<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
FILED BY THE REGISTRANT {X}
FILED BY A PARTY OTHER THAN THE REGISTRANT { }
CHECK THE APPROPRIATE BOX:
{ } PRELIMINARY PROXY STATEMENT
{X} DEFINITIVE PROXY STATEMENT
{ } DEFINITIVE ADDITIONAL MATERIALS
{ } SOLICITING MATERIAL PURSUANT TO SEC. 240.14A-11(C) OR SEC. 240.14A-12
RECOGNITION INTERNATIONAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RECOGNITION INTERNATIONAL INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
{X} $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR 14A-6(J)(2).
{ } $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE ACT RULE
14A-6(I)(3).
{ } FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULE 14A-6(I)(4) AND 0-11.
1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:
4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
{ } CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER,
OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
1) AMOUNT PREVIOUSLY PAID:
2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
3) FILING PARTY:
4) DATE FILED:
<PAGE> 2
RECOGNITION INTERNATIONAL INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MARCH 3, 1994
To the Stockholders of
RECOGNITION INTERNATIONAL INC.
Notice is given that the Annual Meeting of Stockholders of Recognition
International Inc., a Delaware corporation ("Recognition"), will be held on
March 3, 1994, at 10 o'clock in the morning, Central Standard Time, in Grand
Ballroom B of the Stouffer Dallas Hotel, 2222 Stemmons Freeway, Dallas, Texas,
for the following purposes:
1. Electing three directors to serve in Class II until the annual
meeting of stockholders in 1997;
2. Considering and voting upon a proposed amendment to the 1990
Corporate Incentive Plan; and
3. Transacting such other business as may properly be brought before
said meeting or any adjournment(s) thereof.
Only stockholders of record at the close of business on January 12, 1994,
are entitled to notice of, and to vote at, such meeting or any adjournment(s)
thereof. A complete list of stockholders entitled to vote at the meeting will be
open to examination by any stockholder at the offices of Locke Purnell Rain
Harrell, Suite 2200, 2200 Ross Avenue, Dallas, Texas, for a period of at least
ten days before the meeting.
You are encouraged to attend the meeting in person, but if you cannot do
so, please complete, date, sign and return the accompanying proxy card at your
earliest convenience. A reply envelope is provided for this purpose, which needs
no postage if mailed in the United States. Your immediate attention is requested
in order to save the company additional solicitation expense.
By Order of the Board of Directors
CAROL S. LYON,
Vice President
and Secretary
Dallas, Texas
January 24, 1994
<PAGE> 3
RECOGNITION INTERNATIONAL INC.
P.O. BOX 660204
DALLAS, TEXAS 75266-0204
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 3, 1994
SOLICITATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Recognition International Inc., a Delaware corporation
("Recognition"), for use at the Annual Meeting of Stockholders of Recognition to
be held in Grand Ballroom B of the Stouffer Dallas Hotel, 2222 Stemmons Freeway,
Dallas, Texas, on March 3, 1994, and at any adjournment(s) thereof (the "Annual
Meeting"), for the purposes set forth below and in the accompanying Notice of
Annual Meeting of Stockholders. This Proxy Statement and the accompanying proxy
card are being mailed to stockholders on or about January 24, 1994.
ANNUAL REPORT
The Annual Report to Stockholders covering Recognition's fiscal year ended
October 31, 1993, including audited financial statements, is enclosed herewith.
The Annual Report to Stockholders does not form any part of the material for the
solicitation of proxies.
OUTSTANDING COMMON STOCK
The close of business on January 12, 1994, is the record date for
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting. On the record date, there were outstanding and entitled to be voted
14,921,590 shares of Recognition Common Stock, par value $.25 per share ("Common
Stock").
The following table sets forth certain information with respect to each
person or group known to Recognition to be a beneficial owner of more than 5% of
Recognition's outstanding Common Stock. Unless otherwise indicated, to the
knowledge of Recognition, all shares are owned directly and the owner has sole
voting and investment power with respect to the shares owned by it.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS(1)
------------------- ----------------------- -----------
<S> <C> <C>
Greenhaven Associates, Inc. 2,000,637(2)(3) 13.4%
Three Manhattanville Road
Purchase, NY 10577-2110
Spears Benzak Salomon & Farrell 1,794,197(4) 11.3%
45 Rockefeller Plaza, 33rd Floor
New York, NY 10011
Central National-Gottesman Group 1,660,838(5)(3) 11.1%
Three Manhattanville Road
Purchase, NY 10577-2110
FMR Corp. and Edward C. Johnson 3d 1,523,800(6) 10.2%
82 Devonshire Street
Boston, MA 02109
</TABLE>
1
<PAGE> 4
- ---------------
(1) Percent of shares of Common Stock outstanding at January 12, 1994. Shares
subject to issuance upon conversion of convertible securities held by the
identified stockholder are deemed outstanding for purposes of calculating
its percentage, when applicable.
(2) The information set forth in the table and this footnote regarding shares
beneficially owned by Greenhaven Associates, Inc. ("Greenhaven") is based
in part on a Schedule 13G dated January 9, 1991, as amended through April
30, 1992, filed by Greenhaven with the Securities and Exchange Commission
("SEC"), and in part on information furnished orally to Recognition by
Greenhaven as of December 13, 1993. Greenhaven has sole voting and
investment power with respect to 440,472 of such shares, shared investment
power with respect to 1,560,165 of such shares and no voting power with
respect to 1,560,165 of such shares.
(3) Greenhaven is a corporation engaged in providing investment advisory
services and is named as a member of the CNG Group in the Schedule 13D
filed by the CNG Group. Greenhaven has advised Recognition that 1,492,838
of the shares shown in the table as beneficially owned by Greenhaven are
also included in the shares shown in the table as beneficially owned by the
CNG Group.
(4) The information set forth in the table and this footnote regarding shares
beneficially owned by Spears Benzak Salomon & Farrell ("Spears Benzak") is
based in part on a Schedule 13G dated February 13, 1993, filed by Spears
Benzak with the SEC, and in part on information provided orally to
Recognition by Spears Benzak as of November 30, 1993. The shares listed in
the table include 1,000,417 shares issuable upon conversion of $16,757,000
of Recognition's 7 1/4% Convertible Subordinated Debentures Due 2011 held
by Spears Benzak. Spears Benzak holds the securities on behalf of a variety
of individuals, groups and corporations for whom it serves as investment
advisor. Spears Benzak has no voting power and has revocable shared
investment power with respect to such securities.
(5) The information set forth in the table and this footnote regarding the
Central National-Gottesman Group is based in part on a Schedule 13D dated
January 5, 1990, as amended through May 15, 1992, jointly filed with the
SEC by Central National-Gottesman, Inc. ("CNG") and other entities and
individuals having their principal offices at 100 Park Avenue, New York, NY
(herein referred to as the "CNG Group"), and in part on information
furnished orally to Recognition as of December 13, 1993. CNG is a privately
owned corporation whose stockholders include certain of the individuals in
the CNG Group and members of their families. No formal understanding or
agreement exists among the members of the CNG Group as to the disposition
or voting of any securities, including the shares of Common Stock.
(6) The information in the table and this footnote regarding shares
beneficially owned by FMR Corp. ("FMR") and Edward C. Johnson 3d is based
on a Schedule 13G dated October 8, 1993, filed with the SEC jointly by
FMR, Mr. Johnson, Fidelity Management & Research Company ("Fidelity") and
Fidelity Magellan Fund ("Magellan Fund"), all having their principal
offices at 82 Devonshire Street, Boston, MA 02109. Fidelity, a
wholly-owned subsidiary of FMR, beneficially owns 1,452,900 of the shares
listed in the table as a result of acting as an investment advisor to
several investment companies. Of those, Magellan Fund owns 1,187,000
shares. FMR, through its control of Fidelity and Magellan Fund, and Mr.
Johnson, Chairman of FMR, each has sole investment power but no voting
power with respect to these 1,452,900 shares. Fidelity Management Trust
Company, a wholly-owned subsidiary of FMR, beneficially owns 70,900 of
the shares listed in the table as a result of serving as investment
manager of two institutional accounts. FMR, through its control of
Fidelity Management Trust Company, has sole investment power over those
70,900 shares, sole voting power over 26,000 of those shares and no voting
power over 44,900 of those shares. In addition to being Chairman of FMR,
Mr. Johnson owns 34% of the outstanding voting stock of FMR and together
with various trusts for the benefit of family members, form a controlling
group with respect to FMR.
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<PAGE> 5
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth certain information with respect to Common
Stock beneficially owned at January 12, 1994, by directors, nominees, certain
executive officers and all directors and executive officers of Recognition as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
------------------------ ----------------------- -----------
<S> <C> <C>
Lucie J. Fjeldstad 8,000(3)(4) .05%
James F. Gero 31,000(3)(5) .21%
William C. Hittinger 14,200(3)(5) .10%
Gilbert H. Lamphere 58,708(3)(5)(6) .39%
Thomas A. Loose 117,726(7) .78%
A. A. Meitz 11,000(3)(5) .07%
Robert Vanourek 503,148(8) 3.26%
William H. Waltrip 11,000(3)(5) .07%
Thomas R. Frederick 83,050(9) .55%
Robert M. Swartz 79,527(10) .53%
Fredric E. Zucker 4,051(11) .03%
All directors and executive
officers of Recognition as a
group (17 persons) 1,123,141(12) 7.05%
</TABLE>
- ---------------
(1) Unless otherwise indicated, all shares are owned directly and the owner has
sole voting and investment power.
(2) Percent of shares of Common Stock outstanding at January 12, 1994. Shares
subject to purchase pursuant to stock options exercisable at such date or
within 60 days thereafter are deemed to be outstanding for purposes of
calculating the percentage, where applicable.
(3) 4,000 of the shares owned by director Fjeldstad; 2,000 of the shares owned
by each of directors Gero, Lamphere, Meitz and Waltrip; and 1,000 of the
shares owned by director Hittinger, are subject to forfeiture pursuant to
the restricted stock plan for outside directors described below. With
respect to those shares, each director has sole voting power and no
investment power until the risk of forfeiture lapses in accordance with the
terms of the plan.
(4) Includes 3,000 shares of Common Stock issuable upon exercise of options
granted under the Director Stock Option Plan described below.
(5) Includes 6,000 shares of Common Stock issuable upon exercise of options
granted under the Director Stock Option Plan described below.
(6) Includes 677 shares held for his account in a non-Recognition employee
benefit plan, with respect to which he has shared voting and investment
power. Also includes 615 shares held in trust for his minor children, as to
which Mr. Lamphere disclaims beneficial ownership.
(7) Includes 112,913 shares subject to purchase pursuant to employee stock
options exercisable at such date or within 60 days thereafter, and 1,724
shares held in his account under Recognition's 401(k) plan, as to which he
has sole voting power and no investment power.
(8) Includes 500,000 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,534 shares held in his account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(9) Includes 81,666 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,384 shares held in his account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
3
<PAGE> 6
(10) Includes 78,334 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,193 shares held in his account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(11) Includes 3,333 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 718 shares held in his account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(12) Includes 14,613 shares held in their respective accounts under
Recognition's 401(k) plan with respect to which they have sole voting power
and no investment power, and 1,002,916 shares subject to purchase pursuant
to employee stock options exercisable at such date or within 60 days
thereafter.
REVOCATION OF PROXY
Any person giving a proxy has the power to revoke the same at any time
before it has been exercised by giving written notice of such revocation to the
Secretary of Recognition. In addition, any stockholder who attends the Annual
Meeting may vote in person, thereby canceling any proxy previously given by such
stockholder.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of 7,460,796 shares of
Common Stock, being a majority of the outstanding shares of Common Stock
entitled to vote, is necessary to constitute a quorum at the Annual Meeting. The
stockholders entitled to vote at the Annual Meeting, present in person or
represented by proxy, have the power, by a vote of a majority of the voting
power given to all Common Stock so present or represented, to adjourn the
meeting from time to time for a period not exceeding 30 days, without notice
other than announcement at the Annual Meeting. If a quorum was present or
represented at the original meeting, or if a quorum shall be present or
represented at any such adjourned meeting, any business may be transacted which
might have been transacted at the meeting as originally notified.
Cumulative voting is permitted in the election of directors. See the
description of cumulative voting rights below. On any other matter submitted to
a vote of stockholders at the Annual Meeting or any adjournment(s) thereof, each
stockholder will be entitled to one vote for each share of Common Stock owned of
record at the record date.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Recognition's Board of Directors is classified into three classes having
staggered terms of three years each. At the Annual Meeting three directors will
be elected in Class II to serve until the annual meeting of stockholders in 1997
and until their successors have been elected or until their earlier resignation
or removal. The Board of Directors, upon the recommendation of the Committee on
Directors, has nominated Lucie J. Fjeldstad, William C. Hittinger and A. A.
Meitz for election as directors of Recognition in Class II. The directors
elected in Class II will serve with the five other directors named below whose
terms expire in later years.
Cumulative voting is permitted in the election of directors. Accordingly,
in the election of three directors for Class II, each stockholder will be
entitled to as many votes as shall equal the product of the number of shares of
Common Stock owned of record by him or her at the record date multiplied by
three, the number of directors to be elected. For example, each holder of Common
Stock may vote his or her shares for each of the three persons, or may vote on
the cumulative principle by casting three votes per share for one person or by
dividing three votes per share among the nominees as the stockholder desires.
Votes cast pursuant to the accompanying proxy will be voted "FOR" the
election of the nominees unless the giver of the proxy withholds authority to
vote for any or all of the nominees. The persons acting under the
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<PAGE> 7
accompanying proxy will exercise their discretion as to the manner in which the
votes represented thereby will be distributed between or among the nominees.
Should any or all of the nominees named herein become unable or unwilling
to accept nomination or election, which is not expected, it is intended that the
persons acting under the proxy will vote for the election, in their stead, of
such other person or persons as may be nominated by the Board of Directors upon
the recommendation of the Committee on Directors, or the Board may reduce the
number of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" NOMINEES FJELDSTAD,
HITTINGER AND MEITZ FOR CLASS II. UNDER DELAWARE LAW AND RECOGNITION'S RESTATED
CERTIFICATE OF INCORPORATION AND BYLAWS, DIRECTORS WILL BE ELECTED BY A
PLURALITY VOTE, AND THE THREE PERSONS RECEIVING THE GREATEST NUMBER OF VOTES
WILL BE ELECTED AS DIRECTORS OF RECOGNITION FOR CLASS II. BECAUSE DIRECTORS ARE
ELECTED BY PLURALITY VOTE, ABSTENTIONS AND BROKER NON-VOTES WILL NOT AFFECT THE
OUTCOME OF THE ELECTIONS SINCE NO PARTICULAR MINIMUM VOTE OF THE SHARES PRESENT
OR REPRESENTED AT THE MEETING AND ENTITLED TO BE VOTED IS REQUIRED.
Further information with respect to the nominees and continuing directors
is set forth below:
NOMINEES FOR CLASS II -- Term Expires 1997
Lucie J. Fjeldstad, 49, is President of Fjeldstad International, New
Canaan, CT, a management and strategic consulting firm for the new multi-media
world. Mrs. Fjeldstad held a number of positions with International Business
Machines Corporation, White Plains, NY, from 1968 to 1993 including Vice
President and General Manager of MultiMedia in 1992 and 1993, Vice President and
President of the Multimedia and Education Division in 1990 and 1991, Vice
President and President of the Academic, General and Public Sector Division in
1990 and Vice President and General Manager of the General/Public/Academic
Section from 1988 to 1990. She became a director of Recognition on October 28,
1993 and is also a director of PPG Industries, Inc., KeyCorp and Entergy
Corporation.
William C. Hittinger, 71, serves as a director of several public and
private companies, including Bethlehem Steel Corp., BioTechnica International,
Inc. and UNC, Inc., He retired as Executive Vice President of RCA Corporation in
1986. Mr. Hittinger has been a director of Recognition since 1979.
A. A. Meitz, 56, is Of Counsel to Booz-Allen & Hamilton, Inc., an
international management and technology consulting firm. He has been with that
firm for more than 25 years and was a Senior Vice President until he elected
partial retirement in August 1993. Mr. Meitz also previously served as a member
of the Booz-Allen Board of Directors and Chairman of its Audit Committee. The
majority of his work has focused on issues of business strategy, marketing and
organization design. Mr. Meitz became a director of Recognition in February
1990. He is also a director of Associated Materials Incorporated and Northern
Trust Bank of Texas, a subsidiary of Northern Trust Bank of Illinois.
CONTINUING DIRECTORS IN CLASS I -- Term Expires 1996
James F. Gero, 49, is the Chairman and Chief Executive Officer of Sierra
Technologies, Inc., a Buffalo, NY, manufacturer of various electronic equipment
for avionics, electronic warfare and flight inspection and other high technology
hardware and software systems. From 1989 to 1992, Mr. Gero was a private
investor. From 1984 until January 1989, Mr. Gero was President and Chief
Executive Officer of Varo, Inc., a Dallas defense electronics manufacturer, and
in 1987 he also became Chairman of Varo. Mr. Gero became a director of
Recognition in February 1990. He is also a director of American Medical
Electronics, Inc., D F & R, Inc., Drew Industries Inc. and Sierra Technologies,
Inc.
William H. Waltrip, 56, became Chairman of the Board and Chief Executive
Officer of Technology Solutions Company, Chicago, IL, a technology consulting
practice, in June 1993. Mr. Waltrip was Chairman and Chief Executive Officer of
Biggers Brothers, Inc. of Charlotte, NC, a foodservice distribution company,
from 1991 to 1993. He also served as Vice Chairman of Unifax, Inc. of
Wilkes-Barre, PA, the parent company of Biggers Brothers, since 1991. Mr.
Waltrip was a self-employed private management consultant from 1988 to 1991.
From 1985 until 1988 he was President and Chief Operating Officer of IU
International, Inc., Philadelphia, PA, a diversified services company. He was
President and Chief Executive Officer of Purolator,
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<PAGE> 8
Inc., Basking Ridge, NJ, a manufacturer of oil filter and closure caps and
overnight package delivery service, from 1982 until 1985, and was President and
Chief Operating Officer of Pan American World Airlines from 1972 until 1982. Mr.
Waltrip became a director of Recognition in February 1990. Mr. Waltrip is also a
director of Thomas & Betts Corporation, Bausch & Lomb, Inc., Teachers Insurance
and Annuity Association and Technology Solutions Company.
CONTINUING DIRECTORS IN CLASS III -- Term Expires 1995
Gilbert H. Lamphere, 41, became Co-Chairman and Co-Chief Executive Officer
of Noel Group, Inc. of New York, NY, in November 1991. Noel conducts its
diversified operations principally through small and medium-sized operating
companies in which it holds controlling or other significant equity interests.
From 1985 to 1989, Mr. Lamphere was Chairman of the Executive Committee of The
Prospect Group, Inc. of New York, NY, a leveraged buyout and venture capital
operating company. In November 1989, he was named President of Prospect, and
became Chairman and Chief Executive Officer of Prospect in January 1990. Mr.
Lamphere became a director and Chairman of the Board of Recognition in February
1990. He is also Chairman of the Board of Illinois Central Corporation, and a
director of Belding Hemmingway Company, Children's Discovery Centers of America,
Inc., Cleveland-Cliffs, Inc., Global Natural Resources Inc., Illinois Central
Railroad Company, Lincoln Snacks Company, The Noel Group, Inc., The Prospect
Group, Inc., R. P. Scherer Inc., Simmons Outdoor Corporation and Sylvan Foods
Holdings, Inc.
Thomas A. Loose, 61, is Senior Vice President and General Counsel of
Recognition and has been with Recognition for over twenty years. Mr. Loose was
named General Counsel to Recognition in 1975. He was elected a Vice President in
1976 and a Senior Vice President in 1982. He was also Secretary to the Board of
Directors from 1972 until 1990. Mr. Loose became a director of Recognition in
February 1990.
Robert Vanourek, 51, became President and Chief Executive Officer of
Recognition in December 1991. Prior thereto, he served as a Co-Chief Executive
Officer of the company since he joined Recognition in October 1989. From 1985
until 1989 he was Group Vice President of the Mailing Systems Division of Pitney
Bowes Inc. in Stamford, CT. From 1981 to 1985 he was President of Monarch
Marking Systems, Inc., Dayton, OH, a subsidiary of Pitney Bowes. Mr. Vanourek
became a director of Recognition in October 1989.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended October 31, 1993, the Board of Directors of
Recognition had an Executive Committee, an Audit Committee, a Compensation
Committee and a Committee on Directors.
The Executive Committee's function is to act for the Board of Directors, to
the extent permitted by law, in situations in which Board action is required and
it is not practicable to convene a meeting of the full Board. The Executive
Committee held one meeting during fiscal year 1993. Current members of the
Committee are Gilbert H. Lamphere, Chairman, James F. Gero, A. A. Meitz and
Robert Vanourek.
The Audit Committee's functions include (i) reviewing and approving the
scope and general extent of the annual audit, the audit procedures utilized and
the basis for determining the compensation to be paid to the independent
accountants, (ii) recommending to the Board of Directors the engagement of the
independent accountants for the ensuing year, (iii) reviewing and reporting to
the Board concerning the results of the annual audit conducted by the
independent accountants, (iv) reviewing and reporting to the Board concerning
Recognition's policies and procedures relating to internal auditing, accounting
and financial controls and (v) inquiring of appropriate personnel of Recognition
and of the independent accountants as to any deviations from established codes
of conduct and reviewing such codes on a periodic basis. The Committee held
three meetings during the fiscal year. The current members of the Audit
Committee are A. A. Meitz, Chairman, William C. Hittinger and William H.
Waltrip.
The Compensation Committee's responsibilities are described below under
"Report of the Compensation Committee on Executive Compensation." The Committee
held five meetings during the fiscal year ended October 31, 1993. Current
members of the Compensation Committee are William H. Waltrip, Chairman, James F.
Gero, William C. Hittinger, Gilbert H. Lamphere and A. A. Meitz.
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<PAGE> 9
The responsibilities of the Committee on Directors include identifying and
recommending to the Board of Directors suitable candidates for positions as
Board members, and reviewing and making recommendations regarding the structure,
size and composition of the Board and its committees, the compensation of
directors and the performance of incumbent directors. The Committee on Directors
will consider stockholder suggestions of persons for consideration as candidates
for nomination for election as members of the Board if the suggestions are
submitted in accordance with Recognition's By-Laws provisions regarding
stockholder nominations. The By-Laws require that the nomination satisfy certain
conditions. Written notice must be received by the Secretary of Recognition at
the principal executive offices not less than 50 days nor more than 75 days
prior to the meeting or, if Recognition gives less than 60 days notice of the
meeting date, then not later than the 15th day after the notice of the meeting
date was given. The notice must include the name, qualifications and
biographical data on the stockholder's proposed candidate. A copy of the
applicable By-Law is available from the Secretary upon request of any
stockholder. The Committee held three meetings during the 1993 fiscal year.
Current members of the Committee are James F. Gero, Chairman, William C.
Hittinger and William H. Waltrip.
The Board of Directors of Recognition held seven meetings during the fiscal
year. Each incumbent director attended during the fiscal year at least 75% of
the aggregate of (i) the total number of meetings of the Board (held during the
period the director served) and (ii) the total number of meetings held by all
committees of the Board on which the director served (during the periods the
director served).
COMPENSATION OF DIRECTORS
RETAINER
Recognition has a policy of paying outside directors an annual retainer of
$31,500, payable quarterly in arrears, in lieu of all meeting fees and monthly
retainers.
RESTRICTED STOCK PLAN
Recognition has a plan providing for the grant of restricted stock to
outside directors as an additional retainer. The plan was adopted by resolution
of the Board of Directors on September 24, 1987, as amended by resolutions
adopted on November 8, 1990, January 24, 1991, May 30, 1991 and November 1,
1991. Each outside director as of November 1990 originally was granted 2,500
shares of Recognition Common Stock, subject to restrictions. At the time of
issuance of the shares, the director received full voting and dividend rights,
but the stock was non-transferable and subject to forfeiture. On each
anniversary of the date of grant, twenty percent or 500 of those shares become
nonforfeitable and transferable. However, if a director ceases for any reason to
be an outside director prior to the end of the fifth year after grant of the
shares, any shares still subject to forfeiture will revert to Recognition.
Effective November 1, 1991, an additional 2,500 shares of Recognition
Common Stock were granted to each incumbent outside director under the plan.
Twenty percent or 500 of those shares immediately vested and are transferable
and an additional twenty percent vest on each anniversary of the date of grant
for the next four years, so long as the director continues to be an outside
director. Outside directors first elected after November 1, 1991, are
automatically granted 5,000 shares upon election, which shares vest twenty
percent on the date of grant and twenty percent on each anniversary of the date
of grant for a period of four years.
The shares granted under the plan are drawn from the Common Stock held in
Recognition's treasury, and the maximum number of shares that may be granted
pursuant to the plan is 75,000 shares. All shares granted pursuant to the plan
will become nonforfeitable and transferable upon the occurrence of a "change in
control" as defined in the plan.
STOCK OPTION PLAN
The Director Stock Option Plan was adopted by the Board of Directors on
December 10, 1992, and approved by the stockholders on March 11, 1993. Under the
terms of the plan, each outside director automatically receives a one-time grant
of a non-qualified option to purchase 15,000 shares of Common Stock.
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<PAGE> 10
The exercise price per share is the closing price of the Common Stock on the
date of grant as reported on the New York Stock Exchange Composite Tape.
Each option granted under the plan becomes exercisable in five cumulative
annual installments, each of twenty percent of the number of shares covered,
beginning on the date of grant. In the event of a "change of control" as defined
in the plan, all previously granted options become fully exercisable.
A total of 105,000 shares of Recognition's Common Stock (subject to
adjustment in certain events) are reserved for issuance under the plan. The plan
terminates on December 10, 2002 if not sooner terminated by the Board.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding all executive
officers of Recognition as of January 12, 1994:
<TABLE>
<CAPTION>
SERVED AS AN
NAME AGE OFFICE/POSITION OFFICER SINCE
---- --- --------------- -------------
<S> <C> <C> <C>
Robert Vanourek 51 President and Chief Executive October 16, 1989
Officer; Director
James M. Bethmann 39 Vice President; President, November 8, 1990
International Systems Division
Dennis R. Constantine 52 Vice President; President, September 30, 1993
Systems Division
Thomas R. Frederick 37 Vice President; President, April 19, 1990
Software Division
Thomas E. Hoefert 41 Vice President and Controller January 9, 1990
Larry H. Lattig 46 Vice President and Treasurer April 30, 1992
Thomas A. Loose 61 Senior Vice President and General March 1, 1972
Counsel; Director
Carol S. Lyon 45 Vice President, Secretary and February 16, 1990
Associate General Counsel
Thomas D. Neitze1 50 Vice President; President, June 1, 1990
Service Division
Robert M. Swartz 41 Senior Vice President and Chief November 8, 1990
Financial Officer
Fredric E. Zucker 53 Senior Vice President and Chief March 30, 1992
Technology Officer
</TABLE>
Each officer serves until a successor has been chosen or until the
officer's earlier resignation or removal. There is no family relationship among
any of the above executive officers or the directors of Recognition. Summaries
of the employment histories of Messrs. Vanourek and Loose appear above under the
heading "Election of Directors -- Continuing Directors in Class III". Officers
Bethmann, Hoefert, Lattig, Lyon and Neitzel have been employed by Recognition
and/or its subsidiaries for more than five years. The following is a description
of the business experience of the other executives:
Dennis R. Constantine joined Recognition in March 1992 as Executive Vice
President of the Systems Division and in July 1993 he was named President of the
Systems Division. In September 1993, Mr. Constantine was also elected a Vice
President of Recognition. Mr. Constantine was President of Lundy Financial
Systems ("Lundy"), Charlotte, NC, from 1990 until Recognition acquired Lundy's
assets in March 1992. Lundy, a Division of TransTechnology Corporation, was a
manufacturer of banking and remittance processing equipment. From 1987 to 1990,
Mr. Constantine was President of TransTechnology's Federal Laboratories
Division, a developer and manufacturer of law enforcement products.
8
<PAGE> 11
Thomas R. Frederick joined Recognition in August 1989 as Vice President of
sales and marketing of its subsidiary Plexus Software, Inc. He was elected a
Vice President of Recognition in April 1990. In January 1992, Mr. Frederick
became President of the Software Division, responsible for the development,
marketing, sale and support of the company's Plexus(R) software products. His
prior responsibilities included strategic development and marketing. Mr.
Frederick was employed by Plexus Computers, Inc. when Recognition acquired that
company's image processing technology in August 1989. He joined that company in
1986 as Senior Director of Strategic Marketing, and later served as Vice
President of Sales and Marketing.
Robert M. Swartz came to Recognition in October 1990, and in November 1990
was elected Vice President, Chief Financial Officer and Treasurer. He was named
a Senior Vice President and Chief Financial Officer in December 1992. In
addition, Mr. Swartz has responsibility for the Human Resources function. Prior
to joining Recognition, Mr. Swartz was employed by Nashua Corporation of Nashua,
NH, a supplier of office supplies and computer products, as Corporate
Controller/Chief Accounting Officer from 1985 to 1988 and was General Manager of
its Graphic Products Division from 1988 to 1990.
Fredric E. Zucker joined Recognition in March 1992 as Vice President and
President of the Systems Division after serving as a consultant to Recognition
in connection with the acquisition of assets of Lundy. In July 1993, he became
Recognition's Chief Technology Officer and was elected a Senior Vice President
in September 1993. From 1988 through 1991 Mr. Zucker was President and Chief
Operating Officer of Adept Technology Inc., a robotics and factory automation
company in San Jose, CA. Prior thereto, he was Vice President and General
Manager of the Network Systems Division of Convergent Technologies Inc., a
computer company in San Jose.
EXECUTIVE COMPENSATION
The following table sets forth cash and certain other compensation paid or
accrued by Recognition and its subsidiaries for Recognition's chief executive
officer and its four other most highly compensated executive officers
(collectively, the "Named Executives") for services in all capacities for the
last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)
------------------ ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek 1993 $ 304,838 $194,250 * -0- $ 10,292
President, Chief Executive 1992 $ 265,000 $210,000 * -0- *
Officer and Director 1991 $ 250,000 $130,500 * -0- *
Thomas R. Frederick 1993 $ 194,836 $111,000 * 100,000 $ 8,528
Vice President and President, 1992 $ 170,000 $126,000 * -0- *
Software Division 1991 $ 140,000 $ 99,889 * 50,000 *
Thomas A. Loose 1993 $ 184,836 $ 88,800 * -0- $ 11,185
Senior Vice President, 1992 $ 180,000 $105,000 * -0- *
General Counsel and Director 1991 $ 175,000 $ 65,250 * 12,525 *
Robert M. Swartz 1993 $ 194,836 $ 99,900 * 100,000 $ 8,583
Senior Vice President 1992 $ 169,167 $ 98,000 * -0- *
and Chief Financial Officer 1991 $ 146,835 $ 52,200 * 125,000 *
Fredric E. Zucker(1) 1993 $ 194,835 $ 99,900 $ 34,070(2) 50,000 $ 8,926
Senior Vice President, 1992 $ 103,429 $ 61,250 * 100,000 *
President, Systems Division, 1991 -0- -0- * -0- *
and Chief Technology Officer
(footnotes on following page)
</TABLE>
9
<PAGE> 12
- ---------------
* Other Annual Compensation and All Other Compensation amounts are not
required to be reported for fiscal years 1991 and 1992. Perquisites and
other personal benefit amounts are not required to be reported in Other
Annual Compensation for fiscal year 1993 if not exceeding the lesser of
$50,000 or 10% of the executive's annual salary plus bonus.
(1) Mr. Zucker joined Recognition on March 30, 1992.
(2) Represents $21,903 for reimbursement of relocation expenses and $12,167 for
reimbursement of taxes on relocation expense reimbursement.
The following table sets forth information concerning individual grants of
stock options made during the last completed fiscal year to each of the Named
Executives. No stock appreciation rights were granted to the Named Executives
during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------
NAME (#)(2) YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------- ---------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek -0- -- -- -- -- --
Thomas R. Frederick 100,000 14.7% $13.38 3/10/03 $841,461 $2,132,427
Thomas A. Loose -0- -- -- -- -- --
Robert M. Swartz 100,000 14.7% $13.38 3/10/03 $841,461 $2,132,427
Fredric E. Zucker 50,000 7.3% $13.38 3/10/03 $420,731 $1,066,214
</TABLE>
- ---------------
(1) These amounts represent assumed rates of appreciation in market value from
the date of grant until the end of the option term at the rates set by the
SEC and therefore are not intended to forecast possible future appreciation,
if any, in Recognition's stock price. Recognition did not use an alternative
formula for a grant date valuation, as it is not aware of any formula which
will determine with reasonable accuracy a present value based on future
unknown or volatile factors.
(2) All options were granted on March 11, 1993, under Recognition's 1990
Corporate Incentive Plan. Such options become exercisable as follows: (i)
with respect to 10% of the total number of shares subject to the option if,
after Recognition's annual earnings release for fiscal year 1994, the
"Average Price" (as defined below) of Recognition's Common Stock is at least
$20.00 per share; (ii) with respect to 20% of the total number of shares
subject to the option if, after Recognition's annual earnings release for
fiscal year 1995, the Average Price of the Common Stock is at least $25.00
per share; (iii) with respect to 30% of the total number of shares subject
to the option if, after Recognition's annual earnings release for fiscal
year 1996, the Average Price of the Common Stock is at least $30.00 per
share; and (iv) with respect to the remaining 40% of the total number of
shares subject to the option on December 5, 1997; provided, however, that
any shares which do not become exercisable in any year because the Average
Price target for that year was not met shall become exercisable in any
subsequent year in which the Average Price target for such subsequent year
is met; and provided further that all shares not previously exercisable
shall become exercisable on December 5, 1997. The term "Average Price" means
the weighted average of the closing prices at which the first 200,000 shares
of Recognition's Common Stock are traded, as reported on the New York Stock
Exchange Composite Tape, beginning with the first such trade on the trading
day immediately following Recognition's annual earnings release. For
purposes of clauses (i), (ii) and (iii) above, the date of exercisability
will be the date Recognition determines the applicable Average Price target
has been met. No stock appreciation rights were granted.
10
<PAGE> 13
The following table sets forth information concerning each exercise of
stock options during the last completed fiscal year by each Named Executive and
the aggregate fiscal year-end value of unexercised options held by each Named
Executive.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FY-END (#) AT FY-END ($)(2)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek -0- -0- 500,000 -0- $5,500,000 -0-
Thomas R. Frederick 25,000 $240,500 72,333 127,667 $ 768,113 $ 689,037
Thomas A. Loose 25,000 $250,700 99,580 25,420 $ 997,105 $ 272,630
Robert M. Swartz 25,000 $270,700 56,667 143,333 $ 672,637 $ 877,663
Fredric E. Zucker 30,000 $153,900 3,333 116,667 $ 20,831 $ 597,669
</TABLE>
- ---------------
(1) Value Realized reflects the market value of the shares exercised on the date
of exercise, minus the exercise price.
(2) All unexercised options held by the Named Executives are in-the-money. Value
reflects the $17.00 per share market value of the underlying shares on
October 31, 1993, minus the exercise price.
DEFINED BENEFIT PLAN
Recognition has an Executive Benefit Plan under which benefits may be paid
to certain executive officers and their designated beneficiaries. The
participants in the plan are selected from time to time by the Compensation
Committee of the Board of Directors. The plan provides for the payment of
benefits upon death, retirement at age 65, or retirement after age 55 but prior
to reaching age 65. In case of retirement, a participating executive must have
been an employee of Recognition for at least five years. The benefit payment is
a monthly amount which is designated for each participant from time to time by
the Committee. The monthly benefit amount currently in effect for Mr. Vanourek
is $16,500, which approximates 50% of his annual salary plus bonus at the time
his participation commenced in 1989. Mr. Loose's monthly benefit is $10,625,
which approximates 50% of his annual salary plus bonus in 1992. The monthly
benefit for Messrs. Frederick and Swartz is an amount equal to 40% of the sum of
(i) the executive's monthly base salary in effect at the date of retirement,
death or other termination of employment plus (ii) one twelfth of his targeted
bonus in effect at such date. Mr. Zucker is not a participant in the plan.
Upon death or retirement at age 65, a participant or the beneficiary
receives the designated monthly benefit for 20 years. If a participant satisfies
certain restrictions on early retirement, the participant becomes entitled to
receive for 20 years a reduced monthly benefit based upon the ratio of the
number of years the participant was employed to the number of years the
participant would have been employed had the participant remained an employee
until age 65. Following any other termination of employment without cause, a
participant or the beneficiary becomes entitled to receive, upon attaining the
age of 65 or earlier death, a percentage of the monthly benefit based upon the
following table:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS OF PLAN SERVICE CREDIT OF BENEFIT
------------------------------------------------------------------ ----------
<S> <C>
less than 3 years................................................. 0%
3 years but less than 5 years..................................... 25%
5 years but less than 7 years..................................... 50%
7 years but less than 10 years.................................... 75%
10 years or more.................................................. 100%
</TABLE>
Mr. Vanourek has four years of service credit in the plan, while Mr. Loose
has more than ten years of credit. Messrs. Frederick and Swartz each have three
years of service credit. If each of these executives were to continue as an
employee of Recognition until retirement at age 65, assuming no increase in
their respective
11
<PAGE> 14
monthly benefit amounts, their estimated annual benefits payable under the plan
would be $198,000 to Mr. Vanourek, $127,500 to Mr. Loose, $140,000 to Mr.
Frederick and $140,000 to Mr. Swartz.
The plan also provides for monthly disability payments in an amount
designated by the Committee if a participant is disabled for a period in excess
of six months. So long as the participant remains disabled, the participant is
entitled to receive a designated monthly disability payment until the
participant reaches age 65 or earlier death, at which time the participant or
beneficiary becomes entitled to receive the benefit payment for the 20-year
period. Monthly disability amounts currently in effect are $5,000 for Mr.
Vanourek and $3,362 for each of Messrs. Loose, Frederick and Swartz.
Except after the occurrence of an "Event of Nonforfeitability" (as defined
in the plan), the plan may be terminated by the Board of Directors at any time,
in its absolute discretion. Any such termination would terminate all rights of
the participants except as to participants and beneficiaries of participants who
are being paid or have become entitled to benefits under the plan at the time of
such termination. In addition, the Committee may, at any time in its absolute
discretion, terminate the participation of any executive who is still an
employee; provided that the Committee may not terminate such participation after
an Event of Nonforfeitability occurs.
In December 1992, the Board of Directors amended the plan in several
respects. The definition of "Event of Nonforfeitability" was changed to include
significant changes in stock ownership or Board membership, and certain
corporate reorganizations. Upon the occurrence of an Event of Nonforfeitability,
each participant's designated benefit becomes 100% vested. If a participant's
employment is terminated within 24 months following the occurrence of an Event
of Nonforfeitability for any reason other than death, for cause (as defined in
the plan), disability or voluntary resignation (as defined in the plan), the
participant becomes entitled to receive the present value of the benefit paid in
a lump sum. If a participant or a beneficiary suffers a financial hardship and
is in need of funds to pay taxes or medical expenses and does not have other
resources to meet such needs, the Committee may in its discretion pay in a lump
sum up to 50% of the amount of the participant's or beneficiary's benefit to
meet such needs.
Benefits under the plan are payable from the general assets of Recognition
and are not subject to any offset amount. Recognition has insured a portion of
its liability by purchasing insurance contracts on the participating executives.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE
The compensation program for executive officers of Recognition is
administered by the Compensation Committee of the Board of Directors, which is
comprised of at least three directors who are not employees of Recognition. The
responsibilities of the Compensation Committee include (i) conducting periodic
reviews of all direct and indirect compensation and other benefits for
Recognition's executive officers, (ii) establishing annual cash compensation for
the executive officers, and (iii) administering various compensation plans for
Recognition's executive officers and key employees including the grant of stock
options under employee option plans.
COMPENSATION PHILOSOPHY
Environment. Recognition operates in a dynamic and challenging industry
sector. Recognition competes in the computer/information technology/electronics
industry as a high technology company. This industry is regarded as one of the
most demanding and one in which consistent success is difficult to achieve.
Technology and distribution methods are constantly changing. Competition is
global both from companies many times Recognition's size and from much smaller
and entrepreneurial companies. Executive mobility is high within the industry.
In addition, Recognition is emerging from a turnaround situation.
12
<PAGE> 15
Expectations. Given this environment, the expectations for performance of
Recognition's executive officers are high. Individuals are expected to be
outstanding performers in their areas of responsibility and their workload is
demanding. Yet a premium is placed on team and corporate performance as well as
superior individual performance. Significant contribution is expected from each
officer in advancing the cultural transformation and evolution of the company
through active use and encouragement of the company's shared beliefs and values.
Compensation Policies. Recognition's compensation policies for all
employees, including its executive officers, are designed to attract and retain
highly qualified contributors and to reward excellence while encouraging
teamwork and long term commitment to the company. Perquisites are minimal, with
no company paid clubs, first class travel, or financial planning services
provided for executives. Given minimal perquisites, the high risk, challenging
environment, complex mandate and demanding individual/team workload, total
compensation for successful executive officers who meet the performance
standards should be in the 60th to 90th percentile range of peer companies,
including very significant equity incentives to link officer performance to
stockholder value and wealth creation.
At the beginning of each fiscal year, the Compensation Committee reviews
benchmark data on total compensation packages of executives at competitive
hardware and software companies in the electronics and computer industries and
reviews recommendations from the chief executive officer for base salaries and
targeted bonuses for executive officers (other than the chief executive
officer). The Committee then approves base salaries and targeted bonuses for all
executive officers (including the chief executive officer) for the ensuing year,
based on such competitive information and recommendations as well as each
individual's overall compensation package, evaluation of the individual's past
and expected future performance and the level of the individual's
responsibility. Executives with higher levels of responsibility generally have a
greater percentage of cash compensation tied to company performance.
For fiscal year 1993, the total cash compensation (base salary plus
targeted bonus) for executive officers as a group was targeted to be at the 60th
percentile of the comparison industry group. Targeted bonus for fiscal year 1993
was 37% of total cash compensation for the chief executive officer and ranged
from 31% to 34% of the total cash compensation package for the other four Named
Executives.
Bonuses are earned based on the level of achievement of performance goals
established for each fiscal year by the Committee. For fiscal year 1993 and the
two preceding fiscal years, 25% of the bonus was allocated to achievement of
each of the objective performance goals established by the Committee for (i) net
income, (ii) orders, (iii) cash balance and (iv) new product milestones. Orders
and new product milestones are viewed as good long-term indicators, while net
income and cash balances are good short-term indicators. In order to encourage
teamwork, the same performance goals are applicable to all executive officers.
For each of the net income, orders and cash balance goals, bonus payouts
can range from a minimum of 50% to a maximum of 150% of the allocated portion of
the targeted bonus if performance is lesser or greater than the established
goal. No bonus is earned for a goal if achievement is below a threshold amount.
The remaining 25% of the targeted bonus is allocated among a number of new
product milestones. The total bonus payout for fiscal year 1993 was 111% of
targeted bonus for each executive officer, including the chief executive
officer.
Retention of its executive officers is one of the highest priorities of
Recognition's compensation philosophy and is addressed through a variety of
methods: stock options which vest over a period of years, stock options which
vest upon achievement of performance goals and Recognition's Executive Benefit
Plan. Stock options constitute a significant portion of compensation for
executive officers, including the chief executive officer, as is the custom in
the industry. The Compensation Committee believes that use of stock options more
closely aligns the officers' interests with those of Recognition's stockholders.
Virtually all stock options are granted at the prevailing market price on the
date of grant and vest in equal amounts over a period of years. Levels of grants
for executive officers range from nominal amounts to multiples of their annual
target compensation levels, depending on the circumstances. Grants of stock
options generally are based upon the level of the executive's position with
Recognition, the amount of options previously granted or currently held
13
<PAGE> 16
by the executive and by other Recognition executives at similar levels of
responsibility, and an evaluation of the executive's ability to contribute to
the success of the company.
CHIEF EXECUTIVE OFFICER COMPENSATION
A base salary of $304,838 and targeted bonus of $175,000 were established
by the Compensation Committee for Mr. Vanourek for fiscal year 1993. This was
based on the survey of competitive compensation data described above, the change
in Mr. Vanourek's position from Co-Chief Executive Officer to Chief Executive
Officer, Mr. Vanourek's overall compensation package and the Compensation
Committee's assessment of his past performance and its expectations as to his
future contributions in leading Recognition. Individual performance criteria
evaluated by the Committee included managerial effectiveness, leadership and
executive development. The 1993 compensation represents a 13% increase in base
salary and a 17% increase in targeted bonus over fiscal year 1992. The actual
bonus paid to Mr. Vanourek for fiscal year 1993 was $194,250 (111% of his
targeted bonus) based on Recognition's achievement of an overall average of 111%
of the 1993 performance goals described above. The Compensation Committee
believes that Mr. Vanourek's base compensation and targeted bonus are still well
below competitive market rates considering the magnitude of his responsibilities
and the levels of performance achieved by Recognition.
COMPENSATION COMMITTEE
WILLIAM H. WALTRIP, Chairman
JAMES F. GERO
WILLIAM C. HITTINGER
GILBERT H. LAMPHERE
A. A. MEITZ
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the total stockholder return on Recognition's
Common Stock during the five years ended October 31, 1993, to the total return
on the Standard & Poor's 500 Stock Index and the Standard and Poor's High
Technology Composite Index, assuming an investment of $100 in each of the above
at their closing prices on October 31, 1988, and assuming reinvestment of all
dividends, if any. The performance shown in the graph is not necessarily
indicative of future performance.
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Recognition International Inc. $100 $84 $63 $94 $161 $216
S&P 500 Stock Index $100 $126 $117 $156 $172 $197
S&P High Tech Composite Index $100 $102 $90 $113 $114 $142
</TABLE>
AGREEMENTS WITH EXECUTIVE OFFICERS
Mr. Vanourek has an employment agreement in which Recognition agreed to
employ him for an unspecified term and agreed to use its best efforts to cause
him to be nominated and elected to the Board of Directors during the term of
employment. Mr. Vanourek is entitled to receive a minimum annual base salary and
to participate in Recognition's Executive Bonus Plan with a minimum annual
targeted bonus, subject to annual review. Under the terms of the agreement,
Recognition has the right to terminate Mr. Vanourek's employment at any time,
with or without cause. However, if employment is terminated by Recognition for
any reason other than cause or disability, or is terminated by Mr. Vanourek
because of a material change in his duties, because of a material breach of the
employment agreement by Recognition or because he has ceased to be a director of
the company, Recognition must pay Mr. Vanourek a lump sum severance payment of
$400,000 or, if greater, the amount of Recognition's usual severance payment
under existing policies, plus all accrued and unpaid salary and bonuses. If Mr.
Vanourek is required to pay an excise tax on any "excess parachute payments" as
defined in Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), Recognition must reimburse a portion of the excise taxes in certain
circumstances.
Mr. Loose has an employment agreement in which Recognition agreed to employ
him in an executive capacity for an unspecified term. The agreement provides
that Mr. Loose is entitled to receive a minimum annual base salary and to
participate in the Executive Bonus Plan with a minimum annual targeted bonus,
subject to annual review. Recognition has the right to terminate his employment
at any time, with or without cause. However, if employment is terminated by
Recognition for any reason other than cause or disability, or is terminated by
Mr. Loose in certain circumstances, then Recognition must pay Mr. Loose a lump
sum severance payment equal to his annual base salary in effect at the time plus
his targeted bonus for the year under the Executive Bonus Plan. Mr. Loose's
current annual base salary is $190,000 and his current targeted
15
<PAGE> 18
bonus is $85,000. Mr. Loose must elect whether to receive benefits under this
employment agreement or his executive continuation agreement described below if
both are applicable in any circumstance.
Mr. Loose also has an executive continuation agreement which provides that,
in the event of termination of his employment with Recognition prior to age 65
(other than for cause, disability, death or voluntary resignation) within 36
months after a "change in control" of Recognition (as defined in the agreement),
he will receive a termination payment of (i) 125% of the product of his monthly
salary rate in effect immediately prior to the change in control multiplied by
the number of months between the date of termination of employment and the end
of the fifth year after such change in control and (ii) his targeted cash bonus
for the fiscal year during which the change in control occurs or, if no bonus
has been targeted for him for such fiscal year, the cash bonus, if any, earned
by him in the last full fiscal year preceding the change in control. The
agreement contains a provision which limits the aggregate termination payment
which may be made to the maximum amount deductible by Recognition pursuant to
Section 280G of the Code which is approximately three times the individual's
average annual compensation for the preceding five calendar years. The agreement
also provides for immediate exercisability of all Mr. Loose's stock options upon
the occurrence of a change in control and permits exercise of all his
non-incentive stock options during a period of seven months after a termination
of employment which occurs within 36 months after a change in control. The
agreement terminates automatically when Mr. Loose reaches age 65 or five years
after a change in control, and may only be terminated by Recognition by
termination of his employment prior to the occurrence of a change in control.
Mr. Swartz has an employment agreement in which Recognition agreed to
employ him in an executive capacity for an unspecified term at a minimum annual
base salary and a minimum annual targeted bonus under the Executive Bonus Plan,
subject to annual review. Recognition has the right to terminate his employment
at any time, with or without cause. However, if employment is terminated by
Recognition without cause, Recognition must pay Mr. Swartz his then current base
salary for the ensuing year. Mr. Swartz's current annual base salary is
$225,000.
Mr. Zucker has an employment agreement in which Recognition agreed to
employ him in an executive capacity until July 31, 1995, at an annual base
salary of $203,600. Recognition has the right to terminate his employment at any
time, with or without cause. However, if employment is terminated by Recognition
without cause, or if Mr. Zucker terminates his employment, Recognition must pay
Mr. Zucker his current base salary for the balance of the term plus certain
relocation expenses.
Recognition has entered into agreements with Messrs. Vanourek, Frederick,
Loose and Swartz and certain other executive officers which provide for the
reduction of the amount of payments and/or benefits otherwise due to each
executive upon termination of employment after a change in control if, under
Section 4999 of the Code, such reduction would result in a greater amount of
payments and/or benefits to the executive, on an after tax basis, than would
have been received without the reduction.
PROPOSAL NO. 2
TO AMEND THE 1990 CORPORATE INCENTIVE PLAN
The 1990 Corporate Incentive Plan (the "Plan") provides for the granting of
incentive stock options, as defined in Section 422 of the Code, non-incentive
stock options, stock appreciation rights ("SARs") and performance awards to key
employees of Recognition and its subsidiaries, including key employees who are
also executive officers and directors, who possess a capacity for contributing
in substantial measure to the successful performance of Recognition. The Plan
was approved by Recognition's stockholders at the annual meeting held on March
14, 1991, and, unless sooner terminated by Recognition's Board of Directors,
will expire by its terms on November 30, 2000. A total of 995,000 shares of
Recognition's Common Stock have been reserved for issuance under the Plan. On
January 12, 1994, a total of 954,284 shares were subject to options outstanding
under the Plan, 34,882 shares had been issued pursuant to exercise of options
granted under the Plan, no SARs or performance awards had been granted, and
there were approximately 5,834 shares remaining available for the grant of
options, SARs and performance awards.
16
<PAGE> 19
The Board of Directors proposes to amend the Plan to increase the number of
shares available for grant of options, SARs and performance awards and to add to
the Plan a limitation on the number of shares with respect to which stock
options and/or SARs may be granted to any individual in any year.
DESCRIPTION OF PLAN
The Plan is administered by the Compensation Committee of the Board of
Directors which is composed entirely of directors who are not employees of
Recognition. The Committee selects all employees who participate in the Plan and
makes all grants under the Plan, determines the terms and provisions of such
grants and the respective individual agreements between Recognition and each
participant (which need not be identical), construes and interprets the Plan and
such agreements, makes rules and regulations in connection with the
administration and operation of the Plan and makes all other determinations
necessary or desirable in administering the Plan. The Committee, in its
discretion, at the time of grant may impose restrictions and risks of forfeiture
upon shares issued under the Plan.
The exercise price of non-incentive stock options under the Plan may not be
less than 50% of the fair market value of the shares optioned on the date of
grant. So long as required by the Code, the exercise price of incentive stock
options under the Plan may not be less than 100% of such fair market value (110%
if the optionee owns more than 10% of the combined voting power of all classes
of Recognition's stock). The exercise price applicable to each option is stated
in the individual option agreement. Virtually all options currently outstanding
under the Plan have an exercise price of 100% of the fair market value of the
optioned shares on the date of grant. The last reported sale price of
Recognition's Common Stock on the New York Stock Exchange on January 14, 1994,
was $14 per share.
Options granted under the Plan must be for a term not exceeding ten years
and become exercisable at such times and in such amounts as determined at the
time of grant by the Compensation Committee. The Compensation Committee may,
after the time of grant, accelerate the exercisability of options previously
granted. All options currently outstanding under the Plan are for a term of ten
years. If any options, SARs or performance awards granted under the Plan expire,
terminate or are canceled or forfeited without having been exercised or paid in
full, the undelivered shares covered thereby will again become available for
delivery under the Plan.
Shares purchased upon exercise of an option must be purchased by delivering
to Recognition at the time of exercise (i) cash in the amount of the exercise
price for all shares purchased or (ii) to the extent permitted by the Committee,
shares of Common Stock (and cash in lieu of fractional shares) having a fair
market value equal to the exercise price for all shares purchased or a
combination of cash and shares equal in value to the exercise price for all
shares purchased.
Two types of SARs may be granted under the Plan with respect to all or some
of the shares covered by an employee stock option, whether or not the option was
granted under the Plan: "additional rights" and "alternative rights." An
additional right provides for the payment to an optionee, on exercise of an
option, of an amount in cash equal to a specified percentage (from 10% to 100%)
of the difference between the option price and the market price of the shares
with respect to which the option is being exercised. An alternative right allows
an optionee, in lieu of exercising an option, to elect to receive cash or Common
Stock (or a combination thereof) equal in value to the difference between the
option price and the market price of the shares as to which the alternative
right is being exercised. Both an additional right and an alternative right may
be granted with respect to the same option, but their exercise is mutually
exclusive. The exercise of an alternative right proportionately reduces the
number of shares covered by the related option and any additional right with
respect to such option, and the exercise of an option (whether or not any
additional rights have been granted with respect thereto) proportionately
reduces the number of shares covered by any related alternative right.
Performance awards may be granted under the Plan in (i) shares of Common
Stock subject to restrictions, (ii) shares of Common Stock not subject to
restrictions, (iii) cash or (iv) any combination of the foregoing. The Committee
may determine the total amount of performance awards to be granted and whether
performance awards shall be paid immediately at the time of grant or deferred
and paid over a period of time
17
<PAGE> 20
designated by the Committee. The aggregate amount of performance awards may not
exceed 5% of the consolidated net income of Recognition for all preceding fiscal
years commencing with fiscal year 1991, computed before provision for income
taxes and before any charge or credit to income by reason of the Plan.
The Plan may be amended, suspended or terminated at any time by the Board
of Directors of Recognition, which may delegate its authority to the Committee.
There is no restriction under the Plan on the maximum or minimum number of
shares of Common Stock which may be covered by options, SARs or performance
awards granted to any person, and additional options, SARs or performance awards
may be granted to persons to whom options, SARs or performance awards have
heretofore been granted. However, with respect to incentive stock options
granted after December 31, 1986, the aggregate fair market value (determined as
of the time the incentive stock option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time by any person
during any calendar year (under all such plans of Recognition and its
subsidiaries) may not exceed $100,000.
FEDERAL INCOME TAX CONSEQUENCES
The grant of options under the Plan will not result in taxable income to
the employee at the time of the grant, and Recognition will not be entitled to a
deduction at that time. Upon exercise of a non-incentive stock option, an
optionee generally will realize taxable ordinary income in an amount equal to
the excess of the fair market value of the shares acquired at the date of
exercise over the exercise price for those shares, and Recognition will be
entitled to a corresponding deduction.
The exercise of an incentive stock option generally will not result in
taxable income to the optionee, nor will Recognition be entitled to a deduction
at that time, if the shares acquired in such exercise are held for (i) two years
from the date of grant of such option and (ii) one year from the date of its
exercise. Generally, if the optionee does not dispose of the stock during the
applicable holding period, then, upon disposition of such shares, any amount
realized in excess of the exercise price will be taxed to the optionee as
capital gain, and Recognition will not be entitled to any deduction for federal
income tax purposes. If the shares are disposed of before the holding period
requirements are met, the optionee will generally realize taxable ordinary
income, and a corresponding deduction will be allowed to Recognition, at the
time of the disposition of the shares, in an amount equal to the lesser of (i)
the excess of the fair market value of the shares on the date of exercise over
the exercise price, or (ii) the excess, if any, of the amount realized upon
disposition of the shares over the exercise price.
The amount of cash or fair market value of shares received upon exercise of
SARs or in payment of performance awards will be taxable to the employee as
ordinary income, and Recognition will be entitled to a corresponding deduction.
At the discretion of the Committee, shares issued under the Plan may be
non-transferable and subject to a substantial risk of forfeiture. Shares
acquired by individuals who are subject to Section 16(b) of the Securities
Exchange Act of 1934 are subject to a substantial risk of forfeiture and not
transferable free of such risk so long as a sale of such shares could subject
the individual to legal consequences under Section 16(b). If the shares received
upon exercise of a stock option are subject to a substantial risk of forfeiture
and cannot be transferred free of such risk, taxation with respect to the shares
will be deferred until the first taxable year when the shares are no longer
subject to a substantial risk of forfeiture or, if earlier, the first taxable
year when the shares become transferable free of such risk. The measure of the
income realized at that time, and Recognition's corresponding deduction, is the
then value of the shares (in the case of options, in excess of the option
price). However, the recipient of non-transferable shares subject to such a risk
may, if desired, elect to disregard the risk of forfeiture and include the
shares as income at the time of receipt at their then value.
All taxable income recognized by an employee under the Plan is subject to
applicable tax withholding. Special tax rules and elections apply under certain
circumstances which may affect the timing and the measurement of income
recognized in connection with stock options and which may affect the calculation
of an employee's alternative minimum tax.
18
<PAGE> 21
PROPOSED AMENDMENT
Recognition's Board of Directors and the Executive Committee of the Board
have adopted resolutions which, subject to the approval by the stockholders at
the Annual Meeting, amend the Plan (i) to increase by 745,000 the number of
shares of Recognition Common Stock reserved for issuance thereunder and (ii) to
limit to 500,000 the number of shares of Common Stock with respect to which
stock options and/or SARs may be granted in any fiscal year to Recognition's
chief executive officer and to limit to 250,000 the number of shares of Common
Stock with respect to which stock options and/or SARs may be granted in any
fiscal year to any other person.
In the opinion of management, the ability to make stock available to key
employees under the Plan is essential to attracting, retaining and motivating
such employees and provides an expedient and desirable method of meeting
increasingly vigorous competition for competent personnel. Stock options, in
particular, and, to the extent issuable in shares, SARs and performance awards,
enable Recognition to offer an incentive, a proprietary interest in Recognition
and meaningful compensation without an outlay of cash.
There is currently no restriction under the Plan on the maximum number of
shares of Common Stock with respect to which options or SARs may be granted to
any person. The proposed amendment to add such a limit is intended to preserve
Recognition's ability to deduct, for U.S. income tax purposes, compensation
recognized by optionees upon exercise of non-incentive options, disqualifying
dispositions of incentive stock options and exercise of SARs. Section 162(m) of
the Code, adopted in August 1993 and effective for Recognition's fiscal year
beginning November 1, 1994, provides a $1 million limit on deductible
compensation paid to certain executives. Compensation from SARs and from stock
options granted with an exercise price no less than fair market value is not
subject to the $1 million limit on deductibility if the Plan meets certain
requirements, including the requirement that the Plan state the maximum number
of options or SARs that may be granted to any one employee and that the specific
terms of the Plan have been approved by the stockholders.
The amendment will result in no other change to the Plan, nor will it
result in any change, alteration or extension of any options presently
outstanding under the Plan. The amendment will become effective upon approval by
Recognition's stockholders, but will not necessarily result immediately in the
grant of additional options or the grant of SARs or performance awards. The
Compensation Committee has under consideration the grant to Mr. Vanourek of
stock options covering a substantial number of shares. However, the Committee
has made no determination as to the number, terms or timing of the grant, if
any, of options, SARs or performance awards to Mr. Vanourek or any other person.
Stockholder approval of the proposed amendment is not required by the
corporate laws governing Recognition. However, stockholder approval of an
increase in the number of shares available under the Plan is required by the
terms of the Plan and by the rules of the New York Stock Exchange, Inc. as a
condition for listing the additional shares which may be issued on the exercise
of options or SARs or the payment of awards. Stockholder approval is also
required in order for options to be qualified for treatment as incentive stock
options under the Code and is currently one of the conditions of obtaining the
exemptions provided by Rule 16b-3 of the Securities and Exchange Commission from
the operation of the "short swing profit" recovery provisions of Section 16(b)
of the Securities Exchange Act of 1934 with respect to options, SARs and awards
granted under the Plan to directors and executive officers of Recognition. In
addition, stockholder approval of the amendment is required by proposed
regulations issued by the Treasury Department under Section 162(m) of the Code
in order to preserve Recognition's ability to deduct, for U.S. income tax
purposes, compensation recognized by optionees from stock options and SARs
granted under the Plan after the amendment is effective.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL NO.
2 TO AMEND THE 1990 CORPORATE INCENTIVE PLAN. THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE SHARES OF RECOGNITION COMMON STOCK PRESENT OR
REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK IS VOTED ON PROPOSAL NO. 2, IS NECESSARY
FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE 1990 CORPORATE INCENTIVE PLAN.
ABSTENTIONS WITH RESPECT TO PROPOSAL NO. 2 BY SHARES REPRESENTED IN PERSON OR BY
PROXY AT THE ANNUAL MEETING WILL HAVE THE EFFECT OF BEING SUBSTANTIALLY
EQUIVALENT TO VOTES AGAINST THE PROPOSAL BECAUSE A MINIMUM NUMBER OF FAVORABLE
VOTES, BASED UPON THE NUMBER OF
19
<PAGE> 22
SHARES HELD BY PERSONS PRESENT OR REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL
MEETING, IS REQUIRED FOR APPROVAL AND SUCH SHARES WILL BE CONSIDERED AS ENTITLED
TO VOTE ON THE PROPOSAL. BROKER NON-VOTES (WHEN A BROKER HOLDING SHARES FOR
CLIENTS IN STREET NAME IS NOT PERMITTED TO VOTE ON CERTAIN MATTERS WITHOUT THE
CLIENTS' INSTRUCTIONS) WILL NOT AFFECT THE OUTCOME OF THE VOTE ON PROPOSAL NO.
2. SUCH SHARES ARE NOT CONSIDERED TO BE "ENTITLED TO VOTE" ON THAT MATTER AND
THEREFORE ARE NOT COUNTED IN DETERMINING THE NUMBER OF VOTES ELIGIBLE TO BE CAST
ON THE PROPOSAL.
OTHER MATTERS
STOCKHOLDER PROPOSALS
The By-Laws of Recognition require stockholders who wish to make proposals
or nominate directors at an annual meeting to give written notice to the
Secretary of Recognition at the principal executive offices not less than 50
days nor more than 75 days prior to the meeting or, if Recognition gives less
than 60 days notice of the date of the meeting, then not later than the 15th day
after the notice of the date of the meeting was given. Accordingly, in order to
be considered at the Annual Meeting, stockholder proposals or nominations for
directors must be received by February 8, 1994.
In order for stockholder proposals to be included in Recognition's proxy
statement and form of proxy relating to the annual meeting of stockholders to be
held in 1995, such proposals must be received by Recognition by September 26,
1994. Any such proposal must also comply with the requirements of the SEC's
proxy solicitation rules.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4, and amendments thereto furnished
to Recognition during the fiscal year ended October 31, 1993, and Forms 5 and
amendments thereto furnished to Recognition with respect to such fiscal year and
written representations that no Forms 5 were required, Recognition believes that
all reports required by Section 16(a) of the Securities Exchange Act of 1934
applicable to its directors, executive officers and greater than ten percent
stockholders were timely filed in such fiscal year and prior fiscal years except
that executive officer Thomas D. Neitzel filed a Form 4 on November 10, 1993,
which contained a clerical error in the number of stock options exercised by him
the previous month. Mr. Neitzel filed an amended Form 4 on November 19, 1993,
which corrected the error.
MANNER OF SOLICITATION
All costs relating to this proxy statement, the form of proxy and the
Annual Meeting will be borne by Recognition. Recognition will request banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to
forward solicitation material to the beneficial owners of Common Stock held of
record by such persons and will reimburse the reasonable forwarding expense
incurred by such record owners. Solicitations of proxies may be made in person
or by mail, telephone, telegram, facsimile or otherwise by directors, officers
and regular employees of Recognition who will receive no additional compensation
for such service. To assist in the solicitation of proxies, Recognition has
retained Corporate Investor Communications, Inc., 111 Commerce Road, Carlstadt,
New Jersey 07072, at an estimated fee of $5,000 plus reimbursement of expenses
and disbursements.
INDEPENDENT ACCOUNTANTS
Recognition has selected Price Waterhouse as the independent accountants to
audit Recognition's financial statements for the fiscal year ending October 31,
1994. Price Waterhouse has continuously served as the independent accountants of
Recognition since its organization. Recognition has been advised that
representatives of Price Waterhouse will be present at the Annual Meeting and
available during the Annual Meeting to respond to appropriate questions. Such
representatives will have an opportunity to make a statement at the Annual
Meeting if they desire to do so.
20
<PAGE> 23
MISCELLANEOUS
Management knows of no matters to be presented for consideration at the
meeting other than the matters referred to in Proposal Nos. 1 and 2. If,
however, other matters properly come before the meeting or any adjournment(s)
thereof, it is intended that the persons acting under the enclosed proxy will
vote such proxy in accordance with their judgment on any such matters. The
persons acting under the enclosed proxy may, if it is deemed advisable, vote
such proxy to adjourn the meeting from time to time.
By Order of the Board of Directors
CAROL S. LYON,
Vice President and Secretary
Dallas, Texas
January 24, 1994
21
<PAGE> 24
RECOGNITION INTERNATIONAL INC.
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 3, 1994
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert Vanourek and Thomas A. Loose, and
each of them, as Proxies, each with the power to appoint his substitute and to
revoke such appointment, and hereby authorizes each of them, for and in the
name, place and stead of the undersigned, to represent and to vote (acting by
majority or, if only one be present, then by that one alone) all the shares of
Common Stock of Recognition International Inc. held of record by the undersigned
on January 12, 1994 at the annual meeting of stockholders to be held March 3,
1994, or any adjournment(s) thereof, and especially to vote as designated on the
reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted for the election of all of the nominees listed in Proposal No. 1 and
for Proposal No. 2. Shares authorized hereby to be voted in the election of
directors may, in the discretion of the Proxies, be voted cumulatively.
SEE REVERSE SIDE
/X/ Please mark votes as in this example.
1. ELECTION OF DIRECTORS:
Nominees: LUCIE J. FJELDSTAD, WILLIAM C. HITTINGER and A. A. MEITZ
FOR / / WITHHELD / /
/ /___________________
For all nominees except as noted above
2. PROPOSAL TO AMEND THE 1990 CORPORATE INCENTIVE PLAN.
FOR / / AGAINST / / ABSTAIN / /
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S)
THEREOF.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
Signature: Date Signature: Date
<PAGE> 25
APPENDIX
1990 CORPORATE INCENTIVE PLAN
As Proposed to Be Amended and Restated
Effective March 3, 1994
The purposes of this 1990 Corporate Incentive Plan (the "Plan") are to
provide an incentive for key employees of Recognition Equipment Incorporated
(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.
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<PAGE> 26
(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
A-2
<PAGE> 27
respect to which such Right is being exercised, and (ii) with respect
to the exercise of 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.
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<PAGE> 28
Section 1.3 SHARES AVAILABLE. The Board of Directors shall reserve
for the purposes 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
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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 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
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installments, accelerating the dates on which all or any portion of any or all
of such installments were initially to have become exercisable.
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%.
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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:
(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
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(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 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
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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 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
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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.
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,
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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 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
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unexercised portion of the Related Option shall be deemed cancelled
and terminated as of the effective date of such transaction.
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
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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.
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