SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the transition period
from to .
0-5860
(Commission file number)
Recoton Corporation
(Exact name of registrant as specified in its charter)
New York 11-1771737
(State or other jurisdiction of (L.R.S. Employer
incorporation or organization) Identification No.)
2950 Lake Emma Road, Lake Mary, Florida 32746
(Address of principal executive offices, including zip code)
407-333-8900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filings
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the most recent practicable date:
Outstanding as of
Class November 10, 1995
Common stock, par
value $.20 a share 11,153,039
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,034,305 $ 15,475,022
Accounts receivable (less allowance for
possible loss of $1,546,000 in 1995 and
$989,000 in 1994) 45,673,816 35,579,805
Inventories 64,057,703 43,669,443
Prepaid expenses and other current assets 4,692,421 4,299,719
Total current assets 120,458,245 99,023,989
Property and equipment (less accumulated
depreciation and amortization of $12,317,259
in 1995 and $5,854,299 in 1994) 22,640,710 12,947,992
Other assets 21,003,221 6,791,750
T O T A L $164,102,176 $118,763,731
LIABILITIES
Current liabilities:
Due to banks $ 20,290,959
Current portion of long-term debt 1,130,395 $ 863,471
Accounts payable 15,664,085 8,944,083
Accrued expenses 5,224,881 4,117,191
Income taxes payable 2,723,870 1,876,398
Total current liabilities 45,034,190 15,801,143
Long-term debt (less current portion above) 4,701,168 5,220,899
Deferred compensation and other noncurrent
liabilities 1,199,892 1,108,222
Total liabilities 50,935,250 22,130,264
STOCKHOLDERS' EQUITY
Preferred stock - $1.00 par value each -
authorized 10,000,000 shares; none issued -- --
Common stock - $.20 par value each - authorized
25,000,000 shares; issued 12,281,977 shares in
1995 and 11,793,198 shares in 1994 2,456,395 2,358,640
Additional paid-in capital 72,840,142 64,393,649
Retained earnings 42,502,595 33,744,271
Cumulative foreign currency translation
adjustment (188,545) (380,624)
117,610,587 100,115,936
Treasury stock - 1,130,855 shares in 1995 and
1,073,859 shares in 1994, at cost (4,443,661) (3,482,469)
Total stockholders' equity 113,166,926 96,633,467
T O T A L $164,102,176 $118,763,731
The attached notes are made a part hereof.
</TABLE>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $55,728,560 $46,128,636 $135,209,785 $109,394,730
Cost of goods sold 34,170,587 27,223,738 84,198,656 64,267,303
Gross profit 21,557,973 18,904,898 51,011,129 45,127,427
Selling, general and
administrative expenses 15,922,563 13,691,271 39,496,676 34,512,294
Interest expense 15,148 91,024 144,273 525,149
Investment (income) (net) (134,453) (151,714) (554,144) (366,578)
T o t a l 15,803,258 13,630,581 39,086,805 34,670,865
Income before income taxes 5,754,715 5,274,317 11,924,324 10,456,562
Income tax provision 1,597,000 1,625,000 3,166,000 3,212,000
NET INCOME $ 4,157,715 $ 3,649,317 $ 8,758,324 $ 7,244,562
Earnings per common share
(Note E):
Primary $.36 $.33 $.78 $.70
Assuming full dilution $.36 $.33 $.76 $.70
Number of shares used in
computing per share amounts
(Note E):
Primary 11,472,000 11,220,000 11,292,000 10,331,000
Assuming full dilution 11,605,000 11,220,000 11,522,000 10,339,000
Dividends NONE NONE NONE NONE
The attached notes are made a part hereof.
</TABLE>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,758,324 $ 7,244,562
Adjustments to reconcile results of operations
to net cash provided by operating activities:
Depreciation and amortization 2,256,985 1,806,967
Provision for losses on accounts receivable 539,250 214,484
Deferred income taxes (414,000) (441,000)
Net change in asset and liability accounts:
Accounts receivable (3,888,349) (5,107,512)
Inventory (11,683 768) (18,234,220)
Prepaid expenses and other current assets 346,965 (1,432,615)
Other assets (841,809) (24,442)
Accounts payable and accrued expenses 2,561,146 3,077,883
Income taxes payable 640,454 1,131,101
Deferred compensation and other noncurrent
liabilities 173,065 (22,501)
Total adjustments (10,310,061) (19,031,855)
Net cash used for operating activities (1,551,737) (11,787,293)
Cash flows from investing activities:
Expenditures for property and equipment (8,132,271) (3,718,720)
Expenditures for trademarks, patents and
intellectual property (565,370) (77,696)
Payments for acquisitions (net of approximately
$2,340,000 cash acquired in 1995) (12,538,736) (2,543,853)
Net cash used for investing activities (21,236,377) (6,340,269)
Cash flows from financing activities:
Net (repayments) proceeds from line-of-credit
agreement and other bank borrowings 14,539,848 (19,300,000)
Repayment of long-term bank borrowings (667,446) (1,085,703)
Repayment of bank debt assumed from acquisition (1,174,652)
Proceeds from public offering of common stock 46,527,098
Income tax benefit applicable to exercise
of stock options 4,100 477,200
Proceeds from exercise of stock options 178,599 96,305
Purchases of treasury stock (679,767) (57,654)
Net cash provided by financing activities 13,375,334 25,482,594
Effect of foreign exchange rate changes on cash (27,937) (13,371)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(CARRIED FORWARD) (9,440,717) 7,341,661
</TABLE>
<PAGE>
RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-2-
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (BROUGHT FORWARD) $ (9,440,717) $ 7,341,661
Cash and cash equivalents - January 1 15,475,022 4,187,555
CASH AND CASH EQUIVALENTS - SEPTEMBER 30 $ 6,034,305 $11,529,216
Supplemental disclosures of cash paid for:
Interest $ 363,303 $ 590,754
Income taxes $ 2,629,784 $ 2,044,978
Noncash investing and financing activities:
In connection with the acquisition of STD Holding Limited, 406,092 shares of
common stock with a market value of approximately $8.3 million were issued as part
of the purchase price (Note E).
In connection with the exercise of incentive stock options in 1995, 41,602 shares
of common stock were issued in exchange for 3,934 shares of previously issued
common stock with a market value of $87,426.
In April 1995, 11,896 shares of treasury stock with a market value of $194,000
were acquired in consideration for the cancellation of a loan receivable.
</TABLE>
The attached notes are made a part hereof.
<PAGE>
RECOTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A -The attached summarized financial information does not
include all disclosures required to be included in a complete
set of financial statements prepared in conformity with
generally accepted accounting principles. Such disclosures were
included with the consolidated financial statements of the
Company at December 31, 1994, included in its annual report.
Such statements should be read in conjunction with the data
herein.
NOTE B -The financial information reflects all normal recurring
adjustments which, in the opinion of management, are deemed
necessary for a fair presentation of the results for the interim
periods. The results for the interim periods are not
necessarily indicative of the results to be expected for the
year. Historically, the Company's sales and earnings have been
higher in the second half of each year.
NOTE C -Inventory at September 30, 1995 is comprised of:
Raw materials and work-in-process $20,312,919
Finished goods 36,938,138
Merchandise in-transit 6,806,646
T o t a l $64,057,703
NOTE D - Segment Information:
Information applicable to the Company's foreign
operations in Hong Kong and Canada for the three and nine months
ended September 30, 1995 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1995
Consolidated Eliminations U.S. Hong Kong Canada
<S> <C> <C> <C> <C>
Net sales $ 55,728,560 $ (5,664,926) $ 48,236,867 $ 9,517,458 $3,639,161
Pre-tax
income $ 5,754,715 $ (497,425) $ 2,736,343 $ 3,241,797 $ 274,000
Nine Months Ended September 30, 1995
Consolidated Eliminations U.S. Hong Kong Canada
Net sales $135,209,785 $ (7,888,686) $114,304,113 $19,092,098 $9,702,260
Pre-tax
income $ 11,924,324 $ (497,475) $ 5,328,131 $ 6,771,694 $ 321,974
Identifiable
assets at
9/30/95 $164,102,176 $(30,386,785) $143,680,099 $42,012,213 $8,796,649
</TABLE>
<PAGE>
RECOTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE E - Acqusition of Business:
Effective August 31, 1995, the Company acquired, in a
purchase transaction, the outstanding stock of STD Holding
Limited ("STD"), as well as certain net assets owned by one of
STD's subsidiaries. The purchase price was approximately $20.1
million, which included the issuance of 406,092 shares of
Recoton's common stock, cash payments (net of cash acquired) of
approximately $11.2 million and legal and accounting fees and
other acquisition costs of approximately $675,000. The $11.3
million excess of consideration paid over the fair market value
of the net assets acquired has been recorded as goodwill, which
is being amortized to operations over 15 years.
The following presents, on an unaudited pro forma basis,
the net sales, net earnings and earnings per share of the
Company for the nine months ended September 30, 1995 and 1994,
as if STD had been owned during these periods. The information
for STD is based on its unaudited financial statements for the
eight month period ended August 31, 1995 and for the nine month
period ended September 30, 1994, after excluding an
extraordinary item in 1994 which is unrelated to the operations
acquired. The pro forma information does not purport to be
indicative of the results of operations that would
have occured had the transaction taken place at the beginning of
the periods presented, nor is it indicative of the expected
future results of operations.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Net sales $156,429,359 $132,703,900
Net earnings $ 7,842,323 $ 5,861,528
Earnings per share $.67 $.55
</TABLE>
<PAGE>
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Comparison of the quarters ended September 30, 1995 and 1994 and
the nine-month period ended September 30, 1995 and 1994:
Results of Operations
Net sales for the third quarter of 1995 increased by 20.8%
to $55,729,000 from $46,129,000 in the same period in 1994. For
the nine-month period, net sales increased in 1995 by 23.6% to
$135,210,000 from $109,395,000 in 1994. The increase is
attributable to sales of the Interact, Performance
and STD brands (which the Company acquired in September 1995,
through the acquisition of STD Holding Limited), strong sales of
the Company's existing consumer electronics accessory product
lines, including increased international sales, continued growth
of the Company's 900 MHz wireless audio and video line and the
introduction of new products, including computer and
cellular phone accessories.
Gross profit for the third quarter of 1995 increased by
approximately $2,653,000 as compared to the third quarter of
1994, but decreased as a percentage of net sales from 41.0% to
38.7%. For the first nine months of 1995, gross profit increased
by approximately $5,884,000 as compared to the
comparable period in 1994, but decreased as a percentage of net
sales from 41.3% to 37.7%. The percentage decrease was due
primarily to a change in product mix, including sales of newly
introduced cellular phone accessories and universal TV remote
control products, sales of OEM products (which typically carry
lower gross margins, yet have lower associated selling expenses)
and aggressive pricing aimed at capturing market share.
Selling, general and administrative expenses increased in
1995 primarily because of selling expenses related to the
increased sales volume. However, overall selling, general and
administrative expenses as a percent of net sales decreased to
28.6% and 29.2% in the respective three- and nine-month 1995
periods from 29.7% and 31.5% in the respective 1994 three- and
nine-month periods. The percentage decrease was due to the
increased proportion of sales to OEM customers and increased
operating efficiencies, which were however offset by increased
research and development, advertising and marketing expenses.
Interest expense decreased by approximately $381,000 in
the first nine months of 1995 as compared to the respective 1994
nine-month period due to the repayment of short-term borrowings
from the proceeds of the public offering of the Company's Common
Stock concluded in April 1994. Interest expense is expected to
increase in the future due to the acquisition of STD
Holding Limited. The Company borrowed $13 million to finance the
acquisition and also assumed STD's bank obligations.
Additionally, the Company is negotiating for a $5 million term
loan relative to its new Lake Mary, Florida warehouse facility.
Investment income increased by approximately $188,000 in
the first nine months of 1995 as compared to the first nine
months of 1994. The increase in investment income resulted from
the investment of a portion of the proceeds from the 1994 public
offering of the Company's Common Stock in short-term treasury
bills.
The effective income tax rate for the three- and
nine-month periods ended September 30, 1995 decreased to 27.8%
and 26.5% respectively from 30.8% and 30.7% respectively in 1994
as a result primarily of the higher proportion of income earned
by the Company's Hong Kong subsidiaries, which are taxed at
a maximum rate of 16.5%.
Earnings per share were $.78 on a primary basis ($.76 on a
fully-diluted basis) for the nine months ended September 30, 1995
and $.36 on both a primary and fully-diluted basis for the three
months ended September 30, 1995. The 1995 per share calculations
were based on 11,292,000 (11,522,000 on a fully-diluted basis)
average common and common equivalent shares outstanding for the
nine-month period and 11,472,000 (11,605,000 on a fully-diluted
basis) for the three-month period. For the comparable nine
months of 1994, earnings per share were $.70 on both a primary
and fully-diluted basis based on 10,331,000 (10,339,000 on a
fully-diluted basis) average common and common
equivalent shares outstanding. For the comparable three months
of 1994, earnings per share were $.33 on both a primary and
fully-diluted basis based on 11,220,000 average common and common
equivalent shares on both a primary and fully-diluted basis. The
increase in average shares outstanding in 1995 primarily results
from the 1,740,000 shares sold in the public offering of the
Company's Common Stock in April 1994 and the 406,000 shares
issued as part of the STD Holding purchase. As a result of the
offering, the Company's outstanding Common Stock increased by
approximately 33%.
Liquidity and Capital Resources
Prior to April 1994, the Company had obtained the funds
for increases in working capital, capital expenditures and
acquisitions primarily from cash flow from operations, short-term
bank lines of credit, long-term financing and normal trade
credit. In April 1994, the Company completed a public offering
of 1,740,000 shares of Common Stock, raising net proceeds of
approximately $46.5 million. The Company immediately repaid all
outstanding short-term debt. The Company continues to maintain
domestic lines of credit of $45 million with three banks, plus
another $5 million domestic line of credit which can only be used
for acquisition purposes, any of which may be terminated by such
banks at any time. At September 30, 1995, approximately
$3.9 million was outstanding on the domestic lines of credit.
Additionally, the Company's Hong Kong subsidiaries maintain a
combined $15.8 million line of credit with one foreign bank,
which includes a $5 million credit facility secured by a pledge
of accounts receivable. At September 30, 1995
approximately $7.3 million was outstanding on the combined
foreign line of credit.
At September 30, 1995, the Company had working capital of
approximately $75.4 million as compared to approximately $83.2
million at December 31, 1994. In addition, the Company's working
capital ratio decreased to 2.7 to 1 at September 30, 1995 from
6.3 to 1 at December 31, 1994. The September 1995 purchase of
STD Holding Limited brought about a major change in
the components of the Company's working capital and is the
primary reason for the $7.8 million net decrease in working
capital. Inventories as a whole increased approximately $20.4
million, with STD accounting for approximately
$11.1 million of that increase; the balance of the increase was
necessitated by increased investment for the introduction of new
products and anticipated increases in sales volume. Likewise,
trade receivables increased approximately $10.2 million, of which
STD accounted for approximately $7.9 million and the balance was
due to a higher sales volume. During 1995, the Company used
approximately $6.6 million of cash and working capital for the
construction of its new warehouse facility (see details below).
In June and August of 1994, the Company purchased
approximately 30 acres of land in Lake Mary, Florida on which it
is finalizing construction of a 245,000 square foot warehouse
building. The estimated cost for the land and building
construction is approximately $7 million of which approximately
$6.6 million has been incurred as of September 30, 1995.
Although to-date the costs of the facility have been paid out of
the Company's cash resources, the Company is negotiating a $5
million, five-year uncollateralized bank loan.
In August 1994, the Board of Directors authorized the
repurchase by the Company of up to 500,000 shares of its
outstanding Common Stock. In December 1994, 4,000 shares were
repurchased for $68,000 and, in February 1995, an additional
40,000 shares were repurchased for $655,000.
In September 1994, Recoton purchased selected assets and
assumed certain liabilities of Sound Quest, Inc., a leading
supplier of car audio installation and accessory products, for a
purchase price of approximately $2.5 million plus additional
contingent payments over five years, not to exceed $1.15 million.
After this acquisition, Sound Quest's assumed bank loans of
approximately $1.175 million were repaid.
In February 1995, Recoton purchased selected assets of
Ampersand, a division of Ampco Industries, Inc., of Chatsworth,
California, at a cost of approximately $722,000. Ampersand is a
manufacturer and supplier of car stereo installation accessories.
In April 1995, Recoton announced the formation of Christie
Design Corporation located in Chatsworth, California. This
wholly-owned subsidiary will develop and market speaker products.
The Company anticipates that it will incur approximately $850,000
of start-up costs for this subsidiary, of which approximately
$620,000 had been expended as of September 30, 1995.
In September 1995, Recoton acquired STD Holding Limited, a
Hong Kong-based international manufacturer and marketer of
multimedia and computer accessories, including video game
joysticks, controllers and accessories and computer speakers sold
under the Interact, Performance and STD brand names.
STD's operations are in Hong Kong, China and Maryland (U.S.A.).
The purchase price of $21,500,000 was paid through a combination
of $13.5 million in cash and 406,092 Recoton Common Shares
(valued at $8 million). The cash portion of the payout was
initially borrowed under existing bank lines of credit. The
Company is currently negotiating with its banks to replace these
borrowings with a five-year term loan.
The Company has no other material commitments for capital
expenditures, although it will continue to evaluate possible
acquisitions which may be attractive to the growth of the
Company.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(3)(ii) By-Laws, as amended October 19, 1995
(10)(1) Employment Agreement between Recoton
Corporation and Robert L. Borchardt, dated
October 25, 1995
(27) Financial Data Schedule
(b) Reports on Form 8-K:
(1) A report on Form 8-K was filed during the
quarter ended September 30, 1995 dated
September 5, 1995 describing, under Item 2,
the acquisition of STD Holdings Limited. No
financial statements were filed at the time,
but the required financials will be filed
within 60 days from September 19, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
RECOTON CORPORATION
Date: November 14, 1995 /s/ Stuart Mont
Stuart Mont
Chief Operating Officer,
Executive Vice President
- Operations, Chief
Financial Officer and
Secretary
Date: November 14, 1995 /s/ Joseph H. Massot
Joseph H. Massot
Vice President, Treasurer
and Principal Accounting
Officer
EXHIBIT INDEX
Number Description
(3)(ii) By-Laws, as amended October 19, 1995
(10)(1) Employment Agreement between Recoton Corporation and
Robert L. Borchardt, dated October 25, 1995
(27) Financial Data Schedule [EDGAR FILING ONLY]
EXHIBIT (3)(ii)
As Amended October 19, 1995
BY-LAWS
of
RECOTON CORPORATION
ARTICLE I
OFFICES
Section 1.1. Office. The office of the Corporation within
the State of New York shall be located in the City of New York,
New York County.
Section 1.2. Other Offices. The Corporation may also have
offices and places of business at such other places within or
without the State of New York as the Board of Directors may from
time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.1. Time and Place. All meetings of Shareholders
of the Corporation shall be held at such time and place as shall
be stated in the notice of meeting.
Section 2.2. Annual Meeting. The Annual Meeting of the
Shareholders of the Corporation shall be held at such time and
place as the Board of Directors shall determine on the last
Tuesday in May of each year or on such other date as may be
determined by the Board of Directors. At such meetings the
Shareholders shall elect a Board of Directors and transact such
other business as may properly come before the meeting.
Section 2.3. Special Meetings. Special meetings of the
Shareholders of the Corporation, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President, the Chairman of
the Board of Directors or the Board of Directors.
Section 2.4. Notice of Meetings.
(a) Written notice of each meeting of Shareholders of
the Corporation stating the place, date and hour thereof and, in
the case of a special meeting of Shareholders, specifying the
purpose or purposes thereof, and the person or persons by whom or
at whose direction such meeting has been called, shall be given
to each Shareholder entitled to vote thereat, at his address as
it appears on the records of the Corporation, not less than ten
(10) nor more than fifty (50) days prior to the meeting.
(b) At any annual meeting of the Shareholders, only
such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a
meeting, business must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or
(c) otherwise properly brought before the meeting by a
Shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a
Shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be
timely, a Shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that
less than seventy five (75) days' notice or prior public
disclosure of the date of the meeting is given or made to
Shareholders, notice by the Shareholder to be timely must be so
received not later than the close of business on the fifteenth
(15th) day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made,
whichever first occurs. As used herein, the term "public
disclosure" shall include any disclosure made by press release
issued by the Corporation and any notice of record date and
meeting date for the meeting delivered to any national securities
exchange on which the Corporation's securities are listed or to
the National Association of Securities Dealers if the
Corporation's securities are then quoted on such Association's
interdealer quotation system. Such Shareholder's notice to the
Secretary shall set forth as to each matter the Shareholder
proposes to bring before the meeting (i) a brief description of
the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (ii) the
record name and record address of the Shareholder proposing such
business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the Shareholder, and (iv) any
material interest of the Shareholder in such business.
(c) Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this
Section 2.4; provided, however, that nothing in this Section 2.4
shall be deemed to preclude discussion by any Shareholder of any
business properly brought before the meeting in accordance with
said procedure. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with this
Section 2.4, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before
the meeting shall not be transacted.
Section 2.5. Quorum. At each meeting of Shareholders of the
Corporation, the holders of a majority of stock of the
Corporation entitled to vote thereat, present in person or by
proxy, shall constitute a quorum, except as otherwise provided by
statute, the Certificate of Incorporation or these By-Laws. If,
however, a quorum shall not be present on the date specified in
the original notice of meeting, the Shareholders entitled to vote
thereat, present in person or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At
any such adjourned meeting at which a quorum be present, the
Shareholders present in person or by proxy may transact any
business which might have been transacted had a quorum been
present on the date specified in the original notice of meeting.
Section 2.6. Vote Required. When a quorum is present in
person or by proxy at any meeting of Shareholders of the
Corporation, the vote of the holders of a majority of the stock
present in person or by proxy and entitled to vote shall decide
any question brought before such meeting, unless the question is
one upon which, by express provision of statute or of the
Certificate of Incorporation or of these By-Laws, a different
vote is required, in which case such express provision shall
govern and control the decision of such question.
Section 2.7. Voting. At any meeting of the Shareholders of
the Corporation each Shareholder having the right to vote shall
be entitled to vote in person or by proxy appointed by an
instrument in writing subscribed by such Shareholder. Except as
otherwise provided by statute or the Certificate of
Incorporation, each holder of record of shares of Common Stock
shall be entitled to one vote for every share of such stock
standing in his name on the books of the Corporation. All
elections shall be determined by a plurality vote, and, except as
otherwise provided by statute or the Certificate of
Incorporation, all other matters shall be determined by vote of a
majority of the shares present or represented at such meeting and
voting on such questions.
Section 2.8. Proxies. Each proxy must be executed in virtue
by the Shareholder or by his duly authorized attorney. No proxy
shall be valid after the expiration of eleven (11) months from
the date of its execution unless it shall have specified therein
its duration. Each proxy shall be revocable at the pleasure of
the person executing it or of his personal representatives or
assigns, except in those cases where an irrevocable proxy is
permitted by statute.
Section 2.9. Consents. Whenever the vote of Shareholders at
a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provision of statute
or of the Certificate of Incorporation or of these By-Laws, the
meeting and vote of Shareholders may be dispensed with if all the
Shareholders who would have been entitled to vote upon the
action, if such meeting were held, shall consent in writing to
the taking of such corporate action.
ARTICLE III
DIRECTORS
Section 3.1. Board of Directors. The property and business
of the Corporation shall be managed by its Board of Directors,
which may exercise all such powers of the Corporation and do all
such lawful acts and things as are not, by statute or by the
Certificate of Incorporation or by these By-Laws, directed or
required to be exercised or done by the Shareholders.
Section 3.2. Number. The number of directors constituting
the entire Board of Directors shall be not less than nine (9) nor
more than fifteen (15) as shall be fixed from time to time by a
resolution adopted by a majority of the entire Board of
Directors; provided, however, that no decrease in the number of
directors constituting the entire Board of Directors shall
shorten the term of any incumbent director.
Section 3.3. Terms of Office. The directors shall be
divided into three staggered classes, as nearly equal in number
as possible, with the term of office of each class to expire at
the third succeeding Annual Meeting of Shareholders after
electing such class. The term of office for newly created
directorships shall be set by a resolution adopted by a majority
of the entire Board of Directors. A director may resign at any
time. A director may be removed from office only for cause and
only by the affirmative vote of the holders of at least 80% of
the voting power of all of the shares of the Corporation entitled
to vote for the election of directors.
Section 3.4. Election.
(a) At each Annual Meeting of Shareholders directors
elected to succeed those directors whose terms expire shall be
elected for a term of office to expire at the third succeeding
Annual Meeting of Shareholders after their election.
(b) Only persons who are nominated in accordance with
the following procedures shall be eligible for election as
directors by the Shareholders of the Corporation. Nominations of
persons for election to the Board of Directors of the Corporation
may be made at a meeting of Shareholders by or at the direction
of the Board of Directors by any nominating committee or person
appointed by the Board or by any Shareholder of the Corporation
entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this provision.
Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the Corporation. To be timely, a
Shareholder's notice shall be delivered to or mailed and received
at the principal executive offices of the Corporation not less
than sixty (60) days or more than ninety (90) days prior to the
meeting; provided, however, that in the event that less than
seventy five (75) days' notice or prior public disclosure of the
date of the meeting is given or made to Shareholders, notice by
the Shareholder to be timely must be so received not later than
the close of business on the 15th day following the day on which
such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. As used herein, the
term "public disclosure" shall have the meaning given such term
in this Section 2.4 of these By-Laws. Such Shareholder's notice
to the Secretary shall set forth (a) as to each person whom the
Shareholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or
employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by
the person and (iv) any other information relating to the person
that is required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended; and (b) as to the
Shareholder giving notice (i) the record name and record address
of Shareholder and (ii) the class and number of shares of capital
stock of the Corporation which are beneficially owned by the
Shareholder. The Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by
the Corporation to determine the eligibility of such proposed
nominee to serve as director of the Corporation. No person shall
be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 3.5. Location of Meetings and Records. The Board of
Directors may hold its meetings and the Corporation may keep the
books of the Corporation at such places as the Board may from
time to time determine.
Section 3.6. Vacancies. Any vacancy in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office, an increase in the number
of directors or other cause shall be filled by a majority vote of
the directors them in office, although such majority may be less
than a quorum. A director elected to fill a vacancy shall hold
office for a term expiring at the Annual Meeting of Shareholders
at which the term of the class to which such director has been
elected expires.
Section 3.7. Compensation. Directors, as such, shall not
receive any stated salary for their services, but, by resolution
of the Board, a fixed sum and expenses of attendance, if any, may
be allowed for attendance at each regular or special meeting of
the Board; provided that nothing herein contained shall be
construed to preclude any director from serving the Corporation
in any other capacity and receiving compensation therefor.
Section 3.8. Chairman of the Board. The Board of Directors
may at any time choose from among its members a Chairman of the
Board, who shall serve at the pleasure of the Board. The
Chairman, if there be one, shall preside at all meetings of the
Shareholders and the Board of Directors and shall have such other
powers and perform such other duties as may from time to time be
assigned to him by the Board of Directors.
Section 3.9. Indemnification. Any person made a party to an
action by or in the right of the Corporation to procure a
judgment in its favor, or made, or threatened to be made, a party
to an action or proceeding other than one by or in the right of
the Corporation to procure a judgment in its favor, by reason of
the fact that he, his testator or intestate is or was a director
or officer of the Corporation, or of any other corporation,
domestic or foreign, which he, his testator or intestate served
in any capacity at the request of the Corporation, shall be
indemnified by the Corporation against the reasonable expenses
(including attorney's fees, judgments, fines, and amounts paid in
settlement) actually incurred by him as a result of such action
or proceeding, or any appeal therein and the Corporation may
advance his expenses, to the full extent permissible under
Sections 721 through 726 of the New York Business Corporation
Law. Such indemnification may be addition to any other rights to
which any person seeking indemnification may be entitled under
any agreement, vote of shareholders or directors or any provision
of these By-Laws. The directors, officers, employees and agents
of the Corporation shall be fully protected individually in
making or refusing to take any other action under this Section
3.9 in reliance upon the advice of counsel.
ARTICLE IV
MEETINGS OF THE BOARD
Section 4.1. Time and Place. Meetings of the Board of
Directors may be held either within or without the State of New
York. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time
be determined by the Board. Each special meeting of the Board of
Directors shall be held at such time and place as shall be stated
in the notice of the meeting.
Section 4.2. First Meeting. The first meeting of each newly
elected Board of Directors shall be held within ten (10) days
following each annual meeting of the Shareholders at such time
and place, either within or without the State of New York, as
shall be fixed by resolution of the Board of Directors prior to
the annual meeting or by the consent in writing of all the newly
elected directors, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum shall be present.
Section 4.3. Special Meetings. Special meetings of the
Board of Directors may be called by the President or the
Secretary and, at the written request of any two (2) directors,
shall be called by the Secretary. Written notice of each special
meeting of directors, stating the time and place and purpose or
purposes thereof, shall be served upon each director, personally,
by mail or by telegraph, at least forty eight (48) hours before
such meeting.
Section 4.4. Quorum and Voting. At all meetings of the
Board of Directors a majority of the entire Board of Directors
shall be necessary and sufficient to constitute a quorum for the
transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall
be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of
Incorporation or by these By-Laws. If a quorum shall not be
present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present.
Section 4.5. Meetings by Telephonic or Other Communications
Equipment. Any member of the Board of Directors or of any
committee thereof may participate in a meeting of the Board of
Directors or of such committee by means of a conference telephone
or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person
at a meeting.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1. Designation; Powers. The Board of Directors
may, by resolution or resolutions adopted by a majority of the
entire board, designate from among its members an Executive
Committee or other committees, each consisting of three (3) or
more directors, and each of which, to the extent provided in any
such resolution, shall have all the authority of the Board,
except that no such committee shall have authority with regard to
any of the following:
(a) the submission to Shareholders of any action as to
which Shareholders' approval is required by law;
(b) the filling of vacancies in the Board of Directors or
on any committee;
(c) the fixing of compensation of any director for serving
on the Board of Directors or on any committee;
(d) the amendment or repeal of these By-Laws or the
adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board
of Directors which by its term shall not be amendable
or repealable by a committee.
The Board of Directors may designate one or more directors
as alternate members of any such committee who may replace any
absent member or members at any meeting of such committee.
Section 5.2. Tenure and Reports. Each such committee shall
serve at the pleasure of the Board of Directors. It shall keep
minutes of its meetings and report the same to the Board.
ARTICLE VI
NOTICES
Section 6.1. Delivery of Notice. Notices to directors and
Shareholders setting forth the time and place of such meeting
shall be in writing and may be delivered personally, by mail,
Express Mail or overnight courier or telephone, telecopier or
telegraph. Notice by mail shall be deemed to be given seventy
two (72) hours after the time when the same shall be deposited in
the post office or a letter box, in a postpaid sealed wrapper;
notice by Express Mail or overnight courier shall be deemed to be
given upon the day and hour of promised delivery; and notice by
telephone, telecopier, telegraph or personal delivery shall be
deemed to be given immediately (if by telephone, confirmed in
writing before or after the meeting). Notices shall be addressed
to directors or Shareholders at their addresses appearing on the
books of the Corporation, unless any such director or Shareholder
shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other
address, in which case the notice shall be mailed to the address
designated in such request.
Section 6.2. Waiver of Notice. Whenever any notice is
required to be given by any statute, the Certificate of
Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto. In addition, any Shareholder attending a
meeting of shareholders in person or by proxy without protesting
prior to the conclusion of the meeting the lack of notice thereof
to him, and any director attending a meeting of the Board of
Directors without protesting prior to the meeting or at its
commencement such lack of notice, shall be conclusively deemed to
have waived notice of such meeting.
ARTICLE VII
OFFICERS
Section 7.1. Executive Officers. The executive officers of
the Corporation shall be a President, one or more Vice
Presidents, a Treasurer and a Secretary, each of whom shall be
elected annually by the directors at their first meeting and
shall hold office at the pleasure of the Board. Any person may
hold two or more such offices, except that the same person shall
not at the same time be both President and Vice-President or
President and Secretary. All vacancies occurring in any of the
above offices shall be filled by the directors. Any officer may
be removed for cause or without cause by the Board of Directors
at any regular meeting or at any special meeting called for the
purpose.
Section 7.2. Subordinate Officers. The Board of Directors
may appoint such other officers and agents, including additional
Vice Presidents, and one or more Assistant Vice Presidents,
Assistant Secretaries and Assistant Treasurers with such powers
and duties as it shall deem necessary. Any such other officers
or agents shall hold office at the pleasure of the Board of
Directors.
Section 7.3. Authorities and Duties. All officers, as
between themselves and the Corporation, shall have such authority
and perform such duties in the management of the Corporation as
may be provided in these By-Laws, or, to the extent not so
provided, as may be prescribed by the Board of Directors.
Section 7.4. Tenure and Removal. All officers of the
Corporation shall hold office for such term as may be prescribed
by the Board of Directors and until their respective successors
are elected or appointed and qualified in their stead. Any
officer of the Corporation may be removed by the Board of
Directors for cause or without cause at any regular or special
meeting of the Board.
Section 7.5. The President. The President shall be the
chief executive officer of the Corporation. He shall have
general and active management and control of the business and
affairs of the Corporation, subject to the control of the Board
of Directors, and shall see that all orders and resolutions of
the Board are carried into effect; he shall be ex officio a
member of all standing committees; and in the absence of the
Chairman of the Board, or if there be no Chairman, he shall
preside at all meetings of the Shareholders and directors.
Section 7.6. Powers of the President. The President shall
have power to sign on behalf of the Corporation, bonds, notes,
deeds, mortgages, and any and all contracts, agreements and
instruments of a contractual nature pertaining to matters which
arise in the normal conduct and ordinary course of the business
of the Corporation, except in cases in which the signing and
execution thereof shall have been expressly delegated to some
other officer or agent of the Corporation; and he shall perform
such other duties as the Board of Directors shall from time to
time prescribe.
Section 7.7. The Vice Presidents. The Vice President, or,
if there be more than one, the Vice Presidents in the order of
their seniority, as indicated by their titles or as otherwise
determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the
powers of the President, shall perform such other duties as the
Board of Directors shall prescribe and shall generally assist the
President.
Section 7.8. The Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the
Shareholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose and shall
perform like duties for the standing committees when required.
He shall give, or cause to be given, notice of all meetings of
the Shareholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the
Board of Directors or the President, under whose supervision he
shall be. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix
the same to any instrument requiring it and, when so affixed, it
shall be attested by his signature or by the signature of the
Treasurer or an Assistant Secretary or Treasurer. He shall keep
in safe custody the certificate books and stock books and such
other books and papers as the Board may direct and shall perform
all other duties incident to the office of Secretary.
Section 7.9. Assistant Secretaries. The Assistant
Secretaries, if any, in order of their seniority shall, in the
absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other
duties as the Board of Directors shall prescribe.
Section 7.10. The Treasurer. The Treasurer shall have the
care and custody of the corporate funds, and other valuable
effects, including securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The
Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and directors,
at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and
of the financial condition of the Corporation. If required by
the Board of Directors, the Treasurer shall give the Corporation
a bond for such term, in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration
to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the Corporation.
Section 7.11. Assistant Treasurers. The Assistant
Treasurers, if any, in the order of their seniority shall, in the
absence or disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other
duties as the Board of Directors may prescribe.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. Form. The certificates of stock of the
Corporation shall be in such form as shall be determined by the
Board of Directors and shall be numbered consecutively and
entered in the books of the Corporation as they are issued. Each
certificate shall exhibit the registered holder's name and the
number and class of shares, and shall be signed by the president
or a Vice President and the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary, and shall bear the
seal of the Corporation or an engraved or printed facsimile
thereof. Where any such certificate is signed by a Transfer
Agent or by a Registrar, the signature of the President, Vice
President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary may be facsimile. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been
used on any such certificate or certificates, shall cease to be
such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or
certificates have been delivered by the Corporation, such
certificate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such
officer or officers of the Corporation.
Section 8.2. Registered Shareholders. The Corporation shall
be entitled to (1) recognize the exclusive right of a person
registered on its books as the owner of shares entitled to
receive dividends and notices of meetings of Shareholders and to
vote as such owner; and (2) hold liable for calls and assessments
a person registered on its books as the owner of shares; and the
Corporation shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the
State of New York.
Section 8.3. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed, and
upon such other terms as the Board of Directors may prescribe;
and the Board of Directors may, in its discretion and as a
condition precedent to the issuance of a new certificate or
certificates, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to give
the Corporation a bond in such sum and with such surety or
sureties as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Section 8.4. Record Date.
(a) For the purpose of determining the Shareholders entitled
to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining
Shareholders entitled to receive payment of any dividend or the
allotment of any rights, or for the purpose of any other action,
the Board may fix, in advance, a date as of the record date for
any such determination of Shareholders. Such date shall not be
more than fifty (50) nor less than ten (10) days before the date
of such meeting, nor more than fifty (50) days prior to any other
action.
(b) If no record date is fixed:
(1) The record date for the determination of
Shareholders entitled to notice of or to vote at a
meeting of Shareholders shall be at the close of
business on the day next preceding the day on which
notice is given, or, if no notice is given, the day on
which the meeting is held.
(2) The record date for determining Shareholders
for any purpose other than that specified in
subparagraph (1) shall be at the close of business on
the day on which the resolution of the Board relating
thereto is adopted.
(c) When a determination of Shareholders of record entitled
to notice of or to vote at any meeting of Shareholders has been
made as provided in this section, such determination shall apply
to any adjournment thereof, unless the Board fixes a new record
date under this section for the adjourned meeting.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Dividends. Dividends upon the stock of the
Corporation, subject to the applicable provisions of the
Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to
law. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the applicable provisions, if any,
of the Certificate of Incorporation and of these By-Laws. Before
payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for requiring or maintaining any
property of the Corporation, or for such other purpose as the
Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any
such reserve in their absolute discretion.
Section 9.2. Checks. All checks or demands for money and
notes of the Corporation shall be signed by such officer or
officers or such other person or persons as the Board of
Directors may from time to time designate.
Section 9.3. Fiscal Year. The fiscal year of the
Corporation shall be determined by the Board of Directors.
Section 9.4. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, New York". Said seal may be used
by causing it or a facsimile thereof to be impressed, affixed or
otherwise reproduced.
ARTICLE X
AMENDMENTS
Section 10.1. Power to Amend. These By-Laws may be amended
or repealed and any new By-Law may be adopted by vote of the
holders of stock of the Corporation entitled at the time to vote
for the election of directors or by the Board of Directors at any
regular or special meeting; provided, however, that any By-Law or
amendment to the By-Laws adopted by the Board of Directors may be
amended or repealed, and any By-Law repealed by the Board of
Directors may be reinstated, by the holders of stock of the
Corporation entitled at the time to vote for the election of
directors.
Section 10.2. Amendment Affecting Election of Directors. If
any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of
Shareholders for the election of directors, the By-Law so
adopted, amended or repealed, together with a concise statement
of the changes made.
<PAGE>
EXHIBIT (10)(1)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the first day of January, 1995 (the
"Effective Date"), between RECOTON CORPORATION (the "Company"), a
New York corporation with offices at 2950 Lake Emma Road, Lake
Mary, Florida 32746, and ROBERT L. BORCHARDT (the "Employee") of
802 Georgia Avenue, Winter Park, Florida 32789.
WHEREAS, the Company currently employs the Employee in the
capacity of President and he currently holds the positions of Co-
Chairman of the Board and Co-Chief Executive Officer of the
Company; and
WHEREAS, the Company considers it essential to the best
interests of the Company and its shareholders to assure to itself
the continued availability of the services of the Employee and to
induce the Employee to continue to render services to the Company
for the period set forth in this Agreement;
WHEREAS, to induce the Employee to remain in the employ of
the Company in his current position and, at some future date, as
a consultant, the Company desires to continue to employ the
Employee and the Employee desires to continue such employment on
all of the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the promises and mutual
covenants contained in this Agreement, the Company and the
Employee hereby agree as follows:
1. Employment. The Company hereby continues to employ the
Employee, and the Employee hereby accepts continued employment
with the Company, on the terms and conditions set forth in this
Agreement.
2. Term. The term of the Employee's employment hereunder
shall commence as of the Effective Date and shall continue until
5 p.m. Eastern Standard Time on December 31, 2004 (the "Initial
Term") unless sooner terminated pursuant to this Section or
Section 6, 7, 8(b)(iii)(B) or 9. Upon the expiration of the
Employment Period (as hereinafter defined), this Agreement
automatically shall be renewed for successive two-year periods
(each, an "Extension") unless either party gives written notice
to the other party of his or its intention not to renew this
Agreement at least 180 days, but not more than 365 days, prior to
the expiration of the Employment Period (such notice, a "Notice
of Nonrenewal"). (The Initial Term and any and all Extensions
are collectively referred to as the "Employment Period"). The
Employee may, at any time, upon one-year's prior written notice
to the Company, terminate his employment hereunder for any
reason.
3. Duties.
(a) The Employee shall serve as the Co-Chief Executive
Officer of the Company so long as Herbert H. Borchardt is a Co-
Chief Executive Officer, and thereafter as Chief Executive
Officer, and, if elected to such position by the Board of
Directors of the Company (the "Board"), as the President of the
Company and as Co-Chairman of the Board so long as Herbert H.
Borchardt is Co-Chairman of the Board, and thereafter as Chairman
of the Board, and shall faithfully and to the best of his ability
perform reasonable duties, functions and responsibilities
commensurate with such positions, subject only to the direction
of the Board.
(b) The Employee shall devote his full working time,
energy and skills to his employment pursuant to this Agreement
and use his best efforts to promote the business and interests of
the Company, and its subsidiaries. The Employee shall serve as
an officer (including, but not limited to, President and Chairman
or Co-Chairman of the Board) and a director of the Company and
any subsidiary or affiliate thereof if so elected to such
positions, although he may at any time resign from any office or
directorship to which he may have been elected for any reason.
The Employee shall not perform services for compensation for
himself or for any entity or person other than the Company or a
subsidiary or affiliate thereof during the Employment Period
without the prior express written permission of the Board; it
shall not, however, be a violation of this Agreement for the
Employee to (i) serve on corporate, civic, club or charitable
boards, for compensation or otherwise (the Employee being allowed
to retain any such compensation without set-off, adjustment or
diminution of his compensation hereunder); (ii) participate in
professional activities and organizations; and (iii) manage
personal investments, so long as those activities do not
interfere with the Employee's performance of his responsibilities
under this Agreement.
4. Compensation. For all services to be rendered to the
Company or its subsidiaries and affiliates in any capacity,
including services as an employee, officer, director, member of
any committee or trustee of any employee benefit plan or
otherwise, so long as the Employee is employed by the Company
during the term of this Agreement:
(a) Salary. The Employee shall receive from the
Company and/or its subsidiaries a salary (the "Salary") for each
year of employment. The Salary shall be $850,000 for the
calendar year 1995. The Salary shall be increased each year,
effective as of the anniversary of the Effective Date, by the
greater of (i) six percent or (ii) the rate of increase in the
Consumer Price Index for All Urban Consumers, U.S. City Average
(1967=100) as published by the United States Bureau of Labor
Statistics (the "CPI"). The foregoing adjustment shall be made
in each calendar year promptly after the CPI for the preceding
year is published and shall be retroactive to the beginning of
the calendar year. The Salary shall be payable in regular and
equal installments, less any reasonable and customary payroll
deductions, in accordance with prevailing payroll practices of
the Company from time to time.
(b) Bonus. In addition to his Salary, the Employee
shall receive a cash bonus (the "Bonus") with respect to each
year during the Employment Term (a "Bonus Year") (commencing with
the Bonus payable in 1996 with respect to the Bonus Year 1995)
equal to the sum of (i) two percent of the net income of the
Company after taxes for the Bonus Year (calculated by the
Company's independent certified public accountants in accordance
with generally accepted accounting principles) before deducting
any Bonus payment ("Net Income Before Bonus") (but in no event
more than two percent of the Net Income Before Bonus for the year
prior to the Bonus Year (the "Prior Year") plus (ii) five percent
of the amount by which the Net Income Before Bonus of the Company
for the Bonus Year exceeds the Net Income Before Bonus for the
Prior Year. The Bonus with respect to each Bonus Year shall be
paid to the Employee on or before the 90th day of the year
following the Bonus Year (the "Payment Year").
(c) Signing Bonus Options. As an inducement for the
Employee to enter into this Agreement, the Company has,
simultaneous to execution of this Agreement, by action of its
Stock Option Committee (the "Option Committee"), granted to the
Employee nonqualified options to purchase 100,000 shares of the
Company's Common Stock, par value $.20 (the "Common Stock")
pursuant to the Company Corporation 1991 Stock Option Plan or any
successor plan (the "Option Plan") at the closing price for the
Common Stock on the business day immediately prior to the
execution of this Agreement, which option shall have a term of
ten years from the grant date and shall use its best efforts to
cause to be granted by the Option Committee as soon as
practicably after January 1, 1996 nonqualified options to
purchase 150,000 shares of Common Stock pursuant to the Option
Plan at the closing price for the Common Stock on the business
day immediately prior to the grant date. All options granted
under this paragraph (c) and paragraph (d) below shall be issued
under the form of option agreement annexed hereto as Annex A.
The Company shall maintain a current Form S-8 registration with
respect to the Option Plan during the term within which any
options granted to the Employee pursuant to this Agreement are
exercisable.
(d) Additional Options. The Company shall use its
best efforts to cause to be granted by the Option Committee as
soon as the Net Income Before Bonus is available with respect to
each year during the Employment Period additional nonqualified
options under the Option Plan (with an exercise price equal to
the closing price of the Common Stock on the business day
immediately prior to the grant date) on such number of shares of
Common Stock as equals 250 shares for each $10,000 by which the
Net Income Before Bonus for an Option Year exceeds the Net Income
Before Bonus for the Prior Year, but in no event shall the
Employee receive in any year options on more shares than he is
entitled to under the Option Plan. Such options shall have a
term of ten years from the grant date. The Company shall
exercise its best efforts to ensure that there are at all times
sufficient authorized but unissued shares available for grant
under the Option Plan for the purpose of this Agreement,
including diligently seeking shareholder approval for adoption of
any successor Option Plan or approval for the amendment of any
existing Option Plan. The number of shares for which options are
to be granted pursuant to this paragraph shall be adjusted for
any stock splits, stock dividends, subdivisions or combinations
of shares, reclassification of shares or similar event (an
"Adjustment Event") such that the Employee shall be entitled to
receive instead such number of shares as he would have owned or
been entitled to receive after such Adjustment Event had he
exercised the option set forth herein immediately prior to the
record date for the Adjustment Event.
(e) Board Discretion to Grant Additional Compensation.
The Board, in its sole discretion, may increase the Salary or
Bonus payable to the Employee under this Agreement and may make
available to the Employee other compensation and benefits in
addition to those to which the Employee is entitled under this
Agreement.
5. Fringe Benefits.
(a) Insurance and Medical Benefits. The Company shall
maintain the Employee's health, major medical and life insurance
at no less than his current level, payable to the beneficiaries
designated by the Employee at his sole discretion (except as
otherwise limited by currently-existing agreements or as
otherwise agreed by the Employee). In addition, the Company
shall immediately include the Employee in any and all employee
benefit group plans for which he is eligible, which presently may
be in effect or hereafter may be adopted by the Company for other
officers or management-level employees of the Company, including,
but without limitation, disability, life insurance, pension,
retirement, stock ownership, stock purchase, stock option, stock
bonus and profit sharing plans; provided, however, that any such
benefits that the Company presently provides or makes available
to the Employee and/or his dependents, as the case may be, shall
be maintained at no less than their current levels.
(b) Vacation. The Employee shall be entitled to
receive a minimum of four weeks of paid vacation during each
calendar year of the Employment Period (the "Vacation"). The
Employee, in his reasonable discretion, shall determine the time
and intervals of his Vacation and vacation time not used in any
year may be carried forward to subsequent calendar years or if
not used by the termination of the Employee's employment shall
be compensated (at the Employee's then-current Salary) at the
time of termination of employment.
(c) Perquisites. The Company shall provide the
Employee with reasonable perquisites customary for chief
executive officers of similar corporations, including, but not
limited to, two luxury automobiles with the makes and models to
be mutually agreed to by the Employee and the Company (the
"Automobiles") every three years, and pay all related
maintenance, gasoline, repairs, insurance and other costs
incurred with respect to the Automobiles and the salary and
benefits of one driver.
(d) Reimbursement for Reasonable Business Expenses.
The Company shall reimburse the Employee for all reasonable
expenses incurred by him in connection with the performance of
his duties pursuant to this Agreement, which the Employee
reasonably determines shall further the Company's business
interests, provided that such expenses are properly documented
and accounted for in accordance with the then policy of the
Company.
6. Termination of Employment by the Company for Cause.
(a) During the Employment Period, the Company may
terminate the Employee's employment only for Cause, as
hereinafter defined, so determined in good faith by the Board
following a hearing by the Board at which the Employee was given
the opportunity to be present and heard and to be represented by
legal counsel, upon not less than 30 days' prior written notice
to the Employee (such notice, a "Notice of Termination"),
specifying the Cause and the effective date of termination (for
the purposes of this Section 6, the "Date of Termination").
(b) For this Agreement, "Cause," shall mean:
(i) conviction of the Employee by a court of
competent jurisdiction of a felony which is materially
harmful to the reputation or business of the Company, or the
entering of a plea of guilty or nolo contendere to such a
felony charge;
(ii) committing of an act of willful and material
embezzlement or fraud against the Company; or
(iii) willful and material failure of the Employee
to perform substantially his material duties and obligations
pursuant to this Agreement which failure has not been cured
within 30 days after written notice thereof.
(c) If the Employee's employment is terminated for
Cause (a "Termination for Cause"),
(i) the Company shall pay the Employee, in full
and complete satisfaction of all of its obligations
hereunder except as otherwise set forth in this paragraph
(c), his unpaid Salary, the value of his unused Vacation and
any Bonus (prorated for the then-current year) to the extent
earned and accrued as of the Date of Termination, if any,
such payments to be made within ten days of the Date of
Termination to the extent then ascertainable or, in the case
of the Bonus, within ten days after such amount shall have
been ascertained;
(ii) The Employee shall cease to be covered by any
employee benefit group plans as of the last day of the month
in which the Date of Termination occurs, other than medical
benefits that the Employee and/or his dependents may
continue at their expense as provided by applicable law; and
(iii) The Employee shall return the Automobiles to
the Company or its designee within 30 days of the Date of
Termination.
Anything herein to the contrary notwithstanding, a Termination
for Cause shall not affect the Employee's right to receive vested
fringe benefits.
7. Consultancy.
(a) If, pursuant to Section 2, the Company or the
Employee elects to not renew the Employee's employment at the end
of the Employment Period on terms at least as favorable to the
Employee as those herein, or the Employee terminates his
employment pursuant to Section 2 after reaching age 65, Section
8(b)(iii)(B) or Section 9, the Employee, unless he elects
otherwise or except to the extent that he is employed elsewhere
on a full-time basis (but only so long as he is so otherwise
employed), shall become a consultant to the Company. The term of
the Employee's retainer as a consultant hereunder shall be until
the death of the Employee (the "Consulting Period").
(b) During the Consulting Period, the Employee shall
provide the Company and each of its subsidiaries and affiliates
with such consulting services with respect to the business of the
Company and each of its subsidiaries and affiliates as the
Company may from time to time reasonably request. Without
limiting the foregoing, the Employee shall not be requested to
undertake any assignment inconsistent with the dignity,
importance and scope of his prior position as President, Co-Chief
Executive Officer or Co-Chairman of the Board of the Company or
with his physical or mental health at the time, and he may refuse
to travel outside the city of his residence. As a consultant,
the Employee shall not be required to devote more than five
working days in any calendar month nor more than 60 working days
in any calendar year to the performance of such services. It is
understood that the Employee shall be an independent contractor
during such period and may engage in other activities or
employment during such period consistent with Section 13.
(c) As a consultant, the Employee shall receive the
following payments if a consultant during the periods noted (the
"Consulting Fee"):
(i) An amount equal to the Salary as in effect at
the date of termination of employment (the "Final Salary")
for a period of two years commencing as of the date the
consultancy hereunder commenced (the "Consultancy
Commencement Date");
(ii) An amount equal to 75% of the Final Salary
for a period of two years commencing as of the second
anniversary of the Consultancy Commencement Date; and
(iii) An amount equal to 50% of the Final Salary
commencing as of the fourth anniversary of the Consulting
Commencement Date until his death.
The Consulting Fee shall be subject to a cost of living
adjustment as set forth in Section 4(a). The Consulting Fee
shall be paid in equal installments no less frequently than
monthly.
(d) Notwithstanding any other provisions of this
Agreement, the Company shall pay the Employee the Consulting Fee
provided for in this Section 7 for all or any portion of the
Consulting Period during which he shall fail or be unable to
perform the services required pursuant to this Section 7 due to
physical or mental disability and the Consulting Fee shall be
reduced dollar for dollar for any income earned by the Employee
from any employment or retainer by any other person, except for
any compensation earned as authorized by Section 3(b).
(e) During the Consulting Period, the Company shall
provide the Employee with an appropriate office located in the
Company's executive headquarters (or in such other location as
the Employee may choose in the area where the Employee resides at
the Consultancy Commencement Date), telephone and secretarial and
other administrative services.
(f) During the Consulting Period, the Company shall
provide, at the Company's expense, for the continuation of
coverage and benefits equivalent to the medical benefits and life
insurance benefits received by the Employee immediately prior to
the date of the Notice of Nonrenewal. The Company shall provide
such medical benefits by continuing the Employee's participation
in existing employee benefit plans, by arranging for and paying
for coverage in equivalent benefit plans or policies, or by
paying directly any expenses which would have been covered by the
plans in effect as of the commencement of the Consulting Period
(other than medical expenses which are covered by Medicare).
Benefits otherwise receivable by the Employee pursuant to this
paragraph (f) shall be reduced to the extent comparable benefits
are actually received by the Employee from other employers
following the Employee's termination of employment, and any such
benefits actually received by the Employee shall be reported to
the Company.
(g) Until the earlier of one year from the Consultancy
Commencement Date or the date the Employee obtains other full-
time employment, the Company shall provide the Employee with out-
placement services that Employee selects but at Company's
expense, which shall include such office space and support staff
as the Employee reasonably finds necessary to pursue other
employment. Such space and services shall be substantially
similar to the space and services that Employee received before
the Date of Termination.
(h) The Employee may retain the use of the Automobiles
during the Consulting Period with all related maintenance,
gasoline, repairs, insurance and other costs incurred with
respect to the Automobiles (but not the costs of a driver) being
borne by the Company and shall return the Automobiles to the
Company or its designee within 90 days after the end of the
Consulting Period.
(i) Anything herein to the contrary notwithstanding,
non-renewal by the Company shall not effect Employee's right to
receive vested fringe benefits.
8. Change in Control of the Company.
(a) Definitions. For purposes of this Section 8, the
following terms shall have the following meanings:
(i) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations of the Securities Exchange
Act of 1934, as amended (the "Act").
(ii) a Person shall be deemed to be the
"Beneficial Owner" of any securities:
(A) which such Person or any of such Person's
Affiliates or Associates has the right to acquire
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for
purchase;
(B) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Act),
including pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to
beneficially own, any security under this subparagraph
(ii) as a result of an agreement, arrangement or
understanding to vote such security (I) if the
agreement, arrangement or understanding arises solely
from a revocable proxy or consent given to such Person
in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the
applicable rules and regulations under the Act and is
not also then reportable on a Schedule 13D under the
Act (or any comparable or successor report) or (II) if
such Person is obligated to exercise any proxy giving
such Person the right to vote such security pursuant to
the Direction of the Board of directors of the Company;
or
(C) which are beneficially owned, directly
or indirectly, by any other Person with which such
Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except as noted
in the proviso of Subsection 8(a)(ii)(B) above) or
disposing of any voting securities of the Company.
Notwithstanding the foregoing, a Person shall not be deemed
the beneficial owner of any securities which are registered
in such Person's name if such securities are required by a
written agreement to be voted in accordance with the
instruction of the Board of Directors of the Company so long
as the voting rights are so restricted and the holder
thereof votes such shares in accordance with such agreement.
(iii) "Change in Control of the Company" or
"Change of Control" shall mean a change in control of a
nature that would be required to be reported if the Company
were a reporting company under the Act or similar statutes
hereafter enacted in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Act or any similar
provision hereinafter in effect and, in addition, without
limiting the inclusiveness of the definition in the
preceding sentence, a Change in Control of the Company shall
be deemed to have occurred if:
(A) any Person (other than any employee
benefit plan of the Company or of any subsidiary of the
Company or any Person organized, appointed or
established pursuant to the terms of any such benefit
plan) is or becomes the Beneficial Owner of securities
of the Company representing at least 20% of the
combined voting power of the Company's then outstanding
securities; provided, however, that this clause (i)
shall not be applicable to the Employee's beneficial
ownership of the outstanding voting securities of the
Company and provided, further, that if the Board adopts
a resolution within thirty days after the Company
becomes aware of such acquisition that is approved by a
majority of the Continuing Directors providing that
such acquisition shall not constitute a Change of
Control of the Company for purposes of this Agreement,
then such acquisition shall not constitute a change of
Control of the Company;
(B) The Employee ceases personally to be the
Beneficial Owner of at least 10% of the outstanding
voting securities of the Company other than by virtue
of sales or gifts of stock by the Employee or Persons
under his control or whose stock ownership is
beneficially attributed to him;
(C) one-third or more of the members of the
Board are not Continuing Directors;
(D) there shall be consummated (i) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or pursuant to which shares of the Company's Common
Stock would be converted into cash, securities or other
property, other than a merger of the Company in which
the holders of the Company's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all, or
substantially all, of the assets of the Company
(provided, however, that if prior to the merger,
consolidation or sale the Board adopts a resolution
that is approved by a majority of the Continuing
Directors providing that such merger, consolidation or
sale shall not constitute a Change of Control of the
Company for purposes of this Agreement, then such
merger, consolidation or sale shall not constitute a
Change of Control of the Company); or
(E) the shareholders of the Company approve
any plan or proposal for the liquidation or dissolution
of the Company.
Notwithstanding the foregoing, to the extent that the
Employee approves (whether in writing or by voting as a
director or shareholder to approve such issuance or any plan
pursuant to which such shares are issued) the acquisition of
shares by one or more Persons by way of issuance of
additional shares by the Company, by purchase of previously
outstanding shares or otherwise, such shares shall not be
counted for determining if the 20% test set forth in Clause
(A) has been satisfied and the 10% test set forth in Clause
(B) shall be proportionately adjusted (e.g., if the Company
were to issue new shares in an amount such that the number
of outstanding shares on a fully diluted basis were doubled,
the 10% number would become 5%).
(iv) "Continuing Director" means any member of the
Board of the Company who was a member of such Board on
July 1, 1995, and any successor of a Continuing Director who
is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board.
(v) "Code" means the Internal Revenue Code of
1986, including any amendments thereto or successor tax
codes thereof.
(vi) "Person" shall mean any individual, firm,
partnership, corporation or other entity and shall include
any successor (by merger or otherwise) of such entity.
(b) Consequence of a Change in Control. In the event
of a Change in Control of the Company while the Employee is
employed by or a consultant to the Company,
(i) the Company shall, within 90 days after such
Change of Control, pay the Employee $2,000,000 (in 1995
dollars, such amount to be increased pursuant to the cost of
living formula set forth in Section 4(a) for each year
subsequent to 1995), irrespective of whether the Employee
remains in the employ of the Company;
(ii) the Employee shall have the right,
exercisable within 120 days after change of control, to
cause the Company to purchase all of his shares of Company
stock, including shares acquired upon exercise of options
previously or thereupon exercisable, at the Market Price, as
defined in Section 12(c) (with the words "date of the Change
of Control" to replace the words "date of a Sale Request");
and
(iii) if an employee of the Company, the Employee
may, at his election, either (A) continue in the employ of
the Company pursuant to this Agreement, (B) elect to
thereupon terminate his employment hereunder and, if he so
elects, become a consultant to the Company pursuant to
Section 7 or (C) to the extent the conditions set forth in
Section 9 are applicable, exercise his rights under such
Section 9.
9. Termination by Employee for Good Reason.
(a) If the Employee has Good Reason (as hereinafter
defined), the Employee shall have the right, exercisable in his
sole discretion, to terminate his employment or consultancy
hereunder. Such election shall be made by the Employee by notice
in writing to the Company given not less than 60 days in advance
of the date his employment or consultancy is to be terminated
pursuant to this Section 9.
(b) For purposes of this Section 9, "Good Reason"
shall exist upon the occurrence of any of the following:
(i) a material breach of this Agreement by the
Company which is not cured within 30 days after receipt of
written notice thereof; or
(ii) at any time following the occurrence of a
Change of Control, the occurrence of any of the following
circumstances unless, in the case of paragraphs (A), (C),
(D), (E) or (F), such circumstances are fully corrected
prior to the date of termination specified in the notice of
termination delivered by the Employee as aforesaid (for
purposes of this Section 9, the "Date of Termination"):
(A) the assignment to the Employee of any
duties inconsistent with the position in the Company
that the Employee held immediately prior to the Change
of Control, or a significant adverse alteration in the
status or conditions of the Employee's powers,
functions, duties or responsibilities or other nature
of the Employee's responsibilities from those in effect
immediately prior to such Change of Control, including
any significant alteration in the Employee's reporting
responsibilities, titles or offices in effect
immediately prior to such Change of Control or the
removal of the Employee from, or any failure to reelect
the Employee to, any of the position he held with the
Company or its Affiliates on the date of the Change in
Control of the Company or any other positions with the
Company or its Affiliates to which the Employee shall
thereafter be elected or assigned, except in the event
that such removal or failure to reelect relates to the
termination by the Company of the Employee's employment
for Cause or by reason of the death or disability of
the Employee as provided in Section 11;
(B) the relocation of the Employee's office
to a location outside the metropolitan area in which
the Employee's present office is located (or, if
different, the metropolitan area in which such offices
are located immediately prior to the Change of Control)
or the Company's requiring the Employee to be based
anywhere other than the metropolitan area in which the
Employee's office is located prior to the Change of
Control except for required travel on the Company's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(C) a material reduction in the level of
support service, staff, secretarial and other
assistance, office space and accoutrements;
(D) the failure by the Company or any
subsidiary or affiliate to continue in effect any
benefit or compensation plan in which the Employee
participates immediately prior to the Change of Control
which is material to the Employee's total compensation,
including but not limited to stock option, stock
purchase and bonus plans which the Company or its
subsidiaries or affiliates may currently have or any
substitute or additional plans adopted prior to the
Change of Control;
(E) the failure by the Company or any
subsidiary or affiliate to continue to provide the
Employee with benefits substantially similar to those
enjoyed by the Employee under any life insurance,
medical, health and accident, or disability plans in
which the Employee was participating at the time of
Change of Control or the taking of any action by the
Company or any subsidiary or affiliate which would
directly or indirectly materially reduce any of such
benefits or deprive the Employee of any material fringe
benefit enjoyed by the Employee at the time of the
Change of Control;
(F) the failure of the company to obtain a
satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in
Section 14(c); or
(G) any purported termination of the
Employee's employment which is not effected pursuant to
Section 2, 6 or 9.
The Employee's right to terminate his employment or consulting
pursuant to this Section 9 shall not be affected by his physical
or mental disability or incapacity. The Employee's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason
hereunder.
(c) If the Employee chooses to terminate his
employment or consultancy for Good Reason, then the Employee
shall be entitled to the benefits provided below:
(i) the Company shall pay to the Employee the
Employee's unpaid Salary through the Date of Termination at
the rate then in effect plus the Adjusted Bonus (as defined
below) and the cash equivalent (calculated from the Salary
then in effect) of any accrued but unused Vacation no later
than the fifth day following the Date of Termination, plus
all other amounts to which the Employee is entitled under
any compensation plan of the Company at the time such
payments are due;
(ii) the Company shall, at the Employee's written
election, given at any time (which election may subsequently
change from alternative (A) to alternative (B) (the date on
which such notice is given is referred to herein as the
"Date of Election"), either (A) continue to pay the Salary
and Bonus and the Consulting Fee and provide the other
benefits (or, if not able to be provided, the cash value
thereof) set forth in this Agreement on a periodic basis as
if the Employee were still employed or retained by the
Company or, (ii) in lieu of any further Salary, Bonus or
Consulting Fee payments to the Employee for periods
subsequent to the Date of Election, the Company shall pay as
severance pay to the Employee, no later than the fifth day
following the Date of Election, a lump-sum severance payment
(the "Severance Payment") equal to the then present value of
the Salary, Bonus and Consulting Fee for the remaining term
of the Employment Period and the Consulting Period, less any
payments made under clause (ii)(A) calculated at a discount
rate equal to the Federal Discount Rate in effect at the
applicable Date of Election assuming a six percent per year
increase in the Salary, that the term of employment would
end at the first opportunity that the Company could elect to
terminate and that Net Income Before Bonus for each
remaining year increases at a rate equal to the average
increase in the Net Income Before Bonus for the three years
prior to the Date of Election (but in no event less than
zero in any such year);
(iii) if the Employee so elects in writing within
30 days after the Employee elects to terminate for Good
Reason, in lieu of shares of the Company's or any of its
subsidiaries' or affiliates' stock (the "Shares") issuable
upon exercise of outstanding options, whether or not
presently vested or exercisable (hereinafter, "Options"), if
any, granted to the Employee under any stock option plan of
the Company or of such subsidiary or affiliate pursuant to
this Agreement or otherwise (which Options shall be canceled
upon the making of the payment referred to below), the
Employee shall receive an amount in cash equal to the
product of (x) the excess of the higher of (i) the closing
price of the Shares as reported on the national securities
exchange on which the Shares are then listed on or nearest
the date of termination (or, if not listed on an exchange,
on a quotation system on which the trading volume in Shares
is highest) or (ii) the highest per share price for Shares
actually paid in connection with any Change of Control, over
the per share exercise price of each Option held by the
Employee (whether or not then fully vested or exercisable),
and (y) the number of Shares covered by each such Option,
such amount to be paid not later than the fifth business day
following receipt of the Employee's election to receive such
payment;
(iv) the Company also shall pay to the Employee
within five business days after submission of any statements
thereof to the Company all legal fees and expenses incurred
by the Employee as a result of such termination (including
all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or
any successor provision to any payment or benefit provided
hereunder);
(v) until the death of the Employee, the Company
shall provide the benefits set forth in Section 7(f); and
(vi) until the earlier of one year from the Date
of Termination or the date Employee obtains other full-time
employment, the Company shall provide Employee with out-
placement services that Employee selects but at Company's
reasonable expense, which shall include such office space
and support staff as Employee reasonably finds necessary to
pursue other employment. Such space and services shall be
substantially similar to the space and services that
Employee received before the Date of Termination.
(d) The Employee shall not be required to mitigate the
amount of any payment provided for in this Section 9 by seeking
other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 9 be reduced by
any compensation earned by the Employee as the result of
employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Employee to the
Company, or otherwise.
(e) The "Adjusted Bonus" for purposes of Section
9(c)(iii) shall be the greater of (i) the amount of the Bonus
paid or payable with respect to the most recently completed
fiscal year of the Company; and (ii) the amount of the Bonus
which would otherwise be payable with respect to the fiscal year
in which the Employee's employment was terminated, in either case
determined by calculating on an annualized basis the Company's
Net Income Before Bonus for the portion of such year through the
last day of the month preceding the month in which the Date of
Termination occurs.
(f) If amounts are payable pursuant to Sections
9(c)(i) or 9(c)(ii) with respect to the Consulting Period hereof,
the references therein to Base Salary and Adjusted Bonus shall be
deemed to refer to the Consulting Fee.
10. Gross Up Payment.
(a) If the Employee becomes entitled to any of the
payments provided for in Sections 7, 8 or 9 (collectively
"Termination Payment"), if any portion of the Termination Payment
or any other payment or benefit under this Agreement, or under
any other agreement or plan of the Company, regardless of whether
such payment or benefit was paid or provided prior to a
termination by Company without Cause, whether before or after a
Change in Control of the Company, or termination by Employee for
Good Reason (the Termination Payment and such other payments and
benefits are hereinafter in the aggregate referred to as the
"Total Payments"), has been or will be subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code, the Company
shall pay to the Employee an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Employee after
deduction of any Excise Tax (but not any federal, state or local
income tax), including any Excise Tax previously paid by the
Employee, on the Total Payments, and any federal, state and local
income tax and Excise Tax upon the payment provided for by this
Section 9, shall be equal to the Total Payments.
(b) For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the amount
of such Excise Tax, (A) any other payments or benefits received
or to be received by the Employee in connection with a Change in
Control of the Company or the Employee's termination of
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company or with
any person whose actions result in a Change in Control of the
Company or any person affiliated with the Company or such person)
shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless in the opinion of
nationally recognized tax counsel selected by the Company's
independent auditors and acceptable to the Employee in his sole
discretion (which opinion shall be dated as of the Termination
Date and addressed to the Company and the Employee), all of whose
fees and expenses shall be borne by the Company, such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280(G)(b)(4) of
the Code, and (B) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280(G)(d)(3) and (4) of the Code, which determination
shall be evidenced in a certificate of such auditors addressed to
the Company and the Employee.
(c) For purposes of determining the amount of the
Gross-Up Payment, the Employee shall be deemed to pay federal
income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rates of taxation in the state and locality of the Employee's
residence on the Termination Date, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes.
(d) If the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of the Employee's employment, the Employee shall
repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code.
(e) If the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the
termination of the Employee's employment (including by reason of
any payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall at the
time the amount of such excess is finally determined make an
additional Gross-Up Payment relating to such excess (which
payment shall include interest on the amount of such excess at
the rate provided in Section 1274(b)(2)(B) of the Code and any
penalties attributable to such underpayment of Excise Tax), which
additional Gross-Up Payment shall be tax-effected as provided
above.
11. Disability and Death.
(a) If the Employee becomes disabled during the
Employment Period, the Employee shall continue to receive his
full Salary, Vacation, Bonus and all other benefits of
employment; provided, however, that if the Employee becomes
physically or mentally disabled so that he is unable to perform
his normal duties hereunder for 180 consecutive days, then the
Company may upon 30 day's written notice to the Employee (but
before the Employee has recovered from such disability) terminate
the Employee's employment. Evidence of disability shall be
certified in writing by a physician who is acceptable to both
Company and the Employee. For purposes of this Section 11, the
expiration of such 30 day period shall be the "Date of
Termination."
(b) In the event of the Employee's death during the
Employment Period, the Employee's employment shall immediately
terminate. For purposes of this Section 11, the Employee's date
of death shall be the "Date of Termination."
(c) If the Employee's employment is terminated
pursuant to Section 11(a), then the Company shall pay or provide
to the Employee in full and complete satisfaction of all of its
obligations hereunder the following amounts or other benefits:
(i) the Employee's unpaid Salary, Vacation and
Bonus earned and accrued as of the Date of Termination and
in accordance with the terms of the applicable written
agreements or plans, such payments to be made within 30 days
of the Date of Termination;
(ii) the Employee's Salary and Bonus as in effect
at the Date of Termination on a periodic basis for a period
of one year after the Date of Termination, subject, however,
to adjustment pursuant to the formula set forth in Section
4(a);
(iii) the Employee's Salary as in effect at the
Date of Termination for a period commencing one year after
the Date of Termination until his death, subject, however,
to adjustment pursuant to the formula set forth in Section
4(a);
(iv) the benefits set forth in Section 7(f) until
the death of the Employee; and
(v) use of the Automobiles (but no driver) until
90 days after the death of the Employee.
(d) If the Employee's employment is terminated
pursuant to Section 11(b), then the Company shall pay or provide
to the Employee's estate in satisfaction of all of its
obligations hereunder the following amounts or other benefits:
(i) the Employee's unpaid Salary, Vacation and
Bonus earned and accrued as of the Date of Termination and
in accordance with the terms of the applicable written
agreements or plans, such payments to be made within 30 days
of the Date of Termination;
(ii) the Employee's Salary and Bonus as in effect
at the Date of Termination on a periodic basis for a period
of one year after the Date of Termination, subject, however,
to adjustment pursuant to the formula set forth in Section
4(a); and
(iii) the Employee's Salary as in effect at the
Date of Termination on a periodic basis for a period of one
year commencing one year after the Date of Termination,
subject, however, to adjustment pursuant to the formula set
forth in Section 4(a).
(e) In no event shall the Company be obligated to issue
stock options pursuant to Section 4(d) if the Employee is not an
employee of the Company on the date when such options would
otherwise be granted. Nothing herein to the contrary
notwithstanding, termination because of the Employee's death or
disability shall not affect his right and/or either his
beneficiaries' or guardians' rights to receive vested fringe
benefits.
12. Registration Rights
(a) Demand Registration. Subject to the conditions
contained herein, at any time on or after the first to occur of
the fifth anniversary of this Agreement (on condition that the
Employee's employment was not terminated pursuant to Section 6),
the date of any Change of Control of the Company or the Date of
Termination pursuant to Section 11 and before the third
anniversary of the Employee's death, and on a maximum of three
occasions only except as otherwise noted in paragraph (b) the
Employee or his designated beneficiary, guardian, executor or
personal representative may deliver to the Company a written
request (a "Sale Request") that the Company file a registration
statement under the Securities Act (the "Registration Statement")
which Registration Statement shall cover (i) any shares of the
Company Common Stock owned by the Employee or his spouse,
beneficiaries or estate (the "Issued Recoton Stock"), (ii) any
shares of the Company Common Stock owned by the Employee or his
spouse, beneficiaries or estate (for purposes of this Section 12,
"Employee" shall include such spouse, beneficiaries or estate, as
applicable) acquired or acquirable pursuant to any option from
the Company ("Option Stock") and (iii) any securities issued as a
dividend on the Issued Recoton Stock or Option Stock, or in
exchange therefore (collectively, the "Eligible Shares") as to
which registration shall have been requested in accordance with
this Section 12 (the "Registration Shares"). The Company shall
use its reasonable efforts in good faith to cause such
Registration Statement to become effective and to keep such
Registration Statement continuously effective for a period of 90
days after the initial declaration of effectiveness. The minimum
amount of Eligible Shares with respect to which registration
pursuant to this Section 12 may be requested shall be such number
of Registration Shares as shall have a Market Price (as defined
in paragraph (c) below) of at least $1,000,000 in the aggregate.
The timing of the filing and processing of the Registration
Statement shall be determined by the Company in its sole
discretion; provided, however, that if the Company fails to file
a Registration Statement for more than 90 days beyond the date of
receipt of a Sale Request, or if it does so and if such
Registration Statement is not declared effective by the six-month
anniversary of the Sale Request or, if declared effective, the
effectiveness is later suspended and such suspension is not
terminated within 30 days thereafter, the Company shall then
purchase the Registration Shares at the Market Price. The
Company shall advise the Employee's from time to time as to the
actions that it determines to take with respect to any Sale
Request. With respect to each Registration Statement that the
Company files hereunder, the Company shall have the right
(subject to the Employee's prior approval, which shall not be
unreasonably withheld or delayed) to select the managing
underwriters (provided that the fees charged to the Employee are
customary) and the Employee shall have the right (subject to the
Company's prior approval which shall not be unreasonably withheld
or delayed), to determine the timing and the method of sale of
such shares. For the purposes of this Agreement, the term
"customary" shall mean the lesser of: (a) the fees charged to
the Company for comparable public offerings of its common stock
during the past five years or (b) the fees customarily charged
within the underwriting industry in New York City for offerings
of the type requested by the Employee. If there are any disputes
between the Employee and the Company concerning the computation
of customary fees, the same shall be determined by a nationally
known underwriter not affiliated or having a business
relationship with either the Employee or the Company, which shall
be selected by them, or if they shall fail to select such an
underwriter which is willing to act in such capacity, such
dispute shall be submitted to binding arbitration under the rules
of the American Arbitration Association then obtaining.
(b) "Piggy-Back" Rights. If at any time before the
third anniversary of the Employee's death, the Company shall
propose to file a Registration Statement under the Securities Act
on a form suitable for a secondary offering (other than on a Form
S-4 or S-8 under the Securities Act or related to a "rights"
offering to stockholders or in connection with a call of
outstanding debentures) or the Company receives a written request
for a registration of its common stock from a holder of such
stock entitled thereto (other than the Employee), then the
Company shall in each case deliver written notice thereof (the
"Company Notice") to the Employee or his designated beneficiary,
guardian, executor or personal representative so that it is
received at least 20 days before the anticipated filing date.
Such notice shall offer to the Employee the option to include in
such Registration Statement, subject to the conditions set forth
in this Agreement, up to all of the Eligible Shares held by the
Employee. Notwithstanding the foregoing, the Company shall not
be obligated to register the Eligible Shares unless there shall
have been received by the Company, within 10 calendar days of
receipt of a Company Notice by the Employee, written notice (a
"Piggyback Notice") from the Employee, which notice shall set
forth the number of Eligible Shares to be so included (the
"Piggyback Shares"). Neither the giving of notice by the Company
nor any request by the Employee to register Piggyback Shares
pursuant to this Paragraph (b) shall in any way obligate the
Company to file any such Registration Statement. The Company
may, at any time prior to the effective date thereof, determine
not to offer the securities to which such registration relates
and/or withdraw the Registration Statement, without liability of
the Company to the Employee. If the shares covered by such
Registration Statement (other than those held by the Employee)
are to be sold by underwriters in an underwritten public
offering, the Company shall use its best efforts to cause the
managing underwriters, if any, of a proposed offering to grant
any request by the Employee that his Piggyback Shares be included
in the proposed offering on terms and conditions which are
customary under industry practice for such underwriter given the
existing circumstances; provided, however, that any of the
Piggyback Shares to be sold by the Employee shall be sold or
distributed in a manner identical to the manner in which the
other securities which are the subject of such Registration
Statement are sold or distributed. Notwithstanding the
foregoing, if such managing underwriters shall advise the Company
in writing that, in good faith and in its reasonable opinion, the
distribution of the Piggyback Shares concurrently with the
securities being registered by the Company would materially
adversely affect the distribution of such securities by such
underwriter, the Company shall give notice of such determination
to the Employee and either, at the managing underwriters' option,
(i) the number of shares of proposed to be offered by the
Employee and any other persons (other than the Company) shall be
reduced pro rata (as specified by the Company in such notice) to
aggregate a quantity of shares of common stock which said
managing underwriters shall not consider excessive or (ii) the
Employee shall delay his offering and sale for such period, not
to exceed 90 calendar days, as such underwriters shall request.
In the event of the delay described in clause (ii) in the
preceding sentence, the Company shall file such supplements and
post-effective amendments, and take any such other steps as may
be necessary to permit the Employee to make his proposed offering
and sale for a period of 90 calendar days immediately following
the end of such period of delay. If any Piggyback Shares are so
excluded, the Employee shall be entitled to a maximum of one
additional registration pursuant to Paragraph (a) (i.e. for a
total of four registrations thereunder) if the conditions set
forth therein are satisfied. Should the Employee, upon receiving
notice pursuant to this Paragraph (b), not include in such
Registration Statement all his Eligible Shares, he may not demand
registration pursuant to Paragraph (a) until 90 days following
the effective date of such Registration Statement.
(c) "Market Price" Definition. "Market Price" shall
mean the average closing price of the Company Stock as reported
on the national securities exchange on which the Company Stock is
then listed (or, if not listed on an exchange, on a quotation
system on which the trading volume in Company Stock is highest)
during the 30 trading days ending two days immediately prior to
the date of a Sale Request, or Piggy-Back Notice, as applicable,
excluding from the determination of such average the five highest
and five lowest closing prices.
(d) Obligations of the Parties in Connection with a
Registration Statement.
(i) If and when the Company shall be required by
this Agreement to register any Eligible Shares under the
Securities Act, the Company will, subject to the provisions
of Section 12(d)(ii):
(A) prepare and file a Registration
Statement under the Securities Act on such form as the
Company may deem appropriate (including Form S-3 or any
successor form if available at the time) with respect
to the Registration Shares, and use reasonable efforts
in good faith to cause such Registration Statement to
become effective;
(B) within five days before filing a
Registration Statement or prospectus or any amendments
or supplements thereto (excluding documents to be
incorporated by reference therein), furnish to the
Employee and the underwriters, if any, copies of all
such documents in substantially the form proposed to be
filed (including documents incorporated therein by
reference), to enable the Employee and the
underwriters, if any, to review such documents prior to
the filing thereof, and make such reasonable changes
thereto (including changes to, or the filing of
amendments reflecting such changes to, documents
incorporated by reference) as may be reasonably
requested by the Employee and the managing underwriter
or underwriters, if any;
(C) prepare and file such amendments and
supplements to such Registration Statement and the
prospectus used in connection therewith as may be
necessary to comply with the provisions of the
Securities Act and the Exchange Act, with respect to
the offering of the Registration Shares during the
period required for distribution of such stock;
provided, however, that, except as otherwise set forth
in this Agreement, the Company shall not be required to
amend or supplement such Registration Statement or
prospectus after the expiration of 90 days from the
effective date of the Registration Statement;
(D) notify the Employee and the managing
underwriters, if any, promptly, and (if requested by
any such person) confirm such advice in writing, (1)
when the prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-
effective amendment, when the same has become
effective, (2) of any request by the Commission for
amendments or supplements to the Registration Statement
or the prospectus or for additional information, (3) of
the issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations and
warranties of the Company contemplated by paragraph (L)
below cease to be true and correct, (5) of the receipt
by the Company of any notification with respect to the
suspension of the qualification of the Registration
Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose and
(6) of the happening of any event which makes any
statement made in the Registration Statement, the
prospectus or any document incorporated therein by
reference untrue or which requires the making of any
changes in the Registration Statement, the prospectus
or any document incorporated therein by reference in
order to make the statements therein not misleading;
(E) make every reasonable effort to obtain
the withdrawal of any order suspending the
effectiveness of the Registration Statement at the
earliest possible moment;
(F) furnish to the Employee, promptly at the
time of the filing thereof, a copy of the Registration
Statement as filed and any amendment to said
Registration Statement and all exhibits thereto and
consents of experts filed or to be filed therewith;
(G) furnish to the Employee such number of
copies of such Registration Statement and all
amendments thereto and of such prospectuses (including
each preliminary or supplemented prospectus) as the
Employee may reasonably request in order to facilitate
the sale or transfer of the Registration Shares covered
thereby;
(H) make available to the Employee not more
than 16 months after the first day of the month
following the effective date of the Registration
Statement, an earning statement covering a period of at
least twelve months, which earning statement shall
satisfy the provisions of Section 11(a) of the
Securities Act;
(I) use its best efforts to cause all
Registration Shares covered by the Registration
Statement to be listed on each securities exchange on
which similar securities issued by the Company are then
listed if requested by the Employee or the managing
underwriters, if any;
(J) use reasonable efforts in good faith to
register or qualify such Eligible Shares under the
securities or Blue Sky laws in such jurisdictions
within the United States as the applicable managing
underwriters or if none, as the Employee may reasonably
request; provided, however, that the Company shall not
be obligated to execute or file any general consent to
service of process or to qualify as a foreign
corporation to do business under the laws of any such
jurisdiction;
(K) agree in writing to, and failing such
written agreement does hereby, indemnify and hold
harmless the Employee, each underwriter involved in the
offering of the Registration Shares pursuant to a
demand made hereunder and each person who "controls"
the Employee and any underwriter within the meaning of
Section 15 of the Securities Act or Section 20(a) of
the Exchange Act (each of the Employee and each such
underwriter and each such controlling person being
referred to herein as an "Indemnified Person") from and
against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon
any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
or the related prospectus (preliminary or final) or in
any amendment or supplement thereto, or arising out of
or based upon any omission or alleged omission of a
material fact required to be stated therein or
necessary to make a statement therein not misleading,
except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon
any such untrue statement or omission or allegation
thereof based upon information furnished in writing to
the Company by or on behalf of such Indemnified Person
expressly for use therein;
(L) enter into such agreements (including an
underwriting agreement) and take all such other actions
in connection therewith as the managing underwriters,
if any, reasonably request in order to expedite or
facilitate the disposition of such Registration Shares
and in such connection, (1) make such representations
and warranties to the underwriters, if any, in form,
substance and scope as are customarily made by issuers
to underwriters in primary underwritten offerings and
confirm the accuracy of the same if and when requested,
and matters relating to the compliance of the
Registration Statement and the prospectus with the
Securities Act; (2) obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters) addressed to
the underwriters, if any, covering the matters
customary in underwritten primary offerings and such
other matters as may be reasonably requested by the
Employee and the underwriters, if any and (3) obtain
"cold comfort" letters and updates thereof from the
Company's independent certified public accountants
addressed to the underwriters, if any, such letters to
be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by
underwriters in connection with primary underwritten
offerings;
(M) cooperate with the Employee and the
managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing
Registration Shares to be sold and not bearing any
restrictive legends; and enable such Registration
Shares to be in such denominations and registered in
such names as the managing underwriters may request at
least two business days prior to any sale of
Registration Shares to the underwriters;
(N) use its best efforts to cause the
Registration Shares covered by the Registration
Statement to be registered with or approved by such
other governmental agencies or authorities within the
United States as may be necessary to enable the seller
or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registration Shares;
(O) upon the occurrence of any event
contemplated by Clause (6) of Section 12(d)(i)(D),
prepare a supplement or post-effective amendment to the
Registration Statement or the prospectus or any
document incorporated therein by reference or file any
other required document so that, as thereafter
delivered to the purchasers of the Registration Shares,
the prospectus will not contain an untrue statement of
a material fact or omit to state any material fact
necessary to make the statements therein not
misleading; and
(P) make available for inspection during
normal business hours by the Employee, any underwriter
participating in any disposition pursuant to such
registration statement, and any attorney, accountant or
other agent retained by any such seller or underwriter,
all financial and other records, pertinent corporate
documents and properties of the Company, and cause the
Company's officers, directors and employees to supply
all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in
connection with such registration statement; provided,
however, that any records, information or documents
that are designated by the Company in writing as
confidential shall be kept confidential by such
persons.
Upon receipt of any notice from the Company of the happening
of any event of the kind described in Clause (6) of Section
12(d)(i)(D), the Employee will forthwith discontinue
disposition of Registration Shares until the Employee's
receipt of the copies of the supplemented or amended
prospectus contemplated by Section 12(d)(i)(O), or until he
is advised in writing (the "Advice") by the Company that the
use of the prospectus may be resumed, and has received
copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so
directed by the Company, the Employee will, or will request
the underwriters to, deliver to the Company (at the
Company's expense) all copies, other than permanent file
copies then in the Employee's possession, of the prospectus
covering such Registration Shares current at the time of
receipt of such notice. If the Company shall give such
notice, the 90-day time period mentioned in Section 12(a)
hereof shall be extended by the number of days during the
period from and including the date of the giving of such
notice to and including the date when the Employee shall
have received the copies of the supplemented or amended
prospectus contemplated by Section 12(d)(i)(O) or the
Advice.
(ii) the Company's obligations to file a
Registration Statement and the rights of the Employee to
have the Company Stock held by him included in any
Registration Statement pursuant to the provisions this
Agreement, shall be subject to the following conditions:
(A) the Employee shall furnish to the
Company upon request in writing such information and
documents as, in the opinion of counsel to the Company,
may be reasonably required to prepare properly and file
such Registration Statement in accordance with
applicable provisions of the Act; and
(B) the Employee shall agree to indemnify
and hold harmless the Company, its directors and
officers, and each person, if any, who controls the
Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, to
the same extent as the indemnity from the Company to
each Indemnified Person set forth in clause (xi) of
subsection (a) of this Section 3, but only with respect
to information furnished in writing by the Employee to
the Company expressly for use in the Registration
Statement or related Prospectus (preliminary or final),
or any amendment or supplement thereto.
(e) Expenses of Registration. In connection with any
Registration Statement filed pursuant to this Agreement, all
expenses of such registration shall be borne by the Company,
including without limitation, all Commission filing fees,
National Association of Securities Dealers, Inc. fees, Blue Sky
filing and registration fees and expenses with respect to such
jurisdictions as the underwriters may reasonably deem necessary,
the cost of all printed material used by or on behalf of the
Company or the Employee, and the legal and accounting fees and
expenses incurred by the Company in connection with the
Registration Statement; provided, however, that the Employee
shall pay all underwriters' commissions and discounts
attributable to the Eligible Shares to be sold by the Employee
and the fees and expenses of the Employee's counsel.
13. Protection of Confidential Information, Non-Competition
and Non-Solicitation.
(a) In the course of his employment by the Company,
the Employee has had and shall have access to, and has and shall
assist in the development of, confidential and proprietary
information and trade secrets, including information about and
other information not readily available to the public
(collectively "Confidential Information"). Given the foregoing,
the Employee shall:
(i) Keep secret all Confidential Information, and
not disclose the same to anyone outside of the Company,
either during the Employment Period or thereafter, except
with the prior written consent of the Company; and
(ii) Deliver promptly to the Company, at the
termination of his employment (or, if thereafter a
consultant, his consultancy) hereunder, or at any time the
Company may so request, all memoranda, notes, records,
reports and other documents (and all copies thereof)
relating to the business of the Company which he may then
possess or have under his control.
(b) During the Employment Period and the Consultancy
Period and for a period of two years thereafter, the Employee
shall not, without the prior written consent of the Company,
directly or indirectly, either individually or as an employee,
agent, partner, shareholder, consultant or in any other capacity
for any person, firm, partnership or corporation,
(i) engage in any business in which the Company or
any of its subsidiaries are engaged in or which is in
development during the term of the Employee's employment by
the Company (the "Business") other than for the benefit of
the Company in any of the following: (A) New York; or (B)
Florida; or (C) any state in which Recoton or its
subsidiaries at any time during the term of the Employee's
employment has facilities, distributors or customers; or
(D) any geographic area within 100 miles of any state
mentioned in clause (A), (B) or (C) above; or (E) the United
States; or (F) Canada; or (G) Mexico; or (H) Hong Kong; or
(I) any country in which Recoton or its subsidiaries has
facilities or conducts its business at any time during the
term of the Employee's employment; or
(ii) solicit, canvass, represent, induce, or
attempt to induce, directly or indirectly, (A) any then
client of the Company or any subsidiary to cease doing
business with the Company or any subsidiary or (B) any
employee of the Company or any subsidiary to leave his
employment or breach his employment agreement with the
Company or its subsidiaries.
Notwithstanding the foregoing, the restrictions set forth in this
Section 13(b) shall cease at such time as the Employee terminates
his employment pursuant to Section 8(b)(iii)(B) or Section 9.
For purposes of this Section 13, ownership of 3% or less of any
class of outstanding securities of a company the securities of
which are listed on a national securities exchange or which has
1,000 or more shareholders shall not be deemed to constitute
engaging in the Business or having an interest in a person
engaged in the Business.
(c) The Employee hereby acknowledges that the
activities in which he may not engage during the Employment
Period and the Consultancy Period and for two years thereafter as
provided in this Section 13 shall not unreasonably restrict his
ability to earn a livelihood or impose any hardship. Further,
the Employee acknowledges that such restrictions are reasonable
and necessary to protect the Confidential Information and the
goodwill of the Company, that he is experienced and sophisticated
with respect to employment relations, and that he fully
understands all of the provisions of this Employment Agreement,
including without limitation, this Section 13. It is understood
that the Employee is agreeing to the terms of this Section 13 in
order to induce the Company to enter into this Agreement. The
parties acknowledge that the business which the Company plans to
conduct will be conducted throughout the United States and the
world and that, given the current sophistication of the
information and telecommunication "highway," a narrow geographic
limitation would deny the Company protection to which it is
entitled in this Agreement.
(d) If the Employee commits a breach of any of the
provisions of this Section 13, the Company shall suffer an
irreparable injury for which the Company shall have no adequate
remedy at law and shall incur damages not readily ascertainable
in monetary terms. Therefore, if the Employee commits a breach
of any of the provisions of this Section 13, then the Company
shall be entitled to injunctive or other equitable relief,
including specific performance, from any court of competent
jurisdiction in addition to monetary damages that the Company may
be entitled to recover.
(e) If any of the covenants contained in this Section
13, or any part thereof, is hereafter construed to be invalid or
unenforceable by a court of competent jurisdiction the same shall
not affect the remainder of the covenant or covenants, which
shall be given full effect, without regard to the invalid
portions.
(f) If any of the covenants contained in this
Section 13 or any part thereof, is held by a court of competent
jurisdiction to be unenforceable because of the duration of such
provision, the activity limited by or the subject of such
provision and/or the area covered thereby, then the court making
such determination shall construe such restriction so as to
thereafter be limited or reduced to be enforceable to the
greatest extent permissible by applicable law.
14. Miscellaneous.
(a) Survival and No Mitigation. The Employee and
Company's obligations under this Agreement shall survive the
expiration or termination of the Employment Period and the
termination of the Employee's employment. The Employee shall not
be required to mitigate any of the payments made hereunder by
seeking other employment or otherwise, nor shall the payments be
reduced by any compensation earned by the Employee as a result of
employment by another employer, by retirement benefits or by any
amount claimed to be owed by the Employee to the Company, or
otherwise, except where expressly provided herein.
(b) Specific Performance. In the event of any breach
of any provision of this Agreement, the non-breaching party shall
be entitled to seek a decree of specific performance against the
breaching party. Such remedy, however, shall be cumulative and
nonexclusive and shall be in addition to any other remedy to
which the parties may be entitled.
(c) Sale, Consolidation or Merger. In the event of a
Change in Control of the Company, a sale of the stock of the
Company, or consolidation or merger of the Company with or into
another corporation or entity, or the sale of substantially all
of the assets of the Company to another corporation, entity or
individual, the successor-in-interest shall assume in writing all
liabilities of the Company under this Agreement.
(d) Waiver. The failure of either party to insist, in
any one or more instances, upon performance of the terms or
conditions of this Agreement, shall not be construed as a waiver
or a relinquishment of any right granted hereunder or of the
future performance of any such term, covenant or condition. The
waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or
succeeding breach of such provision or as a waiver of the
provision itself. No waiver of any kind shall be effective or
binding, unless it is in writing and is signed by the party
against which such waiver is sought to be enforced.
(e) Notices. All notices, requests, demands and other
communications provided for in this Agreement shall be in writing
and addressed to the address (or telecopier number) of the
parties stated below or to such changed address as such party may
have fixed by notice:
(a) To the Employee:
Robert L. Borchardt
802 Georgia Avenue
Winter Park, Florida 32789
Telecopier No.: 407-644-5523
- copy to (which shall not constitute notice) -
Steven M. Nachman, Esq.
630 Third Avenue
New York, New York 10017
Telecopier No.: 212-661-9491
(b) To the Company:
2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Secretary
Telecopier No.: (407) 333-8903
- copy to (which shall not constitute notice) -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: 212-806-6006
Unless otherwise specifically provided in this Agreement, such
communications shall be deemed to have been given (a) three days
after mailing, when mailed by registered or certified postage-
paid mail, (b) on the next business day, when delivered to a
same-day or overnight national courier service or the U.S. Post
Office Express Mail or (c) upon the date of receipt by the
addressee when delivered personally or by telecopier; provided,
however, that any notice of change of address shall be effective
only upon receipt. Notice may be given on behalf of a party by
his or its counsel.
(f) Severability. Any provision of this Agreement
which is prohibited by, or unlawful or unenforceable under, any
applicable law of any jurisdiction shall be ineffective as to
such jurisdiction without affecting any other provision of this
Agreement in such jurisdiction or all of the provisions of this
Agreement in other jurisdictions. To the full extent, however,
that the provisions of such applicable law may be waived, or the
provisions of this Agreement "blue-penciled" or reformed by any
competent court or arbitral panel, so that they become enforce-
able, such provisions of law shall be hereby deemed waived or
such provisions of this Agreement shall be so blue-penciled or
reformed to the end that this Agreement is deemed to be a valid
and binding agreement enforceable in accordance with its terms.
If any term or provision of this Agreement shall be held invalid
by a competent court or arbitral panel, the remainder of this
Agreement shall not be affected thereby and the parties hereto
shall continue to be bound by the remaining terms hereof. In
such event, the relevant term or provision (or should such
term(s) or provision(s) be such a material element of this
Agreement, then the entire Agreement) shall be renegotiated by
the parties in a good faith effort to achieve mutual agreement
consistent with such holding and the parties shall continue to
perform under this Agreement in a manner consistent with the
intent and objectives of the parties to this Agreement.
(g) Entire Agreement; Amendment. This Agreement
constitutes the entire and only agreement between the parties
relating to employment of the Employee by or with the
Corporation, and this Agreement supersedes and cancels any and
all previous contracts, arrangements or understandings with
respect thereto; provided, however, that nothing herein is
intended to modify the existing Deferred Compensation Agreement
between the Company and the Employee dated July 1, 1982, as
amended, and the various Split-Dollar Life Insurance Agreements
between the Company and the Employee.
(h) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York without reference to choice-of-law rules.
(i) Benefit. This Agreement shall be binding upon and
inure to the benefit of and shall be enforceable by and against
the Company, its successors and assigns, and the Employee, his
heirs, beneficiaries and legal representatives. It is agreed
that the rights and obligations of the Employee may not be
delegated or assigned except as specifically set forth in this
Agreement.
(j) Attorneys' Fees. The Company shall pay or
reimburse the Employee for all Expenses (as hereinafter defined)
incurred by the Employee in connection with any claim for payment
of any amount payable, or alleged to be payable, under this
Agreement. "Expenses" shall mean all reasonable costs, expenses
and obligations including, without limitation, attorneys' fees
paid or incurred in connection with investigating, prosecuting or
settling (including on appeal), or preparing to prosecute any
action, suit, arbitration or proceeding relating to a claim for
payment of any amount payable, or alleged to be payable, under
this Agreement.
(k) Headings; Cross References; Language. The
headings contained in this Agreement are for reference purposes
only and shall in no way affect the meaning or interpretation of
this Agreement. In this Agreement, the singular includes the
plural, the plural the singular, the word "or" is used in the
inclusive and "includes" or "including" shall mean "includes
without limitation" or "including without limitation." Unless
otherwise specifically provided, references in this Agreement to
Articles, Sections, Exhibits and Schedules are to Articles and
Sections of this Agreement and to Exhibits and Schedules attached
to this Agreement. Where the context so requires, the use in
this Agreement of any gender shall be deemed to refer also to any
other gender.
(l) Counterparts. This Agreement may be executed in
two duplicate counterparts, each of which shall be deemed to be
an original.
(m) Advice of Counsel. The Employee acknowledges that
he was given the opportunity to receive the advice of counsel
before signing this Agreement and has consulted counsel.
(n) Interest. Any payments required to be made under
this Agreement which are not made when due shall bear interest at
the higher of 1-1/2% per month or the prime rate of the Company's
primary lender or financial institution.
(o) Board Approval. Recoton's Board of Directors has
approved this Agreement and has delivered to the Employee a
certified copy of the Board's resolution.
IN WITNESS WHEREOF, the parties have executed or caused this
Agreement to be executed effective as of the Effective Date but
executed on the 25th day of October, 1995.
RECOTON CORPORATION
By: /s/ Stuart Mont
Name: Stuart Mont
Title: Executive Vice President -
Operations and Chief
Operating Officer
/s/ Robert L. Borchardt
Robert L. Borchardt
<PAGE>
ANNEX A
No. of shares subject to option: ____ Option No.: _____
RECOTON CORPORATION
1991 NONQUALIFIED STOCK OPTION PLAN AGREEMENT
This AGREEMENT dated as of the ____th day of ________,
_____ between RECOTON CORPORATION, a New York corporation (the
"Company"), and Robert L. Borchardt (the "Optionee").
W I T N E S E T H :
1. Grant of Option. Pursuant to the provisions of the
Recoton Corporation 1991 Stock Option Plan (the "Plan"), the
Company hereby grants to the Optionee, subject to the terms and
conditions set forth in the Plan and this Agreement, the right
and option (the "Option") to purchase from the Company all or any
part of an aggregate of ________ shares of Common Stock, $.20 par
value, of the Company at the purchase price of $_____ per share.
The Option is not intended to qualify as an incentive stock
option pursuant to Section 422A of the Internal Revenue Code of
1986, as amended.
2. Terms and Conditions. The Option is subject to the
following terms and conditions:
(a) Expiration Date. The Option shall expire ten
years after the date of this Agreement (the "Expiration Date"),
except as otherwise noted in subparagraph (d) of this paragraph
2.
(b) Exercise of Option. The Option may be exercised
in full, to the extent otherwise exercisable by its terms, as of
the date hereof; provided, however, that no options granted to
executive officers, directors and beneficial owners of more than
ten percent of any class of the Company's equity securities
("Section 16 Persons") may be exercised in part or in full prior
to six months from the date of grant of the Option.
Notwithstanding the foregoing, all or any part of any remaining
unexercised Option may be exercised in the following
circumstances (but in the case of Section 16 Persons in no event
during the six month period commencing on the date of grant of
the Option): (a) immediately upon (but prior to the expiration
of the term of the Option) the holder's retirement from the
Company and all Subsidiaries on or after such person's 65th
birthday, (b) subject to the provisions of Section 5(e) hereof,
upon the disability (to the extent and in a manner as shall be
determined by the Committee in its sole discretion) or death of
the holder, (c) upon the occurrence of such special circumstances
or event as in the opinion of the Stock Option Committee
constituted pursuant to the Plan (the "Committee") merits special
consideration, or (d) if, while the holder is employed by the
Company or a Subsidiary, there occurs a Change in Control. For
purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if (a) any "person" or group of "persons" (as the
term "person" is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
("Person"), acquires (or has acquired during the twelve-month
period ending on the date of the most recent acquisition by such
Person) the beneficial ownership, directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the then outstanding securities of the
Company; (b) during any period of twelve months, individuals who
at the beginning of such period constitute the Board of
Directors, and any new director whose election or nomination was
approved by the directors in office who either were directors at
the beginning of the period or whose election or nomination was
previously so approved, cease for any reason to constitute at
least a majority thereof; (c) a Person acquires ownership of
stock of the Company that, together with stock held immediately
prior to such acquisition by such Person, possesses more than 50%
of the total fair market value or total voting power of the stock
("50% Ownership") of the Company, unless the additional stock is
acquired by a Person possessing, immediately prior to such
acquisition, ownership of 40% or more of the Common Stock; or (d)
a Person acquires (or has acquired during the twelve-month period
ending on the date of the most recent acquisition by such Person)
assets from the Company that have a total fair market value equal
to or more than one-third of the total fair market value of all
of the assets of the Company immediately prior to such
acquisition. Notwithstanding the foregoing, for purposes of
subsections (a) and (b), a Change in Control will not be deemed
to have occurred if the power to control (directly or indirectly)
the management and policies of the Company is not transferred
from a Person to another Person; and for purposes of subsection
(d), a Change in Control will not be deemed to occur if the
assets of the Company are transferred: (i) to a shareholder in
exchange for his stock, (ii) to an entity in which the
Corporation has (directly or indirectly) 50% Ownership, or (iii)
to a Person that has (directly or indirectly) at least 50%
ownership of the Corporation with respect to its stock
outstanding, or to any entity in which such Person possesses
(directly or indirectly) 50% Ownership. To the extent otherwise
permitted by this Agreement, shares with respect to which the
Option becomes exercisable may be purchased in whole or from time
to time in part at any time prior to the expiration of the
Option. Any exercise shall be accompanied by a written notice to
the Company in a form substantially as attached to this Agreement
as Exhibit 1 (including the last paragraph of such Exhibit if
applicable), specifying the number of shares as to which the
Option is being exercised. Notation of any partial exercise
shall be made by the Company on Schedule 1 to this Agreement.
(c) Payment of Purchase Price Upon Exercise. At the
time of any exercise, the purchase price of the shares as to
which the Option shall be exercised shall be paid (i) in cash or
by check (subject to clearance) made payable to the Company,
(ii) in stock of the Company valued at its fair market value on
the date of exercise by the Committee, (iii) by providing an
order to a designated broker to sell part or all of the shares
being purchased pursuant to exercise of the Option and to deliver
sufficient proceeds to the Company, in cash or by check payable
to the order of the Company, to pay the full purchase price of
such shares and all applicable withholding taxes, or (iv) by such
other methods as the Committee may permit from time to time.
Subject to the provisions of subparagraph (i), as soon as
practicable following receipt of such cash, check, stock or
order, the Company shall issue to Optionee a certificate for the
number of shares as to which the Option is being exercised.
Delivery of such shares shall be at the principal office of the
Company and the obligation of the Company with respect to the
purchase of such shares shall be fulfilled by delivery of such
shares registered in the name of the Optionee.
(d) Exercise Upon Death or Termination of Employment.
(1) In the event of the death of Optionee while an
employee of the Company or a Subsidiary, the Option may be
exercised, to the extent that Optionee could have done so at
the date of death, by the person or persons to whom
Optionee's rights under the Option pass by will or
applicable law, or if no such person has such right, by
Optionee's executors or administrators, at any time, or from
time to time, within one year after the date of Optionee's
death, but not later than the Expiration Date.
(2) If Optionee's employment by the Company or a
Subsidiary shall terminate because of Optionee's permanent
disability, Optionee may exercise the Option, to the extent
that Optionee could have done so at the date of termination
of employment, at any time, or from time to time, within one
year of such termination but not later than the Expiration
Date.
(3) If Optionee's employment by the Company or a
Subsidiary shall terminate for any reason other than death
or permanent disability as aforesaid, Optionee may exercise
the Option, to the extent that Optionee could have done so
at the date of termination of employment, at any time, or
from time to time, within three months of the date of
termination of employment but not later than the Expiration
Date.
(4) Notwithstanding anything in this subparagraph (d)
to the contrary, if Optionee's employment is terminated
because of the Option holder's violation of the duties of
such employment by the Company or a Subsidiary as such
person may from time to time have, the existence of which
violation shall be determined by the Committee in its sole
discretion (which determination by the Committee shall be
conclusive), all unexercised Options of such Option holder
shall terminate immediately upon such termination of the
holder's employment by the Company and all Subsidiaries, and
an Option holder whose employment by the Company and
Subsidiaries is so terminated shall have no right after such
termination to exercise any unexercised Option which such
employee might have exercised prior to the termination of
employment by the Company and Subsidiaries.
(e) Nontransferability. The Option and any rights
hereunder shall not be transferable or assignable other than by
will or by the laws of descent and distribution. During the
lifetime of Optionee, the Option shall be exercisable only by
Optionee.
(f) Adjustments. In the event of any change in the
Common Stock of the Company by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below
fair market value, or of any similar change affecting the Common
Stock, then the number and kind of shares subject to the Option
and their purchase price per share shall be appropriately
adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to Optionee hereunder. Any
adjustment so made shall be final and binding upon Optionee.
(g) No Rights as Stockholder. Optionee shall have no
rights as a stockholder with respect to any shares of Common
Stock subject to the Option prior to the date of issuance of a
certificate or certificates for such shares.
(h) No Right to Continued Employment. The Option
shall not confer upon Optionee any right with respect to
continuance of employment by the Company or any Subsidiary, nor
shall it interfere in any way with the right of Optionee's
employer to terminate Optionee's employment at any time.
(i) Compliance With Other Laws and Regulations. The
Option and the obligation of the Company to sell shares and
deliver certificates for shares of Common Stock pursuant to the
Option shall be subject to all applicable federal and state laws,
rules and regulations and to such approvals by any government or
regulatory agency as may be required. No Option may be granted
pursuant to the Plan or exercised at any time when such Option,
or the granting, exercise or payment thereof, may result in the
violation of any law or governmental order or regulation. The
Plan is intended to comply with the Rule 16b-3 under the Exchange
Act. Any provision inconsistent with such Rule shall be
inoperative and shall not affect the validity of the Plan. If at
any time the Committee shall determine in its discretion that the
listing, registration or qualification of the shares covered by
the Plan upon any national securities exchange or under any state
or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or
in connection with, the sale or purchase of shares under the
Plan, no shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee. If shares are not
required to be registered, but are exempt from registration, upon
exercising all or any portion of the Option the Company may
require Optionee (or any person acting under subparagraph (d) of
paragraph 2), to represent that the shares are being acquired for
investment only and not with a view to their sale or
distribution, and to make such other representations and furnish
such information deemed appropriate by counsel to the Company.
Stock certificates evidencing unregistered shares acquired upon
exercise of an option may be subject to stop orders and shall
bear any legend required by applicable state securities laws and
a restrictive legend substantially as follows:
"The securities represented hereby have
not been registered under the Securities Act
of 1933, as amended (the "Act"), and may not
be transferred in the absence of such
registration or an opinion of counsel
acceptable to the Company that such transfer
will not require registration under such
Act."
3. Optionee Bound by Plan. Optionee acknowledges
receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions of the Plan.
4. Notices. Any notice under this Agreement the
Company shall be addressed to it at its office, 2950 Lake Emma
Road, Lake Mary, FL 32746; Attention: President, and any notice
under this Agreement to Optionee shall be addressed to Optionee
at Optionee's home address as shown on the records of the
Company, subject to the right of either party to designate at any
time hereafter in writing some other address.
5. Counterparts. This Agreement has been executed in
two counterparts, each of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Recoton Corporation has caused this
Agreement to be executed by its President or a Vice President and
Optionee has executed this Agreement, both as of the day and year
first above written.
RECOTON CORPORATION
By: _____________________________
Name:
Title:
___________________________ (L.S.)
Optionee
<PAGE>
SCHEDULE 1 -- NOTATIONS AS TO PARTIAL EXERCISE
Number of Balance of
Date of Shares Shares on Authorized Notation
Exercise Purchased Option Signature Date
<PAGE>
EXHIBIT 1
STOCK OPTION EXERCISE FORM
[Date]
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attention: Secretary
Dear Sirs:
The undersigned elects to exercise the option to pur-
chase ______ shares, $.20 par value, of the Common Stock of
Recoton Corporation (the "Company") under and pursuant to 1991
Stock Option Plan Agreement No. ___ between the Company and the
undersigned dated _________________.
Delivered herewith is a [check in the amount of
$______] [certificate for ____ shares of Common Stock of the
Company] [order to a broker to sell part or all of the shares
being purchased and to deliver sufficient proceeds to the
Company, in cash or by check payable to the order of the Company,
to pay the full purchase price of the shares and all applicable
withholding taxes] in payment of the option price.
[The undersigned hereby represents and agrees that all
of the Common Stock being purchased hereunder is being acquired
for investment and not with a view to the sale or distribution
thereof and that the undersigned understands that such Common
Stock has not been registered under the Securities Act of 1933
(the "Act"), as amended, and such Common Stock may not be sold,
pledged, hypothecated, alienated, or otherwise assigned or
transferred in the absence of registration under the Act, or an
opinion of counsel which opinion is satisfactory to the Company
to the effect that such registration is not required.]
Very truly yours,
[Optionee]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Condensed Consolidated Statement of Financial Condition
at September 30, 1995 (unaudited) and the Condensed Consolidated
Statement of Income for the Nine Months Ended September 30, 1995
(unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 6,034,305
<SECURITIES> 0
<RECEIVABLES> 47,219,816
<ALLOWANCES> 1,546,000
<INVENTORY> 64,057,703
<CURRENT-ASSETS> 120,458,245
<PP&E> 34,957,969
<DEPRECIATION> 12,317,259
<TOTAL-ASSETS> 164,102,176
<CURRENT-LIABILITIES> 45,034,190
<BONDS> 4,701,168
<COMMON> 2,456,395
0
0
<OTHER-SE> 110,710,531
<TOTAL-LIABILITY-AND-EQUITY> 164,102,176
<SALES> 135,209,785
<TOTAL-REVENUES> 135,763,929
<CGS> 84,198,656
<TOTAL-COSTS> 84,198,656
<OTHER-EXPENSES> 38,957,426
<LOSS-PROVISION> 539,250
<INTEREST-EXPENSE> 144,273
<INCOME-PRETAX> 11,924,324
<INCOME-TAX> 3,166,000
<INCOME-CONTINUING> 8,758,324
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,758,324
<EPS-PRIMARY> .78
<EPS-DILUTED> .76
</TABLE>
