Stock Performance Graph/Table
The Company believes that it is the only publicly-held firm in the
embroidery industry, and therefore does not believe that it can reasonably
identify an embroidery industry-based peer group. The Company has elected to
define a peer group based on a group of ten industrial distributors, trading in
similar SIC Codes, with relatively low market capitalization for a benchmark.
The following graph and table compares the percentage indexed change in the
cumulative total stockholder return for the five-year period beginning on
January 31, 1996, and ending on January 31, 2001, based upon the market price of
the Company's Class A Common Stock, with the cumulative total return of the
NASDAQ Composite Index and the defined Peer Group. The Peer Group includes the
following companies: Check Technology Corp.; Lancer Corp.; Quipp Inc.; Speizman
Industries, Inc.; Paul Mueller Company; Control Chief Holdings, Inc.; Oilgear
Company; Aviation Sales Company; Key Technology Inc.; and Industrial Holdings
Inc. The graph assumes a $100 investment on January 31, 1996 in each of the
indices and the reinvestment of any and all dividends.
[GRAPH]
Comparison of Five-Year Cumulative Total Return Among Hirsch International Corp.,
NASDAQ Composite Index and an Industry-based Market Capitalization-Based Peer Group
1/31/96 1/31/97 1/31/98 1/31/99 1/31/00 1/31/01
Hirsch International Corp. 100 209 194 36 13 10
NASDAQ Composite Index 100 130 153 236 372 262
Peer Group 100 150 157 155 97 87
Employment Agreements
Mr. Kris Janowski was employed during fiscal year 2001 under the terms of a
written agreement that expired on February 17, 2001 in accordance with its
terms. Mr. Janowski continues his employment by the Company on an at-will basis
and continues to devote his entire business time and attention to the Company.
Mr. Janowski's salary has been reduced from $300,000 per year to $250,000 for
the next year and then $200,000 each year thereafter. Mr. Janowski is entitled
to executive level benefits, including an automobile allowance, reimbursement of
business expenses, health insurance and related benefits.
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 of
control provision contained 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. 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 without 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 a provision 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, 2001,
2000 and 1999, 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 2001, the Company paid an aggregate of $498,000 in
insurance premiums for insurance policies underwritten through Kaye Insurance
Associates, Inc.
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