SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
[ x ] Definitive Proxy Statement of the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant to 14a-6(e)(2))
section 240.14a-11(c) or section 240.14a-12
Recoton Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, of other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) on Item 22(a)(2) of Schedule 14A.[FN]
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (Set forth
the amount on which the filing fee is calculated and
state how it was determined)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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____________________________
<F1> No fee is being paid since a fee was paid upon filing of
initial preliminary solicitation material
<PAGE>
RECOTONR RECOTON CORPORATION
2950 Lake Emma Road
Lake Mary, Florida 32746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the Annual Meeting
of Shareholders of Recoton Corporation (the "Company"), which
will be held in the Conference Room, 3rd Floor of Chemical Bank,
270 Park Avenue, New York, New York on Monday, June 19, 1995 at
2:00 p.m., for the following purposes:
(1) To elect three directors for a term of three
years;
(2) To consider and vote on an amendment to the
Certificate of Incorporation to increase the
number of authorized shares of Common Stock to
25,000,000 shares;
(3) To consider and vote on an amendment to the
Certificate of Incorporation to authorize a new
class of 10,000,000 shares of Series Preferred
Stock with such terms as the Board of Directors
may, from time to time, determine;
(4) To consider and vote on an amendment of the
Company's 1991 Stock Option Plan to increase the
number of shares authorized for grant to
2,500,000 and to adopt certain changes required
by recent revisions in the Federal tax laws;
(5) To ratify the appointment of Cornick, Garber &
Sandler, LLP as independent auditors of the
Company for the fiscal year ending December 31,
1995; and
(6) To transact such other business as may properly
come before the Annual Meeting or any
adjournments thereof.
Only shareholders of record at the close of business
on May 3, 1995 will be entitled to notice of, and to vote at,
the Annual Meeting or any adjournments thereof.
It is important that your shares be represented at the
annual meeting regardless of the size of your holdings. WHETHER
OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON, WE
URGE YOU TO PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT IN THE ENVELOPE PROVIDED FOR THAT PURPOSE, WHICH DOES
NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY
IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
By Order of the Board of Directors
Stuart Mont
Executive Vice President-
Operations, Chief Operating
Officer, Chief Financial Officer
and Secretary
May 17, 1995
<PAGE>
RECOTONR Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
ANNUAL MEETING OF SHAREHOLDERS
June 19, 1995
PROXY STATEMENT
INTRODUCTION
The 1995 Annual Meeting (the "Annual Meeting") of
Recoton Corporation (the "Company" or "Recoton") will be held on
Monday, June 19, 1995, for the purposes set forth in the
attached Notice of Annual Meeting. The accompanying form of
proxy is solicited on behalf of the Board of Directors of the
Company in connection with the Annual Meeting or any
postponement or adjournment thereof.
EACH SHAREHOLDER'S VOTE IS IMPORTANT. ACCORDINGLY,
SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ACCOMPANYING PROXY
CARD REGARDLESS OF WHETHER THEY PLAN TO ATTEND THE ANNUAL
MEETING. If a shareholder attends and votes by ballot at the
Annual Meeting, that vote will cancel any proxy vote previously
given. Additionally, a shareholder giving a proxy may revoke it
at any time before it is voted at the Annual Meeting by giving a
valid proxy bearing a later date. The accompanying form of
proxy properly signed and returned to the Company will be voted
in accordance with the instructions thereon. Each such proxy
may be revoked at any time prior to the time it is voted at the
Annual Meeting by giving notice thereof in writing to the
Secretary of the Company.
This Proxy Statement, the accompanying form of proxy
and the Notice of Annual Meeting are first being sent or given
to shareholders of the Company (the "Shareholders") on or about
May 17, 1995.
SHARES OUTSTANDING AND VOTING RIGHTS
The securities entitled to vote at the Annual Meeting
consist of shares of Common Stock, $.20 par value per share, of
the Company (the "Common Stock"), each of which entitles the
holder to one vote. Only holders of Common Stock of record at
the close of business on May 3, 1995 are entitled to vote at the
Annual Meeting or any adjournments thereof. On April 19, 1995,
there were 10,680,606 shares of Common Stock outstanding. To
the knowledge of the Company, no person owned beneficially more
than 5% of the outstanding shares of Common Stock except as
otherwise on pages 13-14.
Shareholders representing a majority of the shares of
Common Stock outstanding and entitled to vote must be present or
represented by proxy in order to constitute a quorum to conduct
business at the Annual Meeting. Under the New York Business
Corporation Law ("BCL"), any corporate action, other than the
election of directors, must be authorized by a majority of the
votes cast, except as otherwise required by the BCL or the
Company's Certificate of Incorporation with respect to a
specific proposal, and the three nominees for Director receiving
the highest number of votes will be elected as Directors. For
purposes of determining whether a proposal has received a
majority of the votes cast, where a shareholder abstains from
voting or in instances where brokers are prohibited from
exercising or choose not to exercise discretionary authority for
beneficial owners who have not provided voting instructions
(so-called "broker non-votes"), those shares will not be
included in the vote totals and, therefore, will have no effect
on the vote. Such shares will, however, be counted as "present"
for determining a quorum. Where, however, the BCL requires the
approval of a majority of outstanding shares for passage of a
proposal (as is the case in Proposals II and III to amend the
Company's Certificate of Incorporation), a abstention or a
broker non-vote will have the same practical effect as a vote
cast against the proposal. Furthermore, due to the requirements
imposed by Federal securities laws, approval of Proposal IV to
amend the Company's 1991 Stock Option Plan must be the holders
of a majority of the shares present at the meeting and entitled
to vote (whether or not voted) and, accordingly, a abstention or
broker non-vote will have the same practical effect as a vote
cast against the proposal.
PROPOSAL I
ELECTION OF DIRECTORS
The ten directors of the Company are divided into
classes having staggered terms of three years. At the Annual
Meeting, three persons are to be elected, each for a three-year
term expiring in 1998. It is intended that the persons named in
the enclosed form of proxy will vote for the election of the
nominees named below for terms expiring in 1998 (or for
substitute nominees in the event of contingencies not known at
present) unless the Shareholders submitting proxies specify
otherwise. The other directors will continue in office for the
remainder of their respective terms as indicated below.
Each of the nominees named below has served as a
director during the fiscal year ended December 31,1994. Certain
data with respect to each nominee and each director follows. If
voting by proxy with respect to the election of directors,
shareholders may vote in favor of all nominees, withhold their
votes as to all nominees or withhold their votes as to specific
nominees.
The Board of Directors unanimously recommends that
Shareholders vote FOR the election as directors of the nominees
listed below for terms expiring in 1998. If one or more of the
nominees should become unavailable or unable to serve at the
time of the Annual Meeting, the shares to be voted for such
nominee or nominees which are represented by proxies will be
voted for any substitute nominee or nominees designated by the
Board or, if none, the sire of the Board will be reduced. The
Board knows of no reason why any of the nominees will be
unavailable or unable to serve at the tune of the Annual
Meeting.
Name And Position Business Experience
With The Company Directorship And Age
Nominees For Terms Expiring In 1998
Irwin S. Friedman Director of Recoton since 1982.
Director President, Chief Executive Office
and principal shareholder of I.
Friedman Equities, Inc., a
corporate financial consulting
firm, for more than the past five
years.
Age: 61
Joseph M. Idy Director of Recoton since 1990.
Director Stockbroker and money manager at
Paine Webber, Inc. (Senior Vice
President since 1989) for more than
the past five years. Age 54
Joseph H. Massot Director of Recoton since 1985.
Principal Accounting Controller and Assistant Treasurer
Officer, Vice from 1978 until 1989, Principal
President, Treasurer, Accounting Officer, Vice President
Assistant Secretary and Treasurer since 1989 and
and Director Assistant Secretary since 1983.
Age 50
Directors Whose Terms Expire In 1997
Herbert H. Borchardt Director of Recoton since 1945.
Co-Chairman, Co-Chief Chairman and Chief Executive
Executive Officer and Officer from 1976 until 1992 and
Director Co-Chairman and Co-Chief Executive
Officer since 1992. Age: 89
Peter Wish Director of Recoton since 1969.
Executive Vice Executive Vice President from 1976
President- until 1992 and Executive Vice
Administration President-Administration since
and Director 1992. Age: 59
Ronald E. McPherson Director of Recoton since 1969.
Director Until his retirement in January
1989, Vice President and Secretary
since prior to 1990. Age 65
Directors Whose Terms Expire In 1996
Robert L. Borchardt Director of Recoton since 1964.
Co-Chairman, President of the Company since
President, Co-Chief 1976, Chief Operating Officer from
Executive Officer and 1976 to December 1993 and Co-
Director Chairman and Co-Chief Executive
Officer since 1992. Age: 57
Stuart Mont Director of Recoton since 1975.
Executive Vice President and Treasurer from
President-Operations, prior to 1987 until 1989, Senior
Chief Operating Vice President from 1989 until June
Officer, Secretary and 1992, Secretary since 1989,
Director Executive Vice President-Operations
since June 1992, Chief Financial
Officer since June 1992 and Chief
Operating Officer since December
1993. Age 54
George Calvi Director of Recoton since 1984.
Executive Vice President from 1978 until
President-Sales and 1988, Senior Vice President-Sales
Marketing and Director and Marketing from 1988 until 1992
and Executive Vice President-Sales
and Marketing since 1992. Age: 44
Stephen Bender Director of Recoton since June
President of the Ambico 1993. President of Ambico, Inc.
Division for more than the past five years
until its merger into the company
in December 1992; President of the
Ambico Division since such merger
Age: 57.
Robert L. Borchardt may be deemed to be a control person of
Recoton; Robert L. Borchardt is the son of Herbert H. Borchardt.
Board Committees
The Board has standing Compensation and Audit
Committees but does not have any nominating committee. It also
appoints the members of committees constituted under stock
compensation plans.
Compensation Committee. The Compensation Committee,
composed of Messrs. Friedman, Idy and McPherson (none of whom is
an employee of the Company), met once in 1994. Its function is
to review compensation issues; approve salaries and review
benefit programs for the executive officers; review and
recommend incentive compensation (including stock compensation)
plans; and approve any employment contracts with, or other
contractual benefits for, executive officers. The committee was
formed in June of 1993.
Audit Committee. The audit committee, composed of
Messrs. Bender, Friedman, Idy and McPherson (of whom only Mr.
Bender is a employee of the Company), met once in 1994. It
performs activities, and reviews and makes recommendations,
relating to the accounting controls, audit and financial
statements of the Company.
Committees Under Stock Compensation Plans. In 1994
Messrs. H. Borchardt and Idy were appointed by the Board of
Directors as the Company's Stock Option Committee and the
Company's Stock Bonus Committee. The Stock Option Committee,
which makes awards under, prescribes rules for and interprets
the provisions of the Recoton Corporation 1982 Stock Option
Plan, Nonqualified Stock Option Plan and 1991 Stock Option Plan,
met five tunes during 1994. The Stock Bonus Committee, which
makes awards under, prescribes rules for and interprets the
provision of the Recoton Corporation Stock Bonus Plan, met once
in 1994.
Compensation Of Directors; Attendance
During 1994, none of the directors who are officers of
the Company received any compensation in addition to his regular
compensation from the Company for any services as a director or
as a member of a committee of the Board of Directors. Each of
the directors who are not officers of the Company received an
annual retainer of $4,000 in 1994 and was reimbursed for
expenses, if any, incurred in attending meetings. (See "Certain
Relationships and Related Transactions" for payments to a
company affiliated with a director for services other than as a
director.)
The Board of Directors held eight meetings during the
fiscal year ended December 31,1994. All of the directors except
Ronald McPherson attended at least 75% of the meetings of the
Board of Directors and committees of which they were members in
1994.
Executive Compensation
Report Of The Compensation Committee And Stock Option Committee
On Compensation Of Executive Officers Of The Company<F1>
[FN] This section shall not be deemed incorporated by reference
by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except
to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed
filed under such Acts.
Compensation Philosophy
The philosophy of the Company's executive compensation
has been to provide competitive levels of compensation, reward
above average overall corporate performance, recognize
individual initiative and achievements and assist the Company in
attracting and retaining qualified management. The Company does
not determine compensation based on rigid formulas, fixed
targets or weighting of specific criteria. Due to the relatively
small number of Company employees and the level of
interinvolvement between staff and management, compensation of
non-union employees, including the Co-CEO/President and the
other executive officers of the Company, is based on
management's and the Compensation Committee's subjective
informal assessment of each employee's performance in light of
over-all Company performance.
Base Salaries
Base salary compensation is determined by the
potential impact the executive officer has on the Company, the
skills and experience required by the position and the level of
responsibility. While there is no assurance that base salaries
will always increase, the basic assumption is that such salaries
will increase from year-to-year as the employee assumes greater
levels of responsibility in the Company and to keep pace with
inflation. Increases for 1994 reflect both such factors.
Incentive Compensation
Annual incentive compensation is based primarily on
corporate operating earnings, but also includes an overall
assessment by management and the Committee of each executive
officer's role in helping the Company to generate such earnings.
This assessment may include, but is not limited to, a informal
review of the individual's contributions in areas such as
leadership, decision making and financial and general
management. In fixing incentive compensation in 1993 and 1994,
the Committee took particular note of management's success over
the past few years in increasing the Company's revenues and
profits to record levels.
Prior to 1992, the Company hand historically used cash
as this form of compensation. However, with respect to incentive
compensation for 1992, the Company used both cash and the
issuance of treasury stock as compensation. Cash only was used
as incentive compensation with respect to 1993, however, arising
from the fact that the Company was in the process of registering
stock for public sale. While no stock bonuses were granted in
1994, and options were granted to only a few employees in 1994,
a significant round of options were grated in early 1995 in
recognition of 1994 services (see further discussion below). It
is anticipated that incentive compensation for 1995 and
succeeding years will be made in both cash and stock, either
pursuant to stock bonus grants or grants of stock options. The
primary factor in determining incentive compensation for the
executive officers with respect to 1994 was the continuing
increase in net sales and net earnings of the Company.
Stock Options
The Company has periodically granted stock options in
order to provide certain of its executives with a competitive
total compensation package, reward them for their contribution
to the Company's longterm share performance and provide
incentives to encourage future efforts. Options are generally
granted to key personnel, other employees in recognition of
merit and to each employee who has worked for the Company a
minimum of five years. As noted above, a series of options were
granted to appropriate Company employees in 1995 in recognition
of 1994 services and financial results; options granted to named
executive officers were as follows: Robert Borchardt: 150,000
shares; Stuart Mont: 20,000 shares; Peter Wish: 10,000 shares;
George Calvi: 10,000 shares; and Dennis Wherry: 10,000 shares.
In 1994 options were granted on 150,000 shares to the
Company's President in recognition of his valued services to the
Company over the preceding years; options were also granted to
certain newly-hired officers and to one officer in satisfaction
of obligations pursuant to an acquisition agreement. The options
granted in 1994 were not generally awarded with respect to 1993
services but were rather awarded to individual optionees for
specific reasons, as noted above. While the Stock Option
Committee was aware that the Co-CEO/President hand unexercised
stock options from years prior, such prior grants were not a
significant factor in determining the amount of 1994 grants.
Rather, the Stock Option Committee noted that the
Co-CEO/President hand not received any stock options since 1991
(while other executive employees hand received a round of option
grants in 1993) and that in the interim period the Company's
earnings and profits hand increased due in large part to the
Co-CEO/President's efforts on the Company's behalf and also
felt that the grant of additional options would serve as further
incentive for continued efforts on the Company's behalf by the
Co-CEO/President.
All options granted have an option price that is not
less than the fair market value of the stock on the date of
grant, with the exception of certain nonqualifled options issued
to an officer in satisfaction of obligations under an
acquisition agreement which are issued at the fair market value
as of the end of the prior fiscal year. The terms of the options
and the dates after which they become exercisable are
established by the Stock Option Committee, subject to plan
terms. The Board feels that stock ownership by management is
beneficial in aligning management's and shareholders' interest
in the enhancement of shareholder value.
Chief Executive Officers' Compensation
Mr. Herbert H. Borchardt, Co-Chief Executive Officer
and Co-Chairman of the Board, is being compensated pursuant to
an employment agreement entered into in 1987 which provides for
base compensation which is to be adjusted annually to reflect
changes in the consumer price index ($205,000 effective 1995).
His compensation package includes a provision for an annual
payment ($171,000 effective 1995) when he ceases in his role of
Co-Chairman. Mr. Herbert Borchardt is the only executive
officer who has an employment agreement. The initial salary
level (and corresponding level of payment if Mr. Herbert
Borchardt were to become a consultant) was based on negotiation
between the Company and the employee and approximates the salary
level which the employee was receiving at the time of entering
into the employment agreement and does not vary based on the
Company's performance.
Mr. Robert L. Borchardt, Co-Chief Executive Officer,
Co-Chairman of the Board and President, is compensated in a
similar way as the other executive officers, namely, base
salary, incentive compensation and stock options. The Committee
evaluates Mr. Borchardt's performance relative to the Company's
financial performance including but not limited to sales,
earnings and net worth. The Committee has taken specific note of
Mr. R. Borchardt's role in the Company's success over the past
few years in increasing the Company's revenues and profits to
record levels. As is the case with all compensation paid to
executive officers, the compensation of the Co-CEO/President is
not determined by any rigid formula or weighting of varying
factors but is determined on a subjective basis. The cash
compensation of the Co-CEO,'President did not increase between
1993 and 1994. As noted above, however, the Co-CEO/President did
receive a significant number of options in 1994 and in 1995
instead of an increase in the level of his cash bonus in each
year, to reflect the CO-CEO,'President's substantial efforts in
helping to produce the increases in the Company's earnings and
profits since 1991, when he was last granted options.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code, enacted
in 1993, generally disallows a tax deduction beginning in 1994
to public companies for compensation over $1 million received by
a corporation's Chief Executive Officer and four other most
highly compensated executive officers. Qualifying performance
based compensation will not be subject to the deduction limit if
certain requirements are met. The Internal Revenue Service,
however, has not yet released final rules implementing the
provisions of this statute. In this regard, the Committee must
determine whether any actions with respect to this new limit
should be taken by the Company. No executive officer's
non-deferred cash compensation was in excess of $1,000,000 in
1994 and, at this tune, it is not anticipated that any executive
officer of the Company will receive any such cash compensation
significantly in excess of this limit during 1995. Therefore,
during 1994 the Committee did not take any action to comply with
the new limit. Options granted under the Company's 1991 Stock
Option Plan qualify as performance-based compensation assuming
satisfaction of all other applicable requirements. The Committee
will continue to monitor this situation and will take
appropriate action if it is warranted in the future.
Conclusion
The Committee believes the current compensation
structure (namely, base salaries, incentive compensation in the
form of cash and stock bonuses and the granting of stock
options) has appropriately compensated its officers in a manner
that relates to performance and to the shareholders' long-term
interests. The Committee will continue to review compensation
practices, with respect to both overall arrangements and the
compensation of specific officers.
Respectfully submitted,
For the Compensation Committee:
Irwin S. Friedman
Joseph M. Idy
Ronald E. McPherson
For the Stock Option Committee:
Herbert H. Borchardt
Joseph M. Idy
Compensation Committee Interlocks and Insider Participation
Other than Herbert H. Borchardt, who is a member of
the Stock Option Committee, no members of the Company's
Compensation Committee and Stock Option Committees are employed
by the Company. Mr. McPherson was an officer and employee of the
Company until 1989 and was retained by the Company through
December 31,1993 and a company of which Mr. Friedman is
principal is currently under retainer by the Company (see
"Certain Relationships and Related Transactions"). No director
of the Company served, during the last completed fiscal year, as
an executive officer of any entity whose compensation committee
(or other comparable committee, or the Board, as appropriate)
included an executive officer of the Company. There are no
"interlocks" as defined by the Securities and Exchange
Commission ("SEC").
Compensation Tables
This section of the Proxy Statement discloses fiscal 1994
plan and non-plan compensation awarded or paid to, or earned by,
the Company's Co-Chief Executive Officers ("CEOs") and, of the
Company's other executive officers at December 31, 1994, each of
the four persons who were most highly compensated in fiscal 1994
(to the extent salary and bonuses exceeded $100,000) (together,
these six persons are sometimes referred to as the "Named
Executives").
Summary Compensation Table
The following table contains compensation data for the
Named Executives for the past three fiscal years:
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards Payouts
Other Restricted Securities All Other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus($)2 Compensation Awards Options Payouts sation
Position Year ($)1 ($)3 ($) (#)4 ($) ($)5
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. 1994 $798,950 $250,000 -- -- 150,000 -- $18,143
Borchardt, Co- 1993 799,335 250,000 -- -- -- -- 22,362
Chairman, Co- 1992 655,373 150,000 -- -- -- -- 16,502
CEO and
President
Herbert H. 1994 197,454 -- -- -- -- -- 10,207
Borchardt, 1993 191,703 -- -- -- -- -- 17,196
Co-Chairman 1992 186,119 -- -- -- -- -- 13,544
and Co-CEO
Stuart Mont, 1994 142,237 140,000 -- -- -- -- 14,498
Chief Operating 1993 132,127 125,000 -- -- 22,500 -- 19,436
Officer & 1992 123,190 95,000 -- -- -- -- 9,255
Executive Vice
President-
Operations
Peter Wish, 1994 185,422 125,000 -- -- -- -- 8,514
Executive Vice 1993 174,510 110,000 -- -- 22,500 -- 13,726
President- 1992 162,794 75,000 -- -- -- -- 11,503
Administration
George Calvi, 1994 157,675 125,000 -- -- -- -- 6,917
Executive Vice 1993 143,696 110,000 -- -- 22,500 -- 9,987
President-Sales 1992 139,070 75,000 -- -- -- -- 10,237
and Marketing
Dennis Wherry, 1994 135,980 50,000 -- -- -- -- 7,553
Senior Vice 1993 109,980 45,000 -- -- 11,250 -- 7,916
President- 1992 131,903 28,000 -- -- -- -- 10,974
Operations
1 Includes amounts allocated to the executive's deferred compensation account for each of 1994, 1993 and 1992 (Mr. R. Borchardt:
$49,950, $45,400 and $39,755; Mr. Wish: $14,782, $15,180 and $11,024; and Mr. Calvi: $13,460, $9,556 and $10,913) (see "Employment
Contracts and Changes-In-Control Arrangements" below).
2 Represents bonus awards determined for the performance year indicated but paid in the following year. Includes the fair market
value at the date of grant of stock bonuses under the Stock Bonus Plan awarded in March 1993 with respect to 1992 performance as
follows: Mr. Mont: $75,000; Mr. Wish: $60,000; Mr. Calvi: $55,000; and Mr. Wherry: $28,000.
3 The column "Other Annual Compensation" includes the value of certain personal benefits only where the value is greater than the
lower of $50,000 or 10% of an executive's salary and bonus for the year.
4 Numbers have been adjusted to reflect stock dividends
5 Includes for 1994, 1993 and 1992 respectively, (a) the vested portion of the Company's contribution for each such person pursuant
to the Recoton Corporation Employees' Profit Sharing Plan (Mr. R. Borchardt: $6,368, $10,997 and $9,940; Mr. H. Borchardt: $5,650,
$10,112 and $8,987; Mr. Mont: $6,489, $12,054 and $8,499; Mr. Wish: $6,489, $12,097 and $9,964; Mr. Calvi: $6,489, $9,701 and
$9,962; and Mr. Wherry ($6,489, $6,957 and $10,887); (b) premiums paid by the Company for split dollar insurance arrangements (Mr.
R. Borchardt: $8,850, $9,047 and $5,079); and (c) premiums paid by the Company for life insurance for the direct or indirect
benefit of such person over $50,000 in principal amount (Mr. R. Borchardt: $2,925, $2,318 and $1,483; Mr. H. Borchardt: $4,557,
$7,084 and $4,557; Mr. Mont: $1,210, $824 and $766; Mr. Wish: $2,025, $1,629 and $1,539; Mr. Calvi: $428, $286 and $275; and Mr.
Wherry ($397, $209 and $87). Includes for 1994 and 1993 the value of interest assumed by the Company on relocation and other
loans for Messrs. Mont ($6,800 and $6,558) and Wherry ($667 and $750).
</TABLE>
Option Grants In 1994
The following table contains information concerning the
grant of stock options under the Company's stock option plans to
the Named Executives during 1994 (the Company has not granted
any stock appreciation rights -- "SARs"):
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term1
Percent of
Number of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted (#)2 Fiscal Year ($/Share)3 Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt 129,000 63.2% $19.00 4/17/04 $1,541,421 $3,906,263
Robert L. Borchardt 21,000 10.3 20.90 4/17/99 121,260 267,953
Herbert H. Borchardt -0- NA NA NA NA NA
Stuart Mont -0- NA NA NA NA NA
Peter Wish -0- NA NA NA NA NA
George Calvi -0- NA NA NA NA NA
Dennis Wherry -0- NA NA NA NA NA
1 Executives may not sell or assign any stock grants, which have value
only to the extent of stock price appreciation, which will benefit
all shareholders commensurately. The amounts set forth are based on
assumed appreciation rates of 5% and 10% as prescribed by the
Securities and Exchange Commission rules and are not intended to
forecast future appreciation, if any, of the stock price. The
Company did not use an alternate formula for a grant date valuation
as it is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or
volatile factors. Actual gains, if any, on stock option exercises
and Common Stock holdings are dependent on the future performance of
the Common Stock and overall stock market conditions. There can be
no assurance that the amounts reflected in this table will be
achieved.
2 All of the noted options are exercisable in five equal annual
installments, commencing on the first anniversary of the date of
grant, except for 21,000 options which are exercisable in four equal
annual cumulative installments.
3 The exercise price is equal to or higher than the fair market value
of the Company's Common Stock on the date of the grant.
</TABLE>
Aggregated Option Exercises In 1994
And 1994 Year-End Option Values
The following table sets forth information with respect to
the Named Executives concerning the exercise of options during
1994 and unexercised options held at year-end (as noted above,
the Company has no outstanding SARs) (all share numbers reflect
the stock dividends distributed in December 1992, October 1993
and July 1994):
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-Money Options
Options at 12/31/94 at 12/31/94($)1
Shares Value
Acquired on Realize
Name Exercise (#) ($)1 Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt -0- NA 180,000 236,667 $2,835,241 $1,356,280
Herbert H. Borchardt -0- NA NA NA NA NA
Stuart Mont -0- NA 53,567 27,601 857,901 232,397
Peter Wish 4,801 $74,870 9,301 25,468 97,472 194,802
George Calvi -0- NA 46,102 31,334 737,008 298,191
Dennis Wherry -0- NA 2,250 9,000 9,368 37,470
1 Market value of underlying securities at exercise or year end, as applicable, minus the exercise price. The per share closing
sale price on the Nasdaq National Market on December 31, 1994 was $18.75. 1994 options grants are excluded since they were not
in-the-money at year end.
</TABLE>
Employment Contracts And Change-In-Control Arrangements
General. The Company is party to various employment and
consulting agreements with certain of the Named Executive
Officers as described below. These agreements have been filed
with the SEC as exhibits to the Company's periodic filings, to
which all of the following descriptions are subject.
Employment Agreement. On May 18, 1987, the Company entered
into an employment agreement with Herbert H. Borchardt for a
period equal to the life of Mr. Borchardt. The agreement
provides that on the date Mr. Borchardt ceases to serve as Chief
Executive Officer (including Co-Chief Executive Officer), he
shall advise the Company regarding such business matters
relating to the Company as the Board of Directors or any
successor to the office of chief executive officer may
reasonably request. Pursuant to the agreement, the Company
shall pay Mr. Borchardt not less than $150,000 per annum while
he is Chairman of the Board (including Co-Chairman) and not less
than $125,000 per annum during his life when he is not Chairman
of the Board (such sums being subject to increase based on
changes in the consumer price index; for the year commencing
January 1, 1995 the respective sums were approximately $205,000
and $171,000).
Life Insurance. Pursuant to two separate Split Dollar Life
Insurance Agreements effective as of February 24, 1989 among
Recoton and Trudi Borchardt and Marvin Schlacter (the "Joint
Owner") and Robert L. Borchardt, the Company agreed to maintain
life insurance policies on Robert Borchardt's life in the
aggregate face amount of $2,500,000 the proceeds of which (after
reimbursement to the Company for premiums paid) are payable to
beneficiaries designated by the Company and the Joint Owner.
Pursuant to three separate Split Dollar Life Insurance
Agreements effective December 17, 1994 among Recoton, the Robert
and Trudi Borchardt 1994 Family Trust (the "1994 Borchardt
Family Trust") and Robert L. Borchardt, the Company agreed to
maintain life insurance policies on the joint lives of Robert
Borchardt and Trudi Borchardt in the aggregate face amount of
$10 million and a life insurance policy on the life of Robert L.
Borchardt in the face amount of $1.3 million, the proceeds of
which (after reimbursement to the Company for premiums paid) are
payable to the beneficiary designated by the 1994 Borchardt
Family Trust.
Deferred Compensation Agreements. Pursuant to a Deferred
Compensation Agreement effective as of July 1, 1982 between
Recoton and Robert L. Borchardt, amounts credited under a prior
deferred compensation agreement to Mr. Borchardt plus five
percent of the salary which Mr. Borchardt is or may become
entitled to receive from the Company together with interest
accrued thereon shall be paid to Mr. Borchardt in monthly
installments upon termination of his employment for any reason
whatsoever. In the event of Mr. Borchardt's death, all or any
unpaid portion of his deferred compensation shall be payable to
a beneficiary designated by Mr. Borchardt. Mr. Wish and the
Company entered into a similar Deferred Compensation Agreement
effective as of October 1, 1982, and Mr. Calvi and the Company
entered into a similar Deferred Compensation Agreement effective
as of October 1, 1991.
Change of Control Arrangement. Options granted under the
Company's 1991 Stock Option Plan may include provisions
accelerating the vesting schedule in the case of defined
changes-in-control. Options granted to-date under such plan
have included such provision.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION<F1>
Set forth below is a line graph and chart comparing the yearly
percentage change in the cumulative total shareholder return
(change in year-end stock price plus reinvested dividends) on
the Company's Common Stock with the cumulative total return of
the Russell 2000 Index (an index prepared by Frank Russell &
Associates composed of companies listed on the New York and
American Stock Exchanges and quoted on the Nasdaq Stock Exchange
("Nasdaq") by market capitalization beginning with the company
which ranks 1001 and ending with the company rank of 3000) and a
peer group for the period of five fiscal years commencing on
December 31, 1989 and ending on December 31, 1994. The graph
and chart assumes that the value of the investment in the
Company's stock and for each index was $100 on December 31, 1989
and reflects reinvestment of dividends and market capitalization
weighing. The dollar amounts indicated in the graph and chart
are as of December 31 in each year indicated.
__________________________
[FN] This section shall not be deemed incorporated by reference
by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act
of 1933 or under the Securities Exchange Act of 1934,
except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be
deemed filed under such Acts.
<PAGE>
[THE PERFORMANCE GRAPH REQUIRED BY ITEM 401(1) OF REGULATION S-K
IS HEREBY PRESENTED IN TABULAR FORMAT AS FOLLOWS AND A PAPER
COPY IS BEING SUBMITTED SUPPLEMENTALLY TO THE CORPORATION'S
BRANCH CHIEF IN THE DIVISION OF CORPORATION FINANCE]
<TABLE>
<CAPTION>
Cumulative Total Return ($)
<S> <C> <C> <C> <C> <C> <C>
Registrant/Index 1989 1990 1991 1992 1993 1994
Recoton Corporation $100 91 289 731 1139 1481
Peer Group 100 53 63 102 149 137
Russell 2000 100 80 117 139 166 163
</TABLE>
The common stocks of the following companies have been
included in the peer group index: Acclaim Entertainment Inc.,
Ameriwood Industries International Corp., Boston Acoustics Inc.,
Carver Corp., Emerson Radio Corp., Harman International
Industries Inc., International Jensen Inc., Interactive Network
Inc., Polk Audio Inc. and Zenith Electronics Corp. The members
of the peer group are companies in the Standard & Poor's home
entertainment group but Standard & Poor's does not publish an
index for such group. Because of the Company's exclusive
involvement in the consumer electronics accessory business and
the fact that no other public companies are engaged in this
business on an exclusive basis, no grouping could exactly mirror
the Company's business. All of the companies included in the
Company's peer group index are engaged in certain other
businesses in which the Company is not engaged. Historical
stock price performance shown on the graph is not necessarily
indicative of the future price performance.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth information, as of April 19,
1995, with respect to the beneficial ownership of Common Stock
by (i) each director, (ii) each Named Executive, (iii) each
shareholder known by the Company to be the beneficial owner of
more than 5% of the Common Stock and (iv) all executive officers
and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership(1)
Name and Address of Beneficial Owner(2) Number Percent
<S> <C> <C>
Robert L. Borchardt(3) . . . . . . . . . . . . . . . . . . . . . 1,730,536 15.89%
Joshua B. Cahn, Irwin S. Friedman & Robert L. Borchardt
as Trustees under an Agreement dated February 10, 1983
for the benefit of Robert L. Borchardt, et al. (the
"Borchardt Trust")(4) . . . . . . . . . . . . . . . . . . . . . . 546,666 5.12%
Oppenheimer Management Corporation(6). . . . . . . . . . . . . . . 634,000 5.94%
Stephen Bender(5). . . . . . . . . . . . . . . . . . . . . . . . . 289,945 2.69%
Herbert H. Borchardt . . . . . . . . . . . . . . . . . . . . . . . 2,499 *
George Calvi(5). . . . . . . . . . . . . . . . . . . . . . . . . . 75,910 *
Irwin S. Friedman(4)(5). . . . . . . . . . . . . . . . . . . . . . 44,999 *
Joseph M. Idy. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,999 *
Ronald McPherson . . . . . . . . . . . . . . . . . . . . . . . . . 34,194 *
Joseph H. Massot(5). . . . . . . . . . . . . . . . . . . . . . . . 42,421 *
Stuart Mont(5) . . . . . . . . . . . . . . . . . . . . . . . . . . 63,786 *
Dennis Wherry(5) . . . . . . . . . . . . . . . . . . . . . . . . . 4,693 *
Peter Wish(5). . . . . . . . . . . . . . . . . . . . . . . . . . . 25,007 *
All directors and executive officers as a group (15 persons)(5). .2,355,438 21.08%
* Less than 1%
(1) Except as described in the following notes, beneficial
ownership assumes each person or group owns the shares
directly and has sole voting and investment power with
respect to such shares. A person is deemed to be the
beneficial owner of securities that can be acquired by
such person within 60 days upon the exercise of
outstanding options.
(2) Except as otherwise noted below, the address of all
persons is c/o Recoton Corporation, 2950 Lake Emma Road,
Lake Mary, Florida 32746. The address of Mr. Friedman is
767 Fifth Avenue, 28th Floor, New York, New York 10153;
the address of Mr. Idy is 440 Royal Palm Way, Palm Beach,
Florida 33480; and the address of Mr. McPherson is 6519
Sweet Maple Lane, Boca Raton, Florida 33433.
(3) Includes 46,144 shares held by Mr. R. Borchardt as
custodian for his minor child, 319,999 shares held by
Mr. R. Borchardt as trustee for his children, 39,909
shares held by Mr. R. Borchardt's wife and 30,375 shares
held by a family foundation of which Mr. R. Borchardt is
a director. Mr. R. Borchardt disclaims beneficial
ownership of the shares owned by his wife and the
foundation. Also includes 546,666 shares held by the
Borchardt Trust, of which Mr. R. Borchardt is a trustee
and the beneficiary, the beneficial ownership of which
shares may be attributable to Mr. R. Borchardt, 516,393
shares held by a revocable living trust of which
Mr. R. Borchardt is the sole trustee, 19,999 shares held
in an individual retirement account in Mr. R. Borchardt's
name and 211,051 shares of Common Stock subject to stock
options exercisable as of April 19, 1995 or within 60 days
thereof.
(4) Messrs. Cahn, Friedman and R. Borchardt share voting and
investment power with respect to the shares held of record
by the Borchardt Trust, of which Mr. R. Borchardt is the
beneficiary. The number of shares shown as owned by
Mr. Borchardt includes the shares owned by the Borchardt
Trust; the number of shares shown as owned by Mr. Friedman
does not include the shares owned by the Borchardt Trust.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors and persons who
own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in
ownership with the SEC and the Nasdaq Stock Exchange. Officers,
directors and greater than ten-percent shareholders are required
by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it, or written
representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that all
such 1994 filing requirements were complied with except that a
transaction by a foundation of which Robert Borchardt is a
director which occurred on the last business day of a month was
reported one month late on an amended Form 4.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1994, the Company
paid a total of $56,000 to I. Friedman Equities, Inc.
("Equities"), of which Mr. Friedman, a director of the Company,
is a principal shareholder. $6,000 of the payments were made
for general financial consulting services rendered to the
Company by Equities pursuant to a letter agreement, dated as of
January 1, 1984, between the Company and Equities which provides
that Equities shall render financial consulting services to the
Company for an annual fee of $6,000. A $50,000 fee, determined
by arms-length bargaining between the parties, was paid to
Equities for financial advisory services in connection with the
Company's 1994 stock offering. The Company believes that the
terms of the transactions between the Company and Equities were
at least as favorable as could have been received from other
sources.
In connection with the consolidation of the Company's
facilities to Lake Mary, Florida in 1993, the Company extended
relocation loans to various employees. These loans bear
interest at 5% per annum and have no specific due date, but are
expected to be repaid when the borrower's New York area homes
are sold. In April 1994 the Company extended a $150,000 loan,
bearing interest at 5% per annum, to Stuart Mont, the Chief
Operating Officer and a director of the Company. Through
December 31, 1994 the Company has increased the compensation of
such employees by amounts equal to the interest charged on such
loans. The following are the directors and executive officers
of the Company who received loans aggregating in excess of
$60,000 outstanding at any time in 1994, their relationship with
the Company, the maximum amount borrowed ($12,780 in loans to
Craig Dykes were unrelated to the consolidation) and the
outstanding balance as of April 19, 1995:
<TABLE>
<CAPTION>
Person Relationship Maximum Current Balance
<S> <C> <C> <C>
Craig Dykes Vice President- $235,000 $50,963
Information Systems
Stuart Mont Chief Operating Officer, 194,000 -0-
Chief Financial Officer,
Executive Vice President-
Operations, Director
</TABLE>
The repayment of the loans to Mr. Mont referred to above was
effected by Mr. Mont surrendering 11,896 shares of the Company's
Common Stock, which hand a market value at the date of surrender
equal to the amount owed by Mr. Mont.
PROPOSAL II
PROPOSAL TO INCREASE NUMBER OF SHARES OF COMMON STOCK
The Company's Board of Directors has unanimously approved a
proposal to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from
16,000,000 to 25,000,000, $.20 par value.
Under the Company's current Certificate of Incorporation,
there are 16,000,000 authorized shares of Common Stock, par
value $.20 per share, of which 10,680,606 are outstanding as of
April 19, 1995 and 1,128,011 are in treasury, leaving only a
balance of 4,191,383 shares, of which 2,077,057 have already
been reserved for issuance under stock option or stock bonus
plans or agreements (3,043,724 if Proposal IV is approved),
leaving 2,114,326 shares (1,147,659 if Proposal IV is approved)
shares available for future issuance after the use of all
reserved shares (in addition to the 1,128,011 treasury shares,
which the Company can sell). Adoption of the proposed amendment
would increase the number of shares of Common Stock available
for future issuance to 11,114,326 shares. The additional shares
of Common Stock for which authorization is sought would, if and
when issued, have the same rights and privileges as the
presently outstanding shares of Common Stock.
The Company last increased its authorized shares in 1993, but
subsequent to such increase the Company has declared two stock
splits effected as stock dividends, one of which was a four-for-
three split and one of which was a three-for-two split. In
addition, the Company sold 1,740,000 shares in a public offering
in 1994. Upon adoption of the proposed amendments, the Board of
Directors would be authorized to issue additional shares of
Common Stock at such time or times, to such persons and for such
consideration as it may determine, except as may otherwise be
required by law. Holders of the Company's stock do not have
preemptive rights to subscribe for or purchase any part of any
new or additional issue of stock or securities convertible into
stock.
Purpose
The purpose of increasing the number of authorized shares of
Common Stock is to provide additional authorized capital stock
which may be issued for such corporate purposes as the Board of
Directors may determine in its discretion, including, without
limitation, stock splits, stock dividends or other
distributions, future financings (including public offerings),
acquisitions and employee benefit (including share compensation)
plans. The increase in the number of shares of Common Stock
authorized for issuance would enable the Company, as the need
may arise, to take timely advantage of market conditions and the
availability of favorable opportunities without the delay and
expense associated with the holding of a special meeting of its
shareholders.
As announced on April 26, 1995, the Company is forming a new
subsidiary to develop and market speakers. In connection with
the hiring of personnel and obtaining certain intellectual
properties for that subsidiary, the Company may issue shares of
Company stock to certain employees of such subsidiary over a
five and one-half year time period. The number of shares to be
issued would depend on the amount of pre-tax profits of the
subsidiary and certain other conditions but would not in any
event exceed shares having a market value of $4 million as of
the date of issuance. Based on the closing price for Recoton
stock on April 19, 1995 of $15 11/16, up to approximately
255,000 shares of Recoton common stock may be issued in
connection with this transaction; the actual number of shares to
be issued, however, will depend upon the pre-tax profits of the
subsidiary and the stock price at the time of issuance.
As announced on May 10, 1995, the Company has signed a letter
of intent to acquire substantially all the assets of STD Holding
Limited, a Hong Kong-based international manufacturer of
multimedia and computer accessories, subject to a definitive
purchase agreement and other conditions. While the terms of
such acquisition have not been contractually agreed upon, it is
understood that Recoton would have the right in its sole
discretion to pay a portion of the purchase price using its
Common Stock. the number of shares which would be issued,
however, cannot be determined at this time.
The Company has no other agreements to issue stock other than
pursuant to the Company's existing stock option agreements or
pursuant to options which the company may issue pursuant to
existing stock option plans at times in the future in connection
with certain prior acquisitions. The Company is, however,
constantly evaluating potential acquisitions, some of which may
entail the issuance of common stock. The Company has enough
authorized but unissued, or treasury, shares available to effect
the above-described transactions without the need to utilize the
additional shares for which authorization is sought.
Except as required by law or as a condition to continued
inclusion on Nasdaq, or listing on any stock exchange on which
the Company's stock may in the future be listed, it is unlikely
that further approval from the shareholders would be sought for
any issuance of the shares of Common Stock being authorized by
this amendment. Nasdaq rules currently require shareholder
approval as a condition of continued eligibility for designation
as a National Market System security in several instances,
including issuances of shares in acquisition transactions where
the number of shares of outstanding Common Stock could increase
by 20% or more.
Although the decision of the Board of Directors to propose
amendments increasing the number of shares authorized for
issuance did not result from any effort by any person to
accumulate the Company's stock or effect a change in control of
the Company, one result of an increase may be to help the Board
discourage or render more difficult a change in control. The
additional shares could be used under certain circumstances to
dilute the voting power of, create voting impediments for or
otherwise frustrate the efforts of persons seeking to effect a
takeover or gain control of the Company, whether or not the
change of control is favored by a majority of unaffiliated
shareholders. For example, such shares could be privately
placed with purchasers who might side with the Board in opposing
a hostile takeover bid. The issuance of any additional shares
of Common Stock could also have the effect of diluting the
equity of existing holders and the earnings per share of
existing shares of stock.
Vote Required For Approval
Approval of the amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
Common Stock will require the affirmative vote of the holders of
a majority of all outstanding shares of Common Stock entitled to
vote at the Annual Meeting. There are no rights of appraisal or
dissenter's rights which arise as a result of a vote on this
issue.
The Board of Directors unanimously recommends that the
Shareholders vote For the approval of the amendment to the
Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 25,000,000.
PROPOSAL III
PROPOSAL TO AUTHORIZE SERIES PREFERRED STOCK
The Company's Board of Directors has unanimously approved
a proposal to amend the Company's Certificate of Incorporation
to authorize a new class of Series Preferred Stock, consisting
of 10,000,000 shares, par value $1.00 per share. The Series
Preferred Stock will be issuable from time to time in series
with such series designations, number of shares in each series,
relative rights, preferences and limitations as the Board of
Directors may determine. Among the determinations to be made by
the Board of Directors at the time each series is issued would
be (a) dividend rights, including the dividend rate and whether
dividends would be cumulative; (b)conversion rights, and the
terms of any conversion; (c) voting rights, which might also
include the right to elect a specified number of directors if
dividends were not paid for a specified period of time; (d)
liquidation rights, and whether there would be any preference
with respect to such rights; and (e) redemption rights, and the
terms of any redemption, including the establishment of a
sinking fund. Holders of Series Preferred Stock will not have
preemptive rights.
Purpose
The Board of Directors believes that the authorization of
Series Preferred Stock is in the best interests of the Company
and its shareholders. Such action will provide greater
flexibility to the Company in connection with possible future
financings and acquisitions and will make such shares available
for issuance without the delay and expense of calling a special
meeting of stockholders to secure approval prior to issuing such
shares. The Company is constantly evaluating potential
acquisitions, some of which may entail the issuance of preferred
stock, although it has no current commitments to issue such
stock.
Series Preferred Stock could be issued to effect a
"Shareholder Rights Plan" (pursuant to which shares of Preferred
Stock are issued to existing holders which have certain rights
when another shareholder acquires a stated percentage of the
Company's stock, which may have the effect of making the
acquisition of such stock by the other shareholder less
attractive) or under other circumstances that could make it more
difficult, and thereby, discourage attempts to acquire control
of the Company or remove incumbent management. The Company has
authorized its counsel to explore whether a Shareholder Rights
Plan should be considered if the Series Preferred Stock is
authorized. The Company knows of no existing or contemplated
takeover attempts. While no specific plan has been reviewed with
management of the Company or its Board of Directors, any such
Shareholder Rights Plan would probably be "triggered" when a
person or group (an "Acquiring Person") acquires beneficial
ownership of a fixed percentage (usually ranging from 10% to
30%) of the Company's outstanding common stock Almost all rights
plans adopted in the last several years have contained so-called
"flip-in" provisions, which enable the target company's
stockholders (excluding the Acquiring Person) to purchase the
target's common stock at a signIficant discount when the
Acquiring Person acquires such fixed percentage, thereby
substantially diluting the acquiror's interest. In addition to
containing flip-in provisions, most rights plans contain a
"flip-over" provision, triggered by a merger or a significant
sale of assets in which the target company's stock either does
not survive or is otherwise changed, which enables target
company stockholders to purchase common stock of the "surviving
corporation" at a similar discount.
Shareholder Rights Plans are generally designed to give
the Board of Directors of a target company increased flexibility
to deal with unsolicited acquisition proposals. They do not
prevent the Company from entering into a negotiated transaction,
since the rights themselves would most likely be redeemable
during a specIfied time period, which period is usually
extendable by the Board (or, under certain circumstances, by
only the continuing directors of the Board). The Board usually
would have the power, with certain exceptions, to amend a
Shareholder Rights Plan. In addition, the flip-in and flip-over
provisions may be drafted to contain exceptions which would
permit certain transactions (principally, offers for all
outstanding stock of the Company which a majority of the
Continuing Directors determines to be fair and in the best
interests of the Company and its stockholders) and other
activities to occur, notwithstanding the general provisions of
the Shareholder Rights Plan.
Rights plans have been developed for the purpose of
deterring coercive takeover tactics and otherwise inducing
persons interested in acquiring a company to negotiate with Its
board and management. In particular, a rights plan is intended
to achieve the following objectives:
i) to reduce the risk of "two-tiered, front-end
loaded" acquisitions which may coerce shareholders
into tendering their stock to avoid the prospect of
receiving less valuable "back-end" consideration
(generally in the form of securities) in a later
merger;
ii) to reduce the risk of partial offers, which seek
less than 100% control of a company and do not
result in shareholders receiving a control premium
for all of their stock;
iii) to deter market accumulation through the open
market and/or private purchase of stock, through
which a raider may achieve effective control of a
company without paying a fair control premIum to
either selling or remaining shareholders;
iv) to deter "greenmailers" or other accumulators who
simply are Interested in having their stock
re-purchased at a premium or in putting a company
"into play"; and
v) to enhance a board's bargaining power to deal with
third party acquirors with a view to maximizing
values for all shareholders.
Rights plans do have limitations; they are not, for
example, designed to deter a proxy contest for control of a
company. Moreover, rights plans do not deter well-financed
offers for all of the outstanding stock of a company, although
they might have a chilling effect on some offers. Rights plans,
however, have proven to be a useful tool in affording boards
additional time to explore and assess alternatives which may
provide greater value to shareholders in the context of such an
unsolicited offer for all of a company's stock at a price which
such boards determine is inadequate.
Adoption of a Shareholders Rights Plans may make more
difficult or discourage tender offers or other takeover attempts
or accumulations of large blocks of stock and therefore may
deprive shareholders of the opportunity to sell their shares at
a higher market price which may result from any such attempted
takeover or acquisition attempt. Any shareholder Rights Plan may
tend to insulate current management against its possible removal
in the event of a takeover bid. There may be other responses or
reactions to the adoption of a Shareholders Rights Plan, many of
which are difficult to foresee, including a negative reaction by
the shareholders of the Company or the investment community in
general. Such a reaction could have a negative impact on the
Company's stock price.
There can be no assurance that the Board of Directors of
the Company will adopt a Shareholder Rights Plan or that any
such plan would be as described above. The Board of Directors
will consider the possible negative effects on the shareholders
of the adoption of any Shareholder Rights Plan and the benefits
of such a proposal at the time that it considers adoption of any
such plan.
The current Certificate of Incorporation and By-Laws of
the Company includes other provisions which may have the effect
of deterring takeovers of the Company. These are (i)
classification of the Board of Directors into three separate
classes, each of which has a three-year term, (ii) provisions
requiring the vote of at least 80% of the voting power of the
shares entitled to vote to remove a director for cause and (iii)
provisions requiring approval by at least 80% of the voting
power of outstanding shares for certain business combinations
with any holder of 10% or more of the outstanding voting stock
of the Company which either have not been approved by a vote of
disinterested directors or which do not meet certain minimum
price and procedural requirements. Management does not intend to
propose any other measures which would have the intended effect
of discouraging takeovers. As noted, however, with respect to
Proposal I, an increase in the number of authorized shares of
Common Stock may help the Board discourage or render more
difficult a takeover.
Vote Required For Approval
Approval of the amendment to the Company's Certificate of
Incorporation to authorize the Series Preferred Stock will
require the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company entitled to
vote thereon at the Annual Meeting. There are no rights of
appraisal or dissenter's rights which arise as a result of a
vote on this issue.
The Board of Directors unanimously recommends that the
Shareholders vote For the approval of the amendment to the
Company's Certificate of Incorporation to the authorize the
Series Preferred Stock.
PROPOSAL IV
AMENDMENT TO THE 1991 STOCK OPTION PLAN
The Company's Board of Directors has unanimously approved
a proposal to amend the Recoton Corporation 1991 Stock Option
Plan (the "1991 Plan") to increase the number of shares
authorized for grant under the 1991 Plan by 966,667 shares,
provide that the maximum number of shares which may be the
subject of options granted to the Chief Executive Officer of the
Company and to each of the other executive officers required to
be named in the Company's proxy statement with respect to the
preceding year pursuant to the proxy rules promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
during any calendar year may not exceed 250,000 and make certain
other changes that are intended to comply with Section 162(m) of
the Internal Revenue Code (the "Code"). The 1991 Plan was
approved at the 1992 Annual Meeting of Shareholders. The
amendment proposed to the 1991 Plan will be effective upon
Shareholder approval. A copy of the amendment to the 1991 Plan
is set forth in Annex II.
The 1991 Plan currently conforms to the requirements under
Rule 16b-3 under the Exchange Act and, accordingly, receipt of
an option or exercise of the option is not considered a
"purchase" of a security for purposes of the Federal security
law, Section 16(b) of the Exchange Act, which states that
"short-swing" profits (i.e., profits from a purchase and sale or
a sale and purchase of an equity security of an issuer by a 10%
shareholder, officer or director of the issuer within a six
month period) inure to the issuer. If the grant of options under
the 1991 Plan, or the acquisition of shares pursuant to the
exercise of such an option, were not exempt from Section 16(b),
transactions by a covered individual within a six month period
prior to or following such grant or exercise may inadvertently
result in a violation of Section 16(b) or the individual's
ability to effect normal market transactions in the Company's
stock which are not subject to potential abuse may be otherwise
overly restricted. The exemption applies to grants and exercises
of options; it does not apply to sales of option shares.
The following is a summary of the principal provisions of
the 1991 Plan as proposed to be amended.
Purpose
The purpose of the 1991 Plan is to advance the interests
of the Company and its shareholders by strengthening the ability
of the Company and its subsidiaries to attract and retain
persons of ability as key employees and to motivate such
employees, upon whose judgment, initiative and efforts the
financial success and growth of the Company largely depend, to
exercise their best efforts on behalf of the Company. The 1991
Plan replaced the 1982 Stock Option Plan, which lapsed (as to
new grants) on March 31, 1992.
Shares Available Under The Plan
The aggregate number of shares of Common Stock which may
be the subject of options under the 1991 Plan before the change
was 1,533,333 and after the change will be 2,500,000. Currently,
options for 1,010,943 shares have been granted (of which 33,675
have been exercised and 150 have lapsed). Accordingly, 522,540
shares are currently available under the 1991 Plan for which
future options may be granted and 1,489,207 shares will be
available for future grant if the share Increase is approved.
Pursuant to the amendment, the maximum number of shares of
Common Stock which may be the subject of options granted to any
of the proxy-named executives during any calendar year could not
exceed 250,000.
The number of shares subject to options granted under the
1991 Plan to date (including options previously exercised) to
the Named Executives is as follows: Robert Borchardt: 433,333
shares; Stuart Mont: 55,834 shares; Peter Wish: 45,833 shares;
George Calvi: 45,833 shares; and Dennis Wherry: 21,250 shares.
All current executive officers as a group have been granted
options under the 1991 Plan for a total of 697,165 shares. All
employees as a group (excluding executive officers but including
all current officers who are not executive officers) have been
granted options under the 1991 Plan for a total of 313,778
shares. The Company made a round of stock option grants in
February 1995 in respect of services performed by Company
employees in 1994; while the Company intends to make similar
grants in future years, as well as grants to new employees or
certain specific employees in recognition of services or
anticipated services, the Company has no plans at this time to
issue options to any specific employees or classes of employees
other than to satisfy the Company's obligations to issue shares
to an officer pursuant to an employment agreement entered into
in connection with a 1992 acquisition.
On April 19, 1995 the closing price of the Common Stock,
as reported on Nasdaq, was $15 11/16.
If any option under the 1991 Plan shall expire or
terminate without having been exercised in full the unpurchased
shares subject to such option may again be made subject to
options under the plan. Such number of shares is subject to
adjustment resulting from stock dividends, split-ups,
conversions, exchanges, reclassifications, or other
substitutions of securities for the Common Stock Shares of
Common Stock delivered under the 1991 Plan will be made
available, at the discretion of the Stock Option Committee,
either from authorized but unissued shares or from previously
issued shares of Common Stock reacquired by the Company,
including shares purchased on the open market.
Administration
The 1991 Plan is administered by the Stock Option
Committee (the "Committee"), which is appointed by the Company's
Board of Directors and consists of not less than two and not
more than five members of the Board of Directors whom are
"disinterested persons" within the meaning of Rule 16b-3(d)(3)
(as it may be amended from time to time) promulgated by the SEC
under the Exchange Act. The Board may remove any member of the
Committee at any time, with or without cause. Options are
granted in the discretion of the Committee.
Types of Options to be Granted
The Committee may grant under the 1991 Plan either
"incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or
options which do not satisfy Section 422 ("non-qualified stock
options"), or both (see "Federal Income Tax Consequences"
below). The 1991 Plan provides that the aggregate fair market
value (determined as of the date of grant of an option) of the
shares of Common Stock with respect to which incentive stock
options granted to an individual (if such grant was made after
January 1, 1987) under all incentive stock option plans of the
Company are exercisable for the first time by a participant
during any calendar year shall not exceed $100,000.
Eligibility and Conditions of Grant
Persons eligible to receive options under the 1991 Plan
are such key employees (including employees who are also
directors) of the Company and Its subsidiaries as the Committee
in its sole discretion may select. Options have been granted to
124 persons pursuant to the 1991 Plan who were employees at
April 19, 1995. At such date, there were approximately 860
employees of the Company and its subsidiaries.
The number of shares to be optioned to any employee under
the 1991 Plan and the term, the exercise price and the vesting
schedule thereof is determined by the Committee in its sole
discretion (based upon the Committee's determination as to the
contribution or anticipated contribution of the employee to the
success of the Company), but in the case of incentive stock
options the price shall not be less than the fair market value
(110% of the fair market value for ten-percent shareholders) of
a share of Common Stock on the date such option is granted, as
determined in good faith by the Committee, and the option term
must not exceed 10 years (five years in the case of ten-percent
shareholders). Options and all rights thereunder are
non-transferable and non-assignable by the holder, except to the
extent that the estate of a deceased holder of an option may be
permitted to exercise such option.
Exercise of Options
Options shall be exercisable at such rate and times as are
fixed by the Committee for each option. Options granted to
officers, directors and ten-percent shareholders, however, may
not be exercised until after six months from the date of grant.
Notwithstanding the foregoing, all or any part of any remaining
unexercised options granted to any person under the 1991 Plan
may be exercised (a) immediately upon (but prior to the
expiration of the term of the option) the holder's retirement
from the Company on or after his or her 65th birthday,
(b)subject to the provisions of the 1991 Plan concerning
termination of employment, upon the disability (to the extent
and in a manner as shall be determined by the Committee in its
sole discretion) or death of the holder, (c) upon the occurrence
of such special circumstances or event as in the opinion of the
Committee merits special consideration or (d) with a few
exceptions, if while the holder is employed by the Company there
occurs the acquisition by a person or entity, or a group of
persons or entities acting in conjunction, of more than 50% of
the issued and outstanding shares of stock of the Company having
ordinary voting power, or a sale, lease, transfer or other
disposition of all or substantially all of the assets of the
Company, or a merger or consolidation of the Company into or
with any other company which results in the acquisition of the
Company by a nonaffiliated entity, or any other event which
would similarly constitute an acquisition of the Company by a
non-affiliated entity.
Payment for and Issuance of Shares
Payment for the shares purchased pursuant to the exercise
of an option shall be made in full at the time of the exercise
of the option either (a) in cash (or by check) or (b) if the
particular option agreement so provides, by delivery of
previously-owned shares of Common Stock (which previously-owned
shares shall be valued at their fair market value as of the date
of such exercise). Furthermore, payment for shares may be by
delivery of an order to a broker to sell some or all of such
shares and use the proceeds to pay for shares or any other
method as the Committee may permit and which is set forth in the
applicable option agreement. The 1991 Plan contains standard
provisions to assure that any exercise of an option or the
issuance of shares will comply with applicable securities and
income tax withholding laws.
Effect of Termination of Employment
All or any part of any option, to the extent unexercised,
shall terminate upon the cessation or termination of the option
holder's employment by the Company as follows: (a) immediately
upon termination, if for cause (as determined by the Committee),
(b) within one year after termination, if for death or permanent
disability or (c) within three months after termination, if for
any reason other than termination for cause, death or permanent
disability. In all events, however, unexercised options shall
terminate on the expiration date set forth in the applicable
option agreement.
Amendment and Termination of the Plan
The Board of Directors may at any time amend, suspend or
discontinue the 1991 Plan except that no amendment to the 1991
Plan can increase the number of shares for which options may be
granted under the 1991 Plan or to any individual (except
pursuant to the adjustment provisions described above) or change
the class of persons to whom options may be granted without
Shareholder approval, or permit the granting of options after
October 22, 2001. In addition, no amendment can alter the terms
and conditions of any option granted prior to the amendment,
unless the holder consents to such amendment.
Federal Income Tax Consequences
The following is a summary of certain Federal income tax
consequences of participation in the 1991 Plan:
Incentive Stock Options
Under current law, an employee will not realize any
taxable income upon the grant or exercise of incentive stock
options. If the employee disposes of the Common Stock acquired
upon the exercise of an incentive stock option at least two
years after the date the option was granted and at least one
year after the date the shares are issued or transferred to such
person upon the exercise of an option, the employee will realize
long-term capital gain in an amount equal to the excess, if any,
of the selling price for the Common Stock over the option
exercise price, and the Company will not be entitled to any tax
deduction resulting from the issuance or sale of the shares. If
an employee disposes of the Common Stock acquired upon the
exercise of an incentive stock option prior to the expiration of
two years from the date the option was granted, or prior to the
expiration of one year from the date the Common Stock was
transferred to such employee, any gain realized will be taxable
at such time as follows: (1) as ordinary Income to the extent of
the difference between the option exercise price and the lesser
of (a) the fair market value of the Common Stock on the date the
option was exercised or (b) the amount realized on such
disposition, and (2) as capital gain to the extent of any
excess, which gain shall be treated as short-term or long-term
capital gain depending upon the employee's holding period for
the Common Stock at the time of disposition. In such case, the
Company may claim an income tax deduction (as compensation) for
the amount taxable to the employee as ordinary income.
In general, the amount by which the fair market value of
the Common Stock acquired upon the exercise of an incentive
stock option exceeds the exercise price will constitute an item
of adjustment for purposes of determining alternative minimum
taxable income and under certain circumstances may be subject,
in the year in which the option is exercised, to the alternative
minimum tax.
If an individual uses shares of Common Stock which such
employee owns to pay, in whole or in part, the exercise price
for optioned shares, (a) the individual's holding period for the
newly issued shares of Common Stock equal in number to the
shares of old Common Stock (the "exchanged shares") which were
surrendered upon the exercise shall include the period during
which the surrendered shares were held, (b) the employee's basis
in such exchanged shares will be the same as the employee's
basis in the surrendered shares and (c) no gain or loss will be
recognized by the employee on the exchange of the surrendered
shares for the exchanged shares. Further, the employee will have
a zero basis in the additional shares received over and above
the exchanged shares. However, if an employee tenders Common
Stock acquired pursuant to the exercise of an incentive stock
option to pay all or part of the exercise price under an
incentive stock option, such tender will constitute a
disposition of such previously held Common Stock for purposes of
the one-year (or two-year) holding period requirement applicable
to such incentive stock option and such tender may be treated as
a taxable exchange.
Non-Qualified Options
An employee will not recognize any income at the time a
non-qualified stock option is granted. Generally, employees will
recognize ordinary income at the time of the exercise of a
non-qualified stock option in a total amount equal to: (1) In
the case of options which the employee exercises by payment in
cash, the excess of the then fair market value of the shares
acquired over the exercise price and (2) in the case of options
which an employee exercises by tendering previously owned
shares, the then fair market value of the number of shares
issued in excess of the number of shares surrendered upon such
exercise.
If a director, officer or ten-percent shareholder receives
shares pursuant to the exercise of a non-qualified stock option,
pursuant to Section 83(c) of the Code such employee does not
recognize any income until the date on which such employee can
sell such shares at a profit without being subject to liability
under Section 16(b) of the Exchange Act. Alternatively, a
director, officer or principal shareholder who would not
otherwise be subject to tax on the value of such employee's
shares as of the date the shares are transferred to him or her
can file, within 30 days after the shares are acquired by such
employee, a written election pursuant to Section 83(b) of the
Code to be taxed as of the date of acquisition.
All Income realized upon the exercise of any non-qualified
stock option will be taxed as ordinary income. The Company may
claim an income tax deduction for the amount taxable to an
employee in the same year as those amounts are taxable to the
employee. Shares issued upon the exercise of a non-qualified
stock option are generally eligible for capital gain or loss
treatment upon any subsequent disposition. Generally, an
employee's holding period will commence from the date such
shares are issued and such employee's basis in such shares will
equal their fair market value as of that date. (The holding
period of a director, officer or principal shareholder begins on
the date on which such person recognizes income with respect to
such shares, and such employee's basis in the shares will be
equal to the greater of the then fair market value of the shares
or the amount paid for such shares.) If an individual uses
shares of Common Stock that such individual owns to exercise a
non-qualified stock option, (a) the individual's holding period
for the newly-issued shares equal in number to the exchanged
shares shall include the period during which the surrendered
shares were held, (b) the employee's basis in such exchanged
shares will be the same as such individual's basis in the
surrendered shares, and (c) no gain or loss will be recognized
by the employee on the exchange of the surrendered shares for
the exchanged shares.
General
An employee will be subject to wage withholding on the
amount of ordinary income realized by such employee, as
described above. The Company may require that the employee make
funds available to the Company to satisfy the withholding
requirements.
Section 280G of the Code
Section 280G of the Code provides that if an officer,
shareholder or highly compensated individual receives a payment
which is in the nature of compensation, and which is contingent
upon a change in control of the employer, and such payment
equals or exceeds three times his "base salary" (as hereinafter
defined), then any amount received in excess of base salary
shall be considered an "excess parachute payment." An
individual's "base salary" is equal to such person's average
annual compensation over the five-year period (or period of
employment, if shorter) ending with the close of the
individual's taxable year immediately preceding the taxable year
in which the change in control occurs. If the taxpayer
establishes, by clear and convincing evidence, that an amount
received is reasonable compensation for past or future services,
all or a portion of such amount may be deemed not to be an
excess parachute payment. If any issuances of options under the
1991 Plan constitute excess parachute payments with respect to
an employee then in addition to any income tax which would
otherwise be owed on such payment, the employee will be subject
to an excise tax equal to 20% of such excess payment and the
Company will not be entitled to any tax deduction to which it
otherwise would have been entitled with respect to such payment.
Section 280G provides that payments made pursuant to a
contract entered into within one year of the change in control
are presumed to be parachute payments unless the individual
establishes, by clear and convincing evidence, that such
contract was not entered into in contemplation of a change in
control. In addition, the General Explanation of the Tax Reform
Act of 1984 prepared by the Staff of the Joint Committee on
Taxation indicates that the grant of an option within one year
of the change in control or the acceleration of an option
because of a change in control may be considered a parachute
payment, in an amount equal to the value of the option or the
value of the accelerated portion of the option, as the case may
be. Pursuant to proposed regulations Issued by the Treasury
Department under Section 280G, the acceleration of a
non-qualified stock option because of a change in control is
considered a parachute payment In an amount equal to the value
of the accelerated portion of the option. Even if the grant of
an option within one year of the change in control or the
acceleration of an option is not a parachute payment for
purposes of Section 280G, the exercise of an option granted
within one year of the change in control or the exercise of the
accelerated portion of an option may result in a parachute
payment, in an amount equal to the excess of the fair market
value of the shares received upon exercise of the option over
the exercise price. Payments received for the cancellation of an
option because of a change in control also may result in
parachute payments.
Section 162(m) of the Code
Under Section 162(m) of the Code, effective January 1,
1994, publicly-held companies generally may not deduct
compensation that exceeds $1 million to any proxy-named
executive officer with respect to taxable year. Compensation
which is performance-based (as defined in Section 162(m) and
regulations thereunder), however, is not counted as subject to
the deductibility limitations of Section 162(m). Options granted
to-date under the 1991 Plan have been considered performance-
based under certain "grandfather" provisions of Section 162(m)
and related regulations but since the 1991 Plan is being amended
to increase the number of shares eligible for grant it is
necessary to also adopt certain other changes to the plan in
order for the 1991 Plan to thereafter be considered
performance-based. Accordingly, the amendment to the 1991 Plan
is intended to qualify options to be granted which have an
exercise price equal to or in excess of the fair market value of
the Common Stock on the date of grant as performance-based
compensation and, therefore, exempt from the limitations of
Section 162(m) assuming satisfaction of all other applicable
requirements.
Vote Required For Approval
Shareholder approval of the amendment to the 1991 Plan is
required pursuant to the Code (as it relates to incentive stock
options and to Section 162(m)), Rule 16b-3 under the Exchange
Act and the corporate laws of the State of New York
Approval of the amendment to the 1991 Plan will require
the affirmative vote of the holders of a majority of the shares
present or represented at the meeting and entitled to vote
thereon. There are no rights of appraisal or dissenter's rights
as a result of a vote on this issue.
The Board of Directors unanimously recommends that the
Shareholders vote For the approval of the amendment to the 1991
Stock Option Plan.
PROPOSAL V
SELECTION OF AUDITORS
Action is to be taken at the Annual Meeting to ratify the
selection of Cornick, Garber & Sandler, LLP, as independent
auditors of the Company for the fiscal year ended December 31,
1995.
Representatives of Cornick, Garber & Sandler, LLP, which
has served as the Company's independent auditors since 1981, are
expected to be present at the Annual Meeting and to be available
to respond to appropriate questions. They will have an
opportunity to make a statement If they so desire.
The Board of Directors unanimously recommends that the
Shareholders vote for ratification of the selection of Cornick,
Garber & Sandler, LLP, as the company's independent auditors.
OTHER MATTERS TO COME BEFORE THE MEETING
If any matter not described herein should properly come
before the meeting, the Directors' Proxy Committee will vote the
shares represented by it in accordance with its best judgment.
At the time this Proxy Statement went to press, the Company knew
of no other matters which might be presented for shareholder
action at the Annual Meeting.
EXPENSES OF SOLICITATION
The total cost of this proxy solicitation will be borne by
the Company. Officers, agents and employees of the Company and
other solicitors retained by the Company may, by letter, by
telephone or in person, make additional requests for the return
of proxies and may receive proxies on behalf of the Company.
Brokers, nominees, fiduciaries and other custodians will be
requested to forward soliciting material to the beneficial
owners of shares and will be reimbursed for their out-of-pocket
expenses.
SHAREHOLDERS PROPOSALS
Shareholders are hereby notified that if they intend to
submit proposals for inclusion In the Company's proxy statement
and form of proxy for the 1996 Annual Meeting of Shareholders,
such proposals must be received by the Company no later than
January 15, 1996.
FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements
of the Company (including the independent auditors' report
thereon and the notes thereto) and Management's Discussion and
Analysis of Financial Condition and Results of Operations which
are hereby incorporated by reference from the 1994 Annual Report
enclosed with this Proxy Statement.
MISCELLANEOUS
Management knows of no other business to be presented at
the Annual Meeting, but if other matters properly do come before
the Annual Meeting, it is intended that the proxies in the
accompanying form will be voted thereon in accordance with the
judgment of the person or persons voting such proxies.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH
PERSON SOLICITED, ON WRITTEN REQUEST OF SUCH PERSON, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994. Such a written request is to be directed to
Stuart Mont, Secretary, Recoton Corporation, 2950 Lake Emma
Road, Lake Mary, Florida 32746.
By Order of the Board of Directors
Stuart Mont
Executive Vice President-Operations,
Chief Operating Officer, Chief
Financial Officer and Secretary
Lake Mary, Florida
May 17, 1995
ANNEX I
AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO BE IMPLEMENTED IF THE AUTHORIZATION
OF SERIES PREFERRED STOCK AND INCREASE IN COMMON
SHARES IS APPROVED BY SHAREHOLDERS
Article 3 shall be amended to read in its entirety as
follows:
"3. The aggregate number of shares which the
Corporation shall have the authority to issue is thirty five
million (35,000,000), which are divided into ten million
(10,000,000) Preferred Shares of a par value of $1.00 per share
and twenty five million (25,000,000) Common Shares of a par
value of $1.00 per share. The relative rights, preferences and
limitations of the shares of each class are as follows:
(a) The Preferred Shares authorized hereby may
be issued (i) in such series and with such voting powers,
full or limited, or no voting powers, and such
designations, preferences and relative participating,
optional or other special rights, and with such
qualifications, limitations or restrictions thereon, as
the Board of Directors shall fix by resolution, and (ii)
in such number of shares in each series as the Board of
Directors shall fix by resolution provided that the
aggregate number of all Preferred Shares issued does not
exceed the number of Preferred Shares authorized hereby.
(b) Holders of Common Shares shall be entitled
to such dividend, liquidation and voting rights and
privileges as are provided by the Business Corporation
Law, subject to the rights of holders of Preferred Shares
issued pursuant to paragraph (a) above,"
<PAGE>
ANNEX II
AMENDMENT
TO THE
RECOTON CORPORATION 1991 STOCK OPTION PLAN
WHEREAS, Recoton Corporation (the "Company") has adopted
the Recoton Corporation 1991 Stock Option Plan (the "Plan"); and
WHEREAS, Section 10 of the Plan permits the Board of
Directors of the Company to amend the Plan; and
WHEREAS, the Board of Directors of the Company now desires
to amend the Plan in certain respects;
NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Paragraph 2 of the Plan is hereby amended,
in its entirety, to read as follows:
"2. Number of Shares Available Under Plan.
Options may be granted from time to time to key employees
of either the Company or any Subsidiary (such recipients
being hereafter referred to as "optionees") to purchase up
to an aggregate of 2,500,000 shares of Common Stock ($.20
par value) of the Company (the "Common Stock") for all
optionees and 2,500,000 such shares shall be reserved for
Options granted under the Plan (subject to adjustment as
provided in paragraph 6). The maximum number of shares of
Common Stock which may be the subject of Options granted
to the Company's Chief Executive Officer (or any co-Chief
Executive Officer) and to each of the other executive
officers required to be named in the Company's proxy
statement with respect to the preceding year pursuant to
the proxy rules promulgated under the Securities Exchange
Act of 1934 as amended during any calendar year shall not
exceed 250,000 (subject to adjustment as provided in
paragraph 6). The shares issued upon exercise of Options
granted under the Plan may be authorized and unissued
shares or shares held by the Company in its treasury, or
both. If any Options granted under the Plan shall
terminate, expire or be canceled as to any shares, new
Options may thereafter be granted covering such shares;
provided however. that with respect to any Option granted
to any person who is a `covered employee' as defined in
Section 162(m) of the Code that is canceled or as to which
the exercise price is reduced, the number of shares of
Common Stock subject to such Option shall continue to be
counted, in accordance with said Section 162(m) and
regulations promulgated thereunder, against the maximum
number of shares which may be the subject of Options
granted to such person."
SECOND: The last sentence of Paragraph 10 of the
Plan is hereby amended, in its entirety, to read as follows:
"Notwithstanding the foregoing, any amendment by the Board
of Directors or the Committee which would increase the
number of shares issuable under Options or the number of
shares which may be the subject of Options granted to any
individual optionee, or change the class of persons to
whom Options may be granted, shall be subject to the
approval of the shareholders of the Corporation within one
year of such amendment"
THIRD: This Amendment shall become effective and
in full force and effect upon its approval on or before April 2,
1996 by the holders of a majority of the shares of stock of the
Company voting on the subject at any special or annual meeting
of the shareholders of the Company.
FOURTH: Except to the extent hereinabove set
forth, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this
Amendment to be duly executed by a duly authorized officer on
the ___ day of , 1995.
RECOTON CORPORATION
By: _______________________
Name:
Title:
<PAGE>
RECOTON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
June 19, 1995
This Proxy is Solicited on Behalf of Recoton
Corporation's Board of Directors
The undersigned hereby appoints Stuart Mont and Peter M.
Ildau and each of them, proxies for the undersigned, with full
power of substitution, to vote all shares of Recoton Corporation
capital stock which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of Recoton Corporation, New
York, New York to be held at Chemical Bank, 270 Park Avenue, New
York, NY, on Monday, June 19, 1995 at 2:00 P.M., or at any
adjournment thereof, upon the matters set forth on the reverse
side and described in the accompanying Proxy Statement and upon
such other business as may properly come before the meeting or
any adjournment thereof.
Please mark this proxy as indicated on the reverse side to vote
on any item. If no directions are given, the proxy will be
voted for the election of all listed nominees, in accordance
with the Directors' recommendation on the other matters listed
on the reverse side and at the discretion of the proxies on
other matters that may properly come before the meeting. Please
sign and date on the reverse side and return promptly in the
enclosed envelope or otherwise to Recoton Corporation, c/o
Chemical Bank, JAF Building, P.O. Box 3068, New York, NY 10016,
so that your shares can be represented at the meeting.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON
REVERSE SIDE
(Continued and to be signed on other side)
<PAGE>
________________ /X/ Please mark
COMMON your votes
as this
The Board of Directors recommends a vote FOR Items 1,2,3,4 and
5, each of which has been proposed by Recoton Corporation.
Proposal 1- ELECTION OF DIRECTORS
Nominees: Irwin S. Friedman, WITHHELD
Joseph H. Massot, FOR FOR ALL
Joseph M. Idy, / / / /
WITHHELD FOR: (Write that nominees' name
in the space provided below).
FOR AGAINST ABSTAIN
Proposal 2- APPROVAL OF INCREASE / / / / / /
IN COMMON STOCK
Proposal 3- APPROVAL OF PREFERRED / / / / / /
STOCK
Proposal 4- APPROVAL OF AMENDMENT / / / / / /
TO OPTION PLAN
Proposal 5- APPROVAL OF AUDITORS / / / / / /
I PLAN TO ATTEND THE MEETING / /
COMMENTS/ADDRESS CHANGE
Please mark this box if / /
you have written comments/
address change on the
reverse side.
Receipt of hereby acknowledged
of the Recoton Corporation Notice
of Meeting and Proxy Statement.
Signature(s) ___________________ Date ______________, 1995
Note: Please sign as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
<PAGE>
Effective: 10/23/91
Board Approval: 10/23/91
Shareholder Approval: 6/17/92
Amended: 4/16/93
Shareholder Approval: 6/16/93
RECOTON CORPORATION
1991 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to
provide a means whereby Recoton Corporation (the "Company")
may, through the grant to employees of options to purchase
the Company's Common Stock (as defined below), attract and
retain persons of ability (including officers and directors
who are also employees) of the Company and of any Subsidiary
(as defined below), as key employees and motivate such
employees to exert their best efforts on behalf of the
Company and any Subsidiary. The Plan authorizes the grant
to key employees of the Company of stock incentives in the
form of (a) options to purchase shares of Common Stock of
the Company under Section 422A of the Internal Revenue Code
of 1986, as amended from time to time (the "Code")
("Incentive Options"); and (b) options to purchase shares of
Common Stock of the Company which are not Incentive Options
("Nonqualified Options") (Incentive Options and Nonqualified
Options granted under the Plan being referred to
collectively as "Options").
As used herein, the term "Subsidiary" shall mean
any corporation which at the time of the granting of an
Option qualifies as a subsidiary of the Company under the
definition of "subsidiary corporation" in Section 425(f) of
the Code, or any similar provision hereinafter enacted.
2. NUMBER OF SHARES AVAILABLE UNDER PLAN.
Options may be granted by the Company from time to time to
key employees of either the Company or any Subsidiary (such
recipients being hereafter referred to as "optionees") to
purchase up to an aggregate of 1,533,331[FN] shares of
Common Stock ($.20 par value) of the Company (the "Common
Stock") for all optionees and 1,533,331* such shares shall
be reserved for Options granted under the Plan (subject to
adjustment as provided in paragraph 6). The shares issued
upon exercise of Options granted under the Plan may be
authorized and unissued shares or shares held by the Company
in its treasury, or both. If any Options granted under the
Plan shall terminate, expire or be cancelled as to any
shares, new Options may thereafter be granted covering such
shares.
- --------------------
<F1> Increased in 1992 by action of the Option Committee
pursuant to Section 6 of the Plan from 350,000 to 466,666 to
reflect 33-1/3% stock dividend distributed in December 1992;
increased from 466,666 to 766,666 by action of the Board of
Directors on April 16, 1993 (approved by the shareholders at
the 1993 Annual Meeting) and increased in 1993 by action of
the Option Committee pursuant to Section 6 of the Plan from
766,666 to 1,022,221 to reflect the 33-1/3% stock dividend
distributed in October 1993 and increased in 1994 by action
of the Option Committee purusant to Section 6 of the Plan
from 1,022,221 to 1,533,331 to reflect the 50% stock
dividend distributed in July 1994.
3. ADMINISTRATION. The Plan shall be
administered by a Stock Option Committee (the "Committee")
consisting of not less than two nor more than five members
appointed by the Board of Directors of the Company (the
"Board"), each of whom shall be a "disinterested person"
within the meaning of Rule 16b-3(c)(2) under the Securities
Exchange Act of 1934, as from time to time amended (the
"Exchange Act"). The Board may at any time remove any
member of the Committee with or without cause. Any vacancy
occurring in the membership of the Committee shall be filled
by appointment by the Board.
The Committee may interpret the Plan, prescribe,
amend, and rescind any rules and regulations necessary or
appropriate for the administration of the Plan, and make
such other determinations and take such other action as it
deems necessary or advisable, except as such action may be
otherwise expressly reserved in the Plan to the Board.
Without limiting the generality of the foregoing, the
Committee may, in its sole discretion, treat all or any
portion of any period during which an optionee is on
military leave or on an approved leave of absence from the
Company or a Subsidiary as a period of employment of such
optionee by the Company or such Subsidiary, as the case may
be, for the purpose of accrual of his rights under his
Option. Any interpretation, determination, or other action
made or taken by the Committee shall be final, binding and
conclusive. Any decision or determination reduced to
writing and signed by all members of the Committee shall be
fully as effective as if made by unanimous vote at a meeting
duly called and held.
The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion
received from any such counsel or consultant and any
computation received from any such consultant or agent.
No member or former member of the Committee or of
the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option
awarded under it. To the maximum extent permitted by
applicable law, each member or former member of the
Committee or of the Board shall be indemnified and held
harmless by the Company against any cost or expense
(including counsel fees, which fees may be advanced by the
Company), or liability (including any sum paid in settlement
of a claim with the approval of the Company) arising out of
any act or omission to act in connection with the Plan
unless arising out of such member's or former member's own
fraud or bad faith. Such indemnification shall be in
addition to any rights of indemnification the members or
former members may have as directors or under the
Certificate of Incorporation or By-Laws of the Company.
4. ELIGIBILITY AND AWARDS. Subject to the
provisions of the Plan, the Committee shall have the power
to (a) authorize the granting of Options; (b) determine and
designate from time to time those employees of the Company
or of any Subsidiary to whom Options are to be granted;
provided, however, that no employee who owns, directly or
indirectly, at the time the Option is granted to him, more
than 10% of the total combined voting power of all classes
of stock of the Company or of its Subsidiaries shall be
eligible to receive any Incentive Option under the Plan
except as may be permitted by Section 422A of the Code; (c)
determine the number of shares subject to each Option; (d)
determine whether said Option is to be considered an
Incentive Option or a Nonqualified Option; and (e) determine
the time or times and the manner when each Option shall be
exercisable and the duration of the exercise period. No
director of the Company who is not also an employee of the
Company or a Subsidiary shall be entitled to receive any
Option under the Plan. The Committee may condition the
grant of any Option on the surrender of any option under
this or any other plan.
5. TERMS AND CONDITIONS OF OPTIONS. Each Option
granted under the Plan shall be evidenced by an agreement,
in form approved by the Committee, which shall be subject to
the following express terms and conditions and to such other
terms and conditions as the Committee may deem appropriate:
(a) OPTION PERIOD. Each Option agreement shall
specify the period for which the Option thereunder is
granted (which, in the case of Incentive Options, shall not
exceed ten years from the date of grant) and shall provide
that the Option shall expire at the end of such period.
(b) OPTION PRICE. The Option price per share
shall be determined by the Committee at the time any Option
is granted, and, in the case of Incentive Options, shall not
be less than the fair market value of the Common Stock of
the Company on the date the Option is granted, as determined
in good faith by the Committee.
(c) EXERCISE OF OPTION. No part of any Option
may be exercised until the optionee shall have remained in
the employ of the Company or of a Subsidiary for such
period, if any, after the date on which the Option is
granted as the Committee may specify in the Option
agreement. Subject in each case to the provisions of
paragraphs (a) through (c) and (e) of this paragraph 5, any
Option may be exercised, to the extent exercisable by its
terms, at such time or times as may be determined by the
Committee at the time of grant; PROVIDED, HOWEVER, that no
Option may be exercised in part or in full prior to the
approval of the Plan by a majority vote of the shareholders
of the Company as provided in Section 11 and, PROVIDED
FURTHER, that no options granted to executive officers,
directors and beneficial owners of ten percent or more of
any class of the Company's equity securities may be
exercised in part or in full prior to the later of six
months from the date of grant of the Option or six months
from date of approval of the Plan by the shareholders of the
Company. Notwithstanding the foregoing, all or any part of
any remaining unexercised Options granted to any person may,
after approval of the Plan by the shareholders of the
Company as provided in Section 11, be exercised in the
following circumstances (but in no event during the six
month period commencing on the later of the date of grant of
the Option or the date of shareholder approval of the Plan):
(a) immediately upon (but prior to the expiration of the
term of the Option) the holder's retirement from the Company
and all Subsidiaries on or after such person's 65th
birthday, (b) subject to the provisions of Section 5(e)
hereof, upon the disability (to the extent and in a manner
as shall be determined by the Committee in its sole
discretion) or death of the holder, (c) upon the occurrence
of such special circumstances or event as in the opinion of
the Committee merits special consideration, or (d) if, while
the holder is employed by the Company or a Subsidiary, there
occurs a Change in Control. For purposes of this Plan, a
"Change in Control" shall be deemed to have occurred if (i)
any "person" or group of "persons" (as the term "person" is
used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) ("Person"),
acquires (or has acquired during the twelve-month period
ending on the date of the most recent acquisition by such
Person) the beneficial ownership, directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the then outstanding securities of
the Company; (ii) during any period of twelve months,
individuals who at the beginning of such period constitute
the Board of Directors, and any new director whose election
or nomination was approved by the directors in office who
either were directors at the beginning of the period or
whose election or nomination was previously so approved,
cease for any reason to constitute at least a majority
thereof; (iii) a Person acquires beneficial ownership of
stock of the Company that, together with stock held
immediately prior to such acquisition by such Person,
possesses more than 50% of the total fair market value or
total voting power of the stock ("50% Ownership") of the
Company, unless the additional stock is acquired by a Person
possessing, immediately prior to such acquisition,
beneficial ownership of 40% or more of the Common Stock; or
(iv) a Person acquires (or has acquired during the twelve-
month period ending on the date of the most recent
acquisition by such Person) assets from the Company that
have a total fair market value equal to or more than one-
third of the total fair market value of all of the assets of
the Company immediately prior to such acquisition.
Notwithstanding the foregoing, for purposes of clauses (i)
and (ii), a Change in Control will not be deemed to have
occurred if the power to control (directly or indirectly)
the management and policies of the Company is not
transferred from a Person to another Person; and for
purposes of clause (iv), a Change in Control will not be
deemed to occur if the assets of the Company are
transferred: (A) to a shareholder in exchange for his stock,
(B) to an entity in which the Corporation has (directly or
indirectly) 50% Ownership, or (C) to a Person that has
(directly or indirectly) at least 50% ownership of the
Corporation with respect to its stock outstanding, or to any
entity in which such Person possesses (directly or
indirectly) 50% Ownership.
(d) PAYMENT OF PURCHASE PRICE UPON EXERCISE.
Upon the exercise of an Option, the form of exercise notice
required by the Option agreement shall be delivered with the
purchase price paid (i) in cash or check payable to the
order of the Company; (ii) if the Option Agreement so
provides, in stock of the Company, by the Committee valued
at its fair market value on the date of exercise; PROVIDED,
HOWEVER, that if the Option is treated in part as an
incentive stock option and in part as an Option which is not
an incentive stock option, the Company shall designate the
shares that are treated as purchased pursuant to the
exercise of an incentive stock option by causing to be
delivered a separate certificate therefor; (iii) by
providing an order to a designated broker to sell part or
all of the shares being purchased pursuant to exercise of
the Option and to deliver sufficient proceeds to the
Company, in cash or by check payable to the order of the
Company, to pay the full purchase price of such shares and
all applicable withholding taxes; or (iv) by such other
methods as the Committee may permit from time to time.
(e) EXERCISE IN THE EVENT OF DEATH OR TERMINATION
OF EMPLOYMENT. (1) If an optionee dies while an employee
of the Company or a Subsidiary, such person's Option may be
exercised to the extent that the optionee could have done so
at the date of his or her death by the person or persons to
whom the optionee's rights under the Option pass by will or
applicable law, or if no such person has such right, by the
optionee's executors or administrators, at any time, or from
time to time, within one year after the date of the
optionee's death but not later than the expiration date
specified pursuant to paragraph (a) of this paragraph 5.
(2) If an optionee's employment by the Company or a
Subsidiary terminates because of the optionee's permanent
disability, the optionee may exercise his or her Option, to
the extent that the optionee could have done so at the date
of termination of employment, at any time, or from time to
time, within one year of such determination but not later
than the expiration date specified pursuant to paragraph (a)
of this paragraph 5. (3) If an optionee's employment by
the Company or a Subsidiary terminates for any reason other
than death or permanent disability as aforesaid, the
optionee may exercise his or her Option, to the extent that
the optionee could have done so at the date of termination
of employment, at any time, or from time to time, within
three months of the date of termination of employment but
not later than the expiration date specified pursuant to
paragraph (a) of this paragraph 5. (4) Notwithstanding
anything in this paragraph 5(e) to the contrary, if an
optionee's employment is terminated because of the Option
holder's violation of the duties of such employment by the
Company or a Subsidiary as such person may from time to time
have, the existence of which violation shall be determined
by the Committee in its sole discretion (which determination
by the Committee shall be conclusive) all unexercised
Options of such Option holder shall terminate immediately
upon such termination of the holder's employment by the
Company and all Subsidiaries, and an Option holder whose
employment by the Company and Subsidiaries is so terminated
shall have no right after such termination to exercise any
unexercised Option which such employee might have exercised
prior to the termination of employment by the Company and
Subsidiaries.
(f) NONTRANSFERABILITY. No Option or any right
thereunder shall be transferable or assignable other than by
will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option shall be exercisable
only by the optionee.
(g) DOLLAR LIMITATION. As provided by Section
422A(d) of the Code, no Incentive Option may be granted
under the Plan to any employee to the extent that the
aggregate fair market value (determined as of the date of
grant of the Option) of the common stock of the Company or
any Subsidiary for which such employee has been granted
options under all incentive stock option plans of the
Company and its Subsidiaries qualifying as incentive stock
options under Section 422A of the Code exercisable for the
first time by such optionee during any calendar year exceeds
$100,000. Options with respect to which no designation is
made by the Committee shall be deemed to be Incentive
Options to the extent that the $100,000 limitation described
in the preceding sentence is met. This paragraph shall be
applied by taking Options into account in the order in which
they are granted.
(h) OTHER OPTION PROVISIONS. Each Option
agreement shall contain such terms and provisions as the
Committee may determine to be necessary or desirable.
(i) NO RIGHTS AS A SHAREHOLDER. No optionee
shall have any rights as a shareholder with respect to any
shares of Common Stock subject to option prior to the date
of issuance of a certificate or certificates for such
shares.
6. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON
STOCK. In the event of any change in the Common Stock of
the Company by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation,
split-up, combination, or exchange of shares, or rights
offering to purchase Common Stock at a price substantially
below fair market value, or of any similar change affecting
the Common Stock, the number and kind of shares which
thereafter may be issued upon the issuance of Options and
the number and kind of shares subject to Options and the
purchase price per share under outstanding Option agreements
shall be appropriately adjusted consistent with such change
in such manner as the Committee may deem equitable to
prevent substantial dilution or enlargement of the rights
granted to, or available for, optionees under the Plan.
7. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
The Plan, the grant and exercise of Options thereunder, and
the obligation of the Company to sell and deliver shares of
Common Stock under such Options, shall be subject to all
applicable federal and state laws, rules and regulations and
to such approvals by any government or regulatory agency as
may be required. No Option may be granted pursuant to the
Plan or exercised at any time when such Option, or the
granting, exercise or payment thereof, may result in the
violation of any law or governmental order or regulation.
The Plan is intended to comply with the Rule 16b-3 under the
Exchange Act. Any provision inconsistent with such Rule
shall be inoperative and shall not affect the validity of
the Plan. If at any time the Committee shall determine in
its discretion that the listing, registration or
qualification of the shares covered by the Plan upon any
national securities exchange or under any state or federal
law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in
connection with, the sale or purchase of shares under the
Plan, no shares will be delivered unless and until such
listing, registration, qualification, consent or approval
shall have been effected or obtained, or otherwise provided
for, free of any conditions not acceptable to the Committee.
If shares are not required to be or have not been
registered, upon exercising all or any portion of a Option,
the Company may require each optionee (or any person acting
under paragraph 5(e)), as a condition of such exercise, to
represent that the shares are being acquired for investment
only and not with a view to their sale or distribution, and
shall make such other representations and furnish such
information deemed appropriate by counsel to the Company.
Stock certificates evidencing unregistered shares acquired
upon exercise of Options may be subject to stop orders and
shall bear any legend required by applicable state
securities laws and a restrictive legend substantially as
follows:
The securities represented hereby
have not been registered under the
Securities Act of 1933, as amended (the
"Act"), and may not be transferred to
the absence of such registration or any
opinion of counsel acceptable to the
Company that such transfer will not
require registration under such Act.
8. NO RIGHTS TO CONTINUED EMPLOYMENT. The Plan
and any Option granted under the Plan shall not confer upon
any optionee any right with respect to continuance of
employment by the Company or any Subsidiary, nor shall they
affect in any way the right of the Company or any Subsidiary
by which an optionee is employed to terminate such person's
employment at any time.
9. WITHHOLDING. The Committee in its discretion
may cause to be made as a condition precedent to the payment
of any cash or stock appropriate arrangements for the
withholding of any federal, state, local or foreign taxes.
10. AMENDMENT, SUSPENSION AND DISCONTINUANCE.
Except as hereinafter provided, the Board of Directors or
the Committee may at any time withdraw or from time to time
amend the Plan as it relates to, and the terms and
conditions of, any Options not theretofore granted, and the
Board of Directors or the Committee, with the consent of the
affected holder of an Option, may at any time withdraw or
from time to time amend the Plan as it relates to, and the
terms and conditions of, any outstanding Option.
Notwithstanding the foregoing, any amendment by the Board of
Directors or the Committee which would increase the number
of shares issuable under Options or change the class of
persons to whom Options may be granted shall be subject to
the approval of the shareholders of the Corporation within
one year of such amendment.
11. EFFECTIVE DATE AND TERM. The effective date
of the Plan shall be October 23, 1991, subject to approval
of the Plan by the vote of the holders of a majority of the
Common Stock the not later than October 22, 1992. Options
may be granted, but not exercised, prior to such shareholder
approval; PROVIDED, HOWEVER, that if such shareholder
approval is not obtained, any Options granted under this
Plan shall be of no effect. This Plan shall terminate on
and no Option shall be granted after October 22, 2001;
PROVIDED, HOWEVER, that any Options previously granted may
be exercised in accordance with their terms.
12. NAME. The Plan shall be known as the
"Recoton Corporation 1991 Stock Option Plan."
