SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): June 23, 1996
RECOTON CORPORATION
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(Exact name of registrant as specified in charter)
New York 0-5860 11-1771737
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
2950 Lake Emma Road, Lake Mary, Florida 32746
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: 407-333-8900
N.A.
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(Former name or former address, if changed since last report)
<PAGE>
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
between Recoton and/or Jensen or other parties at or about the same time. Copies
of the Second Amended Merger Agreement and certain related agreements were filed
by Recoton with the SEC on or about May 8, 1996. On May 10, 1996 the Merger
Agreement was further amended and restated (the "Third Amended and Restated
Merger Agreement") and certain of the related agreements also were amended and
restated. On June 23, 1996 the Merger Agreement was further amended and restated
(the "Fourth Amended and Restated Merger Agreement") and certain of the related
agreements also were amended and restated. This Form 8-K is being made for the
purpose of filing the Fourth Amended and Restated Merger Agreement which is
included herewith as Exhibit 2.1 and the other amended and restated 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 and 10.2.
Fourth Amended and Restated Merger Agreement.
Substantive changes in the Fourth Amended and Restated Merger Agreement, as
compared to the Third Amended and Restated Merger Agreement, include the
following:
-- The price per share offered by Recoton to the Jensen
stockholders was increased to $11.00 per share; the price
offered to Robert G. Shaw ("Shaw") and William Blair
Leveraged Capital Fund, L.P. ("WBLCF")(collectively, the
"Principal Stockholders"), however, remained at $8.90 per
share.
-- The merger consideration will be paid entirely in cash, and,
accordingly, the merger will not be tax free as it was before
to the extent that payment was previously made in stock.
-- The Termination Date was moved back from July 15, 1996 to
September 2, 1996 or such other date as Recoton may specify
(but not later than March 31, 1997).
-- The period during which Jensen has a contingent obligation to
pay a break up fee upon the occurence of certain events
following termination of the Merger Agreement was extended
from nine months to one year.
Second Amended and Restated Spread Agreement with Robert Shaw.
Effective as of May 1, 1996, Recoton 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"). Such agreement was amended on May 10, 1996. The Spread
Agreement was further amended on June 23, 1996 to change the term and the
provision regarding the sharing of profits such that Mr. Shaw will pay Recoton
half of the spread between the net proceeds per share received by Mr. Shaw upon
any sale prior to March 31, 1996 (including without limitation sale by way of
merger), but not to exceed $10.65 per share, and $8.90 per share, subject to
certain obligations of Recoton to reimburse Mr. Shaw for possible tax
liabilities. A copy of the Amended and Restated Spread Agreement is attached as
Exhibit 10.1.
Amended and Restated Acoustic Research License and Option Agreement.
On January 3, 1986, Recoton and Jensen entered into an agreement (the "AR
Agreement"), pursuant to which Recoton acquired from Jensen an exclusive
world-wide license to and option to purchase all rights to the "Acoustic
Research" and "AR" trademarks (collectively, the "AR Marks"), and Jensen
acquired an option to sell the AR Marks to Recoton under certain circumstances.
Such agreement was amended, and a related escrow agreement was entered into, on
May 9, 1996. On June 23, 1996, Recoton and Jensen further amended the AR
Agreement to extend the license term until December 31, 2000 and to change the
license fee, effective January 1, 1997, to the greater of $120,000 per year
(payable in monthly installments) or 4% of Net Shipments, as that term is
defined in the AR Agreement. A copy of the Amended and Restated AR Agreement is
attached as Exhibit 10.2.
Item 7(c). Exhibits.
Exhibit 2.1 Fourth 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,
but executed on June 23, 1996.
Exhibit 10.1 Second Amended and Restated Agreement between Robert G.
Shaw and Recoton Corporation dated as of May 1, 1996, but
executed on June 23, 1996.
Exhibit 10.2 Amended and Restated Exclusive World-Wide License and
Option to Sell and Option to Purchase Proprietary Rights
between Recoton Corporation and International Jensen
Incorporated dated as of January 3, 1996, but executed on June
23, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECOTON CORPORATION
By: /s/ Stuart Mont
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Name: Stuart Mont
Title: Executive Vice President -
Operations & Chief
Operating Officer
Dated: July 2, 1996
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.1 Fourth 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, but executed on June 23, 1996.
10.1 Second Amended Agreement between Robert G. Shaw and
Recoton Corporation dated as of May 1, 1996, but
executed on June 23, 1996.
10.2 Amended and Restated Exclusive World-Wide License and Option to
Sell and Option to Purchase Proprietary Rights between Recoton
Corporation and International Jensen Incorporated dated as of
January 3, 1996, but executed on June 23, 1996.
EXHIBIT 2.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JUNE 23, 1996
FOURTH AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
FOURTH 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 Acquisition Sub with and into Jensen (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, 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"), which agreement is
being amended contemporaneous to execution of this Agreement; and
WHEREAS, Jensen and IJI Acquisition Corp. ("IJI") have entered into an
agreement, which is being amended contemporaneous to execution of this Agreement
(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") Acquisition Sub shall be merged with and into Jensen
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 Acquisition Sub shall thereupon cease. Jensen 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 August 15, 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
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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 the right to receive merger consideration (the
"Merger Consideration") in the amount of $11.00 in cash (hereinafter the "Per
Share Cash Amount") or $8.90 in cash 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"). 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. 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 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.
(b) Notwithstanding the foregoing, if between the date of this Agreement
and the Effective Time the outstanding 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 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.
(c) 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.
3.2 Exchange of Certificates.
(a) Exchange Agent. 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 cash in the amount equal to the sum of (i) the number
of shares of Jensen Common Stock outstanding excluding shares held beneficially
by the Principal Stockholders multiplied by the Per Share Cash Amount plus (ii)
the number of shares of Jensen Common Stock held beneficially by the Principal
Stockholders multiplied by the Principal Stockholders Per Share Cash Amount. The
Exchange Agent shall, pursuant to irrevocable instructions, deliver the 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. The Exchange Fund shall be invested by the Exchange Agent as directed
by Recoton (so long as such directions do not impair the rights of the holders
of the shares of Jensen Common Stock) in direct obligations of the United States
of America, obligations for which the full faith and credit of the United States
of America is pledged to provide for the payment of principal and interest,
commercial paper rated P-1 or better by Moody's Investors Services, Inc. or A-1
or better by Standard & Poor's Corporation or certificates of deposit issued by
the Exchange Agent or a commercial bank having at least $1,000,000,000 in
assets, and any net earnings with respect thereto shall be paid to Recoton as
and when requested by Recoton.
(b) Promptly after the Effective Time, Recoton will send, or will cause the
Exchange Agent to send, to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Jensen Common Stock, other than holders of certificates
which represent Shares canceled and retired pursuant to Section 3.1(c) hereof,
(i) a letter of transmittal for use in such exchange (which shall specify that
the delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the certificates representing shares of Jensen Common Stock
to the Exchange Agent) and (ii) instructions for use in effecting the surrender
of certificates for payment therefor (the "Exchange Instructions").
(c) Each holder of certificates representing shares of Jensen Common Stock
that have been converted into a right to receive the Merger Consideration which
holders of such certificates are entitled to receive pursuant to this Article
III, upon surrender to the Exchange Agent of a certificate or certificates
representing such shares of Jensen Common Stock, together with a properly
completed and executed letter of transmittal covering such shares of Jensen
Common Stock and any other documents reasonably required by the Exchange
Instructions, will promptly receive the Merger Consideration payable in respect
of such shares of Jensen Common Stock as provided in this Article III, without
any interest thereon, less any required withholding of taxes, and the
certificates so surrendered shall forthwith be canceled. Until so surrendered,
each such certificate shall, at and after the Effective Time, represent for all
purposes only the right to receive such Merger Consideration.
(d) If any portion of the Merger Consideration is to be paid to a person
other than the registered holder of the shares of Jensen Common Stock
represented by the certificate or certificates surrendered in exchange therefor,
it shall be a condition to such payment that the certificate or certificates so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
person other than the registered holder of such shares of Jensen Common Stock or
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable. The Exchange Agent may make any tax withholdings required by
law if not provided with the appropriate documents.
(e) No Further Rights in Jensen Common Stock. All cash paid upon conversion
of the shares of Jensen Common Stock in accordance with the terms hereof shall
be deemed to have been paid in full satisfaction of all rights pertaining to
such shares of Jensen Common Stock.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including, without limitation, all interest and other income received by the
Exchange Agent in respect of all funds made available to it) 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 cash 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 Internal Revenue
Code of 1986, as amended (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) Immediately prior to the Effective Time, each holder of then
outstanding options ("Options") to purchase shares (whether or not then
presently exercisable) granted under 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 (collectively, the "Option Plans") will be
entitled to receive, and shall receive, in settlement of each such Option a cash
payment from Jensen in an amount equal to the product of (i) the Merger
Consideration minus the exercise price per share of the Option and (ii) the
number of shares of Jensen Common Stock covered by such Option; provided,
however, that each optionee shall receive a payment of at least $50. Jensen
shall use its best efforts to cause each holder of Options (whether or not then
presently exercisable) to execute an agreement consenting to the cancellation of
such Options as aforesaid.
(b) 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(b) (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(b) 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(b) 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 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 validl 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 (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") 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, except
that for purposes of Section 4.12(a), such term shall not include any amount
resulting from the Merger. 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 authorizations 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, intoor 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 nor any directors, officers, 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 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.
Section 4.22 Takeover Provisions. The Board of Directors of Jensen has
approved this Agreement and the OE Agreement by a vote of a majority of the
disinterested directors within the meaning of Article EIGHTH of Jensen's
Certificate of Incorporation. 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 was formed
for the purpose of engaging in the Merger and has not and will not engage prior
to the Effective Time in any activities other than those necessary to effectuate
the terms of this Agreement. 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 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 5.2(b) (formerly 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, and (iii) 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 (iii) collectively are 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.
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 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(e) 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 or Jensen 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 (i) Jensen or its subsidiaries taken as a whole (excluding
the Original Equipment Business) or (ii) the Original Equipment Business
separately;
(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 subject to appropriate confidentiality restrictions, 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 in reasonable detail 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 (including the material
terms thereof to the extent not restricted by any other binding agreement)
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
(excluding the Original Equipment Business);
(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 has provided Jensen with information pursuant to the
Confidentiality Agreement and in the course of its performance under this
Agreement.
(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 Proxy Statement. Jensen shall prepare and file with the SEC as
soon as reasonably practicable after the date hereof the Proxy Statement and any
revisions thereof as may be responsive to SEC comments or changed facts. The
information provided and to be provided by Recoton and Jensen and by their
auditors, attorneys, financial advisors or other consultants or advisors for use
in the 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 Proxy
Statement has been amended to satisfy all comments of the staff of the SEC and,
subject to the fiduciary duties of the Board of Directors of Jensen under
applicable law, shall recommend and 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.
Section 7.4 Expenses. Except as otherwise set forth in Section 9.2, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses; provided, however, that Recoton and Jensen shall share equally the
expenses of printing, filing and mailing the Proxy Statement and any drafts of
any registration statement required under prior versions of this Agreement.
Section 7.5 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 7.6 Public Statements. The parties shall release a press release
immediately upon the signing of this Agreement in the form set forth as Exhibit
7.6 (formerly 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 7.7 Accountant's Letters. Jensen shall use its best efforts to cause
to be delivered to Recoton letters of Coopers and Lybrand, LLP, independent
auditors for Jensen, dated the date of the Proxy Statement and the Effective
Time (or such other dates reasonably acceptable to Recoton) with respect to
certain financial statements and other financial information included in the
Proxy Statement, which letters shall be in customary form and substance
reasonably satisfactory to Recoton.
Section 7.8 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 7.8(b).
Section 7.9 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 shall have
been approved and adopted by the requisite vote of the stockholders of
Jensen pursuant to Section 4.21;
(b) 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;
(c) 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);
(d) 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 unacceptable to Recoton;
(e) 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 unacceptable to Recoton; and
(f) Jensen shall have received one or more letters from Lehman
Brothers dated the date of the Proxy Statement or reasonably prior thereto
(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 or the
waiver thereof by Jensen:
(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 (or, in the case of Acquisition Sub, its Secretary) 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); and
(c) Recoton shall have deposited the 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 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 or the waiver thereof by Recoton and
Acquisition Sub:
(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) Recoton and Acquisition Sub shall have received the letters of
Coopers & Lybrand, LLP contemplated by Section 7.7;
(d) Since the date hereof, no Jensen Material Adverse Effect shall
have occurred;
(e) 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;
(f) Recoton shall not have elected to terminate due to the results of
the inspections or tests performed in accordance with Section 6.2; and
(g) The number of Dissenting Shares shall not exceed 10% of the Jensen
Common Stock outstanding.
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:
(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 September 2, 1996 or such later date as
may be designated by Recoton (but in no event later than March 31, 1997)
(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, 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 unacceptable to Recoton 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 five 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, (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), (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 (v) if any third party commences a tender or exchange offer for
25% or more of Jensen's Common Stock and shares have been tendered thereto
in an amount equal to the minimum amount for which the third party
conditioned such tender or exchange; 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 five
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 Effective Time, (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 (including the satisfaction of the staff
of the SEC regarding the Proxy Statement), 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 effect 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 and thereafter if so requested by Recoton for a period
of up to an additional 60 days. If, at the end of such 120-day (or, if
applicable, such further 60-day period) 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 Fees and Expenses.
(a) General. 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). Language appearing in brackets in this
Section 9.2 is for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. 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 this
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. Except as otherwise set forth herein, payments under this Section
shall be made within five business days of, as applicable, termination of this
Agreement or the demand for reimbursement of Expenses (as that term is defined
below).
(b) Jensen Payment of Break-Up Fee. Jensen shall promptly, but in no event
later than five business days after the first to occur of any of the following
clauses (i) through (iii) (the "Payment Date"), pay to Recoton a fee of
$1,500,000, such amount to be paid on the Payment Date in cash in immediately
available funds by wire transfer to an account designated by Recoton if:
(i) the Agreement terminates pursuant to Section 9.1(e)
[RECOMMENDING OF A JENSEN ACQUISITION TRANSACTION];
(ii) either Acquisition Sub or Jensen shall become entitled to
terminate, and shall terminate, this Agreement pursuant to (1) Section
9.1(b)(i) [FAILURE TO CLOSE BY THE TERMINATION DATE] because of a failure
to satisfy any of the conditions set forth in Sections 8.3(a)(as to the
receipt of the Officer's Certificate only), 8.3(b) or 8.3(c) [CONDITIONS
REQUIRING DELIVERY OF OFFICER'S CERTIFICATES, LEGAL OPINION, COMFORT
LETTER] provided that Jensen did not diligently seek to fulfill or cause
others to fulfill these conditions; (2) Section 9.1(b)(i) [FAILURE TO CLOSE
BY THE TERMINATION DATE] because of a failure to satisfy the conditions set
forth in Section 8.3(e) [OE SALE] provided that this condition was not
satisfied because IJI exercised a right to terminate the OE Agreement
because of a willful and material breach of the OE Agreement by Jensen; or
(3) Section 9.1(b)(ii) [FAILURE OF JENSEN STOCKHOLDERS TO APPROVE THE
MERGER AT THE STOCKHOLDERS' MEETING] provided that contemporaneous with the
Jensen Stockholders' Meeting there shall be outstanding a competing Jensen
Acquisition Transaction proposed by a third party other than Recoton or
Acquisition Sub; or
(iii) Acquisition Sub shall become entitled to terminate, and shall
terminate, this Agreement pursuant to (1) Section 9.1(c)(i) [JENSEN BOARD
WITHDRAWS APPROVAL OR RECOMMENDATION ETC.]; (2) Section 9.1(c)(ii) [JENSEN
SELLS ASSETS, ISSUES STOCK, OR SOLICITS JENSEN ACQUISITION PROPOSAL WITHOUT
FIDUCIARY RIGHT TO DO SO]; (3) Section 9.1(c)(iii)(x) [MATERIAL BREACH OF
COVENANT OR AGREEMENT BY JENSEN], (including, but not limited to, a failure
to proceed diligently to obtain approval of the Proxy Statement by the SEC
and failure to proceed diligently to seek to lift any injunction barring
completion of the Merger) provided that the breach was willful; (4) Section
9.1(c)(iv)(x) [JENSEN ENTERS INTO AN ACQUISITION AGREEMENT WITH A PERSON
OTHER THAN RECOTON OR ACQUISITION SUB]; (5) Section 9.1(c)(iv)(y)
[COMMENCEMENT OF TENDER OFFER AND JENSEN DOES NOT RECOMMEND OR CEASES TO
RECOMMEND REJECTION OF OFFER]; or (6) Section 9.1(c)(v) [SUCCESSFUL TENDER
OFFER].
(c) Jensen Payment of Recoton Expenses. Jensen shall promptly, but in no
event later than five business days after demand has been made pursuant to
Section 9.2(g) after the first to occur of any of the events enumerated in (A)
Section 9.2(b) or in (B) any of the following clauses (i) through (v) (such date
of required payment being referred to as the "Payment Date"), pay to Recoton an
amount equal to Recoton's Expenses (as defined below) not to exceed $2,500,000,
such amount to be paid on the Payment Date in cash in immediately available
funds by wire transfer to an account designated by Recoton, (i) if either
Acquisition Sub or Jensen shall become entitled to terminate, and shall
terminate, this Agreement pursuant to Section 9.1(b)(i) [FAILURE TO CLOSE BY THE
TERMINATION DATE] and the Stockholders Meeting has not been held by the
Termination Date (as such Termination Date has been extended pursuant to the
penultimate sentence of Section 9.1) unless the provisions of the last sentence
of Section 9.1 are applicable; (ii) if either Acquisition Sub or Jensen shall
become entitled to terminate, and shall terminate, this Agreement pursuant to
Section 9.1(b)(ii) [FAILURE OF JENSEN STOCKHOLDERS TO APPROVE AT STOCKHOLDERS'
MEETING] provided that contemporaneous with the Jensen Stockholders' Meeting
there shall be no outstanding competing Jensen Acquisition Transaction proposed
by a third party other than Recoton or Acquisition Sub; (iii) if either
Acquisition Sub or Jensen shall become entitled to terminate, and shall
terminate, this Agreement pursuant to Section 9.1(b)(i) because of a failure to
satisfy any of the conditions set forth in Sections 8.3(b) or 8.3(c) [CONDITIONS
REQUIRING DELIVERY OF LEGAL OPINION, COMFORT LETTER] provided that Jensen
diligently sought to fulfill or cause others to fulfill these conditions; (iv)
if either Acquisition Sub or Jensen shall become entitled to terminate, and
shall terminate, this Agreement pursuant to Section 9.1(b)(i) because of a
failure to satisfy any of the conditions set forth in Section 8.1(f) [FAILURE TO
OBTAIN FAIRNESS OPINION] or Section 8.1(b) [HSR/EC FILINGS]; or (v) if either
Acquisition Sub or Jensen shall become entitled to terminate, and shall
terminate, this Agreement pursuant to Section 8.3(e) [OE SALE] provided that
this condition was not satisfied because IJI exercised a right to terminate for
failure to satisfy a condition under the OE Agreement other than the financing
condition and Jensen has not otherwise willfully and materially breached the OE
Agreement. If Jensen is required to make any payment to Recoton pursuant to
clause (B) of the first sentence of this Section 9.2(c) and within 12 months
following the date of termination of this Agreement (1) the Board of Directors
of Jensen recommends or approves a Jensen Acquisition Transaction by or with a
third party other than Recoton or Acquisition Sub, or enters into or consummates
an agreement with respect to any merger, sale of all of or substantially all of
the assets or shares of capital stock of Jensen, or one of a series of similar
transactions involving Jensen and/or its Subsidiaries having a comparable effect
on Jensen taken as a whole; (2) 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 (3) a third party succeeds in acquiring by tender offer or
exchange offer 25% or more of the Jensen Common Stock, then Jensen shall pay to
Recoton a fee of $1,500,000 within five business days of the first of such
events occurring.
(d) Situations Not Requiring Payment. Except as provided by clause (i)
below of this Section 9.2(d), no payments shall be owed by Recoton, Acquisition
Sub or Jensen if:
(i) Any party shall become entitled to terminate, and shall terminate,
this Agreement pursuant to the last sentence of Section 9.1 [FAILURE TO
RESOLVE GOVERNMENTAL CLEARANCES OR TO LIFT INJUNCTION WITHIN 120 DAY
EXTENSION PERIOD]; provided, however, that if within 12 months following
the date of termination of this Agreement pursuant to the last sentence of
Section 9.1 (1) the Board of Directors of Jensen recommends or approves a
Jensen Acquisition Transaction by or with a third party other than Recoton
or Acquisition Sub, or enters into or consummates an agreement with respect
to any merger, sale of all of or substantially all of the assets or shares
of capital stock of Jensen, or one of a series of similar transactions
involving Jensen and/or its Subsidiaries having a comparable effect on
Jensen taken as a whole; (2) 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 (3) a third party succeeds in
acquiring by tender offer or exchange offer 25% or more of the Jensen
Common Stock, then Jensen shall pay to Recoton a fee of $1,500,000 within
five business days of the first of such events occurring, plus
(ii) Jensen or Acquisition Sub shall become entitled to terminate, and
shall terminate, this Agreement pursuant to (1) Section 9.1(b)(i) [FAILURE
TO CLOSE BY THE TERMINATION DATE] because of a failure to satisfy the
conditions of Section 8.1(e) [GOVERNMENT ACTION]; Section 9.1(b)(iii)
[GOVERNMENTAL APPROVALS] or (3) Section 9.1(b)(iv) [INJUNCTION] provided
that the party terminating this Agreement shall have diligently sought to
satisfy these conditions; provided, however, that if within 12 months
following the date of termination of this Agreement by Jensen due to the
events noted in this clause (ii) (1) the Board of Directors of Jensen
recommends or approves a Jensen Acquisition Transaction by or with a third
party other than Recoton or Acquisition Sub, or enters into or consummates
an agreement with respect to any merger, sale of all of or substantially
all of the assets or shares of capital stock of Jensen, or one of a series
of similar transactions involving Jensen and/or its Subsidiaries having a
comparable effect on Jensen taken as a whole; (2) 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 (3) a third party
succeeds in acquiring by tender offer or exchange offer 25% or more of the
Jensen Common Stock, then Jensen shall pay to Recoton a fee of $1,500,000
within five business days of the first of such events occurring, plus
Recoton's Expenses (such Expenses not to exceed $2,500,000) within five
business days after the demand has been made pursuant to Section 9.2(g);
(iii) Acquisition Sub shall become entitled to terminate, and shall
terminate, this Agreement pursuant to (1) 9.1(c)(iii) [MATERIAL BREACH OF
COVENANT OR AGREEMENT BY JENSEN] provided that the breach was not willful;
or (2) Section 9.1(b)(i) [FAILURE TO CLOSE BY THE TERMINATION DATE] because
of Section 8.3(d) [JENSEN MATERIAL ADVERSE CHANGE] or (B) Section 8.3(g)
[DISSENTING SHARES]; or
(iv) Jensen shall become entitled to terminate, and shall
terminate, this Agreement pursuant to Section 9.1(d) [MATERIAL BREACH OF
COVENANT OR AGREEMENT BY RECOTON] provided that the breach was not willful.
(e) Recoton Payment of Break-Up Fee. Recoton shall promptly, but in no
event later than five business days after the first to occur of any of the
following clauses (i) through (iv) (the "Payment Date"), pay to Jensen a fee of
$1,500,000, such amount to be paid on the Payment Date in cash in immediately
available funds by wire transfer to an account designated by Jensen if Jensen
shall become entitled to terminate, and shall terminate, this Agreement pursuant
to (i) 9.1(b)(i) [FAILURE TO CLOSE BY THE TERMINATION DATE] because of a failure
to satisfy any of the conditions set forth in Sections 8.2(a)(as to the
Officer's Certificate, only) and 8.2(b) [CONDITIONS REQUIRING DELIVERY OF
OFFICER'S CERTIFICATES AND LEGAL OPINION] provided that Recoton did not
diligently seek to fulfill or cause other to fulfill these conditions; (ii)
Section 9.1(b)(i) [FAILURE TO CLOSE BY THE TERMINATION DATE] because of a
failure to satisfy any of the conditions set forth in Section 8.2(c) [DELIVERY
OF CASH TO EXCHANGE FUND]; or (iii) Section 9.1(d)(x) [MATERIAL BREACH OF
COVENANT OR AGREEMENT] (including, but not limited to, a failure to proceed
diligently to seek the lifting of any injunction barring completion of the
Merger) provided that the breach was willful.
(f) Recoton's Payment of Jensen Expenses. Promptly, but in no event later
than five business days after demand has been made pursuant to Section 9.2(g)
after the first to occur of any of the events enumerated in paragraph (e) or if
either Acquisition Sub or Jensen shall become entitled to terminate, and shall
terminate, this Agreement pursuant to Section 9.1(b)(i) [FAILURE TO CLOSE BY THE
TERMINATION DATE] because of a failure to satisfy any of the conditions set
forth in Section 8.2(b) [CONDITIONS REQUIRING DELIVERY OF LEGAL OPINION]
provided that Recoton diligently sought to fulfill or cause others to fulfill
these conditions (such day of required payment being referred to as the "Payment
Date"), Recoton shall pay to Jensen an amount equal to Jensen's Expenses not to
exceed $2,500,000, such amount to be paid on the Payment Date in cash in
immediately available funds by wire transfer to an account designated by Jensen.
(g) Definition of Expenses, Etc. "Expenses" as used in this Agreement shall
include all reasonable out-of-pocket expenses (including without limitation all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and all of the matters
and agreements referred to herein or related hereto, the preparation, printing,
filing and mailing of the Proxy Statement and any drafts of registration
statements required under any prior versions of this Agreement, the solicitation
of stockholder approvals, defending or prosecuting any litigation or other legal
proceedings related to or arising out of the transactions contemplated herein
and all other matters related to the closing of the transactions contemplated
herein. Whenever a party shall be obligated to pay the other party's Expenses,
such payment shall be made within five business days after the presentment of a
demand for reimbursement (which may be made in one or more parts), which demands
may be made up to two months after the event giving rise to the payment of costs
and expenses; provided, however, that no expense payments need be made once
expense payments to such party equal to $2,500,000 have been made.
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 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), 7.4, 7.6, 7.8, 7.9, 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 LLC, 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 Severability; Enforceability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement in any other jurisdiction. Such term or
provision, however, shall be modified to the extent allowable by law so that it
becomes enforceable to the greatest extent permissible, as modified, and shall
be enforced as any other term or provision hereof. The parties further agree to
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
Section 10.10 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 23rd day of June, 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
SECOND AMENDED AND RESTATED AGREEMENT
This SECOND AMENDED AND RESTATED 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 entered into a Third
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 $10.00 or $8.90 in cash and/or
equivalent shares of Common Stock 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
Second Amended and Restated Agreement and Plan of Merger (the "Second Amended
Merger Agreement"), Recoton had required that Shaw agree, and in order to induce
Recoton to enter into the Second Amended Merger Agreement, Shaw had agreed,
among other things, to pay to Recoton certain amounts if Shaw sells his shares
of Jensen Common Stock for greater than $8.90 per share, in accordance with the
terms and conditions of this Agreement.
WHEREAS, Jensen and IJI Acquisition ("Acquisition"), a corporation owned by
Shaw, entered into a Second Amended and Restated Agreement for the Purchase and
Sale of the Assets of the OEM Business of Jensen (the "Purchase Agreement").
WHEREAS, Shaw proposes to further amend the Purchase Agreement to increase
the Purchase Price (as defined in the Purchase Agreement) to $18,405,000 if,
among other things, Recoton enters into this Agreement.
WHEREAS, Recoton and RC Acquisition Sub propose to amend the Revised Merger
Agreement to increase the Merger Consideration to $11.00 per share of Jensen
Common Stock to each of the stockholders of Jensen other than Shaw and Blair and
to make the consideration for each share of Jensen Common Stock all cash if Shaw
enters into 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 $8.90 per share, Shaw shall
promptly pay to Recoton upon Shaw's receipt of the proceeds from the sale of
Shaw's shares 50% of the difference between (a) the net proceeds per share
received by Shaw, but not to exceed $10.65 per share, for each share sold by
Shaw, and (b) the sum of $8.90 per share. Shaw shall retain all net proceeds in
excess of $10.65 per share. If Shaw is required to pay any Federal or state
income taxes which are incurred by him as a result of Recoton's receipt of any
portion of the sales proceeds, Recoton agrees that it will reimburse Shaw for
50% of such Federal and state income tax. Any reimbursement due to 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 March 31, 1997.
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.
4.10 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 on June 23,
1996, to take effect as of the date set forth above.
RECOTON CORPORATION
By: /s/ Stuart Mont
--------------------------
Name: Stuart Mont
Title: Executive Vice President-
Operations
RC ACQUISITION SUB, INC.
By: /s/ Stuart Mont
--------------------------
Name: Stuart Mont
Title: Secretary
/s/ Robert G. Shaw
--------------------------
EXHIBIT 10.2 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JUNE 23, 1996
AMENDED AND RESTATED EXCLUSIVE WORLD-WIDE LICENSE AND
OPTION TO SELL AND OPTION TO PURCHASE PROPRIETARY RIGHTS
THIS AMENDED AND RESTATED AGREEMENT made by and entered into as of the 3rd
day of January, 1996, by and between International Jensen Incorporated, a
Delaware corporation, with its principal place of business at 25 Tri-State
International Office Center, Suite 400, Lincolnshire, IL 60069 ("Jensen") and
Recoton Corporation, a New York corporation, with its principal place of
business at 2950 Lake Emma Road, Lake Mary, FL 32746 ("Recoton").
W I T N E S S E T H:
WHEREAS, Jensen is the owner of the trademarks "Acoustic Research" and "AR"
and certain other trademarks (registered or unregistered), trademark
applications, service marks, trade names, copyrights, trade secrets, and similar
intangible rights associated with such trademarks, including the marks and other
rights described on Exhibit "A", and the good will associated therewith, whether
or not reflected on the books and records of Jensen (collectively, the
"Intellectual Property Rights"); and
WHEREAS, Jensen and Recoton entered into an agreement captioned "EXCLUSIVE
WORLD-WIDE LICENSE AND OPTION TO SELL AND OPTION TO PURCHASE PROPRIETARY RIGHTS"
effective as of January 3, 1996 (the "License and Option Agreement") pursuant to
which Jensen granted to Recoton, inter alia, an option to purchase the
trademarks "Acoustic Research" and "AR" (the "Marks") from Jensen and Recoton
granted to Jensen an option to sell the Marks to Recoton under certain
conditions;
WHEREAS, the License and Option Agreement was amended on or about May 9,
1996 pursuant to a written amendment;
WHEREAS, the parties desire to further amend the License and Option
Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties mutually agree to amend and restate the
License and Option Agreement, as previously amended, to read as follows:
1. License of Proprietary Rights.
(a) Jensen herewith grants to Recoton an exclusive worldwide license of the
Intellectual Property Rights (the "License") in consideration of a payment of a
License Fee (as provided for in Section 5, below) by Recoton to Jensen during
the term of the License. The License shall commence upon the date hereof and
expire upon the earlier of (i) the Effective Time as defined in the Plan and
Agreement of Merger between, inter alia, Recoton and Jensen dated the date
hereof (the "Merger Agreement") or (ii) the date of the exercise of either the
Purchase Option (as defined below) or the Sale Option (as defined below) (the
Purchase Option and the Sale Option sometimes being referred to collectively as
the "Options") or (iii) December 31, 2000 (the "Termination Date"). As used
throughout this Agreement, the period from January 1 (January 3 for 1996)
through December 31 of each year during the term of this Agreement is referred
to herein as an "Annual Period."
2. Option to Purchase and Option to Sell the Proprietary Rights.
(a) Jensen herewith grants to Recoton an option to purchase all of the
Intellectual Property Rights together with the goodwill associated therewith on
a world-wide basis from Jensen (the "Purchase Option"), exercisable by Recoton
on at least five days prior written notice given at any time after the date
hereof such that the purchase shall occur at a time stated (the "Purchase Date")
prior to the Termination Date. In consideration of the grant of the Purchase
Option, Recoton shall pay Jensen a fee of $4,000 per month from the date hereof
until exercise of either of the Options or until the Termination Date.
(b) Recoton herewith grants to Jensen an option to sell all of the
Intellectual Property Rights together with the goodwill associated therewith on
a world-wide basis to Recoton (the "Sale Option"), exercisable by Jensen at any
time after the termination of the Merger Agreement and before the Termination
Date. The sale shall occur on the later of the fifth business day following the
day upon which the Merger Agreement is terminated or the second business day
following the exercise of the Sale Option (the "Purchase Date"). In
consideration of the grant of the Sale Option, Jensen shall pay Recoton a fee of
$4,000 per month from the date hereof until exercise of either of the Options or
until the Termination Date.
(c) On the Purchase Date, Recoton shall pay to Jensen $3.5 million (the
"Purchase Price") by wire transfer or by certified check and Jensen shall
execute and deliver to Recoton the Assignment of Trademarks and Assignment of
Copyrights and, if applicable, the Assignment of Patents attached hereto as
Exhibits "B", "C" and "D" respectively. All assets of Jensen other than the
Intellectual Property Rights are specifically excluded from the assets subject
to the Options.
3. Extension of Term of License and Options. If any dispute should arise
between Jensen and Recoton during the term of the License or the Option
regarding or otherwise affecting the ability of Recoton or Jensen to exercise
one or both of the Options, or regarding the validity of the License, the
License shall remain in full force and effect notwithstanding any such dispute,
and the License and the Options shall otherwise continue on the terms and
conditions set forth herein, until the earlier of resolution of such dispute by
the parties or the expiration of 30 days following the time within which to
appeal any final judgement in any litigation arising from such dispute has
lapsed (the "Extended Termination Date") and all references herein to the
Termination Date shall be deemed references to the Extended Termination Date.
4. Termination
(a) This Agreement shall continue until the end of the term provided in
Section 1 except that Jensen may at any time, immediately upon written notice to
Recoton, terminate this Agreement upon the occurrence of any of the following
events:
(1) Recoton (i) becomes subject to a receiver or trustee, (ii)
becomes insolvent, (iii) becomes subject to an involuntary petition
under the United States Bankruptcy Act, as amended, for whatever
reason, or (iv) makes an assignment for the benefit of its creditors
and any of the foregoing exists for more than 30 days, and Recoton or
any person or entity acting in its behalf fails to provide Jensen with
adequate assurance, as reasonably determined by Jensen, of Recoton's
ability to fully perform its obligations under this Agreement within
30 days of any of the above-mentioned acts or events;
(2) Recoton materially breaches or fails to perform any material
obligation under this Agreement and such breach or failure continues
for 30 days (or such other extended time as may be agreed upon between
the parties) after receiving written notice from Jensen of such breach
or failure; or
(3) any warranty or representation made by Recoton under Section
9 is materially false or misleading.
Any such termination by Jensen shall be without prejudice to any of
Jensen's other rights or remedies.
(b) If the License should terminate other than pursuant to exercise of the
Options or effectiveness of the merger pursuant to the Merger Agreement, Recoton
shall cease manufacturing products bearing the licensed trademarks and refrain
from further use of the Intellectual Property Rights; provided, however, that
Recoton shall, for a period of 12 months following the date of said termination
have the right to continue to sell products manufactured prior to such
termination bearing the licensed trademarks and use related advertising,
promotion and packaging materials on a non-exclusive basis.
5. Royalties, Records and Reports
(a) For the rights and privileges granted under the License, Recoton
shall pay Jensen, in the manner hereinafter provided, the following royalties:
(i) For the first Annual Period of this Agreement, royalties
of $10,000 per month, due by the tenth day of the succeeding
month.
(ii) For the balance of the term of this Agreement, a sum
equal to the greater of (i) $10,000 per month (the "Minimum
Royalty"), or (ii) four percent (4%) of Net Shipments (the
"Earned Royalties"). As used throughout this Agreement, the term
"Net Shipments" shall mean the aggregate of the gross invoiced
amounts of articles subject to this License (the "Licensed
Products") which are sold, shipped, distributed, and/or provided
by Recoton, less (1) refunds, credits, and allowances made or
allowed by Recoton to customers with respect to Licensed
Products, (2) freight charges paid by Recoton and (3) sales and
excise taxes paid by Recoton.
(b) The Minimum Royalty for each month during the terms of this Agreement
ending after January 1, 1997 shall be paid by the tenth day of the succeeding
month. Within 30 days of the end of each calendar quarter ending after January
1, 1997, Recoton shall deliver to Jensen a report, giving such particulars of
the business conducted by Recoton and its affiliates during the preceding three
months under this Agreement as are required for a determination of Earned
Royalties due under this Agreement. The information in such reports shall be
held in confidence by Jensen and shall not be disclosed to any other person or
used for any purpose other than to verify the activities of Recoton under this
Agreement. Simultaneously with the delivery of such report, Recoton shall pay to
Jensen the Earned Royalties under this Agreement for the periods covered by such
report less the Minimum Royalties for the months in such quarterly period
previously paid or paid therewith. If no Earned Royalties are due, the report
shall so state. The excess of Minimum Royalties for any quarterly period over
the Earned Royalties for such quarterly period shall be credited to any future
payments of Earned Royalties during such Annual Period.
6. Books and Records
(a) Recoton shall keep true and accurate books of account containing all
particulars which may be necessary for the purpose of showing the amounts due
and payable to Jensen. Such books of account shall be kept at Recoton's
principal place of business. Said books and the supporting data shall be open at
reasonable times for three years following the end of the Annual Period to which
they pertain for the inspection of an independent certified public accountant
retained by Jensen and reasonably acceptable to Recoton for the purpose of
verifying Recoton's royalty statements. If any underpayment is in excess of five
percent (5%) and $10,000, the cost of any such review by Jensen's independent
certified public accountant shall be borne by Recoton.
(b) Jensen and Recoton shall require any public accountant retained by
Jensen to hold in confidence any information the public accountant obtains from
such inspection, except to the extent of verifying to Jensen the correctness of
Recoton's reports and royalty payments as provided herein, and Jensen shall not
disclose to any competitor of Recoton the amount of the Earned Royalties, sales
or any other information provided by Recoton to Jensen in said reports except as
expressly required by applicable law, rule or regulation.
7. Terms of License or Sale
(a) The Intellectual Property Rights are being licensed or, if either of
the Options is exercised, sold by Jensen to Recoton free and clear of all debts,
mortgages, pledges, liens (including without limitation federal, state, and
local tax liens), taxes, claims, defaults, assessments, fines, penalties,
charges, security interests, encumbrances, options or other restrictions
(whether matured or unmatured) (together, the "Restrictions").
(b) Jensen shall pay any applicable sales, gains, documentary, use, filing,
transfer and similar taxes payable as a result of the licensing or, if either of
the Options is exercised, sale of the Intellectual Property Rights and file all
appropriate returns related thereto. Recoton shall reasonably cooperate in the
preparation of such returns, if necessary and, if required, sign such returns if
true and complete. All taxes on, or measured by, the net income or revenues of
Recoton or Jensen (including, without limitation, income, gross receipts, and
net-worth taxes) imposed or levied by, or payable to, any federal, state, or
local taxing authority shall be paid or payable by the party upon which such
taxes are imposed or levied.
(c) Jensen shall promptly execute and deliver from time to time at the
request and expense of Recoton all such further instruments and further
assurances as may be required in order to effect the license to, or, if either
of the Options is exercised, the sale to, Recoton of, and the right to use and
enjoy, the Intellectual Property Rights.
(d) During the term of the License, the nature and quality of all products
manufactured by Recoton bearing the licensed trademark shall conform to or
exceed the quality of those speakers and consumer electronic products, as
appropriate, held in the inventory of Jensen as of January 1, 1996 which used
the Acoustic Research brand.
8. Representations and Warranties of Jensen. Jensen represents and
warrants to Recoton as follows:
(a) Jensen has the corporate power to execute and deliver this Agreement
and has taken all action required by law, its Certificate of Incorporation, its
By-Laws or otherwise to authorize such execution and delivery; this Agreement
has been, and the other agreements to be executed pursuant to this Agreement by
Jensen will be, duly executed and delivered by Jensen; and this Agreement is a
valid and binding agreement, and all such agreements will be valid and binding
agreements, of Jensen enforceable in accordance with the terms thereof.
(b) Neither the execution and delivery of this Agreement nor the
performance of its terms will conflict with, be a breach of, or constitute a
default under, any agreement or instrument to which Jensen is a party.
(c) To the best of Jensen's knowledge, the Intellectual Property Rights
which are trademark or copyright registrations are valid, in good standing, and
are not involved in any interferences, litigation, oppositions, or cancellation
proceedings, and are owned by Jensen, free and clear of all liens, encumbrances,
equities, or claims. Jensen owns or has the right to use, without payment to any
other party, trademarks, trade names, service marks, copyrights and applications
therefor referred to in such Exhibit A (all of which are being licensed
herewith), and the consummation of the transactions contemplated hereby will not
alter or impair such rights in any material respect. Jensen has no patents or
patent rights covering the products which are currently used in connection with
the Intellectual Property Rights. 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. 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.
9. Representations and Warranties of Recoton. Recoton represents
and warrants to Jensen as follows:
(a) Recoton has the corporate power to execute and deliver this Agreement
and has taken all action required by law, its Certificate of Incorporation, its
By-Laws or otherwise to authorize such execution and delivery; this Agreement
has been, and the other agreements to be executed pursuant to this Agreement by
Recoton will be, duly executed and delivered by Recoton; and this Agreement is a
valid and binding agreement, and all such agreements will be valid and binding
agreements, of Recoton enforceable in accordance with the terms thereof.
(b) Neither the execution and delivery of this Agreement, nor the
performance of its terms, will conflict with, be a breach of or constitute a
default under any agreement or instrument to which Recoton is a party.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter contained herein and no
modification or addition hereto shall be binding unless in writing and signed by
both parties.
11. Parties in Interest. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto, and their respective heirs, representatives
and permitted assigns.
12. Expenses. Except as otherwise provided in this Agreement, Jensen and
Recoton shall pay their own expenses incidental to the carrying out of this
Agreement, including all fees and expenses of counsel and accountants.
13. General Laws; Service of Process. This Agreement shall be governed by
the laws of the State of New York without reference to its choice-of-law rules.
Service of process may be made upon each of the parties hereto by using the
notification procedure set forth in Section 17. 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. To the fullest extent permitted by
law, the parties hereby waive all rights to a trial by jury in connection with
this Agreement. 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.
14. Survival. All warranties, representations, and covenants made by each
party in or pursuant to this Agreement shall survive for the benefit of the
other parties notwithstanding the significance thereof or any examination,
examination opportunity or knowledge (whether implied or actual).
15. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
16. Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
17. 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 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, IL 60069
Attn: Marc T. Tanenberg
with a copy to:
Vedder, Price, Kaufman &
Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
Notice of any change in any such address shall be given in the manner set forth
above. Whenever the giving of notice is required, the giving of such notice may
be waived by the Party entitled to receive such notice. Notice shall be
effective upon receipt.
18. Further Assurances. Recoton and Jensen shall execute all documentation
necessary or appropriate to effect the agreements set forth in this Agreement,
including without limitation any assignment of patents or patent rights if the
representation regarding the lack of patents made in Section 8(c) is incorrect.
19. Assignment. No party may assign its rights or obligations hereunder
without the written consent of the other parties.
20. Exhibits. References to Exhibits and Schedules shall be references to
the exhibits of, and schedules, to this Agreement. Such Exhibits and Schedules,
whether attached to or provided subsequent to the execution of, this Agreement
form an integral part of this Agreement and are hereby incorporated in this
Agreement.
21. Enforceability. If any provision of this Agreement is held illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability will
not affect any other provision hereof. This Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.
22. Costs of Collection. Each party shall pay all costs of litigation,
including reasonable attorney's fees, incurred by the other party in
successfully enforcing any provision of this Agreement.
23. Waiver. The failure of any party to insist upon strict performance of
any of the terms or conditions of this Agreement will not constitute a waiver of
any of its rights hereunder.
24. Right to Offset. Payments due under this Agreement or any other
agreements 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. If the provisions of Section 3 hereof are applicable and the terms of the
License and Options are extended thereunder, payments otherwise due from Jensen
(or any affiliate thereof) to Recoton (or any affiliate thereof) at any time up
to the amount of the Purchase Price shall not be due and payable until the
earlier of payment of the Purchase Price by Recoton to Jensen or the Extended
Termination Date.
25. Remedies. If any party shall fail to make payment in full of any fees
due pursuant to Section 2 or Section 5(a)(i), such failure shall not give the
other party the right to terminate this Agreement unless such payment has not
been made within 30 days after entry of a final judgment requiring such payment.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement on the
23rd day of June, 1996 as of the date set forth above.
INTERNATIONAL JENSEN
INCORPORATED
Witnesses:
______________________ By: /s/ Marc T. Tanenberg
--------------------------
Marc T. Tanenberg
Vice President and Chief
Financial Officer
RECOTON CORPORATION
______________________ By: Stuart Mont
--------------------------
Stuart Mont
Executive Vice President
and Chief Operating Officer
<PAGE>
EXHIBIT A
---------
TRADEMARKS REGISTRATIONS
Trademark Country Registration No.
Acoustic Research United States 1,778,708
AR United States 1,430,911
AR United States 927,195
Additional trademarks are on attachment.
UNREGISTERED TRADEMARKS
None
COPYRIGHT REGISTRATIONS AND APPLICATIONS
None
