<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SEC. 240.14A-11(C) OR SEC. 240.14A-12
RECOGNITION INTERNATIONAL INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RECOGNITION INTERNATIONAL INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I)(1), OR 14A-6(J)(2).
[ ] $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE ACT RULE
14A-6(I)(3).
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULE 14A-6(I)(4) AND 0-11.
1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:
4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT RULE
0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER,
OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
1) AMOUNT PREVIOUSLY PAID:
2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
3) FILING PARTY:
4) DATE FILED:
<PAGE> 2
RECOGNITION INTERNATIONAL INC.
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD MARCH 9, 1995
To the Stockholders of
RECOGNITION INTERNATIONAL INC.
Notice is given that the Annual Meeting of Stockholders of Recognition
International Inc., a Delaware corporation ("Recognition"), will be held on
March 9, 1995, at 10 o'clock in the morning, Central Standard Time, in Grand
Ballroom B of the Stouffer Renaissance Dallas Hotel, 2222 Stemmons Freeway,
Dallas, Texas, for the following purposes:
1. Electing three directors to serve in Class III until the annual
meeting of stockholders in 1998; and
2. Transacting such other business as may properly be brought before
said meeting or any adjournment(s) thereof.
Only stockholders of record at the close of business on January 9, 1995,
are entitled to notice of, and to vote at, such meeting or any adjournment(s)
thereof. A complete list of stockholders entitled to vote at the meeting will be
open to examination by any stockholder at the offices of Locke Purnell Rain
Harrell, Suite 2200, 2200 Ross Avenue, Dallas, Texas, for a period of at least
ten days before the meeting.
You are encouraged to attend the meeting in person, but if you cannot do
so, please complete, date, sign and return the accompanying proxy card at your
earliest convenience. A reply envelope is provided for this purpose, which needs
no postage if mailed in the United States. Your immediate attention is requested
in order to save the company additional solicitation expense.
By Order of the Board of Directors
CAROL S. LYON,
Vice President
and Secretary
Dallas, Texas
January 18, 1995
<PAGE> 3
RECOGNITION INTERNATIONAL INC.
P.O. BOX 660204
DALLAS, TEXAS 75266-0204
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 9, 1995
SOLICITATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Recognition International Inc., a Delaware corporation
("Recognition"), for use at the Annual Meeting of Stockholders of Recognition to
be held in Grand Ballroom B of the Stouffer Renaissance Dallas Hotel, 2222
Stemmons Freeway, Dallas, Texas, on March 9, 1995, and at any adjournment(s)
thereof (the "Annual Meeting"), for the purposes set forth below and in the
accompanying Notice of Annual Meeting of Stockholders. This Proxy Statement and
the accompanying proxy card are being mailed to stockholders on or about January
26, 1995.
ANNUAL REPORT
The Annual Report to Stockholders covering Recognition's fiscal year ended
October 31, 1994, including audited financial statements, is enclosed herewith.
The Annual Report to Stockholders does not form any part of the material for the
solicitation of proxies.
OUTSTANDING COMMON STOCK
The close of business on January 9, 1995, is the record date for
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting. On the record date, there were outstanding and entitled to be voted
15,244,406 shares of Recognition Common Stock, par value $.25 per share ("Common
Stock").
The following table sets forth certain information with respect to each
person or group believed by Recognition to be a beneficial owner of more than 5%
of Recognition's outstanding Common Stock. Unless otherwise indicated, to the
knowledge of Recognition, all shares are owned directly and the owner has sole
voting and investment power with respect to the shares owned by it.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS(1)
-------------------------------------------------- ----------------------- -----------
<S> <C> <C>
Greenhaven Associates, Inc. 2,113,087(2)(5) 13.9%
Three Manhattanville Road
Purchase, NY 10577
Central National-Gottesman Group 1,660,838(3)(5) 10.9%
Three Manhattanville Road
Purchase, NY 10577
Edgar Wachenheim, III 2,100,087(4)(5) 13.8%
Three Manhattanville Road
Purchase, NY 10577
</TABLE>
1
<PAGE> 4
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS(1)
-------------------------------------------------- ----------------------- -----------
<S> <C> <C>
Spears, Benzak, Salomon & Farrell, Inc. 2,307,949(6) 14.2%
45 Rockefeller Plaza, 33rd Floor
New York, NY 10011
Joseph L. Harrosh 972,440(7) 6.4%
40900 Grimmer Blvd.
Fremont, CA 94538
</TABLE>
- ---------------
(1) Percent of shares of Common Stock outstanding at January 9, 1995. Shares
subject to issuance upon conversion of convertible securities held by the
identified stockholder are deemed outstanding for purposes of calculating
its percentage, when applicable.
(2) The information set forth in the table and this footnote regarding shares
beneficially owned by Greenhaven Associates, Inc. ("Greenhaven") is based
on a Schedule 13D dated April 20, 1992, as amended through August 8, 1994,
filed by Greenhaven with the Securities and Exchange Commission ("SEC").
Greenhaven is a corporation engaged in providing investment advisory
services and has shared investment power with respect to all of such shares
and no voting power with respect to such shares.
(3) The information set forth in the table and this footnote regarding the
Central National-Gottesman Group is based in part on a Schedule 13D dated
January 5, 1990, as amended through May 15, 1992, jointly filed with the
SEC by Central National-Gottesman, Inc. ("CNG") and other entities and
individuals having their principal offices at Three Manhattanville Road,
Purchase, NY (herein referred to as the "CNG Group"), and in part on
information included in the Greenhaven Schedule 13D amendment dated August
8, 1994. CNG is a privately owned corporation engaged in the sale of forest
products and investing in securities. CNG's stockholders include certain of
the individuals in the CNG Group and members of their families. No formal
understanding or agreement exists among the members of the CNG Group as to
the disposition or voting of any securities, including the shares of Common
Stock.
(4) The information set forth in the table and this footnote regarding Edgar
Wachenheim, III, is based on a Form 4, Statement of Changes in Beneficial
Ownership, dated August 8, 1994, filed by Mr. Wachenheim with the SEC. Mr.
Wachenheim reported direct ownership of 236,840 of such shares, indirect
ownership of 598,555 of such shares, and shared dispositive power over
1,264,692 of such shares as to which Mr. Wachenheim disclaimed any
pecuniary or direct interest.
(5) Edgar Wachenheim III and his children own Greenhaven, and Mr. Wachenheim is
a director and stockholder of CNG. Greenhaven provides investment advisory
services to members of the CNG Group as well as other, unrelated clients.
Greenhaven, CNG and Mr. Wachenheim are named as members of the CNG Group in
the Schedule 13D filed by the CNG Group. The Schedule 13D filed by
Greenhaven indicates that all of the shares shown in the table for Mr.
Wachenheim and 1,060,366 of the shares shown in the table for the CNG Group
are also included in the shares shown in the table for Greenhaven.
(6) The information set forth in the table and this footnote regarding shares
beneficially owned by Spears, Benzak, Salomon & Farrell, Inc. ("Spears
Benzak") is based in part on a Schedule 13G dated February 13, 1993, as
amended through June 7, 1994, filed by Spears Benzak with the SEC, and in
part on information provided orally to Recognition by Spears Benzak as of
October 24, 1994. The shares listed in the table include 997,313 shares
issuable upon conversion of $16,705,000 of Recognition's 7 1/4% Convertible
Subordinated Debentures Due 2011 held by Spears Benzak. Spears Benzak holds
the securities in client accounts on behalf of a variety of individuals,
groups and corporations for whom it serves as investment advisor. Spears
Benzak has no voting power and has revocable shared investment power with
respect to such securities. The table does not include 8,000 shares owned
by Mr. William G. Spears, Chairman of Spears Benzak and a director of
Recognition.
(7) The information set forth in the table and this footnote regarding Joseph L.
Harrosh is based on a Schedule 13D dated September 21, 1994, filed with the
SEC by Mr. Harrosh, a private investor.
2
<PAGE> 5
SECURITY OWNERSHIP BY MANAGEMENT
The following table sets forth certain information with respect to Common
Stock beneficially owned at January 9, 1995, by directors, nominees, the
individuals named in the Summary Compensation Table below and all directors and
executive officers of Recognition as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
---------------------------------------- ----------------------- -----------
<S> <C> <C>
Lucie J. Fjeldstad 11,000(3)(4) 0.07%
James F. Gero 34,000(3)(5) 0.22%
William C. Hittinger 17,200(3)(5) 0.11%
Gilbert H. Lamphere 61,708(3)(5)(6) 0.40%
A. A. Meitz 14,000(3)(5) 0.09%
William G. Spears 8,000(3)(7) 0.05%
Robert Vanourek 503,776(8) 3.20%
William H. Waltrip 14,000(3)(5) 0.09%
Thomas R. Frederick 101,983(9) 0.66%
Thomas A. Loose 130,319(10) 0.85%
Thomas D. Neitzel 69,774(11) 0.46%
Robert M. Swartz 121,821(12) 0.79%
All directors and executive
officers of Recognition as a
group (16 persons) 1,231,074(13) 7.53%
</TABLE>
- ---------------
(1) Unless otherwise indicated, all shares are owned directly and the owner has
sole voting and investment power.
(2) Percent of shares of Common Stock outstanding at January 9, 1995. Shares
subject to purchase pursuant to stock options exercisable at such date or
within 60 days thereafter are deemed to be outstanding for purposes of
calculating the percentage, where applicable.
(3) 4,000 of the shares owned by director Spears, 3,000 of the shares owned by
director Fjeldstad, 1,000 of the shares owned by each of directors Gero,
Lamphere, Meitz and Waltrip, and 500 of the shares owned by director
Hittinger, are subject to forfeiture pursuant to the restricted stock plan
for outside directors described below. With respect to those shares, each
director has sole voting power and no investment power until the risk of
forfeiture lapses in accordance with the terms of the plan.
(4) Includes 6,000 shares of Common Stock issuable upon exercise of options
granted under the Director Stock Option Plan described below.
(5) Includes 9,000 shares of Common Stock issuable upon exercise of options
granted under the Director Stock Option Plan described below.
(6) Includes 677 shares held for Mr. Lamphere's account in a non-Recognition
employee benefit plan, with respect to which he has shared voting and
investment power. Also includes 615 shares held in trust for his minor
children, as to which Mr. Lamphere disclaims beneficial ownership.
(7) Includes 3,000 shares of Common Stock issuable upon exercise of options
granted under the Director Stock Option Plan described below.
(8) Includes 500,000 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 2,162 shares held in Mr. Vanourek's account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(9) Includes 100,000 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,983 shares held in Mr. Frederick's
3
<PAGE> 6
account under Recognition's 401(k) plan, as to which he has sole voting
power and no investment power.
(10) Includes 125,000 shares subject to purchase pursuant to employee stock
options exercisable at such date or within 60 days thereafter, and 2,230
shares held in Mr. Loose's account under Recognition's 401(k) plan.
(11) Includes 68,000 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,773 shares held in Mr. Neitzel's account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(12) Includes 120,000 shares of Common Stock subject to purchase pursuant to
employee stock options exercisable at such date or within 60 days
thereafter. Also includes 1,821 shares held in Mr. Swartz's account under
Recognition's 401(k) plan, as to which he has sole voting power and no
investment power.
(13) Includes 16,879 shares held in their respective accounts under
Recognition's 401(k) plan with respect to which they have sole voting power
and no investment power, and 1,103,583 shares subject to purchase pursuant
to employee stock options exercisable at such date or within 60 days
thereafter.
REVOCATION OF PROXY
Any person giving a proxy has the power to revoke the same at any time
before it has been exercised by giving written notice of such revocation to the
Secretary of Recognition. In addition, any stockholder who attends the Annual
Meeting may vote in person, thereby canceling any proxy previously given by such
stockholder.
QUORUM; VOTING
The presence, in person or by proxy, of the holders of 7,622,204 shares of
Common Stock, being a majority of the outstanding shares of Common Stock
entitled to vote, is necessary to constitute a quorum at the Annual Meeting. The
stockholders entitled to vote at the Annual Meeting, present in person or
represented by proxy, have the power, by a vote of a majority of the voting
power given to all Common Stock so present or represented, to adjourn the
meeting from time to time for a period not exceeding 30 days, without notice
other than announcement at the Annual Meeting. If a quorum was present or
represented at the original meeting, or if a quorum shall be present or
represented at any such adjourned meeting, any business may be transacted which
might have been transacted at the meeting as originally notified.
Cumulative voting is permitted in the election of directors. See the
description of cumulative voting rights below. On any other matter submitted to
a vote of stockholders at the Annual Meeting or any adjournment(s) thereof, each
stockholder will be entitled to one vote for each share of Common Stock owned of
record at the record date.
4
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Recognition's Board of Directors is classified into three classes having
staggered terms of three years each. At the Annual Meeting three directors are
to be elected in Class III to serve until the annual meeting of stockholders in
1998 and until their successors have been elected or until their earlier
resignation or removal. The Board of Directors, upon the recommendation of the
Committee on Directors, has nominated Gilbert H. Lamphere, William G. Spears and
Robert Vanourek for election as directors of Recognition in Class III. The
directors elected in Class III will serve with the other directors named below
whose terms expire in later years.
Cumulative voting is permitted in the election of directors. Accordingly,
in the election of three directors for Class III, each stockholder will be
entitled to as many votes as shall equal the product of the number of shares of
Common Stock owned of record by him or her at the record date multiplied by
three, the number of directors to be elected. For example, each holder of Common
Stock may vote his or her shares for each of the three persons, or may vote on
the cumulative principle by casting three votes per share for one person or by
dividing three votes per share among the nominees as the stockholder desires.
Votes cast pursuant to the accompanying proxy will be voted "FOR" the
election of the nominees unless the giver of the proxy withholds authority to
vote for any or all of the nominees. The persons acting under the accompanying
proxy will exercise their discretion as to the manner in which the votes
represented thereby will be distributed between or among the nominees.
Should any or all of the nominees named herein become unable or unwilling
to accept nomination or election, which is not expected, it is intended that the
persons acting under the proxy will vote for the election, in their stead, of
such other person or persons as may be nominated by the Board of Directors upon
the recommendation of the Committee on Directors, or the Board may reduce the
number of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" NOMINEES LAMPHERE, SPEARS
AND VANOUREK FOR CLASS III. UNDER DELAWARE LAW AND RECOGNITION'S RESTATED
CERTIFICATE OF INCORPORATION AND BY-LAWS, DIRECTORS WILL BE ELECTED BY A
PLURALITY VOTE, AND THE THREE PERSONS RECEIVING THE GREATEST NUMBER OF VOTES
WILL BE ELECTED AS DIRECTORS OF RECOGNITION FOR CLASS III. BECAUSE DIRECTORS ARE
ELECTED BY PLURALITY VOTE, ABSTENTIONS AND BROKER NON-VOTES WILL NOT AFFECT THE
OUTCOME OF THE ELECTIONS SINCE NO PARTICULAR MINIMUM VOTE OF THE SHARES PRESENT
OR REPRESENTED AT THE MEETING AND ENTITLED TO BE VOTED IS REQUIRED.
Further information with respect to the nominees and continuing directors
is set forth below:
NOMINEES FOR CLASS III -- Term Expires 1998
Gilbert H. Lamphere, 42, became Managing Director of The Fremont Group,
Inc. of San Francisco, CA, a private investment company, in July 1994. Mr.
Lamphere was the Co-Chairman and Co-Chief Executive Officer of Noel Group, Inc.
of New York, NY, a diversified operating company, from November 1991 until June
1994. From 1985 to 1989, Mr. Lamphere was Chairman of the Executive Committee of
The Prospect Group, Inc. of New York, NY, a leveraged buyout and venture capital
operating company. In 1989, he was named President of Prospect, and became
Chairman and Chief Executive Officer of Prospect in 1990. Mr. Lamphere became a
director and Chairman of the Board of Recognition in 1990. He is also Chairman
of the Board of Illinois Central Corporation, Belding Heminway Company and The
Prospect Group, Inc. and a director of Illinois Central Railroad Company and The
Noel Group, Inc.
William G. Spears, 56, is the Chairman of Spears, Benzak, Salomon &
Farrell, Inc., an investment management firm. Mr. Spears has held that position
for over twenty years. Mr. Spears became a director of Recognition in October
1994. He is also a director of Alcide Corporation, Osborn Communications
Corporation and United HealthCare Corp.
Robert Vanourek, 52, became President and Chief Executive Officer of
Recognition in 1991. Prior thereto, he served as a Co-Chief Executive Officer of
the company since he joined Recognition in 1989. From 1985 until 1989 he was
Group Vice President of the Mailing Systems Division of Pitney Bowes Inc. in
5
<PAGE> 8
Stamford, CT. From 1981 to 1985 he was President of Monarch Marking Systems,
Inc., Dayton, OH, a subsidiary of Pitney Bowes. Mr. Vanourek became a director
of Recognition in 1989.
CONTINUING DIRECTORS IN CLASS I -- Term Expires 1996
James F. Gero, 50, became the Chairman of the Board and Chief Executive
Officer of Sierra Technologies, Inc., a Buffalo, NY, manufacturer of various
electronic equipment for avionics, electronic warfare and flight inspection and
other high technology hardware and software systems, in 1992. From 1989 to 1992,
Mr. Gero was a private investor. From 1984 until 1989, Mr. Gero was President
and Chief Executive Officer of Varo, Inc., a Dallas defense electronics
manufacturer, and in 1987 he also became Chairman of Varo. Mr. Gero became a
director of Recognition in 1990. He is also a director of American Medical
Electronics, Inc., D F & R, Inc., Drew Industries Inc., Leslie Building
Products, Inc. and SPAR Aerospace Ltd.
William H. Waltrip, 57, became Chairman of the Board and Chief Executive
Officer of Technology Solutions Company, Chicago, IL, a technology consulting
practice, in 1993. Mr. Waltrip was Chairman and Chief Executive Officer of
Biggers Brothers, Inc. of Charlotte, NC, a food service distribution company,
from 1991 to 1993. He also served as Vice Chairman of Unifax, Inc. of
Wilkes-Barre, PA, the parent company of Biggers Brothers, from 1991 until 1993.
Mr. Waltrip was a self-employed private management consultant from 1988 to 1991.
From 1985 until 1988 he was President and Chief Operating Officer of IU
International, Inc., Philadelphia, PA, a diversified services company. Mr.
Waltrip became a director of Recognition in 1990. Mr. Waltrip is also a director
of Thomas & Betts Corporation, Bausch & Lomb, Inc. and Teachers Insurance and
Annuity Association.
CONTINUING DIRECTORS IN CLASS II -- Term Expires 1997
Lucie J. Fjeldstad, 50, is President of Fjeldstad International, New
Canaan, CT, a management and strategic consulting firm for the new multi-media
world. Mrs. Fjeldstad held a number of positions with International Business
Machines Corporation, White Plains, NY, from 1968 to 1993 including Vice
President and General Manager of MultiMedia in 1992 and 1993, Vice President and
President of the MultiMedia and Education Division in 1990 and 1991, Vice
President and President of the Academic, General and Public Sector Division in
1990 and Vice President and General Manager of the General/Public/Academic
Section from 1988 to 1990. She became a director of Recognition in 1993 and is
also a director of PPG Industries, Inc., KeyCorp and Entergy Corporation.
William C. Hittinger, 72, serves as a director of several public and
private companies, including Bethlehem Steel Corp., BioTechnica International,
Inc. and UNC, Inc. He retired as Executive Vice President of RCA Corporation in
1986. Mr. Hittinger has been a director of Recognition since 1979.
A. A. Meitz, 57, is Of Counsel to Booz-Allen & Hamilton, Inc., an
international management and technology consulting firm. He has been with that
firm for more than 25 years and was a Senior Vice President until he elected
partial retirement in August 1993. Mr. Meitz also previously served as a member
of the Booz-Allen Board of Directors and Chairman of its Audit Committee. The
majority of his work has focused on issues of business strategy, marketing and
organization design. Mr. Meitz became a director of Recognition in 1990. He is
also a director of Associated Materials Incorporated and Northern Trust Bank of
Texas, a subsidiary of Northern Trust Bank of Illinois.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During the fiscal year ended October 31, 1994, the Board of Directors of
Recognition had an Executive Committee, an Audit Committee, a Compensation
Committee, a Committee on Directors and a Corporate Responsibility Committee.
The Executive Committee's function is to act for the Board of Directors, to
the extent permitted by law, in situations in which Board action is required and
it is not practicable to convene a meeting of the full Board.
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<PAGE> 9
The Executive Committee did not hold any meetings during fiscal year 1994.
Current members of the Committee are Gilbert H. Lamphere, Chairman, A. A. Meitz
and Robert Vanourek.
The Audit Committee's functions include (i) reviewing and approving the
scope and general extent of the annual audit, the audit procedures utilized and
the basis for determining the compensation to be paid to the independent
accountants, (ii) recommending to the Board of Directors the engagement of the
independent accountants for the ensuing year, (iii) reviewing and reporting to
the Board concerning the results of the annual audit conducted by the
independent accountants, (iv) reviewing and reporting to the Board concerning
Recognition's policies and procedures relating to internal auditing, accounting
and financial controls and (v) inquiring of appropriate personnel of Recognition
and of the independent accountants as to any deviations from or failures to
fulfill the Corporation's responsibilities relating to accounting policies,
internal controls and financial reporting practices. The Committee held two
meetings during the fiscal year. The current members of the Audit Committee are
A. A. Meitz, Chairman, Lucie J. Fjeldstad and William C. Hittinger.
The Compensation Committee's responsibilities are described below under
"Report of the Compensation Committee on Executive Compensation." The Committee
held five meetings during 1994. Current members of the Compensation Committee
are William H. Waltrip, Chairman, James F. Gero and Gilbert H. Lamphere.
The responsibilities of the Committee on Directors include identifying and
recommending to the Board of Directors suitable candidates for positions as
Board members and reviewing and making recommendations regarding the structure,
size and composition of the Board and its committees, the compensation of
directors and the performance of incumbent directors. The Committee on Directors
will consider stockholder suggestions of persons for consideration as candidates
for nomination for election as members of the Board if the suggestions are
submitted in accordance with Recognition's By-Law provisions regarding
stockholder nominations. The By-Laws require that written notice of the
nomination must be received by the Secretary of Recognition at the principal
executive offices not less than 50 days nor more than 75 days prior to the
meeting or, if Recognition gives less than 60 days notice of the meeting date,
then not later than the 15th day after the notice of the meeting date was given.
The notice must include the name, qualifications and biographical data on the
stockholder's proposed candidate. A copy of the applicable By-Law is available
from the Secretary upon request of any stockholder. The Committee held two
meetings during the 1994 fiscal year. Current members of the Committee are James
F. Gero, Chairman, William C. Hittinger and Gilbert H. Lamphere.
The Corporate Responsibility Committee's functions include oversight,
counseling and advice to management in the development and implementation of
policies and practices in the areas of ethics, charitable contributions,
environmental matters, employee development, and relations with the company's
other stakeholders such as customers, business partners and local communities.
The Committee held two meetings during the 1994 fiscal year. Current members of
the Corporate Responsibility Committee are Lucie J. Fjeldstad, Chair, Robert
Vanourek and William H. Waltrip.
The Board of Directors of Recognition held eight meetings during the fiscal
year. Each incumbent director attended during the fiscal year at least 75% of
the aggregate of (i) the total number of meetings of the Board (held during the
period the director served) and (ii) the total number of meetings held by all
committees of the Board on which the director served (during the periods the
director served).
COMPENSATION OF DIRECTORS
RETAINER
Recognition has a policy of paying outside directors an annual retainer of
$31,500, payable quarterly in arrears, in lieu of all meeting fees and monthly
retainers.
RESTRICTED STOCK PLAN
Recognition has a plan providing for the grant of restricted stock to
outside directors as an additional retainer. The plan was adopted by resolution
of the Board of Directors on September 24, 1987, as amended by
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<PAGE> 10
resolutions adopted on November 8, 1990, January 24, 1991, May 30, 1991 and
November 1, 1991. Each outside director as of November 1990 originally was
granted 2,500 shares of Recognition Common Stock, subject to restrictions. At
the time of issuance of the shares, the director received full voting and
dividend rights, but the stock was non-transferable and subject to forfeiture.
On each anniversary of the date of grant, twenty percent or 500 of those shares
become nonforfeitable and transferable. However, if a director ceases for any
reason to be an outside director prior to the end of the fifth year after grant
of the shares, any shares still subject to forfeiture will revert to
Recognition. Effective November 1, 1991, an additional 2,500 shares of
Recognition Common Stock were granted to each incumbent outside director under
the plan. Twenty percent or 500 of those shares immediately vested and are
transferable and an additional twenty percent vest on each anniversary of the
date of grant for the next four years, so long as the director continues to be
an outside director. Outside directors first elected after November 1, 1991, are
automatically granted 5,000 shares upon election, which shares vest twenty
percent on the date of grant and twenty percent on each anniversary of the date
of grant for a period of four years. The shares granted under the plan are drawn
from the Common Stock held in Recognition's treasury, and the maximum number of
shares that may be granted pursuant to the plan is 75,000 shares. All shares
granted pursuant to the plan will become nonforfeitable and transferable upon
the occurrence of a "change in control" as defined in the plan.
STOCK OPTION PLAN
The Director Stock Option Plan was approved by the stockholders on March
11, 1993. Under the terms of the plan, each outside director automatically
receives a one-time grant of a non-qualified option to purchase 15,000 shares of
Common Stock. The exercise price per share is the closing price of the Common
Stock on the date of grant as reported on the New York Stock Exchange Composite
Tape. Each option granted under the plan becomes exercisable in five cumulative
annual installments, each of twenty percent of the number of shares covered,
beginning on the date of grant. In the event of a "change of control" as defined
in the plan, all previously granted options become fully exercisable. A total of
105,000 shares of Recognition's Common Stock (subject to adjustment in certain
events) are reserved for issuance under the plan. The plan terminates on
December 10, 2002 if not sooner terminated by the Board.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding all executive
officers of Recognition as of January 9, 1995:
<TABLE>
<CAPTION>
SERVED AS AN
NAME AGE OFFICE/POSITION OFFICER SINCE
- --------------------- --- --------------------------------- -------------------
<S> <C> <C> <C>
Robert Vanourek 52 President and Chief Executive October 1989
Officer; Director
Dennis R. Constantine 53 Vice President; President, OEM & September 1993
Technology Division
Thomas R. Frederick 38 Vice President; President, April 1990
Software Division
Thomas E. Hoefert 42 Vice President, Chief Financial January 1990
Officer and Controller
Larry H. Lattig 47 Vice President and Treasurer April 1992
Carol S. Lyon 46 Vice President, Secretary and February 1990
Associate General Counsel
Thomas D. Neitzel 51 Vice President; President, June 1990
Service Division
Robert M. Swartz 42 Senior Vice President; President, November 1990
Worldwide Systems Group
</TABLE>
Each officer serves until a successor has been chosen or until the
officer's earlier resignation or removal. There is no family relationship among
any of the above executive officers or the directors of Recognition. A
8
<PAGE> 11
summary of the employment history of Mr. Vanourek appears above under the
heading "Election of Directors -- Nominees for Class III". Officers Frederick,
Hoefert, Lattig, Lyon and Neitzel have been employed by Recognition for more
than five years. Mr. Hoefert became Chief Financial Officer in 1994. The
following is a description of the business experience of the other executives:
Dennis R. Constantine joined Recognition in 1992 as Executive Vice
President of the Systems Division and in 1993 he was named President of the
Systems Division. In September 1993, Mr. Constantine was also elected a Vice
President of Recognition. In 1994, Mr. Constantine was named President of the
OEM & Technology Division of the Worldwide Systems Group. Mr. Constantine was
President of Lundy Financial Systems ("Lundy"), Charlotte, NC, from 1990 until
Recognition acquired Lundy's assets in 1992. Lundy, a Division of
TransTechnology Corporation, was a manufacturer of banking and remittance
processing equipment. From 1987 to 1990, Mr. Constantine was President of
TransTechnology's Federal Laboratories Division, a developer and manufacturer of
law enforcement products.
Robert M. Swartz came to Recognition in October 1990 and in November 1990
was elected Vice President, Chief Financial Officer and Treasurer. He was named
Senior Vice President and Chief Financial Officer in 1992. In 1994, Mr. Swartz's
position changed to Senior Vice President and President of the Worldwide Systems
Group. In addition, Mr. Swartz previously had responsibility for the human
resources function. Prior to joining Recognition, Mr. Swartz was employed by
Nashua Corporation of Nashua, NH, a supplier of office supplies and computer
products, as Corporate Controller/Chief Accounting Officer from 1985 to 1988 and
was General Manager of its Graphic Products Division from 1988 to 1990.
EXECUTIVE COMPENSATION
The following table sets forth cash and certain other compensation paid or
accrued by Recognition and its subsidiaries for Recognition's chief executive
officer and its four other most highly compensated executive officers
(collectively, the "Named Executives") for services in all capacities for the
last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) OPTIONS(#) ($)
- -------------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek 1994 $ 390,115 $ -0- * 390,650 $ 9,132(1)
President, Chief Executive 1993 $ 304,838 $194,250 * -0- $ 14,348
Officer and Director 1992 $ 265,000 $210,000 * -0- *
Thomas R. Frederick 1994 $ 225,009 $ -0- $146,138(2) -0- $ 6,419(3)
Vice President and President, 1993 $ 194,836 $111,000 * 100,000 $ 10,384
Software Division 1992 $ 170,000 $126,000 * -0- *
Thomas A. Loose(4) 1994 $ 190,007 $ -0- * -0- $ 4,527(5)
Senior Vice President, 1993 $ 184,836 $ 88,800 * -0- $ 9,254
General Counsel and Director 1992 $ 180,000 $105,000 * -0- *
Thomas D. Neitzel 1994 $ 180,007 $ -0- * 60,000 $ 7,535(6)
Vice President and President, 1993 $ 154,836 $ 77,700 * 25,000 $ 10,663
Service Division 1992 $ 127,000 $ 70,000 * -0- *
Robert M. Swartz 1994 $ 250,009 $ -0- * 100,000 $ 7,632(7)
Senior Vice President 1993 $ 194,836 $ 99,900 * 100,000 $ 11,384
and President, 1992 $ 169,167 $ 98,000 * -0- *
Worldwide Systems Group
(footnotes on following page)
</TABLE>
9
<PAGE> 12
- ---------------
* Other Annual Compensation and All Other Compensation amounts are not
required to be reported for fiscal year 1992. Perquisites and other
personal benefit amounts are not required to be reported in Other Annual
Compensation for fiscal years 1993 and 1994 if not exceeding the lesser of
$50,000 or 10% of the executive's annual salary plus bonus.
(1) Represents $4,500 for split dollar life insurance premiums and $4,632 for
employer contribution to his account in the 401(k) plan.
(2) Represents $76,144 for reimbursement of relocation expenses, $62,194 for
reimbursement of taxes on relocation expense reimbursement and $7,800 for
automobile usage.
(3) Represents $2,000 for split dollar life insurance premiums and $4,419 for
employer contribution to his account in the 401(k) plan.
(4) As part of a transition plan leading to his retirement in June 1995, Mr.
Loose resigned as an executive officer and as a director of Recognition in
December 1994.
(5) Represents $795 imputed interest on Mr. Loose's interest-free loan from
Recognition under the company's former education loan program and $3,732
for employer contribution to his account in the 401(k) plan.
(6) Represents $4,000 for split dollar life insurance premiums and $3,535 for
employer contribution to his account in the 401(k) plan.
(7) Represents $3,000 for split dollar life insurance premiums and $4,632 for
employer contribution to his account in the 401(k) plan.
The following table sets forth information concerning individual grants of
stock options made during the last completed fiscal year to each of the Named
Executives. No stock appreciation rights were granted to the Named Executives
during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------- REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OPTION TERM(1)
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek 390,650(2) 40% $ 12.875 03/02/04 $3,163,100 $8,015,917
Thomas R. Frederick -0- -- -- -- -- --
Thomas A. Loose -0- -- -- -- -- --
Thomas D. Neitzel 35,000(2) 4% $ 16.375 12/04/03 $ 360,310 $ 913,026
25,000(3) 3% $ 7.125 10/04/04 $ 112,022 $ 283,885
Robert M. Swartz 100,000(4) 10% $ 8.500 06/07/04 $ 534,560 $1,354,681
</TABLE>
- ---------------
(1) These amounts represent assumed rates of appreciation in market value from
the date of grant until the end of the option term at the rates set by the
SEC and therefore are not intended to forecast possible future
appreciation, if any, in Recognition's stock price. Recognition did not use
an alternative formula for a grant date valuation, as it is not aware of
any formula which will determine with reasonable accuracy a present value
based on future unknown or volatile factors.
(2) Options granted to Mr. Vanourek on March 3, 1994, and to Mr. Neitzel on
December 5, 1993, under Recognition's 1990 Corporate Incentive Plan. Such
options become exercisable as follows: (i) with respect to 10% of the total
number of shares subject to the option if, after Recognition's annual
earnings release for fiscal year 1994, the "Average Price" (as defined
below) of Recognition's Common Stock is at least $20.00 per share; (ii)
with respect to 20% of the total number of shares subject to the option if,
after Recognition's annual earnings release for fiscal year 1995, the
Average Price of the Common Stock is at least $25.00 per share; (iii) with
respect to 30% of the total number of shares subject to the option if,
after
10
<PAGE> 13
Recognition's annual earnings release for fiscal year 1996, the Average
Price of the Common Stock is at least $30.00 per share; and (iv) with
respect to the remaining 40% of the total number of shares subject to the
option on December 5, 1997; provided, however, that any shares which do not
become exercisable in any year because the Average Price target for that
year was not met shall become exercisable in any subsequent year in which
the Average Price target for such subsequent year is met; and provided
further that all shares not previously exercisable shall become exercisable
on December 5, 1997. The term "Average Price" means the weighted average of
the closing prices at which the first 200,000 shares of Recognition's
Common Stock are traded, as reported on the New York Stock Exchange
Composite Tape, beginning with the first such trade on the trading day
immediately following Recognition's annual earnings release. For purposes
of clauses (i), (ii) and (iii) above, the date of exercisability will be
the date Recognition determines the applicable Average Price target has
been met.
(3) Options granted on October 5, 1994, under Recognition's 1990 Corporate
Incentive Plan. Such options become exercisable as follows: 25% upon the
expiration of 12 months following the date of grant, with an additional 25%
becoming exercisable at the end of each of the three subsequent 12-month
periods.
(4) Options granted on June 8, 1994, under Recognition's 1990 Corporate
Incentive Plan. Such options become exercisable as follows: 20% upon the
expiration of 12 months following the date of grant, with an additional 20%
becoming exercisable at the end of each of the four subsequent 12-month
periods.
The following table sets forth information concerning each exercise of
stock options during the last completed fiscal year by each Named Executive and
the aggregate fiscal year-end value of unexercised options held by each Named
Executive.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FY-END (#) AT FY-END ($)(1)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert Vanourek -0- -0- 500,000 390,650 $ 687,500 -0-
Thomas R. Frederick -0- -0- 91,666 108,334 $ 154,040 $18,710
Thomas A. Loose -0- -0- 122,913 2,087 $ 93,224 $ 4,685
Thomas D. Neitzel -0- -0- 56,500 96,500 $ 119,608 $32,068
Robert M. Swartz -0- -0- 98,334 201,666 $ 176,510 $49,290
</TABLE>
- ---------------
(1) Value reflects the $7.375 per share market value of the underlying shares on
October 31, 1994, minus the exercise price.
DEFINED BENEFIT PLAN
Recognition has an Executive Benefit Plan under which benefits may be paid
to certain executive officers and their designated beneficiaries. The
participants in the plan are selected from time to time by the Compensation
Committee of the Board of Directors. The plan provides for the payment of
benefits upon death, retirement at age 65, or retirement after age 55 but prior
to reaching age 65. In case of retirement, a participating executive must have
been an employee of Recognition for at least five years. The benefit payment is
a monthly amount which is designated for each participant from time to time by
the Committee. The monthly benefit for Messrs. Vanourek, Frederick, Neitzel and
Swartz is an amount equal to 40% of the sum of (i) the executive's monthly base
salary in effect at the date of retirement, death or other termination of
employment plus (ii) one twelfth of his targeted bonus in effect at such date,
but not less than $16,500 for Mr. Vanourek and not less than $6,000 for each of
Messrs. Frederick, Neitzel and Swartz.
Upon death or retirement at age 65, a participant or the beneficiary
receives the designated monthly benefit for 20 years. If a participant satisfies
certain restrictions on early retirement, the participant becomes entitled to
receive for 20 years a reduced monthly benefit based upon the ratio of the
number of years the participant was employed to the number of years the
participant would have been employed had the
11
<PAGE> 14
participant remained an employee until age 65. Following any other termination
of employment without cause, a participant or the beneficiary becomes entitled
to receive, upon attaining the age of 65 or earlier death, a percentage of the
monthly benefit based upon the following table:
<TABLE>
<CAPTION>
PERCENTAGE
YEARS OF PLAN SERVICE CREDIT OF BENEFIT
------------------------------------------------------------------ ----------
<S> <C>
less than 3 years................................................. 0%
3 years but less than 5 years..................................... 25%
5 years but less than 7 years..................................... 50%
7 years but less than 10 years.................................... 75%
10 years or more.................................................. 100%
</TABLE>
Mr. Vanourek has five years of service credit in the plan, while Messrs.
Frederick, Neitzel and Swartz each have four years of service credit. If each of
these executives were to continue as an employee of Recognition until retirement
at age 65, assuming no increase in their respective monthly benefit amounts,
their estimated annual benefits payable under the plan would be $234,000 to Mr.
Vanourek, $140,000 to Mr. Frederick, $104,000 to Mr. Neitzel and $160,000 to Mr.
Swartz. Mr. Loose is receiving early retirement benefits in the amount of $9,476
per month under the plan.
The plan also provides for monthly disability payments in an amount
designated by the Committee if a participant is disabled for a period in excess
of six months. So long as the participant remains disabled, the participant is
entitled to receive a designated monthly disability payment until the
participant reaches age 65 or earlier death, at which time the participant or
beneficiary becomes entitled to receive the benefit payment for the 20-year
period. Monthly disability amounts currently in effect are $5,000 for Mr.
Vanourek and $3,362 for each of Messrs. Frederick, Neitzel and Swartz.
Except after the occurrence of an "Event of Nonforfeitability" (as defined
in the plan), the plan may be terminated by the Board of Directors at any time,
in its absolute discretion. Any such termination would terminate all rights of
the participants except as to participants and beneficiaries of participants who
are being paid or have become entitled to benefits under the plan at the time of
such termination. In addition, the Committee may, at any time in its absolute
discretion, terminate the participation of any executive who is still an
employee; provided that the Committee may not terminate such participation after
an Event of Nonforfeitability occurs.
"Event of Nonforfeitability" includes significant changes in stock
ownership or Board membership, and certain corporate reorganizations. Upon the
occurrence of an Event of Nonforfeitability, each participant's designated
benefit becomes 100% vested. If a participant's employment is terminated within
24 months following the occurrence of an Event of Nonforfeitability for any
reason other than for cause (as defined in the plan), death, disability or
voluntary resignation (as defined in the plan), the participant becomes entitled
to receive the present value of the benefit paid in a lump sum. If a participant
or a beneficiary suffers a financial hardship and is in need of funds to pay
taxes or medical expenses and does not have other resources to meet such needs,
the Committee may in its discretion pay in a lump sum up to 50% of the amount of
the participant's or beneficiary's benefit to meet such needs.
Benefits under the plan are payable from the general assets of Recognition
and are not subject to any offset amount. Recognition has insured a portion of
its liability by purchasing insurance contracts on the participating executives.
12
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE
The compensation program for executive officers of Recognition is
administered by the Compensation Committee of the Board of Directors, which is
comprised of at least three directors who are not employees of Recognition. The
responsibilities of the Compensation Committee include (i) conducting periodic
reviews of all direct and indirect compensation and other benefits for
Recognition's executive officers, (ii) establishing annual cash compensation for
the executive officers, and (iii) administering various compensation plans for
Recognition's executive officers and key employees including the grant of stock
options under employee option plans.
COMPENSATION PHILOSOPHY
Environment. Recognition operates in a dynamic and challenging industry
sector. Recognition competes in the computer/information technology/electronics
industry as a high technology company. This industry is regarded as one of the
most demanding and one in which consistent success is difficult to achieve.
Technology and distribution methods are constantly changing. Competition is
global both from companies many times Recognition's size and from much smaller
and entrepreneurial companies. Executive mobility is high within the industry.
In addition, Recognition is emerging from a turnaround situation.
Expectations. Given this environment, the expectations for performance of
Recognition's executive officers are high. Individuals are expected to be
outstanding performers in their areas of responsibility and their workload is
demanding. Yet a premium is placed on team and corporate performance as well as
superior individual performance. Significant contribution is expected from each
officer in advancing the cultural transformation and evolution of the company
through active use and encouragement of the company's shared beliefs and values.
Compensation Policies. Recognition's compensation policies for all
employees, including its executive officers, are designed to attract and retain
highly qualified contributors and to reward excellence while encouraging
teamwork and long term commitment to the company. Perquisites are minimal, with
no company paid clubs, first class travel, or financial planning services
provided for executives. Given minimal perquisites, the high risk, challenging
environment, complex mandate and demanding individual/team workload, total
compensation for successful executive officers who meet the performance
standards should be in the 60th to 90th percentile range of peer companies,
including very significant equity incentives to link officer performance to
stockholder value and wealth creation.
The Compensation Committee reviews benchmark data on total compensation
packages of executives at competitive hardware and software companies in the
electronics and computer industries and reviews recommendations from the chief
executive officer for base salaries and targeted bonuses for executive officers
(other than the chief executive officer). The Committee then approves base
salaries and targeted bonuses for all executive officers (including the chief
executive officer) for the ensuing year, based on such competitive information
and recommendations as well as each individual's overall compensation package,
evaluation of the individual's and the company's past and expected future
performance and the level of the individual's responsibility. Executives with
higher levels of responsibility generally have a greater percentage of cash
compensation tied to company performance.
For fiscal year 1994, cash compensation from base salary for executive
officers as a group was targeted to be at the 60th percentile of the comparison
industry group. Targeted bonus for fiscal year 1994 was 33% of total cash
compensation for the chief executive officer and ranged from 31% to 36% of the
total cash compensation package for the other four Named Executives. Bonuses are
earned based on the level of achievement of performance goals established for
each fiscal year by the Committee. For fiscal year 1994 and the three preceding
fiscal years, 25% of the bonus was allocated to achievement of each of the
objective performance goals established by the Committee for (i) net income,
(ii) orders, (iii) cash balance and
13
<PAGE> 16
(iv) new product milestones. Performance goals were partially met in orders and
new product milestones but, due to the company's financial performance, no
bonuses were paid to executive officers for fiscal year 1994.
Retention of its executive officers is one of the highest priorities of
Recognition's compensation philosophy and is addressed through a variety of
methods: stock options which vest over a period of years, stock options which
vest upon achievement of performance goals and Recognition's Executive Benefit
Plan. Stock options constitute a significant portion of compensation for
executive officers, including the chief executive officer, as is the custom in
the industry. The Compensation Committee believes that use of stock options more
closely aligns the officers' interests with those of Recognition's stockholders.
Virtually all stock options are granted at the prevailing market price on the
date of grant and vest in equal amounts over a period of years. Levels of grants
for executive officers range from nominal amounts to multiples of their annual
target compensation levels, depending on the circumstances. Grants of stock
options generally are based upon the level of the executive's position with
Recognition, the amount of options previously granted or currently held by the
executive and by other Recognition executives at similar levels of
responsibility, and an evaluation of the executive's ability to contribute to
the success of the company.
CHIEF EXECUTIVE OFFICER COMPENSATION
A base salary of $390,000 and targeted bonus of $195,000 were established
by the Compensation Committee for Mr. Vanourek for fiscal year 1994. This was
based on the survey of competitive compensation data described above, Mr.
Vanourek's overall compensation package and the Compensation Committee's
assessment of his past performance and its expectations as to his future
contributions in leading Recognition. Individual performance criteria evaluated
by the Committee included managerial effectiveness, leadership and executive
development. The 1994 compensation represented a 28% increase in base salary and
an 11% increase in targeted bonus over fiscal year 1993. Due to the company's
financial performance, no bonus was paid to Mr. Vanourek for fiscal year 1994.
INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally precludes a public corporation from taking a deduction in any
fiscal year for compensation in excess of $1 million for its chief executive
officer or any of its four other highest-paid officers. Certain
performance-based compensation, however, is specifically exempt from the
deduction limit. This limit was enacted in 1993 and became applicable to
Recognition beginning November 1, 1994. The Committee has reviewed the
implications of Section 162(m) and believes that it will have no impact on
Recognition during fiscal year 1995 or for several years thereafter, absent very
unusual circumstances.
In designing new compensation programs, the Committee's strategy will be to
take into account the potential effects of Section 162(m) and to qualify
compensation paid to its executive officers for deductibility for federal income
tax purposes to the extent feasible. However, to maximize its flexibility with
regard to executive compensation arrangements, the Committee reserves the right
to take actions which it deems to be in the best interests of the company and
its stockholders but which may not always qualify for tax deductibility under
Section 162(m) or other sections of the Code.
COMPENSATION COMMITTEE
WILLIAM H. WALTRIP, Chairman
JAMES F. GERO
GILBERT H. LAMPHERE
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the total stockholder return on Recognition's
Common Stock during the five years ended October 31, 1994, to the total return
on the Standard & Poor's 500 Stock Index and the Standard and Poor's High
Technology Composite Index, assuming an investment of $100 in each of the above
at their closing prices on October 31, 1989, and assuming reinvestment of all
dividends, if any. The performance shown in the graph is not necessarily
indicative of future performance.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Recognition International Inc. $100 $75 $112 $191 $257 $112
S & P 500 $100 $93 $124 $136 $156 $162
S & P High Tech Composite $100 $88 $111 $112 $139 $168
</TABLE>
AGREEMENTS WITH EXECUTIVE OFFICERS
Recognition has employment agreements with Messrs. Vanourek, Frederick,
Neitzel and Swartz to employ each of them in an executive capacity for an
unspecified term. Each agreement provides that the executive is entitled to
receive an annual base salary and to participate in the Executive Bonus Plan
with an annual targeted bonus, subject to annual review. Recognition has the
right to terminate the executive's employment at any time, with or without
cause. However, if employment is terminated by Recognition for any reason other
than cause or disability, or is terminated by the executive in certain
circumstances, then Recognition must pay a lump sum severance payment equal to
the sum of the executive's annual base salary and targeted bonus in effect at
the time in the case of Messrs. Frederick and Neitzel, and twice that sum in the
case of Messrs. Vanourek and Swartz. The total annual base salary and targeted
bonus currently in effect is $585,000 for Mr. Vanourek, $350,000 for Mr.
Frederick, $260,000 for Mr. Neitzel and $400,000 for Mr. Swartz. The agreements
also contain a one year covenant not to compete following termination of
employment. Mr. Frederick also has another incentive arrangement under which he
is entitled to receive an incentive payment in certain circumstances.
The agreements for Messrs. Vanourek, Neitzel and Swartz also provide that,
in the event of termination of the executive's employment with Recognition prior
to age 65 (other than for cause, disability, death or voluntary resignation)
within six months prior to (in the case of Messrs. Vanourek and Swartz) or
within 36 months after a "change in control" of Recognition (as defined in the
agreement), the executive will receive a lump sum payment in an amount which,
when added to all other "parachute payments" (as defined in Section 280G of the
Code), does not exceed approximately three times the executive's average annual
compensation for the preceding five calendar years. The agreement also provides
for immediate exercisability
15
<PAGE> 18
of all of the executive's stock options upon such a termination of employment
following the occurrence of a change in control and permits exercise of all his
non-incentive stock options during a period of 24 months after such termination.
Mr. Loose resigned as Senior Vice President and General Counsel and as a
director of Recognition in December 1994 as part of a transition plan leading to
his eventual retirement from the company. Under his transition agreement, Mr.
Loose will continue to serve as "of counsel" to Recognition until June 15, 1996.
During that time, he is entitled to receive a monthly salary of $15,278 and
other officer benefits but is not entitled to participate in the Executive Bonus
Plan. The Compensation Committee consented to Mr. Loose's receipt of early
retirement benefits under the Executive Benefit Plan described above. He is
entitled to receive $9,476 per month over a 20 year period which began in
December 1994. Mr. Loose is 62 years of age and is 100% vested under the Plan.
In addition, the Compensation Committee amended the exercisability of his stock
options so that each outstanding option, to the extent exercisable at the date
of termination of his employment, would be exercisable at any time prior to the
expiration date of the option or until October 31, 1997, whichever is the
shorter period. Under the transition agreement, Mr. Loose's prior parachute
agreement dated May 10, 1988 was terminated and, in lieu thereof, in the event
of a sale of substantially all of the assets of Recognition, a merger or
consolidation in which Recognition is not the surviving entity, or the
acquisition of 50% or more of Recognition's stock by one or more related
parties, prior to June 16, 1996, Mr. Loose will be entitled to receive, in lieu
of future monthly salary, a lump sum payment of either $550,000 or $367,000,
depending on the date the event occurs. The agreement also contains a one year
covenant not to compete following termination of employment.
Recognition has entered into agreements with all of the Named Executives
which provide for the reduction of the amount of payments and/or benefits
otherwise due to each executive upon termination of employment after a change in
control if, under Section 4999 of the Code, such reduction would result in a
greater amount of payments and/or benefits to the executive, on an after-tax
basis, than would have been received without the reduction.
OTHER MATTERS
STOCKHOLDER PROPOSALS
The By-Laws of Recognition require stockholders who wish to make proposals
or nominate directors at an annual meeting to give written notice to the
Secretary of Recognition at its principal executive offices not less than 50
days nor more than 75 days prior to the meeting or, if Recognition gives less
than 60 days notice of the date of the meeting, then not later than the 15th day
after the notice of the date of the meeting was given. Accordingly, the time has
expired for stockholder proposals or nominations for directors to be considered
at the Annual Meeting.
In order for stockholder proposals to be included in Recognition's proxy
statement and form of proxy relating to the annual meeting of stockholders to be
held in 1996, such proposals must be received by Recognition by September 22,
1995. Any such proposal must also comply with the requirements of the SEC's
proxy solicitation rules.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to Recognition during the fiscal year ended October 31, 1994, Forms 5 and
amendments thereto furnished to Recognition with respect to such fiscal year,
and written representations that no Forms 5 were required, Recognition believes
that all reports required by Section 16(a) of the Securities Exchange Act of
1934 applicable to its directors, executive officers and greater than ten
percent stockholders were timely filed in such fiscal year and prior fiscal
years except that executive officer Thomas D. Neitzel filed a Form 5 on December
14, 1993, which due to clerical error did not reflect the expiration of a stock
option on March 8, 1993. Mr. Neitzel filed an amended Form 5 on May 31, 1994,
which corrected the error.
16
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MANNER OF SOLICITATION
All costs relating to this proxy statement, the form of proxy and the
Annual Meeting will be borne by Recognition. Recognition will request banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to
forward solicitation material to the beneficial owners of Common Stock held of
record by such persons and will reimburse the reasonable forwarding expense
incurred by such record owners. Solicitations of proxies may be made in person
or by mail, telephone, telegram, facsimile or otherwise by directors, officers
and regular employees of Recognition who will receive no additional compensation
for such service. To assist in the solicitation of proxies, Recognition has
retained Corporate Investor Communications, Inc., 111 Commerce Road, Carlstadt,
New Jersey 07072, at an estimated fee of $5,000 plus reimbursement of expenses
and disbursements.
INDEPENDENT ACCOUNTANTS
Recognition has selected Price Waterhouse as the independent accountants to
audit Recognition's financial statements for the fiscal year ending October 31,
1995. Price Waterhouse has continuously served as the independent accountants of
Recognition since its organization. Recognition has been advised that
representatives of Price Waterhouse will be present at the Annual Meeting and
available during the Annual Meeting to respond to appropriate questions. Such
representatives will have an opportunity to make a statement at the Annual
Meeting if they desire to do so.
MISCELLANEOUS
Management knows of no matters to be presented for consideration at the
meeting other than the election of directors. If, however, other matters
properly come before the meeting or any adjournment(s) thereof, it is intended
that the persons acting under the enclosed proxy will vote such proxy in
accordance with their judgment on any such matters. The persons acting under the
enclosed proxy may, if it is deemed advisable, vote such proxy to adjourn the
meeting from time to time.
By Order of the Board of Directors
CAROL S. LYON,
Vice President and Secretary
Dallas, Texas
January 18, 1995
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RECOGNITION INTERNATIONAL INC.
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 9, 1995
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gilbert H. Lamphere and Robert Vanourek,
and each of them, as Proxies, each with the power to appoint his substitute and
to revoke such appointment, and hereby authorizes each of them, for and in the
name, place and stead of the undersigned, to represent and to vote (acting by
majority or, if only one be present, then by that one alone) all the shares of
Common Stock of Recognition International Inc. held of record by the undersigned
on January 9, 1995 at the annual meeting of stockholders to be held March 9,
1995, or any adjournment(s) thereof, and especially to vote as designated on the
reverse side.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted for the election of all of the nominees listed in Proposal No. 1.
Shares authorized hereby to be voted in the election of directors may, in the
discretion of the Proxies, be voted cumulatively.
SEE REVERSE SIDE
X Please mark votes as in this example.
1. ELECTION OF DIRECTORS:
Nominees: GILBERT H. LAMPHERE, WILLIAM G. SPEARS and ROBERT VANOUREK
FOR / / WITHHELD / /
/ /
For all nominees except as noted above
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S)
THEREOF.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
Signature:__________ Date ______ Signature:__________ Date ______
