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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] 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: ___________________________________
(2) Aggregate number of securities to which transaction applies:
___________________________
(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):
______________________________________________________
______________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________
(5) Total fee paid: ______________________________
[ ] 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>
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RECOTON(R) RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
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NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Recoton Corporation. It will be held on Wednesday, June 9, 1999 at 2:00 p.m. in
the Conference Room, 11th Floor of the Chase Manhattan Bank, 270 Park Avenue,
New York, New York. The following items of business will be discussed and voted
on at the meeting:
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(1) The election of four directors for a term of three years;
(2) The ratification of the appointment of Cornick, Garber & Sandler, LLP
as independent auditors of Recoton Corporation for the fiscal year
ending December 31, 1999; and
(3) Such other business as may properly come before the Annual Meeting or
any adjournments.
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A telephone conference connection will be made available at our Florida
facilities, 2950 Lake Emma Road, Lake Mary, Florida, for shareholders who would
care to attend the meeting at that location. Only shareholders of record at the
close of business on April 21, 1999 will be entitled to receive notice of the
Annual Meeting and to vote at the Annual Meeting or any adjournments.
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.
Stuart Mont
Executive Vice President-Operations,
Chief Operating Officer, Chief Financial
Officer and Secretary
May 6, 1999
<PAGE>
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RECOTON(R) RECOTON CORPORATIon
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 9, 1999
VOTING INFORMATION
PURPOSE
The 1999 Annual Meeting of Recoton Corporation will be held on Wednesday,
June 9, 1999, 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 of the meeting.
WHO CAN VOTE
You are entitled to vote at the Annual Meeting or any adjournment if you
were a holder of record of Recoton Corporation common shares at the close of
business on April 21, 1999, the record date for the Annual Meeting. Your shares
can be voted only if you or a person holding your proxy is present at the
meeting.
SHARES OUTSTANDING
The only securities entitled to vote at the Annual Meeting are the
Company's common shares, $.20 par value per share. On April 21, 1999, there were
11,701,153 common shares outstanding. To our knowledge, no person owned
beneficially more than 5% of the outstanding common shares except as otherwise
noted on pages 18-19.
VOTING OF SHARES
Each share represented at the Annual Meeting is entitled to one vote on
each matter properly brought before the meeting. You may vote in person or by
proxy.
VOTING BY PROXY
To ensure that your voice will be heard, you are urged to complete, date,
sign and return the accompanying form of proxy regardless of whether or not you
plan to attend the Annual Meeting. The accompanying form of proxy properly
signed and returned to us will be voted in accordance with your instructions. If
you do not wish to have our proxy committee vote your shares, you may designate
one or more persons to act as your proxy instead of those persons designated on
the proxy card. To give another person authority, strike out the name or names
appearing on the enclosed proxy card, insert the name or names of another person
or persons and deliver the signed card to such person or persons. The persons
designated by you must present the signed proxy card at the meeting in order for
your shares to be voted.
IF SHARES ARE HELD THROUGH A BROKER, NOMINEE, FIDUCIARY OR OTHER CUSTODIAN,
YOU 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.
MAILING DATE
This proxy statement, the accompanying form of proxy and the notice of
annual meeting are first being sent or given to you and the other shareholders
of the Company on or about May 6, 1999.
REQUIRED VOTES
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, any corporate action, other than the election of directors,
must be authorized by a majority of the votes cast, except as otherwise required
by such law or Recoton's Certificate of Incorporation with respect to a specific
proposal, and the four nominees for the four directorships being voted on
receiving the highest number of votes will be elected as directors.
TABULATION OF VOTES
When 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 approval of a specified
percentage of outstanding shares is required 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.
REVOCATION OF PROXY
If you attend and vote by ballot at the Annual Meeting, that vote will
cancel any proxy vote previously given. Additionally, you may revoke a proxy at
any time before it is voted at the Annual Meeting by giving a valid proxy
bearing a later date or by giving notice of revocation in writing to the
Secretary of the Company.
Your vote is important. Please sign, date and return your proxy card so
that a quorum may be represented at the meeting.
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The 10 directors of the Company are divided into substantially equal
classes having staggered terms of three years. At the Annual Meeting, four
directors will be elected, each for a three-year term. It is intended that the
proxy holders 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 2002 (or
for substitute nominees if contingencies not currently known prevent such
persons from taking office) unless the shareholders submitting proxies specify
otherwise. The other directors will continue in office for the remainder of
their terms as indicated below.
Each of the nominees has served as a director during the fiscal year ended
December 31, 1998. 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 for 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
2002. If any nominee should be unable to serve at the time of the Annual
Meeting, the shares to be voted for such nominee which are represented by
proxies will be voted for a substitute nominee designated by the Board or,
alternatively, the size of the Board will be reduced. The Board knows of no
reason why any of the nominees will be unable to serve at the time of the Annual
Meeting.
NAME AND POSITION BUSINESS EXPERIENCE,
WITH THE COMPANY DIRECTORSHIPS AND AGE
NOMINEES FOR TERMS EXPIRING IN 2002
Robert L. Borchardt ROBERT L. BORCHARDT, 61, has served as a
Chairman, President, Chief director of Recoton since 1964, as President
Executive Officer and since 1976, as Chief Executive Officer since
Director 1996 and as Chairman since June 1998. He was
Co-Chairman from 1992 until June 1998,
Co-Chief Executive Officer from 1992 until
1996, Executive Vice President from 1969
until 1976, a Vice President from 1964 until
1969 and Treasurer from 1969 until 1975. Mr.
Borchardt began working for the Company in
1961. He is on the Executive Board of the
Consumer Electronic Manufacturing Association
(CEMA), a division of the Electronics
Industries Alliance (EIA), is on the Board of
Governors of the Electronic Industries
Alliance and is a trustee of the Electronics
Industries Foundation. He may be deemed to be
a control person of Recoton.
George Calvi GEORGE CALVI, 48, has served as a director of
Director Recoton since 1984. Mr. Calvi was Vice
President from 1978 until 1988, Senior Vice
President-Sales and Marketing from 1988 until
1992 and Executive Vice President-Sales and
Marketing of the Company from 1992 until
1996.
Paul E. Feffer PAUL E. FEFFER, 77, has served as a director
Director of Recoton since 1996. He has been Chairman
of Feffer Consulting Co., Inc., an
international media consulting firm, since
1991. Mr. Feffer 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. From 1991 to 1996
he was a consultant to Merck & Company's
publishing division. Feffer & Simons and
Baker & Taylor specialized in international
publishing and book and magazine distribution
and development of overseas markets for U.S.
publishers.
Stuart Mont STUART MONT, 58, has served as a director of
Executive Vice President- Recoton since 1975, as Chief Operating
Operations, Chief Operating Officer since 1993, as Chief Financial
Officer, Chief Financial Officer since 1992, as Secretary since 1989
Officer, Secretary and and as Executive Vice President-Operations
Director since 1992. He was a Vice President from 1978
until 1989, Senior Vice President from 1989
until 1992, and Treasurer from 1975 until
1989. Mr. Mont has also served as President
of Recoton Canada Ltd. since 1992.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Irwin S. Friedman IRWIN S. FRIEDMAN, 65, has served as a
Director director of Recoton since 1982. Mr. Friedman
has been President, Chief Executive Officer
and the principal shareholder of I. Friedman
Equities, Inc., a corporate financial
consulting firm, for more than five years. He
has also been a director of The Kushner-Locke
Company, a California-based publicly traded
media company, since June 1998.
Joseph M. Idy JOSEPH M. IDY, 58, has served as a director
Director of Recoton since 1990. Mr. Idy has been a
stockbroker and money manager at PaineWebber
Inc. for more than fifteen years and Senior
Vice President of PaineWebber Inc. since
1989.
Joseph H. Massot JOSEPH H. MASSOT, 54, has served as a
Principal Accounting Officer, director of Recoton since 1985, as Principal
Vice President, Treasurer, Accounting Officer, Vice President and
Assistant Secretary and Treasurer since 1989 and as Assistant
Director Secretary since 1983. He was Recoton's
Controller and Assistant Treasurer from 1978
until 1989.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Stephen Chu STEPHEN CHU, 41, has served as a director of
Director Recoton since 1997, as President and a
Managing Director of STD and of its various
subsidiaries since 1990 and as President of
Recoton Japan Inc. since 1998. STD was
acquired by the Company in 1995.
Ronald E. McPherson RONALD E. MCPHERSON, 69, has served as a
Director director of Recoton since 1969. He was
Secretary of Recoton from 1964 and a Vice
President from 1978, until his retirement in
1989.
Peter Wish PETER WISH, 63, has served as a director of
Executive Vice President- Recoton since 1969 and as Executive Vice
Administration and President-Administration since 1992. Mr.
Director Wish was Vice President from 1969 until 1976
and Executive Vice President from 1976 until
1992.
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 is currently composed of
Messrs. Feffer, Friedman, Idy and McPherson, none of whom is an employee of the
Company. It met once in 1998. Its function is to review compensation issues,
approve salaries and review benefit programs for the executive officers, review
and recommend stock compensation and other incentive compensation plans and
approve any employment contracts with, or other contractual benefits for,
executive officers.
AUDIT COMMITTEE. The audit committee is currently composed of Messrs.
Feffer, Friedman, Idy and McPherson. It met once in 1998. 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 is currently composed of Messrs. Feffer and Idy. It met ten times in
1998. It makes awards under, prescribes rules for and interprets the provisions
of the 1998 Stock Option Plan, and prescribes rules and interprets the
provisions of the 1982 Stock Option Plan, 1991 Stock Option Plan and
Nonqualified Stock Option Plan for options remaining under those plans. The
Stock Bonus Committee is currently composed of Messrs. Feffer, Idy and
McPherson. It did not meet in 1998. It makes awards under, prescribes rules for
and interprets the provisions of the Recoton Corporation Stock Bonus Plan.
COMPENSATION OF DIRECTORS; ATTENDANCE
During 1998, 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 1998 and was reimbursed for expenses,
if any, incurred in attending meetings. In 1998 each non-employee director also
received a grant of options under the Company's 1998 Stock Option Plan for 1000
shares at an exercise price of $22.625 per share exercisable at any time until
March 22, 2008. 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 eight meetings and acted by consent three times
during 1998. All of the directors attended at least 75% of the meetings of the
Board of Directors and committees of which they were members in 1998 except for
Robert Borchardt and Stephen Chu, who each attended 71.4% 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
1998 reflect both such factors.
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.
Factors utilized in determining incentive compensation for the executive
officers with respect to 1998 included the continuing increase in net sales of
the Company, the increase in net income before a one time provision for an
expected settlement of a pending customs investigation and the increase in
responsibilities as a result of the Company's growth. Such awards were made
exclusively in cash.
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* 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.
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 early 1998 a general round of option grants was made to certain key
employees and options were issued under the employment agreement with Robert
Borchardt with respect to the growth in the Company's earnings between 1996 and
1997. No options were granted in 1999 to Mr. Borchardt with respect to changes
in earnings between 1997 and 1998.
Employee options generally 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 OFFICER'S COMPENSATION
Mr. Robert L. Borchardt, currently the Company's Chief Executive Officer,
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 of 1986, as amended (the 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
employed by a company paying United States taxes received non-deferred cash
compensation substantially in excess of $1,000,000 in 1998; it is not
anticipated that any such executive officer of the Company other than Mr. Robert
L. Borchardt would receive any such cash compensation in excess of this limit
during 1999 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 1998 the Committee did not take any action to comply with the
limit. Options granted under the Company's 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 Chairman of the Board and the prior Co-Chairman 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 1998 (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 1998 plan and non-plan
compensation awarded or paid to, or earned by, the (i) Company's Chief Executive
Officer (CEO), (ii) the Company's four most highly compensated executive
officers other than the CEO who were serving as executive officers at December
31, 1998 and (iii) one additional executive officer who would have been included
in category (ii) except that he was not an executive officer at the end of the
year, to the extent aggregate salary and bonuses exceeded $100,000 (together,
these six persons are sometimes referred to as the Named Executives).
SUMMARY COMPENSATION TABLE
The following table contains compensation data for the Named Executives for
the past three fiscal years:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
PAY-
ANNUAL COMPENSATION AWARDS OUTS
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OTHER RESTRICTED SECURITIES LTIP
ANNUAL SHARES UNDERLYING PAY- ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS OUTS COMPENSATION
POSITION YEAR ($)1 ($)2 ($)3 ($) (#) ($) ($)4
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt, 1998 $1,065,487 $ 87,697 -- -- 230,975 -- $19,385
Chairman, CEO 1997 1,007,793 150,000 -- -- 250,000(5) -- 22,753
and President 1996 947,570 90,000 -- -- 229,741 -- 15,322
Herbert H. Borchardt, 1998 211,838 -- -- -- -- -- 11,454
Former Co-Chairman6 1997 214,507 -- -- -- -- -- 16,870
1996 208,259 -- -- -- -- -- 59,187
Stephen Chu7 1998 391,098 4,179,291(8) -- -- 50,000 -- 20,813
President, STD 1997 360,208 4,029,924(8) -- -- -- -- 21,736
Holding Limited 1996 328,238 1,734,522(8) -- -- -- -- 21,736
Stuart Mont, COO and 1998 276,076 110,000 -- -- 30,000 -- 42,264
Executive Vice 1997 217,240 125,000 -- -- -- -- 37,790
President-Operations 1996 182,227 125,000 -- -- -- -- 13,873
Peter Wish, Executive 1998 226,437 80,000 -- -- 5,000 -- 6,817
Vice President- 1997 218,548 90,000 -- -- -- -- 12,008
Administration 1996 204,673 90,000 -- -- -- -- 6,842
Dennis Wherry, Senior 1998 164,752 50,000 -- -- 5,000 -- 4,729
Vice President- 1997 150,256 50,000 -- -- -- -- 9,920
Operations 1996 139,966 45,000 -- -- -- -- 5,074
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1 Includes amounts allocated to the executive's deferred compensation account
for each for Mr. R. Borchardt of $53,123 for 1998, $52,733 for 1997 and
$49,408 for 1996; and Mr. Wish of $15,146 for 1998, $14,907 for 1997 and
$14,032 for 1996 (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 Consists of (a) the vested portion of the Company's contribution pursuant
to the Recoton Corporation Employees' Profit Sharing Plan for Mr. R.
Borchardt of $4,009 for 1998, $9,200 for 1997 and $1,710 for 1996; for Mr.
H. Borchardt of $4,009 for 1998, $9,200 for 1997 and $1,463 for 1996; for
Mr. Mont of $4,009 for 1998, $9,200 for 1997 and $3,650 for 1996; for Mr.
Wish of $4,009 for 1998, $9,200 for 1997 and $3,683 for 1996; and for Mr.
Wherry of $4,009 for 1998, $9,200 for 1997 and $4,412 for 1996; (b)
premiums paid by the Company for split dollar insurance arrangements for
Mr. R. Borchardt of $11,866 for 1998, $10,741 for 1997 and $10,687 for
1996; (c) premiums paid by the Company for life insurance over $50,000 in
principal amount for the direct or indirect benefit of Mr. R. Borchardt of
$3,510 for 1998, $2,812 for 1997 and $2,925 for 1996; for Mr. H. Borchardt
of $7,445 for 1998, $7,670 for 1997 and $7,445 for 1996; for Mr. Mont of
$1,800 for 1998, $1,875 for 1997 and $1,890 for 1996; for Mr. Wish of
$2,808 for 1998, $2,808 for 1997 and $3,159 for 1996; and for Mr. Wherry of
$720 for 1998, $720 for 1997 and $662 for 1996; (d) premiums paid by the
Company for life insurance for the benefit of Stephen Chu; (e) the value of
interest assumed by the Company on relocation and other loans for Mr. Mont
of $36,455 for 1998, $26,715 for 1997 and $8,333 for 1996; and (e)
reimbursed medical payments not covered by insurance for Mr. H. Borchardt
of $50,279 for 1996.
5 Consists solely of repriced options previously granted in 1994 and 1995.
6 "Salary" and "All Other Compensation" data for 1996 has been restated to
reflect a recharacterization of $4,691 of "Salary" as "All Other
Compensation."
7 Mr. Chu's position was not considered an executive office until fiscal
1998. Salary data includes a housing allowance of $124,031 for 1998,
$122,093 for 1997 and $77,519 for 1996.
8 Consists of payments from a bonus pool established in connection with the
acquisition of STD Holding Limited in 1995. The amount of the payments from
the bonus pool were settled in 1999 but were earned in the years noted
above. For further information, see "EMPLOYMENT CONTRACTS AND
CHANGE-IN-CONTROL ARRANGEMENTS - STEPHEN CHU EMPLOYMENT AGREEMENT" below.
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</TABLE>
OPTION GRANTS IN 1998
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
1998 (the Company has not granted any stock appreciation rights - sometimes
referred to as SARs):
<TABLE>
<CAPTION>
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INDIVIDUAL GRANTS
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- -----------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total
Underlying Options
Options Granted to Exercise
Granted Employees in Price Expiration Grant Date
NAME (#)1 Fiscal Year ($/Share)2 Date3 Present Value($)4
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<S> <C> <C> <C> <C> <C>
Robert L. Borchardt 130,975 20.1% $14.063 2/5/08 $1,228,131
Robert L. Borchardt 100,000 15.3% 22.625 3/22/08 1,515,297
Herbert Borchardt -- -- -- -- --
Stephen Chu 50,000 7.7% 13.500 1/15/08 342,475
Stuart Mont 30,000 4.6% 13.500 1/15/08 205,485
Peter Wish 5,000 0.8% 13.500 1/15/08 34,248
Dennis Wherry 5,000 0.8% 13.500 1/15/08 34,248
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
1 Except as otherwise noted, all options vest over a five year period, 20%
per year, commencing on the first anniversary of the date of grant. In the
event of death, disability or retirement at or after age 65 unvested
installments become fully exerciseable. In the event of death or disability
options are fully exerciseable by the optionee or the optionee's legal
representative for one year following the event, and in the event of
termination of employment for any other reason except "cause" the options
are fully exerciseable by the optionee for three months, or until the
normal expiration date, whichever occurs first. Options also become fully
exerciseable in the event of a "change of control" of the Company as
defined in the relevant option plan. The options on 130,975 shares granted
to Robert Borchardt vest in full six months after grant.
2 The exercise price is equal to the fair market value of the Company's
common shares on the date of the grant.
3 Subject to earlier termination in case of termination of employment.
4 The estimated present value of the stock options as of their grant date was
calculated using the Black-Scholes option pricing model. The assumptions
used in the model include (a) an expected Recoton stock price volatility of
47.2%, (b) risk-free interest rates ranging from 5.56% to 5.86%, (c) no
dividends being paid and (d) all options being exercised at the end of
their expected holding period (ten years for the options held by Robert
Borchardt and a weighted average of 5.5 years for the other options).
Whether these assumptions will prove accurate cannot be known at the date
of grant. 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 market price of the Company's common shares at the dates of exercise
and sale.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
AGGREGATED OPTION EXERCISES IN 1998
AND 1998 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1998 and unexercised
options held at year-end:
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised
Underlying In-the-Money
Shares Unexercised Options
Acquired Options at at 12/31/98 (S)1
on Value 12/31/98
Exercise Realized ------------------------------ -----------------------------
Name (#) ($)1 Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt -- -- 808,250 185,800 $3,762,602 $254,288
Herbert H. Borchardt -- -- -- -- -- --
Stephen Chu -- -- -- 50,000 -- 221,875
Stuart Mont -- -- 61,168 38,000 541,237 152,625
Peter Wish 6,667 83,780 24,500 9,000 76,615 31,938
Dennis Wherry 15,000 116,970 2,250 9,000 7,539 31,938
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
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, 1998 was $17.9375. Certain options
granted in 1996 and 1998 were excluded since they were not in the money at
year-end.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
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, 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%
($1,012,364 effective January 1, 1998) 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 1996 and 1997 bonuses. The agreement references an
option grant to Mr. Borchardt for 150,000 shares during 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 the Company's earnings from 1996 to
1997 and no options were issued in 1997 with respect to 1995 to 1996 earnings
changes or in 1999 with respect to 1997 to 1998 earnings changes. 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 registered.
The agreement is terminable by the Company only for cause (as defined in
the agreement). If the Company elects not to renew the agreement at its
expiration or if Mr. Borchardt terminates employment at age 65, upon a change of
control or for good reason (as defined in the agreement), he 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 in the agreement) during the
term of employment or consultancy, the Company is obligated to pay Mr. Borchardt
$2 million (subject to cost of living adjustments), he would have the right to
cause the Company to purchase his shares in the Company and he would have the
right to remain in employment or to terminate his employment and become a
consultant to the Company. If Mr. Borchardt has good reason, he may terminate
his employment or consultancy, in which event he is entitled to receive his
salary and bonus or his consultancy fee on a periodic or discounted lump sum
basis (at his 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 Mr. Borchardt'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 Mr. Borchardt'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). Mr. Borchardt resigned as Co-
Chairman and a director of the Company on October 14, 1998. For the year
commencing January 1, 1998 Mr. Borchardt was paid at the annual rate of $219,662
through October 14, 1998 and at the annual rate of $183,052 after October 14. He
remains employed by the Company but not as an officer. In 1999 he is being paid
at the rate of $185,903 per annum pursuant to the agreement.
STEPHEN CHU EMPLOYMENT AGREEMENT. When Recoton acquired STD Holding Limited
effective August 31, 1995 it entered into an employment agreement with STD
Holding's Group Managing Director, Stephen Chu, for a term through December 31,
2001. The agreement may be terminated by the Company for cause or disability (as
defined in the agreement), in which case no additional compensation is due. The
Company may also terminate the agreement without cause provided that it pays Mr.
Chu the benefits which he would have received under the agreement until August
30, 2000.
The starting base compensation under the agreement was HK$2,390,000 per
year (approximately US$308,000), which is subject to a cost-of-living adjustment
as well as discretionary adjustments set by the Board of Directors. Effective
May 1, 1996 the agreement was amended to include in the base compensation a
housing allowance but not to increase the aggregate compensation. Mr. Chu
receives customary fringe benefits made available to comparable Recoton
employees. Pursuant to the terms of the stock purchase agreement for STD, Mr.
Chu is entitled to receive certain bonuses out of a bonus pool established for
the employees of STD and its affiliated United States marketing company,
InterAct Accessories, Inc. (collectively, New STD). The bonus pool is comprised
of five separate payments:
(1) a payment of 15% of the net after-tax earnings of New STD for the
period from the August 31, 1995 through December 31, 1995,
payable between January 1, 1996 and March 30, 1996; PLUS
(2) a payment of US$500,000, payable between January 1, 1999 and
March 30, 1999; PLUS
(3) a payment of 33.3% of the cumulative net after-tax earnings of
New STD for the period from January 1, 1996 through December 31,
1998, such payment not to exceed US$5.0 million in the aggregate,
payable between January 1, 1999 and March 30, 1999; PLUS
(4) a payment of an additional 20% of the cumulative net after-tax
earnings of New STD for the period from January 1, 1996 through
December 31, 1998, which are in excess of US$15 million, payable
between January 1, 1999 and March 30, 1999; PLUS
(5) a payment of 20% of the cumulative net after-tax earnings of New
STD for the period from January 1, 1999 through December 31,
2000, payable between January 1, 2001 and March 30, 2001.
Mr. Chu is guaranteed to receive 20% of the payments set forth in clause
(1), 53.1% of the payments set forth in clause (2), 28.5% of the payments set
forth in clause (3) and 17.5% of the payments set forth in clauses (4) and (5).
Certain other employees were also guaranteed payments. The remaining payments
are to be made to employees (which may include Mr. Chu) of New STD pursuant to
the recommendations of a compensation committee comprised of Stephen Chu and
Robert Borchardt. Mr. Chu received advances against such bonus of $652,775 in
1996 and $1,677,012 in 1997 and the balance of the bonus payment under clauses
(1)-(4) of $7,640,450 in 1999.
SPLIT DOLLAR 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 his wife 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. Effective November 6,
1998, two of the 1994 Split Dollar Life Insurance Agreements on the joint lives
of Mr. and Mrs. Borchardt were amended to change the carriers and two additional
Split Dollar Life Insurance Agreements were entered into pursuant to which the
Company agreed to maintain additional life insurance policies on the joint lives
of Mr. and Mrs. Borchardt in the face amount of $4.25 million.
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.
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
STOCK EXCHANGES AND QUOTED ON THE NASDAQ STOCK MARKET 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, 1993 AND ENDING ON DECEMBER 31, 1998. THE GRAPH AND CHART ASSUMES
THAT THE VALUE OF THE INVESTMENT IN THE COMPANY'S COMMON SHARES AND FOR EACH
INDEX WAS $100 ON DECEMBER 31, 1993 AND REFLECTS REINVESTMENT OF DIVIDENDS AND
MARKET CAPITALIZATION WEIGHING. THE DOLLAR AMOUNTS INDICATED IN THE GRAPH AND
CHART ARE AS OF DECEMBER 31 IN EACH YEAR INDICATED.
- --------
* This section shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing
under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG RECOTON CORPORATION, THE RUSSELL 2000 INDEX
AND A PEER GROUP
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Cumulative Total Return ($)
- -----------------------------------------------------------------------------------------------------------------------
Registrant/Index 1993 1994 1995 1996 1997 1998
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Recoton Corporation 100 130 130 104 94 124
- -----------------------------------------------------------------------------------------------------------------------
Peer Group 100 101 89 91 65 68
- -----------------------------------------------------------------------------------------------------------------------
Russell 2000 100 98 126 147 180 179
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The common shares of the following companies have been included in the peer
group index: Acclaim Entertainment Inc., 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 Stock Market. 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 1998 filing
requirements were complied with.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For services rendered during the fiscal year ended December 31, 1998, the
Company paid a total of $12,000 for financial consulting services to I. Friedman
Equities, Inc., a company of which Mr. Irwin Friedman, a director of the
Company, is a principal shareholder. In 1998 Mr. Friedman also received options
under the Company's 1998 Stock Option Plan to purchase 4,000 shares at any
exercise price of $22.625 per share exercisable at any time until March 22,
2008. This grant was in addition to the grant of 1,000 options made each
non-employee director in 1998.
Stuart Mont, the Company's Chief Operating Officer, Chief Financial
Officer, Executive Vice President-Operations and a director, had loans
aggregating at their maximum in 1998 of $475,841. The outstanding balance as of
March 31, 1999 was $386,264.
SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's common shares, its only outstanding shares
of capital stock, by (a) each person who is known by the Company to own
beneficially more than 5% of the outstanding common shares, (b) each director,
(c) the Named Executives and (d) all executive officers and directors as a group
as of March 31, 1999. Unless otherwise indicated, each of the shareholders shown
in the table below has sole voting and investment power with respect to the
common shares beneficially owned.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership as of March 31, 1999
---------------------------------------------------------------
Current
Beneficial Shares Subject
NAME AND ADDRESS OF BENEFICIAL OWNER(1) Holdings to Options(2) Total Percent
- ---------------------------------------------- ----------- --------------- ------ --------
<S> <C> <C> <C> <C>
Robert L. Borchardt(3)................. 1,389,192 884,050 2,273,242 18.1%
Herbert Borchardt...................... 2,499 0 2,499 *
George Calvi........................... 21,008 10,500 31,508 *
Stephen Chu(5) ........................ 175,202 10,000 185,202 1.6
Paul E. Feffer......................... 1,000 1,000 2,000 *
Irwin S. Friedman(4)................... 28,000 12,500 40,500 *
Joseph M. Idy.......................... 8,000 1,000 9,000 *
Ronald McPherson....................... 20,194 1,000 21,194 *
Joseph H. Massot....................... 23,721 25,834 49,555 *
Stuart Mont............................ 35,531 71,168 106,699 *
Peter Wish............................. 11,573 27,500 39,073 *
Dennis P. Wherry....................... 0 5,250 5,250 *
First Pacific Advisors,
Inc. (6) .............................. 1,838,500 0 1,838,500 15.7
FPA Capital Fund, Inc.
(6) ................................... 750,000 0 750,000 6.4
Dimensional Fund
Advisers, Inc.(7) ..................... 660,746 0 660,746 5.6
All Directors and
Executive Officers
as a Group (16 Persons)................ 1,719,251 1,075,552 2,794,803 21.9
- ---------------
* Less than 1%
(1) 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 Limited, Units 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 375 Park Avenue, Suite 2608, New York, New York 10152; 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.
(2) As used in this table, a beneficial owner of a security includes any person
who, directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (i) the power to vote, or direct
the voting of, such security or (ii) investment power which includes the
power to dispose, or to direct the disposition of, such security. It does
not include securities which that person has the right to acquire. Shares
Subject to Option includes shares that may be acquired currently or within
60 days after March 31, 1999 through the exercise of stock options.
(3) Includes 213,333 shares held by Mr. Borchardt as trustee for his children
and 39,909 shares held by Mr. Borchardt's wife. Mr. Borchardt disclaims
beneficial ownership of the shares owned by his wife. Also includes 546,666
shares held by a trust of which Mr. 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. Borchardt, and 589,284 shares held by a revocable living trust of which
Mr. Borchardt is the sole trustee or in an individual retirement account in
Mr. Borchardt's name. Excludes (a) 270,092 shares as to which Mr. Borchardt
holds an irrevocable proxy (valid until August 2005) pursuant to an
agreement among the Company, Mr. Borchardt, Stephen Chu and other
shareholders and 122,190 shares as to which Mr. Borchardt holds an
irrevocable proxy (valid until the earlier of November 2007 or two years
after Micah Ansley and Diane Eberlein both cease to be Company employees)
pursuant to an agreement between the Company, Mr. Borchardt, Micah Ansley
and Diane Eberlein (such shares are to be voted consistent with the
recommendation of the Board of Directors of the Company and the holders of
such shares are generally free to sell such shares at any time), and (b)
30,000 shares held by a foundation of which Mr. Borchardt is a director.
(4) Irwin Friedman and Robert Borchardt share voting and investment power with
respect to the shares held of record by the Borchardt Trust, of which
Robert Borchardt is the beneficiary. The number of shares shown as owned by
Mr. Friedman does not include the common shares owned by the Borchardt
Trust.
(5) Such shares are subject to an agreement between Mr. Chu, the Company,
Robert Borchardt and other shareholders which expires in August 2005
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 includes 175,202 of the total 270,092 shares subject to
such agreement; Mr. Chu disclaims beneficial ownership of the remaining
shares.
(6) Based on a Schedule 13G Statement dated February 12, 1999 filed with the
Commission, First Pacific Advisors, Inc. (11400 West Olympic Boulevard,
Suite 1200, Los Angeles, CA 90064) had shared voting power with respect to
544,000 shares and shared dispositive power with respect to 1,838,500
shares and FPA Capital Fund, Inc. (11400 West Olympic Boulevard, Suite
1200, Los Angeles, CA 90064) had sole voting power and shared dispositive
power with respect to 750,000 shares as of December 31, 1998. The 750,000
shares reported as owned by FPA Capital Fund, Inc. are also included in the
1,838,750 shares reported as owned by First Pacific Advisors, Inc. in the
table. The Company cannot determine from such filing if any natural persons
control the shares beneficially owned by First Pacific Advisors, Inc. or
FPA Capital Fund Inc. and who shares the voting power on such shares.
(7) Based on a Schedule 13G Statement dated February 12, 1999 filed with the
Commission, Dimensional Fund Advisors Inc. (1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401), a registered investment advisor is deemed to have
beneficial ownership of 660,746 shares as of December 31, 1998, all of
which shares are held in various investment companies or other investment
vehicles for which Dimensional Fund Advisors serves as investment manager.
Dimensional Fund Advisors disclaims beneficial ownership of all such
shares.
</TABLE>
PROPOSAL II
SELECTION OF AUDITORS
Action is to be taken at the Annual Meeting to ratify the selection of
Cornick, Garber & Sandler, LLP as independent auditors of the Company for the
fiscal year ended December 31, 1999.
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 in this proxy statement 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 2000
Annual Meeting of Shareholders, such proposals must be received by the Company
no later than January 12, 2000.
MISCELLANEOUS
Pursuant to Section 726 of the New York Business Corporation Law, the
Company has obtained insurance coverage in the principal amount of $50 million
from May 25, 1998 through May 24, 2001 to indemnify the Company and its officers
and directors from certain liabilities. The insurance contract, dated May 25,
1998 with Federal Insurance Company, a Chubb Group Company, costs the Company
$170,000 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 RECOTON'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998 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 6, 1999
<PAGE>
RECOTON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 9, 1999
THIS PROXY IS SOLICITED ON BEHALF OF RECOTON CORPORATION'S BOARD OF DIRECTORS
The undersigned hereby appoints Joseph H. Massot 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 of Recoton
Corporation, to be held at The Chase Manhattan Bank, 270 Park Avenue, New York,
NY, on Wednesday, June 9, 1999 at 2:00 P.M., or at any adjournment of the
meeting, 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 of the meeting.
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C>
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
- ---------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2, EACH OF WHICH HAS
BEEN PROPOSED BY RECOTON CORPORATION.
FOR WITHHELD ABSTAIN FOR ABSTAIN AGAINST
FOR ALL
<S> <C> <C> <C> <C> <C> <C> <C>
Proposal 1-ELECTION OF DIRECTORS Proposal 2-APPROVAL [ ] [ ] [ ]
Nominee: Robert L. Borchardt [ ] [ ] [ ] OF AUDITORS
George Calvi
Paul E. Feffer
Stuart Mont I plan to attend the meeting [ ]
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__________________, 1999
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.
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^ FOLD AND DETACH HERE ^
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