<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission file number 1-7916
RECOGNITION INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 75-1080346
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2701 EAST GRAUWYLER ROAD, IRVING, TEXAS 75061
(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 579-6000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO______
At June 9, 1994, the Registrant had outstanding 15,126,040 shares of its Common
Stock, par value $.25 per share.
<PAGE> 2
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
---------------------
Consolidated Balance Sheet as of 1
April 30, 1994 and October 31, 1993.
Consolidated Statement of Operations - 2
Three Months and Six Months
Ended April 30, 1994 and 1993.
Consolidated Statement of Cash Flows - 3
Six Months Ended April 30, 1994 and 1993.
Notes to Consolidated Financial Statements. 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
----------------------------------------
FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS. 5
-----------
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
-----------------------------------
SECURITY HOLDERS 9
----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 9
---------------------------------
(a) Exhibits
(b) Reports on Form 8-K
SIGNATURES 10
INDEX TO EXHIBITS 11
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(thousands)
<TABLE>
<CAPTION>
April 30,
1994 October 31,
(Unaudited) 1993
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents, including
restricted amounts of $5,086 in 1994
and $4,731 in 1993 $ 31,434 $ 53,334
Short-term investments, including
restricted amounts of $244 in 1994
and $231 in 1993 509 483
Receivables - net 54,973 45,420
Inventories:
Raw materials and parts 9,957 12,203
Work in process 11,666 6,254
Finished goods 8,627 11,378
Other current assets 4,872 3,575
--------- ---------
Total current assets 122,038 132,647
--------- ---------
Property, plant and equipment - net 16,608 16,403
Service parts - net 25,238 19,115
Long-term receivables 4,928 4,886
Goodwill - net 17,306 18,597
Capitalized software - net 9,359 8,991
Other assets 16,062 16,725
--------- ---------
Total assets $211,539 $217,364
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 6,077 $ 5,776
Trade accounts payable 13,586 9,082
Domestic and foreign income taxes 2,338 3,803
Accrued compensation and benefits 4,995 6,924
Advance payments by customers 13,840 18,397
Accrued and other current liabilities 10,779 13,621
--------- ---------
Total current liabilities 51,615 57,603
--------- ---------
Long-term debt 53,656 53,656
--------- ---------
Other liabilities 6,426 5,303
--------- ---------
Stockholders' equity:
Preferred stock, no par value: authorized
shares - 800; issued shares - none -- --
Series A junior participating preferred
stock, no par value: authorized shares -
200; issued shares - none -- --
Common stock, $.25 par value: authorized
shares - 30,000; issued shares - 14,982
in 1994 and 14,953 in 1993 3,746 3,738
Capital in excess of par value 138,645 137,865
Accumulated deficit (38,102) (37,367)
Translation adjustments (4,020) (3,007)
Treasury stock (427) (427)
--------- ---------
Total stockholders' equity 99,842 100,802
--------- ---------
Commitments and contingencies
--------- ---------
Total liabilities and stockholders' equity $211,539 $217,364
========= =========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(thousands, except per share)
<TABLE>
<CAPTION>
Three months ended Six months ended
April 30, April 30,
--------------------------- ---------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Product $31,712 $31,727 $ 49,869 $ 52,500
Customer service 30,865 29,092 63,056 57,347
-------- -------- --------- ---------
62,577 60,819 112,925 109,847
-------- -------- --------- ---------
Cost of revenues:
Product 23,399 19,348 35,420 30,633
Customer service 21,084 20,806 40,940 40,482
-------- -------- --------- ---------
44,483 40,154 76,360 71,115
-------- -------- --------- ---------
Gross profit 18,094 20,665 36,565 38,732
Operating expenses:
Engineering and development 4,094 3,874 8,344 7,736
Selling and marketing 8,879 8,650 16,834 16,381
General and administrative 3,535 3,651 6,751 6,771
Amortization and other operating 856 875 1,761 1,714
-------- -------- --------- ---------
Operating income 730 3,615 2,875 6,130
Interest income 586 614 1,179 1,140
Interest expense (1,071) (1,377) (2,148) (2,774)
Foreign exchange gains, net 217 418 174 575
Other expense, net (143) (92) (193) (289)
-------- -------- --------- ---------
Income before income taxes 319 3,178 1,887 4,782
Provision for income taxes (1,710) (1,992) (2,622) (2,980)
-------- -------- --------- ---------
Net income (loss) $(1,391) $ 1,186 $ (735) $ 1,802
======== ======== ========= =========
Earnings (loss) per share $ (.09) $ .09 $ (.05) $ .14
======== ======== ========= =========
Weighted average shares 15,725 13,284 15,806 13,212
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(thousands)
<TABLE>
<CAPTION>
Six months ended
April 30,
---------------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM:
OPERATIONS -
Net income (loss) $ (735) $ 1,802
--------- --------
Adjustments to reconcile net income (loss) to
net cash used for operations:
Depreciation 5,488 5,778
Amortization 3,275 2,962
Deferred income taxes 791 (390)
Sales-type leases and installment sales, net (433) 701
Net book value of service parts used 543 644
Increase in receivables (10,307) (5,410)
Increase in inventories (372) (4,597)
Other working capital changes (7,071) (3,717)
Proceeds from sale of receivables --- 798
Other 1,165 1,337
-------- --------
Total adjustments (6,921) (1,894)
-------- --------
Net cash used for operations (7,656) (92)
-------- --------
INVESTMENTS AND ACQUISITIONS -
Additions to property, plant and equipment (3,226) (2,710)
Additions to service parts (9,529) (3,632)
Additions to capitalized software (1,839) (1,952)
Decrease (increase) in short-term investments 1 (17)
Payment for acquisition of business (306) (212)
Other 96 131
-------- --------
Net cash used for investments
and acquisitions (14,803) (8,392)
-------- --------
FINANCING ACTIVITIES -
Proceeds from issuance of short-term debt 273 59
Repayment of short-term debt (273) (292)
Repayment of long-term debt --- (1,875)
Issuance of common stock 261 29,487
Other --- (83)
-------- --------
Net cash provided by financing activities 261 27,296
-------- --------
Effect of exchange rate changes on cash 298 (161)
-------- --------
Net increase (decrease) in cash and cash
equivalents (21,900) 18,651
Cash and cash equivalents at beginning of period 53,334 25,851
-------- --------
Cash and cash equivalents at end of period $ 31,434 $ 44,502
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the six-month period for:
Interest $ 2,815 $ 2,732
Income taxes $ 2,878 $ 4,943
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The unaudited financial statements presented herein have been
prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and note disclosures
required by generally accepted accounting principles. These
statements should be read in conjunction with the financial
statements and notes thereto included in Recognition's Annual
Report on Form 10-K for the year ended October 31, 1993. The
accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted
auditing standards, but in the opinion of management such
financial statements include all adjustments of a normal
recurring nature necessary to fairly present Recognition's
financial position, results of operations and cash flows. The
results of operations for the six months ended April 30, 1994
may not be indicative of the results that may be expected for
the year ending October 31, 1994.
(2) Certain amounts in the 1993 financial statements have been
reclassified to conform with the 1994 presentation.
(3) At April 30, 1994, Recognition was contingently liable for
approximately $1,767,000 under letters of credit issued
primarily in connection with vendor purchase contracts and
performance guarantees on customer sales contracts.
4
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CHANGES IN FINANCIAL CONDITION
Working capital at April 30, 1994 was $70.4 million, a decrease of
$4.6 million compared to October 31, 1993. The decrease was a result of a
decrease in current assets of $10.6 million, offset by a decrease in current
liabilities of $6.0 million.
The decrease in current assets was due primarily to a decrease in cash
and cash equivalents of $21.9 million (see Consolidated Statement of Cash
Flows). This decrease was partially offset by increases in accounts receivable
and other current assets of $9.6 million and $1.3 million, respectively.
Accounts receivable increased primarily due to revenue recorded for shipments
of network products under major contracts in Canada made in the second quarter
of 1994. Other current assets increased primarily due to prepaid expenses
related to third party software royalties.
The decrease in current liabilities included a $4.6 million decrease
in advance payments by customers due to revenue recorded in the first six
months of 1994 for which payment was received in 1993. Accrued and other
current liabilities decreased $2.8 million primarily due to payments related to
restructuring and to property and sales taxes accrued at October 31, 1993.
Accrued compensation and benefits decreased $1.9 million primarily due to the
payment of 1993 annual performance bonuses in the first quarter of 1994.
Domestic and foreign income taxes decreased $1.5 million primarily due to
payments of 1993 taxes by certain foreign subsidiaries in 1994. These
decreases were partially offset by an increase in trade accounts payable of
$4.5 million primarily due to purchases related to the delivery of network
products in Canada.
At April 30, 1994, Recognition had $31.9 million of cash, cash
equivalents and short-term investments, of which $5.3 million was pledged as
collateral or otherwise committed to secure certain guarantees and a foreign
bank loan. Recognition has a revolving credit facility for up to $25.0
million. The facility contains covenants including maintenance of certain
financial ratios, net worth requirements, and restrictions on future borrowings
and payment of dividends. Obligations under the facility are secured by a lien
on substantially all of Recognition's assets, excluding its real estate. At
April 30, 1994, letters of credit of $1.2 million were outstanding under the
facility, which reduced the amount of credit available to $23.8 million.
Recognition believes it has sufficient cash, including amounts
available under the credit facility, to meet its operating and capital
requirements for the foreseeable future.
5
<PAGE> 8
RESULTS OF OPERATIONS - COMPARISON OF THREE MONTH PERIODS ENDED
APRIL 30, 1994 AND 1993
Consolidated revenues were $62.6 million in the second quarter of
1994, an increase of three percent, or $1.8 million, as compared to the second
quarter of 1993. Revenues from equipment products and services were $50.4
million in 1994, a decrease of $1.6 million, or three percent, as compared to
1993. Revenues from software products and services, including Plexus(R)
software products and software sold in conjunction with equipment, were $12.2
million in 1994. This represented an increase of $3.4 million, or 38 percent,
as compared to 1993.
The increase in consolidated revenues reflected an increase of $2.5
million, or nine percent, in foreign revenues partially offset by a decrease of
$.7 million, or two percent, in domestic revenues. Foreign operations
contributed 47 percent of the second quarter of 1994 revenues compared to 44
percent in the second quarter of 1993.
Product revenues were unchanged when compared to the second quarter of
1993. Revenues from equipment were $23.9 million in 1994, a decrease of seven
percent, or $1.7 million. This reflected decreased revenues from document
recognition products, offset partially by increased revenues from the delivery
and installation of network products under major contracts in Canada. Revenues
from software products were $7.9 million in 1994, an increase of 28 percent, or
$1.7 million.
Customer service revenues increased 6 percent, or $1.8 million, when
compared to the second quarter of 1993. Equipment related service revenues
were $26.5 million in 1994, essentially unchanged when compared to 1993.
Software service revenues related to both Plexus products and software sold in
conjunction with equipment were $4.3 million in 1994, an increase of 59
percent, or $1.6 million.
Consolidated gross profit in the second quarter of 1994 was $18.1
million, down $2.6 million from the second quarter of 1993. Product gross
profit was $8.3 million, or 26 percent of revenues, in 1994 compared to $12.4
million, or 39 percent of revenues, in 1993. This decline was attributable to
three primary factors: the unfavorable impact of fixed manufacturing expenses
on gross profit margins due to the lower revenues from document recognition
products; a larger percentage of product revenues from lower gross profit
margin contracts for network products in Canada; and increased revenues from
third party software products with lower gross profit margins. Customer
service gross profit increased $1.5 million primarily as a result of revenues
from custom software development and additional revenues from services for
equipment and software which were performed by existing staff without increased
expense.
6
<PAGE> 9
The provision for income taxes for 1994 and 1993 were a result of
income earned by certain foreign entities with relatively high effective tax
rates while no tax benefits were available to entities which recorded losses
for the three months.
Although revenues increased $1.8 million in the second quarter of
1994, the decline in gross profit of $2.6 million resulted in a decrease in
income before income taxes of $2.9 million. After providing for income taxes
on income earned by certain foreign entities, a net loss of $1.4 million
resulted in 1994 compared to net income of $1.2 million in 1993.
Recognition's system business is undergoing a transition from older,
closed architecture products to newer, open architecture products. Revenues
from the older products are declining and may continue at lower levels for the
next several quarters until replaced by revenues from the newer products. Some
of the newer products are being marketed through third parties. Gross profit
margins on such revenues, as well as sales and marketing expenses, are
generally lower than those on end-user revenues. Recognition expects lower
customer service revenues from such products, as end-users will typically
obtain equipment maintenance services from the third parties. Recognition is
marketing its maintenance services for products manufactured by other companies
to generate additional customer service revenues.
As a result of the net loss recorded in the second quarter of 1994 and
the transition from older to newer products, Recognition is evaluating all
aspects of its operations to improve profitability, including the consolidation
of facilities, staffing, investment levels and the targeted growth rates for
its businesses.
RESULTS OF OPERATIONS - COMPARISON OF SIX MONTH PERIODS ENDED
APRIL 30, 1994 AND 1993
Consolidated revenues were $112.9 million in the first six months of
1994, an increase of three percent, or $3.1 million, as compared to the first
six months of 1993. Revenues from equipment products and services were $89.9
million in 1994, a decrease of $4.7 million, or five percent, as compared to
1993. Revenues from software products and services, including Plexus software
products and software sold in conjunction with equipment, were $23.0 million in
1994. This represented an increase of $7.8 million, or 52 percent, as compared
to 1993.
The increase in consolidated revenues reflected an increase of $6.5
million, or 15 percent, in foreign revenues partially offset by a decrease of
$3.4 million, or five percent, in domestic revenues. Foreign operations
contributed 43 percent of the first six months of 1994 revenues compared to 38
percent in the first six months of 1993.
7
<PAGE> 10
Product revenues decreased five percent, or $2.6 million, compared to
the first six months of 1993. Revenues from equipment were $36.3 million in
1994, a decrease of 14 percent, or $5.6 million. This reflected decreased
revenues from document recognition products, offset partially by increased
revenues from the delivery and installation of network products under major
contracts in Canada. Revenues from software products were $13.6 million in
1994, an increase of 29 percent, or $3.0 million.
Customer service revenues increased 10 percent, or $5.7 million, when
compared to the first six months of 1993. Equipment related service revenues
were $53.6 million in 1994, an increase of two percent, or $.9 million.
Software service revenues related to both Plexus products and software sold in
conjunction with equipment were $9.4 million in 1994, an increase of 103
percent, or $4.8 million.
Consolidated gross profit in the first six months of 1994 was $36.6
million, down $2.2 million from the first six months of 1993. Product gross
profit was $14.4 million, or 29 percent of revenues, in 1994 compared to $21.9
million, or 42 percent of revenues, in 1993. This decline was attributable to
four primary factors: the unfavorable impact of fixed manufacturing expenses
on gross profit margins due to the lower revenues from document recognition
products; a larger percentage of product revenues from lower gross profit
margin contracts for network products in Canada; increased revenues from third
party software products with lower gross profit margins; and revenues from
certain contracts which required additional product customization resulting in
lower gross profit margins. Customer service gross profit increased $5.3
million primarily as a result of revenues from custom software development and
additional revenues from services for equipment and software which were
performed by existing staff without increased expense.
Interest expense decreased $.6 million due to interest on the term
loan obtained in conjunction with the acquisition of the Lundy Financial
Systems Division of TransTechnology Corporation which was paid in full in the
third quarter of 1993.
The provision for income taxes for 1994 and 1993 were a result of
income earned by certain foreign entities with relatively high effective tax
rates while no tax benefits were available to entities which recorded losses
for the six months.
8
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Registrant's Annual Meeting of Stockholders was held on March 3, 1994, at which
the following matters were voted on:
(a) Re-election of the following directors in Class II with terms
to expire in 1997:
<TABLE>
<CAPTION>
For Withheld Broker Nonvotes
--- -------- ---------------
<S> <C> <C> <C>
Lucie J. Fjeldstad 12,649,532 418,553 None
William C. Hittinger 12,646,446 418,553 None
A. A. Meitz 12,648,650 418,553 None
</TABLE>
(b) Approval of an increase in the number of shares reserved for issuance
under Registrant's 1990 Corporate Incentive Plan:
<TABLE>
<CAPTION>
For Against Abstentions Broker Nonvotes
--- ------- ----------- ---------------
<S> <C> <C> <C>
10,045,294 2,808,806 213,369 None
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The information required by this portion of Item 6 is set
forth in the Index to Exhibits on pages 11 through 14 of this Report.
(b) Reports on Form 8-K - No Reports on Form 8-K were filed during the
quarter for which this Report is being filed.
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECOGNITION INTERNATIONAL INC.
(Registrant)
Date: June 14, 1994 /s/ THOMAS E. HOEFERT
________________ ____________________________________
Thomas E. Hoefert
Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
10
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- - ------- -----------------------
<S> <C>
2. Not Applicable.
4.1 Restated Certificate of Incorporation effective May 30, 1974 (incorporated by
reference to Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1993).
4.2 Amendment to Article First of Registrant's Restated Certificate of Incorporation
effective March 12, 1993 (incorporated by reference to Exhibit 28(b) to Registrant's
Current Report on Form 8-K dated March 12, 1993).
4.3 Amendment to Article Fourth of Registrant's Restated Certificate of Incorporation
effective April 3, 1985 (incorporated by reference to Exhibit 3.3 to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1993).
4.4 Amendment adding Article Thirteenth to Registrant's Restated Certificate of Incorporation
effective March 16, 1987 (incorporated by reference to Exhibit 3.4 to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1992).
4.5 Certificate of Designation, Preferences and Rights of Series A Junior Participating
Preferred Stock effective September 28, 1992 (incorporated by reference to Exhibit 3.5 to
Registrant's Annual Report on Form 10-K for the fiscal year ended October 31, 1992).
4.7 By-Laws, as amended and restated as of October 28, 1993 (incorporated by reference to
Exhibit 3.6 to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1993).
4.8 Indenture dated as of April 3, 1986 and First Supplemental Indenture dated as of
November 1, 1987 between Registrant and MBank Dallas, National Association, as Trustee,
with respect to Registrant's 7-1/4% Convertible Subordinated Debentures due 2011
(incorporated by reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992).
</TABLE>
11
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- - ------- -----------------------
<S> <C>
4.9 Rights Agreement dated as of September 18, 1992 between Registrant and Society
National Bank as Rights Agent (incorporated by reference to Registrant's Form 8-A
Registration Statement dated September 25, 1992).
4.10 Amended and Restated Promissory Note dated as of March 30, 1992 by Registrant to
TransTechnology Corporation in the principal amount of $1,934,183 (incorporated by
reference to Exhibit 4.10 to Registrant's Quarterly Report on Form 10-Q for the
period ended July 31, 1992).
4.11 Amended and Restated Credit Agreement dated as of July 29, 1993 by and among Registrant
and The First National Bank of Boston, National Bank of Canada, New York Branch and
First Interstate Bank of Texas, N.A. (incorporated by reference to Exhibit 4.11 to
Registrant's Quarterly Report on Form 10-Q for the period ended July 31, 1993).
4.12 Amendment dated as of January 31, 1994 to Amended and Restated Credit Agreement dated as
of July 29, 1993 (incorporated by reference to Registrant's Quarterly Report on Form 10-Q
for the period ended January 31, 1994).
4.13 Amended and Restated Revolving Credit Notes dated as of July 29, 1993 in the principal
amounts of $12,000,000, $7,000,000 and $6,000,000 payable by Registrant to The First
National Bank of Boston, as agent for The First National Bank of Boston, First Interstate
Bank of Texas, N.A. and National Bank of Canada, New York Branch, respectively
(incorporated by reference to Exhibit 4.12 to Registrant's Quarterly Report on Form 10-Q
for the period ended July 31, 1993).
4.14 Security Agreement dated as of March 26, 1992 by and among Registrant, Hybrid Systems Inc.
and The First National Bank of Boston (incorporated by reference to Exhibit 19.5 to Registrant's
Quarterly Report on Form 10-Q for the period ended April 30, 1992).
</TABLE>
12
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- - ------- -----------------------
<S> <C>
4.15 General Security Agreement dated as of March 26, 1992 by and between Mohawk Data Sciences-Canada,
Limited and The First National Bank of Boston (incorporated by reference to Exhibit 19.6 to
Registrant's Quarterly Report on Form 10-Q for the period ended April 30, 1992).
4.16 Unlimited Guaranty dated as of March 26, 1992 by Hybrid Systems Inc. and Recognition
Equipment (Japan), Inc. in favor of The First National Bank of Boston (incorporated
by reference to Exhibit 19.7 to Registrant's Quarterly Report on Form 10-Q for the
period ended April 30, 1992).
4.17 Unlimited Guaranty dated as of March 26, 1992 by Mohawk Data Sciences-Canada, Limited
in favor of The First National Bank of Boston (incorporated by reference to Exhibit 19.8
to Registrant's Quarterly Report on Form 10-Q for the period ended April 30, 1992).
4.18 Amendment of Security Documents Agreement dated as of July 29, 1993 by and among
Registrant, Recognition Canada Inc., Recognition Japan Inc., Recognition Australia Pty.
Ltd. and Recognition Holding Limited and The First National Bank of Boston (incorporated
by reference to Exhibit 4.17 to Registrant's Quarterly Report on Form 10-Q for the period
ended July 31, 1993).
10.1 Form of Assignment of Targeted Bonuses for fiscal year 1994 under the Executive Bonus Plan
(including schedule listing the bonus amounts for each of Thomas R. Frederick, Thomas A.
Loose, Robert M. Swartz and Robert Vanourek).
10.2 1990 Corporate Incentive Plan, as amended and restated as of March 3, 1994.
10.3 Stock Option Agreement dated as of March 3, 1994 under the 1990 Corporate Incentive Plan
between Registrant and Robert Vanourek.
</TABLE>
13
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- - ------- -----------------------
<S> <C>
10.4 Form of Amendment dated as of December 5, 1993 (including schedule) to Stock
Option Agreement dated as of March 11, 1993 under the 1990 Corporate
Incentive Plan between Recognition and each of Thomas R. Frederick and Robert
M. Swartz.
11.1 Statement re computation of per share earnings.
15. Not applicable.
18. Not applicable.
19. Not applicable.
22. Not applicable.
23. Not applicable.
24. Not applicable.
27. Not applicable.
99. Not applicable.
</TABLE>
14
<PAGE> 1
EXHIBIT 10.1
FORM OF
ASSIGNMENT OF TARGETED BONUS (NAME)
UNDER THE RECOGNITION INTERNATIONAL INC.
EXECUTIVE BONUS PLAN (THE "PLAN")
1. TARGETED BONUS. Your Targeted Bonus for the Plan Year ending
October 31, 1994 , as specified by the Compensation Committee, is _______
DOLLARS ($_____) which may be earned, at the times and on the terms and
conditions stated in the Plan and this Assignment, based upon the results
achieved by the Company during that Plan Year.
2. DETERMINATION OF BONUS EARNED. Twenty-five percent of your
Targeted Bonus will be allocated to the achievement of each of the four
Corporate Objectives specified in Exhibit "A" attached hereto and incorporated
by reference herein. The amount of the Targeted Bonus allocated to each such
Objective will be earned as specified in Exhibit "A".
3. THE PLAN. The Plan is incorporated herein by reference, and
made a part hereof as if fully set forth herein. The Plan will control in the
event of any conflict between the Plan and any matter set forth herein, and
will control as to any matters not contained in this Bonus Assignment. Terms
used herein which are not defined here will have the same meanings as are
assigned to such terms in the Plan.
Please sign both copies of this Bonus Assignment in the space below
and return one to Mail Station 21.
I acknowledge that I have received and reviewed a copy of the
Recognition International Inc. Executive Bonus Plan and this Bonus Assignment
and agree to be bound thereby.
PLAN PARTICIPANT
____________________________________
Signature (Date)
<PAGE> 2
EXHIBIT "A"
EXECUTIVE BONUS PLAN
1994 CORPORATE OBJECTIVES
Twenty-five percent of the Targeted Bonus shall be allocated to the
achievement of each of the four corporate objectives specified below:
1. ORDERS
2. CASH BALANCE
3. NET INCOME
4. NEW PRODUCT MILESTONES
As used herein, "Orders", "Cash Balance" and "Net Income" shall each
have the meaning specified in the Plan. The Committee will determine the
specific dollar amount targets which must be achieved in order to earn a bonus
at "Minimum", "Target" and "Maximum" levels and will determine the "New Product
Milestones" and their respective target dates which must be achieved in order
to earn a bonus with respect thereto. The targets for Orders, Cash Balance and
New Product Milestones will be published by the Company. The Net Income targets
will be based upon the Company's financial plan for the fiscal year as approved
by the Committee for purposes of this Plan.
For each of the Orders, Cash Balance and Net Income corporate
objectives, if the Company exceeds the level of achievement for the Target
level, the participant will earn 100% of the portion of his Targeted Bonus
allocated to such objective. Fifty percent of such allocated Targeted Bonus
amount will be earned if the Minimum level of achievement met, and 150% of such
allocated Targeted Bonus amount will be earned if the Maximum level is met.
The percentage earned for achievement between the Minimum and Target levels, or
between the Target and Maximum levels, will be calculated on a straight line
basis. In the event the Minimum level of achievement for a corporate objective
is not reached, no part of the Targeted Bonus allocated to such objective shall
be earned by the participant and in no event may a participant earn more than
150% of the portion of the Targeted Bonus allocated to any objective,
regardless of the actual level of achievement.
One hundred percent of the portion of the Targeted Bonus allocated to
achievement of New Product Milestones shall be earned if all of the New Product
Milestones are achieved on or before the target dates established by the
Committee. If some but not all of the Milestones are met by their target
dates, the participant will earn 10 percent of that portion of the Targeted
Bonus allocated to New Product Milestones for each New Product Milestone which
is met by the specified date. If none of the New Product Milestones are
achieved by the specified dates, no such amount shall be earned.
The percentage of the portion of Targeted Bonus earned for each
corporate objective will be determined separately for each objective.
<PAGE> 3
SCHEDULE
TO FORM OF
ASSIGNMENT OF TARGETED BONUS
UNDER THE RECOGNITION INTERNATIONAL INC.
EXECUTIVE BONUS PLAN (THE "PLAN")
Agreements were entered into under substantially the same terms with the
following:
<TABLE>
<CAPTION>
NAME TARGETED BONUS
- - ---- --------------
<S> <C>
Thomas R. Frederick $125,000
Thomas A. Loose $ 85,000
Robert M. Swartz $125,000
Robert Vanourek $195,000
</TABLE>
<PAGE> 1
EXHIBIT 10.2
1990 CORPORATE INCENTIVE PLAN
As Amended and Restated March 3, 1994
The purposes of this 1990 Corporate Incentive Plan (the "Plan") are to
provide an incentive for key employees of Recognition International Inc. (the
"Company") and its subsidiaries to remain in the employ of the Company and/or
its subsidiaries and to improve their performance of duties for the Company
and/or its subsidiaries, to provide an opportunity for such employees to
acquire a, or enlarge their, proprietary interest in the Company so that they
will devote their best efforts to the benefit of the Company and to provide a
method of rewarding key employees of the Company and its subsidiaries for
superior performance.
DEFINITIONS
As used in the Plan, the following terms shall, unless the context
otherwise requires, have the respective meanings set forth below:
(a) "Additional Right" shall mean a stock appreciation right
granted by the Committee pursuant to the Plan entitling the holder
upon the exercise of the Related Option to receive the cash amount
described in Section 3.2 of the Plan in addition to the shares of
Common Stock issuable upon exercise of his Related Option.
(b) "Alternative Right" shall mean a stock appreciation right
granted by the Committee pursuant to the Plan entitling the holder
upon exercise thereof (and the concurrent termination of the
corresponding portion of the Related Option) to receive the cash
amount and/or shares of Common Stock described in Section 3.3 of the
Plan in lieu of the shares of Common Stock that would have been
deliverable had he exercised the corresponding portion of such Related
Option.
(c) "Award Income" shall mean for any Performance Year the
consolidated net income of the Company and subsidiaries for such
Performance Year as shown on the consolidated statement of operations
set forth in the Annual Report to Shareholders of the Company for such
Performance Year, adjusted by (i) adding thereto the provision for
income taxes, (ii) adding thereto the amount of any charge to income
by reason of the Plan and (iii) deducting therefrom the amount of any
credit to income by reason of the Plan. The Award Income for any
Performance Year for which the consolidated statement of operations
shows a net loss shall be deemed to be zero.
(d) "Award Reserve" shall mean at any time the total amount
expressed in U.S. dollars that is available at the time for the grant
of Performance Awards.
(e) "Common Stock" shall mean the Common Stock, par value $.25
per share, of the Company or the other kind(s) of securities which
shall be substituted for Common Stock or to which Common Stock shall
be adjusted in accordance with Section 5.6 of the Plan. "Shares"
shall mean shares of Common Stock or shares or units of such other
kinds of securities.
<PAGE> 2
(f) "Committee" shall mean the Compensation Committee of the
Board of Directors of the Company which shall consist of three or more
members of the Board of Directors, each of whom shall be selected by
and serve at the pleasure of the Board of Directors and shall be a
disinterested person (as that term is defined in Rule 16b-3, or any
similar or superseding regulation or regulations, in effect from time
to time ("Rule 16b-3"), under the Securities Exchange Act of 1934, as
amended, or any similar or superseding statute or statutes, in effect
from time to time (the "1934 Act")).
(g) "Fair Market Value" on any date shall mean (i) the closing
sale price per share of Common Stock on the principal securities
exchange on which it is listed on such date, or if there be no sales
reported on such date, on the preceding business day on which a sale
is reported or (ii) if the Common Stock is not then listed on any
securities exchange, the amount reasonably determined by the Committee
to be the Fair Market Value per share of Common Stock on such date.
(h) "Option" shall mean an employee stock option granted by the
Committee pursuant to the Plan. An "Incentive Stock Option" shall
mean an Option which meets the requirements of Section 422A of the
Internal Revenue Code of 1986, as amended, or any similar or
superseding statute or statutes, in effect from time to time (the
"Code").
(i) "Parent" shall mean any corporation that owns, directly or
indirectly, stock possessing more than 50% of the voting power of all
classes of stock of the Company.
(j) "Performance Award" shall mean a performance award granted
by the Committee pursuant to the Plan entitling the recipient to
receive the cash and/or shares of Common Stock described in Section
4.1 of the Plan.
(k) "Performance Year" shall mean the fiscal year of the Company
ending on October 31, 1991 and each subsequent fiscal year that ends
during the term of the Plan.
(l) "Related Option" shall mean any option to purchase Common
Stock, heretofore or hereafter granted by the Company to any employee
of the Company and/or any Subsidiary under the Plan or otherwise, with
respect to all or any portion of the shares of Common Stock covered by
such option, an Additional Right or an Alternative Right, or both, has
been granted.
(m) "Rights" shall mean both Additional Rights and Alternative
Rights.
(n) "Securities" shall mean shares of Common Stock of the
Company acquired upon exercise or payment of Options or Rights or
Performance Awards and any securities issued in respect of such
shares.
(o) "Spread" shall mean (i) with respect to the exercise of any
Alternative Right an amount equal to the product computed by
multiplying (A) the excess of (X) the Fair Market Value per share of
Common Stock on the date the Right is exercised over (Y) the option
price per share of Common Stock at which the Related Option is
exercisable, by (B) the number of shares of Common Stock (covered by
the Related Option) with respect to which such Right is being
exercised, and (ii) with respect to the exercise of
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<PAGE> 3
any Related Option an amount equal to the product computed by
multiplying (A) the excess of (X) the Fair Market Value per share of
Common Stock on the date the Related Option is exercised over (Y) the
option price per share at which such Related Option is exercisable, by
(B) the number of shares of Common Stock with respect to which such
Related Option is being exercised.
(p) "Subsidiary" shall mean any corporation, if stock possessing
more than 50% of the voting power of all classes of stock of such
corporation is owned, directly or indirectly, by the Company.
I
ADMINISTRATION
Section 1.1 ADMINISTRATION. The Plan shall be administered by the
Committee. The Committee from time to time may prescribe, amend and rescind
such rules, regulations, provisions and procedures, consistent with the terms
of the Plan, as, in its opinion, may be advisable in the administration of the
Plan and shall determine the provisions, which shall be consistent with the
terms of the Plan but need not be identical, of the respective agreements
required by Section 1.6 of the Plan, including, without limitation, provisions
(a) specifying the term, and period or periods and extent of exercisability, of
Options and Rights, (b) by imposing, and specifying the nature and extent of,
restrictions, if any, upon disposition of any Securities, (c) specifying the
circumstances, if any, under which all or part of any Securities may be
required to be forfeited and surrendered to the Company (and the consideration,
if any, to be paid by the Company for any such Securities forfeited and
surrendered) and (d) specifying the extent and times of lapse of any such
restrictions or risks of forfeiture. The Committee shall have the authority,
in its discretion, to construe and interpret the Plan and such respective
agreements and to make all other determinations necessary or advisable for
administering the Plan. A majority of the Committee shall constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all members of the Committee,
shall be the acts of the Committee, unless provisions to the contrary are
embodied in the Company's By-Laws or resolutions duly adopted by the Board of
Directors. All actions taken and decisions or determinations made by the
Committee pursuant to the Plan shall be binding and conclusive on all persons
interested in the Plan. No member of the Committee shall be liable for any
action, decision or determination taken or made in good faith with respect to
the Plan or any Option, Right or Performance Award granted under it.
Section 1.2 ELIGIBILITY. The employees of the Company and its
Subsidiaries (including officers and directors thereof if they are such
employees) who, in the opinion of the Committee, possess a capacity for
contributing, or have contributed, in substantial measure to the successful
performance of the Company shall be eligible to be granted Options, Rights and
Performance Awards. From such eligible employees, the Committee shall, from
time to time, choose those, if any, to whom Options, Rights and/or Performance
Awards shall be granted. More than one Option, Right and/or Performance Award
may be granted to the same person. The adoption of the Plan shall not be
deemed to give any person a right to be granted any Option, Right or
Performance Award.
Section 1.3 SHARES AVAILABLE. The Board of Directors shall reserve
for the purposes
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<PAGE> 4
of the Plan, out of the authorized but unissued shares of Common Stock or out
of shares of Common Stock held in the Company's Treasury, or partly out of
each, as shall be determined by the Board of Directors, a total of 1,740,000
shares of such Common Stock. Any shares delivered upon exercise of Options or
Alternative Rights or in payment of Additional Rights or Performance Awards
granted under the Plan shall reduce by the number of shares so delivered the
number of shares available for granting of Options, Rights and/or Performance
Awards under the Plan; provided, however, that shares delivered upon exercise
of an Alternative Right relating to an option not granted under the Plan shall
be deemed to have been delivered from the shares reserved for delivery upon
exercise of such option and shall not reduce the number of shares available
under the Plan. If an Option granted under the Plan to any employee expires or
is cancelled or terminated unexercised as to any shares covered thereby, or if
a Performance Award granted to any employee and payable in shares is forfeited
as to any undelivered shares included therein or if any Securities are
forfeited and surrendered to the Company, such shares or Securities shall be
available for granting of Options, Rights and/or Performance Awards under the
Plan. Upon the exercise of an Alternative Right relating to an Option granted
under the Plan, there shall be restored to the shares available for granting of
Options, Rights and/or Performance Awards under the Plan a number of shares
equal to the excess of (i) the number of shares as to which the Related Option
terminates as the result of such exercise over (ii) the number of shares
delivered to the optionee upon such exercise.
Section 1.4 LIMITATION. Subject to adjustment in accordance with
Sections 5.6 and 5.7 of the Plan, notwithstanding anything to the contrary
elsewhere in this Plan, the number of shares of Common Stock with respect to
which Options and/or Rights may be granted to any person in any fiscal year of
the Company shall not exceed an aggregate of 500,000 shares in the case of the
Company's chief executive officer and shall not exceed an aggregate of 250,000
shares in the case of any other person. If Options or Rights granted under the
Plan are cancelled or amended, then the application of the foregoing
limitations shall be determined in accordance with regulations issued by the
Treasury Department under Section 162(m) of the Code.
Section 1.5 AUTHORITY OF THE COMMITTEE TO GRANT OPTIONS, RIGHTS AND
PERFORMANCE AWARDS. Subject to the provisions of the Plan, the Committee shall
have authority, in its discretion, to determine the persons to whom Options,
Rights and Performance Awards shall be granted, to grant Options, Rights and
Performance Awards, to determine the number of shares to be covered by any
Option and to establish limits upon the maximum number of shares (which may be
stated as a maximum percentage of a total Right or a maximum dollar amount of a
total Performance Award) to be issued or delivered upon exercise or payment of
each Right or Performance Award. The Committee shall have the authority to
grant Incentive Stock Options under the Plan. Options shall be clearly
identified as Incentive Stock Options or non-Incentive Stock Options at the
time of grant.
Section 1.6 AGREEMENTS. The specific terms of each Option, Right and
Performance Award granted by the Committee pursuant to the Plan shall be
determined by the Committee, consistent with the terms of the Plan, and shall
be set forth and confirmed in an agreement which shall be in such form and
contain such provisions as shall be determined from time to time by the
Committee and which shall be executed pursuant to and with reference to the
Plan by the Company and the person to whom such Option, Right or Performance
Award is granted. Any such agreement may contain any provisions, consistent
with the terms of the Plan, as may be deemed necessary or appropriate and
approved by the Committee and may be amended from time
4
<PAGE> 5
to time by written instrument executed by the Company and the person holding
such Option, Right or Performance Award to reflect any change in the provisions
thereof made in accordance with the Plan. The agreements relating to Options,
Rights and/or Performance Awards granted to the same person may be included in
a single instrument or in separate instruments as determined from time to time
by the Committee. With respect to an Incentive Stock Option, the Committee
shall specify such terms and provisions as the Committee may determine to be
necessary or desirable to qualify such Option as an "incentive stock option"
within the meaning of Section 422A of the Code. With respect to any Option,
Right or Performance Award, the Committee shall specify such terms and
provisions as the Committee may determine to be necessary or desirable to
comply with Section 16(a) or 16(b) of the 1934 Act and the rules and
regulations thereunder, in effect from time to time.
Section 1.7 NOTICE OF EXERCISE. Each exercise of an Option or Right
must be evidenced by written notice of exercise to the Company in form
satisfactory to the Committee.
II
STOCK OPTIONS
Section 2.1 OPTION TERMS. The Committee shall establish the option
price per share at the time any Option is granted, and such option price per
share shall not be less than the greater of (a) 50% of the Fair Market Value
per share of the shares subject to such Option on the day such Option is
granted or (b) the per share par value of such shares; provided, however, that,
so long as required by the Code, the option price per share for an Incentive
Stock Option shall not be less than 100% (or 110% if the holder of the
Incentive Stock Option owns stock possessing more than 10% of the combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary) of the Fair Market Value per share of the shares subject to such
Option on the day such Option is granted. The option price will be subject to
adjustment in accordance with the provisions of Section 5.6 of the Plan.
Options may be granted under the Plan for terms of not more than ten years from
the date of grant thereof.
Section 2.2 CONTINUATION OF EMPLOYMENT. Each Option by its terms
shall require the employee granted such Option to remain in the continuous
employ of the Company and/or a Subsidiary for such period or periods as the
Committee shall determine at the time of grant, from the date of grant of his
Option before the right to exercise any part of the Option will accrue,
provided that the Committee at any time, or from time to time, after the time
of grant may in its discretion shorten such period or periods.
Section 2.3 EXERCISE OF OPTIONS. Subject to the provisions of this
Article II, each Option shall become and be exercisable at such time or times
and during such period or periods, in full or in such installments (which may
be cumulative or noncumulative), as may be determined by the Committee at the
time of the grant of such Option, provided that the Committee at any time, or
from time to time, after the time of grant may in its discretion accelerate the
exercisability of all or any portion of any Option by accelerating the date on
which it was initially to have become exercisable and/or, in the case of
Options exercisable in installments, accelerating the dates on which all or any
portion of any or all of such installments were initially to have become
exercisable.
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<PAGE> 6
Section 2.4 OPTION PRICE. The option price of each share purchased
pursuant to exercise of each Option shall be paid either (i) entirely in cash
or (ii) if permitted by the Committee in its sole discretion, partially or
entirely in full shares of Common Stock, with the balance, if any, to be paid
in cash. Any payment of the option price in shares of Common Stock shall be
credited toward the option price at the Fair Market Value per share of such
shares on the date of payment. Any payment to the Company in shares of Common
Stock as permitted by this Section 2.4 shall vest in the Company good and
unencumbered title thereto, free and clear of all liens, restrictions, charges,
encumbrances and adverse claims, and shall be effected by delivery of the
certificate(s) representing such shares, duly endorsed in blank or accompanied
by stock power(s) duly executed in blank and otherwise in proper form for
transfer.
III
STOCK APPRECIATION RIGHTS
Section 3.1 GRANT OF RIGHTS. The Committee shall have authority in
its discretion to grant an Additional Right, an Alternative Right, or both, to
the holder of any Related Option with respect to all or a portion of the shares
of Common Stock covered by such Related Option. Any such Right may be granted
either at the time of grant of the Related Option or at any time thereafter
during its term. Each Right shall be exercisable only if and to the extent
that the Related Option (as it may from time to time be modified or amended and
in effect) is exercisable. Upon the exercise of an Alternative Right, the
Related Option (and any Additional Right with respect to which such Related
Option is also a Related Option) shall terminate to the extent of the number of
shares of Common Stock (covered by such Related Option) with respect to which
such Alternative Right is exercised, and each holder of an Alternative Right
granted under this Plan by his exercise thereof shall confirm his agreement to
such termination of the Related Option, any such Additional Right or portion
thereof. Upon the exercise of a Related Option, any Alternative Right with
respect to such Related Option shall terminate to the extent of the number of
shares of Common Stock with respect to which the Related Option was exercised.
Upon the expiration, termination or cancellation of a Related Option, all
Rights with respect to such Related Option shall terminate to the extent of the
number of shares of Common Stock with respect to which the Related Option
expired or was terminated or cancelled.
Section 3.2 ADDITIONAL RIGHTS. Upon the exercise of a Related
Option, the holder of an Additional Right granted with respect to such Related
Option shall be entitled to receive an amount in cash equal to the product
computed by multiplying (i) the Spread, by (ii) a percentage factor (which may
be any percentage factor equal to or greater than 10% and equal to or less than
100%) as determined by the Committee at the time of the grant of such
Additional Right or as determined in accordance with a formula for
determination of such percentage factor established by the Committee at the
time of the grant of such Additional Right. If no percentage factor or formula
is otherwise specified by the Committee at the time of grant of such Additional
Right, the percentage factor shall be deemed to be 100%. The Committee at any
time, or from time to time, after the time of grant may in its discretion
increase such percentage factor (or amend such formula so as to increase such
factor) to not more than 100%.
Section 3.3 ALTERNATIVE RIGHTS. Upon the exercise of an Alternative
Right, the holder thereof, subject to Section 3.4 of the Plan, shall be
entitled at his election, to receive either:
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<PAGE> 7
(i) the number of shares of Common Stock equal to the
quotient computed by dividing the Spread by the Fair
Market Value per share of Common Stock on the date of
exercise of the Alternative Right, provided, however,
that in lieu of fractional shares of Common Stock the
Company shall pay cash equal to the same fraction of the
Fair Market Value per share of Common Stock on the date
of exercise of such Alternative Right, or
(ii) an amount in cash equal to the Spread, or
(iii) a combination of (A) cash in the amount specified in such
holder's notice of exercise and (B) a number of shares of
Common Stock calculated as provided in clause (i) of this
Section 3.3 after reducing the Spread by such cash
amount, plus cash in lieu of fractional shares of Common
Stock as provided above.
Section 3.4 EXERCISE OF ALTERNATIVE RIGHTS. To exercise an
Alternative Right, the holder shall (i) give written notice thereof to the
Company in form satisfactory to the Committee specifying (A) the number of
shares (covered by the Related Option) with respect to which he is exercising
the Alternative Right and (B) the amount he elects to receive in cash and/or
the amount he elects to receive in shares with respect to the exercise of the
Alternative Right. The date of exercise of an Alternative Right which is
validly exercised shall be deemed to be the date on which the Company shall
have received the notice referred to in the preceding sentence.
IV
PERFORMANCE AWARDS
Section 4.1 PERFORMANCE AWARDS. Performance Awards, stated in dollar
amounts, may be granted by the Committee in its discretion at such time or
times after the end of each Performance Year as may be determined by the
Committee. At the discretion of the Committee, Performance Awards may be
payable either wholly in cash, wholly in full shares of Common Stock (with any
fractional shares being payable in cash) or partly in cash and partly in full
shares of Common Stock. Payment and/or delivery of a Performance Award, in the
discretion of the Committee, may be made (i) in full at the time of grant of
such Performance Award, or (ii) in any number of one or more annual or other
deferred installments (which need not be equal), which shall be payable at such
times and over such period of time as determined by the Committee. The number
of shares of Common Stock to be delivered in payment of a Performance Award
shall be determined by dividing the dollar amount of the Performance Award (or
the portion thereof payable in shares of Common Stock) by the Fair Market Value
per share of Common Stock on the date such Performance Award is granted (with
any fractional share resulting from such determination to be paid in cash equal
to the same fraction of the Fair Market Value per share of Common Stock on such
date).
Section 4.2 AWARD RESERVE. The Award Reserve, at any time, shall
equal the sum of (i) the dollar amount, if any, determined by the Committee
during the then current year for addition to the Award Reserve (which amount
shall not exceed 5% of the Award Income for the preceding Performance Year),
plus (ii) the aggregate dollar amount, if any, determined by the Committee in
all prior years for addition to the Award Reserve, plus (iii) the dollar amount
of
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<PAGE> 8
the forfeited portion of any Performance Award previously granted, plus (iv)
the dollar amount of any portion of any Performance Award previously paid which
is attributable to Securities that have been forfeited and surrendered to the
Company, less (v) the dollar amount of all Performance Awards granted prior to
the date of determination. As promptly as practicable after the end of each
Performance Year, the Committee shall determine (i) the then current total
amount of the Award Reserve, (ii) the amount of Award Income for such
Performance Year and (iii) the amount to be added to the Award Reserve in the
then current year in respect of the preceding Performance Year.
Section 4.3 EMPLOYMENT. Notwithstanding the provisions of Section
4.1 of the Plan, no Performance Award may be granted to any person unless he
was an employee of the Company and/or any Subsidiary during a part of the
Performance Year immediately preceding the year during which such Performance
Award is proposed to be granted, and the aggregate dollar amount of the
Performance Awards granted at any time may not exceed the total dollar amount
of the Award Reserve at such time. Except as provided in Section 5.2 of the
Plan, a deferred installment of any Performance Award shall not be paid or
delivered if the employment of the recipient by the Company and all
Subsidiaries has terminated prior to the date on which such installment is to
be paid, and the unpaid portion of each Performance Award shall be forfeited
upon such termination of employment. The dollar amount of the forfeited
deferred portion of any Performance Award and of any previously paid portion of
any Performance Award in respect of which Securities have been forfeited and
surrendered shall be added to the Award Reserve.
V
ADDITIONAL PROVISIONS
Section 5.1 NON-TRANSFERABILITY. Options, Rights and Performance
Awards shall not be transferable by the recipient otherwise than by Will or, if
he dies intestate, by the laws of descent and distribution of the jurisdiction
of his domicile at the time of his death, and such Options, Rights and
Performance Awards shall be exercisable or payable during his lifetime only by
or to such recipient or his guardian or legal representative.
Section 5.2 TERMINATION OF EMPLOYMENT. If the employment by the
Company and all Subsidiaries of a person who is the holder of any Option or
Right or the recipient of any Performance Award shall terminate because of such
person's discharge for cause, his rights under any then outstanding Option,
Right and Performance Award shall terminate and be forfeited immediately as to
any unexercised or unpaid portion thereof. If any such person's employment
shall terminate for any reason other than for cause (other than by reason of
his death or disability), (i) each outstanding Option held by him shall be
exercisable by him at any time prior to the expiration date of the Option or
within three months after the date of such termination of employment, whichever
is the shorter period, but only to the extent such Option was exercisable at
the date of such termination, (ii) each outstanding Right held by him shall be
exercisable or payable to the extent and for the period that the Related Option
is or becomes exercisable in accordance with its terms and (iii) the deferred
installments of each Performance Award payable to him shall become immediately
payable to the extent, if any, determined by the Committee, and the balance of
such Performance Award shall be forfeited. In the event of termination of
employment by reason of disability (of which the Committee shall be the sole
judge) or the death
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of any such person while such person is an employee of the Company or a
Subsidiary, (i) each outstanding Option held by him shall be fully exercisable
(whether or not exercisable on the date of his death or termination of
employment by reason of disability) at any time prior to the expiration date of
the Option or within six months after the date of death or termination of
employment, whichever is the shorter period, (ii) each outstanding Right held
by him shall be exercisable or payable to the extent and for the period that
the Related Option is or becomes exercisable in accordance with its terms and
(iii) the deferred installments of each Performance Award payable to him shall
become immediately payable in full. To the extent any Right or Option is not
exercised or paid during the period after termination of the holder's
employment specified in this Section 5.2, such Right and Option shall terminate
at the end of such period. In the case of death or disability, Options and
Alternative Rights shall be exercisable by and Additional Rights and
Performance Awards shall be payable to the person or persons specified in such
deceased person's Will or, if such deceased person shall have failed to make
specific provision in his Will for such exercise or payment or shall have died
intestate, or in the case of disability, when appropriate, by or to such
person's guardian or legal representative. Anything to the contrary contained
in this Section 5.2 notwithstanding, the Committee, in its sole discretion,
may, at the time of the grant or at any time thereafter, increase the period or
extent of, or accelerate, exercisability or payment of any Option, Right or
Performance Award.
Section 5.3 LEAVE OF ABSENCE. The Committee may make such provisions
regarding the effect of a leave of absence of any recipient as the Committee
shall determine.
Section 5.4 SECURITIES LAWS; COMPLIANCE WITH LAWS. Each exercise or
payment of an Option, Right or Performance Award shall, at the election of the
Committee, be contingent upon receipt by the Company from the recipient (or, in
the event of his death or disability, his legal representatives, legatees or
distributees) of such written representations (if any) concerning the
recipient's (or their) intentions with regard to the acquisition, retention or
disposition of the shares being acquired upon exercise or payment of such
Option, Right or Performance Award and/or such written covenants and agreements
(if any) as to the acquisition, retention and disposition of such shares as, in
the opinion of the Committee, may be necessary to ensure that the acquisition
and any disposition of such shares by the recipient or such other persons will
not involve a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect. Each Option, Right and Performance Award shall
be subject to the requirement that if at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification
of Common Stock subject to such Option, Right or Performance Award upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with the granting of, such Option, Right or
Performance Award or the issuance or delivery of shares thereunder, such
Option, Right or Performance Award may not be exercised or paid in whole or in
part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free of any conditions not acceptable to
the Committee. Nothing in the Plan or in any Option, Right or Performance
Award granted under it shall require the Company to issue or deliver any shares
upon exercise or payment of any Options, Rights or Performance Awards if such
issuance or delivery would, in the opinion of counsel for the Company,
constitute a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect.
9
<PAGE> 10
Section 5.5 ISSUANCE OF SHARES. A person exercising an Option or
Alternative Right or receiving a payment of an Additional Right or a
Performance Award shall not be treated as having become the registered owner of
any shares of Common Stock issuable or deliverable on such exercise or payment
until such shares are issued and delivered.
Section 5.6 ADJUSTMENT OF NUMBER AND KIND OF SHARES. The 1,740,000
shares available for the Plan as provided in Section 1.3 of the Plan are a part
of the Common Stock, par value $.25 per share, of the Company, presently
authorized in the Restated Certificate of Incorporation of the Company. In the
event that a dividend shall be declared and paid upon the Common Stock payable
in shares of Common Stock, the number of undelivered shares of Common Stock
then subject to any Option, Right or Performance Award and the number of shares
of Common Stock at the time reserved for sale or delivery pursuant to the Plan
but not at the time covered by an Option, Right or Performance Award, shall be
adjusted by adding to each such share the number of shares which would be
distributable thereon if such share had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend. In the
event that the outstanding shares of Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company, whether through amendment of the Company's certificate of
incorporation, reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation (other than a merger or consolidation to which
Section 5.7 of the Plan applies), then there shall be substituted for each
undelivered share of Common Stock then subject to any Option or Performance
Award and for each share of Common Stock at the time reserved for sale or
delivery pursuant to the Plan but not at the time covered by an Option or
Performance Award, the number and kind of shares of stock or other securities
into which each outstanding share of Common Stock shall be so changed or for
which each such share shall be exchanged. In the event there shall be any
change, other than as specified above in this Section 5.6, in the outstanding
shares of Common Stock, then if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment or change in the
number or kind of shares then reserved for sale or delivery pursuant to the
Plan but not at the time covered by an Option or Performance Award and of
undelivered shares then subject to an Option or Performance Award, such
adjustment or change shall be made by the Committee and shall be effective and
binding for all purposes of the Plan. In the case of any such substitution or
adjustment as provided for in this Section 5.6, the option price in each stock
option agreement for each share covered thereby prior to such substitution or
adjustment will be the option price for all shares which shall have been
substituted for such share or to which such share shall have been adjusted
pursuant to this Section 5.6. Upon the occurrence of any event requiring or
resulting in an adjustment or substitution pursuant to this Section 5.6, the
Committee shall make such adjustment in any outstanding Right as shall be
necessary to correspond to any adjustment made to the Related Option pursuant
to the terms hereof or of such Related Option. The determination of the
Committee as to all adjustments and substitutions referred to in this Section
5.6 shall be conclusive. No adjustment or substitution provided for in this
Section 5.6 shall require the Company to deliver or sell a fractional share,
and any fractional shares resulting from any adjustment or substitution
pursuant to this Section 5.6 shall be eliminated from the applicable Option,
Right or Performance Award. The provisions of this Section 5.6 shall apply
with respect to successive dividends, amendments, reorganizations,
recapitalizations, stock split-ups, combinations of shares, mergers,
consolidations and changes of the kind referred to in this Section 5.6.
Section 5.7 BUSINESS COMBINATIONS. In the event that, while any
Options, Rights or
10
<PAGE> 11
Performance Awards are outstanding under the Plan, there shall occur (a) a
merger or consolidation of the Company with or into another corporation in
which the Company shall not be the surviving corporation (for purposes of this
Section 5.7, the Company shall not be deemed the surviving corporation in any
such transaction if, as the result thereof, it becomes a wholly-owned
subsidiary of another corporation), (b) a dissolution of the Company or (c) a
transfer of all or substantially all of the assets of the Company in one
transaction or a series of related transactions to one or more other persons or
entities, then, with respect to each Option, Right and Performance Award
outstanding immediately prior to the consummation of such transaction:
(i) If provision is made in writing in connection with such
transaction for the continuance and/or assumption of the
Options, Rights and Performance Awards granted under the
Plan, or the substitution for such Options, Rights and
Performance Awards of new options, rights and awards
equivalent to the Options, Rights and Performance Awards,
with appropriate adjustment as to the number and kind of
shares or other securities deliverable with respect thereto,
the Options, Rights and Performance Awards granted under the
Plan, or the new options, rights and awards substituted
therefor, shall continue, subject to such adjustment, in the
manner and under the terms provided in the respective
agreements under Section 1.6.
(ii) In the event provision is not made in connection with such
transaction for the continuance and/or assumption of the
Options, Rights and Performance Awards granted under the
Plan, or for the substitution of equivalent options, rights
and awards, then (A) each holder of an outstanding Option
shall be entitled, immediately prior to the effective date
of such transaction, to purchase the full number of shares
that he would otherwise have been entitled to purchase
during the entire remaining term of the Option, (B) the
holder of any Alternative Right shall be entitled,
immediately prior to the effective date of such transaction,
to exercise such Right to the extent the Related Option is
or becomes exercisable at such time in accordance with its
terms, (C) the holder of any Additional Right shall be
entitled to receive, to the extent the Related Option is
exercised immediately prior to the effective date of such
transaction, the full amount of cash he would have been
entitled to receive if the Related Option had been exercised
to such extent and the percentage factor relating to such
Additional Right were 100%, (D) the recipient of any
Performance Award shall be entitled, immediately prior to
the effective date of such transaction, to receive all
remaining installments of such Award and (E) any restriction
or risk of forfeiture imposed pursuant to Section 1.1 of the
Plan shall lapse immediately prior to the effective date of
such transaction. The unexercised portion of any Option or
Alternative Right and the portion of any Additional Right
relating to the unexercised portion of the Related Option
shall be deemed cancelled and terminated as of the effective
date of such transaction.
11
<PAGE> 12
VI
MISCELLANEOUS
Section 6.1 AMENDMENT OF PLAN. The Board of Directors of the
Company shall have the right to amend, suspend or terminate the Plan at any
time; provided that an amendment shall be subject to shareholder approval if
such approval is required to comply with Rule 16b-3, the Code or the rules of
any securities exchange on which securities of the Company are listed at the
time such amendment is adopted. The Board of Directors may delegate to the
Committee all or any portion of its authority under this Section 6.1. No
amendment, suspension or termination (whether pursuant to this Section 6.1 or
upon expiration of the stated term of the Plan) may, without the consent of the
holder of an existing Option, Right or Performance Award, materially and
adversely affect his rights under such Option, Right or Performance Award.
Section 6.2 EFFECTIVE DATE AND DURATION OF PLAN; SHAREHOLDER
APPROVAL. The Plan shall become effective on November 30, 1990 and, unless
sooner terminated pursuant to the terms hereof, the Plan shall terminate on
November 30, 2000. The Plan (and each Option, Right and Performance Award
granted under the Plan) will become null and void unless the Plan is approved
no later than May 31, 1991, by the affirmative vote of the holders of a
majority of the shares of voting stock of all classes of the Company present,
or represented, and entitled to vote at a meeting of shareholders of the
Company at which a majority of the outstanding shares of the Company's voting
stock is voted on the proposal to approve the Plan. The agreement relating to
each Option, Right and Performance Award granted under the Plan prior to
approval of the Plan by shareholders as aforesaid shall expressly provide that
such Option, Right or Performance Award will not be exercisable or payable
prior to such approval and that such Option, Right or Performance Award will
become null and void unless the Plan is approved by the shareholders as
aforesaid no later than May 31, 1991.
Section 6.3 RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or
in any Option, Right or Performance Award granted under it shall confer any
right to continue in the employ of the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any of its Subsidiaries
to terminate any employment at any time.
Section 6.4 REQUESTED INFORMATION. Each grantee of an Option, Right
or Performance Award shall furnish to the Company all information requested by
the Company to enable it to comply with any reporting or other requirement
imposed upon the Company by or under any applicable statute or regulation.
Section 6.5 PAYMENT OF TAXES. Prior to the exercise of any Option
or the exercise for shares of Common Stock of all or any portion of any
Alternative Right or the payment of any Performance Award in whole or in part
by the delivery of shares of Common Stock, the holder of such Option, Right or
Performance Award shall make arrangements satisfactory to the Company for the
payment of any applicable federal or other withholding taxes payable as a
result thereof, which arrangements may include the withholding of shares of
Common Stock otherwise issuable upon the exercise or payment of such Option,
Right or Performance Award. Appropriate amounts to pay any such taxes shall be
deducted from any cash amount paid under the Plan.
Section 6.6 HEADINGS. The Article and Section headings contained in
the Plan are for convenience and shall not affect the construction of the Plan.
12
<PAGE> 1
EXHIBIT 10.3
STOCK OPTION AGREEMENT
UNDER THE
1990 CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION INTERNATIONAL INC.
* * * * *
This agreement made and entered into as of the 3rd day of March, 1994, by and
between Recognition International Inc., a Delaware corporation (herein called
the "COMPANY"), and Robert Vanourek (herein called the "OPTIONEE").
In consideration of the premises and mutual covenants herein
contained and other good and valuable consideration, the parties hereto agree
as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority
to make constructions of this option agreement, and to correct any defect or
supply any omission or reconcile any inconsistency in this option agreement,
and to prescribe rules and regulations relating to the administration of this
option and other options granted under the Plan. In this connection, it is
understood that the Plan is incorporated herein by reference, and made a part
of this option Agreement as if fully set forth herein. The Plan shall control
in the event there be any conflict between the Plan and this option agreement,
and shall control as to any matters not contained in this option agreement.
Terms used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE
the right and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 390,650 shares of the presently authorized Common
Stock of the COMPANY at the purchase price of Twelve and seven-eighths
Dollars ($ 12.875) per share. The option evidenced hereby is intended to be
and is designated as a non-incentive stock option and is not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code.
3. DATE OF GRANT. The Date of Grant of this option is the date
of this agreement.
4. TERM. Subject to earlier termination in accordance with the
Plan or this option agreement, this option shall continue for ten (10) years
from the date hereof. If the expiration date of this option or any termination
date provided for in the Plan or in this option agreement shall fall on a
Saturday, Sunday or a day on which the executive offices of the COMPANY are not
open for business, then such expiration or termination date shall be deemed to
be the last normal business day of the COMPANY, at its office specified in or
pursuant to Paragraph 15 hereof, preceding such Saturday, Sunday or day on
which such offices are closed.
1
<PAGE> 2
5. EXERCISABILITY. (a) This option shall become exercisable as
follows: (i) with respect to 10 percent of the total number of shares subject
to the option if, after the COMPANY's annual earnings release for fiscal year
1994, the "Average Price" (as defined below) of the COMPANY's Common Stock is
at least $20.00 per share; (ii) with respect to an additional 20 percent of
such shares if, after the COMPANY's annual earnings release for fiscal year
1995, the Average Price of the COMPANY's Common Stock is at least $25.00 per
share; (iii) with respect to an additional 30 percent of such shares if, after
the COMPANY's earnings release for fiscal year 1996, the Average Price of the
COMPANY's Common Stock is at least $30.00 per share; and (iv) with respect to
the remaining 40 percent of such shares on December 5, 1997; provided, however,
that any shares which do not become exercisable in any year because the Average
Price target for that year was not met shall become exercisable in any
subsequent year in which the Average Price target for such subsequent year is
met; and provided further that all shares not previously exercisable shall
become exercisable on December 5, 1997 and that the total number of shares
becoming exercisable in the aggregate shall in no event exceed the number of
shares specified in Paragraph 2 above. As used in this paragraph, the term
"Average Price" means the weighted average of the closing prices on the days
during which the first 200,000 shares of the COMPANY's Common Stock are traded,
as reported on the New York Stock Exchange Composite Tape, beginning with the
first such trade on the trading day immediately following the day on which the
COMPANY's annual earnings for the previous fiscal year are reported on the Dow
Jones News Wire.
(b) To the extent at the time exercisable, this option may be
exercised in whole or in part at any time, at the sole discretion of the holder
thereof. Except as set forth in Paragraphs 9 and 10 hereof, the OPTIONEE may
not exercise this option unless at the time of exercise thereof he has been in
the employ of the COMPANY or of a Subsidiary continuously since the Date of
Grant of this option. This option shall be exercisable during the lifetime of
the OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 10 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written notice of exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
notice of exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this option agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and,
as a condition to the COMPANY's obligation to deliver shares upon such
exercise, the holder of this option shall make arrangements satisfactory to the
COMPANY for the payment of any applicable federal or other withholding taxes
payable as a result thereof.
2
<PAGE> 3
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and
all Subsidiaries shall terminate because of OPTIONEE's discharge for cause,
then this option, and any rights he may have under this option, shall terminate
and be forfeited immediately as to any unexercised portion thereof.
9. OTHER TERMINATION. If the OPTIONEE's employment by the
COMPANY and all subsidiaries shall terminate for any reason other than cause
(other than by reason of death or disability), this option shall be exercisable
by him at any time prior to the expiration date of this option or within three
months after the date of his termination of employment, whichever is the
shorter period, but only to the extent that this option was exercisable at the
date of his termination.
10. DEATH OR DISABILITY. In the event of termination of
employment by reason of disability (of which the Committee shall be the sole
judge) or the death of the OPTIONEE while he is an employee of the COMPANY or a
Subsidiary, this option shall be fully exercisable (whether or not exercisable
on the date of his death or termination of employment by reason of disability)
at any time prior to the expiration date of this option or within six months
after the date of death or termination of employment, whichever is the shorter
period, by the person or persons specified in the OPTIONEE's Will or, if the
OPTIONEE shall have failed to make specific provision in his Will for such
exercise or shall have died intestate, or in the case of disability, when
appropriate, by the OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this
option shall, at the election of the Committee, be contingent upon receipt by
the COMPANY from the holder of this option of such written representations
concerning his intentions with regard to retention or disposition of the shares
being acquired by exercise of this option and/or such written covenants and
agreements as to the manner of disposal of such shares as, in the opinion of
the Committee, may be necessary to ensure that any disposition by such holder
will not involve a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian
or legal representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option, unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this
option, the exercise of any part hereof, nor any provision of the Plan or this
option agreement shall constitute or be evidence of any understanding, express
or implied, on the part of the COMPANY or any Subsidiary to employ the OPTIONEE
for any specified period.
14. NON-TRANSFERABILITY. Except as otherwise provided in the
Plan or this option agreement, this option and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated or
otherwise disposed of in any way (whether by
3
<PAGE> 4
operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or any right or privilege
conferred hereby contrary to the provisions hereof, this option and the rights
and privileges conferred hereby shall immediately become null and void.
15. NOTICE. Every notice or other communication relating to
this option agreement shall be in writing and shall be mailed to or delivered
to the party for whom it is intended in each case properly addressed. If to
the COMPANY, at its address in Dallas, Texas, attention Corporate Secretary.
If mailed or delivered to the OPTIONEE, at the address set forth below his
signature to this option agreement (or at such other address or in care of such
other person as may hereafter be designated in writing by either party to the
other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be
executed in its name by its duly authorized officer and the OPTIONEE has
hereunto set his hand as of the date above first written.
RECOGNITION INTERNATIONAL INC.
By /s/ Carol S. Lyon
Vice President and Corporate Secretary
OPTIONEE
/s/ Robert Vanourek
Signature
4
<PAGE> 1
EXHIBIT 10.4
FORM OF
AMENDMENT TO STOCK OPTION AGREEMENT
WHEREAS, Recognition International Inc. (herein called the "COMPANY") and
(NAME) (herein called the "OPTIONEE"), are parties to an agreement
entitled "Stock Option Agreement Under The 1990 Corporate Incentive Plan ('The
Plan')" and dated as of March 11, 1993 (herein called the "Agreement"); and
WHEREAS, the COMPANY and the OPTIONEE desire to amend the Agreement as set
forth herein;
NOW, THEREFORE, the COMPANY and the OPTIONEE hereby agree to amend the
Agreement by deleting Paragraph 5(a) of the Agreement in its entirety and
replacing it with the following:
"(a) This option shall become exercisable as follows: (i) with respect
to 10 percent of the total number of shares subject to the option if,
after the COMPANY's annual earnings release for fiscal year 1994, the
"Average Price" (as defined below) of the COMPANY's Common Stock is at
least $20.00 per share; (ii) with respect to an additional 20 percent
of such shares if, after the COMPANY's annual earnings release for
fiscal year 1995, the Average Price of the COMPANY's Common Stock is
at least $25.00 per share; (iii) with respect to an additional 30
percent of such shares if, after the COMPANY's earnings release for
fiscal year 1996, the Average Price of the COMPANY's Common Stock is
at least $30.00 per share; and (iv) with respect to the remaining 40
percent of such shares on December 5, 1997; provided, however, that
any shares which do not become exercisable in any year because the
Average Price target for that year was not met shall become
exercisable in any subsequent year in which the Average Price target
for such subsequent year is met; and provided further that all shares
not previously exercisable shall become exercisable on December 5,
1997 and that the total number of shares becoming exercisable in the
aggregate shall in no event exceed the number of shares specified in
Paragraph 2 above. As used in this paragraph, the term "Average
Price" means the weighted average of the closing prices on the days
during which the first 200,000 shares of the COMPANY's Common Stock
are traded, as reported on the New York Stock Exchange Composite Tape,
beginning with the first such trade on the trading day immediately
following the day on which the COMPANY's annual earnings for the
previous fiscal year are reported on the Dow Jones News Wire."
Except as amended herein, the Agreement shall remain unchanged and shall
continue in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this amendment to
be executed, effective December 5, 1993.
RECOGNITION INTERNATIONAL INC. OPTIONEE
By_________________________________ ____________________________
Vice President and Signature
Corporate Secretary
<PAGE> 2
SCHEDULE
TO FORM OF
AMENDMENT TO STOCK OPTION AGREEMENT
DATED AS OF DECEMBER 5, 1994
Agreements were entered into under substantially the same
terms with the following:
NAME
----
Thomas R. Frederick
Robert M. Swartz
<PAGE> 1
EXHIBIT 11.1
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY EARNINGS (LOSS) PER SHARE
(Unaudited)
(thousands, except per share)
<TABLE>
<CAPTION>
Three months ended Six months ended
April 30, April 30,
------------------------ -------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary:
- - -------
Net income (loss) $(1,391) $ 1,186 $ (735) $ 1,802
======== ======== ======== ========
Shares:
Weighted average shares
outstanding, net of treasury
shares 14,923 12,206 14,919 12,113
Net shares issuable on exercise
of certain stock options 802 1,078 887 1,099
-------- -------- -------- --------
Weighted average shares
outstanding, as adjusted 15,725 13,284 15,806 13,212
======== ======== ======== ========
Earnings (loss) per share -
primary $ (.09) $ .09 $ (.05) $ .14
======== ======== ======== ========
Fully Diluted (A):
- - -----------------
Earnings:
Net income (loss) $(1,391) $ 1,186 $ (735) $ 1,802
Add after tax interest expense
applicable to 7 1/4% convertible
subordinated debentures 919 919 1,837 1,837
-------- -------- -------- --------
Net income (loss), as adjusted $ (472) $ 2,105 $ 1,102 $ 3,639
======== ======== ======== ========
Shares:
Weighted average shares
outstanding, net of treasury
shares 14,923 12,206 14,919 12,113
Shares issuable assuming
conversion of 7 1/4% convertible
subordinated debentures 3,088 3,088 3,088 3,088
Net shares issuable on exercise
of certain stock options 802 1,078 903 1,099
-------- -------- -------- --------
Weighted average shares
outstanding, as adjusted 18,813 16,372 18,910 16,300
======== ======== ======== ========
Earnings (loss) per share -
fully diluted $ (.03) $ .13 $ .06 $ .22
======== ======== ======== ========
</TABLE>
Note A: This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although it is contrary to paragraph 40 of APB
Opinion No. 15 because it produces an anti-dilutive result.
