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 "240.14a-11(c) or "240.14a-12
HIRSCH INTERNATIONAL CORP.
(Name of Registrant as Specified In Its Charter)
Ronald Krasnitz, 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:
Ronald Krasnitz, Secretary, Hirsch International Corp.
4) Date Filed:
<PAGE>
HIRSCH INTERNATIONAL CORP.
(a Delaware corporation)
--------------------------
NOTICE OF 2000 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON AUGUST 4, 2000
--------------------------
To the Stockholders of HIRSCH INTERNATIONAL CORP.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of HIRSCH INTERNATIONAL CORP. (the "Company") will be held on August
4, 2000, at 10:00 A.M. at The Wyndham Wind Watch, 1717 Motor Parkway, Hauppauge,
New York 11788 for the following purposes:
1. to elect seven directors;
2. to ratify the appointment of BDO Seidman LLP as the Company's
independent auditors for the fiscal year ending January 31, 2001;
and
3. to transact such other business as may properly come before the
Meeting and any adjournment or postponement thereof.
The Board of Directors has fixed June 23, 2000, 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 June
26, 2000 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
/s/ Ronald Krasnitz
Ronald Krasnitz, Secretary
Hauppauge, New York
June 29, 2000
<PAGE>
HIRSCH INTERNATIONAL CORP.
200 Wireless Boulevard
Hauppauge, NY 11788
------------------------------
PROXY STATEMENT
------------------------------
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON AUGUST 4, 2000
The enclosed Proxy Statement is solicited by the Board of Directors of
HIRSCH INTERNATIONAL CORP. (the "Company") in connection with the 2000 Annual
Meeting of Stockholders (the "Meeting") to be held on August 4, 2000, at 10:00
a.m. at The Wyndham Wind Watch, 1717 Motor Parkway, Hauppauge, New York 11788
and any adjournment thereof. The Board of Directors has set June 23, 2000, 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 6,487,831 shares of Class A Common Stock and
2,668,139 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 ratification of the appointment of BDO Seidman LLP as the
Company's independent auditors for the fiscal year ending January
31, 2001; and
(3) 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 2000 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 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
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<PAGE>
the Annual Report are being mailed to stockholders on or about June 29, 2000.
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 Executive 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:
Name Age Position
---- --- --------
Henry Arnberg........... 57 Chairman of the Board of Directors and
Chief Executive Officer
Paul Levine............. 47 President and Director
Richard M. Richer....... 48 Vice President of Finance and Chief
Financial Officer
Tas Tsonis.............. 48 Vice President and Director; Chief
Executive Officer of Pulse Microsystems
Ltd.
Brian Goldberg.......... 41 President of Pulse Microsystems Ltd.
Ronald Krasnitz......... 59 Executive Vice President, Secretary and
Director, Chief Operating Officer
Marvin Broitman......... 61 Director
Herbert M. Gardner...... 60 Director
Douglas Schenendorf..... 48 Director
3
<PAGE>
Name Age Position
---- --- --------
Thaddeus Pawelec........ 51 Vice President - Marketing, Vice President
of HAPL Leasing Co., Inc.
Kristof Janowski........ 48 Vice President - National Sales
Howard Arnberg.......... 30 Vice President - New Business Development,
Assistant Secretary and Corporate Counsel
Henry Arnberg has been employed by the Company since 1970, and held the
positions of Chief Executive Officer and Chairman of the Board of Directors of
the Company since 1980. Mr. Arnberg also served as President of the Company
until December 1998. 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
President since December 1998 and a Director of the Company since 1981. From
1981 to December 1998, he served as the Company's Chief Operating Officer,
Executive Vice President and Secretary. Mr. Levine received a Bachelor of
Science in Business from New York University in 1974.
Richard M. Richer has been employed by the Company since January 1999 as
Vice President of Finance and Chief Financial Officer. From 1998 to 1999 Mr.
Richer was Chief Financial Officer at Blue Ridge Farms, Inc. From 1996 to 1998
Mr. Richer was Vice President, Chief Operating Officer and Chief Financial
Officer of Sartorius North America Inc., a division of Sartorius AG, a
scientific instruments manufacturer, with additional responsibilities as
President of Sartorius, Inc. (Puerto Rico) manufacturing division, Head of the
Stainless Fluid Products division, and President of Sartorius, Canada. From 1988
to 1996 Mr. Richer was employed by Joseph E. Seagram & Co., and held various
positions in finance and operations, lastly as a Director of Finance and
Operations for the Tropicana Dole Beverage Division. Mr. Richer earned a
Bachelor of Science from Babson College in 1973, an MBA from Babson College in
1974, and earned the CCM certification in June, 2000.
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. From 1989 to 1999, Mr. Tsonis was the President of Pulse. In
1999, Mr. Tsonis became Chief Executive Officer 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 Microsystems Ltd. and has been
retained or employed by Pulse since that time. From 1989 to 1999, Mr. Goldberg
was the Executive Vice President and Chief Technology Officer of Pulse. Since
1999, Mr. Goldberg has been President and Chief Technology Officer 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.
4
<PAGE>
Ronald Krasnitz was elected Director of the Company in June 1996 and
Executive Vice President, Chief Operating Officer and Secretary in December
1998. Prior to joining the Company, Mr. Krasnitz was employed by Sewing Machine
Exchange, Inc. since 1971. In addition to his positions with the Company, Mr.
Krasnitz presently serves as President 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 secondary public offering in
January 1996. Mr. Gardner is Chairman of the Board of Directors of Supreme
Industries, Inc. a specialized manufacturer of truck bodies and shuttle buses.
Mr. Gardner is also a Director of Nu Horizons Electronics Corp., an electronic
component distributor; Transmedia Network, Inc., a specialized charge card
company; TGC Industries, Inc., a geophysical services company; and Co-Active
Marketing Group, Inc., a marketing and sales promotion company. Mr. Gardner is
also an organizer and proposed Director of Rumson-Fair Haven Bank and Trust
Company, a New Jersey independent bank and commercial trust company currently in
the process of organization.
Douglas Schenendorf was elected a Director of the Company in April 1994.
From 1980 to January 1999, Mr. Schenendorf was the President of D.S.I.
Associates, Inc., an insurance brokerage firm. In February 1999, Mr. Schenendorf
sold D.S.I. Associates, Inc. to Kaye Insurance Associates, Inc. and is currently
a Senior Vice President of Kaye Insurance Associates, Inc.
Thaddeus Pawelec has been employed by the Company as Vice President of
HAPL Leasing Co., Inc. since May 1993. Effective 1999, Mr. Pawelec assumed
additional responsibilities as the Company's Vice President - Marketing.
Kristof Janowski has been employed by the Company since March, 1987. Since
June 1999, Mr. Janowski has served as the Company's Vice President - National
Sales. From October 1994 until June 1999, Mr. Janowski served as the Company's
Vice President - Midwest and West Coast sales.
Howard Arnberg has been employed by the Company since 1995, serving in
various operational roles. He assumed new responsibilities as Vice President -
New Business Development in February 1999 and Assistant Secretary in December
1998, in addition to his role as Corporate Counsel, a position he has held since
late 1995. Mr. Arnberg earned 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. He is a member of the New York State Bar
Association and the American Bar Association.
All Directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. The Company's
executive 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, other than Howard Arnberg, the
Company's Vice President - New Business
5
<PAGE>
Development, Assistant Secretary and General Counsel, who is the son of Henry
Arnberg, the Company's Chairman of the Board of Directors and Chief Executive
Officer.
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 $107,000, 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
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 Marvin Broitman, Herbert M. Gardner
and Douglas Schenendorf. The Audit Committee held four (4) meetings and did not
act by unanimous written consent during the fiscal year ended January 31, 2000.
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 serve on the Compensation
Committee while Messrs. Broitman and Gardner serve on the Stock Option
Committee. The Compensation Committee and the Stock Option Committee each held
one (1) and two (2) meetings, respectively, and did not act by unanimous written
consent during the fiscal year ended January 31, 2000. The function of the
Compensation Committee is to determine the compensation of the Company's
executives. The Stock Option Committee
6
<PAGE>
administers the Company's stock option plans and awards stock options.
The Board of Directors met on five (5) occasions and acted two (2) 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:
Name Age Position
---- --- --------
Nicholas Florio......... 39 Vice President - Administration
Jack Meisner............ 56 Corporate Controller
Eric Gelman............. 48 Vice President, Used Machine Division
Nicholas Florio joined Hirsch in October of 1997 as the Company's Vice
President - Human Resources. Since February 2000, Mr. Florio has served as the
Company's Vice President - Administration. From 1992 until he joined the
Company, Mr. Florio was employed by Woolworth Corporation a.k.a. Venator Group
as Vice President - Human Resource Administration of the Athletic Footwear and
Apparel Division. Mr. Florio received his Bachelor of Science in Human Resource
Management from the State University of New York, College at Oswego in 1982. He
also attended Pace University - Lubin School of Business where he received his
MBA in Information Systems in 1989.
Jack Meisner has been employed by the Company since October 1999. From
August 1982 to July 1997, Mr. Meisner was the Controller of Leslie Supply Co.
Inc. After its acquisition and transfer of administrative positions to Florida,
Mr. Meisner spent two years as a consultant. Mr. Meisner received his Bachelor
of Business Administration in Accounting from CCNY in 1965. Mr. Meisner became a
CPA in 1968.
Eric Gelman has been employed by the Company since 1981 and currently
holds the position of Vice President - Used Machine Division. Mr. Gelman
received a Bachelor of Science in Accounting in 1974 and an MBA in Finance in
1976 from the University of Bridgeport.
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.
Executive Compensation
The following table sets forth the compensation earned during the three
fiscal years ended January 31, 2000, 1999, and 1998 by the Company's Chief
Executive Officer and by the four most highly
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<PAGE>
paid Company's Executive Officers whose total compensation for such periods
exceeded $100,000 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
----------------------------------------- -------------------------
Other All
Name and Annual Other
Principal Position Fiscal Year Salary Bonus Compensation Options Compensation
<S> <C> <C> <C> <C> <C> <C>
Henry Arnberg 2000 $246,749 $ 0 $ 3,460 -- $ 0
Chairman of the Board of 1999 $393,625 $ 0 $ 17,359 -- $ 0
Directors and Chief 1998 $386,228 $835,758 $ 21,200 37,500 $ 3,200
Executive Officer
Thaddeus Pawelec 2000 $359,364 $105,707 $ 2,652 18,000 $ 0
Vice President, 1999 $140,000 $288,931 $ 0 -- $ 0
Marketing, and Vice 1998 $140,000 $296,624 $ 0 7,500 $ 0
President HAPL Leasing
Tas Tsonis 2000 $337,417 $161,239 $ 9,600 18,050 $ 0
Vice President, Chief 1999 $337,417 $430,958 $ 9,600 -- $ 0
Executive Officer of 1998 $335,651 $499,629 $ 9,600 23,750 $ 0
Pulse Microsystems
Ltd. and Director
Brian Goldberg 2000 $337,417 $161,239 $ 9,600 18,050 $ 0
Vice President, 1999 $337,417 $430,958 $ 9,600 -- $ 0
President of Pulse 1998 $335,651 $499,629 $ 9,600 23,750 $ 0
Microsystems Ltd. and
Director
Kristof Janowski 2000 $511,465 $ 0 $ 5,800 18,000 $ 0
Vice President, 1999 $849,295 $ 0 $ 0 -- $ 0
National Sales 1998 $682,295 $ 0 $ 0 17,500 $ 3,200
</TABLE>
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<PAGE>
Stock Options
The following table sets forth information regarding stock options granted
to the Named Executives during the fiscal year ended January 31, 2000
Individual Grants
<TABLE>
<CAPTION>
Potential
Percent of realizable
Total value at
Options/ assumed annual
Number of SAR's rates of stock
Securities granted to Exercise price
Underlying employees or Base appreciation
Options/SAR's in fiscal Price Expiration for option term
Name Granted ($) year ($/Sh) Date 5%($) 10%($)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Henry Arnberg -0-
2. Thaddeus Pawelec 6,000 0.2% $1.75 11/1/04 $2,901 $6,410
6,000 0.2% $3.50 11/1/04 $ 0 $ 0
6,000 0.2% $5.25 11/1/04 $ 0 $ 0
3. Tas Tsonis 6,017 0.2% $1.75 11/1/04 $2,909 $6,429
6,017 0.2% $3.50 11/1/04 $ 0 $ 0
6,016 0.2% $5.25 11/1/04 $ 0 $ 0
4. Brian Goldberg 6,017 0.2% $1.75 11/1/04 $2,909 $6,429
6,017 0.2% $3.50 11/1/04 $ 0 $ 0
6,016 0.2% $5.25 11/1/04 $ 0 $ 0
5. Kristof Janowski 6,000 0.2% $1.75 11/1/04 $2,901 $6,410
6,000 0.2% $3.50 11/1/04 $ 0 $ 0
6,000 0.2% $5.25 11/1/04 $ 0 $ 0
</TABLE>
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, 2000, the number of options owned by the Named Executives and the
value of any in-the-money unexercised stock options as of January 31, 2000.
9
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Value of
Number of Unexercised
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 65,407/12,500 $ 0/0
Kristof Janowski 0 $0 20,001/23,833 $ 0/0
Thaddeus Pawelec 0 $0 11,250/20,500 $ 0/0
Tas Tsonis 0 $0 39,661/25,967 $ 0/0
Brian Goldberg 0 $0 39,662/25,967 $ 0/0
</TABLE>
(1) Represents the closing price of the Company's common stock listed on the
NASDAQ National Market on January 31, 2000 minus the respective exercise
prices.
Stock Option Plans
The Company maintains two stock option plans pursuant to which options to
purchase an aggregate of 1,284,375 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, as amended, has 1,050,000
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.
10
<PAGE>
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 or permanent disability of an optionee, all
options accelerate and become immediately exercisable until the scheduled
expiration date of the option.
11
<PAGE>
Stock Performance Graph/Table
The following graph/table compares the percentage change in the cumulative
total stockholder return for the period beginning on January 31, 1995, and
ending on January 31, 2000, 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 Peer Group includes the
following companies: CE Franklin Ltd.; LINC Capital, Inc.; Mitcham Industries,
Inc.; Speizman Industries, Inc.; and Valley National Gases Incorporated. The
graph assumes a $100 investment on January 31, 1995 in each of the indices and
the reinvestment of any and all dividends.
12
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Comparison of Five-Year Cumulative Total Return Among
Hirsch International Corp.,
S&P 500 Index and a Market Capitalization-Based Peer Group
Hirsch Market
International S&P 500 Capitalization-Based
Period Ended Corp. Index Peer Group
--------------------------------------------------------------------------------
Measurement Pt-
1/31/95 $100 $100 $100
1/31/96 $206 $135 $111
1/31/97 $430 $167 $191
1/31/98 $399 $208 $281
1/31/99 $75 $272 $94
1/31/00 $26 $296 $102
Employment Agreements
The Company had entered into five year employment agreements with Messrs.
Arnberg and Levine which expired by their terms on February 17, 1999. These
employment agreements provided that each of Messrs. Arnberg and Levine received
minimum annual compensation of $350,000 for the fiscal year beginning February
1, 1994. The employment agreements for Messrs. Arnberg and Levine also provided
for bonus payments equal to 5% of pre-tax profits of the Company and use of an
automobile. The employment agreements provided for cost of living increases,
reimbursement of business expenses, health insurance and related benefits. Each
employment agreement required that all of such executive's business time be
devoted to the Company and provided for termination in the event the executive
died or became 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 discontinued operating its business. The employment
agreements further provided that each of Messrs. Arnberg and Levine 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 did
not contain any change of control provisions. Each executive is currently
employed by the Company on an at-will basis. The executives continue on
substantially the same terms and conditions contained in their expired
employment agreements with the exception of their base salaries, which were
voluntarily reduced to an annual rate of $100,000., in the interest of reducing
the Company's fixed overhead expenses.
Mr. Ronald Krasnitz entered into a five year employment agreement
commencing June 7, 1996, with SMX, guaranteed by the Company, providing for an
annual base salary of $300,000. In addition, Mr. Krasnitz's employment agreement
provides for the reimbursement of business expenses, the provision of health
insurance and an automobile at Company expense and related benefits. The
employment agreement requires Mr. Krasnitz to devote his entire business time
and attention to the Company and provides for termination upon his death or
disability (defined as the inability to perform duties for six (6) consecutive
months or nine (9) months in any twelve (12) month period), or for cause (as
defined in the employment agreement). The employment agreement also provides
that Mr. Krasnitz shall not compete with the Company during the term of the
agreement and for a period of five (5) years thereafter. There is no change
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of control provision in the employment agreement.
Tas Tsonis and Brian Goldberg each entered into a five-year employment
agreement commencing in 1994 with Pulse, guaranteed by the Company, providing
each with an annual base salary of $300,000. In addition, each of Messrs. Tsonis
and Goldberg were 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 during the initial term of the employment
agreements. Upon the achievement of certain performance standards, each
employment agreement provided for an additional three-year extension of the
initial term at the option of the employee upon the same terms with the
exception of the bonus payment which will be equal to 12.5% of Pulse's annual
pre-tax profits as defined therein. Effective February 24, 1999, each employment
agreement was renewed for an additional three (3) year period at the election of
each of Messrs. Tsonis and Goldberg executive. 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 minus any 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 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 discretionary matching contributions by the Company up to a maximum of
two percent of an eligible employee's annual compensation. The Company elected
not to make a matching contribution for the fiscal years ended January 31, 2000
and 1999, respectively. For fiscal 1998 the Company contributed $3,200 each for
the accounts of Henry Arnberg, Ron Krasnitz and Kristof Janowski, respectively.
Tas Tsonis and Brian Goldberg do not participate in the 401(k) Plan.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Company's Compensation Committee of the Board of Directors consists of
Herbert M. Gardner, Marvin Broitman and Douglas Schenendorf, all of whom are
independent outside directors of the Company. Mr. Schenendorf is presently a
Senior Vice President of Kaye Insurance Associates, Inc., an insurance brokerage
agency. During fiscal 2000, the Company paid an aggregate of $633,000 in
insurance premiums for insurance policies underwritten through Kay Associates.
14
<PAGE>
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, the Committee takes
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 with the Company.
The employment agreements between the Company and Messrs. Arnberg and Levine
expired on February 17, 1999 in accordance with their terms. To date, no new
written employment agreements have been executed by the Company and Messrs.
Arnberg and Levine; however, their employment with the Company has continued on
substantially the same terms and conditions as previously with the exception of
their base salaries, which were voluntarily reduced to an annualized level of
$100,000.
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 2000, 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
15
<PAGE>
able to earn a percentage of the entity's pre-tax profits 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.
Long-Term Incentives
In order to align long-term executive compensation with long-term
shareholder value improvements, the Committee has from time to time awarded
stock option grants to executives of the Company in recognition of the value of
these grants in motivating long-term strategic decision making. In fiscal year
2000, the CEO and President did not receive any awards of stock options.
Chief Executive Officer
Through February 17, 1999, Mr. Henry Arnberg, Chief Executive Officer, was
compensated under a previously disclosed employment agreement between himself
and the Company. This contract established the minimum levels of compensation
which were to be paid to Mr. Arnberg by the Company. Although this employment
agreement has not been renewed or extended, Mr. Arnberg's employment by the
Company has continued on substantially the same terms and conditions with the
exception of Mr. Arnberg's base salary, which was voluntarily reduced to an
annualized level of $100,000.
In addition to his base salary, Mr. Arnberg is eligible to participate in
the short-term and long-term incentive programs outlined above for the other
Named Executives. Due to the Company's performance during fiscal 2000, Mr.
Arnberg did not receive a short-term incentive bonus payment or any long-term
incentive stock options from the Company.
COMPENSATION COMMITTEE:
Marvin Broitman
Herbert M. Gardner
Douglas Schenendorf
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<PAGE>
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 June 1, 2000, by (i) each person
who owns more than 5% of the 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:
Amount and
Nature of
Name and Address of Title of Beneficial Percent
Beneficial Owner(1) Class(2) Ownership of Class
------------------- -------- --------- --------
Henry Arnberg........... Class A 91,232 (3) 1.4%
Class B 1,368,518(3) 51.3%
Paul Levine............. Class A 78,074(4) 1.2%
Class B 1,099,621(4) 41.2%
Thaddeus Pawelec........ Class A 11,250(5) *
Class B --
Tas Tsonis.............. Class A 132,212(6) 2.0%
Class B --
Brian Goldberg......... Class A 132,212(7) 2.0%
Class B --
Ronald Krasnitz ........ Class A 196,536(8) 2.9%
Class B --
Marvin Broitman......... Class A 11,276(9) *
Class B --
Herbert M. Gardner...... Class A 18,174(10) *
Class B --
Douglas Schenendorf..... Class A 29,455(11) *
Class B --
Kristof Janowski........ Class A 34,834(12) *
Class B --
All Officers and Class A 763,005 11.0%
Directors as a group
(eleven persons)...... Class B 2,468,139 92.5%
* 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 most 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.
17
<PAGE>
(3) Includes options to purchase 3,907, 37,500, 35,000 and 1,667 shares of
Class A Common Stock at exercise prices of $10.04, $15.95, $18.70 and $
24.20, respectively. Does not include options to purchase 833 shares of
Class A Common Stock at an exercise price of $24.20.
(4) Includes 100,000 shares of Class B Common Stock owned by his wife and
100,000 shares of Class B Common Stock owned by trusts created for the
benefit of his minor children as to which he disclaims beneficial
ownership. Includes options to purchase 3,907, 37,500, 35,000 and 1,667
shares of Class A Common Stock at exercise prices of $10.04, $15.95,
$18.70 and $24.20, respectively. Does not include options to purchase 833
shares of Class A Common Stock at an exercise price of $24.20.
(5) Includes options to purchase 6,250 and 5,000 shares of Class A Common
Stock at exercise prices of $14.50 and $17.00, respectively. Does not
include options to purchase 2,500, 6,000, 6,000 and 6,000 shares of Class
A Common Stock at exercise prices of $17.00, $1.75, $3.50 and $5.25,
respectively.
(6) Includes 59,415 shares owned by the Tsonis Family Trust. Includes options
to purchase 1,954, 21,875, 22,500 and 833 shares of Class A Common Stock
at exercise prices of $9.12, $14.50, $17.00 and $22.00, respectively. Does
not include options to purchase 417, 6,017, 6,017 and 6,016 shares of
Class A Common Stock at exercise prices of $22.00, $1.75, $3.50 and $5.25,
respectively.
(7) Includes 59,415 shares owned by the Goldberg Klapman Family Trust.
Includes options to purchase 1,954, 21,875, 22,500 and 833 shares of Class
A Common Stock at exercise prices of $9.12, $14.50, $17.00 and $22.00,
respectively. Does not include options to purchase 417, 6,017, 6,017 and
6,016 shares of Class A Common Stock at exercise prices of $22.00, $1.75,
$3.50 and $5.25, respectively.
(8) Includes options to purchase 165,625, 10,000 and 1,667 shares of Class A
Common Stock at exercise price of $16.20, $17.00 and $22.00, respectively.
Does not include options to purchase 833, 6,000, 6,000 and 6,000 shares of
Class A Common Stock at exercise prices of $22.00, $1.75, $3.50 and $5.25,
respectively.
(9) Includes options to purchase 3,907, 3,125, 1,667 and 833 shares of Class A
Common Stock at exercise prices of $9.12, $15.50, $22.00 and $7.81,
respectively. Does not include options to purchase 833, 1,667 and 2,500
shares of Class A Common Stock at exercise prices of $22.00, $7.81 and
$2.25, respectively.
(10) Includes 8,002 shares held in retirement account. Also, includes 640
shares owned by his wife as to which he disclaims beneficial ownership.
Includes options to purchase 3,907, 3,125, 1,667 and 833 shares of Class A
Common Stock at exercise prices of $9.12, $15.50, $22.00 and $7.81,
respectively. Does not include options to purchase 833, 1,667 and 2,500
shares of Class A Common Stock at exercise prices of $22.00, $7.81 and
$2.25, 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 3,125, 1,667 and 833 shares of Class A Common Stock at
exercise prices of $15.50, $22.00 and $7.81, respectively. Does not
include options to purchase 833, 1,667 and 2,500 shares of Class A Common
Stock at exercise prices $22.00, $7.81 and $2.25, respectively.
(12) Includes options to purchase 8,334 and 17,500 shares of Class A Common
Stock at exercise prices of $18.125 and $17.00, respectively. Does not
include options to purchase 6,000, 6,000 and 6,000 shares of Class A
Common Stock at exercise prices of $1.75, $3.50 and $5.25, respectively.
The Company is unaware of any arrangements that 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 executive, 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, 2000, the
Company believes that the Reporting Persons complied with all filing
requirements applicable to them.
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<PAGE>
Certain Relationships and Related Transactions
The Company has advanced approximately $375,195 for premiums on split
dollar life insurance for the Company's Chief Executive Officer and President.
The spouse of each the Chief Executive Officer and President are the
beneficiaries of these respective policies. These advances are collateralized by
the cash surrender value of the policies, which totaled in the aggregate
approximately $598,800 at January 31, 2000.
The Company purchases certain policies of insurance through Douglas
Schenendorf, a director of the Company. In Fiscal 2000, 1999, and 1998, the
Company paid insurance premiums of approximately $633,000, $574,000 and $516,000
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. SELECTION OF AUDITORS
The Board of Directors recommends that the stockholders ratify the
appointment of BDO Seidman LLP, independent auditors, which served as the
Company's independent auditors for the fiscal year ended January 31, 2000, as
independent auditors to audit the Company's Consolidated Financial Statements
for the fiscal year ending January 31, 2001. A representative of BDO Seidman LLP
is expected to be present at the Meeting and will be given the opportunity to
make a statement and to answer any questions any stockholder may have with
respect to the Consolidated Financial Statements of the Company for the year
ended January 31, 2000. It is not expected that a representative of Deloitte &
Touche LLP, the Company's prior independent auditors, will be present at the
Meeting.
Change in Certifying Accountants
On January 7, 2000, the Company appointed BDO Seidman LLP of Melville, NY
as its independent public accountants for fiscal 2000 to replace Deloitte &
Touche LLP, who were dismissed effective as of such date. The Company's Board of
Directors approved the selection of BDO Seidman LLP as new independent public
accountants upon the recommendation of the Company's Audit Committee.
The reports of Deloitte & Touche LLP on the Company's financial statements
for the past two fiscal years did not contain any adverse opinion or a
disclaimer of opinion and were not modified as to uncertainty, audit scope or
accounting principles.
During the fiscal years ended January 31, 1998 and 1999 respectively, and
for the interim period ended October 31, 1999, the Company did not consult BDO
Seidman, LLP, with respect to the application of accounting principles to a
specified completed or proposed transaction, or the type of audit opinion that
might be rendered on the Company's financial statements.
<PAGE>
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended January 31, 1999 and January 31, 2000,
respectively, there were no disagreements with Deloitte & Touche LLP on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
Deloitte & Touche LLP, would have caused Deloitte & Touche LLP to make reference
to the matter in their report.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 2.
3. OTHER BUSINESS
The Board of Directors has no knowledge of any other business that 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, 2001. 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
/s/ Ronald Krasnitz
Ronald Krasnitz, 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, 2000. Such request should be addressed to Stockholder Relations,
Hirsch International Corp., 200 Wireless Boulevard, Hauppauge, New York 11788.
Dated: June 29, 2000
