RELIABILITY INCORPORATED
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934(Amendment No. )Filed by the RegistrantX
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Filed by a Party other than the Registrant---
Check the appropriate box:
Preliminary Proxy Statement- ---
Confidential, for Use of the Commission Only (as permitted by- ---Rule 14a-6(e)(2))
X Definitive Proxy Statement- ---
Definitive Additional Materials- ---
Soliciting MaterialPursuant to Rule 14a-11(c) or Rule 14a-12 - ---Under 240.14a-12Reliability Incorporated
(Name
(Name of Registrant as Specified in Its Charter)Reliability Incorporated (Name
(Name of Person(s) Filing ProxyStatement)Statement if other than Registrant)
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$125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
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: 5) Total fee paid: Fee paid previously with preliminary materials. - --- - --- Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed:
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 |
4) | Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. | ||
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify | ||
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1
RELIABILITY INCORPORATED
16400 Park Row
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2000
MAY 7, 2003
To the Shareholders of
Reliability Incorporated:
Reliability Incorporated (the "Company") will hold its 20002003 annual meeting of shareholders on April 26, 2000,May 7, 2003, at 10:00 a.m. Houston time. The meeting will be held at the Company's offices at 16400 Park Row, Houston, Texas 77084. The purposes of the meeting are:
1. To elect a Board of Directors to serve until the next annual meeting
of shareholders and until their respective successors are elected.
2. To consider and approve an amendment to the Company's 1997 Stock
Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder from 1,000,000 to 1,500,000.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
1. | To elect a Board of Directors to serve until the next annual meeting of shareholders and until their respective successors are elected. |
2. | To transact such other business as may properly come before the meeting or any adjournment thereof. |
The Board of Directors has designated the close of business on March 3,
2000,10, 2003, as the record date for determining which shareholders are entitled to notice of, and to vote at, the meeting.
Whether you expect to attend the meeting in person or not, you are requested to fill in, date and sign the enclosed proxy and return it in the enclosed envelope at your earliest convenience. No postage is needed if such envelope is mailed in the United States.
By order of the Board of Directors,
Max T. Langley
Secretary
By order of the Board of Directors, |
James M. Harwell |
Date: March 15, 2000
10, 2003
2
RELIABILITY INCORPORATED
16400 Park Row
Houston, Texas 77084
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Solicitation and revocation of proxies
The enclosed proxy is solicited by Reliability Incorporated, a Texas corporation (the "Company"), for use in connection with the 20002003 annual meeting of shareholders of the Company. Although proxies will be solicited primarily by mail, employees of the Company may personally aid in such solicitation. The Company will make arrangements with brokerage houses and banks for forwarding proxy materials to the beneficial owners of shares registered in brokers' and banks' names. All solicitation costs will be paid by the Company. All properly signed proxies will be voted, and, where a choice has been specified by the shareholder as provided on the proxy, it will be voted in accordance with the specification so made. If no specification is made, the shares will be voted FOR all nominees for director, FOR an amendment to the Company's 1997 Stock
Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 1,000,000 to 1,500,000, and in the discretion of the proxy holders on any other matter properly coming before the meeting. Any shareholder giving a proxy may revoke it at any time before it is used at the meeting by giving written notice of revocation to the secretary of the Company or by signing and delivering to the secretary of the Company a proxy bearing a later date.
Proxy materials are expected to be mailed or delivered to shareholders on or about March 20, 2000.
25, 2003.
Voting at the meeting
Only holders of record of the Company's Common Stock (the "Common Stock") at the close of business on March 3, 200010, 2003 will be entitled to vote at the meeting. As of such date, 6,668,7656,335,965 shares were issued and outstanding and entitled to vote at the meeting. Each share of Common Stock is entitled to one vote; shareholders do not have the right to cumulate their votes with respect to the election of directors.
The presence of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote, either in person or represented by proxy, is necessary to constitute a quorum for the transaction of business at the annual meeting. Proxies that withhold authority to vote for a nominee or
abstain from voting on any other matter are counted for the purpose of
determining whether a quorum is present. If a quorum is present for any matter,
such as election of directors, a quorum is deemed present for all matters that
come before the meeting, even if broker non-votes, which may occur when a
broker or nominee has not received timely voting instructions on certain
proposals, cannot be voted for any particular item. If there are not sufficient shares represented at the meeting to constitute a quorum, the meeting may be adjourned until a specified future date to allow the solicitation of additional proxies. 3
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
Directors are elected by a plurality of the votes cast at the meeting. The nominees thatwho receive the greatest number of votes will be elected, even though the number of votes received may be less than a majority of the shares represented in person or by proxy at the meeting. Proxies that withhold authority to vote for a nominee and broker non-votes will not prevent the election of such nominee if other shareholders vote for such nominee. The
amendment to the 1997 Stock Option Plan will be approved if a majority of the
shares entitled to vote and represented at the meeting (in person or by proxy)
approve the amendment.
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RELIABILITY INCORPORATED
PROXY STATEMENT
OWNERSHIP OF COMMON STOCK
Principal shareholders
As of February 11, 2000,
Based on information provided to the Company, as noted below, each of the following persons beneficially owned 5% or more of the 6,631,7656,335,965 shares of Common Stock then outstanding:
Voting shares Dispositive shares
and percentoutstanding as of total and percent of total
Name and address outstanding (1) outstanding (2)
- ---------------- -------------------- --------------------
Dimensional Fund
Advisors Inc. 537,000 (8.10%) 537,000 (8.10%)
1299 Ocean Avenue,
11th Floor
Santa Monica, CA
Fidelity Low-Priced
Stock Fund 635,000 (9.58%) 635,000 (9.58%)
82 Devonshire Street
Boston, MA
The Qubain Family Trust 475,000 (7.16%) 475,000 (7.16%)
1246 Reamwood Avenue
Sunnyvale, CA
Steven T. Newby 387,335 (5.84%) 387,335 (5.84%)
555 Quince Orchard
Road, Suite 606
Gaithersburg, MD
- -----------------------------------------
February 14, 2003:
Name and address | Voting shares and percentof total outstanding (1) | Dispositive shares and percent | ||
Fidelity Management & Research Company | 666,700 | 10.52% | 666,700 | 10.52% |
Dimensional Fund Advisors Inc. | 543,100 | 8.57% | 543,100 | 8.57% |
Steven T. Newby | 531,528 | 8.39% | 531,528 | 8.39% |
The Qubain Family Trust | 369,200 | 5.83% | 369,200 | 5.83% |
(1) Shares which the shareholder has the power to vote.
(2) Shares which the shareholder has the power to sell.
- -----------------------------------------
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 537,000 shares of Common
Stock under the rules of the Securities and Exchange Commission. Dimensional
furnishes investment advice to four investment companies and serves as an
investment manager to certain other investment vehicles, including commingled
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RELIABILITY INCORPORATED
PROXY STATEMENT
group trusts. In its role as investment advisor and investment manager,
Dimensional possesses both voting and investment power over the stock of the
Company. Dimensional disclaims beneficial (economic) ownership of all such
shares.
Fidelity Low-Priced Stock Fund ("Fund") owns 635,000666,700 shares of Common Stock of the Company. The Fund's shares are voted under guidelines established by the Board of Trustees of the Fund. Fidelity Management & Research Company ("Fidelity"), the investment advisor to the Fund, has sole power to sell the Fund's shares. Members of the Edward C. Johnson, III family control FMR Corp.,
which owns Fidelity. Fidelityshares and is deemed the beneficial owner of the shares under the rules of the Securities and Exchange Commission. Members of the Edward C. Johnson, III family control FMR Corp., which owns Fidelity.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of 543,100 shares of Common Stock under the rules of the Securities and Exchange Commission. Dimensional furnishes investment advice to four investment companies and serves as an investment manager to certain commingled group trusts and separate accounts. In its role as investment advisor and investment manager, Dimensional possesses both voting and investment power over the stock of the Company. Dimensional disclaims beneficial (economic) ownership of all such shares.
The Qubain Family Trust acquired shares of Common Stock of the Company in 1998 when the Company issued shares as partial consideration for assets acquired from Basic Engineering Services and Technology Labs, Inc. ("BEST"). BEST subsequently transferred the shares to The Qubain Family Trust, which is the shareholder of BEST.
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RELIABILITY INCORPORATED
PROXY STATEMENT
Steven T. Newby stated that he is a passive investor in his filing with the Securities and Exchange Commission.
The information provided above for Fidelity, Steven T. Newby, Dimensional Fidelity,and The Qubain Family Trust and Steven T. Newby is based on filings made with the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as amended.
The Company's Employee Stock Savings Plan (the "Plan") owns a total of 547,329558,213 shares (8.25%(8.81% of the 6,631,7656,335,965 shares of Common Stock outstanding as of February 11, 2000)14, 2003) of Common Stock. Each employee of the Company who participates in the Plan may direct the Trustee of the Plan on how to vote the stock beneficially owned by such employee, and, under certain circumstances, the employee can direct the sale of some or all of the shares held for his benefit. No employee owns 5% or more of the Company's shares through the Plan.
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RELIABILITY INCORPORATED
PROXY STATEMENT
Security ownership of management
As of March 3, 2000,10, 2003, the amount of Common Stock owned by the directors of the Company, the nominees for director, each executive officer named in the compensation table and all directors and officers as a group is shown below.
Amount and nature of
beneficial ownership
--------------------
Voting Stock
and Other options
Name of individual investment beneficial exercis- Percent
or group power(1) ownership(2) able(3) of class(4)
------------------ --------- ------------ -------- -----------
Larry Edwards 124,600 36,205 104,600 3.80 %
W. L. Hampton 8,000 -0- 5,000 *
John R. Howard 2,100 -0- -0- *
Thomas L. Langford 20,000 -0- 30,000 *
Philip Uhrhan 2,000 -0- 30,000 *
Max T. Langley 28,200 29,337 39,000 1.38
James M. Harwell 16,249 28,475 38,751 1.20
J.E. (Jim) Johnson 12,600 5,574 39,700 *
Paul Nesrsta 27,000 14,294 28,000 1.00
All executive officers
and directors as a
group (nine persons) 240,749 113,885 315,051 9.60
- --------------------
* Less than 1%
(1) Each person has the sole power to vote and sell the shares shown in this
column except that Mr. Edwards has shared power with his spouse to vote
and sell 124,600 of the shares reported above.
(2) Represents shares allocated to the executive officer through his
participation in the Company's Employee Stock Savings Plan (the "Plan"),
according to the latest statement for said Plan, which is as of December
31, 1999. Employees have the right to direct the vote of all shares held
in the Plan and, under certain circumstances, the employee can direct the
sale of some or all of the shares held for his benefit.
(3) Shares listed in the stock options exercisable column represent shares
that are exercisable by the named individual as of March 3, 2000 and
within 60 days thereafter under the Company's stock option plan.
(4) The percent stated in this column is based on the total beneficial
ownership of the individual or group as a percent of the 6,668,765 shares
of Common Stock outstanding as of March 3, 2000, plus shares acquirable
under stock options on, or within 60 days of, March 3, 2000.
- --------------------
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RELIABILITY
Amount and nature ofbeneficial ownership | ||||
Name of individual or group | Voting and investmentpower (1) | Other beneficialownership (2) | Stock optionsexercisable (3) | Percent ofclass (4) |
Larry Edwards | 124,600 | 51,380 | 198,600 | 5.14% |
W.L. Hampton | 8,000 | -0- | -0- | .11 |
John R. Howard | 2,100 | -0- | -0- | .03 |
Thomas L. Langford | 20,000 | -0- | 30,000 | .69 |
Philip Uhrhan | 5,000 | -0- | 15,000 | .27 |
James M. Harwell | 16,249 | 36,542 | 78,751 | 1.81 |
J.E. (Jim) Johnson | 23,950 | 11,271 | 60,000 | 1.31 |
Paul Nesrsta | 27,000 | 18,287 | 65,000 | 1.51 |
All executive officers and directors |
|
|
|
|
(1) | Each person has the sole power to vote and sell the shares shown in this column except that Mr. Edwards has shared power with his spouse to vote and sell 61,200 of the shares reported above. |
(2) | Represents shares allocated to the executive officer through his participation in the Company's Employee Stock Savings Plan (the "Plan"), according to the latest statement for said Plan, which is as of December 31, 2002. Employees have the right to direct the vote of all shares held in the Plan, and, under certain circumstances, an employee can direct the sale of some or all of the shares held for his benefit. |
(3) | Shares listed in the stock options exercisable column represent shares that are exercisable by the named individual as of March 10, 2003, and within 60 days thereafter under the Company's stock option plan. |
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RELABILITY INCORPORATED
PROXY STATEMENT
(4) | The percent stated in this column is based on the total beneficial ownership of the individual or group as a percent of the 6,335,965 shares of Common Stock outstanding as of March 10, 2003, plus the 951,651 shares acquirable under stock options on, or within 60 days of, March 10, 2003. |
The Company is not aware of any contract or agreement which may at any subsequent date result in a change in control of the Company.
ELECTION OF DIRECTORS
At the meeting, five directors are to be elected. Each director will hold office until the next annual meeting of shareholders and until his successor is elected and qualifies. The persons named as proxy holders in the accompanying form of proxy intend to vote each properly signed and submitted proxy for the election as a director of each of the persons named in the following table, unless authority to vote for all or any of such nominees is withheld on such proxy.
Other positions and
offices presently
held with the Company
(and other present
Director principal occupation
Name since Age if different)
---- -------- --- ------------------
Larry Edwards 1995 58 Chairman of the Board
of Directors,
President and Chief
Executive Officer
W.L. Hampton 1984 71 (retired)
John R. Howard 1971 66 (attorney-at-law)
Thomas L. Langford 1980 58 (executive vice
president, Stone
and Webster, Inc.)
Philip Uhrhan 1997 50 (vice president
finance, Solvay
America, Inc.)
Name | Director since | Age | Other positions and offices presently | |
Larry Edwards | 1995 | 61 | Chairman of the Board of Directors, | |
W.L. Hampton | 1984 | 73 | (Retired) | |
John R. Howard | 1971 | 69 | (Attorney-at-law) | |
Thomas L. Langford | 1980 | 61 | (Group Vice President, Consolidated | |
Philip Uhrhan | 1997 | 52 | (Vice President - Finance, | |
Mr. Edwards has been President and Chief Executive Officer of the Company since 1993 and has been a Director and Chairman of the Board of Directors since 1995. From 1990 to 1993, he served as President and Chief Operating Officer of the Company. Mr. Edwards joined the Company in 1977 as Manager of Engineering, Planning and Manufacturing Systems, and subsequently held the positions of Vice President - Operations, Corporate Vice President - Systems, and Executive Vice President - Systems.
Mr. Hampton has been a Director of the Company since 1984. Mr. Hampton was President of S.I.P. Engineering, Inc., an engineering and construction company, from 1984 until his retirement in 1993.
Mr. Howard has been a Director of the Company since 1971. He is and has been for more than five years an attorney in private practice. Mr. Howard is also a Director of Atec, Inc.
Mr. Langford has been a Director of the Company since 1980. Mr. Langford's principal occupation has been that of Group Vice President of Consolidated Contractors International Co. S.A.L., an engineering and construction company, since February 2001. He was Executive Vice President of Stone and Webster, Inc., a professional engineering, construction and consulting company, since 1997. Hefrom 1997 to July 2000. In June 2000, Stone and Webster, Inc. filed a Chapter 11 Bankruptcy, and Mr. Langford served, from July 2000 until January 2001 as President and Chief Restructuring Officer of the Debtor in Possession of
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RELIABILITY INCORPORATED
PROXY STATEMENT
Stone and Webster. From 1991 until 1996, Mr. Langford was President of Parsons Corporation, an engineering and construction company, from 1991 until 1996.
7
RELIABILITY INCORPORATED
PROXY STATEMENT
company.
Mr. Uhrhan has been a Director of the Company since 1997. Mr. Uhrhan's principal occupation has been that of Vice President - Finance of Solvay America, Inc., a chemical and pharmaceuticals company, since 1996. Mr. Uhrhan was a Partner with Ernst and& Young LLP for more than five years prior to his employment by Solvay America, Inc.
Management believes that each person proposed to be elected a director is willing and able to serve if elected. If a situation arises in which any nominee is unable or unwilling to serve, proxies will be voted for a nominee selected by the Board of Directors of the Company.
Board of Directors' meetings and committees
The Company's Board of Directors held four meetings during 1999.2002. All incumbent directors attended 75% or more of the meetings of the Board of Directors. The Company has a standing audit committee and compensation committee, but does not have a nominating comittee.
The Company's audit committee, composed of independent directors Messrs. Langford, Howard and Uhrhan, metheld three meetings during 2002. Messrs. Howard and Uhrhan attended all meetings. Mr. Langford attended two times during 1999, and both members attended the meetings. The audit committee reviews and approves all services to be performed by independent auditors and the fees therefor, consults with independent auditors and management with respect to internal controls and other financial matters and reviews the results of the year-end audit and other reports of independent auditors. The audit committee is governed by a written charter approved by the Board of Directors increasedDirectors. Additional information regarding the sizefunctions performed by the committee is set forth below in the "Report of the audit committee to
three members in February 2000 and appointed Mr. Howard to the committee to
fill the new position.
Audit Committee."
The compensation committee, composed of Messrs. Hampton and Howard, met two times during 1999 and both2002. All members attended theboth meetings. The compensation committee reviews executive compensation and benefit plans, recommends changes therein, and makes recommendations to the Board of Directors concerning executive salaries, incentive plans and incentiveoptions to be granted to executives under the Company's stock option plan. The Compensation Committee Report is included below.
Audit Committee Report
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors includes three directors, all of whom are independent, as defined by the standards of the Nasdaq(r) stock exchange. Management has the primary responsibility for the preparation of financial statements and maintaining the reporting process, including implementing and maintaining the systems of internal controls. The Committee assists the Board in overseeing matters relating to the accounting and financial reporting practices of the Company, the adequacy of its internal controls and the quality and integrity of its financial statements. The Committee operates under a charter approved by the Board of Directors. In fulfilling its oversight responsibilities, the Committee reviewed the audited financial statements in the Annual Report and considered the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgements, and the clarity of disclosures in the financial statements.
The Committee met three times during the year ended December 31, 2002, and the Committee Chairman, on behalf of the Committee, reviewed with the independent auditors the interim financial information included in the March 31, June 30, and September 30, 2002 Form 10-Qs prior to their
7
RELIABILITY INCORPORATED
PROXY STATEMENT
being filed with the Securities and Exchange Commission. The Committee, during 2001, solicited and reviewed proposals from five accounting firms, including Ernst & Young LLP. The Committee reviewed the proposals and recommended to the Company's Board of Directors that Ernst & Young LLP be retained as auditors for the Company.
The independent auditors provided the Committee a written statement describing the relationships between the auditors and the Company that might bear on the auditors' independence consistent with Independence Standards Board Standard No. 1 "Independence Discussions with Audit Committees." The Committee also discussed with the auditors any relationships that may impact their objectivity and independence and considered the compatibility of non-audit services with the auditors' independence.
The Committee discussed and reviewed with the independent auditors all communications required by generally accepted auditing standards, including those described in Statement of Auditing Standards No. 61, as amended, "Communications with Audit Committees."
With and without management present, the Committee discussed and reviewed the results of the independent auditors' examination of the Company's December 31, 2002 financial statements. The discussion included matters related to the overall scope and plans for the Company.
audit, plans for conducting the audit and other items such as the selection of significant accounting policies, the methods used to account for significant or unusual transactions, the effect of significant accounting policies in emerging areas, the process used by management in formulating accounting estimates and the basis for the auditors' conclusions regarding the reasonableness of those estimates, the basis for management's accounting estimates and the disclosures in the financial statements.
The Committee reviewed the Company's audited financial statements as of and for the year ended December 31, 2002, and discussed them with management and the independent auditors. Based on such review and discussions, the Committee recommended to the Board that the Company's audited financial statements be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2002, for filing with the Securities and Exchange Commission.
Respectfully submitted,
Philip Uhrhan, Chairman
Thomas L. Langford
John R. Howard
Compensation Committee Report on executive compensation
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") of Reliability Incorporated submits this report on executive compensation to the Board of Directors and the Company's shareholders. This report covers components of executive compensation and the bases for the Committee's compensation decisions. The Committee's goals are to establish compensation for executive officers that ensures a fair and
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RELIABILITY INCORPORATED
PROXY STATEMENT
competitive salary and additional incentive compensation which is related directly to the financial success of the Company and the performance of the officers and to motivate executive personnel to achieve corporate objectives. A fundamental principle of the compensation program is to align the amount of an executive's total compensation with his contribution to the success of the Company. The program has the following components:
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RELIABILITY INCORPORATED
PROXY STATEMENT
Base salary
Salaries for the chief executive officer ("CEO") and each other executive officer are set annually as of April 1.annually. The Committee strives to set salaries that are competitive with those paid by companies of similar size and revenue in the industry. The Company utilizes the currently available American Electronics Association Executive Compensation Survey ("AEA Compensation
Survey") to determine appropriate and competitive salaries.
In 1999, the salaries of the CEO and other executives were not increased.
Salaries for the CEO and other executives were not increased since the business
plan for 1999 indicated the Company's financial performance would decline below
historical levels for 1999. In 1998, the salary of the CEO was increased 14%
and the raises for the other executive officers ranged from 4% to 7%. The
raises in 1998 for the CEO and executive officers varied depending on the
performance of the individual executive and the financial success of the
industry segment, division or subsidiary for which the executive was
responsible.
The Committee reviews the overall financial performance of the Company, its gross, operating and net profits, the performance of the Company's officers, and the business plan for the upcoming year, as well as the applicable AEA Compensation Survey, to determine appropriate and competitive salaries.base salaries ("salaries"). The Committee considered salaries paid by other companies of similar size and revenues to determine market rate salary, excluding incentive compensation, using the 25th percentile results of the AEA Compensation Survey.
In 2002, there were no salary increases for the CEO or any executive officer because of the Company's financial performance for 2001. In August 2002, the board of directors approved restructuring actions to improve the Company's cost structure. As a result, the salaries of the CEO and all executive officers were reduced by 15%. The level of the Company's loss in 2001 and 2002 resulted in the CEO and executive officers receiving total compensation for 2001 and 2002 at amounts below the 25th percentile of the AEA Survey. The level of the Company's income in 2000 resulted in the CEO and executive officers receiving total compensation somewhat below the 75th percentile in 2000.
Short-term incentive compensation
In addition to base salary, the Company has an incentive plan which applies to the CEO, all other executive officers, the directors and all salaried employees of the Company. The incentive plan has three components:
1. a quantitative measure based on income before income tax of:
(a) the Company as a whole in the case of the CEO and certain
other executive officers, or
(b) the subsidiary, industry segment or division ("Profit
Center") of the Company for which the executive is responsible;
2. a qualitative measure, which is an evaluation of each individual's
performance during the year, made by the Committee for the CEO and by
the CEO for all other executive officers; and
3. a target bonus.
1. | a quantitative measure based on income before income tax of: | ||
(a) | the Company as a whole in the case of the CEO and certain other executive officers; or | ||
(b) | the subsidiary, industry segment or division ("Profit Center") of the Company for which the executive is responsible; | ||
2. | a qualitative measure, which is an evaluation of each individual's performance during the year, made by the Committee for the CEO and by the CEO for all other executive officers; and | ||
3. | a target incentive which is a quantitative percent of base salary. | ||
The Committee's approach to incentive bonuses is to establish incentives at a pay-for-performance level which allows the executive to be compensated in total at a competitive rate. Each year the Committee establishes the target bonus for the CEO and each executive officer and approves the payment of
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RELIABILITY INCORPORATED
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bonuses, if any, based on achieving predetermined goals. The CEO and executive officers are only eligible for bonuses when the Company as a whole and/or the Profit Center for which such officer is responsible reports income before income taxes as a percent of revenues equal to or greater than 5%.
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RELIABILITY INCORPORATED
PROXY STATEMENT
1. Target bonuses, for 1999,
1. | Target incentives, for 2002, ranged from 40% of base salary for the CEO to 30% for executive officers. The Company and its profit centers reported losses in 2002, thus no bonuses were paid to the CEO or any other executive officer. |
2. | Target incentives, for 2001, ranged from 40% of base salary for the CEO to 30% for executive officers. The Company and its profit centers reported losses in 2001, thus no bonuses were paid to the CEO or any other executive officer. |
There were no incentive bonuses paid in 1999, to
the CEO or the other executive officers. In establishing that no
bonuses would be paid for 1999, the Committee and the CEO considered
the decrease in revenues and the loss before income taxes.
2. Target bonuses, for 1998, ranged from 40% of salary for the CEO to
30% for executive officers. The actual bonus paid, in 1998, to the CEO
was 128% of his base salary and ranged from 90% to 117% of salary for
the other executive officers. Actual bonus amounts for any or all
officers can exceed target bonuses when the Company's (or Profit
Center's for which the officer is responsible) profit before income
taxes exceeds income goals and the individual officer's performance
factor exceeds a rating of 1.0, and will be less than target bonuses
if the appropriate net income before income taxes does not reach the
specified goals or an individual officer's performance factor is
judged to be between 0 and 1.0.
The level of the Company's income in 1998 and the loss in 1999 resulted
in income factors, coupled with individual performance factors, being set at
levels that resulted in the CEO and certain executive officers receiving total
compensation for 1999 at amounts below the 25th percentile of the AEA
Compensation Survey and somewhat below the 75th percentile in 1998.
Approximately 20 salaried employees of a subsidiary of the Company
received bonuses in 19992002 or 2001, due to the fact the subsidiary was profitable in 1999;
such bonuses ranged from 3% to 16% of salary. The other salaried employees of
the Company did not receive a bonus in 1999 due to the losses reported bythat the Company and applicableits Profit Centers. All salaried employees of the Company
received bonuses in 1998; such bonuses ranged from 3% to 73% of base salary in
1998, exclusive of bonuses paid to executive officers.
Centers reported losses.
Stock based compensation
The Company's long-term compensation program consists of options granted under the Company's Amended and Restated 1997 Stock Option Plan. The Committee encourages stock ownership by executives and managers so that they have a vested interest in the growth and profitability of the Company. Stock options are used as a component of the total compensation package to reward performance, to equalize benefits with those offered by comparable companies and to encourage key personnel to remain with the Company. In addition, stock options emphasize the objective of increasing shareholder value and encouragingencourage share ownership by management in accordance with established guidelines. In general, options granted to the CEO and executives vest in installments over a period of approximately two to three years. The option agreements encourage the CEO and executives to own shares with a market value, at date of grant, equivalent to one times base annual compensation. If the executive does not own the required number of shares on the date the applicable installment would vest, the option installment expires or the exercise period for certain unexercised shares is shortened from ten years to two to three years.
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RELIABILITY INCORPORATED
PROXY STATEMENT
The Board of Directors functions as the administrative committee for the Option Plan and consults with the Committee and grants options based on its subjective determination of the relative current and future contribution that each optionee has made or may make to the long-term goals of the Company. The OPTION GRANTS IN LAST FISCAL YEAR table
shows theThere were no options granted to the CEO and each of the namedor any executive officers during the 1999 fiscal year. Each option was granted at the fair market value
of the Company's Common Stock on the date of grant. In 1999, stock options were
granted to 18 key employees and directors, including the CEO and named
executive officers, for the purchase of a total of 194,000 shares of Common
Stock at a price per share of $4.88, and a total of 172,000 shares at a price
per share of $2.57, which was the fair market value of the Company's stock on
the date the options were granted.
year ended December 31, 2002.
Benefits
The CEO and other executive officers are not entitled to any additional benefits which are not also provided to all full-time salaried employees.
Respectfully submitted,
W.L. Hampton, Chairman
John R. Howard
11
10
RELIABILITY INCORPORATED
PROXY STATEMENT
COMPENSATION OF EXECUTIVES
Summary compensation table
The following table provides information as to the compensation paid by the Company and its subsidiaries, during fiscal years 1999, 19982002, 2001 and 19972000 to the chief executive officer and the fourthree other highest paid executive officers and directors whose remuneration exceeded $100,000 in 1999.
Annual Long-term
compensation compensation
------------ ------------
(a) (b) (c) (d) (g) (i)
Securities All other
2002.
Annual compensation | Long-term compensation | ||||
(a) | (b) | (c) | (d) | (g) | (i) |
Name and principal position | Year | Salary | Annualbonus | Securities underlyingoptions (#) | All other compen- |
Larry Edwards, | 2002 | $188,452 | $ - | - | $5,100 |
James M. Harwell, | 2002 | 115,150 | - | - | 3,455 |
J.E. (Jim) Johnson, | 2002 | 108,540 | - | - | 3,256 |
Paul Nesrsta, | 2002 | 106,090 | - | - | 3,183 |
In 2000, 2001 and underlying compen-
principal Annual options sation
position Year Salary bonus (#) (1) (2)
---------- ---- ------ ------ ------ -------- -------
Larry Edwards, 1999 $180,000 $ - 70,000 $ 4,800
President, Chairman 1998 174,760 230,037 35,000 12,800
of the Board, and 1997 155,248 362,230 70,000 11,930
Chief Executive
Officer
Max T. Langley, Senior 1999 109,980 - 30,000 3,215
Vice President, 1998 108,864 93,388 15,000 11,387
Chief Financial 1997 104,322 133,806 30,000 11,126
Officer, Secretary
and Treasurer
James M. Harwell, 1999 107,200 - 30,000 3,133
Vice President 1998 105,560 125,904 15,000 11,282
1997 98,600 176,892 30,000 10,951
J. E. (Jim) Johnson (3) 1999 106,600 - 30,000 3,116
Vice President 1998 105,586 108,508 15,000 10,523
1997 30,465 35,229 14,700 2,005
Paul Nesrsta, 1999 102,024 - 30,000 3,061
Vice President 1998 100,728 111,839 15,000 11,133
1997 95,550 150,324 30,000 10,862
- --------------------
In 1997, 1998 and 1999,2002, the Company did not provide any other compensation or long-term compensation plans for executive officers; thus columns (e), (f) and (h) are omitted from the above table.
(1) Number of securities subject to options reflects an adjustment made as a
result of the stock split in the form of a dividend paid by the Company
to shareholders of record on September 22, 1997.
(2) Amounts shown in this column represent the Company's matching and annual
profit sharing contributions to the Employee Stock Savings Plan for the
benefit of the named individual.
(3) Mr. Johnson terminated employment with the Company in August 1996 and was
re-employed in September 1997; thus his compensation for 1997 is for a
period of less than 12 months.
- --------------------
12
(1) | Amounts shown in this column represent the Company's matching and annual profit sharing contributions to the Employee Stock Savings Plan for the benefit of the named individual. |
11
RELIABILITY INCORPORATED
PROXY STATEMENT
The Company sponsors an Employee Stock Savings Plan (the "Plan"). All U.S. employees of the Company who have been employed for six months are covered by the Plan. The Plan allows an employee to contribute up to 15%100% of defined compensation to the Plan. Contributions to the Plan by executive officers have
been limited (10% in 1999 and 9% in 1998) by provisions of the Internal Revenue
Code. The Company matches employee contributions at a rate equal to 50% of the employee's contributions, but the Company's matching contribution is limited to 2% of the employee's defined compensation. The Company also makes a contribution in an amount equal to 1% of the defined compensation of all participants. Since January 1, 1997,In addition, the Company has mademay make additional voluntary profit sharing contributions based on the consolidated profits of the Company. The maximum voluntary profit sharing contribution is 5% of compensation. The Company did not make an additional voluntary profit sharing contribution for
1999,in 2002 or 2001, and the Company's additional voluntary profit sharing contribution was 5%1-1/2% in 1998.
2000.
The Company has no long-term compensation plans, awards or arrangements, except for the Amended and Restated 1997 Stock Option Plan. The Company has no stock appreciation rights or option plans. The Company has no long-term incentive plan, defined benefit or actuarial plan, employment contracts or termination of employment or change in control agreements with any executive officer.
Compensation to directors
Non-employee directors are paid a fee of $1,000 per month, participate in an incentive bonus program similar to the bonus program described in the Compensation Committee Report and participate on a one-time basis in the Amended and Restated 1997 Stock Option Plan. Incentive bonuses paid to directors are based on the Company's performance and profitability. In 1999,2002, the Company was not profitable; thus the directors did not receive a bonus for 1999.
2002.
Stock Option Plan
In 1997,
Under the Board of Directors adopted,Amended and the shareholders approved, theRestated 1997 Stock Option Plan ("Option Plan") for, option grants are available to officers, directors and key employees. The objectives of the Option Plan are to promote the interests of the Company by providing an ownership incentive to officers, directors and key employees, to reward outstanding performance, and to encourage continued employment.
Under the Option Plan, the Board of Directors, which acts as Plan Administrator, determines the officers, directors and key employees to whom options are granted, the type of options, the number of shares covered by such options and the option vesting schedule. The Option Plan provides for the grant of stock options to purchase an aggregate of up to 1,000,0001,500,000 shares of the Company's Common Stock (See Approval of Amendment to the Company's 1997 Stock
Option Plan).Stock. All options are issued at market value on the date of the grant.
The Board of Directors granted options to employees and outside directors
to purchase 351,000 and 15,000 shares respectively, of Common Stock during 1999.2002. At December 31, 1999,2002, options outstanding covered a total of 746,000810,000 shares of Common Stock. OptionsAt December 31, 2002, options covering 379,000558,000 shares, including 77,00045,000 shares exercisable by outside directors, were exercisable, and options covering 367,000252,000 shares were not yet exercisable. The purchase prices for the shares covered by existing unexercised options ranged from $2.57$1.10 to $20.25,$4.88, which was market value on the date of grant.
13
RELIABILITY INCORPORATED
PROXY STATEMENT
Option grants in last fiscal year
The following table provides certain information with respect to
No stock options were granted during the fiscal year ended December 31, 1999,2002 under the Option Plan to the executive officers named in the compensation table above. %Options to purchase a total of Potential
total realizable value280,700 shares
12
RELIABILITY INCORPORATED
PROXY STATEMENT
were cancelled in 2002, of which 97,700 options at assumed
Number of granted annual rates of
securities to em- Exercise Expira- stock price
underlying ployees price tion appreciation forshares were held by the named executive officers. The Company cancelled all outstanding options in $/share date option term
Name granted 1999 (1) (2) 5% 10% (3)
- ----------- ------------ -------- -------- ---------- ------- --------
(a) (b)(#) (c) (d)$ (e) (f)$ (g)$
- ----------- ------------ -------- -------- ---------- ------- --------
Larry Edwards 35,000 10.0% 4.88 2/24/09 107,450 272,300
35,000 10.0 2.57 11/10/09 56,700 143,500
Max T. Langley 15,000 4.3 4.88 2/24/09 46,050 116,700
15,000 4.3 2.57 11/10/09 24,300 61,500
James M. Harwell 15,000 4.3 4.88 2/24/09 46,050 116,700
15,000 4.3 2.57 11/10/09 24,300 61,500
J.E. (Jim) Johnson 15,000 4.3 4.88 2/24/09 46,050 116,700
15,000 4.3 2.57 11/10/09 24,300 61,500
Paul Nesrsta 15,000 4.3 4.88 2/24/09 46,050 116,700
15,000 4.3 2.57 11/10/09 24,300 61,500
- --------------------
(1) Thewith an exercise price is the market price on the datein excess of grant.
(2) Varying amounts of the options will terminate early, beginning$13.37 in March
2000, if optionee does not own a specified number of shares on specified
dates. Generally, the options will expire in one to three installments
over a three-year period from the original grant date.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. Actual gains, if any, on stock appreciation
exercises will depend on the future performance of the Common Stock and
the date on which the options are exercised.
14
RELIABILITY INCORPORATED
PROXY STATEMENT
November 2002.
Aggregate option exercises in 19992002 and outstanding stock option values as of December 31, 1999
2002
The following table discloses, for the executive officers named in the above tables, information regarding options to purchase the Company's Common Stock which were exercised during 19992002 (no options were exercised during 2002) and options to purchase the Company's Common Stock held at the end of 1999.
Number of securi- Value of
ties underlying unexercised
unexercised in-the-money
options options at
Shares Value at 12/31/99 (1) 12/31/99 (2)
acquired realized --------------- ----------------
on upon Exercis- Unexer- Exercis- Unexer-
Name exercise exercise able cisable able cisable
---- --------- --------- -------- ------ ------- --------
(a) (b)(#) (c)($) (d)(#) (e)(#) (f)($) (g)($)
---- --------- --------- -------- ------ ------- --------
Larry Edwards - - 78,100 73,500 - 8,400
Max T. Langley - - 30,000 35,000 - 3,600
James M. Harwell 6,249 8,624 28,751 30,000 - 3,600
J.E. (Jim) Johnson - - 24,800 34,900 - 3,600
Paul Nesrsta 10,000 13,800 35,000 30,000 - 3,600
- --------------------
(1) Number of securities reflects the adjustment made as a result of a stock
split in the form of a dividend which was paid by the Company to
shareholders of record on September 22, 1997.
(2) The amounts in these columns are calculated using the difference between
the exercise price and the closing price ($2.81) for the Common Stock on
The Nasdaq Stock Market(r) on December 31, 1999 of in-the-money stock
options.
- --------------------
15
RELIABILITY INCORPORATED
PROXY STATEMENT
2002.
Name | Shares acquired onexercise | Value realized uponexercise | Number of securities Exercisable Unexercisable | Value of unexercised Exercisable Unexercisable | |||
| (#) |
| (#) | (#) |
|
| |
Larry Edwards | - | $ - | 163,600 | 58,000 | - | - | |
James M. Harwell | - | - | 63,751 | 25,000 | - | - | |
J.E. (Jim) Johnson | - | - | 45,000 | 25,000 | - | - | |
Paul Nesrsta | - | - | 50,000 | 25,000 | - | - | |
| |||||||
(1) | The amounts, if any, in these columns are calculated using the difference between the exercise price and the closing price ($1.02) for the Common Stock on The Nasdaq Stock Market on December 31, 2002 of in-the-money stock options; no outstanding options were in-the-money. | ||||||
SHAREHOLDER RETURN PERFORMANCE GRAPH
Performance graph
The following performance graph compares the five year cumulative total return to shareholders for the Company's Common Stock to (1) the Nasdaq Non-
FinancialNon-Financial Stocks Index (which includes the Company) and to (2) the Nasdaq Stock Market (US) CRSP Total Return Index. The graph assumes that the value of the investment in the Company's Common Stock and each index was $100 at December 31, 19941997 and that all dividends (the Company did not pay any cash dividends) were reinvested.
(Graph
(Graph is displayed here)
13
RELIABILITY INCORPORATED
PROXY STATEMENT
Comparison of Five-Year Cumulative Total Return
For Years Ended December 31,
---------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Reliability Common Stock $100 $300 $263 $1,157 $358 $237
Nasdaq Non-Financial Stocks 100 139 169 198 290 559
Nasdaq Stock Market Total Return 100 141 174 213 300 542
For Years Ended December 31, | ||||||
1997 | 1998 | 1999 | 2000 | 2001 | 2002 | |
Reliability Common Stock | $100 | 31 | 20 | 17 | 23 | 7 |
Nasdaq Non-Financial Stocks | 100 | 147 | 288 | 168 | 128 | 84 |
Nasdaq Stock Market Total Return | 100 | 141 | 261 | 157 | 125 | 86 |
Section 16(a) beneficial ownership reporting compliance
The Securities Exchange Act of 1934, as amended, requires that the Company's directors, executive officers and 10% stockholders (if any) report to the Securities and Exchange Commission certain transactions involving Common Stock. Based solely uponon a review of Forms 3, 4 and 5 furnished to the Company and representations received from persons subject to such reporting requirements, all filings were timely during the year ended December 31, 1999.
2002.
Compensation Committee interlocks and insider participation
The compensation committee is composed of Messrs. Hampton and Howard. Neither of such persons is or has been an officer or employee of the Company or any of its subsidiaries. No director or executive officer of the Company serves as a director (or a member of the compensation committee or other group performing equivalent functions) of another entity, any of whose executive officers or directors serves as a director of the Company.
Certain transactions
On December 3, 1998, the Company purchased certain assets associated with two
integrated circuit testing and conditioning service labs from Basic Engineering
Services and Technology Labs, Inc. ("BEST").
INDEPENDENT AUDITORS
The service labs were located in
Austin, Texas and Singapore. As partial consideration for the purchase, the
Company issued 475,000 shares of Common Stock to BEST, and BEST became a 7%
shareholder of the Company. BEST subsequently transferred the 475,000 shares of
Common Stock to The Qubain Family Trust, which controls BEST (see Principal
shareholders). The Company also issued a note (balance at December 31, 1998 was
$534,000) to BEST, which was paid in full in June 1999.
16
RELIABILITY INCORPORATED
PROXY STATEMENT
The Company entered into a two year consulting agreement with BEST to provide
business transition advice and marketing and customer support services. The
Company pays annual fees, during the two year period, of $150,000 to BEST under
the consulting agreement.
APPROVAL OF AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN
The Company's shareholders are being asked to approve a 500,000 share
increase in the maximum number of shares of Common Stock reserved for issuance
under the Company's 1997 Stock Option Plan ("Option Plan") from 1,000,000 to
1,500,000 shares. As of March 3, 2000, 197,000 shares had been issued for
exercised options, options covering a total of 709,000 shares were outstanding
under the Option Plan and only 94,000 shares remained available for future
issuance of options. On February 23, 2000, the Board of Directors approved an
amendment to the Option Plan to effect the share increase, subject to approval
and ratification by the shareholders. No other amendments were made or are
proposed with respect to the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
INCREASE IN THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE OPTION PLAN.
General Plan Information
The Option Plan was adopted by the Board of Directors on February 26,
1997 and approved by the shareholders on April 30, 1997. The Option Plan is
administered by the Board of Directors, acting as Plan Administrator. Options
can be issued to executive officers, directors and other key employees of the
Company and its subsidiaries for the purchase of the Company's no par Common
Stock. The CompanyAudit Committee has five executive officers (including one person who is
also a director), five directors and approximately 20 key employees considered
by the Plan Administrator to be eligible for option grants. A total of twenty-
three individuals hold options under the Option Plan as of March 3, 2000.
Awards under the Option Plan may be in the form of either one or both of the
following: non-qualified stock options and incentive stock options ("ISOs")
intended to qualify under the provisions of Section 422 of the Internal Revenue
Code of 1986 ("Code"). ISOs must meet certain Code requirements, such as
aggregate fair market value of ISOs that first become exercisable in any
calendar year and term of the option, and may only be issued to employees and
officers. Both ISOs and non-qualified options have vesting and expiration
schedules set by the Plan Administrator at the time of grant, but ISOs may not
have a term in excess of 10 years from date of grant. No award granted under
the Option Plan is assignable or transferable other than by will or by the laws
of descent and distribution. Upon termination of employment, all exercisable
options on the date of termination automatically terminate 30 days after
termination, unless termination is the result of retirement (in which case such
period is extended to the earlier of the end of the exercise period of the
option or 3 months after termination), permanent disability (in which case such
period is extended to the earlier of the end of the exercise period of the
option or 6 months), or death (in which case the optionee's estate or heirs may
exercise options until the end of the earlier of exercise period of the option
or one year after death). Any non-exercisable options on the date of
termination automatically terminate on the date of termination, regardless of
cause.
17
RELIABILITY INCORPORATED
PROXY STATEMENT
A stock option entitles the grantee to purchase a set number of shares of
Common Stock at a set price over a stated period of time. The exercise price of
all options under the Option Plan is the fair market value on the date of the
grant of the option, which in most instances is the closing price on The Nasdaq
Stock Market(r) on the date of the grant. Currently outstanding options have
exercise prices ranging from $2.57 to $20.25. The exercise price must be paid
in full in cash or by the delivery of Common Stock valued at its fair market
value on the exercise date.
Share Reserve
A total of 500,000 shares were reserved for issuance under the Option
Plan when it was approved by the shareholders in 1997. In September 1997, the
Company's Common Stock was split 2 for 1selected and the number of shares reserved
under the Option Plan was automatically increased to 1,000,000. Because, under
the Option Plan, options covering only 94,000 shares remain to be issued, the
Board of Directors seeks approval for an increase in the number of shares that
could be issued under the Option Plan. Of the 709,000 shares subject to
outstanding options on March 3, 2000, 471,000 are currently exercisable, and
238,000 become exercisable over the remaining term of the option grants. To the
extent that an option terminates without having been exercised, the shares
subject to such award will again be available for distribution in connection
with future awards under the Option Plan. Approximately 80,000 shares could be
added back to the available pool of shares in 2000 if the underlying options
expire without exercise. Many of the existing option awards are at prices above
current market value, and the Board of Directors believes it is important to
continue to issue option awards at current market value as additional
compensation and incentives in attracting and retaining key personnel.
Shares issuable under the Option Plan may be drawn from the Company's
authorized but unissued Common Stock or from shares of Common Stock reacquired
by the Company, including shares repurchased on the open market.
Plan Amendments
Amendments to the Option Plan may be made without shareholder approval.
However, the Code or the National Association of Securities Dealers ("NASD")
may require shareholder approval of certain amendments. The increase in
authorized shares is being submitted for shareholder approval in order to
comply with requirements of the NASD. No amendment may adversely affect an
award previously granted without the optionee's written consent.
New Plan Benefits
As of March 3, 2000, no option grants have been made under the Option
Plan on the basis of the proposed share increase in the maximum number of
shares authorized for issuance under the Option Plan. Each award of a stock
option is discretionary with the Plan Administrator. All executive officers,
directors and key employees will be eligible for award grants out of the
additional shares, if approved by the shareholders, when and as determined by
the Plan Administrator.
18
RELIABILITY INCORPORATED
PROXY STATEMENT
INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent auditors of the Company for 2000.2003. Ernst & Young LLP has served asbeen the Company's independent auditorsauditor since 1974. A representative of such firm is expected to be present at the meeting, will be given the opportunity to make a statement if so desired and will respond to appropriate questions.
Audit fees
Amounts billed by Ernst & Young LLP for the year ended December 31, 2002 for fees for the annual audit and review of financial statements included in the Company's quarterly reports (Form 10-Q) were $88,000.
All other fees
The aggregate fees billed for other services rendered by Ernst & Young LLP for the year ended December 31, 2002 were $99,000. All other fees included $6,000 in audit related services and $93,000 related to the preparation of income tax returns, the stock savings plan audit and various other accounting matters. No amounts were paid for financial information systems design and implementation fees. The Company's audit committee has reviewed the fees paid to and services provided by Ernst & Young LLP as they related to non-audit services and has considered their compatibility with Ernst & Young LLP maintaining its independence.
14
THE TRANSACTION OF OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors has no knowledge of business other than that described above which will be presented for consideration at this meeting.meeting other than that described above. If any other business properly comes before the meeting or any adjournment, it is intended that proxies will be voted in accordance with the judgment of the person or persons voting the proxy.
Proposals by shareholders for 20012004 annual meeting of shareholders
Shareholders
Eligible shareholders desiring to present proposals to the shareholders of the Company at the 20012004 annual meeting of shareholders, and to have such proposals included in the Company's proxy statement and proxy, must submit their proposals to the Company so as to be received no later than January 2, 2001.
By orderNovember 28, 2003, and must otherwise comply with Rule 14(a)-8 under the Securities Exchange Act of the Board of Directors,
Larry Edwards
Chairman
Date: March 15, 2000
1934.
By order of the Board of Directors, | |
| |
Date: March 10, 2003 |
THE COMPANY WILL FURNISH WITHOUT CHARGE TO ANY PERSON WHOSE PROXY IS SOLICITED, ON WRITTEN REQUEST FROM SUCH PERSON DELIVERED TO INVESTOR RELATIONS MANAGER, P.O. BOX 218370, HOUSTON, TEXAS 77218, A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K FOR 1999.
19
15
RELIABILITY INCORPORATED PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS - APRIL 26, 2000
May 7, 2003
The undersigned hereby appoints Larry Edwards and Max T. Langley,James Harwell, or either of them, with full power of substitution, attorneys and proxies of the undersigned to vote all shares of Common Stock of Reliability Incorporated (the "Company") that the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company, to be held at the offices of the Company on Wednesday, April 26, 2000,May 7, 2003, at 10:00 a.m., Houston time, and any adjournment thereof.
1. Election of Directors:
Nominees: | 01 Larry | 02 W. L. | 03 John R. | 04 Thomas L. | 05 Philip |
/ / For All | / / Withhold All | / / For All Except* | |
*For ALL except nominees crossed out | |||
2. In their discretion, the proxies are authorized to vote upon such other matters as may come before the meeting or any adjournment thereof.
/ / For | / / Against | / / Abstain |
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(Continued and to be signed on reverse side)
16
This proxy is solicited by the Reliability Incorporated Board of Directors. THIS PROXY WILL BE VOTED AS YOU SPECIFY ON THE REVERSE SIDE. IF NO CONTRARY SPECIFICATION IS MADE, THE PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN ITEM 1 FOR THE AMENDMENT TO THE 1997 STOCK OPTION PLAN IN ITEM 2 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING, ALL AS DESCRIBED IN THE NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND THE PROXY STATEMENT, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
- -----------------------------------------------------------------------
FOLD AND DETACH HERE
20
RELIABILITY INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER
USING DARK INK ONLY /X/
For Withheld For All
All All Except
1. Election of Directors.
Nominees: 01) Larry Edwards,
02) W.L. Hampton, 03) John R. / / / / / /
Howard, 04) Thomas L. Langford,
05) Philip Uhrhan
For ALL except nominees crossed out.
For Against Abstain
2. Approval of an amendment to
the Company's 1997 Stock Option
Plan to increase the number / / / / / /
of shares reserved for
issuance thereunder from
1,000,000 to 1,500,000
For Against Abstain
3. In their discretion, the
proxies are authorized to
vote upon such other matters / / / / / /
as may come before the meeting
or any adjournment thereof.
Please sign exactly as your name appears on your stock certificate. When signing as an executor, administrator, trustee or other representative, please sign your full title. All joint owners should sign.
Dated: , 2000
-----------------------
----------------------------------
Signature
----------------------------------
Signature, if held jointly,
or office or title held
- -----------------------------------------------------------------------
FOLD AND DETACH HERE
21
Dated: , 2003 | ||||
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. | ||||
Signature | ||||
Signature, if held jointly, or office or title held | ||||
17