SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 5, 1995
RECOTON CORPORATION
(Exact name of registrant as specified in charter)
New York 0-5860 11-1771737
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
2950 Lake Emma Road, Lake Mary, Florida 32746
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: 407-333-8900
N.A.
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 5, 1995, the Company acquired the operations of
the STD Group of Companies ("STD"), effective as of August 31,
1995 (the "Contract Date"). STD is a Hong Kong-based
international manufacturer and marketer of multimedia and
computer accessories, including video game and computer joysticks
and controllers and accessories and computer speakers sold under
the Interact, Performance and STD brand names. STD's
manufacturing operations are in the Peoples' Republic of China;
its research and development operations are in Hong Kong, as are
its headquarters and international sales facilities. It also has
a Maryland-based marketing operation.
The transaction was accomplished as a purchase by Recoton
(Far East) Limited ("RFE"), a wholly-owned subsidiary of the
Company, of all of the stock of the Hong Kong holding company STD
Holding Limited ("STD Hong Kong") from its shareholders,
including STD Investments (B.V.I.) Limited ("STD BVI") and
Plomax Holdings Limited ("Plomax"), and a purchase of
substantially all of the assets, and assumption of substantially
all of the liabilities, of its United States subsidiary STD
Entertainment (U.S.A.), Inc. ("STD USA") (the shares of which
were then distributed by STD Hong Kong to STD BVI) by Interact
Accessories, Inc., a wholly-owned subsidiary of the Company .
By virtue of the acquisition of the stock of STD Hong Kong, the
Company also acquired various manufacturing and other
subsidiaries. STD BVI and Plomax are controlled by a Bermuda
holding company of which Stephen Chu, David Chu, Patrick Ho,
Todd Hays and others are shareholders. Copies of the
acquisition agreements (one for the stock acquisition and one for
the asset acquisition), dated as of the Contract Date, are filed
as exhibits to this Form 8-K.
In payment for the purchase of the stock of STD Hong Kong
and the assets of STD USA, the sellers received $13.5 million in
cash and 406,092 shares of Recoton common stock, valued at $8
million based on an average closing price on Nasdaq over certain
days prior to the closing. The purchase price is subject to
adjustment based on the stockholders' equity of STD Hong Kong,
its subsidiaries and STD USA as of the Contract Date. If such
stockholders' equity is more than $10.5 million, then RFE shall
pay the difference to the sellers with interest or if such
stockholders' equity is less than $9.5 million the sellers,
jointly and severally, shall pay the difference to RFE with
interest. The amount of consideration paid was the subject of
arms-length negotiation. Bridge financing for the cash portion
of the Hong Kong stock acquisition was provided by the Hong Kong
branch of Chemical Bank. The Company is in current negotiations
with several lenders regarding replacement long-term financing.
The purchase price with respect to the U.S. assets was from the
Company's working capital.
The plant, equipment and other physical property of STD
which was acquired is used for the manufacturing, assembly,
development and marketing of inventory; the Company plans to
continue to use such assets for such purpose but it may also
utilize STD's manufacturing facilities to manufacture additional
products for Recoton.
STD BVI has pledged the Stock Payment as security for the
performance of the sellers' obligations and the accuracy of the
sellers' representations and warranties under the acquisition
agreements for a period of approximately three years. Twenty-
five percent of the pledged shares may be released from escrow
after two years. A copy of the Escrow Agreement, dated as of the
Contract Date, is filed as an exhibit to the Stock Purchase
Agreement.
Each of the Sellers, Stephen Chu, David Chu, Patrick Ho and
Todd Hays delivered a standstill, registration rights and voting
agreement with the Company, a copy of which is filed as an
exhibit to the Stock Purchase Agreement.
STD Hong Kong entered into Employment Agreements with
Stephen Chu, David Chu and Patrick Ho, each dated as of the
Contract Date. Pursuant to such agreements, Stephen Chu was
engaged as the Group Managing Director of STD Hong Kong, David
Chu was engaged as the President of STD Hong Kong and Patrick Ho
was engaged as the Vice President, Marketing of STD Electronics
International Limited, a subsidiary of STD Hong Kong, each until
December 31, 2001. IAI entered into a similar agreement to
retain Todd Hays as President and Chief Operating Officer of IAI
until December 31, 2001.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
a. Financial Statements of Business
Acquired
It is currently impractical to provide the required
financial statements; such statements will be filed by
amendment on or prior to 60 days from the date hereof.
b. Pro Forma Financial Information
It is currently impractical to provide the required pro
forma financial information; such information will be
filed by amendment on or prior to 60 days from the date
hereof.
c. Exhibits
1. Stock Purchase Agreement dated as of August 31,
1995 among the Company, STD BVI, Plomax, RFE, STD
Holdings and the other shareholders of STD
Holdings.
2. Asset Purchase Agreement dated as of the Closing
Date among the Company, STD USA, Interact, STD
Holdings, STD BVI, Stephen Chu and other STD Group
shareholders.
SIGNATURES
RECOTON CORPORATION
By: /s/ Joseph Massot
Name: Joseph Massot
Title: Vice President &
Treasurer
Dated: September 19, 1995
<PAGE>
EXHIBIT INDEX
ITEM PAGE
1. Stock Purchase Agreement dated as of
August 31, 1995 among the Company, STD
BVI, Plomax, RFE, STD Holdings and the
shareholders of STD Holdings.
2. Asset Purchase Agreement dated as of the
Closing Date among the Company, STD USA,
Interact, STD Holdings, STD BVI, Stephen
Chu and other STD Group shareholders.
EXHIBIT 1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING SEPTEMBER 5, 1995
STOCK PURCHASE AGREEMENT
Among
STD INVESTMENTS (B.V.I.) LIMITED and
PLOMAX HOLDINGS LIMITED,
as Sellers,
and
RECOTON (FAR EAST) LIMITED
as Purchaser,
and
RECOTON CORPORATION
and
STD INTERNATIONAL HOLDINGS LIMITED
and THE SHAREHOLDERS
OF STD INTERNATIONAL HOLDINGS LIMITED
Regarding the Stock of STD HOLDING LIMITED
dated
as of August 31, 1995
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
Section 1.01 Cross References . . . . . . . . . . . . . . 1
Section 1.02 General Terms. . . . . . . . . . . . . . . . 3
Section 1.03 Materiality. . . . . . . . . . . . . . . . . 6
ARTICLE II. SALE OF STOCK
Section 2.01 Purchase and Sale of Stock . . . . . . . . . 6
Section 2.02 Waiver of Pre-Emption Rights . . . . . . . . 6
ARTICLE III. CONSIDERATION
Section 3.01 Purchase Price . . . . . . . . . . . . . . . 6
Section 3.02 Time of Payment; Adjustment. . . . . . . . . 8
ARTICLE IV. THE CLOSING
Section 4.01 Time and Place . . . . . . . . . . . . . . . 9
Section 4.02 Sellers' Actions at Closing. . . . . . . . . 9
Section 4.03 Purchaser's Actions at Closing . . . . . . . 14
ARTICLE V. REPRESENTATIONS, WARRANTIES AND
COVENANTS BY SELLER PARTIES
Section 5.01 Organization, Standing and
Qualification; Corporate Documents . . . . 17
Section 5.02 Capitalization, Shareholders, Subsidiaries
and Investments. . . . . . . . . . . . . . 18
Section 5.03 Execution, Delivery and Performance of
Agreement; Authority . . . . . . . . . . . 18
Section 5.04 Financial Statements, Etc. . . . . . . . . . 19
Section 5.05 Absence of Undisclosed Liabilities . . . . . 20
Section 5.06 Taxes. . . . . . . . . . . . . . . . . . . . 20
Section 5.07 Absence of Changes or Events . . . . . . . . 21
Section 5.08 Litigation . . . . . . . . . . . . . . . . . 23
Section 5.09 Compliance with Legal Requirements
and Instruments. . . . . . . . . . . . . . 24
Section 5.10 Title to, and Condition of, Properties . . . 25
Section 5.11 Disclosure Schedules . . . . . . . . . . . . 25
Section 5.12 Contracts. . . . . . . . . . . . . . . . . . 28
Section 5.13 Proprietary Rights, Etc. . . . . . . . . . . 29
Section 5.14 Inventory. . . . . . . . . . . . . . . . . . 29
Section 5.15 Receivables. . . . . . . . . . . . . . . . . 29
Section 5.16 Employee Benefit Plans . . . . . . . . . . . 30
Section 5.17 Environmental Matters. . . . . . . . . . . . 30
Section 5.18 Brokers and Finders. . . . . . . . . . . . . 33
Section 5.19 Governmental Authorizations. . . . . . . . . 33
Section 5.20 Matters Relating to Estate Duty Ordinance. . 33
Section 5.21 Records. . . . . . . . . . . . . . . . . . . 34
Section 5.22 Employee and Director Indebtedness . . . . . 34
Section 5.23 No Material Interests. . . . . . . . . . . . 34
Section 5.24 Employment Relations . . . . . . . . . . . . 34
Section 5.25 Insurance. . . . . . . . . . . . . . . . . . 35
Section 5.26 Disclosure . . . . . . . . . . . . . . . . . 35
Section 5.27 Title to Stock . . . . . . . . . . . . . . . 36
Section 5.28 Matters Related to Recoton Stock . . . . . . 36
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
BY PURCHASER PARTIES
Section 6.01 Organization . . . . . . . . . . . . . . . . 38
Section 6.02 Execution, Delivery and Performance
of Agreement; Authority. . . . . . . . . . 38
Section 6.03 Recoton Stock. . . . . . . . . . . . . . . . 38
Section 6.04 Brokers and Finders. . . . . . . . . . . . . 39
Section 6.05 Recoton's SEC Filing . . . . . . . . . . . . 39
ARTICLE VII. [OMITTED]
ARTICLE VIII. [OMITTED]
ARTICLE IX. ADDITIONAL COVENANTS
Section 9.01 Noncompetition; Nonsolicitation . . . . . . 39
Section 9.02 Employee Bonus Pool. . . . . . . . . . . . . 40
Section 9.03 Transfer Taxes . . . . . . . . . . . . . . . 43
Section 9.04 Indemnification. . . . . . . . . . . . . . . 43
Section 9.05 Right to Offset. . . . . . . . . . . . . . . 46
Section 9.06 Independent Operations . . . . . . . . . . . 47
Section 9.07 Continued Existence of Sellers . . . . . . . 47
Section 9.08 Recoton Guaranty . . . . . . . . . . . . . . 47
ARTICLE X. GENERAL PROVISIONS
Section 10.01 Nature of Representations, Warranties
and Other Obligations. . . . . . . . . . . 49
Section 10.02 Attorney-in-Fact . . . . . . . . . . . . . . 49
Section 10.03 Notices. . . . . . . . . . . . . . . . . . . 50
Section 10.04 Entire Agreement; Amendment. . . . . . . . . 51
Section 10.05 Waiver . . . . . . . . . . . . . . . . . . . 51
Section 10.06 Binding Nature . . . . . . . . . . . . . . . 52
Section 10.07 Assignment . . . . . . . . . . . . . . . . . 52
Section 10.08 Captions; Language . . . . . . . . . . . . . 52
Section 10.09 Cross-References; Exhibits . . . . . . . . . 52
Section 10.10 Costs. . . . . . . . . . . . . . . . . . . . 52
Section 10.11 Rights of Third Parties. . . . . . . . . . . 52
Section 10.12 Enforceability . . . . . . . . . . . . . . . 52
Section 10.13 Equitable Remedies . . . . . . . . . . . . . 53
Section 10.14 Further Assurances . . . . . . . . . . . . . 53
Section 10.15 Counterparts . . . . . . . . . . . . . . . . 53
Section 10.16 Applicable Law; Dispute Resolution . . . . . 54
Section 10.17 Access; Notice of Actions . . . . . . . . . 54
Section 10.18 Publicity. . . . . . . . . . . . . . . . . . 55
EXHIBITS
4.02(a) Form of Instrument of Transfer and Sold Note
4.02(d) Form of Deed of Indemnity
4.02(m) Form of Escrow Agreement
4.02(o) Form of Shareholders' Agreement
4.02(p) Form of Employment Agreements with
(i) Stephen Chu
(ii) David Chu
(iii) Patrick Ho
(iv) Other Contract Employees
SCHEDULES
2.01 Sellers and Allocation of Purchase Price
4.02(f) Termination of Guarantee
4.02(i) PRC Real Estate
4.02(j) Resignations
4.02(n) STD Companies to Change Names
4.03 Bank Accounts
5.01 Jurisdictions in Which Companies Have Authority to
Do Business
5.02 Shareholders
5.03 Execution, Delivery and Performance of Agreements;
Authority
5.04 Financial Statements, Etc.
5.05 Liabilities
5.06 Taxes
5.07 Changes or Events Since March 31, 1995
5.08 Litigation
5.09 Compliance with Laws and Other Instruments
5.10 Title to, and Condition of, Properties
5.11 Disclosure Schedules:
a. Real Estate
b. Receivables
c. Material Equipment
d. Inventory
e. Trademarks and Patents
f. Material Contracts
g. Employment Agreements
h. Licenses, Etc.
i. Customers and Suppliers
j. Products
k. Creditors
l. Insurance
m. Warranty Polices
n. Present Phone and Fax Numbers
o. Security Deposits, Prepaid Expenses and Other
Deposits Etc.
5.13 Proprietary Rights, Etc.
5.17 Environmental Matters
5.22 Employee Indebtedness
5.23 Material Interests
5.24 Employment Relations
5.25 Insurance
5.26 Affiliates
9.01 Seller Parties Subject to Noncompetition/
Nonsolicitation Provisions
9.04 Litigation
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of August 31, 1995
(the "Contract Date") among STD Investments (B.V.I.) Limited, a
British Virgin Islands company ("STD BVI") and Plomax Holdings
Limited, a British Virgin Islands corporation ("Plomax"), (each a
"Seller" and collectively the "Sellers"), Recoton (Far East)
Limited, a Hong Kong corporation ("Purchaser"), Recoton
Corporation, a New York, U.S.A. corporation ("Recoton") (Recoton
and Purchaser being sometimes referred to as the "Purchaser
Parties") and STD International Holdings Limited, a Bermuda
corporation ("STD Bermuda"), Stephen Chu Nin Yiu ("Stephen Chu"),
David Chu Nin Wai ("David Chu"), Patrick Ho Tze Man ("Patrick
Ho"), Leung Choi Luen, Tong Yue Ting, Stephen Todd Hays and
Williamson Wong Shiu Wah ("Williamson Wong") (STD Bermuda and the
above-named natural persons being referred to collectively as the
"Principal Shareholders" and Sellers and the Principal
Shareholders being sometimes each referred to as a "Seller Party"
and collectively as the "Seller Parties").
W I T N E S E T H :
WHEREAS, the Sellers desire to sell all of the ordinary
shares of capital stock (the "Stock") of STD Holding Limited, a
Hong Kong corporation ("STD Hong Kong") and the Purchaser desires
to purchase such Stock in its name and, in order to satisfy legal
requirements requiring each company to have at least two
shareholders, in the name of a nominee (the "Nominee"); and
WHEREAS, STD Bermuda is the sole shareholder of STD BVI
and the above-named natural persons are the beneficial owners of
all the issued and outstanding capital stock of STD Bermuda and
are willing to execute and deliver this Agreement and undertake
the obligations set forth herein; and
WHEREAS, Recoton is the direct or indirect sole
beneficial owner of Purchaser.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth and subject to the
terms and conditions hereof, the parties hereby agree as follows:
ARTICLE I. DEFINITIONS
1.01 Cross References. The following terms, appearing
in this Agreement in capitalized form, are defined in the
sections noted:
Balance Sheets Section 5.04
Balance Sheet Date Section 5.04
Best Knowledge of Seller Section 5.08
Business Section 9.01(a)
Cash Payment Section 3.01(a)(i)
Chu Introduction
Closing Section 4.01
Closing Date Section 4.01
Closing Payment Section 3.02(a)
Combined Net Worth Section 3.01(a)(iii)
Company(ies) Section 3.01(a)(iii)
Company Assets Section 5.10
Companies Ordinance Section 5.01
Contract Date Balance Sheets Section 5.04
Contract Date Financials Section 5.04
Contract Date Introduction
Current Balance Sheets Section 5.05
Deferred Shares Section 5.27(b)
Employee Benefit Plans Section 5.16
Employment Agreements Section 4.02(p)
Environmental Laws Section 5.17
Escrow Agent Section 3.02(a)
Escrow Agreement Section 4.02(n)
Escrow Amount Section 3.02(a)
Financial Statements Section 5.04
Four Employees Section 9.02(c)
Four Employees' Bonus Section 9.02(c)
Hays Section 4.02(o)
Hong Kong GAAP Section 3.01(a)(iii)
Income Statements Section 5.04
Independent Firm Section 3.02(b)
Land and Building
Certificates Section 4.02(i)
Material Contract Section 5.03
Net Value Adjustment Section 3.01(a)(iii)
New STD Section 9.02(a)
Nominee Recitals
Other Employment Agreements Section 4.02(p)
Plans Section 5.16
Plomax Introduction
Principal Shareholders Introduction
Purchase Price Section 3.01
Purchaser Recitals
Purchaser Parties Introduction
Purchaser's Accountant Section 3.02(b)
Purchaser's Counsel Section 4.03
Purchaser's Other Agreements Section 4.03(i)(ii)
Recoton Stock Section 3.01(a)(ii)
Seller Parties Introduction
Sellers Introduction
Sellers' Accountants Section 3.02(b)
Sellers' Counsel Section 4.02(s)
Sellers' Other Agreements Section 4.02(s)(ii)
Shareholders Agreement Section 4.02(o)
Statements of Cash Flow Section 5.04
STD Bermuda Introduction
STD BVI Introduction
STD Hong Kong Introduction
STD USA Section 1.03
Stock Recitals
Stock Payment Section 3.01(a)(ii)
Stock Security Section 3.02(a)
Territory Section 9.01(a)
Three Employees Section 4.02(p)
U.S. Agreement Section 1.03
U.S. GAAP Section 3.01(a)(iii)
1.02 General Terms. The following definitions shall
apply to the extent not otherwise defined, or used in capitalized
form, in this Agreement:
(a) The term "affiliate" shall mean with respect
to any person a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under
common control with, such person and shall include subsidiaries,
parents and brother-sister companies.
(b) The terms "agreements" and "contracts" shall
include any contract, purchase or sales order, franchise,
insurance policy, license, undertaking, arrangement,
understanding, commitment, document, lease, sublease, deed,
mortgage plan, plan, indenture, bill of sale, assignment, proxy,
voting trust or other agreement or instrument.
(c) The term "approval" shall include any
consent, waiver, license, permit, certificate or authorization.
(d) The term "breach" shall include any default,
event of default or event, occurrence, condition or act which,
with notice or lapse of time or both, would constitute a breach,
default, or event of default or give the other party or parties a
right to accelerate any obligation under the applicable
agreement.
(e) The term "corporate document" shall include
any charter, certificate, memorandum or articles of
incorporation, association or organization; By-Laws; any
resolution, consent or action of, or minutes of meetings of, the
incorporator, directors, stockholders or shareholders; stock
register or stock certificate book; or any other similar
formational, organization or governing document of a corporation.
(f) The term "interest in real property" shall
include all real property, real property leaseholds, rights of
ways and easements.
(g) The term "inventory" shall include any raw
materials, works-in-progress, supplies, finished goods,
packaging, works-in-transit and returned or repossessed goods,
wherever located.
(h) The term "law" shall mean, unless
specifically stated otherwise herein, laws of the United States
of America, Hong Kong and any other applicable jurisdiction.
(i) The term "legal body" shall include any
government, court or governmental department, official,
commission, authority, board, bureau, agency or other
instrumentality.
(j) The term "legal proceeding" shall include any
suit, action, formal dispute, arbitration, hearing, filed
grievance, contested assessment, order, directive, citation,
other legal proceeding, governmental investigation (of which a
Seller Party is aware as to matters involving the Companies) or
governmental audit (of which a Seller Party is aware as to
matters involving such Company) by or before any legal body or
arbitration association, whether pending or threatened in
writing, whether in law or equity or whether civil, criminal or
administrative.
(k) The term "legal requirement" shall include
any published governmental law, act, ordinance, requirement,
rule, regulation, subpoena, order, writ, award, injunction,
judgment or decree.
(l) The terms "liability" and "liabilities" shall
include any direct or indirect indebtedness, claim, loss, damage,
penalty, deficiency (including deferred income tax and other net
tax deficiencies), cost, expense, obligation, or guarantee,
whether accrued, absolute, or contingent, known or unknown, fixed
or unfixed, liquidated or unliquidated, matured or unmatured or
secured or unsecured. The term "liability" as used in Section
9.04 shall include in the case of undisclosed liabilities of a
Company, the reasonable expenses (including reasonable counsel
fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) of defending or
prosecuting such legal proceedings and satisfying such
undisclosed liabilities.
(m) The term "person" shall include an
individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated
organization and a government or other legal body thereof.
(n) The term "proprietary right" shall include
any (i) patent, invention, trademark, service mark, industrial
design, utility model, business name, trade name, trade style,
trade dress, service name, logo, slogan, brand name, brand mark,
copyright and the like (whether registered with any legal body
anywhere in the world or unregistered) or application,
registration, permit, license relating thereto and any reissue,
continuation, continuation-in-part, renewal right and extension
thereof, (ii) computer software or license related thereto and
(iii) invention, process, method, information, data, plan, art
work, blueprint, specification, design, drawing, engineering
report, test report, material standard, processing standard,
performance standard, know-how, formula, trade secret, concept,
application, procedure, marketing and technical data and other
confidential information.
(o) The term "receivable" shall include any
account receivable, unbilled shipment, loan or note receivable,
advance, claim receivable, insurance claim, debit balance from
vendors, right to invoice for work performed or goods sold and
other indebtedness owed to such person.
(p) The term "restriction" shall include any
mortgage, pledge, lien, charge, security interest, encumbrance,
option, lease, license, retention of title or easement whether
legal, equitable, accrued, absolute, contingent, direct, indirect
or otherwise.
(q) The term "return" shall include any return,
declaration, report, estimate, information return and statement
required to be filed with or supplied to any taxing authority in
connection with any taxes.
(r) The term "tax" shall include any tax, assess-
ment, levy, impost, duty, or withholding of any nature now or
hereafter imposed by a legal body and any interest, additional
tax, deficiency, penalty, charge or other addition thereon,
including without limitation any income, gross receipts, profits,
franchise, sales, use, property (real and personal), transfer,
payroll, unemployment, social security, occupancy and excise tax
and customs duty.
(s) The term "transfer" shall include any sale,
pledge, gift, assignment, conveyance, lease or disposition and
the term "transferred" shall include sold, pledged, gave,
assigned, conveyed, leased or disposed of.
1.03 Materiality. All references herein or in the
agreement of even date herewith between STD Entertainment
(U.S.A.) Inc. ("STD USA") and Interact Accessories, Inc. relating
to the purchase of the assets and assumption of the liabilities
of STD USA (the "U.S. Agreement") to "material" or "materially"
when pertaining to the Companies and/or STD USA shall be assessed
on a basis of materiality for all of the Companies plus STD USA
on a combined basis rather than individually. Similarly,
aggregate thresholds in this Agreement and the U.S. Agreement
(including those set forth in Sections 5.07) shall be applied on
a combined basis notwithstanding their separate appearance in
both documents.
ARTICLE II. SALE OF STOCK
2.01 Purchase and Sale of Stock. Sellers shall, and
do hereby, as beneficial owners (in the case of STD BVI) or
nominee for STD BVI (in the case of Plomax), sell, transfer,
convey, assign and deliver to Purchaser and/or Nominee, as
directed by Purchaser, and Purchaser and/or Nominee shall, and do
hereby, purchase from the Sellers, all of the Sellers' right,
title and interest in and to the shares of Stock owned by the
Sellers free from all restrictions, as set forth in Schedule
2.01.
2.02 Waiver of Pre-Emption Rights. Each of the
Sellers hereby waives any pre-emption rights it may have in
relation to any of the capital stock of STD Hong Kong under the
articles of association of that company or otherwise".
ARTICLE III. CONSIDERATION
3.01 Purchase Price.
(a) The price for the Stock is an amount equal to the
sum of the following:
(i) US$13,000,000 in cash (the "Cash Payment"); plus
(ii) US$8,000,000 in the Common Stock of Recoton,
par value US$0.20 per share ("Recoton Stock") ("Stock
Payment"); plus
(iii) the result (as a positive or negative number)
of the difference between (A) the consolidated stockholders'
equity (calculated immediately prior to the closing of the
purchase of the assets of STD USA by Interact Accessories,
Inc. and the distribution of the stock of STD USA to the
shareholders of STD Hong Kong as referred to in Schedule
5.07) of (1) STD Hong Kong, STD Electronic International
Limited, STD Manufacturing Limited, STD Trading Limited, STD
Plastic Industrial Limited, Peak Hero Limited, Ever-Smart
Management Limited, STD (Tianjin) International Trade
Development Co. Ltd. and STD Industrial (Shenzhen) Limited
(each, a "Company" and collectively, the "Companies"), as
calculated pursuant to generally accepted accounting
principles applicable in Hong Kong ("Hong Kong GAAP") and
set forth on the Contract Date Balance Sheets and (2) STD
USA) as calculated pursuant to generally accepted accounting
principles applicable in the United States ("U.S. GAAP")
(such consolidated stockholder equity being referred to as
the "Combined Net Worth") and (B) US$10,000,000 (such amount
being referred to as the "Net Value Adjustment"); provided,
however, that there shall be no increase in the price for
the first US$500,000 or portion thereof by which the
Combined Net Worth exceeds U.S. $10,000,000 and there shall
be no decrease in the price for the first US$500,000 or
portion thereof by which the Combined Net Worth is less than
US$10,000,000; and provided, further, that no assets of the
Companies or STD USA shall have been revalued upwards
subsequent to the Financial Statements for the period ended
March 31, 1995; minus
(iv) amount of any principal and accrued interest
on any loans by any of the Companies to any current or
former directors or affiliates of any of the Companies as
shown on the Closing Date Balance Sheet which are not repaid
within 30 days after the Closing Date; and minus
(v) any costs and expenses of the Sellers
incurred by them in connection with this Agreement which
were borne by any of the Companies.
The sum of the Cash Payment, the Stock Payment and the Net Value
Adjustment is herein referred to as the "Purchase Price". The
portion of the Purchase Price and the various components thereof
which shall be paid by the Purchaser to each of the Sellers is
set forth in Schedule 2.01.
(b) Whenever Recoton Stock is used for any payment
pursuant to this Agreement, the number of shares to be issued
shall be calculated based on the average closing price of Recoton
Stock on the Nasdaq Stock Market (or such other exchange on which
Recoton Stock is quoted or listed) during the 60 trading days
ending five business days immediately prior to the Contract Date
(in the case of the Stock Payment) or other applicable payment
date excluding from the determination of such average the ten
highest and ten lowest closing prices.
3.02 Time of Payment; Adjustment.
(a) At the Closing, the Purchaser is paying to the
Sellers as set forth in Schedule 2.01 an amount (the "Closing
Payment") equal to the Cash Payment and is transferring to STD
BVI a certificate for such number of shares of Recoton Stock as
reflects the Stock Payment. Plomax hereby acknowledges that it
has no right to receive any portion of the Purchase Price,
including the Closing Payment and the Recoton Stock as it holds
its share in STD Hong Kong solely as nominee for the benefit of
STD BVI. At the Closing, STD BVI shall deliver to the escrow
agent named in the Escrow Agreement (the "Escrow Agent") the
certificate for the shares of Recoton Stock issued pursuant to
the Stock Payment (the "Stock Security") (the Stock Security is
sometimes referred to as the "Escrow Amount") to be held pursuant
to the Escrow Agreement.
(b) If the parties cannot finally agree on the amount
of the Net Value Adjustment within 60 days (or such longer period
as the parties may agree) following the Closing Date, the Net
Value Adjustment shall be determined by agreement of Price
Waterhouse or another independent public accountant named by
Seller reasonably satisfactory to Purchaser ("Sellers'
Accountants") and Cornick Garber & Sandler L.L.P. or another
independent public accountant named by Purchaser reasonably
satisfactory to the Sellers ("Purchaser's Accountants"), for
which purposes Purchaser's Accountants and Sellers' Accountants
shall each have access to the financial records of the Companies
and the work papers of the other accountants. If Sellers'
Accountants and Purchaser's Accountants are unable to agree on
any material aspect of such determination within 30 additional
days, the Purchaser and the Sellers shall instruct them (or if
they cannot agree, the American Arbitration Association) to
appoint another firm of independent public accountants of
recognized international standing practicing in Hong Kong or
otherwise familiar with Hong Kong GAAP (the "Independent Firm"),
whose determination on such aspect (which need not be identical
to either Sellers' Accountants' or Purchaser's Accountants'
determination thereon) shall be set forth in writing and shall be
final and binding upon Sellers' Accountants and the Purchaser's
Accountants and the parties. The fees of each party's
accountants for determining the Net Value Adjustment shall be
borne by such party and the fees of any Independent Firm shall be
shared equally by the Sellers and the Purchaser.
(c) Upon determination of the Net Value Adjustment
pursuant to Section 3.02(b), (i) if the Net Value Adjustment is a
positive number, the Purchaser shall promptly pay the difference
to the Sellers with interest at the prime rate of Chemical Bank
from the Contract Date or (ii) if the Net Value Adjustment is a
negative number the Sellers, jointly and severally, shall
promptly pay the difference to the Purchaser with interest at the
prime rate of Chemical Bank from the Contract Date.
(d) If the loan noted in Section 3.01(a)(iv) is not
repaid within the 30 day period set forth therein, the Sellers
shall, jointly and severally, promptly pay to the Purchaser the
amount of the unpaid loan, in which case the payee company shall
assign to STD BVI all of its rights of STD Hong Kong to payment
under such loan.
ARTICLE IV. THE CLOSING
4.01 Time and Place. The closing of the transactions
which are the subject of this Agreement (the "Closing") is taking
place at 10:00 a.m., local time, on September 5, 1995 (but
effective as of the close of business on August 31, 1995) at the
offices of Stroock & Stroock & Lavan, 7 Hanover Square, New York,
NY 10004. The day on which the Closing actually takes place is
sometimes referred to as the "Closing Date."
4.02 Sellers' Actions at Closing. At the Closing,
each Seller is:
(a) delivering duly executed transfers in
substantially the form of Exhibit 4.02(a)(i) and sold notes
in substantially the form of Exhibit 4.02(a)(ii) in respect
of the Stock owned by such Seller in favor of the Purchaser
(and/or its nominees as the Purchaser may direct)
accompanied by the relevant certificates for the Stock;
(b) delivering all powers of attorney or other
authorities under which the transfers and sold notes in
respect of the Stock owned by it have been executed, if
applicable;
(c) delivering duly executed transfers and sold
notes in favor of STD Hong Kong (and/or its nominees as the
Purchaser may direct) in respect of such shares in the
companies in which STD Hong Kong directly or indirectly hold
securities as are registered in the names of nominee holders
on behalf of STD Hong Kong, together with the relevant share
certificates;
(d) delivering a deed of indemnity duly executed
by the Sellers in the form of Exhibit 4.02(d);
(e) delivering all the statutory and other books
and records (including financial records) duly written and
up to date of closing of the Companies and their respective
certificate(s), memoranda and article(s) of association,
current business registration certificates, business
licenses, certificates of incorporation, certificates of
incorporation on change of name, and common seals and any
other papers, records and documents of the Companies;
(f) delivering evidence that all guarantees given
by the Companies in favor of third parties other than the
Companies in respect of the performance of the obligations
of the Seller Parties or any other person as detailed in
Schedule 4.02(f) have been released;
(g) delivering evidence that all loans or other
indebtedness due or owing to the Companies by any of the
Seller Parties or directors or other officers of the
Companies have been repaid in full;
(h) delivering all cheque books and unused
cheques and credit cards of or relating to the Companies;
(i) delivering the title deeds, land use right
certificates, building ownership certificates, leases and
tenancy agreements in respect of properties owned or leased
by the Companies in Hong Kong and the People's Republic of
China and a legal opinion stating that it has applied for,
and satisfied all of the conditions required for, the
issuance of a building ownership certificate and a land use
rights certificate for each parcel of land noted in Schedule
4.02(i) in the People's Republic of China and all buildings
thereon purportedly owned by one or more of the Companies
(or, if available under applicable law, a combined
certificate related to the land use rights and the
buildings) (the "Land and Building Certificates") made up to
the date of the Closing together with all other documents
relating to the properties and possession of all other
property and assets and books and records of the Companies;
(j) delivering the resignations of all directors
of the Companies other than Chu, and delivering a letter
under seal in the form set out in Schedule 4.02(j) from each
of the resigning individuals acknowledging that the person
so resigning has no claim outstanding for compensation for
loss of office or on any other grounds whatsoever as a
director or officer as the case may be and delivering the
resignations of the Secretaries of the Companies;
(k) causing (i) such persons as the Purchaser may
nominate to be validly appointed as directors and officers
of each of the Companies and (ii) the transfers referred to
in Sections 4.02(a) and (c) to be approved for registration
(subject to stamping);
(l) if requested by Purchaser, procuring
revocation of all authorities to the bankers of the
Companies relating to bank accounts and procuring the giving
of authority to such person(s) as the Purchaser may nominate
to operate the same;
(m) executing and delivering an escrow agreement
in substantially the form of Exhibit 4.02(m) (the "Escrow
Agreement") if a party thereto and delivering the Stock
Security, accompanied by five duly executed stock powers
endorsed in blank by STD BVI to the Escrow Agent, which
Stock Security shall be held in escrow by the Escrow Agent
pursuant to the terms of the Escrow Agreement;
(n) delivering, or procuring the delivery, for
filing with the appropriate governmental agency or entity a
duly executed amendment to the various charter or
qualification documents of STD BVI, STD Bermuda and the
other companies noted on Schedule 4.02(n) deleting from its
name the initials or words "STD" or "Standard", in both
English and Chinese;
(o) delivering a standstill, registration rights
and voting agreement with Recoton in substantially the form
of Exhibit 4.02(o) (the "Shareholders' Agreement") executed
by each of the Sellers, the Three Employees and Todd Hays
("Hays");
(p) delivering (i) an employment agreement with
the Company in the form of Exhibit 4.02(p)(i), (ii) and
(iii) respectively executed by each of Stephen Chu, David
Chu and Patrick Ho (the "Three Employees" and together with
Hayes the "Four Employees") (such agreements being referred
to collectively as the "Employment Agreements"), (ii) an
agreement substantially similar to Section 5.16(c) executed
by Patrick Ho, (iii) an employment agreement with the
Company in substantially the form of Exhibit 4.02(p)(iv)
(the "Other Employment Agreement") executed by each of Tong
Yue Ting, Williamson Wong, Gary Lee and Leung Choi Luen;
(q) delivering to the Purchaser a copy of the
resolutions of its directors together with any and all
required resolutions or consents of its shareholders and
appropriate incumbency certificates, duly certified by an
officer of such Seller, approving the execution and delivery
of this Agreement and the consummation of all of the
transactions contemplated hereby;
(r) delivering to the Purchaser a copy of the
resolutions of the directors of each of the Companies
together with any and all required resolutions or consents
of its shareholders and appropriate incumbency certificates,
duly certified by an officer of such Company, approving, as
applicable, the following:
(i) the transfer of the Stock;
(ii) the letters of resignation of the
outgoing directors and secretaries of each of the
Companies;
(iii) the resignation of the existing
auditors of each of the Companies;
(iv) the appointment of the new directors and
secretaries of each of the Companies as requested by
Purchaser; and
(v) the changing of the registered office of
each of the Companies;
(s) delivering the favorable opinions of Heller
Ehrman White & McAuliffe ("Sellers' Counsel") (as to U.S.
Federal and California law); Conyers, Dill & Pearman (as to
Bermuda law); China Legal Service (HK) Ltd. (as to Peoples'
Republic of China law); Sinclair Roche & Temperly (as to
Hong Kong law); and Harney, Westwood & Riegels (as to
British Virgin Islands law) dated the Contract Date or the
Closing Date and in form and substance reasonably
satisfactory to the Purchaser's Counsel to the effect that:
(i) Each of the Companies and the corporate
Seller Parties is duly organized, validly existing and
in good standing under its respective jurisdiction of
incorporation, have all requisite corporate power and
authority to own its property and other assets and
conduct their business as such counsel is advised it is
now being conducted, and is duly qualified and in good
standing as a foreign corporation authorized to do
business in the jurisdictions listed in Schedule 5.01;
(ii) Neither the execution, delivery
performance of this Agreement nor, to the extent a
party thereto, the Escrow Agreement and the
Shareholders' Agreement ("Sellers' Other Agreements"),
with or without the giving of notice or the passage of
time, or both, conflict with or violate (i) any
provision of the Seller Parties' corporate documents or
(ii) any legal requirement, or any order or decree
known to such counsel of any court or other
governmental agency or instrumentality applicable to
any of the Seller Parties;
(iii) Each of the Seller Parties, as
applicable, has the full corporate power and authority
to enter into this Agreement and the Seller's Other
Agreements to which it is a party and to carry out the
transactions contemplated hereby and thereby;
(iv) All proceedings required to be taken by
the Seller Parties and their shareholders to authorize
the execution, delivery and performance of this
Agreement and the Sellers' Other Agreements to which it
is a party have been properly taken and this Agreement
and Seller's Other Agreements constitute legal, valid
and binding obligations of such Seller Party,
enforceable in accordance with their terms except as
may be limited by applicable bankruptcy, insolvency or
similar laws affecting the rights of creditors
generally and subject to the discretion of a court in
granting equitable remedies;
(v) The stock certificates, transfers and
sold notes, and other documents and instruments being
delivered to the Purchaser to transfer all of Sellers'
right, title and interest in and to the Stock are in
proper form to convey such title and by such delivery
the Purchaser thereby shall acquire good and marketable
title to such Stock free and clear of all restrictions;
(vi) Except as set forth in this Agreement,
no registration with, or approval, consent or action
by, any legal body is required in connection with the
execution, delivery and performance by any of the
Seller Parties of this Agreement or any of the Sellers'
Other Agreements to which it is a party; and
(vii) To the best of such counsel's knowledge
after due inquiry of its clients and except as set
forth in schedules to this Agreement, there is no legal
proceeding pending or threatened in writing against any
of the Companies or Sellers except as disclosed
pursuant to this Agreement.
In rendering the opinions specified above, such counsel may
(i) rely upon reports of public officials and, as to matters
of fact, upon certificates of any officer or officers of the
Companies or the Seller Parties; provided, however, that the
extent of such reliance is specified in the opinion, and
such reports and certificates are annexed to such opinion
and (ii) assume the genuineness of all signatures on, and
the authenticity of, documents and conformity with the
original of any copies of such documents;
(t) delivering a lien search in Hong Kong dated
no earlier than 15 days prior to the Closing Date confirming
that there are no financing statements, judgment or tax
liens of record with respect to the Companies or have
delivered properly executed termination statements or
releases therefor;
(u) delivering the resignation of the Sellers'
Accountants to the Companies as the auditors of, and counsel
to, the Companies;
(v) causing statements or on-line reports to have
issued by the Companies' bankers not dated later than two
business days before the Closing showing the balance on all
of the Companies accounts with such bankers as at the date
of the relevant statement;
(w) causing at the Purchaser's reasonable
expense, Price Waterhouse to commit to within 30 days after
the Closing to provide consolidated Financial Statements of
the Companies and STD USA for the years ended March 31, 1994
and 1995 (the "8-K Financials") in form suitable for
inclusion by Recoton in a filing on Form 8-K with the U.S.
Securities and Exchange Commission which shall include a
United States-style auditors' report and a footnote which
reconciles generally accepted accounting principles in Hong
Kong with generally accepted accounting principles in the
United States, if material, or a footnote which states that
there are no material differences between US GAAP and Hong
Kong GAAP; and
(x) delivering all documents, certificates,
consents and undertakings required to be delivered by the
Seller Parties to the Purchaser under the provisions of this
Agreement.
Items (a)-(l), (n),(q)-(r), (t)-(v) and (x) shall be delivered to
a representative of the Purchaser in Hong Kong on or prior to the
Closing Date.
4.03 Purchaser's Actions at Closing. At the Closing,
the Purchaser is:
(a) paying to each Seller the Closing Payment
allocable to such Seller (as set forth on or determined
pursuant to Schedule 2.01) by wire transfer to such Seller's
account at the bank set forth on Schedule 4.03, or other
means acceptable to such Seller;
(b) delivering to STD BVI a certificate for
Recoton Stock issued in the STD BVI's name for the shares of
Recoton Stock;
(c) executing and delivering the Escrow
Agreement;
(d) causing STD Hong Kong to execute and deliver
the Employment Agreements and the Other Employment
Agreements, as authorized by STD Hong Kong's Board of
Directors prior to the Closing;
(e) delivering the Shareholders' Agreement
executed by Recoton;
(f) delivering all documents, certificates,
consents and undertakings required to be delivered by the
Purchaser to the Sellers or the Principal Shareholders under
the provisions of this Agreement;
(g) delivering to the Sellers a counterpart deed
of indemnity in the form of Exhibit 4.02(d) duly executed by
the Purchaser;
(h) delivering a copy of the resolutions of the
Board of Directors of each of the Purchaser Parties and
appropriate incumbency certificates, duly certified by an
officer of such Purchaser Party approving the execution and
delivery of this Agreement and the consummation of all of
the transactions contemplated hereby;
(i) delivering the favorable opinions of Stroock
& Stroock & Lavan ("Purchaser's Counsel") (as to Recoton)
and Siao, Wen and Leung (as to Purchaser) dated the Contract
Date and in form and substance reasonably satisfactory to
the Sellers' Counsel, to the effect that:
(i) Each of the Purchaser and Recoton is a
corporation duly organized, validly existing and in
good standing under its respective jurisdiction of
incorporation and has all requisite corporate power and
authority to carry on its business as such counsel is
advised such company's business is now being conducted;
(ii) Neither the execution, delivery nor
performance of this Agreement nor, to the extent a
party thereto, the Escrow Agreement and Shareholders'
Agreement (the "Purchaser's Other Agreements") will,
with or without the giving of notice or the passage of
time, or both, conflict with or violate (i) any
provision of the Purchaser Parties' corporate documents
or (ii) any legal requirement, or any order or decree
known to such counsel of any court or other
governmental agency or instrumentality applicable to a
Purchaser Party;
(iii) The Purchaser and Recoton have the
full corporate power and authority to enter into this
Agreement and the Purchaser's Other Agreements to which
it is a party, and to carry out the transactions
contemplated hereby and thereby;
(iv) All proceedings required to be taken by
the Purchaser and Recoton to authorize the execution,
delivery and performance of this Agreement and the
Purchaser's Other Agreements to which it is a party
have been properly taken and this Agreement and, to the
extent a party to such agreements, the Purchaser's
Other Agreements to which it is a party constitute
legal, valid and binding obligations of such Purchaser
Parties, enforceable in accordance with their terms
except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting the rights of
creditors generally and subject to the discretion of a
court in granting equitable remedies;
(v) Except as set forth in this Agreement,
no registration with, or approval, consent or action
by, any legal body is required in connection with the
execution, delivery and performance by any of the
Purchaser Parties of this Agreement or any of the
Purchaser's Other Agreements to which it is a party to
such agreements;
(vi) The issuance and sale of the Recoton
Stock by Recoton to the Purchaser and the transfer of
such Recoton Stock by the Purchaser to STD BVI, all as
contemplated by this Agreement, have been duly
authorized and such stock, when issued to the Purchaser
and when transferred in accordance with the terms and
provisions of the Agreement, will be validly issued,
fully paid and non-assessable; and
(vii) To the best of such counsel's knowledge
after due inquiry of its clients and except as set
forth in schedules to this Agreement, there is no legal
proceeding pending or threatened in writing against any
of the Purchaser Parties, which is required to be
disclosed under the periodic reporting requirements of
applicable Federal securities laws which is not so
disclosed.
In rendering the opinion specified above, such counsel may
(i) rely upon opinions of other counsel, reports of public
officials and, as to matters of fact, upon certificates of
any officer or officers of the Purchaser Parties; provided,
however, that the extent of such reliance is specified in
the opinion and such opinions, reports and certificates are
annexed to such opinion and (ii) assume the genuineness of
all signatures on, and the authenticity of, documents and
conformity with the original of any copies of such
documents.
ARTICLE V. REPRESENTATIONS, WARRANTIES AND
COVENANTS BY SELLER PARTIES
Each of the Seller Parties jointly and severally
represents and warrants to, and agrees with, the Purchaser
Parties as follows and acknowledges that Recoton and the
Purchaser Parties are entering into this Agreement in reliance
upon such representations, warranties and agreements.
5.01 Organization, Standing and Qualification;
Corporate Documents.
(a) Each Company is a corporation duly incorporated
under the law of its jurisdiction of incorporation, validly
existing and in good standing under the laws of such
jurisdiction, has all requisite corporate power and authority to
carry on its business as now being conducted and to own, lease or
operate its properties and premises as now owned, leased or
operated, and is duly qualified or licensed as a corporation
authorized to do business in each jurisdiction where the
character of the properties it owns, leases or operates, or the
conduct of its business, requires such qualification or
licensing. The jurisdictions in which each Company is qualified
or licensed to do business are set forth in Schedule 5.01. There
are no other jurisdictions where the failure to be qualified or
licensed to do business would materially adversely affect the
business of the Companies. The Companies do not have and never
have had any place of business or branch or permanent
establishment outside of their jurisdiction of incorporation.
The Register of Members and all other statutory books of each
Company are up to date and contain true, full and accurate
records of all matters required to be dealt with therein and no
Company has received any notice of any application or intended
application under the Companies Ordinance (Chapter 32 of the Laws
of Hong Kong) (the "Companies Ordinance") for rectification of
the Company's register and all annual or other returns required
to be filed with the Companies Registry by each Company have been
properly filed within any applicable time limit
all legal requirements relating to the formation of each Company
and the issuance of its shares and other securities have been
complied with.
(b) Each Company has heretofore delivered to the
Purchaser true and complete copies of its corporate documents as
amended to and including the date hereof with attached thereto
true and complete copies of all resolutions and agreements which
are required to be so attached. The minute books, stock books
and stock transfer records of each Company contain true and
complete minutes and records of all issuances and transfers of
capital stock of such Company, and rights to acquire capital
stock from such Company, and of all minutes and records of all
meetings, proceedings and other actions of the shareholders,
directors and/or committees of such Company and all such
meetings, proceedings and actions have been duly, legally and
properly held or taken, except where failure to do so would not
materially and adversely affect such Company or the Purchased
Assets. The Sellers shall cause each Company on or prior to the
Closing Date to deliver to the Purchaser true and complete copies
of all corporate documents arising subsequent to the date of this
Agreement. Each of the Companies has complied with the corporate
documents in all respects and none of the agreements, commitments
or rights of the Companies is ultra vires or unauthorized.
5.02 Capitalization, Shareholders, Subsidiaries and
Investments. Each Company's capitalization and record and
beneficial shareholders since its formation are as set forth in
Schedule 5.02. The Stock and the shares of Deferred Stock
referred to in Section 5.27(b) are the only authorized and
outstanding capital stock of STD Hong Kong. Except as disclosed
in Schedule 5.02, there are no outstanding warrants, options or
rights (pre-emptive or otherwise) or other securities, plans or
agreements which give the holder or any other person the right to
purchase or otherwise acquire (whether from the Companies, the
Principal Shareholders or any affiliate of any of them) any
shares of capital stock of the Companies or any securities
convertible into, exchangeable or exercisable for shares of such
capital stock or under which any such warrant, option, right or
security may be issued in the future or shares of capital stock
of the Companies reserved for any issuance for any purpose. The
Companies' businesses have not been conducted through any
affiliate, shareholder, officer, director or employee of the
Companies or any affiliate thereof other than other Companies or
STD USA. None of the Companies owns, or has any commitment to
purchase, equity securities of or any interest in any other
person other than another Company or STD USA.
5.03 Execution, Delivery and Performance of Agreement;
Authority. Each of the Seller Parties has the full legal right,
power and authority to enter into this Agreement and the related
agreements referred to herein to which it is a party and to carry
out the transactions contemplated hereby and thereby. All
proceedings required to be taken by each Seller and its
shareholders to authorize the execution, delivery and performance
of this Agreement and the agreements referred to herein to which
it is a party have been properly taken. Each of this Agreement
and the other agreements referred to herein to which a Seller
Party is a party, constitutes a legal, valid and binding
obligation of such party enforceable against it in accordance
with its terms except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting the rights of creditors
generally and subject to the discretion of a court in granting of
equitable remedies. Except as set forth on Schedule 5.03, the
execution, delivery and performance of this Agreement and such
other agreements by each of the Seller Parties will not conflict
with, result in a material breach, default, right to accelerate
or loss of rights under, or result in the creation of any
material restriction pursuant to, or require consent of any
person under any provision of the Sellers' or Companies'
corporate documents, any Contract with a remaining term of more
than one year from the Closing (unless terminable without penalty
by the Companies upon not more than 30 days notice) or requiring
the payment by (or providing for the receipt by) the Companies of
more than $25,000 during a fiscal year or which Contract is
significant for the operation of the Companies' business as
currently conducted (a "Material Contract"), any loan or other
financial agreement for borrowed money and any legal requirement
to which a Seller Party or a Company is a party or by which it or
he or any of its or his properties or assets may be bound or
materially affected.
5.04 Financial Statements, Etc. A true and complete
copy of each of the balance sheets of each Company and a
consolidated balance sheet of STD Hong Kong and its then
subsidiaries (the "Balance Sheets") as of June 30, 1995, March
31, 1995 (the "Balance Sheet Date"), March 31, 1994 and March 31,
1993 and the corresponding statements of income and retained
earnings (the "Income Statements") and cash flows (the
"Statements of Cash Flows") for the periods then ended including
the notes thereto (interim financial statements, however, need
not include footnotes) as prepared by such Company's management,
and with respect to the Balance Sheets and Income Statements as
of and for the periods ending March 31 audited by Sellers'
accountants (provided, however, that the Balance Sheet and Income
Statement of STD USA as of and for the period ended March 31,
1995 is not audited) by certified public accountants, (the
"Financial Statements") have been delivered to the Purchaser; and
true and complete copies of each Company's balance sheet and the
Companies' consolidated balance sheet as of the Contract Date
(the "Contract Date Balance Sheets") and the corresponding
statements of income and retained earnings and cash flows for the
period then ended including the notes thereto (the "Contract Date
Financials") prepared by the Companies' management shall be
delivered to the Purchaser pursuant to Section 3.01(a)(3).
Except as set forth in Schedule 5.04, the Financial Statements
and the Contract Date Financials, including the notes thereto,
(a) have been (or, in the case of the Contract Date Financials,
will be) prepared from the books and records of the Companies
substantially in conformity with Hong Kong GAAP consistently
applied and maintained throughout the periods indicated and (b)
truly and fairly present (or, in the case of the Contract Date
Financials, will truly and fairly present) in all material
respects the financial condition of the Companies as at said
dates, and the results of their operations and their cash flows
for the periods covered thereby. The Financial Statements do not
(and the Contract Date Financials will not) contain any items of
special or nonrecurring income or any other income not earned or
otherwise realized in the ordinary course of business except as
expressly specified therein. Except as noted on Schedule 5.04,
the Financial Statements for interim periods include all material
adjustments, which consist of only normal accruals, necessary for
such fair presentation. In addition, the Contract Date
Financials will reflect all normal recurring material adjustments
(consistent with those for the years ended March 31, 1993 through
March 31, 1995) which are necessary for a fair presentation of
the results as of the Contract Date, as if such Contract Date
Financials were prepared in connection with a normal year-end
closing.
5.05 Absence of Undisclosed Liabilities. Except as
and to the extent reflected or reserved against on the Balance
Sheets (including any notes thereto) as of the Balance Sheet Date
(the "Current Balance Sheets") or disclosed in Schedule 5.05 or
otherwise in writing pursuant to this Agreement (including the
Schedules hereto or separate written disclosures called for
hereby), as of the Balance Sheet Date the Companies had no
material liabilities of any nature whatsoever, whether or not
then due or payable and each of the Company Parties does not know
of any basis for the assertion of any such liability or
obligation. None of the Companies' employees is now, or will by
the passage of time hereafter become, entitled to receive any
deferred compensation, vacation time, vacation pay or severance
pay attributable to services rendered prior to the date hereof
except as disclosed on the Current Balance Sheet (including any
notes thereto) or in Schedule 5.05.
5.06 Taxes. The Companies have filed or caused to be
filed, within the times and within the manner prescribed by law
(including extensions), all returns which are required to be
filed by, or with respect to, the Companies or their property.
Such returns are materially complete and reflect accurately all
liability for taxes for the periods covered thereby. The
Companies have delivered to the Purchaser true and complete
copies of all returns filed by the Companies for the last six
completed tax years. Except as disclosed on Schedule 5.06, all
taxes payable by, or due from, the Companies have been fully paid
or adequately disclosed and fully provided for in the books and
financial statements of the Companies, and there are no tax liens
on the Companies or their properties except as allowed by Section
5.10. The amounts set up as provisions for taxes on the Current
Balance Sheets are, and the amount to be set up on the Contract
Date Balance Sheets shall be, sufficient for the payment of all
taxes, whether or not disputed, and whether or not assessed,
asserted or due at such dates, with respect to the conduct of the
business of the Companies and any of its predecessors up to and
through the Balance Sheet Date and the Contract Date. The
provision for employment, withholding and payroll taxes made by
the Companies (if any) are adequate to pay all unpaid liabilities
for such taxes and the Companies have, within the time and in the
manner prescribed, withheld from employees' wages and paid over
to the proper legal authorities all amounts required to be so
withheld and paid over under all applicable legal requirements.
No examination of any tax return of the Companies has occurred or
is currently in progress. No issues exist or have been raised in
writing (and are currently pending) by any taxing authority in
connection with any of the Companies' returns the resolution of
which, individually or in the aggregate, might reasonably be
expected to affect materially and adversely the Companies. No
waivers of statutes of limitations or extensions of time as to
any tax matters have been given to or requested of any of the
Companies. There are no tax sharing or similar agreements with
respect to any taxes paid or payable by the Companies. Any
deferred income taxes and deficiency assessments, including any
interest or penalty, with respect to the Companies' returns have
been paid by the Companies or are reflected on the Financial
Statements.
5.07 Absence of Changes or Events. Except as set
forth on Schedule 5.07 or disclosed in the Financial Statements
or as authorized by the Purchaser in writing pursuant to this
Agreement or otherwise disclosed pursuant to this Agreement,
since the Balance Sheet Date the Companies have conducted their
business only in the ordinary course and have not:
(a) incurred any liability, except current taxes
not yet due and payable, current liabilities for trade or
business obligations incurred in the ordinary course of
business and consistent with their prior practice or
liabilities adjusted for pursuant to the Net Value
Adjustment;
(b) mortgaged, pledged, encumbered or subjected
(or permitted to be subjected) to any restrictions (other
than liens for taxes not yet due and payable) any of their
property, business assets;
(c) sold, transferred, leased to others or
otherwise disposed of any of their assets, except for
inventory sold (or otherwise disposed of) in the ordinary
course of business;
(d) materially amended or terminated any, or
received any notice of termination of any, Material Contract
or suffered any damage, destruction or loss which, in any
case or in the aggregate, has had a materially adverse
effect on the business of the Companies;
(e) transferred or granted any rights under, or
entered into any settlement regarding the breach or
infringement of, or entered into any agreement or commitment
relating to, any of their proprietary rights or modified any
existing rights with respect thereto;
(f) acquired any capital stock of any corporation
or any interest in any business enterprise or otherwise made
any loan or advance to or investment in any person (other
than routine employee advances);
(g) made any capital expenditures or capital
additions or betterments or commitments therefor in excess
of an aggregate of US$300,000;
(h) instituted, settled or agreed to settle, or
suffered any materially adverse determination in, any legal
proceeding relating to the Companies or their properties or
products, other than collections actions instituted by the
Companies;
(i) failed to maintain reasonable levels of
inventories and supplies in a manner generally consistent
with their prior practice, or made any purchase commitment
for periods subsequent to the Closing in excess of the
normal requirements of their business or at any price
materially in excess of the then-current market price, or
made any material change in their selling, pricing or
advertising practices (e.g., advertising programs,
allowances, rebates, etc.) substantially inconsistent with
their prior practices other than as disclosed to the
Purchaser in writing prior to the execution of this
Agreement;
(j) entered into any transactions, contracts or
commitments other than in the ordinary course of business
involving more than US$25,000 in any one instance or
US$100,000 in the aggregate;
(k) written down the value of any inventory or
written off as uncollectible any receivables, except write-
downs and write-offs in the ordinary course of business,
none of which, individually or in the aggregate, are
material to the Companies;
(l) canceled, compromised, waived or released any
debts, claims or rights with a value of more than US$25,000
in the aggregate (except for accounts receivable written off
in the ordinary course of business against reserves noted on
the Current Balance Sheet);
(m) made any material change in any method of
accounting or use of any accounting principle or any
practice in connection with the treatment of expenses,
valuations or inventory or selling and purchasing policies;
(n) encountered any labor union organizing
activity, had any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts, or had any material
adverse change in their relations with any of the Companies'
employees, agents, customers or suppliers;
(o) made any change in the rate of compensation,
commission, bonus, deferred compensation or other direct or
indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus,
extra compensation, deferred compensation, severance, long
service or vacation pay, to any affiliate, employee,
salesman, manufacturer's representative, distributor or
agent of the Companies other than (A) changes in the
ordinary course of business in employee compensation
consistent with prior pay increase policies (such changes in
the aggregate not exceeding US$10,000 per person and
US$100,000 for all such persons on an annual basis) or (B)
payments pursuant to workers' compensation laws;
(p) suffered any change, event or condition
which, in any case or in the aggregate, has had or is
reasonably likely to have a materially adverse affect on the
Companies' condition (financial or otherwise), properties,
assets, liabilities, operations or prospects, including,
without limitation, any change in its revenues, costs,
backlog or relations with their employees, agents, customers
or suppliers; or
(q) entered into any agreement or made any
commitment to take any of the types of action described in
paragraphs (a) through (p) above.
5.08 Litigation. Except as set forth on Schedule 5.08
or as described in the Financial Statements, (a) there is no
legal proceeding, nor any order, decree or judgment tribunal or
arbitral award in progress, pending, in effect, unsatisfied or,
as the case may be, outstanding, or to the "Best Knowledge of
Seller" (i.e. that which any of Stephen Chu, Todd Hays, Gary Lee,
David Chu, Patrick Ho, Robert Barnett or any officer or director
of STD Hong Kong or a Seller knows, or through the exercise of
reasonable diligence, should know) threatened against any of the
Companies, or any of the assets or business of any of the
Companies or the transactions contemplated by this Agreement and
(b) there has been no legal proceeding involving alleged product
liability (whether in tort, negligence, strict liability or
otherwise) nor has any such proceeding, to the Best Knowledge of
Sellers been threatened.
5.09 Compliance with Legal Requirements and
Instruments.
(a) Except as set forth on Schedules 5.06, 5.09, or
5.17 the Companies have, and on the Closing Date will have,
complied with all material existing legal requirements applicable
to their business, properties or operations as presently
conducted (including legal requirements relating to zoning,
building codes, antitrust, occupational safety and health,
environmental protection and conservation, water or air
pollution, toxic and hazardous waste and substances control,
customs, trade, consumer product safety, product liability,
hiring, wages, hours, equal employment, employee benefit plans
and programs, collective bargaining and withholding and
employment taxes) except where failure to so comply would not
have a material adverse effect on the Companies or their business
or properties. Except as noted in Schedule 5.09, neither the
ownership or use of their properties nor the conduct of their
business conflicts with the rights of any other person, or
violates, or with or without the giving of notice or the passage
of time, or both, will violate, conflict with or result in a
default, right to accelerate or loss of rights under, any terms
or provisions of their corporate documents as presently in effect
or any Contract and none of the Seller Parties is aware of any
proposed legal requirements, governmental takings, condemnations
or other proceedings except as such would not have a material
adverse affect on the Companies or the business related thereto.
(b) The Companies hold all the permits, licenses and
franchises which are material to their current use, occupancy or
operation of their property and the conduct of their business;
and no notice of violation of any applicable zoning regulation,
ordinance or other similar legal requirement binding on the
Companies or with respect to their business has been received.
Except as noted on Schedule 5.09, (i) the Companies have not
received any unremedied inspection reports, complaints or other
communications from any legal body except to the extent in the
ordinary course of business and not having a materially adverse
effect on the Companies' business and (ii) no products
manufactured or distributed by the Companies were subject to
recall (whether due to legal requirements or otherwise).
(c) No authorization, approval, order, license,
permit, franchise or consent by, and no registration, declaration
or filing by the Companies or any shareholder of the Companies
with, any legal body is required in connection with the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby, other than any filing with the
U.S. Federal Trade Commission and the U.S. Justice Department as
is required to comply with the Hart-Scott-Rodino Antitrust
Improvement Act.
5.10 Title to, and Condition of, Properties. Except
for restrictions otherwise permitted by this Agreement or as
disclosed on Schedule 5.10, the Companies have marketable title
to all of their assets (the "Company Assets") including the
properties and assets shown on the Current Balance Sheets. None
of such properties and assets is subject to any restriction
except (a) taxes not yet due and payable, (b) as set forth in the
Current Balance Sheets as securing specific liabilities noted
thereon, or as disclosed on Schedule 5.10 or as otherwise
expressly permitted by the terms of this Agreement or (c) those
imperfections of title and restrictions, if any, which (i) do not
materially detract from the value of the properties subject
thereto and (ii) do not interfere in any material respect with
either the present and continued use of such property or the
conduct of the Business. The Companies own all of the material
assets used by them in the operation and conduct of their
business except for those assets leased by the Companies under
leases specifically identified on Schedule 5.11 (a) or 5.11 (c)
or as noted in Schedule 5.10. Subject to the exceptions noted in
the foregoing sentence or as noted in Schedule 5.10, the Company
Assets constitute all of the material assets used by the
Companies for the normal conduct of their business. Each of the
fixed assets owned or used by the Companies (including, without
limitation, all buildings and equipment leased by the Companies)
is in adequate repair and operating condition, normal wear and
tear excepted. The dollar amount of the fixed assets owned by
the Companies as shown on the Current Balance Sheet does not in
any case exceed the cost of the same, reduced by any previous
write-downs and depreciation determined in accordance with
generally accepted accounting procedures consistently applied,
and the Companies have not written up the value of any such fixed
assets. Lessors of property leased by a Company have made no
claims on any of the Company Assets nor are there any sums due
and owing to lessors which would allow lessors to distrain upon
any such items or otherwise prohibit their removal except as
noted in Schedule 5.10. The Companies have not received notice
of any assessments, and to the Best Knowledge of Seller there are
no pending assessments, affecting the real property or leased
premises. The Companies have heretofore delivered to the
Purchaser copies of all title insurance policies obtained by the
Companies, abstracts of title and other evidence of title and
surveys with respect to all real property owned by the Companies.
5.11 Disclosure Schedules. Each Seller has previously
or simultaneously with the execution of this Agreement delivered
to its Purchaser a separate disclosure schedule certified by such
Seller or an officer of such Seller setting forth Schedules
5.11(a) through 5.11(o) (each schedule corresponding to the
similarly numbered paragraph noted below), which constitute an
accurate and complete list of or, as appropriate, reference to
separately delivered listings of the noted matters as of the date
set forth thereon (which shall not be earlier than the Balance
Sheet Date):
(a) all real property which is used by each
Company in connection with the operation of its business on
the date hereof, together with a list of each lease, land
use rights certificate, sublease, license or any other
instrument under which such Company claims or holds such
leasehold or other interest or right to the use thereof or
pursuant to which such Company has assigned, sublet or
granted any rights therein, identifying the parties thereto
and identifying which of the above requires that a consent
be obtained before a valid transfer in said interest may be
obtained, identifying in each instance the consenting party
thereto;
(b) each Company's receivables aged to indicate
each receivable which has been outstanding for more than 30,
60 and 90 days from the due date;
(c) for property of Seller not within the
possession of Seller, a list showing, by location and name
of person possessing, all such property (including trade
fixtures, motor vehicles, equipment, computers, machinery,
tools, dies, jigs, molds, samples, models, and other similar
tangible personal property) and, with respect to the
property (other than inventory) of or used by Seller within
the possession of Seller, a suitable property management
report describing by item each object having an original
cost in excess of US$5,000, setting forth with respect to
any such listed property a list of all leases identifying
the parties thereto and dates thereof;
(d) each Company's inventory noting reserves for
obsolescence or damage to such inventory;
(e) each Company's patents and trademarks and all
agreements or licenses relating thereto;
(f) each Company's Material Contracts except as
otherwise disclosed on Schedule 5.11(a), 5.11(g) or 5.11(l)
and, identifying any as to which a transfer of the Stock
would require that a consent be obtained, noting in each
instance the consenting party thereto (to the extent that
Contracts which are not Material Contracts require that the
Companies make payments during the life of the Contract in
excess of $10,000 per Contract such Contracts shall also be
noted) and a list or copies of all open purchase orders and
a list or copies of all open sales orders;
(g) each Company's collective bargaining agree-
ments, employment and consulting agreements, executive
compensation plans, incentive plans or agreements, bonus
plans or agreements, deferred compensation plans or
agreements, employee pension, profit sharing, thrift,
retirement, employee stock option, stock purchase, or stock
ownership plans (and any separate agreements entered into
pursuant thereto) and group life, health and accident
insurance and other employee benefit plans, agreements,
arrangements or commitments; and a list of the names, title
or job description, and total annual compensation
(including, as separately set forth figures, any bonuses
paid, accrued, or granted through the Balance Sheet Date,
any bonuses paid, accrued or granted, or to be paid,
accrued, granted or earned, from the Balance Sheet Date to
the date hereof, and any bonuses attributable to the period
of time prior to the date hereof but to be paid, accrued or
granted thereafter) of all employees, officers and directors
of the Companies who, as of the date hereof, are or will be
entitled to receive compensation from the Companies at an
annualized rate in excess of US$40,000 per year;
(h) each Company's permits, licenses, franchises,
rights, approvals and the like granted by or pending with
all legal bodies (whether or not assignable);
(i) each Company's customers and suppliers in
each of the fiscal years 1994 through 1995 and for the
period April 1, 1995 through [July 31], 1995 (noting by
dollar amounts and percentages the billings by or to the ten
largest customers and suppliers);
(j) each Company's products noting the annual
sales amounts of each such product in each of fiscal years
1994 through 1995 and the period April 1, 1995 through [July
31], 1995;
(k) each Company's creditors noting the amounts
owed to each;
(l) each Company's insurance policies currently
in force (including face amount of policy, name of insured,
carrier, premium, expiration date and whether it is a
"claims made" or an "occurrence" policy);
(m) each Company's warranty and return policies;
(n) the present telephone, telex and telefax
numbers of each Company; and
(o) all of the Sellers' security deposits,
prepaid expenses and such other deposits.
True and complete copies of all items referenced in any of
Schedules 5.11(a) through 5.11(o) have been provided to the
Purchaser.
5.12 Contracts.
(a) Except as otherwise noted in Schedules 5.11(a)
through (m), (i) all of the Material Contracts are valid and
binding, enforceable in accordance with their respective terms
(except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting of equitable
remedies), in full force and effect as to the Companies (and, to
the Best Knowledge of the Seller, in full force and effect as to
the other party or parties thereto) and the sale of the Stock
shall not constitute an assignment requiring the consent of any
other person, (ii) there is not under any Material Contract any
existing default by a Company or event which, after notice or
lapse of time, or both, would constitute a default by a Company
or result in a right to accelerate by the other party or loss by
a Company of rights and, to the Best Knowledge of Seller, all of
the material covenants to be performed by any other party under
each Material Contract have been fully performed and (iii) none
of the Material Contracts is subject to renegotiation with any
legal body and is neither registrable or notifiable under legal
requirements.
(b) To the extent that the sale of the Stock would
constitute a breach of a Material Contract unless the consent or
waiver of another party thereto has been obtained, this Agreement
shall not constitute any such assignment or agreement to assign
unless and until such consent or waiver is obtained. The Seller
Parties shall use their best efforts (but they shall not be
required to expend any funds other than their own personnel
costs) to obtain prior to the Closing Date all such consents and
waivers. If any such consent or waiver is not obtained before
the Closing Date and the Closing is nevertheless consummated, the
Seller Parties shall continue to use their best efforts (but it
shall not be required to expend any funds other than their own
personnel costs) to obtain all such consents as have not been
obtained prior to such date and shall cooperate with the
Purchaser after such date in any reasonable arrangement (such as
subcontracting, sublicensing or subleasing) designed to provide
for the Purchaser, on terms no less favorable than the Companies
were previously entitled to, the benefits under the applicable
Contracts, including, without limitation, enforcement at the cost
and for the benefit of the Purchaser of any and all rights of the
Companies against any other party thereto.
(c) The Companies have not since the Balance Sheet
Date entered into any purchase or sales commitment or order
except in the ordinary course of business.
5.13 Proprietary Rights, Etc. All of the proprietary
rights of the Companies, including those set forth on Schedule
5.11(e), are owned by the Companies free and clear of any
restrictions, including licenses granted to others, except as set
forth in Schedule 5.11(e). Except as disclosed in Schedule 5.13,
the Companies own or possess perpetual or renewable royalty-free
licenses or other rights to use all proprietary rights,
packaging, promotional material and advertising necessary to
conduct its business as it is presently operated; the Companies
are not infringing upon any proprietary rights, packaging,
promotional material or advertising owned or obtained by any
other person or persons; and there is no claim or action by any
such person pending, or, to the knowledge of any of the Seller
Parties, threatened, with respect thereto or with respect to the
rights of the Companies in any material confidential information
or trade secrets used in the conduct of the Companies'
businesses.
5.14 Inventory. All items of the Companies'
inventory, net of reserves for obsolescence or damage noted on
Schedule 5.11(d), are (a) of merchantable quality or suitable and
usable for the production or completion of merchantable products
for sale in the ordinary course of the Companies' current
business as regular goods at normal markups and (b) in conformity
with all applicable legal requirements and customer
specifications. The Companies' inventory has been valued on the
Balance Sheet at the lower of cost or market on an average cost
basis in accordance with Hong Kong GAAP consistently applied, and
appropriate reserves against or write-downs of all slow-moving
(i.e., any item of inventory in excess of a one year's supply,
based on sales of inventory during the prior 12 month period),
unmarketable, returned, rejected, damaged or obsolete inventory
have been taken.
5.15 Receivables. All receivables of the Companies
have arisen only from bona fide transactions for the total dollar
amount thereof shown on the books of the Companies which, as to
trade receivables, were in the ordinary course of the Companies'
business; and none of such receivables is or will at Closing be
subject to any counterclaim, set-off, credit for returns (other
than for normal defects, not to exceed 10% in value of the net
receivables) or mispricing except to the extent of reserves
indicated on Schedule 5.11(b), which reserves are reasonable
based on the Companies' experience and fully reflect all
advertising commitments, volume discounts, price protection
arrangements, rebates and allowances for doubtful accounts and
each of such receivables shall be collectable in full within 120
days after the date hereof, except to the extent of reserves
indicated on Schedule 5.11(b).
5.16 Employee Benefit Plans.
(a) Except for those plans set forth on
Schedule 5.11(g) ("Employee Benefit Plans" or "Plans"), the
Companies do not maintain or contribute to any bonus, deferred
compensation, pension, profit sharing, retirement, severance,
stock option, group insurance, death benefit, welfare or other
employee benefit plan, arrangement or policy whether formal or
informal, for the benefit of any of their employees or former
employees. The Financial Statements reflect in the aggregate an
accrual of all amounts accrued but unpaid under all such Plans as
of the dates thereof to the extent required by Hong Kong GAAP.
None of the Companies has any commitment, whether formal or
informal, and whether legally binding or not, to create any
additional such Plan. Each of such Plans disclosed on Schedule
5.11(g) is in effect and each of the Companies is in compliance
with all material laws, rules and regulations applicable thereto.
All Plans disclosed on Schedule 5.11(g) have been duly registered
where required by, and are in good standing under, all applicable
legal requirements and each of the Companies has fulfilled its
funding obligations under all such Plans and no past service
liabilities exist thereunder. None of the Plans disclosed in
Schedule 5.11(g) gives rise to the payment by the Companies of
any amount that would not be tax deductible.
(b) True and complete copies of all the documents
embodying the Plans, including, without limitation, the plans and
trust instruments and insurance, group annuity and other
agreements pertaining thereto and any actuarial reports obtained
with respect to any Plan, as well as the books and records of the
Plans, have been delivered to the Purchaser. There has been (i)
no change in any of the documents delivered to the Purchaser
under which each Plan is maintained and (ii) no change, since
each Plan's most recent valuation date, in the operation of the
Plan which could be expected to adversely affect or alter the tax
status of, or materially increase the cost of maintaining, any
such Plan.
(c) Each of Stephen Chu and David Chu hereby waive any
accrued rights which they may have as of the Contract Date to
receive any "Long Service Payments" pursuant to the Employment
Ordinance, Chapter 57, of Hong Kong, and the Seller Parties shall
deliver at the Closing similar agreement of Patrick Ho.
5.17 Environmental Matters
(a) For the purpose of this Section 5.17, a "hazardous
substance or waste" includes any substance, waste, solid, liquid
or gaseous matter, petroleum or petroleum derived substance,
micro-organism, sound, vibration, ray, heat, odor, radiation,
energy vector, plasma, organic or inorganic matter, whether
animate or inanimate, transient reaction intermediate or any
combination of the above deemed hazardous, hazardous waste, solid
waste, toxic or pollutant, a deleterious substance, a contaminant
or source of pollution or contamination under any Environmental
Law, or by any government, governmental agency, minister, or any
tribunal or board.
(b) "Environmental Laws" includes any legal
requirement of any country or political subdivision relating to
the environment including those relating to (i) the control of
any potential pollutant or the protection of the air, water or
land, (ii) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, and (iii)
exposure to hazardous, toxic or other substances considered to be
harmful, or (iv) the release of any hazardous substance or waste
into the environment.
(c) Except as set forth in Schedule 5.17, the
Companies have complied in all material respects with all
Environmental Laws and obtained all material permits, licenses,
certificates and other authorizations which are required with
respect to its operation under any Environmental Laws and all
such permits, licenses, certificates and other authorizations are
listed on Schedule 5.11(h).
(d) Except as set forth in Schedule 5.17, the
Companies are in compliance in all respects with all permits,
licenses and authorizations required by any Environmental Laws,
and are also in full compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any
Environmental Laws or contained in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. All
products manufactured and services provided by the Companies
prior to the date hereof are in compliance with all Environmental
Laws applicable thereto and all such products and services so
manufactured or provided prior to the Closing Date will as of
such date be in compliance with all Environmental Laws applicable
thereto. The Companies have hereto delivered to the Purchaser
true and complete copies of all environmental studies made in the
last ten years relating to the business or assets of the
Companies.
(e) Except as set forth in Schedule 5.17, there is no
pending or, to the knowledge of the Seller Parties, threatened
legal proceeding, civil, criminal or administrative action,
demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter that affects or applies to
the Companies, their business or assets, the products they have
manufactured or the services they have provided relating in any
way to any Environmental Laws or any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder.
(f) Except as set forth in Schedule 5.17, there are no
past or present (or, to the knowledge of the Seller Parties,
anticipated) events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with
or prevent compliance or continued compliance by the Companies
with any Environmental Laws or with any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder, or which may
give rise to any common law or legal liability, or otherwise form
the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or
related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the
environment, by the Companies of any pollutant, contaminant,
chemical, or industrial, toxic or hazardous substance or waste.
(g) Except in accordance with a valid governmental
permit, license, certificate or approval listed in Schedule 5.17,
there has been no emission, spill, release or discharge by any of
the Companies, from any of its assets, from any site at which any
of such assets are or were located or at any other location or
disposal site, into or upon (i) the air, (ii) soils or
improvements, (iii) surface water or ground water, or (iv) the
sewer, septic system or waste treatment, storage or disposal
system servicing such assets of any toxic or hazardous substances
or wastes used, stored, generated, treated or disposed at or from
any of such assets (any of which events is hereinafter referred
to as "Hazardous Discharge"). Except for inventory of raw
materials, supplies, work in process and finished goods listed in
Schedule 5.17 that are to be used or sold in the ordinary course
of its business, all of the assets of the Companies are free of
all toxic or hazardous substances or wastes.
(h) Except as set forth in Schedule 5.17, there has
been no complaint, order, directive, claim, citation or notice by
any legal body or any other person or entity with respect to (i)
air emissions, (ii) spills, releases or discharges to soils or
any improvements located thereon, surface water, ground water or
the sewer, septic system or waste treatment, storage or disposal
systems servicing the assets of the Companies, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation or disposal of toxic or
hazardous substances or wastes or (vi) other environmental,
health or safety matters affecting the Companies, any of their
assets, any real property on which any of such assets are
located, any improvements located thereon or the business therein
conducted (any of which is hereafter referred to as an
"Environmental Complaint").
(i) The Companies have not received any notice or
letter of any legal body whereby the Companies may be required to
remove and/or clean sites and facilities which have been
contaminated by dangerous, toxic or hazardous substances or
wastes or similar terms under any Environmental Law. To the Best
Knowledge of Seller, the Companies have not sent any hazardous
substance or waste to any facility or site which has received a
notice which would subject such facility or site to damages,
penalties, injunctive relief or clean-up costs under any
Environmental Law.
(j) Prior to the Closing Date, there shall not occur
any Hazardous Discharge (except in accordance with a valid
governmental permit, license, certificate or approval listed in
Schedule 5.17) or Environmental Complaint.
(k) Notwithstanding the foregoing, no representations
or warranties are made in this Section 5.17 with respect to the
Environment Laws of the People's Republic of China.
5.18 Brokers and Finders. None of the Companies or
Seller Parties nor any person acting on their behalf has engaged
any broker, agent or finder or incurred any liability for any
brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein and each of
the Seller Parties, jointly and severally, shall indemnify the
Purchaser Parties with respect to any claim which any person
engaged by a Seller Party may make with respect to the subject
matter of this Agreement and the other Agreements referred to
herein including, but not limited to, any claims related a
contemplated public offering of securities by STD Bermuda.
5.19 Governmental Authorizations. Except for such
filings as may be required to be made by the Seller Parties
pursuant to any laws regarding creditor rights or pursuant to the
Hart-Scott-Rodino Act or by Recoton in connection with any
registration of the offering of Recoton Stock pursuant to Section
9.02, no authorization or approval of, or filing with, any
governmental body is required in connection with the execution
and delivery of this Agreement or the consummation of the
transactions contemplated hereby by the Seller Parties.
5.20 Matters Relating to Estate Duty Ordinance
There has been no transfer of any property to any
Company which has given or may give rise to any claim, assessment
or demand in relation to estate duty under Section 35 of the
Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) and
there is no charge or potential charge on any property or assets
of any Company under Section 18 or Section 43(6) of the Estate
Duty Ordinance.
5.21 Records. The books of account of the Companies
are complete and correct in all known material respects, and
there have been no transactions involving the business or assets
of the Companies which properly should have been set forth
therein and which have not been accurately so set forth.
5.22 Employee and Director Indebtedness. Except as
set forth in Schedule 5.22 or as among the Companies or between
any Company and any employee of STD USA, no current or former
officer, director or employee of any Company or any affiliate of
any Company or any person related to any of such persons is
indebted to any Company nor is any Company indebted to any
current or former officer, director or employee of a Company or
STD USA or any affiliate of a Company or STD USA or any person
related to any of such persons other than for current employee
salary and benefits accrued in the ordinary course of business,
but in the ordinary course of business not yet paid.
5.23 No Material Interests. Except as set forth on
Schedule 5.23 or as among the Companies or between any Company
and STD USA, no shareholder, officer, employee or agent of any
Company, nor any affiliate, spouse, ancestor or descendant
thereof, has any direct or indirect material interest in any
creditor, competitor, supplier or lessor of any Company nor is
any such person a party to or bound by any Contract or the holder
of any interest in any proprietary right of or used by a Company.
5.24 Employment Relations. Except as described in
Schedule 5.24, (a) the Companies are and have been at all times
in compliance with all legal requirements respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor
practice; (b) no unfair labor practice complaint before any legal
body, no discharge or grievance before any legal body responsible
for the prevention of wrongful or unlawful employment practices
and no complaint, charge or grievance of any nature before any
such legal body, in any case relating to the Companies or the
conduct of its business is pending or, to the Seller Parties'
knowledge, threatened nor has any such action occurred within the
past five years; (c) the Companies have not received notice, and
have no knowledge, of the intent of any legal body responsible
for the enforcement of labor or employment laws to conduct any
investigation of or relating to the Companies or the conduct of
their business; (d) to the Best Knowledge of Seller, no officer
or key employee of any Company has any plans to terminate his or
her employment with such Company; (e) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the Best
Knowledge of Seller, threatened against or involving the
Companies nor has any such action occurred within the past five
years; (f) to the Best Knowledge of Seller, no grievance which
might have an adverse effect on the Companies or their business
nor any arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor
has been asserted nor has any such action occurred within the
past five years; (g) no collective bargaining agreement is
currently in effect or being negotiated by the Companies; and (h)
there has not been, and none of the Seller Parties anticipates,
any materially adverse change in relations with employees,
consultants or independent contractors as a result of the
announcement or consummation of the transactions contemplated by
this Agreement. The details regarding the employees of the
Companies as set forth in Schedule 5.24 are true, complete and
accurate and all of such employees are employed by the Companies
and there are no other employees of the Companies.
5.25. Insurance. All premiums due to the date hereof
on the policies have been paid in full. All of such policies
have been issued by reputable insurance companies actively
engaged in the insurance business. All pending claims, if any,
made against the Companies which are covered by insurance are
being defended by the appropriate insurance companies and are
described on Schedule 5.25. The Companies have not failed to
give any notice or present any claim under any such policy in a
timely fashion. The insurance set forth on Schedule 5.11(l) has
(a) been maintained in full force and effect and (b) not been
canceled or changed except to extend the maturity dates thereof.
5.26 Disclosure. No representation or warranty by the
Seller Parties contained in this Agreement nor any statement or
certificate furnished or to be furnished by the Seller Parties or
their officers or shareholders to the Purchaser Parties or their
representatives in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact required to make
the statements herein or therein contained not misleading. To
the Best Knowledge of Seller, all information (including
documents) requested by the memorandum dated May 4, 1995
captioned "Documents and Information Requested for Review of
Acquisition" from the Purchaser's Counsel the "Document Request")
to Sellers' counsel on behalf of the Companies and the Sellers,
to the extent relevant, has been provided by or on behalf of the
Seller Parties and such information as provided, in conjunction
with other information provided by or on behalf of the Companies
and/or the Principal Shareholders, was, as of the date hereof and
the Closing Date, responsive in all material respects to the
Document Request. The copies of all documents furnished to the
Purchaser by or on behalf of the Seller Parties are true and
complete copies of the originals thereof. An item disclosed in
any schedule hereto shall be deemed disclosed solely for purposes
of that schedule unless a cross reference is made in one schedule
to another schedule in a manner sufficient to call the reader's
attention to the significance of the cross reference.
5.27 Title to Stock.
(a) The Stock is validly authorized, issued and
outstanding, fully paid and nonassessable. The Sellers are the
sole beneficial owners of the stock free and clear of any
restrictions and have full power and authority to sell the Stock
as described in this Agreement. By the sale as described in this
Agreement, the Purchaser shall acquire good and marketable title
to the Stock free and clear of any restrictions.
(b) The shares of deferred stock of the Company which
are the subject of an agreement of even date herewith between the
Purchaser (the "Deferred Shares") are validly authorized, issued
and outstanding, fully paid and nonassessable. The sellers of
the Deferred Shares are the sole beneficial owners of the stock
free and clear of any restrictions and have full power and
authority to sell the Deferred Shares as described in such
agreement. By the sale as described in such agreement, the
Purchaser shall acquire good and marketable title to the Deferred
Shares free and clear of any restrictions.
5.28 Matters Related to Recoton Stock.
(a) Any Recoton Stock issued pursuant to Section 3.01
(the "Issued Recoton Stock") is being acquired by the Sellers as
an investment for such person's own account and without a view
to, and not for resale in connection with, any distribution
thereof. Each of the Sellers (i) has such knowledge and
experience in financial and business matters that he is capable
of evaluating the merits and risks of the investment in the
Issued Recoton Stock, (ii) has received from Recoton Recoton's
Annual Report on Form 10-K for the year ended December 31, 1994
(with Amendment No. 1 on Form 10-K/A), Quarterly Reports on Forms
10-Q for the quarter ended March 31, 1995 and June 30, 1995,
press releases issued by Recoton to the financial community since
December 31, 1994 Annual Report to Shareholders for the year
ended December 31, 1994 and Proxy Statement for the 1995 Annual
Meeting), (iii) has had the opportunity to ask questions of and
receive answers from Recoton concerning Recoton and the terms and
conditions of this Agreement and to obtain any information
necessary to verify the information obtained pursuant to clause
(ii) above and (iv) is able to bear the economic risks of such
investment. Except as otherwise agreed to by Recoton in writing
or as set forth in the Shareholders' Agreement, none of the
Sellers has any agreement with any person to sell or transfer to
any person or to have any such person sell for such of the Seller
any of the Issued Recoton Stock and such Acquiring Persons are
not engaged in any discussion with any person relative to such
sale, transfer or distribution of any of the Issued Recoton
Stock. The Sellers are each an Accredited Investor as such term
is defined in Regulation D issued by the Securities and Exchange
Commission (the "Commission") under the Securities Act.
(b) The Sellers acknowledge that, except as otherwise
agreed to by Recoton in writing or set forth in the Shareholders'
Agreement, the Issued Recoton Stock has not been, and will not
be, (i) registered with the Commission under and pursuant to the
Securities Act or (ii) qualified for sale in any state under
applicable state securities or Blue Sky Laws.
(c) Except as otherwise agreed to by Recoton in
writing, (i) none of the Sellers nor any of their successors or
assigns will transfer any of the Issued Recoton Stock unless and
until (A) a registration statement under the Act covering the
Issued Recoton Stock to be disposed of has been duly filed with
the Commission and has become effective or (B) the proposed
transfer of the Issued Recoton Stock is exempt from the
registration requirements of the Securities Act, as evidenced by
written opinion of counsel reasonably acceptable to Recoton, (ii)
a stop transfer order may be placed against the Issued Recoton
Stock and (iii) the stock certificates representing the Issued
Recoton Stock may bear a legend in substantially the following
form:
"No sale, offer to sell or transfer of the
securities represented by this certificate
shall be made unless a registration statement
under the Federal Securities Act of 1933, as
amended, with respect to such securities is
then in effect or an exemption from the
registration requirement of such Act is then
in fact applicable to such securities."
(d) None of the Sellers is an affiliate of any other
person except as set forth in Schedule 5.29.
(e) The Sellers shall file such forms under the United
States Securities Exchange Act of 1934, as amended, as shall be
required of them, including without limitation any filing
required under Section 13(d) thereof.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES BY
PURCHASER PARTIES
Each of the Purchaser Parties jointly and severally
represents and warrants to, and agrees with, the Seller Parties
as follows and acknowledges that the Seller Parties are entering
into this Agreement in reliance upon such representations,
warranties and agreements:
6.01 Organization. The Purchaser is a corporation
duly incorporated under the laws of its jurisdiction of
incorporation, validly existing and in good standing under the
laws of such jurisdiction and has all requisite corporate power
and authority and is entitled to carry on its business as now
being conducted and to own, lease or operate its properties and
premises as are now owned, leased or operated.
6.02 Execution, Delivery and Performance of Agreement;
Authority. Each of the Purchaser Parties has the full legal
right, power and authority to enter into this Agreement and the
related agreements referred to herein to which it is a party and
to carry out the transactions contemplated hereby and thereby.
All proceedings required to be taken by each Purchaser Party to
authorize the execution, delivery and performance of this
Agreement and the agreements referred to herein to which it is a
party have been properly taken. Each of this Agreement and the
other agreements referred to herein to which a Purchaser Party is
a party constitute a valid and binding obligation of such party
enforceable against it in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency or similar
laws affecting the rights of creditors generally and subject to
the discretion of a court in granting equitable remedies. The
execution, delivery or performance of this Agreement by the
Purchaser Parties will not, with or without the giving of notice
or the passage of time, or both, conflict with, result in a
material breach, default, right to accelerate or loss of rights
under, or result in the creation of any material restriction,
pursuant to, any provision of a Purchaser Party's corporate
documents or any agreement or legal requirement to which the
Purchaser Party is a party or by which the Purchaser Party or any
of its properties may be bound or materially affected.
6.03 Recoton Stock. The Recoton Stock will upon
delivery to the Sellers be duly authorized, validly issued, fully
paid and nonassessable with no personal liability attaching to
the ownership thereof other than liabilities imposed upon
shareholders generally by the provision of the Business
Corporation Law of New York and will not be subject to any other
restrictions except as may be imposed by applicable United States
Federal and State securities law.
6.04 Brokers and Finders. None of the Purchaser
Parties nor any person acting on their behalf has employed any
broker, agent or finder or incurred any liability for any
brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein and each of
the Purchaser Parties, jointly and severally, shall indemnify the
Seller Parties with respect to any claim which any person engaged
by a Purchaser Party may make with respect to the subject matter
of this Agreement and the other Agreements referred to herein.
6.05 Recoton's SEC Filings. Recoton's filings with
the U.S. Securities and Exchange Commission under the Securities
Act of 1934, as amended, as enumerated in Section 5.29 and as
supplemented by disclosures by Recoton pursuant to this Agreement
for events subsequent thereto, do not contain any untrue
statement of a material fact or omit to state any material fact
required to make the statements therein contained not misleading.
ARTICLE VII. [OMITTED]
ARTICLE VIII. [OMITTED]
ARTICLE IX. ADDITIONAL COVENANTS
9.01 Noncompetition; Nonsolicitation. Effective on
the Closing Date and for five years following, none of the Seller
Parties named in Schedule 9.01 shall directly or indirectly (by
itself or himself or through any employees or affiliates or
employees of affiliates):
(a) engage in the manufacture or sale of video or
computer gaming accessories (the "Business") in any of (i)
the United States, (ii) Canada, (iii) Mexico, (iv) North
America, (v) Hong Kong, (vi) People's Republic of China
(vii) Asia, (viii) Europe, (ix) South America or (x) any
country to which Purchaser has sales in excess of US$100,000
in any year within the five years prior to or after the
Contract Date (the "Territory") other than as an employee of
Recoton or a Purchaser or an affiliate thereof.
(b) render services to or have any interest, as a
shareholder, owner, agent, director, employee, consultant,
lender, guarantor or otherwise, in any other person (other
than Recoton or a Purchaser or an affiliate thereof) engaged
in the Business; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
itself or as agent for another) for employment or induce,
persuade or encourage any person to leave Recoton or a
Purchaser's employ who, prior to the Closing Date was, or
during such five year period will be, employed or retained
by Recoton or a Purchaser as a consultant, agent, employee
or otherwise or (ii) divert or attempt to divert from
Recoton or a Purchaser any business whatsoever by
influencing or attempting to influence any customer or
supplier of Recoton or a Purchaser.
For purposes of this Section 9.01, ownership by any person of 3%
or less (so long as ownership by all the Seller Parties directly
or indirectly does not exceed 10%) of any class of outstanding
securities of a company or other business 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 ownership
or participation in the ownership of the business of such
company. The Seller Parties acknowledge that the time, scope,
geographic area and other provisions of this Section 9.01 have
been specifically negotiated by sophisticated commercial parties
and that all such provisions are reasonable under the
circumstances of the transactions contemplated by this Agreement
and that such restrictions do not unreasonably interfere with the
Seller Parties' ability to engage in business or impose any undue
hardship. It is understood that the Seller Parties are agreeing
to the terms of this Section 9.01 in order to induce Recoton and
the Purchaser to enter into this Agreement. The parties
acknowledge that the businesses of the Companies are currently
conducted throughout Asia, the Americas and Europe and that such
businesses may be reasonably expected to undergo significant
international business expansion after the date hereof.
Accordingly, given the current sophistication of the information
and telecommunication "highway," a narrow geographic limitation
would deny the Purchaser protection to which they are entitled in
this Agreement and the parties agree that the Territory is
reasonable in scope.
9.02 Employee Bonus Pool.
(a) The Purchaser Parties shall cause to be established
a bonus pool for the employees of the Companies and the purchaser
of the assets of STD USA pursuant to the U.S. Agreement (such
purchaser and the Companies being referred to collectively as
"New STD") to which contributions shall be accrued as follows:
(i) 15% of the net after-tax earnings of New STD
for the period from the Contract Date through December 31,
1995, bonuses therefrom to be payable at such time as New
STD determines but in no event earlier than January 1, 1996
nor later than March 30, 1996; plus
(ii) US$500,000, bonuses therefrom to be payable
at such time as New STD determines but in no event earlier
than January 1, 1999 nor later than March 30, 1999; plus
(iii) one-third of the cumulative net after-tax
earnings of New STD for the period from January 1, 1996
through December 31, 1998 (the "Initial Period"), such bonus
not to exceed US$5.0 million in the aggregate, bonuses
therefrom to be payable at such time as New STD determines
but in no event earlier than January 1, 1999 nor later than
March 30, 1999; plus
(iv) An additional 20% of the cumulative net
after-tax earnings of New STD for the Initial Period over
US$15 million, bonuses therefrom to be payable at such time
as New STD determines but in no event earlier than January
1, 1999 nor later than March 30, 1999; plus
(v) 20% of the cumulative net after-tax earnings
of New STD for the period from January 1, 1999 through
December 31, 2000, bonuses therefrom to be payable at such
time as New STD determines but in no event earlier than
January 1, 2001 nor later than March 30, 2001.
(b) For purposes of Section 9.02(a), "after-tax
earnings" shall mean the net earnings of New STD on a combined
basis after imposition of taxes which will then be paid or are
required to be accrued, computed in accordance with US GAAP but
as if the payments made pursuant to Section 9.02(a) were not
made; provided, however the computation to determine "after tax
earnings" shall not include amortization of the "good will"
associated with the purchase of New STD nor depreciation expense
applicable to any upward revaluation of assets upon allocation of
the Purchase Price and it shall not include the earnings or
losses of any business other than the Companies' and STD USA's
current business except to the extent that Stephen Chu has agreed
to the addition of such new business at the time of its addition.
(c) The payments set forth in Section 9.02(a) shall be
made to such employees of New STD as are recommended by a
compensation committee composed of Stephen Chu and Robert
Borchardt (or if Stephen Chu is unable to serve, David Chu and if
Mr. Borchardt is unable to serve, the designated nominee of the
Board of Directors of Recoton), which employees may include one
or more of the Four Employees; provided, however, that (i) of the
payments set forth in clause (a)(i), a minimum of 6.0 percentage
points shall be paid to the Four Employees as follows: Stephen
Chu: 3.0 percentage points; David Chu, 1.0 percentage points;
Patrick Ho, 1.0 percentage points; and Todd Hays, 1.0 percentage
points; (ii) of the payments set forth in clauses (a)(ii) and
(a)(iii), a minimum of 19.0 percentage points shall be paid to
the Four Employees as follows: Stephen Chu: 9.5 percentage
points; David Chu, 3.0 percentage points; Patrick Ho, 3.0
percentage points; and Todd Hays, 3.5 percentage points; and
(iii) of the payments set forth in clauses (a)(iv) and (a)(v) a
minimum of 8.0 percentage points shall be paid to the Four
Employees as follows: Stephen Chu, 3.5 percentage points; David
Chu, 1.5 percentage points; Patrick Ho, 1.5 percentage points;
and Todd Hays 1.5 percentage points.
(d) Notwithstanding the foregoing, if any of the Four
Employees terminates his employment or his employment is
terminated for cause as described in his respective Employment
Agreement prior to January 1, 1996 for payments under clause
(a)(i), January 1, 1999 for payments under clauses (a)(ii),
(a)(iii) and (a)(iv) or January 1, 2001 for payments under clause
(a)(v), no bonus as set forth in such clauses shall be paid to
such employee and the payments required to be contributed to the
bonus pool shall be reduced by the portion allocated to such
employee, but the percentage points of the bonus pool previously
allocated to the remaining employees shall remain such so as to
result in no diminution of their respective payments.
Furthermore, if any of the Four Employees shall die or his
employment with New STD is terminated for disability prior to
January 1, 1996 for payments under clause (a)(i), January 1, 1999
for payments under clauses (a)(ii), (a)(iii) and (a)(iv) or
January 1, 2001 for payments under clause (a)(v), such employee
(or his estate, as applicable) shall be awarded a bonus equal to
the bonus which would have been paid to him with respect to all
fully completed calendar years in the periods noted in Section
9.02(a) (based on earnings for such completed years without
regard to any adjustment thereto for subsequent years in any such
period and the bonuses for any remaining employees will not be
effected by any such payment) less any bonuses previously paid or
advances made thereagainst and the payments required to be
contributed to the bonus pool shall be reduced by the portion
allocated to such employee for the then-current and any
subsequent years, but the percentage points of the bonus pool
previously allocated to the remaining employees shall remain such
so as to result in no diminution of their respective payments.
If any of the Four Employees is terminated not for cause, death
or disability, such employee shall continue to be paid the bonus
(and receive advance thereagainst) all as if still an employee of
New STD when the bonuses are paid to other employees.
(e) New STD shall grant year-end advances against the
bonuses anticipated to be awarded pursuant to Section 9.02(c) to
each of the Four Employees and such other employees as have been
awarded bonuses by action of the compensation committee pursuant
to Section 9.02(c) equal in the aggregate to approximately 50% of
the projected bonuses to such employees which would have been
earned under clauses (a)(iii), (a)(iv) and (a)(v) for each year
from 1996 through 2000 as if the bonus period was the just-then-
ending year (net of any loss in prior years not utilized in
calculating any previous year's advance), in lieu of cash
bonuses, which advances shall be credited against any bonuses
later paid pursuant to clauses (a)(iii), (a)(iv) and (a)(v).
(f) The payments made under clauses (a)(i) and (a)(ii)
and any advances of the payments pursuant to clauses
(a)(iii),(a)(iv) and (a)(v) shall be made in cash and the
remaining payments shall be made in cash or in Recoton Stock or
any combination thereof at the option of each covered employee's
employer. To the extent legally permissible, Recoton shall file
and maintain the effectiveness of a registration statement with
the Securities and Exchange Commission on Form S-8 (or any
successor form) with respect to any Recoton Stock to be issued
pursuant to the foregoing bonus.
9.03 Transfer Taxes. The Purchaser and the Sellers
shall bear equally all applicable stock transfer, stamp duty,
sales, documentary, use, filing, transfer and other taxes payable
as a result of the transfer of the Stock (provided, however, that
the Purchaser shall bear the first US $63,000 in applicable stamp
duties) and the Companies and the Purchaser shall file all
appropriate returns related thereto required to be filed by each.
All taxes on or measured by the net income or revenues of the
Purchaser or the Sellers (including without limitation, income,
gross receipts, and net worth taxes) imposed or levied by or
payable to any taxing authority shall be paid or payable by the
party upon which such taxes are imposed or levied.
9.04 Indemnification.
(a) Each of the Seller Parties shall indemnify and
hold harmless each of the Purchaser Parties and their officers,
directors, agents, employees and affiliates from and against any
and all of the following:
(i) any liabilities, claims and expenses
(including, without limitation, any reasonable legal fees,
disbursements or expenses) which a Company, Recoton or a
Purchaser or an affiliate may sustain at any time by reason
of, arising out of, based upon or incurred in connection
with (A) the pending litigation description on Schedule
9.04(a)(i)(A) or the settlement thereof to the extent that
the cost of defense, any settlement and/or any judgment
exceeds US$100,000, (B) breach of Section 5.18 or (C) the
conduct of any Seller's business after the Contract Date;
and
(ii) subject to the limitation on liability set
forth in Section 9.04(c), any and all liabilities, claims
and expenses (including, without limitation, any reasonable
legal fees, disbursements or expenses) which the Purchaser
or an affiliate may sustain at any time by reason of,
arising out of, based upon, or incurred in connection with
(A) the breach, inaccuracy, misrepresentation or failure to
comply with any of the warranties, representations,
covenants, agreements or obligations of the Seller Parties
contained in this Agreement or in any agreement, certificate
or document delivered pursuant to or in connection with this
Agreement or with the consummation of the transactions
contemplated by this Agreement (unless the effect of such
breach, inaccuracy, misrepresentation or failure was already
reflected in the Net Value Adjustment)] or (B) a formal,
written claim by a governmental official or agency of the
Peoples' Republic of China or any subdivision or
instrumentality thereof, under color of law and with
competent jurisdiction under applicable Chinese
Environmental Law, that a particular condition or
circumstance associated with the operation of a facility
owned, operated or used by a Company or with respect to
which a Company had an economic relationship constitutes a
violation of an identified provision of applicable Chinese
Environmental Law and must be corrected, remediated or
otherwise ameliorated; provided, however, that such
condition or circumstance must have been in existence so as
to have constituted such a violation at or prior to the
Contract Date.
The obligations of the signatories to this Agreement who are
natural persons (other than Chu) are limited to the portion of
the Purchase Price (by way of dividend or otherwise) that they
receive, subject, however, to the limitation set forth in Section
9.04(c).
(b) The Purchaser Parties shall jointly and severally,
subject to the limitation on liability set forth in Section
9.04(c), indemnify and hold harmless each of the Seller Parties
and their officers, directors, agents, employees and affiliates
from and against any and all liabilities, claims and expenses
(including, without limitation, any reasonable legal fees,
disbursements or expenses) which a Seller Party or an affiliate
may sustain at any time by reason of, arising out of, based upon
or incurred in connection with (i) the breach, inaccuracy,
misrepresentation or failure to comply with any of the
warranties, representations, covenants, agreements or obligations
of the Purchaser Parties contained in this Agreement or in any
agreement, certificate or document delivered pursuant to or in
connection with this Agreement or with the consummation of the
transactions contemplated by this Agreement or (ii) the conduct
of the Companies' business after the Closing Date unless caused
by the negligence or willful act of a Seller Party or one of the
Four Employees.
(c) The Seller Parties, in the aggregate, and the
Purchaser Parties in the aggregate, shall not be required to make
any payments of indemnification claims pursuant to Section
9.04(a)(ii) or Section 9.04(b)(i) except to the extent that such
claims against them plus any claims against them under the U.S.
Agreement or amounts applied to their "basket" set forth in the
U.S. Agreement, in the aggregate, exceed US$500,000 and their
liability shall not exceed the Escrow Amount (including the fair
market value at release of any Security Holdback which may be
released) less any indemnity claims paid by the Seller Parties
under the U.S. Agreement in the case of claims against the Seller
Parties or $8,000,000 less any indemnity claims paid by the
Purchaser Parties under the U.S. Agreement in the case of claims
against the Purchaser Parties. Claims for indemnification shall
survive the Closing for the period set forth in Section 10.01.
If a party asserts a claim for indemnification and the other
party or parties contest in writing its, his or their
responsibility for such indemnification under this Section 9.04,
then the party prevailing in such contest shall be entitled to
reimbursement of its reasonable attorneys' fees and expenses by
the other party or parties.
(d) If any legal proceeding or other claim is brought,
asserted or threatened against a party who seeks or may seek
indemnity (the "Indemnitee") under this Section 9.04, or a party
otherwise delivers a notice that it is entitled to
indemnification hereunder, the Indemnitee shall notify in writing
each party (an "Indemnitor") against whom indemnification is to
be sought before such time as such Indemnitor may be prejudiced,
when known, of the facts constituting the basis for such claim.
In the event of any such claim for indemnification hereunder
resulting from or in connection with any claim or legal
proceedings by a third party, the notice to the Indemnitor shall
specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnitor shall have the
right, at its option (exercised by written notice to the
Indemnitee), to assume control of the defense thereof, including
the employment of counsel reasonably satisfactory to the
Indemnitee, and, if it does so, shall proceed in good faith at
all times; provided, however, that (i) the control by the
Indemnitor of such defense shall not delay the timeliness of such
defense, (ii) the Indemnitor shall not consent to the entry of
any judgment or enter into any settlement without the prior
written consent of the Indemnitee, unless the Indemnitee is
released from all liability (which shall include any and all
direct or indirect costs of implementation) in respect of or
related to such action or proceeding and is not otherwise
required to take or forbear from taking any action in respect
thereof and such settlement is not harmful to the Indemnitee's
reputation in the reasonable determination of such Indemnitee,
(iii) the Indemnitor shall be responsible for all legal fees and
expenses in connection with such defense and (iv) the Indemnitor
shall not have such right to assume the defense if the realistic
exposure under the litigation does not substantially exceed the
unutilized "basket" set forth in Section 9.04(c). The Indemnitee
shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense
of the Indemnitee. If an Indemnitor does not assume control of
such defense, and a judgment or settlement is entered or agreed
to by the Indemnitee in respect of the matter being defended, the
amount of such judgment or settlement plus the Indemnitee's legal
fees and expenses shall conclusively be "liabilities" subject to
Sections 9.04(a) and (b) and other relevant sections.
(e) The Indemnitee shall fully cooperate, at the cost
of the Indemnitor, with the Indemnitor in the defense of any
action assumed by the Indemnitor and shall preserve and make
available relevant records.
(f) Indemnification of legal fees, disbursements and
expenses pursuant to this Agreement shall include such legal
fees, disbursements and expenses as are incurred in actions or
proceedings between an Indemnitee and Indemnitor as well as
between an Indemnitee and any third party.
(g) Any right to indemnification pursuant to this
Section 9.04 shall be limited to liabilities, claims and expenses
net of any insurance payments actually received by the applicable
party (as to which an Indemnified Party shall make all reasonable
claims).
9.05 Right to Offset. Should any of the Sellers or
STD USA owe monies or otherwise be liable to Recoton or the
Purchaser or the purchaser under the U.S. Agreement or should
Recoton or the Purchaser or the purchaser under the U.S.
Agreement owe monies or otherwise be liable to any of the Sellers
or STD USA, under either this Agreement or the U.S. Agreement,
the party to whom monies are owed may set-off and deduct such
sums from any payments otherwise due to such other party or
parties under this Agreement or the U.S. Agreement to the maximum
extent allowed by law. In addition, if the escrow pursuant to
the Escrow Agreement has been terminated and thereafter any of
the Sellers or STD USA owe money or otherwise are liable to
Recoton or the Purchaser under this Agreement or the purchaser
under the U.S. Agreement, Recoton or the Purchaser may offset
against any monies owed to any other Seller Party pursuant to
Section 9.02 (but not against such person's salary), but in no
event may it offset any amount in excess of the value, as of the
date of the claim, of the shares of Recoton Stock and any cash or
other assets which are released from such escrow (and the Seller
Party may tender in payment of any amount sought to be offset
shares of Recoton Stock valued as of the date of such claim).
9.06 Independent Operations. So long as the payment
obligations pursuant to Section 9.02 remain, Recoton shall
maintain New STD as one or more independent subsidiaries or
distinct divisions.
9.07 Continued Existence of Sellers. STD BVI shall
remain in existence as a corporation in good standing in the
British Virgin Islands until the full amount of the Escrow
Security is released.
9.08 Recoton Guaranty.
(a) Recoton (for purposes of this section the
"Guarantor") unconditionally guarantees the full and prompt
payment and performance when due, and at all times thereafter, of
all of the indebtedness, liabilities, and obligations of every
kind and nature of Purchaser to the Seller Parties arising under
or pursuant to this Agreement, whether direct or indirect, or
absolute or contingent (all such indebtedness, liabilities and
obligations being hereinafter referred to as the "Obligations").
This Guaranty shall continue in full force and effect until the
Obligations have been fully paid, performed and discharged.
(b) Guarantor's obligations under this Guaranty shall
be unconditional, irrespective of (a) the absence of any attempt
to collect the Obligations from Purchaser or any other person or
other legal action to enforce the same against Purchaser, (b) any
waiver or consent by any Seller Party given with respect to any
provision of the Agreement or other document evidencing any of
the Obligations, or any part thereof, or, (c) any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of the Guarantor. The Seller
Parties, however, shall make claim against Purchaser at the same
time that it claims against Guarantor or prior thereto.
(c) Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of Purchaser and protest or notice
with respect to the Obligations and all demands whatsoever. Upon
any breach or default by Purchaser of the Agreement or any other
instrument or document evidencing all or any part of the
Obligations, any Seller Party may proceed directly and at once,
to collect and recover the full amount or any portion of the
Obligations or otherwise to enforce performance of the same
against Guarantor, without first bringing legal action against
Purchaser or any other person, firm, or corporation, or against
any security or collateral for the Obligations that may be
obtained by any Seller Party from time to time.
(d) The Seller Parties may, without notice or demand
and without affecting the liability of Guarantor hereunder, from
time to time, (a) subject to agreement by Purchaser, renew,
extend, accelerate or otherwise change the time for payment or
performance of, or other terms relating to, the Obligations, or
otherwise modify, amend or change the terms of the Agreement or
any other agreement, document or instrument now or hereafter
executed by them relating to the Obligations; (b) accept partial
payments on or performance of the Obligations; and (c) settle,
release, compromise, collect or otherwise liquidate the
Obligations, any other guaranty of the Obligations and any
security or collateral for the Obligations or for any such
guaranty in any manner, without affecting or impairing the
obligations of Guarantor hereunder. Guarantor hereby assumes
responsibility for keeping itself informed of the financial
condition of Purchaser and of all other circumstances bearing
upon the risk of nonpayment or nonperformance of the Obligations
or any party thereof that diligent inquiry would reveal and the
Seller Parties shall have no duty to advise Guarantor of
information known to them regarding such condition or any such
circumstances.
(e) Seller Parties shall be under no obligation to
marshall any assets in favor of Guarantor or against or in
payment of any or all of the Obligations. To the extent that
Purchaser makes a payment or payments to any Seller Party, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
any/or required to be repaid to Purchaser, its estate, trustee,
receiver or any other party, including, without limitation,
Guarantor, under any bankruptcy law, state or federal law, common
law or equitable cause, then to the extent of such payment or
repayment, the Obligations or part thereof which have been paid,
reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred.
(f) Notwithstanding anything to the contrary contained
herein or in any other agreement, document or instrument, the
Guarantor hereby irrevocably waives all rights of subrogation
(whether such rights arise under common law, contract or federal
law including, without limitation, Section 509 of the U.S.
Bankruptcy Code) to the claims of Seller Parties against
Purchaser and all contractual, statutory or common law rights of
contribution, reimbursement, indemnification and similar rights
and claims against Purchaser which arise in connection with, or
as a result of, this guaranty. Any and all claims that Guarantor
may have against Purchaser, or against its properties, shall be
subordinate and subject in right of payment to the prior payment,
in full, of all of the Obligations. Guarantor waives notice of
any and all proceedings to enforce any of the Obligations against
Purchaser or anyone else.
(g) Paragraphs (a) through (f) set forth above are not
intended to modify provisions of this Agreement but are only
intended as waivers of suretyship defenses that might be
available to Recoton in respect of its guaranty under this
Section 9.08.
ARTICLE X. GENERAL PROVISIONS
10.01 Nature of Representations, Warranties and Other
Obligations. Each statement, representation, warranty, covenant,
indemnity and agreement in this Agreement or in any document,
certificate or other instrument delivered pursuant to this
Agreement or in connection herewith shall survive the Closing for
36 months notwithstanding any investigation at any time made by
or on behalf of the Purchasers; provided, however that the right
to assert claims under Sections 5.06, 5.17 or 9.04(a)(ii)(B)
shall survive until six years following the Closing (provided,
however, that the right to assert any such claims under Sections
5.06, 5.17 or 9.04(a)(ii)(B) shall survive until 60 days after
the final resolution of any related legal proceeding by any legal
body pending or threatened at the end of such six-year period and
shall survive until 60 days after the expiration of any extension
of any statutory period of limitations with respect to such
claim. All statements contained in any certificate or other
instrument delivered by or on behalf of a Seller Party pursuant
to this Agreement or in connection with the transactions
contemplated hereby shall be deemed representations and
warranties hereunder.
10.02 Attorney-in-Fact. Each of the Seller Parties
hereby appoints Chu and Hays, and each of the Purchaser Parties
hereby appoints Robert Borchardt and Stuart Mont, as its
attorneys-in-fact, each having full powers of authorization,
substitution and delegation for purposes of giving any consents
or approvals required by this Agreement or for executing and
delivering on behalf of such party any agreements, certificates,
documents or other writings as may be required to be delivered
pursuant to this Agreement.
10.03 Notices. Any and all notices or other
communications required or permitted to be given under any of the
provisions of this Agreement shall be in writing and shall be
deemed to have been given when given to the following addresses
or telefax numbers:
(a) If to any of the Seller Parties, c/o
STD International Holdings Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Centre
15-33 Kwai Tak Street
Kwai Chung, New Territories
Hong Kong
Fax: 011-852-2612-1159
Attn: Stephen Chu
with a copy (which shall not
constitute notice) to:
Heller Ehrman White & McAuliffe
1902A Peregrine Tower
Lippo Center
89 Queensway
Hong Kong
Fax: 011-852-2-810-6242
Attn: Simon Luk, Esq.
and
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
Fax: 415-772-6268
Attn: Tim Hoxie, Esq.
(b) If to Recoton or to any Purchaser, c/o:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Fax: (407) 333-8903
Attn: Stuart Mont
with a copy (which shall not
constitute notice) to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004
Fax: (212) 806-6006
Attn: Theodore S. Lynn, Esq.
and
Siao, Wen and Leung
15th Floor, Hang Seng Building
77 Des Voeux Road
Hong Kong
Fax: 011-852-2-525-4630
Attn: Carson Wen, Esq.
(or at such other address or telefax numbers as any party may
specify by notice to all other parties given as aforesaid).
Unless otherwise specifically provided in this Agreement, such
communications shall be deemed to have been given (a) five days
after mailing, when mailed by registered or certified postage-
paid mail, (b) on the second business day after sending, when
delivered to a recognized international courier service such as
Federal Express or DHL or, where applicable, the U.S. or Hong
Kong Post Office Express Mail or (c) upon the date of receipt by
the addressee when delivered personally or dispatched 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.
10.04 Entire Agreement; Amendment. This writing (with
the other agreements referred to herein or delivered at the
Closing in connection herewith) constitutes the entire and only
agreement of the parties with respect to the subject matter
hereof and supersedes and cancels any and all prior negotiations,
understandings and agreements concerning the subject matter
hereof, including the letter of intent dated May 9, 1995, as
amended. This Agreement may be amended, modified, superseded,
canceled, renewed or extended only by a written instrument
executed by the parties hereto.
10.05 Waiver. The failure by any party at any time to
require performance or compliance by the other parties of any of
its obligations or agreements shall in no way affect the right to
require such performance or compliance at any time thereafter.
The waiver by any 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.
10.06 Binding Nature. This Agreement shall be binding
upon and inure to the benefit of each party hereto, its
successors and permitted assigns.
10.07 Assignment. This Agreement and all rights
hereunder may not be transferred or assigned, by operation of law
or otherwise, without the written consent of all the parties to
the Agreement, except that Recoton may assign its rights and
obligations hereunder to one or more wholly-owned subsidiaries
but no such assignment shall relieve the Purchaser or Recoton of
its obligations hereunder.
10.08 Captions; Language. The article, section and
paragraph headings contained in this Agreement are for the
purposes of convenience only and are not intended to define or
limit the contents of such articles, sections or paragraphs. In
this Agreement, unless the context requires otherwise, the
singular includes the plural, the plural the singular, the word
"or" is used in the inclusive sense and all references to
"including" shall mean "including without limitation," unless the
context requires otherwise.
10.09 Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. The Schedules and Exhibits are hereby made a part of
this Agreement.
10.10 Costs. Except as otherwise stated, each party
hereto will pay all costs and expenses incurred by it in connec-
tion with this Agreement, whether or not the transactions contem-
plated herein shall be consummated.
10.11 Rights of Third Parties. Nothing in this Agree-
ment shall be construed as giving any person other than the
parties hereto and their respective successors and permitted
assigns, any right, remedy or claim under or in respect of this
Agreement or any provision hereof.
10.12 Enforceability. 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.
10.13 Equitable Remedies. The Seller Parties
acknowledge that because of the nature of the Companies' business
and the subject matter of this Agreement, a breach of Section
9.01 will cause irreparable injury to the Purchaser Parties for
which money damages will not provide an adequate remedy and,
accordingly, the Purchaser Parties shall have the right to have
the provisions of such Section specifically enforced by a court
having equity jurisdiction, in addition to, and not in limitation
of, any remedies at law that the Purchaser may have.
10.14 Further Assurances. At any time and from time
to time, each party hereto, without further consideration, shall
cooperate, take such further action and execute and deliver such
further instruments and documents as may be reasonably requested
by any other party in order to carry out the provisions and
purposes of this Agreement and to transfer possession of and good
title to the Purchased Assets. Purchaser shall assign to STD
BVI the stock of any subsidiaries of STD Hong Kong other than STD
Electronic International Limited, STD Manufacturing Limited, STD
Plastic Industrial Limited, STD Trading Limited, Peak Hero
Limited, Ever Smart Manufacturing Limited, STD Industrial
(Shenzhen) Limited and STD (Tianjin) International Trade
Development Company, including the companies noted on Schedule
4.02(n) to the extent that distribution thereof had not been made
prior to the Closing or on Schedule 5.07(k)(ii) for HK $1.00 per
per company, and STD BVI shall hold the Purchaser Parties
harmless with respect to any liabilities of such assigned
companies. In the event that there is any restriction on
Purchaser's ability to so assign such shares existing on the
Closing Date, STD BVI shall arrange for the release of such
restriction to the extent necessary to permit such assignment.
10.15 Counterparts. This Agreement may be executed in
one or more counterparts, all of which taken together shall be
deemed to evidence one and the same agreement.
10.16 Applicable Law; Dispute Resolution.
(a) This Agreement and its validity, construction and
performance shall be governed in all respects by the laws of the
State of New York, U.S.A. without giving effect to principles of
conflict of law.
(b) The parties shall promptly cooperate in good faith
to carry out the provisions of this Agreement and the activities
contemplated hereby and shall also cooperate in good faith to
resolve any disputes or differences which may arise in connection
with the provisions hereof and the activities contemplated
hereby. Except as otherwise noted in this Agreement, any
dispute, question, difference, controversy or claim arising out
of or relating to this Agreement, or the breach thereof, shall be
finally settled by arbitration before a panel of three
arbitrators in Honolulu, Hawaii in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, as
then in effect at the time of filing of the notice of demand.
The parties consent to the jurisdiction of the courts of the
State of Hawaii, and of the United States District Court for the
District of Hawaii, for all purposes in connection with
arbitration. The application to either of said courts, and any
paper in connection requested or by personal service or in such
other manner as may be permissible under the rules of the
applicable court or arbitration tribunal, provided a reasonable
time for appearance is allowed. The arbitrators shall not alter
or disregard any express provisions of this Agreement. Any
arbitration award in accordance with this Section 10.16 shall be
final and binding upon the parties and judgment thereon may be
entered in any court having jurisdiction over such party.
Nothing in this Section 10.16, however, shall limit Purchaser's
rights to commence litigation for equitable relief pursuant to
Section 10.13.
10.17 Access; Notice of Actions. Following the
Closing, (i) the Purchaser and the Seller shall each give access
to the other to inspect and copy the books of account of the
Companies in their possession, and (ii) the Companies shall give
access to the Sellers to inspect and copy the minute books and
other records of the Companies in the Companies' possession, if,
in either case, the requesting party has a particularized need
for such records. Each of the parties hereto shall keep the
books of account and minute books and other records of the
Companies which are in their possession for a period of not less
than six years from the Closing Date. All such information, and
any similar information previously provided, shall be retained by
the receiving party and its agents in confidence and (other than
information which has prior thereto been made public) shall not
at any time be disclosed by it to third persons except as may be
required to comply with valid and applicable laws, rules,
regulations or orders of any court or governmental agency.
10.18 Publicity. None of the parties hereto shall
issue any press release or make any other public statement, in
each case relating to or connected with or arising out of the
Agreement or the matters contained herein, without obtaining the
prior written approval of the Sellers and the Purchaser to the
contents and the manner of presentation and publication thereof,
provided, however, that nothing herein shall prevent any party
from making any disclosures required by applicable law or
regulation (including regulation of the Securities and Exchange
Commission and the National Association of Securities Dealers).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above
written.
STD INVESTMENTS (B.V.I.) LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
PLOMAX HOLDINGS LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
STD INTERNATIONAL
HOLDINGS LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
RECOTON (FAR EAST) LIMITED
By: /s/Robert L. Borchardt
Name: Robert L. Borchardt
Title: Director
RECOTON CORPORATION
By: /s/Stuart Mont
Name: Stuart Mont
Title: Chief Operating Officer
/s/Stephen Chu Nin Yiu
Stephen Chu Nin Yiu
/s/David Chu Nin Wai
David Chu Nin Wai
/s/Patrick Ho Tze Man
Patrick Ho Tze Man
/s/Leung Choi Luen
Leung Choi Luen
/s/Tong Yue Ting
Tong Yue Ting
/s/Stephen T. Hays
Stephen T. Hays
/s/Williamson Wong Shiu Wah
Williamson Wong Shiu Wah
EXHIBIT 4.02(a)
INSTRUMENT OF TRANSFER
I(We)......................................................of
......................................... in consideration of
the Sum of Dollars .............................................
paid to me (us) by (name in full) ..............................
(occupation) ...................................................
of (full address) ..............................................
(hereinafter called "the said Transferee") do hereby transfer to
the said Transferee the ........................................
Shares numbered ................................................
................................................................
standing in my (own) name in the Register of STD HOLDING LIMITED
to hold unto the said Transferee his Executors, Administrators or
Assigns, subject to the several conditions upon which I(we hold
the same at the time of execution hereof. An I(we) the said
Transferee do hereby agree to take the said Shares subject to the
same Shares subject to the same conditions.
Witness our hands the ...... day of ................, 1995
Witness to the signature(s) of
..............................
..............................
Name.......................... ...........................
Address.......................
..............................
..............................
Witness to the signature(s) of
..............................
..............................
Name.......................... ...........................
Address.......................
..............................
..............................
BOUGHT AND SOLD NOTE
NAME OF COMPANY :
TRANSFEROR :
TRANSFEREE :
NO. OF SHARES TRANSFERRED :
CONSIDERATION :
PAR VALUE PER SHARE :
DATE :
(TRANSFEROR) (TRANSFEREE)
<PAGE>
Exhibit 4.02(m)
ESCROW AGREEMENT
AGREEMENT made as of August 31, 1995 between STD (BVI)
Limited, a British Virgin Islands corporation ("STD BVI"),
Recoton (Far East) Limited, a Hong Kong corporation ("RFI"),
Interact Accessories, Inc. ("Interact") and Recoton Corporation,
a New York corporation ("Recoton") (RFI, Interact and Recoton
are each sometimes referred to as a "Purchaser Party" and
collectively as the "Purchaser Parties").
WHEREAS, STD BVI was the beneficial holder of all the
outstanding ordinary shares of STD Holding Limited, a Hong Kong
corporation ("STD Hong Kong");
WHEREAS, STD Hong Kong was the beneficial holder of
all of the outstanding shares of STD USA;
WHEREAS, Recoton is the beneficial holder of all of
the outstanding shares of RFI and Interact;
WHEREAS, STD BVI as seller, RFI as purchaser, Recoton
and others are parties to an agreement dated as of the date
hereof (the "Stock Purchase Agreement") providing for the
purchase by RFI from Sellers of all of the ordinary shares of
capital stock (the "STD Shares") of STD Hong Kong as of the date
hereof.
WHEREAS, STD Entertainment (U.S.A.), Inc. ("STD USA")
as seller, Interact as purchaser, Recoton and others are parties
to an agreement dated as of the date hereof (the "Asset Purchase
Agreement") providing for the purchase by Interact of
substantially all of the assets of, and assumption of
substantially all of the liabilities of, STD USA as of the date
hereof;
WHEREAS, in partial payment for the STD Shares
pursuant to Section 3.01 of the Stock Purchase Agreement, RFI is
transferring to STD BVI 406,092 shares of the common stock, par
value U.S. $0.20 per share, of Recoton (with any additional
shares delivered pursuant to Section 3 of this Agreement, the
"Recoton Shares"); and
WHEREAS, Section 3.02(a) of the Stock Purchase
Agreement provides for the delivery by STD BVI to the Escrow
Agent (as hereinafter defined) of stock certificates
representing the Recoton Shares.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements contained herein and in the Agreement,
the parties hereto do hereby agree as follows:
1. Appointment; Deliveries. Chemical Bank is hereby
appointed escrow agent ("Escrow Agent") to hold and dispose of
the Escrow Fund (as hereinafter defined). Seller is herewith
delivering to the Escrow Agent the certificates for the Recoton
Shares, with five stock powers duly endorsed in blank sufficient
to effect a transfer of the escrowed Recoton Shares. The Escrow
Agent is authorized to deposit the certificates representing the
Recoton Shares in a separate escrow account. The Recoton Shares
and any proceeds thereof and any additions thereto, less any
distributions made by the Escrow Agent to Seller or Purchaser in
accordance with this Escrow Agreement, is hereinafter referred
to as the "Escrow Fund".
2. Duty of Care; Investments. The Escrow Agent shall
hold and safeguard the certificates for the Recoton Shares (and
any stock powers which may be received with respect thereto or
other portion of the Escrow Fund) in a safe location. No other
investments shall be made without the prior written approval of
Sellers and Purchaser.
3. Voting Rights; Dividends; Etc.
(a) STD BVI shall be entitled to exercise any and all
voting and other consensual rights (as such rights may be
otherwise limited pursuant to separate agreements) pertaining to
the stock in the Escrow Fund owned by it or any part thereof for
any purpose until such is released pursuant to this Agreement.
(b) STD BVI shall be entitled to receive and retain
any and all dividends paid in respect of the stock in the Escrow
Fund, provided, however, that any and all
(i) dividends paid or payable other than in cash
in respect of, and instruments and other property
received, receivable or otherwise distributed in
respect of, or in exchange for, any stock in the Escrow
Fund,
(ii) dividends and other distributions paid or
payable in cash in respect of any stock in the Escrow Fund
in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital,
capital surplus or paid in surplus, and
(iii) cash paid, payable or otherwise distributed
in respect of principal of, or in redemption of, or in
exchange for, any stock in the Escrow Fund,
shall be, and shall be forthwith delivered to the Escrow Agent
to hold as, part of the Escrow Fund and shall, if received by
STD BVI, be received in trust for the benefit of the parties to
this Agreement, be segregated from the other property or funds
of STD BVI, and be forthwith delivered to the Escrow Agent in
the same form as so received (with any necessary indorsement).
STD BVI hereby authorizes Recoton to deliver any dividends or
other distributions as set forth in clauses (i), (ii) or (iii)
above directly to the Escrow Agent as agent for STD BVI and STD
BVI hereby grants to the Escrow Agent a power of attorney to
endorse any checks or certificates in the name of STD BVI, as
applicable, consistent with this Section 4.
5. Distributions from Escrow Fund.
(a) The Escrow Fund shall be available for claims
asserted by any of the Purchaser Parties on or before August 31,
1998 pursuant to Section 9.04 of the Stock Purchase Agreement or
Section 9.07 of the Asset Purchase Agreement.
(b) If a Purchaser Party proposes to make a claim
against the Escrow Fund hereunder, it shall deliver a
certificate signed by an officer ("Officer's Certificate") to
the Escrow Agent and a duplicate copy thereof to STD BVI, which
Officer's Certificate shall state the basis on which the
Purchaser Party claims entitlement to the amount so specified in
the Officer's Certificate and the number of the Recoton Shares
to be released in payment of the claim (based on the closing
price on the exchange on which such Recoton Shares are then
listed or trading, or otherwise as reasonable if the stock is
not then listed or traded).
(c) For a period of 30 days after the delivery of any
Officer's Certificate, the Escrow Agent shall make no
payment pursuant to Section 5(f) hereof unless the Escrow Agent
shall have received written authorization from STD BVI to make
such payment with respect to such claim. After the expiration
of such 30-day period the Escrow Agent may make payments in
accordance with Section 5(f) hereof, provided, however, that no
such payment may be made with respect to such claim to the
extent that STD BVI shall have objected in a written statement
delivered to the Escrow Agent within such 30-day period. A
duplicate copy of such statement shall be delivered to STD BVI
at the same time it is delivered to the Escrow Agent.
(d) If STD BVI shall object in writing in respect of
any claim or claims made in any Officer's Certificate, STD BVI
and the Purchaser Parties shall, within the 30-day period
beginning as of the date of the receipt by Purchaser of such
written objection, attempt in good faith to agree upon the
rights of the respective parties with respect to each of such
claims. If such parties should so agree, a memorandum setting
forth such agreement and the resulting number of Recoton Shares
to be released shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and make payment from
the Escrow Fund in accordance with the terms thereof and Section
5(f) hereof.
(e) If no agreement can be reached after good faith
negotiation within the 30-day period specified in Section 5(d)
hereof, the claim or claims set forth in the Officer's
Certificate, as well as any other dispute, question, difference,
controversy or claim arising out of or relating to this
Agreement or the breach thereof, shall be finally settled by
arbitration in Honolulu, Hawaii before a panel of three
arbitrators designated by the American Arbitration Association
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association as then in effect at the time
of filing of the Officer's Certificate. The cost of any
arbitration proceedings shall be divided equally by STD BVI on
the one hand and the Purchaser Parties on the other and STD BVI
and the Purchaser Parties shall each bear its own legal and
other expenses in connection therewith. The Escrow Agent shall
be entitled to act in accordance with such decision (which shall
specify the number of Recoton Shares to be released, if any) and
to make payments out of the Escrow Fund in accordance therewith
and with Section 5(f) hereof. The parties consent to the
jurisdiction of the courts of the State of Hawaii, and of the
United States District Court for the District of Hawaii, for all
purposes in connection with arbitration. The application to
either of said courts, and any paper in connection requested or
by personal service or in such other manner as may be
permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance
is allowed. The arbitrators shall not alter or disregard any
express provisions of this Agreement. Any arbitration award in
accordance with this Section 5 shall be final and binding upon
the parties and judgment thereon may be entered in any court
having jurisdiction over such party.
(f) On the later of the expiration of the 30-day
period (in cases covered by Section 5(c) hereof) or the delivery
of a memorandum of agreement (in cases covered by Section 5(d)
hereof) or the receipt of the decision of the arbitrator (in
cases covered by Section 5(e) hereof) the Escrow Agent shall
deliver to the claiming Purchaser Party or Parties, out of the
Escrow Fund, certificates for Recoton Shares as is specified in
the Officer's Certificate, the memorandum of agreement or the
decision of the arbitrator, as the case may be.
6. Limited Release of Recoton Stock to STD BVI.
(a) After August 31, 1997, to the extent not
previously released to a Purchaser Party or claimed, or subject
to an outstanding claim, by a Purchaser Party pursuant to an
Officer's Certificate, STD BVI may request that in the aggregate
up to 25% of the Recoton Shares in the Escrow Fund be released
from the Escrow Fund in order that they may sell such released
shares. Such release shall in no way limit the liability of any
of STD BVI or any related party under the Stock Purchase
Agreement or Asset Purchase Agreement.
(b) If STD BVI proposes to have released Recoton
Shares from the Escrow Fund, it shall deliver a certificate
signed by an officer of STD BVI (the "Stock Release
Certificate") to the Escrow Agent and a duplicate copy thereof
to the Purchaser Parties, which Stock Release Certificate shall
state the number of Recoton Shares sought to be released and the
purpose of such release. The Escrow Agent shall release from
the Escrow Fund the requested Recoton Shares unless otherwise
advised in writing by a Purchaser Party with ten days after
receipt by the Escrow Agent of such Stock Release Certificate.
If a Purchaser Party advises the Escrow Agent not to release
Recoton Shares, the parties shall proceed as set forth in
Section 5(d) and 5(e) to resolve their disagreements.
7. Termination of Escrow Agreement. On the earlier
of (a) September 1, 1998 or (b) delivery to the Purchaser
Parties of all of the Escrow Fund, this Escrow Agreement shall
terminate; provided, however, that this Agreement shall not
terminate if a claim pursuant to Section 5(a) is pending. As
soon as is practicable following the termination the Escrow
Agent shall distribute to STD BVI any and all remaining assets
in the Escrow Fund.
8. Non-Exclusive Remedy. All payments under this
Escrow Agreement shall be without prejudice to any other rights
or remedies which the parties may have under the Stock Purchase
Agreement or the Asset Purchase Agreement.
9. Notices. Any and all notices or other
communications required or permitted to be given under any of
the provisions of this Agreement shall be in writing and shall
be deemed to have been given when delivered to the following
persons at the following addresses or telefax numbers:
(a) If to STD BVI
c/o STD International Holdings Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Centre
Kwai Chung, New Territories
Hong Kong
Fax: 011-852-2612-1159
Attn: Stephen Chu
with a copy (which shall not
constitute notice) to:
Heller Ehrman White & McAuliffe
1902A Peregrine Tower
Lippo Center
89 Queensway
Hong Kong
Fax: 011-852-2-810-6242
Attn: Simon Luk, Esq.
and
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
Fax: 415-772-6268
Attn: Tim Hoxie, Esq.
(b) If to any of the Purchaser Parties, c/o:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Fax: 407-333-8903
Attn: Stuart Mont
with a copy (which shall not
constitute notice) to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004
Fax: 212-806-6006
Attn: Theodore S. Lynn, Esq.
and
Siao, Wen and Leung
15th Floor, Hang Seng Building
77 Des Voeux Road
Hong Kong
Fax: 011-852-2-525-4630
Attn: Carson Wen, Esq.
(c) If to the Escrow Agent:
Chemical Bank
270 Park Avenue
New York, NY 10017-2070
Fax: 212-270-8661
Attn: William Ponce,
Assistant Trust Officer,
20th Floor
with a copy (which shall not
constitute notice) to:
Barbara L. Strohmeier, Esq.,
Vice President
270 Park Avenue, 20th Floor
New York, NY 10017
Fax: 212-270-4823
(or at such other address or telefax numbers as any party may
specify by notice to all other parties given as aforesaid).
Unless otherwise specifically provided in this Agreement, such
communications shall deemed to have been given (a) five days
after mailing, when mailed by registered or certified postage-
paid mail, (b) on the second business day after sending, when
delivered to a recognized international courier service such as
FedEx or DHL or the U.S. or Hong Kong Post Office Express Mail
or (c) upon the date of receipt by the addressee when delivered
personally or dispatched 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.
10. Terms and Conditions to Escrow Agent's Acceptance.
(a) Acceptance by the Escrow Agent of its duties under
this Agreement is subject to the following terms and conditions,
which the parties to this Agreement hereby agree shall govern
and control the rights, duties, liabilities and immunities of
the Escrow Agent:
(i) The duties and obligations of the Escrow
Agent shall be determined solely by the express provisions
of this Agreement and the Escrow Agent shall not be liable
except for the performance of such duties and obligations
as are specifically set out in this Agreement. The Escrow
Agent shall have no implied duties or obligations
hereunder.
(ii) The Escrow Agent shall act hereunder as
depository only, and it shall not be responsible or liable
in any manner whatever for the sufficiency of the documents
and other items delivered herewith. The Escrow Agent shall
not be responsible in any manner whatsoever for any failure
or inability of the parties to this Agreement, or of any
one else, to deliver monies or other property to the Escrow
Agent or otherwise to honor any of the provisions of this
Agreement.
(iii) The fees (which are US $5,000 for the
first year and US $800 per year thereafter) and expenses of
the Escrow Agent in administering this Escrow Agreement
shall be borne equally by STD BVI (jointly and severally
among themselves) and the Purchaser Parties (jointly and
severally among themselves). STD BVI (jointly and
severally among themselves) and the Purchaser Parties
(jointly and severally among themselves) will equally
reimburse and indemnify the Escrow Agent for, and hold it
harmless against any loss, liability or expense, including
but not limited to counsel fees, incurred without bad faith
or willful misconduct on the part of the Escrow Agent
arising out of or in connection with its acceptance of, or
the performance of its duties and obligations under, this
Agreement as well as the costs and expenses of defending
against any claim or liability arising out of or relating
to this Agreement.
(iv) The Escrow Agent shall be fully protected
in acting on and relying upon any written notice,
direction, request, waiver, consent, receipt or other paper
or document furnished to it, not only as to its due
execution and the validity and effectiveness of its
provisions but also as to the truth and acceptability of
any information therein contained, which the Escrow Agent
in good faith believes to be genuine and what it purports
to be.
(v) The Escrow Agent shall not be liable for any
error of judgment, or for any act done or step taken or
omitted by it in good faith or for any mistake in fact or
law, or for anything which it may do or refrain from doing
in connection herewith, except its own gross negligence or
willful misconduct.
(vi) The Escrow Agent may seek the advice of
legal counsel in the event of any dispute or question as to
the construction of any of the provisions of this Agreement
or its duties hereunder, and it shall incur no liability
and shall be fully protected in respect of any action
taken, omitted or suffered by it in good faith in
accordance with the written opinion of such counsel. The
cost of such services shall be reimbursed pursuant to
clause (viii) of this Section.
(vii) The Escrow Agent shall not be bound by any
notice of a claim, or demand with respect thereto, or any
waiver, modification, amendment, termination or rescission
of this Agreement, unless in writing received by it, and,
if its duties herein are modified, unless it shall have
given its prior written consent thereto.
(viii) STD BVI and the Purchaser Parties
(jointly and severally among themselves) shall jointly and
severally reimburse and indemnify the Escrow Agent for, and
hold it harmless against any loss, liability or expense,
including but not limited to counsel fees incurred by it,
incurred without bad faith or willful misconduct on the
part of the Escrow Agent arising out of or in connection
with its acceptance of, or the performance of its duties
and obligations under, this Agreement as well as the costs
and expenses of defending against any claim or liability
arising out of or relating to this Agreement.
(ix) If STD BVI has made any payment to the
Escrow Agent pursuant to Section 10(a)(iii) or Section
10(a)(viii) over and above its pro rata portion thereof, or
if the Purchaser Parties have made any payment to the
Escrow Agent pursuant to Section 10(a)(iii) or Section
10(a)(viii) over and above their pro rata portion thereof,
STD BVI or Purchaser Parties, as applicable, shall have a
claim over against the Purchaser Parties or STD BVI, as
applicable, to the extent of such excess and may make claim
against the Escrow Fund with respect to such monies owed to
them.
(b) If a controversy arises between the parties
hereto, or between the parties hereto and any person not a party
hereto, as to whether or not, or to whom, the Escrow Agent shall
deliver the Escrow Fund or any portion thereof or as to any
other matter arising out of or relating to this Escrow
Agreement, the Stock Purchase Agreement, the Asset Purchase
Agreement or the Escrow Fund deposited hereunder, the Escrow
Agent shall not be required to determine same and need not make
any delivery of the Escrow Fund or any portion thereof but may
retain the same until the rights of the parties to the dispute
shall have finally been determined by agreement or by final
order of a court of competent jurisdiction, provided, however,
that the time for appeal of any such final order has expired
without an appeal having been made. The Escrow Agent shall
deliver the Escrow Fund or any portion thereof within 15 days
after the Escrow Agent has received written notice of any such
agreement or final order (accompanied by an affidavit that the
time for appeal has expired without an appeal having been made).
The Escrow Agent shall be entitled to assume that no such
controversy has arisen unless it has received a written notice
that such a controversy has arisen which refers specifically to
this Escrow Agreement and identifies by name and address the
adverse claimants to the controversy.
11. Attorney-in-Fact. STD BVI hereby appoints each
of Stephen Chu (address as set forth in Section 9) and Todd Hays
(address: c/o Interact Accessories, Inc. 10945 McCormick Road,
Hunt Valley, MD 21030), and each of the Purchaser Parties hereby
appoints each of Robert L. Borchardt (address: c/o Recoton, as
set forth in Section 9) and Stuart Mont (address as set forth in
Section 9), as its attorneys-in-fact, each having full powers of
authorization, substitution and delegation for purposes of
giving any consents or approvals required by this Agreement or
for executing and delivering on behalf of such party any
agreements, certificates, documents or other writings as may be
required to be delivered pursuant to this Agreement.
12. Definition. Unless otherwise stated, all
references in this Agreement to days shall mean calendar days.
If a period of days ends on a weekend or holiday, such period
shall be extended to the next business day.
13. Governing Law. This Agreement and its validity,
construction and performance shall be governed in all respects
by the laws of the State of New York, U.S.A. without giving
effect to principles of conflict of law.
IN WITNESS WHEREOF, STD BVI and the Purchaser Parties
have each caused this Agreement to be executed on its behalf by
a duly authorized officer as of the day and year first above
written.
STD INVESTMENTS (B.V.I.) LIMITED
By:
Name:
Title:
RECOTON CORPORATION
By:
Name:
Title:
RECOTON (FAR EAST) LIMITED
By:
Name:
Title:
INTERACT ACCESSORIES, INC.
By:
Name:
Title:
The undersigned, by its duly authorized
representative, hereby accepts appointment
as Escrow Agent pursuant to the foregoing
Agreement.
CHEMICAL BANK
By:
Name: Gary Marzolla
Title: Vice President
<PAGE>
EXHIBIT 4.02(o)
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of August 31, 1995 (the
"Agreement") among Recoton Corporation, a New York corporation
(the "Company"), and Stephen Chu ("S. Chu"), David Chu ("D.
Chu"), Patrick Ho ("Ho"), Todd Hayes ("Hayes"), STD Investments
(B.V.I.) Limited, a British Virgin Islands corporation ("STD
BVI") (STD BVI and S. Chu, D. Chu, Ho and Hays each sometimes
referred to as a "Shareholder" and collectively as the
"Shareholders") and Robert L. Borchardt, a shareholder of the
Company, as the initial holder of the proxy granted pursuant to
Section 3 hereof.
WHEREAS, simultaneously with the execution of this
Agreement, pursuant to a Stock Purchase Agreement dated as of
August 31, 1995 (the "Stock Purchase Agreement") among STD BVI
and Plomax Holding Limited ("Seller") and Recoton (Far East)
Limited ("Purchaser"), the Company, STD International Holdings
Limited ("STD Bermuda"), S. Chu and certain other shareholders
of STD Bermuda, (i) the Sellers are selling to the Purchaser,
and the Purchaser is purchasing from the Shareholders, all of
the ordinary shares of capital stock of STD Holding Limited, a
Hong Kong corporation, and (ii) in consideration therefor the
Purchaser is delivering to STD BVI, as partial payment of the
Purchase Price (as defined in the Stock Purchase Agreement),
406,092 shares of common stock of the Company, par value US$0.20
per share (the "Common Stock"), which shares (the "Escrow
Shares") are being placed in escrow pursuant to an escrow
agreement dated the date hereof (the "Escrow Agreement"), all of
which shall be subject to escrow for two years (the "Two Year
Period"); at the expiration of the Two Year Period, 25% of the
Escrow Shares may be released from escrow as provided in the
Escrow Agreement and the remaining shares will be subject to the
Escrow Agreement for one additional year (the "Additional Escrow
Period" and together with the Two Year Period, the "Applicable
Escrow Period"); and
WHEREAS, S. Chu, D. Chu, Ho and Hayes may receive Common
Stock as employee bonuses pursuant to Section 9.02 of the Stock
Purchase Agreement and may receive options to purchase Common
Stock as employees of the Company or subsidiaries thereof; and
WHEREAS, the Company and the Shareholders desire to
establish in this Agreement certain terms and conditions of the
Shareholders' relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein and in the Stock Purchase
Agreement, the parties hereto agree as follows:
1. Representations and Warranties.
(a) The Company represents and warrants to the
Shareholders as follows:
(i) The Company has full power and authority to
execute, deliver and perform this Agreement;
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its
terms, except that (x) the enforceability hereof may be
limited by bankruptcy, insolvency, moratorium, fraudulent
conveyance or other similar laws relating to or affecting
creditors' rights generally and court decisions with
respect thereto, (y) the remedy of specific performance and
injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion
of the court before which any proceedings therefor may be
brought, and (z) the rights to indemnity and contribution
hereunder may be limited by federal or state securities
laws or the public policy underlying such laws; and
(iii) The execution, delivery and performance of
this Agreement by the Company do not violate or conflict
with or constitute a default under the Company's
Certificate of Incorporation, By-Laws or any material
agreement to which it is a party or by which it or its
property is bound.
(b) The Shareholders represent and warrant to the
Company as follows:
(i) The Shareholders have full power and
authority to execute, deliver and perform this Agreement;
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Shareholders and
constitutes a valid and binding obligation of the
Shareholders, enforceable against the Shareholders in
accordance with its terms, except that (x) the
enforceability hereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance or other
similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, (y) the
remedy of specific performance and injunctive and other
forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court
before which any proceedings therefor may be brought, and
(z) the rights to indemnity and contribution hereunder may
be limited by federal or state securities laws or the
public policy underlying such laws;
(iii) The execution, delivery and performance of
this Agreement by the Shareholders do not violate or
conflict with or constitute a default under, in the case of
STD BVI, its Certificate, Memorandum or Articles of
Incorporation, Association or Organization and By-Laws, or,
in the case of each Shareholder, any material agreement to
which it is a party or by which it or its property is
bound;
(iv) As of the date hereof, none of the
Shareholders nor any of their "controlled affiliates" (as
defined below) beneficially own any shares of Common Stock
(or any options, warrants, rights or other securities
exercisable for, exchangeable for or convertible into
shares of Common Stock, whether immediately or after the
passage of time (collectively, "Conversion Securities"))
other than shares or to be issued pursuant to the Stock
Purchase Agreement; and
(v) The Shareholders are acquiring the shares of
Common Stock pursuant to the Stock Purchase Agreement for
investment purposes only and not with a view to the
distribution thereof in violation of any applicable state
or federal securities laws.
(c) As used in this Agreement, the term "controlled
affiliate" means any corporation, partnership or other entity
that is "controlled by," "controlling" or "under common control
with" (as such terms are defined under Rule 405 under the United
States Securities Act of 1933, as amended (the "Securities
Act")) the applicable party, and for purposes hereof, when such
term is used with respect to the Shareholders, shall include, in
the case of the Corporate Shareholders, all directors and
officers of such Shareholders.
2. Term of Agreement; Voting Securities.
(a) Subject to the provisions of Section 6 hereof,
the term of this Agreement (the "Term") shall be for a period of
ten years commencing on the date hereof.
(b) For the purposes of this Agreement the term
"Voting Securities" shall mean all securities of the Company
entitled to vote generally in the election of directors of the
Company or on issues submitted to the shareholders of the
Company.
3. Voting and Other Rights. Each of the Shareholders
shall during the Term (a) use reasonable efforts to be present
and cause its controlled affiliates to be present, in person or
represented by proxy, at all shareholder meetings of the
Company, so that all Voting Securities beneficially owned by it
and its controlled affiliates shall be counted for the purpose
of determining the presence of a quorum for such meetings; and
(b) vote, and cause to be voted by its controlled affiliates,
all Voting Securities beneficially owned by it or its controlled
affiliates (i) in favor of all matters proposed by the Board of
Directors of the Company (the "Board") and presented to the
Company's shareholders, (ii) consistent with the recommendation
of the Board on all other matters as to which the Board shall
take a position and (iii) for all nominees for Directors of the
Company recommended by the Board. To effect the foregoing
agreement, the Shareholders hereby grant to Robert L. Borchardt
so long as he is an officer of Recoton, and, if he no longer an
officer of Recoton, to Stuart Mont so long as he is an officer
of Recoton, and, if he is no longer an officer of Recoton to
Peter Wish so long as he is an officer of Recoton, and, if he is
no longer an officer of Recoton, to George Calvi so long as he
is an officer of Recoton, and, if he is no longer an officer of
Recoton, to such officer or officers as may be designed by the
Board of Directors of Recoton from time to time, an irrevocable
proxy, coupled with an interest, to vote all Voting Securities
beneficially owned by them consistent with this Section 3.
4. Acquisition of Voting Securities. During the Term,
the Shareholders will not, and will cause each of its controlled
affiliates not to, acquire, offer or propose to acquire, or
agree to acquire, directly or indirectly, any Voting Securities
or Conversion Securities; provided, however, that the
Shareholders and their controlled affiliates may acquire Voting
Securities and/or Conversion Securities: (a) as provided in the
Stock Purchase Agreement, (b) by way of stock dividends, stock
splits, reorganizations, recapitalizations, mergers,
consolidations or other similar transactions made available to
holders of Common Stock generally, (c) if and to the extent the
Shareholders receive Voting Securities in payment of bonuses
described in the Stock Purchase Agreement or employee stock
options or (d) pursuant to open market purchases by any or all
of the Shareholders such that such purchases (net of any sales
as allowed hereby) when aggregated with Voting Securities and
Conversion Securities acquired pursuant to Section 4(a), (b) and
(c) do not exceed an aggregate of 10% of the outstanding Voting
Securities of the Company (the "Open Market Shares"); provided,
however, that such Voting Securities shall become subject to all
of the provisions of this Agreement upon such acquisition.
5. Certain Prohibited Actions. During the Term, without
the prior written consent of the Company duly authorized by the
Board or except as otherwise required or authorized by this
Agreement, each of the Shareholders will not, and will cause
each of its controlled affiliates not to, singly or as part of a
"group," directly or indirectly, through one or more
intermediaries (i) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" (as such terms
are defined or used in Regulation 14A under the United States
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) with respect to the Voting Securities (including by the
execution of actions by written consent), or become a
"participant" in any "election contest" (as such terms are
defined or used in Rule 14a-11 under the Exchange Act) with
respect to the Company or seek to advise or influence any person
or entity with respect to the voting of any Voting Securities
other than consistent with any proxy solicitation on behalf of
the Board of Directors of the Company; (ii) initiate, propose or
participate in the solicitation of stockholders for the approval
of, one or more stockholder proposals with respect to the
Company (as described in Rule 14a-8 under the Exchange Act) or
induce any other individual or entity to initiate any
stockholder proposal relating to the Company; (iii) form, join,
influence or participate in a "group," act in concert with any
other person or entity or otherwise become a "person," for the
purpose of taking any other actions prohibited under this
Section 5 or any other provision of this Agreement; (iv) make
any proposal or, except as may be required by law, any public
announcement relating to a tender or exchange offer for any
Voting Securities, or a merger, business combination, sale of
assets, liquidation, restructuring, recapitalization or other
extraordinary corporate transaction relating to the Company or
its material assets; (v) act alone or in concert with others
(including by providing financing for another party), to seek or
offer to control the Company; (vi) deposit any Voting Securities
in a voting trust or subject any Voting Securities to any
arrangement or agreement with respect to the voting thereof
other than in connection with this Agreement; or (vii) disclose
any intention, plan or arrangement inconsistent with the
foregoing prohibitions or advise or consent any other person in
connection with the foregoing prohibitions; provided, however,
that nothing contained herein shall prohibit the Company from
publicly announcing its position with respect to any matter
concerning the Company or prohibit the Shareholders from making
any disclosures required to be made under applicable securities
laws.
6. Disposition of Voting Securities.
(a) The Shareholders shall not, and shall cause their
respective controlled affiliates not to, transfer any Voting
Securities, whether by sale, assignment, pledge, encumbrance,
gift, bequest, appointment or otherwise, without the prior
written consent of the Company in each instance except as
specifically provided in, and subject to the provisions of,
Section 6(b), (c), (d), (e) or (f) of this Agreement. Any such
transfers must be in compliance with federal and state and other
applicable securities law.
(b) After the Voting Securities have been released
from the Escrow Agreement in the case of Corporate Shareholders,
or at any time in the case of other Shareholders, the
Shareholders and their respective controlled affiliates may
transfer Voting Securities in a bona fide private transaction to
an unaffiliated person in accordance with the following
provisions:
(i) Promptly upon receipt of a bona fide offer
or the finalization of the terms of a proposed sale or
transfer of Voting Securities to a third party, the
Shareholders proposing to transfer (the "Offering
Shareholders") or their respective controlled affiliates
shall notify the Company in writing of their intention to
sell, transfer or dispose of such Voting Securities,
specifying the number of Voting Securities proposed to be
sold or transferred, the identity or identities of the
prospective purchaser or purchasers thereof, the proposed
purchase price therefor, the manner of sale and the
material terms of any agreement relating thereto. (Such
notification shall hereinafter be referred to as the
"Shareholder Notice.")
(ii) The Company shall have the right,
exercisable by written notice of exercise (the "Exercise
Notice") given to the Offering Shareholders or their
respective controlled affiliates within two business days
(ten business days if the proposed purchase price is not
all cash) following receipt by the Company of the
Shareholder Notice to purchase (and/or to cause a person or
persons designated by the Company to purchase) all but not
less than all of the Voting Securities specified in such
Shareholder Notice at the price, in the manner and on the
terms specified therein. If the purchase price specified
in the Shareholder Notice includes any property other than
cash, the purchase price at which the Company (or its
designee) shall be entitled to purchase shall be (x) the
amount of cash, if any, specified in such Offering
Shareholder Notice plus (y) cash in an amount equal to the
value of the property specified therein. If the purchase
price specified in the Offering Shareholder Notice includes
property other than cash, and the Company notifies the
Offering Shareholders of its irrevocable determination to
exercise its right to purchase all of the Voting Securities
specified in the Offering Shareholder Notice so long as the
value of such property does not exceed the amount specified
in the Company's notice, which represents the Company's
good faith estimate of the value of such property (the
"Company's Valuation"), and the Offering Shareholders or
their respective controlled affiliates do not agree with
such valuation, the value of such property shall be
determined by two independent financial advisors, one such
financial advisor to be selected by the Company and another
to be selected by the Offering Shareholders or their
respective controlled affiliates, in each case, within five
days after notice is given from the Shareholders or their
respective controlled affiliates, to the other party, to
the effect that they are unable to agree as to such value.
If, within five days after being selected, the two
financial advisors have not agreed as to such value, a
third financial advisor shall be selected within five days
thereafter by the mutual consent of the first two financial
advisors, or, if such first two financial advisors shall
fail to agree upon the selection of a third financial
advisor in such time, such selection shall be made as
promptly as practicable in accordance with the Commercial
Arbitration Rules of the American Arbitration Association,
as then in effect at the time of such disagreement. Within
five days of its selection, the third financial advisor
shall determine the value of such property, which
determination shall be final and binding on all parties
hereto. The Company and the Offering Shareholders or their
respective controlled affiliates shall each bear the costs
incurred in connection with the retention of the respective
financial advisor selected by them. All costs incurred as
a result of the retention of a third financial advisor
(including any costs incurred in connection with the
assistance provided by the American Arbitration
Association) shall be borne equally between the Company, on
the one hand, and the Offering Shareholders or their
respective controlled affiliates, on the other hand. If
the value of such property as determined pursuant to the
preceding sentence is (a) less than or equal to the
Company's valuation, the Company shall be deemed to have
exercised its right to purchase all of the Voting
Securities specified in the Exercise Notice as of the date
that the purchase price was determined pursuant to this
clause (ii) and (b) greater than the Company's valuation,
the Company shall have five business days from such date to
determine whether to purchase the Voting Securities
specified in such Shareholder's Notice at the purchase
price determined pursuant to this clause (ii).
(iii) If the Company exercises its option to
purchase all of the Voting Securities being offered
(including by designation of another purchaser or
purchasers), the closing of the purchase of such Voting
Securities shall take place as promptly as practicable, but
(unless extended as provided herein) in no event shall such
closing take place more than five business days after the
later of (a) the date the Company gives notice of such
exercise; and (b) the date the purchase price for such
Voting Securities was determined pursuant to clause (ii)
above; provided, however, that, if any governmental or
regulatory approval is required for the closing of such
purchase, the Company and the Shareholders shall each use
their respective best efforts to obtain such approval as
promptly as practicable and such closing shall occur not
later than five days after such approval is obtained.
(iv) Notwithstanding anything contained in this
Agreement, the Company shall not have the right to transfer
its right of first refusal contained herein to any
purchaser or purchasers if the nature or identity of such
purchaser or purchasers is reasonably likely to delay the
closing of such purchase for a longer period of time than
if the Company were the purchaser.
(v) If the Company elects not to exercise, or
fails to exercise within the time specified for such
exercise, its option provided herein in respect of any
particular Shareholder Notice, the Offering Shareholders or
their respective controlled affiliates shall be free,
during the period of 90 calendar days following the last
day of the period during which the Company was permitted to
exercise such option (or any earlier date on which the
Company gives notice of an election not to exercise such
option), or such period longer than 90 days as may be
reasonably necessary for the Offering Shareholders to
obtain all requisite governmental approvals, to sell the
Voting Securities specified in the Shareholder Notice in
the manner, to the purchasers and on the terms and for not
less than the consideration specified in such Shareholder
Notice. Any proposed transfer by the Shareholders or their
respective controlled affiliates of Voting Securities other
than in accordance with the provision hereof or after the
expiration of the applicable 90 calendar day period
referred to in this clause (v) will give rise to a separate
right of first refusal of the Company pursuant to the
provisions of this Section 6(b).
(c) After the Voting Securities have been released
from the Escrow Agreement in the case of the Corporate
Shareholders, or at any time in the case of other Shareholders,
the Shareholders and their respective controlled affiliates may,
from time to time, sell in open market transactions pursuant to
Rule 144 under the Securities Act (or any successor provision)
the number of Voting Securities then permitted under Rule 144
(or any successor provision) or pursuant to an offering
registered pursuant to Section 7 of this Agreement, provided,
however, that in the case of a registered offering the Company
shall have an option to purchase such Voting Securities at the
Market Price within ten business days of its receipt of a
Piggyback Notice. "Market Price" shall mean the average closing
price of such Voting Security as quoted on Nasdaq (or any other
exchange on which the Voting Securities are then trading) during
the 10 trading days ending two days immediately prior to the
date of the Piggy Back Notice excluding from the determination
of such average the two highest and two lowest closing prices.
(d) The Shareholders and their respective controlled
affiliates shall be free without any restrictions at all times
during the Term to sell or transfer any Voting Securities
(subject, however, to the terms of the Escrow Agreement, if
applicable), (i) if a third party makes a bona fide offer to
purchase Voting Securities which represent with such third
parties' then-current holdings more than 50% of the voting power
of the outstanding Voting Securities, which offer is approved
and recommended by the Board (if such recommendation shall not
have been withdrawn or adversely modified prior thereto) or (ii)
to the Company pursuant to any offer made by the Company
generally to all Shareholders or to any one or more of the
Shareholders.
(e) After the Voting Securities have been released
from the Escrow Agreement in the case of Corporate Shareholders,
or at any time in the case of other Shareholders, the
Shareholders and their respective controlled affiliates may from
time to time (i) dividend or transfer, free of any restriction
other than as set forth in this Agreement, to STD Bermuda and/or
any one or more of the persons set forth on Annex A hereto the
Voting Securities or (ii) sell, transfer, pledge, gift over or
otherwise dispose of any Voting Securities to one or more of the
Shareholders or to spouses, children, grandchildren, siblings or
parents of one or more of the Shareholders or to a company which
is (and during the term of this Agreement will be) wholly owned
by, or a trust the only beneficiaries of which are, one or more
of the Shareholders or Family Members, on condition in any case
that such transferees agree to be bound by all of the provisions
of this Agreement and to execute a writing substantially
equivalent to Section 5.28 of the Stock Purchase Agreement.
(f) The Shareholders shall not, and shall cause their
respective controlled affiliates not to, at any time during the
Term, sell or transfer Voting Securities to (x) any person
(including that person's controlled affiliates and any group in
which that person or its controlled affiliates shall be a member
if the Shareholders know of the existence of such group or
affiliates), other than an underwriter in connection with a
public offering of Voting Securities or pursuant to sales under
Rule 144, which the Shareholder or affiliate knows, or through
the exercise of reasonable diligence should have known, would,
after giving affect to such sale or transfer, beneficially own
in the aggregate more than 10% of the Voting Securities.
7. Registration Rights.
(a) If at any time before the expiration of the Term,
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 Voting Security from a
holder of such stock entitled thereto, then the Company shall in
each case deliver written notice thereof (the "Registration
Notice") to each Shareholder so that it is received at least 14
days before the anticipated filing date. Such notice shall
offer to the Shareholders the option to include in such
Registration Statement, subject to the conditions set forth in
this Agreement, such number of shares of Voting Security
eligible for registration held by the Shareholders which are not
then subject to the Escrow Agreement, which cannot then be sold
pursuant to Rule 144 under the Securities Act (the "Eligible
Shares"). Notwithstanding the foregoing, the Company shall not
be obligated to register the Eligible Shares unless there shall
have been received by the Company, within ten calendar days of
receipt of a Registration Notice by a Shareholder, written
notice (a "Piggyback Notice") from a Shareholder, 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 a Shareholder to register Piggyback
Shares pursuant to this Paragraph (a) 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 a Shareholder. If the shares
covered by such Registration Statement (other than those held by
a Shareholder) 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 a Shareholder that their 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 a Shareholder 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 Shareholders and either, at the managing
underwriters' option, (i) the number of shares proposed to be
offered by the Shareholders 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 Shareholders shall delay their 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
Shareholders to make their proposed offering and sale for a
period of 90 calendar days immediately following the end of such
period of delay.
(b) (i) If and when the Company shall register any
Eligible Shares under the Securities Act, the Company will,
subject to all of the provisions of Section 7(a) hereof:
(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 (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 each participating
Shareholder 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 such Shareholders 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 a Shareholder
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 Shareholders who are offering their
shares ("Participating Shareholders") 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 Participating Shareholders,
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 Participating Shareholders such
number of copies of such Registration Statement and all
amendments thereto and of such prospectuses (including each
preliminary or supplemented prospectus) as such
Shareholders may reasonably request in order to facilitate
the sale or transfer of the Registration Shares covered
thereby;
(H) make available to the Participating Shareholders
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 reasonable 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
Participating Shareholders or the managing underwriters, if
any;
(J) use reasonable efforts to register or qualify
such of the Registration Shares under the securities or
Blue Sky laws in up to ten of such jurisdictions within the
United States as the applicable managing underwriters or if
none, as the Participating Shareholders 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
Participating Shareholders, each underwriter involved in
the offering of the Registration Shares pursuant to a
demand made hereunder and each person who "controls" a
Participating Shareholder and any underwriter within the
meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act (each Shareholder 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) cooperate with the Participating Shareholders 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;
(M) use reasonable 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;
(N) upon the occurrence of any event contemplated by
Clause (6) of Paragraph (b)(i)(D) above, 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
(O) make available for inspection during normal
business hours to Participating Shareholders, 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 Paragraph (b)(i)(D) above, each Participating
Shareholder will forthwith discontinue disposition of
Registration Shares until the Participating Shareholder's
receipt of the copies of the supplemented or amended
prospectus contemplated by Subparagraph (i)(O) above, or
until it 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, such
Shareholder 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 such
Shareholder'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 7(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 such Shareholder shall have
received the copies of the supplemented or amended
prospectus contemplated by Paragraph (b)(i)(O) or the
Advice.
(ii) the Company's obligations to file a
Registration Statement and the rights of a Shareholder to
have the Common Stock held by him to be included in any
Registration Statement pursuant to the provisions of this
Agreement, shall be subject to the following conditions:
(A) The Participating Shareholders shall furnish to
the Company upon request, in writing such information and
documents about themselves, their proposed method of
distribution and related matters 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 Participating Shareholders shall agree in
writing to, and failing such written agreement does hereby,
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 (K) of subsection (i) of this
Section 7, but only with respect to information furnished
in writing by such Participating Shareholders to the
Company expressly for use in the Registration Statement or
related Prospectus (preliminary or final), or any amendment
or supplement thereto.
(c) All expenses of a registration pursuant to this
Agreement, 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 Participating Shareholder, and the legal and
accounting fees and expenses incurred by the Company in
connection with the Registration Statement shall be borne by the
Company; provided, however, that the Participating Shareholders
shall pay all underwriters' commissions and discounts
attributable to the Eligible Shares to be sold by such
Shareholders and the fees and expenses of such Shareholders'
counsel.
(d) Each of the parties hereto acknowledge and agree
that the indemnification provisions set forth in this Section 7
shall not be subject in any manner to any indemnification
provisions contained in the Stock Purchase Agreement or
agreement refined to therein.
8. Legend on Certificates.
(a) During the Term, each of the certificates
representing Voting Securities received or acquired by the
Shareholders or any of their respective controlled affiliates in
accordance with this Agreement shall be subject to stop transfer
instructions and shall include the following legend, to the
extent applicable:
The shares represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, or the securities laws of any state. The
shares represented by this certificate may not be
transferred whether by sale, assignment, pledge,
encumbrance, gift, bequest, appointment or otherwise,
and Recoton Corporation ("Recoton") will not register
the transfer of such shares, except pursuant to and
subject to that certain Shareholders' Agreement among
Recoton, Stephen Chu, David Chu, Patrick Ho, Todd
Hayes and STD Investments (B.V.I.) Limited, a British
Virgin Islands corporation, dated August 31, 1995. A
copy of such agreement is on file with the Secretary
of Recoton.
The Company shall (i) have such legend removed
promptly upon the sale or other disposition of any Voting
Securities pursuant to Section 6(b)(v) or Section 7 hereof and
(ii) have such legend (other than the first sentence thereof)
removed upon the expiration of the Term.
9. Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants
or agreements contained in this Agreement will cause the other
party to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore in the event of
any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any
other remedy to which it may be entitled, at law or in equity.
10. Amendment and Modification. Subject to applicable
law, this Agreement may be amended, modified and supplemented
only by written agreement of the Company and the Shareholders.
11. Notices. Any and all notices or other communications
required or permitted to be given under any of the provisions of
this Agreement shall be in writing and shall be deemed to have
been given when given to the following addresses or telefax
numbers:
(a) If to any of the Shareholders, c/o
STD International Holdings Limited
UNH F-J, 5th Floor, Block 2
Kwai Tak Industrial Centre
15-33 Kwai Tak Street
Kwai Chung, New Territories
Hong Kong
Fax: 011-852-2612-1159
Attn: Stephen Chu
with a copy (which shall not
constitute notice) to:
Heller Ehrman White & McAuliffe
1902A Peregrine Tower
Lippo Center
89 Queensway
Hong Kong
Fax: 011-852-2-810-6242
Attn: Simon Luk, Esq.
and
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
Fax: 415-772-6268
Attn: Tim Hoxie, Esq.
(b) If to the Company:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Fax: 407-333-8903
Attn: Stuart Mont
with a copy (which shall not
constitute notice) to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004
Fax: 212-806-6006
Attn: Theodore S. Lynn, Esq.
(or at such other address or telefax numbers as any party may
specify by notice to all other parties given as aforesaid).
Unless otherwise specifically provided in this Agreement, such
communications shall be deemed to have been given (a) five days
after mailing, when mailed by registered or certified postage-
paid mail, (b) on the second business day after sending, when
delivered to a recognized international courier service such as
Federal Express or DHL or, where applicable, the U.S. [or Hong
Kong] Post Office Express Mail or (c) upon the date of receipt
by the addressee when delivered personally or dispatched 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.
12. Severability. In the event that any provision(s) of
this Agreement shall be held illegal, invalid or unenforceable
under applicable law, then such illegality, invalidity or
unenforceability shall not affect any other provision(s) hereof
and this Agreement shall remain in force and be effectuated as
if such illegal, invalid or unenforceable provision is not part
of this Agreement.
13. Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors,
administrators, legal representatives, successors (including any
successor by merger, reorganization, consolidation or other
business combination) and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the
prior written consent of the other party.
14. Governing Law. This Agreement and its validity,
construction and performance shall be governed in all respects
by the laws of the State of New York, U.S.A. without giving
effect to principles of conflict of law.
15. Jurisdiction and Venue. The parties shall promptly
cooperate in good faith to carry out the provisions of this
Agreement and the activities contemplated hereby and shall also
cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the
activities contemplated hereby. Except as otherwise noted in
this Agreement, any dispute, question, difference, controversy
or claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration before a
panel of three arbitrators in Hawaii in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association, as then in effect at the time of filing of the
notice of demand. The parties consent to the jurisdiction of
the courts of the State of Hawaii, and of the United States
District Court for Hawaii, for all purposes in connection with
arbitration. The application to either of said courts, and any
paper in connection requested or by personal service or in such
other manner as may be permissible under the rules of the
applicable court or arbitration tribunal, provided a reasonable
time for appearance is allowed. The arbitrators shall not alter
or disregard any express provisions of this Agreement. Any
arbitration award in accordance with this Section 15 shall be
final and binding upon the parties and judgment thereon may be
entered in any court having jurisdiction over such party. In
the event of litigation or arbitration hereunder, the prevailing
party in such action or actual expenses incurred by him or it
for reasonable attorney fees and disbursements. Nothing in this
Section 15, however, shall limit Purchaser's rights to commence
litigation for equitable relief pursuant to Section 9.
16. Counterparts. This Agreement may be executed in one
or more counterparts, all of which taken together shall be
deemed to evidence one and the same agreement.
17. Headings. The headings of the Sections of this
Agreement are inserted for convenience only and shall not
constitute a part hereof or affect in any way the meaning or
interpretation of this Agreement.
18. Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersedes
all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party
hereto.
19. Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or corporation, other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed on the day and year first
above written.
STD INVESTMENTS (B.V.I.) LIMITED
By:
Name:
Title:
_______________________________
Stephen Chu
_______________________________
David Chu
_______________________________
Patrick Ho
_______________________________
Todd Hayes
RECOTON CORPORATION
By:
Name: Stuart Mont
Title: Chief Operating Officer
Robert L. Borchardt
ANNEX A
<TABLE>
<CAPTION>
STD INTERNATIONAL HOLDINGS LIMITED
Current Actual Shareholdings
Shareholdings
Shares %
<S> <C> <C>
Plomax Holdings Ltd.
Chu Nin Yiu 65,409,930 48.45
Chu Nin Yiu 37,833,075 28.03
103,243,005 76.48
Bloomshall Holdings Ltd.
Chu Nin Wai 12,958,854 9.60
Ho Tze Man 8,733,174 6.47
Leung Choi Luen 5,239,904 3.88
Ton Yue Ting 4,223,580 3.13
Wong Shiu Wah 127,028 0.09
Todd Stephen Hays 476,355 0.35
31,756,995 23.52
135,000,000 100.00
</TABLE>
<PAGE>
EXHIBIT 4.02(p)(i)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 31st day of August, 1995,
between STD Holding Limited, a Hong Kong corporation (the
"Corporation"), and Stephen Chu (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has heretofore been employed by
the Corporation, a company engaged in the business of
manufacturing and marketing computer and video game accessories,
as its Group Managing Director; and
WHEREAS, the stock of the Corporation has been acquired
by Recoton (Far East) Limited ("RFE") pursuant to an agreement
of even date herewith (the "Acquisition Agreement") and RFE
desires that the Employee would remain employed by the
Corporation or a subsidiary thereof;
WHEREAS, the RFE is a wholly owned subsidiary of
Recoton Corporation, a New York corporation ("Recoton"); and
WHEREAS, the Corporation and the Employee desire to
assure the continued service of the Employee to the Corporation;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, representations, warranties and conditions
herein contained, the parties hereto agree as follows:
1. Employment and Duties.
(a) The Corporation hereby employs the Employee,
and the Employee accepts employment, during the term set forth
in Section 2(a) and upon the other terms and conditions set
forth in this Agreement. The Employee shall serve as Group
Managing Director of the Corporation (or otherwise if the
position is of similar stature) subject to the conditions set
forth in this Agreement, under the direction of the Board of
Directors of the Corporation, and shall exercise such
responsibilities and perform such duties for the Corporation and
any companies in which the Corporation owns a capital stock
interest of at least 40% of the voting equity (a "subsidiary")
commensurate with such capacity as the Board of Directors of the
Corporation may from time to time reasonably designate. The
Employee may also serve as a director of the Corporation during
the term of his employment pursuant to this Agreement, if agreed
and if so elected to such position.
(b) The Employee shall report to Robert L.
Borchardt, so long as he is Director of the Corporation or,
thereafter, to the Chairman of the Board of Directors of the
Corporation or his designee. The Employee shall devote
substantially all of his business time, attention and energies
to the employment under this Agreement and to promoting the best
interests of the Corporation and the Employee shall not, either
during or outside of such normal business hours, directly or
indirectly engage in any activity inimical to such best
interests. The Employee shall not perform services for
compensation for himself or for any entity or person other than
the Corporation without the prior express written permission of
the Corporation's Board of Directors; it shall not, however, be
a violation of this Agreement for the Employee to (i) serve on
civic or charitable boards; (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 and the requirements of the second sentence of this
paragraph are not violated. The Employee shall exert his best
efforts in the performance of his duties under this Agreement.
2. Term; Payment Upon Termination.
(a) The term of the Employee's employment under
this Agreement shall commence as of the date of this Agreement
and shall terminate on the earlier of the death of the Employee,
the Employee ceasing to be employed by the Corporation other
than by reason of breach by the Corporation of this Agreement or
5:00 p.m. on December 31, 2001 (the "Expiration Date").
(b) The Corporation, in the sole discretion of
its Board of Directors, may terminate the employment of the
Employee, and its obligation to pay compensation pursuant to
Section 3, prior to the Expiration Date at any time for "cause".
"Cause" as used in this Agreement shall mean (i) fraud, (ii)
conviction of a felony or any crime having as an essential
element larceny, (iii) commission of an intentional tort against
the Corporation, (iv) wilful and repeated dereliction of duty or
breach of the Employee's material obligations under this
Agreement, (v) failure to perform any material covenants of such
Employee under the Acquisition Agreement to the extent that the
Employee is a party to such agreement, (vi) repeated or material
violation of published Corporation business policies and (vii)
serious violation of law relating to the Corporation's business
or its securities or the business or securities of Recoton. In
addition, the Corporation, in the sole discretion of its Board
of Directors, may terminate the employment of the Employee, and
its obligation to pay compensation pursuant to Section 3 except
as otherwise set forth in Section 3, prior to the Expiration
Date at any time for physical or mental impairment or condition
which renders the Employee unable to perform his usual duties as
an employee which persists for a period of more than 180 days
out of any 24-month period ("disability").
(c) The Corporation may terminate the employment
of the Employee for reasons other than cause or disability
provided that the Corporation shall continue to pay or provide
the Employee the salary and other benefits (including bonuses
and advances thereof which would be paid if the Employee were
still employed hereunder) provided for in this Agreement until
the fifth anniversary of the date of this Agreement.
(d) The Employee may terminate his employment
hereunder without liability to the Company at any time upon 30
days prior written notice, at which time his compensation and
benefits under this Agreement shall cease. If the Employee
terminates his employment hereunder or notifies the Corporation
of his intent to terminate his employment hereunder, the
Corporation in its sole discretion may require the Employee to
cease the exercise of his responsibilities and the performance
of his services for the Corporation at any time prior to the
effective date of the notice of termination and to refrain from
entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date
of termination. If the Corporation shall materially breach any
term of this Agreement, which breach shall not have been cured
within 10 days after written notice thereof has been given to
the Corporation, then the Employee may terminate his employment
under this Agreement and the Corporation shall continue to be
obligated to pay or provide to Employee the salary and other
benefits provided for in this Agreement until the fifth
anniversary of the date of this Agreement.
(e) The Employee shall be under no duty to
mitigate damages in case of termination pursuant to Section 2(c)
or 2(d) but the Corporation may offset against the sums owing to
him by the Corporation hereunder all sums earned by the Employee
either by reason of self-employment, as an employee or as a
consultant or from other activities which would be barred by
this Agreement were the Employee still employed by the
Corporation.
3. Compensation; Benefits; and Expenses.
For all services to be rendered to the Corporation or
any affiliate thereof in any capacity, including services as an
officer, director, member of any committee or otherwise, so long
as the Employee is employed by the Corporation pursuant to
Section 2(a) or as otherwise set forth in Section 2(c) or the
last sentence of Section 2(d):
(a) The Corporation shall pay the Employee a
salary at the initial rate of HK$2,390,000 per year (the
"Base Salary"). Such salary shall be payable in
installments, less any usual payroll deductions, in
accordance with prevailing payroll practices of the
Corporation from time to time. The Board of Directors shall
review the Employee's compensation and benefits at least
once each year and may in its sole discretion and absolute
increase the Employee's Base Salary and benefits over those
provided for hereunder; provided, however, that in any case
the Base Salary shall be increased each year (effective as
of January 1) by an amount at least equal to any increase in
the Consumer Price Index (B) for All Items compiled by the
Consumer Price Index Section of the Census and Statistics
Department of the Hong Kong Government (or by any Hong Kong
Government department upon which duties in connection with
such index shall have devolved). Other than as provided in
this Agreement, in no event may Employee's compensation or
benefits be decreased by the Board of Directors except to
the extent that such benefits (other than Base Salary) are
provided to other employees and such employee benefits are
similarly generally reduced.
(b) The Employee shall be entitled to receive
such bonuses, and advances against such bonuses, as are
described in Section 9.02 of the Acquisition Agreement as
being allocable to him.
(c) The Employee shall be entitled to the fringe
benefits generally made available to the executives of
Recoton of the rank equal to the Employee prior to this
Agreement (including vacation, holidays, insurance, medical
benefits, automobile and professional training) to the
extent that such benefits may be legally extended to him,
but the Corporation shall be under no obligation to include
him in any stock option, profit sharing plan or bonus
program, in light of the bonus referred to in Section 3(b).
He shall continue to receive the same automobile benefits
which he received prior to execution of this Agreement.
(d) The Employee's place of work, when not
engaged in business travel, shall be such place as the
Corporation may reasonably specify from time to time. The
Corporation shall reimburse the Employee's moving and
related expenses, and provide bridge loans, consistent with
Recoton's policy for senior executives if the Corporation's
offices shall be moved out of Hong Kong.
(e) The Corporation shall reimburse the Employee
for all reasonable and necessary expenses incurred by the
Employee requested or authorized by the Corporation in
connection with the Corporation's business and such expenses
are properly documented and accounted for in accordance with
the then policy of the Corporation.
4. Restrictions on the Disclosure of Proprietary
Information; Inventions.
(a) During the course of the Employee's
employment and thereafter, the Employee shall not, without the
prior written consent of the Corporation, directly or indirectly
(i) record, photograph, photocopy or by any other means copy or
cause to be copied any document, list, drawing, writing,
photograph, sketch, sound recording or other material that
embodies Proprietary Information or (ii) use, or disclose or
divulge to any person, firm or corporation, any Proprietary
Information, except as may be necessary in the ordinary course
of the Corporation's business or as may be required by law. As
used in this Agreement, "Proprietary Information" means
information disclosed to or obtained by the Employee, whether or
not acquired during business hours, concerning the
Corporation's, its subsidiaries' and/or Recoton's business,
operations, products, manufacturing or other processes,
services, customers, vendors, costs and pricing policies,
research, development, formulae, specifications, methods,
expertise, techniques, inventions, equipment, purchasing,
merchandising and selling including, but not limited to,
customer lists, financial and/or marketing reports and plans,
product configurations and compositions, pricing guidelines or
information, financial reports, financial projections and other
financial information, business plans and any other information
not readily known or obtainable by the general public, and any
proprietary software. Notwithstanding the foregoing sentence,
Proprietary Information does not include (i) information
acquired by the Employee before the Employee became an employee
of the Corporation, (ii) information which is or becomes public
knowledge (except as may be disclosed by the Employee in
violation of this Agreement), (iii) information acquired by the
Employee from a source, other than the Corporation, Recoton, or
an affiliate of or a party providing such information to the
Corporation or Recoton or an affiliate thereof, that legally
acquired such information and was free to disclose the same or
(iv) information independently developed by the Employee without
the use of Proprietary Information or the Corporation's or its
affiliates' or facilities. Upon termination of employment
hereunder for any reason, the Employee shall promptly return to
the Corporation all books, records, lists, tapes and other
written, typed, computer or printed materials or data and all
copies thereof which contain any information relating to the
business of the Corporation, its affiliates or Recoton, and the
Employee shall not make or retain any copies thereof.
(b) If at any time during the term of employment
by the Corporation the Employee conceives, develops,
participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works,
techniques, processes, programs, software, works or art,
products, ideas or formulae in which intellectual property
subsists whether pursuant to the laws of Hong Kong any other
jurisdiction (collectively, the "Intellectual Property"),
whether or not patentable or copyrightable and whether or not
done within or after normal business hours or alone or in
conjunction with others, relating to the business of the
Corporation or its affiliates or Recoton or any part thereof,
such Intellectual Property shall be and remain the sole and
exclusive property of the Corporation. The Employee shall
promptly communicate and disclose all such Intellectual Property
to the Corporation, and to further effectuate the purposes of
this provision, shall execute and deliver to the Corporation at
the Corporation's expense any instruments deemed necessary by
the Corporation to effect the disclosure thereof to, and
ownership thereof by, the Corporation, including without
limitation any assignments of rights to all Intellectual
Property including without limitation patents, copyrights and
all other proprietary interests which the Employee might have in
any Intellectual Property and shall further assist the
Corporation, as the Corporation may reasonably request, to
obtain patent, trademark or copyright registration, or other
protections for the Intellectual Property, including testifying
in any hearings, depositions or trials related thereto.
5. Restrictions on Competition. During the period of
time during which the Employee is employed by the Corporation
(the "Employment Period") and for two years thereafter, the
Employee shall not directly or indirectly:
(a) engage in the manufacture or sale of video or
computer gaming accessories (the "Business") other than for
the benefit of the Corporation, and its affiliates in any of
the following: (i) Hong Kong; or (ii) the People's Republic
of China, or (iii) any country in which the Corporation or
its subsidiaries or Recoton or its subsidiaries currently or
at any time during the term of this Agreement has
distributors or customers; or (iv) any geographic area
within 100 miles of any country mentioned in clause (i),
(ii) or (iii) above; or (v) any country in Southeast Asia,
(vi) any country in the Pacific, (vii) the United States; or
(viii) Canada; or (ix) Mexico or (x) any country in which
Recoton or the Corporation conducts its business as of the
date hereof or at any time during the term of this
Agreement;
(b) render services to or have any interest, as a
shareholder owner, agent, director, employee, consultant,
lender, guarantor or otherwise, in any other person engaged
in the Business other than the Corporation or its
affiliates; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
himself or for another) for employment or induce, persuade
or encourage any person to leave the employ of the
Corporation or an affiliate who is or was during the
Employment Period employed or retained by the Corporation or
an affiliate as a consultant, agent, employee or otherwise
or (ii) divert or attempt to divert from the Corporation or
an affiliate any business whatsoever by influencing or
attempting to influence any customer or supplier of the
Corporation or an affiliate.
For purposes of this Section 5, 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. The Employee acknowledges that the
time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable
under the circumstances of the transactions contemplated by this
Agreement. It is understood that the Employee is agreeing to
the terms of this Section 5 in order to induce the Corporation
to enter into this Agreement. The parties acknowledge that the
business which the Corporation plans to conduct will be
conducted throughout the United States and that, given the
current sophistication of the information and telecommunication
"highway," a narrow geographic limitation would deny the
Corporation protection to which it is entitled in this
Agreement.
6. Prior Agreements. The Employee represents and
warrants to the Corporation that he is not currently subject to
any agreements, obligations or restrictions regarding prior
employment, competition, solicitation of employees or customers
or disclosure of proprietary information.
7. Certain Business Practices. The Employee shall
not during the term of his employment by the Corporation take or
cause or permit others to take any action which would cause the
Corporation to be in violation of the United States Foreign
Corrupt Practices Act or any other similar legislation of the
United States or any other country or any subdivision thereof.
8. Governing Law; Arbitration; Attorneys Fees.
(a) Applicable Law. This Agreement and its
validity, construction and performance shall be governed in all
respects by the law of the Hong Kong, without giving effect to
principles of conflict of law.
(b) Arbitration. The parties shall promptly
cooperate in good faith to carry out the provisions of this
Agreement and the activities contemplated hereby and shall also
cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the
activities contemplated hereby. Except as otherwise noted in
this Agreement, any dispute, question, difference, controversy
or claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration in the
jurisdiction where the Corporation's main offices are located at
the time of institution of such action (the "Main Office") in
accordance with the Arbitration Rules of the International
Chamber of Commerce, as then in effect at the time of filing of
the notice of demand. The parties consent to the jurisdiction
of the trial courts for or in the region where the Main Office
is located for all purposes in connection with arbitration. The
parties consent that any process or notice of motion or other
application to either of said courts, and any paper in
connection with arbitration, may be served by certified mail,
return receipt requested or by personal service or in such other
manner as may be permissible under the rules of the applicable
court or arbitration tribunal, provided a reasonable time for
appearance is allowed. The arbitrators shall not alter or
disregard any express provisions of this Agreement. Any
arbitration award in accordance with this Section 8(b) shall be
final and binding upon the parties and judgment thereon may be
entered in any court having jurisdiction over such party. The
arbitrators are hereby authorized to award to the winning party
the costs (including reasonable attorneys' fees and expenses) of
any such arbitration.
(c) Legal Fees. In the event of litigation or
arbitration hereunder, the court or arbitral panel shall be
authorized to award the prevailing party in such action or
proceeding any or all reasonable attorney fees and disbursements
paid by it in prosecuting or defending such action.
9. Enforceability. 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.
10. Equitable Remedies. The Employee acknowledges
that because of the nature of the business of the Corporation
and the subject matter of this Agreement, a breach of Section 4
or 5 of this Agreement will cause irreparable injury to the
Corporation for which money damages will not provide an adequate
remedy, and the Employee agrees that the Corporation shall have
the right to have the provisions of such Section specifically
enforced by a court having equity jurisdiction, in addition to,
and not in limitation of, any remedies at law that the Corpora-
tion may have. The Employee further acknowledges that Sections
4 and 5 are reasonable and enforceable.
11. No Waiver. The failure by either party at any
time to require performance or compliance by the other of any of
its obligations or agreements shall in no way affect the right
to require such performance or compliance at any time
thereafter. 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.
12. Assignment. This Agreement and all rights
hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The
Corporation may assign its rights to any parent or subsidiary
or, with the Employee's consent (not to be unreasonably
withheld), any successor or in connection with any sale,
transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and provided,
further, that such assignment and assumption shall not relieve
the Corporation of its obligations hereunder.
13. Entire Agreement. 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.
14. Amendment. This Agreement may be amended,
modified, superseded, canceled, renewed or extended only by a
written instrument executed by both of the parties hereto.
15. 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:
c/o STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
(b) To the Corporation:
STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Attn: Chairman of the Board
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
- copy to (which shall not constitute notice) -
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont
Telecopier No.: 407-333-8903
Telephone No.: 407-333-8900
- 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
Telephone No.: 212-806-5400
(or to such other address or telefax number as any party may
specify by notice to all other parties as aforesaid). 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.
16. Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the personal representatives
and successors of the respective parties hereto.
17. Headings; 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 and the word "or" is used in the inclusive sense and
all references to "including" shall mean "including without
limitation," unless the context requires otherwise.
18. Survival. The provisions of this Agreement shall
survive the termination or expiration of the Employee's
employment as a continuing agreement of the Corporation and the
Employee.
19. Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. Any Schedules and Exhibits are hereby made a part of
this Agreement.
20. Counterparts. This Agreement may be executed in
two duplicate counterparts, each of which shall be deemed to be
an original.
21. 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.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
STD HOLDING LIMITED
By:
Name:
Title:
Stephen Chu
GUARANTY
Recoton Corporation hereby guaranties the performance
by the Corporation of its obligations pursuant to the foregoing
agreement.
RECOTON CORPORATION
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT 4.02(p)(ii)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 31st day of August, 1995,
between STD Holding Limited, a Hong Kong corporation (the
"Corporation"), and David Chu (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has heretofore been employed by
the Corporation, a company engaged in the business of
manufacturing and marketing computer and video game accessories,
as its President; and
WHEREAS, the stock of the Corporation has been acquired
by Recoton (Far East) Limited ("RFE") pursuant to an agreement
of even date herewith (the "Acquisition Agreement") and RFE
desires that the Employee would remain employed by the
Corporation or a subsidiary thereof;
WHEREAS, the RFE is a wholly owned subsidiary of
Recoton Corporation, a New York corporation ("Recoton"); and
WHEREAS, the Corporation and the Employee desire to
assure the continued service of the Employee to the Corporation;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, representations, warranties and conditions
herein contained, the parties hereto agree as follows:
1. Employment and Duties.
(a) The Corporation hereby employs the Employee,
and the Employee accepts employment, during the term set forth
in Section 2(a) and upon the other terms and conditions set
forth in this Agreement. The Employee shall serve as President
of the Corporation (or otherwise if the position is of similar
stature) subject to the conditions set forth in this Agreement,
under the direction of the Board of Directors of the
Corporation, and shall exercise such responsibilities and
perform such duties for the Corporation and any companies in
which the Corporation owns a capital stock interest of at least
40% of the voting equity (a "subsidiary") commensurate with such
capacity as the Board of Directors of the Corporation may from
time to time reasonably designate. The Employee may also serve
as a director of the Corporation during the term of his
employment pursuant to this Agreement, if agreed and if so
elected to such position.
(b) The Employee shall report to Stephen Chu, so
long as he is Group Managing Director of the Corporation or,
thereafter, to the Chairman of the Board of Directors of the
Corporation or his designee. The Employee shall devote
substantially all of his business time, attention and energies
to the employment under this Agreement and to promoting the best
interests of the Corporation and the Employee shall not, either
during or outside of such normal business hours, directly or
indirectly engage in any activity inimical to such best
interests. The Employee shall not perform services for
compensation for himself or for any entity or person other than
the Corporation without the prior express written permission of
the Corporation's Board of Directors; it shall not, however, be
a violation of this Agreement for the Employee to (i) serve on
civic or charitable boards; (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 and the requirements of the second sentence of this
paragraph are not violated. The Employee shall exert his best
efforts in the performance of his duties under this Agreement.
2. Term; Payment Upon Termination.
(a) The term of the Employee's employment under
this Agreement shall commence as of the date of this Agreement
and shall terminate on the earlier of the death of the Employee,
the Employee ceasing to be employed by the Corporation other
than by reason of breach by the Corporation of this Agreement or
5:00 p.m. on December 31, 2001 (the "Expiration Date").
(b) The Corporation, in the sole discretion of
its Board of Directors, may terminate the employment of the
Employee, and its obligation to pay compensation pursuant to
Section 3, prior to the Expiration Date at any time for "cause".
"Cause" as used in this Agreement shall mean (i) fraud, (ii)
conviction of a felony or any crime having as an essential
element larceny, (iii) commission of an intentional tort against
the Corporation, (iv) wilful and repeated dereliction of duty or
breach of the Employee's material obligations under this
Agreement, (v) failure to perform any material covenants of such
Employee under the Acquisition Agreement to the extent that the
Employee is a party to such agreement, (vi) repeated or material
violation of published Corporation business policies and (vii)
serious violation of law relating to the Corporation's business
or its securities or the business or securities of Recoton. In
addition, the Corporation, in the sole discretion of its Board
of Directors, may terminate the employment of the Employee, and
its obligation to pay compensation pursuant to Section 3 except
as otherwise set forth in Section 3, prior to the Expiration
Date at any time for physical or mental impairment or condition
which renders the Employee unable to perform his usual duties as
an employee which persists for a period of more than 180 days
out of any 24-month period ("disability").
(c) The Corporation may terminate the employment
of the Employee for reasons other than cause or disability
provided that the Corporation shall continue to pay or provide
the Employee the salary and other benefits (including bonuses
and advances thereof which would be paid if the Employee were
still employed hereunder) provided for in this Agreement until
the fifth anniversary of the date of this Agreement.
(d) The Employee may terminate his employment
hereunder without liability to the Company at any time upon 30
days prior written notice, at which time his compensation and
benefits under this Agreement shall cease. If the Employee
terminates his employment hereunder or notifies the Corporation
of his intent to terminate his employment hereunder, the
Corporation in its sole discretion may require the Employee to
cease the exercise of his responsibilities and the performance
of his services for the Corporation at any time prior to the
effective date of the notice of termination and to refrain from
entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date
of termination. If the Corporation shall materially breach any
term of this Agreement, which breach shall not have been cured
within 10 days after written notice thereof has been given to
the Corporation, then the Employee may terminate his employment
under this Agreement and the Corporation shall continue to be
obligated to pay or provide to Employee the salary and other
benefits provided for in this Agreement until the fifth
anniversary of the date of this Agreement.
(e) The Employee shall be under no duty to
mitigate damages in case of termination pursuant to Section 2(c)
or 2(d) but the Corporation may offset against the sums owing to
him by the Corporation hereunder all sums earned by the Employee
either by reason of self-employment, as an employee or as a
consultant or from other activities which would be barred by
this Agreement were the Employee still employed by the
Corporation.
3. Compensation; Benefits; and Expenses.
For all services to be rendered to the Corporation or
any affiliate thereof in any capacity, including services as an
officer, director, member of any committee or otherwise, so long
as the Employee is employed by the Corporation pursuant to
Section 2(a) or as otherwise set forth in Section 2(c) or the
last sentence of Section 2(d):
(a) The Corporation shall pay the Employee a
salary at the initial rate of HK$913,000 per year (the "Base
Salary"). Such salary shall be payable in installments,
less any usual payroll deductions, in accordance with
prevailing payroll practices of the Corporation from time to
time. The Board of Directors shall review the Employee's
compensation and benefits at least once each year and may in
its sole discretion and absolute increase the Employee's
Base Salary and benefits over those provided for hereunder;
provided, however, that in any case the Base Salary shall be
increased each year (effective as of January 1) by an amount
at least equal to any increase in the Consumer Price Index
(B) for All Items compiled by the Consumer Price Index
Section of the Census and Statistics Department of the Hong
Kong Government (or by any Hong Kong Government department
upon which duties in connection with such index shall have
devolved). Other than as provided in this Agreement, in no
event may Employee's compensation or benefits be decreased
by the Board of Directors except to the extent that such
benefits (other than Base Salary) are provided to other
employees and such employee benefits are similarly generally
reduced.
(b) The Employee shall be entitled to receive
such bonuses, and advances against such bonuses, as are
described in Section 9.02 of the Acquisition Agreement as
being allocable to him.
(c) The Employee shall be entitled to the fringe
benefits generally made available to the executives of
Recoton of the rank equal to the Employee prior to this
Agreement (including vacation, holidays, insurance, medical
benefits, automobile and professional training) to the
extent that such benefits may be legally extended to him,
but the Corporation shall be under no obligation to include
him in any stock option, profit sharing plan or bonus
program, in light of the bonus referred to in Section 3(b).
He shall continue to receive the same automobile benefits
which he received prior to execution of this Agreement.
(d) The Employee's place of work, when not
engaged in business travel, shall be such place as the
Corporation may reasonably specify from time to time. The
Corporation shall reimburse the Employee's moving and
related expenses, and provide bridge loans, consistent with
Recoton's policy for senior executives if the Corporation's
offices shall be moved out of Hong Kong.
(e) The Corporation shall reimburse the Employee
for all reasonable and necessary expenses incurred by the
Employee requested or authorized by the Corporation in
connection with the Corporation's business and such expenses
are properly documented and accounted for in accordance with
the then policy of the Corporation.
4. Restrictions on the Disclosure of Proprietary
Information; Inventions.
(a) During the course of the Employee's
employment and thereafter, the Employee shall not, without the
prior written consent of the Corporation, directly or indirectly
(i) record, photograph, photocopy or by any other means copy or
cause to be copied any document, list, drawing, writing,
photograph, sketch, sound recording or other material that
embodies Proprietary Information or (ii) use, or disclose or
divulge to any person, firm or corporation, any Proprietary
Information, except as may be necessary in the ordinary course
of the Corporation's business or as may be required by law. As
used in this Agreement, "Proprietary Information" means
information disclosed to or obtained by the Employee, whether or
not acquired during business hours, concerning the
Corporation's, its subsidiaries' and/or Recoton's business,
operations, products, manufacturing or other processes,
services, customers, vendors, costs and pricing policies,
research, development, formulae, specifications, methods,
expertise, techniques, inventions, equipment, purchasing,
merchandising and selling including, but not limited to,
customer lists, financial and/or marketing reports and plans,
product configurations and compositions, pricing guidelines or
information, financial reports, financial projections and other
financial information, business plans and any other information
not readily known or obtainable by the general public, and any
proprietary software. Notwithstanding the foregoing sentence,
Proprietary Information does not include (i) information
acquired by the Employee before the Employee became an employee
of the Corporation, (ii) information which is or becomes public
knowledge (except as may be disclosed by the Employee in
violation of this Agreement), (iii) information acquired by the
Employee from a source, other than the Corporation, Recoton, or
an affiliate of or a party providing such information to the
Corporation or Recoton or an affiliate thereof, that legally
acquired such information and was free to disclose the same or
(iv) information independently developed by the Employee without
the use of Proprietary Information or the Corporation's or its
affiliates' or facilities. Upon termination of employment
hereunder for any reason, the Employee shall promptly return to
the Corporation all books, records, lists, tapes and other
written, typed, computer or printed materials or data and all
copies thereof which contain any information relating to the
business of the Corporation, its affiliates or Recoton, and the
Employee shall not make or retain any copies thereof.
(b) If at any time during the term of employment
by the Corporation the Employee conceives, develops,
participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works,
techniques, processes, programs, software, works or art,
products, ideas or formulae in which intellectual property
subsists whether pursuant to the laws of Hong Kong any other
jurisdiction (collectively, the "Intellectual Property"),
whether or not patentable or copyrightable and whether or not
done within or after normal business hours or alone or in
conjunction with others, relating to the business of the
Corporation or its affiliates or Recoton or any part thereof,
such Intellectual Property shall be and remain the sole and
exclusive property of the Corporation. The Employee shall
promptly communicate and disclose all such Intellectual Property
to the Corporation, and to further effectuate the purposes of
this provision, shall execute and deliver to the Corporation at
the Corporation's expense any instruments deemed necessary by
the Corporation to effect the disclosure thereof to, and
ownership thereof by, the Corporation, including without
limitation any assignments of rights to all Intellectual
Property including without limitation patents, copyrights and
all other proprietary interests which the Employee might have in
any Intellectual Property and shall further assist the
Corporation, as the Corporation may reasonably request, to
obtain patent, trademark or copyright registration, or other
protections for the Intellectual Property, including testifying
in any hearings, depositions or trials related thereto.
5. Restrictions on Competition. During the period of
time during which the Employee is employed by the Corporation
(the "Employment Period") and for two years thereafter, the
Employee shall not directly or indirectly:
(a) engage in the manufacture or sale of video or
computer gaming accessories (the "Business") other than for
the benefit of the Corporation, and its affiliates in any of
the following: (i) Hong Kong; or (ii) the People's Republic
of China, or (iii) any country in which the Corporation or
its subsidiaries or Recoton or its subsidiaries currently or
at any time during the term of this Agreement has
distributors or customers; or (iv) any geographic area
within 100 miles of any country mentioned in clause (i),
(ii) or (iii) above; or (v) any country in Southeast Asia,
(vi) any country in the Pacific, (vii) the United States; or
(viii) Canada; or (ix) Mexico or (x) any country in which
Recoton or the Corporation conducts its business as of the
date hereof or at any time during the term of this
Agreement;
(b) render services to or have any interest, as a
shareholder owner, agent, director, employee, consultant,
lender, guarantor or otherwise, in any other person engaged
in the Business other than the Corporation or its
affiliates; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
himself or for another) for employment or induce, persuade
or encourage any person to leave the employ of the
Corporation or an affiliate who is or was during the
Employment Period employed or retained by the Corporation or
an affiliate as a consultant, agent, employee or otherwise
or (ii) divert or attempt to divert from the Corporation or
an affiliate any business whatsoever by influencing or
attempting to influence any customer or supplier of the
Corporation or an affiliate.
For purposes of this Section 5, 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. The Employee acknowledges that the
time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable
under the circumstances of the transactions contemplated by this
Agreement. It is understood that the Employee is agreeing to
the terms of this Section 5 in order to induce the Corporation
to enter into this Agreement. The parties acknowledge that the
business which the Corporation plans to conduct will be
conducted throughout the United States and that, given the
current sophistication of the information and telecommunication
"highway," a narrow geographic limitation would deny the
Corporation protection to which it is entitled in this
Agreement.
6. Prior Agreements. The Employee represents and
warrants to the Corporation that he is not currently subject to
any agreements, obligations or restrictions regarding prior
employment, competition, solicitation of employees or customers
or disclosure of proprietary information.
7. Certain Business Practices. The Employee shall
not during the term of his employment by the Corporation take or
cause or permit others to take any action which would cause the
Corporation to be in violation of the United States Foreign
Corrupt Practices Act or any other similar legislation of the
United States or any other country or any subdivision thereof.
8. Governing Law; Arbitration; Attorneys Fees.
(a) Applicable Law. This Agreement and its
validity, construction and performance shall be governed in all
respects by the law of the Hong Kong, without giving effect to
principles of conflict of law.
(b) Arbitration. The parties shall promptly
cooperate in good faith to carry out the provisions of this
Agreement and the activities contemplated hereby and shall also
cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the
activities contemplated hereby. Except as otherwise noted in
this Agreement, any dispute, question, difference, controversy
or claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration in the
jurisdiction where the Corporation's main offices are located at
the time of institution of such action (the "Main Office") in
accordance with the Arbitration Rules of the International
Chamber of Commerce, as then in effect at the time of filing of
the notice of demand. The parties consent to the jurisdiction
of the trial courts for or in the region where the Main Office
is located for all purposes in connection with arbitration. The
parties consent that any process or notice of motion or other
application to either of said courts, and any paper in
connection with arbitration, may be served by certified mail,
return receipt requested or by personal service or in such other
manner as may be permissible under the rules of the applicable
court or arbitration tribunal, provided a reasonable time for
appearance is allowed. The arbitrators shall not alter or
disregard any express provisions of this Agreement. Any
arbitration award in accordance with this Section 8(b) shall be
final and binding upon the parties and judgment thereon may be
entered in any court having jurisdiction over such party. The
arbitrators are hereby authorized to award to the winning party
the costs (including reasonable attorneys' fees and expenses) of
any such arbitration.
(c) Legal Fees. In the event of litigation or
arbitration hereunder, the court or arbitral panel shall be
authorized to award the prevailing party in such action or
proceeding any or all reasonable attorney fees and disbursements
paid by it in prosecuting or defending such action.
9. Enforceability. 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.
10. Equitable Remedies. The Employee acknowledges
that because of the nature of the business of the Corporation
and the subject matter of this Agreement, a breach of Section 4
or 5 of this Agreement will cause irreparable injury to the
Corporation for which money damages will not provide an adequate
remedy, and the Employee agrees that the Corporation shall have
the right to have the provisions of such Section specifically
enforced by a court having equity jurisdiction, in addition to,
and not in limitation of, any remedies at law that the Corpora-
tion may have. The Employee further acknowledges that Sections
4 and 5 are reasonable and enforceable.
11. No Waiver. The failure by either party at any
time to require performance or compliance by the other of any of
its obligations or agreements shall in no way affect the right
to require such performance or compliance at any time
thereafter. 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.
12. Assignment. This Agreement and all rights
hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The
Corporation may assign its rights to any parent or subsidiary
or, with the Employee's consent (not to be unreasonably
withheld), any successor or in connection with any sale,
transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and provided,
further, that such assignment and assumption shall not relieve
the Corporation of its obligations hereunder.
13. Entire Agreement. 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.
14. Amendment. This Agreement may be amended,
modified, superseded, canceled, renewed or extended only by a
written instrument executed by both of the parties hereto.
15. 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:
c/o STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
(b) To the Corporation:
STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Attn: Chairman of the Board
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
- copy to (which shall not constitute notice) -
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont
Telecopier No.: 407-333-8903
Telephone No.: 407-333-8900
- 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
Telephone No.: 212-806-5400
(or to such other address or telefax number as any party may
specify by notice to all other parties as aforesaid). 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.
16. Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the personal representatives
and successors of the respective parties hereto.
17. Headings; 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 and the word "or" is used in the inclusive sense and
all references to "including" shall mean "including without
limitation," unless the context requires otherwise.
18. Survival. The provisions of this Agreement shall
survive the termination or expiration of the Employee's
employment as a continuing agreement of the Corporation and the
Employee.
19. Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. Any Schedules and Exhibits are hereby made a part of
this Agreement.
20. Counterparts. This Agreement may be executed in
two duplicate counterparts, each of which shall be deemed to be
an original.
21. 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.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
STD HOLDING LIMITED
By:
Name:
Title:
David Chu
GUARANTY
Recoton Corporation hereby guaranties the performance
by the Corporation of its obligations pursuant to the foregoing
agreement.
RECOTON CORPORATION
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT 4.02(p)(iii)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 31st day of August, 1995,
between STD Holding Limited, a Hong Kong corporation (the
"Corporation"), and Patrick Ho (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has heretofore been employed by
the Corporation, a company engaged in the business of
manufacturing and marketing computer and video game accessories,
as the Vice President, Marketing of STD Electronic International
Limited ("STD Electronic"); and
WHEREAS, the stock of the Corporation has been acquired
by Recoton (Far East) Limited ("RFE") pursuant to an agreement
of even date herewith (the "Acquisition Agreement") and RFE
desires that the Employee would remain employed by the
Corporation or a subsidiary thereof;
WHEREAS, the RFE is a wholly owned subsidiary of
Recoton Corporation, a New York corporation ("Recoton"); and
WHEREAS, the Corporation and the Employee desire to
assure the continued service of the Employee to the Corporation;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, representations, warranties and conditions
herein contained, the parties hereto agree as follows:
1. Employment and Duties.
(a) The Corporation hereby employs the Employee,
and the Employee accepts employment, during the term set forth
in Section 2(a) and upon the other terms and conditions set
forth in this Agreement. The Employee shall serve as Vice
President, Marketing of STD Electronic (or otherwise if the
position is of similar stature) subject to the conditions set
forth in this Agreement, under the direction of the Board of
Directors of the Corporation, and shall exercise such
responsibilities and perform such duties for the Corporation and
any companies in which the Corporation owns a capital stock
interest of at least 40% of the voting equity (a "subsidiary")
commensurate with such capacity as the Board of Directors of the
Corporation may from time to time reasonably designate. The
Employee may also serve as a director of the Corporation during
the term of his employment pursuant to this Agreement, if agreed
and if so elected to such position.
(b) The Employee shall report to Stephen Chu, so
long as he is Group Managing Director of the Corporation or,
thereafter, to the Chairman of the Board of Directors of the
Corporation or his designee. The Employee shall devote
substantially all of his business time, attention and energies
to the employment under this Agreement and to promoting the best
interests of the Corporation and the Employee shall not, either
during or outside of such normal business hours, directly or
indirectly engage in any activity inimical to such best
interests. The Employee shall not perform services for
compensation for himself or for any entity or person other than
the Corporation without the prior express written permission of
the Corporation's Board of Directors; it shall not, however, be
a violation of this Agreement for the Employee to (i) serve on
civic or charitable boards; (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 and the requirements of the second sentence of this
paragraph are not violated. The Employee shall exert his best
efforts in the performance of his duties under this Agreement.
2. Term; Payment Upon Termination.
(a) The term of the Employee's employment under
this Agreement shall commence as of the date of this Agreement
and shall terminate on the earlier of the death of the Employee,
the Employee ceasing to be employed by the Corporation other
than by reason of breach by the Corporation of this Agreement or
5:00 p.m. on December 31, 2001 (the "Expiration Date").
(b) The Corporation, in the sole discretion of
its Board of Directors, may terminate the employment of the
Employee, and its obligation to pay compensation pursuant to
Section 3, prior to the Expiration Date at any time for "cause".
"Cause" as used in this Agreement shall mean (i) fraud, (ii)
conviction of a felony or any crime having as an essential
element larceny, (iii) commission of an intentional tort against
the Corporation, (iv) wilful and repeated dereliction of duty or
breach of the Employee's material obligations under this
Agreement, (v) failure to perform any material covenants of such
Employee under the Acquisition Agreement to the extent that the
Employee is a party to such agreement, (vi) repeated or material
violation of published Corporation business policies and (vii)
serious violation of law relating to the Corporation's business
or its securities or the business or securities of Recoton. In
addition, the Corporation, in the sole discretion of its Board
of Directors, may terminate the employment of the Employee, and
its obligation to pay compensation pursuant to Section 3 except
as otherwise set forth in Section 3, prior to the Expiration
Date at any time for physical or mental impairment or condition
which renders the Employee unable to perform his usual duties as
an employee which persists for a period of more than 180 days
out of any 24-month period ("disability").
(c) The Corporation may terminate the employment
of the Employee for reasons other than cause or disability
provided that the Corporation shall continue to pay or provide
the Employee the salary and other benefits (including bonuses
and advances thereof which would be paid if the Employee were
still employed hereunder) provided for in this Agreement until
the fifth anniversary of the date of this Agreement.
(d) The Employee may terminate his employment
hereunder without liability to the Company at any time upon 30
days prior written notice, at which time his compensation and
benefits under this Agreement shall cease. If the Employee
terminates his employment hereunder or notifies the Corporation
of his intent to terminate his employment hereunder, the
Corporation in its sole discretion may require the Employee to
cease the exercise of his responsibilities and the performance
of his services for the Corporation at any time prior to the
effective date of the notice of termination and to refrain from
entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date
of termination. If the Corporation shall materially breach any
term of this Agreement, which breach shall not have been cured
within 10 days after written notice thereof has been given to
the Corporation, then the Employee may terminate his employment
under this Agreement and the Corporation shall continue to be
obligated to pay or provide to Employee the salary and other
benefits provided for in this Agreement until the fifth
anniversary of the date of this Agreement.
(e) The Employee shall be under no duty to
mitigate damages in case of termination pursuant to Section 2(c)
or 2(d) but the Corporation may offset against the sums owing to
him by the Corporation hereunder all sums earned by the Employee
either by reason of self-employment, as an employee or as a
consultant or from other activities which would be barred by
this Agreement were the Employee still employed by the
Corporation.
3. Compensation; Benefits; and Expenses.
For all services to be rendered to the Corporation or
any affiliate thereof in any capacity, including services as an
officer, director, member of any committee or otherwise, so long
as the Employee is employed by the Corporation pursuant to
Section 2(a) or as otherwise set forth in Section 2(c) or the
last sentence of Section 2(d):
(a) The Corporation shall pay the Employee a
salary at the initial rate of HK$1,108,000 per year (the
"Base Salary"). Such salary shall be payable in
installments, less any usual payroll deductions, in
accordance with prevailing payroll practices of the
Corporation from time to time. The Board of Directors shall
review the Employee's compensation and benefits at least
once each year and may in its sole discretion and absolute
increase the Employee's Base Salary and benefits over those
provided for hereunder; provided, however, that in any case
the Base Salary shall be increased each year (effective as
of January 1) by an amount at least equal to any increase in
the Consumer Price Index (B) for All Items compiled by the
Consumer Price Index Section of the Census and Statistics
Department of the Hong Kong Government (or by any Hong Kong
Government department upon which duties in connection with
such index shall have devolved). Other than as provided in
this Agreement, in no event may Employee's compensation or
benefits be decreased by the Board of Directors except to
the extent that such benefits (other than Base Salary) are
provided to other employees and such employee benefits are
similarly generally reduced.
(b) The Employee shall be entitled to receive
such bonuses, and advances against such bonuses, as are
described in Section 9.02 of the Acquisition Agreement as
being allocable to him.
(c) The Employee shall be entitled to the fringe
benefits generally made available to the executives of
Recoton of the rank equal to the Employee prior to this
Agreement (including vacation, holidays, insurance, medical
benefits, automobile and professional training) to the
extent that such benefits may be legally extended to him,
but the Corporation shall be under no obligation to include
him in any stock option, profit sharing plan or bonus
program, in light of the bonus referred to in Section 3(b).
He shall continue to receive the same automobile benefits
which he received prior to execution of this Agreement.
(d) The Employee's place of work, when not
engaged in business travel, shall be such place as the
Corporation may reasonably specify from time to time. The
Corporation shall reimburse the Employee's moving and
related expenses, and provide bridge loans, consistent with
Recoton's policy for senior executives if the Corporation's
offices shall be moved out of Hong Kong.
(e) The Corporation shall reimburse the Employee
for all reasonable and necessary expenses incurred by the
Employee requested or authorized by the Corporation in
connection with the Corporation's business and such expenses
are properly documented and accounted for in accordance with
the then policy of the Corporation.
4. Restrictions on the Disclosure of Proprietary
Information; Inventions.
(a) During the course of the Employee's
employment and thereafter, the Employee shall not, without the
prior written consent of the Corporation, directly or indirectly
(i) record, photograph, photocopy or by any other means copy or
cause to be copied any document, list, drawing, writing,
photograph, sketch, sound recording or other material that
embodies Proprietary Information or (ii) use, or disclose or
divulge to any person, firm or corporation, any Proprietary
Information, except as may be necessary in the ordinary course
of the Corporation's business or as may be required by law. As
used in this Agreement, "Proprietary Information" means
information disclosed to or obtained by the Employee, whether or
not acquired during business hours, concerning the
Corporation's, its subsidiaries' and/or Recoton's business,
operations, products, manufacturing or other processes,
services, customers, vendors, costs and pricing policies,
research, development, formulae, specifications, methods,
expertise, techniques, inventions, equipment, purchasing,
merchandising and selling including, but not limited to,
customer lists, financial and/or marketing reports and plans,
product configurations and compositions, pricing guidelines or
information, financial reports, financial projections and other
financial information, business plans and any other information
not readily known or obtainable by the general public, and any
proprietary software. Notwithstanding the foregoing sentence,
Proprietary Information does not include (i) information
acquired by the Employee before the Employee became an employee
of the Corporation, (ii) information which is or becomes public
knowledge (except as may be disclosed by the Employee in
violation of this Agreement), (iii) information acquired by the
Employee from a source, other than the Corporation, Recoton, or
an affiliate of or a party providing such information to the
Corporation or Recoton or an affiliate thereof, that legally
acquired such information and was free to disclose the same or
(iv) information independently developed by the Employee without
the use of Proprietary Information or the Corporation's or its
affiliates' or facilities. Upon termination of employment
hereunder for any reason, the Employee shall promptly return to
the Corporation all books, records, lists, tapes and other
written, typed, computer or printed materials or data and all
copies thereof which contain any information relating to the
business of the Corporation, its affiliates or Recoton, and the
Employee shall not make or retain any copies thereof.
(b) If at any time during the term of employment
by the Corporation the Employee conceives, develops,
participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works,
techniques, processes, programs, software, works or art,
products, ideas or formulae in which intellectual property
subsists whether pursuant to the laws of Hong Kong any other
jurisdiction (collectively, the "Intellectual Property"),
whether or not patentable or copyrightable and whether or not
done within or after normal business hours or alone or in
conjunction with others, relating to the business of the
Corporation or its affiliates or Recoton or any part thereof,
such Intellectual Property shall be and remain the sole and
exclusive property of the Corporation. The Employee shall
promptly communicate and disclose all such Intellectual Property
to the Corporation, and to further effectuate the purposes of
this provision, shall execute and deliver to the Corporation at
the Corporation's expense any instruments deemed necessary by
the Corporation to effect the disclosure thereof to, and
ownership thereof by, the Corporation, including without
limitation any assignments of rights to all Intellectual
Property including without limitation patents, copyrights and
all other proprietary interests which the Employee might have in
any Intellectual Property and shall further assist the
Corporation, as the Corporation may reasonably request, to
obtain patent, trademark or copyright registration, or other
protections for the Intellectual Property, including testifying
in any hearings, depositions or trials related thereto.
5. Restrictions on Competition. During the period of
time during which the Employee is employed by the Corporation
(the "Employment Period") and for two years thereafter, the
Employee shall not directly or indirectly:
(a) engage in the manufacture or sale of video or
computer gaming accessories (the "Business") other than for
the benefit of the Corporation, and its affiliates in any of
the following: (i) Hong Kong; or (ii) the People's Republic
of China, or (iii) any country in which the Corporation or
its subsidiaries or Recoton or its subsidiaries currently or
at any time during the term of this Agreement has
distributors or customers; or (iv) any geographic area
within 100 miles of any country mentioned in clause (i),
(ii) or (iii) above; or (v) any country in Southeast Asia,
(vi) any country in the Pacific, (vii) the United States; or
(viii) Canada; or (ix) Mexico or (x) any country in which
Recoton or the Corporation conducts its business as of the
date hereof or at any time during the term of this
Agreement;
(b) render services to or have any interest, as a
shareholder owner, agent, director, employee, consultant,
lender, guarantor or otherwise, in any other person engaged
in the Business other than the Corporation or its
affiliates; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
himself or for another) for employment or induce, persuade
or encourage any person to leave the employ of the
Corporation or an affiliate who is or was during the
Employment Period employed or retained by the Corporation or
an affiliate as a consultant, agent, employee or otherwise
or (ii) divert or attempt to divert from the Corporation or
an affiliate any business whatsoever by influencing or
attempting to influence any customer or supplier of the
Corporation or an affiliate.
For purposes of this Section 5, 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. The Employee acknowledges that the
time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable
under the circumstances of the transactions contemplated by this
Agreement. It is understood that the Employee is agreeing to
the terms of this Section 5 in order to induce the Corporation
to enter into this Agreement. The parties acknowledge that the
business which the Corporation plans to conduct will be
conducted throughout the United States and that, given the
current sophistication of the information and telecommunication
"highway," a narrow geographic limitation would deny the
Corporation protection to which it is entitled in this
Agreement.
6. Prior Agreements. The Employee represents and
warrants to the Corporation that he is not currently subject to
any agreements, obligations or restrictions regarding prior
employment, competition, solicitation of employees or customers
or disclosure of proprietary information.
7. Certain Business Practices. The Employee shall
not during the term of his employment by the Corporation take or
cause or permit others to take any action which would cause the
Corporation to be in violation of the United States Foreign
Corrupt Practices Act or any other similar legislation of the
United States or any other country or any subdivision thereof.
8. Governing Law; Arbitration; Attorneys Fees.
(a) Applicable Law. This Agreement and its
validity, construction and performance shall be governed in all
respects by the law of the Hong Kong, without giving effect to
principles of conflict of law.
(b) Arbitration. The parties shall promptly
cooperate in good faith to carry out the provisions of this
Agreement and the activities contemplated hereby and shall also
cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the
activities contemplated hereby. Except as otherwise noted in
this Agreement, any dispute, question, difference, controversy
or claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration in the
jurisdiction where the Corporation's main offices are located at
the time of institution of such action (the "Main Office") in
accordance with the Arbitration Rules of the International
Chamber of Commerce, as then in effect at the time of filing of
the notice of demand. The parties consent to the jurisdiction
of the trial courts for or in the region where the Main Office
is located for all purposes in connection with arbitration. The
parties consent that any process or notice of motion or other
application to either of said courts, and any paper in
connection with arbitration, may be served by certified mail,
return receipt requested or by personal service or in such other
manner as may be permissible under the rules of the applicable
court or arbitration tribunal, provided a reasonable time for
appearance is allowed. The arbitrators shall not alter or
disregard any express provisions of this Agreement. Any
arbitration award in accordance with this Section 8(b) shall be
final and binding upon the parties and judgment thereon may be
entered in any court having jurisdiction over such party. The
arbitrators are hereby authorized to award to the winning party
the costs (including reasonable attorneys' fees and expenses) of
any such arbitration.
(c) Legal Fees. In the event of litigation or
arbitration hereunder, the court or arbitral panel shall be
authorized to award the prevailing party in such action or
proceeding any or all reasonable attorney fees and disbursements
paid by it in prosecuting or defending such action.
9. Enforceability. 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.
10. Equitable Remedies. The Employee acknowledges
that because of the nature of the business of the Corporation
and the subject matter of this Agreement, a breach of Section 4
or 5 of this Agreement will cause irreparable injury to the
Corporation for which money damages will not provide an adequate
remedy, and the Employee agrees that the Corporation shall have
the right to have the provisions of such Section specifically
enforced by a court having equity jurisdiction, in addition to,
and not in limitation of, any remedies at law that the Corpora-
tion may have. The Employee further acknowledges that Sections
4 and 5 are reasonable and enforceable.
11. No Waiver. The failure by either party at any
time to require performance or compliance by the other of any of
its obligations or agreements shall in no way affect the right
to require such performance or compliance at any time
thereafter. 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.
12. Assignment. This Agreement and all rights
hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The
Corporation may assign its rights to any parent or subsidiary
or, with the Employee's consent (not to be unreasonably
withheld), any successor or in connection with any sale,
transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and provided,
further, that such assignment and assumption shall not relieve
the Corporation of its obligations hereunder.
13. Entire Agreement. 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.
14. Amendment. This Agreement may be amended,
modified, superseded, canceled, renewed or extended only by a
written instrument executed by both of the parties hereto.
15. 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:
c/o STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
(b) To the Corporation:
STD Holding Limited
Unit F-J, 5th Floor, Block 2
Kwai Tak Industrial Center
15-33 Kwai Tak Street
Kwai Chung, N.T., Hong Kong
Attn: Chairman of the Board
Telecopier No.: 011-852-2612-1159
Telephone No.: 011-852-420-1331
- copy to (which shall not constitute notice) -
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont
Telecopier No.: 407-333-8903
Telephone No.: 407-333-8900
- 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
Telephone No.: 212-806-5400
(or to such other address or telefax number as any party may
specify by notice to all other parties as aforesaid). 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.
16. Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the personal representatives
and successors of the respective parties hereto.
17. Headings; 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 and the word "or" is used in the inclusive sense and
all references to "including" shall mean "including without
limitation," unless the context requires otherwise.
18. Survival. The provisions of this Agreement shall
survive the termination or expiration of the Employee's
employment as a continuing agreement of the Corporation and the
Employee.
19. Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. Any Schedules and Exhibits are hereby made a part of
this Agreement.
20. Counterparts. This Agreement may be executed in
two duplicate counterparts, each of which shall be deemed to be
an original.
21. 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.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
STD HOLDING LIMITED
By:
Name:
Title:
Patrick Ho
<PAGE>
EXHIBIT 4.02(p)(iv)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on this
23rd day of August 1995 effective as of September 15, 1995 (the
"Effective Date") by and between STD Holding Limited, a Hong
Kong corporation (the "Employer"), and Tong Yue Ting (the
"Employee").
W I T N E S S E T H
WHEREAS, the Employer is in the business of manufacturing
computer and video game accessories; and
WHEREAS, the Employer desires to employ the Employee, and
the Employee is willing to accept such employment, upon the
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warrants hereinafter set forth,
the parties agree as follows:
1. Employment and Term. The Employer hereby engages the
Employee as a full-time employee for a term of two (2) years
beginning on the Effective Date and ending on September 14,
1997. Employee hereby accepts such employment, in accordance
with the terms set forth herein. During the term of his
employment hereunder, the Employee shall devote his full time
and efforts to render services as the Vice President, Production
Material Control of the Employer, and to perform such other
duties as the Employer may assign to the Employee from time to
time. The Employee shall exert his best efforts in performance
of and shall devote all business time to his employment duties
under this Agreement.
2. Renumeration. In consideration of the Employee
rendering the services required hereunder, the Employer shall
pay the Employee a base salary, and, if earned, bonuses, as
described below:
2.1. Base Salary. The Employer shall pay to the
Employee a monthly salary (the "Salary") of HK $66,000 payable
on the last day of each month or the preceding working day in
case the pay day falls on a public holiday or on a Sunday.
2.2. Double Pay. An additional payment equivalent to
one full month's salary will be paid on February 1 to the
Employee if he has served the Employer for a full year of
service at the expiry of the payment period, and continues to be
employed in the Company after the expiry of the payment period.
Pro-rated payment will be made to the Employee if he served the
Employer continuously for not less than 26 weeks, but less than
a full year, at the expiry of the payment period, or who is
still employed by the Company on or after December 1, or whose
employment has been terminated by the Company.
2.3. CPI Adjustment. The Salary shall be increased
each year by an amount at least equal to any increase in the
Consumer Price Index (B) for All Items complied by the Consumer
Price Index Section of the Census and Statistics Department of
the Hong Kong Government (or by any Hong Kong Government
department upon which duties in connection with such index shall
have devolved).
2.4. Bonus. Any incentive bonus is subject to the
sole and absolute discretion of the Board of Directors of the
Employer, which may, but is not obligated to, consider,among
other things, overall job performance, technical skills, growth
of the Employer's business and profit.
2.5. Increase in Compensation. The salary provided
for herein is subject to increase, but not decrease, by the
determination in the sole discretion of the Chairman of the
Board of the Employer.
3. Benefits. The Employer shall make available to the
Employee the following benefits:
3.1. Participation of the Employee in all medical,
personal accident and other insurance plans and programs
available to Employer's employees generally.
3.2. Fourteen (14) working days of annual leave per
year. The Employee shall take the annual leave at times
convenient to the Employer and only if approved by the Employer.
The Employee shall not be entitled to carry forward any unused
annual leave to the following year except having a special
approval of the President, but shall instead be entitled to
receive payment in lieu of annual leave not taken, based on 365
day year.
3.3. Statutory public holidays as well as every
Sunday.
3.4. Two days of full paid sick leave per month in
which the Employee is unable to work due to sickness.
3.5. Reimbursement for all out-of-pocket expenses
incurred in connection with Employer's business and approved by
the Employer upon submission of evidence thereof in form
satisfactory to the Employer.
3.6. Reimbursement of all costs in connection with a
cellular telephone for business.
3.7. Any other employee benefit made available to
employees of the Employer generally and described in the
Employer's Employee Manual. In the event of any conflict
between the terms in the Manual and in this Agreement, the terms
of this Agreement shall control.
4. Termination of Employment.
4.1. Termination by Employee with Notice. The
Employee may terminate this Agreement by giving to the Employer
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3.
4.2. Termination by Employer with Notice. The
Employer may terminate this Agreement by giving to the Employee
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3
4.3. Termination by Death or Disability of Employee.
This Agreement shall terminate upon the death of the Employee.
The Employer may terminate this Agreement at any time and
without prior notice to the Employee in the event that any
disability of the Employee of any nature prevents him from
substantially performing his duties under this Agreement for any
period of 180 consecutive days or for an aggregate of 180 days
in any 1 year period.
4.4. Termination by Employer for Cause. The Employer
may terminate this Agreement at any time immediately and without
prior notice or wages in lieu of notice to the Employee for
cause. "Cause" shall mean the Employee's dishonesty, fraud,
habitual neglect of his duties, wilful disobedience of lawful
and reasonable order, substance abuse, gross insubordination,
material breach of the terms of the Agreement, or any other
condition stated under Section 9 of the Employment Ordinances.
4.5. Effect of Termination. The Employee shall be
entitled to Salary, earned but unpaid Bonuses and other benefits
provided herein to the date of termination of his employment.
The provisions of Sections 5, 6, 7 and 10 hereof shall survive
any termination and shall remain in full force and effect.
5. Non-competition. The Employee agrees that, except as
an employee pursuant to this Agreement, during the term of this
Agreement and for a period of three (3) months from and after
the date of termination of his employment hereunder the Employee
will not, directly or indirectly, as an owner, principal,
partner, shareholder, agent, employee, consultant or in any
other capacity, engage in the business of the marketing or
selling of computer and/or video game accessories.
6. Non-solicitation. The Employee agrees that for a
period of six (6) months from and after the date of termination
of his employment hereunder the Employee will not, directly or
indirectly, as a principal, partner, shareholder, agent,
director, officer, employee, consultant, or in any other
capacity, (i) solicit or otherwise compete for or provide
products or services to the clients of the Employer which are
competitive with the Employer, or (ii) solicit or otherwise
compete for the business of or engage the services of any of the
employees, agents, consultants or other personnel of the
Employer or any of its affiliates. In addition, during such
period the Employee shall not influence or attempt to influence
any of the employees or personnel of the Employer or any of its
affiliates to cease from providing services to the Employer or
any of its affiliates, or influence, or attempt to influence,
any clients of the Employer or any of its affiliates, directly
or indirectly, to cease doing business with the Employer or its
affiliates.
7. Confidentiality. Except as required in the performance
of his duties hereunder, the Employee shall not, either during
or after the termination of his employment hereunder, use or
disclose to any person whatsoever or permit such disclosure of
any secret, confidential or proprietary information relating to
the business of the Employer, or its affiliates. For the
purpose of this Section 7, the term "proprietary information"
shall include, but not be limited to, customer lists, financial
and/or marketing reports and plans, product configurations and
compositions, pricing guidelines or information, financial
reports, financial projections and other financial information,
business plans and any other information not readily known or
obtainable by the general public, and any proprietary software.
Upon termination of employment hereunder for any reason,
Employee shall promptly return to Employer all books, records,
lists, tapes and other written, typed, computer or printed
materials or data and all copies thereof which contain any
information relating to the business of the Employer, and
Employee further agrees that he will not make or retain any
copies thereof.
8. Equitable Remedies. The Employee agrees that in the
event of a breach of this Agreement by the Employee, the
Employer may not be made whole by the payment of monetary
damages, and therefore consents and will raise no objection to
the Employer seeking injunctive relief or the imposition of
other equitable remedies imposed against him.
9. Reasonable Restrictions. The Employee expressly
acknowledges and agrees (i) that the restrictions set forth
herein are reasonable, in terms of scope, duration, geographic
area, and otherwise, (ii) that the protections afforded to the
Employer hereunder are necessary to protect its legitimate
business interests, and (iii) that the agreement to observe such
restrictions form a material part of the consideration for the
Employee's employment by the Employer hereunder.
10. Intellectual Property. Any improvements, inventions,
techniques, processes, programs, software, works of art,
products or ideas (collectively, "Intellectual Property") made
or developed by the Employee, alone or with others, during the
course of his employment, within or after normal business hours,
relating to the business of the Employer, shall be deemed to
have been made or developed by him solely for the benefit of the
Employer and shall be the sole and exclusive property of the
Employer. To further effectuate the purposes hereof, the
Employee agrees to assign to the Employer all of his rights to
patents, copyrights and all other proprietary interests which
the Employee might have in any Intellectual Property which the
Employee develops during the course of his employment by the
Employer. The Employee further agrees to assist the Employer,
as the Employer may reasonably request, including executing
appropriate documents, to obtain patent, trademark or copyright
registration, or other protections for the Intellectual
Property. The Employee shall not, during or after the course of
employment, use or disclose to any other person or entity and
such Intellectual Property except as expressly authorized in
writing by the Employer.
11. Notices. All notices and other communications
required or permitted to be given by this Agreement shall be in
writing and shall be given and shall be deemed received if and
when either hand-delivered, sent by overnight carrier, or mailed
by registered or certified Hong Kong. Either party hereto shall
have the right to change the address set forth above by giving
notice to the other party in accordance with this Section 11.
12. Miscellaneous.
12.1 Binding Effect Assignment. This Agreement shall
be binding upon and inure to the benefit of the Employer, and
its successors and assigns. This Agreement shall be binding
upon the Employee and his heirs, personal and legal
representatives, and guardians, and shall inure to the benefit
of the Employee. This Agreement is personal to the Employee,
and neither this Agreement nor any part hereof or interest
herein shall be assigned by the Employee.
12.2. Amendment Non-Waiver. Except as otherwise
specifically provided, no amendment or modification of this
Agreement shall be valid unless the same is in writing and
signed by the Employer. No waiver of any of the provisions of
this Agreement shall be valid unless the same is in writing and
signed by the party against whom it is sought to be enforced.
Any waiver of any breach of this Agreement shall not be
considered to be a continuing waiver or consent to any
subsequent breach on the part of either the Employer or the
Employee.
12.3. Governing Law. This Agreement shall be
governed by, enforced and construed in accordance with the laws
of Hong Kong. Any action taken to enforce this Agreement shall
be taken in a court located in Hong Kong. The Employee hereby
consents to jurisdiction of such Hong Kong courts.
12.4. Entire Understanding. This Agreement sets
forth the entire, integrated understanding and agreement of the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements or understandings of any nature
whatsoever between the parties hereto with respect to the
matters covered herein.
12.5. Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable (an
"Improper Provision") in any respect under applicable law, such
Improper Provision shall not affect any other provision of this
Agreement and this Agreement shall continue in full force and
effect without any such Improper Provision being a part hereof.
If any covenant contained herein is deemed unenforceable because
of duration or geographic scope, such covenant shall be reduced
in duration or scope to the extent necessary or appropriate to
render it enforceable.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first hereinabove set forth.
ATTEST: EMPLOYER:
STD HOLDING LIMITED
________________________ By:____________________(SEAL)
Chu Nin Yiu, President
WITNESS: EMPLOYEE:
________________________ By:____________________(SEAL)
Tong Yue Ting
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on this
23rd day of August 1995 effective as of September 15, 1995 (the
"Effective Date") by and between STD Holding Limited, a Hong
Kong corporation (the "Employer"), and Wong Shiu Wah, Williamson
(the "Employee").
W I T N E S S E T H
WHEREAS, the Employer is in the business of manufacturing
computer and video game accessories; and
WHEREAS, the Employer desires to employ the Employee, and
the Employee is willing to accept such employment, upon the
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warrants hereinafter set forth,
the parties agree as follows:
1. Employment and Term. The Employer hereby engages the
Employee as a full-time employee for a term of two (2) years
beginning on the Effective Date and ending on September 14,
1997. Employee hereby accepts such employment, in accordance
with the terms set forth herein. During the term of his
employment hereunder, the Employee shall devote his full time
and efforts to render services as the Financial Controller of
the Employer, and to perform such other duties as the Employer
may assign to the Employee from time to time. The Employee
shall exert his best efforts in performance of and shall devote
all business time to his employment duties under this Agreement.
2. Renumeration. In consideration of the Employee
rendering the services required hereunder, the Employer shall
pay the Employee a base salary, and, if earned, bonuses, as
described below:
2.1. Base Salary. The Employer shall pay to the
Employee a monthly salary (the "Salary") of HK $39,000 payable
on the last day of each month or the preceding working day in
case the pay day falls on a public holiday or on a Sunday.
2.2. Double Pay. An additional payment equivalent to
one full month's salary will be paid on February 1 to the
Employee if he has served the Employer for a full year of
service at the expiry of the payment period, and continues to be
employed in the Company after the expiry of the payment period.
Pro-rated payment will be made to the Employee if he served the
Employer continuously for not less than 26 weeks, but less than
a full year, at the expiry of the payment period, or who is
still employed by the Company on or after December 1, or whose
employment has been terminated by the Company.
2.3. CPI Adjustment. The Salary shall be increased
each year by an amount at least equal to any increase in the
Consumer Price Index (B) for All Items complied by the Consumer
Price Index Section of the Census and Statistics Department of
the Hong Kong Government (or by any Hong Kong Government
department upon which duties in connection with such index shall
have devolved).
2.4. Bonus. Any incentive bonus is subject to the
sole and absolute discretion of the Board of Directors of the
Employer, which may, but is not obligated to, consider,among
other things, overall job performance, technical skills, growth
of the Employer's business and profit.
2.5. Increase in Compensation. The salary provided
for herein is subject to increase, but not decrease, by the
determination in the sole discretion of the Chairman of the
Board of the Employer.
3. Benefits. The Employer shall make available to the
Employee the following benefits:
3.1. Participation of the Employee in all medical,
personal accident and other insurance plans and programs
available to Employer's employees generally.
3.2. Fourteen (14) working days of annual leave per
year. The Employee shall take the annual leave at times
convenient to the Employer and only if approved by the Employer.
The Employee shall not be entitled to carry forward any unused
annual leave to the following year except having a special
approval of the President, but shall instead be entitled to
receive payment in lieu of annual leave not taken, based on 365
day year.
3.3. Statutory public holidays as well as every
Sunday.
3.4. Two days of full paid sick leave per month in
which the Employee is unable to work due to sickness.
3.5. Reimbursement for all out-of-pocket expenses
incurred in connection with Employer's business and approved by
the Employer upon submission of evidence thereof in form
satisfactory to the Employer.
3.6. Reimbursement of all costs in connection with a
cellular telephone for business.
3.7. Any other employee benefit made available to
employees of the Employer generally and described in the
Employer's Employee Manual. In the event of any conflict
between the terms in the Manual and in this Agreement, the terms
of this Agreement shall control.
4. Termination of Employment.
4.1. Termination by Employee with Notice. The
Employee may terminate this Agreement by giving to the Employer
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3.
4.2. Termination by Employer with Notice. The
Employer may terminate this Agreement by giving to the Employee
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3
4.3. Termination by Death or Disability of Employee.
This Agreement shall terminate upon the death of the Employee.
The Employer may terminate this Agreement at any time and
without prior notice to the Employee in the event that any
disability of the Employee of any nature prevents him from
substantially performing his duties under this Agreement for any
period of 180 consecutive days or for an aggregate of 180 days
in any 1 year period.
4.4. Termination by Employer for Cause. The Employer
may terminate this Agreement at any time immediately and without
prior notice or wages in lieu of notice to the Employee for
cause. "Cause" shall mean the Employee's dishonesty, fraud,
habitual neglect of his duties, wilful disobedience of lawful
and reasonable order, substance abuse, gross insubordination,
material breach of the terms of the Agreement, or any other
condition stated under Section 9 of the Employment Ordinances.
4.5. Effect of Termination. The Employee shall be
entitled to Salary, earned but unpaid Bonuses and other benefits
provided herein to the date of termination of his employment.
The provisions of Sections 5, 6, 7 and 10 hereof shall survive
any termination and shall remain in full force and effect.
5. Non-competition. The Employee agrees that, except as
an employee pursuant to this Agreement, during the term of this
Agreement and for a period of three (3) months from and after
the date of termination of his employment hereunder the Employee
will not, directly or indirectly, as an owner, principal,
partner, shareholder, agent, employee, consultant or in any
other capacity, engage in the business of the marketing or
selling of computer and/or video game accessories.
6. Non-solicitation. The Employee agrees that for a
period of six (6) months from and after the date of termination
of his employment hereunder the Employee will not, directly or
indirectly, as a principal, partner, shareholder, agent,
director, officer, employee, consultant, or in any other
capacity, (i) solicit or otherwise compete for or provide
products or services to the clients of the Employer which are
competitive with the Employer, or (ii) solicit or otherwise
compete for the business of or engage the services of any of the
employees, agents, consultants or other personnel of the
Employer or any of its affiliates. In addition, during such
period the Employee shall not influence or attempt to influence
any of the employees or personnel of the Employer or any of its
affiliates to cease from providing services to the Employer or
any of its affiliates, or influence, or attempt to influence,
any clients of the Employer or any of its affiliates, directly
or indirectly, to cease doing business with the Employer or its
affiliates.
7. Confidentiality. Except as required in the performance
of his duties hereunder, the Employee shall not, either during
or after the termination of his employment hereunder, use or
disclose to any person whatsoever or permit such disclosure of
any secret, confidential or proprietary information relating to
the business of the Employer, or its affiliates. For the
purpose of this Section 7, the term "proprietary information"
shall include, but not be limited to, customer lists, financial
and/or marketing reports and plans, product configurations and
compositions, pricing guidelines or information, financial
reports, financial projections and other financial information,
business plans and any other information not readily known or
obtainable by the general public, and any proprietary software.
Upon termination of employment hereunder for any reason,
Employee shall promptly return to Employer all books, records,
lists, tapes and other written, typed, computer or printed
materials or data and all copies thereof which contain any
information relating to the business of the Employer, and
Employee further agrees that he will not make or retain any
copies thereof.
8. Equitable Remedies. The Employee agrees that in the
event of a breach of this Agreement by the Employee, the
Employer may not be made whole by the payment of monetary
damages, and therefore consents and will raise no objection to
the Employer seeking injunctive relief or the imposition of
other equitable remedies imposed against him.
9. Reasonable Restrictions. The Employee expressly
acknowledges and agrees (i) that the restrictions set forth
herein are reasonable, in terms of scope, duration, geographic
area, and otherwise, (ii) that the protections afforded to the
Employer hereunder are necessary to protect its legitimate
business interests, and (iii) that the agreement to observe such
restrictions form a material part of the consideration for the
Employee's employment by the Employer hereunder.
10. Intellectual Property. Any improvements, inventions,
techniques, processes, programs, software, works of art,
products or ideas (collectively, "Intellectual Property") made
or developed by the Employee, alone or with others, during the
course of his employment, within or after normal business hours,
relating to the business of the Employer, shall be deemed to
have been made or developed by him solely for the benefit of the
Employer and shall be the sole and exclusive property of the
Employer. To further effectuate the purposes hereof, the
Employee agrees to assign to the Employer all of his rights to
patents, copyrights and all other proprietary interests which
the Employee might have in any Intellectual Property which the
Employee develops during the course of his employment by the
Employer. The Employee further agrees to assist the Employer,
as the Employer may reasonably request, including executing
appropriate documents, to obtain patent, trademark or copyright
registration, or other protections for the Intellectual
Property. The Employee shall not, during or after the course of
employment, use or disclose to any other person or entity and
such Intellectual Property except as expressly authorized in
writing by the Employer.
11. Notices. All notices and other communications
required or permitted to be given by this Agreement shall be in
writing and shall be given and shall be deemed received if and
when either hand-delivered, sent by overnight carrier, or mailed
by registered or certified Hong Kong. Either party hereto shall
have the right to change the address set forth above by giving
notice to the other party in accordance with this Section 11.
12. Miscellaneous.
12.1 Binding Effect Assignment. This Agreement shall
be binding upon and inure to the benefit of the Employer, and
its successors and assigns. This Agreement shall be binding
upon the Employee and his heirs, personal and legal
representatives, and guardians, and shall inure to the benefit
of the Employee. This Agreement is personal to the Employee,
and neither this Agreement nor any part hereof or interest
herein shall be assigned by the Employee.
12.2. Amendment Non-Waiver. Except as otherwise
specifically provided, no amendment or modification of this
Agreement shall be valid unless the same is in writing and
signed by the Employer. No waiver of any of the provisions of
this Agreement shall be valid unless the same is in writing and
signed by the party against whom it is sought to be enforced.
Any waiver of any breach of this Agreement shall not be
considered to be a continuing waiver or consent to any
subsequent breach on the part of either the Employer or the
Employee.
12.3. Governing Law. This Agreement shall be
governed by, enforced and construed in accordance with the laws
of Hong Kong. Any action taken to enforce this Agreement shall
be taken in a court located in Hong Kong. The Employee hereby
consents to jurisdiction of such Hong Kong courts.
12.4. Entire Understanding. This Agreement sets
forth the entire, integrated understanding and agreement of the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements or understandings of any nature
whatsoever between the parties hereto with respect to the
matters covered herein.
12.5. Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable (an
"Improper Provision") in any respect under applicable law, such
Improper Provision shall not affect any other provision of this
Agreement and this Agreement shall continue in full force and
effect without any such Improper Provision being a part hereof.
If any covenant contained herein is deemed unenforceable because
of duration or geographic scope, such covenant shall be reduced
in duration or scope to the extent necessary or appropriate to
render it enforceable.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first hereinabove set forth.
ATTEST: EMPLOYER:
STD HOLDING LIMITED
________________________ By:____________________(SEAL)
Chu Nin Yiu, President
WITNESS: EMPLOYEE:
________________________ By:____________________(SEAL)
Wong Shiu Wah, Williamson
EXHIBIT 4.02(p)(iv)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on this
23rd day of August 1995 effective as of September 15, 1995 (the
"Effective Date") by and between STD Holding Limited, a Hong
Kong corporation (the "Employer"), and Lee Chun Kun,Gary (the
"Employee").
W I T N E S S E T H
WHEREAS, the Employer is in the business of manufacturing
computer and video game accessories; and
WHEREAS, the Employer desires to employ the Employee, and
the Employee is willing to accept such employment, upon the
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warrants hereinafter set forth,
the parties agree as follows:
1. Employment and Term. The Employer hereby engages the
Employee as a full-time employee for a term of two (2) years
beginning on the Effective Date and ending on September 14,
1997. Employee hereby accepts such employment, in accordance
with the terms set forth herein. During the term of his
employment hereunder, the Employee shall devote his full time
and efforts to render services as the Vice President, Finance
and Administration of the Employer, and to perform such other
duties as the Employer may assign to the Employee from time to
time. The Employee shall exert his best efforts in performance
of and shall devote all business time to his employment duties
under this Agreement.
2. Renumeration. In consideration of the Employee
rendering the services required hereunder, the Employer shall
pay the Employee a base salary, and, if earned, bonuses, as
described below:
2.1. Base Salary. The Employer shall pay to the
Employee a monthly salary (the "Salary") of HK $90,000 payable
on the last day of each month or the preceding working day in
case the pay day falls on a public holiday or on a Sunday.
2.2. Double Pay. An additional payment equivalent to
one full month's salary will be paid on February 1 to the
Employee if he has served the Employer for a full year of
service at the expiry of the payment period, and continues to be
employed in the Company after the expiry of the payment period.
Pro-rated payment will be made to the Employee if he served the
Employer continuously for not less than 26 weeks, but less than
a full year, at the expiry of the payment period, or who is
still employed by the Company on or after December 1, or whose
employment has been terminated by the Company.
2.3. CPI Adjustment. The Salary shall be increased
each year by an amount at least equal to any increase in the
Consumer Price Index (B) for All Items complied by the Consumer
Price Index Section of the Census and Statistics Department of
the Hong Kong Government (or by any Hong Kong Government
department upon which duties in connection with such index shall
have devolved).
2.4. Bonus. Any incentive bonus is subject to the
sole and absolute discretion of the Board of Directors of the
Employer, which may, but is not obligated to, consider,among
other things, overall job performance, technical skills, growth
of the Employer's business and profit.
2.5. Increase in Compensation. The salary provided
for herein is subject to increase, but not decrease, by the
determination in the sole discretion of the Chairman of the
Board of the Employer.
3. Benefits. The Employer shall make available to the
Employee the following benefits:
3.1. Participation of the Employee in all medical,
personal accident and other insurance plans and programs
available to Employer's employees generally.
3.2. Fourteen (14) working days of annual leave per
year. The Employee shall take the annual leave at times
convenient to the Employer and only if approved by the Employer.
The Employee shall not be entitled to carry forward any unused
annual leave to the following year except having a special
approval of the President, but shall instead be entitled to
receive payment in lieu of annual leave not taken, based on 365
day year.
3.3. Statutory public holidays as well as every
Sunday.
3.4. Two days of full paid sick leave per month in
which the Employee is unable to work due to sickness.
3.5. Reimbursement for all out-of-pocket expenses
incurred in connection with Employer's business and approved by
the Employer upon submission of evidence thereof in form
satisfactory to the Employer.
3.6. Reimbursement of all costs in connection with a
cellular telephone for business.
3.7. Any other employee benefit made available to
employees of the Employer generally and described in the
Employer's Employee Manual. In the event of any conflict
between the terms in the Manual and in this Agreement, the terms
of this Agreement shall control.
4. Termination of Employment.
4.1. Termination by Employee with Notice. The
Employee may terminate this Agreement by giving to the Employer
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3.
4.2. Termination by Employer with Notice. The
Employer may terminate this Agreement by giving to the Employee
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3
4.3. Termination by Death or Disability of Employee.
This Agreement shall terminate upon the death of the Employee.
The Employer may terminate this Agreement at any time and
without prior notice to the Employee in the event that any
disability of the Employee of any nature prevents him from
substantially performing his duties under this Agreement for any
period of 180 consecutive days or for an aggregate of 180 days
in any 1 year period.
4.4. Termination by Employer for Cause. The Employer
may terminate this Agreement at any time immediately and without
prior notice or wages in lieu of notice to the Employee for
cause. "Cause" shall mean the Employee's dishonesty, fraud,
habitual neglect of his duties, wilful disobedience of lawful
and reasonable order, substance abuse, gross insubordination,
material breach of the terms of the Agreement, or any other
condition stated under Section 9 of the Employment Ordinances.
4.5. Effect of Termination. The Employee shall be
entitled to Salary, earned but unpaid Bonuses and other benefits
provided herein to the date of termination of his employment.
The provisions of Sections 5, 6, 7 and 10 hereof shall survive
any termination and shall remain in full force and effect.
5. Non-competition. The Employee agrees that, except as
an employee pursuant to this Agreement, during the term of this
Agreement and for a period of three (3) months from and after
the date of termination of his employment hereunder the Employee
will not, directly or indirectly, as an owner, principal,
partner, shareholder, agent, employee, consultant or in any
other capacity, engage in the business of the marketing or
selling of computer and/or video game accessories.
6. Non-solicitation. The Employee agrees that for a
period of six (6) months from and after the date of termination
of his employment hereunder the Employee will not, directly or
indirectly, as a principal, partner, shareholder, agent,
director, officer, employee, consultant, or in any other
capacity, (i) solicit or otherwise compete for or provide
products or services to the clients of the Employer which are
competitive with the Employer, or (ii) solicit or otherwise
compete for the business of or engage the services of any of the
employees, agents, consultants or other personnel of the
Employer or any of its affiliates. In addition, during such
period the Employee shall not influence or attempt to influence
any of the employees or personnel of the Employer or any of its
affiliates to cease from providing services to the Employer or
any of its affiliates, or influence, or attempt to influence,
any clients of the Employer or any of its affiliates, directly
or indirectly, to cease doing business with the Employer or its
affiliates.
7. Confidentiality. Except as required in the performance
of his duties hereunder, the Employee shall not, either during
or after the termination of his employment hereunder, use or
disclose to any person whatsoever or permit such disclosure of
any secret, confidential or proprietary information relating to
the business of the Employer, or its affiliates. For the
purpose of this Section 7, the term "proprietary information"
shall include, but not be limited to, customer lists, financial
and/or marketing reports and plans, product configurations and
compositions, pricing guidelines or information, financial
reports, financial projections and other financial information,
business plans and any other information not readily known or
obtainable by the general public, and any proprietary software.
Upon termination of employment hereunder for any reason,
Employee shall promptly return to Employer all books, records,
lists, tapes and other written, typed, computer or printed
materials or data and all copies thereof which contain any
information relating to the business of the Employer, and
Employee further agrees that he will not make or retain any
copies thereof.
8. Equitable Remedies. The Employee agrees that in the
event of a breach of this Agreement by the Employee, the
Employer may not be made whole by the payment of monetary
damages, and therefore consents and will raise no objection to
the Employer seeking injunctive relief or the imposition of
other equitable remedies imposed against him.
9. Reasonable Restrictions. The Employee expressly
acknowledges and agrees (i) that the restrictions set forth
herein are reasonable, in terms of scope, duration, geographic
area, and otherwise, (ii) that the protections afforded to the
Employer hereunder are necessary to protect its legitimate
business interests, and (iii) that the agreement to observe such
restrictions form a material part of the consideration for the
Employee's employment by the Employer hereunder.
10. Intellectual Property. Any improvements, inventions,
techniques, processes, programs, software, works of art,
products or ideas (collectively, "Intellectual Property") made
or developed by the Employee, alone or with others, during the
course of his employment, within or after normal business hours,
relating to the business of the Employer, shall be deemed to
have been made or developed by him solely for the benefit of the
Employer and shall be the sole and exclusive property of the
Employer. To further effectuate the purposes hereof, the
Employee agrees to assign to the Employer all of his rights to
patents, copyrights and all other proprietary interests which
the Employee might have in any Intellectual Property which the
Employee develops during the course of his employment by the
Employer. The Employee further agrees to assist the Employer,
as the Employer may reasonably request, including executing
appropriate documents, to obtain patent, trademark or copyright
registration, or other protections for the Intellectual
Property. The Employee shall not, during or after the course of
employment, use or disclose to any other person or entity and
such Intellectual Property except as expressly authorized in
writing by the Employer.
11. Notices. All notices and other communications
required or permitted to be given by this Agreement shall be in
writing and shall be given and shall be deemed received if and
when either hand-delivered, sent by overnight carrier, or mailed
by registered or certified Hong Kong. Either party hereto shall
have the right to change the address set forth above by giving
notice to the other party in accordance with this Section 11.
12. Miscellaneous.
12.1 Binding Effect Assignment. This Agreement shall
be binding upon and inure to the benefit of the Employer, and
its successors and assigns. This Agreement shall be binding
upon the Employee and his heirs, personal and legal
representatives, and guardians, and shall inure to the benefit
of the Employee. This Agreement is personal to the Employee,
and neither this Agreement nor any part hereof or interest
herein shall be assigned by the Employee.
12.2. Amendment Non-Waiver. Except as otherwise
specifically provided, no amendment or modification of this
Agreement shall be valid unless the same is in writing and
signed by the Employer. No waiver of any of the provisions of
this Agreement shall be valid unless the same is in writing and
signed by the party against whom it is sought to be enforced.
Any waiver of any breach of this Agreement shall not be
considered to be a continuing waiver or consent to any
subsequent breach on the part of either the Employer or the
Employee.
12.3. Governing Law. This Agreement shall be
governed by, enforced and construed in accordance with the laws
of Hong Kong. Any action taken to enforce this Agreement shall
be taken in a court located in Hong Kong. The Employee hereby
consents to jurisdiction of such Hong Kong courts.
12.4. Entire Understanding. This Agreement sets
forth the entire, integrated understanding and agreement of the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements or understandings of any nature
whatsoever between the parties hereto with respect to the
matters covered herein.
12.5. Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable (an
"Improper Provision") in any respect under applicable law, such
Improper Provision shall not affect any other provision of this
Agreement and this Agreement shall continue in full force and
effect without any such Improper Provision being a part hereof.
If any covenant contained herein is deemed unenforceable because
of duration or geographic scope, such covenant shall be reduced
in duration or scope to the extent necessary or appropriate to
render it enforceable.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first hereinabove set forth.
ATTEST: EMPLOYER:
STD HOLDING LIMITED
________________________ By:____________________(SEAL)
Chu Nin Yiu, President
WITNESS: EMPLOYEE:
________________________ By:____________________(SEAL)
Lee Chun Kun, Gary
EXHIBIT 4.02(p)(iv)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made on this
23rd day of August 1995 effective as of September 15, 1995 (the
"Effective Date") by and between STD Holding Limited, a Hong
Kong corporation (the "Employer"), and Leung Choi Luen (the
"Employee").
W I T N E S S E T H
WHEREAS, the Employer is in the business of manufacturing
computer and video game accessories; and
WHEREAS, the Employer desires to employ the Employee, and
the Employee is willing to accept such employment, upon the
terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warrants hereinafter set forth,
the parties agree as follows:
1. Employment and Term. The Employer hereby engages the
Employee as a full-time employee for a term of two (2) years
beginning on the Effective Date and ending on September 14,
1997. Employee hereby accepts such employment, in accordance
with the terms set forth herein. During the term of his
employment hereunder, the Employee shall devote his full time
and efforts to render services as the Vice President, China
Factory of the Employer, and to perform such other duties as the
Employer may assign to the Employee from time to time. The
Employee shall exert his best efforts in performance of and
shall devote all business time to his employment duties under
this Agreement.
2. Renumeration. In consideration of the Employee
rendering the services required hereunder, the Employer shall
pay the Employee a base salary, and, if earned, bonuses, as
described below:
2.1. Base Salary. The Employer shall pay to the
Employee a monthly salary (the "Salary") of HK $43,006 payable
on the last day of each month or the preceding working day in
case the pay day falls on a public holiday or on a Sunday.
2.2. Double Pay. An additional payment equivalent to
one full month's salary will be paid on February 1 to the
Employee if he has served the Employer for a full year of
service at the expiry of the payment period, and continues to be
employed in the Company after the expiry of the payment period.
Pro-rated payment will be made to the Employee if he served the
Employer continuously for not less than 26 weeks, but less than
a full year, at the expiry of the payment period, or who is
still employed by the Company on or after December 1, or whose
employment has been terminated by the Company.
2.3. CPI Adjustment. The Salary shall be increased
each year by an amount at least equal to any increase in the
Consumer Price Index (B) for All Items complied by the Consumer
Price Index Section of the Census and Statistics Department of
the Hong Kong Government (or by any Hong Kong Government
department upon which duties in connection with such index shall
have devolved).
2.4. Bonus. Any incentive bonus is subject to the
sole and absolute discretion of the Board of Directors of the
Employer, which may, but is not obligated to, consider,among
other things, overall job performance, technical skills, growth
of the Employer's business and profit.
2.5. Increase in Compensation. The salary provided
for herein is subject to increase, but not decrease, by the
determination in the sole discretion of the Chairman of the
Board of the Employer.
3. Benefits. The Employer shall make available to the
Employee the following benefits:
3.1. Participation of the Employee in all medical,
personal accident and other insurance plans and programs
available to Employer's employees generally.
3.2. Fourteen (14) working days of annual leave per
year. The Employee shall take the annual leave at times
convenient to the Employer and only if approved by the Employer.
The Employee shall not be entitled to carry forward any unused
annual leave to the following year except having a special
approval of the President, but shall instead be entitled to
receive payment in lieu of annual leave not taken, based on 365
day year.
3.3. Statutory public holidays as well as every
Sunday.
3.4. Two days of full paid sick leave per month in
which the Employee is unable to work due to sickness.
3.5. Reimbursement for all out-of-pocket expenses
incurred in connection with Employer's business and approved by
the Employer upon submission of evidence thereof in form
satisfactory to the Employer.
3.6. Reimbussement of all costs in connection with
cellular telephone for business.
3.7. Any other employee benefit made available to
employees of the Employer generally and described in the
Employer's Employee Manual. In the event of any conflict
between the terms in the Manual and in this Agreement, the terms
of this Agreement shall control.
4. Termination of Employment.
4.1. Termination by Employee with Notice. The
Employee may terminate this Agreement by giving to the Employer
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3.
4.2. Termination by Employer with Notice. The
Employer may terminate this Agreement by giving to the Employee
not less than six (6) months written notice or wages in lieu of
notice thereof, except when the reason for termination is death
or disability, as provided in Section 4.3
4.3. Termination by Death or Disability of Employee.
This Agreement shall terminate upon the death of the Employee.
The Employer may terminate this Agreement at any time and
without prior notice to the Employee in the event that any
disability of the Employee of any nature prevents him from
substantially performing his duties under this Agreement for any
period of 180 consecutive days or for an aggregate of 180 days
in any 1 year period.
4.4. Termination by Employer for Cause. The Employer
may terminate this Agreement at any time immediately and without
prior notice or wages in lieu of notice to the Employee for
cause. "Cause" shall mean the Employee's dishonesty, fraud,
habitual neglect of his duties, wilful disobedience of lawful
and reasonable order, substance abuse, gross insubordination,
material breach of the terms of the Agreement, or any other
condition stated under Section 9 of the Employment Ordinances.
4.5. Effect of Termination. The Employee shall be
entitled to Salary, earned but unpaid Bonuses and other benefits
provided herein to the date of termination of his employment.
The provisions of Sections 5, 6, 7 and 10 hereof shall survive
any termination and shall remain in full force and effect.
5. Non-competition. The Employee agrees that, except as
an employee pursuant to this Agreement, during the term of this
Agreement and for a period of three (3) months from and after
the date of termination of his employment hereunder the Employee
will not, directly or indirectly, as an owner, principal,
partner, shareholder, agent, employee, consultant or in any
other capacity, engage in the business of the marketing or
selling of computer and/or video game accessories.
6. Non-solicitation. The Employee agrees that for a
period of six (6) months from and after the date of termination
of his employment hereunder the Employee will not, directly or
indirectly, as a principal, partner, shareholder, agent,
director, officer, employee, consultant, or in any other
capacity, (i) solicit or otherwise compete for or provide
products or services to the clients of the Employer which are
competitive with the Employer, or (ii) solicit or otherwise
compete for the business of or engage the services of any of the
employees, agents, consultants or other personnel of the
Employer or any of its affiliates. In addition, during such
period the Employee shall not influence or attempt to influence
any of the employees or personnel of the Employer or any of its
affiliates to cease from providing services to the Employer or
any of its affiliates, or influence, or attempt to influence,
any clients of the Employer or any of its affiliates, directly
or indirectly, to cease doing business with the Employer or its
affiliates.
7. Confidentiality. Except as required in the performance
of his duties hereunder, the Employee shall not, either during
or after the termination of his employment hereunder, use or
disclose to any person whatsoever or permit such disclosure of
any secret, confidential or proprietary information relating to
the business of the Employer, or its affiliates. For the
purpose of this Section 7, the term "proprietary information"
shall include, but not be limited to, customer lists, financial
and/or marketing reports and plans, product configurations and
compositions, pricing guidelines or information, financial
reports, financial projections and other financial information,
business plans and any other information not readily known or
obtainable by the general public, and any proprietary software.
Upon termination of employment hereunder for any reason,
Employee shall promptly return to Employer all books, records,
lists, tapes and other written, typed, computer or printed
materials or data and all copies thereof which contain any
information relating to the business of the Employer, and
Employee further agrees that he will not make or retain any
copies thereof.
8. Equitable Remedies. The Employee agrees that in the
event of a breach of this Agreement by the Employee, the
Employer may not be made whole by the payment of monetary
damages, and therefore consents and will raise no objection to
the Employer seeking injunctive relief or the imposition of
other equitable remedies imposed against him.
9. Reasonable Restrictions. The Employee expressly
acknowledges and agrees (i) that the restrictions set forth
herein are reasonable, in terms of scope, duration, geographic
area, and otherwise, (ii) that the protections afforded to the
Employer hereunder are necessary to protect its legitimate
business interests, and (iii) that the agreement to observe such
restrictions form a material part of the consideration for the
Employee's employment by the Employer hereunder.
10. Intellectual Property. Any improvements, inventions,
techniques, processes, programs, software, works of art,
products or ideas (collectively, "Intellectual Property") made
or developed by the Employee, alone or with others, during the
course of his employment, within or after normal business hours,
relating to the business of the Employer, shall be deemed to
have been made or developed by him solely for the benefit of the
Employer and shall be the sole and exclusive property of the
Employer. To further effectuate the purposes hereof, the
Employee agrees to assign to the Employer all of his rights to
patents, copyrights and all other proprietary interests which
the Employee might have in any Intellectual Property which the
Employee develops during the course of his employment by the
Employer. The Employee further agrees to assist the Employer,
as the Employer may reasonably request, including executing
appropriate documents, to obtain patent, trademark or copyright
registration, or other protections for the Intellectual
Property. The Employee shall not, during or after the course of
employment, use or disclose to any other person or entity and
such Intellectual Property except as expressly authorized in
writing by the Employer.
11. Notices. All notices and other communications
required or permitted to be given by this Agreement shall be in
writing and shall be given and shall be deemed received if and
when either hand-delivered, sent by overnight carrier, or mailed
by registered or certified Hong Kong. Either party hereto shall
have the right to change the address set forth above by giving
notice to the other party in accordance with this Section 11.
12. Miscellaneous.
12.1 Binding Effect Assignment. This Agreement shall
be binding upon and inure to the benefit of the Employer, and
its successors and assigns. This Agreement shall be binding
upon the Employee and his heirs, personal and legal
representatives, and guardians, and shall inure to the benefit
of the Employee. This Agreement is personal to the Employee,
and neither this Agreement nor any part hereof or interest
herein shall be assigned by the Employee.
12.2. Amendment Non-Waiver. Except as otherwise
specifically provided, no amendment or modification of this
Agreement shall be valid unless the same is in writing and
signed by the Employer. No waiver of any of the provisions of
this Agreement shall be valid unless the same is in writing and
signed by the party against whom it is sought to be enforced.
Any waiver of any breach of this Agreement shall not be
considered to be a continuing waiver or consent to any
subsequent breach on the part of either the Employer or the
Employee.
12.3. Governing Law. This Agreement shall be
governed by, enforced and construed in accordance with the laws
of Hong Kong. Any action taken to enforce this Agreement shall
be taken in a court located in Hong Kong. The Employee hereby
consents to jurisdiction of such Hong Kong courts.
12.4. Entire Understanding. This Agreement sets
forth the entire, integrated understanding and agreement of the
parties hereto with respect to the subject matter hereof and
supersedes all prior agreements or understandings of any nature
whatsoever between the parties hereto with respect to the
matters covered herein.
12.5. Severability. If any provision of this
Agreement is held to be invalid, illegal or unenforceable (an
"Improper Provision") in any respect under applicable law, such
Improper Provision shall not affect any other provision of this
Agreement and this Agreement shall continue in full force and
effect without any such Improper Provision being a part hereof.
If any covenant contained herein is deemed unenforceable because
of duration or geographic scope, such covenant shall be reduced
in duration or scope to the extent necessary or appropriate to
render it enforceable.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first hereinabove set forth.
ATTEST: EMPLOYER:
STD HOLDING LIMITED
________________________ By:____________________(SEAL)
Chu Nin Yiu, President
WITNESS: EMPLOYEE:
________________________ By:____________________(SEAL)
Leung Choi Luen
<PAGE>
EXHIBIT 2 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING SEPTEMBER 5, 1995
ASSET PURCHASE AGREEMENT
Among
STD ENTERTAINMENT (U.S.A.) INC.,
as Seller,
and
INTERACT ACCESSORIES, INC.
as Purchaser,
and
RECOTON CORPORATION
and
STD INTERNATIONAL HOLDINGS LIMITED, STD INVESTMENTS
(B.V.I.) LIMITED, AND THE
SHAREHOLDERS OF
STD INTERNATIONAL HOLDING LIMITED
dated
as of August 31, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
Section 1.01 Cross References . . . . . . . . . . . . . . 1
Section 1.02 General Terms . . . . . . . . . . . . . . . 3
Section 1.03 Materiality. . . . . . . . . . . . . . . . . 5
ARTICLE II. SALE OF ASSETS
Section 2.01 Purchase and Sale of Assets. . . . . . . . . 6
Section 2.02 Assets Retained. . . . . . . . . . . . . . . 7
Section 2.03 Liabilities. . . . . . . . . . . . . . . . . 7
ARTICLE III. CONSIDERATION
Section 3.01 Purchase Price . . . . . . . . . . . . . . . 8
Section 3.02 Time of Payment; Adjustment. . . . . . . . . 8
Section 3.03 Assumption of Liabilities. . . . . . . . . . 8
Section 3.04 Allocation . . . . . . . . . . . . . . . . . 8
ARTICLE IV. THE CLOSING
Section 4.01 Time and Place . . . . . . . . . . . . . . . 8
Section 4.02 Seller's Actions at Closing. . . . . . . . . 9
Section 4.03 Purchaser's Actions at Closing . . . . . . . 12
ARTICLE V. REPRESENTATIONS, WARRANTIES AND
COVENANTS BY SELLER PARTIES
Section 5.01 Organization, Standing and
Qualification; Corporate Documents . . . . 14
Section 5.02 Shareholders, Subsidiaries and
Investments. . . . . . . . . . . . . . . . 14
Section 5.03 Execution, Delivery and Performance of
Agreement; Authority . . . . . . . . . . . 14
Section 5.04 Financial Statements, Etc. . . . . . . . . . 15
Section 5.05 Absence of Undisclosed Liabilities . . . . . 16
Section 5.06 Taxes. . . . . . . . . . . . . . . . . . . . 16
Section 5.07 Absence of Changes or Events . . . . . . . . 17
Section 5.08 Litigation . . . . . . . . . . . . . . . . . 19
Section 5.09 Compliance with Legal Requirements
and Instruments. . . . . . . . . . . . . . 20
Section 5.10 Title to, and Condition of, Properties . . . 21
Section 5.11 Disclosure Schedules . . . . . . . . . . . . 21
Section 5.12 Contracts. . . . . . . . . . . . . . . . . . 23
Section 5.13 Proprietary Rights, Etc. . . . . . . . . . . 24
Section 5.14 Inventory. . . . . . . . . . . . . . . . . . 25
Section 5.15 Receivables. . . . . . . . . . . . . . . . . 25
Section 5.16 Employee Benefit Plans . . . . . . . . . . . 25
Section 5.17 Environmental Matters. . . . . . . . . . . . 26
Section 5.18 Brokers and Finders. . . . . . . . . . . . . 28
Section 5.19 Governmental Authorizations. . . . . . . . . 29
Section 5.20 Records. . . . . . . . . . . . . . . . . . . 29
Section 5.21 Employee and Director Indebtedness . . . . . 29
Section 5.22 No Material Interests. . . . . . . . . . . . 29
Section 5.23 Employment Relations . . . . . . . . . . . . 29
Section 5.24 Insurance. . . . . . . . . . . . . . . . . . 30
Section 5.25 Disclosure . . . . . . . . . . . . . . . . . 30
Section 5.26 Disclaimer of Implied Warranties . . . . . . 31
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
BY PURCHASER PARTIES
Section 6.01 Organization . . . . . . . . . . . . . . . . 31
Section 6.02 Execution, Delivery and Performance
of Agreement; Authority. . . . . . . . . . 31
Section 6.03 Brokers and Finders. . . . . . . . . . . . . 32
Section 6.04 Current Business . . . . . . . . . . . . . . 32
ARTICLE VII. [OMITTED]
ARTICLE VIII. [OMITTED]
ARTICLE IX. ADDITIONAL COVENANTS
Section 9.01 Noncompetition; Nonsolicitation. . . . . . . 32
Section 9.02 Employees. . . . . . . . . . . . . . . . . . 33
Section 9.03 Tax Returns. . . . . . . . . . . . . . . . . 34
Section 9.04 Transfer Taxes . . . . . . . . . . . . . . . 34
Section 9.05 Receivables. . . . . . . . . . . . . . . . . 34
Section 9.06 Nonpurchased Assets. . . . . . . . . . . . . 34
Section 9.07 Indemnification. . . . . . . . . . . . . . . 34
Section 9.08 Right to Offset. . . . . . . . . . . . . . . 37
Section 9.09 Continued Existence of Seller. . . . . . . . 38
Section 9.10 Recoton Guaranty . . . . . . . . . . . . . . 38
ARTICLE X. GENERAL PROVISIONS
Section 10.01 Nature of Representations, Warranties
and Other Obligations. . . . . . . . . . . 40
Section 10.02 Attorney-in-Fact . . . . . . . . . . . . . . 40
Section 10.03 Notices. . . . . . . . . . . . . . . . . . . 41
Section 10.04 Entire Agreement; Amendment. . . . . . . . . 42
Section 10.05 Waiver . . . . . . . . . . . . . . . . . . . 42
Section 10.06 Binding Nature . . . . . . . . . . . . . . . 42
Section 10.07 Assignment . . . . . . . . . . . . . . . . . 42
Section 10.08 Captions; Language . . . . . . . . . . . . . 43
Section 10.09 Cross-References; Exhibits . . . . . . . . . 43
Section 10.10 Costs. . . . . . . . . . . . . . . . . . . . 43
Section 10.11 Rights of Third Parties. . . . . . . . . . . 43
Section 10.12 Enforceability . . . . . . . . . . . . . . . 43
Section 10.13 Equitable Remedies . . . . . . . . . . . . . 44
Section 10.14 Further Assurances . . . . . . . . . . . . . 44
Section 10.15 Counterparts . . . . . . . . . . . . . . . . 44
Section 10.16 Applicable Law; Dispute Resolution . . . . . 44
Section 10.17 Access; Notice of Actions. . . . . . . . . . 45
Section 10.18 Publicity. . . . . . . . . . . . . . . . . . 45
EXHIBITS
3.03 Form of Liabilities Undertaking
4.02(a)(i) Form of Bill of Sale
4.02(a)(ii) Form of Assignment of Receivables
4.02(a)(iii) Form of Assignment and Assumption of Contracts
4.02(f) Form of Hays Employment Agreement
9.06 Form of Limited Power of Attorney
SCHEDULES
2.01(h) Present Phone and Fax Numbers
2.01(i) Security Deposits, Prepaid Expenses and Other
Deposits Etc.
2.02(a) Retained Assets
2.02(b) Retained Contracts
3.04 Allocation of Purchase Price
4.03 Payment Instruction at Closing
5.01 Jurisdictions in Which Seller Has Authority to
Do Business
5.02 Shareholders
5.03 Execution, Delivery and Performance of Agreements;
Authority
5.04 Financial Statements, Etc.
5.05 Liabilities
5.06 Taxes
5.07 Changes or Events Since March 31, 1995
5.08 Litigation
5.09 Compliance with Laws and Other Instruments
5.10 Title to, and Condition of, Properties
5.11 Disclosure Schedules:
a. Real Estate
b. Receivables
c. Material Equipment
d. Inventory
e. Patents and Trademarks
f. Material Contracts
g. Employment Agreements
h. Licenses, Etc.
i. Customers and Suppliers
j. Products
k. Creditors
l. Insurance
m. Warranty Polices
5.13 Proprietary Rights, Etc.
5.17 Environmental Matters
5.21 Employee Indebtedness
5.22 Material Interests
5.23 Employment Relations
5.24 Insurance
8.01(m) Other Employees
9.01 Restricted Sellers
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 31, 1995
(the "Contract Date") among STD Entertainment (U.S.A.), Inc., a
Maryland corporation ("Seller"), STD International Holdings
Limited, a Bermuda corporation ("STD Bermuda"), STD Investments
(B.V.I.) Limited, a British Virgin Islands corporation ("STD
BVI"), Recoton Corporation, a New York corporation ("Recoton"),
Interact Accessories, Inc., a Delaware corporation,
("Purchaser") (Recoton and Purchaser sometimes being referred to
collectively as the "Purchaser Parties") and Stephen Chu
("Stephen Chu"), David Chu Nin Wai, Ho Tze Man, Tong Yue Ting,
Leung Choi Luen, Wong Shiu Wah and Todd S. Hays ("Hays") (STD
Hong Kong, STD BVI, STD Bermuda, and the signatories who are
natural persons are sometimes each being referred to each as a
"Principal Shareholder" and collectively as the "Principal
Shareholders" and Seller and the Principal Shareholders
sometimes each being referred to as a "Seller Party" and
collectively as the "Seller Parties").
W I T N E S E T H :
WHEREAS, Seller desires to sell substantially all of
its assets, subject to substantially all of its liabilities, and
Purchaser desires to purchase such assets; and
WHEREAS, the Principal Shareholders are the direct or
indirect beneficial owners of the stock of STD USA and each of
such persons are willing to execute and deliver this Agreement
and undertake the obligations set forth herein; and
WHEREAS, Recoton is the sole shareholder of the
Purchaser.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth and subject to
the terms and conditions hereof, the parties hereby agree as
follows:
ARTICLE I. DEFINITIONS
1.01. Cross References. The following terms,
appearing in this Agreement in capitalized form, are defined in
the sections noted:
Assignment and Assumption of
Contracts Section 4.02(g)
Assumed Liabilities Section 2.03(a)
Balance Sheets Section 5.04
Balance Sheet Date Section 5.04
Best Knowledge of Seller Section 5.08
Business Section 9.01(a)
Cash Assets Section 2.01(a)
Closing Date Section 4.01
Closing Payment Section 3.02
Closing Section 4.01
Consents Section 7.04
Contract Date Introduction
Contract Date Balance Sheet Section 5.04
Contract Date Financials Section 5.04
Contracts Section 2.01(e)
Current Balance Sheet Section 5.05
Designated Assigns Section 3.05
Employee Benefit Plans Section 5.16
Environmental Laws Section 5.17
Equipment Section 2.01(b)
Excluded Assets Section 2.02
Financial Statements Section 5.04
GAAP Section 5.04
Hays Introduction
Hays Employment Agreement Section 4.02(f)
Hong Kong Agreement Section 1.03
Income Statements Section 5.04
Inventory Section 2.01(b)
Liabilities Undertaking Section 3.03
Licenses Section 2.01(f)
Limited Power of Attorney Section 4.02(e)
Material Contracts Section 5.03
Other Assets Section 2.01(i)
Other Employment Agreements Section 4.02
Phone Rights Section 2.01(h)
Plans Section 5.16
Principal Shareholders Introduction
Proprietary Rights Section 2.01(g)
Purchase Price Section 3.01
Purchased Assets Section 2.01
Purchaser Introduction
Purchaser Parties Introduction
Purchaser's Accountant Section 7.02
Purchaser's Counsel Section 4.01
Purchaser's Other Agreements Section 4.03(e)(ii)
Real Property Section 2.01(d)
Receivables Section 2.01(c)
Seller Introduction
Seller Parties Introduction
Seller's Accountants Section 5.04
Seller's Counsel Section 4.02(h)(i)
Seller's Other Agreements Section
4.02(h)(iii)(iv)
Statements of Cash Flows Section 5.04
STD Bermuda Introduction
STD BVI Introduction
STD Hong Kong Section 1.03
Territory Section 9.01(a)
Withheld Sum Section 3.05
1.02 General Terms. The following definitions shall
apply to the extent not otherwise defined, or used in
capitalized form, in this Agreement:
(a) The term "affiliate" shall mean with respect
to any person a person that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is
under common control with, such person and shall include
subsidiaries, parents and brother-sister companies.
(b) The terms "agreements" and "contracts" shall
include any contract, purchase or sales order, franchise,
insurance policy, license, undertaking, arrangement, understand-
ing, commitment, document, lease, sublease, deed, mortgage plan,
plan, indenture, bill of sale, assignment, proxy, voting trust
or other agreement or instrument.
(c) The term "approval" shall include any
consent, waiver, license, permit, certificate or authorization.
(d) The term "breach" shall include any default,
event of default or event, occurrence, condition or act which,
with notice or lapse of time or both, would constitute a breach,
default, or event of default or give the other party or parties
a right to accelerate any obligation under the applicable
agreement.
(e) The term "corporate document" shall include
any charter, certificate, memorandum or articles of
incorporation, association or organization; By-Laws; any
resolution, consent or action of, or minutes of meetings of, the
incorporator, directors, stockholders or shareholders; stock
register or stock certificate book; or any other similar
formational, organization or governing document of a
corporation.
(f) The term "interest in real property" shall
include all real property, real property leaseholds, rights of
ways and easements.
(g) The term "inventory" shall include any raw
materials, works-in-progress, supplies, finished goods,
packaging, works-in-transit and returned or repossessed goods,
wherever located.
(h) The term "law" shall mean, unless
specifically stated otherwise herein, laws of the United States
of America, Hong Kong and any other applicable jurisdiction.
(i) The term "legal body" shall include any
government, court or governmental department, official,
commission, authority, board, bureau, agency or other
instrumentality.
(j) The term "legal proceeding" shall include any
suit, action, formal dispute, arbitration, hearing, filed
grievance, contested assessment, order, directive, citation,
other legal proceeding, governmental investigation (of which a
Seller Party is aware as to matters involving Seller) or
governmental audit (of which a Seller Party is aware as to
matters involving Seller) by or before any legal body or
arbitration association whether pending or threatened in
writing, whether in law or equity or whether civil, criminal or
administrative.
(k) The term "legal requirement" shall include
any published governmental law, act, ordinance, requirement,
rule, regulation, subpoena, order, writ, award, injunction,
judgment or decree.
(l) The terms "liability" and "liabilities" shall
include any direct or indirect indebtedness, claim, loss,
damage, penalty, deficiency (including deferred income tax and
other net tax deficiencies), cost, expense, obligation, or
guarantee, whether accrued, absolute, or contingent, known or
unknown, fixed or unfixed, liquidated or unliquidated, matured
or unmatured or secured or unsecured. The term "liability" as
used in Section 9.08 shall include, in the case of undisclosed
liabilities of a Seller, the reasonable expenses (including
reasonable counsel fees and any and all reasonable expenses
whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim
whatsoever) of defending or prosecuting such legal proceedings
and satisfying such undisclosed liabilities.
(m) The term "person" shall include an
individual, a partnership, a joint venture, a corporation, a
limited liability company, a trust, an unincorporated
organization and a government or other legal body thereof.
(n) The term "proprietary right" shall include
any (i) patent, invention, trademark, service mark, industrial
design, utility model, business name, trade name, trade style,
trade dress, service name, logo, slogan, brand name, brand mark,
copyright and the like (whether registered with any legal body
anywhere in the world or unregistered) or application,
registration, permit, license relating thereto and any reissue,
continuation, continuation-in-part, renewal right and extension
thereof, (ii) computer software or license related thereto and
(iii) invention, process, method, information, data, plan, art
work, blueprint, specification, design, drawing, engineering
report, test report, material standard, processing standard,
performance standard, know-how, formula, trade secret, concept,
application, procedure, marketing and technical data and other
confidential information.
(o) The term "receivable" shall include any
account receivable, unbilled shipment, loan or note receivable,
advance, claim receivable, insurance claim, debit balance from
vendors, right to invoice for work performed or goods sold and
other indebtedness owed to such person.
(p) The term "restriction" shall include any
mortgage, pledge, lien, charge, security interest, encumbrance,
option, lease, license, retention of title or easement, whether
legal, equitable, accrued, absolute, contingent, direct,
indirect or otherwise.
(q) The term "return" shall include any return,
declaration, report, estimate, information return and statement
required to be filed with or supplied to any taxing authority in
connection with any taxes.
(r) The term "tax" shall include any tax, assess-
ment, levy, impost, duty, or withholding of any nature now or
hereafter imposed by a legal body and any interest, additional
tax, deficiency, penalty, charge or other addition thereon,
including without limitation any income, gross receipts, prof-
its, franchise, sales, use, property (real and personal),
transfer, payroll, unemployment, social security, occupancy and
excise tax and customs duty.
(s) The term "transfer" shall include any sale,
pledge, gift, assignment, conveyance, lease or disposition and
the term "transferred" shall include sold, pledged, gave,
assigned, conveyed, leased or disposed of.
1.03 Materiality. All references herein or in the
agreement of even date herewith between STD BVI and Recoton (Far
East) Limited relating to the purchase of the stock of STD
Holding Limited, a Hong Kong corporation ("STD Hong Kong") (the
"Hong Kong Agreement") to "material" or "materially" when
pertaining to the Companies (as defined in the Hong Kong
Agreement) and/or STD USA shall be assessed on a basis of
materiality for all of the Companies plus STD USA on a combined
basis rather than individually. Similarly, aggregate thresholds
in this Agreement and the Hong Kong Agreement (including those
set forth in Sections 5.07) shall be applied on a combined basis
notwithstanding their separate appearance in both documents.
ARTICLE II. SALE OF ASSETS
2.01 Purchase and Sale of Assets. Seller shall, and
does hereby, sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall, and does hereby, purchase from
Seller, at the Closing all of Seller's right, title and interest
in and to all of the assets, properties and rights of Seller
(excluding, however, in each case the assets, properties and
rights referred to in Section 2.02) of every kind and nature,
wherever located and whether or not carried or reflected on the
books and records of Seller and whether or not carried in the
name of Seller, in existence as of the Contract Date or acquired
prior to the Closing Date including the following:
(a) all of Seller's bank deposits, cash on hand,
certificates of deposit and similar assets (the "Cash
Assets");
(b) all of Seller's furniture, trade fixtures,
motor vehicles, equipment, computers, machinery, tools,
dies, jigs, molds, samples, models, office supplies,
packaging, other stores, sales and product literature
and other tangible personal property (collectively, the
"Equipment") and inventory (collectively, the
"Inventory");
(c) all of Seller's receivables and rights to
invoice for work done or goods sold (collectively, the
"Receivables");
(d) all of Seller's interest in real property
(collectively the "Real Property");
(e) all of Seller's rights under its contracts
and other agreements (the "Contracts") to the extent
assignable except as otherwise noted in this Agreement;
(f) all licenses, rights and approvals granted by
legal bodies to Seller to the extent assignable (the
"Licenses");
(g) all of Seller's proprietary rights and the
goodwill associated therewith (the "Proprietary
Rights");
(h) the rights of Seller to use the present
telephone, telex and telefax numbers, including those
as listed on Schedule 2.01(h) and any "yellow page"
advertising rights in connection therewith (the "Phone
Rights");
(i) all of Seller's current or future rights to
insurance proceeds including rights arising from any
casualty to the assets being purchased pursuant to this
Agreement; security deposits, prepaid expenses and such
other deposits including those noted in Schedule
2.01(i); claims, causes of action and or set-offs,
reserves, prepayments and deferred and other charges;
customer and vendor lists; and goodwill (collectively,
the "Other Assets"); and
(j) all books, records, books of account,
computer records, documents and related information
(including, without limitation, files, lists, marketing
literature, blueprints, plans, specifications and
drawings) in the possession of Seller or others
regarding the Cash Assets, Equipment, Inventory,
Receivables, Real Property, Assumed Contracts,
Licenses, Proprietary Rights, Phone Rights and Other
Assets (the "Records").
The assets being purchased from Seller are sometimes referred to
as the "Purchased Assets." To the extent that any assets,
property or rights owned of record or beneficially by Seller do
not appear on the applicable Schedules or Exhibits to this
Agreement, the general language shall govern and such assets,
property and rights shall nonetheless be deemed transferred to
Purchaser unless specifically excluded from acquisition in this
Agreement and its Schedule.
2.02 Assets Retained. Notwithstanding anything in
this Agreement to the contrary, Purchaser is not hereby
purchasing any of the following assets of Seller (collectively,
the "Excluded Assets"):
(a) the assets noted on Schedule 2.02(a);
(b) Contracts identified on Schedule 2.02(b);
(c) any deposits relating to taxes not assumed by
Purchaser;
(d) any corporate documents and seals of Seller;
and
(e) the outstanding capital stock of Seller.
2.03 Liabilities.
(a) The Purchased Assets shall be conveyed subject to
all liabilities of Seller except as set forth in Section 2.03(b)
(collectively, the "Assumed Liabilities").
(b) Notwithstanding anything else to the contrary
contained in this Agreement, Purchaser is not assuming and shall
not be liable for any of the following liabilities of Seller:
(i) liabilities under Contracts which shall not have been
assigned to Purchaser pursuant to this Agreement except to the
extent that Seller continues to hold those Contracts for the
benefit of Purchaser; (ii) liabilities relating to or in any way
arising out of the Excluded Assets; (iii) undisclosed
liabilities to STD Bermuda or STD BVI or the shareholders
thereof; (iv) federal taxes and state income taxes of Seller
(including duties under customs laws applicable to products
imported into the United States and any penalties thereon); (v)
liabilities relating to the capital stock of Seller; and (vi)
liabilities of Seller arising under or pursuant to this
Agreement or the breach thereof or as referred to in Section
10.10.
ARTICLE III. CONSIDERATION
3.01 Purchase Price.
The price for the Purchased Assets (the "Purchase
Price") is $500,000.
3.02 Time of Payment; Adjustment.
At the Closing, Purchaser is paying to Seller in cash
an amount (the "Closing Payment") equal to the Purchase Price.
3.03 Assumption of Liabilities. As additional
consideration for the Purchased Assets, at the Closing Purchaser
is executing and delivering an undertaking substantially in the
form of Exhibit 3.03 (the "Liabilities Undertaking") with
respect to the Assumed Liabilities.
3.04 Allocation. The portions of the Purchase Price
assigned to the various categories of assets of Seller as set
forth in Schedule 3.04 are fair and reasonable values for such
assets purchased. Such allocation shall be binding on Purchaser
and Seller for all purposes, including tax purposes, and the
parties shall not take a contrary position on any tax return or
any documents filed by any of said parties with any governmental
authorities.
ARTICLE IV. THE CLOSING
4.01 Time and Place. The closing of the transactions
which are the subject of this Agreement (the "Closing") is
taking place at 10:00 a.m., local time, on September 5, 1995
(but effective as of the close of business on August 31, 1995)
at the offices of Stroock & Stroock & Lavan ("Purchaser's
Counsel"), 7 Hanover Square, New York 10004 or such other time
and place as the parties may agree upon. The day on which the
Closing actually takes place is sometimes referred to as the
"Closing Date."
4.02 Seller's Actions at Closing. At the Closing,
Seller is:
(a) executing and delivering to Purchaser (i) a
bill of sale for the Cash Assets, Equipment and Inventory,
in substantially the form of Exhibit 4.02(a)(i) (the "Bill
of Sale"), (ii) an assignment of the Receivables in
substantially the form of Exhibit 4.02(a)(ii) (the
"Assignment of Receivables") and (iii) an assignment and
assumption of the Contracts in substantially the form of
Exhibit 4.02(a)(iii) (the "Assignment and Assumption of
Contracts");
(b) executing and delivering such other good and
sufficient instruments of conveyance, assignment and
transfer, in form and substance reasonably satisfactory to
Purchaser's Counsel, as may be reasonably requested by
Purchaser to vest in such Purchaser good and marketable
title to the Purchased Assets;
(c) delivering or relinquishing to Purchaser
physical possession of the Purchased Assets wherever
located;
(d) executing and delivering for filing with the
Secretary of State of Maryland an amendment to Seller's
Articles of Incorporation or qualification documents of
Seller eliminating from its name the initials or word "STD"
and corresponding documents for filing in the states where
it is qualified;
(e) executing and delivering to Purchaser the
limited power of attorney referred to in Section 9.06 (the
"Limited Power of Attorney");
(f) delivering to Purchaser an employment
agreement in substantially the form of Exhibit 4.02(f) (the
"Hays Employment Agreement") executed by Hays;
(g) delivering written consents to the transfer
or assignment to Purchaser of all Material Contracts where
the consent of any other party to any such Material Contract
may be required for such assignment or transfer, without any
material changes in the other terms of such Material
Contracts;
(h) delivering to Purchaser a copy of the
resolutions of the Boards of Directors of all corporate
Seller Parties together with any and all required
resolutions or consents of such parties' shareholders and
appropriate incumbency certificates, duly certified by an
officer of such Seller Party, approving the execution and
delivery of this Agreement and the consummation of all of
the transactions contemplated hereby;
(i) delivering to Purchaser a favorable opinion
of each of Heller Ehrman White & McAuliffe ("Seller's
Counsel") (as to Federal and California law), Gordon,
Feinblatt, Rothman, Hoffberger & Hollander, LLC (as to
Maryland law), Conyers Dill & Pearman (as to Bermuda law)
and Harney Westwood & Riegels (as to British Virgin Islands
law) dated the Contract Date or the Closing Date and in form
and substance reasonably satisfactory to Purchaser's Counsel
to the effect that:
(i) Each of the corporate Seller Parties is
duly organized, validly existing and in good standing
under its jurisdiction of incorporation, has all
requisite corporate power and authority to own its
property and other assets and conduct its business as
such counsel is advised it is now being conducted, and
is duly qualified and in good standing as a foreign
corporation authorized to do business in the
jurisdictions listed in Schedule 5.01;
(ii) Neither the execution, delivery or
performance of this Agreement nor, to the extent a
party thereto, the Escrow Agreement, Bill of Sale,
Assignment of Receivables, Assignment and Assumption of
Contracts and Limited Power of Attorney (collectively,
"Seller's Other Agreements"), with or without the
giving of notice or the passage of time, or both,
conflict with or violate (i) any provision of the
Seller Parties' corporate documents or (ii) any legal
requirement, or any order or decree known to such
counsel of any court or other governmental agency or
instrumentality applicable to any of the Seller
Parties;
(iii) Each of the corporate Seller Parties
has the full corporate power and authority to enter
into this Agreement and the Seller's Other Agreements
to which it is a party and to carry out the
transactions contemplated hereby and thereby;
(iv) All proceedings required to be taken by
each of the corporate Parties and its shareholders to
authorize the execution, delivery and performance of
this Agreement and Seller's Other Agreements to which
it is a party have been properly taken and this
Agreement and the Seller's Other Agreements to which it
is a party constitute legal, valid and binding and
obligations of such Seller Party, enforceable in
accordance with their terms except as may be limited by
applicable bankruptcy, insolvency or similar laws
affecting the rights of creditors generally and subject
to the discretion of a court in granting equitable
remedies;
(v) The bills of sale, assignments and other
documents and instruments being delivered to Purchaser
to transfer all of Seller's right, title and interest
in and to the Purchased Assets are in proper form to
convey such title (no opinion, however, is being given
as to Seller's title to the assets being conveyed);
(vi) Except as set forth in this Agreement,
no registration with, or approval, consent or action
by, any legal body is required in connection with the
execution, delivery and performance by such Seller
Party of this Agreement or of any of the Seller's Other
Agreements to which it is a party; and
(vii) To the best of such counsel's knowledge
after due inquiry of its client, and except as set
forth in schedules to this Agreement, there is no legal
proceeding pending or threatened in writing against
Seller.
In rendering the opinion specified above, such counsel may
(i) rely upon reports of public officials and, as to matters
of fact, upon certificates of any officer or officers of the
Seller Parties; provided, however, that the extent of such
reliance is specified in the opinion and such reports and
certificates are annexed to such opinion and (ii) assume the
genuineness of all signatures on, and the authenticity of,
documents and conformity with the original of any copies of
such documents.
(j) delivering a financing statement, judgment
and tax lien search of the appropriate Maryland authorities
dated no earlier than 15 days prior to the Closing Date
confirming that there are no financing statements, judgment
or tax liens of record with respect to the Purchased Assets
or have delivered properly executed termination statements
or releases therefor; and
(k) delivering a "good standing certificate" and
a "tax status certificate" from Maryland and the appropriate
governmental agencies of the various jurisdictions as listed
on Schedule 5.01 for Seller dated no earlier than 15 days
prior to the Closing Date.
4.03 Purchaser's Actions at Closing. At the Closing,
Purchaser is:
(a) paying to Seller the Closing Payment by wire
transfer to Seller's account at the bank set forth on
Schedule 4.03, or other means acceptable to such Seller;
(b) executing and delivering the Assignment and
Assumption of Contracts, the Liabilities Undertaking and
such other documents in form and substance reasonably
satisfactory to Seller's Counsel, as may be reasonably
requested by Seller to assume Seller's responsibilities and
obligations under the Assumed Contracts and the Assumed
Liabilities;
(c) executing and delivering to Hays the Hays
Employment Agreement; and
(d) delivering to Seller a copy of the
resolutions of each of the Purchaser Parties' Boards of
Directors and appropriate incumbency certificates, duly
certified by an officer of each such Purchaser Party,
approving the execution and delivery of this Agreement and
the consummation of all of the transactions contemplated
hereby.
(e) delivering a favorable opinion of Purchaser's
Counsel dated the Closing Date and in form and substance
reasonably satisfactory to Seller's Counsel, to the effect
that:
(i) Purchaser and Recoton are each a
corporation duly organized, validly existing and in
good standing under its jurisdiction of incorporation
and each has all requisite corporate power and
authority to carry on its business as such counsel is
advised it is now being conducted; and Purchaser is
qualified to do business in each jurisdiction set forth
in Schedule 5.01;
(ii) Neither the execution, delivery nor
performance of this Agreement nor the Escrow Agreement,
Liabilities Undertaking, Assignment and Assumption of
Contracts and Employment Agreement (collectively,
"Purchaser's Other Agreements"), will, with or without
the giving of notice or the passage of time, or both,
conflict with or violate (i) any provision of
Purchaser's or Recoton's Certificate of Incorporation
or By-Laws, or (ii) any legal requirement, or any order
or decree known to such counsel of any court or other
governmental agency or instrumentality applicable to
Purchaser;
(iii) Purchaser and Recoton each have the
full corporate power and authority to enter into this
Agreement and, to the extent either is a party to such
agreements, Purchaser's Other Agreements, and to carry
out the transactions contemplated hereby and thereby;
(iv) All proceedings required to be taken by
Purchaser and Recoton to authorize the execution,
delivery and performance of this Agreement and, to the
extent either is a party to such agreements,
Purchaser's Other Agreements, have been properly taken
and this Agreement and, to the extent either is a party
to such agreements, Purchaser's Other Agreements
constitute legal, valid and binding obligations of
Purchaser and Recoton, enforceable in accordance with
their terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting the
rights of creditors generally and subject to the
discretion of a court in granting equitable remedies;
(v) No registration with, or approval,
consent or action by, any legal body is required in
connection with the execution, delivery and performance
by Purchaser or Recoton of this Agreement or any of
Purchaser's Other Agreements, to the extent either is a
party to such agreements, except as has been made or
obtained; and
(vi) To the best of such counsel's knowledge
after due inquiry of its clients and except as set
forth in schedules to this Agreement, there is no legal
proceeding pending or threatened in writing against any
of the Purchaser Parties which is required to be
disclosed by Recoton under the periodic reporting
requirements of applicable Federal securities laws
which is not so disclosed.
In rendering the opinion specified above, such counsel may
(i) rely upon opinions of other counsel, reports of public
officials and, as to matters of fact, upon certificates of
any officer or officers of Purchaser; provided, however,
that the extent of such reliance is specified in the opinion
and such opinions, reports and certificates are annexed to
such opinion and (ii) assume the genuineness of all
signatures on, and the authenticity of, documents and
conformity with the original of any copies of such
documents.
ARTICLE V. REPRESENTATIONS, WARRANTIES AND
COVENANTS BY SELLER PARTIES
Each of the Seller Parties jointly and severally
represents and warrants to, and agrees with, the Purchaser
Parties as follows and acknowledges that the Purchaser Parties
are entering into this Agreement in reliance upon such
representations, warranties and agreements.
5.01 Organization, Standing and Qualification;
Corporate Documents.
(a) Seller is a corporation duly incorporated under the
law of its jurisdiction of incorporation, validly existing and
in good standing under the laws of such jurisdiction, has all
requisite corporate power and authority to carry on its business
as now being conducted and to own, lease or operate its
properties and premises as now owned, leased or operated, and is
duly qualified or licensed as a corporation authorized to do
business in each jurisdiction where the character of the
properties it owns, leases or operates, or the conduct of its
business, requires such qualification or licensing. The
jurisdictions in which Seller is qualified or licensed to do
business are set forth in Schedule 5.01. There are no other
jurisdictions where the failure to be qualified or licensed to
do business would materially adversely affect the business of
the Companies.
(b) Seller has heretofore delivered to Purchaser true
and complete copies of its corporate documents as amended to and
including the date hereof with attached thereto true and
complete copies of all resolutions and agreements which are
required to be so attached. Seller shall on or prior to the
Closing Date deliver to Purchaser true and complete copies of
all corporate documents arising subsequent to the date of this
Agreement. Seller has complied with the corporate documents in
all respects and none of the agreements, commitments or rights
of Seller is ultra vires or unauthorized.
5.02 Shareholders, Subsidiaries and Investments.
Seller's record and beneficial shareholders are as set forth in
Schedule 5.02. Seller's business has not been conducted through
any affiliate, shareholder, officer, director or employee of
Seller or any affiliate thereof. Seller does not own, or have
any commitment to purchase, any equity securities of or any
interest in any other person.
5.03 Execution, Delivery and Performance of Agreement;
Authority. Each of the Seller Parties has the full legal right,
power and authority to enter into this Agreement and the related
agreements referred to herein to which it is a party and to
carry out the transactions contemplated hereby and thereby. All
proceedings required to be taken by Seller and its shareholders
to authorize the execution, delivery and performance of this
Agreement and the agreements referred to herein have been
properly taken. Each of this Agreement and the other agreements
referred to herein to which a Seller Party is a party,
constitutes a legal, valid and binding obligation of such Seller
Party, enforceable against it in accordance with its terms
except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting of equitable
remedies. Except as set forth on Schedule 5.03, the execution,
delivery and performance of this Agreement and such other
agreements by each of the Seller Parties will not conflict with,
result in a material breach, default, right to accelerate or
loss of rights under, or result in the creation of any material
restriction pursuant to, or require consent of any person under
any provision of Seller's corporate documents, any Contract with
a remaining term of more than one year from the Closing (unless
terminable without penalty by Seller upon not more than 30 days'
notice) or requiring the payment by (or providing for the
receipt by) Seller of more than $25,000 per Contract during a
fiscal year or which Contract is significant for the operation
of Seller's business as currently conducted (a "Material
Contract"), any loan or other financial agreement for borrowed
money and any legal requirement to which a Seller Party is a
party or by which it or he or any of its or his properties or
assets may be bound or materially affected.
5.04 Financial Statements, Etc. A true and complete
copy of each of the balance sheets of Seller (the "Balance
Sheets") as of June 30, 1995, March 31, 1995 (the "Balance Sheet
Date"), March 31, 1994 and March 31, 1993 and the corresponding
statements of income and retained earnings (the "Income
Statements") and cash flows (the "Statements of Cash Flows") for
the periods then ended including the notes thereto (interim
financial statements, however, need not include footnotes) as
prepared by Seller's management, and with respect to the Balance
Sheets and Income Statements as of and for the periods ending
March 31 (other than as of and for the period ending March 31,
1995) audited by Price Waterhouse or other accountants selected
by Seller and reasonably acceptable to Purchaser ("Seller's
Accountants"), (the "Financial Statements") have been delivered
to Purchaser; and true and complete copies of Seller's balance
sheet (the "Contract Date Balance Sheet") and the corresponding
statements of income and retained earnings and cash flows for
the period then ended including the notes thereto (the "Contract
Date Financials") prepared by Seller's management shall be
delivered to Purchaser pursuant to Section 3.02(b). Except as
set forth in Schedule 5.04, the Financial Statements and the
Contract Date Financials, including the notes thereto, (a) have
been (or, in the case of the Contract Date Financials, will be)
prepared from the books and records of Seller substantially in
conformity with generally accepted accounting principles in the
United States ("GAAP") consistently applied and maintained
throughout the periods indicated and (b) fairly present (or, in
the case of the Contract Date Financials, will fairly present)
in all material respects the financial condition of Seller as at
said dates, and the results of its operations and its cash flows
for the periods covered thereby. The Financial Statements do
not (and the Contract Date Financials will not) contain any
items of special or nonrecurring income or any other income not
earned or otherwise realized in the ordinary course of business
except as expressly specified therein. Except as noted on
Schedule 5.04, the Financial Statements for interim periods
include all material adjustments, which consist of only normal
accruals, necessary for such fair presentation. In addition,
the Contract Date Financials will reflect all normal recurring
material adjustments (consistent with those for the years ended
March 31, 1993 through March 31, 1995) which are necessary for a
fair presentation of the results as of the Contract Date, as if
such Contract Date Financials were prepared in connection with a
normal year-end closing.
5.05 Absence of Undisclosed Liabilities. Except as
and to the extent reflected or reserved against on the Balance
Sheet (including any notes thereto) as of the Balance Sheet Date
(the "Current Balance Sheet") or disclosed in Schedule 5.05 or
otherwise in writing pursuant to this Agreement (including the
Schedules hereto or separate written disclosures called for
hereby), as of the Balance Sheet Date Seller had no material
liabilities of any nature whatsoever whether or not then due or
payable and each of the Seller Parties does not know of any
basis for the assertion of any such liability or obligation.
None of Seller's employees is now, or will by the passage of
time hereafter become, entitled to receive any deferred
compensation, vacation time, vacation pay or severance pay
attributable to services rendered prior to the date hereof
except as disclosed on the Current Balance Sheet (including any
notes thereto) or in Schedule 5.05.
5.06 Taxes. Seller has filed or caused to be filed,
within the times and within the manner prescribed by law
(including extensions), all returns which are required to be
filed by, or with respect to, Seller or its property. Such
returns are materially complete and reflect accurately all
liability for taxes for the periods covered thereby. Seller has
delivered to Purchaser true and complete copies of all returns
filed by Seller for all completed tax years since inception.
Except as disclosed on Schedule 5.06, all taxes payable by, or
due from, Seller have been fully paid or adequately disclosed
and fully provided for in the books and financial statements of
Seller, and there are no tax liens on Seller or their properties
except as allowed by Section 5.10(a). The amounts set up as
provisions for taxes on the Current Balance Sheet are, and the
amount to be set up on the Contract Date Balance Sheet shall be,
sufficient for the payment of all taxes, whether or not
disputed, and whether or not assessed, asserted or due at such
dates, with respect to the conduct of the business of Seller and
any of its predecessors up to and through the Balance Sheet Date
and the Contract Date. The provision for employment,
withholding and payroll taxes made by Seller are adequate to pay
all unpaid liabilities for such taxes and Seller has, within the
time and in the manner prescribed, withheld from employees'
wages and paid over to the proper legal authorities all amounts
required to be so withheld and paid over under all applicable
legal requirements. Except as disclosed on Schedule 5.06, no
examination of any tax return of Seller has occurred or is
currently in progress. No issues exist or have been raised in
any writing (and are currently pending) by any taxing authority
in connection with any of Seller's returns the resolution of
which, individually or in the aggregate, might reasonably be
expected to affect materially and adversely the Purchased
Assets. No waivers of statutes of limitations or extensions of
time as to any tax matters have been given to or requested of
Seller. There are no tax sharing or similar agreements with
respect to any taxes paid or payable by Seller. Any deferred
income taxes and deficiency assessments, including any interest
or penalty, with respect to Seller's returns have been paid by
Seller or are reflected on the Financial Statements.
5.07 Absence of Changes or Events. Except as set
forth on Schedule 5.07 or disclosed in the Financial Statements
or as authorized by Purchaser in writing pursuant to this
Agreement or otherwise disclosed pursuant to this Agreement,
since the Balance Sheet Date Seller has conducted its business
only in the ordinary course and has not:
(a) incurred any liability, except current taxes
not yet due and payable and current liabilities for trade or
business obligations incurred in the ordinary course of
business and consistent with their prior practice;
(b) mortgaged, pledged, encumbered or subjected
(or permitted to be subjected) to any restrictions (other
than liens for taxes not yet due and payable) any of its
property, business or assets;
(c) sold, transferred, leased to others or
otherwise disposed of any of its assets, except for
inventory sold or otherwise disposed of in the ordinary
course of business;
(d) materially amended or terminated any, or
received any notice of termination of any, Contract or
suffered any damage, destruction or loss which, in any case
or in the aggregate, has had a materially adverse effect on
the business of Seller;
(e) transferred or granted any rights under, or
entered into any settlement regarding the breach or
infringement of, or entered into any agreement or commitment
relating to, any of their proprietary rights or modified any
existing rights with respect thereto;
(f) acquired any capital stock of any corporation
or any interest in any business enterprise or otherwise made
any loan or advance to or investment in any person (other
than routine employee advances);
(g) made any capital expenditures or capital
additions or betterments or commitments therefor in excess
of an aggregate of $300,000;
(h) instituted, settled or agreed to settle, or
suffered any materially adverse determination in, any legal
proceeding relating to Seller or their properties or
products, other than collections actions instituted by
Seller;
(i) failed to maintain reasonable levels of
inventories and supplies in a manner generally consistent
with its prior practice, or made any purchase commitment for
periods subsequent to the Closing in excess of the normal
requirements of its business or at any price materially in
excess of the then-current market price, or made any
material change in its selling, pricing or advertising
practices (e.g., advertising programs, allowances, rebates,
etc.) substantially inconsistent with its prior practices
other than as disclosed to Purchaser in writing prior to the
execution of this Agreement;
(j) entered into any transactions, contracts or
commitments other than in the ordinary course of business
involving more than $25,000 in any one instance or $100,000
in the aggregate;
(k) written down the value of any inventory
included within the Purchased Assets or written off as
uncollectible any receivables, except write-downs and write-
offs in the ordinary course of business, none of which,
individually or in the aggregate, are material to Seller;
(l) canceled, compromised, waived or released any
debts, claims or rights with a value of more than $25,000 in
the aggregate (except for accounts receivable written off in
the ordinary course of business against reserves noted on
the Current Balance Sheet);
(m) made any material change in any method of
accounting or use of any accounting principle or any
practice in connection with the treatment of expenses,
valuations or inventory or selling and purchasing policies;
(n) encountered any labor union organizing
activity, had any actual or threatened employee strikes,
work stoppages, slowdowns or lockouts, or had any material
adverse change in its relations with any of the Sellers'
employees, agents, customers or suppliers;
(o) made any change in the rate of compensation,
commission, bonus, deferred compensation or other direct or
indirect remuneration payable, or paid or agreed or orally
promised to pay, conditionally or otherwise, any bonus,
extra compensation, deferred compensation or severance or
vacation pay, to any affiliate, employee, salesman,
manufacturer's representative, distributor or agent of the
Seller other than (A) changes in the ordinary course of
business in employee compensation consistent with prior pay
increase policies (such changes in the aggregate not
exceeding $10,000 per person and $100,000 for all such
persons on an annual basis) or (B) payments pursuant to
workers' compensation laws;
(p) suffered any change, event or condition
which, in any case or in the aggregate, has had or is
reasonably likely to have a materially adverse affect on
Seller's condition (financial or otherwise), properties,
assets, liabilities, operations or prospects, including,
without limitation, any change in its revenues, costs,
backlog or relations with its employees, agents, customers
or suppliers; or
(q) entered into any agreement or made any
commitment to take any of the types of action described in
paragraphs (a) through (p) above.
5.08 Litigation. Except as set forth on Schedule 5.08
or as described in the Financial Statements, (a) there is no
legal proceeding, nor any order, decree or judgment tribunal or
arbitral award in progress, pending, in effect, unsatisfied or,
as the case may be, outstanding, or to the "Best Knowledge of
Seller" (i.e. that which any of Stephen Chu, Hays, Gary Lee,
David Chu, Patrick Ho, Robert Barnett or any officer or director
of Seller knows, or through the exercise of reasonable
diligence, should know) threatened against Seller, or any of the
assets or business of Seller or the transactions contemplated by
this Agreement and (b) there has been no legal proceeding
involving alleged product liability (whether in tort,
negligence, strict liability or otherwise) nor has any such
proceeding, to the Best Knowledge of Seller, been threatened.
5.09 Compliance with Legal Requirements and
Instruments.
(a) Except as set forth on Schedule 5.06, 5.09 or
5.17, Seller has, and on the Closing Date will have, complied
with all material existing legal requirements applicable to its
business, properties or operations as presently conducted
(including legal requirements relating to zoning, building
codes, antitrust, occupational safety and health, environmental
protection and conservation, water or air pollution, toxic and
hazardous waste and substances control, customs, trade, consumer
product safety, product liability, hiring, wages, hours, equal
employment, employee benefit plans and programs, collective
bargaining and withholding and employment taxes) except where
failure to comply would not have a material adverse effect on
Seller or its business or property. Except as noted in Schedule
5.09, neither the ownership or use of its properties nor the
conduct of its business conflicts with the rights of any other
person, or violates, or with or without the giving of notice or
the passage of time, or both, will violate, conflict with or
result in a default, right to accelerate or loss of rights
under, any terms or provisions of its corporate documents as
presently in effect or any Contract and none of the Seller
Parties is aware of any proposed legal requirements,
governmental takings, condemnations or other proceedings except
as such would not have a material adverse affect on the
Purchased Assets or the business related thereto.
(b) Seller holds all the permits, licenses and
franchises which are material to its current use, occupancy or
operation of the Purchased Assets and the conduct of its
business; and no notice of violation of any applicable zoning
regulation, ordinance or other similar legal requirement binding
on Seller with respect to the Purchased Assets or its business
has been received. Except as noted on Schedule 5.09, (i) Seller
has not received any unremedied inspection reports, complaints
or other communications from any legal body except to the extent
in the ordinary course of business and not having a materially
adverse effect on the Seller's business and (ii) no products
manufactured or distributed by Seller were subject to recall
(whether due to legal requirements or otherwise).
(c) No authorization, approval, order, license,
permit, franchise or consent by, and no registration,
declaration or filing by Seller or any shareholder of Seller
with, any legal body is required in connection with the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, other than any filing with
the Federal Trade Commission and the Justice Department as is
required to comply with the Hart-Scott-Rodino Antitrust
Improvement Act.
5.10 Title to, and Condition of, Properties. Except
for restrictions otherwise permitted by this Agreement or as
disclosed on Schedule 5.10, Seller has marketable title to all
of the Purchased Assets, including the properties and assets
shown on the Current Balance Sheet. None of such properties and
assets is subject to any restriction except (a) taxes not yet
due and payable, (b) as set forth in the Current Balance Sheet
as securing specific liabilities noted thereon, or as disclosed
on Schedule 5.10, or as otherwise expressly permitted by the
terms of this Agreement or (c) those imperfections of title and
restrictions, if any, which (i) do not materially detract from
the value of the properties subject thereto and (ii) do not
interfere in any material respect with either the present and
continued use of such property or the conduct of the Business.
Seller owns all of the material assets used by it in the
operation and conduct of its business except for those assets
leased by Seller under leases specifically identified on Sched-
ule 5.11 (a) or 5.11 (b) or as noted in Schedule 5.10. Subject
to the exceptions noted in the foregoing sentence or as noted in
Schedule 5.10, the Purchased Assets constitute all of the
material assets used by Seller for the normal conduct of its
business. Each of the fixed assets owned or used by Seller
(including, without limitation, all buildings, and equipment
leased by Seller) is in adequate repair and operating condition,
normal wear and tear excepted. The dollar amount of the fixed
assets owned by the Seller as shown on the Current Balance Sheet
does not in any case exceed the cost of the same, reduced by any
previous write-downs and depreciation determined in accordance
with generally accepted accounting procedures consistently
applied, and Seller has not written up the value of any such
fixed assets. Lessors of property leased by Seller have made no
claims on any of the Purchased Assets nor are there any sums due
and owing to lessors which would allow lessors to distrain upon
any such items or otherwise prohibit their removal except as
noted in Schedule 5.10. Seller has not received notice of any
assessments, and to the Best Knowledge of Seller There are no
pending assessments, affecting the real property or leased
premises. Seller has heretofore delivered to Purchaser copies
of all title insurance policies obtained by Seller, abstracts of
title and other evidence of title and surveys with respect to
all real property owned by Seller.
5.11 Disclosure Schedules. Seller has previously or
simultaneously with the execution of this Agreement delivered to
Purchaser a separate disclosure schedule certified by an officer
of Seller setting forth Schedules 5.11(a) through 5.11(m) (each
schedule corresponding as to the similarly numbered paragraph
noted below), which constitute an accurate and complete list of
or, as appropriate, reference to separately delivered listings
of the noted matters as of the date set forth thereon (which
shall not be earlier than the Balance Sheet Date):
(a) all real property which is used by Seller in
connection with the operation of its business on the date
hereof, together with a list of each lease, sublease,
license or any other instrument under which Seller claims or
holds such leasehold or other interest or right to the use
thereof or pursuant to which Seller has assigned, sublet or
granted any rights therein, identifying the parties thereto
and identifying which of the above requires that a consent
be obtained before a valid transfer in said interest may be
obtained, identifying in each instance the consenting party
thereto;
(b) all of Seller's receivables aged to indicate
each receivable which has been outstanding for more than 30,
60 and 90 days from the due date;
(c) by location, all trade fixtures, motor
vehicles, equipment, computers, machinery, tools, dies,
jigs, molds, samples, models and other similar tangible
personal property other than inventory (which other personal
property may reasonably be described by category rather than
individually) owned or used by Seller and having an original
cost in excess of $5,000, setting forth with respect to any
such listed property a list of all leases identifying the
parties thereto and dates thereof;
(d) Seller's inventory noting reserves for
obsolescence or damage to such inventory;
(e) Seller's patents and trademarks and all
agreements or licenses relating thereto;
(f) all Material Contracts except as otherwise
disclosed on Schedule 5.11(a), 5.11(g) or 5.11(l) and,
identifying any which require that a consent be obtained
before a valid transfer in said interest may be obtained,
noting in each instance the consenting party thereto (to the
extent that Contracts which are not Material Contracts
require that Seller make payments during the life of the
Contract in excess of $10,000 per Contract, such Contracts
shall also be noted); and a list or copies of all open
purchase orders and a list or copies of all open sales
orders;
(g) all collective bargaining agreements,
employment and consulting agreements, executive compensation
plans, incentive plans or agreements, bonus plans or
agreements, deferred compensation plans or agreements,
employee pension, profit sharing, thrift, retirement,
employee stock option, stock purchase, or stock ownership
plans (and any separate agreements entered into pursuant
thereto) and group life, health and accident insurance and
other employee benefit plans, agreements, arrangements or
commitments; and a list of the names, title or job
description, and total annual compensation (including, as
separately set forth, figures, any bonuses paid, accrued, or
granted through the Balance Sheet Date, any bonuses paid,
accrued or granted, or to be paid, accrued, granted or
earned, from the Balance Sheet Date to the date hereof, and
any bonuses attributable to the period of time prior to the
date hereof but to be paid, accrued or granted thereafter)
of all employees, officers and directors of Seller who, as
of the date hereof, are or will be entitled to receive
compensation from Seller at an annualized rate in excess of
$40,000 per year.
(h) all permits, licenses, franchises, rights,
approvals and the like granted by or pending with all legal
bodies (whether or not assignable);
(i) all customers and suppliers in each of the
fiscal years 1994 through 1995 and for the period April 1,
1995 through July 31, 1995 (noting by dollar amounts and
percentages the billings by or to the ten largest customers
and suppliers);
(j) all of the products sold by Seller noting the
annual sales amounts of each such product in each of fiscal
years 1994 through 1995 and the period April 1, 1995 through
July 31, 1995;
(k) all creditors of Seller noting the amounts
owed to each;
(l) all insurance policies currently in force
(including face amount of policy, name of insured, carrier,
premium, expiration date and whether it is a "claims made"
or an "occurrence" policy); and
(m) Seller's warranty and return policies.
True and complete copies of all items referenced in any of
Schedules 5.11(a) through 5.11(m) have been provided to
Purchaser.
5.12 Contracts.
(a) Except as otherwise noted in Schedules 5.11(a)
through (m), (i) all of the Material Contracts are valid and
binding, enforceable in accordance with their respective terms
(except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting of equitable
remedies), in full force and effect as to Seller (and, to the
Best Knowledge of Seller, in full force and effect as to the
other party or parties thereto) and validly assignable to
Purchaser without the consent of any other party so that, after
the assignment thereof, the assignee will be entitled to the
full benefits thereof, (ii) there is not under any Material
Contract any existing default by Seller or event which, after
notice or lapse of time, or both, would constitute a default by
Seller or result in a right to accelerate by the other party or
loss by Seller of rights and, to the Best Knowledge of Seller,
all of the material covenants to be performed by any other party
under any Material Contract have been fully performed and (iii)
none of the Material Contracts is subject to renegotiation with
any legal body and is neither registrable or notifiable under
legal requirements.
(b) To the extent that the assignment of, or the
agreement to assign, any Contract which Purchaser wishes to
assume hereunder would constitute a breach of that Contract
unless the consent or waiver of another party thereto has been
obtained, this Agreement shall not constitute any such
assignment or agreement to assign unless and until such consent
or waiver is obtained. The Seller Parties shall use their best
efforts (but they shall not be required to expend any funds
other than for their own personnel) to obtain prior to the
Closing Date all such consents and waivers. If any such consent
or waiver is not obtained before the Closing Date and the
Closing is nevertheless consummated, the Seller Parties shall
continue to use their best efforts (but they shall not be
required to expend any funds other than their own personnel) to
obtain all such consents as have not been obtained prior to such
date and shall cooperate with Purchaser after such date in any
reasonable arrangement (such as subcontracting, sublicensing or
subleasing) designed to provide for Purchaser, on terms no less
favorable than Seller is entitled to, the benefits under the
applicable Contracts, including, without limitation, enforcement
at the cost and for the benefit of Purchaser of any and all
rights of Seller against any other party thereto.
(c) Seller has not since the Balance Sheet Date
entered into any purchase or sales commitment or order except in
the ordinary course of business.
5.13 Proprietary Rights, Etc. All of the Proprietary
Rights, including those set forth on Schedule 5.11(e), are owned
by Seller free and clear of any restrictions, including licenses
granted to others, except as set forth in Schedule 5.11(e), and
Seller has the unrestricted right to assign such Proprietary
Rights to the Purchaser. Except as disclosed in Schedule 5.13,
Seller owns or possesses perpetual or renewable royalty-free
licenses or other rights to use all proprietary rights,
packaging, promotional material and advertising necessary to
conduct its business as it is presently operated; Seller is not
infringing upon any proprietary rights, packaging, promotional
material or advertising owned or obtained by any other person or
persons; and there is no claim or action by any such person
pending, or, to the knowledge of any of the Seller Parties,
threatened, with respect thereto or with respect to the rights
of Seller in any material confidential information or trade
secrets used in the conduct of the Sellers' businesses.
5.14 Inventory. All items of Inventory, net of
reserves for obsolescence or damage noted on Schedule 5.11(d),
are (a) of merchantable quality or suitable and usable for the
production or completion of merchantable products for sale in
the ordinary course of Seller's current business as goods at
normal markups and (b) in conformity with all applicable legal
requirements and customer specifications. The inventory of
Seller has been valued on the Balance Sheet at the lower of cost
or market on a first-in, first out basis in accordance with
generally accepted accounting principles consistently applied,
and appropriate reserves against or write-downs of all slow-
moving (i.e., any item of inventory in excess of a one year's
supply, based on sales of inventory during the prior 12 month
period), unmarketable, returned, rejected, damaged or obsolete
inventory have been taken.
5.15 Receivables. All Receivables have arisen only
from bona fide transactions for the total dollar amount thereof
shown on the books of Seller which, as to trade receivables,
were in the ordinary course of Seller's business; and none of
such Receivables is or will at Closing be subject to any
counterclaim, set-off, credit for returns (other than for normal
defects, not to exceed 10% in value of the net receivables) or
mispricing except to the extent of reserves indicated on
Schedule 5.11(b), which reserves are reasonable based on
Seller's experience and fully reflect all advertising
commitments, volume discounts, price protection arrangements,
rebates and allowances for doubtful accounts and each of such
receivables shall be collectable in full within 120 days after
the date hereof except to the extent of reserves indicated on
Schedule 5.11(b).
5.16 Employee Benefit Plans.
(a) Except for those plans set forth on
Schedule 5.11(g) ("Employee Benefit Plans" or "Plans"), the
Seller does not maintain or contribute to any bonus, deferred
compensation, pension, profit sharing, retirement, severance,
stock option, group insurance, death benefit, welfare or other
employee benefit plan, arrangement or policy whether formal or
informal, for the benefit of any of its employees or former
employees. The Financial Statements reflect in the aggregate an
accrual of all amounts accrued but unpaid under all such Plans
as of the dates thereof to the extent required by GAAP. Seller
does not have any commitment, whether formal or informal, and
whether legally binding or not, to create any additional such
Plan. Each of such Plans disclosed on Schedule 5.11(g) is in
effect and Seller is in compliance with all material laws, rules
and regulations applicable thereto. All Plans disclosed on
Schedule 5.11(g) have been duly registered where required by,
and are in good standing under, all applicable legal
requirements and Seller has fulfilled its funding obligations
under all such Plans and no past service liabilities exist
thereunder. None of the Plans disclosed in Schedule 5.11(g)
gives rise to the payment by Seller of any amount that would not
be tax deductible.
(b) True and complete copies of all the documents
embodying the Plans, including, without limitation, the plans
and trust instruments and insurance, group annuity and other
agreements pertaining thereto and any actuarial reports obtained
with respect to any Plan, as well as copies of the books and
records of the Plans, have been delivered to Purchaser. There
has been (i) no change in any of the documents delivered to the
Purchasers under which each Plan is maintained and (ii) no
change, since each Plan's most recent valuation date, in the
operation of the Plan which could be expected to adversely
affect or alter the tax status of, or materially increase the
cost of maintaining, any such Plan.
5.17 Environmental Matters
(a) For the purpose of this Section 5.17, a "hazardous
substance or waste" includes any substance, waste, solid, liquid
or gaseous matter, petroleum or petroleum derived substance,
micro-organism, sound, vibration, ray, heat, odor, radiation,
energy vector, plasma, organic or inorganic matter, whether
animate or inanimate, transient reaction intermediate or any
combination of the above deemed hazardous, hazardous waste,
solid waste, toxic or pollutant, a deleterious substance, a
contaminant or source of pollution or contamination under any
Environmental Law, or by any government, governmental agency,
minister, or any tribunal or board.
(b) "Environmental Laws" includes any legal
requirement of any country or political subdivision relating to
the environment including those relating to (i) the control of
any potential pollutant or the protection of the air, water or
land, (ii) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, and (iii)
exposure to hazardous, toxic or other substances considered to
be harmful, or (iv) the release of any hazardous substance or
waste into the environment.
(c) Except as set forth in Schedule 5.17, Seller has
complied in all material respects with all Environmental Laws
and obtained all material permits, licenses, certificates and
other authorizations which are required with respect to its
operation under any Environmental Laws and all such permits,
licenses, certificates and other authorizations are listed on
Schedule 5.11(h).
(d) Except as set forth in Schedule 5.17, Seller is in
compliance in all respects with all permits, licenses and
authorizations required by any Environmental Laws, and are also
in full compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Laws or
contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder. All products manufactured
and services provided by Seller prior to the date hereof are in
compliance with all Environmental Laws applicable thereto and
all such products and services so manufactured or provided prior
to the Closing Date will as of such date be in compliance with
all Environmental Laws applicable thereto. Seller has hereto
delivered to Purchaser true and complete copies of all
environmental studies made in the last ten years relating to the
business or assets of Seller.
(e) Except as set forth in Schedule 5.17, there is no
pending or, to Seller's or other Principal Shareholder's
knowledge, threatened legal proceeding, civil, criminal or
administrative action, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter
that affects or applies to Seller, its business or assets, the
products they have manufactured or the services it has provided
relating in any way to any Environmental Laws or any regulation,
code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved
thereunder.
(f) Except as set forth in Schedule 5.17, there are no
past or present (or, to the knowledge of the Seller Parties,
anticipated) events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with
or prevent compliance or continued compliance by Seller with any
Environmental Laws or with any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, or which may give
rise to any common law or legal liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing,
notice of violation, study or investigation, based on or related
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment,
by Seller of any pollutant, contaminant, chemical, or
industrial, toxic or hazardous substance or waste.
(g) Except in accordance with a valid governmental
permit, license, certificate or approval listed in Schedule
5.17, there has been no emission, spill, release or discharge by
Seller, from any of its assets, from any site at which any of
such assets are or were located or at any other location or
disposal site, into or upon (i) the air, (ii) soils or
improvements, (iii) surface water or ground water, or (iv) the
sewer, septic system or waste treatment, storage or disposal
system servicing such assets of any toxic or hazardous
substances or wastes used, stored, generated, treated or
disposed at or from any of such assets (any of which events is
hereinafter referred to as "Hazardous Discharge"). Except for
inventory of raw materials, supplies, work in process and
finished goods listed in Schedule 5.17 that are to be used or
sold in the ordinary course of its business, all of the assets
of Seller are free of all toxic or hazardous substances or
wastes.
(h) Except as set forth in Schedule 5.17, there has
been no complaint, order, directive, claim, citation or notice
by any legal body or any other person or entity with respect to
(i) air emissions, (ii) spills, releases or discharges to soils
or any improvements located thereon, surface water, ground water
or the sewer, septic system or waste treatment, storage or
disposal systems servicing the assets of Seller, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use,
generation, storage, transportation or disposal of toxic or
hazardous substances or wastes or (vi) other environmental,
health or safety matters affecting Seller, any of their assets,
any real property on which any of such assets are located, any
improvements located thereon or the business therein conducted
(any of which is hereafter referred to as an "Environmental
Complaint").
(i) Seller has not received any notice or letter of
any legal body whereby Seller may be required to remove and/or
clean sites and facilities which have been contaminated by
dangerous, toxic or hazardous substances or wastes or similar
terms under any Environmental Law. To the Best Knowledge of
Seller, Seller has not sent any hazardous substance or waste to
any facility or site which has received a notice which would
subject such facility or site to damages, penalties, injunctive
relief or clean-up costs under any Environmental Law.
(j) Prior to the Closing Date, there shall not occur
any Hazardous Discharge (except in accordance with a valid
governmental permit, license, certificate or approval listed in
Schedule 5.17) or Environmental Complaint.
5.18 Brokers and Finders. None of the Seller Parties
nor any person acting on their behalf has engaged any broker,
agent or finder or incurred any liability for any brokerage
fees, agents' commissions or finders' fees in connection with
the transactions contemplated herein and each of the Seller
Parties, jointly and severally, shall indemnify Recoton and
Purchaser with respect to any claim which any person engaged by
a Seller Party may make with respect to the subject matter of
this Agreement and the other Agreements referred to herein.
5.19 Governmental Authorizations. Except for such
filings as may be required to be made by the Seller Parties
pursuant to any laws regarding creditor rights (compliance with
which is hereby waived) or pursuant to the Hart-Scott-Rodino
Act, no authorization or approval of, or filing with, any
governmental body is required in connection with the execution
and delivery of this Agreement or the consummation of the
transactions contemplated hereby by the Seller Parties.
5.20 Records. The books of account of Seller are
complete and correct in all known material respects, and there
have been no transactions involving the business or assets of
Seller which properly should have been set forth therein and
which have not been accurately so set forth.
5.21 Employee and Director Indebtedness. Except as
set forth in Schedule 5.21 no current or former officer,
director or employee of Seller or any affiliate of Seller or any
person related to any of such persons is indebted to Seller nor
is Seller indebted to any officer, director or employee of
Seller or any affiliate of Seller or any person related to any
such person other than for current employee salary and benefits
accrued in the ordinary course of business, but in the ordinary
course of business not yet paid.
5.22 No Material Interests. Except as set forth on
Schedule 5.22 or as between Seller and STD Hong Kong or any
subsidiary thereof, shareholder, officer, employee or agent of
Seller, nor any affiliate, spouse, ancestor or descendant
thereof, has any direct or indirect material interest in any
creditor, competitor, supplier or lessor of Seller nor is any
such person a party to or bound by any Contract or the holder of
any interest in any proprietary right of or used by Seller.
5.23 Employment Relations. Except as described in
Schedule 5.23, (a) Seller is and has been at all times in
compliance with all legal requirements respecting employment and
employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor
practice; (b) no unfair labor practice complaint before any
legal body, no discharge or grievance before any legal body
responsible for the prevention of wrongful or unlawful
employment practices and no complaint, charge or grievance of
any nature before any such legal body, in any case relating to
Seller or the conduct of its business is pending or, to Seller's
knowledge, threatened nor has any such action occurred within
the past five years; (c) Seller has not received notice, and has
no knowledge, of the intent of any legal body responsible for
the enforcement of labor or employment laws to conduct any
investigation of or relating to Seller or the conduct of its
business; (d) to the Best Knowledge of Seller, no officer or key
employee of Seller has any plans to terminate his or her
employment with Seller other than to accept employment with
Purchaser; (e) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the Best Knowledge of Seller,
threatened against or involving Seller nor has any such action
occurred within the past five years; (f) to the Best Knowledge
of Seller, no grievance which might have an adverse effect on
Seller or its business nor any arbitration proceeding arising
out of or under any collective bargaining agreement is pending
and no claim therefor has been asserted nor has any such action
occurred within the past five years; (g) no collective
bargaining agreement is currently in effect or being negotiated
by Seller; and (h) there has not been, and none of the Seller
Parties anticipates, any materially adverse change in relations
with employees, consultants or independent contractors as a
result of the announcement or consummation of the transactions
contemplated by this Agreement.
5.24. Insurance. All premiums due to the date hereof
on Seller's insurance policies have been paid in full. All of
such policies have been issued by reputable insurance companies
actively engaged in the insurance business. All pending claims,
if any, made against Seller which are covered by insurance are
being defended by the appropriate insurance companies and are
described on Schedule 5.24. Seller has not failed to give any
notice or present any claim under any such policy in a timely
fashion. The insurance set forth on Schedule 5.11(e) has (a)
been maintained in full force and effect and (b) not been
canceled or changed except to extend the maturity dates thereof.
5.25 Disclosure. No representation or warranty by the
Seller Parties contained in this Agreement nor any statement or
certificate furnished or to be furnished by the Seller Parties
or their officers or shareholders to the Purchaser Parties or
their representatives in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact required
to make the statements herein or therein contained not
misleading. To the Best Knowledge of Seller, all information
(including documents) requested by the memorandum dated May 4,
1995 captioned "Documents and Information Requested for Review
of Acquisition" from Purchaser's Counsel (the "Document
Request") to Seller's counsel on behalf of the Seller, to the
extent relevant, has been provided by or on behalf of the Seller
Parties and such information as provided, in conjunction with
other information provided by or on behalf of Seller and/or the
Principal Shareholders, was, as of the date hereof and the
Closing Date, responsive in all material respects to the
Document Request. The copies of all documents furnished to
Purchaser by or on behalf of Seller or the Principal
Shareholders are true and complete copies of the originals
thereof. An item disclosed in any schedule hereto shall be
deemed disclosed solely for purposes of that schedule unless a
cross reference is made in one schedule to another schedule in a
manner sufficient to call the reader's attention to the
significance of the cross reference.
5.26 Disclaimer of Implied Warranties. SELLER HEREBY
DISCLAIMS ALL IMPLIED WARRANTIES WITH RESPECT TO THE PURCHASED
ASSETS (INCLUDING ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR ANY SPECIFIC PURPOSE) EXCEPT AS SET FORTH IN THIS AGREEMENT.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES BY
PURCHASER PARTIES
Each of the Purchaser Parties jointly and severally
represents and warrants to, and agrees with, the Seller Parties
as follows and acknowledges that the Seller Parties are entering
into this Agreement in reliance upon such representations,
warranties and agreements:
6.01 Organization. Purchaser is a corporation duly
incorporated under the laws of its jurisdiction of
incorporation, validly existing and in good standing under the
laws of such jurisdiction, and has all requisite corporate power
and authority and is entitled to carry on its business as now
being conducted and to own, lease or operate its properties and
premises as are now owned, leased or operated and is qualified
or licensed to do business in the jurisdictions set forth in
Schedule 5.01.
6.02 Execution, Delivery and Performance of Agreement;
Authority. Each Purchaser Party has the full legal right, power
and authority to enter into this Agreement and the related
agreements referred to herein to which it is a party and to
carry out the transactions contemplated hereby and thereby. All
proceedings required to be taken by each Purchaser Party to
authorize the execution, delivery and performance of this
Agreement and the agreements referred to herein have been
properly taken. Each of this Agreement and the other agreements
referred to herein to which a Purchaser Party is a party
constitutes a valid and binding obligation of the Purchaser
Party enforceable against it in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting the rights of creditors generally and
subject to the discretion of a court in granting equitable
remedies. The execution, delivery or performance of this
Agreement by the Purchaser Parties will not, with or without the
giving of notice or the passage of time, or both, conflict with,
result in a material breach, default, right to accelerate or
loss of rights under, or result in the creation of any material
restriction, pursuant to, any provision of Purchaser's Party
corporate documents or any agreement or legal requirement to
which such Purchaser Party is a party or by which the Purchaser
Party or any of its properties may be bound or materially
affected.
6.03 Brokers and Finders. Neither Recoton nor
Purchaser nor any person acting on either of their behalf has
employed any broker, agent or finder or incurred any liability
for any brokerage fees, agents' commissions or finders' fees in
connection with the transactions contemplated herein and each of
the Purchaser Parties, jointly and severally, shall indemnify
the Seller Parties with respect to any claim which any person
engaged by a Purchaser Party may make with respect to the
subject matter of this Agreement and the other Agreements
referred to herein.
6.04 Current Business. Purchaser is a newly-formed
corporation with no operating history and no losses or material
liabilities of whatever type or description as of the Closing
Date other than liabilities under or pursuant to this Agreement
or the other writings referenced herein.
ARTICLE VII. OMITTED
ARTICLE VII. OMITTED
ARTICLE IX. ADDITIONAL COVENANTS
9.01 Noncompetition; Nonsolicitation. Effective on
the Closing Date and for five years following, none of the
Seller Parties named in Schedule 9.01 shall directly or
indirectly (by itself or himself or through any employees or
affiliates or employees of affiliates):
(a) engage in the manufacture or sale of video or
computer gaming accessories business, or engage in
competition with, the business heretofore or presently
engaged in by Seller (the "Business") in any of (i)
Maryland, Florida or any state listed in Schedule 5.01; or
(ii) any state in which Seller currently has distributors or
customers; or (iii) any geographic area within 100 miles of
any state mentioned in clause (i) or (ii) above; or (iv) the
United States; (v) Canada; or (vi) Mexico; or (vii) North
America; (viii) any country in which Seller conducts its
business as of the date hereof; or (ix) any country to which
Seller or Purchaser has sales in excess of $100,000 in any
year within the five years prior to or after the Contract
Date (the "Territory") other than as an employee of Recoton
or Purchaser or an affiliate thereof.
(b) render services to or have any interest, as a
shareholder, owner, agent, director, employee consultant,
lender, guarantor or otherwise, in any other person (other
than Recoton or Purchaser or an affiliate thereof) engaged
in the Business; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
itself or as agent for another) for employment or induce,
persuade or encourage any person to leave Recoton or
Purchaser's employ who, prior to the Closing Date was, or
during such five year period will be, employed or retained
by Recoton or Purchaser as a consultant, agent, employee or
otherwise or (ii) divert or attempt to divert from Recoton
or Purchaser any business whatsoever by influencing or
attempting to influence any customer or supplier of Recoton
or Purchaser.
For purposes of this Section 9.01, ownership by any person of 3%
or less (so long as ownership by all of the Seller Parties
directly or indirectly does not exceed 10%) of any class of
outstanding securities of a company or other business 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 ownership or participation in the ownership of the
business of such company. The Seller Parties acknowledge that
the time, scope, geographic area and other provisions of this
Section 9.01 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable
under the circumstances of the transactions contemplated by this
Agreement and that such restrictions do not unreasonably
interfere with the Seller Parties' ability to engage in business
or impose any undue hardship. It is understood that the Seller
Parties are agreeing to the terms of this Section 9.01 in order
to induce Recoton and Purchaser to enter into this Agreement.
The parties acknowledge that the business of Seller is currently
conducted throughout the Americas and that such business may be
reasonably expected to undergo significant international
business expansion after the date hereof. Accordingly, given
the current sophistication of the information and
telecommunication "highway," a narrow geographic limitation
would deny Purchaser protection to which it is entitled in this
Agreement and the parties agree that the Territory is reasonable
in scope.
9.02 Employees. On and after the Closing Date,
Purchaser shall employ each of the employees of Seller who wish
to be employed by Purchaser. Such employees shall be accorded
positions comparable to those held with Seller at the same or
greater rate of pay and shall receive full credit for time of
service with Seller in determining eligibility for benefits.
Purchaser shall assume full responsibility for all obligations
disclosed in or pursuant to this Agreement of Seller to such
employees as of the Closing Date.
9.03 Tax Returns. Seller shall furnish Purchaser with
complete copies of all tax returns filed by Seller subsequent to
the Closing which relate to or concern in any way its operations
during any period prior to the Closing. Seller shall promptly
notify Purchaser of any audit or investigation (and,
periodically the status thereof and the position of Seller in
respect thereof) conducted or threatened by any legal body with
respect to any taxable year or period of the Sellers or any tax
return prepared and filed by the Sellers relating to the
operations of the Sellers prior to the Closing Date.
9.04 Transfer Taxes. Purchaser and Seller shall bear
equally all applicable sales, documentary, use, filing,
transfer, stamp duty and other taxes payable as a result of the
transfer of the Purchased Assets and Seller and Purchaser shall
file all appropriate returns related thereto required to be
filed by each. All taxes on or measured by the net income or
revenues of Purchaser or Seller (including without limitation,
income, gross receipts, and net worth taxes) imposed or levied
by or payable to any taxing authority shall be paid or payable
by the party upon which such taxes are imposed or levied.
9.05 Receivables. Purchaser shall have the right and
authority to collect for its own account all Receivables and
other items which shall be transferred to it as provided herein.
Seller shall execute and deliver at the Closing a separate
limited power of attorney in the form of Exhibit 9.05
authorizing Purchaser and its representatives to endorse in
Seller's name any checks, drafts, notes and other documents
received in payment of such receivables and other items. Seller
will promptly transfer and deliver to Purchaser any cash or
other property which Seller may receive in respect of such
receivables or other items.
9.06 Nonpurchased Assets. Purchasers shall promptly
remit to Seller any assets of Seller, other than Purchased
Assets or proceeds thereof, which Purchaser may from time to
time receive, if any.
9.07 Indemnification.
(a) Each of the Seller Parties shall indemnify and
hold harmless each of the Purchaser Parties and their officers,
directors, agents, employees and affiliates from and against any
and all of the following:
(i) any liabilities, claims and expenses
(including, without limitation, any reasonable legal fees,
disbursements or expenses) which a Purchaser Party or an
affiliate may sustain at any time by reason of, arising out
of, based upon or incurred in connection with (A) any of the
liabilities of Seller not assumed by Purchaser as set forth
in Section 2.03(b), (B) breach of Section 5.18 or (c) the
conduct of Seller's business after the Closing Date; and
(ii) subject to the limitation on liability set
forth in Section 9.07(c), any and all liabilities, claims
and expenses (including, without limitation, any reasonable
legal fees, disbursements or expenses) which Purchaser or an
affiliate may sustain at any time by reason of, arising out
of, based upon, or incurred in connection with the breach,
inaccuracy, misrepresentation or failure to comply with any
of the warranties, representations, covenants, agreements or
obligations of Seller Parties contained in this Agreement or
in any agreement, certificate or document delivered pursuant
to or in connection with this Agreement or with the
consummation of the transactions contemplated by this
Agreement (unless the effect of such breach, inaccuracy,
misrepresentation or failure was already reflected in the
Net Value Adjustment (as defined in the Hong Kong
Agreement)).
The obligations of the signatories to this Agreement who are
natural persons (other than Chu) are limited to the portion of
the Purchase Price (by way of dividend or otherwise) that they
receive, subject, however, to the limitation set forth in
Section 9.07(c).
(b) The Purchaser Parties shall jointly and severally
indemnify and hold harmless each of the Seller Parties and their
officers, directors, agents, employees and affiliates from and
against any and all of the following:
(i) any liabilities, claims and expenses (including,
without limitation, any reasonable legal fees, disbursements
or expenses) which a Seller Party or an affiliate may
sustain at any time by means of, arising out of, based upon,
or incurred in connection with (A) Purchaser's
nonperformance of an Assumed Liability and (B) the conduct
of Purchaser's business after the Closing Date unless caused
by the gross negligence or willful act of a Seller Party;
and
(ii) subject to the limitation on liability set forth
in Section 9.07(c), any and all liabilities, claims and
expenses (including, without limitation, any reasonable
legal fees, disbursements or expenses) which a Seller Party
or an affiliate may sustain at any time by reason of,
arising out of, based upon or incurred in connection with
the breach, inaccuracy, misrepresentation or failure to
comply with any of the warranties, representations,
covenants, agreements or obligations of Purchaser contained
in this Agreement or in any agreement, certificate or
document delivered pursuant to or in connection with this
Agreement or with the consummation of the transactions
contemplated by this Agreement.
(c) The Seller Parties, in the aggregate, and the
Purchaser Parties in the aggregate, shall not be required to
make any payments of indemnification claims pursuant to Section
9.07(a)(ii) or Section 9.07(b)(ii) except in each case to the
extent that such claims against them plus any claims against
them under the Hong Kong Agreement or amounts applied to their
"basket" set forth in the Hong Kong Agreement, in the aggregate,
exceed $500,000 and their liability shall not exceed the Escrow
Amount (as defined in the Hong Kong Agreement) (including the
fair market value at release of any Security Holdback which may
be released) less any indemnity claims paid by the Seller
Parties under the Hong Kong Agreement in the case of claims
against the Seller Parties or $8,000,000 less any indemnity
claims paid by the Purchaser Parties under the Hong Kong
Agreement in the case of claims against the Purchaser Parties.
Claims for indemnification shall survive the Closing for the
period set forth in Section 10.01. If a party asserts a claim
for indemnification and the other party or parties contest in
writing its, his or their responsibility for such
indemnification under this Section 9.07, then the party
prevailing in such contest shall be entitled to reimbursement of
its reasonable attorneys' fees and expenses by the other party
or parties.
(d) If any legal proceeding or other claim is brought,
asserted or threatened against a party who seeks or may seek
indemnity (the "Indemnitee") under this Section 9.07, or a party
otherwise delivers a notice that it is entitled to
indemnification hereunder, the Indemnitee shall notify in
writing each party (an "Indemnitor") against whom
indemnification is to be sought before such time as such
Indemnitor may be prejudiced, when known, of the facts
constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by a third party,
the notice to the Indemnitor shall specify, if known, the amount
or an estimate of the amount of the liability arising therefrom.
The Indemnitor shall have the right, at its option (exercised by
written notice to the Indemnitee), to assume control of the
defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnitee, and, if it does so, shall
proceed in good faith at all times; provided, however, that (i)
the control by the Indemnitor of such defense shall not delay
the timeliness of such defense, (ii) the Indemnitor shall not
consent to the entry of any judgment or enter into any
settlement without the prior written consent of the Indemnitee,
unless the Indemnitee is released from all liability (which
shall include any and all direct or indirect costs of
implementation) in respect of or related to such action or
proceeding and is not otherwise required to take or forbear from
taking any action in respect thereof and such settlement is not
harmful to the Indemnitee's reputation in the reasonable
determination of such Indemnitee (iii) the Indemnitor shall be
responsible for all legal fees and expenses in connection with
such defense and (iv) the Indemnitor shall not have such right
to assume the defense if the realistic exposure under the
litigation does not substantially exceed the unutilized "basket"
set forth in Section 9.04(c) of the Hong Kong Agreement. The
Indemnitee shall have the right to employ separate counsel in
any such action and to participate in the defense thereof at the
expense of the Indemnitee. If an Indemnitor does not assume
control of such defense, and a judgment or settlement is entered
or agreed to by the Indemnitee in respect of the matter being
defended, the amount of such judgment or settlement plus the
Indemnitee's legal fees and expenses shall conclusively be
"liabilities" subject to Sections 9.07(a) and (b) and other
relevant sections.
(e) The Indemnitee shall fully cooperate, at the cost
of the Indemnitor, with the Indemnitor in the defense of any
action assumed by the Indemnitor and shall preserve and make
available relevant records.
(f) Indemnification of legal fees, disbursements and
expenses pursuant to this Agreement shall include such legal
fees, disbursements and expenses as are incurred in actions or
proceedings between an Indemnitee and an Indemnitor as well as
between an Indemnitee and any third party.
(g) Any right to indemnification pursuant to this
Section 9.07 shall be limited to liabilities, claims and
expenses net of any insurance payments actually received (as to
which an Indemnified Party shall make all reasonable claims).
9.08 Right to Offset. Should Seller or any of the
Sellers under the Hong Kong Agreement owe monies or otherwise be
liable to Recoton or Purchaser under this Agreement or to the
purchaser under the Hong Kong Agreement or should Recoton or
Purchaser owe monies or otherwise be liable to Seller under this
Agreement, the party to whom monies are owed may set-off and
deduct such sums from any payments otherwise due to such other
party or parties under this Agreement or the Hong Kong Agreement
to the maximum extent allowed by law. Notwithstanding the
foregoing, no set off may be made against any other person's
salary (including bonuses).
9.09 Continued Existence of Seller. Seller shall
remain in existence as a corporation in good standing in
Maryland for a period of six years following the filing of its
federal tax return for the year ended as of the Closing Date;
provided, however, that the Seller shall remain in existence so
long as there is a related legal proceeding by any legal body
pending or threatened at the end of such three-year period or
there is extension of any statutory period of limitations with
respect to any claim. During the period set forth in the prior
sentence, the Seller shall not declare any dividend or make any
other distribution of assets to its shareholders or any
affiliates thereof and it shall not engage in any business
activity except to the extent consistent with winding-up its
affairs and remaining a dormant company. To the extent that the
net worth of Seller is less than $400,000 at the time of the
termination of the Escrow Agreement (as defined in the Hong Kong
Agreement), STD BVI and Stephen Chu shall cause to be
contributed to Seller simultaneous with the distribution of
assets pursuant to the Escrow Agreement an amount equal to the
lesser of (a) the difference between Seller's net worth and
$400,000 or (b) $400,000. Notwithstanding the foregoing, Seller
may terminate its existence upon proof reasonably satisfactory
to Purchaser that all applicable tax authorities have audited
all tax years of the Seller which include periods prior to the
Closing Date (or the time in which any such audits may be
conducted has expired) and have asserted (and will assert) no
claims with respect to such years or that any such claims have
been paid or compromised in full satisfaction of such claim.
9.10 Recoton Guaranty.
(a) Recoton (for purposes of this section the
"Guarantor") unconditionally guarantees the full and prompt
payment and performance when due, and at all times thereafter,
of all of the indebtedness, liabilities, and obligations of
every kind and nature of Purchaser to the Seller Parties arising
under or pursuant to this Agreement, whether direct or indirect,
or absolute or contingent (all such indebtedness, liabilities
and obligations being hereinafter referred to as the
"Obligations"). This Guaranty shall continue in full force and
effect until the Obligations have been fully paid, performed and
discharged.
(b) Guarantor's obligations under this Guaranty shall
be unconditional, irrespective of (a) the absence of any attempt
to collect the Obligations from Purchaser or any other person or
other legal action to enforce the same against Purchaser, (b)
any waiver or consent by any Seller Party given with respect to
any provision of the Agreement or other document evidencing any
of the Obligations, or any part thereof, or, (c) any other
circumstance which might otherwise constitute a legal or
equitable discharge or defense of the Guarantor. The Seller
Parties, however, shall make claim against Purchaser at the same
time that it claims against Guarantor or prior thereto.
(c) Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of
receivership or bankruptcy of Purchaser and protest or notice
with respect to the Obligations and all demands whatsoever.
Upon any breach or default by Purchaser of the Agreement or any
other instrument or document evidencing all or any part of the
Obligations, any Seller Party may proceed directly and at once,
to collect and recover the full amount or any portion of the
Obligations or otherwise to enforce performance of the same
against Guarantor, without first bringing legal action against
Purchaser or any other person, firm, or corporation, or against
any security or collateral for the Obligations that may be
obtained by any Seller Party from time to time.
(d) The Seller Parties may, without notice or demand
and without affecting the liability of Guarantor hereunder, from
time to time, (a) subject to agreement by Purchaser, renew,
extend, accelerate or otherwise change the time for payment or
performance of, or other terms relating to, the Obligations, or
otherwise modify, amend or change the terms of the Agreement or
any other agreement, document or instrument now or hereafter
executed by them relating to the Obligations; (b) accept partial
payments on or performance of the Obligations; and (c) settle,
release, compromise, collect or otherwise liquidate the
Obligations, any other guaranty of the Obligations and any
security or collateral for the Obligations or for any such
guaranty in any manner, without affecting or impairing the
obligations of Guarantor hereunder. Guarantor hereby assumes
responsibility for keeping itself informed of the financial
condition of Purchaser and of all other circumstances bearing
upon the risk of nonpayment or nonperformance of the Obligations
or any party thereof that diligent inquiry would reveal and the
Seller Parties shall have no duty to advise Guarantor of
information known to them regarding such condition or any such
circumstances.
(e) Seller Parties shall be under no obligation to
marshall any assets in favor of Guarantor or against or in
payment of any or all of the Obligations. To the extent that
Purchaser makes a payment or payments to any Seller Party, which
payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set
aside any/or required to be repaid to Purchaser, its estate,
trustee, receiver or any other party, including, without
limitation, Guarantor, under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent
of such payment or repayment, the Obligations or part thereof
which have been paid, reduced or satisfied by such amount shall
be reinstated and continued in full force and effect as of the
date such initial payment, reduction or satisfaction occurred.
(f) Notwithstanding anything to the contrary contained
herein or in any other agreement, document or instrument, the
Guarantor hereby irrevocably waives all rights of subrogation
(whether such rights arise under common law, contract or federal
law including, without limitation, Section 509 of the U.S.
Bankruptcy Code) to the claims of Seller Parties against
Purchaser and all contractual, statutory or common law rights of
contribution, reimbursement, indemnification and similar rights
and claims against Purchaser which arise in connection with, or
as a result of, this guaranty. Any and all claims that
Guarantor may have against Purchaser, or against its properties,
shall be subordinate and subject in right of payment to the
prior payment, in full, of all of the Obligations. Guarantor
waives notice of any and all proceedings to enforce any of the
Obligations against Purchaser or anyone else.
(g) Paragraphs (a) through (f) set forth above are not
intended to modify provisions of this Agreement but are only
intended as waivers of suretyship defenses that might be
available to Recoton in respect of its guaranty under this
Section 9.10.
ARTICLE X. GENERAL PROVISIONS
10.01 Nature of Representations, Warranties and Other
Obligations. Each statement, representation, warranty,
covenant, indemnity and agreement in this Agreement or in any
document, certificate or other instrument delivered pursuant to
this Agreement or in connection herewith shall survive the
Closing for 36 months notwithstanding any investigation at any
time made by or on behalf of the Purchasers; provided, however
that the right to assert claims under Sections 5.06 or 5.17
shall survive until six years following the Closing (provided,
however, that the right to assert any claims under Section 5.06
or 5.17 shall survive until 60 days after the final resolution
of any related legal proceeding by any legal body pending or
threatened at the end of such six-year period and shall survive
until 60 days after the expiration of any extension of any
statutory period of limitations with respect to such claim).
All statements contained in any certificate or other instrument
delivered by or on behalf of a Seller Party pursuant to this
Agreement or in connection with the transactions contemplated
hereby shall be deemed representations and warranties hereunder.
10.02 Attorney-in-Fact. Each of the Seller Parties
hereby appoints Chu and Hays, and each of the Purchaser Parties
hereby appoints Robert Borchardt and Stuart Mont, as its
attorneys-in-fact, each having full powers of authorization,
substitution and delegation for purposes of giving any consents
or approvals required by this Agreement or for executing and
delivering on behalf of such party any agreements, certificates,
documents or other writings as may be required to be delivered
pursuant to this Agreement.
10.03 Notices. Any and all notices or other
communications required or permitted to be given under any of
the provisions of this Agreement shall be in writing and shall
be deemed to have been given when given to the following
addresses or telefax numbers:
(a) If to any of the Seller Parties, c/o
STD International Holdings Limited
Units F-J, 5th Floor, Block 2
Kwai Tak Industrial Centre
15-33 Kwai Tak Street
Kwai Chung, New Territories
Hong Kong
Fax: 011-852-2612-1159
Attn: Stephen Chu
with a copy (which shall not
constitute notice) to:
Heller Ehrman White & McAuliffe
1902A Peregrine Tower
Lippo Center
89 Queensway
Hong Kong
Fax: 011-852-2-810-6242
Attn: Simon Luk, Esq.
and
Heller Ehrman White & McAuliffe
333 Bush Street
San Francisco, CA 94104-2878
Fax: 415-772-6268
Attn: Tim Hoxie, Esq.
(b) If to Recoton or to Purchaser, c/o:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Fax: (407) 333-8903
Attn: Stuart Mont
with a copy (which shall not
constitute notice) to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, NY 10004
Fax: (212) 806-6006
Attn: Theodore S. Lynn, Esq.
(or at such other address or telefax numbers as any party may
specify by notice to all other parties given as aforesaid).
Unless otherwise specifically provided in this Agreement, such
communications shall be deemed to have been given (a) five days
after mailing, when mailed by registered or certified postage-
paid mail, (b) on the second business day after sending, when
delivered to a recognized international courier service such as
Federal Express or DHL or, where applicable, the Post Office
Express Mail or (c) upon the date of receipt by the addressee
when delivered personally or dispatched 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.
10.04 Entire Agreement; Amendment. This writing (with
the other agreements referred to herein or delivered at the
Closing in connection herewith) constitute the entire and only
agreement of the parties with respect to the subject matter
hereof and supersedes and cancels any and all prior
negotiations, understandings and agreements concerning the
subject matter hereof, including the letter of intent dated May
9, 1995, as amended. This Agreement may be amended, modified,
superseded, canceled, renewed or extended only by a written
instrument executed by the parties hereto.
10.05 Waiver. The failure by any party at any time to
require performance or compliance by the other parties of any of
its obligations or agreements shall in no way affect the right
to require such performance or compliance at any time
thereafter. The waiver by any 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.
10.06 Binding Nature. This Agreement shall be binding
upon and inure to the benefit of each party hereto, its
successors and permitted assigns.
10.07 Assignment. This Agreement and all rights
hereunder may not be transferred or assigned, by operation of
law or otherwise, without the written consent of all the parties
to the Agreement, except that Recoton may assign its rights and
obligations hereunder to one or more wholly-owned subsidiaries
but no such assignment shall relieve Recoton of its obligations
hereunder.
10.08 Captions; Language. The article, section and
paragraph headings contained in this Agreement are for the
purposes of convenience only and are not intended to define or
limit the contents of such articles, sections or paragraphs. In
this Agreement, unless the context requires otherwise, the
singular includes the plural, the plural the singular, the word
"or" is used in the inclusive sense and all references to
"including" shall mean "including without limitation," unless
the context requires otherwise.
10.09 Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. The Schedules and Exhibits are hereby made a part of
this Agreement.
10.10 Costs. Except as otherwise stated, each party
hereto will pay all costs and expenses incurred by it in connec-
tion with this Agreement, whether or not the transactions
contemplated herein shall be consummated.
10.11 Rights of Third Parties. Nothing in this Agree-
ment shall be construed as giving any person other than the
parties hereto and their respective successors and permitted
assigns, any right, remedy or claim under or in respect of this
Agreement or any provision hereof.
10.12 Enforceability. 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.
10.13 Equitable Remedies. The Seller Parties
acknowledge that because of the nature of the Sellers' business
and the subject matter of this Agreement, a breach of Section
9.01 will cause irreparable injury the to Purchaser Parties for
which money damages will not provide an adequate remedy and,
accordingly, the Purchaser Parties shall have the right to have
the provisions of such Section specifically enforced by a court
having equity jurisdiction, in addition to, and not in
limitation of, any remedies at law that the Purchaser Parties
may have.
10.14 Further Assurances. At any time and from time
to time, each party hereto, without further consideration, shall
cooperate, take such further action and execute and deliver such
further instruments and documents as may be reasonably requested
by any other party in order to carry out the provisions and
purposes of this Agreement and to transfer possession of and
good title to the Purchased Assets and to effect the assumption
by Purchaser of the Assumed Liabilities.
10.15 Counterparts. This Agreement may be executed in
one or more counterparts, all of which taken together shall be
deemed to evidence one and the same agreement.
10.16 Applicable Law; Dispute Resolution.
(a) This Agreement and its validity, construction and
performance shall be governed in all respects by the laws of the
State of New York, without giving effect to principles of
conflict of law.
(b) The parties shall promptly cooperate in good faith
to carry out the provisions of this Agreement and the activities
contemplated hereby and shall also cooperate in good faith to
resolve any disputes or differences which may arise in
connection with the provisions hereof and the activities
contemplated hereby. Except as otherwise noted in this
Agreement, any dispute, question, difference, controversy or
claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration before a
panel of three arbitrators in Honolulu, Hawaii in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, as then in effect at the time of filing
of the notice of demand. The parties consent to the
jurisdiction of the courts of the State of Hawaii, and of the
United States District Court for the District of Hawaii, for all
purposes in connection with arbitration. The application to
either of said courts, and any paper in connection requested or
by personal service or in such other manner as may be
permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance
is allowed. The arbitrators shall not alter or disregard any
express provisions of this Agreement. Any arbitration award in
accordance with this Section 10.16 shall be final and binding
upon the parties and judgment thereon may be entered in any
court having jurisdiction over such party. Nothing in this
Section 10.16, however, shall limit Purchaser's rights to
commence litigation for equitable relief pursuant to Section
10.13.
10.17 Access; Notice of Actions. Following the
Closing, (i) Purchaser and Seller shall each give access to the
other to inspect and copy the books of account of Seller in
their possession, and (ii) Seller shall give access to Purchaser
to inspect and copy the minute books and other records of Seller
in Seller's possession, if, in either case, the requesting party
has a particularized need for such records. Each of the parties
hereto shall keep the books of account and minute books and
other records of the Companies which are in their possession for
a period of not less than six years from the Closing Date. All
such information, and any similar information previously
provided, shall be retained by the receiving party and its
agents in confidence and (other than information which has prior
thereto been made public) shall not at any time be disclosed by
it to third persons except as may be required to comply with
valid and applicable laws, rules, regulations or orders of any
court or governmental agency.
10.18 Publicity. None of the parties hereto shall
issue any press release or make any other public statement, in
each case relating to or connected with or arising out of the
Agreement or the matters contained herein, without obtaining the
prior written approval of Seller and Purchaser to the contents
and the manner of presentation and publication thereof,
provided, however, that nothing herein shall prevent any party
from making any disclosures required by applicable law or
regulation (including regulation of the Securities and Exchange
Commission and the National Association of Securities Dealers).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above
written.
INTERACT ACCESSORIES, INC.
By: /s/Robert L. Borchardt
Name: Robert L. Borchardt
Title: CEO/COB
RECOTON CORPORATION
By: /s/Stuart Mont
Name: Stuart Mont
Title: Chief Operating Officer
STD ENTERTAINMENT (U.S.A.), INC.
By: /s/Todd S. Hays
Name: Todd S. Hays
Title: President
STD HOLDING LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
STD INVESTMENTS (B.V.I.) LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
STD INTERNATIONAL HOLDINGS LIMITED
By: /s/Stephen Chu
Name: Stephen Chu
Title: Director
/s/Stephen Chu Nin Yiu
Stephen Chu Nin Yiu
/s/David Chu Nin Wai
David Chu Nin Wai
/s/Patrick Ho Tze Man
Patrick Ho Tze Man
/s/Leung Choi Luen
Leung Choi Luen
/s/Tong Yue Ting
Tong Yue Ting
/s/Todd S. Hays
Todd S. Hays
/s/Williamson Wong Shiu Wah
Williamson Wong Shiu Wah
<PAGE>
EXHIBIT 3.03
LIABILITIES UNDERTAKING
STD ENTERTAINMENT (U.S.A.) INC., a Maryland corporation
(hereinafter referred to as "Assignor"), for valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, paid to it by INTERACT ACCESSORIES, INC., a
Delaware corporation (hereinafter referred to as "Assignee"),
hereby assigns and transfers to Assignee all its right, title
and interest in and to the Assumed Liabilities as defined in the
Asset Purchase Agreement dated as of August __, 1995 among
Assignor, Assignee, Recoton Corporation, STD International
Holdings Limited, STD Investments (B.V.I.) Limited, Stephen Chu
and other principal STD shareholders named therein, (the "Asset
Purchase Agreement"). Nothing in this Assignment shall be
construed to be a modification or expansion of, or limitation
on, any provision of the Asset Purchase Agreement, including the
representations and warranties set forth therein.
Assignee hereby assumes and undertakes to pay, perform
or discharge when due, and hold harmless the Assignor from, the
liabilities and obligations of Assignor under the Assumed
Liabilities assigned hereunder and no others. Nothing herein,
however, shall in any way modify the representations, warranties
and covenant of Assignor under the Asset Purchase Agreement.
Nothing contained herein shall require Assignee to
perform, pay or discharge any Assumed Liabilities of Assignor so
long as Assignee shall in good faith contest or cause to be
contested the amount or validity thereof.
Except as otherwise provided in the Asset Purchase
Agreement, Assignee shall not assume, and Assignor shall remain
liable for, and hold the Assignee harmless against, all
liabilities and obligations of Assignor other than the Assumed
Liabilities, and it is expressly understood and agreed that all
liabilities of Assignor not expressly assumed hereunder by
Assignee shall remain the sole obligation of the Assignor, its
successors and assigns.
Assignee hereby agrees to promptly execute and deliver
from time to time at the request of Assignor all such further
instruments of conveyance, assignments and further assurances as
may be required in order to perfect the assumption of the
Assumed Liabilities.
Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to such term in the Asset
Purchase Agreement.
This Assignment and Assumption Agreement shall be
governed by and construed in accordance with the laws of the
State of New York, without giving affect to principles of
conflict of law.
Dated: August __, 1995
STD ENTERTAINMENT (U.S.A.) INC.
By:
Name:
Title:
INTERACT ACCESSORIES, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 4.02(a)(i)
BILL OF SALE
STD ENTERTAINMENT (U.S.A.) INC., a Maryland corporation
(hereinafter referred to as "Seller"), for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, paid to it by INTERACT ACCESSORIES, INC., a
Delaware corporation (hereinafter referred to as "Purchaser"),
hereby sells, assigns, and transfers to Purchaser all furniture,
trade fixtures, equipment, computers, machinery, tools, dies,
jigs, molds, samples, models, office supplies, sales and product
literature, inventory and other tangible personal property owned
by Seller, excluding such assets set forth in Attachment 1
hereto, (the "Property") pursuant to the Asset Purchase
Agreement dated August __, 1995 among Seller, Purchaser, Recoton
Corporation, STD International Holdings Limited, STD Investments
(B.V.I.) Limited, Stephen Chu and other principal STD
shareholders named therein (the "Asset Purchase Agreement").
Nothing in this Bill of Sale shall be construed to be a
modification or expansion of, or limitation on, any provision of
the Asset Purchase Agreement, including the representations and
warranties set forth therein.
Seller hereby agrees to promptly execute and deliver
from time to time at the request of Purchaser all such further
instruments of conveyance, assignment and further assurance as
may be required in order to put Purchaser in possession of or
vest in or confirm Purchaser's full and complete title to and
the right to use and enjoy such Property.
This Bill of Sale shall be governed by and construed in
accordance with the laws of the State of New York, without
giving affect to principles of conflict of law.
Dated: ___________, 1995
STD ENTERTAINMENT (U.S.A.) INC.
By:
Name:
Title:
<PAGE>
Attachment 1 to
BILL OF SALE
Items Not
Included Within Purchased Assets
(a) Seller's bank account (the assets in such
account, however, are being sold)
(b) any corporate documents and seals of Seller;
(c) vehicles, as to which separate instruments of
conveyance shall be delivered.
<PAGE>
EXHIBIT 4.02(a)(ii)
ASSIGNMENT OF RECEIVABLES
STD ENTERTAINMENT (U.S.A.) INC., a Maryland corporation
(hereinafter referred to as "Assignor"), for valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, paid to it by INTERACT ACCESSORIES, INC., a
Delaware corporation (hereinafter referred to as "Assignee"),
hereby assigns and transfers to Assignee all its right, title
and interest in and to the Receivables (as such term is defined
in the Asset Purchase Agreement dated August __, 1995 among
Assignor, Assignee, Recoton Corporation, STD International
Holdings Limited, STD Investments (B.V.I.) Limited, Stephen Chu
and other principal STD shareholders named therein (the "Asset
Purchase Agreement")) of Assignor. Nothing in this Assignment
shall be construed to be a modification or expansion of, or
limitation on, any provision of the Asset Purchase Agreement,
including the representations and warranties set forth therein.
Assignee hereby agrees to promptly execute and deliver
from time to time at the request of Assignor all such further
instruments as may be required in order to perfect the
assumption of the liabilities.
This Assignment of Receivables shall be governed by and
construed in accordance with the laws of the State of New York,
without giving affect to principles of conflict of law.
Dated: August __, 1995
STD ENTERTAINMENT (U.S.A.) INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 4.02(a)(iii)
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
STD ENTERTAINMENT (U.S.A.) INC., a Maryland corporation
(hereinafter referred to as "Assignor"), for valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, paid to it by INTERACT ACCESSORIES, INC., a
Delaware corporation (hereinafter referred to as "Assignee"),
hereby assigns and transfers to Assignee all its right, title
and interest in and to contracts, leases, instruments, licenses,
franchises, insurance policies and other agreements (the
"Assumed Contracts") pursuant to the Asset Purchase Agreement
dated as of August 31, 1995 among Assignor, Assignee, Recoton
Corporation, STD International Holdings Limited, STD Investments
(B.V.I.) Limited and the Holding Limited shareholders of STD
International Holdings Limited (the "Asset Purchase Agreement"),
except for the contracts, leases, instruments, licenses,
franchises, insurance policies and other agreements set forth on
Attached 1 hereto. Nothing in this Assignment shall be
construed to be a modification or expansion of, or limitation
on, any provision of the Asset Purchase Agreement , including
the representations and warranties set forth therein.
Assignee hereby assumes and undertakes to pay, perform
or discharge when due the liabilities and obligations of
Assignor under the Assumed Contracts assigned hereunder and no
others.
Assignor hereby agrees to promptly execute and deliver
from time to time at the request of Assignee all such further
instruments of conveyance, assignments and further assurances as
may be required in order to put Assignee in possession of or
vest in or confirm Assignee's full and complete title to and the
right to use and enjoy the Assumed Contracts.
This Assignment and Assumption of Contracts Agreement
shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to principles of
conflict of law.
Dated: as of August 31, 1995
STD ENTERTAINMENT (U.S.A.) INC.
By:
Name: Todd S. Hays
Title: President
INTERACT ACCESSORIES, INC.
By:
Name: Robert L. Borchardt
Title: Chief Executive Officer
<PAGE>
Attachment 1 to
ASSIGNMENT AND ASSUMPTION
Contracts Not Assumed
(a) [Contracts identified on Schedule 2.02(b) to
the Asset Purchase Agreement.]
(b) Contracts set forth on the attached Schedule A
which do not have asterisks next to their
name, the assignment of such Contracts being
effective upon obtaining the necessary
consents.
<PAGE>
EXHIBIT 4.02(f)
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 31st day of August, 1995 (the
"Commencement Date"), between Interact Accessories, Inc., a
Delaware corporation (the "Corporation"), and Todd S. Hays (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Employee has heretofore been employed by
STD Entertainment (USA) Inc. ("STD"), a company engaged in the
business of marketing and selling computer and video game
accessories, as its President; and
WHEREAS, the Corporation has acquired certain assets
and liabilities of STD pursuant to an agreement of even date
herewith (the "Acquisition Agreement") and desires to employ the
Employee as President and Chief Operating Officer of the
Corporation;
WHEREAS, the Corporation is a wholly owned subsidiary
of Recoton Corporation, a New York corporation ("Recoton"); and
WHEREAS, the Corporation and the Employee desire to
assure the continued service of the Employee to the Corporation;
NOW, THEREFORE, in consideration of the premises and
the mutual covenants, representations, warranties and conditions
herein contained, the parties hereto agree as follows:
1. Employment and Duties.
(a) The Corporation hereby employs the Employee,
and the Employee accepts employment, during the term set forth
in Section 2(a) and upon the other terms and conditions set
forth in this Agreement. The Employee shall serve the
Corporation as President and Chief Operating Officer of the
Corporation (or otherwise if the position is of similar stature)
subject to the conditions set forth in this Agreement, under the
direction of the Board of Directors of the Corporation, and
shall exercise such responsibilities and perform such duties for
the Corporation commensurate with such capacity as the Board of
Directors of the Corporation may from time to time reasonably
designate. The Employee may also serve as a director of the
Corporation during the term of his employment pursuant to this
Agreement, if agreed and if so elected to such position.
(b) The Employee shall report to Stephen Chu, so
long as he is Group Managing Director of (or holds a comparable
position at) STD Holding Limited or, thereafter, to the Chairman
of the Board of Directors of the Corporation. The Employee
shall devote substantially all of his business time, attention
and energies to the employment under this Agreement and to
promoting the best interests of the Corporation and the Employee
shall not, either during or outside of such normal business
hours, directly or indirectly engage in any activity inimical to
such best interests. The Employee shall not perform services
for compensation for himself or for any entity or person other
than the Corporation without the prior express written
permission of the Corporation's Board of Directors; it shall
not, however, be a violation of this Agreement for the Employee
to (i) serve on civic or charitable boards; (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 and the requirements of
the second sentence of this paragraph are not violated. The
Employee shall exert his best efforts in the performance of his
duties under this Agreement.
2. Term; Payment Upon Termination.
(a) The term of the Employee's employment under
this Agreement shall commence as of the date of this Agreement
and shall terminate on the earlier of the death of the Employee,
the Employee ceasing to be employed by the Corporation other
than by reason of breach by the Corporation of this Agreement or
5:00 p.m. on December 31, 2001 (the "Expiration Date").
(b) The Corporation, in the sole discretion of
its Board of Directors, may terminate the employment of the
Employee, and its obligation to pay compensation pursuant to
Section 3, prior to the Expiration Date at any time for "cause".
"Cause" as used in this Agreement shall mean (i) fraud, (ii)
conviction of a felony or any crime having as an essential
element larceny, (iii) commission of an intentional tort against
the Corporation, (iv) wilful and repeated dereliction of duty or
breach of the Employee's material obligations under this
Agreement, (v) failure to perform any material covenants under
the Acquisition Agreement or another agreement dated as of the
date hereof among STD Investments (B.V.I.) Limited, et. al and
Recoton (Far East) Limited, et. al entitled Stock Purchase
Agreement (the "Stock Purchase Agreement"), (vi) repeated or
material violation of published Corporation business policies
and (vii) serious violation of law relating to the Corporation's
business or its securities or the business or securities of
Recoton. In addition, the Corporation, in the sole discretion
of its Board of Directors, may terminate the employment of the
Employee, and its obligation to pay compensation pursuant to
Section 3 except as otherwise set forth in Section 3, prior to
the Expiration Date at any time for physical or mental
impairment or condition which renders the Employee unable to
perform his usual duties as an employee which persists for a
period of more than 180 days out of any 24-month period
("disability").
(c) The Corporation may terminate the employment
of the Employee for reasons other than cause or disability
provided that the Corporation shall continue to pay or provide
the Employee the salary and other benefits (including bonuses
and advances thereof which would be paid if the Employee were
still employed hereunder) provided for in this Agreement until
the fifth anniversary of the date of this Agreement.
(d) The Employee may terminate his employment
hereunder without liability to the Company at any time upon 30
days prior written notice, at which time his compensation and
benefits under this Agreement shall cease. If the Employee
terminates his employment hereunder or notifies the Corporation
of his intent to terminate his employment hereunder, the
Corporation in its sole discretion may require the Employee to
cease the exercise of his responsibilities and the performance
of his services for the Corporation at any time prior to the
effective date of the notice of termination and to refrain from
entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date
of termination. If the Corporation shall materially breach any
term of this Agreement, which breach shall not have been cured
within 10 days after written notice thereof has been given to
the Corporation, then the Employee may terminate his employment
under this Agreement and the Corporation shall continue to be
obligated to pay or provide to Employee the salary and other
benefits provided for in this Agreement until December 31, 2001.
(e) The Employee shall be under no duty to
mitigate damages in case of termination pursuant to Section 2(c)
or 2(d) but the Corporation may offset against the sums owing to
him by the Corporation hereunder all sums earned by the Employee
either by reason of self-employment, as an employee or as a
consultant or from other activities which would be barred by
this Agreement were the Employee still employed by the
Corporation.
3. Compensation; Benefits; and Expenses.
For all services to be rendered to the Corporation or
any affiliate thereof in any capacity, including services as an
officer, director, member of any committee or otherwise, so long
as the Employee is employed by the Corporation pursuant to
Section 2(a) or as otherwise set forth in Section 2(c) or the
last sentence of Section 2(d):
(a) The Corporation shall pay the Employee a
salary at the initial rate of $192,000 per year (the "Base
Salary"). Such salary shall be payable in installments,
less any usual payroll deductions, in accordance with
prevailing payroll practices of the Corporation from time to
time. The Board of Directors shall review the Employee's
compensation and benefits at least once each year and may in
its sole discretion increase the Employee's Base Salary and
benefits over those provided for hereunder; provided,
however, that in any case on each anniversary of the
Commencement Date during the term of this Agreement, the
Corporation shall increase the Base Salary to reflect any
increase in the cost of living during the preceding 12-month
period, as follows:
(i) The amount of the cost of living
adjustment, if any, shall be based on the
Consumer Price Index for all Urban Consumers
(CPI-U) - United States - All Items - All
Cities (1982-84 = 100) ("CPI"), an index
published each month by the Bureau of Labor
Statistics.
(ii) For each percentage point increase in
the CPI (A) between the Commencement Date and the
first anniversary, (B) between the first
anniversary and the second anniversary and (C)
between each successive anniversary thereafter,
with any increase rounded to the nearest one-tenth
of one percent, the Corporation shall increase the
Base Salary to correspond to any such percentage
increase in the CPI).
(iii) If the CPI information is not available
on the anniversary date of any cost of living
adjustment, then the cost of living adjustment
shall be made as soon as such information is
available retroactive to the effective date.
Other than as provided in this Agreement, in no event may
Employee's compensation or benefits be decreased by the
Board of Directors except to the extent that such benefits
(other than Base Salary) are provided to other employees and
such employee benefits are similarly generally reduced.
(b) The Employee shall be entitled to receive
such bonuses, and advances against such bonuses, as are
described in Section 9.02 of the Stock Purchase Agreement.
(c) The Employee shall be entitled to the fringe
benefits generally made available to the senior executives
of Recoton (including vacation, holidays, insurance, medical
benefits, automobile and professional training) to the
extent that such benefits may be legally extended to him,
but the Corporation shall be under no obligation to include
him in any stock option, profit sharing plan or bonus
program, in light of the bonus set forth in Section 3(b).
(d) The Corporation shall reimburse the
Employee's moving and related expenses, and provide bridge
loans, consistent with Recoton's policy for senior
executives if the Corporation's offices shall be moved to
Florida or any other location outside of the metropolitan
Baltimore area.
(e) The Corporation shall reimburse the Employee
for all reasonable and necessary expenses incurred by the
Employee requested or authorized by the Corporation in
connection with the Corporation's business and such expenses
are properly documented and accounted for in accordance with
the then policy of the Corporation.
4. Restrictions on the Disclosure of Proprietary
Information; Inventions.
(a) During the course of the Employee's
employment and thereafter, the Employee shall not, without the
prior written consent of the Corporation, directly or indirectly
(i) record, photograph, photocopy or by any other means copy or
cause to be copied any document, list, drawing, writing,
photograph, sketch, sound recording or other material that
embodies Proprietary Information or (ii) use, or disclose or
divulge to any person, firm or corporation, any Proprietary
Information, except as may be necessary in the ordinary course
of the Corporation's business or as may be required by law. As
used in this Agreement, "Proprietary Information" means
information disclosed to or obtained by the Employee, whether or
not acquired during business hours, concerning STD's, the
Corporation's, Recoton's and/or their subsidiaries' business,
operations, products, manufacturing or other processes,
services, customers, vendors, costs and pricing policies,
research, development, formulae, specifications, methods,
expertise, techniques, inventions, equipment, purchasing,
merchandising and selling including, but not limited to,
customer lists, financial and/or marketing reports and plans,
product configurations and compositions, pricing guidelines or
information, financial reports, financial projections and other
financial information, business plans and any other information
not readily known or obtainable by the general public, and any
proprietary software. Notwithstanding the foregoing sentence,
Proprietary Information does not include (i) information
acquired by the Employee before the Employee became an employee
of STD, (ii) information which is or becomes public knowledge
(except as may be disclosed by the Employee in violation of this
Agreement), (iii) information acquired by the Employee from a
source, other than STD, Recoton, the Corporation or an affiliate
of or a party providing such information to STD, Recoton, the
Corporation or such affiliate, that legally acquired such
information and was free to disclose the same or (iv)
information independently developed by the Employee without the
use of Proprietary Information or the Corporation's, STD's or an
affiliates' facilities. Upon termination of employment
hereunder for any reason, Employee shall promptly return to
Corporation all books, records, lists, tapes and other written,
typed, computer or printed materials or data and all copies
thereof which contain any information relating to the business
of the Corporation, STD or their affiliates, and the Employee
shall not make or retain any copies thereof.
(b) If at any time during the term of employment
by the Corporation the Employee conceives, develops,
participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works,
techniques, processes, programs, software, works or art,
products, ideas or formulae (collectively, the "Intellectual
Property"), whether or not patentable or copyrightable and
whether or not done within or after normal business hours or
alone or in conjunction with others, relating to the business of
the Corporation, Recoton or their affiliates or any part
thereof, such Intellectual Property shall be and remain the sole
and exclusive property of the Corporation. The Employee shall
promptly communicate and disclose all such Intellectual Property
to the Corporation, and to further effectuate the purposes of
this provision, shall execute and deliver to the Corporation at
the Corporation's expense any instruments deemed necessary by
the Corporation to effect the disclosure thereof to, and
ownership thereof by, the Corporation, including without
limitation any assignments of rights to patents, copyrights and
all other proprietary interests which the Employee might have in
any Intellectual Property and shall further assist the
Corporation, as the Corporation may reasonably request, to
obtain patent, trademark or copyright registration, or other
protections for the Intellectual Property, including testifying
in any hearings, depositions or trials related thereto.
5. Restrictions on Competition. During the period of
time during which the Employee is employed by the Corporation
(the "Employment Period") and for two years thereafter, the
Employee shall not directly or indirectly:
(a) engage in the manufacture or sale of video or
computer gaming accessories (the "Business") other than for
the benefit of the Corporation, and its affiliates in any of
the following: (i) Maryland; or (ii) Florida, or (iii) any
state in which STD or Recoton currently or at any time
during the term of this Agreement has distributors or
customers; or (iv) any geographic area within 100 miles of
any state mentioned in clause (i), (ii) or (iii) above; or
(v) the United States; or (vi) Canada; or (vii) Mexico or
(viii) any country in which Recoton or STD conducts its
business as of the date hereof or at any time during the
term of this Agreement;
(b) render services to or have any interest, as a
shareholder owner, agent, director, employee, consultant,
lender, guarantor or otherwise, in any other person engaged
in the Business other than the Corporation or its
affiliates; or
(c) either (i) hire, offer to hire, entice away,
retain, employ or solicit or attempt to solicit (either for
himself or for another) for employment or induce, persuade
or encourage any person to leave the employ of the
Corporation or an affiliate who is or was during the
Employment Period employed or retained by the Corporation or
an affiliate as a consultant, agent, employee or otherwise
or (ii) divert or attempt to divert from the Corporation or
an affiliate any business whatsoever by influencing or
attempting to influence any customer or supplier of the
Corporation or an affiliate.
For purposes of this Section 5, 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. The Employee acknowledges that the
time, scope, geographic area and other provisions of this
Section 5 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable
under the circumstances of the transactions contemplated by this
Agreement. It is understood that the Employee is agreeing to
the terms of this Section 5 in order to induce the Corporation
to enter into this Agreement. The parties acknowledge that the
business which the Corporation plans to conduct will be
conducted throughout the United States and that, given the
current sophistication of the information and telecommunication
"highway," a narrow geographic limitation would deny the
Corporation protection to which it is entitled in this
Agreement.
6. Prior Agreements. The Employee represents and
warrants to the Corporation that he is not currently subject to
any agreements, obligations or restrictions regarding prior
employment, competition, solicitation of employees or customers
or disclosure of proprietary information.
7. Certain Business Practices. The Employee shall
not during the term of his employment by the Corporation take or
cause or permit others to take any action which would cause the
Corporation to be in violation of the United States Foreign
Corrupt Practices Act or any other similar legislation of the
United States or any other country or any subdivision thereof.
8. Governing Law; Arbitration; Attorneys Fees.
(a) Applicable Law. This Agreement and its
validity, construction and performance shall be governed in all
respects by the law of the State of New York, without giving
effect to principles of conflict of law.
(b) Arbitration. The parties shall promptly
cooperate in good faith to carry out the provisions of this
Agreement and the activities contemplated hereby and shall also
cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the
activities contemplated hereby. Except as otherwise noted in
this Agreement, any dispute, question, difference, controversy
or claim arising out of or relating to this Agreement, or the
breach thereof, shall be finally settled by arbitration in the
jurisdiction where the Corporation's main offices are located at
the time of institution of such action (the "Main Office") in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, as then in effect at the time of filing
of the notice of demand. The parties consent to the
jurisdiction of the trial court for the county where the Main
Office is located and of the United States District Court for
the District where the Main Office is located for all purposes
in connection with arbitration. The parties consent that any
process or notice of motion or other application to either of
said courts, and any paper in connection with arbitration, may
be served by certified mail, return receipt requested or by
personal service or in such other manner as may be permissible
under the rules of the applicable court or arbitration tribunal,
provided a reasonable time for appearance is allowed. The
arbitrators shall not alter or disregard any express provisions
of this Agreement. Any arbitration award in accordance with
this Section 8(b) shall be final and binding upon the parties
and judgment thereon may be entered in any court having
jurisdiction over such party. The arbitrators are hereby
authorized to award to the winning party the costs (including
reasonable attorneys' fees and expenses) of any such
arbitration.
(c) Legal Fees. In the event of litigation or
arbitration hereunder, the court or arbitral panel shall be
authorized to award the prevailing party in such action or
proceeding any or all reasonable attorney fees and disbursements
paid by it in prosecuting or defending such action.
9. Enforceability. 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.
10. Equitable Remedies. The Employee acknowledges
that because of the nature of the business of the Corporation
and the subject matter of this Agreement, a breach of Section 4
or 5 of this Agreement will cause irreparable injury to the
Corporation for which money damages will not provide an adequate
remedy, and the Employee agrees that the Corporation shall have
the right to have the provisions of such Section specifically
enforced by a court having equity jurisdiction, in addition to,
and not in limitation of, any remedies at law that the Corpora-
tion may have. The Employee further acknowledges that Sections
4 and 5 are reasonable and enforceable.
11. No Waiver. The failure by either party at any
time to require performance or compliance by the other of any of
its obligations or agreements shall in no way affect the right
to require such performance or compliance at any time
thereafter. 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.
12. Assignment. This Agreement and all rights
hereunder are personal to the Employee and may not be
transferred or assigned by the Employee at any time. The
Corporation may assign its rights to any parent or subsidiary
or, with the Employee's consent (not to be unreasonably
withheld), any successor or in connection with any sale,
transfer or other disposition of all or substantially all of its
business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and provided,
further, that such assignment and assumption shall not relieve
the Corporation of its obligations hereunder.
13. Entire Agreement. 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.
14. Amendment. This Agreement may be amended,
modified, superseded, canceled, renewed or extended only by a
written instrument executed by both of the parties hereto.
15. 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:
Todd Hays
400 Kilree Road, #302
Mays Chapel, MD 21093
Telecopier: 410-561-7707
Telephone No.: 410-560-1453
(b) To the Corporation:
Interact Accessories, Inc.
10945 McCormick Road
Hunt Valley, MD 21030
Attn: Secretary
Telecopier No.: 410-785-5725
Telephone No.: 410-785-5661
- copy to (which shall not constitute notice) -
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont
Telecopier No.: 407-333-8903
Telephone No.: 407-333-8900
- 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
Telephone No.: 212-806-5400
(or to such other address or telefax number as any party may
specify by notice to all other parties as aforesaid). 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.
16. Binding Nature. This Agreement shall be binding
upon and inure to the benefit of the personal representatives
and successors of the respective parties hereto.
17. Headings; 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 and the word "or" is used in the inclusive sense and
all references to "including" shall mean "including without
limitation," unless the context requires otherwise.
18. Survival. The provisions of this Agreement shall
survive the termination or expiration of the Employee's
employment as a continuing agreement of the Corporation and the
Employee.
19. Cross-References; Exhibits. References in this
Agreement to Articles, Sections, Schedules and Exhibits are
references to Articles and Sections of this Agreement and to
Schedules and Exhibits attached to or delivered pursuant to this
Agreement. Any Schedules and Exhibits are hereby made a part of
this Agreement.
20. Counterparts. This Agreement may be executed in
two duplicate counterparts, each of which shall be deemed to be
an original.
21. 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.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
INTERACT ACCESSORIES, INC.
By:
Name:
Title:
Todd S. Hays
GUARANTY
Recoton Corporation hereby guaranties the performance
by the Corporation of its obligations pursuant to the foregoing
agreement.
RECOTON CORPORATION
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT 9.06
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, which are intended to
constitute a Limited Power of Attorney, that STD ENTERTAINMENT
(U.S.A.) INC. ("Principal"), does hereby designate and appoint
as its lawful attorney-in-fact INTERACT ACCESSORIES, INC.
("Attorney"), in the name of Principal or in the name of
Attorney, to ask for, demand, sue for, collect, compromise,
compound, receive, receipt for and give acquittances for, any
and all sums owing or which may become due upon any items of
receivables ("Receivables") as defined in Section 2.01 of the
Asset Purchase Agreement dated August __, 1995 among Principal,
as Seller, Attorney as Purchaser, Recoton Corporation, STD
International Holdings Limited, STD Investments (B.V.I.)
Limited, Stephen Chu and other principal STD Shareholders named
therein (the "Agreement") and, in connection therewith, to take
any and all actions as Attorney may deem necessary or desirable
in order to realize upon the Receivables including, without
limitation, power to endorse in the name of Principal any
checks, drafts, notes or other instruments received in payment
of or in account of the accounts receivable, but Attorney shall
not be under any duty to exercise any such authority or power or
in any way be responsible for the collection of the Receivables.
This power of attorney shall be irrevocable by Princi-
pal. This power of attorney shall not be affected by the subse-
quent liquidation, dissolution or other disability of Principal.
To induce any third party to act hereunder, Principal
hereby agrees that any third party receiving a duly executed
copy or facsimile of this instrument may act hereunder, and that
revocation or termination hereof shall be ineffective as to such
third party unless and until actual notice or knowledge of such
revocation shall have been received by such third party, and
Principal hereby agrees with such third party that Principal
shall have no right of action against such third party by reason
of such third party having relied on the provisions of this
instrument.
This Limited Power of Attorney shall be governed by and
construed in accordance with the laws of the State of New York,
without giving affect to principles of conflict of law.
IN WITNESS WHEREOF, Principal has caused this Power of
Attorney to be executed this _____ day of __________, 1995.
STD ENTERTAINMENT (U.S.A.) INC.
[SEAL] By:
Name:
Title:
<PAGE>
GUARANTY
Recoton Corporation hereby guaranties the performance
by the Corporation of its obligations pursuant to the foregoing
agreement.
RECOTON CORPORATION
By:__________________________
Name:
Title:
