. The Company receives no tax deduction from the
exercise of an incentive stock option unless the optionee disposes of the
acquired shares before satisfying certain holding periods. The Committee
believes the grant of incentive stock options, despite the general
nondeductibility, benefits the Company by encouraging the long-term ownership of
the Company's stock by officers and other employees.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 per person the amount that the Company may deduct for compensation
paid to any of its five most highly compensated officers in any year. The levels
of salary and bonus paid by the Company generally do not exceed this limit.
However, upon exercise of nonqualified
5
stock options, the excess of current market price over the option price (the
"option spread") is treated as compensation. In addition, if the holder of an
incentive stock option disposes of stock received upon exercise of the option
before satisfying certain holding period requirements, the optionee will
recognize ordinary compensation income for the year of disposition equal to the
lesser of the option spread and the amount of gain realized by the optionee upon
disposition. Under Internal Revenue Service regulations, the $1,000,000 cap on
deductibility will not apply to option spread compensation from the exercise of
either a nonqualified stock option or a disqualifying disposition of an
incentive stock option if such exercise meets certain performance-based
requirements. One of the performance-based requirements is that an option grant
to any individual may not exceed a stockholder-approved maximum number of
shares. The Company exceeded the previously approved 75,000 share annual maximum
with respect to certain employees in 1998. Accordingly, the option spread
compensation from an exercise (in the case of nonqualified stock options) of
those options generally would be treated as compensation for tax purposes and
taken into account in determining the $1,000,000 cap on deductibility. The
stockholders increased the maximum number of shares to 100,000 in 1999 and then
to 300,000 in 2001.
Executive Officer Compensation Program. The Company's executive officer
compensation program is comprised of three elements: base salary, annual cash
bonus and long-term incentive compensation in the form of stock option grants.
Salary. The Company attempts to establish base salary levels for the
Company's executive officers that are competitive with those established by
companies of similar size in the computer electronics and technology industries.
In determining individual salaries within the established ranges, the Committee
takes into account individual experience, job responsibility and individual
performance during the prior year. The Committee does not assign a specific
weight to each of these factors in establishing individual base salaries. Each
executive officer's salary is reviewed annually, and increases to base salary
are made to reflect competitive market increases and the factors described
above.
In determining 2001 salaries, the Committee compared the proposed salaries
to the ranges established in fiscal 2000, reviewed salaries of executives of
similar companies and made specific adjustments as determined by the Committee
to be appropriate in the circumstances.
Cash Bonuses. The purpose of the cash bonus component of the compensation
program is to provide a direct financial incentive to executives and other
employees to achieve predetermined Company performance objectives. The Company
currently has one cash bonus plan covering the executive officers of the
Company.
Performance objectives for the Company as a whole are determined at the
beginning of each fiscal year during the annual budgeting process and are
approved by the Board of Directors. These objectives are based upon competitive
conditions and general economic circumstances then prevailing in the industries
in which the Company does business. Eligibility of an executive officer for a
bonus is generally dependent upon the achievement of the predetermined
performance objectives established pursuant to the bonus plan. Target bonus
amounts are established by the Committee for each executive officer at the
beginning of each fiscal year at a percentage of the executive officer's base
salary, which in fiscal 2001 was 20% of base salary. If the predetermined
performance goals are met, a preliminary bonus amount is calculated under the
bonus formula up to a maximum of the target bonus amount. The final bonus amount
paid to an eligible executive officer is determined by the Committee, which has
discretion to increase or decrease the formula-derived figure within certain
limits
6
based upon the Committee's assessment of the individual's performance and to pay
special bonuses in extraordinary circumstances as judged by the Committee.
No cash bonuses were awarded in 2001. The Committee based its decision on
the formula derived according to the bonus plan. The formula employed contains
an objective component, linked to the Company's revenue growth and
profitability, as well as a subjective component, based upon the Committee's
assessment of the individual officer's relative contribution to the Company as a
whole. Awarded bonuses, if any, are typically paid in the first quarter of the
following fiscal year.
Stock Options. Under the Company's compensation policy, stock options are
the primary vehicle for rewarding long-term achievement of Company goals. The
objectives of the program are to align employee and stockholder long-term
interests by creating a strong and direct link between compensation and
increases in share value. Under the Company's 1996 Stock Incentive Plan, the
Board of Directors or the Committee may grant options to purchase Common Stock
of the Company to key employees of the Company and its subsidiaries. The Board
of Directors makes annual grants of options to purchase the Company's Common
Stock at an exercise price equal to the fair market value of the shares on the
date of grant (the last sale price as reported on the Nasdaq National Market on
the date of grant). Starting in 2000, the Company's options generally vest
ratably on a monthly basis for three succeeding years. Prior to 2000, the
Company's options generally vested 25% on the grant date and the remainder
vested ratably on a monthly basis thereafter for the three succeeding years.
Stock options generally have a five-year term but terminate earlier if
employment is terminated. Option grants to executive officers depend upon the
level of responsibility and position, the Committee's subjective assessment of
performance, the number of options granted in the past and the exercise price of
such grants, among other factors. In fiscal 2001, the Board of Directors, upon
recommendation of the Committee, made the following grants of options to
purchase Company Common Stock to executive officers of the Company: E. Michael
Thoben, III, 285,000 shares; Paul D. Meyer, 142,500 shares; and Mike W. Ambrose,
131,000 shares. The Committee expects that in the future, if additional grants
are made, consideration will be given to the number of options granted in the
past and the exercise price of such grants.
Chief Executive Officer Compensation. The Committee determined the Chief
Executive Officer's compensation for fiscal 2001, with the final approval of the
Board of Directors, employing the same criteria that it used to set compensation
for other executive officers. The Chief Executive Officer's base salary was
determined based upon a review of both the salaries of chief executive officers
for companies of comparable size and in comparable industries and the Chief
Executive Officer's performance. Option grants in fiscal 2001 were determined
under the criteria described under "Stock Options," above.
Compensation Committee for 2001
Merritt Lutz, Chair
Eugene Hovanec
George Gu
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Hovanec, Gu and Lutz. There
are no interlocking relationships, as described by the Securities and Exchange
Commission, between the Compensation Committee members.
7
Summary Compensation Table
The following table sets forth a summary of all compensation paid to the
Chief Executive Officer of the Company and the two other executive officers of
the Company for services in all capacities to the Company and its subsidiaries
during each of the last three fiscal years. The option numbers have been
adjusted retroactively to reflect the three-for-two stock dividend to all
stockholders of record on March 20, 2000.
Long-Term
Compensation
------------
Securities
Annual Compensation Other Annual Underlying
Name and Principal Position Year Salary Bonus/(1)/ Compensation Options (#)
- --------------------------- ---- ------ ---------- ------------ ----------
E. Michael Thoben, III ...... 2001 $214,375 $ -0- $47,285/(2)/ 285,000
Chairman of the Board, 2000 240,000 60,000 - 90,000
President and Chief 1999 205,273 50,400 - 75,000
Executive Officer
Paul D. Meyer ............... 2001 $147,508 $ -0- - 142,500
Chief Financial Officer 2000 135,000 33,600 - 45,000
1999 117,500 28,800 - 37,500
Mike W. Ambrose ............. 2001 $131,250 $ -0- - 131,000
Sr. Vice President, 2000 115,000 24,000 - 37,500
Technology and 1999 97,917 10,000 - 37,500
Product Development
- ------------------
/(1)/ Bonuses listed are paid in the succeeding fiscal year. See "Report of
Compensation Committee on Executive Compensation-Executive Officer
Compensation Program-Cash Bonuses."
/(2)/ The Company reimbursed Mr. Thoben $47,285 for the use of his personal
airplane to transport him on Company business.
8
Option Grants in Last Fiscal Year
The following table provides information regarding grants of stock options
to the named executive officers in 2001.
Individual Grants
-----------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Total Annual Rates of Stock
Options Price Appreciation for
Number of Granted Exercise Option Term(4)
Securities Underlying to Employees Price Per Expiration --------------
Name Options Granted(1) in Fiscal Year(2) Share Date(3) 5% 10%
- ---- ------------------ ----------------- --------- ----------- --------- ---------
E. Michael Thoben, III ... 135,000 6.1% $6.875 2/21/06 $ 256,424 $ 566,630
112,500 5.1% 2.400 10/1/06 74,596 164,838
37,500 1.7% 4.420 12/20/06 45,794 101,192
Paul D. Meyer ............ 67,500 3.1% 6.875 2/21/06 128,212 283,315
56,250 2.5% 2.400 10/1/06 37,298 82,419
18,750 0.8% 4.420 12/21/06 22,897 50,596
Mike W. Ambrose .......... 56,000 2.5% 6.875 2/21/06 106,368 235,046
56,250 2.5% 2.400 10/1/06 37,298 82,419
18,750 0.8% 4.420 12/20/06 22,897 50,596
- -------------------
(1) These options were granted pursuant to the 1996 Plan.
(2) In fiscal 2001, the Company granted options to purchase a total of
2,209,750 shares of its Common Stock under the 1996 Plan, and this number
is used in calculating the percentages set forth in this column.
(3) Options granted under the 1996 Plan generally expire on the fifth
anniversary of the date of grant. Unless otherwise determined by the Board
of Directors, options granted under the 1996 Plan expire prior to the fifth
anniversary of grant (i) if the optionee's employment (or service as a
director, as applicable) is terminated for any reason (other than death or
disability), in which case options vested but unexercised at the date of
termination may be exercised prior to the expiration date of the option or
within 30 days after the date of termination, whichever comes first, or
(ii) if the optionee's employment (or service as a director, as applicable)
terminates because of death or disability, options vested but unexercised
at the date of termination may be exercised within 12 months after the date
of termination. If employment (or service as director, as applicable) is
terminated by death of the optionee, the option generally may be exercised
by persons to whom the optionee's rights pass by will or the laws of
descent or distribution.
(4) The assumed 5% and 10% annual rates of appreciation over the term of the
options are set forth in accordance with rules and regulations adopted by
the Securities and Exchange Commission and do not represent the Company's
estimate of stock price appreciation. Value shown is net of exercise costs.
9
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table indicates (on an aggregated basis) (i) stock options
exercised by named executive officers during fiscal 2001, including the value
realized on the date of exercise, (ii) the number of shares subject to
exercisable and unexercisable stock options as of the Company's fiscal yearend,
December 31, 2001, and (iii) the value of "in-the-money" options at December 31,
2001.
Value of Unexercised
Number of Unexercised In-the-Money Options
Shares Options at Year-End At Year-End(1)
Acquired Value -------------------------- --------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
E. Michael Thoben,III .... - - 635,688 276,883 $1,256,720 $208,970
Paul D. Meyer ............ - - 224,765 138,442 395,943 104,485
Mike W. Ambrose .......... - - 76,042 129,458 34,128 104,350
(1) Options are "in-the-money" at the fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option. The amounts set forth represent the difference between the fair
market value of the securities underlying the options on December 31, 2001,
based on the last sale price of $4.33 per share of Common Stock on that
date as reported by the Nasdaq National Market and the exercise price of
the options, multiplied by the applicable number of options.
10
Performance Graph
The following line graph provides a comparison of the annual percentage
change in the Company's cumulative total stockholder return on its Common Stock
to the cumulative total return of the Nasdaq Composite Index and a peer group
consisting of companies included in the Nasdaq Computer Manufacturers Index. The
comparison assumes $100 was invested on January 1, 1997 in the Company's Common
Stock and in each of the foregoing indices and, in each case, assumes the
reinvestment of dividends.
Interlink Electronics
Cumulative Total Return To Stockholders
1/1/97 - 12/31/01
(in $100's)
[GRAPH]
12/29/2001 9/29/2001 6/30/2001 3/31/2001 12/29/2000 9/29/2000 6/30/2000 3/31/2000
Interlink Electronics 1.08 0.54 2.03 0.92 3.17 4.84 10.47 15.9
Nasdaq US 1.53 1.18 1.7 1.44 1.93 2.88 3.13 3.6
Nasdaq Computer Manufacturers 2.17 1.41 2.43 2.24 3.14 6.18 6.06 6.98
12/31/1999 9/30/1999 6/30/1999 3/31/1999 12/31/1998 9/30/1998 6/30/1998 3/31/1998
Interlink Electronics 9.79 1.34 1.66 0.84 0.75 0.42 0.77 0.91
Nasdaq US 3.21 2.17 2.12 1.94 1.73 1.33 1.47 1.43
Nasdaq Computer Manufacturers 5.57 3.74 3.29 2.96 2.63 1.93 1.76 1.49
12/31/1997 9/30/1997 6/30/1997 3/31/1997 12/31/1996
Interlink Electronics 0.74 1.52 1.17 0.96 1
Nasdaq US 1.22 1.31 1.12 0.95 1
Nasdaq Computer Manufacturers 1.21 1.36 1.09 0.84 1
AUDIT COMMITTEE MATTERS
The Board of Directors has approved and adopted a written Audit Committee
Charter, a copy of which is attached to our 2001 Proxy Statement and can be
accessed on-line through www.sec.gov.
Report of the Audit Committee
In connection with the Company's audited financial statements for the year
ended December 31, 2001, the Audit Committee (1) reviewed and discussed the
audited financial statements with management; (2) discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61; and (3) received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1 and
discussed with the independent auditors their independence. Based upon these
reviews and discussions, the Audit Committee has recommended to the Board of
Directors, and the Board of Directors has approved, that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the Securities and Exchange
Commission.
11
Audit Committee for 2001
Eugene F. Hovanec, Chairman
George Gu
John Buckett
Principal Accounting Firm Fees
The Company incurred the following fees for services performed by the
Company's principal accounting firm, Arthur Andersen LLP, in fiscal 2001:
Audit fees $ 65,650/(1)/
Financial information
systems design and
implementation fees $ -
All other fees $ 4,200
---------
Total $ 69,850
=========
/(1)/ Fees for the audit of the Company's Annual Report on Form 10-K for
the year ended December 31, 2001 and the reviews of the financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarterly
periods ended March 31, 2001, June 30, 2001 and September 30, 2001.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 15, 2002 with
respect to the beneficial ownership of the Common Stock by each person, or group
of affiliated persons, who is known by us to be the beneficial owner of more
than five percent of the Common Stock; each of the directors and the nominees
for director; each of the named executive officers; and all of the Company's
named executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock issuable on exercise of
currently exercisable or convertible securities or securities exercisable or
convertible within 60 days of March 15, 2002 are deemed beneficially owned and
outstanding for computing the percentage owned by the person holding such
securities, but are not considered outstanding for purposes of computing the
percentage of any other person. Except as otherwise noted, the address for each
stockholder named below is: c/o Interlink Electronics, 546 Flynn Rd., Camarillo,
CA 93012.
Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Ownership(1) Of Class
- ------------------------------------ ------------ --------
E. Michael Thoben, III ....................................... 701,905(2) 6.7%
George Gu .................................................... 319,898(3) 3.3%
Paul D. Meyer ................................................ 247,996(4) 2.5%
Eugene F. Hovanec ............................................ 97,883(5) *
Michael W. Ambrose ........................................... 93,217(6) *
Merritt M. Lutz .............................................. 71,749(7) *
12
John Buckett II .............................................. 28,749(8) *
Royce & Associates, Inc. ..................................... 566,500(9) 5.8%
1414 Avenue of the Americas
New York, NY 10019
All executive officers and directors as a group (7 people) ... 1,561,397(8) 14.3%
*Less than 1%
- --------------------
(1) Except as modified by applicable community property laws or as otherwise
indicated, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite that
stockholder's name.
(2) Consists of 42,259 shares of Common Stock and options to purchase 659,646
shares of Common Stock.
(3) Includes 271,899 shares of Common Stock held by Force Sensor Investment
Corporation, which is owned by Mr. Gu's family, and options granted to
Mr.Gu to purchase 47,999 shares of Common Stock.
(4) Consists of 11,251 shares of common stock and options to purchase 236,745
shares of Common Stock.
(5) Consists of 30,251 shares of Common Stock and options to purchase 67,632
shares of Common Stock. All shares of Common Stock are jointly held with
his wife, Victoria Hovanec.
(6) Consists of 6,251 shares of Common Stock and options to purchase 86,966
shares of Common Stock.
(7) Consists of 6,251 shares of Common Stock and options to purchase 65,498
shares of Common Stock.
(8) Consists of 6,251 shares of Common Stock and options to purchase 22,498
shares of Common Stock.
(9) Based solely on Schedule 13G dated February 7, 2002.
(10) Consists of 374,413 shares of Common Stock and options to purchase
1,186,984 shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 11, 2001, E. Michael Thoben, III, our President and Chief Executive
Officer, Paul D. Meyer, our Chief Financial Officer, and Michael W. Ambrose, our
Senior Vice President, Technology and Product Development, delivered secured
promissory notes to the Company as payment for profits required to be disgorged
to the Company pursuant to Section 16(b) of the Securities Exchange Act of 1934.
The principal amount owed by each person as of June 11, 2001 pursuant to each
promissory note was: Mr. Thoben -- $132,652; Mr. Meyer -- $132,109; and Mr.
Ambrose -- $104,050. These principal amounts corresponded to the amount of
profit realized by each of Messrs. Thoben, Meyer and Ambrose as a result of open
market purchases and sales of the Common Stock between October 2000 and April
2001. The
13
principal amount of each note constitutes the largest aggregate amount of
indebtedness outstanding at any time during fiscal 2001. Each promissory note
bears interest at the rate of 7% per annum and is secured by options which had a
value as of June 11, 2001 equal to 150% of the principal amount due under the
note.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10% of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Executive officers, directors and beneficial owners of
more than 10% of the Common Stock are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on a review of the copies of such forms received
by the Company and on written representations from certain reporting persons
that they have complied with the relevant filing requirements, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers and directors have been complied with, except that E. Michael Thoben,
III, Paul D. Meyer, Mike W. Ambrose, George Gu, Eugene F. Hovanec and Merritt M.
Lutz each filed a Form 5, Annual Statement of Changes in Beneficial Ownership,
late.
ANNUAL REPORT
We have included a copy of the Company's Annual Report on Form 10-K.
METHOD AND COST OF SOLICITATION
The Company will pay the cost of preparing and mailing the proxies, the
proxy statements and any other materials furnished to the stockholders. In
addition to soliciting by mail, the Company's directors, officers and employees,
without additional compensation, may request the return of proxies in person or
by telephone. Brokers and persons holding shares for the benefit of others may
incur expenses in forwarding proxies and accompanying materials and in obtaining
permission from beneficial owners of stock to execute proxies. On request, we
will reimburse those expenses.
OTHER BUSINESS/DISCRETIONARY AUTHORITY
The Board of Directors does not intend to present any business for action
at the meeting other than the election of directors, nor does it have knowledge
of any matters that may be presented by others. If any other matter properly
comes before the meeting, the persons named in the accompanying form of proxy
intend to vote in accordance with the recommendations of the Board of Directors.
For this year's Annual Meeting of Stockholders, if notice of a stockholder
proposal to be raised at the Annual Meeting was received at the principal
executive offices of the Company after March 27, 2002, proxy voting on that
proposal when and if raised at the Annual Meeting will be subject to the
discretionary voting authority of the designated proxy holders. If notice of any
stockholder proposal to be raised at next year's Annual Meeting of Stockholders
is received by the Company at its principal executive offices after March 11,
2003, then proxy voting on that proposal when and if raised at the 2003 Annual
Meeting, will be subject to the discretionary voting authority of the designated
proxy holders.
14
STOCKHOLDER PROPOSALS
Any stockholder proposals to be considered for inclusion in next year's
proxy materials must be received by December 26, 2002 at the Company's principal
executive offices. Stockholders' proposals, should be sent to the Secretary,
Interlink Electronics, Inc., 546 Flynn Road, Camarillo, California 93012.
Whether you plan to attend the meeting or not, please sign the enclosed
proxy form and return it to us in the enclosed stamped, return envelope.
By Order of the Board of Directors
/s/ Paul D. Meyer
Paul D. Meyer
Secretary
15
PROXY
INTERLINK ELECTRONICS, INC.
Annual Meeting, June 11, 2002
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints E. Michael Thoben, III, and Paul D. Meyer, and
each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares that the undersigned may be entitled to vote at the
annual meeting of stockholders of Interlink Electronics, Inc. (the "Company") on
June 11, 2002 and any adjournments thereof, with all powers that the undersigned
would possess if personally present, with respect to the following:
1. Election of Directors: [_] FOR all nominees except as
marked to the contrary below.
[_] WITHHOLD AUTHORITY to vote for all
nominees listed below.
(Instructions: To withhold authority to vote for any individual, strike a
line through the nominee's name below.)
George Gu, E. Michael Thoben, III
2. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the
meeting may exercise all the powers granted hereby.
(Continued and to be signed on the other side.)
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be voted
for the election of the directors. The proxies may vote in their discretion
as to other matters that may come before this meeting.
Shares:
Date:_______________________________, 2002
P Name:_____________________________________
R
O
X Signature(s):_____________________________
Y Signature or Signatures
Please date and sign as name is imprinted hereon,
including designation as executor, trustee, etc.,
if applicable. A corporation must sign its name by
the president or other authorized officer.
The Annual Meeting of Stockholders of Interlink
Electronics, Inc. will be held on June 11, 2002 at
11:00 a.m., Pacific Daylight Time, at the
Company's corporate offices located at 546 Flynn
Road, Camarillo, California 93012.
Please Note: Any shares of stock of the Company held in the name of
fiduciaries, custodians or brokerage houses for the benefit of their
clients may only be voted by the fiduciary, custodian or brokerage house
itself--the beneficial owner may not directly vote or appoint a proxy to
vote the shares and must instruct the person or entity in whose name the
shares are held how to vote the shares held for the beneficial owner.
Therefore, if any shares of stock of the Company are held in "street name"
by a brokerage house, only the brokerage house, at the instructions of its
client, may vote or appoint a proxy to vote the shares.