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 ss. 240.14a-11(c) or ss.240.14a-12
RECOTON CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, of other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x ] No fee required
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(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
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state how it was determined):
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[ ] Check box if any part of the fee is offset as provided by Exchange
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statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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RECOTON(R) RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FLORIDA 32746
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NOTICE OF 2000 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 7, 2000 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:
(1) The election of four directors for a term of three years;
(2) The ratification of the appointment of Deloitte & Touche LLP as
independent auditors of Recoton Corporation for the fiscal year
ending December 31, 2000;
(3) An amendment of the Company's 1998 Stock Option Plan to increase
the number of shares authorized for grant; and
(4) Such other business as may properly come before the Annual
Meeting or any adjournments.
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, 2000 will be entitled to receive
notice of the Annual Meeting and to vote at the Annual Meeting or any
adjournments.
YOUR VOTE IS VERY IMPORTANT. SHAREHOLDERS OF RECORD CAN VOTE IN ANY
ONE OF THE FOLLOWING THREE WAYS:
o BY MAIL - fill in, sign and date your enclosed proxy card
and return it promptly in the enclosed
postage-paid envelope.
o BY TELEPHONE - call the toll-free telephone number on your
proxy/voting instruction card.
o VIA INTERNET - visit the web site on your proxy/voting
instruction card to vote via the Internet.
If your shares are held in the name of a bank, broker or other holder
of record, you will receive instructions from the holder of record that you must
follow in order for you to vote your shares.
Any proxy may be revoked at any time prior to its exercise at the
meeting.
Joseph H. Massot
Senior Vice President-Administration and
Human Resources and Secretary
Lake Mary, Florida
May 3, 2000
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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 7, 2000
VOTING INFORMATION
PURPOSE
The 2000 Annual Meeting of Recoton Corporation will be held on
Wednesday, June 7, 2000, 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, 2000, 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, 2000, there were
11,739,856 common shares outstanding. To our knowledge, no person owned
beneficially more than 5% of the outstanding common shares except as otherwise
noted on pages 17-18.
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
If you hold your shares in your own name as a holder of record, you
may instruct the proxies how to vote your shares by using the toll free
telephone number or the Internet voting site listed on the proxy/voting
instruction card or by signing, dating and mailing the proxy card in the postage
paid envelope that we have provided to you. Of course, you can always come to
the meeting and vote your shares in person. When you use the telephone system or
our Internet voting site, the system verifies that you are a shareholder through
the use of a unique Personal Identification Number that is assigned to you. The
procedure allows you to instruct the proxies how to vote your shares and to
confirm that your instructions have been properly recorded. Specific directions
for using the telephone and Internet voting systems are on the proxy/voting
instruction card. The Internet and telephone voting procedures are available 24
hours, 7 days a week until 11:59 p.m., Eastern Daylight Time, on June 6, 2000.
Whichever of these methods you select to transmit your instructions, the proxies
will vote your shares in accordance with those instructions. If you sign and
return a proxy/voting instruction card without giving specific voting
instructions, your shares will be voted as recommended by our Board of
Directors.
If you do not wish to have our proxies 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 4, 2000.
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.
In situations where the approval of a specified percentage of our
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. None of the matters slated for consideration at this year's annual
meeting require approval by a specified percentage of our outstanding shares.
REVOCATION OF PROXY
To revoke your proxy instructions, you must advise Recoton's Secretary
in writing before your shares have been voted by the proxies at the meeting,
deliver later proxy instructions, or attend the meeting and vote your shares in
person. Unless you decide to attend the meeting and vote your shares in person
after you have submitted voting instructions to the proxies, you should revoke
or amend your prior instructions in the same way you initially gave them C that
is, by telephone, Internet or in writing. This will help to ensure that your
shares are voted the way you have finally determined you wish them to be voted.
Your vote is important. Please sign, date and return your proxy card
or vote by phone or Internet so that a quorum may be represented at the meeting.
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, four
directors will be elected, each for a three-year term. It is intended that the
proxies 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 2003 (or for
substitute nominees if contingencies not currently known prevent such persons
from taking office) unless the shareholders submitting proxy votes 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, 1999. 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
2003. 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
WITH THE COMPANY BUSINESS EXPERIENCE, DIRECTORSHIPS AND AGE
NOMINEES FOR TERMS EXPIRING IN 2003
Jerry Kalov, DIRECTOR Mr. Kalov, 64, was the President of Cobra
Electronics Corporation, a public consumer
electronics company from 1985 until his
retirement in 1998 and served as a director
until December 1999. He has also been a
senior partner in a venture capital and
management consulting firm, the President of
Harman International Industries and its
subsidiary JBL Incorporated and the President
of Jensen International. Mr. Kalov is a
member of the Executive Board of the Consumer
Electronics Association and the Board of
Governors of the Electronics Industries
Association and a trustee of the Electronic
Industries Foundation. He is a director of
Wells-Gardner Electronics Corporation, a
public corporation primarily supplying
monitors and related items to the gaming and
amusement industry.
Ann R. Leven, DIRECTOR Ms. Leven, 59, is a Director of the Delaware
Group of Mutual Funds and a Governor of The
Investment Company Institute. She was the
Treasurer and Chief Fiscal Officer of the
National Gallery of Art from 1994 to 1999.
She has also been Treasurer and Chief Fiscal
Officer of the Smithsonian Institution,
Treasurer of The Metropolitan Museum of Art,
Vice President and Senior Corporate Planning
Officer of The Chase Manhattan Bank and
Adjunct Professor at Columbia University
Graduate School of Business.
Ronald E. McPherson, Mr. McPherson, 71, 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, EXECUTIVE VICE Mr. Wish, 64, has served as a director of
PRESIDENT-ADMINISTRATION, Recoton since 1969 and as Executive Vice
RECOTON ACCESSORIES President-Administration of the Recoton
DIVISION AND DIRECTOR Accessories Division since 1999 (and in the
same position in Recoton before such division
was established from 1992 until 1999).
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Robert L. Borchardt, Mr. Borchardt, 62, has served as a director
CHAIRMAN, PRESIDENT, of Recoton since 1964, as President since
CHIEF EXECUTIVE OFFICER 1976, as Chief Executive Officer since 1996
AND DIRECTOR and as Chairman since 1998. He previously
served as Co-Chairman from 1992 until 1998
and Co-Chief Executive Officer from 1992
until 1996. He is past Chairman and currently
on the Executive Board of the Consumer
Electronics Association, a division of the
Electronic Industries Alliance, is Vice
Chairman and on the Executive 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, DIRECTOR Mr. Calvi, 49, has served as a director
of Recoton since 1984. He 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, DIRECTOR Mr. Feffer, 78, has served as a director of
Recoton since 1996. He has been Chairman of
Feffer Consulting Co., Inc., an international
media consulting firm, since 1991.
Stuart Mont, EXECUTIVE Mr. Mont, 59, has served as a director of
VICE PRESIDENT- Recoton since 1975, as Executive Vice
OPERATIONS, CHIEF President-Operations since 1992 and as Chief
OPERATING OFFICER AND Operating Officer since 1993. He previously
DIRECTOR served as Chief Financial Officer from 1992
until 1999 and Secretary from 1989 until
1999. Mr. Mont has also served as President
of Recoton Canada Ltd. since 1992.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Irwin S. Friedman, Mr. Friedman, 66, has served as a director
DIRECTOR of Recoton since 1982. He 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 1998.
Joseph M. Idy, Mr. Idy, 59, has served as a director of
DIRECTOR Recoton since 1990. He has been Senior Vice
President of PaineWebber Inc. since 1989.
Joseph H. Massot, SENIOR Mr. Massot, 55, has served as Senior Vice
VICE PRESIDENT- President-Administration and Human Resources
ADMINISTRATION AND since 1999, as Secretary since 1999 and as a
HUMAN RESOURCES, director of Recoton since 1985. He previously
SECRETARY AND DIRECTOR served as Principal Accounting Officer, Vice
President and Treasurer from 1989 until 1999
and as Assistant Secretary from 1983 until
1999.
BOARD COMMITTEES
The Board has a standing Audit Committee, Compensation and Option
Committee and Finance Committee but does not have a nominating committee.
AUDIT COMMITTEE. The Audit Committee is currently composed of Mr.
Friedman (Chair), Mr. Feffer, Mr. Kalov and Ms. Leven. It met six times in 1999.
It performs activities, and reviews and makes recommendations, relating to the
accounting controls, audit and financial statements of the Company.
COMPENSATION AND OPTION COMMITTEE. The Compensation and Option
Committee is currently composed of Ms. Leven (Chair), Mr. Feffer, Mr. Idy and
Mr. McPherson, none of whom is an employee of the Company. 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. Effective January 1, 2000 this
committee was merged with the committees under the Company's stock option and
stock bonus plans, which make awards under, prescribe rules for and interpret
the provisions of the 1998 Stock Option Plan and the Stock Bonus Plan, and
prescribe rules and interpret the provisions of the 1982 Stock Option Plan, 1991
Stock Option Plan and Nonqualified Stock Option Plan for options remaining under
those plans. The predecessor committees meet four times in 1999.
FINANCE COMMITTEE. The Finance Committee was formed late in 1999 and
it did not meet during the year. It is composed of Mr. Kalov (Chair), Mr.
Friedman, Mr. Joseph M. Idy and Ms. Leven. It advises the Board with respect to
the financing of the Company, including the review of financial transactions,
mergers and acquisitions.
COMPENSATION OF DIRECTORS; ATTENDANCE
During 1999, none of the directors who are employees of the Company
received any compensation in addition to 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 1999 and was reimbursed for expenses, if any,
incurred in attending meetings. In 1999 each non-employee director also received
a grant of options under the Company's 1998 Stock Option Plan for 3,000 shares
at an exercise price of $7.4375 per share exercisable at any time until December
1, 2009. See "Certain Relationships and Related Transactions" for transactions
with directors or their affiliates for services other than as a director.
Effective as of January 1, 2000 the annual retainer for each non-employee
director was increased to $12,000 per year, a per meeting fee was established
($1,500 for in-person meetings and $750 for telephonic meetings) and
compensation for committee involvement was established (with an annual fee of
$2,000 to be paid to the Chair of the Audit Committee and $1,000 to be paid to
the Chairs of the Compensation and Option Committee and the Finance Committee,
and per meeting fees to be paid at the rate of $1,000 for each in-person Audit
Committee meeting, $500 for each telephonic Audit Committee meeting and $500 for
each in-person or telephonic meeting of the Compensation and Option Committee
and Finance Committee, with per meeting fees to be reduced by 50% if the
meetings are held in conjunction with a full Board meeting and to be reduced to
$250 for telephonic meetings of the Compensation and Option Committee which do
not exceed 15 minutes).
The Board of Directors held 13 meetings and acted by consent once
during 1999. All of the directors attended at least 75% of the meetings of the
Board of Directors and committees of which they were members in 1999. 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 AND OPTION COMMITTEE ON COMPENSATION OF EXECUTIVE
OFFICERS OF THE COMPANY*
COMPENSATION PHILOSOPHY
The Company's philosophy for executive compensation has been to
provide competitive levels of compensation, to reward above average overall
corporate performance, to recognize individual initiative and achievement and to
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. The Company does not offer a defined
benefit or defined contribution retirement plan requiring mandatory
contributions by the Company. Employees may elect to participate in the
Company's 401(k) plan but the Company does not match employee contribution.
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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.
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 to reflect an employee's greater
responsibility in the Company and to keep pace with inflation. Increases for
1999 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 earnings, and
an 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 management.
These factors were utilized in determining incentive compensation for
the executive officers with respect to 1999. 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 each employee who has worked for the Company a minimum of five
years. In 1999 option grants were made accordingly. 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 to Mr.
Borchardt with respect to changes in earnings between 1997 and 1998 or between
1998 and 1999.
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
Compensation and Option Committee, subject to plan terms. The Board feels that
share ownership by employees is beneficial in aligning management's and
shareholders' interest in the enhancement of shareholder value.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. 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. 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 cash
(deferred or non- deferred) compensation substantially in excess of $1,000,000
in 1999; it is not anticipated that any such executive officer of the Company
other than Mr. Borchardt would receive any such cash compensation in excess of
this limit during 2000 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 1999 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 Company and management have concurred that the present
compensation program for those employees not covered by employment agreements
merits review. William M. Mercer Incorporated has been hired to undertake such a
study and report to management and the Board with recommendations, if any, for
change in the current year.
The Committee believes the employment agreements for the Chairman of
the Board and certain subsidiary officers hired in connection with acquisitions
currently compensates these officers in a manner that relates to performance and
to the shareholders' long-term interests. The Committee will continue to review
such agreements, with respect to both overall arrangements and the compensation
of specific officers.
Respectfully submitted,
For the Compensation and Option Committee:
Paul E. Feffer
Joseph M. Idy
Ann R. Leven
Ronald E. McPherson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For a list of the current members of the Compensation and Option
Committees, see page 6. Irwin Friedman was also a member of the previous
Compensation Committee in 1999. No person who was in 1999 a member of the
Company's Compensation and Option Committee (or the previous Compensation
Committee) was employed by the Company at the time of membership on the
committee. Mr. McPherson was an officer and employee of the Company until 1989.
A company of which Mr. Friedman is principal was under retainer by the Company
as a consultant during 1999 (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 1999 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, 1999 (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>
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LONG-TERM COMPENSATION
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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, 1999 $1,131,185 $ 0 -- -- 50,000 -- $14,722
CHAIRMAN, CEO 1998 1,065,487 87,697 -- -- 230,975 -- 19,765
AND PRESIDENT 1997 1,007,793 150,000 -- -- 250,000(5) -- 22,621
Stephen Chu(6) 1999 512,248 1,841,9447 -- -- 70,000 -- 20,531
PRESIDENT, STD 1998 391,098 4,179,2917 -- -- 50,000 -- 20,813
HOLDING LIMITED 1997 360,208 4,029,9247 -- -- -- -- 21,736
Stuart Mont, COO AND 1999 293,956 85,000 -- -- 30,000 -- 24,953
EXECUTIVE VICE 1998 276,076 110,000 -- -- 30,000 -- 42,644
PRESIDENT-OPERATIONS 1997 217,240 125,000 -- -- -- -- 37,658
Peter Wish, EXECUTIVE 1999 236,787 60,000 -- -- 10,000 -- 5,471
VICE PRESIDENT- 1998 226,437 80,000 -- -- 5,000 -- 7,197
ADMINISTRATION, 1997 218,548 90,000 -- -- -- -- 11,876
RECOTON ACCESSORIES
DIVISION
Arnold Kezsbom(8), 1999 187,005 60,000 -- -- 30,000 -- 4,518
SENIOR VICE PRESIDENT- 1998 143,410 60,000 -- -- 5,000 -- 4,720
FINANCE, TREASURER 1997 119,040 45,000 -- -- -- -- 7,097
AND CHIEF FINANCIAL
OFFICER
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1 Includes amounts allocated to the executive's deferred compensation account
for each for Mr. Borchardt of $58,080 for 1999, $53,123 for 1998 and
$52,733 for 1997; and Mr. Wish of $15,161 for 1999, $15,146 for 1998 and
$14,907 for 1997 (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 each of the
named Executive Officers other than Mr. Chu (who is not a participant in
such plan) of $4,283 for 1999 (estimate), $4,389 for 1998 and $9,068 for
1997 ($6,905 for Mr. Kezsbom in 1997)), (b) premiums paid by the Company
for split dollar insurance arrangements for Mr. Borchardt of $9,251 for
1999, $11,866 for 1998 and $10,741 for 1997; (c) premiums paid by the
Company for life insurance over $50,000 in principal amount for the direct
or indirect benefit of Mr. Borchardt of $1,188 for 1999, $3,510 for 1998
and $2,812 for 1997; for Mr. Mont of $774 for 1999, $1,800 for 1998 and
$1,875 for 1997; for Mr. Wish of $1,188 for 1999, $2,808 for 1998 and
$2,808 for 1997; and for Mr. Kezsbom of $236 for 1999, $331 for 1998 and
$192 for 1997; (d) premiums paid by the Company for life insurance for the
benefit of Stephen Chu; and (e) the value of interest assumed by the
Company on relocation and other loans for Mr. Mont of $19,896 for 1999,
$36,455 for 1998 and $26,715 for 1997.
5 Consists solely of repriced options previously granted in 1994 and 1995.
6 Mr. Chu's position was not considered an executive office until 1998.
Salary data includes a housing allowance of $123,936 for 1999 (estimate),
$124,031 for 1998 and $122,093 for 1997.
7 Consists of payments from a bonus pool established in connection with the
acquisition of STD Holding Limited in 1995. The amount of the payments from
the bonus pool with respect to 1997 and 1998 were settled in 1999 but were
earned in the years noted above. The amount with respect to 1999 is an
estimate and will be paid in 2001 after final calculation. For further
information, see "EMPLOYMENT CONTRACTS AND CHANGE- IN-CONTROL ARRANGEMENTS
- STEPHEN CHU EMPLOYMENT AGREEMENT" below.
8 Mr. Kezsbom's prior position was not considered an executive office until
1998.
</TABLE>
OPTION GRANTS IN 1999
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
1999 (the Company has not granted any stock appreciation rights - sometimes
referred to as SARs):
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES PERCENT OF TOTAL OPTIONS EXERCISE
UNDERLYING OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION GRANT DATE
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE)(2) DATE(3) PRESENT VALUE($)(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt 50,000 6.0% $7.4375 12/1/09 $276,806
Stephen Chu 70,000 8.4% $7.4375 12/1/09 312,505
Stuart Mont 30,000 3.6% $7.4375 12/1/09 133,931
Peter Wish 10,000 1.2% $7.4375 12/1/09 26,498
Arnold Kezsbom 30,000 3.6% $7.4375 12/1/09 133,931
- -----------------------------------------------------------------------------------------------------------------------------------
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. Mr.
Wish's options vest over a two year period. In the event of death,
disability or retirement at or after age 65 unvested installments become
fully exercisable. In the event of death or disability options are fully
exercisable 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 exercisable by the
optionee for three months, or until the normal expiration date, whichever
occurs first. Options also become fully exercisable in the event of a
"change of control" of the Company as defined in the relevant option plan.
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
57.4%, (b) risk-free interest rates ranging from 5.98% to 6.55%, (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 Mr.
Borchardt, two years for the options held by Mr. Wish and 5.9 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 1999
AND 1999 YEAR-END OPTION VALUES
The following table sets forth information with respect to the Named
Executives concerning the exercise of options during 1999 and unexercised
options held at year-end:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/99 AT 12/31/99 (S)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Borchardt - 0 - - 863,050 160,000 $756,004 $ 78,125
Stephen Chu - 0 - - 10,000 110,000 0 109,375
Stuart Mont 21,334 $172,016 49,834 58,000 30,244 46,875
Peter Wish - 0 - - 27,500 16,000 0 15,625
Arnold Kezsbom - 0 - - 3,400 33,000 0 46,875
- ------------------------------------------------------------------------------------------------------------------------------------
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, 1999 was $9.00. Certain options
granted from 1993 through 1998 were excluded since they were not in the
money at year-end.
</TABLE>
<PAGE>
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
adjusted annually to reflect the greater of the changes in the consumer price
index or 6% ($1,073,000 effective January 1, 1999) 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 1997 bonus. The agreement 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), but in no event would Mr.
Borchardt receive more options than he is entitled to under the applicable
option plan (currently 250,000 options per year). 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, in 1999 with respect to 1997 to 1998 earnings changes or
in 2000 with respect to 1998 to 1999 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.
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) based on net after-tax
earnings of New STD. With respect to bonuses accrued for the periods from August
31, 1995 through December 31, 1998, he received payments of $1,677,012 in 1997
and $7,640,450 in 1999. He is entitled to a minimum payment of 3.5% 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 may also be eligible to receive additional payments from the bonus pool
as an employee of New STD pursuant to the recommendations of a compensation
committee constituted under the stock purchase agreement comprised of Mr. Chu
and Mr. Borchardt.
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 Mr. Borchardt, the
Company agreed to maintain life insurance policies on Mr. 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 Mr. 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 Mr. 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
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 Mr.
Borchardt's employment agreement.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION*
Set forth below is a chart and line graph 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, 1994 and ending on December 31, 1999. The chart and graph assume
that the value of the investment in the Company's common shares and for each
index was $100 on December 31, 1994 and reflects reinvestment of dividends and
market capitalization weighing. The dollar amounts indicated in the chart and
graph are as of December 31 in each year indicated.
<TABLE>
<CAPTION>
Cumulative Total Return ($)
========================================================================================================================
Registrant/Index 1994 1995 1996 1997 1998 1999
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Recoton Corporation 100 100.00 79.67 72.00 95.67 48.00
- ------------------------------------------------------------------------------------------------------------------------
Peer Group 100 99.93 83.06 69.48 95.58 88.18
- ------------------------------------------------------------------------------------------------------------------------
Russell 2000 100 127.49 154.73 203.91 190.75 187.92
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* 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.
[GRAPHIC OMITTED]
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. and Harman International Industries Inc. 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 1999 filing
requirements were complied with except that Dennis Wherry filed a late Form 4
with respect to options granted to his spouse prior to their marriage.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For services rendered during the fiscal year ended December 31, 1999,
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 1999 Mr. Friedman also received
options under the Company's 1998 Stock Option Plan to purchase 5,000 shares at
an exercise price of $8.00 per share exercisable at any time until December 20,
2009. This grant was in addition to the grant of 3,000 options made to each
non-employee director in 1999.
Stuart Mont, the Company's Chief Operating Officer, Executive Vice
President- Operations and a director, had loans aggregating at their maximum in
1999 of $466,792. The outstanding balance as of March 31, 2000 was $415,843.
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, 2000. 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, 2000
---------------------------------------------------------------
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).................... 1,187,859 913,050 2,100,909 16.6%
George Calvi.............................. 21,008 12,500 33,508 *
Stephen Chu(5) ........................... 6,010 20,000 26,010 *
Paul E. Feffer............................ 1,000 4,000 5,000 *
Irwin S. Friedman(4)...................... 28,000 20,500 48,500 *
Joseph M. Idy............................. 5,000 4,000 9,000 *
Jerry Kalov............................... 10,000 3,000 13,000 *
Arnold Kezsbom............................ 0 3,400 3,400 *
Ann R. Leven.............................. 0 3,000 3,000 *
Ronald McPherson.......................... 20,194 4,000 24,194 *
Joseph H. Massot.......................... 23,721 27,834 51,555 *
Stuart Mont............................... 54,252 59,834 114,086 *
Peter Wish................................ 14,573 30,500 45,073 *
First Pacific Advisors, Inc. (6).......... 1,958,100 0 1,958,100 16.7%
Dimensional Fund Advisers, Inc.(7)........ 901,196 0 901,196 7.7%
Putnam Investments, Inc. and Putnam
Advisory Company, Inc. (8)............. 695,900 0 695,900 5.9%
All Directors and Executive Officers
as a Group (19 Persons)................ 1,385,947 1,143,518 2,529,465 19.6%
- ---------------
* 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; the
address of Mr. Kalov is 6308 Valley View Circle, Long Grove, IL 60047; the
address of Ms. Leven is 785 Park Avenue, New York, NY 10021; 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, 2000 through the exercise of stock options.
(3) Includes 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 601,284 shares held
directly, 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) 30,800 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 6,010 of the total 30,800 shares subject to such
agreement; Mr. Chu disclaims beneficial ownership of the remaining shares.
(6) Based on a Schedule 13G Statement dated February 11, 2000 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
776,700 shares and shared dispositive power with respect to 1,958,100
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 630,400 shares as of December 31, 1999. The 630,400
shares reported as owned by FPA Capital Fund, Inc. are also included in the
1,958,100 shares reported as owned by First Pacific Advisors, Inc. in the
table.
(7) Based on a Schedule 13G Statement dated February 3, 2000 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 901,196 shares as of December 31, 1999, all of
which shares it had sole power to vote. Such shares are held in various
investment companies or other investment vehicles for which Dimensional
Fund Advisors serves as investment manager, no one of which to the
knowledge of Dimensional Fund Advisors owns more than 5% of the class.
Dimensional Fund Advisors disclaims beneficial ownership of all such
shares.
(8) Based on a Schedule 13G Statement dated February 7, 2000 filed with the
Commission, Putnam Investments Inc. and Putnam Advisory Company, Inc. (One
Post Office Square, Boston, MA 02109) is deemed to have beneficial
ownership of 695,900 shares as of December 31, 1999, of which such
companies had shared voting power as to 212,200 shares and shared
dispositive power as to 695,900 shares.
</TABLE>
PROPOSAL II
AMENDMENT TO THE 1998 STOCK OPTION PLAN
The Company's Board of Directors has unanimously approved an amendment
of Section 5 of the Recoton Corporation 1998 Stock Option Plan to increase the
number of shares authorized for grant under the 1998 Plan by 1,000,000 shares.
The amendment to the 1998 Plan will be effective upon shareholder approval.
The purpose of the increase in authorized shares is to better
facilitate the Company's planned shift to an incentive-based compensation
system. As noted above in the report of the Compensation and Option Committee,
the Company has retained consultants to recommend appropriate changes to the
current compensation system to better reflect the need to incentivize employees
to maximize shareholder value. It is expected that such consultants will
recommend continued, and possibly increased, usage of options as part of such
new system. If the number of options available for future grant is not
increased, the Company's ability to adequately carry out any such recommended
changes may be adversely affected.
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 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 replaced the 1991 Stock Option Plan and the Nonqualified Stock
Option 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 before approval of the amendment; it
will be 2,500,000 if the amendment is approved by the shareholders. As of April
21, 2000, options for 851,500 shares were outstanding. 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.
Shares subject to options granted under the 1998 Plan as of April 21,
2000 were as follows:
NAME AND CHIEF POSITION NUMBER OF UNITS
- ----------------------- ----------------
Robert L. Borchardt, CEO 50,000
Stephen Chu, President of STD Holding Limited 70,000
Arnold Kezsbom, CFO 30,000
Stuart Mont, COO 30,000
Peter Wish, EVP 10,000
Current executive officers 268,000
Current directors who are not executive officers 34,000
All employees, including all current officers who are
not executive officers (including 3000 options issued
a director who is a non-executive officer) 552,500
On April 20, 2000 the closing price of the common shares, as reported
on Nasdaq, was $9.4375.
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 Compensation and Option Committee (the
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 Compensation and Option
Committee, which is appointed by the Company's Board of Directors and consists
of not less than two members of the Board of Directors who 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 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, as applicable. 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 ("incentive stock options"
or "incentive options") 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
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
non-affiliated 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.
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 more than two
years after the date the option was granted and more than one year after the
date the shares are issued or transferred to such person upon the exercise of an
option, the employee will realize long-term capital gain 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 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 amendment to increase the number of shares
eligible for grant under 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 amendment 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 AMENDMENT TO THE 1998 STOCK OPTION PLAN.
PROPOSAL III
SELECTION OF AUDITORS
Action is to be taken at the Annual Meeting to ratify the selection of
Deloitte & Touche LLP as independent auditors of the Company for the fiscal year
ended December 31, 2000.
Representatives of Deloitte & Touche LLP, which began serving as the
Company's independent auditors in 1999, 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 DELOITTE & TOUCHE 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.
PROPOSALS BY SHAREHOLDERS
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 2001 Annual Meeting of Shareholders, such proposals must be received by the
Company no later than January 12, 2001
MISCELLANEOUS
Pursuant to Section 726 of the New York Business Corporation Law, the
Company has obtained insurance coverage in the aggregate 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 contracts, dated
May 25, 1998 with Federal Insurance Company, and Great American Insurance
Company cost the Company approximately $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, 1999 MAY BE OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST. SUCH
REQUEST SHOULD BE SENT TO JOSEPH MASSOT, SECRETARY, RECOTON CORPORATION, 2950
LAKE EMMA ROAD, LAKE MARY, FLORIDA 32746.
By Order of the Board of Directors
Joseph Massot
Senior Vice President-Administration and
Human Resources and Secretary
Lake Mary, Florida
May 3, 2000
<PAGE>
RECOTON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 7, 2000
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 7, 2000 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.
- -------------------------------------------------------------------------------
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 AND 3, EACH OF WHICH HAS
BEEN PROPOSED BY RECOTON CORPORATION.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR / / WITHHELD / / ABSTAIN / /
Proposal 1-ELECTION OF DIRECTORS FOR ALL
Nominee: 01 Jerry Kalov
02 Ann R. Leven
03 Ronald E. McPherson
04 Peter Wish
Proposal 3-APPROVAL FOR / / WITHHELD / / ABSTAIN / /
OF AUDITORS FOR ALL
</TABLE>
WITHHELD FOR: (Write that nominees' name in the
space below).
- --------------------------------------------
Proposal 2 - Approval of increase in number of
I plan to attend the meeting shares in 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_____________, 2000
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
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE ANY ONE OF THREE WAYS
<TABLE>
<CAPTION>
<S> <C> <C>
VOTE BY INTERNET [DRAWING OF Follow the instructions at our Internet address:
24 HOURS A DAY, 7 DAYS A WEEK A COMPUTER] http://www.eproxy.com/RCOT
OR
VOTE BY TELEPHONE [DRAWING OF Call toll-free 1-800-840-1208. There is no charge for the call.
24 HOURS A DAY, 7 DAYS A WEEK A PHONE] You will be asked to enter your 11 digit control number which
is located in the box in the lower right hand corner of this form.
Follow the recorded instructions.
OR
VOTE BY MAIL - USE PROXY CARD [DRAWING OF Mark, sign and date your proxy voting card and return in the
AN ENVELOPE] enclosed, pre-paid envelope.
</TABLE>
NOTE: If you vote by Internet or telephone, there is no need to mail back
this card.
THANK YOU FOR VOTING.
<PAGE>
APPROVED BY BOARD: 3/23/98
APPROVED BY SHAREHOLDERS: 6/10/98
AMENDMENT TO INCREASE SHARES APPROVED BY BOARD: 4/5/00
AMENDMENT TO INCREASE SHARES APPROVED BY SHAREHOLDERS: _____
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 2,500,000 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.
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: _________________________
- --------
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.
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: _________________________
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: _________________________
