Universal Display Corp.s 3-Plus Million Dollar Men__»

May 12, 2010

Those of us of a certain age may remember the old 1970s television show called —The Six Million Dollar Man. The title character in the show, Steve Austin, was a bionic man, and suffice it to say that he could do just about anything.

To our knowledge, there aren—t any bionic executives leading the charge at Universal Display Corp. (PANL), the New Jersey-based company that describes itself —a world leader in the development of innovative OLED technology for use in flat panel displays, lighting and organic electronics. However, based on the quarterly report that the company filed May 10, it’s possible that its Compensation Committee members think that its executives are at least partly bionic.

We noticed that in addition to its new Supplemental Executive Retirement Plan (SERP) that became effective April 1, 2010, the company also entered into Equity Retention Agreements in March with two of its top executives.

Both agreements are dated March 18, 2010. The first Equity Retention Agreement is with CEO/President Steven Abramson; the second agreement is with EVP/CFO Sidney Rosenblatt. Both executives are getting 250,000 shares of common stock. The shares will vest over five years, with 50,000 shares vesting for each executive on the first through fifth anniversary dates of the grants.

The filing explains that the Compensation Committee members —determined that it is in the best interests of the shareholders to make a significant Stock Award to Abramson and Rosenblatt so that they have an —inducement to:

  • —Devote substantial time and attention to promotion and development of the Company at a time that is important for the future success of the Company;
  • Maintain a significant long-term ownership interest in the Company;
  • Continue in employment in order to ensure continuity of leadership and vision for the Company; and thereby
  • Increase shareholder value.

Since the shares vest over a period of years, it’s impossible to calculate a precise value for the grants. However, based on today’s trading price of $14.42 per share, and if the stock trades somewhere within the range of the past year (considering the low trading price of $8.53 to today’s high of $14.42), the grants will be worth over $2.1 million on the low end, to more than $3.6 million on the high end. And if the stock continues to appreciate, of course the value will be even higher.

Both Equity Retention Agreements also have a clause that states: ——the Stock Award shall vest in accordance with the terms of the Grantee’s Amended and Restated Change in Control Agreement dated November 4, 2008, between the Company and the Grantee— in the event of a Change in Control—, so we researched what would happen in that context. We found Abramson—s and Rosenblatt—s Amended and Restated Change in Control Agreements attached as exhibits to the company’s March 12, 2009 annual report.

And, as is typically the case, both Change in Control Agreements state that all outstanding equity awards vest immediately and fully if there is a change in control of the company (so long as the shares aren’t tied to performance, which these grants are not).

Thus, so long as the stock stays in the price range that it’s been in during the past year, Abramson and Rosenblatt will get an extra $2-3 million (and very likely more) for staying with the company and continuing to do their jobs. And while having millions of extra dollars may not be quite as cool as being able to shoot a laser beam from one’s eye – honestly – isn’t it more useful?

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