SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-K/A - NO. 2
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the Fiscal Year Ended December 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ____ to ____
Commission file number: 0-5860
----------------------------
RECOTON CORPORATION
(Exact name of Registrant as Specified in its Charter)
NEW YORK 22-3326054
(State or Other (IRS Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA 32745
(Address of principal executive offices, including zip code)
(407) 333-8900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.20 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
reporting requirements for the past 90 days. Yes x/ No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$128,322,036 based on the closing price on the Nasdaq Stock Market
of $13.50 as of March 21, 1997
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
11,377,183 shares of Common Stock as of March 21, 1997
DOCUMENTS INCORPORATED BY REFERENCE
Various exhibits, as listed in Item 14 of Part IV, have been incorporated by
reference.
<PAGE>
Items 10, 11, 12 and 13 of Part III of the Form 10-K are amended to read as
follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding the executive officers of Recoton is
contained under "Directors and Executive Officers of Recoton" under Item 1 to
this Report.
The directors of Recoton and certain information regarding such persons
is as follows:
Name and Position Business Experience,
WITH THE COMPANY DIRECTORSHIPS AND AGE
DIRECTORS WHOSE TERMS EXPIRE IN 1997
Herbert H. Borchardt Director of Recoton
Co-Chairman and Director since 1945. Chairman and Chief
Executive Officer from 1976 until
1992, Co-Chief Executive Officer
from 1992 until June 1996 and Co-
Chairman since 1992. Age: 91
Stephen Chu Director of Recoton
Director since January 1997. President and
Director of STD Holding Limited, a
Hong Kong subsidiary of the
Company, and of its various
subsidiaries, since September 1990.
STD was acquired by the Company in
September 1995. Age: 40.
Ronald E. McPherson
Director Director of Recoton
since 1969. Vice President and
Secretary from 1964 until his
retirement in 1989. Age: 67
Peter Wish Director of Recoton
Executive Vice President- since 1969. Executive Vice
Administration and Director President from 1976 until 1992 and
Executive Vice
President-Administration since
1992. Age: 61
DIRECTORS WHOSE TERMS EXPIRE IN 1998
Irwin S. Friedman Director of Recoton
Director since 1982. 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: 63
Joseph M. Idy Director of Recoton
Director since 1990. Stockbroker and money
manager at PaineWebber, Inc.
(Senior Vice President since 1989)
for more than the past five years.
Age: 56
Joseph H. Massot Director of Recoton
Principal Accounting Officer, since 1985. Controller and
Vice President, Treasurer, Assistant Treasurer from 1978 until
Assistant Secretary and Director 1989, Principal Accounting Officer,
Vice President and Treasurer since
1989 and Assistant Secretary since
1983. Age: 52
Robert G. Shaw Director of Recoton
Vice President and Director since August 1996. Vice President
of Recoton since August 1996.
President and a director of Recoton
Audio Corporation (f/k/a
International Jensen Incorporated)
(RAC) since June 1994 (RAC was
acquired by the Company in August
1996). President, Director and sole
stockholder of International Jensen
Incorporated (f/k/a IJI Acquisition
Corp.) (IJI) since January 1996
(RAC sold its original equipment
manufacturing business to IJI at
the time of RAC's acquisition by
the Company). Mr. Shaw is also a
director of Gibraltar Packaging
Group, Inc., a manufacturer and
marketer of printed paperboard
packaging, and a trustee of Beloit
College. Age: 56.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Robert L. Borchardt Director of Recoton
Co-Chairman, President, since 1964. Chief Operating Officer
Chief Executive Officer and from 1976 to December 1993,
Director President since 1976, Co-Chairman
since 1992, Co-Chief Executive
Officer from 1992 until June 1996
and Chief Executive Officer since
June 1996. Age: 59
Stuart Mont Director of Recoton
Executive Vice President- since 1975. Vice President and
Operations, Chief Operating Treasurer from prior to 1987 until
Officer, Chief Financial Officer, 1989, Senior Vice President from
Secretary and Director 1989 until 1992, Secretary since
1989, Executive Vice
President-Operations since 1992,
Chief Financial Officer since 1992
and Chief Operating Officer since
1993. Age: 56
George Calvi Director of Recoton
Director since 1984. Vice President from
1978 until 1988, Senior Vice
President-Sales and Marketing from
1988 until 1992 and Executive Vice
President-Sales and Marketing from
1992 until October 1996. Age: 46
Paul E. Feffer Director of Recoton
Director since June 1996. 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 to
overseas markets for U.S.
publishers. Age: 75
Robert L. Borchardt may be deemed to be a control person of Recoton;
Robert L. Borchardt is the son of Herbert H. Borchardt.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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
1996 filing requirements were complied with except that Mr. Feffer's Form 3 was
filed late.
ITEM 11. EXECUTIVE COMPENSATION.
This section of the Form 10-K discloses fiscal 1996 plan and non-plan
compensation awarded or paid to, or earned by, the (i) Company's Co-Chief
Executive Officers ("CEOs") (as of June 1996, the Company commenced to have only
one CEO), (ii) the Company's four most highly compensated executive officers
other than the CEOs who were serving as executive officers at December 31, 1996,
to the extent salary and bonuses exceeded $100,000 and (iii) one person for whom
disclosure would have been provided pursuant to clause (ii) but for the fact
that the individual was not an executive officer at December 31, 1996 (together,
these seven persons are sometimes referred to as the "Named Executives").
SUMMARY COMPENSATION TABLE
The following table contains compensation data for the Named Executives
for the past three fiscal years:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Name and
Principal Annual Compensation Long-Term Compensation
Position
-------------------------------------------
Awards Payouts
-----------------------------------------------------------------------------------------
Other Restricted Securities
Annual Stock Underlying All
Salary Bonus Compensation Awards Options LTIP Other
Year ($)1 ($)2 ($)3 ($) (#)4 Payouts Compensation
($) ($)5
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. 1996 $947,570 $ 90,000 -- -- 229,741 -- $15,322
Borchardt, 1995 899,950 150,000 -- -- 250,000 -- 14,284
Co-Chairman, 1994 798,950 250,000 -- -- 150,000 -- 18,143
CEO and President
Herbert H. Borchardt, 1996 212,950 -- -- -- -- -- 54,496
Co-Chairman 1995 202,587 -- -- -- -- -- 8,263
1994 197,454 -- -- -- -- -- 10,207
Stuart Mont, Chief 1996 182,227 125,000 -- -- -- -- 13,813
Operating Officer, 1995 162,241 160,000 -- -- 20,000 -- 9,327
Executive Vice 1994 142,237 140,000 -- -- -- -- 14,499
President-Operations
and Secretary
Peter Wish, Executive 1996 204,673 90,000 -- -- -- -- 6,842
Vice President- 1995 200,122 125,000 -- -- 10,000 -- 6,841
Administration 1994 185,422 125,000 -- -- -- -- 8,514
George Calvi, Former 1996 192,637 70,000 -- -- -- 4,123
Executive Vice 1995 167,126 125,000 -- -- 10,000 -- 4,221
President-Sales & 1994 157,675 125,000 -- -- -- -- 6,917
Marketing
Dennis Wherry, Senior 1996 139,966 45,000 -- -- -- -- 5,074
Vice President- 1995 131,980 55,000 -- -- 10,000 -- 4,655
Operations 1994 135,980 55,000 -- -- -- -- 7,553
Craig A. Dykes, Vice 1996 93,681 86,781 -- -- -- -- 8,585
President-Information 1995 87,692 40,000 -- -- 5,000 -- 7,565
Systems 1994 81,692 40,000 -- -- -- -- 17,230
</TABLE>
1 Includes amounts allocated to the executive's deferred compensation
account for each of 1996, 1995 and 1994 (Mr. R. Borchardt:
$49,408, 49,950, and $49,950; Mr. Wish: $14,032, $15,482,
and $14,782; and Mr. Calvi: $12,507, $13,911, and $13,460)
(see "Employment Contracts and Changes-In-Control
Arrangements" below).
2 Represents bonus awards determined for the performance year indicated,
whether paid in such year or paid in the following year.
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 1996, 1995 and 1994 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: $1,710, $3,009 and $6,368; Mr. H.
Borchardt: $1,453, $818 and $5,650; Mr. Mont: $3,650, $3,659
and $6,489; Mr. Wish: $3,683, $3,682 and $6,489; Mr. Calvi:
$3,451, $3,490 and $6,489; Mr. Wherry $4,412, $3,998, and
$6,489; and Mr. Dykes: $4,412, $3,387 and $5,446; (b) premiums
paid by the Company for split dollar insurance arrangements
(Mr. R. Borchardt: $10,687, $8,350 and $8,850); (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 $2,925; Mr. H.
Borchardt: $7,445, $7,445 and $4,557; Mr. Mont: $1,890,
$1,890, and $1,210; Mr. Wish: $3,159, $3,159 and $2,025; Mr.
Calvi: $672, $731 and $428; Mr. Wherry ($662, $657 and
$397); and Mr. Dykes: $91, $123 and $123; (d) the value of
interest assumed by the Company on relocation and other
loans for Mr. Mont ($8,333, $3,778 and $6,800); Mr. Wherry
($667 in 1994); and Mr. Dykes ($4,082, $4,055 and $11,661);
and (e) payment of medical expenses pursuant to an
employment agreement with Mr. H. Borchardt ($45,588 in 1996).
OPTION GRANTS IN 1996
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
1996 (the Company has not granted any stock appreciation rights -- "SARs"):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE
AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
RATES OF
STOCK PRICE
APPRECIATION
FOR OPTION TERM1
- ----------------------------------------------------------------------------------------------------------------------------------
Percent
Number of of Total
Securities Options
Underlying Granted Exercise
Options to Price Expiration
NAME Granted Employees ($/Share)3 Date 5%($) 10%($)
(#)2 in
Fiscal
Year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert L. Borchardt 150,000 52.7% $16.75 1/23/06 $1,580,098 $4,004,278
Robert L. Borchardt 79,741 28.0% 18.75 3/14/06 940,288 2,382,874
Herbert H.Borchardt -0- NA NA NA NA NA
Stuart Mont -0- NA NA NA NA NA
Peter Wish -0- NA NA NA NA NA
George Calvi -0- NA NA NA NA NA
Dennis Wherry -0- NA NA NA NA NA
Craig A. Dykes -0- NA NA NA NA NA
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Executives may not sell or assign any stock grants, which have value
only to the extent of stock price appreciation, which
will benefit all shareholders commensurately. The
amounts set forth are based on assumed appreciation rates
of 5% and 10% as prescribed by the Securities and
Exchange Commission rules and are not intended to
forecast future appreciation, if any, of the stock
price. The Company did not use an alternate formula for
a grant date valuation as it is not aware of any formula
which will determine with reasonable accuracy a present
value based on future unknown or volatile factors.
Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market
conditions. There can be no assurance that the amounts
reflected in this table will be achieved.
2 The options for 150,000 shares fully vested on July 24, 1996 and the
options for 79,741 shares fully vested on September 15,
1996.
3 The exercise price is equal to the fair market value of the Company's
Common Stock on the date of the grant.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Number of Value of
Unexercised Unexercised
Securities In-the-Money
Underlying Options
Options at at 12/31/96
12/31/96 ($)1
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Value
Name Acquired Realized
on Exercise (#) ($)1 Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt 133,334 $1,902,176 557,175 207,900 $1,547,674 $-0-
Herbert H.Borchardt NA NA NA NA NA NA
Stuart Mont NA NA 44,168 25,000 361,326 3,157
Peter Wish NA NA 22,435 17,000 94,645 3,157
George Calvi 24,834 287,068 26,000 17,000 210,345 3,157
Dennis Wherry NA NA 8,750 12,500 2,368 1,579
Craig A Dykes NA NA 7,800 6,400 38,407 842
</TABLE>
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, 1996 was $14.9375. Certain
options granted in 1994, 1995 and 1996 were excluded since they were
not in the money at year-end.
Employment Contracts and Change-In-Control Arrangements
GENERAL. The Company is party to various employment and consulting
agreements with certain of the Named Executives 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.
ROBERT L. BORCHARDT EMPLOYMENT AGREEMENT. Effective January 1, 1995,
the Company entered into an employment agreement with Robert L. Borchardt,
currently its Chief Executive Officer, Co- Chairman of the Board and President,
for a ten year term. The agreement automatically is renewed thereafter for
successive two-year periods unless either party affirmatively elects to not
renew. 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. Mr. Borchardt waived the right to receive certain portions of his 1995 and
1996 bonuses. 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 and no options in 1997 with respect to 1996 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 the employee $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.
HERBERT H. 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. 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). In 1997, this agreement was amended to provide that Mrs. Herbert
Borchardt would be retained by the Company as a consultant upon the death of Mr.
Borchardt so long as she shall live, for which she will receive annual
compensation at a rate equal to one-half of the amount which Mr. Borchardt was
receiving as a consultant (or would have received were he a consultant), which
payment shall be subject to CPI adjustment, and to provide Mrs. Borchardt with
hospitalization and major medical benefits comparable to those provided to Mr.
Borchardt.
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 Owners") and Robert L. Borchardt, the Company
agreed to maintain life insurance policies on Robert L. 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 Owners. Pursuant to three separate Split Dollar Life
Insurance Agreements effective December 17, 1994 among Recoton, the Robert and
the 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 L. 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 L. Borchardt Employment Agreement.
COMPENSATION OF DIRECTORS
During 1996, none of the directors who are employees 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 was not an employee of the Company
received an annual retainer of $10,000 in 1996 and was reimbursed for expenses,
if any, incurred in attending meetings. (See "Certain Relationships and Related
Transactions" transactions with directors or their affiliates for services other
than as a director.)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Compensation Committee and Stock Option
Committees is employed by the Company. Mr. McPherson was an officer and employee
of the Company until 1989 and was retained by the Company as a consultant
through December 31, 1993 and a company of which Mr. Friedman is principal was
under retainer by the Company during 1996 (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").
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information, as of April 28, 1997, 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
Ownership1
- -----------------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner2 Number Percent
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert L. Borchardt3,4 2,106,083 17.54%
Herbert H. Borchardt 1,667 *
George Calvi4 54,608 *
Stephen Chu5 199,803 1.75
Craig A. Dykes4 8,800 *
Paul E. Feffer 1,000 *
Irwin S. Friedman4,6 37,500 *
Joseph M. Idy 10,000 *
Ronald E. McPherson 30,194 *
Joseph H. Massot4 43,555 *
Stuart Mont4 83,699 *
Robert G. Shaw 0 *
Dennis Wherry4 10,750 *
Peter Wish4 36,341 *
First Pacific Advisors, Inc.7 1,638,100 14.38
All directors and executive officers
as a group (20 persons)4 2,681,628 22.00
</TABLE>
* Less than 1%
1 Unless it is so stated otherwise, each holder owns the reported share
directly and has sole voting and dispositive power with respect to such
shares. The number of shares beneficially owned by a person also
includes all shares which can be acquired by such person within 60 days
after April 28, 1997, including by way of 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. Chu is c/o STD Holding, Unit F-J, 5th Floor, Block 2,
Kwai Tak Industrial Centre, Kwai Tak Street, Kwai Chung, NT, Hong Kong;
the address of Mr. Feffer is 60 Sutton Place, New York, NY 10022; the
address of Mr. Friedman is 730 Fifth Avenue, New York, New York 10019;
the address of Mr. Idy is 440 Royal Palm Way, Palm Beach, Florida
33480; the address of Mr. Shaw is 25 Tri-State International Office
Center, Lincolnshire, IL 60609; 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 and 39,909 shares held by Mr. R. Borchardt's wife. Mr. R.
Borchardt disclaims beneficial ownership of the shares owned by his
wife. 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 616,225 share subject
to stock options exercisable as of April 28, 1997 or within 60 days
thereof. Excludes 406,092 shares as to which Mr. Borchardt holds a
proxy pursuant to an agreement between the Company, Mr. Borchardt,
Stephen Chu and other shareholders, which shares are to be voted
consistent with the recommendation of the Board of Directors of the
Company, and 30,000 shares held by a foundation of which Mr. Borchardt
is a director.
4 Includes shares of Common Stock subject to stock options exercisable as
of April 28, 1997 or within 60 days thereof as follows: Mr. R.
Borchardt: 616,225; Mr. Calvi: 13,000; Mr. Dykes: 8,800; Mr. Friedman:
7,500; Mr. Massot: 27,834; Mr. Mont: 48,168; Mr. Wherry: 10,750; Mr.
Wish: 20,167; and all executive officers and directors as a group:
795,444.
5 Such shares are subject to an agreement between Mr. Chu, the Company,
Robert Borchardt and other shareholders pursuant to which Mr. Borchardt
holds a proxy to vote the shares consistent with the recommendation of
the Board of Directors of the Company.
6 Does not include the shares held by the Borchardt Trust, of which Mr.
Friedman is a trustee.
7 Based on a Schedule 13G Statement dated February 12, 1997, and filed
with the Securities and Exchange Commission, First Pacific Advisors,
Inc. had shared voting power with respect to 653,100 shares and shared
dispositive power with respect to 1,638,100; such shareholder's address
is 11400 West Olympic Boulevard, Suite 1200, Los Angeles, CA 90064. The
Company cannot determine from such filing if any natural persons
control the shares beneficially owned by First Pacific Advisors, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In August 1996 the Company acquired International Jensen Incorporated
(Jensen), a Delaware corporation, by way of merger. Jensen has been renamed
Recoton Audio Corporation (Recoton Audio). Immediately prior to such
acquisition, Jensen sold its original equipment manufacturing (OEM) business
(excluding the related receivables, which were sold to a financial institution)
to IJI Acquisition Inc. (IJI Acquisition), a company controlled by Robert G.
Shaw, the former Chairman of the Board, President and Chief Executive Officer of
Jensen (and the current President of Recoton Audio, a Vice President of the
Company and a director of Recoton Audio and the Company) for approximately
$8,344,000 with IJI Acquisition also assuming related debt and liabilities. IJI
Acquisition was renamed International Jensen Incorporated after the acquisition
of Jensen by the Company. IJI Acquisition's sole stockholder is Robert G. Shaw.
Recoton Audio, the Company and IJI Acquisition are parties to a number
of agreements, including a Management Services Agreement, a Supply and Services
Agreement, a Shared Facilities Agreement, a Non-Competition Agreement and a
License Agreement. Pursuant to the Management Services Agreement, which has an
initial term of one year and is automatically renewed unless otherwise
terminated, Mr. Shaw and certain other employees of the Company are authorized
to perform various managerial and administrative services for IJI Acquisition
during the course of their employment by the Company, for which IJI Acquisition
pays Recoton a fee (pursuant to which IJI paid Recoton Audio approximately
$98,000 in 1996). The Supply and Services Agreement provides for IJI Acquisition
to supply Recoton Audio's requirements for certain products and services for a
term of twelve months (pursuant to which Recoton Audio paid IJI Acquisition
approximately $1,005,000 in 1996). The Shared Facilities Agreement governs the
use of facilities in Schiller Park and Lincolnshire, Illinois leased by Recoton
Audio but also used by IJI Acquisition (pursuant to which IJI Acquisition paid
Recoton Audio approximately $146,000 in facility fees in 1996 under such
agreement); such agreement may be terminated by Recoton Audio or IJI Acquisition
at any time on six-month's notice after February 1997. The Non-Competition
Agreement provides that Recoton Audio and IJI Acquisition each will not compete
in certain areas of each other's business, with certain exceptions. Pursuant to
the License Agreement, Recoton Audio has granted IJI Acquisition a ten-year,
world-wide royalty-bearing license to use the trademarks of Recoton Audio in OEM
business applications in the automotive, truck, recreation vehicle, aircraft or
other motorized vehicle markets, for which no royalties were due in 1996.
In July 1996 Robert L. Borchardt sold 65,000 shares of the Company's
Common Stock to the Corporation at $17.75 per share, a price equal to the
then-current market value, having previously exercised options to purchase
133,334 shares.
For services rendered during the fiscal year ended December 31, 1996,
the Company paid in 1997 a total of $50,000 to I. Friedman Equities, Inc.
("Equities"), of which Mr. Friedman, a director of the Company, is a principal
shareholder for financial consulting services.
The following directors and executive officers of the Company received
loans aggregating in excess of $60,000 outstanding at any time in 1996, their
relationship with the Company, the maximum amount borrowed and the outstanding
balance as of April 28, 1997:
<TABLE>
<CAPTION>
PERSON Relationship Maximum Current
Balance
<S> <C> <C> <C>
Stuart Mont Chief Operating $357,921 $302,781
Officer,
Chief Financial
Officer,
Executive Vice
President-
Operations, Director
William Vice $215,450 $215,450
McGreevy President-Engineering
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 to the
Registrant's Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.
RECOTON CORPORATION
By: /S/ JOSEPH MASSOT
Joseph Massot, Vice President
Dated: April 28, 1997
