<PAGE> 1
_______________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
COMMISSION FILE NUMBER 1-7916
RECOGNITION INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 75-1080346
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2701 EAST GRAUWYLER ROAD, IRVING, TEXAS 75061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 579-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
COMMON STOCK, PAR VALUE $.25 PER SHARE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 20, 1995 was $120,977,872.
At January 20, 1995, the Registrant had outstanding 15,244,406 shares of
its Common Stock, par value $.25 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the fiscal year
ended October 31, 1994 are incorporated by reference into Parts I and II.
Portions of Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on March 9, 1995 are incorporated by reference into
Part III.
_______________________________________________________________________________
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PART I
ITEM 1. BUSINESS.
GENERAL
Recognition International Inc. ("Recognition") is a Delaware corporation
organized on March 5, 1962. Recognition designs, manufactures, markets and
provides services for electronic document processing solutions. The foregoing
business is reported as one segment. Except where the context otherwise
requires, the term "Recognition" as used in this report includes Recognition
International Inc. and its subsidiaries.
Recognition(R) products are marketed to organizations which manage and
process substantial amounts of paper-based information, including financial and
insurance services companies, utilities and government agencies.
Pursuant to its mission to be a major open systems supplier of electronic
document processing solutions, Recognition divested assets and businesses in
1990 and 1991 which were not strategic to its mission, and invested in new
products. In addition to the internal development of products, Recognition has
made a number of acquisitions to expand its product offerings. In 1989,
Recognition purchased certain assets of Plexus Computers, Inc. and began
marketing image processing software. In 1991, Recognition purchased all of the
outstanding stock of Hybrid Systems Inc., a manufacturer of document processing
systems. In 1992, Recognition purchased certain assets of the Lundy Financial
Systems Division of TransTechnology Corporation, a manufacturer of document
processing systems.
Recognition operates its business through several strategic business units:
the Worldwide Systems Group (comprised of the OEM & Technology Division, the
Solutions Division, the International Solutions Division and the Service
Division); and the Software Division.
OEM & TECHNOLOGY DIVISION
The OEM & Technology Division develops and manufactures equipment and
software products designed to automate the input of data from paper documents
for processing in centralized and distributed environments. These products
utilize Recognition's core technical competencies which include magnetic ink
character recognition ("MICR"), optical character recognition ("OCR"), image
character recognition ("ICR"), high-speed paper handling, image capture and
local area networking. Data from the paper documents is translated into a
computer processable form using
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MICR, a process of reading magnetic ink characters on a document, OCR, a
process of optically reading machine- and/or hand-printed characters from
documents, or ICR, a process of reading machine- and/or hand-printed characters
from images of documents. Imaging permits users to capture, store and process
the picture form of documents and is available with most of the Division's
transport products.
The Division's products are marketed as integrated systems or as component
subsystems of other vendors' document processing systems. The products are
marketed by the Division through agents, OEMs and resellers, by the Solutions
Division to customers in the U.S. and by the International Solutions Division
to distributors and end-users outside of the U.S. These products include item
processing, page processing and data entry products.
Item Processing Products. Item processing products are used for banking
applications, remittance applications and various other document processing
applications. The item processing transports operate at speeds of 250 to 2,400
documents per minute. These products are used for processing various documents,
including checks, credit card sales drafts, airline tickets, proxy cards and
remittance documents such as credit card bills, utility bills and insurance
premiums. The Division's high-speed power encoder product is used to automate
the encoding of the dollar amount field on the bottom of checks for processing
by banks and in remittance applications.
Page Processing and Data Entry Products. Page processing and data entry
products are used by federal, state and local governments, health insurance
organizations and commercial entities which input data and/or capture images
from a large volume of documents. Page reading systems capture machine- and
hand-printed data from documents.
SOLUTIONS DIVISION
The Solutions Division was formed in 1994 to take advantage of
Recognition's application expertise in order to develop and market complete
system solutions for forms processing, remittance and payment processing and
document management processing. In developing these solutions, the Division
integrates equipment, application software and professional services provided
by the Division, other Recognition divisions and/or third parties.
INTERNATIONAL SOLUTIONS DIVISION
The International Solutions Division markets products to the international
marketplace through Recognition's wholly-owned subsidiaries and a network of
resellers and distributors. The Division sells products which are produced by
other Recognition divisions and products supplied by other vendors. The
Division also markets PC-based wide and local area network products purchased
from various vendors and integrated for use by government agencies and
commercial customers. Such network products are primarily marketed by
Recognition's Canadian subsidiary. In addition, the Division markets equipment
and software maintenance and support services similar to those provided by the
Service Division.
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SERVICE DIVISION
The Service Division provides equipment and software maintenance and
support services in the U.S. on an on-site, on-call and return-to-factory
basis. These services are provided for Recognition's products and other
manufacturers' electro-mechanical equipment, such as item processing transports
and high-speed laser printers. The Division utilizes a network of approximately
500 customer service field technicians throughout the U.S., systems for
inventorying and distributing parts, and a communication and dispatch system
accessible to customers 365 days a year, 24 hours per day. On-call and on-site
service and telephone assistance are performed under contracts with customers
at fixed periodic charges. Factory return service is billed on a per-occurrence
basis or at a fixed periodic charge. The Division also provides telephone
support services, contract programming services, software updates and training
for equipment and software products.
Recognition's equipment and software related customer service revenues from
all of its divisions represented 58 percent of Recognition's total revenues for
fiscal year 1994, 50 percent for fiscal year 1993 and 54 percent for fiscal
year 1992.
SOFTWARE DIVISION
The Software Division develops and markets Plexus(R) software products
which facilitate the automation of work processes using imaging and workflow
technologies. The Division also markets products developed by other vendors.
The Division's imaging software products consist of optical storage management
software and a development environment for network-based imaging systems. Its
workflow products manage the flow of data between various steps in a
user-defined business process. Plexus software operates on industry standard
operating systems through an architecture which allows users to choose from a
variety of hardware and software products for use in an integrated system.
This architecture enables the Plexus software products to work within the
user's existing processing environment and interface with other processing
applications that are currently installed or will be installed in the future.
The Division also provides telephone support services, contract programming
services, consulting services, software updates and training for its products.
Plexus products are distributed through its own sales organization, other
Recognition divisions and a worldwide network of systems integrators and value
added resellers (VARs).
DISTRIBUTION AND MARKETS
Recognition markets its products to end-users through its own sales
organizations and subsidiaries in North America, Europe and Japan, and through
distributors in Europe, Asia/Pacific, the Middle East, Africa and Latin
America. Recognition's products are also sold through agents, OEMs, resellers
and systems integrators for resale as components of larger systems.
Most of Recognition's equipment and related software products are offered
on both a sale/perpetual license and lease/temporary license basis. Both
sales-type leases and operating leases are available, depending on competitive
conditions and the needs of customers. Recognition's software products are
primarily marketed on a perpetual license basis.
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In conducting business outside the U.S., Recognition is subject to various
risks and hazards, including political, economic and other uncertainties;
foreign exchange rate fluctuations and currency transfer restrictions;
restrictions on foreign investment; and general risks inherent in conducting
business in areas under foreign sovereignty. See the discussion under the
caption "Geographic Information" appearing in Recognition's 1994 Annual Report
to Stockholders for financial information by geographic area for fiscal years
1994, 1993 and 1992. Such information is incorporated by reference in Item 8 of
Part II of this Report.
ORDERS
At October 31, 1994, Recognition's total backlog of orders believed to be
firm was $44,738,000 compared to $49,289,000 at October 31, 1993. Recognition
presently anticipates that approximately 84% of its backlog at October 31, 1994
will be reflected in revenues during fiscal year 1995. Backlog does not
include orders for maintenance and related services.
RESEARCH AND DEVELOPMENT
Recognition has invested substantial amounts in the development of products
and technologies and believes it must continue to emphasize research and
development in order to maintain its technological and competitive position.
Expenditures during fiscal years 1994, 1993 and 1992 for company-funded
research and development were approximately $13,452,000, $12,369,000 and
$10,673,000, respectively.
COMPETITION
The products of Recognition and its competitors are marketed on the basis
of functionality, performance, accuracy and speed in relation to price, as well
as the ability to provide maintenance services and software programming/support
services for such products. In addition, customers' evaluation of products
includes the ease with which the products can be integrated with equipment and
software supplied by other vendors.
Competitive conditions vary from product to product. In the markets served
by Recognition's medium to low-speed item processing transports, there are a
few major competitors which vary by the type of application, as well as several
small competitors. In the target markets served by its high-speed item
processing transports, Recognition is one of the industry leaders. In the
integrated solutions markets and the image processing and workflow software
markets served by Recognition, there are numerous competitors, including major
computer equipment and software vendors, none of which is dominant. In the
markets served by Recognition's multi-vendor maintenance services, the major
competitors are equipment manufacturers. In addition, there are numerous other
service suppliers.
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INTELLECTUAL PROPERTY
Recognition has approximately 75 U.S. patents and 20 foreign patents and
holds licenses under numerous patents owned by others. Recognition also owns a
number of registered and common law trademarks in the U.S. and other countries
relating to Recognition's tradenames and product names.
Products developed, manufactured or used by Recognition may from time to
time raise questions of infringement of patents owned by others and not
licensed to Recognition. If it should be determined that licenses under
patents owned by others are essential, but not available, a material hardship
on Recognition might result.
The majority of Recognition's equipment and software products were
developed by Recognition or by its acquired businesses. Certain components of
equipment are purchased from other manufacturers. Certain software products
include software programs licensed to Recognition by various software vendors.
SOURCES AND AVAILABILITY OF COMPONENTS
Most of the mechanical, electrical and electronic components used in
Recognition's products and most of the peripheral items are purchased from
others. Recognition believes that materials, components, supplies and
peripheral items of the type and in the quantities necessary for its
manufacturing operations are available, and in many cases alternate sources
currently exist. Recognition procures certain items of custom design,
computers, computer software programs and peripheral items from sole sources
under supply/license agreements. In the event any sole source item becomes
unavailable from the present supplier or the supplier's lead-time to produce
such item is abruptly extended beyond normal, Recognition could experience
difficulty, delay and expense in obtaining delivery from other sources and in
making software modifications.
EMPLOYEES
As of October 31, 1994, Recognition had 1,525 employees, of which 1,155 are
located in the U.S. and the remainder in Europe, the Far East and elsewhere in
North America.
____________________________
Recognition and Plexus are Registered Trademarks of Recognition International
Inc. in the U.S. and other countries.
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ITEM 2. PROPERTIES.
Recognition owns three buildings located on approximately 50 acres of
property in Irving, Texas, a suburb of Dallas. Two buildings containing
approximately 235,000 square feet are used for offices and manufacturing. The
third building contains approximately 80,000 square feet and has been leased to
an unrelated party. Recognition owns substantially all of its office,
laboratory and manufacturing equipment.
Recognition leases approximately 40 offices in the U.S. and approximately
30 offices outside of the U.S. used for sales, service and product development.
These leased offices include a facility containing approximately 30,000 square
feet in Toronto, Canada used for sales, service and product development, a
facility containing approximately 43,000 square feet in Dallas which is
partially sub-leased to an unrelated party and partially used for warehouse
space, and a facility containing approximately 40,000 square feet in Sunnyvale,
California used for sales, service and product development. Recognition also
leases approximately 100,000 square feet in Charlotte, North Carolina which has
been used for product development and manufacturing. Recognition is in the
process of consolidating the Charlotte facility into its Dallas facility and
the lease will terminate in 1995.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended October 31, 1994, no
matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information appearing in the "Corporate Information" section of
Recognition's 1994 Annual Report to Stockholders under the caption "Stock
Prices", is incorporated herein by reference in partial answer to this item.
Recognition has never paid dividends to its stockholders and currently has a
policy of retaining earnings for use in its operations. Recognition is
currently a party to a credit agreement which includes a covenant prohibiting
the payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item appears in Recognition's 1994 Annual
Report to Stockholders under the caption "Summary of Selected Financial Data",
which information is incorporated herein by reference in partial answer to this
item. See the information appearing in Recognition's 1994 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the "Notes to
Consolidated
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Financial Statements" of such Annual Report under the caption "Acquisitions"
for a discussion as to acquisitions. Such information is incorporated by
reference in Items 7 and 8 of Part II of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information appearing in Recognition's 1994 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations", is incorporated herein by
reference in answer to this item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears in Recognition's 1994 Annual
Report to Stockholders under the captions "Consolidated Statement of
Operations", "Consolidated Balance Sheet", "Consolidated Statement of Cash
Flows", "Consolidated Statement of Stockholders' Equity", "Notes to
Consolidated Financial Statements", "Report of Management" and "Report of
Independent Accountants", which information is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the current directors of Recognition, and persons
nominated for election as directors of Recognition at its Annual Meeting of
Stockholders to be held on March 9, 1995, appears in Recognition's Proxy
Statement relating to that Annual Meeting under the caption "Election of
Directors". Information regarding the current executive officers of
Recognition appears in such Proxy Statement under the captions "Executive
Officers" and "Other Matters - Compliance with Section 16(a) of the Exchange
Act". All such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item appears in Recognition's Proxy
Statement for its Annual Meeting of Stockholders to be held on March 9, 1995
under the captions "Compensation of Directors", "Executive Compensation",
"Report of Compensation Committee on Executive Compensation", "Performance
Graph" and "Agreements with Executive Officers", which information is
incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item appears in Recognition's Proxy
Statement for its Annual Meeting of Stockholders to be held on March 9, 1995
under the captions "Outstanding Common Stock" and "Security Ownership by
Management", which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
(1) and (2) - Index to Financial Statements and Schedules - The
information required by this portion of Item 14 is set forth in a
separate section on page 11 of this report.
(3) - List of Exhibits - The information required by this portion of
Item 14 is set forth in a separate section in this report following
page F-4. Recognition's management contracts, and compensatory plans
and arrangements which are required to be filed as exhibits to this
report are listed in Exhibits 10.17 through 10.63.
(B) REPORTS ON FORM 8-K
During the three months ended October 31, 1994, no reports were filed
by Recognition on Form 8-K.
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POWER OF ATTORNEY
The Registrant and each person whose signature appears below hereby
appoints each of Robert Vanourek and Thomas E. Hoefert as attorney-in-fact,
each with full power to act alone, to execute in the name and on behalf of the
Registrant and any such person, individually and in each capacity stated below,
one or more amendments to this report, which amendments may make such changes
in this report as any of said attorneys-in-fact deems appropriate, and to file
each such amendment to this report together with all exhibits thereto and any
and all documents in connection therewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RECOGNITION INTERNATIONAL INC.
(Registrant)
Date January 26, 1995 By: /s/ Robert Vanourek
-------------------------
Robert Vanourek
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/ Robert Vanourek President, January 26, 1995
- --------------------- Chief Executive Officer
Robert Vanourek and Director
(Principal Executive Officer)
/s/ Thomas Hoefert Vice President, Chief January 26, 1995
- --------------------- Financial Officer and Controller
Thomas E. Hoefert (Principal Financial and
Accounting Officer)
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Signatures Title Date
/s/ Lucie J. Fjeldstad Director January 26, 1995
- ---------------------
Lucie J. Fjeldstad
/s/ James F. Gero Director January 26, 1995
- ---------------------
James F. Gero
/s/ William C. Hittinger Director January 26, 1995
- ---------------------
William C. Hittinger
/s/ Gilbert H. Lamphere Director January 26, 1995
- ---------------------
Gilbert H. Lamphere
/s/ A. A. Meitz Director January 26, 1995
- ---------------------
A. A. Meitz
/s/ W. G. Spears Director January 26, 1995
- ---------------------
William G. Spears
/s/ W. H. Waltrip Director January 26, 1995
- ---------------------
William H. Waltrip
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RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of Recognition
International Inc. and subsidiaries appearing in Recognition's Annual Report to
Stockholders for the fiscal year ended October 31, 1994, have been incorporated
herein by reference under Item 8 of Part II of this report.
Consolidated Statement of Operations for the three years ended October 31,
1994.
Consolidated Balance Sheet as of October 31, 1994 and 1993.
Consolidated Statement of Cash Flows for the three years ended October 31,
1994.
Consolidated Statement of Stockholders' Equity for the three years ended
October 31, 1994.
Notes to Consolidated Financial Statements.
Report of Management.
Report of Independent Accountants.
The following financial statement schedules of Recognition International
Inc. and subsidiaries for the three years ended October 31, 1994, are filed
herewith:
Report of Independent Accountants on Financial Statement Schedules. F-1
Schedule VIII Valuation and Qualifying Accounts and Reserves. F-2
Schedule IX Short-Term Borrowings. F-3
Schedule X Supplementary Income Statement Information. F-4
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required or are inapplicable and therefore have been omitted. Individual
financial statements of Recognition International Inc. have been omitted since
consolidated financial statements are being filed and no significant amount of
the net assets of subsidiaries included in the consolidated financial
statements being filed are restricted as to transfer to Recognition
International Inc.
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REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Recognition International Inc.
Our audits of the consolidated financial statements referred to in our report
dated December 7, 1994 appearing in the 1994 Annual Report to Stockholders of
Recognition International Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed in Item
14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
Dallas, Texas
December 7, 1994
F-1
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SCHEDULE VIII
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(thousands)
<TABLE>
<CAPTION>
Additions
--------------------------
Balance at Charged to Balance
beginning of costs and end of
Description period expenses Other(A) Write-offs period
- ---------------------------------- ------------ -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1994:
Allowance for doubtful accounts $ 1,997 $ 1,690 $ 40 $(1,128) $ 2,599
Deferred tax valuation allowance $34,434 $10,447 $ -- $ -- $44,881
Year ended October 31, 1993:
Allowance for doubtful accounts $ 1,598 $ 687 $(32) $ (256) $ 1,997
Deferred tax valuation allowance $25,520 $ 8,914(B) $ -- $ -- $34,434(B)
Year ended October 31, 1992:
Allowance for doubtful accounts $ 1,323 $ 765 $ -- $ (490) $ 1,598
Deferred tax valuation allowance $ -- $25,520(C) $ -- $ -- $25,520
</TABLE>
(A) Includes effects of changes in foreign currency exchange rates.
(B) Includes a reclassification of ($5,653) from valuation allowance to net
operating loss carryforwards.
(C) Recognition adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," prospectively as of November 1, 1991.
F-2
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SCHEDULE IX
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
Short-Term Borrowings
(thousands)
<TABLE>
<CAPTION>
Balance at end of period
-------------------------------- Maximum amount Average amount Weighted average
Weighted outstanding outstanding interest rate
average during the during the during the
Classification Amount interest rate period period(A) period(B)
- ---------------------------- ------------- ------------- -------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Year ended October 31, 1994:
Foreign Bank Loans $6,054 3.0% $6,725 $5,921 4.2%
Year ended October 31, 1993:
Foreign Bank Loans $5,776 4.0% $6,563 $6,080 6.3%
Year ended October 31, 1992:
Foreign Bank Loans $5,990 6.8% $6,184 $5,496 7.2%
</TABLE>
(A) The average amount outstanding during the period was determined by
averaging the month-end balances.
(B) The weighted average interest rate during the period was computed by
dividing actual interest expense by the average short-term debt
outstanding during the period.
F-3
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SCHEDULE X
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
Supplementary Income Statement Information
(thousands)
<TABLE>
<CAPTION>
Charged to costs and expenses for
the years ended October 31,
---------------------------------------
Item 1994 1993 1992
- ------------------------------------ ------ ------- --------
<S> <C> <C> <C>
Maintenance and repairs * * *
Depreciation and amortization:
Property, plant and equipment $5,707 $5,345 $5,302
Service parts $5,870 $5,926 $5,418
Goodwill amortization $2,439 $2,385 $2,166
Amortization of intangible assets $4,010 $4,096 $2,454
Rents $4,882 $5,149 $4,990
Taxes, other than payroll and income taxes * $2,542 $2,194
Royalties * * *
Advertising * * *
</TABLE>
* Less than 1% of total revenues.
F-4
<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
2.1 Asset Acquisition Agreement dated as of March 5, 1992 between
Registrant and TransTechnology Corporation (incorporated by reference
to Exhibit 2.2 to Registrant's Quarterly Report on Form 10-Q for the
period ended January 31, 1992).
2.2 Amendment dated March 30, 1992 to the Asset Acquisition Agreement
dated as of March 5, 1992 between Registrant and TransTechnology
Corporation (incorporated by reference to Exhibit 2.2 to Amendment No.
1 dated June 11, 1992 to the Current Report on Form 8-K dated March
30, 1992).
3.1 Restated Certificate of Incorporation effective May 30, 1974
(incorporated by reference to Exhibit 3.1 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1993).
3.2 Amendment to Article First of Registrant's Restated Certificate of
Incorporation effective March 12, 1993 (incorporated by reference to
Exhibit 28(b) to Registrant's Current Report on Form 8-K dated March
12, 1993).
3.3 Amendment to Article Fourth of Registrant's Restated Certificate of
Incorporation effective April 3, 1985 (incorporated by reference to
Exhibit 3.3 to Registrant's Annual Report on Form 10-K for the period
ended October 31, 1993).
3.4 Amendment adding Article Thirteenth to Registrant's Restated
Certificate of Incorporation effective March 16, 1987 (incorporated by
reference to Exhibit 3.4 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1992).
3.5 Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock effective September 28, 1992
(incorporated by reference to Exhibit 3.5 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1992).
3.6 By-Laws, as amended and restated as of December 15, 1994.
4.1 Indenture dated as of April 3, 1986 and First Supplemental Indenture
dated as of November 1, 1987 between Registrant and MBank Dallas,
National Association, as Trustee, with respect to Registrant's 7-1/4%
Convertible Subordinated Debentures due 2011 (incorporated by
reference to Exhibit 4.1 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1992).
4.2 Rights Agreement dated as of September 18, 1992 between Registrant and
Society National Bank as Rights Agent (incorporated by reference to
Registrant's Form 8-A Registration Statement dated September 25,
1992).
<PAGE> 18
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
9. Not applicable.
10.1 Purchase Agreement dated as of February 28, 1990 between Registrant
and Security Pacific Credit Corporation (incorporated by reference to
Exhibit (19)(f) to Registrant's Quarterly Report on Form 10-Q for the
period ended January 31, 1990).
10.2 Letter Agreements dated March 21, 1990, May 21, 1990, June 15, 1990,
July 26, 1990 and September 10, 1990 amending the Purchase Agreement
dated as of February 28, 1990 between Registrant and Security Pacific
Credit Corporation (incorporated by reference to Exhibit 10.16 to
Registrant's Annual Report on Form 10-K for the period ended October
31, 1990).
10.3 Supplement No. 1 dated as of October 31, 1990 to Purchase Agreement
dated as of February 28, 1990 between Registrant and Security Pacific
Credit Corporation (incorporated by reference to Exhibit 10.17 to
Registrant's Annual Report on Form 10-K for the period ended October
31, 1990).
10.4 Purchase Agreement dated as of June 18, 1992 among Registrant, BA
Credit Corporation and Security Pacific Credit Corporation
(incorporated by reference to Exhibit 19.1 to Registrant's Quarterly
Report on Form 10-Q for the period ended July 31, 1992).
10.5 Amended and Restated Credit Agreement dated as of July 29, 1993 by and
among Registrant and The First National Bank of Boston, National Bank
of Canada, New York Branch and First Interstate Bank of Texas, N.A.
(incorporated by reference to Exhibit 4.11 to Registrant's Quarterly
Report on Form 10-Q for the period ended July 31, 1993).
10.6 First Amendment dated as of January 31, 1994 to Amended and Restated
Credit Agreement dated as of July 29, 1993 (incorporated by reference
to Exhibit 4.12 to Registrant's Quarterly Report on Form 10-Q for the
period ended January 31, 1994).
10.7 Second Amendment dated as of October 31, 1994 to Amended and Restated
Credit Agreement dated as of July 29, 1993.
10.8 Amended and Restated Revolving Credit Notes dated as of July 29, 1993
in the principal amounts of $12,000,000, $7,000,000 and $6,000,000
payable by Registrant to The First National Bank of Boston, as agent
for The First National Bank of Boston, First Interstate Bank of Texas,
N.A. and National Bank of Canada, New York Branch, respectively
(incorporated by reference to Exhibit 4.12 to Registrant's Quarterly
Report on Form 10-Q for the period ended July 31, 1993).
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
10.9 Security Agreement dated as of March 26, 1992 by and among Registrant,
Hybrid Systems Inc. and The First National Bank of Boston
(incorporated by reference to Exhibit 19.5 to Registrant's Quarterly
Report on Form 10-Q for the period ended April 30, 1992).
10.10 General Security Agreement dated as of March 26, 1992 by and between
Mohawk Data Sciences-Canada, Limited and The First National Bank of
Boston (incorporated by reference to Exhibit 19.6 to Registrant's
Quarterly Report on Form 10-Q for the period ended April 30, 1992).
10.11 Unlimited Guaranty dated as of March 26, 1992 by Hybrid Systems Inc.
and Recognition Equipment (Japan), Inc. in favor of The First National
Bank of Boston (incorporated by reference to Exhibit 19.7 to
Registrant's Quarterly Report on Form 10-Q for the period ended April
30, 1992).
10.12 Unlimited Guaranty dated as of March 26, 1992 by Mohawk Data
Sciences-Canada, Limited in favor of The First National Bank of Boston
(incorporated by reference to Exhibit 19.8 to Registrant's Quarterly
Report on Form 10-Q for the period ended April 30, 1992).
10.13 Amendment of Security Documents Agreement dated as of July 29, 1993 by
and among Registrant, Recognition Canada Inc., Recognition Japan Inc.,
Recognition Australia Pty. Ltd. and Recognition Holding Limited and
The First National Bank of Boston (incorporated by reference to
Exhibit 4.17 to Registrant's Quarterly Report on Form 10-Q for the
period ended July 31, 1993).
10.14 Amended and Restated Promissory Note dated as of March 30, 1992 by
Registrant to TransTechnology Corporation in the principal amount of
$1,934,183 (incorporated by reference to Exhibit 4.10 to Registrant's
Quarterly Report on Form 10-Q for the period ended July 31, 1992).
10.15 Lease Agreement dated March 30, 1992 between Registrant and
TransTechnology Corporation (incorporated by reference to Exhibit
19.11 to Registrant's Quarterly Report on Form 10-Q for the period
ended April 30, 1992).
10.16 Letter Agreement dated as of August 24, 1994 amending the Lease
Agreement dated as of March 30, 1992 between Registrant and
TransTechnology Corporation (incorporated by reference to Exhibit 10.1
to Registrant's Quarterly Report on Form 10-Q for the period ended
July 31, 1994).
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Management Contracts, and Compensatory Plans and Arrangements (Exhibits 10.17
through 10.63):
10.17 Executive Benefit Plan, as amended and restated as of December 1, 1984
and amendment thereto dated as of December 10, 1992 (incorporated by
reference to Exhibit 10.14 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1993).
10.18 Executive Benefit Plan letter dated January 8, 1990 between Registrant
and Robert Vanourek (incorporated by reference to Exhibit 10.15 to
Registrant's Annual Report on Form 10-K for the period ended October
31, 1993).
10.19 Letter Agreement dated January 12, 1994 amending the Executive Benefit
Plan letter dated January 8, 1990 between Registrant and Robert
Vanourek (incorporated by reference to Exhibit 10.19 to Registrant's
Annual Report on Form 10-K for the period ended October 31, 1993).
10.20 Executive Benefit Plan letter dated January 15, 1985 and amendment
thereto dated May 27, 1992 between Registrant and Thomas A. Loose
(incorporated by reference to Exhibit 10.16 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1993).
10.21 Form of Executive Benefit Plan letter dated May 12, 1992 (including
schedule describing the terms of agreements between Registrant and
each of Thomas R. Frederick and Robert M. Swartz) (incorporated by
reference to Exhibit 19.10 to Registrant's Quarterly Report on Form
10-Q for the period ended April 30, 1992).
10.22 Form of Letter Agreement dated January 12, 1994 amending the Executive
Benefit Plan letter dated May 12, 1992 between Registrant and each of
Thomas R. Frederick and Robert M. Swartz (incorporated by reference to
Exhibit 10.18 to Registrant's Annual Report on Form 10-K for the
period ended October 31, 1993).
10.23 Executive Benefit Plan letter dated May 12, 1992 and Letter Agreement
dated January 12, 1994 amending the Executive Benefit Plan letter
between Registrant and Thomas D. Neitzel.
10.24 Split Dollar Agreement and Collateral Assignment Agreement, both dated
December 1, 1984, between Registrant and Thomas A. Loose (incorporated
by reference to Exhibit 10.20 to Registrant's Annual Report on Form
10-K for the period ended October 31, 1993).
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
10.25 Form of Split Dollar Agreement and form of Collateral Assignment
Agreement (including schedule describing the terms of agreements
between Thomas R. Frederick, Robert M. Swartz and Robert Vanourek)
(incorporated by reference to Exhibit 10.21 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1993).
10.26 Split Dollar Agreement and Collateral Assignment Agreement, both dated
October 12, 1990, between Registrant and Thomas D. Neitzel.
10.27 Executive Bonus Plan, as amended and restated as of November 1, 1992
(incorporated by reference to Exhibit 10.3 to Registrant's Quarterly
Report on Form 10-Q for the period ended April 30, 1993).
10.28 Form of Assignment of Targeted Bonuses for fiscal year 1994 under the
Executive Bonus Plan (including schedule listing the bonus amounts for
each of Thomas R. Frederick, Thomas A. Loose, Robert M. Swartz and
Robert Vanourek) (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the period ended April
30, 1994).
10.29 Assignment of Targeted Bonus for fiscal year 1994 under the Executive
Bonus Plan for Thomas D. Neitzel.
10.30 Waiver with respect to fiscal year 1994 bonuses under the Executive
Bonus Plan.
10.31 Executive Bonus Plan, as amended and restated as of November 1, 1994.
10.32 Employment Agreement dated as of December 14, 1994 between Registrant
and Robert Vanourek.
10.33 Employment Agreement dated as of December 15, 1994 between Registrant
and Thomas A. Loose.
10.34 Employment Agreement dated as of December 14, 1994 between Registrant
and Robert M. Swartz.
10.35 Employment Agreement dated as of June 1, 1994 between Registrant and
Thomas R. Frederick.
10.36 Employment Agreement dated as of December 14, 1994 between Registrant
and Thomas D. Neitzel.
<PAGE> 22
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
10.37 Corporate Incentive Plan, as amended and restated as of March 12, 1987
(incorporated by reference to Exhibit 10.43 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1992).
10.38 Form of Stock Option Agreement under the Corporate Incentive Plan
(including schedule describing the terms of agreements between
Registrant and each of Thomas R. Frederick, Thomas A. Loose and Robert
M. Swartz) (incorporated by reference to Exhibit 10.50 to Registrant's
Annual Report on Form 10-K for the period ended October 31, 1991).
10.39 Incentive Stock Option Agreement dated May 23, 1985 under the
Corporate Incentive Plan between Registrant and Thomas A. Loose
(incorporated by reference to Exhibit 10.32 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1993).
10.40 Incentive Stock Option Agreement dated May 23, 1985 under the
Corporate Incentive Plan between Registrant and Thomas D. Neitzel.
10.41 Stock Option Agreements dated as of May 26, 1988, June 1, 1990 and
December 13, 1990 under the Corporate Incentive Plan between
Registrant and Thomas D. Neitzel.
10.42 Stock Option Plan VII, as amended and restated as of June 10, 1993
(incorporated by reference to Exhibit 10.1 to Registrant's Quarterly
Report on Form 10-Q for the period ended July 31, 1993).
10.43 Stock Option Agreement dated October 16, 1989 under Stock Option Plan
VII between Registrant and Robert Vanourek (incorporated by reference
to Exhibit 10.34 to Registrant's Annual Report on Form 10-K for the
period ended October 31, 1993).
10.44 Form of Stock Option Agreement under Stock Option Plan VII (including
schedule describing the terms of agreements between Registrant and
each of Thomas R.Frederick and Robert M. Swartz) (incorporated by
reference to Exhibit 10.55 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1991).
10.45 1990 Corporate Incentive Plan, as amended and restated as of March 3,
1994 (incorporated by reference to Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for the period ended April 30, 1994).
<PAGE> 23
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
10.46 Stock Option Agreement dated as of March 3, 1994 under the 1990
Corporate Incentive Plan between Registrant and Robert Vanourek
(incorporated by reference to Exhibit 10.3 to Registrant's Quarterly
Report on Form 10-Q for the period ended April 30, 1994).
10.47 Form of Stock Option Agreement dated as of March 11, 1993 under the
1990 Corporate Incentive Plan between Registrant and each of Thomas R.
Frederick and Robert M. Swartz (incorporated by reference to Exhibit
10.2 to Registrant's Quarterly Report on Form 10-Q for the period
ended April 30, 1993).
10.48 Form of Amendment dated as of December 5, 1993 (including schedule) to
Stock Option Agreement dated as of March 11, 1993 under the 1990
Corporate Incentive Plan between Registrant and each of Thomas R.
Frederick and Robert M. Swartz (incorporated by reference to Exhibit
10.4 to Registrant's Quarterly Report on Form 10-Q for the period
ended April 30, 1994).
10.49 Notice of Grant of Stock Option and Stock Option Grant Agreement dated
as of June 8, 1994 under the 1990 Corporate Incentive Plan between
Registrant and Robert M. Swartz (incorporated by reference to Exhibit
10.4 to Registrant's Quarterly Report on Form 10-Q for the period
ended July 31, 1994).
10.50 Stock Option Agreement dated as of March 11, 1993 and Amendment dated
as of December 5, 1993 under the 1990 Corporate Incentive Plan between
Registrant and Thomas D. Neitzel.
10.51 Stock Option Agreement dated as of December 5, 1993 under the 1990
Corporate Incentive Plan between Registrant and Thomas D. Neitzel.
10.52 Notice of Grant of Stock Option and Stock Option Grant Agreement dated
as of October 5, 1994 under the 1990 Corporate Incentive Plan between
Registrant and Thomas D. Neitzel.
10.53 Form of Letter Agreement dated January 12, 1994 between Registrant and
each of Thomas R. Frederick, Thomas A. Loose, Robert M. Swartz and
Robert Vanourek, regarding the taxation of benefits under executive
benefit programs in certain circumstances (incorporated by reference
to Exhibit 10.39 to Registrant's Annual Report on Form 10-K for the
period ended October 31, 1993).
10.54 Letter Agreement dated January 12, 1994 between Registrant and Thomas
D. Neitzel regarding the taxation of benefits under executive benefit
programs in certain circumstances.
<PAGE> 24
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
10.55 Description of Registrant's stock plan for non-employee directors
(incorporated by reference to Exhibit 10.51 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1992).
10.56 Letter Agreement dated February 1, 1988 between Registrant and William
C. Hittinger with regard to the grant of stock under Registrant's
stock plan for non-employee directors (incorporated by reference to
Exhibit 10.54 to Registrant's Annual Report on Form 10-K for the
period ended October 31, 1990).
10.57 Form of Letter Agreement dated as of February 16, 1990 between
Registrant and each of James F. Gero, Gilbert H. Lamphere, A. A. Meitz
and William H. Waltrip with regard to the grant of stock under
Registrant's stock plan for non-employee directors (incorporated by
reference to Exhibit 10.55 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1990).
10.58 Form of Letter Agreement dated as of November 19, 1991 between
Registrant and each of James F. Gero, William C. Hittinger, Gilbert H.
Lamphere, A. A. Meitz and William H. Waltrip with regard to the grant
of stock under Registrant's stock plan for non-employee directors
(incorporated by reference to Exhibit 10.64 to Registrant's Annual
Report on Form 10-K for the period ended October 31, 1991).
10.59 Letter Agreement dated as of October 28, 1993 between Registrant and
Lucie J. Fjeldstad with regard to the grant of stock under
Registrant's stock plan for non-employee directors (incorporated by
reference to Exhibit 10.44 to Registrant's Annual Report on Form 10-K
for the period ended October 31, 1993).
10.60 Letter Agreement dated as of October 25, 1994 between Registrant and
William G. Spears with regard to the grant of stock under Registrant's
stock plan for non-employee directors.
10.61 Director Stock Option Plan dated as of December 10, 1992 (incorporated
by reference to Exhibit 10.55 to Registrant's Annual Report on Form
10-K for the period ended October 31, 1992).
10.62 Consulting Agreement dated December 6, 1994 between Registrant and
Fjeldstad International.
10.63 Description of Registrant's former educational loan program for
executive officers (incorporated by reference to Exhibit 10.46 to
Registrant's Annual Report on Form 10-K for the period ended October
31, 1993).
11.1 Statement Re Computation of Per Share Earnings.
<PAGE> 25
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
12. Not applicable.
13.1 Sections from Annual Report to Stockholders of Recognition
International Inc. for the fiscal year ended October 31, 1994 (any
portions thereof which are not expressly incorporated by reference in
this report are furnished for information of the Commission only and
are not to be deemed "filed" as a part of this report).
16. Not applicable.
18. Not applicable.
21.1 Subsidiaries of Registrant.
22. Not applicable.
23.1 Consent of Independent Accountants.
24. Not applicable.
27. Financial Data Schedules.
28. Not applicable.
99. Not applicable.
<PAGE> 1
EXHIBIT 3.6
RECOGNITION INTERNATIONAL INC.
BY-LAWS
AMENDED AND RESTATED AS OF DECEMBER 15, 1994
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE. The registered office of the Corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle, State of Delaware.
SECTION 1.2 OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
STOCKHOLDERS
SECTION 2.1 ANNUAL MEETINGS. An annual meeting of stockholders shall be
held, at such place within or without the State of Delaware as may be
designated by the Board of Directors, on the first Thursday following the 15th
day of February in each year, if not a legal holiday in the place where the
meeting is to be held, and, if such a legal holiday, then on the next secular
day following, at ten o'clock a.m. local time at the place of meeting, or on
such other date or at such other time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, for the
election of directors and transaction of such other business as may properly be
brought before the meeting pursuant to Section 2.2.
SECTION 2.2 ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT AN ANNUAL
MEETING. At any annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise brought before the meeting by or at the
direction of the Board of Directors, or otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholders to be timely must be so received not later than the close
of business on the 15th day following the day on which such notice of the date
of the annual meeting was first mailed or given to stockholders or such public
disclosure was made. A stockholder's notice to the secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (a)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and record address of the stockholder proposing such business, (c) the
class and number of shares of the Corporation which are beneficially owned by
the stockholder, and (d) any material interest of the stockholder in such
business.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 2.2; provided, however,
1
<PAGE> 2
that nothing in this Section 2.2 shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting in
accordance with said procedure.
The chairman of an annual meeting shall, if the facts warrant, determine
that business was not properly brought before the meeting in accordance with
the provisions of this Section 2.2, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SECTION 2.3 STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation. Nominations of persons for election
as directors may be made at a meeting of stockholders (a) by or at the
direction of the Board of Directors, (b) by any nominating committee or person
appointed by the Board of Directors or (c) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 2.3. Nominations
by such a stockholder shall be made pursuant to timely notice in writing to the
secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event less than 60 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was first mailed or given to stockholders or such public disclosure
was made. Such stockholder's notice to the secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or reelection as
a director: (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Corporation which are
beneficially owned by the person and (iv) any other information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the Securities Exchange Act of
1934, as amended; and as to the stockholder giving the notice: (i) the name and
record address of the stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth
herein.
The chairman of the meeting shall, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
SECTION 2.4 SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, which shall be held at such place either within or
without the State of Delaware as shall be stated in the notice or a duly
executed waiver thereof unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the president or the Board of
Directors and shall be called by the president or secretary at the request in
writing of a majority of the total number of directors. Such request shall
state the purpose or purposes of the proposed meeting and the date, time and
place thereof. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
SECTION 2.5 FIXING RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may
2
<PAGE> 3
fix a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date (i) in the case of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
shall not be more than sixty or less than ten days before the date of such
meeting, (ii) in the case of determining stockholders entitled to express
consent to corporate action in writing without a meeting, shall not be more
than ten days after the date upon which the resolution fixing the record date
is adopted by the Board of Directors and (iii) in the case of determining
stockholders for any other purpose, shall not be more than sixty days prior to
any other action.
(a) If no record date is fixed:
(i) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived,
at the close of business on the day next preceding the day on which the meeting
is held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the first date on which a
signed written consent is delivered to the Corporation.
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(b) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 2.6 NOTICE OF MEETINGS. Except as otherwise required by
statute, notice of the time and place of each meeting of stockholders, whether
annual or special, shall, at least ten, and not more than sixty, days before
the day on which the meeting is to be held, be given to each stockholder of
record entitled to vote thereat, by delivering a written or printed notice
thereof to such stockholder personally or by mailing such notice in a postage
prepaid envelope addressed to such stockholder at his post office address as
the same appears on the stock records of the Corporation.
(a) Except as otherwise required by statute, no publication of any notice
of a meeting of stockholders shall be required
(b) In the case of a special meeting, the notice shall indicate briefly
the purpose or purposes of such meeting.
(c) Except as otherwise required by statute, no notice of a special or
annual meeting shall be required as to any stockholder who shall attend such
meeting in person or by proxy; and if any stockholder shall, in person or by
attorney duly authorized, waive notice of any meeting, whether before or after
such meeting be held, notice shall not be required as to such stockholder.
(d) Except as otherwise required by statute, no notice of any adjourned
meeting of stockholders shall be required to be given.
3
<PAGE> 4
SECTION 2.7 QUORUM. The holders of stock constituting a majority of the
voting power given to all stock issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum at each meeting of the stockholders for the transaction of business
except as otherwise provided by statute or by the Certificate of Incorporation.
SECTION 2.8 ADJOURNMENT. At any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, may, by a vote of a majority of the voting power given to all stock so
present or represented, adjourn the meeting for a period not exceeding thirty
days from time to time, without notice other than announcement at the meeting,
except as otherwise provided by statute or the Certificate of Incorporation. If
a quorum was present or represented at the original meeting or if a quorum
shall be present or represented at such adjourned meeting, any business may be
transacted at an adjourned meeting which might have been transacted at the
meeting as originally notified.
SECTION 2.9 VOTING. When a quorum is present at any meeting, directors
shall be elected by a plurality vote and all other questions brought before the
meeting shall be decided by the vote of the holders of stock constituting a
majority of the voting power given to all stock present in person or
represented by proxy at such meeting and entitled to vote thereon, unless the
question is one upon which by express provision of statute or of the
Certificate of Incorporation or of these By-Laws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
(a) Each outstanding share of stock shall be entitled to one vote on each
matter submitted to a vote at a meeting of the stockholders, except as and to
the extent otherwise provided by statute, the Certificate of Incorporation or
these By-Laws.
(b) At any meeting of the stockholders, every stockholder having the
right to vote shall be entitled to vote either in person or by proxy executed
in writing by such stockholder.
(c) No proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
SECTION 2.10 VOTING LIST. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if
not so specified, at the place where said meeting is to be held, and the list
shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
SECTION 2.11 INSPECTORS. At each meeting of the stockholders, the polls
shall be opened and closed. Two inspectors shall (i) receive and have custody
of the proxies; (ii) decide all questions respecting the qualification of
voters and the validity of proxies, and the acceptance or rejection of votes;
and (iii) receive and count the ballots, if voting is by ballot, and certify
the results of the voting. Such inspectors shall be appointed by the Board of
Directors before the meeting, or in default thereof, by the presiding officer
at the meeting, and shall be sworn to the faithful performance of their duties.
If any of the inspectors previously appointed shall fail to attend or refuse or
be unable to serve, substitutes shall be appointed in like manner.
4
<PAGE> 5
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND TERM. The number of directors which shall
constitute the whole Board shall be eight, which number may be changed by
amendment of these By-Laws, provided that in no event may such number be
decreased to less than six. Directors need not be stockholders. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 3.2 of this Article. Beginning with the election of directors at the
annual meeting of stockholders in 1983, the directors shall be divided into
three classes as nearly equal in number as possible, with the initial term of
the directors elected in Class I to expire at the annual meeting of
stockholders in 1984, the initial term of the directors elected in Class II to
expire at the annual meeting of stockholders in 1985 and the initial term of
the directors elected in Class III to expire at the annual meeting of
stockholders in 1986. The directors elected in each class upon expiration of
the initial term and thereafter shall be elected for a term expiring at the
third annual meeting of stockholders following the annual meeting at which they
are elected. Each director elected shall hold office until expiration of the
term for which he is elected and until his successor is elected and qualified
or until his earlier resignation or removal. In the event the number of
directors constituting the whole Board shall be a number not evenly distributed
by three, the number of directors to serve in each class shall be determined by
the Board of Directors, subject to the requirement that the number in each
class shall be as nearly equal as possible. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of preferred or
preference stock issued by the Corporation shall have the right, voting
separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of the
Certificate of Incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Section 3.1 of Article III
unless expressly provided by such terms. At all elections of directors, each
stockholder shall be entitled to as many votes in the election of directors in
each class for which directors are being elected as shall equal the number of
votes which (except for the provision in the Certificate of Incorporation as to
cumulative voting) he would be entitled to cast for the election of directors
with respect to his shares of Common Stock multiplied by the number of
directors to be elected in such class, and he may cast all of such votes for a
single director in such class or may distribute them among the number to be
voted for in such class, or for any two or more of them in such class as he may
see fit.
SECTION 3.2 VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director. A director chosen to fill a vacancy shall serve for
the remainder of the unexpired term of his predecessor and until his successor
is elected and qualified or until his earlier resignation or removal. A
director chosen to fill a newly created directorship shall serve until the next
annual meeting of the stockholders, at which time such newly created
directorship shall be classified by the Board of Directors into one of the
three classes referred to in Section 3.1 of this Article, subject to the
requirement that the number of directors to serve in each class shall be as
nearly equal as possible. At such annual meeting, a director shall be elected
to fill such newly created directorship and to serve for the unexpired term of
the class in which he is elected and until his successor is elected and
qualified or until his earlier resignation or removal.
SECTION 3.3 POWERS. The business and affairs of the Corporation shall
be managed by the Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute, the
Certificate of Incorporation or these By-Laws, directed or required to be
exercised or done by the stockholders.
SECTION 3.4 MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. The first meeting of each newly elected Board of Directors shall be
held following the adjournment of and at the same place as the annual meeting
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of stockholders and no notice of such meeting shall be necessary to the newly
elected directors in order to legally constitute the meeting, provided a quorum
shall be present. In the event of the failure to hold such meeting of the newly
elected Board of Directors at such time and place, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as specified in a
written waiver signed by all of the directors.
(a) Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors and communicated to all members thereof.
(b) Special meetings of the Board of Directors may be called by the
president or the chairman of the board with notice (i) by mail to each
director, addressed to him at his residence or usual place of business, not
later than three (3) days before the day on which the meeting is to be held, or
(ii) by telegram, telex, telecopy or personal or courier delivery, addressed to
him at his residence or usual place of business, or by communicating to him
personally or by telephone, not later than twenty-four (24) hours before the
time of such meeting; special meetings shall be called by the president,
chairman of the board or secretary in like manner and on like notice on the
written request of at least two directors.
SECTION 3.5 QUORUM. At all meetings of the Board of Directors, a
majority of the total number of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as otherwise provided by statute, the Certificate of
Incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of the Board of Directors the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION 3.6 ACTION WITHOUT MEETING. Unless otherwise restricted by
statute, the Certificate of Incorporation or these By-Laws, any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent thereto
is signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of the
proceedings of the Board of Directors or committee.
SECTION 3.7 TELEPHONIC MEETING. Unless otherwise restricted by statute,
the Certificate of Incorporation or these By-Laws, members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
SECTION 3.8 COMPENSATION. The directors and members of special and
standing committees may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors or such committee and such compensation for
their services as the Board of Directors may determine from time to time. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEES
SECTION 4.1 EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
elect from the directors an Executive Committee which shall consist of not less
than two members. Within the foregoing limit, the number of members shall be
determined from time to time by resolution passed by a majority of the whole
Board of Directors. The Board of Directors shall designate for such committee a
chairman, who shall continue as such during the pleasure
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of the Board of Directors. So far as practicable, members of the Executive
Committee shall be appointed by the Board of Directors at its first meeting
after each annual meeting of stockholders and, unless sooner discharged by
resolution passed by a majority of the whole Board of Directors, shall hold
office until their respective successors are appointed and qualified or until
their earlier respective deaths or resignations.
SECTION 4.2 VACANCIES. Any vacancy in the Executive Committee may be
filled by resolution passed by a majority of the whole Board of Directors.
SECTION 4.3 REGULAR MEETINGS. Regular meetings of the Executive
Committee may be held without notice at such time and place as shall be
determined from time to time by the Committee and communicated to all of the
members thereof.
SECTION 4.4 SPECIAL MEETINGS. Special meetings of the Executive
Committee may be called by the chairman of the Executive Committee or any two
members thereof at any time on twenty-four (24) hours' notice to each member,
either personally or by mail or telegram.
SECTION 4.5 ACTION WITHOUT MEETING. Unless otherwise restricted by
statute, the Certificate of Incorporation or these By-Laws, any action required
or permitted to be taken at any meeting of the Executive Committee may be taken
without a meeting if a written consent thereto is signed by all members and
such written consent is filed with the minutes of the proceedings of the
Committee.
SECTION 4.6 TELEPHONIC MEETINGS. Unless otherwise restricted by
statute, the Certificate of Incorporation or these By-Laws, members of the
Executive Committee may participate in a meeting of such Committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in
a meeting pursuant to this Section shall constitute presence in person at such
meeting.
SECTION 4.7 QUORUM. A majority of the total number of members of the
Executive Committee shall constitute a quorum for the transaction of business,
and the act of a majority of those present at any meeting at which a quorum is
present shall be the act of the Executive Committee.
SECTION 4.8 COMMITTEE ACTION. The members of the Executive Committee
shall act only as a committee, and the individual members shall have no power
as such.
SECTION 4.9 RECORDS. The Executive Committee shall keep regular minutes
of its meetings. The secretary of the Corporation, or in his or her absence, an
assistant secretary, shall act as secretary of the Executive Committee or the
Committee may, in its discretion, appoint its own secretary.
SECTION 4.10 REPORTING. The Executive Committee shall report its acts and
proceedings to the Board of Directors.
SECTION 4.11 POWERS. The Executive Committee shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided,
however, in no event shall the Executive Committee have any power or authority
in reference to (i) amending the Certificate of Incorporation; (ii) adopting an
agreement of merger or consolidation; (iii) recommending to the stockholders
the sale, lease or exchange of all or substantially all of the Corporation's
property and assets; (iv) recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution; (v) amending the By-Laws of the
Corporation; or (vi) unless specifically so authorized by resolution passed by
a majority of the whole Board of Directors, declaring a dividend or authorizing
the issuance of stock.
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SECTION 4.12 OTHER COMMITTEES. The Board of Directors may, by resolution
or resolutions passed by a majority of the whole Board of Directors, designate
one or more committees other than the Executive Committee, each committee to
consist of two or more of the directors of the Corporation, which, to the
extent provided in such resolution or resolutions, shall have and may exercise
the powers of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it, subject to the same limitations set
forth in Section 4.11 of these By-Laws. Such committee or committees shall have
such name or names and conduct its business in such areas and under such rules
and regulations as may be determined from time to time by resolution passed by
a majority of the whole Board of Directors. The provisions of Sections 4.2
through 4.10 of these By-Laws shall be applicable to each committee designated
hereunder unless otherwise provided by resolution passed by a majority of the
whole Board of Directors.
ARTICLE V
NOTICES
SECTION 5.1 DELIVERY.
(a) Notices to stockholders shall be in writing and delivered personally
or mailed to them at their addresses appearing on the stock records of the
Corporation.
(b) Notices to directors and committee members may be in writing and
delivered personally or by courier or mailed to the directors or committee
members at their residences or usual places of business. Notices to directors
or committee members may also be given by telegram, telex or telecopy, or
communicated to them personally or by telephone.
(c) Notice by mail shall be deemed to be given when deposited in the
United States mail postage prepaid. Notice by courier delivery shall be deemed
to be given twenty-four (24) hours after delivery by the Corporation to the
courier service. Notice by telegram, telex or telecopy shall be deemed to be
given at the time when the same is deposited for transmission.
SECTION 5.2 WAIVER. Whenever any notice is required to be given by
statute, the Certificate of Incorporation or these By-Laws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders, directors, or members of a committee of
directors need be specified in any written waivers of notice.
ARTICLE VI
OFFICERS
SECTION 6.1 ELECTED OFFICERS. The elected officers of the Corporation
shall be a chairman of the board (if the Board of Directors shall determine the
election of such officer to be appropriate), a vice chairman of the board (if
the Board of Directors shall determine the election of such officer to be
appropriate), a president, one or more vice presidents, with such titles as may
be designated by the Board of Directors, a controller, a secretary and a
treasurer. No elected officer, other than the chairman of the board and vice
chairman of the board, need be a director.
SECTION 6.2 ELECTION. All elected officers shall be chosen by the Board
of Directors and as far as is practicable shall be chosen at the first meeting
of the Board of Directors after each annual meeting of stockholders.
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SECTION 6.3 APPOINTIVE OFFICES. The Board of Directors may also appoint
one or more assistant secretaries and assistant treasurers and such other
officers, assistant officers and agents as it shall deem necessary who shall
exercise such powers and perform such duties as are prescribed in these By-Laws
and as may be determined from time to time by the Board of Directors or by the
president. No appointive officer or agent need be a director.
SECTION 6.4 COMPENSATION. The compensation of all officers of the
Corporation shall be fixed by the Board of Directors; provided, however, the
Board of Directors may delegate to the president the authority to fix the
compensation of all officers other than the chairman of the board and the
president.
SECTION 6.5 TERM. The officers and agents of the Corporation shall hold
office until their successors are chosen and qualified or until their earlier
resignation or removal. Any officer or agent elected or appointed by the Board
of Directors may be removed with or without cause at any time by the
affirmative vote of a majority of the whole Board of Directors.
SECTION 6.6 THE CHAIRMAN OF THE BOARD. The chairman of the board, if
there be one, shall preside at all meetings of the stockholders and of the
Board of Directors and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION 6.7 THE VICE CHAIRMAN OF THE BOARD. The vice chairman of the
board, if there be one, shall, in the absence or disability of the chairman of
the board, preside at all meetings of the stockholders and of the Board of
Directors and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
SECTION 6.8 THE PRESIDENT. The president shall be the chief executive
officer of the Corporation and, subject to the provisions of these By-Laws,
shall have general supervision of the affairs of the Corporation and shall have
general and active control of all its business. In the absence of the chairman
of the board and vice chairman of the board, or if such officers shall not have
been elected or be serving, the president shall preside when present at
meetings of the stockholders and the Board of Directors. The president shall
have general authority to execute bonds, deeds and contracts in the name of the
Corporation and to affix the corporate seal thereto; to sign stock
certificates; to cause the employment or appointment of such employees and
agents of the Corporation as the proper conduct of operations may require and
to fix their compensation, subject to the provisions of these By-Laws; to
remove or suspend any employee or agent who shall have been employed or
appointed under authority of the president or under authority of any
subordinate officer; to suspend for cause any officer subordinate to the
president, pending final action by the authority which shall have elected or
appointed such officer; and in general to exercise all the powers usually
appertaining to the office of president of a corporation, except as otherwise
provided by statute, the Certificate of Incorporation or these By-Laws.
SECTION 6.9 THE VICE PRESIDENTS. The vice president, or if there shall
be more than one, the vice presidents in the order designated by the Board of
Directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president. In addition, each vice
president shall have the general authority to execute and deliver contracts and
other documents in the name and on behalf of the Corporation in connection with
transactions in the ordinary course of the Corporation's business, and affix
the Corporate seal thereto. Each vice president shall generally assist the
president and shall perform such other duties and have such other powers not
inconsistent with these By-Laws as the Board of Directors or the president may
from time to time prescribe.
SECTION 6.10 THE CHIEF FINANCIAL OFFICER. The chief financial officer
shall have overall responsibility for all accounting and financial matters of
the Corporation. He shall have direct responsibility for all matters pertaining
to the finances of the Corporation and will develop the necessary financial
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resources to ensure that adequate funds are available to meet the requirements
of the Corporation. He shall ensure that all matters of taxation are handled on
a timely basis and in a manner which minimizes the Corporation's tax burden. He
will determine that the assets of the Corporation are properly protected and
will assure the adequacy of the Corporation's system of internal controls.
SECTION 6.11 THE SECRETARY. The secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or the president, under whose supervision he shall be. He
shall keep in safe custody the seal of the Corporation and he, or an assistant
secretary, shall have the authority to affix the same to any instrument
requiring it and, when so affixed, it may be attested by his signature or by
the signature of such assistant secretary. The secretary shall generally
perform all the duties usually appertaining to the office of secretary of a
corporation.
SECTION 6.12 ASSISTANT SECRETARIES. The assistant secretary, or if there
be more than one, the assistant secretaries in the order designated by the
Board of Directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary. Each assistant
secretary shall perform such other duties and have such other powers not
inconsistent with these By-Laws as the Board of Directors or the secretary may
from time to time prescribe.
SECTION 6.13 THE TREASURER. Under the general direction of the chief
financial officer, the treasurer shall have the care and custody of all monies
and securities of the Corporation; shall deposit such funds in and with such
depositories as shall be selected in accordance with procedure established by
the Board of Directors; shall advise upon all terms of credit granted by the
Corporation; and shall be responsible for the collection of all its accounts
and shall cause to be kept full and accurate accounts of all receipts and
disbursements of the Corporation. He shall have the power to endorse for
deposit or collection or otherwise all checks, drafts, notes, bills of exchange
or other commercial paper payable to the Corporation and to give proper
receipts or discharges for all payments to the Corporation. The treasurer shall
generally perform all the duties usually appertaining to the office of
treasurer of a corporation.
SECTION 6.14 THE CONTROLLER. Under the general direction of the chief
financial officer, the controller shall be the chief accounting officer of the
Corporation and shall have active control of and shall be responsible for all
matters pertaining to the accounts of the Corporation. He shall audit all
payrolls and vouchers of the Corporation and shall direct the manner of
certifying the same; shall supervise the manner of keeping all vouchers for
payments by the Corporation and all other documents relating to such payments;
shall receive and consolidate all operating and financial statements of the
Corporation and its various departments; shall have supervision of the books of
account of the Corporation, their arrangement and classification; shall
supervise the accounting practices of the Corporation; and shall be the primary
interface with the external auditors. In addition, he shall be responsible for
the preparation and timely filing of all local, state and federal tax returns,
and he shall have the authority to execute and deliver such tax returns and
related documents in the name and on behalf of the Corporation. He shall ensure
that all financial information furnished to the directors, stockholders,
regulatory agencies and to the public is accurate, timely and is prepared in
accordance with generally accepted accounting principles. He will establish and
maintain a system of internal controls that complies with the various legal and
regulatory requirements and meets accepted professional and accounting
standards. The controller shall generally perform all duties usually
appertaining to the office of the controller of a corporation.
SECTION 6.15 ASSISTANT TREASURERS. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order designated by the
Board of Directors, shall, in the absence or disability
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of the treasurer, perform the duties and exercise the powers of the treasurer.
Each assistant treasurer shall perform such other duties and have such other
powers not inconsistent with these By-Laws as the Board of Directors or the
treasurer may from time to time prescribe.
SECTION 6.16 DESIGNATION BY PRESIDENT. The Board of Directors may
delegate to the president of the Corporation the authority to make any or all
of the designations referred to in Sections 6.9, 6.12 and 6.15.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 7.1 EXECUTION. Every holder of stock in the Corporation shall
be entitled to have a certificate signed by, or in the name of the Corporation
by the chairman or vice chairman of the Board of Directors, or the president or
a vice president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the Corporation certifying the number of
shares owned by him in the Corporation. If the Corporation shall be authorized
to issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may
be set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Any of or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum and with
such coverage as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
SECTION 7.3 TRANSFERS OF STOCK. Shares of stock shall be transferable
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney.
SECTION 7.4 REGISTERED STOCKHOLDERS. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends and to vote as such owner and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of the State of Delaware.
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ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 DIVIDENDS. Dividends upon the stock of the Corporation,
subject to the provisions of the statutes and the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of stock of any class, subject to the provisions of the statutes and the
Certificate of Incorporation.
SECTION 8.2 RESERVES. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for working capital or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think in the best
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
SECTION 8.3 SURETY BONDS. The Board of Directors may require, from time
to time, that such officers, agents or employees of the Corporation as the
Board of Directors may direct, be bonded for the faithful performance of their
duties in such amounts and by such surety companies as the Board of Directors
may determine. The premium on such bonds shall be paid by the Corporation, and
the bonds so furnished shall be in the custody of the secretary or treasurer.
SECTION 8.4 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 8.5 FISCAL YEAR. The fiscal year of the Corporation shall end
on October 31 in each year.
SECTION 8.6 SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be imprinted, impressed or affixed or otherwise reproduced.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER
THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 9.3, the
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact
that he is or was a director or officer of the Corporation, or (while a
director or officer of the Corporation) is or was an employee or agent of the
Corporation, or (while a director or officer of the Corporation) is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
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interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interest of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 9.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Subject to Section 9.3, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the Corporation, or (while a director or
officer of the Corporation) is or was an employee or agent of the Corporation,
or (while a director or officer of the Corporation) is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation; except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
SECTION 9.3 AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article IX (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of a person is proper in the circumstances because he is a
person specified in Section 9.1 or 9.2 and he has met the applicable standard
of conduct set forth in Section 9.1 or Section 9.2, as the case may be. Such
determination shall be made (a) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders. To the extent, however, that a
person specified in Section 9 . 1 or 9.2 has been successful on the merits or
otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
SECTION 9.4 GOOD FAITH DEFINED. For purposes of any determination under
Section 9.3, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise, in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise, or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 9.4 shall
mean any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 9.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 9.1 or 9.2, as the case may be.
SECTION 9.5 INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 9.3, and notwithstanding the
absence of any determination thereunder, any person may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise permissible under Section 9.1 and 9.2. The basis of such
indemnification by a court shall
13
<PAGE> 14
be a determination by such court that indemnification of a person is proper in
the circumstances because he is a person specified in Section 9.1 or 9.2 and he
has met the applicable standards of conduct set forth in Sections 9.1 or 9.2,
as the case may be. Notice of any application for indemnification pursuant to
this Section 9.5 shall be given to the Corporation promptly upon the filing of
such application.
SECTION 9.6 EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a person
specified in Section 9.1 or 9.2 in defending or investigating a threatened or
pending action, suit or proceeding shall be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article IX.
SECTION 9.7 NON-EXCLUSIVITY OF INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other Sections
of this Article IX shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested
directors or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, it being the
policy of the Corporation that indemnification of the persons specified in
Sections 9.1 and 9.2 shall be made to the fullest extent permitted by law. The
provisions of this Article IX shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 9.1 or 9.2 but
whom the Corporation has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of Delaware, or
otherwise.
SECTION 9.8 INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power or
the obligation to indemnify him against such liability under the provisions of
this Article IX.
SECTION 9.9 MEANING OF CERTAIN TERMS FOR PURPOSES OF ARTICLE IX. For
purposes of this Article IX, references to "the Corporation" shall include any
successor corporation to the Corporation in a consolidation or merger;
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries. For purposes of this Article IX, a
person who acted in good faith and in a manner he reasonably believed to be in
the interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article IX.
SECTION 9.10 SURVIVAL. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article IX shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
14
<PAGE> 15
ARTICLE X
AMENDMENTS
SECTION 10.1 BY-LAWS. The Board of Directors is authorized and
empowered without the assent or vote of the stockholders to make, alter or
repeal the By-Laws of the Corporation. By-Laws may be made, altered or repealed
at any regular or special meeting of the Board of Directors.
I hereby certify that the foregoing is a true and correct copy of the By-Laws
of Recognition International Inc.
15
<PAGE> 1
EXHIBIT 10.7
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
October 31, 1994 (the "Amendment"), by and among RECOGNITION INTERNATIONAL
INC., a Delaware corporation (the "Borrower"), THE FIRST NATIONAL BANK OF
BOSTON, FIRST INTERSTATE BANK OF TEXAS, N.A., NATIONAL BANK OF CANADA, NEW YORK
BRANCH and the other lending institutions from time to time listed on Schedule
1 to the Credit Agreement (as hereinafter defined) (collectively, the "Banks")
and THE FIRST NATIONAL BANK OF BOSTON as agent (the "Agent") for itself and the
other Banks, amending certain provisions of the Amended and Restated Credit
Agreement dated as of July 29, 1993 (as amended and in effect from time to
time, the "Credit Agreement") by and among the Borrower, the Banks and the
Agent. Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Borrower, the Banks and the Agent have agreed to modify
certain terms and conditions of the Credit Agreement as specifically set forth
in this Amendment; and
NOW, THEREFORE, in consideration of the mutual agreements contained in the
Credit Agreement and herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT. Section
10 of the Credit Agreement is hereby amended as follows:
(a) Section 10.1 of the Credit Agreement is hereby amended by deleting the
text of Section 10.1 in its entirety and restating it as follows:
SECTION 10.1. OPERATING CASH FLOW TO TOTAL INTEREST EXPENSE.
The Borrower will not permit the ratio of Consolidated Operating Cash
Flow to Consolidated Total Interest Expense (a) for the fiscal quarter
ending October 31, 1994 to be less than 1.50:1.00 and (b) for any
period of two consecutive fiscal quarters (treated as a single
accounting period) ending on any date set forth in the table below to
be less than the ratio set forth opposite such date in such table:
<TABLE>
<S> <C>
January 31, 1995 1.10:1.00
April 30, 1995 1.35:1.00
July 31, 1995 2.50:1.00
Thereafter 3.00:1.00
</TABLE>
<PAGE> 2
-2-
provided, however, for purposes of calculating Consolidated
Operating Cash Flow for this Section 10.1, there shall be added back
to Consolidated Operating Cash Flow in each fiscal quarter (to the
extent not previously added in pursuant to such definition) all
restructuring charges and extraordinary nonrecurring items of expense
of the Borrower and its Subsidiaries for such fiscal quarter.
(b) Section 10.2 of the Credit Agreement is hereby amended by
deleting the text of Section 10.2 in its entirety and restating it as follows:
"SECTION 10.2 FUNDED DEBT TO OPERATING CASH FLOW. The
Borrower will not permit the ratio of Funded Debt to Consolidated
Operating Cash Flow for (a) the fiscal quarter ending October 31,
1994; (b) the two consecutive fiscal quarters (treated as a single
accounting period) ending January 31, 1995; (c) the three consecutive
fiscal quarters (treated as a single accounting period) ending April
30, 1995; and (d) each successive period of four consecutive fiscal
quarters (treated as a single accounting period) commencing with the
four quarter period ending July 31, 1995, to exceed 3.00:1.00."
(c) Section 10.3 of the Credit Agreement is hereby amended by (a)
deleting the amount "$47,000,000" from the first sentence thereof and
substituting in place thereof the amount "$40,000,000"; and (b) deleting the
date "April 30, 1993" in each place in which it appears in Sections 10.3(b) and
(c) of the Credit Agreement and substituting in each place thereof the date
"October 31, 1994".
(d) Section 10.4 of the Credit Agreement is hereby amended by
deleting the ratio of "1.50:1.00" which appears in the first sentence of
Section 10.4 and substituting in place thereof the ratio "1.75:1.00".
(e) Section 10.5 of the Credit Agreement is hereby amended by
deleting the text of Section 10.5 in its entirety and substituting in place
thereof the words "Intentionally Omitted".
(f) Section 10.6 of the Credit Agreement is hereby amended by
deleting the text of Section 10.6 in its entirety and restating it as follows:
"SECTION 10.6. NET INCOME. The Borrower will not permit (a)
Consolidated Net Income to be less than $1.00 for the fiscal quarter
ending October 31, 1994; (b) Consolidated Net Deficit to be more than
$2,000,000 for the fiscal quarter ending January 31, 1995; and (c)
Consolidated Net Income to be less than $1.00 for any fiscal quarter
thereafter."
SECTION 2. CONDITIONS TO EFFECTIVENESS. This Amendment shall
not become effective until the Agent receives (a) a counterpart of this
Amendment executed by the Borrower, the Guarantors (as hereinafter defined),
the Banks and the Agent and (b) payment by the Borrower of an amendment fee
for the pro rata accounts of the Banks in an amount of $31,250.
<PAGE> 3
-3-
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
reaffirms and repeats, on and as of the date hereof, each of the
representations and warranties made by it in Section 7 of the Credit Agreement,
other than those representations and warranties which, if repeated as of the
date hereof, would be untrue or inaccurate and which have been waived in
writing by the Agent and the Banks; provided, that all references therein to
the Credit Agreement shall refer to the Credit Agreement as amended hereby.
SECTION 4. RATIFICATION, ETC. Except as expressly amended
hereby, the Credit Agreement and all documents, instruments and agreements
related thereto, including, but not limited to the Security Documents, are
hereby ratified and confirmed in all respects and shall continue in full force
and effect. The Credit Agreement and this Amendment shall be read and
construed as a single agreement. All references in the Credit Agreement or any
related agreement or instrument to the Credit Agreement shall hereafter refer
to the Credit Agreement as amended hereby.
SECTION 5. NO WAIVER. Nothing contained herein shall constitute
a waiver of, impair or otherwise affect any Obligations, any other obligation
of the Borrower or any rights of the Banks and the Agent consequent thereon.
SECTION 6. COUNTERPARTS. This Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
a document under seal as of the date first above written.
RECOGNITION INTERNATIONAL INC.
By: /s/ Thomas E. Hoefert
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, INDIVIDUALLY AND AS AGENT
By: /s/ Elizabeth M. Passela
Title: Director
FIRST INTERSTATE BANK OF
TEXAS, N.A.
By: /s/ Steve Wood
Title: Senior Vice President
NATIONAL BANK OF CANADA,
NEW YORK BRANCH
By: /s/ Larry L. Sears
Title: Group Vice President
By: /s/ William W. Handley
Title: Vice President
<PAGE> 5
-5-
RATIFICATION OF GUARANTY
Each of undersigned guarantors (the "Guarantors") under the Guaranty
and the Canadian Guaranty hereby acknowledges and consents to the foregoing
Amendment as of October 31, 1994 and confirms and ratifies all of its
obligations under the Guaranty and the Canadian Guaranty.
RECOGNITION JAPAN INC.
By: /s/ Robert M. Swartz
Title: Vice President
RECOGNITION CANADA INC.
By: /s/ Robert M. Swartz
Title: Vice President
<PAGE> 1
[RECOGNITION LETTERHEAD]
EXHIBIT 10.23
May 12, 1992
Mr. Thomas D. Neitzel
124 Deann
Coppell, TX 75019
REFERENCE: Recognition Equipment Incorporated
Executive Benefit Plan
Dear Mr. Neitzel:
On December 9, 1991, the Compensation Committee of the Board of Directors
designated you as a participant in Recognition's Executive Benefit Plan, as
amended and restated as of December 1, 1984 (the "Plan"). Under the terms of
the Plan, benefits are determined by reference to "Benefit Payment" and
"Disability Payment" which are defined in the Plan and which are required to be
set forth in this letter of acceptance. Your Benefit Payment is $6,000 and
your Disability Payment is $3,362.
Your participation in the Plan is subject to all of the terms and conditions of
the Plan, a copy of which has been attached to this letter, and the Plan shall
control in the event of any conflict between the Plan and this letter, and
shall control as to any matters not contained in this letter. Notwithstanding
the foregoing, the Compensation Committee specified that your "Vested
Percentage" as determined pursuant to Section 6.1 of the Plan shall be
determined as if you had become a Plan participant June 1, 1990, the date that
you became an Executive Officer of the Company.
Your agreement to participate in the Plan, as indicated by your signature in
the appropriate space below, shall constitute your acknowledgement that your
participation is subject to all of the terms and conditions of the Plan
including, but not limited to, the following:
a. your participation in the Plan may be terminated at any time
in accordance with the provisions thereof;
b. you shall not be entitled to receive any benefit by reason of
your participation in the Plan except as may be provided from
time to time under the Plan;
c. your designation as a participant to receive any benefit by
reason of your participation in the Plan does not give you any
right to be retained in the employ of the Company or any of
the Company's subsidiaries that you would not have if you had
not been so designated;
d. your interest in the Plan may not be anticipated, alienated,
sold, transferred, assigned, pledged, encumbered or charged in
any manner for any purpose;
<PAGE> 2
[LOGO]
Mr. Thomas D. Neitzel
May 12, 1992
Page 2
e. the benefits under the Plan constitute general obligations of
the Company and its subsidiaries and you shall have no right
to have any amounts in respect of such benefits set aside or
held in trust nor any right to have any benefit that may
become payable to you pursuant to the Plan paid out of any
particular assets of the Company or its subsidiaries;
f. your right to payment of benefits under the Plan will
terminate if you engage in certain competitive activities
within five years from the date you become entitled to receive
benefits;
g. the Plan may be amended in any respect at any time in
accordance with the provisions thereof, without your consent,
and, in such event, your rights shall be controlled by the
Plan as so amended; and
h. the Plan may be terminated at any time in accordance with the
provisions thereof, and, in such event, you shall have no
further rights under the Plan except as may be provided in
Sections 7.1 or 8.2 of the Plan.
Your agreement to participate shall also constitute your acknowledgement that
you have received the copy of the Plan attached hereto and that you have read
and understand all of the provisions of the Plan, and your consent to your
designation as a participant in the Plan.
If you agree to the foregoing, please sign both the original and the copy of
this letter in the space provided, retain the original of this letter with the
Plan attached, and return the copy to the Compensation Committee. In addition,
please complete and return with the copy of this letter, the attached form of
Beneficiary Designation.
RECOGNITION EQUIPMENT INCORPORATED
By /s/ Robert Vanourek
------------------------------------
Robert Vanourek
President and Chief Executive Officer
Agreed To and Accepted By:
/s/ Thomas D. Neitzel 5-20-92
------------------------------------
(Name) (Date)
<PAGE> 3
[RECOGNITION LETTERHEAD]
January 12, 1994
Mr. Thomas D. Neitzel
124 Deann
Coppell, TX 75019
REFERENCE: Recognition International Inc.
Executive Benefit Plan
Dear Mr. Neitzel:
The Compensation Committee of the Board of Directors has previously designated
you as a participant in Recognition's Executive Benefit Plan, as amended and
restated as of December 1, 1984 and as further amended on December 10, 1992
(the "Plan"). Under the terms of the Plan, benefits are determined by
reference to "Benefit Payment" and "Disability Payment" which are defined in
the Plan and which are required to be set forth in a letter of acceptance.
I am pleased to inform you that, effective December 5, 1993, the Compensation
Committee changed the amount of your "Benefit Payment" from $6,000 per month to
an amount per month equal to 40% of the sum of (i) your monthly base salary in
effect at the date of your retirement, death or other termination of employment
plus (ii) one twelfth of your targeted bonus in effect at such date under the
Executive Bonus Plan (or other similar bonus plan, if any, in effect at such
date).
Except for the above described change, all other terms and conditions of your
participation in the Plan shall remain unchanged and in full force and effect.
If you agree to the foregoing, please sign this letter and the enclosed copy of
this letter in the space provided, retain the original of this letter, and
return the copy to the Corporate Secretary, Mail Station 21.
RECOGNITION INTERNATIONAL INC.
By /s/ Carol S. Lyon
----------------------------------------------
Carol S. Lyon
Vice President and Corporate Secretary
AGREED TO AND ACCEPTED BY:
/s/ Thomas D. Neitzel 1/15/94
- ----------------------------------------------
(Signature) (Date)
<PAGE> 1
EXHIBIT 10.26
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into as of the 12th day of October,
1990, by and between Recognition Equipment Incorporated, herein called the
Company and Thomas D. Neitzel, II, herein called the Employee.
WHEREAS, the Company desires to assist the Employee in providing
protection for the Employee's spouse, children, and other heirs in the event of
the Employee's death while employed by the Company;
NOW THEREFORE, in consideration of the covenants herein contained, it
is mutually agreed as follows:
(1) The Employee will purchase a life insurance policy on the Employee's
life issued by the Union Central Life Insurance Company (the
"Insurer") in the face amount of $200,000. The Employee shall have
all incidents of ownership in the policy, including the right to
designate the beneficiary of the proceeds of the policy and the manner
in which the proceeds are to be paid, except to the extent assigned by
the Employee to the Company pursuant to the collateral assignment
referred to in paragraph (3) below.
(2) The Company will pay the premiums on the policy each year to Union
Central Life Insurance Company provided that the Company may, at any
time in its absolute discretion, discontinue making such payments upon
giving the Employee written notice of such discontinuance at least 90
days prior to the date any premium on such policy is due.
(3) The total amount of premiums paid by the Company to the Insurer shall
constitute a debt owed by the Employee to the Company. As security
for the repayment of this debt, the Employee will execute and deliver
to the Company a collateral assignment of the policy.
(4) Upon the death of the Employee, this agreement shall terminate and the
Company shall receive so much of the proceeds of the policy as shall
be necessary to satisfy the then outstanding debt, if any, of the
Employee under this agreement. The remainder of the proceeds shall be
paid to the beneficiary designated by the Employee.
(5) In the event the Company gives notice to the Employee of its decision
to discontinue making premium payments pursuant to paragraph (2)
above, the Employee shall, within the notice
<PAGE> 2
period provided for in said paragraph (2), at the Employee's option:
(i) pay to the Company, or cause another person or entity to pay
to the Company, the amount of the debt then owed by the
Employee to the Company pursuant to paragraph (3) above, or
(ii) surrender the policy to the Company and assign to the Company
all of the Employee's incidents of ownership in the policy.
In the event the Employee exercises the option set forth in (i) above,
the Company will release the collateral assignment and deliver the
policy to the Employee. In the event the Employee fails to exercise
either option set forth above, the Employee shall be conclusively
deemed to have exercised the option set forth in (ii) above and the
Company shall have the right to surrender the policy for its cash
value to satisfy the debt.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on
the day and year first above written.
/s/ Thomas D. Neitzel, II
------------------------------------
Thomas D. Neitzel, II
Employee
RECOGNITION EQUIPMENT INCORPORATED
By: /s/ Tom Hurley
------------------------------------
Thomas M. Hurley
Co-Chief Executive Officer
ATTEST:
/s/ Carol S. Lyon
- ---------------------------
Carol S. Lyon, Secretary
<PAGE> 3
COLLATERAL ASSIGNMENT
INSURER: Union Central Life Insurance Company
POLICY NUMBER: 4221514
POLICY OWNER: Thomas D. Neitzel, II (hereinafter referred to as the
"Assignor")
ASSIGNEE: Recognition Equipment Incorporated
A. FOR VALUE RECEIVED, the Assignor hereby assigns, and sets over to the
Assignee, its successors and assigns, the above policy and any
supplementary contracts issued in connection therewith (said policy
and contracts being herein called the "Policy"), subject to all the
terms and conditions of the Policy and to all superior liens, if any,
which the Insurer may have against the Policy. The Assignor by this
instrument agrees and the Assignee by the acceptance of this
assignment agrees to the conditions and provisions herein set forth
and further acknowledges that this assignment does not transfer to the
Assignee any incidents of ownership but merely grants to the Assignee
a lien against the Policy for the amount of the indebtedness owing by
the Assignor to the Assignee.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in this
assignment and pass to the Assignee by virtue hereof:
1. The right to collect from the Insurer the net proceeds of the
Policy when it becomes a claim by reason of death or maturity;
and
2. The right to claim all distributions or shares of surplus,
dividend deposits or additions to the Policy now or hereafter
made or apportioned thereto, and to exercise any and all
options contained in the Policy with respect thereto, provided
that unless and until the Assignee shall notify the Insurer in
writing to the contrary, the distributions or shares of
surplus, dividend deposits and additions shall continue on the
plan in force at the time of this assignment.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this assignment and do not pass to the Assignee by virtue hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance;
2. The right to designate and change the beneficiary;
<PAGE> 4
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer; and
4. The right to obtain one or more loans or advances on the
Policy although the Assignee may borrow an amount equal to the
amount of premiums paid by the Assignee up to the cash
surrender value less any Policy loans and interest thereon.
D. Only the Assignor has the right to pledge the Policy for collateral
purposes.
E. This assignment is made and the Policy is to be held as collateral
security for any and all liabilities with respect to the Policy of the
Assignor to the Assignee, either now existing or that may hereafter
arise pursuant to the Split Dollar Agreement entered into between
Assignor and Assignee of even date herewith (all of which liabilities
secured or to become secured are herein called "Liabilities").
F. The Assignee covenants and agrees with the Assignor as follows:
1. That any balance of sums received under the Policy from the
Insurer remaining after payment of the then existing
Liabilities, matured or unmatured, shall be paid by the
Assignee to the persons entitled thereto under the terms of
the Policy had this assignment not been executed.
2. That the Assignee will, upon request, forward without
unreasonable delay to the Insurer the Policy for endorsement
of any designation or change of beneficiary or any election of
an optional mode of settlement.
G. The Insurer is hereby authorized to recognize the Assignee's claims to
rights hereunder without investigating the reason for any action taken
by the Assignee, or the validity or the amount of the Liabilities or
the existence of any default therein, or the application to be made by
the Assignee of any amounts to be paid to the Assignee. The sole
signature of the Assignee shall be sufficient for the exercise of any
rights as noted herein under the Policy assigned hereby and the sole
receipt of the Assignee for any sums received shall be a full
discharge and release therefor to the Insurer. Checks for all or part
of the sums payable under the Policy and assigned herein shall be
drawn to the exclusive order of the Assignee, if, when, and in such
amounts as may be requested by the Assignee.
H. The Assignee shall be under no obligation to pay any premium, or the
principal of or interest on any loans or advances on the Policy, or
any other charges on the Policy, but any such amounts so paid by the
Assignee from its own funds shall become part of the Liabilities
hereby secured.
<PAGE> 5
I. The Assignee may release any party primarily or secondarily liable for
any of the Liabilities, or may apply to the Liabilities in such order
as the Assignee shall determine the proceeds of the Policy hereby
assigned or any amount received on account of the Policy by the
exercise of any right permitted under this assignment, without
resorting or regard to other security.
J. In the event of any conflict between the provisions of this assignment
and any other evidence of the Liability, with respect to the Policy or
rights of collateral security therein, the provisions of this
assignment shall prevail.
K. Each of the undersigned declares that no proceedings in bankruptcy are
pending against the Assignor and that Assignor's property is not
subject to any assignment for the benefit of creditors.
Signed at Irving, Texas effective as of the 12th day of October, 1990.
/s/ Linda Sims /s/ Thomas D. Neitzel, II
- -------------------- --------------------------------------
Witness Thomas D. Neitzel, II, Assignor
RECOGNITION EQUIPMENT INCORPORATED,
Assignee
/s/ Carol S. Lyon By: /s/ Tom Hurley
- -------------------- --------------------------------------
Secretary Thomas M. Hurley
Co-Chief Executive Officer
DECLARATION A
I, Helen Kay Stephens, Notary Public for the State of Texas of
Name in full of Notary Public, Justice of Peace, etc.
Dallas, Dallas County, Texas duly commissioned and qualified,
City, Town, etc., and State
do hereby certify that on this 30th day of October, 1990, before me
personally appeared Thomas D. Neitzel, II known to
Policyholder
me to be the individual described in the Collateral Assignment on the front of
this form and who executed such assignment and, having been informed by me of
the contents of it, and, having been duly sworn, acknowledged to me that he
executed the same freely and voluntarily for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF I have hereunto set my hand and official seal the day and
year last above written.
/s/ Helen Kay Stephens (Seal)
--------------------------------------
Notary Public, Justice of Peace, etc.
My commission expires December 4, 1992
<PAGE> 1
EXHIBIT 10.29
C O N F I D E N T I A L
ASSIGNMENT OF TARGETED BONUS THOMAS D.NEITZEL
UNDER THE RECOGNITION INTERNATIONAL INC.
EXECUTIVE BONUS PLAN (THE "PLAN")
1. TARGETED BONUS. Your Targeted Bonus for the Plan Year ending
October 31, 1994 , as specified by the Compensation Committee, is Eighty
thousand DOLLARS ($ 80,000.00) which may be earned, at the times and on the
terms and conditions stated in the Plan and this Assignment, based upon the
results achieved by the Company during that Plan Year.
2. DETERMINATION OF BONUS EARNED. Twenty-five percent of your
Targeted Bonus will be allocated to the achievement of each of the four
Corporate Objectives specified in Exhibit "A" attached hereto and incorporated
by reference herein. The amount of the Targeted Bonus allocated to each such
Objective will be earned as specified in Exhibit "A".
3. THE PLAN. The Plan is incorporated herein by reference, and
made a part hereof as if fully set forth herein. The Plan will control in the
event of any conflict between the Plan and any matter set forth herein, and
will control as to any matters not contained in this Bonus Assignment. Terms
used herein which are not defined here will have the same meanings as are
assigned to such terms in the Plan.
Please sign both copies of this Bonus Assignment in the space below
and return one to Mail Station 21.
I acknowledge that I have received and reviewed a copy of the
Recognition International Inc. Executive Bonus Plan and this Bonus Assignment
and agree to be bound thereby.
PLAN PARTICIPANT
/s/ Thomas D. Neitzel 6-16-94
- -------------------------------------------
Signature (Date)
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<PAGE> 2
EXHIBIT "A"
EXECUTIVE BONUS PLAN
1994 CORPORATE OBJECTIVES
Twenty-five percent of the Targeted Bonus shall be allocated to the
achievement of each of the four corporate objectives specified below:
1. ORDERS
2. CASH BALANCE
3. NET INCOME
4. NEW PRODUCT MILESTONES
As used herein, "Orders", "Cash Balance" and "Net Income" shall each
have the meaning specified in the Plan. The Committee will determine the
specific dollar amount targets which must be achieved in order to earn a bonus
at "Minimum", "Target" and "Maximum" levels and will determine the "New Product
Milestones" and their respective target dates which must be achieved in order
to earn a bonus with respect thereto. The targets for Orders, Cash Balance and
New Product Milestones will be published by the Company. The Net Income targets
will be based upon the Company's financial plan for the fiscal year as approved
by the Committee for purposes of this Plan.
For each of the Orders, Cash Balance and Net Income corporate
objectives, if the Company exceeds the level of achievement for the Target
level, the participant will earn 100% of the portion of his Targeted Bonus
allocated to such objective. Fifty percent of such allocated Targeted Bonus
amount will be earned if the Minimum level of achievement met, and 150% of such
allocated Targeted Bonus amount will be earned if the Maximum level is met.
The percentage earned for achievement between the Minimum and Target levels, or
between the Target and Maximum levels, will be calculated on a straight line
basis. In the event the Minimum level of achievement for a corporate objective
is not reached, no part of the Targeted Bonus allocated to such objective shall
be earned by the participant and in no event may a participant earn more than
150% of the portion of the Targeted Bonus allocated to any objective,
regardless of the actual level of achievement.
One hundred percent of the portion of the Targeted Bonus allocated to
achievement of New Product Milestones shall be earned if all of the New Product
Milestones are achieved on or before the target dates established by the
Committee. If some but not all of the Milestones are met by their target
dates, the participant will earn 10 percent of that portion of the Targeted
Bonus allocated to New Product Milestones for each New Product Milestone which
is met by the specified date. If none of the New Product Milestones are
achieved by the specified dates, no such amount shall be earned.
The percentage of the portion of Targeted Bonus earned for each
corporate objective will be determined separately for each objective.
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<PAGE> 1
EXHIBIT 10.30
TO: THE MEMBERS OF THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS OF
RECOGNITION INTERNATIONAL INC.
Re: Assignment of Targeted Bonus for the Plan Year ending
October 31, 1994 under the Recognition International Inc. Executive
Bonus Plan (the "Plan")
Gentlemen:
Please be advised that I hereby waive any right that I may have either now, or
subsequent to the Plan Year ending October 31, 1994, to receive any portion of
my Targeted Bonus for such Plan Year under my Assignment of Targeted Bonus or
under the Plan.
PLAN PARTICIPANT
/s/ Robert Vanourek 9/26/94 /s/ JM Bethmann 9/29/94
- -------------------------------- -------------------------------------
Robert Vanourek (Date) James M. Bethmann (Date)
/s/ D Constantine 9/30/94 /s/ T.R. Frederick 10/3/94
- -------------------------------- -------------------------------------
Dennis R. Constantine (Date) Thomas R. Frederick (Date)
/s/ Thomas Hoefert 9-30-94 /s/ LH Lattig 10/3/94
- -------------------------------- -------------------------------------
Thomas E. Hoefert (Date) Larry H. Lattig (Date)
/s/ Carol S. Lyon 9-30-94 /s/ Thomas A. Loose 9/29/94
- -------------------------------- -------------------------------------
Carol S. Lyon (Date) Thomas A. Loose (Date)
/s/ Thomas D. Neitzel 10-3-94 /s/ Robert M. Swartz 9/27/94
- -------------------------------- -------------------------------------
Thomas D. Neitzel (Date) Robert M. Swartz (Date)
<PAGE> 1
EXHIBIT 10.31
RECOGNITION INTERNATIONAL INC.
EXECUTIVE BONUS PLAN
As Amended and Restated as of November 1, 1994
The purposes of this Executive Bonus Plan (the "Plan") are to provide
an incentive for key executives of the Company (as defined below) which is
related to the attainment of Company performance goals; to promote teamwork
among the key executives of the Company by basing the earning of Bonuses on
overall Company goals; and to provide such key executives an incentive to (i)
remain in the employ of the Company, (ii) improve their performance of duties
for the Company, (iii) devote their best efforts to the benefit of the Company,
and (iv) provide a method of rewarding key executives of the Company 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) "Bonus" shall mean cash compensation earned with respect to a
particular Plan Year pursuant to an Agreement.
(b) "Bonus Assignment" shall mean the Targeted Bonus Assignment sheet
for an specific participant specifying the Targeted Bonus assigned to
that participant in the Plan as described in Section 1.3 hereof.
(c) "Cause" shall mean fraud, embezzlement or theft constituting a
felony; gross inattention to duties to the Company (other than by
reason of illness, accident, or other physical or mental incapacity);
or any act intentionally against the interests of the Company which
causes it material injury.
(d) "Committee" shall mean the Compensation Committee of the Board of
Directors of Recognition 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.
(e) "Company" shall mean Recognition International Inc. and its
Subsidiaries.
(f) "Cash Balance" for any Plan Year shall mean the total of cash,
cash equivalents and short-term investments as of the end of such Plan
Year as reported in the Company's annual published financial
statements for such Plan Year, as adjusted to reflect the exclusion of
items which in the opinion of the Committee, in its absolute
discretion, abnormally affect cash flow of the Company for such Plan
Year.
<PAGE> 2
(g) "Earnings per Share" for a particular Plan Year shall mean
the primary earnings per share on income before extraordinary items as
reported in the Company's annual published financial statements for
such Plan Year, as adjusted to reflect the exclusion of items of
income or expense which in the opinion of the Committee, in its
absolute discretion, abnormally affect the results of operations of
the Company for such Plan Year.
(h) "Net Income" for a particular Plan Year shall mean the income
before extraordinary items for such Plan Year as reported in the
Company's annual published financial statements for such Plan Year, as
adjusted to reflect the exclusion of items of income or expense which
in the opinion of the Committee, in its absolute discretion,
abnormally affect the results of operations of the Company for such
Plan Year.
(i) "Orders" shall mean the original purchase value of orders entered
into backlog for a particular Plan Year (excluding the value of orders
entered and then removed from backlog for such Plan Year) pursuant to
the Company's Functional Procedure No. C-1, subject: "Order Entry and
Backlog", as the same may be amended from time to time.
(j) "Plan Year" shall mean the fiscal year of the Company ending on
October 31, 1987 and each subsequent fiscal year that ends during the
term of the Plan.
(k) "Recognition" shall mean Recognition International Inc.
(l) "Targeted Bonus" shall mean a targeted amount of cash
compensation for a particular participant in the Plan for a particular
Plan Year determined by the Committee and set forth in a Bonus
Assignment.
(m) "Subsidiary" shall mean any corporation 50% or more of the
outstanding shares of Voting Stock of which is owned, directly or
indirectly, by Recognition or by one or more other Subsidiaries or by
Recognition and one or more other Subsidiaries.
(n) "Voting Stock" shall mean stock of any class or classes (however
designated) having ordinary voting power for the election of a
majority of the Board of Directors of a corporation, other than stock
having such power only by reason of the happening of a contingency
(unless such contingency shall have occurred and is continuing).
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<PAGE> 3
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 of the Bonus Assignments, which
provisions shall be consistent with the terms of the Plan but need not be
identical in all Bonus Assignments. The Committee shall have the authority, in
its discretion, to construe and interpret the Plan and such respective Bonus
Assignments and to correct any defect or supply any omission or reconcile any
inconsistency in a Bonus Assignment and to make all other determinations
necessary or advisable for administering the Plan. 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 Bonus granted under it.
Section 1.2 ELIGIBILITY. The key executives of the Company 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 participate in the Plan. From such eligible
executives, the Committee shall, from time to time, choose those, if any, who
will be entitled to participate in the Plan with respect to a particular Plan
Year. If an executive is chosen to participate in the Plan with respect to a
particular Plan Year after the commencement of such Plan Year, the amount of
such person's Targeted Bonus may reflect the shorter period of such executive's
participation as determined by the Committee in its absolute discretion. The
adoption of the Plan shall not be deemed to give any person a right to receive
the payment of any Bonus under the Plan.
Section 1.3 BONUS ASSIGNMENTS. Each person chosen to participate in
the Plan with respect to a particular Plan Year shall be given a Bonus
Assignment sheet which references the Plan and sets forth such participant's
Targeted Bonus for such Plan Year as determined by the Committee.
Additionally, such Bonus Assignment shall set forth or reference the basis and
the criteria which are to be used to determine if, and to what extent, a
Targeted Bonus is earned by such participant. Such Bonus Assignment may
contain any provisions, consistent with the terms of the Plan, as may be deemed
necessary or appropriate and approved by the Committee. A Bonus Assignment may
be amended from time to time as determined by the Committee, in its sole
discretion, to reflect any change in the provisions thereof made in accordance
with the Plan; provided, however, that no decrease in the amount of a
participant's Targeted Bonus may be made during the last six months
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<PAGE> 4
of any Plan Year without the written consent of the participant.
Section 1.4 COMMITTEE DISCRETION. Notwithstanding anything to the
contrary contained in the Plan or a Bonus Assignment, the Committee, in its
sole discretion, may (i) increase, decrease or eliminate the amount of Bonus
payable to or on behalf of all participants or a participant or pay a Bonus to
or on behalf of a participant (whether such participant remains in the
employment of the Company or has terminated such employment for any reason)
when the Committee finds that special circumstances exist that, in the sole
judgment of the Committee, warrant such increase, decrease or elimination, or
payment, (ii) make estimates of the amount of Bonus payable to a participant
whose employment terminates as the result of the participant's death or
disability during any Plan Year and make partial payments of such Bonus prior
to the end of the Plan Year and (iii) authorize partial payments of Bonuses
prior to the end of any Plan Year.
Section 1.5 PAYMENT OF BONUSES. Any Bonus earned pursuant to the
Plan and a participant's Bonus Assignment shall be paid as soon as reasonably
practicable after the end of the calendar year within which the Plan Year ended
or such earlier date as shall be determined by Recognition's Chief Executive
Officer, in his sole discretion (provided the Company's results of operations
for the Plan Year have been publicly released). Notwithstanding the foregoing,
the Committee may, in its absolute discretion, authorize a partial payment
prior to the end of the Plan Year of a Bonus calculated on the year-to-date
results achieved by the Company prior to the date the Committee makes such
determination, which partial payment of such Bonus shall reduce the
participant's Bonus as finally determined for the Plan Year.
II
ADDITIONAL PROVISIONS
Section 2.1 NON-TRANSFERABILITY. Neither a Bonus Assignment nor a
Bonus earned thereunder nor any other rights or privileges conferred thereunder
or under the this Plan may be transferred, assigned, pledged or hypothecated or
otherwise disposed of by a participant in any way (whether by operation of law
or otherwise) and shall not be subject to execution, attachment or similar
process; provided, however, that the right to receive a Bonus which has been
earned pursuant to the Plan and a Bonus Assignment shall be transferable by a
participant 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
a Bonus shall be payable during his lifetime only to such participant or his
guardian or legal representative. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any right or privilege conferred by
the Plan or a Bonus Assignment, contrary to the provisions hereof, such rights
and privileges shall immediately become null and void.
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<PAGE> 5
Section 2.2 TERMINATION OF EMPLOYMENT.
(a) If the employment by the Company of a person who is a Plan
participant for a particular Plan Year shall be terminated:
(i) by the Company for Cause during such Plan Year or at
any time after the end of such Plan Year and prior to the
payment of any Bonus earned by such person for such Plan
Year, such person's rights under the Plan and his Bonus
Assignment and to the payment of any Bonus shall terminate
and be forfeited immediately,
(ii) by the Company without Cause during the first six
months of such Plan Year, or by reason of the voluntary
resignation of such person at any time during such Plan
Year, such person's rights under the Plan and his Bonus
Assignment and to the payment of any Bonus shall terminate
and be forfeited immediately, or
(iii) by the Company without Cause during the last six
months of such Plan Year, such person's Bonus for such
Plan Year shall be calculated as if the date of
termination occurred after the end of such Plan Year
except that the total amount that Recognition shall be
obligated to pay under such person's Bonus Assignment
shall be an amount equal to the product of (x) such
person's Bonus as so calculated, multiplied by (y) a
fraction the denominator of which is the total number of
days in the applicable Plan Year and the numerator of
which is the total number of days in such Plan Year prior
to the actual date of such person's termination of
employment.
(b) In the event of termination of employment at any time during a
Plan Year by reason of the disability (of which the Committee shall be
the sole judge) or the death of a person who is a Plan participant for
such Plan Year, such person's Bonus for the Plan Year shall be
calculated as if the date of death or disability occurred after the
end of such Plan Year and such person's Bonus, if any, shall be
payable to the person or persons specified in such deceased person's
Will or, if such deceased person shall have died intestate, or in the
case of disability, when appropriate, to such person's legal
representative or guardian.
Section 2.3 BUSINESS COMBINATIONS. In the event that, while any
Bonus Assignments are in effect under the Plan, there shall occur (a) a merger
or consolidation of Recognition with or into another corporation in which
Recognition shall not be the surviving corporation (for purposes of this
Section 2.3, Recognition shall
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<PAGE> 6
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 Recognition, (c) a transfer of all or substantially all of
the assets of Recognition in one transaction or a series of related
transactions to one or more other persons or entities, or (d) a transaction
(unrelated to any transaction referred to in (a), (b) or (c) above) in which a
Subsidiary ceases to be such, then, (x) in the case of a transaction referred
to in (a), (b) or (c) above, with respect to each Bonus Assignment in effect
immediately prior to the consummation of such transaction, or (y) in the case
of a transaction referred to in (d) above, with respect to each Bonus
Assignment (in effect immediately prior to the consummation of such
transaction) which is with a participant who, immediately prior to such
consummation, is an employee of such Subsidiary and who does not upon such
consummation become an employee of Recognition or another Subsidiary:
(i) If provision is made in writing in connection
with such transaction for the continuance and/or
assumption of such Bonus Assignment, or the substitution
for such Bonus Assignment of a new agreement equivalent to
such Bonus Assignment, such Bonus Assignment or the new
agreement substituted therefor shall continue in the
manner and under the terms provided therein as a Bonus
Assignment under the Plan.
(ii) In the event provision is not made in
connection with such transaction for the continuance
and/or assumption of such Bonus Assignment, or for the
substitution of an equivalent agreement, then the
participant who is a party to such Bonus Assignment shall
be entitled, immediately prior to the effective date of
such transaction, to receive the entire amount of the
Targeted Bonus specified in such Bonus Assignment.
III
MISCELLANEOUS
Section 3.1 AMENDMENT OF PLAN. The Board of Directors of Recognition
shall have the right to amend, suspend or terminate the Plan at any time. The
Board of Directors may delegate to the Committee all or any portion of its
authority under this Section 3.1. No amendment, suspension or termination
(whether pursuant to this Section 3.1 or upon expiration of the stated term of
the Plan) may, without the consent of a participant who has a Bonus Assignment,
materially and adversely affect the participant's rights pursuant to this Plan
and such Bonus Assignment.
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<PAGE> 7
Section 3.2 EFFECTIVE DATE AND DURATION OF PLAN. The Plan as amended
and restated herein shall become effective as of November 1, 1992 and shall
continue in effect until terminated pursuant to the terms hereof.
Section 3.3 RIGHT TO CONTINUED EMPLOYMENT. Nothing in the Plan or in
any Bonus Assignment shall confer any right to continue in the employ of
Recognition or any of its Subsidiaries or interfere in any way with the right
of Recognition or any Subsidiary to terminate any employment at any time.
Section 3.4 REQUESTED INFORMATION. Each participant in the Plan
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 3.5 PAYMENT OF TAXES. Prior to the payment of any Bonus, the
appropriate amounts for the payment of any applicable federal or other
withholding taxes payable as a result thereof shall be withheld by Recognition.
Section 3.6 HEADINGS. The Article and Section headings contained in
the Plan and any Bonus Assignment are for convenience only and shall not affect
the construction of the Plan or any Bonus Assignment.
Section 3.7 CHOICE OF LAW; JURISDICTION. This Plan has been adopted
by Recognition at its worldwide headquarters in Dallas County, Texas. This
Plan and every Bonus Assignment hereunder shall be construed and governed in
accordance with the laws of the State of Texas. Recognition and each person
who receives and signs a Bonus Assignment under this Plan shall be deemed to
have irrevocably consented and agreed to the personal and exclusive
jurisdiction and venue of the District Courts of Dallas County, Texas for
resolution of any dispute arising between them in relation to this Plan and
such Bonus Assignment.
Section 3.8 NOTICE. Every notice or other communication relating to
this Plan and/or any Bonus Assignment hereunder shall be in writing and shall
be delivered to the party for whom it is intended, or mailed to such party,
properly addressed, if to the Company, at its principal offices in Dallas
County, Texas, attention Corporate Secretary, or if mailed to the Plan
participant, at his most recent home address as shown in the personnel records
of the Company (or at such other address or in care of such other person as may
hereafter be designated in writing by either party to the other).
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<PAGE> 1
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
AGREEMENT made this 14th day of December, 1994, by and between
Recognition International Inc., a Delaware corporation (the "Company"), and
Robert A. Vanourek (the "Employee").
The Company desires to continue the employment of the Employee to
perform the functions of chief executive officer and to obtain the benefit of
the Employee's knowledge, experience and abilities and the Employee is willing
to serve in such capacity and continue his employment by the Company.
Employee represents to the Company (a) that there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which
would prevent or make unlawful Employee's execution of this Agreement or
Employee's employment hereunder, (b) that Employee's execution of this
Agreement and Employee's employment hereunder shall not constitute a breach of
any contract, agreement or understanding, oral or written, to which Employee is
a party or by which Employee is bound, and (c) that Employee is free and able
to execute this Agreement and to continue his employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Employment Agreements. This Agreement supersedes and
replaces in all respects the agreement between the parties hereto dated
October 16, 1989.
2. Position and Responsibilities. During the Employment Period
(as hereinafter defined), the Company shall employ the Employee and the
Employee shall serve the Company in an executive capacity performing the
functions of Chief Executive Officer of the Company. The Employee shall devote
his full business time to the business and affairs of the Company and the
promotion of its interests and perform all duties and services on behalf of the
Company necessary to carry out such functions.
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<PAGE> 2
3. Employment Period.
3.1. The Employment Period shall mean the period commencing as of
the date of this Agreement and continuing until terminated by the Company
pursuant to paragraph 3.2 hereof or terminated by the Employee.
3.2 The Company shall have the right in its sole discretion, on
written notice to the Employee, to terminate the Employee's employment with or
without Cause (as defined in paragraph 5.5), such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
4. Compensation.
4.1. The Company shall pay to the Employee for the services to be
rendered by the Employee hereunder a base salary at the rate per month
determined by the Compensation Committee of the Board of Directors of the
Company (the "Committee"). The base salary will be reviewed at least annually
by the Committee and may be adjusted at any time in the sole discretion of the
Board of Directors or the Committee. The term "Base Salary" as used in this
Agreement shall mean, at any point in time, the Employee's monthly base salary
at such time.
4.2. The Employee shall be eligible to participate in the Company's
Executive Bonus Plan as in effect from time to time (the "Executive Bonus
Plan"). A targeted bonus for the Employee shall be established annually and
may be earned based on the achievement of performance goals to be established
by the Committee. The term "Targeted Bonus" as used in this Agreement shall
mean, at any point in time, the Employee's targeted bonus under the Executive
Bonus Plan at such time.
4.3. During the Employment Period, the Employee shall be entitled
to participate fully in any benefit plans, programs, policies and fringe
benefits which are made available to the corporate officers of the Company
generally.
2
<PAGE> 3
5. Severance Pay and Benefits upon Termination of Employment
without Cause.
5.1 In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee is
not eligible to receive benefits under the Company's Long Term Disability Plan;
or (ii) the Employee terminates his employment as a result of any of the
following reasons: (A) without the Employee's consent the Company materially
diminishes the scope of the Employee's duties, assigns to the Employee duties
materially inconsistent with his designated position, or reduces the Employee's
Base Salary or Targeted Bonus to an amount less than previously determined or
established by the Committee, or (B) without the Employee's consent, the
Employee is not elected and thereafter continuously re-elected as a director of
the Company or is removed as a director of the Company without Cause, or (C)
the Company breaches any of its material obligations under this Agreement and
such breach is not cured within 30 days after written notice thereof by the
Employee; then the Company shall provide to Employee the following benefits and
payments (the "Severance Pay"):
5.1A Severance Payments. The Company shall pay the Employee severance
payments in an amount equal to two (2) times the sum of the (i) Employee's
annualized Base Salary in effect at the time of such termination, and (ii) an
amount equal to the Employee's Targeted Bonus for the fiscal year in which such
termination occurs (provided, however, that if the basis for Employee's
termination is the reduction in his Base Salary or the reduction of his
Targeted Bonus, the severance pay shall be based on the Base Salary and the
Targeted Bonus in effect prior to such reduction). The severance payments shall
be made in equal monthly installments for a period of 12 months.
Notwithstanding the foregoing, if the Employee terminates his employment
pursuant to paragraph 5.1(ii) above, he shall be entitled to the Severance Pay
only if he gives written notice to the Company of his termination of employment
within 30
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<PAGE> 4
days after the occurrence of the event or events specified in paragraph 5.1(ii)
on which he bases his termination and such notice specifies such event or
events.
5.1B Pro-rated Targeted Bonus. The Company shall pay the Employee an
amount equal to the Employee's Targeted Bonus for the fiscal year in which such
termination occurs, pro-rated to the date of such termination (provided,
however, that if the basis for Employee's termination is the reduction in his
Targeted Bonus, the pro-rated payment shall be based on the Targeted Bonus in
effect prior to such reduction).
5.1C Stock Options. Pursuant to the Company's Corporate Incentive
Plan, Stock Option Plan VII, and 1990 Corporate Incentive Plan, the
Compensation Committee of the Board of Directors of the Company has determined
that such a termination constitutes special circumstances that, in the judgment
of the Compensation Committee, merits the following increase in the period of
exercisability and payment of the Employee's then vested Options, Rights and
Performance Awards (as defined by the Plans), except incentive stock options
and those Rights related to incentive stock options. Therefore, in the event
of such termination, each then vested outstanding Option, except incentive
stock options, held by the Employee shall be exercisable at any time prior to
the expiration date of said Option, or within twenty-four (24) months after
such termination, whichever is the shorter period, each then vested outstanding
Right held by the Employee shall be exercisable or payable to the extent and
for the period that the Related Option (as defined by the Plans) is or becomes
exercisable in accordance with its terms and the deferred installments of each
then vested Performance Award payable to the Employee shall become immediately
payable in full. This Agreement shall constitute an amendment to each
agreement between the Employee and the Company under each Plan.
5.1D Split Dollar Life Insurance Policy. The Company will offer the
Employee the option to convert the split dollar life
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<PAGE> 5
insurance policy on his life to a personal policy owned by the Employee
pursuant to the provisions of the agreements between the Employee and the
Company relating to such policy.
5.1E Executive Benefit Plan. Notwithstanding any provision of the
Company's Executive Benefit Plan to the contrary, the Present Value of the
Employee's then Vested Percentage of his Benefit Payment (as such terms are
defined in the Executive Benefit Plan, as amended) shall be paid to the
Employee in a lump sum. The Present Value shall be calculated using a discount
rate equal to 120% of the applicable federal rate (determined under Section
1274(d) of the Internal Revenue Code and the Regulations thereunder),
compounded semi-annually.
5.1F Outplacement Services. The Company shall pay the reasonable
costs incurred for outplacement services for the Employee, to be selected by
the Employee for a period of up to twelve (12) months, not to exceed $40,000.
5.2 Except as provided in paragraph 5.4 hereof, the Severance Pay
shall be in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time to time
in effect, including the Company's Executive Benefit Plan, except for (i)
accrued and unpaid Base Salary to the date of termination, (ii) any bonus due
with respect to fiscal years completed as of the date of termination pursuant
to the Executive Bonus Plan, and (iii) payments made in lieu of accrued
vacation as provided for in the Company's vacation policies. Nothing contained
in the foregoing shall be construed so as to affect the Employee's rights or
the Company's obligations relating to agreements or benefits which are
unrelated to termination of employment.
5.3 Parachute Payment Agreement. The provisions of this paragraph
5.3 of the Agreement set forth certain terms of an agreement reached between
the Employee and the Company regarding the Employee's rights and obligations
upon the occurrence of a Change in Control of the Company. These provisions
are intended to
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assure and encourage in advance the Employee's continued attention and
dedication to his assigned duties and his objectivity during the pendency and
after the occurrence of any such event. These provisions shall terminate and
be of no further force or effect on the earlier of (i) five (5) years after the
occurrence of a Change in Control, or (ii) the date that the Employee attains
age 65.
5.3A Potential Change in Control. Subject to the terms and conditions
of this Agreement, in the event of a Potential Change in Control, the Employee
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the occurrence of such Potential Change in Control, (ii)
the termination of his employment by reason of his inability, due to illness,
accident or other physical or mental incapacity, to perform his duties for more
than one hundred eighty (180) days during any twelve-month period, (iii) his
attainment of age 65, or (iv) the occurrence of a Change in Control.
5.3B Change in Control. If within six (6) months prior to, or within
thirty-six (36) months after, the occurrence of the first event constituting a
Change in Control, the Employee's employment terminates prior to his attainment
of age 65, for any reason other than (i) death, (ii) termination by the Company
for Cause, (iii) his inability, due to illness, accident or other physical or
mental incapacity, to perform his duties for more than one hundred eighty (180)
days during any twelve-month period or (iv) his Voluntary Resignation
("Termination"), the Company shall pay Employee in a lump sum an amount equal
to the applicable Severance Amount.
5.3C Stock Options. Pursuant to the Company's Corporate Incentive
Plan, Stock Option Plan VII, and 1990 Corporate Incentive Plan, the
Compensation Committee of the Board of Directors of the Company has determined
that upon such a Termination, each outstanding Option (as defined by the Plans)
held by the Employee shall be fully exercisable (whether or not exercisable on
the date of such occurrence) at any time prior to the expiration date of the
Option. Pursuant to the Plans, the Compensation Committee has determined that
such a Termination constitutes special
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circumstances that, in the judgment of the Compensation Committee, merits the
following increase in the period of exercisability and payment of every Option,
Right and Performance Award (as defined by the Plans), except incentive stock
options and those Rights related to incentive stock options, held by the
Employee at the time of such Termination. Therefore, in the event of such
Termination, each outstanding Option, except incentive stock options, held by
the Employee shall be exercisable at any time prior to the expiration date of
said Option, or within twenty-four (24) months after such termination,
whichever is the shorter period, each outstanding Right held by the Employee
shall be exercisable or payable to the extent and for the period that the
Related Option (as defined by the Plans) is or becomes exercisable in
accordance with its terms and the deferred installments of each Performance
Award payable to the Employee shall become immediately payable in full. This
Agreement shall constitute an amendment to each agreement between the Employee
and the Company under each Plan.
5.4 The Severance Amount and benefits provided for in paragraphs
5.3B and 5.3C of this Agreement shall be in lieu of the severance payment and
the benefits under paragraphs 5.1A, 5.1B, and 5.1C of this Agreement, but shall
be in addition to the other payments and benefits to which the Employee is
entitled under paragraphs 5.1D, 5.1E and 5.1F, and those benefits to which the
Employee is entitled listed in paragraph 5.2(i) through (iii). In addition to
the Severance Amount, the Employee shall in the event of such Termination be
entitled to receive payment of his pro-rated Target Bonus if he has completed
the six-month period of employment required by the Company's Executive Bonus
Plan to receive payment of such pro-rated amount. Nothing contained in the
foregoing shall be construed so as to affect the Employee's rights or the
Company's obligations relating to agreements or benefits which are unrelated to
termination of employment.
5.5 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
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<PAGE> 8
"CAUSE" shall mean: (i) neglect, refusal or failure by the Employee
(other than by reason of illness, accident or other physical or mental
incapacity) in any material respect, to attend to his duties as
assigned to him by the Company consistent with this Agreement; (ii)
failure by the Employee in any material respect to comply with any of
the other terms of this Agreement; (iii) repeated failure by the
Employee to follow the established reasonable and material written or
other policies, standards and regulations of the Company; (iv) willful
engagement by the Employee in gross misconduct injurious to the
Company or any of its subsidiaries (including, without limitation,
fraudulent misappropriation of Company confidential or proprietary
information); or (v) Employee's conviction in a court of law of, or
guilty or nolo contendere plea to, any crime that constitutes a felony
in the jurisdiction involved; provided, however, that occurrences
described in clauses (i), (ii) or (iii) of this paragraph shall not be
deemed to constitute "Cause" unless Employee shall have first received
written notice from the Chairman of the Board of Directors advising
the Employee in reasonable detail of the specific acts or omissions
alleged to constitute "Cause" under said clauses, and such act or
omission continues after Employee shall have had a reasonable
opportunity to cease or correct the acts or omissions so complained
of.
"CHANGE IN CONTROL" shall mean an event which shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the
Company (the "Board") and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (i) or (iii) of
this paragraph) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or (iii) the
stockholders of the Company approve a merger or consolidation
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of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
"COMPANY" shall mean not only Recognition International Inc. but also
its successors by merger or otherwise.
"POTENTIAL CHANGE IN CONTROL" shall mean an event which shall be
deemed to have occurred if (i) the Company enters into an agreement,
the consummation of which would result in the occurrence of a Change
in Control; (ii) any person (including the Company) publicly announces
an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any person,
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, who is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of
the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (iv) the Board adopts a
resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control of the Company has occurred.
"SEVERANCE AMOUNT" shall mean an amount equal to 2.99 times the
Employee's "annualized includible compensation for the base period" as
defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), reduced by the total amount of any installment
payments previously paid to the Employee under paragraph 5.1A as
severance pay; provided, however, that the Severance Amount shall be
reduced in value to the maximum amount that can be paid so that the
then aggregate present value of all "parachute payments" (as defined
in Section 280G of the Code) to which the Employee is entitled does
not equal or exceed 300% of the Employee's "annualized includible
compensation for the base period." In determining the Severance
Amount, there shall be first taken into account any other "parachute
payments" to which the Employee is entitled.
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<PAGE> 10
"VOLUNTARY RESIGNATION" shall mean any termination of Employee's
employment by his own act, unless such termination follows any change
in his position with the Company to a position of lesser authority,
any material changes in his duties, any reduction in his Base Salary
or Targeted Bonus, any material reduction of his employee benefits,
any material increase in the frequency of his travel, or any change in
the circumstances of his employment which, in the Employee's good
faith judgment, results in his being unable to carry out the duties,
authority or powers attached to his position; provided that (i) such
change, reduction or increase occurs after the occurrence of a Change
in Control, (ii) any sale of assets of the Company that constitute
less than 25% of the Company's assets and less than 25% of the
Company's annual revenues for the preceding fiscal year shall not
result in a change in the circumstances of Employee's employment with
the Company, and (iii) any position of equivalent authority with the
Company will be considered a position of lesser authority if, at any
time after the occurrence of a Change in Control, the Company is a
direct or indirect 50% or more owned subsidiary of another company and
the Employee is not the chief executive officer of the highest level
parent company in the chain of companies in which the Company is a
subsidiary.
6. Source and Timing of Payments. All payments provided
under this Agreement shall be paid in cash from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Employee shall have no right,
title, or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship,
between the Company and Employee or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company. All payments required to be made to Employee in installments
hereunder shall be made over the applicable period in accordance with the
Company's normal payroll dates and procedures. All payments under this
Agreement that are not specified to be paid in installments shall be paid in a
lump sum (except for payments under
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the Company's Executive Bonus Plan made pursuant to paragraph 5.4, which shall
be paid in accordance with the terms of such Plan).
7. Agreement Not To Compete. Provided that the Company has
complied in all material respects with this Agreement, the Employee
agrees that he will not, prior to the expiration of one year after the date of
termination of his employment with the Company, become employed by, or provide
services as a consultant or otherwise to, BancTec, Inc., FileNet Corporation,
ScanOptics, Inc., Wang Laboratories, Inc. or Viewstar Corporation, or any
subsidiary, affiliate or successor of any such company, or any subsidiary,
affiliate or division of International Business Machines Corporation ("IBM")
that deals primarily with workflow, check processing or imaging products, or
any subsidiary, affiliate or division of AT&T that deals primarily with
workflow, check processing or imaging products. This agreement not to compete
shall apply worldwide. Employee acknowledges that the restrictions contained in
this paragraph, in view of the nature of the business in which the Company is
engaged and Employee's position within the Company, are reasonable and
necessary in order to protect the legitimate interests of the Company, and that
any violation thereof would result in irreparable injuries to the Company.
8. Company Proprietary Information. Upon termination of
Employee's employment for any reason, he will forthwith deliver and assign to
the Company all the results of his service as an employee and all documents,
records, notebooks and repositories of or containing secret, confidential or
proprietary information concerning the Company or its business or affairs,
including all copies thereof in his possession or control, whether prepared by
him or others. In the absence of permission by the Company, Employee will not
at any time during, or after the termination of, his employment reveal, divulge
or make known to any person outside the Company's business organization or use
for his own account any secret, confidential or proprietary information
concerning the Company or its business or affairs known to him (whether or not
developed in whole or in part by his efforts). During and after
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the termination of his employment, Employee will make no use of any such
information except for the benefit of the Company.
9. Injunctive Relief. Employee agrees that the Company will have
no adequate remedy at law if he violates any of the terms of paragraphs 7 or
8 above. In such event, the Company will have the right, in addition to any
other right the Company may have, to obtain injunctive relief to restrain any
breach or threatened breach by the Employee or specific enforcement of such
terms. The Company and the Employee recognize that the terms of such paragraphs
may be subject to reformation by a court of equity in any suit for the
enforcement thereof, and it is the Company's and the Employee's agreement and
intention that such terms are severable and divisible, and the invalidity of any
such term under applicable law shall not affect the enforceability of any of the
remaining terms and that any such terms not enforceable in full under applicable
law shall be reformed and construed to provide for a scope and duration
consistent with the maximum scope and duration enforceable under applicable law.
10. Tax Withholding. Payments to the Employee of all compensation
and other amounts contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the withholding of taxes.
11. Assignment. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Employee without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Employee from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives
from assigning any rights hereunder to the person or persons or entities
entitled thereto. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, and upon the Employee and his
heirs, estate, executors, administrators and legal representatives. The
Company shall assign this Agreement to any successor to all or a substantial
portion of the Company's
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business and assets and the Company will require any such successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Employee to compensation from
the Company in the same amount and on the same terms as he would be entitled to
hereunder upon his Termination following a Change in Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of Termination.
12. Headings. The headings of the paragraphs hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
13. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when delivered by hand or
when mailed by registered or certified mail, addressed to the appropriate
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
if by mail:
Recognition International Inc.
Post Office Box 660204
Dallas, Texas 75266
Attn: Secretary
if by hand:
Recognition International Inc.
2701 East Grauwyler Road
Irving, Texas 75061
Attn: Secretary
To the Employee:
At his home address as shown
in the Company's personnel records
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provided, however, that any notice of change of address shall be effective only
upon receipt.
14. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(d) This Agreement is not intended to and does not supersede
(i) that certain letter agreement regarding the possible reduction in benefits
payable by reason of a Change in Control between the Company and the Employee
dated January 12, 1994, and (ii) that certain Employee Agreement and Assignment
of Inventions between the Company and the Employee dated October 18, 1989.
15. Arbitration.
15.1 Any controversy between the parties hereto involving the
construction or application of any of the terms, covenants or conditions hereof
shall, on the written request of one party served upon the other, be submitted
to arbitration, and such arbitration
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shall be governed by the provisions of the Texas General Arbitration Act,
Articles 224 through 238-20 of the Revised Civil Statutes of Texas, as amended
from time to time.
15.2 The parties hereto may agree upon one arbitrator to resolve
any controversy, but in the event that they cannot so agree, there shall be
three arbitrators, one named in writing by each of the parties with notice
thereof to be furnished to the other party within thirty (30) days after demand
for arbitration is made, and a third to be chosen by the two so named within
thirty (30) days after the appointment of the second arbitrator. If either
party refuses or neglects to join in the appointment of the arbitrator(s)
within the designated period, or if the two arbitrators chosen by the parties
are unable to agree on a third arbitrator within the designated period, any
arbitrator not so selected shall be appointed by the court on the application
of either party in accordance with the provisions of Article 226 of the Revised
Civil Statutes of Texas.
15.3 At the time any dispute hereunder is submitted to arbitration,
the parties hereto shall use reasonable efforts to agree on the procedures to
govern such arbitration. If the parties hereto are unable to agree on such
procedures within thirty (30) days after the designation of the arbitrator(s),
the arbitrator(s) shall determine such procedures.
15.4 All arbitration hearings conducted hereunder, and all judicial
proceedings to enforce any of the provisions hereof relating to arbitration,
shall take place in Dallas County, Texas and shall be governed by the laws of
the State of Texas.
15.5 Unless the Employee's employment terminates within six (6)
months prior to, or within thirty-six (36) months after, the occurrence of the
first event constituting a Change in Control, each party shall be responsible
for its own attorneys' fees and expenses and all other expenses incurred by
such party in connection with the arbitration, and the other costs and expenses
of the arbitration proceeding, including the fees and expenses of the
arbitrator(s) themselves, shall be shared equally by the
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parties. If the Employee's employment terminates within six (6) months prior
to, or within thirty-six (36) months after, the occurrence of the first event
constituting a Change in Control, the Company will, upon submission of proper
documentation, promptly reimburse Employee for his attorneys' fees and
expenses, and all other expenses incurred in connection with the arbitration,
and shall bear all of the costs and expenses of the arbitration proceeding,
including (i) the fees and expenses of the arbitrator(s) themselves, without
regard to the outcome of the arbitration proceeding, and (i) any legal fees and
expenses incurred in any legal proceeding to enforce the decision reached in an
arbitration proceeding.
15.6 The award under any arbitration hereunder shall be made within
sixty (60) days of the conclusion of the arbitration. The award shall be in
writing and signed by the arbitrator(s) joining in the award and shall be
binding upon the parties.
16. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, cancelled or discharged except by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RECOGNITION INTERNATIONAL, INC.
By: /s/ William H. Waltrip
------------------------------------------
William H. Waltrip,
Chairman of the Compensation
Committee of the Board of Directors
EMPLOYEE
/s/ Robert A. Vanourek
------------------------------------------
Robert A. Vanourek
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EXHIBIT 10.33
EMPLOYMENT AGREEMENT
AGREEMENT made as of December 15, 1994, by and between Recognition
International Inc., a Delaware corporation (the "Company"), and Thomas A. Loose
(the "Employee").
The Company desires to continue the employment of the Employee to
serve the Company in an executive capacity and to obtain the benefit of the
Employee's knowledge, experience and abilities and the Employee is willing to
serve in such capacity and continue his employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Employment Agreements. This Agreement supersedes and replaces
in all respects the agreement between the parties hereto dated November 1,
1989, as amended.
2. Position and Responsibilities. During the Employment Period
(as hereinafter defined), the Company shall employ the Employee and the
Employee shall serve the Company in an executive capacity as "counsel" to the
Company and to its Board of Directors giving advice as to matters attendant to
his role as General Counsel to the Company in prior periods. Except during
periods of illness or disability, the Employee shall devote such business time
to the business and affairs of the Company and the promotion of its interests
as may be requested by the Chief Executive Officer, provided that such
request shall not exceed one-half of usual and customary business time.
3. Employment Period.
3.1. The Employment Period shall mean the period commencing as of
the date of this Agreement and continuing until June 15, 1996, unless earlier
terminated by the Company pursuant to paragraph 3.2 hereof or terminated by the
Employee.
3.2 The Company shall have the right in its sole discretion, on
written notice to the Employee, to terminate the Employee's employment with or
without Cause (as defined in Paragraph 5.5), such termination to be effective
as of the date
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on which notice is given or as of such later date otherwise specified in the
notice.
4. Compensation.
4.1. The Company shall pay to the Employee for the services to be
rendered by the Employee hereunder a salary at the rate of $15,278 per month
payable no less frequently than every month.
4.2. During the Employment Period, the Employee shall be entitled
to participate fully in any benefit plans, programs, policies and fringe
benefits which are made available to the corporate officers of the Company
generally including (but not limited to) automobile allowance and medical,
dental, disability and life insurance except that Employee shall not accrue any
vacation during the Employment Period and Employee shall not be eligible to
participate in the Company's Executive Bonus Plan for fiscal year 1995 or
thereafter.
5. Severance Pay upon Termination of Employment without Cause.
5.1 In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause or Disability; or (ii) the
Employee terminates his employment as a result of any of the following reasons:
(A) without the Employee's consent the Company materially diminishes the scope
of the Employee's duties, assigns to the Employee duties materially
inconsistent with his designated position, or reduces the Employee's salary to
an amount less than previously determined or established by the Committee, or
(B) the Company breaches any of its material obligations under this Agreement
and such breach is not cured within 30 days after written notice thereof by the
Employee; then the Company shall, within 30 days after that termination, pay
the Employee a lump sum severance payment in an amount equal to $15,278 times
the number of months equal to eighteen months less that number of full months
from December 15, 1994 to the date of Employee's termination. Notwithstanding
the foregoing, if the Employee terminates his employment pursuant to clause
(ii) above, he shall be entitled to the severance payment provided for in this
paragraph only if he gives written notice to the Company of his termination of
employment within 30 days after
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the occurrence of the event or events specified in clause (ii) on which he
bases his termination and such notice specifies such event or events.
5.2 Except as provided in Sections 5.3 and 5.4 hereof, the severance
payments provided for in Paragraph 5.1 of this Agreement shall be in lieu of
all severance payments or benefits to which the Employee might otherwise be
entitled under Company severance policies from time to time in effect, except
for (i) accrued and unpaid Base Salary to the date of termination, (ii) the
Company's obligations relating to medical insurance coverage set forth in
Paragraph below, and (iii) benefits payable or available to the Employee
pursuant to the Company's Executive Benefit Plan. Nothing contained in the
foregoing shall be construed so as to affect the Employee's rights or the
Company's obligations relating to agreements or benefits which are unrelated to
termination of employment.
5.3 Disability. If Employee's employment by the Company is
terminated as a result of Employee's Disability, the Company will pay to
Employee for the period beginning on the date of such termination and ending
on June 15, 1996, a monthly disability benefit in an amount equal to that
amount which, when added to the total amount of all benefits to which Employee
may be entitled under any group benefit plan for employees of the Company that
are payable as a result of such Disability, shall equal $15,278 per month.
5.4 Parachute Payment. That certain agreement dated May 10, 1988,
between the Company and the Employee regarding change in control of the Company
is hereby terminated, and the following terms are agreed upon in lieu thereof:
Unless the Employee's employment has been terminated for Cause or for
Disability prior to a Sale Event, in the event that a Sale Event
should take place during the period from December 15, 1994 to June 15,
1996, the Company will pay to the Employee in a lump sum in place of
the Employee's monthly salary after a Sale Event, the sum of $550,000
if a Sale Event should occur on or before December 15, 1995, or the
sum of $367,000 if a Sale Event should occur during the
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period from December 15, 1995 to June 15, 1996. A Sale Event shall
not affect Employee's employment status. If the Employee's employment
has terminated other than for Cause or Disability prior to the Sale
Event and prior to June 15, 1996, the amount of $550,000 or $367,000
as applicable pursuant to the previous sentence, shall be reduced by
the amount of any severance payment paid to the Employee pursuant to
paragraph 5.1 above. Notwithstanding the foregoing, the amounts set
forth above to be paid in the event of a Sale Event shall be reduced
in value to the maximum amount that can be paid so that the then
aggregate present value of all "parachute payments" (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended) to
which the Employee is entitled does not equal or exceed 300% of the
Employee's "annualized includible compensation for the base period".
In determining the reduction, there shall be first taken into account
any other "parachute payments" to which the Employee is entitled.
5.5 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"CAUSE" shall mean: (i) failure by the Employee in any material
respect to comply with any of the terms of this Agreement; (ii)
repeated failure by the Employee to follow the established reasonable
and material written or other policies, standards and regulations of
the Company; (iii) willful engagement by the Employee in gross
misconduct injurious to the Company or any of its subsidiaries
(including, without limitation, fraudulent misappropriation of Company
confidential or proprietary information); or (iv) Employee's
conviction in a court of law of, or guilty plea or plea of nolo
contendere to, any crime that constitutes a felony in the jurisdiction
involved; provided, however, that occurrences described in clauses (i)
and (ii) of this paragraph shall not be deemed to constitute "Cause"
unless Employee shall have first received written notice from the
Chief Executive Officer advising the Employee in reasonable detail of
the specific acts or omissions alleged to constitute "Cause" under
said clauses, and such act or omission continues after Employee shall
have had a reasonable opportunity to cease or correct the acts or
omissions so complained of.
"COMPANY" shall mean not only Recognition International Inc. but also
its successors by merger or otherwise.
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"DISABILITY" shall mean the Employee's inability, due to illness,
accident or other physical incapacity to perform his duties hereunder
for more than 180 days during any 12 month period. The determination
of the Employee's Disability shall be made by the Compensation
Committee of the Board of Directors of the Company.
"SALE EVENT" shall mean the following:
(i) the acquisition by one or more related parties of
more than 50% of the outstanding capital stock of the
Company;
(ii) a sale of substantially all of the assets of the
Company; or
(iii) a merger or consolidation of the Company with another
entity in which the Company's shareholders
immediately prior to such transaction do not,
immediately following such transaction, own at least
a majority of the outstanding stock or other equity
ownership in the resulting entity.
6. Retirement Benefits. Pursuant to the consent of the
Compensation Committee of the Board of Directors of the Company, Employee shall
receive benefits pursuant to Section 5.1.C of the Executive Benefit Plan, as
amended and restated as of December 1, 1984 and as further amended on December
10, 1992, and pursuant to the related letter of acceptance executed by Employee
and the Company dated January 15, 1985, as amended as to Employee as of May 27,
1992. The benefit payments shall be at the monthly rate of $9,476, shall
commence on December 15, 1994, and shall be payable at least monthly
thereafter, in accordance with the terms of such Plan.
7. Additional Benefits. Upon termination of employment, Employee
shall also receive the following benefits:
7.1 Employee will be given the option to convert the Split Dollar
Life Insurance Policy on Employee's life to a personal policy owned by Employee
pursuant to the provisions of the agreements between Employee and the Company
relating to the policy.
7.2 Stock Options. Pursuant to the Company's Corporate Incentive
Plan (the "Plan"), the Compensation Committee of the Board of Directors of the
Company has determined that upon Employee's termination, each outstanding
option held by the Employee shall be fully exercisable (whether or not
exercisable
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on the date of such termination) at any time prior to the expiration date of
the option. Pursuant to the plan, the Compensation Committee has determined
that such termination constitutes special circumstances that, in the judgment
of the Compensation Committee, merits the following increase in the period of
exercisability of each option, except incentive stock options, held by the
Employee at the time of such termination. Therefore, in the event of such
termination, each outstanding option, except incentive stock options, held by
the Employee shall be exercisable at any time prior to the expiration date of
said option, or until October 31, 1997, whichever is the shorter period. This
Agreement shall constitute an amendment to each agreement between the Employee
and the Company under the Plan.
7.3 Employee will also be reimbursed on a monthly basis for the
amounts which Employee pays under COBRA in order to purchase group health plan
coverage for Employee and Employee's spouse under the Company's Bene/Flex Plan
for a period of 18 months following Employee's termination of employment. In
addition, if Employee is terminated without Cause prior to June 15, 1996, the
Company will provide Employee medical and dental coverage equivalent to the
coverage provided to Employee under COBRA for that period between the
expiration of Employee's coverage under COBRA and Employee's 65th birthday, and
the Company will reimburse Employee monthly for any amounts which Employee is
required to pay for such coverage.
8. Source and Timing of Payments. All payments provided under
this Agreement shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation of
assets made, to assure payment. Employee shall have no right, title, or
interest whatever in or to any investments which the Company may make to aid
the Company in meeting its obligations hereunder. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship, between
the Company and Employee or any other person. To the extent that any person
acquires a right to receive payments from the Company hereunder,
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such right shall be no greater than the right of an unsecured creditor of the
Company. All payments required to be made to Employee in installments
hereunder shall be made over the applicable period in accordance with the
Company's normal payroll dates and procedures. All payments under this
Agreement that are not specified to be paid in installments shall be paid in a
lump sum.
9. Agreement Not To Compete. Provided that the Company has
complied in all material respects with this Agreement, the Employee agrees that
he will not, prior to the expiration of one year after the date of termination
of his employment with the Company, become employed by, or provide services as
a consultant or otherwise to, BancTec, Inc., FileNet Corporation, ScanOptics,
Inc., Wang Laboratories, Inc. or Viewstar Corporation, or any subsidiary,
affiliate or successor of any such company, or any subsidiary, affiliate or
division of International Business Machines Corporation or AT&T Global
Information Systems that deals primarily with workflow, check processing or
imaging products. This agreement not to compete shall apply worldwide.
Employee acknowledges that the restrictions contained in this paragraph, in
view of the nature of the business in which the Company is engaged and
Employee's position within the Company, are reasonable and necessary in order
to protect the legitimate interests of the Company, and that any violation
thereof would result in irreparable injuries to the Company.
10. Company Proprietary Information. Upon termination of
Employee's employment for any reason, he will forthwith deliver and assign to
the Company all the results of his service as an employee and all documents,
records, notebooks and repositories of or containing secret, confidential or
proprietary information concerning the Company or its business or affairs,
including all copies thereof in his possession or control, whether prepared by
him or others. In the absence of permission by the Company, Employee will not
at any time during, or after the termination of, his employment reveal, divulge
or make known to any person outside the Company's business organization or use
for his own account any secret, confidential or proprietary information
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concerning the Company or its business or affairs known to him (whether or not
developed in whole or in part by his efforts). During and after the
termination of his employment, Employee will make no use of any such
information except for the benefit of the Company.
11. Injunctive Relief. Employee agrees that the Company will have
no adequate remedy at law if he violates any of the terms of Paragraphs 9 or 10
above. In such event, the Company will have the right, in addition to any
other right the Company may have, to obtain injunctive relief to restrain any
breach or threatened breach by the Employee or specific enforcement of such
terms. The Company and the Employee recognize that the terms of such
paragraphs may be subject to reformation by a court of equity or by arbitration
pursuant to the provisions of Paragraph 17, and it is the Company's and the
Employee's agreement and intention that such terms are severable and divisible,
and the invalidity of any such term under applicable law shall not affect the
enforceability of any of the remaining terms and that any such terms not
enforceable in full under applicable law shall be reformed and construed to
provide for a scope and duration consistent with the maximum scope and duration
enforceable under applicable law.
12. Tax Withholding. Payments to the Employee of all compensation
and other amounts contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the withholding of taxes.
13. Assignment. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Employee without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Employee from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives
from assigning any rights hereunder to the person or persons or entities
entitled thereto. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, and upon the Employee and his
heirs,
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estate, executors, administrators and legal representatives. The Company shall
assign this Agreement to any successor to all or a substantial portion of the
Company's business and assets and the Company will require any such successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Employee to compensation from
the Company in the same amount and on the same terms as he would be entitled to
hereunder upon a Sale Event, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date of the Sale Event.
14. Headings. The headings of the paragraphs hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
15. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when delivered by hand or
when mailed by registered or certified mail, addressed to the appropriate
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
if by mail:
Recognition International Inc.
Post Office Box 660204
Dallas, Texas 75266
Attn: Secretary
if by hand:
Recognition International Inc.
2701 East Grauwyler Road
Irving, Texas 75061
Attn: Secretary
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To the Employee:
At his home address as shown
in the Company's personnel records
provided, however, that any notice of change of address shall be effective only
upon receipt.
16. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Committee or the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Texas.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(d) This Agreement is not intended to and does not supersede
(i) that certain letter agreement regarding the possible reduction in benefits
payable by reason of a Change in Control between the Company and the Employee
dated January 12, 1994, and (ii) that certain Employee Agreement and Assignment
of Inventions between the Company and the Employee dated February 5, 1990.
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17. Arbitration.
17.1 Any controversy between the parties hereto involving the
construction or application of any of the terms, covenants or conditions hereof
shall, on the written request of one party served upon the other, be submitted
to arbitration, and such arbitration shall be governed by the provisions of the
Texas General Arbitration Act, Articles 224 through 238-20 of the Revised Civil
Statutes of Texas, as amended from time to time.
17.2 The parties hereto may agree upon one arbitrator to resolve
any controversy, but in the event that they cannot so agree, there shall be
three arbitrators, one named in writing by each of the parties with notice
thereof to be furnished to the other party within thirty (30) days after demand
for arbitration is made, and a third to be chosen by the two so named within
thirty (30) days after the appointment of the second arbitrator. If either
party refuses or neglects to join in the appointment of the arbitrator(s)
within the designated period, or if the two arbitrators chosen by the parties
are unable to agree on a third arbitrator within the designated period, any
arbitrator not so selected shall be appointed by the court on the application
of either party in accordance with the provisions of Article 226 of the Revised
Civil Statutes of Texas.
17.3 At the time any dispute hereunder is submitted to arbitration,
the parties hereto shall use reasonable efforts to agree on the procedures to
govern such arbitration. If the parties hereto are unable to agree on such
procedures within thirty (30) days after the designation of the arbitrator(s),
the arbitrator(s) shall determine such procedures.
17.4 All arbitration hearings conducted hereunder, and all judicial
proceedings to enforce any of the provisions hereof relating to arbitration,
shall take place in Dallas County, Texas and shall be governed by the laws of
the State of Texas.
17.5 Unless a Sale Event shall have occurred, each party shall be
responsible for its own attorneys' fees and expenses and all other expenses
incurred by such party in connection with the arbitration, and the other costs
and expenses of the arbitration proceeding, including the fees and expenses of
the arbitrator(s)
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themselves, shall be shared equally by the parties. If a Sale Event has
occurred, the Company will, upon submission of proper documentation, promptly
reimburse Employee for his attorneys' fees and expenses, and all other expenses
incurred in connection with the proceeding, including (i) the fees and expenses
of the arbitrator(s) themselves, without regard to the outcome of the
arbitration proceeding, and (ii) any legal fees and expenses incurred in any
legal proceeding to enforce the decision reached in an arbitration proceeding.
17.6 The award under any arbitration hereunder shall be made within
sixty (60) days of the conclusion of the arbitration. The award shall be in
writing and signed by the arbitrator(s) joining in the award and shall be
binding upon the parties.
17.7 Notwithstanding the above, either party shall have the right to
seek injunctive relief from a court of competent jurisdiction in order to
protect the rights of the parties pending the final award/judgment of the
arbitrator.
18. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, cancelled or discharged except by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RECOGNITION INTERNATIONAL INC.
By: /s/ Robert A. Vanourek
-----------------------------
EMPLOYEE
/s/ Thomas A. Loose
-------------------------------------
Thomas A. Loose
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EXHIBIT 10.34
EMPLOYMENT AGREEMENT
AGREEMENT made this 14th day of December, 1994, by and between
Recognition International Inc., a Delaware corporation (the "Company"), and
Robert M. Swartz (the "Employee").
The Company desires to continue the employment of the Employee to
serve the Company in an executive capacity and to obtain the benefit of the
Employee's knowledge, experience and abilities and the Employee is willing to
serve in such capacity and continue his employment by the Company.
Employee represents to the Company (a) that there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which
would prevent or make unlawful Employee's execution of this Agreement or
Employee's employment hereunder, (b) that Employee's execution of this
Agreement and Employee's employment hereunder shall not constitute a breach of
any contract, agreement or understanding, oral or written, to which Employee is
a party or by which Employee is bound, and (c) that Employee is free and able
to execute this Agreement and to continue his employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Employment Agreements. This Agreement supersedes and replaces
in all respects the agreement between the parties hereto dated as of June 1,
1994.
2. Position and Responsibilities. During the Employment Period
(as hereinafter defined), the Company shall employ the Employee and the
Employee shall serve the Company in an executive capacity performing the
functions as shall be designated by the Chief Executive Officer of the Company
or attendant to the office that he may hold from time to time. The Employee
shall devote his full business time to the business and affairs of the Company
and the promotion of its interests and perform all duties and services on
behalf of the Company necessary to carry out such functions.
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3. Employment Period.
3.1. The Employment Period shall mean the period commencing as of
the date of this Agreement and continuing until terminated by the Company
pursuant to paragraph 3.2 hereof or terminated by the Employee.
3.2 The Company shall have the right in its sole discretion, on
written notice to the Employee, to terminate the Employee's employment with or
without Cause (as defined in paragraph 5.5), such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
4. Compensation.
4.1. The Company shall pay to the Employee for the services to be
rendered by the Employee hereunder a base salary at the rate per month
determined by the Compensation Committee of the Board of Directors of the
Company (the "Committee"). The base salary will be reviewed at least annually
by the Committee and may be adjusted at any time in the sole discretion of the
Board of Directors or the Committee. The term "Base Salary" as used in this
Agreement shall mean, at any point in time, the Employee's monthly base salary
at such time.
4.2. The Employee shall be eligible to participate in the Company's
Executive Bonus Plan as in effect from time to time (the "Executive Bonus
Plan"). A targeted bonus for the Employee shall be established annually and
may be earned based on the achievement of performance goals to be established
by the Committee. The term "Targeted Bonus" as used in this Agreement shall
mean, at any point in time, the Employee's targeted bonus under the Executive
Bonus Plan at such time.
4.3. During the Employment Period, the Employee shall be entitled
to participate fully in any benefit plans, programs, policies and fringe
benefits which are made available to the corporate officers of the Company
generally.
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5. Severance Pay and Benefits upon Termination of Employment
without Cause.
5.1 In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee is
not eligible to receive benefits under the Company's Long Term Disability Plan;
or (ii) the Employee terminates his employment as a result of any of the
following reasons: (A) without the Employee's consent the Company materially
diminishes the scope of the Employee's duties, assigns to the Employee duties
materially inconsistent with his designated position, or reduces the Employee's
Base Salary or Targeted Bonus to an amount less than previously determined or
established by the Committee, or (B) the Company breaches any of its material
obligations under this Agreement and such breach is not cured within 30 days
after written notice thereof by the Employee; then the Company shall provide to
Employee the following benefits and payments (the "Severance Pay"):
5.1A Severance Payments. The Company shall pay the Employee severance
payments in an amount equal to two (2) times the sum of the (i) Employee's
annualized Base Salary in effect at the time of such termination, and (ii) an
amount equal to the Employee's Targeted Bonus for the fiscal year in which such
termination occurs (provided, however, that if the basis for Employee's
termination is the reduction in his Base Salary or the reduction of his
Targeted Bonus, the severance pay shall be based on the Base Salary and the
Targeted Bonus in effect prior to such reduction). The severance payments shall
be made in equal monthly installments for a period of 12 months.
Notwithstanding the foregoing, if the Employee terminates his employment
pursuant to paragraph 5.1(ii) above, he shall be entitled to the Severance Pay
only if he gives written notice to the Company of his termination of employment
within 30 days after the occurrence of the event or events specified in
paragraph 5.1(ii) on which he bases his termination and such notice specifies
such event or events.
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5.1B Pro-rated Targeted Bonus. The Company shall pay the Employee an
amount equal to the Employee's Targeted Bonus for the fiscal year in which such
termination occurs, pro-rated to the date of such termination (provided,
however, that if the basis for Employee's termination is the reduction in his
Targeted Bonus, the pro-rated payment shall be based on the Targeted Bonus in
effect prior to such reduction).
5.1C Stock Options. Pursuant to the Company's Corporate Incentive
Plan, Stock Option Plan VII, and 1990 Corporate Incentive Plan, the
Compensation Committee of the Board of Directors of the Company has determined
that such a termination constitutes special circumstances that, in the judgment
of the Compensation Committee, merits the following increase in the period of
exercisability and payment of the Employee's then vested Options, Rights and
Performance Awards (as defined by the Plans), except incentive stock options
and those Rights related to incentive stock options. Therefore, in the event
of such termination, each then vested outstanding Option, except incentive
stock options, held by the Employee shall be exercisable at any time prior to
the expiration date of said Option, or within twenty-four (24) months after
such termination, whichever is the shorter period, each then vested outstanding
Right held by the Employee shall be exercisable or payable to the extent and
for the period that the Related Option (as defined by the Plans) is or becomes
exercisable in accordance with its terms and the deferred installments of each
then vested Performance Award payable to the Employee shall become immediately
payable in full. This Agreement shall constitute an amendment to each
agreement between the Employee and the Company under each Plan.
5.1D Split Dollar Life Insurance Policy. The Company will offer the
Employee the option to convert the split dollar life insurance policy on his
life to a personal policy owned by the Employee pursuant to the provisions of
the agreements between the Employee and the Company relating to such policy.
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5.1E Executive Benefit Plan. Notwithstanding any provision of the
Company's Executive Benefit Plan to the contrary, the Present Value of the
Employee's then Vested Percentage of his Benefit Payment (as such terms are
defined in the Executive Benefit Plan, as amended) shall be paid to the
Employee in a lump sum. The Present Value shall be calculated using a discount
rate equal to 120% of the applicable federal rate (determined under Section
1274(d) of the Internal Revenue Code and the Regulations thereunder),
compounded semi-annually.
5.1F Outplacement Services. The Company shall pay the reasonable
costs incurred for outplacement services for the Employee, to be selected by
the Employee for a period of up to twelve (12) months, not to exceed $40,000.
5.2 Except as provided in paragraph 5.4 hereof, the Severance Pay
shall be in lieu of all severance payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time to time
in effect, including the Company's Executive Benefit Plan, except for (i)
accrued and unpaid Base Salary to the date of termination, (ii) any bonus due
with respect to fiscal years completed as of the date of termination pursuant
to the Executive Bonus Plan, and (iii) payments made in lieu of accrued
vacation as provided for in the Company's vacation policies. Nothing contained
in the foregoing shall be construed so as to affect the Employee's rights or
the Company's obligations relating to agreements or benefits which are
unrelated to termination of employment.
5.3 Parachute Payment Agreement. The provisions of this paragraph
5.3 of the Agreement set forth certain terms of an agreement reached between
the Employee and the Company regarding the Employee's rights and obligations
upon the occurrence of a Change in Control of the Company. These provisions
are intended to assure and encourage in advance the Employee's continued
attention and dedication to his assigned duties and his objectivity during the
pendency and after the occurrence of any such event. These provisions shall
terminate and be of no further force or effect on
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the earlier of (i) five (5) years after the occurrence of a Change in Control,
or (ii) the date that the Employee attains age 65.
5.3A Potential Change in Control. Subject to the terms and conditions
of this Agreement, in the event of a Potential Change in Control, the Employee
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the occurrence of such Potential Change in Control, (ii)
the termination of his employment by reason of his inability, due to illness,
accident or other physical or mental incapacity, to perform his duties for more
than one hundred eighty (180) days during any twelve-month period, (iii) his
attainment of age 65, or (iv) the occurrence of a Change in Control.
5.3B Change in Control. If within six (6) months prior to, or within
thirty-six (36) months after, the occurrence of the first event constituting a
Change in Control, the Employee's employment terminates prior to his attainment
of age 65, for any reason other than (i) death, (ii) termination by the Company
for Cause, (iii) his inability, due to illness, accident or other physical or
mental incapacity, to perform his duties for more than one hundred eighty (180)
days during any twelve-month period or (iv) his Voluntary Resignation
("Termination"), the Company shall pay Employee in a lump sum an amount equal
to the applicable Severance Amount.
5.3C Stock Options. Pursuant to the Company's Corporate Incentive
Plan, Stock Option Plan VII, and 1990 Corporate Incentive Plan, the
Compensation Committee of the Board of Directors of the Company has determined
that upon such a Termination, each outstanding Option (as defined by the Plans)
held by the Employee shall be fully exercisable (whether or not exercisable on
the date of such occurrence) at any time prior to the expiration date of the
Option. Pursuant to the Plans, the Compensation Committee has determined that
such a Termination constitutes special circumstances that, in the judgment of
the Compensation Committee, merits the following increase in the period of
exercisability and payment of every Option, Right and Performance Award (as
defined by the Plans), except incentive stock options and those Rights related
to incentive stock options, held by the Employee at the time of
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such Termination. Therefore, in the event of such Termination, each
outstanding Option, except incentive stock options, held by the Employee shall
be exercisable at any time prior to the expiration date of said Option, or
within twenty-four (24) months after such termination, whichever is the shorter
period, each outstanding Right held by the Employee shall be exercisable or
payable to the extent and for the period that the Related Option (as defined by
the Plans) is or becomes exercisable in accordance with its terms and the
deferred installments of each Performance Award payable to the Employee shall
become immediately payable in full. This Agreement shall constitute an
amendment to each agreement between the Employee and the Company under each
Plan.
5.4 The Severance Amount and benefits provided for in paragraphs
5.3B and 5.3C of this Agreement shall be in lieu of the severance payment and
the benefits under paragraphs 5.1A, 5.1B, and 5.1C of this Agreement, but shall
be in addition to the other payments and benefits to which the Employee is
entitled under paragraphs 5.1D, 5.1E and 5.1F, and those benefits to which the
Employee is entitled listed in paragraph 5.2(i) through (iii). In addition to
the Severance Amount, the Employee shall in the event of such Termination be
entitled to receive payment of his pro-rated Target Bonus if he has completed
the six-month period of employment required by the Company's Executive Bonus
Plan to receive payment of such pro-rated amount. Nothing contained in the
foregoing shall be construed so as to affect the Employee's rights or the
Company's obligations relating to agreements or benefits which are unrelated to
termination of employment.
5.5 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"CAUSE" shall mean: (i) neglect, refusal or failure by the Employee
(other than by reason of illness, accident or other physical or mental
incapacity) in any material respect, to attend to his duties as
assigned to him by the Company consistent with this Agreement; (ii)
failure by the Employee in any material respect to comply with any of
the other terms of this Agreement; (iii) repeated failure by the
Employee to follow the established reasonable and material written or
other policies, standards and regulations of the Company; (iv) willful
engagement by the Employee in gross misconduct
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injurious to the Company or any of its subsidiaries (including,
without limitation, fraudulent misappropriation of Company
confidential or proprietary information); or (v) Employee's
conviction in a court of law of, or guilty or nolo contendere plea to,
any crime that constitutes a felony in the jurisdiction involved;
provided, however, that occurrences described in clauses (i), (ii) or
(iii) of this paragraph shall not be deemed to constitute "Cause"
unless Employee shall have first received written notice from the
Chief Executive Officer advising the Employee in reasonable detail of
the specific acts or omissions alleged to constitute "Cause" under
said clauses, and such act or omission continues after Employee shall
have had a reasonable opportunity to cease or correct the acts or
omissions so complained of.
"CHANGE IN CONTROL" shall mean an event which shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the
Company (the "Board") and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (i) or (iii) of
this paragraph) whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or (iii) the
stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or
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disposition by the Company of all or substantially all the Company's
assets.
"COMPANY" shall mean not only Recognition International Inc. but also
its successors by merger or otherwise.
"POTENTIAL CHANGE IN CONTROL" shall mean an event which shall be
deemed to have occurred if (i) the Company enters into an agreement,
the consummation of which would result in the occurrence of a Change
in Control; (ii) any person (including the Company) publicly announces
an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any person,
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, who is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of
the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (iv) the Board adopts a
resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control of the Company has occurred.
"SEVERANCE AMOUNT" shall mean an amount equal to 2.99 times the
Employee's "annualized includible compensation for the base period" as
defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), reduced by the total amount of any installment
payments previously paid to the Employee under paragraph 5.1A as
severance pay; provided, however, that the Severance Amount shall be
reduced in value to the maximum amount that can be paid so that the
then aggregate present value of all "parachute payments" (as defined
in Section 280G of the Code) to which the Employee is entitled does
not equal or exceed 300% of the Employee's "annualized includible
compensation for the base period." In determining the Severance
Amount, there shall be first taken into account any other "parachute
payments" to which the Employee is entitled.
"VOLUNTARY RESIGNATION" shall mean any termination of Employee's
employment by his own act, unless such termination follows any change
in his position with the Company to a position of lesser authority,
any material changes in his duties, any reduction in his Base Salary
or Targeted Bonus, any material reduction of his employee benefits,
any material increase in the frequency of his travel, or any change in
the circumstances of his employment which, in the Employee's good
faith judgment, results in his being unable to carry out the duties,
authority or powers attached to his position; provided
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that (i) such change, reduction or increase occurs after the
occurrence of a Change in Control, (ii) any sale of assets of the
Company that constitute less than 20% of the Company's assets and less
than 25% of the Company's annual revenues for the preceding fiscal
year shall not result in a change in the circumstances of Employee's
employment with the Company, and (iii) any position of equivalent
authority with the Company will be considered a position of lesser
authority if, at any time after the occurrence of a Change in Control,
the Company is a direct or indirect 50% or more owned subsidiary of
another company and the Employee does not have a position of authority
equivalent to a chief operating officer with the highest level parent
company in the chain of companies in which the Company is a subsidiary.
6. Source and Timing of Payments. All payments provided
under this Agreement shall be paid in cash from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Employee shall have no right,
title, or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship,
between the Company and Employee or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company. All payments required to be made to Employee in installments
hereunder shall be made over the applicable period in accordance with the
Company's normal payroll dates and procedures. All payments under this
Agreement that are not specified to be paid in installments shall be paid in a
lump sum (except for payments under the Company's Executive Bonus Plan made
pursuant to paragraph 5.4, which shall be paid in accordance with the terms of
such Plan).
7. Agreement Not To Compete. Provided that the Company has
complied in all material respects with this Agreement, the Employee agrees that
he will not, prior to the expiration of one year after the date of termination
of his employment with the Company, become employed by, or provide services as
a consultant or otherwise to, BancTec, Inc., FileNet Corporation, ScanOptics,
Inc., Wang
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Laboratories, Inc. or Viewstar Corporation, or any subsidiary, affiliate or
successor of any such company, or any subsidiary, affiliate or division of
International Business Machines Corporation ("IBM") that deals primarily with
workflow, check processing or imaging products, or any subsidiary, affiliate or
division of AT&T that deals primarily with workflow, check processing or
imaging products. This agreement not to compete shall apply worldwide.
Employee acknowledges that the restrictions contained in this paragraph, in
view of the nature of the business in which the Company is engaged and
Employee's position within the Company, are reasonable and necessary in order
to protect the legitimate interests of the Company, and that any violation
thereof would result in irreparable injuries to the Company.
8. Company Proprietary Information. Upon termination of
Employee's employment for any reason, he will forthwith deliver and assign to
the Company all the results of his service as an employee and all documents,
records, notebooks and repositories of or containing secret, confidential or
proprietary information concerning the Company or its business or affairs,
including all copies thereof in his possession or control, whether prepared by
him or others. In the absence of permission by the Company, Employee will not
at any time during, or after the termination of, his employment reveal, divulge
or make known to any person outside the Company's business organization or use
for his own account any secret, confidential or proprietary information
concerning the Company or its business or affairs known to him (whether or not
developed in whole or in part by his efforts). During and after the
termination of his employment, Employee will make no use of any such
information except for the benefit of the Company.
9. Injunctive Relief. Employee agrees that the Company will have
no adequate remedy at law if he violates any of the terms of Paragraphs 7 or 8
above. In such event, the Company will have the right, in addition to any
other right the Company may have, to obtain injunctive relief to restrain any
breach or threatened breach by the Employee or specific enforcement of such
terms. The Company and the Employee recognize that the terms of such
11
<PAGE> 12
paragraphs may be subject to reformation by a court of equity in any suit for
the enforcement thereof, and it is the Company's and the Employee's agreement
and intention that such terms are severable and divisible, and the invalidity
of any such term under applicable law shall not affect the enforceability of
any of the remaining terms and that any such terms not enforceable in full
under applicable law shall be reformed and construed to provide for a scope and
duration consistent with the maximum scope and duration enforceable under
applicable law.
10. Tax Withholding. Payments to the Employee of all compensation
and other amounts contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the withholding of taxes.
11. Assignment. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Employee without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Employee from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives
from assigning any rights hereunder to the person or persons or entities
entitled thereto. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, and upon the Employee and his
heirs, estate, executors, administrators and legal representatives. The
Company shall assign this Agreement to any successor to all or a substantial
portion of the Company's business and assets and the Company will require any
such successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Employee
to compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder upon his Termination following a
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<PAGE> 13
Change in Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
Termination.
12. Headings. The headings of the paragraphs hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
13. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when delivered by hand or
when mailed by registered or certified mail, addressed to the appropriate
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
if by mail:
Recognition International Inc.
Post Office Box 660204
Dallas, Texas 75266
Attn: Secretary
if by hand:
Recognition International Inc.
2701 East Grauwyler Road
Irving, Texas 75061
Attn: Secretary
To the Employee:
At his home address as shown
in the Company's personnel records
provided, however, that any notice of change of address shall be effective only
upon receipt.
14. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
13
<PAGE> 14
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(d) This Agreement is not intended to and does not supersede
(i) that certain letter agreement regarding the possible reduction in benefits
payable by reason of a Change in Control between the Company and the Employee
dated January 12, 1994, and (ii) that certain Employee Agreement and Assignment
of Inventions between the Company and the Employee dated September 13, 1990.
15. Arbitration.
15.1 Any controversy between the parties hereto involving the
construction or application of any of the terms, covenants or conditions hereof
shall, on the written request of one party served upon the other, be submitted
to arbitration, and such arbitration shall be governed by the provisions of the
Texas General Arbitration Act, Articles 224 through 238-20 of the Revised Civil
Statutes of Texas, as amended from time to time.
15.2 The parties hereto may agree upon one arbitrator to resolve
any controversy, but in the event that they cannot so agree, there shall be
three arbitrators, one named in writing by each of the parties with notice
thereof to be furnished to the other party within thirty (30) days after demand
for arbitration is made, and a third to be chosen by the two so named within
thirty (30) days after the appointment of the second arbitrator. If either
party refuses or neglects to join in the appointment of the
14
<PAGE> 15
arbitrator(s) within the designated period, or if the two arbitrators chosen by
the parties are unable to agree on a third arbitrator within the designated
period, any arbitrator not so selected shall be appointed by the court on the
application of either party in accordance with the provisions of Article 226 of
the Revised Civil Statutes of Texas.
15.3 At the time any dispute hereunder is submitted to arbitration,
the parties hereto shall use reasonable efforts to agree on the procedures to
govern such arbitration. If the parties hereto are unable to agree on such
procedures within thirty (30) days after the designation of the arbitrator(s),
the arbitrator(s) shall determine such procedures.
15.4 All arbitration hearings conducted hereunder, and all judicial
proceedings to enforce any of the provisions hereof relating to arbitration,
shall take place in Dallas County, Texas and shall be governed by the laws of
the State of Texas.
15.5 Unless the Employee's employment terminates within six (6)
months prior to, or within thirty-six (36) months after, the occurrence of the
first event constituting a Change in Control, each party shall be responsible
for its own attorneys' fees and expenses and all other expenses incurred by
such party in connection with the arbitration, and the other costs and expenses
of the arbitration proceeding, including the fees and expenses of the
arbitrator(s) themselves, shall be shared equally by the parties. If the
Employee's employment terminates within six (6) months prior to, or within
thirty-six (36) months after, the occurrence of the first event constituting a
Change in Control, the Company will, upon submission of proper documentation,
promptly reimburse Employee for his attorneys' fees and expenses, and all other
expenses incurred in connection with the arbitration, and shall bear all of the
costs and expenses of the arbitration proceeding, including (i) the fees and
expenses of the arbitrator(s) themselves, without regard to the outcome of the
arbitration proceeding, and (i) any legal fees and expenses incurred in any
legal proceeding to enforce the decision reached in an arbitration proceeding.
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<PAGE> 16
15.6 The award under any arbitration hereunder shall be made within
sixty (60) days of the conclusion of the arbitration. The award shall be in
writing and signed by the arbitrator(s) joining in the award and shall be
binding upon the parties.
16. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, cancelled or discharged except by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RECOGNITION INTERNATIONAL INC.
By: /s/ Robert A. Vanourek
-------------------------------------------------
Chief Executive Officer
EMPLOYEE
/s/ Robert M. Swartz
---------------------------------------
Robert M. Swartz
16
<PAGE> 1
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
AGREEMENT made as of June 1, 1994, by and between Recognition
International Inc., a Delaware corporation (the "Company"), and Thomas R.
Frederick (the "Employee").
The Company desires to continue the employment of the Employee to
serve the Company in an executive capacity and to obtain the benefit of the
Employee's knowledge, experience and abilities and the Employee is willing to
serve in such capacity and continue his employment by the Company.
Employee represents to the Company (a) that there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which
would prevent or make unlawful Employee's execution of this Agreement or
Employee's employment hereunder, (b) that Employee's execution of this
Agreement and Employee's employment hereunder shall not constitute a breach of
any contract, agreement or understanding, oral or written, to which Employee is
a party or by which Employee is bound, and (c) that Employee is free and able
to execute this Agreement and to enter into employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Position and Responsibilities. During the Employment Period (as
hereinafter defined), the Company shall employ the Employee and the Employee
shall serve the Company in an executive capacity performing the functions as
shall be designated by the Chief Executive Officer of the Company or attendant
to the office that he may hold from time to time. The Employee shall devote
his full business time to the business and affairs of the Company and the
promotion of its interests and perform all duties and services on behalf of the
Company necessary to carry out such functions.
2. Employment Period.
2.1. The Employment Period shall mean the period commencing as of
the date of this Agreement and continuing until terminated by the Company
pursuant to paragraph 2.2 hereof or terminated by the Employee.
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<PAGE> 2
2.2 The Company shall have the right in its sole discretion, on
written notice to the Employee, to terminate the Employee's employment with or
without Cause (as defined in Paragraph 4.3), such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
3. Compensation.
3.1. The Company shall pay to the Employee for the services to be
rendered by the Employee hereunder a base salary at the rate per month
determined by the Compensation Committee of the Board of Directors of the
Company (the "Committee"). The base salary will be reviewed at least annually
by the Committee and may be adjusted at any time in the sole discretion of the
Board of Directors or the Committee. The term "Base Salary" as used in this
Agreement shall mean, at any point in time, the Employee's monthly base salary
at such time.
3.2. The Employee shall be eligible to receive an annual bonus
payment pursuant to the Company's executive bonus plan as in effect from time
to time (the "Executive Bonus Plan"). A targeted bonus for the Employee shall
be established annually and shall be earned based on the achievement of
performance goals to be established by the Committee. The term "Targeted
Bonus" as used in this Agreement shall mean, at any point in time, the
Employee's targeted bonus under the Executive Bonus Plan at such time.
3.3. During the Employment Period, the Employee shall be entitled
to participate fully in any benefit plans, programs, policies and fringe
benefits which are made available to the corporate officers of the Company
generally.
4. Severance Pay.
4.1 In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee is
not receiving benefits under the Company's Short Term Disability Policy or Long
Term Disability Plan; or (ii) the Employee terminates his employment as a
result of any of the following reasons: (A) without the Employee's consent the
Company materially diminishes the scope of the Employee's duties, assigns to
the Employee duties materially inconsistent with his designated position, or
reduces the Employee's Base Salary or Targeted Bonus
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<PAGE> 3
to an amount less than previously determined or established by the Committee,
(B) the Company fails on or before the effective date to obtain the assumption
of this Agreement by any acquiror of substantially all of its assets or other
successor to the Company, or (C) the Company breaches any of its material
obligations under this Agreement and such breach is not cured within 30 days
after written notice thereof by the Employee; then the Company shall pay the
Employee severance payments in an amount equal to the sum of the Employee's
annualized Base Salary in effect at the time of such termination, plus an
amount equal to the Employee's Targeted Bonus for the fiscal year in which such
termination occurs (provided, however, that if the basis for Employee's
termination is the reduction in his Base Salary or the reduction of his
Targeted Bonus, the severance pay shall be based on the Base Salary and the
Targeted Bonus in effect prior to such reduction). The severance payments shall
be made in equal monthly installments for a period of 12 months unless the
termination of employment occurs within 180 days after a "Change in Control"
(as defined in Paragraph 4.3 below), in which case the severance payment shall
be paid in a lump sum on the day following such termination. Notwithstanding
the foregoing, if the Employee terminates his employment pursuant to clause
(ii) above, he shall be entitled to the severance payments provided for in this
paragraph only if he gives written notice to the Company of his termination of
employment within 30 days after the occurrence of the event or events specified
in clause (ii) on which he bases his termination and such notice specifies such
event or events.
4.2 The severance payments provided for in Paragraph 4.1 of this
Agreement shall be in lieu of all severance payments or benefits to which the
Employee might otherwise be entitled under Company severance policies from time
to time in effect, except for (i) accrued and unpaid Base Salary to the date of
termination, (ii) any bonus due with respect to fiscal years completed as of
the date of termination pursuant to the Executive Bonus Plan, (iii) payments
made in lieu of accrued vacation as provided for in the Company's vacation
policies, and (iv) benefits payable or available to the Employee pursuant to
the Company's Executive Benefit Plan. Nothing
3
<PAGE> 4
contained in the foregoing shall be construed so as to affect the Employee's
rights or the Company's obligations relating to agreements or benefits which
are unrelated to termination of employment.
4.3 For purposes of this Agreement, the following terms shall have
the following meanings:
"CAUSE" shall mean: (i) neglect, refusal or failure by the Employee
(other than by reason of illness, accident or other physical or mental
incapacity) in any material respect, to attend to his duties as
assigned to him by the Company consistent with this Agreement; (ii)
failure by the Employee in any material respect to comply with any of
the other terms of this Agreement; (iii) repeated failure by the
Employee to follow the established reasonable and material written or
other policies, standards and regulations of the Company; (iv) willful
engagement by the Employee in gross misconduct injurious to the
Company or any of its subsidiaries; (v) misappropriation of property
worth more than $100 of the Company or any of its subsidiaries; or
(vi) Employee's conviction in a court of law of any crime that
constitutes a felony in the jurisdiction involved; provided, however,
that occurrences described in clauses (i), (ii) or (iii) of this
paragraph shall not be deemed to constitute "Cause" unless Employee
shall have first received written notice from the Chief Executive
Officer advising the Employee in reasonable detail of the specific
acts or omissions alleged to constitute "Cause" under said clauses,
and such act or omission continues after Employee shall have had a
reasonable opportunity to cease or correct the acts or omissions so
complained of; and
"CHANGE IN CONTROL" shall mean an event which shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the
Company (the "Board") and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in
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<PAGE> 5
clauses (i) or (iii) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority of the Board; or (iii)
the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
5. Source and Timing of Payments. All payments provided under
this Agreement shall be paid in cash from the general funds of the Company, and
no special or separate fund shall be established, and no other segregation of
assets made, to assure payment. Employee shall have no right, title, or
interest whatever in or to any investments which the Company may make to aid
the Company in meeting its obligations hereunder. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, or a fiduciary relationship, between
the Company and Employee or any other person. To the extent that any person
acquires a right to receive payments from the Company hereunder, such right
shall be no greater than the right of an unsecured creditor of the Company.
All payments required to be made to Employee in installments hereunder shall be
made over the applicable period in accordance with the Company's normal payroll
dates and procedures.
6. Agreement Not To Compete. Provided that the Company has
complied in all material respects with this Agreement, the Employee agrees that
he will not, prior to the expiration of one year after the date of termination
of his employment with the Company, within the United States of America, become
employed by, or provide services as a consultant or otherwise to, (i)
International
5
<PAGE> 6
Business Machines Corporation, Lotus Development Corporation, Oracle
Corporation or Microsoft Corporation, or any subsidiary, affiliate or successor
of any such company, in a capacity in which Employee's primary responsibility
would be related to products with functionality substantially similar to the
Company's FloWare products in production workflow or the Company's XDP products
in production imaging, or (ii) BancTec, Inc., FileNet Corporation, ScanOptics,
Inc., Wang Laboratories, Inc., Viewstar Corporation, Watermark Software, Inc.
Financial and Corporate Modeling Consultants, Action Technologies, Inc. or
LaserData, Inc. or any subsidiary, affiliate or successor of any such company,
in any capacity. Employee acknowledges that the restrictions contained in this
paragraph, in view of the nature of the business in which the Company is
engaged and Employee's position within the Company, are reasonable and
necessary in order to protect the legitimate interests of the Company, and that
any violation thereof would result in irreparable injuries to the Company.
7. Company Proprietary Information. Upon termination of
Employee's employment for any reason, he will forthwith deliver and assign to
the Company all the results of his service as an employee and all documents,
records, notebooks and repositories of or containing secret, confidential or
proprietary information concerning the Company or its business or affairs,
including all copies thereof in his possession or control, whether prepared by
him or others. In the absence of permission by the Company, Employee will not
at any time during, or after the termination of, his employment reveal, divulge
or make known to any person outside the Company's business organization or use
for his own account any secret, confidential or proprietary information
concerning the Company or its business or affairs known to him (whether or not
developed in whole or in part by his efforts). During and after the
termination of his employment, Employee will make no use of any such
information except for the benefit of the Company.
8. Injunctive Relief. Employee agrees that the Company will have
no adequate remedy at law if he violates any of the terms of Paragraphs 6 or 7
above. In such event, the Company will have the right, in addition to any
other right the Company may have, to
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<PAGE> 7
obtain injunctive relief to restrain any breach or threatened breach by the
Employee or specific enforcement of such terms. The Company and the Employee
recognize that the terms of such paragraphs may be subject to reformation by a
court of equity in any suit for the enforcement thereof, and it is the
Company's and the Employee's agreement and intention that such terms are
severable and divisible, and the invalidity of any such term under applicable
law shall not affect the enforceability of any of the remaining terms and that
any such terms not enforceable in full under applicable law shall be reformed
and construed to provide for a scope and duration consistent with the maximum
scope and duration enforceable under applicable law.
9. Tax Withholding. Payments to the Employee of all compensation
and other amounts contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the withholding of taxes.
10. Assignment. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Employee without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Employee from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives
from assigning any rights hereunder to the person or persons or entities
entitled thereto. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, and upon the Employee and his
heirs, estate, executors, administrators and legal representatives.
11. Headings. The headings of the paragraphs hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
12. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when delivered by hand or
when mailed by registered or certified mail, addressed to the appropriate
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
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<PAGE> 8
To the Company:
if by mail:
Recognition International Inc.
Post Office Box 660204
Dallas, Texas 75266
Attn: Secretary
if by hand:
Recognition International Inc.
2701 East Grauwyler Road
Irving, Texas 75061
Attn: Secretary
To the Employee:
At his home address as shown
in the Company's personnel records
provided, however, that any notice of change of address shall be effective only
upon receipt.
13. Waivers. If either party should waive any breach of any
provision of this Agreement, such party shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
15. Governing Law. This Agreement is to be governed by and
construed in accordance with the laws of the State of Texas as applicable to
contracts entered into and to be performed wholly within the State, without
giving effect to the choice of law provisions thereof.
16. Arbitration.
16.1 Any controversy between the parties hereto involving the
construction or application of any of the terms, covenants or conditions hereof
shall, on the written request of one party served upon the other, be submitted
to arbitration, and such arbitration shall be governed by the provisions of the
Texas General Arbitration Act, Articles 224 through 238-20 of the Revised Civil
Statutes of Texas, as amended from time to time.
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<PAGE> 9
16.2 The parties hereto may agree upon one arbitrator to resolve
any controversy, but in the event that they cannot so agree, there shall be
three arbitrators, one named in writing by each of the parties with notice
thereof to be furnished to the other party within thirty (30) days after demand
for arbitration is made, and a third to be chosen by the two so named within
thirty (30) days after the appointment of the second arbitrator. If either
party refuses or neglects to join in the appointment of the arbitrator(s)
within the designated period, or if the two arbitrators chosen by the parties
are unable to agree on a third arbitrator within the designated period, any
arbitrator not so selected shall be appointed by the court on the application
of either party in accordance with the provisions of Article 226 of the Revised
Civil Statutes of Texas.
16.3 At the time any dispute hereunder is submitted to arbitration,
the parties hereto shall use reasonable efforts to agree on the procedures to
govern such arbitration. If the parties hereto are unable to agree on such
procedures within thirty (30) days after the designation of the arbitrator(s),
the arbitrator(s) shall determine such procedures.
16.4 All arbitration hearings conducted hereunder, and all judicial
proceedings to enforce any of the provisions hereof relating to arbitration,
shall take place in Dallas County, Texas and shall be governed by the laws of
the State of Texas.
16.5 Each party shall be responsible for its own attorneys' fees
and expenses and all other expenses incurred by such party in connection with
the arbitration. The other costs and expenses of the arbitration proceeding,
including the fees and expenses of the arbitrator(s) themselves, shall be
shared equally by the parties.
16.6 The award under any arbitration hereunder shall be made within
sixty (60) days of the conclusion of the arbitration. The award shall be in
writing and signed by the arbitrator(s) joining in the award and shall be
binding upon the parties.
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17. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, cancelled or discharged except by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RECOGNITION INTERNATIONAL INC.
By: /s/ R.A. Vanourek
------------------------------
Chief Executive Officer
EMPLOYEE
/s/ T.R. Frederick
-------------------------------
Thomas R. Frederick
10
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
AGREEMENT made as of December 14, 1994, by and between Recognition
International Inc., a Delaware corporation (the "Company"), and Thomas D.
Neitzel (the "Employee").
The Company desires to continue the employment of the Employee to
serve the Company in an executive capacity and to obtain the benefit of the
Employee's knowledge, experience and abilities and the Employee is willing to
serve in such capacity and continue his employment by the Company.
Employee represents to the Company (a) that there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which
would prevent or make unlawful Employee's execution of this Agreement or
Employee's employment hereunder, (b) that Employee's execution of this
Agreement and Employee's employment hereunder shall not constitute a breach of
any contract, agreement or understanding, oral or written, to which Employee is
a party or by which Employee is bound, and (c) that Employee is free and able
to execute this Agreement and to enter into employment by the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Employment Agreements. This Agreement supersedes and replaces
in all respects the agreement between the parties hereto dated June 1, 1994.
2. Position and Responsibilities. During the Employment Period
(as hereinafter defined), the Company shall employ the Employee and the
Employee shall serve the Company in an executive capacity performing the
functions as shall be designated by the Chief Executive Officer of the Company
or attendant to the office that he may hold from time to time. The Employee
shall devote his full business time to the business and affairs of the Company
and the promotion of its interests and perform all duties and services on
behalf of the Company necessary to carry out such functions.
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3. Employment Period.
3.1. The Employment Period shall mean the period commencing as of
the date of this Agreement and continuing until terminated by the Company
pursuant to paragraph 3.2 hereof or terminated by the Employee.
3.2 The Company shall have the right in its sole discretion, on
written notice to the Employee, to terminate the Employee's employment with or
without Cause (as defined in Paragraph 5.5), such termination to be effective
as of the date on which notice is given or as of such later date otherwise
specified in the notice.
4. Compensation.
4.1. The Company shall pay to the Employee for the services to be
rendered by the Employee hereunder a base salary at the rate per month
determined by the Compensation Committee of the Board of Directors of the
Company (the "Committee"). The base salary will be reviewed at least annually
by the Committee and may be adjusted at any time in the sole discretion of the
Board of Directors or the Committee. The term "Base Salary" as used in this
Agreement shall mean, at any point in time, the Employee's monthly base salary
at such time.
4.2. The Employee shall be eligible to receive an annual bonus
payment pursuant to the Company's executive bonus plan as in effect from time
to time (the "Executive Bonus Plan"). A targeted bonus for the Employee shall
be established annually and shall be earned based on the achievement of
performance goals to be established by the Committee. The term "Targeted
Bonus" as used in this Agreement shall mean, at any point in time, the
Employee's targeted bonus under the Executive Bonus Plan at such time.
4.3. During the Employment Period, the Employee shall be entitled
to participate fully in any benefit plans, programs, policies and fringe
benefits which are made available to the corporate officers of the Company
generally.
5. Severance Pay upon Termination of Employment without Cause.
5.1 In the event that (i) the Company terminates the Employee's
employment for any reason other than for Cause and at a time when Employee is
not eligible to receive benefits under the
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Company's Long Term Disability Plan; or (ii) the Employee terminates his
employment as a result of any of the following reasons: (A) without the
Employee's consent the Company materially diminishes the scope of the
Employee's duties, assigns to the Employee duties materially inconsistent with
his designated position, or reduces the Employee's Base Salary or Targeted
Bonus to an amount less than previously determined or established by the
Committee, or (B) the Company breaches any of its material obligations under
this Agreement and such breach is not cured within 30 days after written notice
thereof by the Employee; then the Company shall pay the Employee severance
payments in an amount equal to the sum of the (x) Employee's annualized Base
Salary in effect at the time of such termination, and (y) an amount equal to
the Employee's Targeted Bonus for the fiscal year in which such termination
occurs (provided, however, that if the basis for Employee's termination is the
reduction in his Base Salary or the reduction of his Targeted Bonus, the
severance pay shall be based on the Base Salary and the Targeted Bonus in
effect prior to such reduction). The severance payments shall be made in
installments over a period of 12 months. Notwithstanding the foregoing, if the
Employee terminates his employment pursuant to clause (ii) above, he shall be
entitled to the severance payments provided for in this paragraph only if he
gives written notice to the Company of his termination of employment within 30
days after the occurrence of the event or events specified in clause (ii) on
which he bases his termination and such notice specifies such event or events.
5.2 Except as provided in Section 5.3 hereof, the severance payments
provided for in Paragraph 5.1 of this Agreement shall be in lieu of all
severance payments or benefits to which the Employee might otherwise be
entitled under Company severance policies from time to time in effect, except
for (i) accrued and unpaid Base Salary to the date of termination, (ii) any
bonus due with respect to fiscal years completed as of the date of termination
pursuant to the Executive Bonus Plan, (iii) payments made in lieu of accrued
vacation as provided for in the Company's vacation policies, and (iv) benefits
payable or available to the Employee pursuant to the Company's Executive
Benefit Plan. Nothing contained in the
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foregoing shall be construed so as to affect the Employee's rights or the
Company's obligations relating to agreements or benefits which are unrelated to
termination of employment.
5.3 Parachute Payment Agreement. The provisions of this Section 5.3
of the Agreement set forth certain terms of an agreement reached between the
Employee and the Company regarding the Employee's rights and obligations upon
the occurrence of a Change in Control (as defined in Paragraph 5.5) of the
Company. These provisions are intended to assure and encourage in advance the
Employee's continued attention and dedication to his assigned duties and his
objectivity during the pendency and after the occurrence of any such event.
These provisions shall terminate and be of no further force or effect on the
earlier of (i) five (5) years after the occurrence of a Change in Control, or
(ii) the date that the Employee attains age 65.
5.3A Potential Change in Control. Subject to the terms and conditions
of this Agreement, in the event of a Potential Change in Control (as defined in
Paragraph 5.5), the Employee will remain in the employ of the Company until the
earliest of (i) a date which is six (6) months from the occurrence of such
Potential Change in Control, (ii) the termination of his employment by reason
of his inability, due to illness, accident or other physical or mental
incapacity, to perform his duties for more than one hundred eighty (180) days
during any twelve-month period, (iii) his attainment of age 65, or (iv) the
occurrence of a Change in Control.
5.3B Change in Control. If within thirty-six (36) months after the
occurrence of the first event constituting a Change in Control, the Employee's
employment terminates prior to his attainment of age 65, for any reason other
than (i) death, (ii) termination by the Company for Cause, (iii) his Voluntary
Resignation (as defined in Paragraph 5.5) or (iv) his inability, due to
illness, accident or other physical or mental incapacity, to perform his duties
for more than one hundred eighty (180) days during any twelve-month period
("Termination"), the Company shall pay Employee in a lump sum an amount equal
to the applicable Severance Amount (as defined in Paragraph 5.5).
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5.3C Stock Options. Pursuant to the Company's Corporate Incentive
Plan, Stock Option Plan VII, and 1990 Corporate Incentive Plan, the Committee
has determined that upon such a Termination, each outstanding Option (as
defined by the Plans) held by the Employee shall be fully exercisable (whether
or not exercisable on the date of such occurrence). Pursuant to such Plans, the
Committee has determined that such a Termination constitutes special
circumstances that, in the judgment of the Committee, merits the following
increase in the period of exercisability and payment of every Option, Right and
Performance Award (as defined by the Plans), except incentive stock options and
those Rights related to incentive stock options, held by the Employee at the
time of such Termination. Therefore, in the event of such Termination, each
outstanding Option, except incentive stock options, held by the Employee shall
be exercisable at any time prior to the expiration date of said Option, or
within twelve (12) months after such Termination, whichever is the shorter
period, each outstanding Right held by the Employee shall be exercisable or
payable to the extent and for the period that the Related Option (as defined by
the Plans) is or becomes exercisable in accordance with its terms and the
deferred installments of each Performance Award payable to the Employee shall
become immediately payable in full. This Agreement shall constitute an
amendment to each agreement between the Employee and the Company under each
Plan.
5.4 The Severance Amount and benefits provided for in Paragraphs
5.3B and 5.3C of this Agreement shall be in lieu of the severance payments
under Paragraph 5.1 and all other payments or benefits to which the Employee
might otherwise be entitled under Company severance policies from time to time
in effect, except for (i) accrued and unpaid Base Salary to the date of
termination, (ii) any bonus due with respect to fiscal years completed as of
the date of termination pursuant to the Executive Bonus Plan, (iii) payments
made in lieu of accrued vacation as provided for in the Company's vacation
policies, and (iv) benefits payable or available to the Employee pursuant to
the Company's Executive Benefit Plan. Nothing contained in the foregoing shall
be construed so as to affect the
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Employee's rights or the Company's obligations relating to agreements or
benefits which are unrelated to termination of employment.
5.5 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"CAUSE" shall mean: (i) neglect, refusal or failure by the Employee
(other than by reason of illness, accident or other physical or mental
incapacity) in any material respect, to attend to his duties as
assigned to him by the Company consistent with this Agreement; (ii)
failure by the Employee in any material respect to comply with any of
the other terms of this Agreement; (iii) repeated failure by the
Employee to follow the established reasonable and material written or
other policies, standards and regulations of the Company; (iv) willful
engagement by the Employee in gross misconduct injurious to the
Company or any of its subsidiaries (including, without limitation,
fraudulent misappropriation of Company confidential or proprietary
information); or (v) Employee's conviction in a court of law of, or
guilty plea or plea of nolo contendere to, any crime that constitutes a
felony in the jurisdiction involved; provided, however, that
occurrences described in clauses (i), (ii) or (iii) of this paragraph
shall not be deemed to constitute "Cause" unless Employee shall have
first received written notice from the Chief Executive Officer
advising the Employee in reasonable detail of the specific acts or
omissions alleged to constitute "Cause" under said clauses, and such
act or omission continues after Employee shall have had a reasonable
opportunity to cease or correct the acts or omissions so complained
of.
"CHANGE IN CONTROL" shall mean an event which shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended [the
"Exchange Act"]), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years (not including any period
prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the
Company (the "Board") and any new director (other than a director
designated by a person who has entered into an agreement with the
Company to effect a transaction described in clauses (i) or (iii) of
this paragraph) whose election by
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the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board;
or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
"COMPANY" shall mean not only Recognition International Inc. but also
its successors by merger or otherwise.
"POTENTIAL CHANGE IN CONTROL" shall mean an event which shall be
deemed to have occurred if (i) the Company enters into an agreement,
the consummation of which would result in the occurrence of a Change
in Control; (ii) any person (including the Company) publicly announces
an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; (iii) any person,
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, who is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 10% or more of the combined voting power of
the Company's then outstanding securities, increases his beneficial
ownership of such securities by 5% or more over the percentage so
owned by such person on the date hereof; or (iv) the Board adopts a
resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control of the Company has occurred.
"SEVERANCE AMOUNT" shall mean an amount equal to two (2) times the sum
of (i) the Employee's annualized Base Salary in effect at the time of
such termination and (ii) the Employee's Targeted Bonus for the fiscal
year in which such termination occurs (provided, however, that if the
basis for Employee's termination is the reduction in his Base Salary
or the reduction of his Targeted Bonus, the Severance Amount shall be
based on the Base Salary and the Targeted Bonus in effect prior to
such reduction); provided, however, that the
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Severance Amount shall be reduced in value to the maximum amount that
can be paid so that the then aggregate present value of all "parachute
payments" (as defined in Section 280G of the Internal Revenue Code of
1986, as amended) to which the Employee is entitled does not equal or
exceed 300% of the Employee's "annualized includible compensation for
the base period." In determining the Severance Amount, there shall be
first taken into account any other "parachute payments" to which the
Employee is entitled.
"VOLUNTARY RESIGNATION" shall mean any termination of Employee's
employment by his own act, unless such termination follows any change
in his position with the Company to a position of lesser authority,
any material changes in his duties, any reduction in his Base Salary
or Targeted Bonus, any material reduction of his employee benefits,
any material increase in the frequency of his travel, or any change in
the circumstances of his employment which, in the Employee's good
faith judgment, results in his being unable to carry out the duties,
authority or powers attached to his position; provided that such
change, reduction or increase occurs after the occurrence of a Change
in Control, and provided further that any sale of assets of the
Company that constitute less than 25% of the Company's assets and less
than 25% of the Company's annual revenues for the preceding fiscal
year shall not result in a change in the circumstances of Employee's
employment with the Company.
6. Source and Timing of Payments. All payments provided
under this Agreement shall be paid in cash from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Employee shall have no right,
title, or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind, or a fiduciary relationship,
between the Company and Employee or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured creditor of the
Company. All payments required to be made to Employee in installments
hereunder shall be made over the applicable period in accordance with the
Company's normal payroll dates and procedures. All
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payments under this Agreement that are not specified to be paid in installments
shall be paid in a lump sum.
7. Agreement Not To Compete. Provided that the Company has
complied in all material respects with this Agreement, the Employee agrees that
he will not, prior to the expiration of one year after the date of termination
of his employment with the Company, become employed by, or provide services as
a consultant or otherwise to, BancTec, Inc., ScanOptics, Inc., or National
Computer Services Inc., or any subsidiary, affiliate or successor of any such
company. This agreement not to compete shall apply worldwide. Employee
acknowledges that the restrictions contained in this paragraph, in view of the
nature of the business in which the Company is engaged and Employee's position
within the Company, are reasonable and necessary in order to protect the
legitimate interests of the Company, and that any violation thereof would
result in irreparable injuries to the Company.
8. Company Proprietary Information. Upon termination of
Employee's employment for any reason, he will forthwith deliver and assign to
the Company all the results of his service as an employee and all documents,
records, notebooks and repositories of or containing secret, confidential or
proprietary information concerning the Company or its business or affairs,
including all copies thereof in his possession or control, whether prepared by
him or others. In the absence of permission by the Company, Employee will not
at any time during, or after the termination of, his employment reveal, divulge
or make known to any person outside the Company's business organization or use
for his own account any secret, confidential or proprietary information
concerning the Company or its business or affairs known to him (whether or not
developed in whole or in part by his efforts). During and after the
termination of his employment, Employee will make no use of any such
information except for the benefit of the Company.
9. Injunctive Relief. Employee agrees that the Company will have
no adequate remedy at law if he violates any of the terms of Paragraphs 7 or 8
above. In such event, the Company will have the right, in addition to any
other right the Company may have, to
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obtain injunctive relief to restrain any breach or threatened breach by the
Employee or specific enforcement of such terms. The Company and the Employee
recognize that the terms of such paragraphs may be subject to reformation by a
court of equity or by arbitration pursuant to the provisions of Paragraph 15,
and it is the Company's and the Employee's agreement and intention that such
terms are severable and divisible, and the invalidity of any such term under
applicable law shall not affect the enforceability of any of the remaining
terms and that any such terms not enforceable in full under applicable law
shall be reformed and construed to provide for a scope and duration consistent
with the maximum scope and duration enforceable under applicable law.
10. Tax Withholding. Payments to the Employee of all compensation
and other amounts contemplated under this Agreement shall be subject to all
applicable legal requirements with respect to the withholding of taxes.
11. Assignment. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Employee without the Company's prior written consent; provided, however, that
nothing in this paragraph shall preclude the Employee from designating any of
his beneficiaries to receive any benefits payable hereunder upon his death or
disability, or his executors, administrators, or other legal representatives
from assigning any rights hereunder to the person or persons or entities
entitled thereto. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns, and upon the Employee and his
heirs, estate, executors, administrators and legal representatives. The
Company shall assign this Agreement to any successor to all or a substantial
portion of the Company's business and assets and the Company will require any
such successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach
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of this Agreement and shall entitle the Employee to compensation from the
Company in the same amount and on the same terms as he would be entitled to
hereunder upon his Termination following a Change in Control, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of Termination.
12. Headings. The headings of the paragraphs hereof are inserted
for convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
13. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been given at the time when delivered by hand or
when mailed by registered or certified mail, addressed to the appropriate
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
if by mail:
Recognition International Inc.
Post Office Box 660204
Dallas, Texas 75266
Attn: Secretary
if by hand:
Recognition International Inc.
2701 East Grauwyler Road
Irving, Texas 75061
Attn: Secretary
To the Employee:
At his home address as shown
in the Company's personnel records
provided, however, that any notice of change of address shall be effective only
upon receipt.
14. Miscellaneous.
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Committee or the Board. No waiver by either party hereto at
any time of any breach by the
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other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Texas.
(b) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(d) This Agreement is not intended to and does not supersede
that certain letter agreement regarding the possible reduction in benefits
payable by reason of a Change in Control between the Company and the Employee
dated January 12, 1994.
15. Arbitration.
15.1 Any controversy between the parties hereto involving the
construction or application of any of the terms, covenants or conditions hereof
shall, on the written request of one party served upon the other, be submitted
to arbitration, and such arbitration shall be governed by the provisions of the
Texas General Arbitration Act, Articles 224 through 238-20 of the Revised Civil
Statutes of Texas, as amended from time to time.
15.2 The parties hereto may agree upon one arbitrator to resolve
any controversy, but in the event that they cannot so agree, there shall be
three arbitrators, one named in writing by each of the parties with notice
thereof to be furnished to the other party within thirty (30) days after demand
for arbitration is made, and a third to be chosen by the two so named within
thirty (30) days after the appointment of the second arbitrator. If
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either party refuses or neglects to join in the appointment of the
arbitrator(s) within the designated period, or if the two arbitrators chosen by
the parties are unable to agree on a third arbitrator within the designated
period, any arbitrator not so selected shall be appointed by the court on the
application of either party in accordance with the provisions of Article 226 of
the Revised Civil Statutes of Texas.
15.3 At the time any dispute hereunder is submitted to arbitration,
the parties hereto shall use reasonable efforts to agree on the procedures to
govern such arbitration. If the parties hereto are unable to agree on such
procedures within thirty (30) days after the designation of the arbitrator(s),
the arbitrator(s) shall determine such procedures.
15.4 All arbitration hearings conducted hereunder, and all judicial
proceedings to enforce any of the provisions hereof relating to arbitration,
shall take place in Dallas County, Texas and shall be governed by the laws of
the State of Texas.
15.5 Unless the Employee's employment terminates within thirty-six
(36) months after the occurrence of the first event constituting a Change in
Control, each party shall be responsible for its own attorneys' fees and
expenses and all other expenses incurred by such party in connection with the
arbitration, and the other costs and expenses of the arbitration proceeding,
including the fees and expenses of the arbitrator(s) themselves, shall be
shared equally by the parties. If the Employee's employment terminates within
thirty-six (36) months after the occurrence of the first event constituting a
Change in Control, the Company will, upon submission of proper documentation,
promptly reimburse Employee for his attorneys' fees and expenses, and all other
expenses incurred in connection with the arbitration, and shall bear all of the
costs and expenses of the arbitration proceeding, including (i) the fees and
expenses of the arbitrator(s) themselves, without regard to the outcome of the
arbitration proceeding, and (ii) any legal fees and expenses incurred in any
legal proceeding to enforce the decision reached in an arbitration proceeding.
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15.6 The award under any arbitration hereunder shall be made within
sixty (60) days of the conclusion of the arbitration. The award shall be in
writing and signed by the arbitrator(s) joining in the award and shall be
binding upon the parties.
15.7 Notwithstanding the above, either party shall have the right to
seek injunctive relief from a court of competent jurisdiction in order to
protect the rights of the parties pending the final award/judgment of the
arbitrator.
16. Conditions to the Company's Obligations. The obligations of
the Company hereunder are conditioned upon the Employee executing simultaneously
herewith, or having previously executed, the Company's standard form of
"Employee Agreement and Assignment of Inventions" attached hereto as Exhibit A.
In the event of any conflict between the provisions of this Agreement and the
provisions of the Employee Agreement and Assignment of Inventions, this
Agreement shall control.
17. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended, supplemented, cancelled or discharged except by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RECOGNITION INTERNATIONAL INC.
By: /s/ Robert M. Swartz
-------------------------------
EMPLOYEE
/s/ Thomas D. Neitzel
--------------------------------------
Thomas D. Neitzel
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EXHIBIT A
[RECOGNITION LOGO]
EMPLOYEE AGREEMENT AND ASSIGNMENT
OF INVENTIONS
In consideration of my initial or continued employment by Recognition
International Inc. or any of its subsidiaries (collectively, the "Company"), of
compensation to be paid to me, and other valuable consideration, I
_________________________, hereby agree as follows:
1. I recognize that my position with the Company is one of trust and
confidence by reason of access to trade secrets and confidential and
proprietary business or technical information which are or may be either
applicable to, or related in any way to (i) the business, present or future, of
the Company, (ii) the research and development or investigations of the
Company, or (iii) the business of any customer of the Company (hereinafter
called "Proprietary Information"). Proprietary Information includes, for
example and without limitation, trade secrets, processes, formulas, data,
algorithms, source code, object code, know-how, improvements, inventions,
techniques, marketing plans and strategies, and information concerning
customers or vendors. I agree to use my best efforts to protect the
Proprietary Information and I shall not, either during or after my employment,
directly or indirectly, use for my benefit or for the benefit of another, or
disclose to any unauthorized person, firm or corporation, any Proprietary
Information without the Company's prior written consent. I agree to abide by
the Company's policies and procedures, as established from time to time, for
the protection of Proprietary Information.
2. I agree that all memoranda, notes, records, drawings, forms, computer
software or listings, business records, manuals, and any other documents and
materials made or prepared by me within the scope of my employment or made
available to me by the Company are the property of the Company and shall be
delivered to the Company upon termination of my employment, or at any time upon
request. I agree that the Company is the author of and owns all the copyright
rights to any copyrightable works prepared by me within the scope of my
employment.
3. I agree that all inventions, discoveries, improvements, trade secrets,
formulas, techniques, processes, and know-how, whether or not patentable and
whether or not reduced to practice, conceived or learned by me during the
period of my employment, either alone or jointly with others (hereinafter call
"Inventions") which result to any extent from use of the Company's time,
premises or property, or are within the Company's field of interest", are the
exclusive property of the Company. The Company's field of interest includes
any subject (i) which has been worked on by the Company in the past, or (ii) in
which there is, during my employment, work in progress at the Company or
projects and other operations planned by the Company for the future. I
understand my obligations under this paragraph apply without regard to whether
an idea for an invention occurs on the job, at home, or elsewhere and I agree
to disclose all Inventions promptly, completely and in writing to the Company.
4. I agree to assist, either during or after my employment, without charge
but at the Company's expense, in the preparation, execution and delivery of any
documents which may be necessary or desirable, on the Company's opinion, to
perfect the right, title and interest of the Company to any Inventions or
copyrightable works within the scope of paragraphs 2 and 3 of this Agreement,
and to assist in such other proceedings as may be necessary to give effect to
the provisions of such paragraphs. Such documents shall include, but are not
limited to, disclosures, patent or copyright applications or papers required or
helpful to obtain patents or copyrights in this or in other countries. If the
Company is unable to secure my signature on any such documents after reasonable
efforts, I hereby irrevocably appoint the Company, its successors and assigns,
and any present or future officer thereof, as my true and lawful attorney with
full power to execute any such documents from time to time in my name and on my
behalf.
5. During my employment and for two years after termination of my
employment, I will not, either directly or indirectly, either individually or
jointly (i) solicit for employment any Company employee or (ii) attempt to
induce or influence any person to leave the Company's employment.
6. If I voluntarily resign from the Company within six months from my date
of employment of if the Company terminates my employment for any willful
misrepresentation on my employment application, I promise to reimburse the
Company for (i) that portion of any employment agency fee paid by the Company
for my employment which is not recoverable from the agency in accordance with
the agency's refund policy, and (iii) all expenses paid by the Company in
connection with my relocation as a new employee.
7. During my employment I will not engage in any work or activity
competitive with or adverse to the Company's interests, or combine with other
Company employees or other parties for the purpose of organizing such
competitive activity, or engage in any activities which conflict or interfere
with my responsibilities as an employee of the Company.
8. I acknowledge that the agreements on my part contained in this
Agreement are reasonable and necessary for the protection of the Company and
that the Company could suffer irreparable injury if I breach any of my
agreements. Therefore, I agree that the Company, in addition to any other
remedy available to it, shall be entitled to injunctive relief in the event of
any breach or threatened breach on my part of any of my agreements contained
herein.
9. This agreement may not be modified in any respect by any verbal
statement, representation or agreement made by any employee of the Company, or
by a written document unless signed by an authorized officer of the Company.
However, I agree that a court may modify any provision of this Agreement rather
than hold the provision invalid or unenforceable to effectuate the provision's
intent to the fullest extent possible, and if any provision of this Agreement
is modified or held wholly or partly ineffective by any court, such holding
shall not invalidate or render ineffective any other provision. This Agreement
may be assigned by the Company to any succesors in business and is binding on
my heirs or legal representatives.
10. This agreement is considered to have been made in Dallas, Texas, and
the laws of the State of Texas shall govern this Agreement without regard to
the place of execution or the place of performance thereof, except that, as to
California employees, this Agreement shall not apply to assignment of an
Invention which qualifies fully under the provisions of Section 2870 of the
California Labor Code.
/s/
- ----------------------------------------
Employee Signature Date
- ----------------------------------------
Witness Date
NOTICE TO EMPLOYEE: This agreement affects important rights. DO NOT sign it
unless you have read it carefully, and are satisfied that you understand it
completely.
Rev: 3/93
<PAGE> 1
EXHIBIT 10.40
INCENTIVE
STOCK OPTION AGREEMENT
UNDER THE
CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION EQUIPMENT INCORPORATED
* * *
This agreement made and entered into as of the 23rd day of May, 1985,
by and between Recognition Equipment Incorporated, a Delaware corporation
(herein called the "COMPANY"), and Thomas D. Neitzel, III, (herein called the
"OPTIONEE").
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to make
constructions of this incentive stock option agreement, and to correct any
defect or supply any omission or reconcile any inconsistency in this agreement,
and to prescribe rules and regulations relating to the administration of this
incentive stock option and other options granted under the Plan. In this
connection, it is understood that the Plan is incorporated herein by reference,
and made a part of this agreement as if fully set forth herein. The Plan shall
control in the event there be any conflict between the Plan and this agreement,
and shall control as to any matters not contained in this agreement. Terms
used in this agreement which are defined in the Plan shall have the same
meanings in this agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE the right
and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 3,000 shares of the presently authorized Common
Stock of the COMPANY at the purchase price of Nine and 88/100 Dollars
($9.88) per share. The option evidenced hereby is an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1954,
as amended.
3. DATE OF GRANT. The Date of Grant of this incentive stock option is
the date of this agreement.
4. TERM. Subject to earlier termination in accordance with the Plan or
this agreement, this option shall continue for ten (10) years from the date
hereof. If the expiration date of this option or any termination date provided
for in the Plan or in this option agreement shall fall on a Saturday, Sunday or
a day on which the executive offices of the COMPANY are not open for business,
then such expiration or termination date shall be deemed to be the last normal
business day of the COMPANY, at its office specified in or pursuant to
Paragraph 17 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 2
5. EXERCISABILITY. This option shall become exercisable with respect to
(a) 50 percent of the total number of shares subject to the option upon the
expiration of 12 months from the date hereof, and (b) the remaining 50 percent
of such total number of shares upon the expiration of 24 months from the date
hereof. Such exercisable installments shall be cumulative. To the extent at
the time exercisable, this option may be exercised in whole or in part at any
time, at the sole discretion of the holder thereof. Except as set forth in
Paragraphs 11 and 12 hereof, the OPTIONEE may not exercise this option unless
at the time of exercise thereof he has been in the employ of the COMPANY and/or
of a Subsidiary continuously since the Date of Grant of this option. This
option shall be exercisable during the lifetime of the OPTIONEE only by him or
his guardian or legal representative. Neither the OPTIONEE nor any person
exercising this option pursuant to Paragraph 12 hereof may exercise this option
for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written Notice of Exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such Notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) partially or entirely in whole
shares of Common Stock of the COMPANY, with the balance, if any, to be paid in
cash. Options shall be deemed to have been exercised on the first date upon
which the COMPANY receives the Notice of Exercise, payment of the purchase
price and all other documents, information and amounts required in respect of
such exercise by the Plan or this agreement.
7. DISPOSITION OF SHARES. OPTIONEE shall report to the COMPANY any
disposition of any shares acquired upon exercise of this option, including the
date of disposition and the amount realized thereon, if such disposition shall
occur within (a) two years from the date this option is granted or (b) one year
from the date such shares are acquired upon exercise of this option.
Certificates which are to evidence the shares to be issued upon any exercise of
this option may bear an indication that such shares have been issued pursuant
to the exercise of an incentive stock option.
8. PRIOR INCENTIVE STOCK OPTIONS. Notwithstanding any other provision
hereof, this option shall not be exercisable while there is outstanding (within
the meaning of Section 422(c)(7) of the Internal Revenue Code of 1954, as
amended) any incentive stock option (within the meaining of Section 422A(b) of
the Code) which was granted, before the granting of this option, to the
OPTIONEE, to purchase stock in his employer corporation or in a corporation
which (at the time of granting this option) is a parent or subsidiary
corporation of his employer corporation, or in a predecessor corporation of any
of such corporations.
9. WITHHOLDING TAX. Prior to the exercise of this option and, as a
condition to the COMPANY's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the COMPANY for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
2
<PAGE> 3
10. DISCHARGE. If the OPTIONEE's employment by the COMPANY and all
Subsidiaries shall terminate because of such OPTIONEE's discharge (for or
without cause), then this option, and any rights he may have under this option,
shall terminate and be forfeited immediately as to any unexercised portion
thereof.
11. VOLUNTARY TERMINATION. If the OPTIONEE voluntarily terminates his
employment with the COMPANY and all subsidiaries (other than by reason of
disability), this option shall be exercisable by him at any time prior to the
expiration date of this option or within three months after the date of his
termination of employment, whichever is the shorter period, but only to the
extent that this option was exercisable at the date of his termination.
12. DEATH OR DISABILITY. In the event of termination of employment by
reason of disability (of which the Committee shall be the sole judge) or the
death of the OPTIONEE while he is an employee of the COMPANY or a Subsidiary,
this option shall be fully exercisable (whether or not exercisable on the date
of his death or termination of employment by reason of disability) at any time
prior to the expiration date of this option or within six months after the date
of death or termination of employment, whichever is the shorter period, by the
person or persons specified in the OPTIONEE's Will or, if the OPTIONEE shall
have failed to make specific provision in his Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
OPTIONEE's guardian or legal representative.
13. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the COMPANY
from the holder of this option of such written representations concerning his
intentions with regard to retention or disposition of the shares being acquired
by exercise of this option and/or such written covenants and agreements as to
the manner of disposal of such shares as, in the opinion of the Committee, may
be necessary to ensure that any disposition by such holder will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect.
14. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or legal
representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option unless and until certificates representing such shares
shall have been issued and delivered.
15. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this agreement
shall constitute or be evidence of any understanding, express or implied, on
the part of the COMPANY or any Subsidiary to employ the OPTIONEE for any
specified period.
3
<PAGE> 4
16. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or
this agreement, this option and the rights and privileges conferred hereby may
not be transferred, assigned, pledged or hypothecated or otherwise disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this option or any right or
privilege conferred hereby, contrary to the provisions hereof, this option and
the rights and privileges conferred hereby shall immediately become null and
void.
17. NOTICE. Every notice or other communication relating to this
agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed, if to the COMPANY, at
its address in Dallas, Texas, attention Corporate Secretary, or if mailed or
delivered to the OPTIONEE, at the address set forth below his signature to this
agreement (or at such other address or in care of such other person as
may hereafter be designated in writing by either party to the other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be executed
by its duly authorized officer and its corporate seal to be hereunto affixed
and attested by its Secretary or one of its Assistant Secretaries on the date
first above written, and the OPTIONEE has hereunto set his hand on such date.
RECOGNITION EQUIPMENT INCORPORATED
By: /s/ William G. Moore, Jr.
------------------------------
President
ATTEST:
/s/ Thomas A. Loose
------------------------
Secretary
(Corporate Seal)
OPTIONEE
/s/ Thomas D. Neitzel, II
-------------------------------
Name
4
<PAGE> 1
EXHIBIT 10.41
STOCK OPTION AGREEMENT
UNDER THE
CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION EQUIPMENT INCORPORATED
* * * * *
This agreement made and entered into as of the 26th day of May,
1988, by and between Recognition Equipment Incorporated, a Delaware
corporation (herein called the "COMPANY"), and THOMAS D. NEITZEL
(herein called the "OPTIONEE").
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to make
constructions of this option agreement, and to correct any defect or supply
any omission or reconcile any inconsistency in this option agreement,
and to prescribe rules and regulations relating to the administration of this
option and other options granted under the Plan. In this connection, it is
understood that the Plan is incorporated herein by reference, and made a part
of this option agreement as if fully set forth herein. The Plan shall control
in the event there be any conflict between the Plan and this option agreement,
and shall control as to any matters not contained in this option agreement.
Terms used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE the right
and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 1,000 shares of the presently authorized Common
Stock of the COMPANY at the purchase price of Six and 88/100 DOLLARS
($6.88) per share.
3. DATE OF GRANT. The Date of Grant of this option is the date of this
agreement.
4. TERM. Subject to earlier termination in accordance with the Plan or
this option agreement, this option shall continue for ten (10) years from the
date hereof. If the expiration date of this option or any termination date
provided for in the Plan or in this option agreement shall fall on a Saturday,
Sunday or a day on which the executive offices of the COMPANY are not open for
business, then such expiration or termination date shall be deemed to be the
last normal business day of the COMPANY, at its office specified in or pursuant
to Paragraph 15 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 2
5. EXERCISABILITY. This option shall become exercisable with respect to
(a) 20 percent of the total number of shares subject to the option upon the
expiration of 12 months from the date hereof, and (b) an additional 20 percent
of such total number of shares upon the expiration of each of the four
succeeding 12-month periods thereafter. Such exercisable installments shall be
cumulative. To the extent at the time exercisable, this option may be
exercised in whole or in part at any time, at the sole discretion of the holder
thereof. Except as set forth in Paragraphs 11 and 12 hereof, the OPTIONEE may
not exercise this option unless at the time of exercise thereof he has been in
the employ of the COMPANY and/or of a Subsidiary continuously since the Date of
Grant of this option. This option shall be exercisable during the lifetime of
the OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 12 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written Notice of Exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such Notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
the Notice of Exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this option agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and, as a
condition to the COMPANY's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the COMPANY for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and all
Subsidiaries shall terminate because of such OPTIONEE's discharge (for or
without cause), then this option, and any rights he may have under this option,
shall terminate and be forfeited immediately as to any unexercised portion
thereof.
9. VOLUNTARY TERMINATION. If the OPTIONEE voluntarily terminates his
employment with the COMPANY and all subsidiaries (other than by reason of
disability), this option shall be exercisable by him at any time prior to the
expiration date of this option or within three months after the date of his
termination of employment, whichever is the shorter period, but only to the
extent that this option was exercisable at the date of his termination.
2
<PAGE> 3
10. DEATH OR DISABILITY. In the event of termination of employment by
reason of disability (of which the Committee shall be the sole judge) or the
death of the OPTIONEE while he is an employee of the COMPANY or a Subsidiary,
this option shall be fully exercisable (whether or not exercisable on the date
of his death or termination of employment by reason of disability) at any time
prior to the expiration date of this option or within six months after the date
of death or termination of employment, whichever is the shorter period, by the
person or persons specified in the OPTIONEE's Will or, if the OPTIONEE shall
have failed to make specific provision in his Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the COMPANY
from the holder of this option of such written representations concerning his
intentions with regard to retention or disposition of the shares being acquired
by exercise of this option and/or such written covenants and agreements as to
the manner of disposal of such shares as, in the opinion of the Committee, may
be necessary to ensure that any disposition by such holder will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or legal
representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this agreement
shall constitute or be evidence of any understanding, express or implied, on
the part of the COMPANY or any Subsidiary to employ the OPTIONEE for any
specified period.
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or this
option agreement, this option and the rights and privileges conferred hereby
may not be transferred, assigned, pledged or hypothecated or otherwise disposed
of in any way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or
any right or privilege conferred hereby, contrary to the provisions hereof,
this option and the rights and privileges conferred hereby shall immediately
become null and void.
15. NOTICE. Every notice or other communication relating to this
agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed. If to the COMPANY, at
its address in Dallas, Texas, attention Corporate Secretary. If mailed or
delivered to the OPTIONEE, at the address set forth below his signature to this
option agreement (or at such other address or in care of such other person as
may hereafter be designated in writing by either party to the other).
3
<PAGE> 4
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be executed in
its name by its President or one of its Vice Presidents and its corporate seal
to be hereunto affixed and attested by its Secretary or one of its Assistant
Secretaries on the date first above written, and the OPTIONEE has hereunto set
his hand on such date.
RECOGNITION EQUIPMENT INCORPORATED
By /s/ W.G. Moore, Jr.
----------------------------
Chairman and Chief Executive Officer
ATTEST:
/s/ Thomas A. Loose
----------------------
Secretary
(Corporate Seal)
OPTIONEE
/s/ Thomas D. Neitzel
-------------------------------
Name
4
<PAGE> 5
STOCK OPTION AGREEMENT
UNDER THE
CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION EQUIPMENT INCORPORATED
* * * * *
This agreement made and entered into as of the 1st day of June, 1990,
by and between Recognition Equipment Incorporated, a Delaware corporation
(herein called the "COMPANY"), and Thomas D. Neitzel (herein called the
"OPTIONEE").
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to make
constructions of this option agreement, and to correct any defect or supply any
omission or reconcile any inconsistency in this option agreement, and to
prescribe rules and regulations relating to the administration of this option
and other options granted under the Plan. In this connection, it is understood
that the Plan is incorporated herein by reference, and made a part of this
option agreement as if fully set forth herein. The Plan shall control in the
event there be any conflict between the Plan and this option agreement, and
shall control as to any matters not contained in this option agreement. Terms
used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE the right and
option to purchase, at the times and on the terms and conditions
hereinafter set forth, 25,000 shares of the presently authorized Common Stock
of the COMPANY at the purchase price of Four and 88/100 Dollars ($4.88) per
share. The option evidenced hereby is intended to be and is designated as a
non-incentive stock option and is not intended to be an "incentive stock
option" within the meaning of Section 422A of the Internal Revenue Code.
3. DATE OF GRANT. The Date of Grant of this incentive stock option is
the date of this agreement.
4. TERM. Subject to earlier termination in accordance with the Plan or
this option agreement, this option shall continue for ten (10) years from the
date hereof. If the expiration date of this option or any termination date
provided for in the Plan or in this option agreement shall fall on a Saturday,
Sunday or a day on which the executive offices of the COMPANY are not open for
business, then such expiration or termination date shall be deemed to be the
last normal business day of the COMPANY, at its office specified in or pursuant
to Paragraph 15 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 6
5. EXERCISABILITY. This option shall become exercisable with respect to
(a) 20 percent of the total number of shares subject to the option upon the
expiration of 12 months from the date hereof, and (b) an additional 20 percent
of such total number of shares upon the expiration of each of the four
succeeding 12-month periods thereafter. Such exercisable installments shall be
cumulative. To the extent at the time exercisable, this option may be
exercised in whole or in part at any time, at the sole discretion of the holder
thereof. Except as set forth in Paragraphs 9 and 10 hereof, the OPTIONEE may
not exercise this option unless at the time of exercise thereof he has been in
the employ of the COMPANY and/or of a Subsidiary continuously since the Date of
Grant of this option. This option shall be exercisable during the lifetime of
the OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 10 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written Notice of Exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such Notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
the Notice of Exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and, as a
condition to the COMPANY's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the COMPANY for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and all
Subsidiaries shall terminate because of such OPTIONEE's discharge (for or
without cause), then this option, and any rights he may have under this option,
shall terminate and be forfeited immediately as to any unexercised portion
thereof.
9. VOLUNTARY TERMINATION. If the OPTIONEE voluntarily terminates his
employment with the COMPANY and all subsidiaries (other than by reason of
disability), this option shall be exercisable by him at any time prior to the
expiration date of this option or within three months after the date of his
termination of employment, whichever is the shorter period, but only to the
extent that this option was exercisable at the date of his termination.
2
<PAGE> 7
10. DEATH OR DISABILITY. In the event of termination of employment by
reason of disability (of which the Committee shall be the sole judge) or the
death of the OPTIONEE while he is an employee of the COMPANY or a Subsidiary,
this option shall be fully exercisable (whether or not exercisable on the date
of his death or termination of employment by reason of disability) at any time
prior to the expiration date of this option or within six months after the date
of death or termination of employment, whichever is the shorter period, by the
person or persons specified in the OPTIONEE's Will or, if the OPTIONEE shall
have failed to make specific provision in his Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the COMPANY
from the holder of this option of such written representations concerning his
intentions with regard to retention or disposition of the shares being acquired
by exercise of this option and/or such written covenants and agreements as to
the manner of disposal of such shares as, in the opinion of the Committee, may
be necessary to ensure that any disposition by such holder will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or legal
representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this option
agreement shall constitute or be evidence of any understanding, express or
implied, on the part of the COMPANY or any Subsidiary to employ the OPTIONEE
for any specified period.
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or this
option agreement, this option and the rights and privileges conferred hereby
may not be transferred, assigned, pledged or hypothecated or otherwise disposed
of in any way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or
any right or privilege conferred hereby, contrary to the provisions hereof,
this option and the rights and privileges conferred hereby shall immediately
become null and void.
3
<PAGE> 8
15. NOTICE. Every notice or other communication relating to this option
agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed. If to the COMPANY, at
its address in Dallas, Texas, attention Corporate Secretary. If mailed or
delivered to the OPTIONEE, at the address set forth below his signature to this
option agreement (or at such other address or in care of such other person as
may hereafter be designated in writing by either party to the other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be executed in
its name by its duly authorized officer and the OPTIONEE has hereunto set his
hand as of the date above first written.
RECOGNITION EQUIPMENT INCORPORATED
By /s/ R. A. Vanourek
----------------------------------
Co-Chief Executive Officer
OPTIONEE
/s/ Thomas D. Neitzel
---------------------------------
Name
4
<PAGE> 9
STOCK OPTION AGREEMENT
UNDER THE
CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION EQUIPMENT INCORPORATED
* * * * *
This agreement made and entered into as of the 13th day of
December , 1990, by and between Recognition Equipment Incorporated, a
Delaware corporation (herein called the "COMPANY"), and Thomas D. Neitzel
(herein called the "OPTIONEE").
In consideration of the premises and mutual covenants herein contained
and other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to
make constructions of this option agreement, and to correct any defect or
supply any omission or reconcile any inconsistency in this option agreement,
and to prescribe rules and regulations relating to the administration of this
option and other options granted under the Plan. In this connection, it is
understood that the Plan is incorporated herein by reference, and made a part
of this option agreement as if fully set forth herein. The Plan shall control
in the event there be any conflict between the Plan and this option agreement,
and shall control as to any matters not contained in this option agreement.
Terms used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE
the right and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 69,000 shares of the presently authorized Common Stock
of the COMPANY at the purchase price of Five and 13/100 Dollars ($5.13) per
share. The option evidenced hereby is intended to be and is designated as a
non-incentive stock option and is not intended to be an "incentive stock
option" within the meaning of Section 422A of the Internal Revenue Code.
3. DATE OF GRANT. The Date of Grant of this option is the date
of this agreement.
4. TERM. Subject to earlier termination in accordance with the
Plan or this option agreement, this option shall continue for ten (10) years
from the date hereof. If the expiration date of this option or any termination
date provided for in the Plan or in this option agreement shall fall on a
Saturday, Sunday or a day on which the executive offices of the COMPANY are not
open for business, then such expiration or termination date shall be deemed to
be the last normal business day of the COMPANY, at its office specified in or
pursuant to Paragraph 15 hereof, preceding such Saturday, Sunday or day on
which such offices are closed.
<PAGE> 10
5. EXERCISABILITY. (a) This option shall become exercisable in
cumulative installments as follows: (i) with respect to one-sixth of the total
number of shares subject to the option upon the expiration of one year from the
date of grant and (ii) with respect to the remaining shares subject to the
option, an additional one-sixth of the shares upon the expiration of each of
the five succeeding years thereafter; provided, however, that the number of
shares which shall become exercisable on any such date shall be twice the
number specified above if the COMPANY has met or exceeded the objective
relating to net income specified in the COMPAMY's base financial plan for the
preceding fiscal year as proposed by management and approved by the Committee;
and provided further that the total number of shares becoming exercisable in
the aggregate shall in no event exceed the number of shares specified in
Paragraph 2 above.
(b) To the extent at the time exercisable, this option may be
exercised in whole or in part at any time, at the sole discretion of the holder
thereof. Except as set forth in Paragraphs 9 and 10 hereof, the OPTIONEE may
not exercise this option unless at the time of exercise thereof he has been in
the employ of the COMPANY and/or of a Subsidiary continuously since the Date of
Grant of this option. This option shall be exercisable during the lifetime of
the OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 10 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written Notice of Exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such Notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
the Notice of Exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and, as
a condition to the COMPANY's obligation to deliver shares upon such exercise,
the holder of this option shall make arrangements satisfactory to the COMPANY
for the payment of any applicable federal or other withholding taxes payable as
a result thereof.
2
<PAGE> 11
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and
all Subsidiaries shall terminate because of such OPTIONEE's discharge (for or
without cause), then this option, and any rights he may have under this option,
shall terminate and be forfeited immediately as to any unexercised portion
thereof.
9. VOLUNTARY TERMINATION. If the OPTIONEE voluntarily terminates
his employment with the COMPANY and all subsidiaries (other than by reason of
disability), this option shall be exercisable by him at any time prior to the
expiration date of this option or within three months after the date of his
termination of employment, whichever is the shorter period, but only to the
extent that this option was exercisable at the date of his termination.
10. DEATH OR DISABILITY. In the event of termination of
employment by reason of disability (of which the Committee shall be the sole
judge) or the death of the OPTIONEE while he is an employee of the COMPANY or a
Subsidiary, this option shall be fully exercisable (whether or not exercisable
on the date of his death or termination of employment by reason of disability)
at any time prior to the expiration date of this option or within six months
after the date of death or termination of employment, whichever is the shorter
period, by the person or persons specified in the OPTIONEE's Will or, if the
OPTIONEE shall have failed to make specific provision in his Will for such
exercise or shall have died intestate, or in the case of disability, when
appropriate, by the OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option
shall, at the election of the Committee, be contingent upon receipt by the
COMPANY from the holder of this option of such written representations
concerning his intentions with regard to retention or disposition of the shares
being acquired by exercise of this option and/or such written covenants and
agreements as to the manner of disposal of such shares as, in the opinion of
the Committee, may be necessary to ensure that any disposition by such holder
will not involve a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or
legal representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option, unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option,
the exercise of any part hereof, nor any provision of the Plan or this option
agreement shall constitute or be evidence of any understanding, express or
implied, on the part of the COMPANY or any Subsidiary to employ the OPTIONEE
for any specified period.
3
<PAGE> 12
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan
or this option agreement, this option and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated or otherwise
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or
any right or privilege conferred hereby, contrary to the provisions hereof,
this option and the rights and privileges conferred hereby shall immediately
become null and void.
15. NOTICE. Every notice or other communication relating to this
option agreement shall be in writing and shall be mailed to or delivered to the
party for whom it is intended in each case properly addressed. If to the
COMPANY, at its address in Dallas, Texas, attention Corporate Secretary. If
mailed or delivered to the OPTIONEE, at the address set forth below his
signature to this option agreement (or at such other address or in care of such
other person as may hereafter be designated in writing by either party to the
other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be
executed in its name by its duly authorized officer and the OPTIONEE has
hereunto set his hand as of the date above first written.
RECOGNITION EQUIPMENT INCORPORATED
By /s/ R. A. Vanourek
-------------------------------
Co-Chief Executive Officer
OPTIONEE
/s/ Thomas D. Neitzel
-------------------------------
Signature
4
<PAGE> 1
EXHIBIT 10.50
STOCK OPTION AGREEMENT
UNDER THE
1990 CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION EQUIPMENT INCORPORATED
* * * * *
This agreement made and entered into as of the 11th day of March, 1993,
by and between Recognition Equipment Incorporated, a Delaware corporation
(herein called the "COMPANY"), and Thomas D. Neitzel (herein called the
"OPTIONEE").
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to make
constructions of this option agreement, and to correct any defect or supply any
omission or reconcile any inconsistency in this option agreement, and to
prescribe rules and regulations relating to the administration of this option
and other options granted under the Plan. In this connection, it is understood
that the Plan is incorporated herein by reference, and made a part of this
option agreement as if fully set forth herein. The Plan shall control in the
event there be any conflict between the Plan and this option agreement, and
shall control as to any matters not contained in this option agreement. Terms
used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE the right
and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 25,000 shares of the presently authorized Common
Stock of the COMPANY at the purchase price of Thirteen and 38/100
Dollars ($13.38) per share. The option evidenced hereby is intended to be
and is designated as a non-incentive stock option and is not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code.
3. DATE OF GRANT. The Date of Grant of this option is the date of this
agreement.
4. TERM. Subject to earlier termination in accordance with the Plan or
this option agreement, this option shall continue for ten (10) years from the
date hereof. If the expiration date of this option or any termination date
provided for in the Plan or in this option agreement shall fall on a Saturday,
Sunday or a day on which the executive offices of the COMPANY are not open for
business, then such expiration or termination date shall be deemed to be the
last normal business day of the COMPANY, at its office specified in or pursuant
to Paragraph 15 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 2
5. EXERCISABILITY. (a) This option shall become fully exercisable 60
months following the date on which the option granted by the COMPANY on
December 13, 1990 become fully exercisable (which date shall be either December
13, 1993 or December 13, 1994 and is herein referred to as the "Commencement
Date"), provided, however, that 30% of the total number of shares subject to
this option shall become exercisable after the expiration of 24 months
following the Commencement Date if the COMPANY has met or exceeded the
performance objective(s) established by the Compensation Committee for the
COMPANY's fiscal year ending prior to such 24th month; and that 30% of the
total number of shares subject to this option shall become exercisable 48
months following the Commencement Date if the COMPANY has met or exceeded the
performance objective(s) established by the Compensation Committee for the
COMPANY's fiscal year ending prior to such 48th month; and provided further,
that the total number of shares becoming exercisable in the aggregate shall in
no event exceed the number of shares specified in Paragraph 2 above.
(b) To the extent at the time exercisable, this option may be exercised in
whole or in part at any time, at the sole discretion of the holder thereof.
Except as set forth in Paragraphs 9 and 10 hereof, the OPTIONEE may not
exercise this option unless at the time of exercise thereof he has been in the
employ of the COMPANY or of a Subsidiary continuously since the Date of Grant
of this option. This option shall be exercisable during the lifetime of the
OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 10 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written notice of exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
notice of exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this option agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and, as a
condition to the COMPANY's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the COMPANY for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
2
<PAGE> 3
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and all
Subsidiaries shall terminate because of OPTIONEE's discharge for cause, then
this option, and any rights he may have under this option, shall terminate and
be forfeited immediately as to any unexercised portion thereof.
9. OTHER TERMINATION. If the OPTIONEE's employment by the COMPANY and
all subsidiaries shall terminate for any reason other than cause (other than by
reason of death or disability), this option shall be exercisable by him at any
time prior to the expiration date of this option or within three months after
the date of his termination of employment, whichever is the shorter period, but
only to the extent that this option was exercisable at the date of his
termination.
10. DEATH OR DISABILITY. In the event of termination of employment by
reason of disability (of which the Committee shall be the sole judge) or the
death of the OPTIONEE while he is an employee of the COMPANY or a Subsidiary,
this option shall be fully exercisable (whether or not exercisable on the date
of his death or termination of employment by reason of disability) at any time
prior to the expiration date of this option or within six months after the date
of death or termination of employment, whichever is the shorter period, by the
person or persons specified in the OPTIONEE's Will or, if the OPTIONEE shall
have failed to make specific provision in his Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the COMPANY
from the holder of this option of such written representations concerning his
intentions with regard to retention or disposition of the shares being acquired
by exercise of this option and/or such written covenants and agreements as to
the manner of disposal of such shares as, in the opinion of the Committee, may
be necessary to ensure that any disposition by such holder will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or legal
representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option, unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this option
agreement shall constitute or be evidence of any understanding, express or
implied, on the part of the COMPANY or any Subsidiary to employ the OPTIONEE
for any specified period.
3
<PAGE> 4
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or this
option agreement, this option and the rights and privileges conferred hereby
may not be transferred, assigned, pledged or hypothecated or otherwise disposed
of in any way (whether by operation of law or otherwise) and shall not be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of this option or
any right or privilege conferred hereby contrary to the provisions hereof, this
option and the rights and privileges conferred hereby shall immediately become
null and void.
15. NOTICE. Every notice or other communication relating to this option
agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed. If to the COMPANY, at
its address in Dallas, Texas, attention Corporate Secretary. If mailed or
delivered to the OPTIONEE, at the address set forth below his signature to this
option agreement (or at such other address or in care of such other person as
may hereafter be designated in writing by either party to the other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be executed
in its name by its duly authorized officer and the OPTIONEE has hereunto set
his hand as of the date above first written.
RECOGNITION EQUIPMENT INCORPORATED
By /s/ Thomas A. Loose
--------------------------------------
Senior Vice President
OPTIONEE
/s/ Thomas D. Neitzel
---------------------------
Signature
4
<PAGE> 5
AMENDMENT TO STOCK OPTION AGREEMENT
WHEREAS, Recognition International Inc. (herein called the "COMPANY") and
Thomas D. Neitzel (herein called the "OPTIONEE"), are parties to an agreement
entitled "Stock Option Agreement Under The 1990 Corporate Incentive Plan
('The Plan')" and dated as of March 11, 1993 (herein called the "Agreement");
and
WHEREAS, the COMPANY and the OPTIONEE desire to amend the Agreement as set
forth herein;
NOW, THEREFORE, the COMPANY and the OPTIONEE hereby agree to amend the
Agreement by deleting Paragraph 5(a) of the Agreement in its entirety and
replacing it with the following:
"(a) This option shall become exercisable as follows: (i) with respect to
10 percent of the total number of shares subject to the option if, after
the COMPANY's annual earnings release for fiscal year 1994, the "Average
Price" (as defined below) of the COMPANY's Common Stock is at least $20.00
per share; (ii) with respect to an additional 20 percent of such shares if,
after the COMPANY's annual earnings release for fiscal year 1995, the
Average Price of the COMPANY's Common Stock is at least $25.00 per share;
(iii) with respect to an additional 30 percent of such shares if, after the
COMPANY's earnings release for fiscal year 1996, the Average Price of the
COMPANY's Common Stock is at least $30.00 per share; and (iv) with respect
to the remaining 40 percent of such shares on December 5, 1997; provided,
however, that any shares which do not become exercisable in any year
because the Average Price target for that year was not met shall become
exercisable in any subsequent year in which the Average Price target for
such subsequent year is met; and provided further that all shares not
previously exercisable shall become exercisable on December 5, 1997 and
that the total number of shares becoming exercisable in the aggregate shall
in no event exceed the number of shares specified in Paragraph 2 above. As
used in this paragraph, the term "Average Price" means the weighted average
of the closing prices on the days during which the first 200,000 shares of
the COMPANY's Common Stock are traded, as reported on the New York Stock
Exchange Composite Tape, beginning with the first such trade on the trading
day immediately following the day on which the COMPANY's annual earnings
for the previous fiscal year are reported on the Dow Jones News Wire."
Except as amended herein, the Agreement shall remain unchanged and shall
continue in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the COMPANY and the OPTIONEE have caused this amendment to
be executed, effective December 5, 1993.
RECOGNITION INTERNATIONAL INC. OPTIONEE
By /s/ Carol S. Lyon /s/ Thomas D. Neitzel
- ------------------------ ------------------------
Vice President and Signature
Corporate Secretary
<PAGE> 1
EXHIBIT 10.51
STOCK OPTION AGREEMENT
UNDER THE
1990 CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION INTERNATIONAL INC.
* * * * *
This agreement made and entered into as of the 5th day of December, 1993,
by and between Recognition International Inc., a Delaware corporation (herein
called the "COMPANY"), and Thomas D. Neitzel (herein called the "OPTIONEE").
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, the parties hereto agree as follows:
1. COMMITTEE AND THE PLAN. The Committee shall have authority to make
constructions of this option agreement, and to correct any defect or supply any
omission or reconcile any inconsistency in this option agreement, and to
prescribe rules and regulations relating to the administration of this option
and other options granted under the Plan. In this connection, it is understood
that the Plan is incorporated herein by reference, and made a part of this
option Agreement as if fully set forth herein. The Plan shall control in the
event there be any conflict between the Plan and this option agreement, and
shall control as to any matters not contained in this option agreement. Terms
used in this agreement which are defined in the Plan shall have the same
meanings in this option agreement as are assigned to such terms in the Plan.
2. GRANT OF OPTION. The COMPANY hereby grants to the OPTIONEE the right
and option to purchase, at the times and on the terms and conditions
hereinafter set forth, 35,000 shares of the presently authorized Common
Stock of the COMPANY at the purchase price of Sixteen and three-eighths
Dollars ($ 16.375) per share. The option evidenced hereby is intended to be
and is designated as a non-incentive stock option and is not intended to be an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code.
3. DATE OF GRANT. The Date of Grant of this option is the date of this
agreement.
4. TERM. Subject to earlier termination in accordance with the Plan or
this option agreement, this option shall continue for ten (10) years from the
date hereof. If the expiration date of this option or any termination date
provided for in the Plan or in this option agreement shall fall on a Saturday,
Sunday or a day on which the executive offices of the COMPANY are not open for
business, then such expiration or termination date shall be deemed to be the
last normal business day of the COMPANY, at its office specified in or pursuant
to Paragraph 15 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 2
5. EXERCISABILITY. (a) This option shall become exercisable as follows:
(i) with respect to 10 percent of the total number of shares subject to the
option if, after the COMPANY's annual earnings release for fiscal year 1994,
the "Average Price" (as defined below) of the COMPANY's Common Stock is at
least $20.00 per share; (ii) with respect to an additional 20 percent of such
shares if, after the COMPANY's annual earnings release for fiscal year 1995,
the Average Price of the COMPANY's Common Stock is at least $25.00 per share;
(iii) with respect to an additional 30 percent of such shares if, after the
COMPANY's earnings release for fiscal year 1996, the Average Price of the
COMPANY's Common Stock is at least $30.00 per share; and (iv) with respect to
the remaining 40 percent of such shares on December 5, 1997; provided, however,
that any shares which do not become exercisable in any year because the Average
Price target for that year was not met shall become exercisable in any
subsequent year in which the Average Price target for such subsequent year is
met; and provided further that all shares not previously exercisable shall
become exercisable on December 5, 1997 and that the total number of shares
becoming exercisable in the aggregate shall in no event exceed the number of
shares specified in Paragraph 2 above. As used in this paragraph, the term
"Average Price" means the weighted average of the closing prices on the days
during which the first 200,000 shares of the COMPANY's Common Stock are traded,
as reported on the New York Stock Exchange Composite Tape, beginning with the
first such trade on the trading day immediately following the day on which the
COMPANY's annual earnings for the previous fiscal year are reported on the Dow
Jones News Wire.
(b) To the extent at the time exercisable, this option may be exercised in
whole or in part at any time, at the sole discretion of the holder thereof.
Except as set forth in Paragraphs 9 and 10 hereof, the OPTIONEE may not
exercise this option unless at the time of exercise thereof he has been in the
employ of the COMPANY or of a Subsidiary continuously since the Date of Grant
of this option. This option shall be exercisable during the lifetime of the
OPTIONEE only by him or his guardian or legal representative. Neither the
OPTIONEE nor any person exercising this option pursuant to Paragraph 10 hereof
may exercise this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written notice of exercise to the COMPANY, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the COMPANY, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the COMPANY receives
notice of exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this option agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option and, as a
condition to the COMPANY's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the COMPANY for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
2
<PAGE> 3
8. DISCHARGE. If the OPTIONEE's employment by the COMPANY and all
Subsidiaries shall terminate because of OPTIONEE's discharge for cause, then
this option, and any rights he may have under this option, shall terminate and
be forfeited immediately as to any unexercised portion thereof.
9. OTHER TERMINATION. If the OPTIONEE's employment by the COMPANY and
all subsidiaries shall terminate for any reason other than cause (other than by
reason of death or disability), this option shall be exercisable by him at any
time prior to the expiration date of this option or within three months after
the date of his termination of employment, whichever is the shorter period, but
only to the extent that this option was exercisable at the date of his
termination.
10. DEATH OR DISABILITY. In the event of termination of employment by
reason of disability (of which the Committee shall be the sole judge) or the
death of the OPTIONEE while he is an employee of the COMPANY or a Subsidiary,
this option shall be fully exercisable (whether or not exercisable on the date
of his death or termination of employment by reason of disability) at any time
prior to the expiration date of this option or within six months after the date
of death or termination of employment, whichever is the shorter period, by the
person or persons specified in the OPTIONEE's Will or, if the OPTIONEE shall
have failed to make specific provision in his Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
OPTIONEE's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the COMPANY
from the holder of this option of such written representations concerning his
intentions with regard to retention or disposition of the shares being acquired
by exercise of this option and/or such written covenants and agreements as to
the manner of disposal of such shares as, in the opinion of the Committee, may
be necessary to ensure that any disposition by such holder will not involve a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or regulation,
as then in effect.
12. STOCKHOLDER RIGHTS. Neither the OPTIONEE nor his guardian or legal
representatives shall be or have any of the rights or privileges of a
stockholder of the COMPANY in respect of any of the shares deliverable upon the
exercise of this option, unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this option
agreement shall constitute or be evidence of any understanding, express or
implied, on the part of the COMPANY or any Subsidiary to employ the OPTIONEE
for any specified period.
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or this
option agreement, this option and the rights and privileges conferred hereby
may not be transferred, assigned, pledged or hypothecated or otherwise disposed
of in any way (whether by
3
<PAGE> 4
operation of law or otherwise) and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this option or any right or privilege
conferred hereby contrary to the provisions hereof, this option and the rights
and privileges conferred hereby shall immediately become null and void.
15. NOTICE. Every notice or other communication relating to this option
agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed. If to the COMPANY, at
its address in Dallas, Texas, attention Corporate Secretary. If mailed or
delivered to the OPTIONEE, at the address set forth below his signature to this
option agreement (or at such other address or in care of such other person as
may hereafter be designated in writing by either party to the other).
IN WITNESS WHEREOF, the COMPANY has caused this agreement to be executed
in its name by its duly authorized officer and the OPTIONEE has hereunto set
his hand as of the date above first written.
RECOGNITION INTERNATIONAL INC.
By /s/ Carol S. Lyon
---------------------------------------
Vice President and Corporate Secretary
OPTIONEE
/s/ Thomas D. Neitzel
-------------------------------------
Signature
4
<PAGE> 1
EXHIBIT 10.52
[RECOGNITION LOGO]
RECOGNITION INTERNATIONAL INC.
NOTICE OF GRANT OF STOCK OPTIONS
TO: THOMAS D. NEITZEL
Congratulations! You have been granted an option to purchase
Recognition International Inc. Common Stock as follows:
Non-Qualified Stock Option Grant No. 001429
Date of Grant 10/05/94
Stock Option Plan 1990 Corporate Incentive Plan
Option Price Per Share $7.125
Total Number of Shares Granted 25,000
This option shall become exercisable in cumulative installments as
follows: (a) with respect to 25% of the total number of shares subject to the
option upon the expiration of 12 months from the date of grant and (b) with
respect to the remaining shares subject to the option, an additional 25% of the
total number of shares upon the expiration of each of the three succeeding
12-month periods thereafter.
By your signature and Recognition's signature below, you and
Recognition agree that this stock option is granted under and governed by the
terms and conditions of Recognition's 1990 Corporate Incentive Plan, as
amended, and the terms of the Stock Option Grant Agreement which is attached to
and made a part of this document.
RECOGNITION INTERNATIONAL INC.
By: /s/ Carol S. Lyon 10-5-94
----------------------------- ------------
Carol S. Lyon, Vice President Date
/s/ Thomas D. Neitzel 11-12-94
- ------------------------------------- -------------
Optionee Signature Date
Name: THOMAS D. NEITZEL
Address:
Tax I.D.:
NOTE: Address and Tax I.D. Number shown above are as reflected in our records.
Please make any necessary corrections above.
<PAGE> 2
STOCK OPTION GRANT AGREEMENT
UNDER THE
1990 CORPORATE INCENTIVE PLAN (THE "PLAN")
OF
RECOGNITION INTERNATIONAL INC.
* * * * *
In consideration of the premises and mutual covenants herein contained and
other good and valuable consideration, Recognition International Inc. (the
"Company") and the individual named on the attached Notice of Grant of Stock
Options (the "Optionee") agree as follows:
This agreement covers the grant of a stock option as specified in the
attached Notice of Grant of Stock Options (the "Notice"). As used herein, the
term "Agreement" means this Stock Option Grant Agreement and the Notice.
1. COMMITTEE AND THE PLAN. The Compensation Committee of the Company's
Board of Directors (the "Committee") shall have authority to make constructions
of this Agreement, and to correct any defect or supply any omission or
reconcile any inconsistency in this Agreement, and to prescribe rules and
regulations relating to the administration of this option and other options
granted under the Plan. In this connection, it is understood that the Plan is
incorporated herein by reference, and made a part of this Agreement as if fully
set forth herein. The Plan shall control in the event there be any conflict
between the Plan and this Agreement, and shall control as to any matters not
contained in this Agreement. Terms used in this Agreement which are defined in
the Plan shall have the same meanings in this Agreement as are assigned to such
terms in the Plan.
2. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option to purchase the number of shares of the presently authorized Common
Stock of the Company set forth in the attached Notice at the per-share purchase
price reflected in such Notice, at the times and on the terms and conditions
set forth herein and in the Notice. The option evidenced hereby is intended to
be and is designated as a non-incentive stock option and is not intended to be
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code.
3. DATE OF GRANT. The Date of Grant of this option is the date set
forth in the Notice.
4. TERM. Subject to earlier termination in accordance with the Plan or
this Agreement, this option shall continue for ten (10) years from the Date of
Grant. If the expiration date of this option or any termination date provided
for in the Plan or in this Agreement shall fall on a Saturday, Sunday or a day
on which the executive offices of the Company are not open for business, then
such expiration or termination date shall be deemed to be the last normal
business day of the Company, at its office specified in or pursuant to
Paragraph 15 hereof, preceding such Saturday, Sunday or day on which such
offices are closed.
<PAGE> 3
5. EXERCISABILITY. This option shall become exercisable as set forth in
the attached Notice, provided that the total number of shares becoming
exercisable in the aggregate shall in no event exceed the Total Number of
Shares Granted" as specified in the Notice. To the extent at the time
exercisable, this option may be exercised in whole or in part at any time, at
the sole discretion of the holder thereof. Except as set forth in Paragraphs 9
and 10 hereof, the Optionee may not exercise this option unless at the time of
exercise thereof the Optionee has been in the employ of the Company or of a
Subsidiary continuously since the Date of Grant of this option. This option
shall be exercisable during the lifetime of the Optionee only by the Optionee
or the Optionee's guardian or legal representative. Neither the Optionee nor
any person exercising this option pursuant to Paragraph 10 hereof may exercise
this option for a fraction of a share.
6. EXERCISE AND PAYMENT. The option granted hereunder shall be
exercisable by giving written notice of exercise to the Company, in form
satisfactory to the Committee, specifying the number of shares to be purchased
and accompanying such notice with payment of the full purchase price therefor
in (a) lawful United States currency or (b) if permitted by the Committee, in
its sole discretion, partially or entirely in whole shares of Common Stock of
the Company, with the balance, if any, to be paid in cash. Options shall be
deemed to have been exercised on the first date upon which the Company receives
notice of exercise, payment of the purchase price and all other documents,
information and amounts required in respect of such exercise by the Plan or
this Agreement.
7. WITHHOLDING TAX. Prior to the exercise of this option, and as a
condition to the Company's obligation to deliver shares upon such exercise, the
holder of this option shall make arrangements satisfactory to the Company for
the payment of any applicable federal or other withholding taxes payable as a
result thereof.
8. DISCHARGE. If the Optionee's employment by the Company and all
Subsidiaries shall terminate because of the Optionee's discharge for cause,
then this option, and any rights the Optionee may have under this option, shall
terminate and be forfeited immediately as to any unexercised portion thereof.
9. OTHER TERMINATION. If the Optionee's employment by the Company and
all Subsidiaries shall terminate for any reason other than cause (other than by
reason of death or disability), this option shall be exercisable by the
Optionee at any time prior to the expiration date of this option or within
three months after the date of such termination of employment, whichever is the
shorter period, but only to the extent that this option was exercisable at the
date of such termination.
10. DEATH OR DISABILITY. In the event of termination of the Optionee's
employment by reason of disability (of which the Committee shall be the sole
judge) or the death of the Optionee while an employee of the Company or a
Subsidiary, this option shall be fully exercisable (whether or not exercisable
on the date of death or termination of employment by reason of disability) at
any time prior to the expiration date of this option or within six months after
the date of death or
2
<PAGE> 4
termination of employment, whichever is the shorter period, by the person or
persons specified in the Optionee's Will or, if the Optionee shall have failed
to make specific provision in the Optionee's Will for such exercise or shall
have died intestate, or in the case of disability, when appropriate, by the
Optionee's guardian or legal representative.
11. SECURITIES ACT REPRESENTATIONS. Each exercise of this option shall,
at the election of the Committee, be contingent upon receipt by the Company
from the holder of this option of such written representations concerning the
Optionee's intentions with regard to retention or disposition of the shares
being acquired by exercise of this option and/or such written covenants and
agreements as to the manner of disposal of such shares as, in the opinion of
the Committee, may be necessary to ensure that any disposition by such holder
will not involve a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect.
12. STOCKHOLDER RIGHTS. Neither the Optionee nor the Optionee's guardian
or legal representatives shall be or have any of the rights or privileges of a
stockholder of the Company in respect of any of the shares deliverable upon the
exercise of this option, unless and until certificates representing such shares
shall have been issued and delivered.
13. NO RIGHT OF EMPLOYMENT. Neither the granting of this option, the
exercise of any part hereof, nor any provision of the Plan or this Agreement
shall constitute or be evidence of any understanding, express or implied, on
the part of the Company or any Subsidiary to employ the Optionee for any
specified period.
14. NON-TRANSFERABILITY. Except as otherwise provided in the Plan or
this Agreement, this option and the rights and privileges conferred hereby may
not be transferred, assigned, pledged or hypothecated or otherwise disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of this option or any right or
privilege conferred hereby contrary to the provisions hereof, this option and
the rights and privileges conferred hereby shall immediately become null and
void.
15. NOTICE. Every notice or other communication relating to this
Agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended in each case properly addressed: if to the Company, at
its address in Dallas, Texas, attention Corporate Secretary; or if mailed or
delivered to the Optionee, at the address set forth below the Optionee's
signature on the attached Notice (or at such other address or in care of such
other person as may hereafter be designated in writing by either party to the
other).
3
<PAGE> 1
EXHIBIT 10.54
[RECOGNITION LETTERHEAD]
January 12, 1994
Mr. Thomas D. Neitzel
Vice President
Recognition International Inc.
2701 East Grauwyler Road
Irving, TX 75061
Re: Executive Benefit Programs
Dear Mr. Neitzel:
Reference is hereby made to the benefits to which you may become entitled under
the Company's Executive Benefit Plan (as amended and restated as of December 1,
1984), those agreements under which you have been granted options, rights and
awards pursuant to the Company's 1990 Corporate Incentive Plan and any other
plan, arrangement or agreement with the Company (excluding any qualified
pension, profit sharing or stock bonus plan) under which you may receive any
payment or benefit in connection with a change of control of the Company or the
termination of your employment with the company (herein, the "Benefit
Agreements"). It is the intention of the Company that you should not suffer a
reduction in your benefits by the application of the excise tax under Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, to carry out this intent, and notwithstanding any contrary
provision in any of the Benefit Agreements, you and the Company hereby agree to
modify the terms of the Benefit Agreements in the following respects, which
amendment shall supersede any provisions of the Benefit Agreements to the
contrary.
If any of the payments or the value of any benefits received or to be received
by you in connection with your termination of employment that are contingent
upon a change in control of the Company (whether payable pursuant to the terms
of the Benefit Agreements or any other agreement, plan or arrangement) (i)
constitute "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and (ii) would result in all or a portion of such payments or the value
of any benefits received or to be received being subject to excise tax under
Section 4999 of the Code, then such payments and/or benefits will be reviewed
and to the extent necessary reduced to an amount that will result in your
receipt, on an after-tax basis, of the greatest amount of payments and benefits
in connection with your
<PAGE> 2
[RECOGNITION LOGO]
Mr. Thomas D. Neitzel
January 12, 1994
Page 2
termination of employment, notwithstanding that all or some portion of such
payments or the value of such benefits received or to be received may be
taxable under Section 4999 of the Code. In any event, you shall direct which
payments are to be reduced, if any; provided however, that no change in the
time of the payments shall be made without the consent of the Company.
For purposes of determining the amount that will result in the greatest net
after-tax payments to you, you shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in effect in the calendar
year in which your termination of employment occurs.
If the terms of this letter agreement are satisfactory to you, please sign the
copy of this letter enclosed and return it to us. This agreement shall be
binding upon the company, its successors and assigns.
Yours very truly,
RECOGNITION INTERNATIONAL INC.
By: /s/ Thomas A. Loose
-----------------------------
Thomas A. Loose, Senior Vice President
TAL/sh
The terms set forth herein to modify and supersede any provisions of Benefit
Agreements to the contrary are accepted and agreed, this day of , 199 .
/s/ Thomas D. Neitzel
- --------------------------------
Thomas D. Neitzel
1-15-94
- ------------------
Date
<PAGE> 1
EXHIBIT 10.60
[RECOGNITION LETTERHEAD]
October 25, 1994
Mr. William G. Spears
Dear Mr. Spears:
Reference is hereby made to the Director Stock Plan set forth in the
resolutions adopted by the Board of Directors of the Company on September 24,
1987, as amended by the resolutions adopted by the Board of Directors on
November 8, 1990, January 24, 1991, May 30, 1991, and November 1, 1991 (the
"Plan"). A copy of the Plan is attached hereto.
Pursuant to the Plan, you received a grant of 5,000 shares of Common Stock of
the Company upon your election as a Director. This grant is effective October
25, 1994. With regard to that grant, you understand that such shares of stock
are subject to the restrictions relating to the shares as are set forth in the
Plan, and in consideration of the grant of such shares to you, you hereby agree
(a) to the Company's holding the certificates representing the shares until
such time as the shares become nonforfeitable and transferable; (b) to comply
with all applicable federal and state securities laws and other legal
requirements relating to such shares, including, but not limited to, the
requirements (i) that any disposition of such shares by an "affiliate" (as that
term is defined in the federal securities laws) shall only be accomplished
pursuant to the provisions of Rule 144 (except for the holding period
requirement), and (ii) that any shares forfeited pursuant to the provisions of
the Plan shall be reported pursuant to Section 16(a) of the Securities Exchange
Act of 1934; and (c) to execute and deliver to Recognition such instruments, if
any, as Recognition may request to evidence the forfeiture of such shares.
If you agree to the foregoing, please sign both the original and the copy of
this letter where indicated, retain the original and return the copy to the
Secretary.
Yours very truly, Agreed and accepted:
RECOGNITION INTERNATIONAL INC.
/s/ W.G. Spears
---------------------------------
Signature
By: /s/ Carol S. Lyon 10-28-94
----------------------------------- ---------------------------------
Carol S. Lyon Date
Vice President and
Corporate Secretary
/ls
<PAGE> 1
EXHIBIT 10.62
[RECOGNITION LOGO]
CONSULTING AGREEMENT - CORPORATION
CONSULTANT
FJELDSTAD INTERNATIONAL Date: December 6, 1994
- ------------------------- -----------------------
Recognition Purchase Order No.:
______________________________
Recognition International Inc., on behalf of itself and its
subsidiaries/divisions (hereinafter collectively referred to as "Recognition")
hereby agrees to retain the services of the company named above (hereinafter
referred to as "Consultant") as a consultant in accordance with the terms and
conditions set forth below:
1. SERVICES. Consultant will provide the services described in Exhibit A
to this Agreement.
Requesting Recognition Manager: Robert A. Vanourek
2. COMPENSATION. (CHECK ONE)
<TABLE>
<S> <C> <C>
___ (a) Recognition will pay Consultant a fee at a rate of $___________ per hour for services performed
hereunder. The total fee shall not exceed $ _____________________.
_X_ (b) Recognition will pay Consultant a fee at a flat rate of $ 5,000.00 per day for services performed
hereunder. The total fee shall not exceed $ 50,000.00.
___ (c) Recognition will pay Consultant a fixed fee of $ ____________________ for services performed hereunder.
___ (d) Other ________________________________________________________________________________________________
</TABLE>
When specifically authorized by Recognition, Recognition will also
reimburse Consultant for reasonable travel and living expenses incurred
in performing the work, not to exceed Recognition's usual and customary
policy for employee expense reimbursement. Invoices for expense
reimbursement must be accompanied by receipts and other appropriate
explanation of expenses.
All amounts due under this Agreement will be paid by Recognition within
30 days after receipt of an itemized invoice referencing Recognition's
purchase order number.
3. TERM. This Agreement shall commence on September 1, 1994 and shall
terminate on August 31, 1995 unless extended by mutual agreement of
the parties; provided, however, that either party may terminate this
Agreement upon 30 days prior written notice to the other party.
1
<PAGE> 2
4. Consultant's status will be that of an independent contractor, and its
employees, and agents will in no sense be considered an employees of
Recognition. As a result, such individuals shall not be entitled to, or
eligible to participate in, any benefits or privileges given or extended
by Recognition to its employees. Neither shall Recognition be
responsible for the direct payment of any withholding taxes, social
security payments, payments under worker's compensation or other
insurance premiums or other charges of any kind or nature except as
specifically set forth herein.
5. During the term of this Agreement, and for a period of three (3) years
thereafter, Consultant agrees that neither Consultant nor any of its
employees will, without Recognition's written consent, disclose to any
person outside of Recognition, at any time, any proprietary or
confidential information which is normally available only to Recognition
employees and which is obtained or developed by Consultant in the course
of work with Recognition. Consultant further agrees upon termination of
this Agreement to return to Recognition, upon request, any records,
drawings, reproductions or other documents received from Recognition or
produced by Consultant during the course of this Agreement and to retain
no copies.
6. Consultant agrees that any information communicated by Consultant to
Recognition in connection with this Agreement will not contain any
information which might be deemed to be confidential or proprietary
information of any other organization or person and such information
shall be free from any restrictions against its use by Recognition for
the purposes intended, and Consultant further agrees to make reasonable
inquiry as to any possible restrictions against use of, and the
confidential or proprietary nature of, such information prior to
Consultant's communication to Recognition.
7. Consultant agrees that information of any kind disclosed by Consultant
to Recognition under this Agreement shall be deemed to have been
disclosed for the use of Recognition in its business in consideration of
the payment provided for herein and shall be deemed work made for hire
with Recognition retaining all proprietary interest in such work.
8. Due to the confidential relations contemplated between Consultant and
Recognition and of the payments to be made to Consultant as set forth
herein, Consultant agrees that all inventions, whether or not
patentable, made or conceived by Consultant and all copyrightable works
authored by Consultant or any employees of Consultant resulting from
Consultant's services to Recognition during the life of this Agreement
shall be promptly disclosed to Recognition. Said inventions and
copyrightable works are to become and remain the property of Recognition
whether or not patent applications or copyright registrations are filed
thereon, and Consultant agrees from time to time, upon request and at
the expense of Recognition, to make or obtain, through the attorneys of
Recognition, applications for Letters Patent and/or registrations for
copyright in the United States and any and all other countries, on said
inventions and copyrightable works, and to assign all such copyright
registrations, patent applications and all rights to said inventions and
any patents resulting therefrom to Recognition forthwith as and when
requested and without charge for such services beyond the payments set
forth above. Consultant represents that each of its employees who will
perform services under this Agreement has entered into a contract with
Consultant which provides for the assignment to Consultant or to
Recognition of all said inventions, registrations and applications.
Consultant agrees that neither Consultant nor any of its employees will
perform services under this Agreement which would cause a conflict
between any existing agreement and the above agreement to assign
copyright registrations, patent applications and rights to inventions to
2
<PAGE> 3
Recognition, and Consultant will enter into no such agreement during the
term of this Agreement.
9. During the term of this Agreement, neither Consultant nor those of
Consultant's employees performing services under this Agreement will
accept employment or engage in work or activities which are adverse to
Recognition's interests.
10. (a) Consultant agrees to indemnify and hold Recognition harmless from
any loss or damage arising from any breach of confidentiality resulting
from any unauthorized disclosures by Consultant or its employees of any
information received pursuant to this Agreement or any other breach of
this Agreement.
(b) Recognition agrees to indemnify and hold Consultant harmless from
any loss or damage arising out of any claim, suit or proceeding brought
by a third party based on any actions taken by Recognition as a direct
result of information and recommendations furnished to Recognition by
Consultant solely in the capacity of Consultant under this Agreement,
unless Consultant is found, by a court of competent jurisdiction, to
have been negligent or to have acted in bad faith in furnishing such
information or recommendations to Recognition.
(c) If any action, suit or proceeding is commenced against Consultant
or Recognition with respect to which Consultant or Recognition believes
it is entitled to indemnification under this Agreement, such party shall
give the indemnifying party prompt notice of such action, suit or
proceeding, sole control of the defense and/or settlement thereof and
all reasonable cooperation and assistance in defense thereof. The
indemnifying party shall reimburse the indemnified party for all
reasonable out-of-pocket expenses incurred at the request of the
indemnifying party in cooperating and assisting with such defense but
shall not be liable for any expense or settlement made by the
indemnified party without the indemnifying party's prior written
consent, which shall not be unreasonably withheld. The indemnified
party shall have the right to retain counsel of its own choice and at
its own expense.
11. The parties agree that the results of Consultant's services under this
Agreement will be used only for internal evaluation and decision making
by Recognition's directors, officers and other management and that
Recognition will not publicly disclose specific information or specific
recommendations furnished by Consultant under this Agreement without the
written authorization of Consultant unless, in the opinion of counsel to
Recognition, such public disclosure is required by applicable laws or
regulations.
12. Paragraphs 5 through 11 of this Agreement shall survive the expiration,
cancellation or termination of this Agreement.
13. No failure to exercise, and no delay in exercising, on the part of
Recognition, any of its rights under this Agreement shall operate as a
waiver thereof nor shall any single or partial exercise preclude any
further exercise thereof or exercise of any other right.
14. In the event that any one or more of the provisions contained in this
Agreement shall be held to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions of
this Agreement shall not in any way be impaired.
3
<PAGE> 4
15. This Agreement shall be interpreted in accordance with the laws of the
State of New York.
This Agreement, any exhibits attached hereto and referred to herein, and
Recognition's purchase order referred to on the first page hereof (as amended
from time to time) constitute the entire agreement between Consultant and
Recognition. No amendment or alteration of the Agreement shall be valid or
binding unless in writing and signed by Consultant and an appropriate corporate
officer of Recognition. In the event there is a conflict between the terms of
this Agreement and the preprinted terms of the purchase order, the terms of
this Agreement will control.
<TABLE>
<S> <C>
CONSULTANT RECOGNITION INTERNATIONAL INC.
FJELDSTAD INTERNATIONAL P. O. BOX 660204
Dallas, TX 75266-0204
By: /s/ Lucie J. Fjeldstad By: /s/ Robert A. Vanourek
------------------------------------------------ ------------------------------------------
Name: Lucie J. Fjeldstad Name: Robert A. Vanourek
----------------------------------------------- ------------------------------------------
Title: President and CEO Title: President and CEO
----------------------------------------------- ------------------------------------------
</TABLE>
4
<PAGE> 5
EXHIBIT A
TO
CONSULTING AGREEMENT - CORPORATION
Fjeldstad International
The following is a description of the services to be provided by Consultant:
1. Consultant will provide strategic consulting advice on software and
systems business.
2. Lucie J. Fjeldstad will function as Consultant's senior principal on
this project.
5
<PAGE> 1
EXHIBIT 11.1
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(thousands, except per share)
<TABLE>
<CAPTION>
Years ended October 31,
------------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Primary:
Earnings:
Income (loss) before extra-
ordinary item $(26,580) $ 7,936 $ 4,052
Extraordinary item --- --- 784
--------- -------- --------
Net income (loss) $(26,580) $ 7,936 $ 4,836
========= ======== ========
Shares:
Weighted average shares
outstanding, net of
treasury shares 15,018 13,414 11,941
Net shares issuable on
exercise of certain stock
options 605 1,082 708
--------- -------- --------
Weighted average shares
outstanding, as adjusted 15,623 14,496 12,649
========= ======== ========
Earnings (loss) per share - primary:
Income (loss) before extra-
ordinary item $ (1.70) $ 0.55 $ 0.32
Extraordinary item --- --- 0.06
--------- -------- --------
Net income (loss) $ (1.70) $ 0.55 $ 0.38
========= ======== ========
</TABLE>
<PAGE> 2
EXHIBIT 11.1
(Continued)
RECOGNITION INTERNATIONAL INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(thousands, except per share)
<TABLE>
<CAPTION>
Years ended October 31,
-----------------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Fully Diluted:
Earnings:
Income (loss) before extra-
ordinary item $(26,580) $ 7,936 $ 4,052
Add after tax interest expense
applicable to 7 1/4% convertible
subordinated debentures 3,676 3,676 3,676
--------- -------- --------
Income (loss) before extra-
ordinary item, as adjusted (22,904) 11,612 7,728
Extraordinary item --- --- 784
--------- -------- --------
Net income (loss), as adjusted $(22,904) $11,612 $ 8,512
========= ======== ========
Shares:
Weighted average shares
outstanding, net of
treasury shares 15,018 13,414 11,941
Weighted average shares
issuable assuming conversion
of 7 1/4% convertible subordin-
ated debentures 3,088 3,088 3,088
Net shares issuable on
exercise of certain stock
options 612 1,254 1,067
--------- -------- --------
Weighted average shares
outstanding, as adjusted 18,718 17,756 16,096
========= ======== ========
Earnings (loss) per share -
fully diluted (A):
Income (loss) before extra-
ordinary item $ (1.22) $ 0.65 $ 0.48
Extraordinary item --- --- 0.05
--------- -------- --------
Net income (loss) $ (1.22) $ 0.65 $ 0.53
========= ======== ========
</TABLE>
(A) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
<PAGE> 1
EXHIBIT 13.1
Sections from Annual Report to Stockholders of Recognition International Inc.
for the fiscal year ended October 31, 1994.
<PAGE> 2
Recognition International Inc. and Subsidiaries
SUMMARY OF SELECTED FINANCIAL DATA
Years ended October 31, (dollars and shares in thousands, except per share)
<TABLE>
<CAPTION>
1994 1993 1992* 1991* 1990*
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $219,393 $230,578 $199,186 $155,153 $230,618
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) (22,218) 15,111 12,130 8,296 (27,210)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income
taxes (23,571) 11,828 9,323 7,008 (30,979)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before
extraordinary items (26,580) 7,936 4,052 2,709 (31,687)
Extraordinary items -- -- 784 3,529 --
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $(26,580) $ 7,936 $ 4,836 $ 6,238 $(31,687)
=======================================================================================================================
Earnings (loss) per share:
Income (loss) before
extraordinary items $ (1.70) $ .55 $ .32 $ .25 $ (3.10)
Extraordinary items -- -- .06 .32 --
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1.70) $ .55 $ .38 $ .57 $ (3.10)
=======================================================================================================================
Weighted average
shares outstanding 15,623 14,496 12,649 10,878 10,213
=======================================================================================================================
Working capital $ 52,592 $ 75,044 $ 42,193 $ 57,651 $ 59,933
- -----------------------------------------------------------------------------------------------------------------------
Total assets $204,463 $217,364 $188,383 $163,793 $181,291
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt $ 51,722 $ 53,656 $ 63,781 $ 57,688 $ 77,628
- -----------------------------------------------------------------------------------------------------------------------
Stockholders' equity $ 77,837 $100,802 $ 61,416 $ 56,232 $ 39,495
=======================================================================================================================
Engineering and
development expenses $ 17,979 $ 16,585 $ 14,168 $ 12,695 $ 12,184
=======================================================================================================================
Number of employees 1,525 1,683 1,695 1,368 1,515
=======================================================================================================================
</TABLE>
* Certain items have been reclassified to conform to 1993 and 1994
presentation.
<PAGE> 3
Recognition International Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CHANGES IN FINANCIAL CONDITION
In 1994, Recognition adopted a restructuring plan to consolidate
certain operations, close its Charlotte, North Carolina facility and other
offices and consolidate certain software support functions. The plan is
expected to be completed by the end of the third quarter of 1995. As a result,
Recognition recorded restructuring charges of $19.7 million for obligations
relating to employee severance and relocation, write-down of certain assets no
longer required in the business, facility lease terminations and other related
items. Together, these charges are expected to use approximately $13 million
of cash, of which approximately $9 million would have been incurred as salaries
and office rents without the restructuring. As of October 31, 1994,
approximately $11 million of the $13 million of cash remains to be paid.
Additional restructuring costs of $2 to $3 million are expected to be incurred
in 1995 for relocation, hiring and training of employees to accomplish the
restructuring.
Working capital at October 31, 1994 was $52.6 million, a decrease of
$22.5 million compared to October 31, 1993. The decrease was a result of a
decrease in current assets of $11.5 million and an increase in current
liabilities of $11.0 million.
The decrease in current assets was due primarily to a decrease in cash
and cash equivalents of $13.2 million (see Consolidated Statement of Cash
Flows). Inventory decreased $5.2 million as a result of the write-down of
inventory primarily due to the discontinuation of certain products as a result
of the restructuring. These decreases were partially offset by increases in
accounts receivable and other current assets of $4.8 million and $2.0 million,
respectively. The increase in accounts receivable is due to foreign revenues
recognized late in the fourth quarter of 1994 as compared to 1993. Other
current assets increased primarily due to a reclassification of a cash escrow
of $1.4 million for the purchase of real property which was included in other
assets in 1993. The escrow was related to the acquisition of the Lundy
Financial Systems Division (Lundy) of TransTechnology Corporation and is
expected to be released to Recognition in 1995.
The increase in current liabilities included a $9.3 million increase
in accrued and other current liabilities due primarily to accruals related to
the restructuring. Short-term debt increased $2.2 million due primarily to a
reclassification of a $1.9 million promissory note due in 1995 to
TransTechnology Corporation which was included in long-term debt in 1993.
Advance payments by customers increased $2.0 million due to advance payments
made under maintenance contracts. These increases were partially offset by
<PAGE> 4
decreases in domestic and foreign income taxes and accrued compensation and
benefits of $2.2 million and $1.6 million, respectively. Domestic and foreign
income taxes decreased primarily due to payments of 1993 taxes, lower provision
for 1994 taxes and prepayment of certain foreign income taxes. The decrease in
accrued compensation and benefits is primarily due to the payment of 1993
annual performance bonuses in the first quarter of 1994, while no annual
performance bonuses were due for 1994.
At October 31, 1994, Recognition had $40.7 million of cash, cash
equivalents and short-term investments, of which $6.9 million was pledged as
collateral or otherwise committed to secure certain guarantees and a foreign
bank loan. Recognition has a $25.0 million revolving credit facility which was
amended effective October 1994. The facility contains covenants including
maintenance of certain financial ratios, net worth requirements, and
restrictions on future borrowings and payment of dividends with which
Recognition was in commpliance at October 31, 1994. Obligations under the
facility are secured by a lien on substantially all of Recognition's assets,
excluding its real estate. At October 31, 1994, letters of credit of $1.0
million were outstanding under the facility, which reduced borrowings available
to $24.0 million. The credit facility expires in July 1995 and any borrowings
outstanding at that time will convert to a one-year term loan. Recognition
expects to extend or renegotiate the revolving credit agreement at that time.
Recognition believes it has sufficient cash, including amounts
available under the current credit facility, to meet its operating and capital
requirements for fiscal year 1995.
RESULTS OF OPERATIONS - 1994 COMPARED TO 1993
Recognition recorded a net loss for 1994 of $26.6 million compared to
net income of $7.9 million in 1993. The loss for 1994 included restructuring
charges of $19.2 million, net of tax, and $5.9 million of other charges. The
other charges included $1.8 million for the write-down of inventory and $.4
million of additional amortization of capitalized software charged to cost of
product revenues, $.5 million for the write-down of service parts charged to
cost of customer service revenues, $2.8 million for the write-down of certain
capitalized software charged to engineering and development expenses, and $.4
million of additional allowances for doubtful accounts receivable charged to
other operating expenses. Excluding the restructuring and the other charges,
the loss for 1994 was $1.5 million, a decrease of $9.4 million compared to
1993. This decrease was primarily the result of a decline in revenues from
older, proprietary products due to the-on-going transition from older to newer,
open architecture products, offset by savings from the restructuring of
approximately $2.5 million.
Consolidated revenues were $219.4 million in 1994, a decrease of five
percent, or $11.2 million, as compared to 1993. Revenues
<PAGE> 5
from equipment products and services were $174.3 million in 1994, a decrease of
$18.1 million, or nine percent, as compared to 1993. Revenues from software
products and services, including Plexus(R) software products and software sold
in conjunction with equipment, were $45.1 million in 1994. This represented an
increase of $6.9 million, or 18 percent, as compared to 1993.
The decrease in consolidated revenues reflected a decrease of $17.4
million, or 12 percent, in domestic revenues offset by an increase in foreign
revenues of $6.2 million, or seven percent. Foreign operations contributed 42
percent of the 1994 revenues compared to 37 percent in 1993.
Product revenues were $92.4 million, a decrease of 20 percent, or
$23.0 million, when compared to 1993. Revenues from equipment products were
$66.3 million in 1994, a decrease of 24 percent, or $21.5 million. This
reflected decreased revenues from document recognition products, offset
partially by increased revenues from the delivery and installation of network
products under major contracts in Canada. Revenues from software products were
$26.1 million in 1994, a decrease of five percent, or $1.5 million, due to
price reductions for Recognition client image software products in 1994 as a
result of significant competitor price reductions in the application
development tool market. In addition, 1993 revenues included several large
transactions.
Customer service revenues were $127.0 million, an increase of 10
percent, or $11.8 million, when compared to 1993. Equipment related service
revenues were $108.0 million in 1994, an increase of three percent, or $3.4
million. Software service revenues related to both Plexus products and
software sold in conjunction with equipment were $19.0 million in 1994, an
increase of 79 percent, or $8.4 million. This increase is primarily the result
of custom software provided in conjunction with equipment, additional software
support revenues due to a larger installed base and professional services
provided in conjunction with certain network integration contracts in Canada.
Consolidated gross profit in 1994 was $66.8 million, down $17.1
million from 1993. Product gross profit was $25.0 million, or 27 percent of
revenues, in 1994 compared to $50.0 million, or 43 percent of revenues in 1993.
This decline in product gross profit was attributable to several factors: the
decrease in product revenues in 1994 when compared to 1993; the write-down of
inventory of $1.8 million; the unfavorable impact of fixed manufacturing
expenses on gross profit margins due to the lower revenues from document
recognition products; a larger percentage of product revenues from lower gross
profit contracts for network products in Canada; increased revenues from third
party software products with lower gross profit margins; and price reductions
on selected products. Customer service gross profit increased $7.9 million
primarily as a result of increased revenues.
Amortization and other operating expenses increased $1.0
<PAGE> 6
million due to additional allowances for doubtful accounts receivable
associated with software products.
Interest expense decreased $1.0 million primarily due to interest on a
term loan obtained in conjunction with the acquisition of Lundy which was paid
in full in the third quarter of 1993.
The provisions for income taxes for 1994 and 1993 were a result of
income earned by certain foreign entities with relatively high effective tax
rates while no tax benefits were available to entities which recorded losses.
The 1994 provision also included a $.5 million tax benefit for the
restructuring charges.
Recognition's system business is undergoing a transition, which should
be essentially completed during 1995, from older, proprietary products to
newer, open architecture products. As a result of the transition, revenues from
older products have declined and have not been replaced by revenues from newer
products. Some of the new products are being marketed through third parties.
Gross profit margins on such revenues, as well as sales and marketing expenses,
are generally lower than those on end-user revenues. Recognition expects lower
customer service revenues from such products, as end-users will typically
obtain equipment maintenance services from the third parties. To offset the
expected decline in equipment related service revenues as a result of the
expiration of maintenance agreements for older products, Recognition is
marketing its maintenance services for products manufactured by other
companies. Recognition expects these service revenues on third party products
to replace the majority of the revenues lost on its older products in 1995.
In 1994 the growth rate in software revenues from products and
services did not match the growth rates previously experienced. These revenues
increased 18 percent in 1994, a growth rate more in line with industry rates
which Recognition estimates to be 15 to 30 percent annually. Although the
volume of software shipments expanded significantly in 1994, revenue growth in
server software products did not offset the decline in client software product
revenues which were impacted by significant competitor price reductions in the
application development tool market. Recognition expects server software
product revenues to continue to increase and account for a greater portion of
software product revenues; however, the uncertain timing of large orders and
the effect of industry forces and competition on pricing makes growth rates
difficult to forecast.
Additional restructuring expenses of $2 to $3 million are expected to
be incurred in 1995 for relocation, hiring and training of employees to
accomplish the restructuring. When the restructuring actions are complete,
Recognition believes annual costs, primarily payroll, should be reduced by $8
to $9 million.
<PAGE> 7
RESULTS OF OPERATIONS - 1993 COMPARED TO 1992
Recognition acquired Lundy effective February 1992. This contributed
to the increase in the 1993 revenues and related expenses as compared to those
reported in 1992.
Consolidated revenues were $230.6 million in 1993, an increase of 16
percent, or $31.4 million, as compared to 1992. Revenues from equipment
products and services were $192.4 million in 1993, an increase of $18.3
million, or 11 percent, as compared to 1992. Revenues from software products
and services, including Plexus software products and software sold in
conjunction with equipment, were $38.2 million in 1993. This represented an
increase of $13.1 million, or 52 percent, as compared to 1992.
The increase in consolidated revenues reflected an increase of $21.2
million, or 17 percent, in domestic revenues and an increase of $10.2 million,
or 14 percent, in foreign revenues. Foreign operations contributed 37 percent
of the 1993 revenues compared to 38 percent in 1992.
Product revenues from equipment and software increased 26 percent, or
$24.1 million, when compared to 1992. Revenues from equipment were $87.8
million in 1993, an increase of 20 percent, or $14.6 million. This reflected
increased revenues from the delivery and installation of network products under
major contracts in Canada and from document recognition products. Revenues from
software products were $27.6 million in 1993, an increase of 52 percent, or
$9.5 million.
Customer service revenues increased seven percent, or $7.3 million,
when compared to 1992. Equipment related service revenues were $104.6 million
in 1993, an increase of four percent, or $3.7 million, due to the revenues of
Lundy. Software service revenues related to both Plexus products and software
sold in conjunction with equipment were $10.6 million in 1993, an increase of
52 percent, or $3.6 million.
Consolidated gross profit in 1993 was $83.9 million, up $12.7 million
from 1992. Product gross profit was 43 percent of revenues in 1993, unchanged
from 1992. Customer service gross profit increased $1.6 million as a result of
increased revenues.
Engineering and development expenses increased $2.4 million as a
result of the expenses of Lundy and an increase in spending for Plexus software
products, offset by a decrease in spending for XDR(R) products which were
released in 1992.
Selling and marketing expenses increased $6.3 million primarily as a
result of investments in developing distribution channels for Plexus software
products, costs to support foreign distributors and increased commissions due
to the increase in revenues.
<PAGE> 8
General and administrative expenses increased $2.3 million compared to
1992. In 1992, a $2.4 million gain was recorded in general and administrative
expenses for the settlement of Recognition's lawsuit against its former
directors and officers liability insurance carrier. In the settlement,
Recognition recovered costs and expenses incurred in the defense of various
legal proceedings.
In the second quarter of 1992, Recognition recorded a restructuring
charge of $2.3 million for costs to reorganize the operations of Recognition.
These costs were primarily for severance, relocation and related expenses to
eliminate operations of Recognition which were duplicated by those of Lundy.
Amortization and other operating expenses increased $.9 million
primarily due to the amortization of goodwill and customer lists and contracts
from the acquisition of Lundy and additional allowances for doubtful accounts
receivable associated with the increase in revenues.
Interest income decreased $1.2 million due to lower interest rates and
lower receivables from sales-type leases.
Recognition's annual consolidated effective tax rate was 33 percent
for 1993 compared to 57 percent in 1992. The provisions for income taxes for
1993 and 1992 were primarily a result of income earned by certain foreign
entities with relatively high effective tax rates while minimal tax benefits
were available to entities which recorded losses. The decrease in the annual
consolidated tax rate was due to an increase in domestic income which was
subject to minimal taxes as a result of the utilization of net operating loss
carryforwards.
Recognition recorded an extraordinary item in 1992 of $.8 million, net
of income taxes, as a result of the early extinguishment of the 10% Convertible
Senior Subordinated Notes due 1997 (Prospect Notes) issued by Recognition to
The Prospect Group, Inc. (Prospect) in 1990. In July 1991, pursuant to an
agreement between Recognition and Prospect, Recognition issued 1,725,625 shares
of its common stock and paid $2.1 million in cash to Prospect for the surrender
and cancellation of the Prospect Notes. Pursuant to the agreement, Recognition
also recorded an obligation to pay Prospect $.8 million contingent on the
trading price of Recognition's common stock during a trading period which ended
in June 1992. As the contingency did not occur, Recognition recorded the $.8
million extraordinary gain in the third quarter of 1992.
<PAGE> 9
Recognition International Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Years ended October 31,
(thousands, except per share) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product $ 92,422 $115,375 $ 91,321
Customer service 126,971 115,203 107,865
- -----------------------------------------------------------------------------------------------------------------------
219,393 230,578 199,186
- ------------------------------------------------------------------------------------------------------------------------
Cost of revenues:
Product 67,396 65,343 52,412
Customer service 85,213 81,309 75,595
- -----------------------------------------------------------------------------------------------------------------------
152,609 146,652 128,007
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 66,784 83,926 71,179
Operating expenses:
Engineering and development 17,979 16,585 14,168
Selling and marketing 33,614 34,710 28,394
General and administrative 12,752 13,548 11,200
Restructuring 19,732 -- 2,257
Amortization and other operating 4,925 3,972 3,030
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) (22,218) 15,111 12,130
Interest income 2,430 2,676 3,902
Interest expense (4,342) (5,340) (5,610)
Foreign exchange gains (losses) - net 849 (91) (1,031)
Other expense - net (290) (528) (68)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (23,571) 11,828 9,323
Provision for income taxes (3,009) (3,892) (5,271)
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item (26,580) 7,936 4,052
Extraordinary item:
Gain on early extinguishment of debt,
net of $16 of income taxes -- -- 784
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $(26,580) $ 7,936 $ 4,836
=======================================================================================================================
Earnings (loss) per share:
Income (loss) before extraordinary
item $ (1.70) $ .55 $ .32
Extraordinary item -- -- .06
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (1.70) $ .55 $ .38
=======================================================================================================================
Weighted average shares outstanding 15,623 14,496 12,649
=======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 10
Recognition International Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As of October 31, (thousands) 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents, including
restricted amounts of $6,359 in 1994
and $4,731 in 1993 $ 40,115 $ 53,334
Short-term investments, including restricted
amounts of $536 in 1994 and $231 in 1993 549 483
Receivables:
Trade, less allowance for doubtful
accounts of $2,599 in 1994 and
$1,997 in 1993 48,602 42,786
Other 1,661 2,634
Inventories 24,685 29,835
Other current assets 5,599 3,575
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 121,211 132,647
- ---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 16,304 16,403
- ---------------------------------------------------------------------------------------------------------------------
Service parts - net 25,281 19,115
- ---------------------------------------------------------------------------------------------------------------------
Long-term receivables 5,278 4,886
- ---------------------------------------------------------------------------------------------------------------------
Goodwill, less accumulated amortization
of $10,017 in 1994 and
$7,681 in 1993 16,377 18,597
- ---------------------------------------------------------------------------------------------------------------------
Capitalized software - net 5,605 8,991
- ---------------------------------------------------------------------------------------------------------------------
Other assets 14,407 16,725
- ---------------------------------------------------------------------------------------------------------------------
Total assets $204,463 $217,364
=====================================================================================================================
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Recognition International Inc.
As of October 31, (thousands) 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 7,988 $ 5,776
Trade accounts payable 10,426 9,082
Domestic and foreign income taxes 1,650 3,803
Accrued compensation and benefits 5,328 6,924
Advance payments by customers 20,350 18,397
Accrued and other current liabilities 22,877 13,621
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 68,619 57,603
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt 51,722 53,656
- ---------------------------------------------------------------------------------------------------------------------
Other liabilities 6,285 5,303
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, no par value: authorized
shares - 800; issued shares - none -- --
Series A junior participating preferred
stock, no par value: authorized shares -
200; issued shares - none -- --
Common stock, $.25 par value: authorized
shares - 30,000; issued shares - 15,295
in 1994 and 14,953 in 1993 3,824 3,738
Capital in excess of par value 140,851 137,865
Accumulated deficit (63,947) (37,367)
Translation adjustments (2,503) (3,007)
Treasury stock (388) (427)
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 77,837 100,802
- ---------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $204,463 $217,364
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 12
Recognition International Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended October 31, (thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM:
OPERATIONS -
Net income (loss) $(26,580) $ 7,936 $ 4,836
- -----------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Depreciation 11,577 11,271 10,720
Amortization 6,449 6,481 4,620
Restructuring 19,732 -- 2,257
Write-down of capitalized software 2,821 -- --
Extraordinary item -- -- (784)
Sales-type leases and installment
sales - net (867) 1,321 (433)
Net book value of service
parts used 1,317 1,223 1,822
Increase in receivables (4,638) (4,979) (8,910)
Decrease (increase) in inventories 1,772 (244) (1,055)
Other working capital changes (7,100) 3,050 (4,030)
Proceeds from sales of
receivables -- 1,271 4,794
Other 2,668 1,145 1,427
- -----------------------------------------------------------------------------------------------------------------------
Total adjustments 33,731 20,539 10,428
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operations 7,151 28,475 15,264
- -----------------------------------------------------------------------------------------------------------------------
INVESTMENTS AND ACQUISITIONS -
Additions to property, plant
and equipment (6,143) (6,444) (4,834)
Additions to service parts (14,022) (7,095) (6,321)
Additions to capitalized software (2,597) (4,164) (3,825)
Decrease (increase) in short-term
investments (11) 23 28,381
Payment for acquisition of
businesses - net of cash
acquired (497) (415) (32,462)
Escrow for purchase of real property -- -- (1,400)
Other (171) 113 (414)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used for investments
and acquisitions $(23,441) $(17,982) $(20,875)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
Recogntion International Inc.
Years ended October 31, (thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES -
Proceeds from issuance of short-
term debt $ 278 $ 184 $ 618
Repayment of short-term debt (632) (897) (77)
Proceeds from issuance of long-term debt -- -- 15,000
Repayment of long-term debt -- (14,250) (7,351)
Issuance of common stock 2,047 32,358 505
Redemption of stock rights -- -- (1)
Establishment of stock rights plan -- (83) (38)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by
financing activities 1,693 17,312 8,656
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,378 (322) 689
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (13,219) 27,483 3,734
Cash and cash equivalents at beginning
of year 53,334 25,851 22,117
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end
of year $ 40,115 $ 53,334 $ 25,851
=======================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,117 $ 5,196 $ 5,290
Income taxes $ 5,474 $ 8,942 $ 3,836
=======================================================================================================================
</TABLE>
Supplemental schedule of noncash investing and financing activities:
In August 1991, Recognition purchased all of the outstanding stock of Hybrid
Systems Inc. for cash of $6,026 and royalties based on future revenues payable
over 12 years. In 1994, 1993 and 1992, Recognition paid royalties of $497, $415
and $524, respectively.
Effective February 1992, Recognition purchased certain assets and
liabilities of the Lundy Financial Systems Division of TransTechnology
Corporation for cash of $31,982, a note of $1,934 and a cash escrow of $1,400
for purchase of real property.
Details of the businesses acquired were as follows:
<TABLE>
<S> <C> <C> <C>
Fair value of assets acquired $ 497 $ 415 $ 44,326
Liabilities assumed -- -- (9,886)
Note issued -- -- (1,934)
- -----------------------------------------------------------------------------------------------------------------------
Cash paid 497 415 32,506
Less cash acquired -- -- (44)
- -----------------------------------------------------------------------------------------------------------------------
Net cash paid $ 497 $ 415 $ 32,462
=======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 14
Recognition International Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years ended October 31,
(thousands, except shares) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 3,738 $ 3,010 $ 2,995
Issued under stock and bonus plans 86 153 15
Issuance of stock -- 575 --
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 3,824 $ 3,738 $ 3,010
- ---------------------------------------------------------------------------------------------------------------------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year $137,865 $105,350 $103,938
Issued under stock and bonus plans 1,923 3,932 382
Amortization of deferred
compensation 1,063 1,006 1,068
Issuance of stock - net -- 27,660 --
Establishment of stock rights plan -- (83) (38)
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $140,851 $137,865 $105,350
- ---------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT
Balance at beginning of year $(37,367) $(45,303) $(50,139)
Net income (loss) (26,580) 7,936 4,836
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $(63,947) $(37,367) $(45,303)
- ---------------------------------------------------------------------------------------------------------------------
TRANSLATION ADJUSTMENTS
Balance at beginning of year $ (3,007) $ (1,176) $ 10
Translation adjustments 87 (1,748) (1,186)
Liquidation of Norwegian subsidiary 417 -- --
Liquidation of Finnish subsidiary -- (83) --
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year $ (2,503) $ (3,007) $ (1,176)
--------------------------------------------------------------------------------------------------------------------
TREASURY STOCK
Balance at beginning of year $ (427) $ (465) $ (572)
Issued to directors under a stock
plan (5,000 shares in 1994,
5,000 shares in 1993 and
12,500 shares in 1992) 39 38 107
- ---------------------------------------------------------------------------------------------------------------------
Balance at end of year (50,739 shares
in 1994, 55,739 shares in 1993
and 60,739 shares in 1992) $ (388) $ (427) $ (465)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 77,837 $100,802 $ 61,416
=====================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 15
Recognition International Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include those of Recognition
International Inc. and its wholly owned subsidiaries (Recognition). All
significant intercompany accounts and transactions are eliminated.
Certain amounts in the 1993 and 1992 financial statements have been
reclassified to conform with the 1994 presentation.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated into United
States dollars using the year-end exchange rates. Revenue and expense accounts
are translated at average exchange rates prevailing during the year.
Transaction gains and losses are reported in operations while translation gains
and losses, including those arising from intercompany accounts considered to be
long-term investments, are reported separately in stockholders' equity.
REVENUE RECOGNITION
Product revenues include revenues from the sale and lease of equipment and
computer software. Revenues from equipment sales and perpetual end-user
software licenses are recognized upon shipment. Revenues from operating leases
of equipment and temporary end-user software licenses are recognized ratably
over the terms of the related contracts.
Recognition also licenses software and receives license fees from original
equipment manufacturers (OEMs) and value-added resellers (VARs) who sublicense
the software to their customers. Revenues from such software are recognized as
product revenue upon delivery to the OEM or VAR. If the terms of the contracts
include minimum payment requirements, the minimum amounts of license fees due
under the contracts are recognized as product revenue upon delivery of the
software if the terms of the contracts are such that the amounts due within one
year are nonrefundable, the contracts are noncancelable and Recognition has
substantially performed all of its contractual obligations. Additional revenues
under such contracts are subsequently recognized at the time additional software
is delivered or additional fees are reported to Recognition by the OEMs and
VARs.
Customer service revenues include revenues from maintenance contracts for
hardware, postcontract support for software, custom software and professional
services, and are recognized ratably over the terms of the related contracts or
when services are performed.
<PAGE> 16
ENGINEERING AND DEVELOPMENT COSTS
Engineering and development costs, including costs for research,
development and on-going engineering efforts, are normally expensed when
incurred. However, computer software development costs incurred after
technological feasibility of the product is established are capitalized and
included in noncurrent assets. The amortized cost of capitalized software is
charged to product cost of revenues on a straight-line basis over its estimated
useful life ranging from three to five years, or the ratio of current revenues
to current and anticipated revenues from the software, whichever provides the
greater amortization.
RESTRUCTURING
Termination benefits provided to involuntarily terminated employees
and costs directly associated with a plan to exit an activity (exit costs) are
recognized as restructuring expense upon management's commitment to a formal
plan of restructuring. Exit costs are those unrelated to the generation of
revenues which will be incurred after the exit plan's commitment date, and
either are incremental to the costs incurred prior to the commitment date or
will be incurred under a contractual obligation that existed prior to the
commitment date and will continue after the exit plan is completed with no
economic benefit. Expenses that benefit on-going operations, but are necessary
to accomplish the restructuring plan, are charged to restructuring when an
obligation has been incurred.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the anticipated
future tax effects of differences in the carrying amount and tax basis of
assets and liabilities. Income taxes are provided on anticipated remittances of
foreign subsidiaries' earnings.
EARNINGS PER SHARE
Earnings per share amounts (primary) are computed based upon the
weighted average shares of common stock and common stock equivalents
outstanding during each period. Outstanding stock options are included as
common stock equivalents using the treasury stock method. If dilutive,
conversion of convertible subordinated debentures into common stock,
elimination of the related interest expense (after-tax) thereon and recognition
of available tax credits and net operating loss carryforwards are included in
the computation of fully diluted earnings per share. If the computation of
fully diluted earnings per share is anti-dilutive on net income, only primary
earnings per share is presented.
INVENTORIES
Inventories are stated at the lower of standard cost (approximates
actual cost on the first-in, first-out basis) or market. Inventoried costs
include amounts related to programs and contracts having production cycles
longer than one year.
<PAGE> 17
PROPERTY
Buildings and improvements are depreciated using the straight-line
method over their estimated useful lives ranging from one and a half to 33
years. Machinery and equipment are depreciated using the straight-line method
over their estimated useful lives ranging from three to 10 years. Systems on
lease are depreciated using the straight-line method over their estimated
useful lives ranging from three to seven years. Service parts are depreciated
using the straight-line method over their estimated useful lives of six years.
Maintenance and repairs are expensed as incurred.
GOODWILL, OTHER INTANGIBLE ASSETS AND DEFERRED DEBT ISSUE COSTS
Goodwill represents the cost in excess of the fair value of net assets
acquired and is amortized using the straight-line method over periods ranging
from seven to 20 years. Other intangible assets (included in Other Assets)
represent values assigned to customer lists and contracts and patents acquired
with purchased businesses. These assets are amortized using the straight-line
method over their estimated useful lives ranging from five to 12 years.
Deferred debt issue costs associated with various debt issues are amortized
over the terms of the related debt, ranging from three to 25 years, using the
interest method.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash and cash equivalents are comprised of highly liquid instruments
such as certificates of deposit, time deposits, commercial paper and money
market funds with original maturities of generally three months or less.
Short-term investments are similar instruments with original maturities in
excess of three months and are valued at cost, which approximates market.
LEASING OPERATIONS
Recognition leases certain products to customers with terms generally
ranging from one to five years. Transactions that do not qualify as sales-type
leases are accounted for as operating leases. As of October 31, 1994, minimum
future lease payments expected to be received were as follows (thousands):
<TABLE>
<CAPTION>
Sales-type Operating
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 3,286 $ 372
1996 2,044 131
1997 654 10
1998 397 --
1999 127 --
- -------------------------------------------------------------------------------------------------------------
$ 6,508 $ 513
=============================================================================================================
</TABLE>
<PAGE> 18
The net investment in sales-type leases at October 31, 1994 and 1993 was as
follows (thousands):
<TABLE>
<CAPTION>
Non-
Current Current
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
October 31, 1994
Future minimum lease payments receivable $ 3,286 $ 3,222
Estimated residual value of leased assets -- 552
Unearned interest income (430) (340)
- -------------------------------------------------------------------------------------------------------------
$ 2,856 $ 3,434
=============================================================================================================
October 31, 1993
Future minimum lease payments receivable $ 3,610 $ 3,866
Estimated residual value of leased assets -- 554
Unearned interest income (596) (458)
- -------------------------------------------------------------------------------------------------------------
$ 3,014 $ 3,962
=============================================================================================================
</TABLE>
INVENTORIES
Inventories at October 31, 1994 and 1993 included the following
(thousands):
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and parts $ 4,375 $12,203
Work in process 10,243 6,254
Finished goods 10,067 11,378
- -------------------------------------------------------------------------------------------------------------
$24,685 $29,835
=============================================================================================================
</TABLE>
<PAGE> 19
PROPERTY
Property at October 31, 1994 and 1993 included the following
(thousands):
<TABLE>
<CAPTION>
Accumulated
Cost Depreciation Net
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
October 31, 1994
Property, plant and equipment:
Buildings and improvements $13,915 $ 8,840 $ 5,075
Machinery and equipment 44,175 34,398 9,777
Systems on lease 1,718 1,139 579
Land 873 -- 873
- -------------------------------------------------------------------------------------------------------------
$60,681 $44,377 $16,304
=============================================================================================================
Service parts $42,450 $17,169 $25,281
=============================================================================================================
October 31, 1993
Property, plant and equipment:
Buildings and improvements $13,763 $ 8,645 $ 5,118
Machinery and equipment 39,145 29,252 9,893
Systems on lease 1,653 1,134 519
Land 873 -- 873
- -------------------------------------------------------------------------------------------------------------
$55,434 $39,031 $16,403
=============================================================================================================
Service parts $33,042 $13,927 $19,115
=============================================================================================================
</TABLE>
CAPITALIZED SOFTWARE
The net amount of capitalized software at October 31, 1994, 1993 and
1992 was as follows (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capitalized amounts - at cost:
Balance at beginning of year $13,805 $ 9,823 $ 4,760
Internally developed 2,597 4,164 3,825
Purchased in connection with
an acquisition -- -- 1,885
Write-downs charged to expense (3,234) -- --
Fully amortized balances
written off (2,347) (182) (647)
- ----------------------------------------------------------------------------------------------------------------
Balance at end of year 10,821 13,805 9,823
- ----------------------------------------------------------------------------------------------------------------
Accumulated amortization:
Balance at beginning of year 4,814 2,758 2,177
Amortization charged to cost
of product revenues 2,749 2,238 1,228
Fully amortized balances
written off (2,347) (182) (647)
- ----------------------------------------------------------------------------------------------------------------
Balance at end of year 5,216 4,814 2,758
- ----------------------------------------------------------------------------------------------------------------
$ 5,605 $ 8,991 $ 7,065
================================================================================================================
</TABLE>
<PAGE> 20
OTHER ASSETS
Other assets at October 31, 1994 and 1993 included the following
(thousands):
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customer lists and contracts - less
accumulated amortization of $2,224
in 1994 and $1,390 in 1993 $ 7,784 $ 8,618
Cash surrender value of life insurance
policies - net of loans 2,209 1,759
Deferred debt issue costs - less
accumulated amortization of $552 in
1994 and $487 in 1993 1,063 1,128
Patents - less accumulated amortization
of $692 in 1994 and $433 in 1993 613 872
Other 2,738 4,348
- ----------------------------------------------------------------------------------------------------------------
$14,407 $16,725
================================================================================================================
</TABLE>
ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities at October 31, 1994 and 1993
included the following (thousands):
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Taxes - other than income taxes $ 3,455 $ 3,243
Accrued restructuring 12,355 4,242
Other current liabilities 7,067 6,136
- ----------------------------------------------------------------------------------------------------------------
$22,877 $13,621
================================================================================================================
</TABLE>
INDEBTEDNESS
Short-term debt at October 31, 1994 and 1993 included the following
(thousands):
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign bank loans $ 6,054 $ 5,776
Promissory note due 1995 1,934 --
- ----------------------------------------------------------------------------------------------------------------
$ 7,988 $ 5,776
================================================================================================================
</TABLE>
Long-term debt at October 31, 1994 and 1993 included the following
(thousands):
<TABLE>
<CAPTION>
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
7 1/4% convertible subordinated debentures
due 2011 $51,722 $51,722
Promissory note due 1995 -- 1,934
- ----------------------------------------------------------------------------------------------------------------
$51,722 $53,656
================================================================================================================
</TABLE>
The debentures are subordinated to all senior indebtedness and are
convertible into common stock at $16.75 per share. Annual sinking fund payments
of $2,250,000 are required beginning April 15, 1996. The debentures are
redeemable at Recognition's option at 101.45 percent of face value prior to
April 16, 1995, declining to
<PAGE> 21
100 percent of face value by April 16, 1996.
Recognition has a $25,000,000 revolving credit facility with a group
of banks which was amended effective October 1994. The credit agreement
contains financial covenants including maintenance of certain financial ratios,
net worth requirements, and restrictions on future borrowings and payment of
dividends with which Recognition was in compliance at October 31, 1994.
Obligations under the credit agreement are secured by a lien on substantially
all of Recognition's assets, excluding its real estate. At October 31, 1994,
Recognition had $965,000 in letters of credit issued under the facility which
reduced the amount of borrowings available to $24,035,000. The credit facility
expires in July 1995 and any borrowings outstanding at that time will convert
to a one-year term loan. Recognition expects to extend or renegotiate the
revolving credit agreement at that time.
In connection with the acquisition of the Lundy Financial Systems
Division (Lundy) of TransTechnology Corporation (TransTechnology), Recognition
issued a promissory note to TransTechnology for $1,934,000 due in 1995.
Interest is payable quarterly based on varying interest rates above the prime
rate. The interest rate at October 31, 1994 was 9.75 percent. The note contains
a debt-to-worth covenant.
At October 31, 1994, $6,895,000 of cash, cash equivalents and
short-term investments were pledged as collateral or otherwise committed to
secure certain guarantees and a foreign bank loan.
Annual principal payment requirements on long-term debt for the five
years ending October 31, 1999 are as follows (thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
<S> <C>
1995 $1,934
1996 2,250
1997 2,250
1998 2,250
1999 2,250
- ------------------------------------------------------------------
</TABLE>
STOCKHOLDERS' EQUITY
TREASURY STOCK
At October 31, 1994, there were 50,739 shares held in treasury, of
which 37,000 shares were reserved for issuance to outside directors as
supplemental compensation pursuant to a plan.
INCENTIVE PLANS
Recognition has incentive plans which provide for the granting of
stock options, stock appreciation rights and performance awards to key
employees. Stock options under these plans must be granted at a price not less
than 50 percent of fair market value at the date of grant and for a term not
exceeding 10 years. No stock appreciation rights or performance awards had been
granted as of
<PAGE> 22
October 31, 1994. Recognition also has a plan which provides for the granting
of stock options at fair market value at date of grant to outside directors.
The changes in stock options outstanding for the year ended October
31, 1994 were as follows (shares in thousands):
<TABLE>
<CAPTION>
Number of Exercise
Shares Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at October 31, 1993 2,384 $ 4.88-$16.75
Options granted 971 $ 7.13-$16.38
Options exercised (342) $ 5.00-$13.88
Options terminated/cancelled (231) $ 6.88-$13.88
----------------------------------
Options outstanding at October 31, 1994 2,782 $ 4.88-$16.75
==================================
Options exercisable at October 31, 1994 1,240 $ 4.88-$16.75
==================================
</TABLE>
At October 31, 1994, there were 3,147,000 shares of common stock
reserved for issuance pursuant to the incentive plans of which 365,000 shares
were available for grant.
STOCK RIGHTS
In September 1992, Recognition's Board of Directors declared a
dividend distribution to stockholders of record on September 29, 1992, of one
preferred stock purchase right for each outstanding share of common stock. A
right may be exercised to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock of Recognition at an exercise price of
$60. The rights are exercisable only if a person or group acquires beneficial
ownership of 25 percent or more of Recognition's common stock or commences a
tender or exchange offer upon consummation of which such person or group would
beneficially own 25 percent or more of the common stock. However, the rights
will not become exercisable if Recognition's common stock is acquired pursuant
to an offer for all shares which a majority of Recognition's independent
directors, excluding all officers, determines to be fair to, and otherwise in
the best interests of, Recognition and its stockholders.
If any person or group becomes the beneficial owner of 25 percent or
more of Recognition's common stock other than pursuant to an offer for all
shares as described above, or if a 25 percent or more stockholder engages in a
merger with Recognition in which Recognition survives and its shares of common
stock are not changed or converted, each right not owned by such person or
group or related parties will entitle its holder to purchase, at the right's
then current exercise price, common stock of Recognition (or, in certain
circumstances as determined by Recognition's Board of Directors, cash, property
or other securities) having a value of twice the right's exercise price.
In addition, if at any time after a person or group acquires
<PAGE> 23
beneficial ownership of 25 percent or more of Recognition's common stock,
Recognition is involved in a merger or other business combination transaction
with another person in which Recognition's common stock is changed or converted
or sells 50 percent or more of Recognition's assets or earning power to another
person, each right will entitle its holder to purchase, at the right's then
current exercise price, common stock of such other person having a value of
twice the right's exercise price.
The rights will expire in 2002, and may be redeemed by Recognition for
one cent per right at any time before the tenth business day following the
public announcement that a person or group has acquired 25 percent or more of
Recognition's common stock.
SUPPLEMENTARY EARNINGS PER SHARE
Primary earnings per share of common stock is based on the weighted
average number of shares outstanding. Common stock issued April 27, 1993 from
an underwritten public offering has been included in the weighted average
number of shares outstanding subsequent to that date. A portion of the proceeds
received from the issuance of the common stock was used to retire an
outstanding $12,375,000 term loan.
Supplementary earnings per share data is presented for the years ended
October 31, 1993 and 1992. For the computation of supplementary earnings per
share, the portion of the shares issued April 27, 1993 whose proceeds were used
to retire the term loan are included in the weighted average number of shares
outstanding as if the issuance had taken place at the beginning of the year in
1993, and at the date of the issuance of the debt in 1992. Net income has been
adjusted for the term loan interest expense and the related income taxes.
Supplementary earnings per share for the years ended October 31, 1993
and 1992 was as follows (thousands, except per share):
<TABLE>
<CAPTION>
1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income before extraordinary item $ 8,572 $ 4,700
Extraordinary item -- 784
- ---------------------------------------------------------------------------------------------------------------
Net income $ 8,572 $ 5,484
==============================================================================================================
Weighted average shares outstanding 14,980 13,258
==============================================================================================================
Earnings per share:
Income before extraordinary item $ .57 $ .35
Extraordinary item -- .06
- ---------------------------------------------------------------------------------------------------------------
Net Income $ .57 $ .41
==============================================================================================================
</TABLE>
<PAGE> 24
ENGINEERING AND DEVELOPMENT EXPENSES
Engineering and development expenses for the years ended October 31,
1994, 1993 and 1992 included the following (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Research and
development $13,452 $12,369 $10,673
On-going engineering
efforts 4,527 4,216 3,495
----------------------------------------------------------
$17,979 $16,585 $14,168
==========================================================
</TABLE>
RESTRUCTURING CHARGES
In 1994, Recognition adopted a plan to restructure its operations
which is expected to be completed by the end of the third quarter of 1995.
There are three major parts to this plan: (1) to consolidate certain
operations into a new Worldwide Systems Group to eliminate duplicate support
and overhead operations and move Recognition's systems business more quickly
through the transition from older, proprietary products to newer, open
architecture products; (2) to consolidate manufacturing and engineering into
the Dallas, Texas facility and to close the Charlotte, North Carolina facility
and other offices; and (3) to reduce expenses in Recognition's software
business by consolidating certain software support functions into the
Sunnyvale, California location and reduce overall headcount.
As a result of adopting this plan, Recognition recorded restructuring
charges of $19,732,000. This includes termination benefits of $7,932,000 for
the involuntary termination of 314 employees. The majority of the employees to
be terminated are currently employed in Recognition's Charlotte, North Carolina
facility. The remainder of the employees to be terminated are part of the
restructuring of the Worldwide Systems Group and the Software Division. The
restructuring charge also includes $3,125,000 for obligations relating to
employee relocation, $5,973,000 for the write-down of certain assets no longer
required in the business, $1,443,000 for facility lease terminations and
$1,259,000 for other related items. As of October 31, 1994, Recognition has
paid $1,522,000 in termination benefits for the involuntary termination of 129
employees and has written-down assets or paid $7,089,000 related to the other
restructuring items.
In 1992, Recognition recorded a restructuring charge of $2,257,000 for
costs related to the reorganization of the operations of Recognition as a
result of the Lundy acquisition. These costs were primarily for severance,
relocation and related expenses to eliminate operations of Recognition which
were duplicated by those of Lundy.
<PAGE> 25
ACQUISITIONS
Effective February 23, 1992, Recognition acquired certain assets and
liabilities of Lundy. Lundy designed, manufactured, sold and serviced document
processing systems used mainly by banks, utilities, and insurance and telephone
companies. The purchase price, after post-closing adjustments, included cash
consideration of $33,338,000 and a promissory note of $1,934,000 to
TransTechnology, plus related costs of approximately $3,700,000 incurred by
Recognition. The purchase price included $1,400,000 placed in escrow which will
be released to Recognition in 1995. The cash consideration and related costs of
the acquisition were funded by a term loan of $15,000,000 and internally
generated cash of approximately $22,038,000.
The Lundy acquisition was accounted for by the purchase method.
Accordingly, the purchase price was allocated to the assets acquired and the
liabilities assumed based on the estimated fair values as of the effective date
of the acquisition. The excess of the purchase price over the estimated fair
values of the net assets acquired was $6,637,000 and is being amortized on a
straight-line basis over 12 years.
The accounts of Lundy are included in Recognition's consolidated
financial statements and, accordingly, the Consolidated Statement of Operations
for the year ended October 31, 1992 includes the operating results of Lundy
beginning February 23, 1992. The following unaudited pro forma summary of
results of operations for the year ended October 31, 1992 assumes the
acquisition occurred as of the beginning of the period after giving effect to
certain adjustments, including amortization of goodwill and other intangible
assets, increased interest expense due to acquisition debt, cost savings from
the elimination of duplicate operations and lower interest income due to the
use of internally generated cash for the acquisition:
<TABLE>
<CAPTION>
Year ended October 31,
(thousands, except per share)
1992
- -----------------------------------------------------------------------------------------------
<S> <C>
Revenues $214,451
Income before extraordinary item $ 7,076
Net income $ 7,860
Earnings per share:
Income before extraordinary item $ .56
Net income $ .62
</TABLE>
The foregoing unaudited pro forma results were prepared for
comparative purposes only and do not purport to be indicative of the results
that would have occurred had the acquisition been made as of the beginning of
the period or of the results which may occur in the future.
<PAGE> 26
INCOME TAXES
Income (loss) before income taxes and extraordinary item for the years
ended October 31, 1994, 1993 and 1992 included the following (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic income (loss) $(28,159) $ 6,570 $ 404
Foreign income 4,588 5,258 8,919
- --------------------------------------------------------------------------------------------------------------
$(23,571) $11,828 $9,323
==============================================================================================================
</TABLE>
The provision for income taxes for the years ended October 31, 1994,
1993 and 1992 consisted of the following (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic:
Current - federal and state $ 401 $ 121 $ 682
Deferred 2 -- 135
- --------------------------------------------------------------------------------------------------------------
403 121 817
- --------------------------------------------------------------------------------------------------------------
Foreign:
Current 2,545 5,479 5,286
Deferred 61 (1,708) (832)
- --------------------------------------------------------------------------------------------------------------
2,606 3,771 4,454
- --------------------------------------------------------------------------------------------------------------
$3,009 $3,892 $5,271
==============================================================================================================
</TABLE>
In the opinion of Recognition, undistributed earnings of foreign
subsidiaries aggregating approximately $4,268,000 at October 31, 1994 will be
required for use in the subsidiaries' operations and, therefore, no provision
has been made for domestic or foreign taxes which would be incurred by the
parent company upon repatriation of such earnings. Should any of these earnings
be distributed, any income taxes payable would be at a rate less than the U.S.
statutory tax rate as a result of domestic net operating loss carryforwards
available to offset such earnings.
<PAGE> 27
The following is a reconciliation of the provision for income taxes
for the years ended October 31, 1994, 1993 and 1992 computed at the U.S.
statutory rate to the consolidated provision for income taxes (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision (benefit) at U.S.
statutory rate $(8,250) $ 4,140 $ 3,169
Change in valuation allowance 6,292 (1,256) (292)
Net operating losses providing no
current tax benefit 2,803 453 524
Tax expense from foreign
subsidiaries' dividends 1,226 594 1,930
Nondeductible goodwill amortization 642 836 735
Foreign taxes in excess of U.S.
tax rate on foreign earnings 516 509 624
Benefit of net operating loss carry-
forwards -- (2,431) (1,941)
Other - net (220) 1,047 522
- ---------------------------------------------------------------------------------------------------------------
$ 3,009 $ 3,892 $ 5,271
==============================================================================================================
</TABLE>
The components of the net deferred tax asset (liability) as of October
31, 1994, 1993 and 1992 were as follows (thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 24,587 $ 22,957* $ 15,935
Inventory and other provisions 13,404 8,707 8,175
Restructuring 3,828 439 661
Deferred revenues 3,151 1,825 1,059
Tax deductible foreign reserves 415 -- --
Sales-type leases and depreciation 324 1,187 --
Unrealized foreign exchange gains -- 219 276
Other - net 1,985 1,568 480
Valuation allowance (44,881) (34,434)* (25,520)
- -------------------------------------------------------------------------------------------------------------
Total deferred tax asset 2,813 2,468 1,066
- -------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Foreign and other tax credits (547) (547) (547)
Unrealized foreign exchange gains (175) -- --
Tax deductible foreign reserves -- (30) (425)
Sales-type leases and depreciation -- -- (328)
- -------------------------------------------------------------------------------------------------------------
Total deferred tax liability (722) (577) (1,300)
- -------------------------------------------------------------------------------------------------------------
$ 2,091 $ 1,891 $ (234)
==============================================================================================================
</TABLE>
* Includes a reclassification of $5,653 from valuation allowance to net
operating loss carryforwards.
In accordance with Statement of Financial Accounting Standards (SFAS
109), "Accounting for Income Taxes," Recognition has recorded a valuation
allowance to reduce the deferred tax assets, primarily net operating loss
carryforwards, potentially available to Recognition to the amount that is "more
likely than not to be
<PAGE> 28
realized." The ultimate realization of these deferred tax assets depends on the
ability of Recognition to generate sufficient taxable income in the future.
While Recognition believes the deferred tax assets will be substantially
realized by future operating results, due to the cumulative losses incurred in
recent years the deferred tax assets do not currently meet the criteria for
recognition under SFAS 109.
At October 31, 1994, domestic net operating losses of $49,201,000 and
foreign net operating losses of $17,008,000 may be carried forward for tax
purposes. Net operating loss carryforwards expire as follows (thousands):
<TABLE>
<CAPTION>
Expire Domestic Foreign
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1996 $ 4,011 $ 486
1997 832 538
1998 1,037 479
2005 38,180 --
2006 and thereafter 5,141 15,505
- -------------------------------------------------------------------------------------------------------------
$49,201 $17,008
=============================================================================================================
</TABLE>
At October 31, 1994, investment and other tax credit carryforwards
totaled $1,868,000 and expire as follows (thousands):
<TABLE>
<CAPTION>
Expire
- -------------------------------------------------------------------------------------------------------------
<S> <C>
1995 $ 327
1996 209
1997 290
1998 183
1999 and thereafter 859
- -------------------------------------------------------------------------------------------------------------
$ 1,868
=============================================================================================================
</TABLE>
In the opinion of Recognition, a change in ownership occurred within
the meaning of Section 382 of the Internal Revenue Code in 1990. A change in
ownership places an annual limitation on the amount of domestic net operating
loss carryforwards Recognition can utilize. It is Recognition's opinion that
the change does not materially limit Recognition's use of domestic net
operating loss carryforwards. The annual limitation is $4,600,000 and may be
carried forward to subsequent years when not fully utilized in an earlier year.
EXTRAORDINARY ITEM
Recognition recorded an extraordinary item in 1992 of $784,000, net of
income taxes, as a result of the early extinguishment of the 10% Convertible
Senior Subordinated Notes due 1997 (Prospect Notes) issued by Recognition to The
Prospect Group, Inc. (Prospect) in 1990. In July 1991, pursuant to an agreement
between Recognition and Prospect, Recognition issued 1,725,625 shares of its
common stock and paid $2,100,000 in cash to Prospect for the surrender and
cancellation of the Prospect Notes. Pursuant to the agreement, Recognition also
recorded an obligation to pay Prospect $800,000 contingent on the trading price
of Recognition's
<PAGE> 29
common stock during a trading period ending in June 1992. As the contingency
did not occur, Recognition recorded the $800,000 extraordinary gain in the
third quarter of 1992.
COMMITMENTS AND CONTINGENCIES
At October 31, 1994, Recognition was contingently liable for
approximately $1,578,000 under letters of credit issued primarily in connection
with vendor purchase contracts and performance guarantees on customer sales
contracts.
Recognition leases certain facilities and computer and other equipment
used in its operations under non-cancelable lease agreements having an initial
term of more than one year and expiring at various dates through 1999. Most
leases contain renewal options and some contain purchase options. The leases
generally provide that Recognition pay taxes, maintenance, insurance and
certain other operating expenses.
Rent expense was approximately $4,882,000 in 1994, $5,149,000 in 1993,
and $4,990,000 in 1992.
Minimum rental payments under the leases described above are as
follows (thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
<S> <C>
1995 $3,157
1996 2,168
1997 1,014
1998 211
1999 25
- -------------------------------------------------------------------
$6,575
===================================================================
</TABLE>
In 1990 and 1992, Recognition sold with recourse a substantial portion
of its long-term receivables from sales-type leases and installment sales
contracts to a third party. At October 31, 1994, the third party had retained
as security $277,000 which will be repaid to Recognition over the next three
years, subject to certain conditions. Recognition is unable to quantify its
outstanding potential obligation as the third party performs the invoicing and
collection activities on a commingled basis with its other accounts.
GEOGRAPHIC INFORMATION
Recognition is an international open systems supplier of high
performance document recognition systems, image and workflow software, and
related customer services. Recognition reports its business as one segment.
<PAGE> 30
Financial information by geographic area for the years ended October
31, 1994, 1993, and 1992 is summarized on the following chart. Because of
significant interdependencies among Recognition's operating units, the
information may not be indicative of the results of the reported areas had they
been independent entities. Intercompany transfers are generally priced at cost
plus an appropriate profit margin.
<TABLE>
<CAPTION>
Geographic Areas (thousands)
- ----------------------------------------------------------------------------------------------------------------------
United Elimi- Consol-
States Europe Pacific Canada nations idated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994
- -----------------------------------------------------------------------------------------------------------------------
Revenues $128,077 $22,675 $28,470 $40,171 $ -- $219,393
Intercompany
transfers 9,838 2,157 1 -- (11,996) --
- -----------------------------------------------------------------------------------------------------------------------
Total revenues 137,915 24,832 28,471 40,171 (11,996) 219,393
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) (28,850) 585 (114) 1,519 280 (26,580)
- -----------------------------------------------------------------------------------------------------------------------
Assets at Octo-
ber 31, 1994 133,750 22,108 27,027 23,613 (2,035) 204,463
- -----------------------------------------------------------------------------------------------------------------------
Liabilities at
October 31,
1994 $ 99,393 $ 7,117 $16,893 $ 3,223 $ -- $126,626
========================================================================================================================
1993
- ------------------------------------------------------------------------------------------------------------------------
Revenues $145,458 $20,834 $31,945 $32,341 $ -- $230,578
Intercompany
transfers 17,432 1,605 -- -- (19,037) --
- -----------------------------------------------------------------------------------------------------------------------
Total revenues 162,890 22,439 31,945 32,341 (19,037) 230,578
- -----------------------------------------------------------------------------------------------------------------------
Net income(loss) 5,491 (226) (548) 2,214 1,005 7,936
- -----------------------------------------------------------------------------------------------------------------------
Assets at Octo-
ber 31, 1993 158,951 19,522 22,416 18,917 (2,442) 217,364
- -----------------------------------------------------------------------------------------------------------------------
Liabilities at
October 31,
1993 $ 91,522 $ 6,435 $15,559 $ 3,046 $ -- $116,562
========================================================================================================================
1992
- ------------------------------------------------------------------------------------------------------------------------
Revenues $124,222 $24,477 $24,553 $25,934 $ -- $199,186
Intercompany
transfers 19,280 937 10 -- (20,227) --
- -----------------------------------------------------------------------------------------------------------------------
Total revenues 143,502 25,414 24,563 25,934 (20,227) 199,186
- -----------------------------------------------------------------------------------------------------------------------
Net income 336 2,418 250 1,893 (61) 4,836
- -----------------------------------------------------------------------------------------------------------------------
Assets at Octo-
ber 31, 1992 128,900 22,548 19,976 19,813 (2,854) 188,383
- -----------------------------------------------------------------------------------------------------------------------
Liabilities at
October 31,
1992 $100,419 $ 9,799 $12,254 $ 4,495 $ -- $126,967
========================================================================================================================
</TABLE>
Recognition's investment in international operations was $22,539,000 at October
31, 1994, $18,605,000 at October 31, 1993, and $22,665,000 at October 31, 1992.
<PAGE> 31
QUARTERLY FINANCIAL DATA (UNAUDITED)
Unaudited summarized financial data by quarter for the years ended
October 31, 1994 and 1993 were as follows (thousands, except per share
amounts):
<TABLE>
<CAPTION>
Earnings
Net (Loss)
Gross Income Per
Revenues Profit (Loss) Share*
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
1ST QUARTER $ 50,348 $18,471 $ 656 $ .04
2ND QUARTER $ 62,577 $18,094 $ (1,391) $ (.09)
3RD QUARTER $ 45,117 $11,717 $(26,426) $(1.71)
4TH QUARTER $ 61,351 $18,502 $ 581 $ .04
===============================================================================================================
1993
1st Quarter $ 49,028 $18,067 $ 616 $ .05
2nd Quarter $ 60,819 $20,665 $ 1,186 $ .09
3rd Quarter $ 60,341 $21,726 $ 2,440 $ .16
4th Quarter $ 60,390 $23,468 $ 3,694 $ .23
===============================================================================================================
</TABLE>
* Due to changes in the market value of Recognition's stock, earnings
(loss) per share as presented does not equal the sum of the quarters.
<PAGE> 32
REPORT OF MANAGEMENT
The management of Recognition International Inc. is responsible for
the fair presentation of the information contained in this annual report. The
financial statements have been prepared in accordance with generally accepted
accounting principles appropriate in the circumstances and reflect management's
best judgment as to Recognition's financial position, results of operations and
cash flows.
In recognition of its responsibility for the reliability of the
financial statements, Recognition maintains a system of internal accounting
controls. This system is designed to provide reasonable assurance that assets
are safeguarded and transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements. The design of the system recognizes that errors or irregularities
may occur and that estimates and judgments are required to assess the relative
costs and expected benefits of the controls. The system is supported by an
internal auditing function that operates worldwide and reports its findings to
management throughout the year.
The independent accountants are engaged to express an opinion on the
financial statements. They review Recognition's internal accounting controls
and perform procedures which they consider sufficient to enable them to reach a
conclusion as to the fairness of the presentation of the financial statements.
The Audit Committee of the Board of Directors which is comprised
solely of Directors who are not employees of Recognition, is responsible for
monitoring Recognition's accounting and reporting practices. The Audit
Committee meets periodically with management, the internal auditors and
independent accountants to review matters relating to financial reporting,
internal accounting controls and auditing. The independent accountants and
internal auditors both have free access to the Audit Committee without
management present.
/s/Robert A. Vanourek
President and Chief Executive Officer
/s/Thomas Hoefert
Vice President, Chief Financial Officer and Controller
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Recognition
International Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations of stockholders' equity and of
cash flows present fairly in all material respects, the financial position of
Recognition International Inc. and its subsidiaries (Recognition) at October
31, 1994 and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended October 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of Recognition's management; our responsibility is to
express a opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financials statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financials statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
Dallas, Texas
December 7, 1994
<PAGE> 34
CORPORATE INFORMATION
STOCK PRICES
Recognition's common stock is listed on the New York Stock Exchange
(NYSE) under the symbol REC. The table below sets forth the high and low sales
prices on the NYSE Composite Tape for Recognition's common stock for each
fiscal quarter of 1994 and 1993 as reported by the National Quotation Bureau,
Inc.
<TABLE>
<CAPTION>
Fiscal Year 1994 High Low
- -------------------------------------------------------------------------------------
<S> <C> <C>
1st Quarter 17 13 1/2
2nd Quarter 14 5/8 9 1/2
3rd Quarter 10 3/8 7 5/8
4th Quarter 8 1/2 6 3/8
<CAPTION>
Fiscal Year 1993 High Low
- -------------------------------------------------------------------------------------
<S> <C> <C>
1st Quarter 16 1/4 12 1/4
2nd Quarter 15 1/8 11 7/8
3rd Quarter 16 1/2 11 3/4
4th Quarter 17 3/4 12
</TABLE>
The number of stockholders of record of Recognition's common stock as
of January 9, 1995, was approximately 5,000. Recognition has never paid cash
dividends on its common stock and currently has a policy of retaining its
earnings for use in Recognition's operations.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following is a list of subsidiaries of the Registrant as of January 18,
1995:
Jurisdiction
Name of Incorporation
- ---- --------------------
Recognition Australia Pty Ltd N.S.W., Australia
Recognition Benelux B.V. The Netherlands
Recognition Canada Inc. Ontario, Canada
Recognition Danmark A/S Denmark
Recognition Equipment GmbH Germany
Recognition Equipment Wholesale Pty. Ltd. N.S.W., Australia
Recognition Holding Limited England
Recognition Iberica, S.A. Spain
Recognition Japan Inc. Delaware, USA
Recognition Mexico Holding Inc. Delaware, USA
Recognition de Mexico, S.A. de C.V. Mexico
Recognition Pacific Limited Hong Kong
Recognition Singapore Pte Ltd Singapore
Recognition Sverige A.B. Sweden
Recognition UK Limited England
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Numbers 33-38896, 33-53347 and 33-60722) of Recognition
International Inc. of our report dated December 7, 1994 appearing in the 1994
Annual Report to Stockholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedules, which appears on Page F-1 of this Form 10-K.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Dallas, Texas
January 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5 Exhibit 27
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<CASH> 40,115
<SECURITIES> 549
<RECEIVABLES> 52,862
<ALLOWANCES> 2,599
<INVENTORY> 24,685
<CURRENT-ASSETS> 121,211
<PP&E> 103,131
<DEPRECIATION> 61,546
<TOTAL-ASSETS> 204,463
<CURRENT-LIABILITIES> 68,619
<BONDS> 51,722
<COMMON> 3,824
0
0
<OTHER-SE> 74,013
<TOTAL-LIABILITY-AND-EQUITY> 204,463
<SALES> 92,422
<TOTAL-REVENUES> 219,393
<CGS> 67,396
<TOTAL-COSTS> 152,609
<OTHER-EXPENSES> 21,214
<LOSS-PROVISION> 1,690
<INTEREST-EXPENSE> 4,342
<INCOME-PRETAX> (23,571)
<INCOME-TAX> 3,009
<INCOME-CONTINUING> (26,580)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,580)
<EPS-PRIMARY> (1.70)
<EPS-DILUTED> (1.22)
</TABLE>
