SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
[ X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c)
or section 240.14a-12
RECOTON CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, of other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________
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_____________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
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[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: _____________________________________________
(2) Form, Schedule or Registration Statement No.: _______________________
(3) Filing Party: _______________________________________________________
(4) Date Filed: _________________________________________________________
<PAGE>
DRAFT 4/21/98
- - -------------------------------------------------------------------------------
RECOTON(R) RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
- - -------------------------------------------------------------------------------
To the Shareholders of Recoton Corporation:
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 the Chase Manhattan Bank, 270 Park Avenue, New York, New York
on Wednesday, June 10, 1998 at 2:00 p.m., for the following purposes:
(1) To elect three directors for a term of three years;
(2) To consider and vote on an amendment to the Restated Certificate
of Incorporation to increase the number of authorized Common
Shares;
(3) To approve the 1998 Stock Option Plan, which will replace the
current 1991 and Nonqualified Stock Option Plans;
(4) To ratify the appointment of Cornick, Garber & Sandler, LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1998; and
(5) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
A telephone conference connection will be made available at the
Company's Florida facilities, 2950 Lake Emma Road, Lake Mary, Florida, for
shareholders who would care to attend the meeting by phone. Only shareholders of
record at the close of business on April 21, 1998 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 COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. NO POSTAGE IS NECESSARY
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 __, 1998
<PAGE>
DRAFT 4/21/98
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RECOTON(R) RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
- - ------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1998
PROXY STATEMENT
INTRODUCTION
The 1998 Annual Meeting (the "Annual Meeting") of Recoton Corporation
(the "Company" or "Recoton") will be held on Wednesday, June 10, 1998, for the
purposes and at the time and location 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 COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY
REGARDLESS OF WHETHER OR NOT 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 or by giving notice thereof in writing
to the Secretary of the Company. The accompanying form of proxy properly signed
and returned to the Company will be voted in accordance with the instructions
thereon. A shareholder may designate a person or persons to act as the share
owner's proxy other than those persons designated on the proxy card. The
shareholder may use the proxy card to give another person authority by striking
out the name or names appearing on the enclosed proxy card, inserting the name
or names of another person or persons and delivering the signed card to such
person or persons. The person(s) designated by the shareholder must present the
signed proxy card at the meeting in order for the shares to be voted. If shares
are held through a broker, nominee, fiduciary or other custodian, the
shareholder must provide voting instructions to the record holder in accordance
with the record holder's requirements in order to ensure the shares are properly
voted.
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 ___, 1998.
SHARES OUTSTANDING AND VOTING RIGHTS
The securities entitled to vote at the Annual Meeting consist of
Common Shares, $.20 par value per share, of the Company (the "Common Shares"),
each of which entitles the holder to one vote. Only holders of Common Shares of
record at the close of business on April 21, 1998 are entitled to vote at the
Annual Meeting or adjournments thereof. On April 21, 1998, there were 11,623,019
Common Shares outstanding. To the knowledge of the Company, no person owned
beneficially more than 5% of the outstanding Common Shares except as otherwise
noted on page 14.
Shareholders representing a majority of the Common Shares outstanding
and entitled to vote must be present or represented by proxy in order to
constitute a quorum to conduct business at the Annual Meeting. Under the New
York Business Corporation Law ("BCL"), any corporate action, other than the
election of directors, must be authorized by a majority of the votes cast,
except as otherwise required by the BCL or the Company's Certificate of
Incorporation with respect to a specific proposal, and the three nominees for
Director receiving the highest number of votes will be elected as Directors. For
purposes of determining whether a proposal has received a majority of the votes
cast, where a shareholder abstains from voting or in instances where brokers are
prohibited from exercising or choose not to exercise discretionary authority for
beneficial owners who have not provided voting instructions (so-called "broker
non-votes"), those shares will not be included in the vote totals and,
therefore, will have no effect on the vote. Such shares will, however, be
counted as "present" for determining a quorum. Where, however, the BCL requires
the approval of a majority of outstanding shares for passage of a proposal, 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 11 directors of the Company are divided into substantially equal
classes having staggered terms of three years. At the Annual Meeting, three
persons are to be elected, each for a three-year term. 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 at the Annual Meeting in 2001 (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, 1997. Certain data with respect to each nominee
and each director follows. Except as otherwise noted, directors who are shown as
officers or partners of other corporations, institutions or firms have held such
position, or have been officers of such organization, for more than five years.
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
2001. 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.
<PAGE>
NAME AND POSITION BUSINESS EXPERIENCE,
WITH THE COMPANY DIRECTORSHIPS AND AGE
NOMINEES FOR TERMS EXPIRING IN 2001
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.
Age: 64
Joseph M. Idy Director of Recoton since 1990.
Director Stockbroker and money manager at
PaineWebber, Inc. (Senior Vice
President since 1989). Age: 57
Joseph H. Massot Director of Recoton since 1985.
Principal Accounting Officer, Controller and Assistant
Vice President, Treasurer, Treasurer from 1978 until 1989,
Assistant Secretary Principal Accounting Officer,
and Director Vice President and Treasurer
since 1989 and Assistant
Secretary since 1983. Age: 53
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Herbert H. Borchardt Director of Recoton since 1945.
Co-Chairman and Director Chairman and Chief Executive
Officer from 1976 until 1992,
Co-Chief 1992, Executive Officer
from 1992 until 1996 and Co-
Chairman since 1992. Age: 92
Stephen Chu Director of Recoton since January
Director 1997. President and Director of
STD Holding Limited ("STD"), a
Hong Kong subsidiary of the
Company, and of its various
subsidiaries, since September
1990. STD was acquired by the
Company in 1995. Age: 41.
Ronald E. McPherson Director of Recoton since 1969.
Director Vice President and Secretary from
1964 until his retirement in
1989. Age: 68
Peter Wish Director of Recoton since 1969.
Executive Vice Executive Vice President from
President-Administration 1976 until 1992 and Executive Vice
and Director President-Administration since
1992. Age: 62
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Robert L. Borchardt Director of Recoton since 1964.
Co-Chairman, President, Chief President since 1976, Chief
Executive Officer and Director Operating Officer from 1976 to
December 1993, Co-Chairman since
1992, Co-Chief Executive Officer
from 1992 until 1996 and Chief
Executive Officer since 1996.
Age: 60
Stuart Mont Director of Recoton since 1975.
Executive Vice Vice President and Treasurer from
President-Operations, Chief prior to 1987 until 1989, Senior
Operating Officer, Chief Vice President from 1989 until
Financial Officer, 1992, Secretary since 1989,
Secretary and Director Executive Vice President-
Operations since 1992, Chief
Financial Officer since 1992 and
Chief Operating Officer since
1993. Age: 57
George Calvi Director of Recoton since 1984.
Director 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
1996. Age: 47
Paul E. Feffer Director of Recoton since 1996.
Director Chairman of Feffer Consulting
Co., Inc., an international media
consulting firm, and a consultant
to Merck & Company's publishing
division. 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: 76
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 a nominating committee. It also appoints the members of committees
constituted under stock compensation plans.
COMPENSATION COMMITTEE. The Compensation Committee, currently composed
of Messrs. Feffer, Friedman, Idy and McPherson (none of whom is an employee of
the Company), met once in 1997. 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.
AUDIT COMMITTEE. The audit committee, currently composed of Messrs.
Feffer, Friedman, Idy and McPherson, met once in 1997. 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. The Company's Stock Option
Committee, currently composed of Messrs. Feffer and Idy, met five times in 1997.
It makes awards under, prescribes rules for and interprets the provisions of the
Recoton Corporation 1998 Stock Option Plan (which plan is subject to shareholder
approval), 1991 Stock Option Plan and Nonqualified Stock Option Plan and
prescribes rules and interprets the provisions of the 1982 Stock Option Plan for
options remaining under that plan. The Stock Bonus Committee, currently composed
of Messrs. Feffer, Idy and McPherson, did not meet in 1997. It makes awards
under, prescribes rules for and interprets the provisions of the Recoton
Corporation Stock Bonus Plan.
COMPENSATION OF DIRECTORS; ATTENDANCE
During 1997, 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 1997 and was reimbursed for expenses,
if any, incurred in attending meetings. (See "Certain Relationships and Related
Transactions" for transactions with directors or their affiliates for services
other than as a director.)
The Board of Directors held seven meetings during 1997. All of the
directors attended at least 75% of the meetings of the Board of Directors and
committees of which they were members in 1997 except for Stephen Chu, who
resides in Hong Kong, who attended 71% of such meetings. Directors discharge
their responsibilities to the Company not only by attending Board and committee
meetings but also through communications with Company management relative to
matters in which their expertise and interest are appropriate.
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
has not historically determined compensation based on rigid formulas, fixed
targets or weighing of specific criteria. Due to the relatively small number of
management employees and the level of interinvolvement between staff and
management, compensation of executives not subject to employment agreements has
been based on management's and the Compensation Committee's subjective informal
assessment of each such employee's performance in light of over-all Company
performance.
BASE SALARIES
Base salary compensation for each executive officer not the subject of
an employment agreement is determined by the potential impact which such
executive officer has on the Company, the skills and experience required by the
position and the officer's 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
1997 reflect both such factors.
- - --------
* 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>
INCENTIVE COMPENSATION
Annual incentive compensation for each executive officer not the
subject of an employment agreement is based primarily on corporate operating
earnings, but also includes an overall assessment by management and the
Committee of such 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
1997, the Committee took particular note of management's success over the past
few years in increasing the Company's revenues and the increased profitability
of the Company.
Factors utilized in determining incentive compensation for the
executive officers with respect to 1997 included the continuing increase in net
sales of the Company , the increase in profits and the increase in
responsibilities as a result of the Company's growth.] In past years, the
Company has used either cash or awards of treasury shares as incentive
compensation. In 1997 such awards were made exclusively in cash.
STOCK OPTIONS
The Company has periodically granted stock options in order to provide
certain of its executives and other employees 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. In 1997 the only new options which were granted were to certain
newly-hired personnel. A general round of option grants was made to certain key
employees in early 1998, however.
All employee options granted have an option price that is not less
than the fair market value of the shares on the date of grant. 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 share
ownership by management is beneficial in aligning management's and shareholders'
interest in the enhancement of shareholder value.
CHIEF EXECUTIVE OFFICERS' COMPENSATION
Mr. Robert L. Borchardt, currently the Company's 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. 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.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction 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 Committee
has reviewed employment arrangements to determine whether any actions with
respect to this limit should be taken by the Company. No executive officer's
non-deferred cash compensation was substantially in excess of $1,000,000 in 1997
(Robert L. Borchardt having waived approximately $280,265 of his bonus payable
with respect to 1997); it is not anticipated that any executive officer of the
Company other than Mr. Robert L. Borchardt would receive any such cash
compensation in excess of this limit during 1998 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 1997 the
Committee did not take any action to comply with the limit. Options granted
under the Company's 1991 and 1998 Stock Option Plans qualify as
performance-based compensation assuming satisfaction of all other applicable
requirements. The Committee will continue to monitor this situation and will
consider taking 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-Chairmen of the Board and certain subsidiary
officers hired in connection with acquisitions 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:
Paul E. Feffer
Irwin S. Friedman
Joseph M. Idy
Ronald E. McPherson
For the Stock Option Committee:
Paul E. Feffer
Joseph M. Idy
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 through December 31,
1993 and a company of which Mr. Friedman is principal was under retainer by the
Company as a consultant during 1997 (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 1997 plan and
non-plan compensation awarded or paid to, or earned by, the (i) Company's Chief
Executive Officer ("CEO") and (ii) the Company's four most highly compensated
executive officers other than the CEO who were serving as executive officers at
December 31, 1997, to the extent salary and bonuses exceeded $100,000 (together,
these five persons are sometimes referred to as the "Named Executives").
SUMMARY COMPENSATION TABLE
The following table contains compensation data for the Named
Executives for the past three fiscal years:
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
-----------------------------------------------
PAY-
ANNUAL COMPENSATION AWARDS OUTS
- - ------------------------------------------------------------------------------------------------------------------------------------
OTHER RESTRICTED SECURITIES LTIP ALL
ANNUAL SHARES UNDERLYING PAY- OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS OUTS COMPENSATION
POSITION YEAR ($)1 ($)2 ($)3 ($) (#) ($) ($)4
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt, 1997 $1,007,793 $150,000 -- -- 250,000(5) -- $22,753
Co-Chairman, CEO 1996 947,570 90,000 -- -- 229,741 -- 15,322
and President 1995 899,950 150,000 -- -- 250,000 -- 14,284
Herbert H. Borchardt, 1997 214,507 -- -- -- -- -- 16,870
Co-Chairman6 1996 208,259 -- -- -- -- -- 59,187
1995 202,587 -- -- -- -- -- 8,263
Stuart Mont, COO 1997 217,240 125,000 -- -- -- -- 37,790
and Executive 1996 182,227 125,000 -- -- -- -- 13,873
Vice President- 1995 162,241 160,000 -- -- 20,000 -- 9,327
Operations
Peter Wish, 1997 218,548 90,000 -- -- -- -- 12,008
Executive Vice 1996 204,673 90,000 -- -- -- -- 6,842
President- 1995 200,122 125,000 -- -- 10,000 -- 6,841
Administration
Dennis Wherry, 1997 150,256 50,000 -- -- -- -- 9,920
Senior Vice 1996 139,966 45,000 -- -- -- -- 5,074
President- 1995 131,980 55,000 -- -- 10,000 -- 4,655
Operations
- - -----------------------------------------------------------------------------------------------------------------------------------
1 Includes amounts allocated to the executive's deferred compensation account
for each of 1997, 1996 and 1995 (Mr. R. Borchardt: $52,733, $49,408 and
49,950; and Mr. Wish: $14,907, $14,032 and $15,482) (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 Includes for 1997, 1996, and 1995 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: $9,200 $1,710
and $3,009; Mr. H. Borchardt: $9,200, $1,463 and $818; Mr. Mont: $9,200,
$3,650 and $3,659; Mr. Wish: $9,200, $3,683 and $3,682; and Mr. Wherry:
$9,200, $4,412 and $3,998; (b) premiums paid by the Company for split
dollar insurance arrangements (Mr. R. Borchardt: $10,741, $10,687 and
$8,350); (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: $2,812, $2,925 and $2,925; Mr. H. Borchardt: $7,670, $7,445 and
$7,445; Mr. Mont: $1,875, $1,890 and $1,890; Mr. Wish: $2,808, $3,159 and
$3,159; and Mr. Wherry $720, $662 and $657; (d) the value of interest
assumed by the Company on relocation and other loans for Mr. Mont ($26,715,
$8,333 and $3,778) and (e) reimbursed medical payments not covered by
insurance (Mr. H. Borchardt in 1996 of $50,279).
5 Consists solely of repriced options previously granted in 1994 and 1995.
The 1995 number also includes 100,000 of such options.
6 Salary and All Other Compensation Data for 1996 has been restated to
reflect a recharacterization of $4,691 of Salary as Other Compensation.
- - -------------------------------------------------------------------------------
</TABLE>
OPTION GRANTS IN 1997
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
1997 (the Company has not granted any stock appreciation rights -- "SARs"):
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- - -----------------------------------------------------------------------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) FISCAL YEAR ($/SHARE)2 DATE VALUE ($)1
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert L. Borchardt3 21,000 5.0% $15.125 04/17/99 $ 99,009
Robert L. Borchardt3 129,000 30.4% 13.75 04/17/04 1,047,048
Robert L. Borchardt3 100,000 23.6% 13.75 10/24/05 887,287
Herbert Borchardt - 0 - --- --- --- ---
Stuart Mont - 0 - --- --- --- ---
Peter Wish - 0 - --- --- --- ---
Dennis Wherry - 0 - --- --- --- ---
- - ------------------------------------------------------------------------------------------------------------------------
1 Executives may not sell or assign any stock options (other than assignments
which may be allowed to family members in certain circumstances), which
have value only to the extent of share price appreciation, which will
benefit all shareholders commensurately. Actual gains, if any, on stock
option exercises and stock holdings are dependent on the future performance
of the Common Shares and overall stock market conditions. There can be no
assurance that the amounts reflected in this table will be achieved.
Black-Scholes calculations were made the following assumptions: historic
volatility from October 1995 through March 1997; interest rates based on
Treasury strip yields over the remaining lives of the options; and all
options exercised at end of term.
2 The exercise price is equal to the fair market value of the Company's
Common Shares on the date of the grant.
3 Such options consist of options previously granted on April 18, 1994 (as to
the options for 21,000 and 129,000 shares) or October 27, 1995 (as to the
options for 100,000 shares), re-priced to fair market value as of the date
of repricing in 1997; the percentage figures reflect the fact that there
was no general round of option grants in 1997 and there were few other
option grants in that year.
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AGGREGATED OPTION EXERCISES IN 1997
AND 1997 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1997 and unexercised
options held at year-end (as noted above, the Company has no outstanding SARs):
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT 12/31/97
12/31/97 ($)1
- - -----------------------------------------------------------------------------------------------------------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED ($)1 EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt 0 --- 616,225 146,850 $1,356,007 0
Herbert H. Borchardt 0 --- 0 0 0 0
Stuart Mont 0 --- 52,668 16,500 318,255 0
Peter Wish 4,268 $65,621 24,667 10,500 27,123 0
Dennis Wherry 0 --- 13,000 8,250 0 0
- - -----------------------------------------------------------------------------------------------------------------------------------
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 Market on December 31, 1997 was $13.50. Certain options
granted in 1994, 1995 and 1996 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 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 is automatically 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% ($955,060 effective January 1, 1997) 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" or "NIBB") (but in no
event more than two percent of the corresponding NIBB for the prior year) plus
five percent of the amount by which such NIBB number for the just-completed year
exceeds the NIBB number for the prior year. Mr. Borchardt waived the right to
receive certain portions of his 1995, 1996 and 1997 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 NIBB for
each just-completed year during the contract term exceeds the NIBB for the prior
year (exercisable at the fair market value as of the grant date). Mr. Borchardt
received options on 130,975 shares in 1998 with respect to the growth in growth
in Company's 1997 earnings between 1997 and 1996 and no options were issued in
1997 with respect to 1996 to 1997 earnings growth. 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 Shares 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" (as defined), 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, 1997 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. Peter Wish and the Company entered into a
similar Deferred Compensation Agreement effective as of October 1, 1982.
CHANGE OF CONTROL ARRANGEMENTS. Options granted under the Company's
1998 and 1991 Stock Option Plans 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.
<PAGE>
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 SHARES 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
SHARES EXCHANGES AND QUOTED ON THE NASDAQ STOCK MARKET ("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, 1992 AND ENDING ON DECEMBER 31, 1997. THE GRAPH AND
CHART ASSUMES THAT THE VALUE OF THE INVESTMENT IN THE COMPANY'S COMMON SHARES
AND FOR EACH INDEX WAS $100 ON DECEMBER 31, 1992 AND REFLECTS REINVESTMENT OF
DIVIDENDS AND MARKET CAPITALIZATION WEIGHING. THE DOLLAR AMOUNTS INDICATED IN
THE GRAPH AND CHART ARE AS OF DECEMBER 31 IN EACH YEAR INDICATED.
- - --------
* This section shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURN ($)
- - -----------------------------------------------------------------------------------------------------------------------
REGISTRANT/INDEX 1992 1993 1994 1995 1996 1997
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Recoton Corporation 100 156 203 203 161 146
Peer Group 100 157 154 135 140 100
Russell 2000 100 119 117 150 175 214
- - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The common shares 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., 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. Historical share price performance shown on the graph is not necessarily
indicative of the future price performance.
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 Shares
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
1997 filing requirements were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For services rendered during the fiscal year ended December 31, 1997,
the Company paid a total of $12,000 to I. Friedman Equities, Inc. ("Equities")
for financial consulting services. Mr. Irwin Friedman, a director of the
Company, is a principal shareholder of Equities.
Stuart Mont, the Company's Chief Operating Officer, Chief Financial
Officer, Executive Vice President-Operations and a Director, had loans
aggregating at their maximum at any time in 1997 of $475,841; the outstanding
balance as of April 21, 1998 was $385,795. William McGreevy, the Company's Vice
President-Engineering, had loans aggregating at their maximum at any time in
1997 of $215,450; such loans were repaid prior to April 21, 1998.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth information, as of April 21, 1998, with
respect to the beneficial ownership of Common Shares 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 Shares and (iv) all executive
officers and directors as a group.
<PAGE>
- - -------------------------------------------------------------------------------
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP1
- - -------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER2 NUMBER PERCENT
- - -------------------------------------------------------------------------------
Robert L. Borchardt3,4 2,173,133 17.7%
Herbert H. Borchardt 2,499 *
Stephen Chu5 185,251 1.6
Paul E. Feffer 1,000 *
Irwin S. Friedman4,6 35,000 *
Joseph M. Idy 1,000 *
Ronald E. McPherson 20,194 *
Joseph H. Massot4 46,055 *
Stuart Mont4 92,199 *
Dennis Wherry4 13,000 *
Peter Wish4 31,573 *
First Pacific Advisors, Inc.7 1,719,000
Dimensional Fund Advisers, Inc.8 689,746
Putnam Investments, Inc9 636,200
All directors and executive officers
as a group (19 persons)4 2,708,141 21.7
- - -------------------------------------------------------------------------------
* Less than 1%
1 Unless it is so stated otherwise, each holder owns the reported shares
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
21, 1998, 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; 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, 589,284 shares held by a
revocable living trust of which Mr. R. Borchardt is the sole trustee or in
an individual retirement account in Mr. R. Borchardt's name and 677,275
shares subject to shares options exercisable as of April 28, 1998 or within
60 days thereof. Excludes (a) 380,392 shares as to which Mr. Borchardt
holds a proxy pursuant to an agreement between the Company, Mr. Borchardt,
Stephen Chu and other shareholders and 122,190 shares as to which Mr.
Borchardt holds a proxy pursuant to an agreement between the Company, Mr.
Borchardt, Micah Ansley and Diane Eberlein which shares are to be voted
consistent with the recommendation of the Board of Directors of the
Company, and (b) 30,000 shares held by a foundation of which Mr. Borchardt
is a director.
4 Includes shares of Common Shares subject to stock options exercisable as of
April 21, 1998 or within 60 days thereof as follows: Mr. R. Borchardt:
677,275; Mr. Friedman: 7,500; Mr. Massot: 25,000; Mr. Mont: 56,668;
Mr. Wherry: 15,000; Mr. Wish: 20,000; and all executive officers and
directors as a group: 854,343.
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. The reported number reflects a portion
of the total 380,382 shares subject to such agreement; Mr. Chu disclaims
beneficial ownership of the remaining shares.
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 10, 1998 filed with
the SEC, First Pacific Advisors, Inc. (11400 West Olympic Boulevard, Suite
1200, Los Angeles, CA 90064) had shared voting power with respect to
715,000 shares and shared dispositive power with respect to 1,719,000
shares. The Company cannot determine from such filing if any natural
persons control the shares beneficially owned by First Pacific Advisors,
Inc.
8 Based on a Schedule 13G statement dated February 9, 1998 filed with the
SEC, Dimensional Fund Advisors Inc. ("Dimensional") (1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401), a registered investment advisor is
deemed to have beneficial ownership of 689,746 shares of the Company's
shares as of December 31, 1997, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares
9 Based on a Schedule 13G dated January 16, 1998 filed with the SEC, The
Putnam Advisory Company, Inc. and its parent Putnam Investments, Inc. (One
Post Office Square, Boston, MA 02109) had shared voting power with respect
to 354,400 shares and shared dispositive power with respect to 636,200
shares. Putnam Investment, Inc. is the investment advisor to Putnam's
Institutional clients. Putnam disclaims beneficial ownership of all such
shares.
- - -------------------------------------------------------------------------------
PROPOSAL II
PROPOSAL TO INCREASE NUMBER OF SHARE OF COMMON SHARES
The Company's Board of Directors has unanimously approved and
recommends for shareholder adoption an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized Common Shares
from 25,000,000 to 40,000,000. Article 3 of the Company's Restated Certificate
of Incorporation would be amended to read as follows:
"3. THE AGGREGATE NUMBER OF SHARES WHICH THE CORPORATION SHALL
HAVE THE AUTHORITY TO ISSUE IS FIFTY MILLION (50,000,000), WHICH ARE
DIVIDED INTO TEN MILLION (10,000,000) PREFERRED SHARES OF A PAR VALUE
OF $1.00 PER SHARE AND FORTY MILLION (40,000,000) COMMON SHARES OF A
PAR VALUE OF $.20 PER SHARE. THE RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS ARE AS FOLLOWS:
(A) THE PREFERRED SHARES AUTHORIZED HEREBY MAY BE ISSUED (I)
IN SUCH SERIES AND WITH SUCH VOTING POWERS, FULL OR LIMITED, OR NO
VOTING POWERS, AND SUCH DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND WITH SUCH
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREON, AS THE BOARD OF
DIRECTORS SHALL FIX BY RESOLUTION, AND (II) IN SUCH NUMBER OF SHARES
IN EACH SERIES AS THE BOARD OF DIRECTORS SHALL FIX BY RESOLUTION
PROVIDED THAT THE AGGREGATE NUMBER OF ALL PREFERRED SHARES ISSUED DOES
NOT EXCEED THE NUMBER OF PREFERRED SHARES AUTHORIZED HEREBY.
(B) HOLDERS OF COMMON SHARES SHALL BE ENTITLED TO SUCH
DIVIDEND, LIQUIDATION AND VOTING RIGHTS AND PRIVILEGES AS ARE PROVIDED
BY THE BUSINESS CORPORATION LAW, SUBJECT TO THE RIGHTS OF HOLDERS OF
PREFERRED SHARES ISSUED PURSUANT TO PARAGRAPH (A) ABOVE."
The provisions regarding Preferred Shares are unchanged. No Preferred
Shares have been issued.
Under the Company's current Restated Certificate of Incorporation,
there are 25,000,000 authorized Common Shares, par value $.20 per share, of
which 11,623,019 are outstanding as of April 21, 1998 and 1,225,917 are in
treasury, leaving a balance of 12,151,414 shares, of which 2,555,029 have
already been reserved for issuance under stock option or stock bonus plans or
agreements (4,055,029 if Proposal III is approved). Adoption of the proposed
amendment would increase the number of Common Shares available for future
issuance to 27,151,414 shares. The additional Common Shares for which
authorization is sought would, if and when issued, have the same rights and
privileges as the presently outstanding Common Shares.
The Company last increased its authorized shares in 1995. Since that
time, the only share issuances occurred in connection with acquisitions (406,092
shares in connection with the STD Holding Limited acquisition in 1995 and
169,706 shares in connection with the AAMP of Florida, Inc. acquisition in 1997)
and pursuant to exercises of stock options or other compensation-related grants.
Upon adoption of the proposed amendments, the Board of Directors would be
authorized to issue additional shares of Common Shares at such time or times, to
such persons and for such consideration as it may determine, except as may be
otherwise be required by law. Holders of the Company's shares do not have
preemptive rights to subscribe for or purchase any part of any new or additional
issued of shares or securities convertible into shares.
PURPOSE
The purpose of increasing the number of authorized Common Shares is to
provide additional authorized capital stock which may be issued for such
corporate purposes as the Board of Directors may determine in its discretion,
including, without limitation, stock splits, dividends or other distributions,
future financings (including public offerings), acquisitions and employee
benefit (including stock compensation) plans. The increase in the number of
Common Shares authorized for issuance would enable the Company, as the need may
arise, to take timely advantage of market conditions and the availability of
favorable opportunities without the delay and expense associated with the
holding of a special meeting of its shareholders.
The Company has had a history of stock splits (effected as stock
dividends), including a 4-for-3 split in 1992, a 4-for-3 split in 1993 and a
3-for-2 split in 1994, and there has been discussion of effecting another stock
split if conditions are appropriate. The Company has no agreements to issue
shares other than pursuant to the Company's existing stock option agreements or
pursuant to options which the Company may issue pursuant to existing stock
option plans at times in the future in connection with certain prior
acquisitions or employment agreement. The Company does, however, constantly
evaluate potential acquisitions, some of which might entail the issuance of
Common Shares. The Company has enough authorized but unissued, or treasury,
shares available to effect the issuance of shares under existing option plans
and commitments without the need to utilize the additional shares for which
authorization is sought, but the ability to declare stock splits is limited
based on the current number of authorized shares.
Except as required by law or as a condition to continued inclusion of
Nasdaq, or listing on any Shares exchange on which the Company's Common Shares
may in the future be listed, it is unlikely that further approval from the
shareholders would be sought for any issuance of the shares of Common Shares
being authorized by this amendment. Nasdaq rules currently require shareholder
approval as a condition of continued eligibility for designation as a National
Market System security in several instances, including issuances of shares in
acquisition transactions where the number of outstanding Common Shares could
increase by 20% or more.
Although the decision of the Board of Directors to propose amendments
increasing the number of shares authorized for issuance did not result from any
effort by any person to accumulate the Company shares or effect a change in
control of the Company, one result of an increase may be to help the Board
discourage or render more difficult a change in control. The additional shares
could be used under certain circumstances to dilute the voting power of, create
voting impediments for or otherwise frustrate the efforts of persons seeking to
effect a takeover or gain control of the Company, whether or not the change of
control is favored by a majority of unaffiliated shareholder. For example, such
shares could be privately placed with purchasers who might side with the Board
in opposing a hostile takeover bid. The Company has other defenses available
against coercive or unfair acts of third parties that are designed to effect a
change in control of the Company. Presently the Board has no knowledge of any
attempts to obtain control of the Company. The issuance of any additional Common
Shares could also have the effect of diluting the equity of existing holders and
the earnings per share of existing shares.
VOTE REQUIRED FOR APPROVAL
Approval of the amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized Common Shares will require
the affirmative vote of the holders of a majority of all outstanding Common
Shares entitled to vote at the Annual Meeting. There are no rights of appraisal
or dissenter's rights which arise as a result of a vote on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES TO 40,000,000.
PROPOSAL III
APPROVAL OF 1998 STOCK OPTION PLAN
The Company's Board of Directors has unanimously approved a proposal
to adopt the Recoton Corporation 1998 Stock Option Plan (the "1998 Plan"). The
1998 Plan was effective upon adoption by the Board on March 23, 1998, subject to
Shareholder approval. A copy of the 1998 Plan is set forth in Annex I.
The following is a summary of the principal provisions of the 1998
Plan.
PURPOSE
The purpose of the 1998 Plan is to advance the interests of the
Company and its shareholders by strengthening the ability of the Company and its
subsidiaries to attract and retain persons of ability as key employees,
directors and consultants and to motivate such employees, directors and
consultants, upon whose judgment, initiative and efforts the financial success
and growth of the Company largely depend, to exercise their best efforts on
behalf of the Company. The 1998 Plan, if adopted, will replace, effective as of
the date of such Shareholder approval, the 1991 Stock Option Plan (the "1991
Plan") and the Nonqualified Stock Option Plan (the "Nonqualified Plan") as to
future grants; options previously granted under such plans will continue for the
life of such options.
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of Common Shares which may be the subject of
options under the 1998 Plan is 1,500,000. Currently, options for 8,000 shares
have been granted. The maximum number of Common Shares which may be the subject
of options granted to any person during any calendar year can not exceed
250,000.
The only grants which have been made to date under the 1998 Plan were
a grant of 1,000 options to each of the current non-employee directors (Messrs.
Feffer, Friedman, Idy and McPherson ) and a grant of 4,000 options to Irwin
Friedman. Shares subject to options have been granted under the 1998 Plan to
date as follows:
NEW PLAN BENEFITS
1998 STOCK OPTION PLAN
NAME AND POSITION NUMBER OF UNITS
Robert L. Borchardt, CEO -0-
Herbert H. Borchardt, Co-Chairman -0-
Stuart Mont, COO -0-
Peter Wish, Exec. VP-Administration -0-
Dennis Wherry, Sr.VP-Operations -0-
Executive Group -0-
Non-Executive Director Group 8,000
Non-Executive Officer Employee Group -0-
On April 21, 1998 the closing price of the Common Shares, as reported
on Nasdaq, was $24.75.
If any option under the 1998 Plan shall expire or terminate without
having been exercised in full the unpurchased shares subject to such option may
again be made subject to options under the plan. Such number of shares is
subject to adjustment resulting from stock dividends, split-ups, conversions,
exchanges, reclassifications, or other substitutions of securities for the
Common Shares. Common Shares delivered under the 1998 Plan will be made
available, at the discretion of the Stock Option Committee, either from
authorized but unissued shares or from previously issued shares of Common Shares
reacquired by the Company, including shares purchased on the open market.
ADMINISTRATION
The 1998 Plan is administered by the Stock Option Committee (the
"Committee"), which is appointed by the Company's Board of Directors and
consists of not less than two members of the Board of Directors whom are
"Non-Employee Directors" within the meaning of Rule 16b-3(d)(3) (as it may be
amended from time to time) promulgated by the SEC under the Securities Exchange
Act and "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Under the 1998 Plan, however,
options granted to members of the Board of Directors who are not also employees
must be granted by action of the full Board and options granted to consultants
can be granted by action of either the Committee or the full Board. The Board
may remove any member of the Committee at any time, with or without cause.
Options are granted in the discretion of the Committee or the Board of
Directors. For the balance of this description, references to the Committee
shall be deemed to refer to the Board of Directors in the case of options
granted by the Board to directors or consultants.
TYPES OF OPTIONS TO BE GRANTED
The Committee may grant under the 1998 Plan either "incentive stock
options" within the meaning of Section 422 of the Code or options which do not
satisfy Section 422 ("non-qualified stock options"), or both (see "Federal
Income Tax Consequences" below). The 1998 Plan provides that the aggregate fair
market value (determined as of the date of grant of an option) of the Common
Shares with respect to which incentive stock options granted to an individual
under all incentive stock option plans of the Company are exercisable for the
first time by a participant during any calendar year shall not exceed $100,000.
Incentive options can be granted only to employees.
ELIGIBILITY AND CONDITIONS OF GRANT
Persons eligible to receive options under the 1998 Plan are such key
employees, directors and consultants of the Company and its subsidiaries as the
Committee may select in its sole discretion.
The number of shares to be optioned to any individual under the 1998
Plan and the term, the exercise price and the vesting schedule thereof is
determined by the Committee in its sole discretion (based upon the Committee's
determination as to the contribution or anticipated contribution of the
individual to the success of the Company), but in the case of incentive options
the price shall not be less than the fair market value (110% of the fair market
value for ten-percent shareholders) of a Common Share on the date such option is
granted and the option term must not exceed 10 years (five years in the case of
ten-percent shareholders). Options and all rights thereunder are
non-transferable and non-assignable by the holder, except to the extent that the
estate of a deceased holder of an option may be permitted to exercise such
option or as otherwise allowed by the Committee in certain instances.
EXERCISE OF OPTIONS
Options shall be exercisable at such rate and times as are fixed by
the Committee for each option. Notwithstanding the foregoing, all or any part of
any remaining unexercised options granted to any person under the 1998 Plan may
be exercised (a) immediately upon (but prior to the expiration of the term of
the option) the holder's retirement from the Company on or after his or her 65th
birthday, (b) subject to the provisions of the 1998 Plan concerning termination
of employment, upon the disability (to the extent and in a manner as shall be
determined by the Committee in its sole discretion) or death of the holder, (c)
upon the occurrence of such special circumstances or event as in the opinion of
the Committee merits special consideration or (d) with a few exceptions, if
while the holder is employed by, or serving as a director of or consultant to,
the Company there occurs the acquisition by a person or entity, or a group of
persons or entities acting in conjunction, of 20% or more of the issued and
outstanding shares of the Company having ordinary voting power, or a sale,
lease, transfer or other disposition of all or substantially all of the assets
of the Company, or a merger or consolidation of the Company into or with any
other company which results in the acquisition of the Company by a nonaffiliated
entity, or any other event which would similarly constitute an acquisition of
the Company by a non-affiliated entity.
PAYMENT FOR AND ISSUANCE OF SHARES
Payment for the shares purchased pursuant to the exercise of an option
shall be made in full at the time of the exercise of the option either (a) in
cash (or by check) or (b) by delivery of previously-owned shares of Common
Shares which the holder has owned for at least six months (which
previously-owned shares shall be valued at their fair market value as of the
date of such exercise). Furthermore, payment for shares may be by delivery of an
order to a broker to sell some or all of such shares and use the proceeds to pay
for shares or by any other method as the Committee may permit. The 1998 Plan
contains standard provisions to assure that any exercise of an option or the
issuance of shares will comply with applicable securities and income tax
withholding laws.
EFFECT OF TERMINATION OF EMPLOYMENT
All or any part of any option, to the extent unexercised, shall
terminate upon the cessation or termination of the option holder's employment by
the Company as follows: (a) immediately upon termination, if for cause (as
determined by the Committee), (b) within one year after termination, if for
death or permanent disability or (c) within three months after termination, if
for any reason other than termination for cause, death or permanent disability.
In addition, in the discretion of the Committee, the exercise period can be
extended past the three-month and one-year periods noted above. In all events,
however, unexercised options shall terminate on the expiration date set forth in
the applicable option certificate.
<PAGE>
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend, suspend or discontinue
the 1998 Plan except that no amendment to the 1998 Plan can increase the number
of shares for which options may be granted under the 1998 Plan or to any
individual in any calendar year (except pursuant to the adjustment provisions
described above) or change the class of persons to whom options may be granted
without shareholder approval, or permit the granting of options after March 22,
2008. In addition, no amendment can alter the terms and conditions of any option
granted prior to the amendment, unless the holder consents to such amendment.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences
of participation in the 1998 Plan:
INCENTIVE OPTIONS
Under current law, an employee will not realize any taxable income
upon the grant or exercise of incentive options. If the employee disposes of the
Common Shares acquired upon the exercise of an incentive option at least two
years after the date the option was granted and at least one year after the date
the shares are issued or transferred to such person upon the exercise of an
option, the employee will realize capital gain (which may be mid-term or
long-term gain, depending on the holding period) in an amount equal to the
excess, if any, of the selling price for the Common Shares over the option
exercise price, and the Company will not be entitled to any tax deduction
resulting from the issuance or sale of the shares. If an employee disposes of
the Common Shares acquired upon the exercise of an incentive option prior to the
expiration of two years from the date the option was granted, or prior to the
expiration of one year from the date the Common Shares were transferred to such
employee, any gain realized will be taxable at such time as follows: (1) as
ordinary income to the extent of the difference between the option exercise
price and the lesser of (a) the fair market value of the Common Shares on the
date the option was exercised or (b) the amount realized on such disposition,
and (2) as capital gain to the extent of any excess, which gain shall be treated
as short-term, mid-term or long-term capital gain depending upon the employee's
holding period for the Common Shares at the time of disposition. In such case,
the Company may claim an income tax deduction (as compensation) for the amount
taxable to the employee as ordinary income.
In general, the amount by which the fair market value of the Common
Shares acquired upon the exercise of an incentive stock option exceeds the
exercise price will constitute an item of adjustment for purposes of determining
alternative minimum taxable income and under certain circumstances may be
subject, in the year in which the option is exercised, to the alternative
minimum tax.
If an individual uses Common Shares which such employee owns to pay,
in whole or in part, the exercise price for optioned shares, (a) the
individual's holding period for the newly issued shares of Common Shares equal
in number to the shares of old Common Shares (the "exchanged shares") which were
surrendered upon the exercise shall include the period during which the
surrendered shares were held, (b) the employee's basis in such exchanged shares
will be the same as the employee's basis in the surrendered shares and (c) no
gain or loss will be recognized by the employee on the exchange of the
surrendered shares for the exchanged shares. Further, the employee will have a
zero basis in the additional shares received over and above the exchanged
shares. However, if an employee tenders Common Shares acquired pursuant to the
exercise of an incentive option to pay all or part of the exercise price under
an incentive stock option, such tender will constitute a disposition of such
previously held Common Shares for purposes of the one-year (or two-year) holding
period requirement applicable to such incentive option and such tender may be
treated as a taxable exchange.
NON-QUALIFIED OPTIONS
An individual will not recognize any income at the time a
non-qualified stock option is granted. Generally, individuals will recognize
ordinary income at the time of the exercise of a non-qualified option in a total
amount equal to: (1) in the case of options which the individual exercises by
payment in cash, the excess of the then fair market value of the shares acquired
over the exercise price and (2) in the case of options which an individual
exercises by tendering previously owned shares, the then fair market value of
the number of shares issued in excess of the number of shares surrendered upon
such exercise.
If a director, officer or ten-percent shareholder receives shares
pursuant to the exercise of a non-qualified option, pursuant to Section 83(c) of
the Code such individual does not recognize any income until the date on which
such individual can sell such shares at a profit without being subject to
liability under Section 16(b) of the Exchange Act. Alternatively, a director,
officer or principal shareholder who would not otherwise be subject to tax on
the value of such individual 's shares as of the date the shares are transferred
to him or her can file, within 30 days after the shares are acquired by such
individual, a written election pursuant to Section 83(b) of the Code to be taxed
as of the date of acquisition.
All income realized upon the exercise of any non-qualified stock
option will be taxed as ordinary income. The Company may claim an income tax
deduction for the amount taxable to an employee in the same year as those
amounts are taxable to the individual. Shares issued upon the exercise of a
non-qualified option are generally eligible for capital gain or loss treatment
upon any subsequent disposition. Generally, an individual 's holding period will
commence from the date such shares are issued and such individual 's basis in
such shares will equal their fair market value as of that date. (The holding
period of a director, officer or principal shareholder begins on the date on
which such person recognizes income with respect to such shares, and such
individual's basis in the shares will be equal to the greater of the then fair
market value of the shares or the amount paid for such shares.) If an individual
uses Common Shares that such individual owns to exercise a non-qualified option,
(a) the individual's holding period for the newly-issued shares equal in number
to the exchanged shares shall include the period during which the surrendered
shares were held, (b) the individual's basis in such exchanged shares will be
the same as such individual's basis in the surrendered shares, and (c) no gain
or loss will be recognized by the individual on the exchange of the surrendered
shares for the exchanged shares.
GENERAL
An employee will be subject to wage withholding on the amount of
ordinary income realized by such employee, as described above. The Company may
require that the employee make funds available to the Company to satisfy the
withholding requirements.
SECTION 280G OF THE CODE
Section 280G of the Code provides that if an officer, shareholder or
highly compensated individual receives a payment which is in the nature of
compensation, and which is contingent upon a change in control of the employer,
and such payment equals or exceeds three times his "base salary" (as hereinafter
defined), then any amount received in excess of base salary shall be considered
an "excess parachute payment." An individual's "base salary" is equal to such
person's average annual compensation over the five-year period (or period of
employment, if shorter) ending with the close of the individual's taxable year
immediately preceding the taxable year in which the change in control occurs. If
the taxpayer establishes, by clear and convincing evidence, that an amount
received is reasonable compensation for past or future services, all or a
portion of such amount may be deemed not to be an excess parachute payment.
Under certain circumstances, options under the 1998 Plan could give rise to
excess parachute payments. In any such case, in addition to any income tax which
would otherwise be owed on such payment, the individual will be subject to an
excise tax equal to 20% of such excess payment and the Company will not be
entitled to any tax deduction to which it otherwise would have been entitled
with respect to such payment.
SECTION 162(M) OF THE CODE
Under Section 162(m) of the Code, publicly-held companies generally
may not deduct compensation that exceeds $1 million to any proxy-named executive
officer with respect to the taxable year. Compensation which is performance-
based (as defined in Section 162(m) and regulations thereunder), however, is not
counted as subject to the deductibility limitations of Section 162(m). Options
granted under the 1998 Plan are intended to qualify as performance-based under
Section 162(m) and related regulations.
VOTE REQUIRED FOR APPROVAL
Shareholder approval of the 1998 Plan is required pursuant to the Code
(as it relates to incentive stock options and to Section 162(m)) and the
corporate laws of the State of New York.
Approval of the 1998 Plan will require the affirmative vote of the
holders of a majority of the votes cast on this issue. There are no rights of
appraisal or dissenter's rights as a result of a vote on this issue.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE 1998 STOCK OPTION PLAN.
PROPOSAL IV
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, 1998.
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 1999 Annual Meeting of Shareholders, such proposals must be received by the
Company no later than January 12, 1999.
FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements of the
Company (including the independent auditors' report thereon and the notes
thereto) and Management's Discussion and Analysis of Financial Condition and
Results of Operations which are hereby incorporated by reference from the 1997
Annual Report enclosed with this Proxy Statement.
MISCELLANEOUS
Pursuant to Section 726 of the New York Business Corporation Law, the
Company has obtained insurance coverage ($10 million principal amount from May
25, 1997 until October 24, 1997 and $25 million principal amount from October
24, 1997 through May 24, 1998) to indemnify the Company and its officers and
directors from certain liabilities. The insurance contract, dated May 25, 1997
with Federal Insurance Company, a Chubb Group Company, cost the Company $184,608
in annual premiums.
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.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST. Such
request should be sent 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 ___, 1998
<PAGE>
Annex I
RECOTON CORPORATION
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Stock Option Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by directors, employees
and consultants of the Corporation and its Subsidiaries upon whose judgment and
keen interest the Corporation is largely dependent for the successful conduct of
its operations. It is anticipated that the acquisition of such proprietary
interest in the Corporation will stimulate the efforts of such directors,
employees and consultants on behalf of the Corporation and its Subsidiaries and
strengthen their desire to remain with the Corporation and its Subsidiaries. It
is also expected that the opportunity to acquire such a proprietary interest
will enable the Corporation and its Subsidiaries to attract desirable personnel,
directors and consultants.
2. DEFINITIONS. When used in this Plan, unless the context otherwise
requires: "Board of Directors" shall mean the Board of Directors of the
Corporation, as constituted at any time.
a) "Chairman of the Board" shall mean the person who at the time
shall be Chairman (or Co-Chairman) of the Board of Directors.
b) "Committee" shall mean the Committee hereinafter described in
Section 3.
c) "Corporation" shall mean Recoton Corporation.
d) "Fair Market Value" on a specified date shall mean the closing
price at which one Share was traded on the stock exchange, if any, on
which Shares are primarily traded on the prior day, or the last sale
price or average of the bid and asked closing prices at which one
Share was traded on the over-the-counter market on the prior day, as
reported on the National Association of Security Dealers Automated
Quotation System, but if no Shares were traded on such date, then on
the last previous date on which a Share was so traded, or, if none of
the above are applicable the value of a Share as established by the
Committee for such date using any reasonable method of valuation.
e) "Options" shall mean the stock options granted pursuant to
this Plan.
f) "Plan" shall mean this 1998 Stock Option Plan of Recoton
Corporation, as adopted by the Board of Directors on March 23, 1998,
as such Plan from time to time may be amended.
g) "Share" shall mean a common share of the Corporation.
h) "Subsidiary" shall mean any corporation 50% or more of whose
stock having general voting power is owned by the Corporation, or by
another Subsidiary as herein defined, of the Corporation.
3. COMMITTEE. The Plan shall be administered by a Committee which
shall consist of two or more directors of the Corporation, each of whom shall be
a "Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and an "outside director"
within the meaning of Section 162 (m) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), to the extent that such persons are
available to serve (and at any time when there are not at least two of such
persons, the Board of Directors shall function as the Committee). The members of
the Committee shall be selected by the Board of Directors. Any member of the
Committee may resign by giving written notice thereof to the Board of Directors,
and any member of the Committee may be removed at any time, with or without
cause, by the Board of Directors. If, for any reason, a member of the Committee
shall cease to serve, the vacancy shall be filled by the Board of Directors. The
Committee shall establish such rules and procedures as are necessary or
advisable to administer the Plan.
4. PARTICIPANTS. The class of persons who are potential recipients of
Options granted under this Plan consist of the (i) employees of the Corporation
or a Subsidiary, as determined by the Committee in its sole discretion; (ii)
directors of the Corporation or a Subsidiary who are not also employees of the
Corporation or a Subsidiary, as determined by the Board of Directors in its sole
discretion and (iii) consultants to the Corporation or a Subsidiary, as
determined by the Committee or the Board of Directors in its sole discretion.
Notwithstanding any other provision of the Plan to the contrary, all
determinations with respect to any Option granted to a director of the
Corporation or a Subsidiary who is not also an employee of the Corporation or a
Subsidiary shall be made by the Board of Directors and, with respect to any such
Option and Options to consultants granted by the Board of Directors, all
references in the Plan to the Committee shall be deemed to refer to the Board of
Directors.
5. SHARES. Subject to the provisions of Section 14, the aggregate
number of Shares which may be the subject of Options granted under this Plan
shall be 1,500,000 Shares, which may be either Shares held in treasury or
authorized but unissued Shares. The maximum number of Shares which may be the
subject of Options granted to any individual during any calendar year shall not
exceed 250,000 Shares. If the Shares that would be issued or transferred
pursuant to any Option are not issued or transferred and cease to be issuable or
transferable for any reason, the number of Shares subject to such Option will no
longer be charged against the limitation provided for herein and may again be
made subject to Options; PROVIDED, HOWEVER, that with respect to any Option
granted to any person who is a "covered employee" as defined in Section 162(m)
of the Code and the regulations promulgated thereunder that is canceled or
repriced, the number of Shares subject to such Option shall continue to count
against the maximum number of Shares which may be the subject of Options granted
to such person and such maximum number of Shares shall be determined in
accordance with Section 162(m) of the Code and the regulations promulgated
thereunder.
6. GRANT OF OPTIONS. The number of Options to be granted to any
individual shall be determined by the Committee in its sole discretion.
At the time an Option is granted, the Committee may, in its sole
discretion, designate whether such Option (a) is to be considered as an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code, or (b) is not to be treated as an incentive stock option for purposes of
this Plan and the Internal Revenue Code. No Option which is intended to qualify
as an incentive stock option shall be granted under this Plan to any individual
who, at the time of such grant, is not an employee of the Corporation or a
Subsidiary.
Notwithstanding any other provision of this Plan to the contrary, to
the extent that the aggregate Fair Market Value (determined as of the date an
Option is granted) of the Shares with respect to which Options which are
designated as incentive stock options, and any other incentive stock options,
granted to an employee (under this Plan, or any other incentive stock option
plan maintained by the Corporation or any Subsidiary that meets the requirements
of Section 422 of the Internal Revenue Code) first become exercisable in any
calendar year exceeds $100,000, such Options shall be treated as Options which
are not incentive stock options. Options with respect to which no designation is
made by the Committee shall be deemed to be incentive stock options to the
extent that the $100,000 limitation described in the preceding sentence is met.
This paragraph shall be applied by taking options into account in the order in
which they are granted.
If any Option shall expire, be canceled or terminate for any reason
without having been exercised in full, the unpurchased Shares subject thereto
may again be made subject to Options under the Plan.
Nothing herein contained shall be construed to prohibit the issuance
of Options at different times to the same employee, director or consultant.
A certificate of Option signed by the Chairman of the Board of
Directors or the President or a Vice President of the Corporation, shall be
issued to each person to whom an Option is granted, in the form attached hereto
as Exhibit A with respect to an incentive stock option, in the form attached
hereto as Exhibit B with respect to a non-qualified stock option granted to an
employee or consultant and in the form attached hereto as Exhibit C with respect
to a non- qualified stock option granted to a director who is not also an
employee.
7. PRICE. The price per Share of the Shares to be purchased pursuant
to the exercise of any Option shall be determined by the Committee at the time
of grant; PROVIDED, HOWEVER, that the purchase price per share of the Shares to
be purchased pursuant to the exercise of an Option which is intended to be an
incentive stock option shall not be less than the Fair Market Value of a Share
on the day on which the Option is granted.
8. DURATION OF OPTIONS. The duration of any Option granted under this
Plan shall be determined by the Committee in its sole discretion at the time of
grant; PROVIDED, HOWEVER, that no Option which is intended to be an incentive
stock option shall remain in effect for a period of more than ten years from the
date upon which the Option is granted.
9. TEN PERCENT SHAREHOLDERS. Notwithstanding any other provision of
this Plan to the contrary, no Option which is intended to qualify as an
incentive stock option may be granted under this Plan to any employee who, at
the time the Option is granted, owns shares possessing more than ten percent of
the total combined voting power or value of all classes of stock of the
Corporation, unless the exercise price under such Option is at least 110% of the
Fair Market Value of a Share on the date such Option is granted and the duration
of such Option is no more than five years.
10. CONSIDERATION FOR OPTIONS. The Corporation shall obtain such
consideration for the grant of an Option as the Committee in its discretion may
request.
11. RESTRICTIONS ON TRANSFERABILITY OF OPTIONS. Options shall not be
transferable otherwise than by will or by the laws of descent and distribution
or as provided in this Section 11. Notwithstanding the preceding, the Committee
may, in its discretion, authorize a transfer of all or a portion of any Option,
other than an Option which is intended to qualify as an incentive stock option,
by such holders who are or were executive officers of the Company (as such
officers are determined from time to time by the Board of Directors of the
Company) to (i) the spouse, children, stepchildren, grandchildren or other
family members of the initial holder ("Family Members"), (ii) a trust or trusts
for the exclusive benefit of such Family Members or (iii) such other persons or
entities which the Committee may permit; PROVIDED, HOWEVER, that subsequent
transfers of such Options shall be prohibited except by will or the laws of
descent and distribution. Any transfer of such an Option shall be subject to
such terms and conditions as the Committee shall approve, including that such
Option shall continue to be subject to the terms and conditions of the Option
and of the Plan as amended from time to time. The events of termination of
employment or service under Section 13 shall continue to be applied with respect
to the initial holder, following which a transferred Option shall be exercisable
by the transferee only to the extent and for the periods provided pursuant to
Section 13. An Option which is intended to qualify as an incentive stock option
shall not be transferable otherwise than by will or by the laws of descent and
distribution and shall be exercisable during the holder's lifetime only by the
holder thereof.
12. EXERCISE OF OPTIONS. An Option, after the grant thereof, shall be
exercisable by the holder at such rate and times as may be determined by the
Committee.
Notwithstanding the foregoing, all or any part of any remaining
unexercised Option granted to any person may be exercised in the following
circumstances (but in no event prior to approval of the Plan by shareholders as
provided in Section 18 or after the expiration of the Option): (a) subject to
the provisions of Section 13 hereof, upon the holder's retirement as an employee
from the Corporation and all Subsidiaries at or after age 65, (b) subject to the
provisions of Section 13 hereof, upon the disability (to the extent and in a
manner as shall be determined by the Committee in its sole discretion) or death
of the holder, (c) upon the occurrence of such special circumstance or event as
in the opinion of the Committee merits special consideration, or (d) if, while
the holder is employed by, or serving as a director of or consultant to, the
Corporation or a Subsidiary, there occurs a Change in Control. For purposes of
this Plan, a "Change in Control" shall be deemed to have occurred if (i) any
"person" or group of "persons" (as the term "person" is used in Sections 13(d)
and 14(d) of the Exchange Act ("Person"), acquires (or has acquired during the
twelve-month period ending on the date of the most recent acquisition by such
Person) the beneficial ownership, directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the then
outstanding securities of the Corporation; (ii) during any period of twelve
months, individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election or nomination was approved by the
directors in office who either were directors at the beginning of the period or
whose election or nomination was previously so approved, cease for any reason to
constitute at least a majority thereof; (iii) a Person acquires beneficial
ownership of stock of the Corporation that, together with stock held immediately
prior to such acquisition by such Person, possesses more than 50% of the total
fair market value or total voting power of the stock ("50% Ownership") of the
Corporation, unless the additional stock is acquired by a Person possessing,
immediately prior to such acquisition, beneficial ownership of 40% or more of
the Common Stock; or (iv) a Person acquires (or has acquired during the
twelve-month period ending on the date of the most recent acquisition by such
Person) assets from the Corporation that have a total fair market value equal to
or more than one-third of the total fair market value of all of the assets of
the Corporation immediately prior to such acquisition. Notwithstanding the
foregoing, for purposes of clauses (i) and (ii), a Change in Control will not be
deemed to have occurred if the power to control (directly or indirectly) the
management and policies of the Corporation is not transferred from a Person to
another Person; and for purposes of clause (iv), a Change in Control will not be
deemed to occur if the assets of the Corporation are transferred: (A) to a
shareholder in exchange for his or her stock, (B) to an entity in which the
Corporation has (directly or indirectly) 50% Ownership, or (C) to a Person that
has (directly or indirectly) at least 50% ownership of the Corporation with
respect to its stock outstanding, or to any entity in which such Person
possesses (directly or indirectly) 50% Ownership.
An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect ("Exercise Notice"), together with
the Option certificate and the full purchase price of the Shares purchased
pursuant to the exercise of the Option, to the Chairman of the Board or an
officer of the Corporation appointed by the Chairman of the Board for the
purpose of receiving the same. Payment of the full purchase price shall be made
as follows: in cash or by check payable to the order of the Corporation; by
delivery to the Corporation of Shares which shall be valued at their Fair Market
Value on the date of exercise of the Option (provided, that a holder may not use
any previously owned Shares unless the holder has beneficially owned such Shares
for at least six months); by providing with the Exercise Notice an order to a
designated broker to sell part or all of the Shares and to deliver sufficient
proceeds to the Corporation, in cash or by check payable to the order of the
Corporation, to pay the full purchase price of the Shares and all applicable
withholding taxes; or by such other methods as the Committee may permit from
time to time.
Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto, a
certificate for the Shares purchased pursuant to the exercise of the Option. If
the Option shall have been exercised with respect to less than all of the Shares
subject to the Option, the Corporation shall also cause to be delivered to the
person entitled thereto a new Option certificate in replacement of the
certificate surrendered at the time of the exercise of the Option, indicating
the number of Shares with respect to which the Option remains available for
exercise, or the original Option certificate shall be endorsed to give effect to
the partial exercise thereof.
13. TERMINATION OF EMPLOYMENT OR SERVICE. All or any part of any
Option, to the extent unexercised, shall terminate immediately (i) in the case
of an employee, upon the cessation or termination for any reason of the Option
holder's employment by the Corporation and all Subsidiaries, or (ii) in the case
of a director of the Corporation or a Subsidiary who is not also an employee of
the Corporation or a Subsidiary or in the case of a consultant to the
Corporation or a Subsidiary, upon the holder's ceasing to serve as a director of
or consultant to (as the case may be) the Corporation or a Subsidiary, except
that in either case under clause (i) or (ii) above, the Option holder shall have
three months following the cessation of the holder's employment with the
Corporation and Subsidiaries or his service as a director of or consultant to
the Corporation or a Subsidiary, as the case may be, and no longer, to exercise
any unexercised Option that the holder could have exercised on the day on which
such employment, or service as a director or consultant, terminated; PROVIDED,
HOWEVER, that such exercise must be accomplished prior to the expiration of the
term of such Option and PROVIDED, FURTHER, that if the cessation of employment
or service as a director or consultant is due to disability (to an extent and in
a manner as shall be determined in each case by the Committee in its sole
discretion) or to death, the Option holder or the representative of the Estate
or the heirs of a deceased Option holder shall have the privilege of exercising
the Options which are unexercised at the time of such disability or death, at
any time within one year after the Option holder's disability or death, as the
case may be, but prior to the expiration of the term of such Option.
Notwithstanding the foregoing or any other provision of the Plan to the
contrary, with respect to any Option, the Committee may determine, in its sole
discretion, either at the time of grant or thereafter, to permit such Option to
be exercised for such period extending beyond the three-month and one-year
periods specified above as the Committee deems appropriate, but in no event
beyond the expiration of the term of such Option. If the employment or service
of any Option holder with the Corporation or a Subsidiary shall be terminated
because of the Option holder's violation of the duties of such employment or
service with the Corporation or a Subsidiary as such holder may from time to
time have, the existence of which violation shall be determined by the Committee
in its sole discretion (which determination by the Committee shall be
conclusive), all unexercised Options of such Option holder shall terminate
immediately upon such termination of the holder's employment or service with the
Corporation and all Subsidiaries, and an Option holder whose employment or
service with the Corporation and Subsidiaries is so terminated, shall have no
right after such termination to exercise any unexercised Option that such holder
might have exercised prior to the termination of employment or service with the
Corporation and Subsidiaries.
Nothing contained herein or in the Option certificate shall be
construed to confer on any employee, director or consultant any right to be
continued in the employ of the Corporation or any Subsidiary or as a director of
or consultant to the Corporation or a Subsidiary or derogate from any right of
the Corporation and any Subsidiary to request the resignation of or discharge
any employee, director or consultant (without or with pay), at any time, with or
without cause.
14. ADJUSTMENT OF OPTIONED SHARES. If prior to the complete exercise
of any Option there shall be declared and paid a stock dividend upon the common
stock of the Corporation or if the common stock of the Corporation shall be
split up, converted, exchanged, reclassified, or in any way substituted for, the
Option, to the extent that it has not been exercised, shall entitle the holder
thereof upon the future exercise of the Option to such number and kind of
securities or other property subject to the terms of the Option to which such
holder would have been entitled had such holder actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such stock dividend, split-up, conversion, exchange, reclassification or
substitution; and the aggregate purchase price upon the future exercise of the
Option shall be the same as if the originally optioned Shares were being
purchased thereunder. Any fractional shares or securities payable upon the
exercise of the Option as a result of such adjustment shall be payable in cash
based upon the Fair Market Value of such shares or securities at the time of
such exercise. If any such event should occur, the number of Shares with respect
to which Options remain to be issued, or with respect to which Options may be
reissued, shall be adjusted in a similar manner. Notwithstanding any other
provision of the Plan, in the event of a recapitalization, merger,
consolidation, rights offering, separation, reorganization or liquidation, or
any other change in the corporate structure or outstanding Shares, the Committee
may make such equitable adjustments to the number of Shares and the class of
shares available hereunder or to any outstanding Options as it shall deem
appropriate to prevent dilution or enlargement of rights.
15. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES Act. The
Corporation may postpone the issuance and delivery of Shares upon any exercise
of an Option until (a) the admission of such Shares to listing on any stock
exchange on which Shares of the Corporation of the same class are then listed,
and (b) the completion of such registration or other qualification of such
Shares under any State or Federal law, rule or regulation as the Corporation
shall determine to be necessary or advisable. Any person exercising an Option
shall make such representations and furnish such information as may, in the
opinion of counsel for the Corporation, be appropriate to permit the
Corporation, in the light of the then existence or non-existence with respect to
such Shares of an effective Registration Statement under the Securities Act of
1933, as from time to time amended (the "Securities Act"), to issue the Shares
in compliance with the provisions of the Securities Act or any comparable act.
The Corporation shall have the right, in its sole discretion, to legend any
Shares which may be issued pursuant to the exercise of an Option, or may issue
stop transfer orders in respect thereof.
16. INCOME TAX WITHHOLDING. If the Corporation or a Subsidiary shall
be required to withhold any amounts by reason of any national, state or local
tax rules or regulations in respect of the issuance of Shares pursuant to the
exercise of such Option, the Corporation or the Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the holder
of such Option. In any event, the holder shall make available to the Corporation
or Subsidiary, promptly when requested by the Corporation or such Subsidiary,
sufficient funds to meet the requirements of such withholding; and the
Corporation or Subsidiary shall be entitled to take and authorize such steps as
it may deem advisable in order to have such funds made available to the
Corporation or Subsidiary out of any funds or property due or to become due to
the holder of such Option.
17. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Options not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any outstanding Option. Notwithstanding the foregoing, any
amendment by the Board of Directors or the Committee which would increase the
number of Shares issuable under Options granted pursuant to the Plan or to any
individual during any calendar year or change the class of persons to whom
Options may be granted shall be subject to the approval of the shareholders of
the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise
with respect to the interpretation of the provisions of the Plan and Options
shall be final. The Committee may authorize and establish such rules,
regulations and revisions thereof not inconsistent with the provisions of the
Plan, as it may deem advisable to make the Plan and Options effective or provide
for their administration, and may take such other action with regard to the Plan
and Options as it shall deem desirable to effectuate their purpose.
18. EFFECTIVE DATE. This Plan is conditioned upon its approval by the
shareholders of the Corporation on or before March 22, 1999, at any special or
annual meeting of the shareholders of the Corporation, except that this Plan is
adopted and approved by the Board of Directors effective March 23, 1998, to
permit the grant of Options prior to the approval of the Plan by the
shareholders of the Corporation as aforesaid. If this Plan is not approved by
the shareholders of the Corporation within the time period noted above, this
Plan and any Options granted hereunder shall be void and of no force or effect.
19. FINAL ISSUANCE DATE. No Option shall be granted under the Plan
after March 22, 2008.
<PAGE>
EXHIBIT A
Form of Certificate
for Incentive
Stock Options
OPTION CERTIFICATE
INCENTIVE STOCK OPTION
(Non-Assignable)
To Purchase _____________ Common Shares of
RECOTON CORPORATION
Issued Pursuant to the 1998
Stock Option Plan of Recoton Corporation
THIS CERTIFIES that on ________________, 19__, _________________ (the
"Holder") was granted an option ("Option"), to purchase at the Option price of
$_________ per share all or any part of _____________ fully paid and
non-assessable shares Common Shares, p.v. $.20 (the "Shares") of Recoton
Corporation ("Corporation"), upon and subject to the following terms and
conditions.
This Option shall expire on _________________, 20__.
This Option may be exercised or surrendered during the Holder's
lifetime only by the Holder. This Option shall not be transferable by the Holder
otherwise than by will or by the laws of descent and distribution.
Except as otherwise provided in the1998 Stock Option Plan of Recoton
Corporation (the "Plan"), this Option shall be exercisable as follows: [insert
vesting schedule; also insert any extension of post-termination exercise period
beyond three-month and one-year periods, if determined at time of grant].1 In no
event, however, may this Option be exercised after the Option's expiration date.
- - --------
1 If, at the time of grant, the post-termination exercise period extends
beyond the three- month and one-year periods, then also add the following: In
the event the Option is exercised more than three months after the Holder's
termination of employment for reasons other than death or disability, or more
than one year after the Holder's termination of employment due to the Holder's
disability, then the Option, to the extent so exercised, shall be deemed not to
be an incentive stock option.
<PAGE>
The Option and this Option certificate are issued pursuant to and are
subject to all of the terms and conditions of the Plan, the terms and conditions
of which are hereby incorporated by reference and a copy of which is attached to
this certificate. A determination of the Committee under the Plan as to any
questions which may arise with respect to the interpretation of the provisions
of the Option and of the Plan shall be final. The Committee may authorize and
establish such rules, regulations and revisions thereof not inconsistent with
the provisions of the Plan, as it may deem advisable.
WITNESS the signature of the Corporation's duly authorized officer.
Dated: _______________________, 19__.
RECOTON CORPORATION
By: _________________________
<PAGE>
EXHIBIT B
Form of Certificate
for Employees' and Consultants'
Non-Qualified Options
OPTION CERTIFICATE
NON-QUALIFIED STOCK OPTION
To Purchase _____________ Common Shares of
RECOTON CORPORATION
Issued Pursuant to the 1998
Stock Option Plan of Recoton Corporation
THIS CERTIFIES that on ________________, 19__, ____________________
(the "Holder") was granted an option ("Option"), which is not an incentive stock
option, to purchase at the Option price of $_________ per share all or any part
of _____________ fully paid and non-assessable Common Shares, p.v. $.20 (the
"Shares"). of Recoton Corporation ("Corporation"), upon and subject to the
following terms and conditions.
This Option shall expire on _________________, 20__.
This Option shall not be transferable by the Holder otherwise than by
will or by the laws of descent and distribution or as provided pursuant to the
1998 Stock Option Plan of Recoton Corporation (the "Plan").
Except as otherwise provided in the Plan, this Option shall be
exercisable as follows: [insert vesting schedule; also insert any extension of
post-termination exercise period beyond three-month and one-year periods, if
determined at time of grant]. In no event, however, may this Option be exercised
after the Option's expiration date.
The Option and this Option certificate are issued pursuant to and are
subject to all of the terms and conditions of the Plan, the terms and conditions
of which are hereby incorporated by reference and a copy of which is attached to
this certificate. A determination of the Committee or the Board of Directors
under the Plan as to any questions which may arise with respect to the
interpretation of the provisions of the Option and of the Plan shall be final.
The Committee or the Board of Directors may authorize and establish such rules,
regulations and revisions thereof not inconsistent with the provisions of the
Plan, as it may deem advisable.
WITNESS the signature of the Corporation's duly authorized officer.
Dated: _______________________, 19__.
RECOTON CORPORATION
By: _________________________
<PAGE>
EXHIBIT C
Form of
Certificate
for Non-Employee
Directors' Options
OPTION CERTIFICATE
NON-QUALIFIED STOCK OPTION
To Purchase _____________ Common Shares of
RECOTON CORPORATION
Issued Pursuant to the 1998
Stock Option Plan of Recoton Corporation
THIS CERTIFIES that on ________________, 19__, _____________________
(the "Holder") was granted an option ("Option"), which is not an incentive stock
option, to purchase at the Option price of $_________ per share all or any part
of _____________ fully paid and non-assessable shares Common Shares, p.v. $.20
(the "Shares") of Recoton Corporation ("Corporation"), upon and subject to the
following terms and conditions.
This Option shall expire on _________________, 20__.
This Option shall not be transferable by the Holder otherwise than by
will or by the laws of descent and distribution or as provided pursuant to the
1998 Stock Option Plan of Recoton Corporation (the "Plan").
Except as otherwise provided in the Plan, this Option shall be
exercisable as follows: [insert vesting schedule; also insert any extension of
post-termination exercise period beyond three-month and one-year periods, if
determined at time of grant]. In no event, however, may this Option be exercised
after the Option's expiration date.
The Option and this Option certificate are issued pursuant to and are
subject to all of the terms and conditions of the Plan, the terms and conditions
of which are hereby incorporated by reference and a copy of which is attached to
this certificate. A determination of the Board of Directors of the Corporation
as to any questions which may arise with respect to the interpretation of the
provisions of the Option and of the Plan shall be final. The Board of Directors
of the Corporation may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
deem advisable.
WITNESS the signature of the Corporation's duly authorized officer.
Dated: _______________________, 19__.
RECOTON CORPORATION
By: _________________________
<PAGE>
RECOTON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF RECOTON CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints Stuart Mont and Peter M. Ildau and
each of them proxies for the undersigned with full power of substitution, to
vote all shares of Recoton Corporation capital stock which the undersigned may
be entitled to vote at the Annual Meeting of Shareholders at Recoton
Corporation, to be held at The Chase Manhattan Bank, 270 Park Avenue, New York,
NY, on Wednesday, June 10, 1998 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 indicted on the reserve 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 ChaseMellon Shareholders Services LLC, Proxy
Processing, Church Street Station, P.O. Box 1554, New York, NY 10277-1554, 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)
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3 AND 4, EACH OF WHICH
HAS BEEN PROPOSED BY RECOTON CORPORATION.
<TABLE>
<CAPTION>
FOR WITHHELD ABSTAIN FOR WITHHELD ABSTAIN
FOR ALL FOR ALL
<S> <C> <C> <C> <C> <C> <C> <C>
Proposal 1-ELECTION OF DIRECTORS Proposal 4-APPROVAL
Nominee: Irwin S. Friedman / / / / / / OF AUDITORS / / / / / /
Joseph M. Idy / / / / / /
Joseph H. Massot / / / / / /
Proposal 2-INCREASE IN NUMBER OF / / / / / / I plan to attend
COMMON SHARES the meeting / /
Proposal 3-APPROVAL OF 1998 STOCK OPTION PLAN / / / / / / Comments/address change / /
Please mark this box
if you have a written
comment/address
change on the reverse
side
Receipt is hereby
acknowledged of the
Recoton Corporation
Notice of Meeting
and Proxy Statement
Signature________________________Signature_________________________________Date__________________, 1998
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
- - ----------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
