<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
REFAC TECHNOLOGY DEVELOPMENT CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] 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:
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(4) Date Filed:
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<PAGE>
REFAC TECHNOLOGY DEVELOPMENT CORPORATION
122 East 42nd Street, New York, New York 10168
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 10, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of REFAC
Technology Development Corporation, a Delaware corporation (the "Corporation"),
will be held at the Board of Governors' Room of the American Stock Exchange, 86
Trinity Place, New York, New York, on Monday, May 10, 1999, at 10:00 A.M., New
York City time, for the following purposes:
1. To elect directors of the Corporation;
2. To approve an amendment to the Restated and Amended Certificate of
Incorporation to change the Corporation's name to "REFAC" (the "Amendment");
and
3. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on March 29, 1999 as
the record date for the determination of stockholders who are entitled to notice
of and to vote at the meeting.
A copy of the Corporation's Annual Report for the year ended December 31,
1998 is sent to you herewith.
To assure your representation at the meeting, please sign, date and return
your proxy in the enclosed envelope, which requires no postage if mailed in the
United States.
By Order of the Board of Directors
Robert L. Tuchman
Chairman of the Board
<PAGE>
REFAC TECHNOLOGY DEVELOPMENT CORPORATION
122 East 42nd Street, New York, New York 10168
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS - MAY 10, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of REFAC Technology Development Corporation, a
Delaware corporation (the "Corporation"), to be used at the Annual Meeting of
Stockholders of the Corporation to be held at the Board of Governors' Room of
the American Stock Exchange, 86 Trinity Place, New York, New York, on May 10,
1999, at 10:00 A.M., New York City time.
You are requested to complete, date and sign the accompanying proxy and
return it to the Corporation in the enclosed envelope. The proxy may be revoked
at any time before it is exercised by written notice to the Corporation bearing
a later date than the date on the proxy and any stockholder attending the
meeting may vote in person whether or not he has previously submitted a proxy.
Where instructions are indicated, proxies will be voted in accordance therewith.
Where no instructions are indicated, proxies will be voted for the nominees for
directors set forth below and for the approval of the Amendment.
The Board of Directors has fixed the close of business on March 29, 1999 as
the record date (the "Record Date") for the determination of stockholders who
are entitled to notice of and to vote at the meeting. The transfer books of the
Corporation will not be closed. As of the Record Date, the outstanding shares
of the Corporation entitled to vote were 3,795,261 shares of common stock, par
value $.10 per share ("Common Stock"), the holders of which are entitled to one
vote per share.
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock issued and outstanding and entitled to vote will
constitute a quorum. A plurality of the votes of the shares of Common Stock
present at the meeting will be necessary for the election of directors of the
Corporation. Under applicable Delaware law, in tabulating the vote, abstentions
(including broker nonvotes) will be disregarded and will have no effect on the
outcome of the vote. The approval of the adoption of the Amendment to the
Corporation's Restated and Amended Certificate of Incorporation (the
"Certificate of Incorporation") to change its name from REFAC Technology
Development Corporation to "REFAC" will require the affirmative vote of the
majority of the Corporation's outstanding shares of common stock. Under
applicable Delaware laws, in tabulating the vote, abstentions (including broker
nonvotes) will be counted and will have the same effect as a vote against the
proposal.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and proxy are being mailed to the Corporation's stockholders on or
about April 5, 1999. A copy of the Corporation's Annual Report for the year
ended December 31, 1998 is also enclosed.
EACH STOCKHOLDER OF RECORD OR BENEFICIALLY AS OF THE RECORD DATE FOR
SECURITY HOLDERS ENTITLED TO VOTE AT THE MEETING WILL BE ENTITLED, UPON WRITTEN
REQUEST, TO RECEIVE FROM THE CORPORATION, WITHOUT CHARGE, A COPY OF THE
CORPORATION'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. SUCH REQUESTS SHOULD BE MADE TO STOCKHOLDER RELATIONS AT THE
ADDRESS OF THE CORPORATION SET FORTH ABOVE.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
On the Record Date, to the knowledge of the Corporation, the persons listed
below were the only beneficial owners of more than five percent of the
outstanding shares of Common Stock. The Corporation has no other class of
voting securities outstanding. Information regarding the persons or entities
set forth below is based upon information contained in filings made with the
Securities and Exchange Commission by such persons or entities.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percentage of
Beneficial Owner of Beneficial Ownership Outstanding Shares
------------------- ------------------------ -------------------
<S> <C> <C>
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11/th/ Floor
Santa Monica, CA 90401 320,442 (1) 8.4%
Robert L. Tuchman
122 East 42/nd/ Street
New York, NY 10168 263,000 (2) 6.7%
ZPR Investment Management, Inc.
1642 N. Volusia Avenue
Orange City, FL 32763 223,200 5.9%
- -------
</TABLE>
(1) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 320,442 shares of the
Corporation's Common Stock as of December 31, 1998, all of which shares are
held in portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified benefit plans,
all of which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(2) Includes 160,000 shares of Common Stock which would be acquired upon the
exercise of stock options which are exercisable immediately or within sixty
days.
SECURITY OWNERSHIP OF MANAGEMENT
On the Record Date, the directors listed below and all officers and
directors as a group beneficially owned the following equity securities of the
Corporation, including options to purchase shares of Common Stock of the
Corporation:
2
<PAGE>
<TABLE>
<CAPTION>
Common Stock of the Corporation
- ----------------------
Amount and Nature of
Name of Beneficial Percent of Percent of
Beneficial Owner Ownership (1) Class (2) Options
- ------------------------------------ ------------ - --------- --------
<S> <C> <C> <C>
Neil R. Austrian................ 8,000 (3) .2% 10,000
Raymond A. Cardonne, Jr......... 9,000 (4) .2% 35,000
Robin L. Farkas................. 32,096 (3) .8% 10,000
Elliott S. Greller.............. 6,380 (5) .2% 35,000
Mark N. Kaplan.................. 22,828 (3) .6% 10,000
Herbert W. Leonard.............. 79,963 (3) 2.1% 10,000
Douglas M. Spranger............. 52,013 (6) 1.4% 45,000
Robert L. Tuchman............... 263,000 (7) 6.7% 250,000
Ira T. Wender................... 9,000 (3) .2% 10,000
Officers and Directors
as a Group (9 persons)........ 482,280 (8) 11.3% 415,000 (9)
- ----------
</TABLE>
(1) Except as otherwise described in these Notes, for the purposes of the above
table and the following Notes, the securities shown as "beneficially owned"
include all securities which, pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), may be deemed to be
"beneficially owned," including, without limitation, all securities which
the "beneficial owner" has the right to acquire within sixty days, as, for
example, through the exercise of any option. Unless otherwise noted, all
officers and directors have sole voting and investment power with respect
to securities beneficially owned by them.
(2) The percentage of ownership of the Common Stock set forth in the above
table has been calculated by dividing (i) the aggregate number of shares of
Common Stock which may be deemed to be "beneficially owned" as explained in
Note (1) above, by (ii) the number of shares of Common Stock actually
outstanding plus the additional number of shares of Common Stock which such
"beneficial owner" would be deemed to "beneficially own" assuming the
exercise of all options which are exercisable immediately or within sixty
days by such beneficial owner and assuming no other acquisitions of shares
of Common Stock through the exercise of any option, warrant, right or
conversion of any security convertible into such shares by any other
person.
(3) Includes 8,000 shares of Common Stock which would be acquired upon the
exercise of options which are exercisable immediately or within sixty days.
(4) Includes 9,000 shares of Common Stock which would be acquired upon the
exercise of options which are exercisable immediately or within sixty days.
(5) Includes 6,380 shares of Common Stock which would be acquired upon the
exercise of options which are exercisable immediately or within sixty days.
(6) Includes 16,200 shares of Common Stock which would be acquired upon the
exercise of options which are exercisable immediately or within sixty days.
3
<PAGE>
(7) Includes 160,000 shares of Common Stock which would be acquired upon the
exercise of options which are exercisable immediately or within sixty days.
(8) Includes an aggregate of 231,580 shares of Common Stock which such persons
would acquire upon the exercise of options which are exercisable
immediately or within sixty days.
(9) Consists of 231,580 options which are exercisable immediately or within
sixty days, and 183,420 options which are not exercisable immediately or
within sixty days.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors of the Corporation are to be elected at the meeting. The
directors will serve, subject to the By-Laws of the Corporation, until the
Annual Meeting of Stockholders to be held in 2000 and until their respective
successors shall have been elected and qualified.
It is the intention of the individuals named in the enclosed proxy to vote
such proxy for the election as directors of the persons named in the table below
entitled "Identification of Directors." Each of the persons named below was
elected to such position at the Corporation's Annual Meeting of Stockholders in
1998. The term of office of each such director of the Corporation will expire
on the date of the Corporation's Annual Meeting of Stockholders in 2000 and upon
the election and qualification of each such director's successor. The Board of
Directors of the Corporation has no reason to believe that any of the nominees
for the office of director will be unavailable for election as a director.
However, should any of them become unwilling or unable to accept nomination for
election, it is intended that the individuals named in the enclosed proxy may
vote for the election of such other persons as the Board of Directors of the
Corporation may recommend.
(a) Identification of Directors
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Served
Continuously
as Director
Name Age Principal Occupation or Employment (1) Since
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Neil R. Austrian 58 President, National Football League 1980
(Professional Sports)
Robin L. Farkas (2) 65 Private investor 1976
Mark N. Kaplan 69 Partner, Skadden, Arps, Slate, 1967
Meagher & Flom LLP (Attorneys)
Herbert W. Leonard 73 President, Hamilton Associates 1967
(Consulting)
Douglas M. Spranger (3) 51 Senior Vice President, REFAC Technology 1998
Development Corporation and REFAC
International, Ltd., Chief Executive Officer
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Served
Continuously
as Director
Name Age Principal Occupation or Employment (1) Since
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
of Human Factors Industrial Design Division
(Product design and development)
Robert L. Tuchman (4) 56 Chairman, President, Chief Executive Officer 1991
and General Counsel, REFAC Technology
Development Corporation
Ira T. Wender (5) 72 Of Counsel, Patterson, Belknap, Webb 1981
& Tyler (Attorneys)
</TABLE>
(1) Unless otherwise noted, the principal occupation or employment of each
individual set forth in this table has been such individual's principal
occupation or employment for the past five years and no such individual
holds another position or office with the Corporation.
(2) Robin L. Farkas was the Chairman of the Board of Directors and Chief
Executive Officer of Alexander's Inc., a retailer, from prior to 1986 to
1994 when he retired.
(3) Douglas M. Spranger has been the Chief Executive Officer of Human Factors
Industrial Design, Inc. since its formation in 1974. Human Factors
Industrial Design, Inc., which was acquired by the Corporation in November,
1997, was merged into the Corporation's wholly owned subsidiary, REFAC
International, Inc., on December 31, 1998. Mr. Spranger became the Senior
Vice President of REFAC International, Ltd. in December, 1998 and
relinquished the position of President of the Human Factors Industrial
Design Division ("Human Factors") to Bert D. Heinzelman. Mr. Heinzelman
will also assume the position of Chief Executive Officer of Human Factors
when the Corporation relocates to its new facilities in late spring, 1999.
(4) Robert L. Tuchman succeeded Eugene M. Lang as the Chief Executive Officer of
the Corporation on January 6, 1997 and as Chairman of the Board of Directors
on June 30, 1997. From August 1, 1991 to January 6, 1997, he served as the
Corporation's President and Chief Operating Officer. He is also the
Corporation's General Counsel and was the Corporation's Treasurer from May,
1994 to March, 1997.
(5) Ira T. Wender has been of counsel to the law firm of Patterson, Belknap,
Webb & Tyler since January, 1994. He was a partner in such law firm from
January, 1988 to December, 1993. He was also Chairman of Perry Ellis
International, Inc. from January, 1994 to October, 1994.
(b) Directorships
------------------
The following nominees for director of the Corporation additionally serve as
director for the following companies registered pursuant to Section 12 or
subject to Section 15 (d) of the Exchange Act and registered investment
companies.
5
<PAGE>
Name Directorships of Nominees
------ -------------------------
Neil R. Austrian BT Alex Brown Inc.
Office Depot, Inc.
Robin L. Farkas Insignia Financial Group Inc.
Noodle Kidoodle, Inc.
Mark N. Kaplan American Biltrite, Inc.
Congoleum, Inc.
DRS Technologies, Inc.
Grey Advertising Inc.
MovieFone, Inc.
Volt Information Sciences, Inc.
Ira T. Wender Deotoxis, Inc.
Dime Bancorp, Inc.
United Investors Realty Trust
(c) Committees
---------------
The Board of Directors has established and currently maintains as standing
committees an Audit Committee and a Compensation Committee. The Corporation
does not have a standing Nominating Committee.
Audit Committee - This committee was established at the November, 1991 Board
---------------
meeting. The Audit Committee meets periodically with the Corporation's
Independent Auditors to review plans for the audit and the audit results. The
Audit Committee makes recommendations to the full Board as to the engagement or
discharge of the Independent Auditors and reviews financial statements,
accounting policies, tax and other matters for compliance with the requirements
of the Financial Accounting Standards Board and government regulatory agencies.
The Audit Committee consists of three directors: Mark N. Kaplan, Herbert W.
Leonard and Ira T. Wender. This Committee met once in 1998.
Compensation Committee - This committee administers the executive
----------------------
compensation and benefit plans and grants under such plans. The Compensation
Committee consists of three directors: Neil R. Austrian, Mark N. Kaplan and Ira
T. Wender. This Committee met once in 1998. For further information regarding
executive compensation, see "Compensation Committee Report on Executive
Compensation," page 11.
6
<PAGE>
(d) Meetings of Board of Directors
-----------------------------------
During the last fiscal year, four meetings of the Board of Directors of the
Corporation were held. During such period, except for Neil R. Austrian, none of
the directors attended fewer than 75% of an aggregate of the meetings of the
Board and Board Committees of which he was a member. Mr. Austrian attended the
Annual Meeting of Stockholders, the Compensation Committee meeting and 25% of
the Board meetings.
(e) 1998 Annual Meeting of Stockholders
----------------------------------------
At the last Annual Meeting of Stockholders of the Corporation, held in
1998, approximately 94% of the outstanding shares of Common Stock was present at
the meeting in person or by proxy. Each director received votes for his
election in excess of 92% of such shares.
(f) Directors' fees
--------------------
Each director who is not also an employee of or consultant to the
Corporation was paid the sum of $1,000 for each meeting of the Board of
Directors attended in 1998. No additional payments were made with respect to
service on or attendance at the meetings of any committee established by the
Board.
(g) Vote Required
------------------
Election of the directors of the Corporation will require the affirmative
vote of a plurality of the stockholders present in person or represented by
proxy at the meeting and entitled to vote thereon.
PROPOSAL 2
APPROVAL OF THE AMENDMENT TO CHANGE THE CORPORATION'S NAME FROM REFAC TECHNOLOGY
DEVELOPMENT CORPORATION TO REFAC.
The Board of Directors has recommended, and at the meeting, the
stockholders will be asked to approve an amendment to the Corporation's
Certificate of Incorporation to change its name from REFAC Technology
Development Corporation to "REFAC" (the "Amendment"). The Board believes that
the change of name is appropriate given the broadening of the Corporation's
services and capabilities. If Proposal 2 is adopted, Article FIRST of the
Corporation's Certificate of Incorporation will be amended to read in its
entirety as follows:
"FIRST: The name of the corporation is "REFAC" (hereinafter the
"Corporation")."
VOTE REQUIRED
Approval of the Plan will require the affirmative vote of stockholders
representing a majority of the Corporation's outstanding shares.
7
<PAGE>
BOARD RECOMMENDATION
The Board unanimously recommends a vote FOR approval of the Amendment.
Proxies solicited by management will be voted FOR the proposal to adopt the
Amendment unless a vote AGAINST the proposal or ABSTENTION is specifically
indicated.
REMUNERATION OF EXECUTIVE OFFICERS
----------------------------------
The following table presents the aggregate compensation for services in all
capacities paid by the Corporation and its subsidiaries in respect of the years
ended December 31, 1998, 1997 and 1996 to the Chief Executive Officer and each
of the executive officers of the Corporation whose aggregate compensation
exceeded $100,000 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Securities
Annual Compensation Underlying
---------------------- Options/SARs All Other
Name and Position Year Salary Bonus (#) Compensation (4)
- --------------------------------------- ------------ --------- ------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Robert L. Tuchman, Chairman, 1998 $260,000 $69,196 50,000 -
President, Chief Executive Officer, 1997 $250,000 $50,000 - $1,000
Treasurer and General Counsel 1996 $250,000 - 100,000 $1,000
Douglas M. Spranger 1998 $226,840 - - -
Senior Vice President (1) 1997 $ 24,462 - 45,000 -
Raymond A. Cardonne, Jr. 1998 $121,115 $ 7,500 35,000 -
Vice President and Secretary (2)
Elliott S. Greller 1998 $142,666 $ 5,000 35,000 -
Vice President, Treasurer
and Chief Financial Officer (3)
</TABLE>
__________
(1) Mr. Spranger has been the Chief Executive Officer of Human Factors
Industrial Design, Inc. since its formation in 1974. Human Factors
Industrial Design, Inc., which was acquired by the Corporation in November,
1997, was merged into the Corporation's wholly owned subsidiary, REFAC
International, Ltd., on December 31, 1998. Mr. Spranger became a Senior
Vice President of REFAC International, Ltd. in December, 1998.
(2) Raymond A. Cardonne, Jr. joined the Corporation in December, 1997.
(3) Elliott S. Greller joined the Corporation as President of REFAC Services
Corporation on a part-time basis in March, 1998 and became the Corporation's
Chief Financial Officer on a full-time basis in October, 1998.
(4) The Corporation offers a 401(k) Savings Plan to all classes of employees.
Prior to calendar year 1998, the Corporation matched employee contributions
to the extent of $1,000. The amount shown represents the Corporation's
matching contribution to this plan.
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
During 1998, the following Named Executives were issued stock options
pursuant to the 1990 Stock Option and Incentive Plan and the 1998 Stock Option
and Incentive Plan as described below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Percent Potential Realizable
Number of Value At Assumed
of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted Option Price
Options to Exercise ----------------------
Granted (1) Employees Price Expiration --
in 1998 Per Share Date 5% 10%
- ---------------------------------------------------------------------------------------------------
Robert L. Tuchman (2) 50,000 17.6% $10.00 12/15/08 $84,173 $428,364
Raymond A. Cardonne, Jr. 25,000 8.8% $ 9.50 03/17/08 $44,127 $194,765
Raymond A. Cardonne, Jr. 10,000 3.5% $ 6.88 12/15/08 $48,085 $116,923
Elliott S. Greller 8,000 2.8% $ 9.50 03/17/08 $14,121 $ 62,325
Elliott S. Greller 17,000 6.0% $12.00 05/10/08 - $ 94,111
Elliott S. Greller 10,000 3.5% $ 6.88 12/15/08 $48,085 $116,923
</TABLE>
_______
(1) The options were granted under the 1990 and 1998 Stock Option and Incentive
Plans. The option exercise price is the fair market value at the date of
award. The options have a term of ten years and become exercisable over the
first six years of the term of the option.
(2) The fair market value of the Corporation's Common Stock on the date of the
grant was $6.875.
No options were exercised by the Named Executives during 1998. The
following table reflects the value of all stock options held by the Named
Executives as of December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR &
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised Options
At Fiscal Year-End
- ------------------------------------------------------------------------------
Not Not
Name Exercisable Exercisable Exercisable Exercisable
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert L. Tuchman 160,000 90,000 $65,625 --
Douglas M. Spranger 16,200 28,800 -- --
Raymond A. Cardonne, Jr. 5,000 30,000 -- $3,125
Elliott S. Greller 5,000 30,000 -- $3,125
</TABLE>
9
<PAGE>
EMPLOYMENT CONTRACTS
Robert L. Tuchman
The Corporation has entered into an employment contract with Mr. Tuchman,
amended and restated effective December 13, 1996 (the "Tuchman Employment
Agreement"), which, as further amended in January, 1999, has a term ending
December 31, 2003. Such term will extend for an additional year as of each
January 1, unless, at least 90 days prior to the end of December 31, 2002 or any
subsequent December 31 during the term, either Mr. Tuchman or the Corporation
shall have given notice of nonrenewal. In addition to salary payments, the
Tuchman Employment Agreement provides for the payment of an annual bonus to be
determined by the Board in its sole discretion. Under the Tuchman Employment
Agreement, the Corporation accepted from Mr. Tuchman in payment for certain
stock options a promissory note in an amount equal to $375,000, bearing interest
at the Long-Term Applicable Federal Rate. The Tuchman Employment Agreement
further provides in general that Mr. Tuchman will not (a) engage in any
"Competitive Activity" (as defined in the Tuchman Employment Agreement) during
the term of such Employment Agreement and for a period of eighteen months
thereafter, or (b) for a period of two years following his termination of
employment, solicit the business of any client or prospective client of the
Corporation or the employment of any present or future employee of the
Corporation.
In the event that the Corporation terminates Mr. Tuchman's employment for
any reason other than because of a "permanent disability" or for "cause" (as
each such term is defined in the Tuchman Employment Agreement), Mr. Tuchman is
entitled to receive a lump sum equal to his full salary through the expiration
date of the Tuchman Employment Agreement at the rate in effect at the time
notice of termination is given, plus an additional amount equal to the bonus Mr.
Tuchman received in respect of the calendar year prior to such termination. In
addition, Mr. Tuchman is entitled to receive, except to the extent that he
receives similar benefits from a subsequent employer, life, health and similar
benefits (other than incentives such as stock options) to which he would
otherwise have been entitled through the expiration of the Tuchman Employment
Agreement. If, during the two-year period following a "Change in Control" (as
defined in the Tuchman Employment Agreement), Mr. Tuchman's employment with the
Corporation is terminated by the Corporation (or any successor thereto) other
than because of a permanent disability or for cause, or if Mr. Tuchman
terminates his employment for "good reason" (as defined in the Tuchman
Employment Agreement), Mr. Tuchman is entitled to receive a lump sum payment
equal to the sum of (i) his full salary through the expiration date of the
Tuchman Employment Agreement at the rate in effect at the time notice of
termination is given or for a full year, whichever is greater, plus (ii) a bonus
payment equal to two times the amount of the bonus paid or payable to Mr.
Tuchman in respect of the calendar year preceding the year in which the change
in control occurs. In addition, Mr. Tuchman will not be bound by the non-
compete provisions otherwise applicable in the event of his termination of
employment. The Tuchman Employment Agreement provides that, in the event that
any payments made to Mr. Tuchman in connection with a Change in Control
(including severance payments and any other benefits to be paid or provided
pursuant to the Tuchman Employment Agreement or any other benefit or incentive
plan of the Corporation) would not be deductible by the Corporation by operation
of section 280G of the Code, cash payments will be reduced (if necessary, to
zero) to the extent necessary to make such payments deductible; provided, that
Mr. Tuchman may elect to have noncash payments reduced (or eliminated) prior to
the reduction of the cash severance payments.
10
<PAGE>
Douglas M. Spranger
In connection with the acquisition by the Corporation of Human Factors, Human
Factors entered into an employment contract with Mr. Spranger effective November
25, 1997 (the "Spranger Employment Agreement"), which, as amended in January,
1999, has an initial term (the "Initial Term") ending December 31, 2000.
Beginning on January 1, 2001 and on each January 1 thereafter, the Term of the
Spranger Employment Agreement will automatically extend for an additional year
unless, not later than June 30 of the preceding year, either Mr. Spranger or
Human Factors shall have given notice of nonrenewal. The Spranger Employment
Agreement provides for annual review of his salary, which shall be increased by
no less than 5% per year. During the Initial Term, Mr. Spranger will be
entitled to receive an incentive bonus payable from an earnings pool relating to
the performance of Human Factors during the relevant fiscal year of Human
Factors; following the Initial Term, the Board of Directors will have sole
discretion to determine any annual cash bonuses to be awarded to Mr. Spranger.
The Spranger Employment Agreement provides that in the event that Mr. Spranger's
employment with Human Factors is terminated for any reason other than (i) by Mr.
Spranger without Good Reason, (ii) by reason of Mr. Spranger's death, disability
or retirement or (iii) by Human Factors for Cause (as each such term is defined
in the Spranger Employment Agreement), Mr. Spranger shall be entitled to receive
(a) a lump sum in cash equal to the base salary in effect at the effective date
of such termination that would otherwise have been payable during the remainder
of the term of the Employment Agreement and (b) an annual bonus for the
remainder of the term (payable at such time or times as such bonus would have
been paid to Mr. Spranger were he employed for the remainder of the term, which
bonus amount will be equal to no less than 50% of the bonus earned by Mr.
Spranger in respect of the last fiscal year completed prior to the effective
date of termination. In addition, Mr. Spranger would be entitled to life,
health, disability and similar benefits for the remainder of the term, except to
the extent that he receives such benefits from a subsequent employer.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of Neil R. Austrian, Mark N. Kaplan and Ira T. Wender. While the
Committee administers, and makes recommendations to the Board of Directors with
respect to, the executive compensation, stock option and benefit plans and
grants under such plans, the Corporation's overall compensation strategy,
including a determination of compensation paid to the Chief Executive Officer of
the Corporation, Robert L. Tuchman, is determined by the entire Board of
Directors.
Objectives
- ----------
The Committee's primary objective is to attract and retain the most highly
qualified executive officers and to insure that their compensation structure
aligns their interests with those of the stockholders of the Corporation. Since
Mr. Tuchman was the only key executive for which the Committee was responsible
for administering compensation in 1998 and because of the specific circumstances
surrounding the compensation paid to him, a policy which relates the
compensation of executive officers to the overall performance of the Corporation
has not been formulated. However, the Committee contemplates that, to the extent
appropriate in the future, it may develop guidelines which could be utilized in
relating executive compensation to the Corporation's overall growth and success.
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Employment Agreements
- ---------------------
The Corporation has employment agreements with Robert L. Tuchman, its Chief
Executive Officer, and Douglas M. Spranger, its Senior Vice President. The
Committee has considered the advisability of using employment agreements and has
determined that their use is in the best interest of the Corporation because it
facilitates the Corporation's ability to attract and retain the services of
highly qualified executive officers. The Committee has observed that the use of
employment agreements by the Corporation has provided stability with respect to
the leadership of the Corporation's team of executive officers, and the
Committee has determined that the practice of using employment agreements to
retain the services of its senior executive officers should continue in the
future. Each employment agreement separately reflects the terms that the
Committee felt were necessary and appropriate to retain the services of such
executive officer.
Components of Executive Compensation
- ------------------------------------
The Corporation's executive compensation program consists of cash and
equity compensation components.
Cash Compensation.
------------------
Cash compensation is comprised of base salary and annual cash incentive
bonuses. The Chief Executive Officer had an employment agreement with the
Corporation during the past fiscal year, and, therefore, his cash compensation
levels are subject to the provisions of such employment agreement. The
Committee has determined that it will continue the Corporation's policy of
subjectively arriving at appropriate cash compensation levels in the process of
negotiating such agreements. The terms and conditions of the Corporation's
employment agreement with Mr. Tuchman are discussed in detail above. See
"Employment Contracts," page 10.
The Corporation offers the Chief Executive Officer an opportunity to earn
additional cash compensation in the form of an annual bonus based on a number of
subjective factors including the earnings of the Corporation, acquisition of
enterprises and intellectual property and the efforts of the Chief Executive
Officer.
Bonuses that were paid to the Chief Executive Officer are disclosed above
in the bonus column of the Summary Compensation Table.
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Equity Compensation.
--------------------
Equity compensation is comprised of stock options. Stock option grants
reflect the Committee's desire to provide a meaningful equity incentive for the
executive to have the Corporation prosper over the long term.
Chief Executive Officer Compensation
- ------------------------------------
Mr. Tuchman has served as Chief Executive Officer of the Corporation since
January 6, 1997. Mr. Tuchman's compensation is governed by the terms of an
employment contract between Mr. Tuchman and the Corporation, entered into at the
time he joined the Corporation in 1991, that was amended and extended in 1994,
1996 and again in January, 1999. In addition to salary payments, Mr. Tuchman's
employment agreement provides for the payment of an annual bonus to be
determined by the Board of Directors in its sole discretion. In its
recommendation to the Board of Directors regarding Mr. Tuchman's bonus for
fiscal 1998, the Committee considered Mr. Tuchman's active role in connection
with the Corporation's acquisition of Selective Licensing and Promotion, Ltd.,
the operations of Human Factors the licensing of the Storer Modem technology,
the Corporation's planned relocation in spring, 1999 and his overall
contribution to the future growth of the Corporation.
Deductibility of Compensation
- -----------------------------
Section 162(m) of the Code generally limits to $1,000,000 the Corporation's
federal income tax deduction for compensation paid in any year to each of its
Chief Executive Officer and the four other most highest paid executive officers,
to the extent such compensation is not "performance-based" within the meaning of
Section 162(m). The Committee will, in general, seek to qualify compensation
paid to its executive officers for deductibility under Section 162(m), although
the Committee believes it is appropriate to retain the flexibility to authorize
payments of compensation that may not qualify for deductibility if, in the
Committee's judgment, it is in the Corporation's best interest to do so.
The Compensation Committee of the Board of Directors
Neil R. Austrian
Mark N. Kaplan
Ira T. Wender
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Committee is comprised of the following three directors: Neil R.
Austrian, Mark N. Kaplan and Ira T. Wender. Mark N. Kaplan, a director of the
Corporation, is a partner of Skadden, Arps, Slate, Meagher & Flom LLP which has
been retained since February, 1982 to render legal services to the Corporation.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
The following graph compares cumulative total return, assuming reinvestment
of dividends, of the Corporation, the NASDAQ Market Index, the American Stock
Exchange Index and a Peer Group Index, referred to below as the "SIC Code
Index," which includes companies in Standard Industrial Classification Code 6794
(Patent Owners and Lessors) for the period commencing December 31, 1993 and
ending December 31, 1998. The Peer Group Index consists of the following
companies: 4 Kids Entertainment, Inc., All-American Sportpark Inc., Blimpie
International, Inc., Dwyer Group Inc., Electric Fuel Corporation, Frontier
Adjuster of America, Ha-Lo Industries Inc., Harvey Entertainment Co., Igen
International, Inc., Inacom Corporation, Interdigital Communications
Corporation, Maxim Group, Inc., Mesabi Trust, N-Viro International Corporation.,
Projectavision, Inc., Quizno's Corporation, REFAC Technology Development
Corporation, Rentrak Corporation, SRS Labs Inc., Waste Systems International and
Zitel Corporation.
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On March 14, 1994, the Company's common stock became listed and began to trade
on the American Stock Exchange ("AMEX") with the symbol REF. The move to the
AMEX was prompted by AMEX's auction market system. The Company felt that
stockholder value would be enhanced by narrower quotation spreads, low trade-to-
trade price variation and better stock liquidity.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
REFAC Technology Development Corporation $100.00 $ 92.00 $107.16 $102.34 $187.26 $125.20
Peer Group (SIC Code) Index $100.00 $110.31 $233.84 $300.42 $351.15 $408.98
American Stock Exchange Index $100.00 $ 88.33 $113.86 $120.15 $144.57 $142.61
NASDAQ Market Index $100.00 $104.99 $136.18 $169.23 $207.00 $291.96
- ------------------------------------------------------------------------------------------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(1) Mark N. Kaplan is a partner of Skadden, Arps, Slate, Meagher & Flom LLP
which has been retained since February, 1982 to render legal services to
the Corporation.
(2) See "Employment Contracts", page 10.
(3) In connection with the acquisition of Human Factors in November, 1997,
Human Factors entered into a five year employment agreement with Douglas M.
Spranger to serve as its President and Chief Executive Officer. On
December 31, 1998, Human Factors was merged into REFAC International, Ltd.
("RIL") and, on January 14,1999, Mr. Spranger's contract was amended. As a
result, he has become the Senior Vice President of the Corporation and RIL
and Bert D. Heinzelman has succeeded him as President of Human Factors.
Mr. Heinzelman will also become the Chief Executive Officer of Human
Factors when the Corporation relocates its facilities to Edgewater, New
Jersey in late spring, 1999. The term of Mr. Spranger's contract was also
reduced and now
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terminates on December 31, 2000. His annual service was reduced from ten
months to eight months and his annual compensation was reduced from
$226,840 to $190,545.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP served as the independent public accountants for the
Corporation and its subsidiaries for the fiscal year ended December 31, 1998 and
the Board of Directors has retained such Firm to serve as the Corporation's
independent public accountants for the fiscal year commencing January 1, 1999.
Grant Thornton LLP does not have any direct or indirect financial interest in
the Corporation or any of its subsidiaries in any capacity other than that of
independent public accountants. A representative of the firm will be present at
the meeting to answer questions by stockholders concerning the accounts of the
Corporation and will have the opportunity to make a statement, if such
representative desires to do so.
OTHER MATTERS
The Board of Directors of the Corporation does not know of any other
matters which are likely to be brought before the meeting. However, in the
event that any other matters properly come before the meeting, the persons named
in the enclosed proxy will vote such proxy in accordance with their judgment on
such matters.
PROPOSALS BY STOCKHOLDERS
Proposals of stockholders intended to be presented, pursuant to Rule 14a-8
under the Exchange Act, at the Annual Meeting of Stockholders of the Corporation
to be held in 2000 must be received by the Company at the Company's principal
executive offices by December 7, 1999 if they are to be included in the
Corporation's proxy statement and proxy relating to such meeting. In order for
stockholder proposals made outside of Rule 14a-8 under the Exchange Act to be
considered "timely" within the meaning of Rule 14a-4(c) under the Exchange Act,
such proposals must be received by the Company at the Company's principal
executive offices by March 11, 2000. The Company's By-Laws require that
proposals of stockholders made outside of Rule 14a-8 under the Exchange Act must
be submitted, in accordance with the requirements of the By-Laws, not later than
March 11, 2000 and not earlier than February 10, 2000.
SOLICITATION OF PROXIES
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy will be borne by
the Corporation. In addition to the solicitation of proxies by use of the
mails, the Corporation may utilize the services of some of its officers and
regular employees (who will receive no compensation therefor in addition to
their regular salaries) to solicit proxies personally and by telephone and
telegraph.
By Order of the Board of Directors
Robert L. Tuchman
Chairman of the Board
New York, New York
April 5, 1999
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