SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use
[ x ] Definitive Proxy Statement of the Commission Only
[ ] Definitive Additional Materials (as permitted by Rule
[ ] Soliciting Material Pursuant
to ss.240.14a-11(c) or
ss.240.14a-12 14a-6(e)(2))
Recoton Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, of other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) on Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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transaction applies:
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transaction applies:
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filing fee is calculated and state how it was
determined)
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[ ] Check box if any part of the fee is offset as provided
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previously. Identify the previous filing by registration
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<PAGE>
RECOTON Regristration Mark Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the Annual Meeting of Shareholders
of Recoton Corporation (the "Company"), which will be held in Conference Room C,
11th Floor of Chase Bank, 270 Park Avenue, New York, New York on Wednesday, June
12, 1996 at 2:00 p.m., for the following purposes:
(1) To elect four directors for a term of three years;
(2) To ratify the appointment of Cornick, Garber & Sandler, LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1996; and
(3) To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only shareholders of record at the close of business on May 1, 1996
will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournments thereof.
It is important that your shares be represented at the annual meeting
regardless of the size of your holdings. WHETHER OR NOT YOU INTEND TO BE PRESENT
AT THE MEETING IN PERSON, WE URGE YOU TO PLEASE MARK, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ENVELOPE PROVIDED FOR THAT PURPOSE, WHICH DOES NOT
REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AT ANY
TIME PRIOR TO ITS USE.
By Order of the Board of Directors
Stuart Mont
Executive Vice President-Operations,
Chief Operating Officer, Chief Financial
Officer and Secretary
May 8, 1996
<PAGE>
RECOTON Registration Mark RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
ANNUAL MEETING OF SHAREHOLDERS
JUNE 12, 1996
PROXY STATEMENT
INTRODUCTION
The 1996 Annual Meeting (the "Annual Meeting") of Recoton Corporation
(the "Company" or "Recoton") will be held on Wednesday, June 12, 1996, for the
purposes set forth in the attached Notice of Annual Meeting. The accompanying
form of proxy is solicited on behalf of the Board of Directors of the Company in
connection with the Annual Meeting or any postponement or adjournment thereof.
EACH SHAREHOLDER'S VOTE IS IMPORTANT. ACCORDINGLY, SHAREHOLDERS ARE
URGED TO SIGN AND RETURN THE ACCOMPANYING PROXY CARD REGARDLESS OF WHETHER THEY
PLAN TO ATTEND THE ANNUAL MEETING. If a shareholder attends and votes by ballot
at the Annual Meeting, that vote will cancel any proxy vote previously given.
Additionally, a shareholder giving a proxy may revoke it at any time before it
is voted at the Annual Meeting by giving a valid proxy bearing a later date. The
accompanying form of proxy properly signed and returned to the Company will be
voted in accordance with the instructions thereon. Each such proxy may be
revoked at any time prior to the time it is voted at the Annual Meeting by
giving notice thereof in writing to the Secretary of the Company.
This Proxy Statement, the accompanying form of proxy and the Notice of
Annual Meeting are first being sent or given to shareholders of the Company (the
"Shareholders") on or about May 8, 1996.
SHARES OUTSTANDING AND VOTING RIGHTS
The securities entitled to vote at the Annual Meeting consist of shares
of Common Stock, $.20 par value per share, of the Company (the "Common Stock"),
each of which entitles the holder to one vote. Only holders of Common Stock of
record at the close of business on May 1, 1996 are entitled to vote at the
Annual Meeting or any adjournments thereof. On April 19, 1996, there were
11,223,479 shares of Common Stock outstanding. To the knowledge of the Company,
no person owned beneficially more than 5% of the outstanding shares of Common
Stock except as otherwise noted on pages 14-15.
Shareholders representing a majority of the shares of Common Stock
outstanding and entitled to vote must be present or represented by proxy in
order to constitute a quorum to conduct business at the Annual Meeting. Under
the New York Business Corporation Law ("BCL"), any corporate action, other than
the election of directors, must be authorized by a majority of the votes cast,
except as otherwise required by the BCL or the Company's Certificate of
Incorporation with respect to a specific proposal, and the four nominees for
Director receiving the highest number of votes will be elected as Directors. For
purposes of determining whether a proposal has received a majority of the votes
cast, where a shareholder abstains from voting or in instances where brokers are
prohibited from exercising or choose not to exercise discretionary authority for
beneficial owners who have not provided voting instructions (so-called "broker
non-votes"), those shares will not be included in the vote totals and,
therefore, will have no effect on the Rvote. Such shares will, however, be
counted as "present" for determining a quorum. Where, however, the BCL requires
the approval of a majority of outstanding shares for passage of a proposal, an
abstention or a broker non-vote will have the same practical effect as a vote
cast against the proposal.
PROPOSAL I
ELECTION OF DIRECTORS
The ten directors of the Company are divided into classes having
staggered terms of three years. At the Annual Meeting, four persons are to be
elected, each for a three-year term expiring in 1999. It is intended that the
persons named in the enclosed form of proxy will vote for the election of the
nominees named below for terms expiring in 1999 (or for substitute nominees in
the event of contingencies not known at present) unless the Shareholders
submitting proxies specify otherwise. The other directors will continue in
office for the remainder of their respective terms as indicated below.
Each of the nominees named below has served as a director during the
fiscal year ended December 31, 1995 except Paul Feffer, who is being proposed
for election. Certain data with respect to each nominee and each director
follows. If voting by proxy with respect to the election of directors,
shareholders may vote in favor of all nominees, withhold their votes as to all
nominees or withhold their votes as to specific nominees.
The Board of Directors unanimously recommends that Shareholders vote
FOR the election as directors of the nominees listed below for terms expiring in
1999. If one or more of the nominees should become unavailable or unable to
serve at the time of the Annual Meeting, the shares to be voted for such nominee
or nominees which are represented by proxies will be voted for any substitute
nominee or nominees designated by the Board or, if none, the size of the Board
will be reduced. The Board knows of no reason why any of the nominees will be
unavailable or unable to serve at the time of the Annual Meeting.
Name and Position Business Experience,
WITH THE COMPANY DIRECTORSHIPS AND AGE
NOMINEES FOR TERMS EXPIRING IN 1999
Robert L. Borchardt Director of Recoton since 1964.
Co-Chairman, President, President of theCompany since 1976,
Co-Chief Executive Chief Operating Officer from 1976 to
Officer and Director December 1993 and Co-Chairman and
Co-Chief Executive Officer since
1992. Age: 58
Stuart Mont Director of Recoton since 1975.
Executive Vice President-Operations, Vice President and Treasurer from
Chief Operating Officer, Chief prior to 1987 until 1989, Senior
Financial Officer, Secretary and Vice President from 1989 until June
Director 1992, Secretary since 1989, Executive
Vice President-Operations since June
1992, Chief Financial Officer since
June 1992 and Chief Operating Officer
since December 1993. Age: 55
George Calvi Director of Recoton since 1984.
Executive Vice President-Sales Vice President from 1978 until 1988,
and Marketing and Director Senior Vice President-Sales and
Marketing from 1988 until 1992 and
Executive Vice President-Sales and
Marketing since 1992. Age: 45
Paul E. Feffer Chairman of Feffer Consulting Co.,
Inc., an international media
consulting firm, since 1991 and a
consultant to Merck & Company's
publishing division. He founded
Feffer and Simons Inc. in 1955,
which was sold to Doubleday & Co.
in 1962 (where he remained as
President of the subsidiary Feffer
and Simons until 1986) and was
Chairman of Baker & Taylor
International, a subsidiary of W. R.
Grace & Co., from 1987 until 1991.
Feffer & Simons and Baker & Taylor
specialized in international
publishing and book and magazine
distribution and developed overseas
markets for U.S. publishers. Age: 74.
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Irwin S. Friedman Director of Recoton since 1982.
Director President, Chief Executive Officer
and principal shareholder of I.
Friedman Equities, Inc., a corporate
financial consulting firm, for more
than the past five years. Age: 62
Joseph M. Idy Director of Recoton since 1990.
Director Stockbroker and money manager at
PaineWebber, Inc. (Senior Vice
President since 1989) for more than
the past five years. Age: 55
Joseph H. Massot Director of Recoton since 1985.
Principal Accounting Officer, Controller and Assistant Treasurer
Vice President, Treasurer, from 1978 until 1989, Principal
Assistant Secretary and Accounting Officer, Vice President
Director and Treasurer since 1989 and
Assistant Secretary since 1983.
Age: 51
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Herbert H. Borchardt Director of Recoton since 1945.
Co-Chairman, Co-Chief Executive Chairman and Chief Executive Officer
Officer and Director from 1976 until 1992 and Co-Chairman
and Co-Chief Executive Officer since
1992. Age: 90
Peter Wish Director of Recoton since 1969.
Executive Vice President- Executive Vice President from 1976
Administration and Director until 1992 and Executive Vice
President-Administration since 1992.
Age: 60
Ronald E. McPherson Director of Recoton since 1969.
Director Until his retirement in January 1989,
Vice President and Secretary since
prior to 1990. Age: 66
Robert L. Borchardt may be deemed to be a control person of Recoton;
Robert L. Borchardt is the son of Herbert H. Borchardt.
BOARD COMMITTEES
The Board has standing Compensation and Audit Committees but does not
have any nominating committee. It also appoints the members of committees
constituted under stock compensation plans.
Compensation Committee. The Compensation Committee, composed of Messrs.
Friedman, Idy and McPherson (none of whom is an employee of the Company), met
twice in 1995. Its function is to review compensation issues; approve salaries
and review benefit programs for the executive officers; review and recommend
incentive compensation (including stock compensation) plans; and approve any
employment contracts with, or other contractual benefits for, executive
officers. The committee was formed in 1993.
Audit Committee. The audit committee, composed of Messrs. Friedman, Idy and
McPherson, met once in 1995. It performs activities, and reviews and makes
recommendations, relating to the accounting controls, audit and financial
statements of the Company.
Committees Under Stock Compensation Plans. In 1995 Messrs. H. Borchardt
and Idy were appointed by the Board of Directors as the Company's Stock Option
Committee and Messrs. McPherson and Idy were appointed by the Board of Directors
as the Company's Stock Bonus Committee. The Stock Option Committee, which makes
awards under, prescribes rules for and interprets the provisions of the Recoton
Corporation 1982 Stock Option Plan, Nonqualified Stock Option Plan and 1991
Stock Option Plan, met or acted by written consent five times during 1995. The
Stock Bonus Committee, which makes awards under, prescribes rules for and
interprets the provision of the Recoton Corporation Stock Bonus Plan, did not
meet in 1995.
COMPENSATION OF DIRECTORS; ATTENDANCE
During 1995, none of the directors who are officers of the Company
received any compensation in addition to his regular compensation from the
Company for any services as a director or as a member of a committee of the
Board of Directors. Each of the directors who are not officers of the Company
received an annual retainer of $4,000 in 1995 (which annual retainer has been
increased to $10,000 effective January 1, 1996) and was reimbursed for expenses,
if any, incurred in attending meetings. (See "Certain Relationships and Related
Transactions" for payments to a company affiliated with a director for services
other than as a director.)
The Board of Directors held ten meetings during the fiscal year ended
December 31, 1995. All of the directors attended at least 75% of the meetings of
the Board of Directors and committees of which they were members in 1995.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON COMPENSATION
OF EXECUTIVE OFFICERS OF THE COMPANY*
COMPENSATION PHILOSOPHY
The philosophy of the Company's executive compensation has been to
provide competitive levels of compensation, reward above average overall
corporate performance, recognize individual initiative and achievement and
assist the Company in attracting and retaining qualified management. The Company
does not determine compensation based on rigid formulas, fixed targets or
weighing of specific criteria. Due to the relatively small number of Company
employees and the level of interinvolvement between staff and management,
compensation of non-union employees, including the Co- CEO/President and the
other executive officers of the Company, is based on management's and the
Compensation Committee's subjective informal assessment of each employee's
performance in light of over-all Company performance.
- --------
* This section shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
BASE SALARIES
Base salary compensation is determined by the potential impact the
executive officer has on the Company, the skills and experience required by the
position and the level of responsibility. While there is no assurance that base
salaries will always increase, the basic assumption is that such salaries will
increase from year-to-year as the employee assumes greater levels of
responsibility in the Company and to keep pace with inflation. Increases for
1995 reflect both such factors.
INCENTIVE COMPENSATION
Annual incentive compensation is based primarily on corporate operating
earnings, but also includes an overall assessment by management and the
Committee of each executive officer's role in helping the Company to generate
such earnings. This assessment may include, but is not limited to, an informal
review of the individual's contributions in areas such as leadership, decision
making and financial and general management. In fixing incentive compensation in
1995, the Committee took particular note of management's success over the past
few years in increasing the Company's revenues and profits to record levels.
In recent years, the Company has used either cash or awards of treasury
stock as incentive compensation. The primary factor in determining incentive
compensation for the executive officers with respect to 1995 was the continuing
increase in net sales and net earnings of the Company. In 1995 such awards were
made exclusively in cash.
STOCK OPTIONS
The Company has periodically granted stock options in order to provide
certain of its executives with a competitive total compensation package, reward
them for their contribution to the Company's long-term share performance and
provide incentives to encourage future efforts. Options are generally granted to
key personnel, other employees in recognition of merit and to each employee who
has worked for the Company a minimum of five years. A significant round of
options were granted to appropriate Company employees in 1995 in recognition of
1994 services and financial results and to serve as incentive for continued
performance; options granted to named executive officers were as follows: Robert
Borchardt: 150,000 shares; Stuart Mont: 20,000 shares; Peter Wish: 10,000
shares; George Calvi: 10,000 shares; and Dennis Wherry: 10,000 shares. Options
were also granted in 1995 to certain newly-hired officers, to one former (now
deceased) officer in satisfaction of obligations pursuant to an acquisition
agreement and to certain newly-hired key personnel of a new subsidiary of the
Corporation, and pursuant to an employment agreement with Robert Borchardt (see
"Chief Executive Officers' Compensation" below).
All options granted have an option price that is not less than the fair
market value of the stock on the date of grant, with the exception of certain
nonqualified options which were issued to a former (now deceased) officer in
satisfaction of obligations under an acquisition agreement which were issued at
the fair market value as of the end of the prior fiscal year. The terms of the
options and the dates after which they become exercisable are established by the
Stock Option Committee, subject to plan terms. The Board feels that stock
ownership by management is beneficial in aligning management's and shareholders'
interest in the enhancement of shareholder value.
CHIEF EXECUTIVE OFFICERS' COMPENSATION
Mr. Herbert H. Borchardt, Co-Chief Executive Officer and Co-Chairman of
the Board, is being compensated pursuant to an employment agreement entered into
in 1987 which provides for base compensation which is to be adjusted annually to
reflect changes in the consumer price index (approximately $213,000 effective
1996). His compensation package includes a provision for an annual payment
(approximately $177,000 effective 1996) were he to cease in his role of
Co-Chairman and become a consultant. The initial salary level (and corresponding
level of payment if Mr. Herbert Borchardt were to become a consultant) was based
on negotiation between the Company and the employee and approximates the salary
level which the employee was receiving at the time of entering into the
employment agreement and does not vary based on the Company's performance.
Mr. Robert L. Borchardt, Co-Chief Executive Officer, Co-Chairman of the
Board and President, is being compensated pursuant to an employment agreement
entered into effective as of January 1, 1995. Such agreement provides for a base
annual salary of $850,000 which is to be adjusted annually to reflect the
greater of any increase in the consumer price index or 6% ($901,000.00 effective
1996) and an annual bonus equal to two percent of the Company's net income after
taxes for the just-completed year but before deducting the bonus ("Net Income
Before Bonus") (but in no event more than two percent of the corresponding Net
Income Before Bonus for the prior year) plus five percent of the amount by which
such Net Income Before Bonus number for the just-completed year exceeds the Net
Income Before Bonus number for the prior year. In addition, the Company granted
Mr. Borchardt 100,000 options at the time of contract execution, and 150,000
options in 1996 and agreed to exercise its best efforts to grant the employee
during each year of the employment term options on 250 shares for each $10,000
by which the Net Income Before Bonus for each just-completed year exceeds the
Net Income Before Bonus for the prior year (commencing with the grant of options
on 79,741 shares in 1996 with respect to the growth in Net Income Before Bonus
between 1994 and 1995). For a more complete description of the employment
agreement with Mr. Robert Borchardt, see "Employment Contracts and
Change-in-Control Arrangements" appearing elsewhere in this proxy statement. The
initial salary level was based on negotiation between the Company and the
employee and approximates the salary level which the employee was receiving at
the time of entering into the employment agreement. In recommending that the
Company enter into such employment, the Committee took specific note of Mr.
Robert Borchardt's role in the Company's success over the past few years in
increasing the Company's revenues and profits to record levels and the
desirability to the Company of his continued employment on a basis which would
serve to provide incentive for such continued efforts.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction beginning in 1994 to public companies for compensation
over $1 million received by a corporation's Chief Executive Officer and four
other most highly compensated executive officers. Qualifying performance-based
compensation will not be subject to the deduction limit if certain requirements
are met. The Internal Revenue Service released final rules in 1995 implementing
the provisions of this statute. In this regard, the Committee is reviewing
employment arrangements to determine whether any actions with respect to this
new limit should be taken by the Company. No executive officer's non-deferred
cash compensation was substantially in excess of $1,000,000 in 1995 (Robert
Borchardt having waived approximately $250,000 of his bonus payable with respect
to 1995); it is not anticipated that any executive officer of the Company other
than Mr. Robert Borchardt would likely receive any such cash compensation
significantly in excess of this limit during 1996 and, with respect to Mr.
Borchardt, it can not be determined whether he would waive receipt of any
portion of his contractually mandated bonus. Therefore, during 1995 the
Committee did not take any action to comply with the new limit. Options granted
under the Company's 1991 Stock Option Plan qualify as performance-based
compensation assuming satisfaction of all other applicable requirements. The
Committee will continue to monitor this situation and will take appropriate
action if it is warranted in the future, including possible renegotiation of the
employment agreement with Mr. Borchardt to conform to the exemptions allowed
under the IRS regulations.
CONCLUSION
The Committee believes the current compensation structure (namely
employment agreements for the Co-Chief Executive Officers and informal
arrangements consisting of base salaries, incentive compensation in the form of
cash and stock bonuses and the granting of stock options for the other executive
officers) has appropriately compensated its officers in a manner that relates to
performance and to the shareholders' long-term interests. The Committee will
continue to review compensation practices, with respect to both overall
arrangements and the compensation of specific officers.
Respectfully submitted,
For the Compensation Committee:
Irwin S. Friedman
Joseph M. Idy
Ronald E. McPherson
For the Stock Option Committee:
Herbert H. Borchardt
Joseph M. Idy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Other than Herbert H. Borchardt, who is a member of the Stock Option
Committee, no members of the Company's Compensation Committee and Stock Option
Committees are employed by the Company. Mr. McPherson was an officer and
employee of the Company until 1989 and was retained by the Company through
December 31, 1993 and a company of which Mr. Friedman is principal was under
retainer by the Company during 1995 (see "Certain Relationships and Related
Transactions"). No director of the Company served, during the last completed
fiscal year, as an executive officer of any entity whose compensation committee
(or other comparable committee, or the Board, as appropriate) included an
executive officer of the Company. There are no "interlocks" as defined by the
Securities and Exchange Commission ("SEC").
COMPENSATION TABLES
This section of the Proxy Statement discloses fiscal 1995 plan and
non-plan compensation awarded or paid to, or earned by, the Company's Co-Chief
Executive Officers ("CEOs") and, of the Company's other executive officers at
December 31, 1995, each of the four persons who were most highly compensated in
fiscal 1995 (to the extent salary and bonuses exceeded $100,000) (together,
these six persons are sometimes referred to as the "Named Executives").
SUMMARY COMPENSATION TABLE
The following table contains compensation data for the Named Executives
for the past three fiscal years:
<TABLE>
<CAPTION>
Name and
Principal Position Annual Compensation Long-Term Compensation
------------------------------------------
Awards Payouts
Other Securities All Other
Annual Restricted Underlying LTIP Compen-
Salary Bonus Compensation Stock Awards Options Payouts sation
Year ($)1 ($)2 ($)3 ($) (#)4 ($) ($)5
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. 1995 $899,950 $150,000 -- -- 250,000 -- $14,261
Borchardt, Co- 1994 798,950 250,000 -- -- 150,000 -- 18,143
Chairman, Co- 1993 799,335 250,000 -- -- -- -- 22,362
CEO and
President
Herbert H. 1995 202,587 -- -- -- -- -- 10,090
Borchardt, 1994 197,454 -- -- -- -- -- 10,207
Co-Chairman 1993 191,703 -- -- -- -- -- 17,196
and Co-CEO
Stuart Mont, 1995 162,241 160,000 -- -- 20,000 -- 8,785
Chief Operating 1994 142,237 140,000 -- -- -- -- 14,498
Officer & 1993 132,127 125,000 -- -- 22,500 -- 19,436
Executive Vice
President-
Operations
Peter Wish, 1995 200,122 125,000 -- -- 10,000 -- 6,276
Executive Vice 1994 185,422 125,000 -- -- -- -- 8,514
President- 1993 174,510 110,000 -- -- 22,500 -- 13,726
Administration
George Calvi, 1995 167,126 125,000 -- -- 10,000 -- 3,848
Executive Vice 1994 157,675 125,000 -- -- -- -- 6,917
President-Sales 1993 143,696 110,000 -- -- 22,500 -- 9,987
and Marketing
Dennis Wherry, 1995 131,980 55,000 -- -- 10,000 -- 3,774
Senior Vice 1994 135,980 50,000 -- -- -- -- 7,553
President- 1993 109,980 45,000 -- -- 11,250 -- 7,916
Operations
1 Includes amounts allocated to the executive's deferred compensation
account for each of 1995, 1994 and 1993 (Mr. R. Borchardt: $49,950, $49,950
and $45,400; Mr. Wish: $15,482, $14,782 and $15,180; and Mr. Calvi:
$13,911, $13,460 and $9,556) (see "Employment Contracts and
Changes-In-Control Arrangements" below).
2 Represents bonus awards determined for the performance year
indicated but paid in the following year. Includes the fair market value at
the date of grant of stock bonuses under the Stock Bonus Plan awarded in
March 1993 with respect to 1992 performance as follows: Mr. Mont: $75,000;
Mr. Wish: $60,000; Mr. Calvi: $55,000; and Mr. Wherry: $28,000.
3 The column "Other Annual Compensation" includes the value of certain
personal benefits only where the value is greater than the lower of $50,000
or 10% of an executive's salary and bonus for the year.
4 Numbers have been adjusted to reflect stock dividends.
5 Includes for 1995, 1994 and 1993 respectively, (a) the vested
portion of the Company's contribution for each such person pursuant to the
Recoton Corporation Employees' Profit Sharing Plan (Mr. R. Borchardt:
$2,986, $6,368 and $10,997; Mr. H. Borchardt: $2,645, $5,650 and $10,112;
Mr. Mont: $3,117, $6,489 and $12,054; Mr. Wish: $3,117, $6,489 and $12,097;
Mr. Calvi: $3,117, $6,489 and $9,701; and Mr. Wherry ($3,117, $6,489 and
$6,957); (b) premiums paid by the Company for split dollar insurance
arrangements (Mr. R. Borchardt: $8,350, $8,850 and $9,047); (c) premiums
paid by the Company for life insurance for the direct or indirect benefit
of such person over $50,000 in principal amount (Mr. R. Borchardt: $2,925,
$2,925 and $2,318; Mr. H. Borchardt: $7,445, $4,557 and $7,084; Mr. Mont:
$1,890, $1,210 and $824; Mr. Wish: $3,159, $2,025 and $1,629; Mr. Calvi:
$731, $428 and $286; and Mr. Wherry ($657, $397 and $209); and (d) the
value of interest assumed by the Company on relocation and other loans for
Mr. Mont ($3,778, $6,800 and $6,558); and Mr. Wherry ($667 in 1994 and $750
in 1993).
</TABLE>
OPTION GRANTS IN 1995
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
1995 (the Company has not granted any stock appreciation rights -- "SARs"):
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM1
Number of Percent of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Price Expiration
NAME Granted (#)2 Fiscal Year ($/Share)3 Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt 150,000 34.2% $15.50 2/26/05 $1,462,180 $3,705,451
Robert L. Borchardt 100,000 22.8% 24.00 10/26/05 1,509,347 3,824,982
Herbert H. Borchard - 0 - -- -- -- -- --
Stuart Mont 20,000 4.6% 15.50 2/26/05 194,957 494,060
Peter Wish 10,000 2.3% 15.50 2/26/05 97,479 247,030
George Calvi 10,000 2.3% 15.50 2/26/05 97,479 247,030
Dennis Wherry 10,000 2.3% 15.50 2/26/05 97,479 247,030
(continuation of table)
1 Executives may not sell or assign any stock grants, which have value
only to the extent of stock price appreciation, which will benefit all
shareholders commensurately. The amounts set forth are based on assumed
appreciation rates of 5% and 10% as prescribed by the Securities and
Exchange Commission rules and are not intended to forecast future
appreciation, if any, of the stock price. The Company did not use an
alternate formula for a grant date valuation as it is not aware of any
formula which will determine with reasonable accuracy a present value based
on future unknown or volatile factors. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved.
2 All of the noted options are exercisable in five equal annual installments,
commencing on the first anniversary of the date of grant, except for 100,000
options granted to Robert L. Borchardt, which are exercisable on the six
month anniversary of grant.
3 The exercise price is equal to or higher than the fair market value of the
Company's Common Stock on the date of the grant.
</TABLE>
AGGREGATED OPTION EXERCISES IN 1995
AND 1995 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1995 and unexercised
options held at year-end (as noted above, the Company has no outstanding SARs)
(all share numbers reflect the stock dividends distributed in December 1992,
October 1993 and July 1994):
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Securities Underlying In-the-Money Options
Options at 12/31/95 at 12/31/95 ($)1
-----------------------------------------------------------
Shares Acquired on Value Realized
Name Exercise (#) ($)1 Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt - 0 - NA 271,051 395,617 $3,780,316 $898,705
Herbert H. Borchardt - 0 - NA - 0 - - 0 - NA NA
Stuart Mont 32,000 $762,360 33,001 36,167 454,607 162,330
Peter Wish 5,334 99,253 13,268 26,167 112,693 129,830
George Calvi 19,602 281,298 41,667 26,167 607,345 129,830
Dennis Wherry - 0 - NA 4,500 16,750 18,735 60,602
1 Market value of underlying securities at exercise or year end, as
applicable, minus the exercise price. The per share closing sale price on the
Nasdaq Stock Exchange on December 31, 1995 was $18.75. Certain options granted
in 1994 and 1995 were excluded since they were not in the money at year-end.
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
GENERAL. The Company is party to various employment and consulting
agreements with certain of the Named Executive Officers as described below.
These agreements have been filed with the SEC as exhibits to the Company's
periodic filings, to which all of the following descriptions are subject.
HERBERT BORCHARDT EMPLOYMENT AGREEMENT. On May 18, 1987, the Company
entered into an employment agreement with Herbert H. Borchardt for a period
equal to the life of Mr. Borchardt. The agreement provides that on the date Mr.
Borchardt ceases to serve as Chief Executive Officer (including Co- Chief
Executive Officer), he shall advise the Company regarding such business matters
relating to the Company as the Board of Directors or any successor to the office
of chief executive officer may reasonably request. Pursuant to the agreement,
the Company shall pay Mr. Borchardt not less than $150,000 per annum while he is
Chairman of the Board (including Co-Chairman) and not less than $125,000 per
annum during his life when he is not Chairman of the Board (such sums being
subject to increase based on changes in the consumer price index; for the year
commencing January 1, 1996 the respective sums were approximately $213,000 and
$177,000).
ROBERT BORCHARDT EMPLOYMENT AGREEMENT. Effective January 1, 1995, the
Company entered into an employment agreement with Robert L. Borchardt, its
Co-Chief Executive Officer, Co-Chairman of the Board and President, for a ten
year term, which is automatically renewed thereafter for successive two-year
periods unless either party affirmatively elects to not renew the agreement.
Such agreement provides for a base annual salary of $850,000 which is to be
adjusted annually to reflect the greater of the changes in the consumer price
index or 6% ($901,000 effective 1996) and an annual bonus equal to two percent
of the Company's net income after taxes for the just-completed year but before
deducting the bonus ("Net Income Before Bonus") (but in no event more than two
percent of the corresponding Net Income Before Bonus for the prior year) plus
five percent of the amount by which such Net Income Before Bonus number for the
just-completed year exceeds the Net Income Before Bonus number for the prior
year. The agreement references option grants to Mr. Borchardt aggregating
250,000 shares during 1995 and 1996 (exercisable at the fair market value as of
the grant date) and requires the Company to exercise its best efforts to grant
the employee during the employment term options on 250 shares for each $10,000
by which the Net Income Before Bonus for each just-completed year during the
contract term exceeds the Net Income Before Bonus for the prior year
(exercisable at the fair market value as of the grant date). Mr. Borchardt
received options on 79,741 shares in 1996 with respect to the Company's 1995
earnings. The agreement provides for disability insurance and medical benefits,
vacation and perquisites customary for a chief executive officer as well as
certain demand and "piggy back" rights to have his shares of Company stock
registered.
The agreement is terminable by the Company only for "cause," (as
defined). If the Company elects not to renew the agreement at its expiration or
if the employee terminates employment at age 65, upon a change of control or for
"good reason" (as defined), the employee has the right to become a consultant to
the Company until the time of his death. As a consultant, Mr. Borchardt would
receive an amount equal to his salary at the time of termination of employment
for two years, an amount equal to 75% of that salary for two more years and an
amount equal to 50% of that salary for the balance of the consultancy period
(all such payments being subject to cost of living adjustments). Upon a "change
of control" (as defined) during the term of employment or consultancy, the
Company is obligated to pay Mr. Borchardt $2 million (subject to cost of living
adjustments), the employee would have the right to cause the Company to purchase
his shares in the Company and the employee would have the right to remain in
employment or to terminate his employment and become a consultant to the
Company. If the employee has "good reason" he may terminate his employment or
consultancy, in which event he is entitled to receive his salary and bonus or
his consultancy fee on a periodic or discounted lump sum basis (at the
employee's option) for the balance of the employment and/or consulting period
and may elect to receive the cash value of unexercised options (whether vested
or not). In certain events the Company is required to gross up payments to
reflect certain excise taxes which may be imposed under the Internal Revenue
Code. Upon the employee's termination of employment for disability, he would
receive his salary and bonus for one year and his salary as in effect at the
date of termination and benefits until his death. Upon the employee's death, his
estate would receive his salary and bonus for one year and his salary for one
additional year thereafter.
LIFE INSURANCE. Pursuant to two separate Split Dollar Life Insurance
Agreements effective as of February 24, 1989 among Recoton and Trudi Borchardt
and Marvin Schlacter (the "Joint Owner") and Robert L. Borchardt, the Company
agreed to maintain life insurance policies on Robert Borchardt's life in the
aggregate face amount of $2,500,000 the proceeds of which (after reimbursement
to the Company for premiums paid) are payable to beneficiaries designated by the
Company and the Joint Owner. Pursuant to three separate Split Dollar Life
Insurance Agreements effective December 17, 1994 among Recoton, the Robert and
Trudi Borchardt 1994 Family Trust (the "1994 Borchardt Family Trust") and Robert
L. Borchardt, the Company agreed to maintain life insurance policies on the
joint lives of Robert Borchardt and Trudi Borchardt in the aggregate face amount
of $10 million and a life insurance policy on the life of Robert L. Borchardt in
the face amount of $1.3 million, the proceeds of which (after reimbursement to
the Company for premiums paid) are payable to the beneficiary designated by the
1994 Borchardt Family Trust.
DEFERRED COMPENSATION AGREEMENTS. Pursuant to a Deferred Compensation
Agreement effective as of July 1, 1982 between Recoton and Robert L. Borchardt,
amounts credited under a prior deferred compensation agreement to Mr. Borchardt
plus five percent of the salary which Mr. Borchardt is or may become entitled to
receive from the Company together with interest accrued thereon shall be paid to
Mr. Borchardt in monthly installments upon termination of his employment for any
reason whatsoever. In the event of Mr. Borchardt's death, all or any unpaid
portion of his deferred compensation shall be payable to a beneficiary
designated by Mr. Borchardt. Mr. Wish and the Company entered into a similar
Deferred Compensation Agreement effective as of October 1, 1982, and Mr. Calvi
and the Company entered into a similar Deferred Compensation Agreement effective
as of October 1, 1991.
CHANGE OF CONTROL ARRANGEMENT. Options granted under the Company's
1991 Stock Option Plan may include provisions accelerating the vesting schedule
in the case of defined changes-in-control. Options granted to-date under such
plan have included such provision. See also the discussion above regarding the
Robert Borchardt Employment Agreement.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION*
Set forth below is a line graph and chart comparing the yearly percentage
change in the cumulative total shareholder return (change in year-end stock
price plus reinvested dividends) on the Company's Common Stock with the
cumulative total return of the Russell 2000 Index (an index prepared by Frank
Russell & Associates composed of companies listed on the New York and American
Stock Exchanges and quoted on the Nasdaq Stock Exchange ("Nasdaq") by market
capitalization beginning with the company which ranks 1001 and ending with the
company rank of 3000) and a peer group for the period of five fiscal years
commencing on December 31, 1990 and ending on December 31, 1995. The graph and
chart assumes that the value of the investment in the Company's stock and for
each index was $100 on December 31, 1990 and reflects reinvestment of dividends
and market capitalization weighing. The dollar amounts indicated in the graph
and chart are as of December 31 in each year indicated.
- --------
* This section shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement
into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return ($)
Registrant/Index 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Recoton Corporation $100 318 805 1,255 1,633 1,633
Peer Group 100 122 199 306 305 260
Russell 2000 100 148 173 206 202 260
</TABLE>
<PAGE>
The common stocks of the following companies have been included in
the peer group index: Acclaim Entertainment Inc., Ameriwood Industries
International Corp., Boston Acoustics Inc., Carver Corp., Emerson Radio Corp.,
Harman International Industries Inc., International Jensen Incorporated,
Interactive Network Inc., Polk Audio Inc. and Zenith Electronics Corp. The
members of the peer group are companies in the Standard & Poor's home
entertainment group but Standard & Poor's does not publish an index for such
group. Because of the Company's exclusive involvement in the consumer
electronics accessory business and the fact that no other public companies are
engaged in this business on an exclusive basis, no grouping could exactly mirror
the Company's business. All of the companies included in the Company's peer
group index are engaged in certain other businesses in which the Company is not
engaged. Historical stock price performance shown on the graph is not
necessarily indicative of the future price performance.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth information, as of April 19, 1996,
with respect to the beneficial ownership of Common Stock by (i) each director,
(ii) each Named Executive, (iii) each shareholder known by the Company to be the
beneficial owner of more than 5% of the Common Stock and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership(1)
Name and Address of Beneficial Owner(2) Number Percent
<S> <C> <C>
Robert L. Borchardt(3)(4)...................................................... 1,905,067 16.34%
First Pacific Advisors, Inc(5)................................................. 1,110,300 9.89
Herbert H. Borchardt........................................................... 2,499 *
George Calvi(4)................................................................ 62,423 *
Irwin S. Friedman(4)(6)........................................................ 39,000 *
Joseph M. Idy.................................................................. -0- *
Ronald McPherson............................................................... 34,194 *
Joseph H. Massot(4)............................................................ 41,988 *
Stuart Mont(4)................................................................. 74,953 *
Dennis Wherry(4)............................................................... 6,500 *
Peter Wish(4).................................................................. 31,174 *
All directors and executive officers as a group (17 persons)(4)................ 2,248,209 19.03
* Less than 1%
(1) Except as described in the following notes, beneficial ownership
assumes each person or group owns the shares directly and has sole
voting and investment power with respect to such shares. A person is
deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days upon the exercise of outstanding
options.
(2) Except as otherwise noted below, the address of all persons is c/o
Recoton Corporation, 2950 Lake Emma Road, Lake Mary, Florida 32746.
The address of Mr. Friedman is 730 Fifth Avenue, Suite 2102, New
York, New York 10019; the address of Mr. Idy is 440 Royal Palm Way,
Palm Beach, Florida 33480; and the address of Mr. McPherson is 6519
Sweet Maple Lane, Boca Raton, Florida 33433.
(3) Includes 319,999 shares held by Mr. R. Borchardt as trustee for his
children, 39,909 shares held by Mr. R. Borchardt's wife and 30,000
shares held by a family foundation of which Mr. R. Borchardt is a
director. Mr. R. Borchardt disclaims beneficial ownership of the
shares owned by his wife and the foundation. Also includes 546,666
shares held by a trust of which Mr. R. Borchardt and Mr. Irwin
Friedman are the trustees and of which Mr. Borchardt is the
beneficiary (the "Borchardt Trust"), the beneficial ownership of
which shares may be attributable to Mr. R. Borchardt, 516,393 shares
held by a revocable living trust of which Mr. R. Borchardt is the
sole trustee, 19,999 shares held in an individual retirement account
in Mr. R. Borchardt's name and 432,101 shares of Common Stock subject
to stock options exercisable as of April 19, 1996 or within 60 days
thereof. Excludes 406,092 shares as to which Mr. Borchardt also holds
a proxy pursuant to an agreement between the Company, Mr. Borchardt
and certain shareholders, which shares are to be voted consistent
with the recommendation of the Board of Directors of the Company.
(4) Includes shares of Common Stock subject to stock options exercisable
as of April 19, 1996 or within 60 days thereof as follows: Mr. R.
Borchardt: 432,101; Mr. Calvi: 36,500; Mr. Friedman: 7,500; Mr.
Massot: 24,267; Mr. Mont: 37,001; Mr. Wherry: 6,500; Mr. Wish: 15,268;
and all executive officers and directors as a group: 590,437.
(5) Based on a Schedule 13G Statement dated February 9, 1996, and filed
with the Securities and Exchange Commission, First Pacific Advisors,
Inc. had shared voting power with respect to 270,300 shares and
shared dispositive power with respect to 1,110,300; such
shareholder's address is 1140 West Olympic Boulevard, Suite 1200, Los
Angeles, CA 90064. The Company can not determine from such filing if
any natural persons control the shares beneficially owned by First
Pacific Advisors, Inc.
(6) Does not include the shares held by the Borchardt Trust, of which Mr.
Friedman is a trustee.
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the SEC and the Nasdaq Stock
Exchange. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that all such
1995 filing requirements were complied with except that Irwin Friedman filed one
report late.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1995, the Company paid a
total of $6,000 to I. Friedman Equities, Inc. ("Equities"), of which Mr.
Friedman, a director of the Company, is a principal shareholder pursuant to a
letter agreement dated as of January 1, 1984 between the Company and Equities
for financial consulting services at an annual fee of $6,000.
The following are the directors and executive officers of the Company
who received loans aggregating in excess of $60,000 outstanding at any time in
1995, their relationship with the Company, the maximum amount borrowed and the
outstanding balance as of April 19, 1996:
PERSON RELATIONSHIP MAXIMUM CURRENT BALANCE
Craig Dykes Vice President- $233,330 $ 51,030
Information Systems
Stuart Mont Chief Operating Officer, 195,686 171,686
Chief Financial Officer,
Executive Vice President-
Operations, Director
PROPOSAL II
SELECTION OF AUDITORS
Action is to be taken at the Annual Meeting to ratify the selection
of Cornick, Garber & Sandler, LLP as independent auditors of the Company for the
fiscal year ended December 31, 1996.
Representatives of Cornick, Garber & Sandler, LLP, which has served
as the Company's independent auditors since 1981, are expected to be present at
the Annual Meeting and to be available to respond to appropriate questions. They
will have an opportunity to make a statement if they so desire.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR RATIFICATION OF THE SELECTION OF CORNICK, GARBER & SANDLER, LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS TO COME BEFORE THE MEETING
If any matter not described herein should properly come before the
meeting, the Directors' Proxy Committee will vote the shares represented by it
in accordance with its best judgment. At the time this Proxy Statement went to
press, the Company knew of no other matters which might be presented for
shareholder action at the Annual Meeting.
EXPENSES OF SOLICITATION
The total cost of this proxy solicitation will be borne by the
Company. Officers, agents and employees of the Company and other solicitors
retained by the Company may, by letter, by telephone or in person, make
additional requests for the return of proxies and may receive proxies on behalf
of the Company. Brokers, nominees, fiduciaries and other custodians will be
requested to forward soliciting material to the beneficial owners of shares and
will be reimbursed for their out-of-pocket expenses.
SHAREHOLDER'S PROPOSALS
Shareholders are hereby notified that if they intend to submit
proposals for inclusion in the Company's proxy statement and form of proxy for
the 1997 Annual Meeting of Shareholders, such proposals must be received by the
Company no later than January 15, 1997.
MISCELLANEOUS
Management knows of no other business to be presented at the Annual
Meeting, but if other matters properly do come before the Annual Meeting, it is
intended that the proxies in the accompanying form will be voted thereon in
accordance with the judgment of the person or persons voting such proxies.
THE COMPANY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON
SOLICITED, ON WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995. Such a written request
is to be directed to Stuart Mont, Secretary, Recoton Corporation, 2950 Lake Emma
Road, Lake Mary, Florida 32746.
By Order of the Board of Directors
Stuart Mont
Executive Vice President-Operations, Chief
Operating Officer, Chief Financial Officer
and Secretary
Lake Mary, Florida
May 8, 1996
RECOTON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
June 12, 1996
This Proxy is Solicited on Behalf of Recoton Corporation's Board of Directors
This undersigned hereby appoints Joseph H. Massot and Peter M. Ildau and
each of them proxies for the undersigned with full power of substituion, to vote
all shares of Recoton Corporation capital stock which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders at Recoton Corporation,
New York, New York to be held at Chase Bank, 270 Park Avenue, New York, NY, on
Wednesday, June 12, 1996 at 2:00 P.M., or at any adjournment thereof, upon the
matters set forth on the reverse side and described in the accompanying Proxy
Statement and upon such other business as may properly come before the meeting
or any adjournment thereof.
Please mark this proxy as indicated on the reverse side to vote on any item.
If no directions are given, this proxy will be voted for the election of all
listed nominees, in accordance with the Directors' recommendation on the other
matters listed on the reverse side and at the discretion of the proxies on other
matters that may properly come before the meeting. Please sign and date on the
reverse side and return promptly in the enclosed envelope or otherwise to
Recoton Corporation, c/o Chemical Bank, JAF Building, P.O. box 3068, New York,
NY 10016, so that your shares can be represented at the meeting.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
<PAGE>
<TABLE>
<CAPTION>
Please mark
your votes as --------
indicated in X
this example --------
The Board of Directors recommends a vote FOR Items 1 and 2, each of which has
been proposed by Recoton Corporation
<S> <C> <C> <C> <C> <C> <C>
WITHHELD*
FOR FOR ALL FOR AGAINST ABSTAIN
----- ------- ------ ------ ------
Proposal 1-ELECTION OF DIRECTORS Proposal 2-APPROVAL OF
Nominee: Robert L. Borchardt ----- ------- AUDITORS ------ ------ ------
Stuart Mont
George Calvi
Paul E. Feffer
WITHHELD FOR: (Write that nominees' name in the
space provided below).
________________________________________ I PLAN TO ATTEND THE MEETING
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written com-
ments/address change on the reverse side.
Receipt is hereby acknowledged of the
Recoton Corporation Notice of Meeting and
Proxy Statement.
Signature________________________________________Signature__________________________________________Date___________________, 1996
</TABLE>
