SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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 ss.240.14a-11(c) or ss.240.14a-12
HIRSCH INTERNATIONAL CORP.
(Name of Registrant as Specified In Its Charter)
Paul Levine, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check Appropriate Box):
[ ] $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 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:
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:
3) Filing Party:
Paul Levine, Secretary, Hirsch International Corp.
4) Date Filed:
May 29, 1996
<PAGE>
HIRSCH INTERNATIONAL CORP.
(a Delaware corporation)
NOTICE OF 1997 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON JUNE 20, 1997
To the Stockholders of HIRSCH INTERNATIONAL CORP.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
"Meeting") of HIRSCH INTERNATIONAL CORP. (the "Company") will be held on June
20, 1997, at 10:00 A.M. at The Marriott Windwatch, 1717 Motor Parkway,
Hauppauge, New York 11788 for the following purposes:
1. to elect seven directors;
2. to consider and act upon a proposal to amend the Company's Stock Option
Plan to increase the number of shares of common stock reserved for issuance
thereunder from 750,000 to 1,050,000;
3. to ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending January 31, 1998; and
4. to transact such other business as may properly come before the Meeting
and any adjournment or postponement thereof.
The Board of Directors has fixed April 25, 1997, at the close of business,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting, and only holders of record of shares of the
Company's Common Stock at the close of business on that day will be entitled to
vote. The stock transfer books of the Company will not be closed.
A complete list of stockholders entitled to vote at the Meeting shall be
available at the offices of the Company during ordinary business hours from May
23, 1997 until the Meeting for examination by any stockholder for any purpose
germane to the Meeting. This list will also be available at the Meeting.
All stockholders are cordially invited to attend the Meeting in person.
However, whether or not you expect to be present at the Meeting, you are urged
to mark, sign, date and return the enclosed Proxy, which is solicited by the
Board of Directors, as promptly as possible in the postage-prepaid envelope
provided to ensure your representation and the presence of a quorum at the
Meeting. The shares represented by the Proxy will be voted according to your
specified response. The Proxy is revocable and will not affect your right to
vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Paul Levine, Secretary
Hauppauge, New York
May 20, 1997
<PAGE>
HIRSCH INTERNATIONAL CORP.
200 Wireless Boulevard
Hauppauge, NY 11788
------------------------------
PROXY STATEMENT
------------------------------
1997 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON JUNE 20, 1997
The enclosed Proxy Statement is solicited by the Board of Directors of
HIRSCH INTERNATIONAL CORP. (the "Company") in connection with the 1997 Annual
Meeting of Stockholders (the "Meeting") to be held on June 20, 1997, at 10:00
a.m. at The Marriott Windwatch, 1717 Motor Parkway, Hauppauge, New York 11788
and any adjournment thereof. The Board of Directors has set April 25, 1997, at
the close of business, as the record date ("Record Date") for the determination
of stockholders entitled to notice of and to vote at the Meeting. As of the
record date, the Company had 5,323,636 shares of Class A Common Stock and
2,732,249 shares of Class B Common Stock outstanding. A stockholder executing
and returning a proxy has the power to revoke it at any time before it is
exercised by filing a later proxy with, or other communication to, the Secretary
of the Company or by attending the Meeting and voting in person. The proxy will
be voted in accordance with your directions as to:
(1) the election of the persons listed herein as directors of the Company;
(2) the amendment of the Company's stock option plan;
(3) the ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending January 31, 1998; and
(4) the transaction of such other business as may properly come before the
Meeting and any adjournment or postponement thereof.
In the absence of direction, the proxy will be voted in favor of these
proposals.
The entire cost of soliciting proxies will be borne by the Company. The
cost of solicitation, which represents an amount believed to be normally
expended for a solicitation relating to an uncontested election of directors,
will include the cost of supplying necessary additional copies of the
solicitation materials and the Company's 1997 Annual Report to Stockholders (the
"Annual Report") to beneficial owners of shares held of record by brokers,
dealers, banks, trustees, and their nominees, including the reasonable expenses
of such recordholders for completing the mailing of such materials and Annual
Report to such beneficial owners.
In voting at the Meeting, each stockholder of record on the Record Date of
either Class A or Class B Common Stock will be entitled to one vote on all
matters other than the election of directors, where the holders of the Class B
Common Stock will elect four, of the directors (Class B directors), and the
holders of Class A Common Stock will elect three, of the directors (Class A
directors). Holders of a majority of the outstanding shares of Common Stock must
be represented in person or by proxy in order to achieve a quorum to vote on all
matters other than the election of directors. To vote for the
<PAGE>
Class A directors, holders of a majority of the outstanding shares of Class
A Common Stock must be represented in person or by proxy in order to achieve a
quorum. To vote for the Class B directors, holders of a majority of the
outstanding shares of Class B Common Stock must be represented in person or by
proxy in order to achieve a quorum. The Proxy Statement, the attached Notice of
Meeting, the enclosed form of Proxy and the Annual Report are being mailed to
stockholders on or about May 20, 1997.
1. ELECTION OF DIRECTORS
Seven directors are to be elected by a plurality of the votes cast at the
Meeting, each to hold office until the next Annual Meeting of Stockholders and
until his respective successor is elected and qualified.
Of the persons named below, Messrs. Broitman, Schenendorf and Krasnitz have
been nominated for election as Class A directors and Messrs. Arnberg, Gardner,
Levine and Tsonis have been nominated for election as Class B directors. The
persons named in the accompanying Proxy have advised management that it is their
intention to vote for the election of Messrs. Broitman, Schenendorf and Krasnitz
as Class A directors and for the election of Messrs. Arnberg, Gardner, Levine
and Tsonis as Class B directors unless authority is withheld.
o Henry Arnberg
o Marvin Broitman
o Herbert M. Gardner
o Paul Levine
o Ronald Krasnitz
o Douglas Schenendorf
o Tas Tsonis
Management believes that each nominee will be able to serve. If any nominee
becomes unable or unwilling to serve, proxies may be voted for the election of
such person or persons as the Board of Directors determines.
Information Regarding Officers and Directors
The following table sets forth the names and ages of the Company's
directors and executive officers and the positions they hold with the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Henry Arnberg.......................... 54 Chief Executive Officer, President and Chairman of the
Board of Directors
Paul Levine............................ 44 Chief Operating Officer, Secretary, Executive Vice
President and Director
Kenneth Shifrin........................ 39 Chief Financial Officer and Vice President - Finance
Tas Tsonis............................. 45 Vice President, President of Pulse Microsystems Ltd.
and Director
2
<PAGE>
Brian Goldberg......................... 37 Vice President and Executive Vice President of Pulse
Microsystems Ltd.
Ronald Krasnitz........................ 56 Vice President, Vice President - Manufacturing of
Tajima USA, Inc. and Director
Marvin Broitman........................ 58 Director
Herbert M. Gardner..................... 57 Director
Douglas Schenendorf.................... 45 Director
</TABLE>
Henry Arnberg has been employed by the Company since 1970 and has been
Chief Executive Officer, President and Chairman of the Board of Directors, of
the Company since 1980. Mr. Arnberg received a Bachelor of Science in Accounting
from the University of Bridgeport in 1965 and an MBA in Finance and Management
from Adelphi University in 1971.
Paul Levine has been employed by the Company since 1974 and has been
Chief Operating Officer, Secretary, Executive Vice President and a director of
the Company since 1981. Mr. Levine received a Bachelor of Science in Business
from New York University in 1974.
Kenneth Shifrin has been employed by the Company since 1989. From January
1989 until October 1992, Mr. Shifrin was Controller of the Company. Since
November 1992, Mr. Shifrin has been Chief Financial Officer and Vice
President-Finance of the Company. From February 1987 to December 1989, Mr.
Shifrin was controller of National Business Products, a business machine
distributor. From February 1986 to January 1987, Mr. Shifrin was assistant
controller of Career Employment Services, Inc. From October 1985 to January
1986, Mr. Shifrin was employed by Citicorp. From September 1982 to September
1985, Mr. Shifrin was employed by Touche Ross & Co. Mr. Shifrin received a
Bachelor of Arts in Economics from the State University of New York at Stony
Brook in 1979 and a MBA in Accounting from Adelphi University in 1982. Mr.
Shifrin became a CPA in March 1984.
Tas Tsonis was elected a director of the Company in April 1994 and Vice
President of the Company in September 1994. Mr. Tsonis co-founded Pulse
MicroSystems Ltd. ("Pulse") in 1982 and has been retained or employed by Pulse
since that time. Since 1989, Mr. Tsonis has been the President of Pulse. Mr.
Tsonis received a Bachelor of Mathematics in Computer Science and Statistics
from the University of Waterloo in 1975 and a Master of Science in Computer
Science from the University of Toronto in 1981.
Brian Goldberg was elected Vice President of the Company in September 1994.
In 1982, Mr. Goldberg co-founded Pulse and has been retained or employed by
Pulse Microsystems Ltd. since that time. Since 1989, Mr. Goldberg has been the
Executive Vice President of Pulse. Mr. Goldberg received a Bachelor of Arts in
Economics from the University of Toronto in 1980 and an LLB and MBA from York
University in 1984.
Ronald Krasnitz was elected Vice President and a director of the Company in
June 1996. Prior to joining the Company, Mr. Krasnitz was employed by Sewing
Machine Exchange, Inc. since 1971. Mr. Krasnitz is presently the President of
Sewing Machine Exchange, Inc. and Vice-President-
3
<PAGE>
Manufacturing of Tajima USA, Inc. Mr. Krasnitz received a Bachelor of
Science in Mechanical Engineering from the University of Illinois in 1963 and an
MBA from the University of Chicago in 1966. Mr. Krasnitz is a Registered
Professional Engineer in the State of Illinois.
Marvin Broitman was elected a director of the Company in April 1994. Since
1968, he has been Vice President of Uniwave, Inc., a company engaged in the
engineering and manufacturing of automation accessory equipment for textile
machinery. Mr. Broitman received a Bachelor of Electrical Engineering degree
from City College in 1961 and an MBA from the Harvard Business School in 1968.
Herbert M. Gardner was elected a director of the Company in April 1994.
Since 1978, Mr. Gardner has been a Senior Vice President of Janney Montgomery
Scott Inc., an investment banking firm and the underwriter of the Company's
initial public offering in February 1994 and second public offering in January
1996. Mr. Gardner is Chairman of the Board of Supreme Industries, a specialized
manufacturer of truck bodies and shuttle buses. Mr. Gardner is also a director
of Shelter Components Corporation, a supplier to the manufactured housing and
recreational vehicle industries; Nu Horizons Electronics Corp., an electronic
component distributor; Transmedia Network, Inc., a specialized charge card
company; TGC Industries, Inc., a geophysical services Company; The Western
Systems Corp., a company redeploying assets in seeking acquisitions; and Chase
Packaging, a specialty agriculture packaging products company.
Douglas Schenendorf was elected a director of the Company in April 1994.
Since 1980, Mr. Schenendorf has been the President of D.S.I. Associates, Inc.,
an insurance brokerage firm.
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. The Company's
officers are elected annually by the Board of Directors and serve at the
discretion of the Board. There are no family relationships between any of the
directors, executive officers or persons nominated or chosen by the Company to
become directors or executive officers.
The Company's By-Laws provide that the Company shall indemnify each
director and such of the Company's officers, employees and agents as the Board
of Directors shall determine from time to time to the fullest extent provided by
the laws of the State of Delaware.
The Company carries insurance providing indemnification, under certain
circumstances, to all of its directors and officers for claims against them by
reason of, among other things, any act or failure to act in their capacities as
directors or officers. The current annual premium for such insurance is
approximately $75,000, all of which is paid by the Company. To date, no sums
have been paid to any past or present director or officer of the Company under
this or any prior indemnification insurance policy.
The Company has also entered into Indemnity Agreements with all of its
directors and executive officers. The Indemnity Agreements provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by the provisions of the General Corporation Law of the State of
Delaware.
The Indemnity Agreements provide that the Company will pay any costs which
an indemnitee actually and reasonably incurs because of any claims made against
him by reason of the fact that he is or was a director or officer of the
Company, except that the Company is not obligated to make any payment which the
Company is prohibited by law from paying as indemnity, or where (a) a final
4
<PAGE>
determination is rendered on a claim based upon the indemnitee's obtaining
a personal profit or advantage to which he was not legally entitled; (b) a final
determination is rendered on a claim for an accounting of profits made in
connection with a violation of Section 16(b) of the Securities Exchange Act of
1934, or similar state or common law provisions; (c) a claim where the
indemnitee was adjudged to be deliberately dishonest; or (d) a final
determination is rendered that indemnification is not lawful.
Meetings and Committees of the Board of Directors
The Board of Directors has an Audit Committee, a Compensation Committee and
a Stock Option Committee. The Board of Directors does not have a nominating
committee or a committee performing the functions of a nominating committee.
The members of the Audit Committee are Henry Arnberg, Marvin Broitman,
Herbert M. Gardner and Douglas Schenendorf. The Audit Committee held one meeting
and acted one time by unanimous written consent during the fiscal year ended
January 31, 1997. The function of the Audit Committee is to recommend annually
to the Board of Directors the appointment of the independent public accountants
of the Company, discuss and review the scope and the fees of the prospective
annual audit and review the results thereof with the independent public
accountants, review and approve non-audit services of the independent public
accountants, review compliance with existing major accounting and financial
policies of the Company, review the adequacy of the financial organization of
the Company and review management's procedures and policies relative to the
adequacy of the Company's internal accounting controls.
Messrs. Broitman, Gardner and Schenendorf also serve on the Stock Option
and Compensation Committees. The Compensation Committee met one time during
fiscal year 1997 and the Stock Option Committee acted two times by unanimous
written consent. The function of the Compensation Committee is to determine the
compensation of the Company's executives. The Stock Option Committee administers
the Company's stock option plans and awards stock options.
The Board of Directors met on six occasions and acted two times by
unanimous written consent during the last fiscal year.
Key Employees
The following table sets forth the names and ages of the Company's key
employees:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Theodore Pawelec....................... 45 Vice President - HAPL Leasing Co., Inc.
Kristof Janowski....................... 43 Vice President - Midwest and West Coast Sales
Michael P. Petaja...................... 31 Corporate Controller
Howard Arnberg......................... 27 Corporate Counsel
</TABLE>
Theodore Pawelec has been employed by the Company as Vice President of HAPL
Leasing Co., Inc. since May 1993. From June 1991 to May 1993, Mr. Pawelec was an
independent consultant to
5
<PAGE>
various leasing corporations. From November 1988 to June 1991, Mr. Pawelec
was Senior Vice President of Tiger Leasing Corp.
Kristof Janowski has been employed by the Company and currently serves as
Vice President--Midwest and West Coast sales since October 1994.
Michael P. Petaja has been employed by the Company as Corporate Controller
since August 1994. Prior to joining the Company Mr. Petaja was an audit manager
for Deloitte & Touche LLP where he had been employed since September 1987. Mr.
Petaja received a Bachelor of Science in Accounting from the New York Institute
of Technology in 1987. Mr. Petaja became a CPA in December 1989.
Howard Arnberg has been employed by the Company since 1995 as Corporate
Counsel. Mr. Arnberg received a Bachelor of Science in Business Administration
from the University of Florida at Gainesville in 1991 and a Juris Doctor from
Brooklyn Law School in 1994. Prior to joining the Company, Mr. Arnberg was
engaged in the private practice of law, specializing in the area of corporate
law.
Director's Compensation
Directors who are employees of the Company or its subsidiaries receive no
compensation, as such, for service as members of the Board other than
reimbursement of expenses incurred in attending meetings. Directors who are not
employees of the Company or its subsidiaries receive an annual directors' fee of
$6,000 plus $1,000 for each board meeting and $500 for each committee meeting
attended, and are reimbursed for expenses incurred in attending such meetings.
In addition, all non-employee directors participate in the Company's 1994
Non-Employee Director Stock Option Plan. The Company's officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
6
<PAGE>
Executive Compensation
The following table sets forth the compensation paid or accrued by the
Company during the four fiscal years ended January 31, 1997, 1996 and 1995 to
the Company's Chief Executive Officer and to the four most highly paid Company's
Executive Officers whose total cash compensation for such periods exceeded
$100,000 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards
Name and
Principal Position Other
Annual All other
Fiscal Salary Bonus Compensation Compen-
Year ($) ($) ($) Options sation ($)
------- ------ --------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Henry Arnberg..................... 1997 $ 377,937 $ 878,827 $ 18,985 37,500 $ 3,000
----
Chairman of the Board of 1996 $ 365,049 $ 680,796 $ 17,849 3,907 $ 3,000
----
Directors, President and 1995 $ 371,347 $ 479,405 $ 13,806 11,719 $ 3,000
----
Chief Executive Officer
Paul Levine....................... 1997 $ 377,937 $ 878,827 $ 17,481 37,500 $ 3,000
----
Executive Vice President, 1996 $ 365,049 $ 680,796 $ 16,817 3,907 $ 3,000
----
Chief Operating Officer 1995 $ 370,701 $ 479,405 $ 20,648 11,719 $ 3,000
----
and Secretary
Kenneth Shifrin................... 1997 $ 107,982 $ 351,531 $ 2,572 15,625 -
----
Vice President-Finance and 1996 $ 104,300 $ 272,318 $ 2,572 - $ 2,075
----
Chief Financial Officer 1995 $ 100,715 $ 191,761 $ 1,224 2,052 $ 450
----
Tas Tsonis........................ 1997 $ 321,360 $ 372,373 $ 9,600 21,875 -
----
Vice President and President of 1996 $ 308,591 $ 355,306 $ 9,600 1,954 -
----
Pulse Microsystems Ltd. 1995 $ 300,000 $ 116,917 $ 8,800 23,804 -
----
Brian Goldberg.................... 1997 $ 321,360 $ 372,373 $ 9,600 21,875 -
----
Vice President and Executive Vice 1996 $ 308,591 $ 355,306 $ 9,600 1,954 -
----
President of Pulse Microsystems Ltd. 1995 $ 300,000 $ 116,917 $ 8,800 23,804 -
----
</TABLE>
7
<PAGE>
Stock Options
The following table discloses information concerning stock options granted
to the Named Executives during the Company's fiscal year ended January 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Individual Grants Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term (2)
% of Total Market
Options Exercise or Price on
Options Granted to Employees Base Price Date of Expiration
Name Granted (#) in Fiscal Year(1) ($/share) Grant Date 5%($) 10%($)
---- ----------- ----------------- --------- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Henry Arnberg 37,500 15.4% $ 15.95 $14.50 5/14/01 $ 95,853 $277,590
Paul Levine 37,500 15.4% $ 15.95 $14.50 5/14/01 $ 95,853 $277,590
Kenneth Shifrin 12,500 5.1% $ 14.50 $14.50 5/14/01 $ 50,076 $110,655
3,125 1.3% $ 15.50 $15.50 6/21/01 $ 13,382 $ 29,572
Tas Tsonis 21,875 9.0% $ 14.50 $14.50 5/14/01 $ 87,633 $193,646
Brian Goldberg 21,875 9.0% $ 14.50 $14.50 5/14/01 $ 87,633 $193,646
</TABLE>
(1) One-third of the shares covered by the options are exercisable after
one year; two thirds after two years; and all after three years.
(2) The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates required by the SEC and therefore, are not intended to
forecast possible future appreciation, if any, of the stock price.
Option Exercises and Holdings
The following table sets forth information concerning the exercise of stock
options by the Named Executives during the Company's fiscal year ended January
31, 1997, the number of options owned by the Named Executives and the value of
any in-the-money unexercised stock options as of January 31, 1997.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercisable
Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) $ Unexercisable Unexercisable (1)
---- --------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
Henry Arnberg 0 0 9,114/44,012 $144,856/$337,462
Paul Levine 0 0 9,114/44,012 $144,856/$337,462
Ken Shifrin 0 0 2,052/15,625 $35,882/$119,922
Tas Tsonis 0 0 22,501/25,132 $611,826/$222,811
Brian Goldberg 0 0 22,501/25,132 $611,826/$222,811
</TABLE>
-------------------
(1) Represents the closing price of the Company's common stock listed on
the NASDAQ National Market on January 31, 1997 minus the respective exercise
prices.
8
<PAGE>
Stock Option Plans
The Company maintains two stock option plans pursuant to which options to
purchase an aggregate of 984,375 shares of Class A Common Stock may be granted.
1993 Stock Option Plan. The 1993 Stock Option Plan was adopted by the Board
of Directors in December 1993 and was approved by the stockholders of the
Company in July 1994 (the "1993 Plan"). The 1993 Plan has 750,000 shares of
Class A Common Stock reserved for issuance upon exercise of options designated
as either (i) incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended (the "Code"), or (ii) non-qualified options. ISOs may be
granted under the 1993 Plan to employees and officers of the Company.
Non-qualified options may be granted to consultants, directors (whether or not
they are employees), employees or officers of the Company.
The purpose of the 1993 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and to give them a greater personal
interest in the success of the Company. The 1993 Plan is administered by the
Stock Option Committee. The Committee, within the limitations of the 1993 Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, the time, manner and form of payment upon
exercise of an option, and whether restrictions such as repurchase rights in the
Company are to be imposed on shares subject to options. Options granted under
the 1993 Plan may not be granted at a price less than the fair market value of
the Class A Common Stock on the date of grant (or 110% of fair market value in
the case of persons holding 10% or more of the voting stock of the Company). The
aggregate fair market value of shares for which ISOs granted to any person are
exercisable for the first time by such person during any calendar year (under
all stock option plans of the Company and any related corporation) may not
exceed $100,000. The 1993 Plan will terminate in December 2003; however, options
granted under the 1993 Plan will expire not more than five years from the date
of grant. Options granted under the 1993 Plan are not transferable during an
optionee's lifetime but are transferable at death by will or by the laws of
descent and distribution.
1994 Non-Employee Director Stock Option Plan. The 1994 Non-Employee
Director Stock Option Plan (the "Directors Plan") was adopted by the Board of
Directors in September 1994 and was approved by the stockholders of the Company
in June 1995. The Directors Plan has 234,375 shares of Class A Common Stock
reserved for issuance. Pursuant to the terms of the Directors Plan, each
independent unaffiliated Director shall automatically be granted, subject to
availability, without any further action by the Board of Directors or the Stock
Option Committee: (i) a non-qualified option to purchase 7,500 shares of Class A
Common Stock upon their election to the Board of Directors; and (ii) a
non-qualified option to purchase 2,500 shares of Class A Common Stock on the
date of each annual meeting of stockholders following their election to the
Board of Directors. The exercise price of each option is the fair market value
of the Company's Class A Common Stock on the date of grant. Each option expires
five years from the date of grant and vests in three annual installments of 33%
each on the first, second and third anniversary of the date of grant. Options
granted under the Directors Plan are generally not transferrable during an
optionee's lifetime but are transferrable at death by will or by the laws of
descent and distribution. In the event an optionee ceases to be a member of the
Board of Directors (other than by reason of death or disability), then the
non-vested portion of the option immediately terminates and becomes void and any
vested but unexercised portion of the option may be exercised for a period of
180 days from the date the optionee ceased to be a member of the Board of
Directors. In the event of death
9
<PAGE>
or permanent disability of an optionee, all options accelerate and become
immediately exercisable until the scheduled expiration date of the option.
Stock Performance Graph
The following graph compares the percentage change in the cumulative total
stockholder return for the period beginning on February 17, 1994, and ending on
January 31, 1997, based upon the market price of the Company's Class A Common
Stock, with the cumulative total return of the S&P 500 and a defined peer group
based on similar market capitalization. The Company has elected to compare its
yearly percentage change in total stockholder return against a market
capitalization-based peer group due to the lack of publicly-held competitors in
the Company's industry. The Company therefore does not believe that it can
reasonably identify an industry-based peer group. The graph assumes a $100
investment on February 17, 1994 in each of the indices and the reinvestment of
any and all dividends.
Comparison of Five-Year Cumulative Total Return Among Hirsch International
Corp., S&P 500 Index and Market Capitalization-Based Peer Group
<TABLE>
<CAPTION>
Period Ending Hirsch International Corp. S&P 500 Index Market Capitalization-Based
------------- -------------------------- ------------- -------------------
Peer Group
----------
<S> <C> <C> <C>
Measurement
Pt-2/17/94 $100 $100 $100
1/31/95 $133 $102 $106
1/31/96 $219 $141 $124
1/31/97 $459 $179 $119
</TABLE>
Employment Agreements
The Company has entered into five year employment agreements with Messrs.
Arnberg, Levine and Shifrin which expire February 17, 1999. These employment
agreements provide that each of Messrs. Arnberg and Levine will receive minimum
annual compensation of $350,000 for fiscal years beginning February 1, 1994. The
employment agreement for Mr. Shifrin provides for minimum annual compensation of
$100,000 and a bonus equal to 2% of pre-tax profits of the Company. The
employment agreements for Messrs. Arnberg and Levine also provide for bonuses
equal to 5% of pre-tax profits of the Company and use of an automobile. All
employment agreements provide for cost of living increases, reimbursement of
business expenses, health insurance and related benefits. Each employment
agreement requires that all of such executive's business time be devoted to the
Company and provides that it may be terminated if the executive dies or becomes
disabled (defined in the employment agreement as the inability to perform duties
for six consecutive months or nine months in any twelve-month period) or if the
Company discontinues operating its business. All employment agreements further
provide that each of Messrs. Arnberg, Levine and Shifrin will not compete with
the Company during the term of the agreement and for a period of two years from
the termination of the agreement. The employment agreements do not contain
change of control provisions.
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Tas Tsonis and Brian Goldberg have each entered into a five-year employment
agreement with Pulse, guaranteed by the Company, providing each with an annual
base salary of $300,000. In addition, Messrs. Tsonis and Goldberg are entitled
to an annual bonus equal to 25% of annual pre-tax profits of Pulse between
$400,000 and $1,200,000 and 12.5% of annual pre-tax profits in excess of
$1,200,000. If Pulse achieves certain performance standards as defined in the
employment agreements, each employment agreement may be extended at the option
of the employee for an additional three years upon the same terms except that
the bonus will be 3.75% of the first $1,200,000 of pre-tax profits and 12.5% of
the excess above $1,200,000 of pre-tax profits. Upon expiration of the first
renewal period, each employment agreement may be extended at the option of the
employee for a final two-year term upon the same terms and conditions as during
the first renewal term except there is no further right of renewal. In addition,
each employment agreement provides for cost of living increases, reimbursement
of business expenses, health insurance and related benefits and an automobile
allowance. Each employment agreement requires that all of such executive's
business time be devoted to the Company. Each Employment Agreement also contains
provisions for termination if the employee dies or becomes disabled (defined in
the employment agreement as the inability to perform duties for six consecutive
months or nine months in any twelve-month period) or if the Company discontinues
operating its business or for cause (as defined in the employment agreement). In
connection with each employment agreement, Messrs. Tsonis and Goldberg entered
into a non-competition undertaking with the Company pursuant to which Messrs.
Tsonis and Goldberg have agreed not to compete with the Company during their
term of employment and for a period of two years thereafter. The employment
agreements do not contain change of control provisions.
401(k) Plan
The Company sponsors a voluntary contribution profit sharing plan qualified
under Section 401(k) of the Code (the "401(k) Plan"). Employees of the Company
who have attained the age of 21 and who complete one year of continuous service
are eligible to participate in the 401(k) Plan. Under the 401(k) Plan, an
employee may elect to contribute annually on a pre-tax basis to a retirement
account a specified percentage of his or her compensation. Each employee is
fully vested at all times with respect to his or her contributions. Within
certain limits prescribed by the 401(k) Plan and applicable law, the Board of
Directors may authorize matching contributions and discretionary employer
contributions to the 401(k) Plan up to a maximum of two percent of an eligible
employee's annual compensation. For fiscal 1997, 1996 and 1995, the Company
contributed $3,000, $3,000 and $3,000, respectively, for the account of Henry
Arnberg and $3,000, $3,000 and $3,000, respectively, for the account of Paul
Levine. For fiscal 1997, 1996 and 1995 the Company made contributions of $0,
$2,075 and $450, respectively, for Kenneth Shifrin. Tas Tsonis and Brian
Goldberg do not participate in the 401(k) Plan.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Prior to the Company's initial public offering in February 1994, the
Company was privately owned by only two stockholders and did not have a
Compensation Committee of its Board of Directors. In May 1994, the Company
formed a Compensation Committee. Prior to the formation of the Compensation
Committee, decisions regarding compensation were made by Henry Arnberg and Paul
Levine, the Company's sole stockholders and its Chairman, President and Chief
Executive Officer and Executive Vice President, Chief Operating Officer and
Secretary, respectively. Messrs. Arnberg and Levine, in their capacities as
directors, made all decisions concerning compensation of executive officers for
the Company's fiscal year ended January 31, 1994, including entering into five
year employment
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<PAGE>
agreements between themselves and the Company, which agreements became
effective February 17, 1994 and terminate February 17, 1999.
Board Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three independent outside directors of the Company.
The Committee focuses on compensating Company executives on a competitive
basis with other comparably sized and managed companies; in a manner consistent
and supportive of overall Company objectives; and through a compensation plan
which balances the long-term and short-term strategic initiatives of the
Company. The Committee intends that the Company's executive compensation program
will:
(1) reward executives for strategic management and enhancement of
stockholder value;
(2) reflect each executive's success at resolving key operational issues;
(3) facilitate both the short-term and long-term planning process; and
(4) attract and retain key executives believed to be critical to the
long-term success of the Company.
The Company's compensation program for executive officers generally
consists of a fixed base salary, performance-related annual bonus awards and
long-term incentive compensation in the form of stock options. In addition,
Company executives are able to participate in various benefit plans generally
available to other full-time employees of the Company.
In reviewing the Company and executives' performance over the past fiscal
year, the Committee took into consideration, among other things, the following
performance factors in making its compensation recommendations: revenues, net
income and cash flow.
Base Salary
Base salary for the Company's executives is intended to provide competitive
remuneration for services provided to the Company over a one year period. Base
salaries are set at levels designed to attract and retain the most appropriately
qualified individuals for each of the key management level positions within the
Company. Minimum base salary levels for the Named Executives are determined
according to employment agreements which are in effect through February 17,
1999.
Short-Term Incentives
Short-term incentives are paid primarily to recognize specific operating
performance achieved within the last fiscal year. Since such incentive payments
are related to a specific year's performance, the Committee understands and
accepts that such payments may vary considerably from one year to the next. The
Company's bonus program ties executive compensation directly back to the annual
performance of both the individual executive and the Company overall. Through
this program, in fiscal year 1997, each of the Named Executives' actual bonus
payment was derived from specific measures of Company and individual
performance. Depending on management level and seniority, executives within each
entity are able to earn a percentage of the base salary as a performance-related
bonus. The actual annual bonus awards payable to the Named Executives are based
on the terms established in their employment agreements which are in effect
through February 17, 1999.
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Long-Term Incentives
In keeping with its desire to align long-term executive compensation with
long-term shareholder value improvements, the Committee has again awarded stock
option grants to executives of the Company. Recognizing the value of these
grants in motivating long-term strategic decision making, the use of the stock
options, in compensating other members of Company management was again employed
by the Company. In fiscal year 1997, the five Named Executives received an
aggregate of 134,375 stock options. Options were granted to the President and
Executive Vice President of the Company at an exercise price equal to 110% of
the grant date market price with the remaining options having been granted at an
exercise price equal to the grant date market price, making the options valuable
to these executives only if the share price appreciates. The options vest over
three years as long as the option recipient remains an employee of the Company.
Chief Executive Officer
Through February 17, 1999, Mr. Henry Arnberg, Chief Executive Officer, will
be compensated under a previously disclosed employment agreement between himself
and the Company. This contract establishes the minimum levels of compensation
which are to be paid to Mr. Arnberg by the Company.
During Fiscal 1997, Mr. Arnberg received an increase in his base salary of
approximately 3.2% from the prior year's level. In addition to his base salary,
Mr. Arnberg is eligible to participate in the short-term or long-term incentive
programs outlined above for the other Named Executives. During Fiscal Year 1997,
the amount of Mr. Arnberg's short-term incentive bonus was calculated based on
the terms established in the employment agreement. Based on this formula, Mr.
Arnberg received a $878,827 bonus payment for fiscal year 1997.
Finally, Mr. Arnberg was granted 37,500 stock options as part of the
Company's previously described long-term incentive program. These options were
granted at an exercise price equal to 110% of the grant date market price, and
therefore attain value only through an increase in the publicly traded price per
share. The options vest over three years.
The Committee believes that Mr.Arnberg's compensation reflects his
contribution to the Company and the achievement of specific long-term and
short-term objectives of the Company. In addition to the Company's financial
performance, the Committee has taken into consideration a number of other
managerial and leadership factors.
COMPENSATION COMMITTEE:
Marvin Broitman
Herbert M. Gardner
Douglas Schenendorf
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of shares of Class
A Common Stock and Class B Common Stock as of April 25, 1997, by (i) each person
who owns more than 5% of the
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outstanding shares of Class A and Class B Common Stock; (ii) each executive
officer and director of the Company; and (iii) all officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner(1) Title of Class(2) Beneficial Ownership of Class
<S> <C> <C> <C>
Henry Arnberg...................... Class A 445,126(3) 8.36%
Class B 1,493,518(3) 54.66%
Paul Levine........................ Class A 391,977(4) 7.36%
Class B 1,163,731(4) 42.59%
Kenneth Shifrin.................... Class A 8,041(5) *
Class B - -
Tas Tsonis......................... Class A 115,493(6) 2.17%
Class B - -
Brian Goldberg..................... Class A 115,493(7) 2.17%
Class B - -
Ronald Krasnitz ................... Class A 52,012(8) *
Class B - -
Marvin Broitman.................... Class A 13,231(9) *
Class B - -
Herbert M. Gardner................. Class A 19,659(10) *
Class B - -
Douglas Schenendorf................ Class A 19,661(11) *
Class B - -
All Officers and Directors as a group Class A 1,180,693 22.18%
(nine persons)................... Class B 2,657,249 97.26%
</TABLE>
* less than one percent
(1) All addresses are c/o Hirsch International Corp., 200 Wireless
Boulevard, Hauppauge, New York 11788.
(2) The Company's outstanding Common Stock consists of two classes. Class A
Common Stock and Class B Common Stock. The Class A Common Stock and the Class B
Common Stock are substantially identical except that two-thirds of the directors
of the Company will be elected by Messrs. Arnberg and Levine, the holders of the
Class B Common Stock, as long as the number of outstanding Shares of Class B
Common Stock equals or exceeds 400,000 shares.
(3) Includes 100,000 shares of Class B Common Stock and 64,063 shares of
Class A Common Stock owned by his wife and 25,000 shares of Class B Common Stock
and 16,017 shares of Class A Common Stock owned by his minor child as to which
he disclaims beneficial ownership. Includes options to purchase
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<PAGE>
7,812, 2,604, and 12,500 shares of Class A Common Stock at exercise prices
of $5.90, $10.04 and $15.95, respectively. Does not include options to purchase
3,907, 1,302, and 25,000 shares of Class A Common Stock at exercise prices of
$5.90, $10.04, and $15.95, respectively.
(4) Includes 100,000 shares of Class B Common Stock and 64,065 shares of
Class A Common Stock owned by his wife and 100,000 shares of Class B Common
Stock and 64,068 shares of Class A Common Stock owned by trusts created for the
benefit of his minor children as to which he disclaims beneficial ownership.
Includes options to purchase 7,812, 2,604, and 12,500 shares of Class A Common
Stock at exercise prices of $5.90, $10.04, and $15.95, respectively. Does not
include options to purchase 3,907, 1,302, and 25,000 shares of Class A Common
Stock at exercise prices of $5.90, $10.04, and $15.95, respectively.
(5) Includes options to purchase 2,052, 4,166 and 1,041 shares of the Class
A Common Stock at exercise prices of $4.87, $14.50 and $15.50, respectively.
Does not include options by purchase 8,334 and 2,084 shares of the Class A
Common Stock at exercise prices of $14.50 and $15.50, respectively.
(6) Includes 59,415 shares owned by the Tsonis Family Trust. Includes
options to purchase 17,944, 3,906, 1,302, and 7,291 shares of Class A Common
Stock at exercise prices of $4.87, $5.36, $9.12, and $14.50, respectively. Does
not include options to purchase 1,954, 652, and 14,584 shares of Class A Common
Stock at exercise prices of $5.36, $9.12, and $14.50, respectively.
(7) Includes 59,415 shares owned by the Goldberg Klapman Family Trust.
Includes options to purchase 17,944, 3,906, 1,302, and 7,291 shares of Class A
Common Stock at exercise prices of $4.87, $5.36, $9.12, and $14.50,
respectively. Does not include options to purchase 1,954, 652, and 14,584 shares
of Class A Common Stock at exercise prices of $5.36, $9.12, and $14.50,
respectively.
(8) Includes options to purchase 41,406 shares of Class A Common Stock at
an exercise price of $16.20. Does not include 124,219 options to purchase shares
of Class A Common Stock at an exercise price of $16.20.
(9) Includes options to purchase 7,812, 2,604, and 1,041 shares of Class A
Common Stock at exercise prices of $5.36, $9.12 and $15.50, respectively. Does
not include options to purchase 3,907, 1,303 and 2,084 shares of Class A Common
Stock at exercise prices of $5.36, $9.12 and $15.50, respectively.
(10) Includes 8,202 shares held in retirement account. Also, includes 1,140
shares owned by his wife as to which he disclaims beneficial ownership. Includes
options to purchase 7,812, 2,604 and 1,041 shares of Class A Common Stock at
exercise prices of $5.36, $9.12 and $15.50, respectively. Does not include
options to purchase 3,907, 1,303 and 2,084 shares of Class A Common Stock at
exercise prices of $5.36, $9.12 and $15.50, respectively.
(11) Includes 1,640 shares owned by his wife and 4,920 shares owned by his
minor children as to which he disclaims beneficial ownership. Includes option to
purchase 7,812, 2,604 and 1,041 shares of Class A Common Stock at exercise
prices of $5.36, $9.12 and $15.50, respectively. Does not include options to
purchase 3,907, 1,303 and 2,084 shares of Class A Common Stock at exercise
prices of $5.36, $9.12 and $15.50, respectively.
The Company is unaware of any arrangements which may result in a change in
control of the Company.
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting Persons")
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with copies of these reports.
Based solely on the Company's review of the copies of such forms received by it
during its fiscal year ended January 31, 1997, the Company believes that the
Reporting Persons complied with all filing requirements applicable to them.
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Certain Relationships and Related Transactions
The Company has advanced approximately $267,000 for premiums on split
dollar life insurance for the Company's President and Executive Vice President.
The President and Executive Vice President are the beneficiaries of these
policies. These advances are collateralized by the cash surrender value of the
policies, which was $294,000 at January 31, 1997.
The Company purchases certain policies of insurance through Douglas
Schenendorf, a director of the Company. In Fiscal 1997, 1996, and 1995 the
Company paid insurance premiums of $381,519, $442,671 and $544,860,
respectively, to companies with which Mr. Schenendorf is affiliated.
The Company's By-Laws provide that all transactions between the Company and
any of its officers, directors or affiliates must be approved by a majority of
the unaffiliated members of the Board of Directors, will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and will be in connection with bona fide business purposes.
2. AMENDMENT OF STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
THEREUNDER FROM 750,000 TO 1,050,000
At the Meeting, the Company's stockholders will be asked to approve an
amendment to the Stock Option Plan (the "Plan") to increase the number of shares
of Class A Common Stock authorized for issuance thereunder from 750,000 to
1,050,000. The Plan was adopted by the Board of Directors of the Company in
December 1993, and approved by the Stockholders of the Company in July 1994.
As of May 1, 1997, options to purchase 40,281 shares of Class A Common
Stock were exercisable under the Stock Option Plan, and options to purchase
588,197 shares of Class A Common Stock were outstanding but not exercisable,
leaving 121,110 available for future grant under the Stock Option Plan.
The Board believes that in order to enable the Company to continue to
attract and retain personnel of the highest caliber, provide incentives for
certain directors, officers and employees of the Company and certain other
persons instrumental to the success of the Company and to continue to promote
the wellbeing of the Company, it is in the best interest of the Company and its
stockholders to provide to such persons, through the granting of stock options,
the opportunity to participate in the value and/or appreciation in value of the
Company's Common Stock. The Board has found that the grant of options under the
Plan has proven to be a valuable tool in attracting and retaining key employees.
It believes that such authority, in view of the substantial growth of the
Company and need to continue to expand, should be expanded to increase the
number of options which may be granted under the Plan. The Board believes that
such authority (i) will provide the Company with significant means to attract
and retain talented personnel; (ii) will result in saving cash, which otherwise
would be required to maintain current key employees and adequately attract and
reward key personnel; and (iii) consequently will prove beneficial to the
Company's ability to be competitive.
If the above-described amendment to the Plan is approved by the
stockholders, additional options may be granted under the Plan, the timing,
amounts and specific terms of which cannot be determined at this time.
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<PAGE>
The following summary of the Plan does not purport to be complete, and is
subject to and qualified in its entirety by reference to the full text of the
Plan, as proposed to be amended, set forth as Exhibit "A" to this Proxy
Statement.
Summary of the Plan
The Plan has 750,000 shares of Common Stock reserved for issuance upon the
exercise of options designated as either (i) incentive stock options ("ISOs")
under the Code or (ii) non-qualified stock options. ISOs may be granted under
the Plan to employees and officers of the Company. Non-qualified options may be
granted to consultants, directors (whether or not they are employees), employees
or officers of the Company. In certain circumstances, the exercise of stock
options may have an adverse effect on the market price of the Common Stock.
The purpose of the Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and give them a greater personal
interest in the success of the Company. The Plan is administered by the Stock
Option Committee. The Committee, within the limitations of the Plan, determines
the persons to whom options will be granted, the number of shares to be covered
by each option, whether the options granted are intended to be ISOs, the
duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, the time, manner and form of payment upon
exercise of an option, and whether restrictions such as repurchase rights in the
Company are to be imposed on the shares subject to options. Options granted
under the Plan may not be granted at a price less than the fair market value of
the Common Stock on the date of the grant (or 110% of fair market value in the
case of persons holding 10% or more of the voting stock of the Company). The
aggregate fair market value of shares for which ISOs granted to any person are
exercisable for the first time by such person during any calendar year (under
all stock option plans of the Company and any related corporation) may not
exceed $100,000. The Plan will terminate in December 2003; however, options
granted under the Plan will expire not more than five years from the date of
grant. Options granted under the Plan are not transferable during an optionee's
lifetime but are transferable at death by will or by the laws of descent and
distribution.
Certain Federal Income Tax Consequences of the Plan
The following is a brief summary of the Federal income tax aspects of stock
options to be granted under the Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended to be
exhaustive, and does not describe state or local tax consequences.
Incentive Stock Options. A participant will recognize no taxable income
upon the grant or exercise of an ISO. Upon a disposition of the shares after the
later of two years from the date of grant and one year after the transfer of the
shares to the participant, (i) the participant will recognize the difference, if
any, between the amount realized and the exercise price as long-term capital
gain or long-term capital loss (as the case may be) if the shares are capital
assets; and (ii) the Company will not qualify for any deduction in connection
with the grant or exercise of the options. The excess, if any, of the fair
market value of the shares on the date of exercise of an ISO over the exercise
price will be treated as an item of adjustment for a participant's taxable year
in which the exercise occurs and may result in an alternative minimum tax
liability for the participant. In the case of a disposition of shares in the
same taxable year as the exercise, where the amount realized on the disposition
is less than the fair market value of the shares on the date of exercise, there
will be no adjustment since the amount treated as an item of
17
<PAGE>
adjustment, for alternative minimum tax purposes, is limited to the excess
of the amount realized on such disposition over the exercise price which is the
same amount included in the regular taxable income.
If Common Stock acquired upon the exercise of an ISO is disposed of prior
to the expiration of the holding periods described above, (i) the participant
will recognize ordinary compensation income in the taxable year of disposition
on an amount equal to the excess, if any, of the lesser of the fair market value
of the shares on the date of exercise or the amount realized on the disposition
of the shares, over the exercise price paid for such shares; and (ii) the
Company will qualify for a deduction equal to any such amount recognized,
subject to the limitation that the compensation be reasonable. The participant
will recognize the excess, if any, of the amount realized over the fair market
value of the shares on the date of exercise, if the shares are capital assets,
as short-term or long-term capital gain, depending on the length of time that
the participant held the shares, and the Company will not qualify for a
deduction with respect to such excess.
Subject to certain exceptions for disability or death, if an ISO is
exercised more than three months following the termination of the participant's
employment, the option will generally be taxed as a non- qualified stock option.
See "Non-Qualified Stock Options."
Non-Qualified Stock Options. Except as noted below, with respect to
non-qualified stock options (i) upon grant of the option, the participant will
recognize no income; (ii) upon exercise of the option (if the shares of Common
Stock are not subject to a substantial risk of forfeiture), the participant will
recognize ordinary compensation income in an amount equal to the excess, if any,
of the fair market value of the shares on the date of exercise over the exercise
price, and the Company will qualify for a deduction in the same amount, subject
to the requirement that the compensation be reasonable; (iii) the Company will
be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the participant; and (iv) on a sale of the shares, the participant
will recognize gain or loss equal to the difference, if any, between the amount
realized and the sum of the exercise price and the ordinary compensation income
recognized. Such gain or loss will be treated as capital gain or loss if the
shares are capital assets and as short-term or long-term capital gain or loss,
depending upon the length of time that the participant held the shares.
Recommendation and Vote Required
The vote of the holders of a majority of the shares of the Company's Common
Stock present in person or represented by proxy at the Meeting is required to
adopt the foregoing proposal to amend the Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 2.
3. SELECTION OF AUDITORS
The Board of Directors recommends that the stockholders ratify the
appointment of Deloitte & Touche LLP, independent auditors, which served as the
Company's independent auditors for the last fiscal year, as independent auditors
to audit the Company's Consolidated Financial Statements for the fiscal year
ending January 31, 1998. A representative of Deloitte & Touche is expected to be
present at the Meeting and will be given the opportunity to make a statement and
to answer any questions any
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stockholder may have with respect to the Consolidated Financial Statements
of the Company for the year ended January 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 3.
4. OTHER BUSINESS
The Board of Directors has no knowledge of any other business which may
come before the Meeting and does not intend to present any other business.
However, if any other business shall properly come before the Meeting or any
adjournment thereof, the persons named as proxies will have discretionary
authority to vote the shares of Class A Common Stock represented by the
accompanying proxy in accordance with their best judgment.
Stockholder's Proposals
Any stockholder of the Company who wishes to present a proposal to be
considered at the next annual meeting of stockholders of the Company and who
wishes to have such proposal presented in the Company's proxy statement for such
Meeting must deliver such proposal in writing to the Company at 200 Wireless
Boulevard, Hauppauge, New York 11788, on or before February 23, 1998. In order
to curtail controversy as to the date on which the proposal was received by the
Company, it is suggested that proponents submit their proposals by certified
mail, return receipt requested.
By Order of the Board of Directors
Paul Levine, Secretary
The Company will furnish without charge to each person whose proxy is being
solicited by this proxy statement, on the written request of such person, a copy
of the Company's Annual Report on Form 10-K, for its fiscal year ended January
31, 1997. Such request should be addressed to Stockholder Relations, Hirsch
International Corp., 200 Wireless Boulevard, Hauppauge, New York 11788.
Dated: May 20, 1997
19
EXHIBIT 22.a
HIRSCH INTERNATIONAL CORP.
STOCK OPTION PLAN
1. Plan; Purpose; General. The purpose of this Stock Option Plan (the
"Plan") is to advance the interests of Hirsch International Corp. (the
"Company") by enhancing the ability of the Company to attract and retain
selected employees, consultants, advisors to the Board of Directors and
qualified directors (collectively the "Participants") by creating for such
Participants incentives and rewards for their contributions to the success of
the Company, and by encouraging such Participants to become owners of shares of
the Company's Class A Common Stock, par value $0.01 per share, as the title or
par value may be amended (the "Shares").
Options granted pursuant to the Plan may be incentive stock options
("Incentive Options") as defined in the Internal Revenue Code of 1986, as
amended (the "Code") or non-qualified options, or both. The proceeds received
from the sale of Shares pursuant to the Plan shall be used for general corporate
purposes.
1. Effective Date of Plan. The Plan will become effective upon approval by
the Board of Directors (the "Board"), and shall be subject to the approval by
the holders of at least a majority of all Shares present in person and by proxy
and entitled to vote thereon at a meeting of stockholders of the Company within
12 months after the Company has a class of equity securities registered under
the Securities Act of 1933, as amended (the "Act").
2. Administration of the Plan. The Plan will be administered by the Board
of the Company. The Board will have authority, not inconsistent with the express
provisions of the Plan, to take all action necessary or appropriate thereunder,
to interpret its provisions, and to decide all questions and resolve all
disputes which may arise in connection therewith. Such determinations of the
Board shall be conclusive and shall bind all parties.
The Board may, in its discretion, delegate its powers with respect to the
Plan to an employee benefit plan committee or any other committee (the
"Committee"), in which event all references to the Board hereunder, including
without limitation the references in Section 9, shall be deemed to refer to the
Committee. The Committee shall consist of not fewer than two members. Each of
the members must be a "disinterested person" as that term is defined in Rule
16b-3 adopted pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"). A majority of the members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by the majority of its members
present at a meeting. Any determination of the Committee under the Plan may be
made without notice or meeting of the Committee by a writing signed by all of
the Committee members.
The Board and the Committee, if any, shall have the authority to determine
eligibility, the number of options granted and the exercise price of options.
3. Eligibility. The Participants in the Plan shall be all employees,
consultants, advisors to the Board of Directors and qualified directors of the
Company or any of its present or future subsidiaries (as defined in Section 8)
whether or not they are also officers of the Company. Members of the Committee
are
A-1
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eligible only if they do not exercise any discretion in selecting
Participants who receive grants of options, in determining the number of shares
to be granted to any Participant or in determining the exercise price of any
options, or if counsel to the Company may otherwise advise the Committee that
the taking of any such action does not impair the status of such eligible
Committee members as "disinterested persons" within the meaning of Exchange Act
Rule 16b-3.
4. Grant of Options.
(a) The Board shall grant options to Participants that it, in its sole
discretion, selects. Options shall be granted on such terms as the Board shall
determine except that Incentive Options shall be granted on terms that comply
with the Code and Regulations thereunder.
(b) No options shall be granted after December 3, 2003 but options
previously granted may extend beyond that date.
5. Terms and Conditions of Options
(a) Exercise Price. Except as provided in Section 5(b) of this Plan, the
purchase price per Share for Shares issuable upon exercise of options shall be a
minimum of 100% of fair market value on the date of grant and shall be
determined by the Board. For this purpose, "fair market value" will be
determined as set forth in Section 8. Notwithstanding the foregoing, if any
person to whom an option is to be granted owns in excess of ten percent of the
outstanding capital stock of the Company, then no option may be granted to such
person for less than 110% of the fair market value on the date of grant as
determined by the Board.
(b) Period of Options. Unless earlier terminated, options shall terminate
and no longer be exercisable five years from the date of grant.
(c) Payment for Delivery of Shares. Shares which are subject to options
shall be issued only upon receipt by the Company of full payment of the purchase
price for the Shares as to which the option is exercised. The purchase price
shall be payable by the Participant to the Company either (i) in cash or by
check, bank draft or money order payable to the order of the Company; or (ii)
for Incentive Options, through the delivery of Shares owned by the Participant
for a period of not less than six months and for which the Participant has good
title (free and clear of any liens and encumbrances) having a fair market value
equal to the purchase price; or (iii) for non-qualified options, by a
combination of cash and Shares as provided in (i) and (ii) above.
The Company shall not be obligated to deliver any Shares unless and until,
in the opinion of the Company's counsel, all applicable federal and state laws
and regulations have been complied with, nor, if the outstanding Class A Common
Stock is at the time listed on any securities exchange, unless and until the
Shares to be delivered have been listed (or authorized to be added to the list
upon official notice of issuance) upon such exchange, nor unless or until all
other legal matters in connection with the issuance and delivery of Shares have
been approved by the Company's counsel. Without limiting the generality of the
foregoing, the Company may require from the person exercising an option such
investment representation or such agreement, if any, as counsel for the Company
may consider necessary in order to comply with the Act and applicable state
securities laws.
A Participant shall have the rights of a shareholder only as to Shares
actually acquired by him under the Plan.
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(d) Vesting. Except for options granted pursuant to Section 5(b) of this
Plan, the Board may impose such vesting restrictions as it sees fit at the time
of grant.
(e) Non-Transferability of Options. Options may not be sold, assigned or
otherwise transferred or disposed of in any manner whatsoever except as provided
in Section 6(g).
(f) Forfeiture of Options upon Termination of Relationship. All previously
unexercised options including options which have not vested shall terminate and
be forfeited automatically upon the termination for any reasons whatsoever of a
Participant's status as an employee, consultant on advisor to the Board. Except
as provided in Section 6(g) below, unexercised options granted to directors
shall not terminate or be forfeited in the event such person is no longer a
director of the Company.
(g) Death. If a Participant dies at a time when he is entitled to exercise
an option, then at any time or times within one year after his death (or such
further period as the Board may allow) such options may be exercised, as to all
or any of the Shares which the Participant was entitled to purchase immediately
prior to his death, by his personal representative or the person or persons to
whom the options are transferred by the will or the applicable laws of descent
and distribution, and except as so exercised such options will expire at the end
of such period.
(h) Loans to Exercise Option. If requested by any Participant to whom a
grant of non-qualified options has been made, the Company or any subsidiary may
loan such person the amount of money necessary to pay the federal income taxes
incurred as a result of the exercise of any options (or guarantee a bank loan
for such purpose), assuming that the Participant is in the maximum federal
income tax bracket six months from the time of exercise and assuming that the
Participant has no deductions which would reduce the amount of such tax owed.
The loan shall be made on or after April 15th of the year following the year in
which the amount of tax is determined as may be requested by the Participant and
shall be made on such terms as the Company or lending bank determines.
(i) Withholding Taxes. To the extent that the Company is required to
withhold taxes for federal income tax purposes in connection with the exercise
of any options, the Company shall have the right to assist the Participant to
satisfy such withholding requirement by (i) the Participant paying the amount of
the required withholding tax to the Company, (ii) the Participant delivering to
the Company Shares of its Class A Common Stock previously owned by the
Participant or (iii) the Participant having the Company retain a portion of the
Shares covered by the option exercise. The number of Shares to be delivered to
or withheld by the Company times the fair market value as defined by Section 9
of this Plan shall equal the cash required to be withheld. To the extent that
the Company elects to allow the Participant either to deliver or have withheld
Shares of the Company's Class A Common Stock, the Board or the Committee may
require him to make such election only during certain periods of time as may be
necessary to comply with appropriate exemptive procedures regarding the
"short-swing" profit provisions of Section 16(b) of the Exchange Act or to meet
certain Code requirements.
6. Shares Subject to Plan.
(a) Number of Shares and Stock to be Delivered. Shares delivered pursuant
to this Plan shall in the discretion of the Board be authorized but unissued
Shares of Class A Common Stock or previously issued Shares acquired by the
Company. Subject to adjustments as described below, the aggregate number of
Shares which may be delivered under this Plan shall not exceed 750,000 Shares of
Class A Common Stock of the Company.
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(b) Changes in Stock. In the event of a stock dividend, stock split or
combination of Shares, recapitalization, merger in which the Company is the
surviving corporation or other change in the Company's capital stock, the number
and kind of Shares of stock or securities of the Company to be subject to the
Plan and to options then outstanding or to be granted thereunder, the maximum
number of Shares or securities which may be delivered under the Plan, the option
price and other relevant provisions shall be appropriately adjusted by the
Board, whose determination shall be binding on all persons. In the event of a
consolidation or merger in which the Company is not the surviving corporation or
which results in the acquisition of substantially all the Company's outstanding
stock by a single person or entity, or in the event of the sale or transfer of
substantially all the Company's assets, all outstanding options shall thereupon
terminate.
The Board may also adjust the number of Shares subject to outstanding
options, the exercise price of outstanding options and the terms of outstanding
options to take into consideration material changes in accounting practices or
principles, consolidations or mergers (except those described in the immediately
preceding paragraph), acquisitions or dispositions of stock or property or any
other event if it is determined by the Board that such adjustment is appropriate
to avoid distortion in the operation of the Plan.
7. Definitions.
(a) For purposes of the Plan, a subsidiary is any corporation (i) in which
the Company owns, directly or indirectly, stock possessing 50 percent or more of
the total combined voting power of all classes of stock or (ii) over which the
Company has effective operating control.
(b) The fair market value of the Class A Common Stock shall be deemed to
be:
(i) the closing price of the Company's Class A Common Stock appearing on a
national securities exchange if the Company's common stock is listed on such an
exchange, or if not listed, the average closing bid price appearing on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ");
(ii) if the Shares are not listed on NASDAQ, then the average bid price for
the Company's stock as listed in the National Quotation Bureau's pink sheets;
(iii) if there are no listed bid prices published in the pink sheets, then
the market value shall be based upon the average closing bid price as determined
following a polling of all dealers making a market in the Company's Shares.
8. Indemnification of Board. In addition to and without affecting such
other rights of indemnification as they may have as members of the Board or
otherwise, each member of the Board shall be indemnified by the Company to the
extent legally possible against reasonable expenses, including attorney's fees,
actually and reasonably incurred in connection with any appeal therein, to which
he may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any option granted thereunder, and against all
judgments, fines and amounts paid by his in settlement thereof; provided that
such payment of amounts so indemnified is first approved by a majority of the
members of the Board who are not parties to such action, suit or proceedings, or
by independent legal counsel selected by the Company, in either case on the
basis of a determination that such member acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company; and except that no indemnification shall be made in relation to matters
as to which it shall be adjudged
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<PAGE>
in such action, suit or proceeding that such Board member is liable for a
breach of the duty of loyalty, bad faith or intentional misconduct in his
duties; and provide, further that the Board member shall in writing offer the
Company the opportunity, at its own expense, to handle and defend same.
9. Amendments. The Board may at any time discontinue granting options under
the Plan. The Board may at any time of times amend the Plan or amend any
outstanding option or options for the purpose of satisfying the requirements of
any changes in applicable laws or regulations or for any other purpose which may
at the time be permitted by law, provided that (except to the extent explicitly
required or permitted herein above) no such amendment will, without the approval
of the stockholders of the Company, (a) increase the maximum number of Shares
available under the Plan, (b) reduce the option price of outstanding options or
reduce the price at which options may be granted, (c) extend the time within
which options may be granted, (d) amend the provisions of this Section 10 of the
Plan, (e) extend the period of an outstanding option beyond five years from the
date of grant, (f) adversely affect the rights of any Participant (without his
consent) under any options theretofore granted or (g) be effective if
stockholder approval is required by applicable statute, rule or regulation.
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EXHIBIT 22.b
CLASS A COMMON STOCK PROXY
------------------------------------
HIRSCH INTERNATIONAL CORP.
200 Wireless Boulevard
Hauppauge, NY 11788
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby appoints Henry
Arnberg, Paul Levine, Tas Tsonis and Herbert M. Gardner, and each of them,
proxies with power of substitution to each, for and in the name of the
undersigned to vote all shares of Class A Common Stock of Hirsch International
Corp. (the "Company"), held of record by the undersigned on April 25, 1997 which
the undersigned would be entitled to vote if present at the Annual Meeting of
Shareholders of the Company to be held on June 20, 1997, at 10:00 a.m. at The
Marriott Windwatch, 1717 Motor Parkway, Hauppauge, New York 11788, and any
adjournments thereof, upon the matters set forth in the Notice of Annual
Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting, Proxy
Statement and the Company's 1997 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed Withhold Authority to vote
below (except as marked for all nominees listed
to the contrary below) ______ below ______
(Instruction: To withhold authority to vote for an individual nominee
strike a line through such nominee's name in the list below.)
MARVIN BROITMAN
DOUGLAS SCHENENDORF
RONALD KRASNITZ
2. AMENDMENT OF STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE THEREUNDER FROM 750,000 TO 1,050,000.
FOR ______ AGAINST ______ ABSTAIN ______
3. RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JANUARY 31, 1998.
FOR ______ AGAINST ______ ABSTAIN ______
4. TRANSACTION OF SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF
FOR ______ AGAINST ______ ABSTAIN ______
<PAGE>
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and when
properly executed will be voted as directed herein. If no direction is given,
this Proxy will be voted FOR Proposals 1, 2, 3 and 4.
- ---------------------------------
(Date)
- ---------------------------------
(Signature)
- ---------------------------------
(Signature, if held jointly)
Please sign exactly as name appears below. If Shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please list 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 sign, date and return promptly in the enclosed envelope. No postage
need be affixed if mailed in the United States.
