SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): MAY 1, 1996
RECOTON CORPORATION
(Exact name of registrant as specified in charter)
NEW YORK 0-5860 11-1771737
(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA 32746
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: 407-333-8900
N.A.
(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS.
On January 3, 1996, International Jensen Incorporated ("Jensen") and
Recoton Corporation ("Recoton") jointly announced that Recoton had agreed to
acquire Jensen pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"). A copy of the Merger Agreement was filed with the Securities and
Exchange Commission ("SEC") on or about January 12, 1996. On January 30, 1996,
the Merger Agreement was amended and restated (the "Amended and Restated Merger
Agreement") and a copy of the Amended and Restated Merger Agreement was filed by
Recoton with the SEC on or about February 9, 1996. On May 1, 1996 the Merger
Agreement was further amended and restated (the "Second Amended and Restated
Merger Agreement") and certain other related agreements were entered into. This
Form 8-K is being made for the purpose of filing the Second Amended and Restated
Merger Agreement which is included herewith as Exhibit 2.1 and the other
agreements entered into between Recoton and/or Jensen or other parties at or
about the same time, which are included herewith as Exhibits 10.1, 10.2, 10.3,
and 10.4.
SECOND AMENDED AND RESTATED MERGER AGREEMENT.
The Second Amended and Restated Merger Agreement differs from
the Amended and Restated Merger Agreement in the following
substantive respects:
- The price per share offered by Recoton to the Jensen
stockholders was increased to $9.15 per share, except that
the price to Robert G. Shaw ("Shaw") and William Blair
Leveraged Capital Fund, L.P. ("WBLCF")(collectively, the
"Principal Stockholders") was increased to $9.00 per share.
- Subject to adjustment as noted below, the percentage of
Jensen common stock to be converted to Recoton common
shares was increased to 44.3% and the corresponding
percentage to be converted into cash was reduced to 55.7%,
with the merger intended to qualify as under the prior
versions of the merger agreement as a reorganization under
the Internal Revenue Code and to be treated as a tax-free
transaction for federal income tax purposes to the extent
Recoton common shares are received in exchange for shares
of Jensen common stock, subject to adjustment as noted
below.
- If the Average Recoton Share Price (as defined in the Merger
Agreement) is less than $16.00, the merger would be as an all
cash transaction, rather than as a cash and stock transaction.
- If the tax opinion that the merger qualifies as a
reorganization under the Internal Revenue Code cannot be
confirmed at the closing due to the difference between the
Recoton share price at closing and the Average Recoton
Share Price, the percentage of shares of Jensen common
stock to be converted to Recoton common shares would be
increased to a percentage sufficient to confirm the tax
opinion still, but not to a percentage in excess of 50%.
If the tax opinion cannot be confirmed at the closing
based on such increased percentage or for any other reason,
the merger will be an all cash transaction, rather than a cash
and stock transaction.
- The Jensen stockholders will be asked to vote on various
proposals, as follows:
Proposal 1 -- a stock and cash transaction, as described
above
Proposal 2 -- an all cash transaction, if the Average
Recoton Share Price is at least $16.00 but
the tax opinion cannot be confirmed at the
closing
Proposal 3 -- an all cash transaction if the Average
Recoton Share Price is below $16.00
Failure of the Jensen stockholders to approve (i) Proposal 1
if the tax opinion is confirmed at the closing and the Average
Recoton Share Price is $16.00 or above, (ii) both of Proposals
1 and 2 if the tax opinion is not confirmed at the closing and
the Average Recoton Share Price is $16.00 or above, or (iii)
Proposal 3 if the Average Recoton Share Price is below $16.00
shall constitute failure to approve the merger with Recoton.
The Second Amended and Restated Merger Agreement also provides for
certain other changes, including more detailed disclosure obligations for Jensen
should it receive a competitive bid and a provision requiring litigation in New
York in the event of any disputes.
STOCK OPTION, VOTING AND SIMILAR AGREEMENTS.
Effective as of May 1, 1996, Recoton entered into a Stock Option and
Voting Agreement with WBLCF, which holds approximately 25.9% of the outstanding
Jensen stock, and Recoton also entered into an agreement with Robert G. Shaw,
who holds approximately 36.8% of the outstanding Jensen stock, regarding the
sharing of profits upon a sale of his shares of Jensen (the "Spread Agreement").
A copy of the Stock Option and Voting Agreement is attached as Exhibit 10.1 and
a copy of the Spread Agreement is attached as Exhibit 10.2.
Pursuant to the Stock Option and Voting Agreement with Recoton, WBLCF
has agreed to vote its shares of Jensen common stock in favor of the merger with
Recoton and has granted Recoton an option to purchase all of its shares of
Jensen Common Stock at $9.00 per share plus any net proceeds which Recoton may
receive upon the sale of the shares purchased pursuant to the stock option from
WBLCF within three months to the extent the net proceeds exceed $10.00 per share
under certain circumstance.
Pursuant to the Spread Agreement, Mr. Shaw will pay to Recoton the
difference between (i) the net proceeds per share received by Mr. Shaw, but not
to exceed $10.00 per share from the transfer of any or all of his Jensen shares,
to a third person other than Recoton, and (ii) $9.00 per share, less applicable
taxes attributable to the difference. The agreement further provides that Mr.
Shaw shall retain any proceeds received in excess of $10.00 per share. The
agreement will terminate on December 31, 1996. Mr. Shaw has not entered into any
voting agreement or stock options with respect to his shares of Jensen stock
related to the merger with Recoton.
ESCROW AGREEMENT REGARDING ACOUSTIC RESEARCH OPTION.
Effective as of May 1, 1996, Recoton entered into an escrow agreement
with Jensen and Vedder, Price, Kaufman & Kammholz (the "Escrow Agent") pursuant
to which Jensen delivered to the Escrow Agent an executed assignment required
under the License and Option Agreement entered into between Jensen and Recoton
dated January 3, 1996 (the "AR Agreement") regarding the marks "Acoustic
Research" and "AR" (the "AR Marks") and the Escrow Agent is to deliver such
assignment to Recoton upon the occurrence of certain circumstances including
either the exercise of the option under the AR Agreement granted by Jensen to
Recoton to purchase the AR Marks or exercise of the option under the AR
Agreement granted by Recoton to Jensen to sell the AR Marks and the payment of
the purchase price for such trademarks. A copy of such escrow agreement is
attached as Exhibit 10.3.
EMPLOYMENT AGREEMENT WITH ROBERT G. SHAW.
As of May 1, 1996, Recoton and Jensen entered into an employment
agreement with Robert G. Shaw pursuant to which Mr. Shaw would be employed hired
as the President and CEO of the surviving corporation after the merger and as an
executive officer of Recoton. A copy of such agreement is attached as Exhibit
10.4.
Item 7(c). EXHIBITS.
Exhibit 2.1 Second Amended and Restated Agreement and Plan of
Merger among Recoton Corporation, RC Acquisition Sub,
Inc. and International Jensen Incorporated dated as
of January 3, 1996
Exhibit 10.1 Stock Option and Voting Agreement between William
Blair Leveraged Capital Fund, L.P. and Recoton
Corporation dated as of May 1, 1996
Exhibit 10.2 Agreement between Robert G. Shaw and Recoton
Corporation dated as of May 1, 1996
Exhibit 10.3 Escrow Agreement between Recoton Corporation,
International Jensen Incorporated and Vedder, Price,
Kaufman & Kammholz dated as of May 1, 1996
Exhibit 10.4 Employment Agreement between Recoton Corporation,
International Jensen Incorporated and Robert G. Shaw
dated as of May 1, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECOTON CORPORATION
By: /S/ JOSEPH H. MASSOT
Name: Joseph H. Massot
Title: Vice President,
Treasurer and Principal
Accounting Officer
Dated: May 8, 1996
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.1 Amended and Restated Agreement and Plan of Merger
among Recoton Corporation, RC Acquisition Sub, Inc.
and International Jensen Incorporated dated as of
January 3, 1996
10.1 Stock Option and Voting Agreement between William
Blair Leveraged Capital Fund, L.P. and Recoton
Corporation dated as of May 1, 1996
10.2 Agreement between Robert G. Shaw and Recoton
Corporation dated as of May 1, 1996
10.3 Escrow Agreement between Recoton Corporation,
International Jensen Incorporated and Vedder, Price,
Kaufman & Kammholz dated as of May 1, 1996
10.4 Employment Agreement between Recoton Corporation,
International Jensen Incorporated and Robert G. Shaw
dated as of May 1, 1996
EXHIBIT 2.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING MAY 1, 1996
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
January 3, 1996 (the "Agreement"), by and between RECOTON CORPORATION, a New
York corporation ("Recoton"), RC ACQUISITION SUB, INC., a Delaware corporation
("Acquisition Sub") and wholly-owned subsidiary of Recoton, and INTERNATIONAL
JENSEN INCORPORATED, a Delaware corporation ("Jensen").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Recoton, Acquisition Sub and Jensen
have approved the merger of Jensen with and into Acquisition Sub (the "Merger")
pursuant to the terms and conditions set forth in this Agreement and the sole
stockholder of Acquisition Sub has approved the Merger;
WHEREAS, for federal income tax purposes, it is intended that
Acquisition Sub and Jensen and their respective stockholders will recognize no
gain or loss for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder as a result of the
consummation of the Merger except with respect to stockholders who exercise
dissenters' rights, or to the extent stockholders receive cash in lieu of
fractional shares, the Per Share Cash Amount (as defined in Section 3.1) or a
portion thereof; and
WHEREAS, Jensen and Recoton entered into an agreement on January 3,
1996 (the "AR Agreement") by which Recoton has acquired a license to and an
option to purchase, and Jensen has acquired an option to sell, the trademarks
and associated copyrights and other intellectual properties of Jensen associated
with the name "Acoustic Research" or "AR" (the "AR Rights"); and
WHEREAS, Jensen and IJI Acquisition Corp. ("IJI") have entered into an
agreement, which is being amended contemporaneous to execution of this Second
Amended and Restated Agreement and Plan of Merger, (the "OE Agreement") by which
IJI has agreed to acquire the assets associated with the original equipment
business of Jensen (the "Original Equipment Business") and assume related
liabilities prior to the Effective Time (as defined in Section 1.2), which
agreement Recoton has approved.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, Recoton,
Acquisition Sub and Jensen, intending to be legally bound hereby, agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time in accordance with the Delaware General
Corporation Law (the "GCL") Jensen shall be merged with and into Acquisition Sub
in accordance with this Agreement and the form of certificate of merger attached
hereto as Exhibit 1.1 (the "Certificate of Merger") and the separate existence
of Jensen shall thereupon cease. Acquisition Sub shall be the surviving
corporation in the Merger (hereinafter sometimes referred to as the "Surviving
Corporation").
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") after the Closing (as defined
below) as a copy of the duly completed Certificate of Merger (the "Merger
Filing") is delivered to the Secretary of State of the State of Delaware for
filing and is filed by the Secretary of State of the State of Delaware or at
such later time as the parties may agree to specify in the Certificate of
Merger.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 259 of the GCL.
Section 1.4 CLOSING. The closing (the "Closing ") of the transactions
contemplated by this Agreement shall take place at the offices of Stroock &
Stroock & Lavan, 7 Hanover Square, New York, New York on June 11, 1996 at 9:30
A.M. New York time, or, if later, on the second business day immediately
following the date on which the last of the conditions set forth in Article VIII
hereof is fulfilled or waived, or at such other time and place as Acquisition
Sub and Jensen shall agree (the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION; AMENDMENT. The Certificate of
Incorporation of Acquisition Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
after the Effective Time until amended in accordance with the provisions of the
GCL, except that Article FIRST shall be amended as of and from the Effective
Time to read "The name of the Corporation shall be Recoton Audio Corporation."
Section 2.2 BY-LAWS. The By-Laws of Acquisition Sub shall be the
By-Laws of the Surviving Corporation after the Effective Time, and thereafter
may be amended in accordance with their terms and as provided by the Certificate
of Incorporation of the Surviving Corporation and the GCL.
Section 2.3 DIRECTORS AND OFFICERS. (a) At the Effective
Time, the Board of Directors of the Surviving Corporation shall
consist of the following persons:
Robert L. Borchardt
Joseph H. Massot
Stuart Mont
Robert G. Shaw
Marc T. Tanenberg
(b) At the Effective Time, the officers of the Surviving
Corporation shall be as follows:
OFFICE HOLDER
Chairman Robert L. Borchardt
President & Robert G. Shaw
CEO
Vice President & Marc T. Tanenberg
CFO
Secretary Stuart Mont
Treasurer & Joseph H. Massot
Assistant Secretary
ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF JENSEN SHARES IN THE MERGER.
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of Jensen except as set forth in
this Section 3.1, subject to the other provisions of this Section 3.1, each
share of common stock, par value $.01 per share, of Jensen ("Jensen Common
Stock") issued and outstanding immediately prior to the Effective Time
(excluding any treasury shares and Dissenting Shares (as defined in Section
3.5)) shall be converted into either
(i) the right to receive cash in the amount of $9.15 (hereinafter
the "Per Share Cash Amount") or $9.00 in the case of shares held
beneficially by Robert G. Shaw ("Shaw") and William Blair Leveraged Capital
Fund, L.P. ("WBLCF") (WBLCF and Shaw being referred to herein as the
"Principal Stockholders") (the "Principal Stockholders Per Share Cash
Amount");
(ii) the right to receive such number of validly issued, fully paid
and nonassessable Common Shares, $0.20 par value, of Recoton ("Recoton
Common Shares") as shall be determined by dividing the Per Share Cash Amount
(or the Principal Stockholders Per Share Cash Amount, in the case of shares
of Common Stock beneficially owned by the Principal Stockholders) by the
Average Recoton Share Price (as defined in Section 3.1(b)) carried out to
four decimal places (such number divided by one being referred to
hereinafter as the "Exchange Ratio") (or, in the case of the Principal
Stockholders, the "Principal Stockholders Exchange Ratio"); or
(iii) the right to receive a combination of Recoton Common Shares
valued at the Average Recoton Share Price and cash equal in the aggregate to
the Per Share Cash Amount or the Principal Stockholders Per Share Cash
Amount, as applicable;
PROVIDED, HOWEVER, that if the Average Recoton Share Price is below $16.00, then
each share of the Jensen Common Stock shall be converted into the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable (the
conversion of all shares of Jensen Common Stock into the Per Share Cash Amount
or the Principal Stockholders Per Share Cash Amount in such event or in other
events detailed in this Agreement is referred to herein as an "All Cash
Transaction" and a transaction in which Jensen Common Stock is to be converted
into a combination of cash and Recoton Common Shares is referred to herein as a
"Cash and Stock Transaction").
At the Effective Time, all shares of Jensen Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration (as defined
in Section 3.2(b)). The holders of certificates previously evidencing shares of
Jensen Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to shares of Jensen Common Stock except as
otherwise provided herein or by law. Certificates previously evidencing shares
of Jensen Common Stock shall be exchanged for (i) certificates evidencing whole
Recoton Common Shares issued in consideration therefor, (ii) the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable
multiplied by the number of shares previously evidenced by the canceled
certificate, or (iii) a combination thereof, in each case in accordance with the
election and allocation procedures of this Section 3.1 and upon the surrender of
such certificates in accordance with the provisions of Section 3.2, without
interest. No fractional Recoton Common Shares shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 3.2(e). The recipients
of Recoton Common Shares issued in accordance with this Section 3.1 shall also
by receiving Recoton Common Shares thereby receive an associated Common Share
purchase right pursuant to the Rights Agreement dated as of October 27, 1995,
between Recoton and Chemical Mellon Shareholder Services, L.L.C.
(b) The "Average Recoton Share Price" shall mean the average of the closing
prices of Recoton Common Shares on the Nasdaq Stock Exchange ("Nasdaq") during
the 20 consecutive trading days ending the fifth trading day prior to the
meeting of the stockholders of Jensen being held to vote upon the Merger (the
"Jensen Stockholders' Meeting"), discarding the three highest and three lowest
closing prices, carried out to four decimal places.
(c) Notwithstanding the foregoing, if between the date of this Agreement and
the Effective Time the outstanding Recoton Common Shares or shares of Jensen
Common Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio,
the Principal Stockholders Exchange Ratio, the Per Share Cash Amount and the
Principal Stockholders Per Share Cash Amount shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(d) Except as otherwise set forth in the proviso to Section 3.1(a) or as set
forth in Section 3.1(i), the number of shares of Jensen Common Stock to be
converted into the right to receive cash in the Merger (including Dissenting
Shares and Fractional Shares) shall be 55.7% of the number of shares of Jensen
Common Stock outstanding immediately prior to the Effective Time (as such number
may be decreased as set forth in Section 3.1(i), the "Target Cash Election
Number") and the number of shares of Jensen Common Stock to be converted into
the right to receive Recoton Common Shares in the Merger shall be 44.3% of the
number of shares of Jensen Common Stock outstanding immediately prior to the
Effective Time (as such number may be increased as set forth in Section 3.1(i),
the "Target Stock Election Number").
(e) Subject to the allocation and election procedures set forth in this
Section 3.1, each record holder immediately prior to the Effective Time of
shares of Jensen Common Stock will be entitled (i) to elect to receive cash for
some or all of such shares (a "Cash Election") and/or (ii) to elect to receive
Recoton Common Shares for some or all of such shares (a "Stock Election"), or
(iii) to indicate that such record holder has no preference as to the receipt of
cash or Recoton Common Shares for such shares (a "Non-Election"). All such
elections shall be made on a form designed for that purpose (a "Form of
Election"), which shall also be the letter of transmittal for the certificates
representing such shares of Common Stock. Each Holder of record of shares of
Jensen Common Stock who holds such shares as a nominee, trustee or in other
representative capacity (a "Representative") may submit multiple Forms of
Election, provided that such Representative certifies that each such Form of
Election covers all the shares of Jensen Common Stock held by such
Representative for a particular beneficial owner.
(f) If the aggregate number of shares covered by Cash Elections (the "Cash
Election Shares") exceeds the Target Cash Election Number, all shares of Jensen
Common Stock covered by Stock Elections (the "Stock Election Shares") and all
shares of Jensen Common Stock covered by Non-Elections (the "Non-Election
Shares") shall be converted into the right to receive Recoton Common Shares, and
each Cash Election Share shall be converted into the right to receive (i) an
amount in cash, without interest, equal to the product of (x) the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable and
(y) a fraction (the "Cash Fraction"), the numerator of which shall be the Target
Cash Election Number and the denominator of which shall be the total number of
Cash Election Shares, and (ii) a number of Recoton Common Shares equal to the
product of (x) the Exchange Ratio or the Principal Stockholders Exchange Ratio,
as applicable and (y) a fraction equal to one minus the Cash Fraction.
(g) If the aggregate number of Stock Election Shares exceeds the Target
Stock Election Number, all Cash Election Shares and all Non-Election Shares
shall be converted into the right to receive cash, and each Stock Election Share
shall be converted into the right to receive (i) a number of Recoton Common
Shares equal to the product of (x) the Exchange Ratio or the Principal
Stockholders Exchange Ratio, as applicable and (y) a fraction (the "Stock
Fraction"), the numerator of which shall be the Target Stock Election Number and
the denominator of which shall be the total number of Stock Election Shares, and
(ii) an amount in cash, without interest, equal to the product of (x) the Per
Share Cash Amount or the Principal Stockholders Per Share Cash Amount, as
applicable and (y) a fraction equal to one minus the Stock Fraction.
(h) If neither Section 3.1(f) nor Section 3.1(g) is applicable, all Cash
Election Shares shall be converted into the right to receive cash, all Stock
Election Shares shall be converted into the right to receive Recoton Common
Shares, and each Non-Election Share shall be converted into the right to receive
(i) an amount in cash, without interest, equal to the product of (x) the Per
Share Cash Amount or the Principal Stockholders Per Share Cash Amount, as
applicable and (y) a fraction (the "Non-Election Fraction"), the numerator of
which shall be the amount by which the Target Cash Election Number exceeds the
total number of Cash Election Shares and the denominator of which shall be the
amount by which (A) the number of shares of Jensen Common Stock outstanding
immediately prior to the Effective Time exceeds (B) the sum of the total number
of Cash Election Shares and the total number of Stock Election Shares and (ii) a
number of Recoton Common Shares equal to the product of (x) the Exchange Ratio
or the Principal Stockholders Exchange Ratio, as applicable and (y) a fraction
equal to one minus the Non-Election Fraction.
(i) Notwithstanding the foregoing, if the issuer of the tax opinion required
by Section 8.1(h) does not confirm its opinion at the Closing due to differences
between the market price of Recoton Common Shares at the Closing Date and the
Average Recoton Share Price then the Target Stock Election Number shall be
increased so as to allow the issuer of the tax opinion to confirm the tax
opinion; PROVIDED, HOWEVER, that the Target Stock Election Number shall not be
increased to more than 50% of the number of shares of Jensen Common Stock
outstanding immediately prior to the Effective Time. If the issuer of the tax
opinion required by Section 8.1(h) does not confirm its opinion at the Closing
Date with a Target Stock Election Number of 50% or for any other reason, then
(A) if the stockholders of Jensen have approved at the Jensen Stockholders'
Meeting an All Cash Transaction in the event the tax opinion is not confirmed,
each share of the Jensen Common Stock shall be converted into the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable in an
All Cash Transaction or (B) if the stockholders of Jensen have not approved at
the Jensen Stockholders' Meeting an All Cash Transaction in such circumstances,
the Merger Agreement shall be terminated and such termination shall be deemed a
failure of the stockholders of Jensen to approve the Merger in accordance with
the provisions of Section 4.21 of this Agreement.
(j) Elections shall be made by holders of Jensen Common Stock by mailing to
the Exchange Agent (as defined in Section 3.2(a)) a Form of Election. To be
effective, a Form of Election must be properly completed, signed and submitted
to the Exchange Agent and accompanied by the certificates representing the
shares of Jensen Common Stock as to which the election is being made (or by an
appropriate guaranty of delivery by a commercial bank or trust company in the
United States or a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc. (the "NASD")). Recoton will
have the discretion, which it may delegate in whole or in part to the Exchange
Agent, to determine whether Forms of Election have been properly completed,
signed and submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of Recoton (or the Exchange Agent) in such matters shall
be conclusive and binding. Neither Recoton nor the Exchange Agent will be under
any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by this Section 3.1 and all such computations shall be
conclusive and binding on the holders of Jensen Common Stock, absent manifest
error.
(k) For the purposes hereof, a holder of Jensen Common Stock who does not
submit a Form of Election which is received by the Exchange Agent prior to the
Election Deadline (as hereinafter defined) shall be deemed to have made a
Non-Election. If Recoton or the Exchange Agent shall determine that any
purported Cash Election or Stock Election was not properly made, such purported
Cash Election or Stock Election shall be deemed to be of no force and effect and
the stockholder making such purported Cash Election or Stock Election shall for
purposes hereof, be deemed to have made a Non-Election.
(l) Jensen shall mail a Form of Election to each stockholder of Jensen as of
the record date for the Jensen Stockholders' Meeting (the "Record Date") with
the Proxy Statement for the Jensen Stockholders' Meeting and shall use its best
efforts to mail the Form of Election to all persons who become holders of Jensen
Common Stock during the period between the Record Date and 10:00 a.m. New York
time, on the date seven calendar days prior to the anticipated Effective Time
and to make the Form of Election available to all persons who become holders of
Jensen Common Stock subsequent to such day and no later than the close of
business on the business day prior to the Effective Time. A Form of Election
must be received by the Exchange Agent by the close of business on the last
business day prior to the Effective Time (the "Election Deadline") in order to
be effective. All elections may be revoked until the Election Deadline.
(m) Each share of Jensen Common Stock held in the treasury of Jensen and
each share of Jensen Common Stock owned by Recoton or any direct or indirect
wholly owned subsidiary of Recoton or of Jensen immediately prior to the
Effective Time shall be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
(n) If certificates for shares of Jensen Common Stock are delivered to the
Exchange Agent and this Agreement is terminated prior to the effective time,
Recoton shall use its best efforts to cause the Exchange Agent to return
tendered certificates as promptly as practicable after such termination date.
3.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly after completion of the allocation and election
procedures set forth in Section 3.1, but prior to the Effective Time, Recoton or
Acquisition Sub shall deposit, or shall cause to be deposited, with a bank or
trust company designated by Recoton (the "Exchange Agent"), for the benefit of
the holders of shares of Jensen Common Stock, for exchange in accordance with
this Article III, through the Exchange Agent, (i) certificates evidencing such
number of Recoton Common Shares equal to (x) the Exchange Ratio multiplied by
the Target Stock Election Number multiplied by a fraction the numerator of which
is the number of shares of Jensen Common Stock not owned by the Principal
Stockholders (the "Publicly Held Shares") and the denominator of which is the
number of shares of Jensen Common Stock plus (y) the Principal Stockholders
Exchange Ratio multiplied by the Target Stock Election Number multiplied by a
fraction the numerator of which is the number of shares of Jensen Common Stock
owned by the Principal Stockholders and the denominator of which is the number
of shares of Jensen Common Stock and (ii) cash in the amount equal to the (x)
Per Share Cash Amount multiplied by the Target Cash Election Number (including
an amount as estimated by the Exchange Agent as necessary to pay for Fractional
Shares minus an amount equal to the Dissenting Shares multiplied by the Per
Share Cash Amount) multiplied by a fraction the numerator of which is the number
of Publicly Held Shares and the denominator of which is the number of shares of
Jensen Common Stock plus (y) the Principal Stockholders Per Share Cash Amount
multiplied by the Target Cash Election Number multiplied by a fraction the
numerator of which is the number of shares of Jensen Common Stock owned by the
Principal Stockholders and the denominator of which is the number of shares of
Jensen Common Stock (such certificates for Recoton Common Shares, together with
any dividends or distributions with respect thereto and cash, being hereinafter
referred to as the "Exchange Fund"); PROVIDED, HOWEVER, that should there be an
All Cash Transaction, Recoton or Acquisition Sub only shall deposit in the
Exchange Fund cash in the amount equal to the number of shares of Jensen Common
Stock outstanding multiplied by the Per Share Cash Amount or the Principal
Stockholders Per Share Cash Amount, as applicable and PROVIDED, FURTHER, that
the cash and Recoton Common Shares to be deposited in the Exchange Fund shall be
adjusted as necessary to reflect any adjustments pursuant to Section 3.1(i). The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the Recoton
Common Shares and cash out of the Exchange Fund in accordance with Section 3.1.
Except as contemplated by Section 3.2(f) hereof, the Exchange Fund shall not be
used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, (i) the Exchange Agent shall deliver the Merger Consideration
(as hereinafter defined) to each holder of record of a Certificate (as
hereinafter defined) who has theretofore submitted to the Exchange Agent an
effective Form of Election accompanied by the Certificate(s) representing the
shares covered by such Form of Election or the appropriate guaranty of delivery,
and (ii) the Surviving Corporation shall instruct the Exchange Agent to promptly
mail to each holder of record of a certificate or certificates which immediately
prior to the Effective Time evidenced outstanding shares of Jensen Common Stock
(other than Dissenting Shares) (the "Certificates") who did not submit a
properly completed Form of Election accompanied by the necessary stock
certificates or guaranty of delivery (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as the
Surviving Corporation may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
evidencing Recoton Common Shares and/or cash. Upon surrender of a Certificate
for cancellation to the Exchange Agent (or, in lieu thereof delivery to
the Exchange Agent of an appropriate affidavit of loss and such other documents
as may be required under Section 3.2(i)) together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificates shall be
entitled to receive, and shall instruct the Exchange Agent to promptly deliver
after the Effective Time, in exchange therefor (A) certificates evidencing that
number of whole Recoton Common Shares which such holder has the right to receive
in respect of the shares of Jensen Common Stock formerly evidenced by such
Certificate in accordance with Section 3.1, (B) cash to which such holder is
entitled to receive in accordance with Section 3.1, (C) cash in lieu of
fractional Recoton Common Shares to which such holder is entitled pursuant to
Section 3.2(e) and/or (D) any dividends or other distributions to which such
holder is entitled pursuant to Section 3.2(c) (the Recoton Common Shares,
dividends, distributions and cash described in clauses (A), (B), (C) and (D)
being collectively, the "Merger Consideration") and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Jensen Common Stock which is not registered in the transfer records
of Jensen, a certificate evidencing the proper number of Recoton Common Shares
and/or cash may be issued and/or paid in accordance with this Article III to a
transferee if the Certificates evidencing such shares of Jensen Common Stock are
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
3.2, each Certificate shall be deemed at any time after the Effective Time to
evidence only the right to receive upon such surrender the Merger Consideration.
(c) RECOTON DISTRIBUTION WITH RESPECT TO UNSURRENDERED CERTIFICATES OF
JENSEN. No dividends or other distributions declared or made after the Effective
Time with respect to Recoton Common Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Recoton Common Shares evidenced thereby, and no other part of the
Merger Consideration shall be paid to any such holder, until the holder of such
Certificate shall surrender such Certificate or complies with Section 3.2(i).
Subject to the effect of applicable laws, following surrender of any such
Certificate or compliance with Section 3.2(i), there shall be paid to the holder
of such Certificates promptly (i) the Merger Consideration and (ii) the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Recoton Common Shares and, at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole Recoton Common
Shares. No interest shall be paid on the Merger Consideration or any dividends
or other distributions.
(d) NO FURTHER RIGHTS IN JENSEN COMMON STOCK. All Recoton Common Shares
issued and cash paid upon conversion of the shares of Jensen Common Stock in
accordance with the terms hereof shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to such shares of Jensen Common
Stock.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip evidencing fractional
Recoton Common Shares shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Recoton. In lieu of any
such fractional shares, each holder of Jensen Common Stock upon surrender of a
Certificate for exchange pursuant to this Section 3.2 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the Average Recoton Share Price by (b) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Jensen Common Stock then held of record by such holder).
(ii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Jensen Common Stock with respect to
any fractional share interests, the Exchange Agent shall promptly pay such
amounts to such holders of Jensen Common Stock subject to and in accordance with
this Agreement.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Jensen Common Stock for one year after
the Effective Time shall be delivered to the Surviving Corporation, upon demand,
and any holders of Jensen Common Stock who have not theretofore complied with
this Article III shall thereafter look only to the Surviving Corporation for the
Merger Consideration to which they are entitled.
(g) NO LIABILITY. Neither Recoton nor the Surviving Corporation shall be
liable to any holder of shares of Jensen Common Stock for any such Recoton
Common Shares or cash (or dividends or distributions with respect thereto) from
the Exchange Fund delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) WITHHOLDING RIGHTS. Recoton and/or the Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Jensen Common Stock such
amounts as Recoton and/or the Surviving Corporation is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Recoton and/or the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Jensen Common Stock in respect of which such deduction
and withholding was made by Recoton and/or the Surviving Corporation.
(i) LOST CERTIFICATES. In the event any certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if reasonably
required by the Surviving Corporation (which determination may be delegated to
the Exchange Agent), the posting by such person of a bond in such amount as the
Surviving Corporation or such Exchange Agent may determine is reasonably
necessary as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed certificate the Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
Section 3.3 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Jensen shall be closed and there shall be no further registration of
transfers of shares of Jensen Common Stock thereafter on the records of Jensen.
On or after the Effective Time, any certificates presented to the Exchange
Agent, Recoton or the Surviving Corporation for any reason shall be converted
into the Merger Consideration.
Section 3.4 STOCK OPTIONS AND OTHER RIGHTS.
(a) At the Effective Time, each outstanding option to purchase shares of
Jensen Common Stock (a "Jensen Stock Option") issued pursuant to the Jensen
Stock Option Plan (1989), the Jensen 1991 Stock Incentive Plan and the 1994
Jensen Stock Option and Purchase Plan for Non-Employee Directors (together, the
"Jensen Stock Option Plans") shall be assumed by Recoton with each such option
becoming fully exercisable upon the Merger to the extent so required by the
applicable plan. Except for any such acceleration of the exercisability of the
Jensen Stock Options as provided in the preceding sentence, each Jensen Stock
Option shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Jensen Stock Option, the same number of
Recoton Common Shares as the holder of the Jensen Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such option
in full immediately prior to the Effective Time and received in the Merger such
number of Recoton Common Shares equal to the number of shares of Jensen Common
Stock represented by such Jensen Stock Option multiplied by the Exchange Ratio,
at a price per share equal to (y) the aggregate exercise price for the shares of
Jensen Common Stock otherwise purchasable pursuant to such Jensen Stock Option
divided by (z) the number of full Recoton Common Shares deemed purchasable
pursuant to such Jensen Stock Option.
(b) As soon as practicable after the Effective Time, Recoton shall deliver
to the holders of Jensen Stock Options appropriate notices setting forth such
holders' rights pursuant to the Jensen Stock Option Plans and the agreements
evidencing the grants of such Jensen Stock Options shall continue in effect on
the same terms and conditions (subject to the adjustment required by this
Section 3.4 after giving effect to the Merger and the assumption by Recoton as
set forth above and until otherwise determined). Recoton shall comply with the
terms of the Jensen Stock Option Plans with respect to the Jensen Stock Options.
(c) Pursuant to Section 3.2 of the 1994 Stock Option and Purchase Plan For
Non-Employee Directors (the "Jensen Directors Plan"), certain directors of
Jensen ("Deferred Holders") have elected to defer the receipt of shares of
Jensen Common Stock ("Deferred Shares") owed to them in lieu of directors' fees
pursuant to the Jensen Directors Plan. Immediately prior to the Effective Time,
Jensen shall terminate each such director's right to receive the Deferred
Shares, and in consideration thereof, Jensen shall make a cash payment to each
Deferred Holder at the time provided in the final two sentences of this Section
3.4(c) (and subject, in the case of each such Deferred Holder, to the receipt
from such Deferred Holder of a Cancellation Agreement, as that term is defined
in the next sentence), in an amount equal to the number of Deferred Shares held
by such Deferred Holder times the Per Share Cash Amount. Jensen shall use its
best efforts to obtain from each Deferred Holder a written agreement
substantially in the form of Exhibit 3.4 (a "Cancellation Agreement") prior to
the Effective Time. A Deferred Holder who has delivered to Jensen a Cancellation
Agreement prior to the Effective Time shall be paid pursuant to this Section
3.4(c) at or prior to the Effective Time. In the case of any Deferred Holder who
does not deliver a Cancellation Agreement to Jensen prior to the Effective Time,
Recoton shall cause the Surviving Corporation to pay such Deferred Holder after
the Effective Time the amount to which the Deferred Holder is entitled pursuant
to this Section 3.4(c) promptly after the receipt by the Surviving Corporation
from the Deferred Holder of a Cancellation Agreement.
Section 3.5 DISSENTING SHARES. Notwithstanding any other provisions of this
Agreement to the contrary, shares of Jensen Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for such shares in
accordance with Section 262 of the GCL (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to receive the Merger
Consideration. Such stockholders shall be entitled to receive payment of the
appraised value of such shares of Jensen Common Stock held by them in accordance
with the provisions of such Section 262, except that all Dissenting Shares held
by stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares of Jensen Common
Stock under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration, as if such
shares of Jensen Common Stock were covered by Non-Elections, upon surrender, in
the manner provided in Section 3.2, of the certificate or certificates that
formerly evidenced such shares of Jensen Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JENSEN
Jensen represents and warrants to Recoton and Acquisition Sub as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Jensen is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its businesses as it is
now being conducted. Jensen is qualified to do business and is in good standing
in each jurisdiction in which the properties owned, leased or operated by it or
the nature of the businesses conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Jensen Material Adverse
Effect. For purposes of this Agreement, a Jensen Material Adverse Effect shall
be a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), results of operations or prospects of Jensen
and its subsidiaries taken as a whole, excluding the Original Equipment Business
(except that for purposes of determining whether a Jensen Material Adverse
Effect arising out of the matters described in Section 4.17 has occurred,
"Jensen Material Adverse Effect" shall mean potential liabilities and costs that
reasonably may exceed $5,000,000). True and complete copies of Jensen's
Certificate of Incorporation and By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Recoton.
Section 4.2 JENSEN COMMON STOCK. Jensen has 10,000,000 authorized shares of
Common Stock, of which 5,714,799 shares are outstanding as of November 30, 1995,
all of which are or shall be validly issued and are fully paid, nonassessable
and free of preemptive rights. Except as set forth in Section 4.2 of the
separate disclosure schedule executed and delivered by Jensen simultaneous with
the execution and delivery of the Agreement ("Jensen's Disclosure Schedule"), as
of the date hereof, there are no outstanding subscriptions, options, warrants,
rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or other agreement
obligating Jensen to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of Jensen or obligating Jensen or
any subsidiary of Jensen to grant, extend or enter into any such agreement or
commitment except pursuant to this Agreement.
Section 4.3 SUBSIDIARIES. Each direct and indirect subsidiary of Jensen is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted. Each of such subsidiaries is qualified to do
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all such other failures,
have a Jensen Material Adverse Effect. Except as set forth in Section 4.3 of
Jensen's Disclosure Schedule, all of the outstanding shares of capital stock of
each subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights, and those owned directly or indirectly by Jensen are owned
free and clear of any liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever. Except as set forth in Section 4.3
of Jensen's Disclosure Schedule or in Jensen's Annual Report on Form 10-K for
the year ended February 28, 1995 or the exhibits and schedules thereto (the
"Jensen 10-K" and, together with any reports filed by Jensen with the Securities
and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934,
as amended, (the "Exchange Act") after the Jensen 10-K and prior to the date of
this Agreement, the "Jensen 1995 Reports"), Jensen owns directly or indirectly
all of the issued and outstanding shares of the capital stock of each of its
subsidiaries. Except as set forth in Section 4.3 of Jensen's Disclosure Schedule
or in the Jensen 1995 Reports, there are no outstanding subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights affecting any shares of capital
stock of any subsidiary of Jensen, including any right of conversion or exchange
under any outstanding security, instrument or agreement. Section 4.3 of Jensen's
Disclosure Schedule sets forth a list of all material corporations,
partnerships, joint ventures and other business entities in which Jensen or any
of its subsidiaries directly or indirectly owns an interest and such
subsidiaries' direct and indirect share, partnership or other ownership interest
of each such entity.
Section 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Jensen has full
corporate power and authority to enter into this Agreement and, subject to
Jensen Stockholders' Approval (as defined in Section 4.18) and the Jensen
Required Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by Jensen of the transactions contemplated
hereby have been duly authorized by Jensen's Board of Directors, and no other
corporate proceedings on the part of Jensen are necessary to authorize the
execution and delivery of this Agreement and the consummation by Jensen of the
transactions contemplated hereby, except for the Jensen Stockholders' Approval
and the obtaining of the Jensen Required Approvals. This Agreement has been duly
and validly executed and delivered by Jensen and constitutes a valid and legally
binding agreement of Jensen enforceable against it in accordance with its terms.
(b) Except as set forth in Section 4.4(b) of Jensen's Disclosure Schedule,
the execution and delivery of this Agreement by Jensen does not, and the
consummation by Jensen of the transactions contemplated hereby will not,
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Jensen or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or By-Laws of Jensen or any of its subsidiaries, (ii)
subject to obtaining the Jensen Required Approvals and the receipt of the Jensen
Stockholders' Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Jensen or any of its subsidiaries or any of their
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Jensen or any of its
subsidiaries is now a party or by which Jensen or any of its subsidiaries or any
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Jensen Material
Adverse Effect.
(c) Except for (i) the filings by Jensen required by Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) any filings required by comparable European or European Community
regulation ("EC Filings"), (iii) the filing of the Proxy Statement (as
hereinafter defined) with the SEC pursuant to the Exchange Act, and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various blue sky
authorities and (iv) the making of the Merger Filing with the Secretary of State
of the State of Delaware in connection with the Merger (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Jensen Required Approvals"), no declaration, filing or registration
with, or notice to, or authorization, consent or approval of, any governmental
or regulatory body or authority is necessary for the execution and delivery of
this Agreement by Jensen or the consummation by Jensen of the transactions
contemplated hereby.
Section 4.5 REPORTS AND FINANCIAL STATEMENTS; DERIVATIVE TRANSACTIONS. Since
February 28, 1995, Jensen and each of its subsidiaries required to make filings
under the Securities Act, the Exchange Act and applicable state laws and
regulations, as the case may be, have filed all forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by them under each of the Securities Act, the Exchange Act,
applicable laws and regulations of Jensen's and its subsidiaries' jurisdictions
of incorporation and the respective rules and regulations thereunder, all of
which complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. Jensen has previously
delivered to Recoton true and complete copies of its (a) Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed by
Jensen or any of its subsidiaries with the SEC from February 28, 1992, until the
date hereof, (b) proxy and information statements relating to all meetings of
its stockholders (whether annual or special) and actions by written consent in
lieu of a stockholders' meeting from February 28, 1992 until the date hereof and
(c) all other reports or registration statements filed by Jensen with the SEC
from February 28, 1992 until the date hereof (collectively, the "Jensen SEC
Reports"), and (d) audited consolidated financial statements for the fiscal year
ended February 28, 1995 and its unaudited consolidated financial statements for
the nine months ended November 30, 1995 (the "Nine Month Jensen Financial
Statements") (collectively the "1995 Jensen Financial Statements").
As of their respective dates, the Jensen SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Jensen included in the Jensen SEC Reports and the 1995 Jensen Financial
Statements (collectively, the "Jensen Financial Statements") fairly present the
financial position of Jensen and its subsidiaries as of the dates thereof and
the results of their operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto), subject, in
the case of the unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein. Jensen and its
subsidiaries do not, and will not, use any derivative financial instruments
other than as disclosed in Section 4.5 of Jensen's Disclosure Schedule.
Section 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Section 4.6 of Jensen's Disclosure Schedule or in the Jensen 1995 Reports,
neither Jensen nor any of its subsidiaries had at February 28, 1995, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the 1995 Jensen
Financial Statements or reflected in the notes thereto or (b) which were
incurred after February 28, 1995, and were incurred in the ordinary course of
business and consistent with past practices and, in either case, except for any
such liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Jensen Material Adverse Effect or (ii) have been discharged or
paid in full prior to the date hereof.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 4.7 of Jensen's Disclosure Schedule or in the Jensen 1995 Reports, since
February 28, 1995 there has not been any material adverse change in the business
(including, without limitation, any actual or threatened loss of significant
customers (excluding customers of the Original Equipment Business) or any
cancellation or threatened cancellation of any orders with an aggregate value of
$1,000,000 or more (excluding orders of the Original Equipment Business)),
operations, properties, assets, liabilities, condition (financial or other),
results of operations or prospects of Jensen and its subsidiaries, taken as a
whole (excluding the original equipment business), and Jensen and its
subsidiaries have in all material respects conducted their respective businesses
in the ordinary course consistent with past practice.
Section 4.8 LITIGATION. Except as disclosed in the Jensen 1995 Reports, the
1995 Jensen Financial Statements, or Section 4.8 of Jensen's Disclosure
Schedule, (a) there are no claims, suits, actions or proceedings pending or, to
the knowledge of Jensen, threatened, nor to the knowledge of Jensen are there
any investigations or reviews pending or threatened, against, relating to or
affecting Jensen or any of its subsidiaries, which, if adversely determined,
would have a Jensen Material Adverse Effect; (b) there have not been any
developments since the date of the Jensen 10-K with respect to such claims,
suits, actions, proceedings, investigations or reviews which, individually or in
the aggregate, may have a Jensen Material Adverse Effect; and (c) except as
contemplated by the Jensen Required Approvals, neither Jensen nor any of its
subsidiaries is subject to any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator which prohibits or restricts the consummation of the
transactions contemplated hereby or may have a Jensen Material Adverse Effect.
Section 4.9 PROXY STATEMENT. The proxy statement to be distributed in
connection with the Jensen Stockholders' Meeting (the "Proxy Statement") and
which shall be included in the Registration Statement (as hereinafter defined)
will not at the time of the mailing of the Proxy Statement and any amendment or
supplement thereto, and at the time of the Jensen Stockholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier filing with the SEC of such
Proxy Statement or any amendment or supplement thereto or any earlier
communication to stockholders of Jensen with respect to the transactions
contemplated by this Agreement. The Proxy Statement will comply as to form in
all material respects with all applicable laws, including the provisions of the
Exchange Act and the rules and regulations promulgated thereunder.
Notwithstanding the foregoing, no representation is made by Jensen with respect
to information supplied by Recoton or Acquisition Sub or their representatives
specifically for inclusion in the Proxy Statement.
Section 4.10 NO VIOLATION OF LAW. Except as set forth in Section 4.10 of
Jensen's Disclosure Schedule, neither Jensen nor any of its subsidiaries is in
violation of, or, to the knowledge of Jensen, is under investigation with
respect to or has been given notice or been charged with any violation of, any
law, statute, order, rule, regulation, ordinance, or judgment of any
governmental or regulatory body or authority, except for violations which in the
aggregate do not have a Jensen Material Adverse Effect. Jensen and its
subsidiaries have all material permits, licenses, franchises and other
governmental authorizations, consents and approvals (the "Jensen Government
Approvals") necessary to conduct their businesses as presently conducted and,
except as set forth in Section 4.10 of Jensen's Disclosure Schedule, all such
Jensen Government Approvals shall be transferred to the Surviving Corporation.
Section 4.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Jensen
1995 Reports, the Jensen 1995 Financial Statements or Section 4.11 of Jensen's
Disclosure Schedule, Jensen and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (i) the respective charters or
by-laws of Jensen or any of its subsidiaries or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which Jensen or any of its subsidiaries is a
party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults, in the case of clause (ii) of
this Section 4.11 would have, in the aggregate, a Jensen Material Adverse
Effect.
Section 4.12 TAXES. (a) Jensen and its subsidiaries have duly filed with the
appropriate federal, state, local, and foreign taxing authorities all tax
returns required to be filed by them on or prior to the Effective Time and such
tax returns are true and complete in all material respects, and duly paid in
full or made adequate provision for the payment of all taxes for all periods
ending at or prior to the Effective Time. The liabilities and reserves for taxes
reflected in the Jensen balance sheets (x) as of February 28, 1995, contained in
the Jensen 10-K, are adequate to cover all taxes for any period ending on or
prior to February 28, 1995; and (y) as of August 31, 1995, contained in the Form
10-Q filed with the SEC on or about October 15, 1995 (the "Six Month 1995
Financial Statements"), are adequate to cover all taxes for any period ending on
or prior to August 31, 1995; and (z) as of November 30, 1995, contained in the
Nine Month Financial Statements are adequate to cover all taxes for any period
ending on or prior to November 30, 1995. Except as set forth in Section 4.12 of
Jensen's Disclosure Schedule, (i) there are no material liens for taxes upon any
property or asset of Jensen or any subsidiary thereof, except for (x) liens for
taxes not yet due and (y) any such liens for taxes shown on such Section 4.12 of
Jensen's Disclosure Statement, which are being contested in good faith through
appropriate proceedings; (ii) Jensen has not made any change in accounting
method, received a ruling from any taxing authority or signed an agreement with
any taxing authority which will materially and adversely affect Jensen in future
periods; (iii) during the past three years neither Jensen nor any of its
subsidiaries has received any notice of deficiency, proposed deficiency or
assessment from any governmental taxing authority with respect to taxes of
Jensen or any of its subsidiaries, except any such notice of deficiency,
proposed deficiency or assessment which will not in the aggregate cause a Jensen
Material Adverse Effect, and, any such deficiency or assessment shown on such
Section 4.12 of Jensen's Disclosure Schedule has been paid or is being contested
in good faith through appropriate proceedings; (iv) the income tax returns for
Jensen and its subsidiaries are not currently the subject of any audit by the
Internal Revenue Service (the "IRS") or any other national taxing authority, and
such federal income tax returns have been examined by the IRS (or the applicable
statutes of limitation for the assessment of federal taxes for such periods have
expired) for all periods through and including February 28, 1990, and no
material deficiencies were asserted as a result of such examinations which have
not been resolved and fully paid; (v) there are no outstanding requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any taxes or deficiencies against Jensen or any
of its subsidiaries, and no power of attorney granted by either Jensen or any of
its subsidiaries with respect to any taxes is currently in force; and (vi)
neither Jensen nor any of its subsidiaries is a party to any agreement providing
for the allocation or sharing of taxes. Neither Jensen nor any of its
subsidiaries has, with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent to the application of Section 341(f) of
the Code. Except as set forth on Section 4.12(b) of Jensen's Disclosure
Schedule, Jensen will not have any carryovers subject to limitation under
Section 382 or Section 383 of the Code immediately after the Merger. Jensen and
its subsidiaries, in accordance with Section 482 of the Code, properly conducted
intercompany pricing studies for the tax year ended February 1995, and is
conducting such study in a timely manner with respect to the tax year ending
February 1996.
(b) The term "tax" shall include any tax, assessment, levy, impost, duty, or
withholding of any nature now or hereafter imposed by a government authority and
any interest, additional tax, deficiency, penalty, charge or other addition
thereon, including without limitation any income, gross receipts, profits,
franchise, sales, use, property (real and personal), transfer, payroll,
unemployment, social security, occupancy and excise tax and customs duty. The
term "return" shall include any return, declaration, report, estimate,
information return and statement required to be filed with or supplied to any
taxing authority in connection with any taxes.
Section 4.13 CUSTOMS. Except as set forth in the Jensen 1995 Reports or in
Section 4.13 of Jensen's Disclosure Schedule, Jensen and its subsidiaries have
at all times been in compliance with all requirements administered and enforced
by the U.S. Customs Service, including, but not limited to the classification,
valuation, and marking of articles imported into the United States in a way so
as not to give rise to a Jensen Material Adverse Effect.
Section 4.14 EMPLOYEE BENEFIT PLANS; ERISA. (a) Section 4.14 of Jensen's
Disclosure Schedule lists all material employee benefit plans, employment
contracts or other arrangements for the provision of benefits for employees or
former employees of Jensen and its subsidiaries (other than its foreign
subsidiaries as to which such disclosure shall be provided within ten business
days after the date hereof and as to which the agreements, plans, contracts, or
other arrangements thereof shall not be unduly burdensome or out of the
ordinary), and, except as set forth in Section 4.14(a) of Jensen's Disclosure
Schedule, neither Jensen nor its subsidiaries have any commitment to create any
additional plan, contract or arrangement or to amend any such plan, contract or
arrangement so as to increase benefits thereunder, except as required under
existing collective bargaining agreements. Section 4.14(a) of Jensen's
Disclosure Schedule identifies all "employee benefit plans" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA, covering current or former employees of Jensen and its
subsidiaries (the "Jensen Plans"), other than Jensen Plans which are described
in Jensen 1995 Reports or the Proxy Statement for the 1995 Annual Meeting of
Stockholders of Jensen. A true and correct copy of each of the employee benefit
plans, employment contracts and other arrangements for the provision of benefits
for employees and former employees of Jensen and its subsidiaries described in
the Jensen SEC Reports, the Jensen Plans listed on Section 4.14(a) of Jensen's
Disclosure Schedule, except for any multiemployer plans, and all contracts
relating thereto, or to the funding thereof (including, without limitation, all
trust agreements, insurance contracts, investment management agreements,
subscription and participation agreements and recordkeeping agreements), each as
will be in effect at the Effective Time, has been provided to Recoton. In the
case of any employee benefit plan, employment contract or other benefit
arrangement which is not in written form, an accurate description of such plan,
contract or arrangement as will be in effect at the Effective Time has been
provided to Recoton. A true and correct copy of the most recent annual report,
actuarial report, summary plan description, and Internal Revenue Service
determination letter with respect to each such Jensen plan, to the extent
applicable, and a current schedule of assets (and the fair market value thereof
assuming liquidation of any asset which is not readily tradeable) held with
respect to any funded plan, Jensen Plan, or benefit arrangement has been
provided to Recoton by Jensen, and there have been no material changes in the
financial condition in the respective plans, Jensen Plans or benefit
arrangements from that stated in such annual report and actuarial reports.
(b) Except as disclosed in the Jensen 1995 Reports or as set
forth in Section 4.14(b) of Jensen's Disclosure Schedule, (i) there have been no
prohibited transactions within the meaning of Section 406 of ERISA or Section
4975 of the Code with respect to any of the Jensen Plans which, assuming that
the taxable period of such transaction expired as of the date hereof, could
subject Jensen or its subsidiaries to a material tax or penalty under Section
502(i) of ERISA or Section 4975 of the Code; (ii) no liability (except for
premiums due) has been or is expected to be incurred by Jensen or any of its
subsidiaries under Title IV of ERISA with respect to any of the Jensen Plans or
with respect to any ongoing, frozen or terminated "single employer plan" within
the meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by
any of them, or by any entity which is considered a single employer with Jensen
under Section 4001 of ERISA or Section 414 of the Code (a "Jensen ERISA
Affiliate"); (iii) all amounts which Jensen or its subsidiaries are required to
pay as contributions to the Jensen Plans have been timely made or have been
reflected in the Jensen Financial Statements; (iv) none of the Jensen Plans has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived; (v) the current value
of all "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions used in the Plan's most
recent actuarial valuation) under each of the Jensen Plans which is subject to
Title IV of ERISA did not exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount disclosed in
the Jensen 10-K as of February 28, 1995; (vi) each of the Jensen Plans has been
operated and administered in all material respects in accordance with applicable
laws, including, but not limited to, the reporting and disclosure requirements
of Part 1 of Subtitle I of ERISA and the group health plan continuation
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA; (vii) each of the Jensen Plans which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the IRS to be
so qualified and Jensen is not aware of any circumstances likely to result in
revocation of any such determination; (viii) there are no material pending,
threatened or anticipated claims involving any of the Jensen Plans other than
claims for benefits in the ordinary course; (ix) no notice of a "reportable
event" within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived has been required to be filed for any
of the Jensen Plans; (x) neither Jensen nor any of its subsidiaries is a party
to, nor participates or has any liability or contingent liability with respect
to, any multiemployer plan (regardless of whether based on contributions of a
Jensen ERISA affiliate); and (xi) neither Jensen nor its subsidiaries has any
liability or contingent liability for retiree life and health benefits under any
of the Jensen Plans other than statutory liability for providing group health
plan continuation coverage under Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code, except as set forth on Section 4.14(b) of Jensen's
Disclosure Schedule.
(c) Except as set forth in Section 4.14(c) of Jensen's Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will accelerate benefits or any payments under
any Jensen employee agreement, plan or arrangement.
Section 4.15 MATERIAL DEFAULTS. Except as set forth on Section 4.15 of
Jensen's Disclosure Schedule, neither Jensen nor its subsidiaries is, or has
received any notice or has any knowledge that any other party is, in default in
any respect under any contract, agreement, commitment, arrangement, lease,
insurance policy, or other instrument to which Jensen or any of its subsidiaries
is a party or by which Jensen or any of its subsidiaries or the assets,
business, or operations receives benefits, except for those defaults which would
not have, individually or in the aggregate, a Jensen Material Adverse Effect;
and there has not occurred any event that with the lapse of time or the giving
of notice or both would constitute such a default.
Section 4.16 LABOR MATTERS. Except as set forth on Section 4.16 of Jensen's
Disclosure Schedule, there are no material controversies pending or, to the
knowledge of Jensen, threatened between Jensen or its subsidiaries and any
representatives of its employees, and, to the knowledge of Jensen, there are no
material organizational efforts presently being made involving any of the
presently unorganized employees of Jensen or its subsidiaries. Jensen and its
subsidiaries have complied in all material respects with all laws relating to
the employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and no person has, to the knowledge of Jensen,
asserted that Jensen or its subsidiaries are is liable in any material amount
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing.
Section 4.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, Jensen and its subsidiaries have complied in all
respects with all Environmental Laws (as defined below in this Section). Jensen
and its subsidiaries have obtained and will maintain through the Closing Date
all permits, licenses, certificates and other authorizations which are required
with respect to its operation under any Environmental Laws and all such permits,
licenses, certificates and other authorizations are listed on Section 4.17 to
Jensen's Disclosure Schedule.
(b) Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, Jensen and its subsidiaries are in compliance in
all respects with all permits, licenses and authori- zations required by any
Environmental Laws, and is also in full compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any Environmental Laws or contained in any
regulation or code promulgated or approved under the Environmental Laws, or any
plan, order, decree, judgment, injunction, notice or demand letter issued to or
entered, against Jensen thereunder. All products manufactured and services
provided by Jensen or its subsidiaries prior to the date hereof are in
compliance with all Environmental Laws applicable thereto and all such products
and services so manufactured or provided prior to the Closing Date will as of
such date be in compliance with all Environmental Laws applicable thereto.
Jensen has hereto delivered to Buyer true and complete copies of all
environmental studies made in the last ten years relating to the business or
assets of Jensen and its subsidiaries.
(c) Except as set forth in the Jensen 1995 Reports or Section 4.17 to
Jensen's Disclosure Schedule, there is no pending or, to Jensen's knowledge,
threatened civil, criminal or administrative Action, demand, claim, hearing,
notice of violation, investigation, proceeding, notice or demand letter that
affects or applies to Jensen or its subsidiaries, their business or assets, the
products they have manufactured or the services they have provided relating in
any way to any Environmental Laws or any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered against Jensen or its
subsidiaries thereunder.
(d) Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, there are no past or present (or, to the knowledge
of Jensen, anticipated) events, conditions, circumstances, activities,
practices, incidents, Actions or plans which may interfere with or prevent
compliance or continued compliance by Jensen or its subsidiaries with any
Environmental Laws or with any regulation or code promulgated or approved under
the Environmental Laws, or any plan, order, decree, judgment, injunction, notice
or demand letter issued to or entered against Jensen or its subsidiaries
thereunder, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, by Jensen or its subsidiaries of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or waste.
(e) Except as set forth in Section 4.17 to the Jensen Disclosure Schedule
and except in accordance with a valid governmental permit, license, certificate
or approval listed in Section 4.17 to Jensen's Disclosure Schedule there has
been no emission, spill, release or discharge by Jensen or its subsidiaries,
from any of their assets, from any site at which any of such assets are or were
located, into or upon (i) the air, (ii) soils or improvements, (iii) surface
water or ground water, or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing such assets of any toxic or hazardous
substances or wastes used, stored, generated, treated or disposed at or from any
of such assets (any of which events is hereinafter referred to as "Hazardous
Discharge").
(f) Prior to the Closing Date, there shall not occur any Hazardous Discharge
(except in accordance with a valid governmental permit, license, certificate or
approval listed in Section 4.17 to Jensen's Disclosure Schedule).
(g) The term "Environmental Laws" means all federal, state, local and
foreign environmental, health and safety laws, codes and ordinances and all
rules and regulations promulgated under the Environmental Laws, including,
without limitation laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes. As
used in this Agreement, the term "hazardous substances or wastes" includes,
without limitation, (i) all substances which are designated pursuant to Section
311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C ss.
1251 ET SEQ.; (ii) any element, compound, mixture, solution, or substance which
is designated pursuant to Section 102 of the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 ET SEQ.;
(iii) any hazardous waste having the characteristics which are identified under
or listed pursuant to Section 3001 of the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. ss. 6901 ET SEQ.; (iv) any toxic pollutant listed under
Section 307(a) of the FWPCA; (v) any hazardous air pollutant which is listed
under Section 112 of the Clean Air Act, 42 U.S.C. ss. 7401 ET SEQ.; (vi) any
imminently hazardous chemical substance or mixture with respect to which action
has been taken pursuant to Section 7 of the Toxic Substances Control Act, 15
U.S.C. ss. 2601 ET SEQ.; and (vii) waste oil.
(h) Notwithstanding anything in the foregoing to the contrary, the
representations and warranties contained in this Section 4.17 shall be deemed to
be true and correct unless the aggregate exposure to Recoton, Acquisition Sub
and/or the Surviving Corporation of undisclosed and disclosed liabilities which
have either arisen or which may arise under the Environmental Laws exceeds $5
million.
Section 4.18 CERTAIN BUSINESS PRACTICES. As of the date of this Agreement,
except for such action which would not have a Jensen Material Adverse Effect,
neither Jensen nor any of its subsidiaries not any directors, officer, agents,
or employees of Jensen or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
Section 4.19 NO EXCESS PARACHUTE PAYMENTS. Sections 4.14(a), 4.14(b), and
4.14(c) of Jensen's Disclosure Schedule set forth all written contracts,
arrangements, or undertakings (excluding Jensen Stock Options (as defined in
Section 3.4)) pursuant to which any person may receive any amount or entitlement
from Jensen or the Surviving Corporation or any of their respective subsidiaries
(including cash or property or the vesting of property) that may be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(B)(1) of the Code) (any such amount being an "Excess Parachute
Payment") as a result of any of the transactions being contemplated by this
Agreement. Except as set forth in Section 4.14(c) of Jensen's Disclosure
Schedule, no person is entitled to receive any additional payment from Jensen,
the Surviving Corporation, their respective subsidiaries, or any other person (a
"Parachute Gross-Up Payment") in the event that the 20 percent parachute excise
tax of Section 4999(a) of the Code is imposed on such person. The Board of
Directors of Jensen has not during the six months prior to the date of this
Agreement granted to any officer, director, or employee of Jensen any right to
receive any Parachute Gross-Up Payment.
Section 4.20 TRADEMARKS, ETC. Section 4.20 of Jensen's Disclosure Schedule
sets forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks, and registered copyrights and
applications therefor owned, used, or filed by or licensed to Jensen and its
subsidiaries ("Intellectual Property Rights") and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as disclosed on Section 4.20 of Jensen's Disclosure Schedule, the Intellectual
Property Rights which are trademark or copyright registrations and issued
patents are valid and in good standing, and are owned by Jensen, free and clear
of all liens, encumbrances, equities, or claims and, along with applications
therefor, are not involved in any interferences, litigations, oppositions, or
cancellation proceedings. Jensen or its subsidiaries owns or has the right to
use, without payment to any other party, the patents, trademarks, trade names,
service marks, copyrights, and applications therefor referred to in such
Schedule or otherwise used by Jensen or its subsidiaries, and the consummation
of the transactions contemplated hereby will not alter or impair such rights in
any material respect. Except as set forth in Section 4.20 to Jensen's Disclosure
Schedule, Jensen is not a licensor or licensee in respect of any Intellectual
Property Rights, nor has it granted any rights thereto or interest therein to
any person or entity. Except as set forth in Section 4.20 of Jensen's Disclosure
Schedule, no claims are pending or threatened by any person with respect to the
ownership, validity, enforceability, or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which claims reasonably could be expected to have a Jensen Material
Adverse Effect. Jensen shall make all required filings to ensure the continued
validity and enforceability of its Intellectual Property Rights up to the
Effective Time.
Section 4.21 JENSEN STOCKHOLDERS' APPROVAL. Jensen will take all necessary
action so that stockholder approval of the Merger and the transactions
contemplated hereby will require the affirmative vote of (i) a majority of the
outstanding shares of Jensen Common Stock, and (ii) a majority of the
outstanding shares of Jensen Common Stock which are voted at the Jensen
Stockholders' Meeting other than shares held directly or indirectly by Robert G.
Shaw. Approval shall be sought of three separate proposals for the Merger: (a)
as a Cash and Stock Transaction ("Proposal 1"), (b) as an All Cash Transaction
if the Recoton Share Price is equal to or greater than $16.00 and the tax
opinion required by Section 8.1(h) is not confirmed at the Closing ("Proposal
2") and (c) as an All Cash Transaction because the Average Recoton Share Price
is below $16.00 ("Proposal 3"). Either (x) both Proposal 1 and Proposal 2 or (y)
Proposal 3 alone shall be voted on at the Jensen Stockholders Meeting, depending
on whether the Average Recoton Share Price is either equal to or above $16.00 or
is below $16.00. If Proposals 1 and 2 are submitted for a vote at the Jensen
Stockholders Meeting, the Merger shall not be deemed approved by the
stockholders unless Proposal 1 is approved and such tax opinion is confirmed at
the Closing or if both Proposals 1 and 2 are approved.
Section 4.22 STATE TAKEOVER STATUTES. The Board of Directors of Jensen has
approved the Merger. The Certificate of Incorporation of Jensen expressly elects
not to be governed by Section 203 of the GCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ACQUISITION SUB AND RECOTON
Acquisition Sub and Recoton hereby jointly and severally represent and
warrant to Jensen as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Acquisition Sub and Recoton are
each corporations duly organized, validly existing and in good standing under
the laws of their states of incorporation and have the requisite corporate power
and authority to own, lease and operate their assets and properties and to carry
on their businesses as they are now being conducted. Acquisition Sub and Recoton
are each qualified to do business and is in good standing in each jurisdiction
in which the properties owned, leased or operated by each or the nature of the
businesses conducted by each makes such qualification necessary, except where
the failure to be so qualified and in good standing will not, when taken
together with all other such failures, have a Recoton Material Adverse Effect.
For purposes
of this Agreement, a Recoton Material Adverse Effect shall be a material adverse
effect on the business, operations, properties, assets, condition (financial or
otherwise), results of operations or prospects of Recoton and its subsidiaries
taken as a whole. True and complete copies of Acquisition Sub's and Recoton's
Certificate of Incorporation and By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Jensen.
Recoton directly owns and has the power to vote all of the outstanding capital
stock of Acquisition Sub, and, as the sole stockholder of Acquisition Sub, has
approved this Merger Agreement and the transactions contemplated hereunder.
Section 5.2 RECOTON COMMON SHARES. Recoton has 25,000,000 authorized Common
Shares, of which 11,163,390 shares are outstanding as of December 31, 1995.
Acquisition Sub holds, or by the Effective Time shall hold, a number of Recoton
Common Shares sufficient to convert Jensen Common Stock to Recoton Common Shares
pursuant to Article III, all of which are or shall be validly issued and are
fully paid, nonassessable and free of preemptive rights. Except as set forth in
Section 5.2 of the separate disclosure schedule executed and delivered by
Recoton and Acquisition Sub simultaneous with the execution and delivery of this
Agreement ("Recoton's Disclosure Schedule") or in Recoton's Annual Report on
Form 10-K for the year ended December 31, 1994 and the exhibits and schedules
thereto (the "Recoton 10-K" and, together with any reports filed by Recoton with
the SEC under the Exchange Act after the Recoton 10-K and prior to the date of
this Agreement, the "Recoton 1994-5 Reports") or any of the Recoton 1994-5
Reports, as of the date hereof, there are no outstanding subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies and other
commitments, understandings, restrictions and arrangements, including any right
of conversion or exchange under any outstanding security, instrument or other
agreement obligating Recoton to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Recoton or
obligating Recoton or any subsidiary of Recoton to grant, extend or enter into
any such agreement or commitment except pursuant to this Agreement. The Recoton
Common Shares to be issued to stockholders of Jensen in the Merger will be at
the Effective Time duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights and each certificate evidencing such shares shall
contain a notation incorporating by reference that certain Rights Agreement
dated as of October 27, 1995 between Recoton and Chemical Mellon Shareholder
Services L.L.C.
Section 5.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Recoton and
Acquisition Sub have full corporate power and authority to enter into this
Agreement and the Recoton Required Approvals (as hereinafter defined), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Recoton and Acquisition
Sub of the transactions contemplated hereby have been duly authorized by
Recoton's and Acquisition Sub's Boards of Directors, and no other corporate
proceedings on the part of Recoton and Acquisition Sub are necessary to
authorize the execution and delivery of this Agreement and the consummation by
Recoton and Acquisition Sub of the transactions contemplated hereby except for
the obtaining of the Recoton Required Approvals. This Agreement has been duly
and validly executed and delivered by Recoton and Acquisition Sub, and, assuming
the due authorization, execution and delivery hereof by Jensen, constitutes a
valid and legally binding agreement of Recoton and Acquisition Sub enforceable
against them in accordance with its terms.
(b) Except as set forth in Section 5.3(b) of Recoton's Disclosure Schedule,
the execution and delivery of this Agreement by Recoton and Acquisition Sub does
not, and the consummation by Recoton and Acquisition Sub of the transactions
contemplated hereby will not, violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Recoton or Acquisition Sub or any of its subsidiaries under any of the terms,
conditions or provisions of (i) the respective charters or By-Laws of Recoton or
any of its subsidiaries, (ii) subject to obtaining the Recoton Required
Approvals, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to Recoton or any of its subsidiaries or any of their
respective properties or assets, and (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Jensen or any of its
subsidiaries is now a party or by which Jensen or any of its subsidiaries or any
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Recoton
Material Adverse Effect.
(c) Except for (i) the filings by Recoton, Acquisition Sub and Jensen
required by Title II of the HSR Act, (ii) any EC Filings, (iii) the filing of
the Registration Statement (as hereinafter defined) with the SEC pursuant to the
Securities Act, and the declaration of the effectiveness thereof by the SEC and
filings with various blue sky authorities, (iv) the making of the Merger Filing
with the Secretary of State of the State of Delaware in connection with the
Merger and (v) the listing with Nasdaq of the additional Recoton Common Shares
to be issued in the Merger (the filings and approvals referred to in clauses (i)
through (v) are collectively referred to as the "Recoton Required Approvals"),
no declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Recoton or
Acquisition Sub or the consummation by Recoton or Acquisition Sub of the
transactions contemplated hereby, other than such filings, registrations,
authorizations, consents or approvals the failure of which to make or obtain, as
the case may be, will not, in the aggregate, have a Recoton Material Adverse
Effect.
Section 5.4 REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1994,
Recoton and each of its subsidiaries required to make filings under the
Securities Act, the Exchange Act and applicable state laws and regulations, as
the case may be, have filed all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by them under each of the Securities Act, the Exchange Act, applicable
laws and regulations of Recoton's and its subsidiaries' jurisdictions of
incorporation and the respective rules and regulations thereunder, all of which
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. Recoton has previously
delivered to Jensen true and complete copies of its (a) Annual Reports on Form
10-K, Quarterly Reports on Form 10- Q, and Current Reports on Form 8-K filed by
Recoton or any of its subsidiaries with the SEC from December 31, 1991 until the
date hereof, (b) proxy and information statements relating to all meetings of
its shareholders (whether annual or special) and actions by written consent in
lieu of a shareholders' meeting from December 31, 1991 until the date hereof and
(c) all other reports or registration statements filed by Recoton or its
subsidiaries with the SEC from December 31, 1991, until the date hereof
(collectively, the "Recoton SEC Reports") and (d) audited consolidated financial
statements of Recoton for the fiscal year ended December 31, 1994 and its
unaudited consolidated financial statements for the nine months ended September
30, 1995 (the "1994-95 Recoton Financial Statements"). As of their respective
dates, the financial statements of Recoton included in the Recoton SEC Reports
and the 1994-95 Recoton Financial Statements (collectively, the "Recoton
Financial Statements") fairly present the financial position of Recoton and its
subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
Section 5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Section 5.5 of Recoton's Disclosure Schedule or in the Recoton 1994-5 Reports,
neither Recoton nor any of its subsidiaries had at December 31, 1994, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the 1994- 1995
Recoton Financial Statements or reflected in the notes thereto or (b) which were
incurred after December 31, 1994, and were incurred in the ordinary course of
business and consistent with past practices and, in either case, except for any
such liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Recoton Material Adverse Effect or (ii) have been discharged
or paid in full prior to the date hereof.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 5.6 of Recoton's Disclosure Schedule or in the Recoton 1994-95 Reports,
since December 31, 1994, there has not been any material adverse change in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of Recoton and its subsidiaries,
taken as a whole, and Recoton and its subsidiaries have in all material respects
conducted their respective businesses in the ordinary course consistent with
past practice.
Section 5.7 REGISTRATION STATEMENT. The Prospectus forming part of the
Registration Statement on Form S-4 to be filed under the Securities Act with the
SEC by Recoton for the purpose of registering the Recoton Common Shares to be
issued in the Merger, including Recoton Common Shares that may be issued upon
the exercise of Jensen Stock Options after the Effective Time (the "Registration
Statement") will not at the time it becomes effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier filing with the SEC of such
Registration Statement or any amendment or supplement thereto. The Registration
Statement will comply as to form in all material respects with all applicable
laws, including the provisions of the Securities Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, no
representation is made by Recoton with respect to information supplied by Jensen
or its representatives specifically for inclusion therein.
Section 5.8 NO VIOLATION OF LAW. Except as disclosed in the Recoton 1994-5
Reports or set forth in Section 5.8 of Recoton's Disclosure Schedule, neither
Recoton nor any of its subsidiaries is in violation of, or, to the knowledge of
Recoton, is under investigation with respect to or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance, or judgment of any governmental or regulatory body or authority,
except for violations which in the aggregate do not have a Recoton Material
Adverse Effect. Recoton and its subsidiaries have all material permits,
licenses, franchises and other governmental authorizations, consent and
approvals necessary to conduct their businesses as presently conducted.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY JENSEN PENDING THE MERGER. Except as set
forth in Section 6.1 of Jensen's Disclosure Schedule or as otherwise
contemplated by this Agreement, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless Recoton shall otherwise
agree in writing (it being agreed, however, that Jensen shall be solely
responsible for its operations and those of its subsidiaries in accordance with
the provisions of this Agreement), Jensen shall and shall cause each of its
subsidiaries, to:
(a) conduct their respective businesses in the ordinary
and usual course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters
or by-laws; (ii) split, combine or reclassify their outstanding capital
stock or declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise; or (iii) knowingly take any action which
would result in a failure to maintain the trading of Jensen Common Stock on
Nasdaq;
(c) not (i) except for the issuance of shares of Common Stock
upon the exercise of currently outstanding Jensen Stock Options, authorize
the issuance of, or issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of, their capital stock
of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, (ii) except for the sale of the assets
associated with the Original Equipment Business as described in Section
8.3(f) and the sale of the AR Rights pursuant to the AR Agreement, sell
(including, without limitation, by sale/leaseback), pledge, dispose of,
license or encumber any material assets (including without limitation
intellectual property), or any interests therein, other than in the ordinary
course of business and consistent with past practice; (iii) redeem,
purchase, acquire or offer to purchase or acquire any (x) shares of its
capital stock, other than in accordance with the governing terms of such
securities or (y) long-term debt, other than as required by the governing
instruments relating thereto; (iv) take or fail to take any action which
action or failure to take action would cause Acquisition Sub, Jensen or
their respective stockholders (except to the extent that any stockholders
perfect dissenters' rights under Delaware law, or receive cash in lieu of
fractional shares or receive the Per Share Cash Amounts) to recognize gain
or loss for federal income tax purposes as a result of the consummation of
the Merger or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing; PROVIDED, however, that
Jensen or any of its subsidiaries, after consulting with Recoton, may take
any of the actions otherwise prohibited by this Section 6.1(c) if counsel to
Jensen advises the Board of Directors of Jensen or any of its subsidiaries
that the failure to take such action or actions might reasonably subject
Jensen's or any of its subsidiaries' directors to liability for breach of
their fiduciary duties;
(d) use their best efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and others
having business relationships with them;
(e) confer on a regular and frequent basis with one or more
representatives of Recoton to discuss operational matters of materiality and
the general status of ongoing operations;
(f) promptly notify Recoton of any significant changes in the
business, properties, assets, financial condition, or results of operations
or prospects of Jensen or its subsidiaries taken as a whole (excluding the
Original Equipment Business);
(g) not acquire, or publicly propose to acquire, all or any
substantial part of the business and properties or capital stock of any
person not a party to this Agreement, whether by merger, purchase of assets,
tender offer or otherwise;
(h) not, directly or indirectly, through any officer, director,
employee, representative, agent, or otherwise, solicit, initiate or
encourage the submission of any proposal or offer from any person
(including, without limitation, a "person" as defined in Section 13(d)(3) of
the Exchange Act) or entity relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any portion of the assets
of, or any equity interest in, or any merger or other business combination
with, Jensen or any of its subsidiaries, other than with respect to the
Original Equipment Business or the transactions contemplated hereby
(collectively, a "Jensen Acquisition Transaction"); PROVIDED, HOWEVER, that
Jensen or any of its subsidiaries may take any of the actions otherwise
prohibited by this Section 6.1(h) if counsel to Jensen advises the Board of
Directors of Jensen or any of its subsidiaries that the failure to take such
action or actions might reasonably subject Jensen's or any of its
subsidiary's directors to liability for breach of their fiduciary duties;
and PROVIDED, FURTHER HOWEVER, that notwithstanding the foregoing sentence,
(a) following receipt of a BONA FIDE unsolicited written offer to consummate
a Jensen Acquisition Transaction (an "Acquisition Proposal"), Jensen may
take and disclose to Jensen's stockholders the position of the Board of
Directors of Jensen contemplated by Rule 14e-2 under the Exchange Act or
otherwise make appropriate disclosures to its stockholders, (b) Jensen may
furnish or cause to be furnished information concerning its business,
properties or assets to a third party, and (c) Jensen may engage in
discussions or negotiations with a third party concerning a Jensen
Acquisition Transaction. If Jensen should receive an Acquisition Proposal or
take any action described in (b) or (c) above, Jensen shall promptly inform
Recoton of the material details of such Acquisition Proposal and/or its
actions in response thereto or its actions described in clauses (b) or (c)
and shall thereafter keep Recoton reasonably and promptly informed of all
material facts and material circumstances relating to such Acquisition
Proposal and Jensen's actions shall include the actions of its advisors,
agents and representatives.
(i) not enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except with the prior written approval of Recoton;
(j) not adopt, enter into or amend any bonus, profit sharing,
compensation (except ordinary course salary adjustments consistent with
historic practice), stock option, pension, retirement, deferred
compensation, health care, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
employee or retiree, except as required to comply with changes in applicable
law occurring after the date hereof, except with the prior written approval
of Recoton;
(k) maintain with financially responsible insurance companies,
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice and
customary for companies engaged in the business engaged in by Jensen and its
subsidiaries;
(l) not introduce any new product or plan which would
substantially increase the risk exposure of Jensen and its
subsidiaries taken as a whole;
(m) not enter into any material arrangement, agreement, or
contract with any third party (other than customers in the ordinary course
of business) which provides for an exclusive arrangement with that third
party or is substantially more restrictive on Jensen or substantially less
advantageous to Jensen than arrangements, agreements, or contracts existing
on the date hereof;
(n) not establish any new lines of credit or other credit
facilities or incur any indebtedness other than pursuant to existing credit
facilities except for trade liabilities incurred in the ordinary course of
business; and
(o) not agree in writing, or otherwise, to take any of the
foregoing actions or any other action which would make any representation or
warranty contained in Article IV untrue or incorrect in any material respect
as of the time of the Closing.
Section 6.2 SITE TESTING AND EVALUATION. Prior to the later of March 1, 1996
or the date of the Proxy Statement (which Recoton may cause to be delayed if it
is still conducting its study and testing), Recoton may at its own expense
perform or have performed such environmental site inspections and reasonable
testing relating to the real property owned or operated by Jensen or its
subsidiaries as it
may deem appropriate. If based upon the written reports of independent
environmental consultants, Recoton determines in its sole and reasonable
discretion that the results of the inspections or tests performed indicate that
any of such property or a number of such properties is, or that there is a
material risk that such property(ies) may be, contaminated in a way as to give
rise to possible liability, contingent or otherwise, under the Environmental
Laws in an aggregate amount of $5,000,000 or greater, Recoton may terminate this
Agreement by notice to Jensen prior to the date of the Proxy Statement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION. (a) Jensen and its subsidiaries shall
afford to Recoton and Acquisition Sub and its accountants, counsel, and other
representatives full access during normal business hours throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and to their customers, vendors, employees, consultants and professional
advisors and, during such period, shall furnish promptly to Recoton and
Acquisition Sub (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state
securities laws or the HSR Act or filed or received by any of them with or from
the SEC, Federal Trade Commission ("FTC") or Department of Justice ("DOJ") and
(ii) all other information concerning their respective businesses, properties
and personnel as Acquisition Sub may reasonably request; PROVIDED, HOWEVER, that
no investigation pursuant to this Section 7.1(a) shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Jensen and its subsidiaries
shall promptly advise Recoton and Acquisition Sub in writing of any change or
occurrence of any event after the date of this Agreement having, or which,
insofar as can reasonably be foreseen, in the future may have, a Jensen Material
Adverse Effect.
(b) Recoton and its subsidiaries shall afford to Jensen and its accountants,
counsel and other representatives full access during normal business hours
throughout the period prior to the Effective Time to all of their respective
properties, books, contracts, commitments and records (including, but not
limited to, tax returns) and, during such period, shall furnish promptly to
Jensen (i) a copy of each report, schedule and other document filed or received
by any of them pursuant to the requirements of federal or state securities laws
or the HSR Act or filed or received by any of them with or from the SEC, FTC or
DOJ and (ii) all other information concerning their respective businesses,
properties and personnel as Jensen may reasonably request; PROVIDED, HOWEVER,
that no investigation pursuant to this Section 7.1(b) shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Recoton and its subsidiaries
shall promptly advise Jensen in writing of any change or occurrence of any event
after the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Recoton Material Adverse Effect.
(c) Any information received pursuant to Sections 7.1(a) and 7.1(b) above
shall be considered Evaluation Material (as defined in the letter agreements
dated August 21, 1995 and October 16, 1995, as applicable (the "Confidentiality
Agreements"), between Recoton and Jensen, and such information shall be held in
confidence by Recoton, Acquisition Sub and Jensen in accordance with the terms
of the Confidentiality Agreements.
Section 7.2 REGISTRATION STATEMENT AND PROXY STATEMENT. Recoton shall
prepare and file with the SEC as soon as reasonably practicable after the date
hereof the Registration Statement (in which the Proxy Statement shall be
included) and shall use all reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable. Jensen shall
prepare and file with the SEC as soon as reasonably practicable after the date
hereof the Proxy Statement. Recoton shall also take any action required to be
taken under applicable state blue sky or securities laws in connection with the
issuance of Recoton Common Shares in the Merger; PROVIDED, HOWEVER, that with
respect to such blue sky qualifications neither Recoton nor Jensen shall be
required to register or qualify as a foreign corporation or to take any action
which would subject it to service of process in any jurisdiction (other than
Delaware) where any such entity is not now so subject, except as to matters and
transactions relating to or arising solely from the offer and sale of Recoton
Common Shares. Recoton and Jensen shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with any action by any of them in connection with the preceding
sentence. The information provided and to be provided by Recoton and Jensen,
respectively, (and by their auditors, attorneys, financial advisors or other
consultants or advisors) to the other for use in the Registration Statement and
Proxy Statement shall be true and complete in all material respects without
omission of any material fact which is required to make such information not
false or misleading.
Section 7.3 STOCKHOLDERS' APPROVAL. Subject to the provisions of Section
6.1(h) and 9.1(e), Jensen shall promptly submit this Agreement and the
transactions contemplated hereby for the approval of its stockholders at the
Jensen Stockholders' Meeting to be held as soon as practicable after the
Registration Statement is declared effective by the SEC and, subject to the
fiduciary duties of the Board of Directors of Jensen under applicable law, shall
use its best efforts to obtain stockholder approval (the "Jensen Stockholders'
Approval") of this Agreement and the transactions contemplated hereby in
accordance with Section 4.21, including approval of the separate proposals
enumerated in, and in accordance with, Section 4.21. Subject to the fiduciary
duties of the Board of Directors of Jensen under applicable law and the
provisions of Section 6.1(h) and 9.1(e), Jensen shall, through its Board of
Directors, recommend to its stockholders approval of the proposals enumerated in
Section 4.21.
Section 7.4 COMPLIANCE WITH THE SECURITIES ACT. Jensen shall use its best
efforts to cause each principal executive officer, each director and each other
person who is an "affiliate," as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (an "Affiliate"), of Jensen to deliver to
Recoton and Jensen on or prior to the Effective Time a written agreement (an
"Affiliate Agreement") to the effect that such person will not offer to sell,
sell or otherwise dispose of any Recoton Common Shares issued in the Merger,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel reasonably satisfactory to Recoton, is
exempt from the registration requirements of the Securities Act and, in any
case, until after the results covering 30 days of post-merger combined
operations of Recoton and Jensen have been filed with the SEC, sent to
shareholders of Recoton or otherwise publicly issued.
Section 7.5 NASDAQ LISTING. Recoton shall use its best efforts to obtain the
listing on Nasdaq, at or before the Effective Time of the additional Recoton
Common Shares to be issued pursuant to the Merger.
Section 7.6 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section 7.7 AGREEMENT TO COOPERATE. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents and approvals and SEC "no-action" letters
(including, but not limited to, required approvals under applicable Delaware
state laws and regulations), to effect all necessary registrations and filings
(including, but not limited to, filings under the HSR Act) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible), subject, however, to the provisions of
Sections 6.1(h) and 9.1(e) and to the requisite votes of the stockholders of
Jensen. Each party hereto agrees to allow the other to review each regulatory
filing made by such party prior to the filing thereof during the term of this
Agreement.
Section 7.8 PUBLIC STATEMENTS. The parties shall release a press release
immediately upon the signing of this Agreement in the form set forth as Exhibit
7.8 to this Agreement. None of the parties hereto shall issue any press release
or make any other public statements, in each case relating to or connected with
or arising out of this Agreement or the matters contained therein, without
obtaining the prior written approval of the other parties to the contents and
the manner of presentation and publication thereof, PROVIDED, HOWEVER, that
nothing herein shall prevent any party from making any disclosures required by
applicable law or regulation (including regulation of the SEC and the NASD).
Section 7.9 ACCOUNTANTS' LETTERS. Each of Recoton and Jensen shall use its
best efforts to cause to be delivered to the other letters of Cornick, Garber &
Sandler, LLP, independent auditors for Recoton, and Coopers and Lybrand, LLP,
independent auditors for Jensen, respectively, dated the date of the Proxy
Statement, the effective date of the Registration Statement and the Effective
Time (or such other dates reasonably acceptable to the parties) with respect to
certain financial statements and other financial information included in the
Registration Statement, which letters shall be in customary form and substance
reasonably satisfactory to the addressee.
Section 7.10 INDEMNIFICATION OF CERTAIN OFFICERS AND DIRECTORS. (a) To the
extent permitted by applicable law, Recoton and Acquisition Sub agree that all
rights to indemnification from Jensen or any subsidiary of Jensen now existing
in favor of the directors, officers, employees or agents of Jensen and any
subsidiary of Jensen as provided in their respective certificates of
incorporation or charters, as the case may be, or by-laws, as in effect on the
date of this Agreement, shall survive the Merger and shall continue in full
force and effect and be honored by Recoton, Acquisition Sub and the Surviving
Corporation for a period of not less than five years from the Effective Time;
PROVIDED, HOWEVER, that in the event any claim or claims are asserted or made
within such five-year period, all such rights shall continue until final
disposition of any such claim or claims.
(b) Recoton and Acquisition Sub will use their best efforts, and will cause
the Surviving Corporation to use its best efforts, to cause to be maintained in
effect a tail, for not less than three years from the Effective Time, on the
current policies of directors' and officers' liability insurance maintained by
Jensen and the subsidiaries of Jensen (provided that the Surviving Corporation
or Acquisition Sub may substitute therefor policies of at least the same level
of coverage containing terms and conditions which are in the aggregate no less
advantageous so long as no lapse in coverage occurs as a result of such
substitution) with respect to all matters, including the transactions
contemplated hereby, occurring prior to and including the Effective Time.
Notwithstanding the foregoing, neither Recoton, Acquisition Sub nor the
Surviving Corporation shall be required to expend in excess of $150,000 in the
aggregate pursuant to this Section 7.10(b).
Section 7.11 EMPLOYEE BENEFITS. For a period of one year after the Effective
Time, the Surviving Corporation shall make available to the current employees of
Jensen, so long as such persons continue after the Effective Time to hold
positions as employees with the Surviving Corporation, the same employee
benefits that are currently in effect at Jensen, or similar employee benefits on
substantially the same terms and conditions as the Jensen plans, including, but
not limited to, health care and life insurance, pension and retirement benefits
and vacation and sick pay. Thereafter, the Surviving Corporation shall provide a
benefits package at least comparable to the benefit package provided by Recoton
to its own employees. Recoton and the Surviving Corporation shall use their best
efforts to insure that employees of the Surviving Corporation shall not be
subject to any waiting periods or pre-existing condition restrictions under
employee benefit plans offered by Recoton or the Surviving Corporation to the
extent that such periods are longer or such periods impose a greater limitation
than the period or limitations imposed under employee benefit plans currently
offered by Jensen. Employees of the Surviving Corporation shall be given credit
for prior service with Jensen for purposes of crediting periods of service for
eligibility and vesting of all such substitute employee benefits offered by
Recoton or the Surviving Corporation.
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby
(including such of the proposals enumerated in Section 4.21 as shall be
required in order to effect the Merger) shall have been approved and adopted
by the requisite vote of the stockholders of Jensen pursuant to Section
4.21;
(b) The additional Recoton Common Shares issuable in the
Merger shall have been authorized for listing on Nasdaq;
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and any EC
Filings shall have been made and no additional requirements relating thereto
shall be applicable;
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(e) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to
use all reasonable efforts to have
any such injunction, order or decree lifted);
(f) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state, federal or foreign
government or governmental agency which would prevent the consummation of
the Merger or that would have a material adverse effect on the prospects of
the Surviving Corporation;
(g) All governmental consents and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby,
including, without limitation, approval (if required) by the DOJ, FTC and
the SEC, shall have been obtained and be in effect at the Effective Time on
terms and conditions that would not have a material adverse effect on the
prospects of the Surviving Corporation;
(h) Jensen shall have received an opinion, and such opinion
shall not have been withdrawn at or prior to the Effective Time if the
Average Recoton Share Price is equal to or greater than $16.00, of a firm of
professionals which is qualified to render tax opinions in reorganizations
under Section 368(a) (and has rendered such opinions in other comparable
reorganizations of public companies) which firm of professionals is
reasonably satisfactory to both Jensen and Recoton, which opinion Recoton
shall be allowed to rely upon, subject to customary assumptions and based on
representations of Jensen, Jensen Stockholders and Recoton and Acquisition
Sub dated the date of the Proxy Statement, to the effect that Acquisition
Sub and Jensen and their respective shareholders (except to the extent any
stockholders have perfected dissenters' rights under Delaware law or Jensen
stockholders have received (i) cash in lieu of fractional shares or (ii) the
Per Share Cash Amount or portion thereof) will recognize no gain or loss for
federal income tax purposes as a result of consummation of the Merger and
that the transaction qualifies as a reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code; provided, HOWEVER, that if such
opinion in form reasonably satisfactory to Jensen and Recoton has not been
received by the date of the Proxy Statement or is withdrawn prior to the
Effective Time, the conditions of this Section 8.1(h) shall be satisfied if
the stockholders of Jensen have approved at the Jensen Stockholders' Meeting
an All Cash Transaction and such other proposals as shall be required
pursuant to Section 4.21; and
(i) Jensen shall have received letters from Lehman Brothers
dated the date of this Agreement and the date of the Proxy Statement (or
such other dates reasonably acceptable to Jensen and Recoton), which letters
shall be of the opinion that (1) the Merger Consideration is "fair from a
financial point of view" to Jensen's stockholders; and (2) that the proceeds
received by Jensen from the sale of the assets of the Original Equipment
Business are "fair from a financial point of view" to Jensen.
Section 8.2 CONDITIONS TO OBLIGATION OF JENSEN TO EFFECT THE MERGER. The
obligation of Jensen to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following additional conditions:
(a) Acquisition Sub and Recoton shall have performed in all
material respects their agreements contained in this Agreement required to
be performed on or prior to the Effective Time and the representations and
warranties of Acquisition Sub and Recoton contained in this Agreement shall
be true and correct in all material respects on and as of the date of this
Agreement and on and as of the Effective Time as if made on and as of such
date, except as contemplated or permitted by this Agreement, and Jensen
shall have received a certificate of the President and the Chief Operating
Officer of each of Acquisition Sub and Recoton to that effect;
(b) Jensen shall have received an opinion addressed to Jensen
from Stroock & Stroock & Lavan, counsel to Recoton and Acquisition Sub, or
other counsel reasonably acceptable to Jensen, dated the Closing Date,
substantially in the form set forth in Exhibits 8.2(b);
(c) Jensen shall have received the letters of Cornick
Garber & Sandler, LLP contemplated by Section 7.9;
(d) Since the date hereof, no Recoton Material Adverse
Effect shall have occurred; and
(e) Recoton shall have deposited the Recoton Common Shares
and cash into the Exchange Fund in accordance with Section 3.2(a) and the
Exchange Agent shall have delivered to Jensen a certificate acknowledging
receipt of such stock and cash.
Section 8.3 CONDITIONS TO OBLIGATION OF RECOTON AND ACQUISITION SUB TO
EFFECT THE MERGER. The obligation of Recoton and Acquisition Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions:
(a) Jensen shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time and the representations and warranties of Jensen
contained in this Agreement shall be true and correct in all material
respects on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such date, except as contemplated or
permitted by this Agreement, and Recoton and Acquisition Sub shall have
received a Certificate of the President and the Chief Financial Officer of
Jensen to that effect;
(b) Recoton and Acquisition Sub shall have received an opinion
from Vedder, Price, Kaufman & Kammholz, counsel to Jensen, or other counsel
reasonably acceptable to Recoton and Acquisition Sub, dated the Closing
Date, substantially in the form set forth in Exhibit 8.3(b);
(c) The Affiliate Agreements required to be delivered to
Acquisition Sub pursuant to Section 7.4 shall have been furnished as
required by Section 7.4;
(d) Recoton and Acquisition Sub shall have received the letters
of Coopers & Lybrand, LLP contemplated by Section 7.9;
(e) Since the date hereof, no Jensen Material Adverse
Effect shall have occurred;
(f) The closing of the sale of the assets of the Original
Equipment Business pursuant to the OE Agreement shall have occurred prior to
the Effective Time;
(g) Recoton shall not have elected to terminate due to the
results of the inspections or tests performed in accordance with
Section 6.2;
(h) The number of Recoton Common Shares to be issued in the
Merger shall not equal or exceed 20% of the Recoton Common Shares
outstanding prior to the Effective Time;
(i) The number of Dissenting Shares shall not exceed 10%
of the Jensen Common Stock outstanding; and
(j) Recoton and Acquisition Sub shall have received a letter
from Furman Selz LLC, dated the Effective Date of the Registration Statement
(or such other date reasonably acceptable to Recoton), which letter shall be
of the opinion that the Merger Consideration is "fair from a financial point
of view" to Recoton.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
Jensen or the shareholders of Acquisition Sub:
(a) by mutual written consent of Acquisition Sub and
Jensen; or
(b) by either Acquisition Sub or Jensen if (i) the Merger shall
not have been consummated on or before June 30, 1996 (the "Termination
Date"), (ii) the requisite vote of the stockholders of Jensen to approve
this Agreement pursuant to Section 8.1(a) and the transactions contemplated
hereby shall not be obtained at the Jensen Stockholders' Meeting (including,
such of the proposals enumerated in Section 4.21 as shall be required in
order to effect the Merger), or any adjournments thereof, (iii) any
governmental or regulatory body, the consent of which is a condition to the
obligations of Acquisition Sub and Jensen to consummate the transactions
contemplated hereby, shall have determined not to grant its consent and any
appeals of such determination shall have been taken and have been
unsuccessful or such body shall have imposed conditions or limitations on
its consent that would have a material adverse effect on the prospects of
the Surviving Corporation and any appeals from such imposition shall have
been taken and have been unsuccessful, or (iv) any court of competent
jurisdiction in the United States, or any state or any country in which
there is a subsidiary of Jensen, shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall
have become final and nonappealable; or
(c) by Acquisition Sub (i) if the Board of Directors of Jensen
shall have withdrawn or modified in a manner adverse to Acquisition Sub its
approval or recommendation of the Merger, this Agreement or the transactions
contemplated hereby or shall have failed to reaffirm such approval or
recommendation upon Acquisition Sub's request, or shall have resolved to do
any of the foregoing, (ii) if Jensen or any of the other persons or entities
described in Section 6.1(c) or 6.1(h) shall take any of the actions that
would be proscribed by Section 6.1(c) or 6.1(h) but for the PROVISO therein
allowing certain actions to be taken if required by fiduciary duty upon
advice of counsel, (iii) if there has been (x) a material breach of any
covenant or agreement herein on the part of Jensen which has not been cured
or adequate assurance of cure given, in either case within 15 business days
following receipt of notice of such breach, or (y) a representation or
warranty of Jensen herein is or becomes untrue or incorrect in a material
respect which representation or warranty by its nature cannot be made true
and correct in all material respects prior to the Termination Date or is not
made true and correct prior to the Termination Date or (iv) if (x) Jensen
enters into an agreement with any corporation, partnership, person, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act) other
than Recoton or Acquisition Sub whereby such entity or group would directly
or indirectly acquire all or any substantial part of the assets or capital
stock of Jensen, whether by merger, share exchange, purchase of assets,
consolidation, tender offer or otherwise (other than with regard to the
Original Equipment Business) or (y) any third party commences a tender or
exchange offer for 25% or more of Jensen's Common Stock and Jensen's Board
of Directors does not recommend, or ceases to recommend, to Jensen's
stockholders that they reject such offer; or
(d) by Jensen if there has been (x) a material breach of any
covenant or agreement herein on the part of Acquisition Sub or Recoton which
has not been cured or adequate assurance of cure given, in either case
within 15 business days following receipt of notice of such breach or (y) a
representation or warranty of Recoton or Acquisition Sub herein is or
becomes untrue or incorrect in a material respect which representation or
warranty by its nature cannot be made true and correct in all material
respects prior to the Termination Date or is not made true and correct prior
to the Termination Date; or
(e) automatically, if the Jensen Board of Directors shall
recommend a Jensen Acquisition Transaction or authorize or approve the
entering into by Jensen of a Jensen Acquisition Transaction.
Notwithstanding the foregoing, if prior to the Closing Date, (i) any preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued, and
remains in effect (each party agreeing to use all reasonable efforts to have any
such injunction, order or decree lifted); (ii) any action shall have been taken,
or any statute, rule or regulation shall have been enacted, by any state,
federal or foreign government or governmental agency which would prevent the
consummation of the Merger or that would have a material adverse effect on the
prospects of the Surviving Corporation; or (iii) any governmental consents and
approvals legally required for the consummation of the Merger and the
transactions contemplated hereby, including, without limitation, approval (if
required) by the DOJ, FTC and the SEC, shall not have been obtained or not be in
effect at the Effective Time on terms and conditions that would not have a
material adverse on the prospects of the Surviving Corporation, the Termination
Date shall be extended at the option of any party hereto for a period of up to
120 days. If, at the end of such 120-day period, the matters referred to in (i),
(ii) or (iii) shall not have been satisfied to each party's reasonable
satisfaction, either party may terminate this Agreement pursuant to the
applicable provisions of this Section 9.1.
Section 9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either Recoton,
Acquisition Sub or Jensen as provided in Section 9.1 or any breach of any party
or any failure of condition giving rise to a right to terminate this Agreement,
there shall be no liability on the part of either Jensen or Recoton or
Acquisition Sub or their respective officers or directors except as set forth in
this Section 9.2 or in Section 7.1(c).
(b) If this Agreement is terminated pursuant to (i) Section 9.1(b)(i) due to
failure to satisfy the conditions set forth in Section 8.1(a) (including the
failure of the Jensen stockholders to approve such of the proposals enumerated
in Section 4.21 as shall be required in order to effect the Merger), 8.1(h) (if
caused by Jensen's willful act), 8.1(i) (if caused by Jensen's willful act),
8.3(a) due to failure to obtain officer's certificate under circumstances in
which Jensen has otherwise performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and in which the representations and warranties of Jensen
contained in this Agreement are true and correct in all material respects on and
as of the date of this Agreement and on and as of the Effective Time as if made
on and as of such date, except as contemplated or permitted by this Agreement,
8.3(b) (if caused by Jensen's willful act), 8.3(c) (if caused by Jensen's
willful act) or 8.3(d) (if caused by Jensen's willful act), (ii) Section
9.1(b)(ii), (iii) Section 9.1(c)(i), (iv) Section 9.1(c)(ii), (v) Section
9.1.(c)(iii)(x) (if caused by Jensen's willful act), (vi) Section 9.1(c)(iv) or
(vii) Section 9.1(e), then Jensen shall pay Recoton $6,000,000.
(c) If this Agreement is terminated pursuant to (i) Section 9.1(b)(i) due to
failure to satisfy the conditions set forth in Section 8.1(c) or 8.3(f) or (ii)
Section 9.1(b)(iii) (but only if the condition set forth in Section 8.1(c) is
the basis for the termination under Section 9.1(b)(iii)), then Jensen shall pay
Recoton $1,500,000.
(d) If this Agreement is terminated pursuant to (i) Section 6.2 or (ii)
Section 9.1(b)(i) due to failure to satisfy a condition set forth in Section
8.1(b), 8.1(d), 8.1(e), 8.1(f), 8.1(g), 8.1(h) (unless caused by Jensen's
willful act), 8.1(i) (unless caused by Jensen's willful act), 8.2(a), 8.2(b),
8.2(c), 8.2(d), 8.2(e), 8.3(a) due to failure to obtain officer's certificate
except under the circumstances set forth in Section 9.2(b), 8.3(b) (unless
caused by Jensen's willful act), 8.3(c) (unless caused by Jensen's willful act),
8.3(d) (unless caused by Jensen's willful act), 8.3(e), 8.3(g), 8.3(h), 8.3(i)
or 8.3(j), (iii) Section 9.1(b)(iii) (other than under the circumstances set
forth in Section 9.2(c)(ii)), (iv) Section 9.1(b)(iv), (v) Section
9.1(c)(iii)(x) (unless caused by Jensen's wilful act), (vi) Section
9.1(c)(iii)(y), or (vii) Section 9.1(d), no payment shall be due from Jensen,
Recoton or Acquisition Sub.
(e) The agreements contained in this Section 9.2 are an integral part of the
transactions contemplated by this Agreement and constitute liquidated damages or
other appropriate payments and not a penalty. If a party fails promptly pay to
perform in accordance with Article IX, such party shall pay the costs and
expenses (including legal fees and expenses) of the other party in connection
with any action, including the filing of any lawsuit or other legal action,
taken to enforce the terms of this Agreement. Payments by Jensen under this
Section shall be made within five business days after termination of this
Agreement.
Section 9.3 AMENDMENT. This Agreement may be amended by the parties hereto,
at any time before or after approval hereof by the stockholders of Jensen, but,
after any such approval, no amendment shall be made which (a) changes the
procedure pursuant to which the Exchange Ratio (or the Principal Stockholders
Exchange Ratio) is calculated or the Per Share Cash Amount (or the Principal
Stockholders Per Share Cash Amount) or (b) changes any of the other principal
terms of this Agreement, in each case, without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein; PROVIDED, HOWEVER, that waiver of compliance with
any agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of the parties.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement shall
survive the Merger, except for the agreements contained in this Section 10.1,
Article III, and in Sections 2.3, 7.1(c), 7.6, 7.8, 7.10, 7.11, and Article IX.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
Section 10.2 BROKERS. Jensen represents and warrants that, except for its
investment banking firm, Lehman Brothers, whose fee arrangement has been
disclosed to Recoton prior to the date hereof, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Jensen. Acquisition Sub and
Recoton represent and warrant that, except for its investment banking firm,
Furman Selz Incorporated, whose fee arrangement has been disclosed to Jensen
prior to the date hereof, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of Acquisition Sub.
Section 10.3 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Acquisition Sub or Recoton, to:
c/o Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont, Chief Operating Officer
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, NY 10004
Attn: Theodore S. Lynn, Esq.
(b) If to Jensen, to:
International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attn: Marc T. Tanenberg, Chief Financial Officer
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North La Salle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
Section 10.4 GENERAL TERMS. The following definitions shall apply to the
extent not otherwise defined, or used in capitalized form, in this Agreement:
(a) The terms "agreements" and "contracts" shall include any contract,
purchase or sales order, franchise, insurance policy, license, undertaking,
arrangement, understanding, commitment, document, lease, sublease, deed,
mortgage plan, plan, indenture, bill of sale, assignment, proxy, voting trust or
other agreement or instrument.
(b) The term "approval" shall include any consent, waiver, license, permit,
certificate or authorization.
(c) The term "breach" shall include any default, event of default or event,
occurrence, condition or act which, with notice or lapse of time or both, would
constitute a breach, default, or event of default or give the other party or
parties a right to accelerate any obligation under the applicable agreement.
(d) The term "governmental authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any government, whether
foreign or domestic and whether national, federal, state, provincial or local.
(e) The term "law" shall mean, unless specifically stated otherwise herein,
means laws, rules, regulations, codes, orders, ordinances, judgments,
injunctions, decrees and government policies.
(f) The terms "liability" and "liabilities" shall include any direct or
indirect indebtedness, claim, loss, damage, penalty, deficiency (including
deferred income tax and other net tax deficiencies), cost, expense, obligation,
duties or guarantee, whether accrued, absolute, or contingent, known or unknown,
fixed or unfixed, liquidated or unliquidated, matured or unmatured or secured or
unsecured.
(g) The term "person" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization and a government or other legal body thereof.
(h) The term "subsidiary" shall include each entity controlled by
Jensen.
(i) The term "transfer" shall include any sale, pledge, gift, assignment,
conveyance, lease or disposition and the term "transferred" shall include sold,
pledged, gave, assigned, conveyed, leased or disposed of.
Section 10.5 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.6 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) together with the Confidentiality
Agreements, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof; (b) is not intended to
confer upon any other person any rights or remedies hereunder; (c) shall not be
assigned by operation of law or otherwise; (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware (without giving effect to the provisions thereof relating to
conflicts of law) and service of process may be made upon any party by using the
notification procedure set forth in Section 10.3; (e) all disputes that arise
with respect to this Agreement shall be brought only in the Federal District
Court, located in or having jurisdiction for New York County, New York or in a
state court in and for New York County, New York; (f) to the fullest extent
permitted by law, the parties hereby waive all rights to a trial by jury in
connection with this Agreement; (g) by execution and delivery of this Agreement,
each of the parties accepts for himself or itself the jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement; (h) references to Exhibits and
Schedules shall be references to the exhibits of, and schedules, to this
Agreement. Such Exhibits and Schedules form an integral part of this Agreement
and are hereby incorporated in this Agreement. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
Section 10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under this Agreement.
Section 10.9 RIGHT TO OFFSET. Payments due under this Agreement or any other
agreements or obligation between Recoton (or any affiliate thereof) and Jensen
(or any affiliate thereof) may, at the election of either party, be set off
against each other including by way of (but not limited to) cancellation of
outstanding notes.
IN WITNESS WHEREOF, Recoton, Acquisition Sub and Jensen have caused
this Agreement to be signed by their respective officers thereunto duly
authorized on the 1st day of May, 1996 as of the date first written above.
RECOTON CORPORATION
By: /S/ STUART MONT
Stuart Mont
Executive Vice President-Operations
& Chief Operating Officer
RC ACQUISITION SUB, INC.
By: /S/ STUART MONT
Stuart Mont
Secretary
INTERNATIONAL JENSEN INCORPORATED
By: /S/ MARC T. TANENBERG
Marc T. Tanenberg
Vice President & Chief
Financial Officer
EXHIBIT 10.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING MAY 1, 1996
STOCK OPTION AND VOTING AGREEMENT
STOCK OPTION AND VOTING AGREEMENT (this "AGREEMENT"), dated as of May 1,
1996, by and among RECOTON CORPORATION, a New York corporation ("RECOTON"), RC
ACQUISITION SUB, INC., a Delaware corporation and a wholly-owned subsidiary of
Recoton ("RC ACQUISITION SUB"), and WILLIAM BLAIR LEVERAGED CAPITAL FUND, L.P.
(the "STOCKHOLDER"), a stockholder of INTERNATIONAL JENSEN INCORPORATED, a
Delaware corporation ("JENSEN").
W I T N E S S E T H:
WHEREAS, Recoton, RC Acquisition Sub and Jensen are entering into a Second
Amended and Restated Agreement and Plan of Merger (the "REVISED MERGER
AGREEMENT") pursuant to which Jensen will be merged with and into RC Acquisition
Sub (the "MERGER") and each stockholder of Jensen will receive merger
consideration (the "MERGER CONSIDERATION") of $9.15 or $9.00 in cash and/or a
fraction of a Common Share of Recoton for each share of Jensen Common Stock, par
value $0.01 per share ("JENSEN COMMON STOCK").
WHEREAS, as a condition to the willingness of Recoton to enter into the
Revised Merger Agreement, Recoton has required that the Stockholder agree, and
in order to induce Recoton to enter into the Revised Merger Agreement, the
Stockholder has agreed, among other things, to (i) grant Recoton the option to
purchase all of the shares of Jensen Common Stock now owned or which may
hereafter be acquired by such Stockholder (the "Shares") in certain
circumstances, (ii) appoint Recoton as the Stockholder's proxy to vote the
Jensen Common Stock held by the Stockholder (the "Shares") in connection with
the Revised Merger Agreement, and (iii) with respect to certain questions put to
stockholders of Jensen for a vote, to vote the Shares, in each case, in
accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. STOCK OPTION.
1.1 GRANT OF STOCK OPTION. The Stockholder hereby grants to Recoton
an irrevocable option (the "STOCK OPTION") to purchase all of the Shares legally
and/or beneficially owned by such Stockholder, at such time as Recoton may
exercise the Stock Option during the Exercise Period (as defined below), at a
purchase price equal to the sum of (a) $9.00 per share of Jensen Common Stock
(the "Purchase Price") and (b) any net proceeds which Recoton may receive upon
the sale of the Shares within three months after the date of purchase pursuant
to the Stock Option to the extent the net proceeds exceed $10.00 per Share.
1.2 EXERCISE OF STOCK OPTION. (a) Subject to Section 1.3 hereof,
the Stock Option may be exercised by Recoton, in whole or in part, at any time
or from time to time, following the execution and delivery of the Revised Merger
Agreement until the earlier of (i) the Effective Time (as defined in the Revised
Merger Agreement) or (ii) 30 days following the termination of the Revised
Merger Agreement in accordance with its terms if:
(i) a corporation, partnership, person, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act), other than Recoton or any
of its affiliates, shall have acquired beneficial ownership (as defined in
Rule l3d-3 under the Securities Exchange Act of 1934) of at least 20% of the
then outstanding Shares or shall have commenced a tender or exchange offer
for at least 50% of the then outstanding shares of Jensen Common Stock at a
price per share of Jensen Common Stock in excess of $9.00;
(ii) the Stockholders Meeting (as defined in the Revised Merger
Agreement) shall not have been held by June 30, 1996 or such meeting shall
have been held but the Revised Merger Agreement and the transactions
contemplated thereby (including such of the proposals enumerated in Section
4.21 of the Revised Merger Agreement as shall be required in order to effect
the Merger) had not been approved by the requisite vote pursuant to Section
4.21 of the Revised Merger Agreement; or
(iii) Jensen shall have breached or failed to perform in any
material respect any material covenant or agreement to be performed by it
under the Revised Merger Agreement.
In the event Recoton wishes to exercise the Stock Option, Recoton shall give a
written notice (the "Exercise Notice") to the Stockholder of such exercise,
specifying the number of Shares to be purchased (the "Optioned Shares"). The
Exercise Notice shall be delivered to the Stockholder in accordance with the
requirements of Section 6.1, and shall specify a date (which may be the date of
such notice) not more than ten business days from the date the Exercise Notice
is given for the purchase of the Optioned Shares. The closing of the purchase of
the Optioned Shares (the "Stock Option Closing") shall take place at the offices
of Stroock & Stroock & Lavan, Seven Hanover Square, New York, New York 10004 or
at such other location as Recoton shall elect. If any law or regulation shall
not permit the purchase of the Optioned Shares to be consummated on the date
specified in such Exercise Notice, the date for the Stock Option Closing shall
be as soon as practicable following the cessation of such restriction on
consummation, but in any event within two business days thereof.
(b) Upon receipt of the Exercise Notice, the Stockholder shall be obligated
to deliver to Recoton a certificate or certificates representing the number of
Shares held by the Stockholder, in accordance with the terms of this Agreement,
on the later of the date specified in such Exercise Notice and the first
business day on which the conditions specified in Section 1.3 shall be
satisfied. The date specified in such Exercise Notice may be as early as one
business day after the date of such Exercise Notice.
1.3 CONDITIONS TO DELIVERY OF THE SHARES. The obligation of the Stockholder
to deliver the Shares upon exercise of the Stock Option is subject to the
following conditions:
(a) All waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, applicable to the exercise of the Stock Option and the
delivery of the Shares shall have expired or been terminated; and
(b) There shall be no preliminary or permanent injunction or other order by
any court of competent jurisdiction restricting, preventing or prohibiting the
exercise of the Stock Option or the delivery of the Shares in respect of such
exercise.
1.4 STOCK OPTION CLOSINGS. At the Stock Option Closing, the Stockholder will
deliver to Recoton a certificate or certificates evidencing the number of Shares
owned by the Stockholder, each such certificate being duly endorsed in blank and
accompanied by such stock powers and such other documents as may be necessary in
Recoton's judgment to transfer record ownership of the Shares into Recoton's
name on the stock transfer books of Jensen, and Recoton will purchase the
delivered Shares at the Purchase Price. All payments made by Recoton to the
Stockholder pursuant to this Section 1.4 shall be made by wire transfer of
immediately available funds or by certified bank check payable to the
Stockholder, in an amount for the Stockholder equal to the product of (a) the
Purchase Price and (b) the number of Shares delivered by the Stockholder in
respect of the Stock Option Closing.
1.5 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any change
in the number of issued and outstanding shares of Jensen Common Stock by reason
of any stock dividend, subdivision, merger, recapitalization, combination,
conversion or exchange of shares, or any other change in the corporate or
capital structure of Jensen (including, without limitation, the declaration or
payment of an extraordinary dividend of cash or securities) which would have the
effect of diluting or otherwise adversely affecting Recoton's rights and
privileges under this Agreement, the number and kind of the Shares and the
consideration payable in respect of the Shares shall be appropriately and
equitably adjusted to restore to Recoton its rights and privileges under this
Agreement. Without limiting the scope of the foregoing, in any such event, at
the option of Recoton, the Stock Option shall represent the right to purchase,
in addition to the number and kind of Shares which Recoton would be entitled to
purchase pursuant to the immediately preceding sentence, whatever securities,
cash or other property the Shares subject to the Stock Option shall have been
converted into or otherwise exchanged for, together with any securities, cash or
other property which shall have been distributed with respect to such Shares.
2. NO DISPOSITION OR ENCUMBRANCE OF SHARES; NO ACQUISITION OF SHARES. The
Stockholder covenants and agrees that, except as contemplated by this Agreement
or pursuant to the Revised Merger Agreement, it shall not, and it shall not
offer or agree to, sell, transfer, tender, assign, hypothecate or otherwise
dispose of, or create any security interest, lien, claim, pledge, option, right
of first refusal, agreement, limitation on such Stockholder's voting rights,
charge or other encumbrance of any nature whatsoever with respect to the Shares
now legally and/or beneficially owned by, or that may hereafter be acquired by,
the Stockholder.
3. COVENANTS OF RECOTON AND RC ACQUISITION SUB.
3.1 NO SALE. Neither Recoton nor RC Acquisition Sub will
sell, offer to sell or otherwise dispose of the Shares in violation
of the Securities Act of 1993, as amended.
3.2 PERFORMANCE. Recoton and RC Acquisition Sub shall
perform in all material respects all of their respective obligations
under the Revised Merger Agreement.
4. VOTING AGREEMENT; PROXY OF STOCKHOLDER.
4.1 VOTING AGREEMENT. The Stockholder hereby agrees that, during
the time this Agreement is in effect, at any meeting of the stockholders of
Jensen, however called, and in any action by written consent of the stockholders
of Jensen, the Stockholder shall (i) vote all of the Shares legally and/or
beneficially owned by such Stockholder in favor of the Merger, the Revised
Merger Agreement (as amended from time to time) and any of the transactions
contemplated by the Revised Merger Agreement; (ii) vote such Shares against any
action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other
obligation of Jensen under the Revised Merger Agreement; and (iii)
vote the Shares against any action or agreement that would
materially impede, interfere with or attempt to discourage the Merger. The
covenants of the Stockholder under this Section 6.1 relate only to
the Stockholder in its capacity as stockholder and not to any other
capacity in which such person or its affiliates may be acting.
4.2 IRREVOCABLE PROXY. In the event that the Stockholder shall
breach its covenant set forth in Section 2.1, the Stockholder (without any
further action on such Stockholder's part) shall be deemed to have hereby
irrevocably appointed Recoton as the attorney and proxy of such Stockholder
pursuant to the provisions of Section 212 of the Delaware General Corporation
Law ("DGCL"), with full power of substitution, to vote, and otherwise act (by
written consent or otherwise) with respect to all shares of Jensen Common Stock,
including the Shares, that the Stockholder is entitled to vote at any meeting of
stockholders of Jensen (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, to vote such shares as set forth in Section 4.1 above; PROVIDED that
in any such vote or other action pursuant to such proxy, Recoton shall not have
the right (and such proxy shall not confer the right) to vote to reduce the
consideration payable to the stockholders of Jensen pursuant to the Revised
Merger Agreement or to otherwise modify or amend the Revised Merger Agreement to
reduce the rights or benefits of Jensen or any stockholders of Jensen (including
the Stockholders) under the Merger Agreement or to reduce the obligations of
Recoton and/or RC Acquisition Sub thereunder; and PROVIDED FURTHER, that this
proxy shall irrevocably cease to be in effect at any time that Recoton or RC
Acquisition Sub shall be in violation of the terms of this Agreement. THIS PROXY
AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder hereby revokes, effective upon the execution and delivery of the
Merger Agreement by the parties thereto, all other proxies and powers of
attorney with respect to the Shares that the Stockholder may have heretofore
appointed or granted, and no subsequent proxy or power of attorney (except in
furtherance of the Stockholder's obligations under Section 4.1 hereof) shall be
given or written consent executed (and if given or executed, shall not be
effective) by the Stockholder with respect thereto so long as this Agreement
remains in effect. The Stockholder shall forward to Recoton any proxy cards that
the Stockholder receives with respect to the Revised Merger Agreement.
5. EFFECTIVENESS; TERMINATION; NO SURVIVAL. This Agreement shall become
effective upon its execution by each of the parties hereto and upon the
execution of the Revised Merger Agreement. This Agreement may be terminated at
any time by mutual written consent of the parties hereto. Other than the Stock
Option, which shall be governed by Section 1.2(a), this Agreement shall
terminate, without any action by the parties hereto, on the date on which the
Revised Merger Agreement terminates in accordance with its terms. No such
termination shall relieve any party from liability for any breach of this
Agreement.
6. MISCELLANEOUS.
6.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally or sent by registered or certified mail, postage prepaid, with return
receipt requested, as follows:
If to Recoton or RC Acquisition Sub, to:
c/o Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont, Chief Operating Officer
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2594
Attention: Theodore S. Lynn
If to the Stockholder, to:
William Blair Leverage
Capital Fund, L.P.
222 West Adams
Chicago, IL 60606
Attn.: David G. Chandler
with a copy to:
Kirkland & Ellis
200 East Randolph
Chicago, IL 60001
Attn.: James L. Learner
6.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time. No such waiver,
amendment or supplement shall be effective unless in writing and signed by the
party sought to be bound thereby.
6.3 NO PRIOR AGREEMENTS. This Agreement and the Revised Merger
Agreement contain the entire agreement, and supersede all other prior agreements
and understandings, both written and oral, among the parties hereto with respect
to the subject matter hereof. This Agreement is not intended to confer upon any
other person any rights or remedies hereunder.
6.4 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable,
except that Recoton or RC Acquisition Sub may assign its rights under this
Agreement to another direct or indirect wholly-owned subsidiary of Recoton, but
such assignment shall not relieve Recoton or RC Acquisition Sub of their
respective obligations hereunder. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by and against the parties hereto and their
successors (including administrators and executors of individuals) and permitted
assigns.
6.5 REMEDIES. Recoton and RC Acquisition Sub, on the one hand, and
the Stockholder, on the other hand, each acknowledge and agree that the other
would be irreparably damaged in the event any of the provisions of this
Agreement were not performed by the other in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that each party shall
be entitled to an injunction or injunctions to redress the breaches of this
Agreement and to specifically enforce the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which such party may be
entitled at law or in equity.
6.6 EXPENSES. Each of the parties shall pay its own
expenses in connection with the negotiation, execution and performance of
the Agreement.
6.7 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two or more counterparts, each of which shall be considered to be an
original, but of which together shall constitute the same instrument.
6.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Delaware,
without regard to the principles of conflicts of laws.
6.9 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
7. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the meaning or interpretation
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to take effect
as of the date set forth above.
RECOTON CORPORATION
By: /S/ STUART MONT
Name: Stuart Mont
Title: Executive Vice President
RC ACQUISITION SUB, INC.
By:/S/ STUART MONT
Name: Stuart Mont
Title: Secretary
WILLIAM BLAIR LEVERAGED
CAPITAL FUND, L.P.
By: WILLIAM BLAIR LEVERAGED CAPITAL MANAGEMENT, L.P.
By: WILLIAM BLAIR & COMPANY, L.L.C., ITS
GENERAL PARTNER
By: /S/ DAVID G. CHANDLER
David G. Chandler,
Its Principal
<PAGE>
EXHIBIT 10.2 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING MAY 1, 1996
AGREEMENT
This AGREEMENT (the "Agreement") is dated as of May 1, 1996, by and among
RECOTON CORPORATION, a New York corporation ("Recoton"), RC ACQUISITION SUB,
INC., a Delaware corporation and a wholly-owned subsidiary of Recoton ("RC
Acquisition Sub"), and ROBERT G. SHAW ("Shaw"), solely in his capacity as a
stockholder of INTERNATIONAL JENSEN INCORPORATED, a Delaware corporation
("Jensen").
W I T N E S S E T H:
WHEREAS, Recoton, RC Acquisition Sub and Jensen are entering into a Second
Amended and Restated Agreement and Plan of Merger (the "Revised Merger
Agreement") pursuant to which Jensen will be merged with and into RC Acquisition
Sub (the "Merger") and each stockholder of Jensen will receive merger
consideration (the "Merger Consideration") of $9.15 or $9.00 in cash and or
equivalent shares of Common Share of Recoton for each share of Jensen Common
Stock, par value $0.01 per share ("Jensen Common Stock").
WHEREAS, as a condition to the willingness of Recoton to enter into the
Revised Merger Agreement, Recoton has required that Shaw agree, and in order to
induce Recoton to enter into the Revised Merger Agreement, Shaw has agreed,
among other things, to pay to Recoton certain amounts if Shaw sells his shares
of Jensen Common Stock for greater than $9.00 per share, in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. SALE AND PAYMENT. From the date hereof through the Termination Date (as
hereinafter defined), if Shaw transfers all or any portion of his shares of
Jensen Common Stock (including without limitation by merger or tender offer) to
a third party other than Recoton for greater than $9.00 per share, Shaw shall
promptly pay to Recoton upon Shaw's receipt of the proceeds from the sale of
Shaw's shares the difference between (a) the net proceeds per share received by
Shaw, but not to exceed $10.00 per share, for each share sold by Shaw less the
payment of any applicable Federal and state income taxes estimated in good faith
by Shaw attributable to the difference, and (b) the sum of $9.00 per share. Shaw
shall retain all net proceeds in excess of $10.00 per share. Any reimbursement
due to Shaw or any additional payment due from Shaw shall be made upon the
filing of the appropriate tax return and/or upon the final determination by the
Internal Revenue Service or the Illinois Department of Revenue of the taxes due.
For purposes of this Agreement, payment of applicable Federal and state income
taxes shall mean any such income tax payable at or before the date on which Shaw
files his income tax return for the taxable year (and any amended returns) or
any amounts otherwise payable as a result of a determination by the Internal
Revenue Service or the Illinois Department of Revenue that such taxes are due
and owing.
1.1 EFFECTIVE DATE/TERMINATION DATE. This Agreement shall become
effective upon the execution and delivery of the Revised Merger Agreement and
shall terminate December 31, 1996.
1.2 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number of issued and outstanding shares of Jensen Common Stock by
reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of shares, or any other change in the
corporate or capital structure of Jensen (including, without limitation, the
declaration or payment of an extraordinary dividend of cash or securities) which
would have the effect of diluting or otherwise adversely affecting Recoton's
rights and privileges under this Agreement, the consideration payable in respect
of the sale of Jensen Common Stock by Shaw shall be appropriately and equitably
adjusted.
2. COVENANTS OF SHAW. Shaw covenants and agrees that he shall not, and shall
not offer to agree to, acquire any additional shares of Jensen Common Stock, or
options, warrants or other rights to acquire shares of Jensen Common Stock,
without the prior written consent of Recoton, unless such shares are made
subject to this Agreement.
3. COVENANTS OF RECOTON AND RC ACQUISITION SUB. Recoton and RC
Acquisition Sub shall perform in all material respects all of their
respective obligations under the Revised Merger Agreement.
4. MISCELLANEOUS.
4.1 NOTICES. Any notice, request, consent or communication
(collectively "Notice") sent under this Agreement shall be effective only if it
is in writing and (a) personally delivered, (b) sent by certified or registered
mail, return receipt requested, postage prepaid, (c) sent by a nationally
recognized overnight delivery service, with delivery confirmed, or (d) telexed
or telecopied with receipt confirmed, addressed as follows:
If to Recoton or RC Acquisition Sub, to:
c/o Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attention: Stuart Mont, Chief Operating Officer
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2594
Attention: Theodore S. Lynn
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
If to Shaw, to:
IJI Acquisition Corp./International Jensen Incorporated
25 Tri-State International Officer Center
Suite 400
Lincolnshire, IL 60606
Attention: Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy to:
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Suite 3000
Chicago, Illinois 60606-1229
Attn: Richard B. Thies
Telecopier: (312) 201-2555
Telephone: (312) 201-2521
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
4.2 WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time. No such waiver,
amendment or supplement shall be effective unless in writing and signed by the
party sought to be bound thereby.
4.3 NO PRIOR AGREEMENTS. This Agreement and the Revised Merger
Agreement contain the entire agreement, and supersede all other prior agreements
and understandings, both written and oral, among the parties hereto with respect
to the subject matter hereof. This Agreement is not intended to confer upon any
other person any rights or remedies hereunder.
4.4 SUCCESSORS AND ASSIGNS. This Agreement shall not be assignable,
except that Recoton or RC Acquisition Sub may assign its rights under this
Agreement to another direct or indirect wholly-owned subsidiary of Recoton, but
such assignment shall not relieve Recoton or RC Acquisition Sub of their
respective obligations hereunder. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by and against the parties hereto and their
successors (including administrators and executors of individuals) and permitted
assigns.
4.5 REMEDIES. Recoton and RC Acquisition Sub, on the one hand, and
Shaw, on the other hand, each acknowledge and agree that the other would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed by the other in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each party shall be entitled
to an injunction or injunctions to redress any breach of this Agreement and to
specifically enforce the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction, in
addition to any other remedy to which such party may be entitled at law or in
equity.
4.6 EXPENSES. Each of the parties shall pay its own
expenses in connection with the negotiation, execution and performance of
the Agreement.
4.7 COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two or more counterparts, each of which shall be considered to be an
original, but of which together shall constitute the same instrument.
4.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the state of Delaware,
without regard to the principles of conflicts of law.
4.9 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
5. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the meaning or interpretation
of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to take effect
as of the date set forth above.
RECOTON CORPORATION
By: /S/ STUART MONT
Name: Stuart Mont
Title: Executive Vice President
RC ACQUISITION SUB, INC.
By: /S/ STUART MONT
Name: Stuart Mont
Title: Secretary
/S/ ROBERT G.SHAW
Robert G. Shaw
<PAGE>
EXHIBIT 10.3 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING MAY 1, 1996
ESCROW AGREEMENT
AGREEMENT (the "Agreement") made as of May 1, 1996 between
International Jensen Incorporated, a corporation organized and existing under
the laws of the State of Delaware ("Jensen"), and Recoton Corporation, a
corporation organized and existing under the laws of the State of New York
("Recoton").
WHEREAS, Recoton and Jensen have entered into an agreement dated as
of January 3, 1996 (the "License and Option Agreement") providing for the
license by Jensen to Recoton of rights in the trademarks Acoustic Research and
AR and granting to Recoton an option to purchase such trademarks from Jensen
(the "Purchase Option") and granting to Jensen an option to sell such trademarks
to Recoton (the "Sale Option");
WHEREAS, upon exercise of the Purchase Option or the Sale Option
and payment as required in the License and Option Agreement (including without
limitation payment by way of setoff), Jensen is required under the License and
Option Agreement to execute and deliver to Recoton a form of assignment attached
to the License and Option Agreement (the "Assignment");
WHEREAS, in order to ensure the full performance of the License and
Option Agreement, the parties desire that Jensen execute the Assignment at this
time and deliver the executed Assignment to an escrow agent to hold in escrow
pending receipt of certain notices as provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the License and Option Agreement, the parties
hereto do hereby agree as follows:
1. APPOINTMENT. Vedder, Price, Kaufman & Kammholz is hereby
appointed escrow agent ("Escrow Agent") to hold and dispose of the Assignment as
provided for in this Section 1. Jensen has herewith delivered to the Escrow
Agent a fully executed copy of the Assignment, receipt of which is hereby
acknowledged by the Escrow Agent. The Escrow Agent shall deliver the Assignment
and any other items delivered hereafter to the Escrow Agent pursuant to this
Agreement as follows:
(a) upon receipt of a notice of exercise of the Purchase
Option in the form attached hereto as Exhibit 1 or a
notice of exercise of the Sale Option in the form
attached hereto as Exhibit 2 and payment of the purchase
price for the Purchase Option or the Sale Option by
either (i) payment to the Escrow Agent by wire transfer
or certified check in the amount of $6 million or (ii)
payment to the Escrow Agent by wire transfer or
certified check in the amount of $4 million and delivery to the
Escrow Agent of a notice, substantially in the form set
forth in Exhibit 3 attached hereto, of cancellation of
$2 million of indebtedness of Jensen owing to Recoton
represented by that certain Promissory Note dated
January 3, 1996, in the original principal amount of $2
million, accompanied by the original canceled promissory note,
the Escrow Agent shall, within 20 days after its receipt
of such items, deliver the Assignment to Recoton and
deliver to Jensen the payments received by the Escrow
Agent along with the notice of cancellation and the
original canceled promissory note, if applicable; or
(b) within five business days after receipt of the joint
written instructions of Jensen and Recoton substantially
in the form set forth in Exhibit 4 attached hereto, the
Escrow Agent shall act in accordance therewith; or
(c) within five business days after receipt of a certified
copy of a determination by final order, decree or
judgment of a court of competent jurisdiction in the
United States of America (the time for appeal having
expired with no appeal having been taken) in a
proceeding to which Jensen and Recoton are parties (the "Final
Decree") accompanied by a written notice from Jensen or
Recoton substantially in the form of Exhibit 5 attached
hereto, the Escrow Agent shall act in accordance with
the requirements of the Final Decree;
PROVIDED, HOWEVER, that the Escrow Agent shall have no obligation to deliver the
Assignment or any other items delivered into escrow to Recoton, Jensen or any
other person if it shall have been enjoined from performing hereunder.
2. NOTICES. Any notices or other communications required
or permitted hereunder shall be sufficiently given if sent by
registered mail or certified mail, postage prepaid, or by telegraph,
charges prepaid, addressed as follows:
(a) If to Recoton:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Secretary
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, NY 10004
Attn: Theodore S. Lynn, Esq.
(b) If to Jensen:
International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, IL 60069
Attn: Mark T. Tanenberg
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
(c) If to Escrow Agent:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed or as of the date deposited with a public telegraph company for
transmittal with all charges prepaid except notices or communications to the
Escrow Agent which shall be deemed to have been given when received by it. Any
notice given in any other manner shall be deemed to have been duly given when
received.
3. TERMS AND CONDITIONS TO ESCROW AGENT'S ACCEPTANCE. (a)
Acceptance by the Escrow Agent of its duties under this Agreement is subject to
the following terms and conditions, which the parties to this Agreement hereby
agree shall govern and control the rights, duties and immunities of the Escrow
Agent:
(i) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and
the Escrow Agent shall not be liable except for the performance of
such duties and obligations as are specifically set out in this
Agreement;
(ii) The Escrow Agent shall not be responsible in any manner
whatsoever for any failure or inability of the parties of this
Agreement, or of any one else, to deliver monies or other property
to the Escrow Agent or otherwise to honor any of the provisions of
this Agreement;
(iii) Each of Jensen and Recoton shall hold the Escrow Agent
harmless from, and indemnify the Escrow Agent against, any loss,
liability, expense (including reasonable attorneys' fees and
expenses), claim or demand arising out of or in connection with the
performance of its obligations under this Agreement, except for any
of the foregoing arising out of the bad faith or willful misconduct
of the Escrow Agent. The foregoing indemnification obligations
shall survive the termination of this Agreement. The Escrow Agent
is attorney for Jensen and, in the event of a dispute hereunder
(including a dispute concerning the disposition of the Assignment),
may represent Jensen while it continues to act as the Escrow Agent;
(iv) The Escrow Agent shall be equally reimbursed by Jensen and
Recoton for all fees, expenses, disbursements and advances,
including reasonable attorneys' fees, incurred by the Escrow Agent
in connection with carrying out its duties in administering this
Agreement. Jensen, on the one hand, and Recoton, on the other hand,
agree that if the Escrow Agent shall incur or suffer any other
costs, charges, damages or attorneys' fees on account of being the
Escrow Agent or on account of having received the Assignment
hereunder (including, without limitation, costs, charges, damages
and reasonable attorneys' fees as a result of litigation involving
this Agreement or the Assignment other than by reason of the bad
faith or willful misconduct of the Escrow Agent), then such costs,
charges, damages or fees (including, without limitation, reasonable
attorneys' fees incurred by the Escrow Agent in connection with any
litigation) shall be paid one half by Jensen and one half by
Recoton, or, in the case of any cost, charge, damage or fee arising
as a result of litigation, in such manner as the court in which
such litigation occurs may direct;
(v) The Escrow Agent shall be fully protected in acting on and
relying upon any written notice, direction, request, waiver,
consent, receipt or other paper or document which the Escrow Agent
in good faith believes to be genuine and to have been signed or
presented by the proper party or parties;
(vi) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in
good faith or for any mistake in fact or law, or for anything which
it may do or refrain from doing in connection herewith, except its
own willful misconduct; and
(vii) The Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any
of the provisions of this Agreement or its duties hereunder, and it
shall incur no liability and shall be fully protected in respect of
any action taken, omitted or suffered by it in good faith in
accordance with the advice of such counsel.
(b) If a controversy arises between the parties hereto, or
between the parties hereto and any person not a party hereto, as to whether or
not, or to whom, the Escrow Agent shall deliver the Assignment or any portion
thereof or as to any other matter arising out of or relating to this Escrow
Agreement or the Assignment deposited hereunder, the Escrow Agent shall not be
required to determine same and need not make any delivery of the Assignment but
may retain the same until the rights of the parties to the dispute shall have
finally been determined by agreement or by final order of a court of competent
jurisdiction, in accordance with Section 1(c) hereof. The Escrow Agent shall be
entitled to assume that no such controversy has arisen unless it has received a
written notice that such a controversy has arisen which refers specifically to
this Escrow Agreement and identifies by name and address the adverse claimants
to the controversy.
(c) This Agreement shall terminate upon the distribution of the
Assignment by the Escrow Agent in accordance with this Agreement.
Notwithstanding any termination of this Agreement, the provisions of Section
3(a) hereof shall survive such termination and remain in full force and effect.
(d) The Escrow Agent may resign and be discharged from its
duties hereunder at any time by giving at least 30 days' notice of such
resignation to Jensen and Recoton, specifying a date upon which such resignation
shall take effect (the "Resignation Notice"); PROVIDED, HOWEVER, that the Escrow
Agent shall continue to serve until its successor accepts the Assignment. Upon
receipt of any Resignation Notice, a successor Escrow Agent shall be appointed
by Jensen and Recoton, such successor Escrow Agent to become the Escrow Agent
hereunder on the later of the date set forth in the Resignation Notice and the
date on which the successor Escrow Agent accepts the Assignment. If an
instrument of acceptance by a successor Escrow Agent shall not have been
delivered to the resigning Escrow Agent within 15 days after delivery of the
Resignation Notice, the resigning Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor Escrow Agent. Jensen
and Recoton, acting jointly, may at any time substitute a new Escrow Agent by
giving 20 days' notice thereof to the current Escrow Agent and paying all fees
and expenses of the current Escrow Agent as provided in Section 3(a)(iii) hereof
4. BINDING AGREEMENT. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, Recoton and Jensen have each caused this
Agreement to be executed on its behalf by a duly authorized officer as of the
day and year first above written.
RECOTON CORPORATION
By: /S/ STUART MONT
Name: Stuart Mont
Title: Executive Vice
President-Operations
INTERNATIONAL JENSEN INCORPORATED
By: /S/ MARC TANENBERG
Name: Marc Tanenberg
Title: Vice President
The undersigned, by its duly authorized partner, hereby accepts appointment as
Escrow Agent pursuant to the foregoing Agreement.
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By: /S/ JOHN R. OBIALA
Name: John R. Obiala
____________, 199_
[NAME AND ADDRESS OF ESCROW AGENT]
Recoton Corporation ("Recoton") hereby exercises the Purchase Option
pursuant to Section 2(a) of the Exclusive World-Wide License and Option to Sell
and Option to Purchase Proprietary Rights between Recoton and International
Jensen Incorporated ("Jensen") dated as of January 3, 1996 (the "License and
Option Agreement").
Recoton herewith tenders to the Escrow Agent the Purchase Price by way of
[payment of $4,000,000 by [wire transfer] [certified check] payable to the
Escrow Agent and cancellation of $2,000,000 of indebtedness of Jensen owing to
Recoton pursuant to the enclosed Notice of Cancellation of Indebtedness]
[payment of $6,000,000 by [wire transfer] [certified check] payable to the
Escrow Agent].
The license under the License and Option Agreement shall continue pursuant
to the License and Option Agreement until the delivery of the executed
Assignment to Recoton.
RECOTON CORPORATION
By: ___________________
Name:
Title:
cc: International Jensen Incorporated
25 Tri-State International Office Center, Suite 400
Lincolnshire, IL 60069
<PAGE>
EXHIBIT 2
____________, 199_
[NAME AND ADDRESS OF ESCROW AGENT]
International Jensen Incorporated ("Jensen") hereby exercises the Sale
Option pursuant to Section 2(b) of the Exclusive World-Wide License and Option
to Sell and Option to Purchase Proprietary Rights between Recoton Corporation
("Recoton") and Jensen dated as of January 3, 1996 (the "License and Option
Agreement").
Please deliver to Recoton the Assignment upon payment of the purchase price
to the Escrow Agent by way of either (a) delivery to the Escrow Agent of a
notice of cancellation of $2,000,000 of indebtedness of Jensen owing to Recoton
represented by that certain promissory note dated January 3, 1996 in the
original principal amount of $2,000,000 and surrender of the original canceled
promissory note and payment by wire transfer or certified check of $4,000,000 to
the Escrow Agent or (b) payment by wire transfer or certified check of
$6,000,000 to the Escrow Agent.
The license under the License and Option Agreement shall continue pursuant
to the License and Option Agreement until the delivery of the executed
Assignment to Recoton.
INTERNATIONAL JENSEN INCORPORATED
By: ___________________
Name:
Title:
cc: Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn:
[Name and Address of Escrow Agent]
[Date]
NOTICE OF CANCELLATION OF INDEBTEDNESS
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the
"Escrow Agreement"), between International Jensen Incorporated, a Delaware
corporation ("Jensen"), and Recoton Corporation, a New York corporation
("Recoton").
Pursuant to Section 1(a) of the Escrow Agreement, the undersigned
hereby notifies you of the cancellation of $2 million of indebtedness of Jensen
owing to Recoton represented by that certain Promissory Note dated January 3,
1996, in the original principal amount of $2,000,000 (the "Note"). The original
canceled Note is enclosed herewith.
RECOTON CORPORATION
By:______________________________
Name:
Title:
[Name and Address of Escrow Agent]
Re: JOINT WRITTEN INSTRUCTIONS
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the
"Escrow Agreement"), between International Jensen Incorporated, a Delaware
corporation and Recoton Corporation, a New York corporation.
Pursuant to Section 1(b) of the Escrow Agreement, the undersigned
hereby instruct you to disburse the Assignment (as defined in the Escrow
Agreement) to _________________________.
INTERNATIONAL JENSEN INCORPORATED
By:______________________________
Name:
Title:
RECOTON CORPORATION
By:______________________________
Name:
Title:
[Name and Address of Escrow Agent]
[Date]
NOTICE OF FINAL DECREE
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the "Escrow
Agreement"), between International Jensen Incorporated, a Delaware corporation,
and Recoton Corporation, a New York corporation.
Pursuant to Section 1(c) of the Escrow Agreement, the undersigned hereby
instructs you to disburse the Assignment (as defined in the Escrow Agreement) in
accordance with the Final Decree (as defined in the Escrow Agreement), a
certified copy of which is attached hereto.
[INTERNATIONAL JENSEN INCORPORATED
By:______________________________
Name:
Title:]
[RECOTON CORPORATION
By:_______________________________
Name:
Title:]
<PAGE>
EXHIBIT 10.4 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING MAY 1, 1996
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of May, 1996
(the "Commencement Date"), between RC Acquisition Sub, Inc., a Delaware
corporation to be renamed Recoton Audio Corporation (the "Corporation"), Robert
Shaw (the "Employee"), International Jensen Incorporated, a Delaware corporation
("Jensen") and Recoton Corporation, a New York corporation ("Recoton").
W I T N E S S E T H:
WHEREAS, the Employee is currently employed by Jensen as its
President and Chief Executive Officer;
WHEREAS, the Corporation, Recoton and Jensen have entered into a Second
Amended and Restated Agreement and Plan of Merger dated as of January 3, 1996
(the "Merger Agreement"), pursuant to which Jensen will merge with and into the
Corporation;
WHEREAS, the Corporation and the Employee desire to enter into an agreement
pursuant to which the Employee is employed by the Corporation effective as of
the filing date of the Merger Agreement with the Delaware Secretary of State's
office (the "Effective Time");
WHEREAS, in consideration for this Agreement, the Employee has agreed to
release Jensen and the Corporation from any and all compensation, benefits and
fees, payable or owing under the Employment Agreement dated December 19, 1991,
but effective as of January 1, 1992, by and between Jensen and the Employee (the
"1991 Employment Agreement") as of the Effective Time;
WHEREAS, Jensen, the Corporation and Recoton have agreed to release Employee
from any duties or obligations and any claims arising under the 1991 Employment
Agreement as of the Effective Time;
WHEREAS, the Employee also may serve as President, or in another executive
capacity, of IJI Acquisition Corporation, an Illinois Corporation ("IJI
Acquisition"); and
WHEREAS, the Corporation and the Employee desire to assure the service of
the Employee to the Corporation as of the Effective Time.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and conditions herein contained, the parties hereto
agree as follows:
1. Effect of this Agreement on the 1991 Employment Agreement. As of the
Effective Time, the 1991 Employment Agreement shall automatically terminate. By
executing this Agreement, the Employee, on behalf of himself, his heirs,
executors, administrators and assigns, or anyone else acting on his behalf,
hereby unconditionally and irrevocably releases Jensen, the Corporation, and its
successors and assigns, subsidiaries, affiliates, directors, officers, agents
and employees, in both their individual and representative capacities, from any
obligations under the 1991 Employment Agreement, and unconditionally and
irrevocably waives any compensation, benefits, termination payments, or other
payments provided for in the 1991 Employment Agreement, as of the Effective
Time. By executing this Agreement, Jensen, Recoton and the Corporation, jointly
and severally, and on behalf of their respective successors and assigns,
subsidiaries affiliates, directors, officers, agents and employees, in their
representative capacities, hereby unconditionally and irrevocably release
Employee from any obligations or duties arising under the 1991 Employment
Agreement and any claims arising thereunder, as of the Effective Time. This
Agreement shall terminate ab initio if the Merger Agreement is terminated and
the 1991 Employment Agreement shall remain in full force and effect.
2. Employment and Duties.
(a) The Corporation shall employ the Employee, and the Employee shall accept
employment, effective as of the Effective Time for the period of time set forth
in Section 3(a), upon such terms and conditions as set forth in this Agreement.
The Employee shall serve the Corporation as President and as Chief Executive
Officer subject to the conditions set forth in this Agreement, under the
direction of the Board of Directors of the Corporation, and shall exercise such
responsibilities and perform such duties for the Corporation as the Board of
Directors shall from time to time reasonably designate and which are
commensurate with the typical duties of a President or Chief Executive Officer
of a wholly-owned subsidiary of a public company in the business in which the
Corporation is engaged. The Employee also shall be elected to the Board of
Directors of Recoton and the Board of Directors of the Corporation as of the
Effective Date and shall serve as an executive officer of Recoton (in which
capacity he shall exercise such responsibilities and perform such duties for
Recoton as the President/Co-Chief Executive Officer and the Chief Operating
Officer shall from time to time designate commensurate with the Employee's
position as the President and Chief Executive Officer of a significant
subsidiary. As set forth following this Agreement, Robert L. Borchardt
("Borchardt"), the President and Co-Chief Executive Officer of Recoton, has
agreed to vote the common shares of Recoton, which he beneficially owns or as to
which he has discretionary voting authority in favor of the election and
reelection of the Employee to serve as a director of Recoton for so long as the
Employee is employed by Recoton or the Corporation or any affiliate thereof
whether during or after the termination of this Agreement. Recoton shall vote
the common shares of the Corporation in favor of the election and reelection of
the Employee to serve as a director of the Corporation, for so long as the
Employee is employed by the Corporation or any affiliate thereof whether during
or after the termination of this Agreement. For purposes of the foregoing,
Borchardt shall be deemed to own beneficially any common shares of Recoton which
are owned by himself, his spouse, any descendant of his, any trust, partnership,
corporation, joint venture, and limited liability company which has been created
primarily for his benefit or the benefit of his spouse or any descendant of
Borchardt, or over which he has discretionary voting authority. At such time as
the Employee ceases to be employed by the Corporation, the Employee shall resign
as a director of the Corporation and Recoton.
(b) The Employee shall report to the President/Co-Chief Executive Officer,
or to the President/Co-Chief Executive Officer and the Chief Operating Officer
of Recoton, together, as an officer of Recoton and to the Board of Directors of
the Corporation as the President or as an executive officer of the Corporation.
With the exception of that business time which will be devoted to the
performance of the Employee's responsibilities to IJI Acquisition pursuant to an
agreement to be entered into between Recoton, Jensen and IJI Acquisition
captioned Management Services Agreement (the "MS Agreement"), the form of which
is attached to the Amended and Restated Agreement for Purchase and Sale of the
Assets of International Jensen Incorporation by and between Jensen and IJI
Acquisition dated as of January 3, 1996 (the "Purchase Agreement") and such
other business time as is devoted to other responsibilities as set forth herein,
the Employee shall devote all of his business time and attention to the
performance of his duties under this Agreement and to promoting the best
interests of the Corporation and Recoton and the Employee shall not, either
during or outside of such normal business hours, directly or indirectly engage
in any activity inimical to such best interests. The Employee shall not perform
services for compensation and/or bonuses for himself or for any entity or person
other than the Corporation, or Recoton, without the prior express written
permission of Recoton's Board of Directors. Notwithstanding anything to the
contrary contained herein, it shall not be a violation of this Agreement for the
Employee to (i) serve on civic or charitable boards; (ii) participate in
professional activities and organizations; (iii) manage his personal investments
and his real estate development concerns at a level of activity currently so
engaged so long as those activities do not interfere with the Employee's
performance of his responsibilities under this Agreement; and (iv) be an officer
of or serve on the Board of Directors and be an employee of IJI Acquisition and
receive compensation in connection therewith, so long as those activities do not
interfere with the Employee's performance of his responsibilities under this
Agreement. The Employee shall exert his best efforts in the performance of his
duties under this Agreement.
(c) The Employee and the Corporation acknowledge that there may be
situations which arise, in light of the Employee being an officer, director,
stockholder and/or employee of IJI Acquisition and an officer, director and/or
employee of Recoton or the Corporation, which would constitute, or give rise to
the possibility of, a conflict of interest or the appearance of a conflict of
interest. The Employee agrees that he shall refrain from taking action which
would constitute a violation of his fiduciary duties to Recoton or the
Corporation. To the extent that he is aware of any conflicts (or potential
conflicts) of interest, he shall promptly so advise the Corporation and Recoton.
Recoton and the Corporation may take such reasonable efforts as they deem
appropriate (including without limitation the establishment of a "Chinese Wall"
between the Employee and other employees of Recoton and the Corporation working
on, or with knowledge of, the matter or matters in conflict or potential or
possible conflict (the "Conflicting Matters") and the reasonable exclusion of
the Employee from those portions of meetings which are relevant and from having
access to those portions of the files, documents, data bases and communications
regarding or relating to the Conflicting Matters) in order to reasonably
insulate the Employee from any such Conflicting Matters). The purpose of this
paragraph is to protect the Corporation and Recoton against injury due to the
Employee's conflict of interest. In no event shall the parties construe this
provision as a means to derogate the Employee's duties, as described herein, or
otherwise negate the Corporation's obligations and responsibilities under the MS
Agreement (as defined in Section 2(b)), or the Supply Agreement (as defined in
Section 5(a)). Any reasonable action taken by Recoton or the Corporation in good
faith, pursuant to this Section 2(c), shall not constitute an event giving the
Employee the right to terminate this Agreement pursuant to the third sentence of
Section 3(d). Subject to the terms and conditions set forth in Section 5, the
Employee shall not use or transmit, to IJI Acquisition or others, Recoton or
Corporation Proprietary Information relating to any Conflicting Matters.
3. Term; Payment Upon Termination.
(a) The term of the Employee's employment under this Agreement shall
commence as of the Effective Time and shall terminate on the earlier of the
death of the Employee, the Employee ceasing to be employed by the Corporation
other than by reason of breach by the Corporation of this Agreement, or 5:00
p.m. on the second anniversary of the Effective Time (the "Employment Term").
Except with respect to the provisions of Sections 2, 3(d) and 3(e) which
expressly survive the termination of this Agreement, the continued employment of
the Employee following the expiration of the Employment Term shall be other than
pursuant to this Agreement.
(b) The Corporation, in the sole discretion of its Board of Directors, may
terminate the employment of the Employee, and its obligation to pay compensation
pursuant to Section 4, during the Employment Term at any time for "cause."
"Cause" as used in this Agreement shall mean (i) conviction of a felony or any
crime having larceny as an essential element, (ii) willful conduct that is
materially injurious to the Corporation or Recoton, (iii) willful and repeated
dereliction of duty or breach of the Employee's material obligations under this
Agreement, (iv) failure to perform any material covenants under the agreement
dated as of January 3, 1996 among the Employee and the Corporation entitled
Shareholders' Agreement (the "Shareholders' Agreement") and (v) serious
violation of law relating to the Corporation's or Recoton's business or
securities. For the purpose of this section, no act or failure to act on the
Employee's part will be considered "willful" unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that his action or
omission was in the interest of the Corporation or not opposed to the interests
of the Corporation. For termination for cause, written notice of the termination
shall be served upon the Employee and, except as otherwise provided herein,
shall be effective as of the date of such service ("Termination Notice"). With
respect to items (iii) and (iv) of this subsection 3(b), Employee shall have ten
(10) days within receipt of the Termination Notice to cure the cause violation,
and his failure to do so shall result in his termination. Such written notice
shall specify in reasonable detail the act or acts of the Employee underlying
such termination.
(c) The Corporation may terminate the employment of the Employee for reasons
other than for cause provided that the Corporation shall continue to pay or
provide the Employee the salary and other benefits (including bonus which would
be paid if the Employee were still employed hereunder) provided for in this
Agreement until the expiration of the Employment Term.
(d) The Employee may terminate his employment hereunder at any time upon
sixty (60) days prior written notice. If the Employee has been employed by the
Corporation for a period of two (2) years or more, at the time he gives his
written notice of termination, the Corporation shall pay Employee a severance
payment in an amount equal to one (1) year of his then-current Base Salary and
Guaranteed Bonus, payable in one lump sum upon the termination of his
employment. If the Employee has been employed by the Corporation for less than
two (2) years, his compensation and benefits under this Agreement shall cease at
the time of the termination of his employment. Notwithstanding anything herein
to the contrary, the Employee's rights under the Option Plan, shall be governed
by the terms and conditions of the Option Agreement, a form of which is attached
hereto as Exhibit 4(d). If the Employee terminates his employment hereunder or
notifies the Corporation of his intent to terminate his employment hereunder,
the Corporation in its sole discretion may require the Employee to cease the
exercise of his responsibilities and the performance of his services for the
Corporation at any time prior to the effective date of the notice of termination
and to refrain from entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date of termination.
If the Corporation shall: (i) materially breach any term of this Agreement,
which breach shall not have been cured within ten (10) days after written notice
thereof has been given to the Corporation by the Employee, (ii) assign duties or
a title to the Employee or delegate powers to the Employee inconsistent, in any
material respect with the Employee's position as President or as an executive
officer of the Corporation; (iii) (A) relocate the Employee to an office or
location outside of a radius of ten (10) miles from the Lincolnshire office and
which is further than two (2) miles from an expressway (excluding the Employee's
relocation to the Corporation's Schiller Park Facility), or (B) require the
Employee to travel out-of-town in excess of an average of three (3) days per
week over any period of twelve (12) consecutive weeks, other than with the prior
written consent of the Employee, (iv) fail to require a successor of Recoton to
perform under the Employment Agreement; and/or (v) materially change the
Employee's reporting requirements; then the Employee may terminate his
employment under this Agreement and the Corporation shall continue to be
obligated to pay or provide to the Employee the salary and bonus provided for in
this Agreement until the expiration of the Employment Term and the Corporation
shall be obligated to provide to the Employee the payments and benefits
specified in Section 3(e).
(e) If the employment of the Employee is terminated by the Corporation at
any time, whether during the Employment Term or thereafter (including, but not
limited to, termination due to the death or disability of the Employee and the
"constructive termination" specified in the last sentence of Section 3(d)
above), unless terminated by the Corporation for cause, (i) the Employee will
receive a severance payment equal to twice the sum of the Base Salary (as
defined below) in effect at the time of termination and the Guaranteed Bonus (as
defined below), of which one-half shall be paid upon the effective date of such
termination and one-half of which shall be paid in equal monthly installments
over a 24-month period commencing upon the effective date of such termination,
(ii) all options to purchase the common shares of the Corporation in the
Employee's name shall immediately vest, (iii) the Corporation shall pay (or, if
desired by the Employee, reimburse the Employee for) all premiums for COBRA
insurance coverage for 18 months and shall reimburse the Employee for any
comparable coverage obtained thereafter (but not for an amount in the aggregate
in excess of the premiums paid or reimbursed for COBRA coverage) until the
second anniversary of such termination and (iv) the Corporation shall pay the
premiums for the life insurance policy noted in Section 4(c) for two years.
Recoton agrees to guaranty the obligations of the Corporation under Sections 3
and 4.
4. Compensation; Benefits; and Expenses. For all services to be rendered to
the Corporation or any affiliate thereof in any capacity, including services as
an officer, director, member of any committee or otherwise, so long as the
Employee is employed by the Corporation or Recoton during the Employment Term
pursuant to Section 3(a) or as otherwise set forth in the last sentence of
Section 3(d);
(a) The Corporation or the Surviving Corporation shall pay the Employee a
salary at the rate of $300,000 per year (the "Base Salary"). Such Base Salary
shall be payable in equal installments, less any usual payroll deductions, in
accordance with prevailing payroll practices of the Corporation from time to
time. The Board of Directors may in its sole discretion increase the Employee's
Base Salary and benefits over those provided for hereunder. Other than as
provided in this Agreement, in no event may Employee's compensation or benefits
be decreased by the Board of Directors except to the extent that such benefits
(other than Base Salary and Guaranteed Bonus, as defined below) are provided to
other employees and such employee benefits are similarly generally reduced.
(b) The Employee shall receive an annual bonus in respect of services for
each twelve (12) month period during the Employment Term in the amount of at
least $150,000 (the "Guaranteed Bonus"). The Guaranteed Bonus shall be paid in
one (1) installment, payable on the fifteenth day following the end of each
twelve month period. The Employee also shall be eligible for an additional
annual performance-based bonus which may be granted by the Board of Directors of
the Corporation in its sole discretion (the "Performance Bonus").
(c) The Employee shall be eligible to participate in all executive medical,
dental, life, long-term disability, and qualified or non-qualified retirement
benefit plans and all key executive and other employee benefit plans or
arrangements of the Corporation, including, without limitation, any Section
401(k) savings and profit sharing plan, and any standard life, disability,
accidental death and dismemberment and retirement plans or programs consistent
with the terms and coverages of such plans or arrangements and such other
individual plans and arrangements applicable to key executives or employees
generally, each as may from time to time be established, amended or terminated;
provided, however, that the value of all such benefits shall not be less than
the aggregate value of those benefits provided to the Employee under Section
4(e) of the 1991 Employment Agreement except that the key man life insurance
policies with aggregate benefits totalling $16.5 million can be terminated or
assigned to IJI Acquisition but the Corporation shall pay the premiums on the
Transamerica Life insurance policy owned by the Robert G. Shaw Trust in the
principal amount of $2.5 million during the Employment Term, and for a period of
two (2) years following the termination of the Employment Term, to the extent
required pursuant to Section 3(e).
(d) On the Effective Date, the Employee shall be granted a nonqualified
option pursuant to the terms of the Recoton Corporation 1991 Stock Option Plan
(the "Option Plan") to purchase 50,000 Recoton Common Shares, par value $.20
(the "Common Shares") at the closing price for the Common Shares on the day
prior to the Effective Time which option shall vest in five equal annual
installments, commencing on the first anniversary of the grant, and shall have a
term of ten years from the date hereof. The options granted under this paragraph
(d) shall be issued under the form of option agreement attached hereto as
Exhibit 4(d).
(e) The Corporation shall reimburse the Employee for all reasonable and
necessary expenses incurred by the Employee requested or authorized by the
Corporation in connection with the Corporation's business where such expenses
are properly documented and accounted for in accordance with the current policy
of the Corporation.
5. Restrictions on the Disclosure of Proprietary Information;
Inventions.
(a) During the period from the Effective Time until the expiration of the
Employment Term and thereafter, and except as may be necessary in the ordinary
course of the Corporation's business, the Employee shall not, without the prior
written consent of the Corporation, directly or indirectly (i) record,
photograph, photocopy or by any other means copy or cause to be copied any
document, list, drawing, writing, photograph, sketch, sound recording or other
material that embodies Proprietary Information as defined herein or (ii) use, or
disclose or divulge to any person, firm or corporation, any Proprietary
Information. Notwithstanding the above, the parties acknowledge that the MS
Agreement will be entered into pursuant to the Purchase Agreement and that a
certain Supply and Services Agreement will be entered into between Jensen and
IJI Acquisition (the "Supply Agreement"), the form of which is attached to the
Purchase Agreement, and recognize that the non- disclosure limitation as set
forth herein does not apply to information properly transmitted to any of the
parties in the performance of the MS Agreement and/or the Supply Agreement and
maintained in confidence by the recipient. As used in this Agreement,
"Proprietary Information" means information disclosed to or obtained by the
Employee, whether or not acquired during business hours, concerning Jensen's,
the Corporation's, Recoton's and/or their subsidiaries' business, operations,
products, manufacturing or other processes, services, customers, vendors, costs
and pricing policies, research, development, formulae, specifications, methods,
expertise, techniques, inventions, equipment, purchasing, merchandising and
selling including, but not limited to, customer lists, financial and/or
marketing reports and plans, product configurations and compositions, pricing
guidelines or information, financial reports, financial projections and other
financial information, business plans and any other information not readily
known or obtainable by the general public, and any proprietary software.
Notwithstanding the foregoing sentence, Proprietary Information does not include
(i) information acquired by the Employee before the Employee became an employee
of Jensen, (ii) information acquired by the Employee pursuant to his employment
by or ownership of IJI Acquisition, (iii) information which is or becomes public
knowledge (except as may be disclosed by the Employee in violation of this
Agreement), (iv) information acquired by the Employee from a source other than
Jensen, the Corporation, Recoton or an affiliate thereof or a party providing
such information to Jensen, the Corporation, Recoton or such affiliate that
legally acquired such information and was free to disclose the same or, (iv)
information independently developed by the Employee without the use of
Proprietary Information or the Corporation's, Recoton's, Jensen's or an
affiliates' facilities. Upon termination of employment hereunder for any reason,
Employee shall, to the extent feasible, promptly return to the Corporation that
portion of all books, records, lists, tapes and other written, typed, computer
or printed materials or data and all copies thereof which contain any
Proprietary Information, and the Employee shall not make or retain any copies
thereof.
(b) If at any time during the term of employment by the Corporation the
Employee conceives, develops, participates in the development of or causes to be
developed any products, methods, techniques, inventions, improvements, works,
techniques, processes, programs, software, works of art, products, ideas or
formulae which are not related to any of the businesses conducted by IJI
Acquisition or any of its affiliates (collectively, the "Corporation
Intellectual Property"), whether or not patentable or copyrightable and whether
or not done within or after normal business hours or alone or in conjunction
with others, relating exclusively to the business of the Corporation or any of
its affiliates, or their affiliates or any part thereof, such Corporation
Intellectual Property shall be and remain the sole and exclusive property of the
Corporation. The Employee shall promptly communicate and disclose all such
Corporation Intellectual Property or Employee Intellectual Property, as defined
below, to the Corporation, and to further effectuate the purposes of this
provision, each of the Corporation and the Employee shall execute and deliver to
the other at the requesting party's expense any instruments deemed necessary by
the requesting party to effect the disclosure thereof to, and ownership thereof
by, the requesting party, including without limitation any assignments of rights
to patents, copyrights and all other proprietary interests which the Employee or
the Corporation, as applicable, might have in any Corporation Intellectual
Property or Employee Intelectual Property, defined below, and shall further
assist the requesting party as the requesting party may reasonably request, to
obtain patent, trademark or copyright registration, or other protections for the
Corporation Intellectual Property/or Employee Intellectual Property, as defined
below, including testifying in any hearings, depositions or trials related
thereto.
If at any time during the term of employment the Employee conceives,
develops, participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works, techniques,
processes, programs, software, works of art, products, ideas or formulae which
are not related to any of the business conducted by the Corporation or any of
its affiliates (collectively, the "Employee Intellectual Property"), whether or
not patentable or copyrightable and whether or not done within or after normal
business hours or alone or in conjunction with others, relating exclusively to
the business of IJI Acquisition, or its affiliates or any part thereof, such
Employee Intellectual Property shall be and remain the sole and exclusive
property of the Employee. To the extent the Employee conceives, develops,
participates in the development of or causes to be developed any products,
methods, techniques, inventions, improvements, works, techniques, processes,
programs, software, works of art, products, ideas or formulae which are related
to the business conducted by both the Corporation or any of its affiliates and
IJI Acquisition or any of its affiliates (collectively the "Shared Intellectual
Property"), whether or not patentable or copyrightable and whether or not done
within or after normal business hours or alone or in conjunction with others,
which does not relate exclusively to the business of IJI Acquisition, the
Corporation or any of their affiliates, shall be and remain the shared property
of the Employee, IJI Acquisition, and the Corporation, as the case may be. The
parties shall, in good faith, endeavor to agree on an appropriate bifurcation or
other allocation of such Shared Intellectual Property, to the extent the parties
cannot agree on such bifurcation or allocation or other appropriate arrangement,
the parties shall each hold a perpetual worldwide royalty free license to use
such Shared Intellectual Property on a non-exclusive basis.
6. Restrictions on Competition. During the period of time during which the
Employee is employed by the Corporation (for the purpose of this section, the
term "Corporation" shall include the Corporation's subsidiaries and Recoton)
(the "Employment Period") and for that period of time after the Employment
Period in which the Employee is deemed to receive benefits pursuant to Section
3(d) (i.e. one (1) year after termination of the Employment Agreement if the
severance payment referenced in the second sentence of Section 3(d) is made), or
Section 3(e), as applicable, the Employee shall not:
(a) directly or indirectly, either individually or as a principal, partner,
agent, employer, consultant, stockholder, joint venturer, or investor, or in any
other manner or capacity whatsoever, engage in, assist or have any active
interest in a business that engages in the Branded Business or any business of
Recoton or its affiliates as that term is defined in that certain
Non-Competition Agreement to be entered into by and among Jensen, IJI
Acquisition, the Corporation, Recoton, and Fuji Cone, Inc., a Delaware
corporation (the "Non-Competition Agreement") the form of which is attached to
the Purchase Agreement as it exists on the Commencement Date, located anywhere
in the United States of America or any foreign country in which the Corporation
has conducted business in the last three (3) years. Notwithstanding anything to
the contrary contained herein: (A) this Section shall not preclude the Employee
from owning not more than 5% of the outstanding securities of a corporation
which is publicly traded, either on a securities exchange or over-the-counter;
and which engages in a business or lines of business similar to the Branded
Business, as that term is defined in the Non-Competition Agreement; and (B) it
shall not be a violation of this Agreement for Employee (whether during
employment or after termination of employment of the Employee hereunder) to: (i)
provide services pursuant to the MS Agreement, (ii) act as an executive officer
or director of IJI Acquisition, so long as those activities do not interfere
with the Employee's performance of his responsibilities under this Agreement,
(iii) own stock in IJI Acquisition, or (iv) be employed by IJI Acquisition so
long as those activities do not interfere with the Employee's performance of his
responsibilities under this Agreement.
(b) directly or indirectly, either individually or as a principal, partner,
agent, employer, consultant, stockholder, joint venturer, or investor, or in any
other manner or capacity whatsoever:
(i) divert or attempt to divert from the Corporation or an affiliate any
Branded Business, as that term is defined in the Non-Competition Agreement, with
respect to any customer or account, with which the Corporation or any of its
affiliates had any contact or association, or which was under the supervision of
the Corporation within three (3) years prior thereto;
(ii) induce any employee, salesperson, distributor, supplier, vender,
manufacturer, representative, agent, jobber, or other person transacting
business relating to the Branded Business, as that term is defined in the
Non-Competition Agreement, with the Corporation, or any of the affiliates, to
terminate their relationship or association with the Corporation or any of its
affiliates, or to represent or sell services or products in competition with
services or products relating to the Branded Business, as that term is defined
in the Non-Competition Agreement, of the Corporation or any of its affiliates,
excluding, however, any employee first hired after the Employee's employment
with the Corporation terminated (a "Prohibited Employee") for employment by any
person, business, firm or corporation, or any other entity;
(iii) employ or retain, directly or indirectly, a Prohibited
Employee; or
(iv) be an officer, director, partner, sole proprietor, the holder of
outstanding securities (except the holder of not more than 5% of the securities
of any corporation which is publicly traded, either on a securities exchange or
over-the-counter, or principal of any person, business, firm, corporation or
other entity that employs or retains a Prohibited Employee; provided, however,
that nothing in this Section 6 shall be construed to in any way prohibit IJI
Acquisition's right to hire any of the persons named as Management Service
Providers in the MS Agreement as an officer, director, employee or agent of IJI
Acquisition during the course of the Employee's employment with the Corporation
and for six months after termination of such employment pursuant to the
Non-Competition Agreement.
Nothing contained in this Agreement shall prevent Employee during the
Employment Period or thereafter, from performing his duties as an employee of
IJI Acquisition while IJI Acquisition engages in activities consistent with the
Non-Competition Agreement, so long as such performance conforms with Section
2(c). The Employee acknowledges that the time, scope, geographic area and other
provisions of this Section 6 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable under the
circumstances of the transactions contemplated by this Agreement. It is
understood that the Employee is agreeing to the terms of this Section 6 in order
to induce the Corporation and Recoton to enter into this Agreement. The parties
acknowledge that the business which the Corporation plans to conduct will be
conducted throughout the United States and worldwide and that, given the current
sophistication of the information and telecommunication "highway," a narrow
geographic limitation would deny the Corporation protection to which it is
entitled in this Agreement.
7. Prior Agreements. The Employee represents and warrants to the Corporation
that, except for his current employment by Jensen and the Purchase Agreement and
all ancillary documents thereto, he is not currently subject to any agreements,
obligations or restrictions regarding prior employment, competition,
solicitation of employees or customers or disclosure of proprietary information.
8. Certain Business Practices. The Employee shall not during the term of his
employment by the Corporation take or cause or knowingly permit others to take
any action which would cause the Corporation or Recoton to be in violation of
the United States Foreign Corrupt Practices Act or any other similar legislation
of the United States or any other country or any subdivision thereof.
9. Governing Law; Arbitration; Attorneys Fees.
(a) This Agreement and its validity, construction and performance shall be
governed in all respects by the law of the State of Illinois, without giving
effect to principles of conflict of law.
(b) The parties shall promptly cooperate in good faith to carry out the
provisions of this Agreement and the activities contemplated hereby and shall
also cooperate in good faith to resolve any disputes or differences which may
arise in connection with the provisions hereof and the activities contemplated
hereby. Except as otherwise noted in this Agreement, any dispute, question,
difference, controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be finally settled by arbitration in the
jurisdiction where the Corporation's main offices are located at the time of
institution of such action (the "Main Office") in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, as then in effect at
the time of filing of the notice of demand. The parties consent to the
jurisdiction of the trial court for the county where the Main Office is located
and of the United States Federal District Court for the District where the Main
Office is located for all purposes in connection with arbitration. The parties
consent that any process or notice of motion or other application to either of
said courts, and any paper in connection with arbitration, may be served by
certified mail, return receipt requested or by personal service or in such other
manner as may be permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance is allowed. The
arbitrators shall not alter or disregard any express provisions of this
Agreement. Any arbitration award in accordance with this Section 9(b) shall be
final and binding upon the parties and judgment thereon may be entered in any
court having jurisdiction over such party. The arbitrators are hereby authorized
to award to the prevailing party the costs (including reasonable attorneys' fees
and expenses) of any such arbitration.
(c) In the event of litigation or arbitration hereunder, the court or
arbitration panel shall be authorized to award the prevailing party in such
action or proceeding any or all reasonable attorney fees and disbursements paid
by it in pursuing or defending such action.
10. Enforceability. Any provision of this Agreement which is prohibited by, or
unlawful or unenforceable under, any applicable law of any jurisdiction shall be
ineffective as to such jurisdiction without affecting any other provision of
this Agreement in such jurisdiction or all of the provisions of this Agreement
in other jurisdictions. To the full extent, however, that the provisions of such
applicable law may be waived, or the provisions of this Agreement
"blue-penciled" or reformed by any competent court or arbitration panel, so that
they become enforceable, such provisions of law shall be hereby deemed waived or
such provisions of this Agreement shall be so blue-penciled or reformed to the
end that this Agreement is deemed to be a valid and binding agreement
enforceable in accordance with its terms. If any term or provision of this
Agreement shall be held invalid by a competent court or arbitration panel, the
remainder of this Agreement shall not be affected thereby and the parties hereto
shall continue to be bound by the remaining terms hereof. In such event, the
relevant term or provision (or should such term(s) or provision(s) be such a
material element of this Agreement, then the entire Agreement) shall be
renegotiated by the parties in a good faith effort to achieve mutual agreement
consistent with such holding and the parties shall continue to perform under
this Agreement in a manner consistent with the intent and objectives of the
parties to this Agreement.
11. Equitable Remedies. The Employee acknowledges that because of the nature of
the business of the Corporation and the subject matter of this Agreement, a
breach of Section 5 or 6 of this Agreement will cause irreparable injury to the
Corporation for which money damages will not provide an adequate remedy, and the
Employee agrees that the Corporation shall have the right to have the provisions
of such Sections specifically enforced by a court having equity jurisdiction, in
addition to, and not in limitation of, any remedies at law that the Corporation
may have.
12. No Waiver. The failure by either party at any time to require performance
or compliance by the other of any of its obligations or agreements shall in no
way affect the right to require such performance or compliance at any time
thereafter. The waiver by either party of a breach of any provision hereof shall
not be taken or held to be a waiver of any preceding or succeeding breach of
such provision or as a waiver of the provision itself. No waiver of any kind
shall be effective or binding, unless it is in writing and is signed by the
party against which such waiver is sought to be enforced.
13. Assignment. This Agreement and all rights hereunder are personal to the
Employee and may not be transferred or assigned by the Employee at any time. The
Corporation may assign its rights to any parent or subsidiary or, with the
Employee's consent (not to be unreasonably withheld), any successor or in
connection with any sale, transfer or other disposition of all, or substantially
all, of its business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and provided, further, that such
assignment and assumption shall not relieve the Corporation of its obligations
hereunder.
14. Entire Agreement. This Agreement constitutes the entire and
only agreement between the parties relating to employment of the
Employee by or with the Corporation, and this Agreement supersedes
and cancels any and all previous contracts, arrangements or
understandings with respect thereto.
15. Amendment. This Agreement may be amended, modified, superseded,
canceled, renewed or extended only by a written instrument executed by both of
the parties hereto.
16. Notices. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by certified or registered mail, return
receipt requested, postage prepaid, (c) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (d) telexed or
telecopied with receipt confirmed, addressed as follows:
(i) To the Employee: Robert G. Shaw
c/o International Jensen Incorporated/
Recoton Audio Corporation
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Telecopier: (847) 317-3855
Telephone No.: (847) 317-3700
- copy to (which shall not constitute notice) -
Wildman Harrold Allen & Dixon
225 W. Wacker Drive
Chicago, IL 60606-229
Attn.: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone No.: (312) 201-2000
(ii) To the Corporation: RC Acquisition Sub, Inc./Recoton
Audio Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Stuart Mont
Telecopier No.: (407) 333-8903
Telephone No.: (407) 333-8900
- copy to (which shall not constitute notice) -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: (212) 806-6006
Telephone No.: (212) 806-5400
(iii) To Jensen International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
(iv) To the Corporation: RC Acquisition Sub, Inc./Recoton
Audio Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Stuart Mont
Telecopier No.: (407) 333-8903
Telephone No.: (407) 333-8900
- copy to (which shall not constitute notice) -
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: (212) 806-6006
Telephone No.: (212) 806-5400
or such other persons or addresses as shall be furnished in writing by any party
to the other parties. A notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five days after the date when deposited with
the United States mail properly addressed, (iii) when a receipt of a Notice sent
by a overnight delivery service is confirmed by such overnight delivery service,
or (iv) when receipt of the telex or telecopy is confirmed, as the case may be,
unless the sending party has actual knowledge that a Notice was not received by
the intended recipient.
17. Binding Nature. This Agreement shall be binding upon and
inure to the benefit of the personal representatives and successors of
the respective parties hereto.
18. Headings; Language. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the plural, the
plural the singular and the word "or" is used in the inclusive sense and all
references to "including" shall mean "including without limitation," unless the
context requires otherwise.
19. Survival. Unless otherwise provided herein, the provisions of Sections 2,
3(d), 3(e), 4(b), 4(d), 5, 6, 9, 10, 11, 12, 13 and 16 of this Agreement shall
survive the termination of this Agreement as a continuing agreement of the
Corporation and the Employee.
20. Cross-References; Exhibits. References in this Agreement to
Articles, Sections, Schedules and Exhibits are references to
Articles and Sections of this Agreement and to Schedules and Exhibits
attached to or delivered pursuant to this Agreement. Any Schedules
and Exhibits are hereby made a part of this Agreement.
21. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original.
22. Advice of Counsel. The Employee acknowledges that he was
given the opportunity to receive the advice of counsel before signing
this Agreement and has consulted counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
INTERNATIONAL JENSEN INCORPORATED RECOTON CORPORATION
By: /S/ MARC TANENBERG By: /S/ STUART MONT
Name: Marc Tanenberg Name: Stuart Mont
Title: Executive Vice
Title: Vice President President-Operations
RC ACQUISITION SUB, INC.
By: /S/ STUART MONT /s/ Robert G. Shaw
Name: Stuart Mont Robert G. Shaw
Title: Secretary
AGREEMENT REGARDING ELECTION AND RE-ELECTION
OF ROBERT G. SHAW AS A RECOTON CORPORATION DIRECTOR
The undersigned hereby agrees to vote the Common Shares of Recoton
Corporation beneficially held by him as set forth in this Employment Agreement
or as to which he has discretionary voting authority in favor of the election
and reelection of Robert G. Shaw as a director of Recoton Corporation so long as
Employee is employed by Recoton Corporation or any affiliate thereof.
/s/ Robert L. Borchardt
Robert L. Borchardt
