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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MAY 1, 1996
INTERNATIONAL JENSEN INCORPORATED
(Exact name of registrant as specified in its charter)
_____________________________
DELAWARE 0-19779 13-3346656
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation) identification no.)
25 TRI-STATE INTERNATIONAL 60069
OFFICE CENTER, SUITE 400 (Zip Code)
LINCOLNSHIRE, ILLINOIS
(Address of principal executive office)
Registrant's telephone number, include area code: (847) 317-3700
NOT APPLICABLE
(Former name or former address, if changed since last year)
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ITEM 5. OTHER EVENTS.
On January 3, 1996, International Jensen Incorporated ("IJI") and
Recoton Corporation ("Recoton") jointly announced that Recoton had agreed to
acquire IJI pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"). The Merger Agreement was amended and restated on January 30,
1996 (the "Amended and Restated Merger Agreement"), and was filed with the
Securities and Exchange Commission on or about January 30, 1996. On May 1,
1996, the Amended and Restated Merger Agreement was again amended and
restated (the "Second Amended and Restated Merger Agreement"). This Form 8-K
is being made for the purpose of filing the Second Amended and Restated
Merger Agreement, which is included herewith as Exhibit 2.1, and certain
other items described below.
The Second Amended and Restated Merger Agreement differs
from the Amended and Restated Merger Agreement in the following
substantive respects:
- The price per share offered by Recoton to the IJI
stockholders was increased to $9.15 per share, except
that the price to Robert G. Shaw ("Shaw") and William
Blair Leveraged Capital Fund, L.P. ("WBLCF")
(collectively, the "Principal Stockholders") was
increased to $9.00 per share.
- Subject to adjustment as noted below, the percentage of
IJI common stock to be converted into Recoton common
shares was increased to 44.3% and the corresponding
percentage to be converted into cash was reduced to
55.7%, with the merger intended to qualify as under the
prior versions of the merger agreement as a
reorganization under the Internal Revenue Code and to
be treated as a tax-free transaction for federal income
tax purposes to the extent the Recoton common shares are
received in exchange for shares of IJI common stock,
subject to adjustment as noted below.
- If the Average Recoton Share Price (as defined in the
Merger Agreement) is less than $16.00, the merger would
be as an all cash transaction, rather than as a cash
and stock transaction.
- If the tax opinion that the merger qualifies as a
reorganization under the Internal Revenue Code can not
be confirmed at the closing due to the difference
between the Recoton share price at closing and the
Average Recoton Share Price, the percentage of shares
of IJI common stock to be converted to Recoton common
shares would be increased to a percentage sufficient to
confirm the tax opinion, but not to a percentage in
excess of 50%. If the tax opinion can not be confirmed
at the closing based on such increased percentage or
for any other reason, the merger will be an all cash
transaction, rather than a cash and stock transaction.
- The IJI stockholders will be asked to vote on various
proposals, as follows:
Proposal 1 -- a stock and cash transaction, as
described above
Proposal 2 -- an all cash transaction, if the Average
Recoton Share Price is at least $16.00
but the tax opinion can not be confirmed
at the closing
Proposal 3 -- an all cash transaction if the Average
Recoton Share Price is below $16.00
Failure of the IJI stockholders to approve (i) Proposal
1 if the tax opinion is confirmed at the closing and
the Average Recoton Share Price is $16.00 or above,
(ii) both of Proposals 1 and 2 if the tax opinion is
not confirmed at the closing and the Average Recoton
Share Price is $16.00 or above, or (iii) Proposal 3 if
the Average Recoton Share Price is below $16.00 shall
constitute failure to approve the merger with Recoton.
The Second Amended and Restated Merger Agreement also
provides for certain other changes, including more detailed
disclosure obligations for IJI should it receive a competitive
bid and a provision requiring litigation in New York in the event
of any disputes.
On January 3, 1996, IJI and IJI Acquisition Corp. ("IJI Acquisition")
entered into an Agreement for Purchase and Sale of the OEM Business of IJI by
and to IJI Acquisition (the "OEM Agreement"). The OEM Agreement was
subsequently amended and restated on May 1, 1996 (the "Amended and Restated
OEM Agreement"). The Amended and Restated OEM Agreement is included herewith
as Exhibit 2.2.
Following the merger, the surviving corporation and IJI Acquisition will
be parties to a number of agreements, including a management services
agreement, a supply and services agreement, a shared facilities agreement, a
non-competition agreement and a license agreement, forms of which are
included herewith as Exhibits 2.3 through 2.7, respectively.
On May 1, 1996, IJI, Recoton, RC Acquisition Sub, Inc. and Robert G. Shaw
entered into an Employment Agreement (the "Shaw Employment Agreement") pursuant
to which Mr. Shaw will serve as an executive officer of Recoton and President
and Chief Executive Officer of the surviving corporation after the merger. The
Shaw Employment Agreement is included herewith as Exhibit 2.8.
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On May 1, 1996, IJI and Recoton entered into an Escrow Agreement ("the
Escrow Agreement") with Vedder, Price, Kaufman & Kammholz (the "Escrow
Agent") pursuant to which the Escrow Agent is obligated to deliver an
executed assignment of the Acoustic Research and AR trademarks to Recoton
upon the occurrence of certain circumstances including Recoton's exercise of
the purchase option and payment of the purchase price for such trademarks.
The Escrow Agreement is included herewith as Exhibit 2.9.
On May 1, 1996, IJI and Recoton entered into an agreement (the"Amendment
Agreement") pursuant to which IJI has agreed not to agree to any amendment to
the OEM Agreement, or any language for exhibits stated "to be attached
subsequent to execution," or to the sale of IJI's accounts receivable related
to the OEM Business pursuant to Section 1.8 of the OEM Agreement at a
discount in excess of an aggregate of $200,000 of the face amount of such
receivables, without in each case Recoton's prior written approval. The
Amendment Agreement is included herewith as Exhibit 2.10.
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ITEM 7(C). EXHIBITS.
Exhibit 2.1 Second Amended and Restated Agreement and Plan of Merger among
Recoton Corporation, RC Acquisition Sub, Inc. and International
Jensen Incorporated dated as of January 3, 1996.
Exhibit 2.2 Amended and Restated Agreement for Purchase and Sale of the
Assets of the OEM Business of International Jensen Incorporated
by and to IJI Acquisition Corp. dated as of January 3, 1996 (the
"OEM Agreement").
Exhibit 2.3 Form of Management Services Agreement between International
Jensen Incorporated and IJI Acquisition Corp. to be entered into
at the time of the closing under the OEM Agreement.
Exhibit 2.4 Form of Supply and Services Agreement between International
Jensen Incorporated and IJI Acquisition Corp. to be entered into
at the time of the closing under the OEM Agreement.
Exhibit 2.5 Form of Shared Facilities Agreement between International Jensen
Incorporated and IJI Acquisition Corp. to be entered into at the
time of the closing under the OEM Agreement.
Exhibit 2.6 Form of Non-competition Agreement between International Jensen
Incorporated, IJI Acquisition Corp., Recoton Corporation, RC
Acquisition Sub, Inc. and FujiCone, Inc. to be entered into at
the time of the closing under the OEM Agreement.
Exhibit 2.7 Form of License Agreement between International Jensen
Incorporated and IJI Acquisition Corp. to be entered into at the
time of the closing under the OEM Agreement.
Exhibit 2.8 Employment Agreement entered into as of May 1, 1996, between RC
Acquisition Sub, Inc., Robert Shaw, International Jensen
Incorporated and Recoton Corporation.
Exhibit 2.9 Escrow Agreement made as of May 1, 1996, between International
Jensen Incorporated and Recoton Corporation.
Exhibit 2.10 Agreement dated as of May 1, 1996, between Recoton Corporation
and International Jensen Incorporated.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL JENSEN INCORPORATED
Date: May 8, 1996 By: /s/ Marc T. Tanenberg
------------------------------------
Marc T. Tanenberg
Vice President Finance and Chief
Financial Officer
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INDEX TO EXHIBITS
Exhibits
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2.1 Second Amended and Restated Agreement and Plan of Merger among
International Jensen Incorporated, Recoton Corporation and RC
Acquisition Sub, Inc. dated as of January 3, 1996
2.2 Amended and Restated Agreement for Purchase and Sale of the Assets
of the OEM Business of International Jensen Incorporated by and to
IJI Acquisition Corp. dated January 3, 1996
2.3 Form of Management Services Agreement between International Jensen
Incorporated and IJI Acquisition Corp.
2.4 Form of Supply and Services Agreement between International Jensen
Incorporated and IJI Acquisition Corp.
2.5 Form of Shared Facilities Agreement between International Jensen
Incorporated and IJI Acquisition Corp.
2.6 Form of Non-competition Agreement between International Jensen
Incorporated, IJI Acquisition Corp., Recoton Corporation, RC
Acquisition Sub, Inc. and FujiCone, Inc.
2.7 Form of License Agreement between International Jensen Incorporated
and IJI Acquisition Corp.
2.8 Employment Agreement entered into as of May 1, 1996, between RC
Acquisition Sub, Inc., Robert Shaw, International Jensen Incorporated
and Recoton Corporation
2.9 Escrow Agreement made as of May 1, 1996 between International Jensen
Incorporated and Recoton Corporation
2.10 Agreement dated as of May 1, 1996, between Recoton Corporation and
International Jensen Incorporated.
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Exhibit 2.1
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
January 3, 1996 (the "Agreement"), by and between RECOTON CORPORATION, a New
York corporation ("Recoton"), RC ACQUISITION SUB, INC., a Delaware corporation
("Acquisition Sub") and wholly-owned subsidiary of Recoton, and INTERNATIONAL
JENSEN INCORPORATED, a Delaware corporation ("Jensen").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Recoton, Acquisition Sub and Jensen have
approved the merger of Jensen with and into Acquisition Sub (the "Merger")
pursuant to the terms and conditions set forth in this Agreement and the sole
stockholder of Acquisition Sub has approved the Merger;
WHEREAS, for federal income tax purposes, it is intended that Acquisition
Sub and Jensen and their respective stockholders will recognize no gain or loss
for federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder as a result of the
consummation of the Merger except with respect to stockholders who exercise
dissenters' rights, or to the extent stockholders receive cash in lieu of
fractional shares, the Per Share Cash Amount (as defined in Section 3.1) or a
portion thereof; and
WHEREAS, Jensen and Recoton entered into an agreement on January 3, 1996
(the "AR Agreement") by which Recoton has acquired a license to and an option to
purchase, and Jensen has acquired an option to sell, the trademarks and
associated copyrights and other intellectual properties of Jensen associated
with the name "Acoustic Research" or "AR" (the "AR Rights"); and
WHEREAS, Jensen and IJI Acquisition Corp. ("IJI") have entered into an
agreement, which is being amended contemporaneous to execution of this Second
Amended and Restated Agreement and Plan of Merger, (the "OE Agreement") by which
IJI has agreed to acquire the assets associated with the original equipment
business of Jensen (the "Original Equipment Business") and assume related
liabilities prior to the Effective Time (as defined in Section 1.2), which
agreement Recoton has approved.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, Recoton, Acquisition Sub
and Jensen, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time in accordance with the Delaware General
Corporation Law (the "GCL") Jensen shall be merged with and into Acquisition Sub
in accordance with this Agreement and the form of certificate of merger attached
hereto as Exhibit 1.1 (the "Certificate of Merger") and the separate existence
of Jensen shall thereupon cease. Acquisition Sub shall be the surviving
corporation in the Merger (hereinafter sometimes referred to as the "Surviving
Corporation").
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") after the Closing (as defined
below) as a copy of the duly completed Certificate of Merger (the "Merger
Filing") is delivered to the Secretary of State of the State of Delaware for
filing and is filed by the Secretary of State of the State of Delaware or at
such later time as the parties may agree to specify in the Certificate of
Merger.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the GCL.
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Section 1.4 CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Stroock &
Stroock & Lavan, 7 Hanover Square, New York, New York on June 11, 1996 at 9:30
A.M. New York time, or, if later, on the second business day immediately
following the date on which the last of the conditions set forth in Article VIII
hereof is fulfilled or waived, or at such other time and place as Acquisition
Sub and Jensen shall agree (the "Closing Date").
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION; AMENDMENT. The Certificate of
Incorporation of Acquisition Sub as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
after the Effective Time until amended in accordance with the provisions of the
GCL, except that Article FIRST shall be amended as of and from the Effective
Time to read "The name of the Corporation shall be Recoton Audio Corporation."
Section 2.2 BY-LAWS. The By-Laws of Acquisition Sub shall be the By-Laws
of the Surviving Corporation after the Effective Time, and thereafter may be
amended in accordance with their terms and as provided by the Certificate of
Incorporation of the Surviving Corporation and the GCL.
Section 2.3 DIRECTORS AND OFFICERS. (a) At the Effective Time, the Board
of Directors of the Surviving Corporation shall consist of the following
persons:
Robert L. Borchardt
Joseph H. Massot
Stuart Mont
Robert G. Shaw
Marc T. Tanenberg
(b)At the Effective Time, the officers of the Surviving Corporation shall be
as follows:
<TABLE>
<CAPTION>
OFFICE HOLDER
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Chairman Robert L. Borchardt
President & CEO Robert G. Shaw
Vice President & CFO Marc T. Tanenberg
Secretary Stuart Mont
Treasurer & Assistant Secretary Joseph H. Massot
</TABLE>
ARTICLE III
CONVERSION OF SHARES
Section 3.1 CONVERSION OF JENSEN SHARES IN THE MERGER.
(a)At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of Jensen except as set forth
in this Section 3.1, subject to the other provisions of this Section 3.1, each
share of common stock, par value $.01 per share, of Jensen ("Jensen Common
Stock") issued and outstanding immediately prior to the Effective Time
(excluding any treasury shares and Dissenting Shares (as defined in Section
3.5)) shall be converted into either
(i)
the right to receive cash in the amount of $9.15 (hereinafter the
"Per Share Cash Amount") or $9.00 in the case of shares held
beneficially by Robert G. Shaw ("Shaw") and William Blair Leveraged Capital
Fund, L.P. ("WBLCF") (WBLCF and Shaw being referred to herein as the
"Principal Stockholders") (the "Principal Stockholders Per Share Cash
Amount");
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(ii)
the right to receive such number of validly issued, fully paid and
nonassessable Common Shares, $0.20 par value, of Recoton ("Recoton
Common Shares") as shall be determined by dividing the Per Share Cash Amount
(or the Principal Stockholders Per Share Cash Amount, in the case of shares
of Common Stock beneficially owned by the Principal Stockholders) by the
Average Recoton Share Price (as defined in Section 3.1(b)) carried out to
four decimal places (such number divided by one being referred to
hereinafter as the "Exchange Ratio") (or, in the case of the Principal
Stockholders, the "Principal Stockholders Exchange Ratio"); or
(iii)
the right to receive a combination of Recoton Common Shares valued at
the Average Recoton Share Price and cash equal in the aggregate to
the Per Share Cash Amount or the Principal Stockholders Per Share Cash
Amount, as applicable;
PROVIDED, HOWEVER, that if the Average Recoton Share Price is below $16.00, then
each share of the Jensen Common Stock shall be converted into the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable (the
conversion of all shares of Jensen Common Stock into the Per Share Cash Amount
or the Principal Stockholders Per Share Cash Amount in such event or in other
events detailed in this Agreement is referred to herein as an "All Cash
Transaction" and a transaction in which Jensen Common Stock is to be converted
into a combination of cash and Recoton Common Shares is referred to herein as a
"Cash and Stock Transaction").
At the Effective Time, all shares of Jensen Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration (as defined
in Section 3.2(b)). The holders of certificates previously evidencing shares of
Jensen Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to shares of Jensen Common Stock except as
otherwise provided herein or by law. Certificates previously evidencing shares
of Jensen Common Stock shall be exchanged for (i) certificates evidencing whole
Recoton Common Shares issued in consideration therefor, (ii) the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable
multiplied by the number of shares previously evidenced by the canceled
certificate, or (iii) a combination thereof, in each case in accordance with the
election and allocation procedures of this Section 3.1 and upon the surrender of
such certificates in accordance with the provisions of Section 3.2, without
interest. No fractional Recoton Common Shares shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 3.2(e). The recipients
of Recoton Common Shares issued in accordance with this Section 3.1 shall also
by receiving Recoton Common Shares thereby receive an associated Common Share
purchase right pursuant to the Rights Agreement dated as of October 27, 1995,
between Recoton and Chemical Mellon Shareholder Services, L.L.C.
(b)The "Average Recoton Share Price" shall mean the average of the closing
prices of Recoton Common Shares on the Nasdaq Stock Exchange ("Nasdaq")
during the 20 consecutive trading days ending the fifth trading day prior to the
meeting of the stockholders of Jensen being held to vote upon the Merger (the
"Jensen Stockholders' Meeting"), discarding the three highest and three lowest
closing prices, carried out to four decimal places.
(c)Notwithstanding the foregoing, if between the date of this Agreement and
the Effective Time the outstanding Recoton Common Shares or shares of
Jensen Common Stock shall have been changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Exchange Ratio, the Principal Stockholders Exchange Ratio, the Per Share
Cash Amount and the Principal Stockholders Per Share Cash Amount shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(d)Except as otherwise set forth in the proviso to Section 3.1(a) or as set
forth in Section 3.1(i), the number of shares of Jensen Common Stock to
be converted into the right to receive cash in the Merger (including Dissenting
Shares and Fractional Shares) shall be 55.7% of the number of shares of Jensen
Common Stock outstanding immediately prior to the Effective Time (as such number
may be
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decreased as set forth in Section 3.1(i), the "Target Cash Election Number") and
the number of shares of Jensen Common Stock to be converted into the right to
receive Recoton Common Shares in the Merger shall be 44.3% of the number of
shares of Jensen Common Stock outstanding immediately prior to the Effective
Time (as such number may be increased as set forth in Section 3.1(i), the
"Target Stock Election Number").
(e)Subject to the allocation and election procedures set forth in this
Section 3.1, each record holder immediately prior to the Effective Time
of shares of Jensen Common Stock will be entitled (i) to elect to receive cash
for some or all of such shares (a "Cash Election") and/or (ii) to elect to
receive Recoton Common Shares for some or all of such shares (a "Stock
Election"), or (iii) to indicate that such record holder has no preference as to
the receipt of cash or Recoton Common Shares for such shares (a "Non-Election").
All such elections shall be made on a form designed for that purpose (a "Form of
Election"), which shall also be the letter of transmittal for the certificates
representing such shares of Common Stock. Each Holder of record of shares of
Jensen Common Stock who holds such shares as a nominee, trustee or in other
representative capacity (a "Representative") may submit multiple Forms of
Election, provided that such Representative certifies that each such Form of
Election covers all the shares of Jensen Common Stock held by such
Representative for a particular beneficial owner.
(f)If the aggregate number of shares covered by Cash Elections (the "Cash
Election Shares") exceeds the Target Cash Election Number, all shares of
Jensen Common Stock covered by Stock Elections (the "Stock Election Shares") and
all shares of Jensen Common Stock covered by Non-Elections (the "Non-Election
Shares") shall be converted into the right to receive Recoton Common Shares, and
each Cash Election Share shall be converted into the right to receive (i) an
amount in cash, without interest, equal to the product of (x) the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable and
(y) a fraction (the "Cash Fraction"), the numerator of which shall be the Target
Cash Election Number and the denominator of which shall be the total number of
Cash Election Shares, and (ii) a number of Recoton Common Shares equal to the
product of (x) the Exchange Ratio or the Principal Stockholders Exchange Ratio,
as applicable and (y) a fraction equal to one minus the Cash Fraction.
(g)If the aggregate number of Stock Election Shares exceeds the Target Stock
Election Number, all Cash Election Shares and all Non-Election Shares
shall be converted into the right to receive cash, and each Stock Election Share
shall be converted into the right to receive (i) a number of Recoton Common
Shares equal to the product of (x) the Exchange Ratio or the Principal
Stockholders Exchange Ratio, as applicable and (y) a fraction (the "Stock
Fraction"), the numerator of which shall be the Target Stock Election Number and
the denominator of which shall be the total number of Stock Election Shares, and
(ii) an amount in cash, without interest, equal to the product of (x) the Per
Share Cash Amount or the Principal Stockholders Per Share Cash Amount, as
applicable and (y) a fraction equal to one minus the Stock Fraction.
(h)If neither Section 3.1(f) nor Section 3.1(g) is applicable, all Cash
Election Shares shall be converted into the right to receive cash, all
Stock Election Shares shall be converted into the right to receive Recoton
Common Shares, and each Non-Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product of (x) the
Per Share Cash Amount or the Principal Stockholders Per Share Cash Amount, as
applicable and (y) a fraction (the "Non-Election Fraction"), the numerator of
which shall be the amount by which the Target Cash Election Number exceeds the
total number of Cash Election Shares and the denominator of which shall be the
amount by which (A) the number of shares of Jensen Common Stock outstanding
immediately prior to the Effective Time exceeds (B) the sum of the total number
of Cash Election Shares and the total number of Stock Election Shares and (ii) a
number of Recoton Common Shares equal to the product of (x) the Exchange Ratio
or the Principal Stockholders Exchange Ratio, as applicable and (y) a fraction
equal to one minus the Non-Election Fraction.
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(i)Notwithstanding the foregoing, if the issuer of the tax opinion required
by Section 8.1(h) does not confirm its opinion at the Closing due to
differences between the market price of Recoton Common Shares at the Closing
Date and the Average Recoton Share Price then the Target Stock Election Number
shall be increased so as to allow the issuer of the tax opinion to confirm the
tax opinion; PROVIDED, HOWEVER, that the Target Stock Election Number shall not
be increased to more than 50% of the number of shares of Jensen Common Stock
outstanding immediately prior to the Effective Time. If the issuer of the tax
opinion required by Section 8.1(h) does not confirm its opinion at the Closing
Date with a Target Stock Election Number of 50% or for any other reason, then
(A) if the stockholders of Jensen have approved at the Jensen Stockholders'
Meeting an All Cash Transaction in the event the tax opinion is not confirmed,
each share of the Jensen Common Stock shall be converted into the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable in an
All Cash Transaction or (B) if the stockholders of Jensen have not approved at
the Jensen Stockholders' Meeting an All Cash Transaction in such circumstances,
the Merger Agreement shall be terminated and such termination shall be deemed a
failure of the stockholders of Jensen to approve the Merger in accordance with
the provisions of Section 4.21 of this Agreement.
(j)Elections shall be made by holders of Jensen Common Stock by mailing to
the Exchange Agent (as defined in Section 3.2(a)) a Form of Election. To
be effective, a Form of Election must be properly completed, signed and
submitted to the Exchange Agent and accompanied by the certificates representing
the shares of Jensen Common Stock as to which the election is being made (or by
an appropriate guaranty of delivery by a commercial bank or trust company in the
United States or a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc. (the "NASD")). Recoton will
have the discretion, which it may delegate in whole or in part to the Exchange
Agent, to determine whether Forms of Election have been properly completed,
signed and submitted or revoked and to disregard immaterial defects in Forms of
Election. The decision of Recoton (or the Exchange Agent) in such matters shall
be conclusive and binding. Neither Recoton nor the Exchange Agent will be under
any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by this Section 3.1 and all such computations shall be
conclusive and binding on the holders of Jensen Common Stock, absent manifest
error.
(k)For the purposes hereof, a holder of Jensen Common Stock who does not
submit a Form of Election which is received by the Exchange Agent prior
to the Election Deadline (as hereinafter defined) shall be deemed to have made a
Non-Election. If Recoton or the Exchange Agent shall determine that any
purported Cash Election or Stock Election was not properly made, such purported
Cash Election or Stock Election shall be deemed to be of no force and effect and
the stockholder making such purported Cash Election or Stock Election shall for
purposes hereof, be deemed to have made a Non-Election.
(l)Jensen shall mail a Form of Election to each stockholder of Jensen as of
the record date for the Jensen Stockholders' Meeting (the "Record Date")
with the Proxy Statement for the Jensen Stockholders' Meeting and shall use its
best efforts to mail the Form of Election to all persons who become holders of
Jensen Common Stock during the period between the Record Date and 10:00 a.m. New
York time, on the date seven calendar days prior to the anticipated Effective
Time and to make the Form of Election available to all persons who become
holders of Jensen Common Stock subsequent to such day and no later than the
close of business on the business day prior to the Effective Time. A Form of
Election must be received by the Exchange Agent by the close of business on the
last business day prior to the Effective Time (the "Election Deadline") in order
to be effective. All elections may be revoked until the Election Deadline.
(m)Each share of Jensen Common Stock held in the treasury of Jensen and each
share of Jensen Common Stock owned by Recoton or any direct or indirect
wholly owned subsidiary of Recoton or of Jensen immediately prior to the
Effective Time shall be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto.
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(n)If certificates for shares of Jensen Common Stock are delivered to the
Exchange Agent and this Agreement is terminated prior to the effective
time, Recoton shall use its best efforts to cause the Exchange Agent to return
tendered certificates as promptly as practicable after such termination date.
Section 3.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Promptly after completion of the allocation and
election procedures set forth in Section 3.1, but prior to the Effective Time,
Recoton or Acquisition Sub shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Recoton (the "Exchange Agent"), for the
benefit of the holders of shares of Jensen Common Stock, for exchange in
accordance with this Article III, through the Exchange Agent, (i) certificates
evidencing such number of Recoton Common Shares equal to (x) the Exchange Ratio
multiplied by the Target Stock Election Number multiplied by a fraction the
numerator of which is the number of shares of Jensen Common Stock not owned by
the Principal Stockholders (the "Publicly Held Shares") and the denominator of
which is the number of shares of Jensen Common Stock plus (y) the Principal
Stockholders Exchange Ratio multiplied by the Target Stock Election Number
multiplied by a fraction the numerator of which is the number of shares of
Jensen Common Stock owned by the Principal Stockholders and the denominator of
which is the number of shares of Jensen Common Stock and (ii) cash in the amount
equal to the (x) Per Share Cash Amount multiplied by the Target Cash Election
Number (including an amount as estimated by the Exchange Agent as necessary to
pay for Fractional Shares minus an amount equal to the Dissenting Shares
multiplied by the Per Share Cash Amount) multiplied by a fraction the numerator
of which is the number of Publicly Held Shares and the denominator of which is
the number of shares of Jensen Common Stock plus (y) the Principal Stockholders
Per Share Cash Amount multiplied by the Target Cash Election Number multiplied
by a fraction the numerator of which is the number of shares of Jensen Common
Stock owned by the Principal Stockholders and the denominator of which is the
number of shares of Jensen Common Stock (such certificates for Recoton Common
Shares, together with any dividends or distributions with respect thereto and
cash, being hereinafter referred to as the "Exchange Fund"); PROVIDED, HOWEVER,
that should there be an All Cash Transaction, Recoton or Acquisition Sub only
shall deposit in the Exchange Fund cash in the amount equal to the number of
shares of Jensen Common Stock outstanding multiplied by the Per Share Cash
Amount or the Principal Stockholders Per Share Cash Amount, as applicable and
PROVIDED, FURTHER, that the cash and Recoton Common Shares to be deposited in
the Exchange Fund shall be adjusted as necessary to reflect any adjustments
pursuant to Section 3.1(i). The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Recoton Common Shares and cash out of the Exchange
Fund in accordance with Section 3.1. Except as contemplated by Section 3.2(f)
hereof, the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, (i) the Exchange Agent shall deliver the Merger Consideration
(as hereinafter defined) to each holder of record of a Certificate (as
hereinafter defined) who has theretofore submitted to the Exchange Agent an
effective Form of Election accompanied by the Certificate(s) representing the
shares covered by such Form of Election or the appropriate guaranty of delivery,
and (ii) the Surviving Corporation shall instruct the Exchange Agent to promptly
mail to each holder of record of a certificate or certificates which immediately
prior to the Effective Time evidenced outstanding shares of Jensen Common Stock
(other than Dissenting Shares) (the "Certificates") who did not submit a
properly completed Form of Election accompanied by the necessary stock
certificates or guaranty of delivery (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as the
Surviving Corporation may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
evidencing Recoton Common Shares and/or cash. Upon surrender of a Certificate
for cancellation to the Exchange Agent (or, in lieu thereof delivery to the
Exchange Agent of an appropriate affidavit of loss and such other documents as
may be required under Section 3.2(i)) together with such letter of
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transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificates shall be
entitled to receive, and shall instruct the Exchange Agent to promptly deliver
after the Effective Time, in exchange therefor (A) certificates evidencing that
number of whole Recoton Common Shares which such holder has the right to receive
in respect of the shares of Jensen Common Stock formerly evidenced by such
Certificate in accordance with Section 3.1, (B) cash to which such holder is
entitled to receive in accordance with Section 3.1, (C) cash in lieu of
fractional Recoton Common Shares to which such holder is entitled pursuant to
Section 3.2(e) and/or (D) any dividends or other distributions to which such
holder is entitled pursuant to Section 3.2(c) (the Recoton Common Shares,
dividends, distributions and cash described in clauses (A), (B), (C) and (D)
being collectively, the "Merger Consideration") and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Jensen Common Stock which is not registered in the transfer records
of Jensen, a certificate evidencing the proper number of Recoton Common Shares
and/or cash may be issued and/or paid in accordance with this Article III to a
transferee if the Certificates evidencing such shares of Jensen Common Stock are
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
3.2, each Certificate shall be deemed at any time after the Effective Time to
evidence only the right to receive upon such surrender the Merger Consideration.
(c) RECOTON DISTRIBUTION WITH RESPECT TO UNSURRENDERED CERTIFICATES OF
JENSEN. No dividends or other distributions declared or made after the
Effective Time with respect to Recoton Common Shares with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the Recoton Common Shares evidenced thereby, and no other part
of the Merger Consideration shall be paid to any such holder, until the holder
of such Certificate shall surrender such Certificate or complies with Section
3.2(i). Subject to the effect of applicable laws, following surrender of any
such Certificate or compliance with Section 3.2(i), there shall be paid to the
holder of such Certificates promptly (i) the Merger Consideration and (ii) the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Recoton Common Shares
and, at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole Recoton Common Shares. No interest shall be paid on the Merger
Consideration or any dividends or other distributions.
(d) NO FURTHER RIGHTS IN JENSEN COMMON STOCK. All Recoton Common Shares
issued and cash paid upon conversion of the shares of Jensen Common Stock in
accordance with the terms hereof shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to such shares of Jensen Common
Stock.
(e) NO FRACTIONAL SHARES. (i) No certificates or scrip evidencing
fractional Recoton Common Shares shall be issued upon the surrender for exchange
of Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Recoton. In lieu of any
such fractional shares, each holder of Jensen Common Stock upon surrender of a
Certificate for exchange pursuant to this Section 3.2 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the Average Recoton Share Price by (b) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Jensen Common Stock then held of record by such holder).
(ii)
As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Jensen Common Stock with respect to any
fractional share interests, the Exchange Agent shall promptly pay such amounts
to such holders of Jensen Common Stock subject to and in accordance with this
Agreement.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Jensen Common Stock for one year after
the Effective Time shall be
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delivered to the Surviving Corporation, upon demand, and any holders of Jensen
Common Stock who have not theretofore complied with this Article III shall
thereafter look only to the Surviving Corporation for the Merger Consideration
to which they are entitled.
(g) NO LIABILITY. Neither Recoton nor the Surviving Corporation shall be
liable to any holder of shares of Jensen Common Stock for any such Recoton
Common Shares or cash (or dividends or distributions with respect thereto) from
the Exchange Fund delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) WITHHOLDING RIGHTS. Recoton and/or the Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Jensen Common Stock such
amounts as Recoton and/or the Surviving Corporation is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Recoton and/ or the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Jensen Common Stock in respect of which such deduction
and withholding was made by Recoton and/or the Surviving Corporation.
(i) LOST CERTIFICATES. In the event any certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if reasonably
required by the Surviving Corporation (which determination may be delegated to
the Exchange Agent), the posting by such person of a bond in such amount as the
Surviving Corporation or such Exchange Agent may determine is reasonably
necessary as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed certificate the Merger Consideration deliverable in
respect thereof pursuant to this Agreement.
Section 3.3 STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Jensen shall be closed and there shall be no further
registration of transfers of shares of Jensen Common Stock thereafter on the
records of Jensen. On or after the Effective Time, any certificates presented to
the Exchange Agent, Recoton or the Surviving Corporation for any reason shall be
converted into the Merger Consideration.
Section 3.4 STOCK OPTIONS AND OTHER RIGHTS.
(a)At the Effective Time, each outstanding option to purchase shares of
Jensen Common Stock (a "Jensen Stock Option") issued pursuant to the
Jensen Stock Option Plan (1989), the Jensen 1991 Stock Incentive Plan and the
1994 Jensen Stock Option and Purchase Plan for Non-Employee Directors (together,
the "Jensen Stock Option Plans") shall be assumed by Recoton with each such
option becoming fully exercisable upon the Merger to the extent so required by
the applicable plan. Except for any such acceleration of the exercisability of
the Jensen Stock Options as provided in the preceding sentence, each Jensen
Stock Option shall be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such Jensen Stock Option, the same
number of Recoton Common Shares as the holder of the Jensen Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time and received in the
Merger such number of Recoton Common Shares equal to the number of shares of
Jensen Common Stock represented by such Jensen Stock Option multiplied by the
Exchange Ratio, at a price per share equal to (y) the aggregate exercise price
for the shares of Jensen Common Stock otherwise purchasable pursuant to such
Jensen Stock Option divided by (z) the number of full Recoton Common Shares
deemed purchasable pursuant to such Jensen Stock Option.
(b)As soon as practicable after the Effective Time, Recoton shall deliver to
the holders of Jensen Stock Options appropriate notices setting forth
such holders' rights pursuant to the Jensen Stock Option Plans and the
agreements evidencing the grants of such Jensen Stock Options shall continue in
effect on the same terms and conditions (subject to the adjustment required by
this Section 3.4 after
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giving effect to the Merger and the assumption by Recoton as set forth above and
until otherwise determined). Recoton shall comply with the terms of the Jensen
Stock Option Plans with respect to the Jensen Stock Options.
(c)Pursuant to Section 3.2 of the 1994 Stock Option and Purchase Plan For
Non-Employee Directors (the "Jensen Directors Plan"), certain directors
of Jensen ("Deferred Holders") have elected to defer the receipt of shares of
Jensen Common Stock ("Deferred Shares") owed to them in lieu of directors' fees
pursuant to the Jensen Directors Plan. Immediately prior to the Effective Time,
Jensen shall terminate each such director's right to receive the Deferred
Shares, and in consideration thereof, Jensen shall make a cash payment to each
Deferred Holder at the time provided in the final two sentences of this Section
3.4(c) (and subject, in the case of each such Deferred Holder, to the receipt
from such Deferred Holder of a Cancellation Agreement, as that term is defined
in the next sentence), in an amount equal to the number of Deferred Shares held
by such Deferred Holder times the Per Share Cash Amount. Jensen shall use its
best efforts to obtain from each Deferred Holder a written agreement
substantially in the form of Exhibit 3.4 (a "Cancellation Agreement") prior to
the Effective Time. A Deferred Holder who has delivered to Jensen a Cancellation
Agreement prior to the Effective Time shall be paid pursuant to this Section
3.4(c) at or prior to the Effective Time. In the case of any Deferred Holder who
does not deliver a Cancellation Agreement to Jensen prior to the Effective Time,
Recoton shall cause the Surviving Corporation to pay such Deferred Holder after
the Effective Time the amount to which the Deferred Holder is entitled pursuant
to this Section 3.4(c) promptly after the receipt by the Surviving Corporation
from the Deferred Holder of a Cancellation Agreement.
Section 3.5 DISSENTING SHARES. Notwithstanding any other provisions of
this Agreement to the
contrary, shares of Jensen Common Stock that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have not
voted in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of the GCL (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
shares of Jensen Common Stock held by them in accordance with the provisions of
such Section 262, except that all Dissenting Shares held by stockholders who
shall have failed to perfect or who effectively shall have withdrawn or lost
their rights to appraisal of such shares of Jensen Common Stock under such
Section 262 shall thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to receive, without
any interest thereon, the Merger Consideration, as if such shares of Jensen
Common Stock were covered by Non-Elections, upon surrender, in the manner
provided in Section 3.2, of the certificate or certificates that formerly
evidenced such shares of Jensen Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF JENSEN
Jensen represents and warrants to Recoton and Acquisition Sub as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Jensen is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its businesses as it is
now being conducted. Jensen is qualified to do business and is in good standing
in each jurisdiction in which the properties owned, leased or operated by it or
the nature of the businesses conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Jensen Material Adverse
Effect. For purposes of this Agreement, a Jensen Material Adverse Effect shall
be a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), results of operations or prospects of Jensen
and its subsidiaries taken as a whole, excluding the Original Equipment Business
(except that for purposes of determining whether a Jensen Material
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Adverse Effect arising out of the matters described in Section 4.17 has
occurred, "Jensen Material Adverse Effect" shall mean potential liabilities and
costs that reasonably may exceed $5,000,000). True and complete copies of
Jensen's Certificate of Incorporation and By-Laws, as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Recoton.
Section 4.2 JENSEN COMMON STOCK. Jensen has 10,000,000 authorized shares
of Common Stock, of which 5,714,799 shares are outstanding as of November 30,
1995, all of which are or shall be validly issued and are fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section 4.2
of the separate disclosure schedule executed and delivered by Jensen
simultaneous with the execution and delivery of the Agreement ("Jensen's
Disclosure Schedule"), as of the date hereof, there are no outstanding
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions, or arrangements,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Jensen to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Jensen or obligating Jensen or any subsidiary of Jensen to grant, extend or
enter into any such agreement or commitment except pursuant to this Agreement.
Section 4.3 SUBSIDIARIES. Each direct and indirect subsidiary of Jensen is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of such subsidiaries is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Jensen Material Adverse Effect. Except as set forth in
Section 4.3 of Jensen's Disclosure Schedule, all of the outstanding shares of
capital stock of each subsidiary are validly issued, fully paid, nonassessable
and free of preemptive rights, and those owned directly or indirectly by Jensen
are owned free and clear of any liens, claims, encumbrances, security interests,
equities, charges and options of any nature whatsoever. Except as set forth in
Section 4.3 of Jensen's Disclosure Schedule or in Jensen's Annual Report on Form
10-K for the year ended February 28, 1995 or the exhibits and schedules thereto
(the "Jensen 10-K" and, together with any reports filed by Jensen with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") after the Jensen 10-K and prior to the
date of this Agreement, the "Jensen 1995 Reports"), Jensen owns directly or
indirectly all of the issued and outstanding shares of the capital
stock of each of its subsidiaries. Except as set forth in Section 4.3 of
Jensen's Disclosure Schedule or in the Jensen 1995 Reports, there are no
outstanding subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights affecting any shares of capital stock of any subsidiary of Jensen,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. Section 4.3 of Jensen's Disclosure Schedule sets forth
a list of all material corporations, partnerships, joint ventures and other
business entities in which Jensen or any of its subsidiaries directly or
indirectly owns an interest and such subsidiaries' direct and indirect share,
partnership or other ownership interest of each such entity.
Section 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Jensen has full
corporate power and authority to enter into this Agreement and, subject to
Jensen Stockholders' Approval (as defined in Section 4.18) and the Jensen
Required Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation by Jensen of the transactions contemplated
hereby have been duly authorized by Jensen's Board of Directors, and no other
corporate proceedings on the part of Jensen are necessary to authorize the
execution and delivery of this Agreement and the consummation by Jensen of the
transactions contemplated hereby, except for the Jensen Stockholders' Approval
and the obtaining of
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the Jensen Required Approvals. This Agreement has been duly and validly executed
and delivered by Jensen and constitutes a valid and legally binding agreement of
Jensen enforceable against it in accordance with its terms.
(b)Except as set forth in Section 4.4(b) of Jensen's Disclosure Schedule,
the execution and delivery of this Agreement by Jensen does not, and the
consummation by Jensen of the transactions contemplated hereby will not,
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Jensen or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or By-Laws of Jensen or any of its subsidiaries, (ii)
subject to obtaining the Jensen Required Approvals and the receipt of the Jensen
Stockholders' Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Jensen or any of its subsidiaries or any of their
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Jensen or any of its
subsidiaries is now a party or by which Jensen or any of its subsidiaries or any
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Jensen Material
Adverse Effect.
(c)Except for (i) the filings by Jensen required by Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) any filings required by comparable European or European
Community regulation ("EC Filings"), (iii) the filing of the Proxy Statement (as
hereinafter defined) with the SEC pursuant to the Exchange Act, and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various blue sky
authorities and (iv) the making of the Merger Filing with the Secretary of State
of the State of Delaware in connection with the Merger (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred to
as the "Jensen Required Approvals"), no declaration, filing or registration
with, or notice to, or authorization, consent or approval of, any governmental
or regulatory body or authority is necessary for the execution and delivery of
this Agreement by Jensen or the consummation by Jensen of the transactions
contemplated hereby.
Section 4.5 REPORTS AND FINANCIAL STATEMENTS; DERIVATIVE
TRANSACTIONS. Since February 28, 1995, Jensen and each of its subsidiaries
required to make filings under the Securities Act, the Exchange Act and
applicable state laws and regulations, as the case may be, have filed all forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by them under each of the Securities
Act, the Exchange Act, applicable laws and regulations of Jensen's and its
subsidiaries' jurisdictions of incorporation and the respective rules and
regulations thereunder, all of which complied in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. Jensen has previously delivered to Recoton true and complete copies
of its (a) Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and
Current Reports on Form 8-K filed by Jensen or any of its subsidiaries with the
SEC from February 28, 1992, until the date hereof, (b) proxy and information
statements relating to all meetings of its stockholders (whether annual or
special) and actions by written consent in lieu of a stockholders' meeting from
February 28, 1992 until the date hereof and (c) all other reports or
registration statements filed by Jensen with the SEC from February 28, 1992
until the date hereof (collectively, the "Jensen SEC Reports"), and (d) audited
consolidated financial statements for the fiscal year ended February 28, 1995
and its unaudited consolidated financial statements for the nine months ended
November 30, 1995 (the "Nine Month Jensen Financial Statements") (collectively
the "1995 Jensen Financial Statements"). As of their respective dates, the
Jensen SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated
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therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Jensen included in the Jensen SEC Reports and the 1995 Jensen Financial
Statements (collectively, the "Jensen Financial Statements") fairly present the
financial position of Jensen and its subsidiaries as of the dates thereof and
the results of their operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto), subject, in
the case of the unaudited interim financial statements, to normal year-end and
audit adjustments and any other adjustments described therein. Jensen and its
subsidiaries do not, and will not, use any derivative financial instruments
other than as disclosed in Section 4.5 of Jensen's Disclosure Schedule.
Section 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Section 4.6 of Jensen's Disclosure Schedule or in the Jensen 1995 Reports,
neither Jensen nor any of its subsidiaries had at February 28, 1995, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the 1995 Jensen
Financial Statements or reflected in the notes thereto or (b) which were
incurred after February 28, 1995, and were incurred in the ordinary course of
business and consistent with past practices and, in either case, except for any
such liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Jensen Material Adverse Effect or (ii) have been discharged or
paid in full prior to the date hereof.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 4.7 of Jensen's Disclosure Schedule or in the Jensen 1995 Reports, since
February 28, 1995 there has not been any material adverse change in the business
(including, without limitation, any actual or threatened loss of significant
customers (excluding customers of the Original Equipment Business) or any
cancellation or threatened cancellation of any orders with an aggregate value of
$1,000,000 or more (excluding orders of the Original Equipment Business)),
operations, properties, assets, liabilities, condition (financial or other),
results of operations or prospects of Jensen and its subsidiaries, taken as a
whole (excluding the original equipment business), and Jensen and its
subsidiaries have in all material respects conducted their respective businesses
in the ordinary course consistent with past practice.
Section 4.8 LITIGATION. Except as disclosed in the Jensen 1995 Reports,
the 1995 Jensen Financial Statements, or Section 4.8 of Jensen's Disclosure
Schedule, (a) there are no claims, suits, actions or proceedings pending or, to
the knowledge of Jensen, threatened, nor to the knowledge of Jensen are there
any investigations or reviews pending or threatened, against, relating to or
affecting Jensen or any of its subsidiaries, which, if adversely determined,
would have a Jensen Material Adverse Effect; (b) there have not been any
developments since the date of the Jensen 10-K with respect to such claims,
suits, actions, proceedings, investigations or reviews which, individually or in
the aggregate, may have a Jensen Material Adverse Effect; and (c) except as
contemplated by the Jensen Required Approvals, neither Jensen nor any of its
subsidiaries is subject to any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator which prohibits or restricts the consummation of the
transactions contemplated hereby or may have a Jensen Material Adverse Effect.
Section 4.9 PROXY STATEMENT. The proxy statement to be distributed in
connection with the Jensen Stockholders' Meeting (the "Proxy Statement") and
which shall be included in the Registration Statement (as hereinafter defined)
will not at the time of the mailing of the Proxy Statement and any amendment or
supplement thereto, and at the time of the Jensen Stockholders' Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier filing with the SEC of such
Proxy Statement or any amendment or supplement thereto or any earlier
communication to stockholders of Jensen with respect to the transactions
contemplated by this Agreement. The Proxy Statement will comply as to form in
all material respects with all applicable laws, including the
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provisions of the Exchange Act and the rules and regulations promulgated
thereunder. Notwithstanding the foregoing, no representation is made by Jensen
with respect to information supplied by Recoton or Acquisition Sub or their
representatives specifically for inclusion in the Proxy Statement.
Section 4.10 NO VIOLATION OF LAW. Except as set forth in Section 4.10 of
Jensen's Disclosure Schedule, neither Jensen nor any of its subsidiaries is in
violation of, or, to the knowledge of Jensen, is under investigation with
respect to or has been given notice or been charged with any violation of, any
law, statute, order, rule, regulation, ordinance, or judgment of any
governmental or regulatory body or authority, except for violations which in the
aggregate do not have a Jensen Material Adverse Effect. Jensen and its
subsidiaries have all material permits, licenses, franchises and other
governmental authorizations, consents and approvals (the "Jensen Government
Approvals") necessary to conduct their businesses as presently conducted and,
except as set forth in Section 4.10 of Jensen's Disclosure Schedule, all such
Jensen Government Approvals shall be transferred to the Surviving Corporation.
Section 4.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Jensen
1995 Reports, the Jensen 1995 Financial Statements or Section 4.11 of Jensen's
Disclosure Schedule, Jensen and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (i) the respective charters or
by-laws of Jensen or any of its subsidiaries or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which Jensen or any of its subsidiaries is a
party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults, in the case of clause (ii) of
this Section 4.11 would have, in the aggregate, a Jensen Material Adverse
Effect.
Section 4.12 TAXES. (a) Jensen and its subsidiaries have duly filed with
the appropriate federal, state, local, and foreign taxing authorities all tax
returns required to be filed by them on or prior to the Effective Time and such
tax returns are true and complete in all material respects, and duly paid in
full or made adequate provision for the payment of all taxes for all periods
ending at or prior to the Effective Time. The liabilities and reserves for taxes
reflected in the Jensen balance sheets (x) as of February 28, 1995, contained in
the Jensen 10-K, are adequate to cover all taxes for any period ending on or
prior to February 28, 1995; and (y) as of August 31, 1995, contained in the Form
10-Q filed with the SEC on or about October 15, 1995 (the "Six Month 1995
Financial Statements"), are adequate to cover all taxes for any period ending on
or prior to August 31, 1995; and (z) as of November 30, 1995, contained in the
Nine Month Financial Statements are adequate to cover all taxes for any period
ending on or prior to November 30, 1995. Except as set forth in Section 4.12 of
Jensen's Disclosure Schedule, (i) there are no material liens for taxes upon any
property or asset of Jensen or any subsidiary thereof, except for (x) liens for
taxes not yet due and (y) any such liens for taxes shown on such Section 4.12 of
Jensen's Disclosure Statement, which are being contested in good faith through
appropriate proceedings; (ii) Jensen has not made any change in accounting
method, received a ruling from any taxing authority or signed an agreement with
any taxing authority which will materially and adversely affect Jensen in future
periods; (iii) during the past three years neither Jensen nor any of its
subsidiaries has received any notice of deficiency, proposed deficiency or
assessment from any governmental taxing authority with respect to taxes of
Jensen or any of its subsidiaries, except any such notice of deficiency,
proposed deficiency or assessment which will not in the aggregate cause a Jensen
Material Adverse Effect, and, any such deficiency or assessment shown on such
Section 4.12 of Jensen's Disclosure Schedule has been paid or is being contested
in good faith through appropriate proceedings; (iv) the income tax returns for
Jensen and its subsidiaries are not currently the subject of any audit by the
Internal Revenue Service (the "IRS") or any other national taxing authority, and
such federal income tax returns have been examined by the IRS (or the applicable
statutes of limitation for the assessment of federal taxes for such periods have
expired) for all periods through and including February 28, 1990, and no
material deficiencies were asserted as a result of such examinations which have
not been resolved and fully paid; (v) there are no outstanding requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to
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the assessment of any taxes or deficiencies against Jensen or any of its
subsidiaries, and no power of attorney granted by either Jensen or any of its
subsidiaries with respect to any taxes is currently in force; and (vi) neither
Jensen nor any of its subsidiaries is a party to any agreement providing for the
allocation or sharing of taxes. Neither Jensen nor any of its subsidiaries has,
with regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f) of the Code. Except
as set forth on Section 4.12(b) of Jensen's Disclosure Schedule, Jensen will not
have any carryovers subject to limitation under Section 382 or Section 383 of
the Code immediately after the Merger. Jensen and its subsidiaries, in
accordance with Section 482 of the Code, properly conducted intercompany pricing
studies for the tax year ended February 1995, and is conducting such study in a
timely manner with respect to the tax year ending February 1996.
(b)The term "tax" shall include any tax, assessment, levy, impost, duty, or
withholding of any nature now or hereafter imposed by a government
authority and any interest, additional tax, deficiency, penalty, charge or other
addition thereon, including without limitation any income, gross receipts,
prof-its, franchise, sales, use, property (real and personal), transfer,
payroll, unemployment, social security, occupancy and excise tax and customs
duty. The term "return" shall include any return, declaration, report, estimate,
information return and statement required to be filed with or supplied to any
taxing authority in connection with any taxes.
Section 4.13 CUSTOMS. Except as set forth in the Jensen 1995 Reports or in
Section 4.13 of Jensen's Disclosure Schedule, Jensen and its subsidiaries have
at all times been in compliance with all requirements administered and enforced
by the U.S. Customs Service, including, but not limited to the classification,
valuation, and marking of articles imported into the United States in a way so
as not to give rise to a Jensen Material Adverse Effect.
Section 4.14 EMPLOYEE BENEFIT PLANS; ERISA. (a) Section 4.14 of Jensen's
Disclosure Schedule lists all material employee benefit plans, employment
contracts or other arrangements for the provision of benefits for employees or
former employees of Jensen and its subsidiaries (other than its foreign
subsidiaries as to which such disclosure shall be provided within ten business
days after the date hereof and as to which the agreements, plans, contracts, or
other arrangements thereof shall not be unduly burdensome or out of the
ordinary), and, except as set forth in Section 4.14(a) of Jensen's Disclosure
Schedule, neither Jensen nor its subsidiaries have any commitment to create any
additional plan, contract or arrangement or to amend any such plan, contract or
arrangement so as to increase benefits thereunder, except as required under
existing collective bargaining agreements. Section 4.14(a) of Jensen's
Disclosure Schedule identifies all "employee benefit plans" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA, covering current or former employees of Jensen and its
subsidiaries (the "Jensen Plans"), other than Jensen Plans which are described
in Jensen 1995 Reports or the Proxy Statement for the 1995 Annual Meeting of
Stockholders of Jensen. A true and correct copy of each of the employee benefit
plans, employment contracts and other arrangements for the provision of benefits
for employees and former employees of Jensen and its subsidiaries described in
the Jensen SEC Reports, the Jensen Plans listed on Section 4.14(a) of Jensen's
Disclosure Schedule, except for any multiemployer plans, and all contracts
relating thereto, or to the funding thereof (including, without limitation, all
trust agreements, insurance contracts, investment management agreements,
subscription and participation agreements and recordkeeping agreements), each as
will be in effect at the Effective Time, has been provided to Recoton. In the
case of any employee benefit plan, employment contract or other benefit
arrangement which is not in written form, an accurate description of such plan,
contract or arrangement as will be in effect at the Effective Time has been
provided to Recoton. A true and correct copy of the most recent annual report,
actuarial report, summary plan description, and Internal Revenue Service
determination letter with respect to each such Jensen plan, to the extent
applicable, and a current schedule of assets (and the fair market value thereof
assuming liquidation of any asset which is not readily tradeable) held with
respect to any funded plan, Jensen Plan, or benefit arrangement
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has been provided to Recoton by Jensen, and there have been no material changes
in the financial condition in the respective plans, Jensen Plans or benefit
arrangements from that stated in such annual report and actuarial reports.
(b)Except as disclosed in the Jensen 1995 Reports or as set forth in Section
4.14(b) of Jensen's Disclosure Schedule, (i) there have been no
prohibited transactions within the meaning of Section 406 of ERISA or Section
4975 of the Code with respect to any of the Jensen Plans which, assuming that
the taxable period of such transaction expired as of the date hereof, could
subject Jensen or its subsidiaries to a material tax or penalty under Section
502(i) of ERISA or Section 4975 of the Code; (ii) no liability (except for
premiums due) has been or is expected to be incurred by Jensen or any of its
subsidiaries under Title IV of ERISA with respect to any of the Jensen Plans or
with respect to any ongoing, frozen or terminated "single employer plan" within
the meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by
any of them, or by any entity which is considered a single employer with Jensen
under Section 4001 of ERISA or Section 414 of the Code (a "Jensen ERISA
Affiliate"); (iii) all amounts which Jensen or its subsidiaries are required to
pay as contributions to the Jensen Plans have been timely made or have been
reflected in the Jensen Financial Statements; (iv) none of the Jensen Plans has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived; (v) the current value
of all "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions used in the Plan's most
recent actuarial valuation) under each of the Jensen Plans which is subject to
Title IV of ERISA did not exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount disclosed in
the Jensen 10-K as of February 28, 1995; (vi) each of the Jensen Plans has been
operated and administered in all material respects in accordance with applicable
laws, including, but not limited to, the reporting and disclosure requirements
of Part 1 of Subtitle I of ERISA and the group health plan continuation
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA; (vii) each of the Jensen Plans which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the IRS to be
so qualified and Jensen is not aware of any circumstances likely to result in
revocation of any such determination; (viii) there are no material pending,
threatened or anticipated claims involving any of the Jensen Plans other than
claims for benefits in the ordinary course; (ix) no notice of a "reportable
event" within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived has been required to be filed for any
of the Jensen Plans; (x) neither Jensen nor any of its subsidiaries is a party
to, nor participates or has any liability or contingent liability with respect
to, any multiemployer plan (regardless of whether based on contributions of a
Jensen ERISA affiliate); and (xi) neither Jensen nor its subsidiaries has any
liability or contingent liability for retiree life and health benefits under any
of the Jensen Plans other than statutory liability for providing group health
plan continuation coverage under Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code, except as set forth on Section 4.14(b) of Jensen's
Disclosure Schedule.
(c)Except as set forth in Section 4.14(c) of Jensen's Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will accelerate benefits or any payments
under any Jensen employee agreement, plan or arrangement.
Section 4.15 MATERIAL DEFAULTS. Except as set forth on Section 4.15 of
Jensen's Disclosure Schedule, neither Jensen nor its subsidiaries is, or has
received any notice or has any knowledge that any other party is, in default in
any respect under any contract, agreement, commitment, arrangement, lease,
insurance policy, or other instrument to which Jensen or any of its subsidiaries
is a party or by which Jensen or any of its subsidiaries or the assets,
business, or operations receives benefits, except for those defaults which would
not have, individually or in the aggregate, a Jensen Material Adverse Effect;
and there has not occurred any event that with the lapse of time or the giving
of notice or both would constitute such a default.
Section 4.16 LABOR MATTERS. Except as set forth on Section 4.16 of
Jensen's Disclosure Schedule, there are no material controversies pending or, to
the knowledge of Jensen, threatened between Jensen or its subsidiaries and any
representatives of its employees, and, to the knowledge of Jensen,
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there are no material organizational efforts presently being made involving any
of the presently unorganized employees of Jensen or its subsidiaries. Jensen and
its subsidiaries have complied in all material respects with all laws relating
to the employment of labor, including, without limitation, any provisions
thereof relating to wages, hours, collective bargaining, and the payment of
social security and similar taxes, and no person has, to the knowledge of
Jensen, asserted that Jensen or its subsidiaries are is liable in any material
amount for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing.
Section 4.17 ENVIRONMENTAL MATTERS.
(a)Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, Jensen and its subsidiaries have complied
in all respects with all Environmental Laws (as defined below in this Section).
Jensen and its subsidiaries have obtained and will maintain through the Closing
Date all permits, licenses, certificates and other authorizations which are
required with respect to its operation under any Environmental Laws and all such
permits, licenses, certificates and other authorizations are listed on Section
4.17 to Jensen's Disclosure Schedule.
(b)Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, Jensen and its subsidiaries are in
compliance in all respects with all permits, licenses and authorizations
required by any Environmental Laws, and is also in full compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws or contained in any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered, against Jensen
thereunder. All products manufactured and services provided by Jensen or its
subsidiaries prior to the date hereof are in compliance with all Environmental
Laws applicable thereto and all such products and services so manufactured or
provided prior to the Closing Date will as of such date be in compliance with
all Environmental Laws applicable thereto. Jensen has hereto delivered to Buyer
true and complete copies of all environmental studies made in the last ten years
relating to the business or assets of Jensen and its subsidiaries.
(c)Except as set forth in the Jensen 1995 Reports or Section 4.17 to
Jensen's Disclosure Schedule, there is no pending or, to Jensen's
knowledge, threatened civil, criminal or administrative Action, demand, claim,
hearing, notice of violation, investigation, proceeding, notice or demand letter
that affects or applies to Jensen or its subsidiaries, their business or assets,
the products they have manufactured or the services they have provided relating
in any way to any Environmental Laws or any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered against Jensen or its
subsidiaries thereunder.
(d)Except as set forth in the Jensen 1995 Reports or in Section 4.17 to
Jensen's Disclosure Schedule, there are no past or present (or, to the
knowledge of Jensen, anticipated) events, conditions, circumstances, activities,
practices, incidents, Actions or plans which may interfere with or prevent
compliance or continued compliance by Jensen or its subsidiaries with any
Environmental Laws or with any regulation or code promulgated or approved under
the Environmental Laws, or any plan, order, decree, judgment, injunction, notice
or demand letter issued to or entered against Jensen or its subsidiaries
thereunder, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge, release or threatened release
into the environment, by Jensen or its subsidiaries of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or waste.
(e)Except as set forth in Section 4.17 to the Jensen Disclosure Schedule and
except in accordance with a valid governmental permit, license,
certificate or approval listed in Section 4.17 to Jensen's Disclosure Schedule
there has been no emission, spill, release or discharge by Jensen or its
subsidiaries, from any of their assets, from any site at which any of such
assets are or were located,
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into or upon (i) the air, (ii) soils or improvements, (iii) surface water or
ground water, or (iv) the sewer, septic system or waste treatment, storage or
disposal system servicing such assets of any toxic or hazardous substances or
wastes used, stored, generated, treated or disposed at or from any of such
assets (any of which events is hereinafter referred to as "Hazardous
Discharge").
(f)Prior to the Closing Date, there shall not occur any Hazardous Discharge
(except in accordance with a valid governmental permit, license,
certificate or approval listed in Section 4.17 to Jensen's Disclosure Schedule).
(g)The term "Environmental Laws" means all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules
and regulations promulgated under the Environmental Laws, including, without
limitation laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes. As
used in this Agreement, the term "hazardous substances or wastes" includes,
without limitation, (i) all substances which are designated pursuant to Section
311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.
Section 1251 ET SEQ.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 ET SEQ.; (iii) any hazardous waste having the characteristics which
are identified under or listed pursuant to Section 3001 of the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.; (iv) any
toxic pollutant listed under Section 307(a) of the FWPCA; (v) any hazardous air
pollutant which is listed under Section 112 of the Clean Air Act, 42 U.S.C.
Section 7401 ET SEQ.; (vi) any imminently hazardous chemical substance or
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; and (vii) waste
oil.
(h)Notwithstanding anything in the foregoing to the contrary, the
representations and warranties contained in this Section 4.17 shall be
deemed to be true and correct unless the aggregate exposure to Recoton,
Acquisition Sub and/or the Surviving Corporation of undisclosed and disclosed
liabilities which have either arisen or which may arise under the Environmental
Laws exceeds $5 million.
Section 4.18 CERTAIN BUSINESS PRACTICES. As of the date of this Agreement,
except for such action which would not have a Jensen Material Adverse Effect,
neither Jensen nor any of its subsidiaries not any directors, officer, agents,
or employees of Jensen or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
Section 4.19 NO EXCESS PARACHUTE PAYMENTS. Sections 4.14(a), 4.14(b), and
4.14(c) of Jensen's Disclosure Schedule set forth all written contracts,
arrangements, or undertakings (excluding Jensen Stock Options (as defined in
Section 3.4)) pursuant to which any person may receive any amount or entitlement
from Jensen or the Surviving Corporation or any of their respective subsidiaries
(including cash or property or the vesting of property) that may be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(B)(1) of the Code) (any such amount being an "Excess Parachute
Payment") as a result of any of the transactions being contemplated by this
Agreement. Except as set forth in Section 4.14(c) of Jensen's Disclosure
Schedule, no person is entitled to receive any additional payment from Jensen,
the Surviving Corporation, their respective subsidiaries, or any other person (a
"Parachute Gross-Up Payment") in the event that the 20 percent
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parachute excise tax of Section 4999(a) of the Code is imposed on such person.
The Board of Directors of Jensen has not during the six months prior to the date
of this Agreement granted to any officer, director, or employee of Jensen any
right to receive any Parachute Gross-Up Payment.
Section 4.20 TRADEMARKS, ETC. Section 4.20 of Jensen's Disclosure Schedule
sets forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks, and registered copyrights and
applications therefor owned, used, or filed by or licensed to Jensen and its
subsidiaries ("Intellectual Property Rights") and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as disclosed on Section 4.20 of Jensen's Disclosure Schedule, the Intellectual
Property Rights which are trademark or copyright registrations and issued
patents are valid and in good standing, and are owned by Jensen, free and clear
of all liens, encumbrances, equities, or claims and, along with applications
therefor, are not involved in any interferences, litigations, oppositions, or
cancellation proceedings. Jensen or its subsidiaries owns or has the right to
use, without payment to any other party, the patents, trademarks, trade names,
service marks, copyrights, and applications therefor referred to in such
Schedule or otherwise used by Jensen or its subsidiaries, and the consummation
of the transactions contemplated hereby will not alter or impair such rights in
any material respect. Except as set forth in Section 4.20 to Jensen's Disclosure
Schedule, Jensen is not a licensor or licensee in respect of any Intellectual
Property Rights, nor has it granted any rights thereto or interest therein to
any person or entity. Except as set forth in Section 4.20 of Jensen's Disclosure
Schedule, no claims are pending or threatened by any person with respect to the
ownership, validity, enforceability, or use of any such Intellectual Property
Rights challenging or questioning the validity or effectiveness of any of the
foregoing which claims reasonably could be expected to have a Jensen Material
Adverse Effect. Jensen shall make all required filings to ensure the continued
validity and enforceability of its Intellectual Property Rights up to the
Effective Time.
Section 4.21 JENSEN STOCKHOLDERS' APPROVAL. Jensen will take all necessary
action so that stockholder approval of the Merger and the transactions
contemplated hereby will require the affirmative vote of (i) a majority of the
outstanding shares of Jensen Common Stock, and (ii) a majority of the
outstanding shares of Jensen Common Stock which are voted at the Jensen
Stockholders' Meeting other than shares held directly or indirectly by Robert G.
Shaw. Approval shall be sought of three separate proposals for the Merger: (a)
as a Cash and Stock Transaction ("Proposal 1"), (b) as an All Cash Transaction
if the Recoton Share Price is equal to or greater than $16.00 and the tax
opinion required by Section 8.1(h) is not confirmed at the Closing ("Proposal
2") and (c) as an All Cash Transaction because the Average Recoton Share Price
is below $16.00 ("Proposal 3"). Either (x) both Proposal 1 and Proposal 2 or (y)
Proposal 3 alone shall be voted on at the Jensen Stockholders Meeting, depending
on whether the Average Recoton Share Price is either equal to or above $16.00 or
is below $16.00. If Proposals 1 and 2 are submitted for a vote at the Jensen
Stockholders Meeting, the Merger shall not be deemed approved by the
stockholders unless Proposal 1 is approved and such tax opinion is confirmed at
the Closing or if both Proposals 1 and 2 are approved.
Section 4.22 STATE TAKEOVER STATUTES. The Board of Directors of Jensen has
approved the Merger. The Certificate of Incorporation of Jensen expressly elects
not to be governed by Section 203 of the GCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB AND RECOTON
Acquisition Sub and Recoton hereby jointly and severally represent and
warrant to Jensen as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Acquisition Sub and Recoton
are each corporations duly organized, validly existing and in good standing
under the laws of their states of incorporation and have the requisite corporate
power and authority to own, lease and operate their assets and properties and to
carry on their businesses as they are now being conducted. Acquisition Sub and
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Recoton are each qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by each or the
nature of the businesses conducted by each makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Recoton Material Adverse
Effect. For purposes of this Agreement, a Recoton Material Adverse Effect shall
be a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), results of operations or prospects of
Recoton and its subsidiaries taken as a whole. True and complete copies of
Acquisition Sub's and Recoton's Certificate of Incorporation and By-Laws, as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Jensen. Recoton directly owns and has the power to vote all of
the outstanding capital stock of Acquisition Sub, and, as the sole stockholder
of Acquisition Sub, has approved this Merger Agreement and the transactions
contemplated hereunder.
Section 5.2 RECOTON COMMON SHARES. Recoton has 25,000,000 authorized
Common Shares, of which 11,163,390 shares are outstanding as of December 31,
1995. Acquisition Sub holds, or by the Effective Time shall hold, a number of
Recoton Common Shares sufficient to convert Jensen Common Stock to Recoton
Common Shares pursuant to Article III, all of which are or shall be validly
issued and are fully paid, nonassessable and free of preemptive rights. Except
as set forth in Section 5.2 of the separate disclosure schedule executed and
delivered by Recoton and Acquisition Sub simultaneous with the execution and
delivery of this Agreement ("Recoton's Disclosure Schedule") or in Recoton's
Annual Report on Form 10-K for the year ended December 31, 1994 and the exhibits
and schedules thereto (the "Recoton 10-K" and, together with any reports filed
by Recoton with the SEC under the Exchange Act after the Recoton 10-K and prior
to the date of this Agreement, the "Recoton 1994-5 Reports") or any of the
Recoton 1994-5 Reports, as of the date hereof, there are no outstanding
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies and other commitments, understandings, restrictions and arrangements,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Recoton to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Recoton or obligating Recoton or any subsidiary of Recoton to grant, extend or
enter into any such agreement or commitment except pursuant to this Agreement.
The Recoton Common Shares to be issued to stockholders of Jensen in the Merger
will be at the Effective Time duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and each certificate evidencing such
shares shall contain a notation incorporating by reference that certain Rights
Agreement dated as of October 27, 1995 between Recoton and Chemical Mellon
Shareholder Services L.L.C.
Section 5.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) Recoton and
Acquisition Sub have full corporate power and authority to enter into this
Agreement and the Recoton Required Approvals (as hereinafter defined), to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Recoton and Acquisition
Sub of the transactions contemplated hereby have been duly authorized by
Recoton's and Acquisition Sub's Boards of Directors, and no other corporate
proceedings on the part of Recoton and Acquisition Sub are necessary to
authorize the execution and delivery of this Agreement and the consummation by
Recoton and Acquisition Sub of the transactions contemplated hereby except for
the obtaining of the Recoton Required Approvals. This Agreement has been duly
and validly executed and delivered by Recoton and Acquisition Sub, and, assuming
the due authorization, execution and delivery hereof by Jensen, constitutes a
valid and legally binding agreement of Recoton and Acquisition Sub enforceable
against them in accordance with its terms.
(b)Except as set forth in Section 5.3(b) of Recoton's Disclosure Schedule,
the execution and delivery of this Agreement by Recoton and Acquisition
Sub does not, and the consummation by Recoton and Acquisition Sub of the
transactions contemplated hereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of
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Recoton or Acquisition Sub or any of its subsidiaries under any of the terms,
conditions or provisions of (i) the respective charters or By-Laws of Recoton or
any of its subsidiaries, (ii) subject to obtaining the Recoton Required
Approvals, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to Recoton or any of its subsidiaries or any of their
respective properties or assets, and (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Jensen or any of its
subsidiaries is now a party or by which Jensen or any of its subsidiaries or any
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Recoton
Material Adverse Effect.
(c)Except for (i) the filings by Recoton, Acquisition Sub and Jensen
required by Title II of the HSR Act, (ii) any EC Filings, (iii) the
filing of the Registration Statement (as hereinafter defined) with the SEC
pursuant to the Securities Act, and the declaration of the effectiveness thereof
by the SEC and filings with various blue sky authorities, (iv) the making of the
Merger Filing with the Secretary of State of the State of Delaware in connection
with the Merger and (v) the listing with Nasdaq of the additional Recoton Common
Shares to be issued in the Merger (the filings and approvals referred to in
clauses (i) through (v) are collectively referred to as the "Recoton Required
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
Recoton or Acquisition Sub or the consummation by Recoton or Acquisition Sub of
the transactions contemplated hereby, other than such filings, registrations,
authorizations, consents or approvals the failure of which to make or obtain, as
the case may be, will not, in the aggregate, have a Recoton Material Adverse
Effect.
Section 5.4 REPORTS AND FINANCIAL STATEMENTS. Since December 31, 1994,
Recoton and each of its subsidiaries required to make filings under the
Securities Act, the Exchange Act and applicable state laws and regulations, as
the case may be, have filed all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by them under each of the Securities Act, the Exchange Act, applicable
laws and regulations of Recoton's and its subsidiaries' jurisdictions of
incorporation and the respective rules and regulations thereunder, all of which
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. Recoton has previously
delivered to Jensen true and complete copies of its (a) Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K filed by
Recoton or any of its subsidiaries with the SEC from December 31, 1991 until the
date hereof, (b) proxy and information statements relating to all meetings of
its shareholders (whether annual or special) and actions by written consent in
lieu of a shareholders' meeting from December 31, 1991 until the date hereof and
(c) all other reports or registration statements filed by Recoton or its
subsidiaries with the SEC from December 31, 1991, until the date hereof
(collectively, the "Recoton SEC Reports") and (d) audited consolidated financial
statements of Recoton for the fiscal year ended December 31, 1994 and its
unaudited consolidated financial statements for the nine months ended September
30, 1995 (the "1994-95 Recoton Financial Statements"). As of their respective
dates, the financial statements of Recoton included in the Recoton SEC Reports
and the 1994-95 Recoton Financial Statements (collectively, the "Recoton
Financial Statements") fairly present the financial position of Recoton and its
subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
Section 5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Section 5.5 of Recoton's Disclosure Schedule or in the Recoton 1994-5 Reports,
neither Recoton nor any of its subsidiaries had at December 31, 1994, or has
incurred since that date, any liabilities or obligations (whether absolute,
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accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the 1994-1995
Recoton Financial Statements or reflected in the notes thereto or (b) which were
incurred after December 31, 1994, and were incurred in the ordinary course of
business and consistent with past practices and, in either case, except for any
such liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Recoton Material Adverse Effect or (ii) have been discharged
or paid in full prior to the date hereof.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 5.6 of Recoton's Disclosure Schedule or in the Recoton 1994-95 Reports,
since December 31, 1994, there has not been any material adverse change in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of Recoton and its subsidiaries,
taken as a whole, and Recoton and its subsidiaries have in all material respects
conducted their respective businesses in the ordinary course consistent with
past practice.
Section 5.7 REGISTRATION STATEMENT. The Prospectus forming part of the
Registration Statement on Form S-4 to be filed under the Securities Act with the
SEC by Recoton for the purpose of registering the Recoton Common Shares to be
issued in the Merger, including Recoton Common Shares that may be issued upon
the exercise of Jensen Stock Options after the Effective Time (the "Registration
Statement") will not at the time it becomes effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier filing with the SEC of such
Registration Statement or any amendment or supplement thereto. The Registration
Statement will comply as to form in all material respects with all applicable
laws, including the provisions of the Securities Act and the rules and
regulations promulgated thereunder. Notwithstanding the foregoing, no
representation is made by Recoton with respect to information supplied by Jensen
or its representatives specifically for inclusion therein.
Section 5.8 NO VIOLATION OF LAW. Except as disclosed in the Recoton 1994-5
Reports or set forth in Section 5.8 of Recoton's Disclosure Schedule, neither
Recoton nor any of its subsidiaries is in violation of, or, to the knowledge of
Recoton, is under investigation with respect to or has been given notice or been
charged with any violation of, any law, statute, order, rule, regulation,
ordinance, or judgment of any governmental or regulatory body or authority,
except for violations which in the aggregate do not have a Recoton Material
Adverse Effect. Recoton and its subsidiaries have all material permits,
licenses, franchises and other governmental authorizations, consent and
approvals necessary to conduct their businesses as presently conducted.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY JENSEN PENDING THE MERGER. Except as
set forth in Section 6.1 of Jensen's Disclosure Schedule or as otherwise
contemplated by this Agreement, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless Recoton shall otherwise
agree in writing (it being agreed, however, that Jensen shall be solely
responsible for its operations and those of its subsidiaries in accordance with
the provisions of this Agreement), Jensen shall and shall cause each of its
subsidiaries, to:
(a) conduct their respective businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws; (ii) split, combine or reclassify their outstanding capital
stock or declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise; or (iii) knowingly take any action which
would result in a failure to maintain the trading of Jensen Common Stock on
Nasdaq;
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(c) not (i) except for the issuance of shares of Common Stock upon the
exercise of currently outstanding Jensen Stock Options, authorize the
issuance of, or issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of, their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, (ii) except for the sale of the assets associated with
the Original Equipment Business as described in Section 8.3(f) and the sale
of the AR Rights pursuant to the AR Agreement, sell (including, without
limitation, by sale/ leaseback), pledge, dispose of, license or encumber any
material assets (including without limitation intellectual property), or any
interests therein, other than in the ordinary course of business and
consistent with past practice; (iii) redeem, purchase, acquire or offer to
purchase or acquire any (x) shares of its capital stock, other than in
accordance with the governing terms of such securities or (y) long-term
debt, other than as required by the governing instruments relating thereto;
(iv) take or fail to take any action which action or failure to take action
would cause Acquisition Sub, Jensen or their respective stockholders (except
to the extent that any stockholders perfect dissenters' rights under
Delaware law, or receive cash in lieu of fractional shares or receive the
Per Share Cash Amounts) to recognize gain or loss for federal income tax
purposes as a result of the consummation of the Merger or (v) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing; PROVIDED, HOWEVER, that Jensen or any of its subsidiaries, after
consulting with Recoton, may take any of the actions otherwise prohibited by
this Section 6.1(c) if counsel to Jensen advises the Board of Directors of
Jensen or any of its subsidiaries that the failure to take such action or
actions might reasonably subject Jensen's or any of its subsidiaries'
directors to liability for breach of their fiduciary duties;
(d) use their best efforts to preserve intact their respective business
organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and others
having business relationships with them;
(e) confer on a regular and frequent basis with one or more
representatives of Recoton to discuss operational matters of
materiality and the general status of ongoing operations;
(f) promptly notify Recoton of any significant changes in the business,
properties, assets, financial condition, or results of operations or
prospects of Jensen or its subsidiaries taken as a whole (excluding the
Original Equipment Business);
(g) not acquire, or publicly propose to acquire, all or any substantial
part of the business and properties or capital stock of any person
not a party to this Agreement, whether by merger, purchase of assets, tender
offer or otherwise;
(h) not, directly or indirectly, through any officer, director, employee,
representative, agent, or otherwise, solicit, initiate or encourage
the submission of any proposal or offer from any person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act)
or entity relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any portion of the assets of, or any equity
interest in, or any merger or other business combination with, Jensen or any
of its subsidiaries, other than with respect to the Original Equipment
Business or the transactions contemplated hereby (collectively, a "Jensen
Acquisition Transaction"); PROVIDED, HOWEVER, that Jensen or any of its
subsidiaries may take any of the actions otherwise prohibited by this
Section 6.1(h) if counsel to Jensen advises the Board of Directors of Jensen
or any of its subsidiaries that the failure to take such action or actions
might reasonably subject Jensen's or any of its subsidiary's directors to
liability for breach of their fiduciary duties; and PROVIDED, FURTHER
HOWEVER, that notwithstanding the foregoing sentence, (a) following receipt
of a BONA FIDE unsolicited written offer to consummate a Jensen Acquisition
Transaction (an "Acquisition Proposal"), Jensen may take and disclose to
Jensen's stockholders the position of the Board of Directors of Jensen
contemplated by Rule 14e-2 under the Exchange Act or otherwise make
appropriate disclosures to its stockholders, (b) Jensen may furnish or
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cause to be furnished information concerning its business, properties or
assets to a third party, and (c) Jensen may engage in discussions or
negotiations with a third party concerning a Jensen Acquisition Transaction.
If Jensen should receive an Acquisition Proposal or take any action
described in (b) or (c) above, Jensen shall promptly inform Recoton of the
material details of such Acquisition Proposal and/or its actions in response
thereto or its actions described in clauses (b) or (c) and shall thereafter
keep Recoton reasonably and promptly informed of all material facts and
material circumstances relating to such Acquisition Proposal and Jensen's
actions shall include the actions of its advisors, agents and
representatives.
(i) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees, except with the prior written approval of Recoton;
(j) not adopt, enter into or amend any bonus, profit sharing,
compensation (except ordinary course salary adjustments consistent
with historic practice), stock option, pension, retirement, deferred
compensation, health care, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any
employee or retiree, except as required to comply with changes in applicable
law occurring after the date hereof, except with the prior written approval
of Recoton;
(k) maintain with financially responsible insurance companies, insurance
on its tangible assets and its businesses in such amounts and against
such risks and losses as are consistent with past practice and customary for
companies engaged in the business engaged in by Jensen and its subsidiaries;
(l) not introduce any new product or plan which would substantially
increase the risk exposure of Jensen and its subsidiaries taken as a
whole;
(m) not enter into any material arrangement, agreement, or contract with
any third party (other than customers in the ordinary course of
business) which provides for an exclusive arrangement with that third party
or is substantially more restrictive on Jensen or substantially less
advantageous to Jensen than arrangements, agreements, or contracts existing
on the date hereof;
(n) not establish any new lines of credit or other credit facilities or
incur any indebtedness other than pursuant to existing credit
facilities except for trade liabilities incurred in the ordinary course of
business; and
(o) not agree in writing, or otherwise, to take any of the foregoing
actions or any other action which would make any representation or
warranty contained in Article IV untrue or incorrect in any material respect
as of the time of the Closing.
Section 6.2 SITE TESTING AND EVALUATION. Prior to the later of March 1,
1996 or the date of the Proxy Statement (which Recoton may cause to be delayed
if it is still conducting its study and testing), Recoton may at its own expense
perform or have performed such environmental site inspections and reasonable
testing relating to the real property owned or operated by Jensen or its
subsidiaries as it may deem appropriate. If based upon the written reports of
independent environmental consultants, Recoton determines in its sole and
reasonable discretion that the results of the inspections or tests performed
indicate that any of such property or a number of such properties is, or that
there is a material risk that such property(ies) may be, contaminated in a way
as to give rise to possible liability, contingent or otherwise, under the
Environmental Laws in an aggregate amount of $5,000,000 or greater, Recoton may
terminate this Agreement by notice to Jensen prior to the date of the Proxy
Statement.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION. (a) Jensen and its subsidiaries shall
afford to Recoton and Acquisition Sub and its accountants, counsel, and other
representatives full access during normal business hours throughout the period
prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and to their customers, vendors, employees, consultants and professional
advisors and, during such period, shall furnish promptly to Recoton and
Acquisition Sub (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state
securities laws or the HSR Act or filed or received by any of them with or from
the SEC, Federal Trade Commission ("FTC") or Department of Justice ("DOJ") and
(ii) all other information concerning their respective businesses, properties
and personnel as Acquisition Sub may reasonably request; PROVIDED, HOWEVER, that
no investigation pursuant to this Section 7.1(a) shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Jensen and its subsidiaries
shall promptly advise Recoton and Acquisition Sub in writing of any change or
occurrence of any event after the date of this Agreement having, or which,
insofar as can reasonably be foreseen, in the future may have, a Jensen Material
Adverse Effect.
(b)Recoton and its subsidiaries shall afford to Jensen and its accountants,
counsel and other representatives full access during normal business
hours throughout the period prior to the Effective Time to all of their
respective properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, shall furnish promptly to
Jensen (i) a copy of each report, schedule and other document filed or received
by any of them pursuant to the requirements of federal or state securities laws
or the HSR Act or filed or received by any of them with or from the SEC, FTC or
DOJ and (ii) all other information concerning their respective businesses,
properties and personnel as Jensen may reasonably request; PROVIDED, HOWEVER,
that no investigation pursuant to this Section 7.1(b) shall affect any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Recoton and its subsidiaries
shall promptly advise Jensen in writing of any change or occurrence of any event
after the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Recoton Material Adverse Effect.
(c)Any information received pursuant to Sections 7.1(a) and 7.1(b) above
shall be considered Evaluation Material (as defined in the letter
agreements dated August 21, 1995 and October 16, 1995, as applicable (the
"Confidentiality Agreements"), between Recoton and Jensen, and such information
shall be held in confidence by Recoton, Acquisition Sub and Jensen in accordance
with the terms of the Confidentiality Agreements.
Section 7.2 REGISTRATION STATEMENT AND PROXY STATEMENT. Recoton shall
prepare and file with the SEC as soon as reasonably practicable after the date
hereof the Registration Statement (in which the Proxy Statement shall be
included) and shall use all reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable. Jensen shall
prepare and file with the SEC as soon as reasonably practicable after the date
hereof the Proxy Statement. Recoton shall also take any action required to be
taken under applicable state blue sky or securities laws in connection with the
issuance of Recoton Common Shares in the Merger; PROVIDED, HOWEVER, that with
respect to such blue sky qualifications neither Recoton nor Jensen shall be
required to register or qualify as a foreign corporation or to take any action
which would subject it to service of process in any jurisdiction (other than
Delaware) where any such entity is not now so subject, except as to matters and
transactions relating to or arising solely from the offer and sale of Recoton
Common Shares. Recoton and Jensen shall promptly furnish to each other all
information, and take such other actions, as may reasonably be requested in
connection with any action by any of them in connection with the preceding
sentence. The information provided and to be provided by Recoton and Jensen,
respectively,
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(and by their auditors, attorneys, financial advisors or other consultants or
advisors) to the other for use in the Registration Statement and Proxy Statement
shall be true and complete in all material respects without omission of any
material fact which is required to make such information not false or
misleading.
Section 7.3 STOCKHOLDERS' APPROVAL. Subject to the provisions of Section
6.1(h) and 9.1(e), Jensen shall promptly submit this Agreement and the
transactions contemplated hereby for the approval of its stockholders at the
Jensen Stockholders' Meeting to be held as soon as practicable after the
Registration Statement is declared effective by the SEC and, subject to the
fiduciary duties of the Board of Directors of Jensen under applicable law, shall
use its best efforts to obtain stockholder approval (the "Jensen Stockholders'
Approval") of this Agreement and the transactions contemplated hereby in
accordance with Section 4.21, including approval of the separate proposals
enumerated in, and in accordance with, Section 4.21. Subject to the fiduciary
duties of the Board of Directors of Jensen under applicable law and the
provisions of Section 6.1(h) and 9.1(e), Jensen shall, through its Board of
Directors, recommend to its stockholders approval of the proposals enumerated in
Section 4.21.
Section 7.4 COMPLIANCE WITH THE SECURITIES ACT. Jensen shall use its best
efforts to cause each principal executive officer, each director and each other
person who is an "affiliate," as that term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act (an "Affiliate"), of Jensen to deliver to
Recoton and Jensen on or prior to the Effective Time a written agreement (an
"Affiliate Agreement") to the effect that such person will not offer to sell,
sell or otherwise dispose of any Recoton Common Shares issued in the Merger,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel reasonably satisfactory to Recoton, is
exempt from the registration requirements of the Securities Act and, in any
case, until after the results covering 30 days of post-merger combined
operations of Recoton and Jensen have been filed with the SEC, sent to
shareholders of Recoton or otherwise publicly issued.
Section 7.5 NASDAQ LISTING. Recoton shall use its best efforts to obtain
the listing on Nasdaq, at or before the Effective Time of the additional Recoton
Common Shares to be issued pursuant to the Merger.
Section 7.6 EXPENSES. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.
Section 7.7 AGREEMENT TO COOPERATE. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all action to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents and approvals and SEC "no-action" letters
(including, but not limited to, required approvals under applicable Delaware
state laws and regulations), to effect all necessary registrations and filings
(including, but not limited to, filings under the HSR Act) and to lift any
injunction or other legal bar to the Merger (and, in such case, to proceed with
the Merger as expeditiously as possible), subject, however, to the provisions of
Sections 6.1(h) and 9.1(e) and to the requisite votes of the stockholders of
Jensen. Each party hereto agrees to allow the other to review each regulatory
filing made by such party prior to the filing thereof during the term of this
Agreement.
Section 7.8 PUBLIC STATEMENTS. The parties shall release a press release
immediately upon the signing of this Agreement in the form set forth as Exhibit
7.8 to this Agreement. None of the parties hereto shall issue any press release
or make any other public statements, in each case relating to or connected with
or arising out of this Agreement or the matters contained therein, without
obtaining the prior written approval of the other parties to the contents and
the manner of presentation and publication thereof, PROVIDED, HOWEVER, that
nothing herein shall prevent any party from making any disclosures required by
applicable law or regulation (including regulation of the SEC and the NASD).
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Section 7.9 ACCOUNTANTS' LETTERS. Each of Recoton and Jensen shall use its
best efforts to cause to be delivered to the other letters of Cornick Garber &
Sandler, LLP, independent auditors for Recoton, and Coopers and Lybrand, LLP,
independent auditors for Jensen, respectively, dated the date of the Proxy
Statement, the effective date of the Registration Statement and the Effective
Time (or such other dates reasonably acceptable to the parties) with respect to
certain financial statements and other financial information included in the
Registration Statement, which letters shall be in customary form and substance
reasonably satisfactory to the addressee.
Section 7.10 INDEMNIFICATION OF CERTAIN OFFICERS AND DIRECTORS. (a) To
the extent permitted by applicable law, Recoton and Acquisition Sub agree that
all rights to indemnification from Jensen or any subsidiary of Jensen now
existing in favor of the directors, officers, employees or agents of Jensen and
any subsidiary of Jensen as provided in their respective certificates of
incorporation or charters, as the case may be, or by-laws, as in effect on the
date of this Agreement, shall survive the Merger and shall continue in full
force and effect and be honored by Recoton, Acquisition Sub and the Surviving
Corporation for a period of not less than five years from the Effective Time;
PROVIDED, HOWEVER, that in the event any claim or claims are asserted or made
within such five-year period, all such rights shall continue until final
disposition of any such claim or claims.
(b)Recoton and Acquisition Sub will use their best efforts, and will cause
the Surviving Corporation to use its best efforts, to cause to be
maintained in effect a tail, for not less than three years from the Effective
Time, on the current policies of directors' and officers' liability insurance
maintained by Jensen and the subsidiaries of Jensen (provided that the Surviving
Corporation or Acquisition Sub may substitute therefor policies of at least the
same level of coverage containing terms and conditions which are in the
aggregate no less advantageous so long as no lapse in coverage occurs as a
result of such substitution) with respect to all matters, including the
transactions contemplated hereby, occurring prior to and including the Effective
Time. Notwithstanding the foregoing, neither Recoton, Acquisition Sub nor the
Surviving Corporation shall be required to expend in excess of $150,000 in the
aggregate pursuant to this Section 7.10(b).
Section 7.11 EMPLOYEE BENEFITS. For a period of one year after the
Effective Time, the Surviving Corporation shall make available to the current
employees of Jensen, so long as such persons continue after the Effective Time
to hold positions as employees with the Surviving Corporation, the same employee
benefits that are currently in effect at Jensen, or similar employee benefits on
substantially the same terms and conditions as the Jensen plans, including, but
not limited to, health care and life insurance, pension and retirement benefits
and vacation and sick pay. Thereafter, the Surviving Corporation shall provide a
benefits package at least comparable to the benefit package provided by Recoton
to its own employees. Recoton and the Surviving Corporation shall use their best
efforts to insure that employees of the Surviving Corporation shall not be
subject to any waiting periods or pre-existing condition restrictions under
employee benefit plans offered by Recoton or the Surviving Corporation to the
extent that such periods are longer or such periods impose a greater limitation
than the period or limitations imposed under employee benefit plans currently
offered by Jensen. Employees of the Surviving Corporation shall be given credit
for prior service with Jensen for purposes of crediting periods of service for
eligibility and vesting of all such substitute employee benefits offered by
Recoton or the Surviving Corporation.
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ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby (including
such of the proposals enumerated in Section 4.21 as shall be required
in order to effect the Merger) shall have been approved and adopted by the
requisite vote of the stockholders of Jensen pursuant to Section 4.21;
(b) The additional Recoton Common Shares issuable in the Merger shall
have been authorized for listing on Nasdaq;
(c) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated and any EC Filings
shall have been made and no additional requirements relating thereto shall
be applicable;
The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect;
(e) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to
use all reasonable efforts to have any such injunction, order or decree
lifted);
(f) No action shall have been taken, and no statute, rule or regulation
shall have been enacted, by any state, federal or foreign government
or governmental agency which would prevent the consummation of the Merger or
that would have a material adverse effect on the prospects of the Surviving
Corporation;
(g) All governmental consents and approvals legally required for the
consummation of the Merger and the transactions contemplated hereby,
including, without limitation, approval (if required) by the DOJ, FTC and
the SEC, shall have been obtained and be in effect at the Effective Time on
terms and conditions that would not have a material adverse effect on the
prospects of the Surviving Corporation;
(h) Jensen shall have received an opinion, and such opinion shall not
have been withdrawn at or prior to the Effective Time if the Average
Recoton Share Price is equal to or greater than $16.00, of a firm of
professionals which is qualified to render tax opinions in reorganizations
under Section 368(a) (and has rendered such opinions in other comparable
reorganizations of public companies) which firm of professionals is
reasonably satisfactory to both Jensen and Recoton, which opinion Recoton
shall be allowed to rely upon, subject to customary assumptions and based on
representations of Jensen, Jensen Stockholders and Recoton and Acquisition
Sub dated the date of the Proxy Statement, to the effect that Acquisition
Sub and Jensen and their respective shareholders (except to the extent any
stockholders have perfected dissenters' rights under Delaware law or Jensen
stockholders have received (i) cash in lieu of fractional shares or (ii) the
Per Share Cash Amount or portion thereof) will recognize no gain or loss for
federal income tax purposes as a result of consummation of the Merger and
that the transaction qualifies as a reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code; PROVIDED, HOWEVER, that if such
opinion in form reasonably satisfactory to Jensen and Recoton has not been
received by the date of the Proxy Statement or is withdrawn prior to the
Effective Time, the conditions of this Section 8.1(h) shall be satisfied if
the stockholders of Jensen have approved at the Jensen Stockholders' Meeting
an All Cash Transaction and such other proposals as shall be required
pursuant to Section 4.21; and
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(i) Jensen shall have received letters from Lehman Brothers dated the
date of this Agreement and the date of the Proxy Statement (or such
other dates reasonably acceptable to Jensen and Recoton), which letters
shall be of the opinion that (1) the Merger Consideration is "fair from a
financial point of view" to Jensen's stockholders; and (2) that the proceeds
received by Jensen from the sale of the assets of the Original Equipment
Business are "fair from a financial point of view" to Jensen.
Section 8.2 CONDITIONS TO OBLIGATION OF JENSEN TO EFFECT THE MERGER. The
obligation of Jensen to effect the Merger shall be subject to the fulfillment at
or prior to the Effective Time of the following additional conditions:
(a) Acquisition Sub and Recoton shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties of Acquisition Sub and Recoton contained in this Agreement shall
be true and correct in all material respects on and as of the date of this
Agreement and on and as of the Effective Time as if made on and as of such
date, except as contemplated or permitted by this Agreement, and Jensen
shall have received a certificate of the President and the Chief Operating
Officer of each of Acquisition Sub and Recoton to that effect;
(b) Jensen shall have received an opinion addressed to Jensen from
Stroock & Stroock & Lavan, counsel to Recoton and Acquisition Sub, or
other counsel reasonably acceptable to Jensen, dated the Closing Date,
substantially in the form set forth in Exhibits 8.2(b);
(c) Jensen shall have received the letters of Cornick Garber & Sandler,
LLP contemplated by Section 7.9;
(d) Since the date hereof, no Recoton Material Adverse Effect shall have
occurred; and
(e) Recoton shall have deposited the Recoton Common Shares and cash into
the Exchange Fund in accordance with Section 3.2(a) and the Exchange
Agent shall have delivered to Jensen a certificate acknowledging receipt of
such stock and cash.
Section 8.3 CONDITIONS TO OBLIGATION OF RECOTON AND ACQUISITION SUB TO
EFFECT THE MERGER. The obligation of Recoton and Acquisition Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions:
(a) Jensen shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties of Jensen
contained in this Agreement shall be true and correct in all material
respects on and as of the date of this Agreement and on and as of the
Effective Time as if made on and as of such date, except as contemplated or
permitted by this Agreement, and Recoton and Acquisition Sub shall have
received a Certificate of the President and the Chief Financial Officer of
Jensen to that effect;
(b) Recoton and Acquisition Sub shall have received an opinion from
Vedder, Price, Kaufman & Kammholz, counsel to Jensen, or other
counsel reasonably acceptable to Recoton and Acquisition Sub, dated the
Closing Date, substantially in the form set forth in Exhibit 8.3(b);
(c) The Affiliate Agreements required to be delivered to Acquisition Sub
pursuant to Section 7.4 shall have been furnished as required by
Section 7.4;
(d) Recoton and Acquisition Sub shall have received the letters of
Coopers & Lybrand, LLP contemplated by Section 7.9;
(e) Since the date hereof, no Jensen Material Adverse Effect shall have
occurred;
(f) The closing of the sale of the assets of the Original Equipment
Business pursuant to the OE Agreement shall have occurred prior to
the Effective Time;
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(g) Recoton shall not have elected to terminate due to the results of the
inspections or tests performed in accordance with Section 6.2;
(h) The number of Recoton Common Shares to be issued in the Merger shall
not equal or exceed 20% of the Recoton Common Shares outstanding
prior to the Effective Time;
(i) The number of Dissenting Shares shall not exceed 10% of the Jensen
Common Stock outstanding; and
(j) Recoton and Acquisition Sub shall have received a letter from Furman
Selz LLC, dated the Effective Date of the Registration Statement (or
such other date reasonably acceptable to Recoton), which letter shall be of
the opinion that the Merger Consideration is "fair from a financial point of
view" to Recoton.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Jensen or the shareholders of Acquisition Sub:
(a) by mutual written consent of Acquisition Sub and Jensen; or
(b) by either Acquisition Sub or Jensen if (i) the Merger shall not have
been consummated on or before June 30, 1996 (the "Termination Date"),
(ii) the requisite vote of the stockholders of Jensen to approve this
Agreement pursuant to Section 8.1(a) and the transactions contemplated
hereby shall not be obtained at the Jensen Stockholders' Meeting (including,
such of the proposals enumerated in Section 4.21 as shall be required in
order to effect the Merger), or any adjournments thereof, (iii) any
governmental or regulatory body, the consent of which is a condition to the
obligations of Acquisition Sub and Jensen to consummate the transactions
contemplated hereby, shall have determined not to grant its consent and any
appeals of such determination shall have been taken and have been
unsuccessful or such body shall have imposed conditions or limitations on
its consent that would have a material adverse effect on the prospects of
the Surviving Corporation and any appeals from such imposition shall have
been taken and have been unsuccessful, or (iv) any court of competent
jurisdiction in the United States, or any state or any country in which
there is a subsidiary of Jensen, shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall
have become final and nonappealable; or
(c) by Acquisition Sub (i) if the Board of Directors of Jensen shall have
withdrawn or modified in a manner adverse to Acquisition Sub its
approval or recommendation of the Merger, this Agreement or the transactions
contemplated hereby or shall have failed to reaffirm such approval or
recommendation upon Acquisition Sub's request, or shall have resolved to do
any of the foregoing, (ii) if Jensen or any of the other persons or entities
described in Section 6.1(c) or 6.1(h) shall take any of the actions that
would be proscribed by Section 6.1(c) or 6.1(h) but for the PROVISO therein
allowing certain actions to be taken if required by fiduciary duty upon
advice of counsel, (iii) if there has been (x) a material breach of any
covenant or agreement herein on the part of Jensen which has not been cured
or adequate assurance of cure given, in either case within 15 business days
following receipt of notice of such breach, or (y) a representation or
warranty of Jensen herein is or becomes untrue or incorrect in a material
respect which representation or warranty by its nature cannot be made true
and correct in all material respects prior to the Termination Date or is not
made true and correct prior to the Termination Date or (iv) if (x) Jensen
enters into an agreement with any corporation, partnership, person, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act) other
than Recoton or Acquisition Sub whereby such entity or group would directly
or indirectly acquire all or any substantial part of the
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assets or capital stock of Jensen, whether by merger, share exchange,
purchase of assets, consolidation, tender offer or otherwise (other than
with regard to the Original Equipment Business) or (y) any third party
commences a tender or exchange offer for 25% or more of Jensen's Common
Stock and Jensen's Board of Directors does not recommend, or ceases to
recommend, to Jensen's stockholders that they reject such offer; or
(d) by Jensen if there has been (x) a material breach of any covenant or
agreement herein on the part of Acquisition Sub or Recoton which has
not been cured or adequate assurance of cure given, in either case within 15
business days following receipt of notice of such breach or (y) a
representation or warranty of Recoton or Acquisition Sub herein is or
becomes untrue or incorrect in a material respect which representation or
warranty by its nature cannot be made true and correct in all material
respects prior to the Termination Date or is not made true and correct prior
to the Termination Date; or
(e) automatically, if the Jensen Board of Directors shall recommend a
Jensen Acquisition Transaction or authorize or approve the entering
into by Jensen of a Jensen Acquisition Transaction.
Notwithstanding the foregoing, if prior to the Closing Date, (i) any preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued, and
remains in effect (each party agreeing to use all reasonable efforts to have any
such injunction, order or decree lifted); (ii) any action shall have been taken,
or any statute, rule or regulation shall have been enacted, by any state,
federal or foreign government or governmental agency which would prevent the
consummation of the Merger or that would have a material adverse effect on the
prospects of the Surviving Corporation; or (iii) any governmental consents and
approvals legally required for the consummation of the Merger and the
transactions contemplated hereby, including, without limitation, approval (if
required) by the DOJ, FTC and the SEC, shall not have been obtained or not be in
effect at the Effective Time on terms and conditions that would not have a
material adverse on the prospects of the Surviving Corporation, the Termination
Date shall be extended at the option of any party hereto for a period of up to
120 days. If, at the end of such 120-day period, the matters referred to in (i),
(ii) or (iii) shall not have been satisfied to each party's reasonable
satisfaction, either party may terminate this Agreement pursuant to the
applicable provisions of this Section 9.1.
Section 9.2 EFFECT OF TERMINATION.
(a)In the event of termination of this Agreement by either Recoton,
Acquisition Sub or Jensen as provided in Section 9.1 or any breach of any
party or any failure of condition giving rise to a right to terminate this
Agreement, there shall be no liability on the part of either Jensen or Recoton
or Acquisition Sub or their respective officers or directors except as set forth
in this Section 9.2 or in Section 7.1(c).
(b)If this Agreement is terminated pursuant to (i) Section 9.1(b)(i) due to
failure to satisfy the conditions set forth in Section 8.1(a) (including
the failure of the Jensen stockholders to approve such of the proposals
enumerated in Section 4.21 as shall be required in order to effect the Merger,
8.1(h) (if caused by Jensen's willful act), 8.1(i) (if caused by Jensen's
willful act), 8.3(a) due to failure to obtain officer's certificate under
circumstances in which Jensen has otherwise performed in all material respects
its agreements contained in this Agreement required to be performed on or prior
to the Effective Time and in which the representations and warranties of Jensen
contained in this Agreement are true and correct in all material respects on and
as of the date of this Agreement and on and as of the Effective Time as if made
on and as of such date, except as contemplated or permitted by this Agreement,
8.3(b) (if caused by Jensen's willful act), 8.3(c) (if caused by Jensen's
willful act) or 8.3(d) (if caused by Jensen's willful act), (ii) Section
9.1(b)(ii), (iii) Section 9.1(c)(i), (iv) Section 9.1(c)(ii), (v) Section
9.1.(c)(iii)(x) (if caused by Jensen's willful act), (vi) Section 9.1(c)(iv) or
(vii) Section 9.1(e), then Jensen shall pay Recoton $6,000,000.
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(c)If this Agreement is terminated pursuant to (i) Section 9.1(b)(i) due to
failure to satisfy the conditions set forth in Section 8.1(c) or 8.3(f)
or (ii) Section 9.1(b)(iii) (but only if the condition set forth in Section
8.1(c) is the basis for the termination under Section 9.1(b)(iii)), then Jensen
shall pay Recoton $1,500,000.
(d)If this Agreement is terminated pursuant to (i) Section 6.2 or (ii)
Section 9.1(b)(i) due to failure to satisfy a condition set forth in
Section 8.1(b), 8.1(d), 8.1(e), 8.1(f), 8.1(g), 8.1(h) (unless caused by
Jensen's willful act), 8.1(i) (unless caused by Jensen's willful act), 8.2(a),
8.2(b), 8.2(c), 8.2(d), 8.2(e), 8.3(a) due to failure to obtain officer's
certificate except under the circumstances set forth in Section 9.2(b), 8.3(b)
(unless caused by Jensen's willful act), 8.3(c) (unless caused by Jensen's
willful act), 8.3(d) (unless caused by Jensen's willful act), 8.3(e), 8.3(g),
8.3(h), 8.3(i) or 8.3(j), (iii) Section 9.1(b)(iii) (other than under the
circumstances set forth in Section 9.2(c)(ii)), (iv) Section 9.1(b)(iv), (v)
Section 9.1(c)(iii)(x) (unless caused by Jensen's wilful act), (vi) Section
9.1(c)(iii)(y), or (vii) Section 9.1(d), no payment shall be due from Jensen,
Recoton or Acquisition Sub.
(e)The agreements contained in this Section 9.2 are an integral part of the
transactions contemplated by this Agreement and constitute liquidated
damages or other appropriate payments and not a penalty. If a party fails
promptly pay to perform in accordance with Article IX, such party shall pay the
costs and expenses (including legal fees and expenses) of the other party in
connection with any action, including the filing of any lawsuit or other legal
action, taken to enforce the terms of this Agreement. Payments by Jensen under
this Section shall be made within five business days after termination of this
Agreement.
Section 9.3 AMENDMENT. This Agreement may be amended by the parties
hereto, at any time before or after approval hereof by the stockholders of
Jensen, but, after any such approval, no amendment shall be made which (a)
changes the procedure pursuant to which the Exchange Ratio (or the Principal
Stockholders Exchange Ratio) is calculated or the Per Share Cash Amount or (or
the Principal Stockholders Per Share Cash Amount) (b) changes any of the other
principal terms of this Agreement, in each case, without the further approval of
such stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.4 WAIVER. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein; PROVIDED, HOWEVER, that waiver of compliance with
any agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of the parties.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement shall survive the Merger, except for the agreements contained in this
Section 10.1, Article III, and in Sections 2.3, 7.1(c), 7.6, 7.8, 7.10, 7.11,
and Article IX. This Section 10.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective Time
of the Merger.
Section 10.2 BROKERS. Jensen represents and warrants that, except for its
investment banking firm, Lehman Brothers, whose fee arrangement has been
disclosed to Recoton prior to the date hereof, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Jensen. Acquisition Sub and
Recoton represent and warrant
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that, except for its investment banking firm, Furman Selz Incorporated, whose
fee arrangement has been disclosed to Jensen prior to the date hereof, no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Acquisition Sub.
Section 10.3 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to Acquisition Sub or Recoton, to:
c/o Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Stuart Mont, Chief Operating Officer
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, NY 10004
Attn: Theodore S. Lynn, Esq.
(b) If to Jensen, to:
International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attn: Marc T. Tanenberg, Chief Financial Officer
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North La Salle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
Section 10.4 GENERAL TERMS. The following definitions shall apply to the
extent not otherwise defined, or used in capitalized form, in this Agreement:
(a) The terms "agreements" and "contracts" shall include any contract,
purchase or sales order, franchise, insurance policy, license,
undertaking, arrangement, understanding, commitment, document, lease,
sublease, deed, mortgage plan, plan, indenture, bill of sale, assignment,
proxy, voting trust or other agreement or instrument.
(b) The term "approval" shall include any consent, waiver, license,
permit, certificate or authorization.
(c) The term "breach" shall include any default, event of default or
event, occurrence, condition or act which, with notice or lapse of
time or both, would constitute a breach, default, or event of default or
give the other party or parties a right to accelerate any obligation under
the applicable agreement.
(d) The term "governmental authority" means any agency, instrumentality,
department, commission, court, tribunal or board of any government,
whether foreign or domestic and whether national, federal, state, provincial
or local.
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(e) The term "law" shall mean, unless specifically stated otherwise
herein, means laws, rules, regulations, codes, orders, ordinances,
judgments, injunctions, decrees and government policies.
(f) The terms "liability" and "liabilities" shall include any direct or
indirect indebtedness, claim, loss, damage, penalty, deficiency
(including deferred income tax and other net tax deficiencies), cost,
expense, obligation, duties or guarantee, whether accrued, absolute, or
contingent, known or unknown, fixed or unfixed, liquidated or unliquidated,
matured or unmatured or secured or unsecured.
(g) The term "person" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or other legal body thereof.
(h) The term "subsidiary" shall include each entity controlled by Jensen.
(i) The term "transfer" shall include any sale, pledge, gift, assignment,
conveyance, lease or disposition and the term "transferred" shall
include sold, pledged, gave, assigned, conveyed, leased or disposed of.
Section 10.5 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.6 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) together with the Confidentiality
Agreements, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof; (b) is not intended to
confer upon any other person any rights or remedies hereunder; (c) shall not be
assigned by operation of law or otherwise; (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Delaware (without giving effect to the provisions thereof relating to
conflicts of law) and service of process may be made upon any party by using the
notification procedure set forth in Section 10.3; (e) all disputes that arise
with respect to this Agreement shall be brought only in the Federal District
Court, located in or having jurisdiction for New York County, New York or in a
state court in and for New York County, New York; (f) to the fullest extent
permitted by law, the parties hereby waive all rights to a trial by jury in
connection with this Agreement; (g) by execution and delivery of this Agreement,
each of the parties accepts for himself or itself the jurisdiction of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement; (h) references to Exhibits and
Schedules shall be references to the exhibits of, and schedules, to this
Agreement. Such Exhibits and Schedules form an integral part of this Agreement
and are hereby incorporated in this Agreement. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
Section 10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under this Agreement.
Section 10.9 RIGHT TO OFFSET. Payments due under this Agreement or any
other agreements or obligation between Recoton (or any affiliate thereof) and
Jensen (or any affiliate thereof) may, at the election of either party, be set
off against each other including by way of (but not limited to) cancellation of
outstanding notes.
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IN WITNESS WHEREOF, Recoton, Acquisition Sub and Jensen have caused this
Agreement to be signed by their respective officers thereunto duly authorized on
the 1st day of May, 1996 as of the date first written above.
RECOTON CORPORATION
By: /s/ STUART MONT
-----------------------------------
Stuart Mont
EXECUTIVE VICE PRESIDENT-OPERATIONS
&
CHIEF OPERATING OFFICER
RC ACQUISITION SUB, INC.
By: /s/ STUART MONT
-----------------------------------
Stuart Mont
SECRETARY
INTERNATIONAL JENSEN INCORPORATED
By: /s/ MARC T. TANENBERG
-----------------------------------
Marc T. Tanenberg
VICE PRESIDENT & CHIEF FINANCIAL
OFFICER
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Exhibit 2.2
AMENDED AND RESTATED AGREEMENT FOR PURCHASE AND SALE OF ASSETS
THIS AMENDED AND RESTATED AGREEMENT (this "Agreement"), dated as of the 3rd
day of January, 1996, is made by and between INTERNATIONAL JENSEN INCORPORATED,
a Delaware corporation (hereinafter referred to as "Seller"), FUJICONE, INC., a
Delaware corporation (hereinafter referred to as "FujiCone"), and IJI
ACQUISITION CORP., an Illinois corporation (hereinafter referred to as
"Purchaser").
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE. In consideration of the purchase price and the
assumption by Purchaser of the "Assumed Liabilities" as defined in Section 1.4,
and subject to the terms and conditions set forth in this Agreement, Seller will
sell to Purchaser and Purchaser will purchase from Seller, at the Closing Date
(as hereinafter defined), all or substantially all of the assets of Seller's
original equipment manufacturer's business (the "OEM Business") as a going
concern, as the same are more specifically set forth in Section 1.2 hereof. For
purposes of this Agreement, the OEM Business consists of the business associated
with and the assets comprising (i) the loudspeaker assembly plant facility and
operations in Lumberton, North Carolina, (ii) the metal and plastic parts
manufacturing/home loudspeaker assembly plant facility and operations in
Punxsutawney, Pennsylvania, (iii) the magnet manufacturing and general offices
of the General Magnetic division in Dallas, Texas, (iv) the cone manufacturing
and general offices of FujiCone in Clinton, North Carolina, (v) the OEM
value-add facility in Livonia, Michigan, (vi) the Bingham Farms, Michigan sales
office, and (vii) the original equipment manufacturing portion of the
engineering, research and development center and distribution facility in
Schiller Park, Illinois (but only to the extent such operation can be
bifurcated).
1.2 PURCHASED ASSETS. The assets to be purchased are all of Seller's
assets, properties and rights (real and personal, tangible and intangible) to
the extent owned or used in the conduct of the OEM Business on November 30, 1995
(the "Financial Statement Date") and all of Seller's assets, properties and
rights (real and personal, tangible and intangible) acquired after said date to
the extent owned by Seller or used by Seller in the conduct of the OEM Business
on the Closing Date except for those assets which have since been sold,
transferred or disposed of in the ordinary and regular course of business and
except for the "Excluded Assets" (as defined in Section 1.6) (hereinafter
collectively referred to as the "Purchased Assets"). To the extent assets owned
or used by Seller are used in both the conduct of the OEM Business and other
businesses of Seller ("Joint Use Property"), the parties shall endeavor to agree
on an appropriate bifurcation or other allocation of such Joint Use Property; to
the extent that the parties cannot agree on such bifurcation or allocation by
the Closing Date, Seller shall retain such Joint Use Property subject to
Purchaser's right of reasonable access and/or use. The Purchased Assets shall
include, without limitation, the following (subject, however, to the provisions
set forth above regarding Joint Use Property) at the Closing Date:
1.2.1 All of Seller's right, title and interest (including leasehold
interests as tenant, if any) in the lands, buildings and any and
all improvements thereon pertaining to the OEM Business to the extent noted
in Exhibit 1.2.1 hereto.
1.2.2 All of Seller's machinery, equipment, patterns, tools, dies,
furniture, office equipment, vehicles, fixtures, telephone numbers
(toll-free and others) and other personal property and all of Seller's fixed
assets pertaining to the OEM Business. A schedule thereof as of the
Financial Statement Date is set forth on Exhibit 1.2.2.
1.2.3 All of Seller's accounts receivable and all other receivables of
any other kind pertaining to the OEM Business. A schedule thereof
as of the Financial Statement Date is set forth on Exhibit 1.2.3.
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1.2.4 All of FujiCone's assets, properties and rights (real and personal,
tangible and intangible) to the extent owned by FujiCone in the
conduct of its business as of the Financial Statement Date and all of
FujiCone's assets, properties and rights (real and personal, tangible and
intangible) acquired after said date to the extent owned by FujiCone or used
by FujiCone in the conduct of its business on the Closing Date except for
those assets which have since been sold, transferred or disposed of in the
ordinary and regular course of business and except for the "Excluded Assets"
(as defined in Section 1.6), but including, without limitation, as assets to
be transferred all of FujiCone's interests and rights to the FujiCone name
and any common law and/or registered trade names, trademarks and service
marks relating or pertaining to the FujiCone name.
1.2.5 All of Seller's books, financial and business records, insurance
policies and any claims and credits thereunder pertaining
exclusively to the OEM Business. Seller shall retain ownership of all books,
financial and business records, insurance policies and any claims and
credits thereunder to the extent not exclusively pertaining to the OEM
Business, which shall be held for the benefit of each of Seller and
Purchaser as their interests may appear and as to which Seller shall give
Purchaser reasonable access.
1.2.6 All inventories and other supplies pertaining to the OEM Business
on hand or at third party premises or in transit, including raw
materials, work in process and finished goods, and including any rights of
Seller to warranties received from suppliers. A schedule thereof as of the
Financial Statement Date is set forth on Exhibit 1.2.6.
1.2.7 All of Seller's interests and rights to the corporate name
"International Jensen Incorporated" and the trade name "IJI" (for
purposes of corporate identification only), patents, copyrights, tradenames,
service marks, product designations, trade secrets, formulae, processes,
know-how and other intellectual property to the extent pertaining
exclusively to the OEM Business and set forth on Exhibit 1.2.7 ("Proprietary
Rights") and all registrations, applications, assignments, amendments,
research, development, updates and modifications pertaining thereto and all
drawings, art work, designs, printing plates, dies, molds, samples and the
like exclusively related thereto. To the extent the Proprietary Rights are
currently used for both the OEM Business and other businesses of Seller,
Seller shall retain ownership of such rights (other than ownership of the
corporate name International Jensen Incorporated and the IJI trade name for
purposes of corporate identification) subject to a perpetual nonassignable
royalty-free worldwide license to Purchaser; provided, however, that
Seller's trademarks shall be licensed to Purchaser as provided in Section
6.8.
1.2.8 All of Seller's right, title and interest in franchises, licenses,
permits, options and any inventions, developments and ideas to the
extent pertaining to the OEM Business and to the extent assignable or
sublicenseable. If such rights are not assignable or licensable, the parties
shall cooperate to effect an appropriate written agreement regarding the
sharing of such rights. A schedule of such rights, whether assignable or
sublicenseable, as of the Financial Statement Date is set forth on Exhibit
1.2.8.
1.2.9 All of Seller's rights and privileges arising from Seller's
unshipped orders, prepaid expenses (including all insurance
prepayments and rights to refunds thereof), prepayments, deposits, customer
contracts, customer lists, outstanding offers, sales records, advertising
materials, and all agreements for the sale, purchase or lease of goods or
services, and all other contracts, agreements, assets and things of value
beneficially owned as of the date of this Agreement or acquired by Seller at
or before the Closing Date, whether tangible or intangible, real or
personal, inchoate, partial or complete, fixed or contingent, of every kind
and description and wherever situated to the extent pertaining to the OEM
Business.
1.2.10All of Seller's right, title and interest in and to the assets
comprising Seller's travel agency business.
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1.3 PURCHASE PRICE.
(a)Subject to the terms and conditions of this Agreement, the adjustments
set forth herein and the transaction described in Section 1.8 hereof, if
any, Purchaser agrees to pay to Seller at the Closing an aggregate purchase
price of $15,200,000, as it may be modified pursuant to this Agreement (the
"Purchase Price") by delivery of a certified or cashier's check or funds by wire
transfer to Seller's account.
(b)The Purchase Price shall be increased or decreased, as the case may be,
on a dollar for dollar basis, to the extent that on the Closing Date the
"Pro Forma Shaw Payment," calculated utilizing the most recently available
Return on Investment Capital ("ROIC") balance sheet in consideration of the
transaction contemplated in Section 1.8, and in a manner consistent with Exhibit
1.3 attached hereto is more or less than $15,200,000. The "Pro Forma Shaw
Payment" is the amount deemed to be due by Purchaser to Seller as of the Closing
Date. If the "Pro Forma Shaw Payment" exceeds $15,200,000, then Purchaser shall
have until thirty (30) days after the Closing to pay that portion of the
Purchase Price which exceeds $15,200,000. If the "Pro Forma Shaw Payment" is
less than $15,200,000, then Purchaser shall pay such lesser amount on the
Closing Date. Sixty (60) days after the Closing, the parties shall prepare an
actual ROIC balance sheet as of the Closing Date which shall calculate the final
actual Purchase Price ("Final Purchase Price") in consideration of the
transaction contemplated in Section 1.8, if any, and in a manner consistent with
Exhibit 1.3. Any payments due either party after the preparation of the actual
ROIC balance sheet shall be made within thirty (30) days after the actual
calculation of the amount due. If the parties disagree as to the calculation of
the Final Purchase Price based upon the ROIC balance sheet as of the Closing
Date, each party shall submit a calculation of the Final Purchase Price with
supporting documentation to an accounting firm mutually acceptable to the
parties (the "accounting firm"). The accounting firm shall determine the amount
of the Final Purchase Price in accordance with the terms of this Section 1.3 and
Exhibit 1.3. The determination of the Final Purchase Price by the accounting
firm shall be made within ninety (90) days of submission of the calculation to
it and shall be binding upon the parties. Any payments due to a party after the
determination of the accounting firm shall be made within thirty (30) days after
such determination. The cost of such accounting firm will be shared equally by
the parties.
The "Pro Forma Shaw Payment" and the Final Purchase Price shall be
calculated in accordance with and in a manner consistent with the ROIC balance
sheet set forth on Exhibit 1.3. As set forth on Exhibit 1.3, the "Pro Forma Shaw
Payment" and the Final Purchase Price shall be calculated as follows: (i) ROIC
Equity (as that term is defined and calculated in a manner consistent with
Exhibit 1.3) for the OEM Business (plus or minus, as applicable, accrued Seller
corporate accounts attributable to the operations of the OEM Business); less
(ii) a discount of $11.4 million. For purposes of illustration and guidance,
Exhibit 1.3 sets forth the calculation of the "Pro Forma Shaw Payment" for the
months ended 10/95, 11/95, 12/95, 1/96 and 2/96. Seller represents that the "Pro
Forma Shaw Payment" for each month-end as set forth on Exhibit 1.3 is true and
correct and based on such representation, the parties agree that the "Pro Forma
Shaw Payment" shall be based on the most recent available ROIC balance sheet and
the Final Purchase Price calculation shall be made on the basis of the actual
ROIC balance sheet on the day of Closing in a manner consistent with Exhibit
1.3.
(c)In the event the parties elect to sell the accounts receivable for the
OEM Business as described in Section 1.8 hereof, the parties shall
calculate the "Pro Forma Shaw Payment" and the "Final Purchase Price" in a
manner consistent with subsection (b) above, provided that the "Pro Forma Shaw
Payment" shall be reduced by the face amount of the accounts receivable sold to
a third party. In addition, the "Final Purchase Price" shall be increased by any
amounts paid by Seller to the purchaser of the accounts receivable subsequent to
the sale of such accounts receivable pursuant to the terms of that transaction.
1.4 ASSUMPTION OF LIABILITIES. Provided that the transactions herein
contemplated are consummated, and as a precondition of the sale of the Purchased
Assets to Purchaser, Purchaser will assume and discharge, and will indemnify
Seller against all liabilities (whether known or unknown,
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matured or unmatured, absolute or contingent, or otherwise) associated with,
pertaining to, arising out of, connected with or relating to the conduct of the
OEM Business or the Purchased Assets other than the Excluded Liabilities listed
in Section 1.5 (the "Assumed Liabilities"), including the following:
(a) all liabilities of Seller pertaining to the OEM Business shown in the
1995 Seller Financial Statements (as defined in Section 2.5), except
for federal, state and local income taxes of Seller (including FujiCone)
which shall be Excluded Liabilities;
(b) any products liability (related to OEM Business products sold to
customers other than those customers in the markets listed in
Paragraph 1(a) of Exhibit 6.7 prior to the Closing), liability arising from
or relating to Environmental Laws (as defined herein) or other environmental
matters, liability for violations of laws (including customs laws),
liability for termination of employees working exclusively or primarily for
the OEM Business prior to or after the Closing (provided, however, that the
outstanding balance of the severance payments to be made to Donald J. Cowie
and James B. Ross at Closing shall be allocated between Seller and Purchaser
in proportion to the percentage of sales of the OEM Business and the non-OEM
Business for the fiscal year ended February 29, 1996 (the "Cowie/Ross
Severance Payment")), or any other liabilities in each case pertaining to,
associated with, arising out of, connected with or related to the conduct of
the OEM Business (including acts or omissions) prior to and after the
Closing Date; and
(c) liabilities and obligations incurred by Seller in the ordinary course
of the OEM Business prior to the Financial Statement Date, between
the Financial Statement Date and the Closing Date and after the Closing Date
under leases, contracts, purchase orders, sales commitments, and outstanding
offers for purchase or sale or guarantees.
1.5 EXCLUDED LIABILITIES. Purchaser shall not be responsible for the
following liabilities (whether known or unknown, matured or unmatured, absolute
or contingent, or otherwise) (the "Excluded Liabilities"):
(a) liabilities incurred by Seller and FujiCone in connection with this
Agreement and the transactions contemplated herein as set forth in
Section 12.3(a);
(b) any liability of Seller insured against to the extent such liability
is paid by an insurer and does not thereby result in an increase in
Seller's premiums;
(c) any liability or obligation of Seller with respect to any Excluded
Asset;
(d) any federal, state or local income tax liability of Seller and
FujiCone;
(e) any liability or obligation of Seller pertaining to, associated with,
arising out of, connected with or related to any of Seller's employee
benefit plans (other than the FujiCone benefit plans);
(f) Seller's share of the Cowie/Ross Severance Payment;
(g) Note Agreement by and between Seller and Connecticut Mutual Life
Insurance Company; and
(h) Credit Agreement by and between Seller and Harris Trust and Savings
Bank.
1.6 EXCLUDED ASSETS. The term "Excluded Assets" shall mean:
(a) cash and cash equivalents pertaining to Seller's OEM Business;
(b) Leases for the leased facilities located in Lincolnshire, Illinois
and Schiller Park, Illinois;
(c) any right, title and interest in and to any of Seller's registered
trademarks and other intellectual property not pertaining to the OEM
Business; and
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(d) any other asset of Seller to the extent that it does not pertain to
Seller's OEM Business.
1.7 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price shall be
attributed to the Purchased Assets according to their respective fair market
values as of the Closing in conformity with the applicable provisions of the
Internal Revenue Code of 1986, as amended, governing transactions of this type
as determined by mutual agreement of the parties on or before the Closing.
1.8 INDEPENDENT ACCOUNTS RECEIVABLE TRANSACTION. Notwithstanding anything
to the contrary contained in this Agreement, the parties shall have the right to
designate a purchaser for all or any portion of Seller's accounts receivable
related to the OEM Business at any time prior to the Closing, which accounts
receivable sale shall take place prior to or simultaneous with the Closing Date.
In the event a purchaser is designated to purchase all or any portion of
Seller's accounts receivable related to the OEM Business as provided in this
Section 1.8 and such purchase is consummated upon terms and conditions
acceptable to the parties, then: (i) those accounts receivable which are not
purchased by Purchaser shall not be "Purchased Assets," but shall be "Excluded
Assets" for all purposes of this Agreement, including, without limitation, the
provisions of Section 1.4 (Assumption of Liabilities) and Section 11.2
(Indemnification by Purchaser); and (ii) the "Pro Forma Shaw Payment" and the
Final Purchase Price shall be calculated in accordance with Section 1.3(c)
above.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser, as follows:
2.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on the OEM Business as it is
now being conducted. Seller is qualified to do the OEM Business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the OEM Business makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a material adverse effect on
the OEM Business; (financial or other), results of operations or prospects of
Seller and its subsidiaries as related to the OEM Business, taken as a whole (a
"Seller Material Adverse Effect"). True and complete copies of Seller's
Certificate of Incorporation and By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Purchaser.
2.2 TITLE AND RELATED MATTERS. Except as set forth in Section 2.2 of
Seller's Disclosure Schedule, Seller has good and marketable title to all of the
properties and assets owned or used in the conduct of the OEM Business whether
reflected in the Seller Financial Statements or acquired after the date thereof
(except properties sold or otherwise disposed of since the date thereof in the
ordinary course of business and consistent with past practices) including,
without limitation, the specific assets referred to in paragraphs (a), (b) and
(c) below, free and clear of all mortgages, security interests, liens, pledges,
claims, escrows, options, rights of first refusal, indentures, easements,
licenses, security agreements or other agreements, arrangements, contracts,
commitments, understandings, obligations, charges or encumbrances of any kind or
character, except as reflected in the 1995 Seller Financial Statements. Seller
owns or leases, directly or indirectly, all of such assets and properties, and
is a party to all licenses and other agreements, presently used or necessary to
carry on its OEM Business, and its OEM Business operations as presently
conducted.
(a) REAL PROPERTY. Seller does not currently have, and in the past has
not had, any interest (as owner, tenant or otherwise) in any real
property related to the OEM Business except as disclosed in Section 2.2(a)
of Seller's Disclosure Statement.
(b) PERSONAL PROPERTY. Seller has good and marketable title to all the
personal property and assets, tangible or intangible, related to the OEM
Business shown in the 1995 Seller Financial Statements, except to the extent
sold or disposed of in transactions entered into in the
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ordinary course of business consistent with past practices since the
Financial Statement Date. The personal property related to the OEM Business
in the aggregate is in good condition and working order, and each individual
item of such personal property which would cost in excess of $10,000 to
replace is in good condition and working order. None of such assets are
subject to any (i) contracts of sale or lease, except contracts for the sale
of inventory in the ordinary and regular course of business; or (ii)
security interests, encumbrances, liens or charges of any kind or character,
except as set forth in Section 2.2(a) of Seller's Disclosure Statement.
Except as set forth in Section 2.2(a) of Seller's Disclosure Statement,
there are no lease restrictions with respect to the personal property leased
by Seller related to the OEM Business.
(c) INVENTORIES. In addition to subsection (b) of this Section, the
inventories of Seller related to the OEM Business included in the Seller
Financial Statements, to be included on interim balance sheets provided
pursuant to Section 4.8 and owned by Seller on the Closing Date: (i) are
valued with respect to each category of inventory at the lower of cost (on a
LIFO basis) or market; and (ii) do not include any items which are below
standard quality, damaged or spoiled, obsolete or of a quality or quantity
not usable or saleable in the normal course of the OEM Business as currently
conducted within normal inventory "turn" experience, the value of which has
not been fully written down, or with respect to which adequate reserves have
not been provided. Seller has the proper amount of inventories to conduct
the OEM Business consistent with past practices. There has not been since
the Financial Statement Date any provision for markdowns or shrinkage with
respect to inventories of the OEM Business other than in the ordinary and
regular course of business consistent with past activities or as otherwise
consented to by Purchaser.
(d) NO DISPOSITION OF ASSETS. There has not been since the Financial
Statement Date any sale, lease or any other disposition or distribution
by Seller of any of the assets or properties of the OEM Business and any
other assets of the OEM Business now or hereafter owned by Seller, except
transactions in the ordinary and regular course of business consistent with
past practices or as otherwise consented to by Purchaser.
2.3 SUBSIDIARIES. FujiCone is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted. FujiCone is qualified to do business, and is in good standing,
in each jurisdiction in which the properties owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all such other failures, have a Seller Material Adverse
Effect. Except as set forth in Section 2.3 of Seller's Disclosure Schedule or in
Seller's Annual Report on Form 10-K for the year ended February 28, 1995 or the
exhibits and schedules thereto (the "Seller 10-K") and, together with any
reports filed by Seller with the Securities and Exchange Commission (the "SEC")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") after
the Seller 10-K and prior to the date of this Agreement (the "Seller 1995
Reports"), Seller owns directly or indirectly all of the issued and outstanding
shares of the capital stock of FujiCone. Except as set forth in Section 2.3 of
Seller's Disclosure Schedule or in the Seller 1995 Reports, there are no
outstanding Subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights affecting any shares of capital stock of any subsidiary of Seller,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. Section 2.3 of Seller's Disclosure Schedule sets forth
a list of all material corporations, partnerships, joint ventures and other
business entities in which Seller or any of its subsidiaries directly or
indirectly owns an interest which are involved in the OEM Business, and such
subsidiaries' direct and indirect share, partnership or other ownership interest
of each such entity. FujiCone is the only subsidiary of Seller which, directly
or indirectly, conducts or is involved in the OEM Business.
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2.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a)Seller has full corporate power and authority to enter into this
Agreement and, subject to Seller Stockholders' Approval (as defined in
Section 2.21) and the Seller Required Approvals (as defined in Section 2.4(c)),
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by Seller's Board of Directors,
and no other corporate proceedings on the part of Seller are necessary to
authorize the execution and delivery of this Agreement and the consummation by
Seller of the transactions contemplated hereby, except for the Seller
Stockholders' Approval and the obtaining of the Seller Required Approvals. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes a valid and legally binding agreement of Seller enforceable against
it in accordance with its terms.
(b)Except as set forth in Section 2.4(b) of Seller's Disclosure Schedule,
the execution and delivery of this Agreement by Seller does not, and the
consummation by Seller of the transactions contemplated hereby will not,
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice of lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Seller or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or By-Laws of Seller or any of its subsidiaries, (ii)
subject to obtaining the Seller Required Approvals and the receipt of the Seller
Stockholders' Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Seller or any of its subsidiaries or any of their
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Seller or any of its
subsidiaries is now a party or by which Seller or any of its subsidiaries or any
of their respective properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security interests,
charges or encumbrances that would not, in the aggregate, have a Seller Material
Adverse Effect.
(c)Except for the filing of the Proxy Statement (as hereinafter defined)
with the SEC pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act") (the "Seller Required Approval"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution and
delivery of this Agreement by Seller or the consummation by Seller of the
transactions contemplated hereby.
2.5 REPORTS AND FINANCIAL STATEMENTS. Since February 28, 1995, Seller and
each of its subsidiaries required to make filings under the Securities Act, the
Exchange Act and applicable state laws and regulations, as the case may be, have
filed all forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by them under each of
the Securities Act, the Exchange Act, applicable laws and regulations of
Seller's and its subsidiaries' jurisdictions of incorporation and the respective
rules and regulations thereunder, all of which complied in all material respects
with all applicable requirements of the appropriate act and the rules and
regulations thereunder. Seller has previously delivered to Purchaser true and
complete copies of its (a) Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q, and Immediate Reports on Form 8-K filed by Seller or any of its
subsidiaries with the SEC from February 28, 1992, until the date hereof, (b)
proxy and information statements relating to all meetings of its stockholders
(whether annual or special) and actions by written consent in lieu of a
stockholders' meeting from February 28, 1992 until the date hereof, (c) all
other reports or registration statements filed by Seller with the SEC from
February 28, 1992 until the date hereof (collectively, the "Seller SEC
Reports"), and (d) the audited consolidated financial statements of Seller for
the fiscal year ended February 28, 1995 and its unaudited consolidated financial
statements for the nine months ended November 30, 1995 (the "Nine Month Seller
Financial Statements") (collectively the "1995 Seller Financial Statements"). As
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of their respective dates, the Seller SEC Reports and the 1995 Seller Financial
Statements did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited financial statements of Seller included in the
Seller SEC Reports and the 1995 Seller Financial Statements (collectively, the
"Seller Financial Statements") fairly represent the financial position of Seller
and its subsidiaries related to the OEM Business as of the dates thereof and the
results of their operations and cash flows for the periods then ended in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto, subject in
the case of the unaudited interim financial statements, to the normal year-end
and audit adjustments and any other adjustments described therein.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Section 2.6
of Seller's Disclosure Schedule or in the Seller 1995 Reports, neither Seller
nor any of its subsidiaries had at February 28, 1995, or has incurred since that
date, any liabilities or obligations related to the OEM Business (whether
absolute, accrued, contingent or otherwise) of any nature, except liabilities,
obligations or contingencies (a) which are accrued or reserved against in the
1995 Seller Financial Statements or reflected in the notes thereto or (b) which
were incurred after February 28, 1995, and were incurred in the ordinary course
of business and consistent with past practices and, in either case, except for
any such liabilities, obligations or contingencies which (i) would not, in the
aggregate have a Seller Material Adverse Effect or (ii) have been discharged or
paid in full prior to the date hereof.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section
2.7 of Seller's Disclosure Schedule or in the Seller 1995 Reports, since
February 28, 1995 there has not been any material adverse change in the OEM
Business (including, without limitation, any actual or threatened loss of
significant customers or any cancellation or threatened cancellation of any
orders with an aggregate value of $500,000 or more), operations, properties,
assets, liabilities, condition (financial or other), results of operations or
prospects of Seller and its subsidiaries, taken as a whole, and Seller and its
subsidiaries have in all material respects conducted the OEM Business in the
ordinary course consistent with past practice.
2.8 LITIGATION. Except as disclosed in the Seller 1995 Reports, the 1995
Seller Financial Statements, or Section 2.8 of Seller's Disclosure Schedule, (a)
there are no claims, suits, actions or proceedings pending or, to the knowledge
of Seller, threatened, nor to the knowledge of Seller are there any
investigations or reviews pending or threatened, against, relating to or
affecting Seller or any of its subsidiaries related to the OEM Business, which,
if adversely determined, would have a Seller Material Adverse Effect; (b) there
have not been any developments since the date of the Seller 10-K with respect to
such claims, suits, actions, proceedings, investigations or reviews which,
individually or in the aggregate, may have a Seller Material Adverse Effect; and
(c) except as contemplated by the Seller Required Approvals, neither Seller nor
any of its subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or authority or any arbitrator which prohibits or restricts the consummation of
the transactions contemplated hereby or may have a Seller Material Adverse
Effect.
2.9 PROXY STATEMENT. The proxy statement to be distributed in connection
with the Seller stockholders' meeting (the "Proxy Statement") will not at the
time of the mailing of the Proxy Statement and any amendment or supplement
thereto, and at the time of the Seller stockholders' meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading or necessary to
correct any statement in any earlier filing with the SEC of such Proxy Statement
or any amendment or supplement thereto or any earlier communication to
stockholders of Seller with respect to the transactions contemplated by this
Agreement. The Proxy Statement will comply as to form in all material respects
with all applicable laws,
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including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing, no representation is made
by Seller with respect to information supplied by Purchaser specifically for
inclusion in the Proxy Statement.
2.10 NO VIOLATION OF LAW. Except as set forth in Section 2.10 of Seller's
Disclosure Schedule, neither Seller nor any of its subsidiaries is in violation
of, or, to the knowledge of Seller, is under investigation with respect to or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment of any governmental or
regulatory body or authority, except for violations which in the aggregate, do
not have a Seller Material Adverse Effect. Seller and its subsidiaries have all
material permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct the OEM Business as presently
conducted.
2.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the Seller 1995
Reports, the Seller 1995 Financial Statements or Section 2.11 of Seller's
Disclosure Schedule, Seller and FujiCone are not in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, could
result in a default under, (i) the respective charters or by-laws of Seller or
FujiCone or (ii) any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other instrument to which
Seller or any of its subsidiaries is a party or by which any of them is bound or
to which any of their property is subject, which breaches, violations and
defaults, in the case of clause (ii) of this Section 2.11 would have, in the
aggregate, a Seller Material Adverse Effect.
2.12 TAXES.
(a)Seller and its subsidiaries have duly filed with the appropriate federal,
state, local, and foreign taxing authorities all tax returns required to
be filed by them on or prior to the Closing Date as related to the OEM Business
and the Purchased Assets and such tax returns are true and complete in all
material respects, and duly paid in full or made adequate provision for the
payment of all taxes for all periods ending at or prior to the Closing Date. The
liabilities and reserves for taxes as related to the OEM Business and the
Purchased Assets reflected in the Seller balance sheets as of February 28, 1995,
contained in the Seller 10-K, are adequate to cover all taxes for any period
ending on or prior to February 28, 1995 and as of October 31, 1995, are adequate
to cover all taxes for any period ending on or prior to October 31, 1995. Except
as set forth in Section 2.12 of Seller's Disclosure Schedule, (i) there are no
material liens for taxes upon any property or asset of Seller or any subsidiary
thereof as related to the OEM Business and the Purchased Assets, except for
liens for taxes not yet due and any such liens for taxes shown on such Section
2.12 of Seller's Disclosure Statement are being contested in good faith through
appropriate proceedings; (ii) Seller has not made any change in accounting
method, received a ruling from any taxing authority or signed an agreement with
any taxing authority which will materially and adversely affect the OEM Business
in future periods; (iii) during the past 10 years neither Seller nor any of its
subsidiaries has received any notice of deficiency, proposed deficiency or
assessment from any governmental taxing authority with respect to taxes of
Seller or any of its subsidiaries related to Seller's OEM Business and, any such
deficiency or assessment shown on such Section 2.12 of Seller's Disclosure
Schedule has been paid or is being contested in good faith through appropriate
proceedings; (iv) the federal income tax returns for Seller and its subsidiaries
are not currently the subject of any audit by the Internal Revenue Service (the
"IRS"), and such federal income tax returns have been examined by the IRS (or
the applicable statutes of limitation for the assessment of federal taxes for
such periods have expired) for all periods through and including February 28,
1990, and no material deficiencies were asserted as a result of such
examinations which were related to the OEM business which have not been resolved
and fully paid and similar adjustments cannot reasonably be expected to be made
for subsequent periods; (v) there are no outstanding requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any taxes or deficiencies against Seller or any of its
subsidiaries, and no power of attorney granted by either Seller or any of its
subsidiaries with respect to any taxes is currently in force; and (vi) neither
Seller nor any of its subsidiaries is a party to any agreement providing for the
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allocation or sharing of taxes which are related to or in any way connected to
the OEM Business. Neither Seller nor any of its subsidiaries has, with regard to
any assets or property held related to the OEM Business, acquired or to be
acquired by any of them, which assets or properties are related to the OEM
Business, filed a consent, to the application of Section 341(f) of the Code.
Seller and its subsidiaries, in accordance with Section 482 of the Code,
properly conducted intercompany pricing studies related to the OEM Business for
the tax year ended February 28, 1995, and is conducting such study in a timely
manner with respect to the tax year ending February 28, 1996.
(b)The term "tax" shall include any tax, assessment, levy, impost, duty, or
withholding of any nature now or hereafter imposed by a governmental
authority and any interest, additional tax, deficiency, penalty, charge or other
addition thereon, including without limitation any income, gross receipts,
profits, franchise, sales, use, property (real and personal), transfer, payroll,
unemployment, social security, occupancy and excise tax and customs duty. The
term "return" shall include any return, declaration, report, estimate,
information return and statement required to be filed with or supplied to any
taxing authority in connection with any taxes.
2.13 CUSTOMS. Except as set forth in the Seller 1995 Reports or in Section
2.13 of Seller's Disclosure Schedule, Seller and its subsidiaries have at all
times been in compliance with all requirements administered and enforced by the
U.S. Customs Service related to the OEM Business, including, but not limited to
the classification, valuation, and marking of articles imported into the United
States in a way so as not to give rise to a Seller Material Adverse Effect.
2.14 EMPLOYEE BENEFIT PLANS; ERISA.
(a)Section 2.14 of Seller's Disclosure Schedule lists all material employee
benefit plans, employment contracts or other arrangements for the
provision of benefits for employees or former employees of Seller and its
subsidiaries related to the OEM Business, and, except as set forth in Section
2.14(a) of Seller's Disclosure Schedule, neither Seller nor its subsidiaries
have any commitment to create any additional plan, contract or arrangement
related to the OEM Business or to amend any such plan, contract or arrangement
related to the OEM Business so as to increase benefits thereunder, except as
required under existing collective bargaining agreements. Section 2.14(a) of
Seller's Disclosure Schedule identifies all "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA, covering current or former employees of Seller and its
subsidiaries (the "Seller Plans"), other than Seller Plans which are described
in Seller 1995 Reports or the Proxy Statement for the 1995 Annual Meeting of
Stockholders of Seller. A true and correct copy of each of the employee benefit
plans, employment contracts and other arrangements for the provision of benefits
for employees and former employees of Seller and its subsidiaries related to the
OEM Business described in the Seller SEC Reports, the Seller Plans listed on
Section 2.14(a) of Seller's Disclosure Schedule, except for any multiemployer
plans, and all contracts relating thereto, or to the funding thereof including,
without limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
recordkeeping agreements), each as will be in effect on the Closing Date, has
been provided to Purchaser. In the case of any employee benefit plan, employment
contract or other benefit arrangement related to the OEM Business which is not
in written form, an accurate description of such plan, contract or arrangement
as will be in effect on the Closing Date, has been provided to Purchaser. A true
and correct copy of the most recent annual report, actuarial report, summary
plan description, and Internal Revenue Service determination letter with respect
to each such Seller plan, to the extent applicable, and a current schedule of
assets (and the fair market value thereof assuming liquidation of any asset
which is not readily tradeable) held with respect to any funded plan, Seller
Plan, or benefit arrangement has been provided to Purchaser by Seller, and there
have been no material changes in the financial condition in the respective
plans, Seller Plans or benefit arrangements from that stated in such annual
report and actuarial reports.
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(b)Except as disclosed in the Seller 1995 Reports or as set forth in Section
2.14(b) of Seller's Disclosure Schedule, (i) there have been no
prohibited transactions within the meaning of Section 406 of ERISA or Section
4975 of the Code with respect to any of the Seller Plans which, assuming that
the taxable period of such transaction expired as of the date hereof, could
subject Seller or its subsidiaries to a material tax or penalty under Section
502(i) of ERISA or Section 4975 of the Code; (ii) no liability (except for
premiums due) has been or is expected to be incurred by Seller or any of its
subsidiaries under Title IV of ERISA with respect to any of the Seller Plans or
with respect to any ongoing, frozen or terminated "single employer plan" within
the meaning of Section 4001(a)(15) of ERISA currently or formerly maintained by
any of them, or by any entity which is considered a single employer with Seller
under Section 4001 of ERISA or Section 414 of the Code (a "Seller ERISA
Affiliate"); (iii) all amounts which Seller or its subsidiaries are required to
pay as contributions to the Seller Plans have been timely made or have been
reflected in the Seller Financial Statements; (iv) none of the Seller Plans has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived; (v) the current value
of all "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions used in the Plan's most
recent actuarial valuation) under each of the Seller Plans which is subject to
Title IV of ERISA did not exceed the then current value of the assets of such
plan allocable to such benefit liabilities by more than the amount disclosed in
the Seller 10-K as of February 28, 1995; (vi) each of the Seller Plans has been
operated and administered in all material respects in accordance with applicable
laws, including, but not limited to, the reporting and disclosure requirements
of Part 1 of Subtitle I of ERISA and the group health plan continuation
requirements of Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA; (vii) each of the Seller Plans which is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the IRS to be
so qualified and Seller is not aware of any circumstances likely to result in
revocation of any such determination; (viii) there are no material pending,
threatened or anticipated claims involving any of the Seller Plans other than
claims for benefits in the ordinary course; (ix) no notice of a "reportable
event" within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived has been required to be filed for any
of the Seller Plans; (x) neither Seller nor any of its subsidiaries is a party
to, or participates or has any liability or contingent liability with respect
to, any multiemployer plan (regardless of whether based on contributions of a
Jensen ERISA affiliate); and (xi) neither Seller nor its subsidiaries has any
liability or contingent liability for retiree life and health benefits under any
of the Seller Plans other than statutory liability for providing group health
plan continuation coverage under Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code, except as set forth on Section 2.14(b) of Seller's
Disclosure Schedule; and each of (i) through (xii) being qualified to the extent
such matters relate to or are a party of the OEM Business.
(c)Except as set forth in Section 2.14(c) of Seller's Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will accelerate benefits or any payments
under any Seller employee agreement, plan or arrangement related to the OEM
Business.
2.15 MATERIAL DEFAULTS. Except as set forth on Section 2.15 of Seller's
Disclosure Schedule, neither Seller nor its subsidiaries is, or has received any
notice or has any knowledge that any other party is, in default in any respect
under any contract, agreement, commitment, arrangement, lease, insurance policy,
or other instrument to which Seller or any of its subsidiaries is a party which
is related to the OEM Business or by which Seller or any of its subsidiaries or
the assets, business, or operations receives benefits, except for those defaults
which would not have, individually or in the aggregate, a Seller Material
Adverse Effect, and there has not occurred any event that with the lapse of time
or the giving of notice or both could constitute such a default.
2.16 LABOR MATTERS. Except as set forth on Section 2.16 of Seller's
Disclosure Schedule, there are no material controversies pending or, to the
knowledge of Seller, threatened between Seller or its subsidiaries and any
representatives of its employees, and, to the knowledge of Seller, there are no
material organizational efforts presently being made involving any of the
presently unorganized
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employees of Seller or its subsidiaries related to the OEM Business. With regard
to the OEM Business, Seller and its subsidiaries have complied in all material
respects with all laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, and the payment of social security and similar taxes, and no person
has, to the knowledge of Seller, asserted that Seller or its subsidiaries are
liable in any material amount for any arrears of wages or any taxes or penalties
for failure to comply with any of the foregoing.
2.17 ENVIRONMENTAL MATTERS.
(a)Except as set forth in the Seller 1995 Reports or in Section 2.17 to
Seller's Disclosure Schedule, Seller and its subsidiaries have complied
in all respects with all Environmental Laws (as defined below in this Section)
in connection with the OEM Business or the Purchased Assets. Seller has obtained
and will maintain through the Closing Date all permits, licenses, certificates
and other authorizations which are required with respect to the OEM Business
under any Environmental Laws and all such permits, licenses, certificates and
other authorizations are listed on Section 2.17 to Seller's Disclosure Schedule.
(b)Except as set forth in the Seller 1995 Reports or in Section 2.17 to
Seller's Disclosure Schedule, Seller and its subsidiaries are in
compliance in all respects with all permits, licenses and authorizations
required by any Environmental Laws for the OEM Business, and are also in full
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any Environmental Laws or contained in any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered against Seller
thereunder and related to the OEM Business. All products manufactured and
services provided by Seller or its subsidiaries related to the OEM Business
prior to the date hereof are in compliance with all Environmental Laws
applicable thereto. Seller has hereto delivered to Purchaser true and complete
copies of all environmental studies made in the last ten years relating to the
OEM Business and the Purchased Assets.
(c)Except as set forth in the Seller 1995 Reports or Section 2.17 to
Seller's Disclosure Schedule, there is no pending or, to Seller's
knowledge, threatened civil, criminal or administrative Action, demand, claim,
hearing, notice of violation, investigation, proceeding, notice or demand letter
that affects or applies to the OEM Business or the Purchased Assets, the
products the OEM Business has manufactured or the services it has provided
relating in any way to any Environmental Laws or any regulation or code
promulgated or approved under the Environmental Laws, or any plan, order,
decree, judgment, injunction, notice or demand letter issued to or entered
against Seller or its subsidiaries related to the OEM Business.
(d)Except as set forth in the Seller 1995 Reports or in Section 2.17 to
Seller's Disclosure Schedule, there are no past or present (or, to the
knowledge of Seller, anticipated) events, conditions, circumstances, activities,
practices, incidents, Actions or plans which may interfere with or prevent
compliance or continued compliance by Seller with any Environmental Laws or with
any regulation or code promulgated or approved under any Environmental Law, or
any plan, order, decree, judgment, injunction, notice or demand letter issued to
or entered against Seller or its subsidiaries thereunder, or which may give rise
to any common law or legal liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, notice of violation, study or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, by Seller or its
subsidiaries of any pollutant, contaminant, chemical, industrial, toxic or
hazardous substance or waste; all as related to the OEM Business.
(e)Except as set forth in Section 4.17 to the Jensen Disclosure Schedule and
except in accordance with a valid governmental permit, license,
certificate or approval listed in Section 2.17 to Seller's Disclosure Schedule,
there has been no emission, spill, release or discharge by Seller or its
subsidiaries, from any of its assets, from any site at which any of such assets
are or were located or at
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any other location or disposal site, into or upon (i) the air, (ii) soils or
improvements, (iii) surface water or ground water, or (iv) the sewer, septic
system or waste treatment, storage or disposal system servicing such asset is
any toxic or hazardous substances or wastes used, stored, generated, treated or
disposed at or from any of such assets (any of which events is hereinafter
referred to as "Hazardous Discharge"), all as related to the OEM Business.
(f)Prior to the Closing Date, there shall not occur any Hazardous Discharge
which occurs or is related to the OEM Business (except in accordance with
a valid governmental permit, license, certificate or approval listed in Section
2.17 to Seller's Disclosure Schedule).
(g)The term "Environmental Laws" means all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules
and regulations promulgated under the Environmental Laws, including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment, (including, without
limitation, air, surface water, ground, water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes. As
used in this Agreement, the term "hazardous substances or wastes" includes,
without limitation, (i) all substances which are designated pursuant to Section
311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.
Section1251 ET SEQ.; (ii) any element, compound, mixture, solution, or substance
which is designated pursuant to Section 102 of the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section9601 ET
SEQ.; (iii) any hazardous waste having the characteristics which are identified
under or listed pursuant to Section 3001 of the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section6901 ET SEQ.; (iv) any toxic pollutant
listed under Section 307(a) of the FWPCA; (v) any hazardous air pollutant which
is listed under Section 112 of the Clean Air Act, 42 U.S.C. Section7401 ET SEQ.;
(vi) any imminently hazardous chemical substance or mixture with respect to
which action has been taken pursuant to Section 7 of the Toxic Substances
Control Act, 15 U.S.C. Section2601 ET SEQ.; and (vii) waste oil.
(h)Notwithstanding anything in the foregoing to the contrary, the
representations and warranties contained in this Section 4.17 shall be
deemed to be true and correct unless the aggregate exposure to Purchaser of
undisclosed and disclosed liabilities which have either arisen or which may
arise under Environmental Laws exceeds in the aggregate $1 million.
2.18 CERTAIN BUSINESS PRACTICES. As of the date of this Agreement, except
for such action which would not have a Seller Material Adverse Effect, neither
Seller nor any of its subsidiaries, nor any directors, officers, agents, or
employees of Seller or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activities, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any unlawful payment.
2.19 [INTENTIONALLY OMITTED.]
2.20 TRADEMARKS, ETC. Section 2.20 of Seller's Disclosure Schedule sets
forth a true and complete list of all patents, trademarks (registered or
unregistered), trade names, service marks, and registered copyrights and
applications therefor owned, used, or filed by or licensed to Seller and its
subsidiaries ("Intellectual Property Rights") and, with respect to registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as set forth in Section 2.20 of Seller's Disclosure Schedule, the Intellectual
Property Rights which are trademark or copyright registrations and issued
patents are valid and in good standing and, along with applications therefor,
are not involved in any interferences, oppositions, or cancellation proceedings,
and are owned by Seller, free and clear of all liens, encumbrances, equities, or
claims. Seller or its subsidiaries owns or has the right to use, without payment
to any other party, the patents, trademarks, trade names, service marks,
copyrights, and applications therefor
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referred to in such Schedule or otherwise used by Seller or its subsidiaries,
and the consummation of the transactions contemplated hereby will not alter or
impair such rights in any material respect. Except as set forth in Section 2.20
to Seller's Disclosure Schedule, Seller is not a licensor or licensee in respect
of any Intellectual Property Rights, nor has it granted any rights thereto or
interest therein to any person or entity. Except as set forth in Section 2.20 to
Seller's Disclosure Schedule, no claims are pending or threatened by any person
with respect to the ownership, validity, enforceability, or use of any such
Intellectual Property Rights challenging or questioning the validity or
effectiveness of any of the foregoing which claims reasonably could be expected
to have a Seller Material Adverse Effect. Seller shall make all required filings
to ensure the continued validity and enforceability of its Intellectual Property
Rights up to the Closing Date.
2.21 SELLER STOCKHOLDERS' APPROVAL. Seller will take all necessary action
so that stockholder approval of this Agreement and the transactions contemplated
hereby (the "Seller Stockholders' Approval"), will require only the affirmative
vote of the holders of (i) a majority of the outstanding shares of Seller Common
Stock, and (ii) a majority of the outstanding shares of Seller Common Stock
which are voted at the Seller stockholders' meeting other than shares held of
record or beneficially by Robert G. Shaw.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller, as follows:
3.1 CORPORATE ORGANIZATION. ETC. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and will be qualified to do business in Illinois on the Closing Date.
3.2 CAPITALIZATION. As of the date of this Agreement, Purchaser has
authorized capital stock consisting of 1,000 shares of common stock, no par
value per share.
3.3 AUTHORIZATION, ETC. Purchaser has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. The Board of Directors of Purchaser has duly authorized the execution
and delivery of this Agreement and the transactions contemplated hereby, and no
other corporate proceedings on its part are necessary to authorize this
Agreement and the transactions contemplated hereby.
3.4 NO VIOLATION. Purchaser is not subject to or obligated under any
certificate of incorporation, bylaw, Law, or any agreement or instrument, or any
license, franchise or permit which would be breached or violated by its
execution, delivery or performance of this Agreement. Purchaser will comply with
all Laws in connection with its execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
3.5 GOVERNMENTAL AUTHORITIES. Purchaser is not required to submit any
notice, report or other filing with and no consent, approval or authorization is
required by any governmental or regulatory authority in connection with
Purchaser's execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE IV
COVENANTS OF SELLER
Except as otherwise consented to or approved by Purchaser in writing, Seller
covenants and agrees as follows:
4.1 REGULAR COURSE OF BUSINESS. Seller will operate the OEM Business in
the ordinary course, diligently and in good faith, consistent with past
management practices; will maintain all of the OEM Business properties in
customary repair, order and condition, reasonable wear and tear excepted; will
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maintain (except for expiration due to lapse of time) all leases and contracts
described herein and related to the OEM Business in effect without change except
as expressly provided herein; will comply with the provisions of all Laws
applicable to the conduct of the OEM Business; will not engage in any
significant or unusual transaction related to the OEM Business; will not cancel,
release, waive or compromise any debt, claim or right in its favor having a
value in excess of $5,000 other than in connection with returns for credit or
replacement in the ordinary course of the OEM Business; will not convert its
assets into cash except in the ordinary course of business consistent with prior
practices; and will maintain insurance coverage up to the Closing Date in
amounts adequate to protect and insure Seller against perils which good business
practice demands be insured against or which are normally insured against by
other industry members similarly situated.
4.2 AMENDMENTS. Except as required for the transactions contemplated in
this Agreement and in that certain Amended and Restated Agreement and Plan of
Merger dated as of this date by and among Recoton Corporation, RC Acquisition
Sub, Inc. and Seller (the "Merger Agreement"), no change or amendment shall be
made in or to FujiCone's articles or certificate of incorporation or bylaws.
Seller will not merge FujiCone into or consolidate FujiCone with any other
corporation or person, or change the character of FujiCone's business.
4.3 CAPITAL CHANGES. Seller will not issue or sell any shares of
FujiCone's capital stock of any class or issue or sell any securities
convertible into, or options, warrants to purchase or rights to subscribe to,
any shares of FujiCone's capital stock of any class.
4.4 BONUSES. Except as set forth in Exhibit 4.4, Seller will not pay, set
aside, accrue, agree to or become liable in any manner for any bonus, of any
nature or type, to any employee or officer of the OEM Business.
4.5 CAPITAL AND OTHER EXPENDITURES. Seller will not make any capital
expenditures related to the OEM Business, or commitments with respect thereto,
in excess of $10,000, except as set forth in Exhibit 4.5. Except as set forth on
Exhibit 4.5, Seller will not pay any debt or obligation of the OEM Business
(except for prepaying trade accounts payable in the normal course of business to
take advantage of cash discounts) or make any other payments or distributions.
4.6 BORROWING. Except as disclosed on Exhibit 4.6, Seller will not incur,
assume or guarantee any indebtedness or capital leases in connection with the
OEM Business. Seller will not create or permit to become effective any mortgage,
pledge, lien, encumbrance or charge of any kind upon the Purchased Assets other
than in the ordinary course of business.
4.7 OTHER COMMITMENTS. Except in the ordinary course of business
consistent with past practices, Seller will not enter into any material
transaction related to the OEM Business, make any material commitment related to
the OEM Business or incur any material obligation related to the OEM Business.
4.8 FULL ACCESS AND DISCLOSURE.
(a)Seller shall afford to Purchaser and its lenders and their respective
counsel, accountants and other authorized representatives access during
business hours to Seller's plants, properties, books and records related to the
OEM Business in order that Purchaser and its lenders may have full opportunity
to make such reasonable investigations as they shall desire to make of the
affairs of Seller, and Seller will cause its officers and employees to furnish
such additional financial and operating data and other information related to
the OEM Business as Purchaser and its lenders shall from time to time reasonably
request.
(b)From time to time prior to the Closing Date, Seller will promptly
supplement or amend in writing information previously delivered to
Purchaser with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or disclosed.
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4.9 CONSENTS. Seller will use all necessary means at its disposal to
obtain on or prior to the Closing Date all consents necessary to the
consummation of the transactions contemplated hereby.
4.10 BREACH OF AGREEMENT. Seller will not take any action which, if taken
prior to the Closing Date, would constitute a breach of this Agreement.
4.11 FURTHER ASSURANCES. Seller and Seller's counsel will furnish
Purchaser with such other and further documents, certificates, opinions,
consents and information as Purchaser shall reasonably request to enable
Purchaser to borrow funds from a bank or other lending entity or individual(s)
to acquire the Purchased Assets and to evidence compliance with the terms and
conditions of any credit agreement in existence or to be entered into between
Purchaser and a bank and/or other lending entities or individuals.
4.12 FULFILLMENT OF CONDITIONS. Seller will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Purchaser contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.
4.13 TITLE AND SURVEY. Seller shall furnish to Purchaser as soon as
possible but in no event later than May 6, 1996, commitments from a title
company or companies designated by Purchaser and reasonably satisfactory to
Seller (the "Title Company"), to issue to Purchaser at Closing ALTA Form B
Extended Coverage Owner's Title Policies reasonably acceptable to Purchaser in
the amount of the appraised value of the real property to be conveyed by Seller
to Purchaser pursuant hereto (the "Subject Real Property") naming the Purchaser
as proposed insured. Seller shall procure all utility letters necessary for the
Title Company to issue its extended coverage endorsement. Seller shall also
cause to be delivered to Purchaser copies of all recorded documents listed in
Schedule B of the title commitment. Seller shall cause the Title Company to
issue an endorsement deleting all Schedule B general exceptions, a 3.1 zoning
endorsement and any other endorsements desired or requested by Purchaser or
Purchaser's lenders. Seller shall also furnish to Purchaser ALTA/ACSM surveys,
prepared by a surveyor designated by Purchaser and dated subsequent to the date
of this Agreement, certified in favor of the Purchaser, Purchaser's lenders and
the Title Company depicting each parcel comprising the Subject Real Property,
manholes, structures and utility lines in, over, under or upon each parcel
comprising the Subject Real Property, the locations of all easements upon each
parcel comprising the Subject Real Property or appurtenant thereto (identified
by the recorder's document number) and showing that there are no encroachments
from or upon adjoining property or upon any easements located on each parcel
comprising the Subject Real Property, and containing such certifications as may
be required by the Title Company to issue its extended coverage endorsements.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with Seller that:
5.1 CONFIDENTIALITY. Purchaser will hold in strict confidence and not
disclose to any other party (other than its counsel and other advisors), without
Seller's prior consent, all information received by Purchaser from Seller, and
any of Seller's officers, directors, employees, agents, counsel or auditors in
connection with the transactions contemplated hereby except as may be required
by applicable law or as otherwise contemplated herein.
5.2 BOOKS AND RECORDS. Purchaser shall preserve and keep Seller's books
and records delivered hereunder for a period of not less than three (3) years
from the date hereof and shall, during such period, make such books and records
available to officers and directors of Seller for any reasonable purpose.
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5.3 FULFILLMENT OF CONDITIONS. Purchaser will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the obligations of Purchaser contained in this
Agreement and will not take or fail to take any action that could reasonably be
expected to result in the non-fulfillment of any such condition.
ARTICLE VI
OTHER AGREEMENTS
Purchaser and Seller covenant and agree that:
6.1 AGREEMENT TO COOPERATE/DEFEND. In the event any action, suit,
proceeding or investigation of the nature specified in Section 7.5 or Section
8.4 hereof is commenced, whether before or after the Closing Date, all the
parties hereto agree to cooperate and use their best efforts to defend against
and respond thereto.
6.2 CONSULTANTS, BROKERS AND FINDERS. Except for Lehman Brothers, Seller's
investment banking firm, whose fee arrangement has been disclosed to Purchaser
prior to the date hereof, each of Seller and Purchaser represents and warrants
to the other that each has not retained any consultant, broker or finder in
connection with the transactions contemplated by this Agreement. Purchaser
hereby agrees to indemnify, defend and hold Seller and its respective officers,
directors, employees and affiliates, harmless from and against any and all
claims, liabilities or expenses for any brokerage fees, commissions or finders
fees due to any consultant, broker or finder retained by Purchaser. Seller
hereby agrees to indemnify, defend and hold Purchaser and its officers,
directors, employees and affiliates, harmless from and against any and all
claims, liabilities or expenses for any brokerage fees, commissions or finders
fees due to any consultant, broker or finder retained by Seller, including,
without limitation, Lehman Brothers.
6.3 ASSUMPTION AGREEMENT. At the Closing, Purchaser and Seller will enter
into the Assumption Agreement, as contemplated by Section 9.2(e) hereof, in the
form set forth in Exhibit 6.3.
6.4 MANAGEMENT SERVICES AGREEMENT. At the Closing, Purchaser and Seller
will enter into a Management Services Agreement in the form set forth in Exhibit
6.4.
6.5 SUPPLY AGREEMENT. At the Closing, Purchaser and Seller will enter into
a Supply Agreement in the form set forth in Exhibit 6.5.
6.6 SHARED FACILITIES AGREEMENT. At the Closing, Purchaser and Seller will
enter into a Shared Facilities Agreement in the form set forth in Exhibit 6.6.
6.7 NONCOMPETITION AGREEMENT. At the Closing, Purchaser and Seller and
FujiCone will enter into a Noncompetition Agreement in the form set forth in
Exhibit 6.7.
6.8 LICENSE AGREEMENT. At the Closing, Purchaser and Seller will enter
into a limited license agreement for use of Seller's trademarks in connection
with the OEM Business in the form set forth in Exhibit 6.8.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
Each and every obligation of Purchaser under this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions unless waived in writing by Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations and
warranties made by Seller herein shall be true and correct in all material
respects on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; Seller shall have performed and complied in
all material respects with all agreements, covenants and conditions required by
this
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Agreement to be performed and complied with by it prior to the Closing Date; the
Vice President of Seller shall have delivered to Purchaser a certificate, dated
the Closing Date, in the form designated Exhibit 7.1 hereto, certifying to such
matters and the other conditions contained in this Article VII.
7.2 CONSENTS AND APPROVALS. All consents from and filings with third
parties, regulators and governmental agencies required to consummate the
transactions contemplated hereby, or which, either individually or in the
aggregate, if not obtained, would cause a materially adverse effect on Seller's
financial condition or business shall have been obtained and delivered to
Purchaser.
7.3 OPINION OF COUNSEL TO SELLER. Purchaser shall have received an opinion
of counsel to Seller, dated the Closing Date, substantially in the form attached
hereto as Exhibit 7.3.
7.4 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change since the date of this Agreement in the business, prospects, financial
condition, earnings or operations of Seller's OEM Business.
7.5 NO PROCEEDING OR LITIGATION. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced or
threatened, and no investigation by any governmental or regulatory authority
shall have been commenced or threatened against Seller or Purchaser or any of
their respective principals, officers or directors seeking to restrain, prevent
or change the transactions contemplated hereby or questioning the validity or
legality of any of such transactions or seeking damages in connection with any
of such transactions.
7.6 FINANCING. Purchaser shall have obtained, on terms satisfactory to it,
such financing as it deems necessary to enable it to consummate the transactions
contemplated hereby. It is expressly understood that all proposed financing will
be conditioned on completion of any environmental, business and financial due
diligence of Purchaser's proposed lender(s) and Seller's ability to obtain any
and all necessary consents to the proposed transactions in any contracts or
other agreements requiring such consents, provided, however, that Purchaser
shall have undertaken reasonable good faith efforts to obtain such financing.
7.7 CONSUMMATION OF MERGER WITH RECOTON. The transactions contemplated in
the Merger Agreement shall be consummated as a post closing condition. In the
event the transactions contemplated by the Merger Agreement do not occur within
one (1) business day of the Closing of the transaction contemplated by this
Agreement, this transaction shall automatically be unwound and the Purchase
Price shall be immediately returned to Purchaser.
7.8 [INTENTIONALLY OMITTED.]
7.9 ENVIRONMENTAL DUE DILIGENCE REVIEW. Prior to April 2, 1996 (which date
may be extended if Purchaser is still conducting its study and testing),
Purchaser may perform or have performed such environmental site inspections and
reasonable testing relating to the real properties owned or operated by Seller
and FujiCone in which the OEM Business is operated as Purchaser may deem
appropriate. If based upon the written reports of independent environmental
consultants, Purchaser determines in its sole and reasonable discretion that the
results of the inspections or tests performed indicate that any of such property
or a number of such properties is, or that there is a material risk that such
property(ies) may be, contaminated in a way as to give rise to possible
liability, contingent or otherwise, under the Environmental Laws in an aggregate
amount of $1 million or greater, Purchaser may terminate this Agreement by
written notice to Seller. The parties acknowledge that Recoton has engaged
certain environmental consultants to perform certain tests and inspections on
the real properties described above as to which Purchaser shall have full access
and Purchaser shall be entitled to rely upon such reports prepared or generated
by such consultants as the written reports of independent environmental
consultants referred to above. In consideration for access to such
Recoton-retained consultants and resulting reports, Purchaser shall make
available to Recoton its consultants, if any, and any resulting reports.
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7.10 SHAW EMPLOYMENT AGREEMENT. At the Closing, the employment agreement
with Robert G. Shaw in the form set forth in Exhibit 7.10 shall be effective.
7.11 TRANSFER/ASSIGNMENT OF LICENSES. Purchaser shall have received and
entered in a satisfactory license agreement or sublicense agreement regarding
the Goodman Speaker Licenses referenced in Exhibit 1.2.8.
7.12 OTHER DOCUMENTS. Seller will furnish Purchaser with such other and
further documents and certificates of Seller's officers and others as Purchaser
shall reasonably request to evidence compliance with the conditions set forth in
this Agreement.
7.13 OTHER AGREEMENTS. The agreements described in Article VI shall have
been entered into and delivered.
7.14 GOVERNMENTAL APPROVALS, ETC. Purchaser, its legal counsel,
consultants and others appointed by Purchaser shall have received satisfactory
evidence that all governmental, regulatory and third-party approvals required to
complete the acquisition of the Purchased Assets have been obtained.
7.15 MSP LETTERS. At the Closing, Recoton Corporation shall have delivered
a letter to each of the persons described as "MSPs" in the Management Services
Agreement between Seller and Purchaser ("MSA") stating that the services being
performed under the MSA by such MSP does not violate such MSP's Transitional
Employment Agreement.
7.16 ACCOUNTS RECEIVABLE SALE. If the parties designate a purchaser of the
accounts receivable pursuant to Section 1.8 hereof, such sale shall have been
consummated.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement shall be subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions unless waived in writing by Seller:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations and
warranties made by Purchaser herein shall be true and correct in all material
respects on the date of this Agreement and on the Closing Date with the same
effect as though made on such date; Purchaser shall have performed and complied
with in all material respects all agreements, covenants and conditions required
by this Agreement to be performed and complied with by it prior to the Closing
Date; Purchaser shall have delivered to Seller a certificate of its President,
dated the Closing Date, certifying to the fulfillment of the conditions set
forth herein, in the form designated as Exhibit 8.1 and the other conditions
contained in this Article VIII.
8.2 STOCKHOLDER APPROVAL. The Agreement and the transaction contemplated
hereby shall have been approved and adopted by the vote of the stockholders of
Seller in accordance with Section 2.21.
8.3 FAIRNESS OPINION. Seller shall have received from Lehman Brothers an
opinion letter stating that the transaction contemplated by this Agreement is
"fair from a financial point of view" to Seller.
8.4 NO PROCEEDING OR LITIGATION. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced, or
threatened, and no investigation by any governmental or regulatory authority
shall have been commenced, or threatened, against Seller, Purchaser or any of
their respective principals, officers or directors, seeking to restrain, prevent
or change the transactions contemplated hereby or questioning the validity or
legality of any of such transactions or seeking damages, in connection with any
of such transactions.
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8.5 OPINION OF COUNSEL. Seller shall have received an opinion of counsel
to Purchaser dated the Closing Date substantially in the form of Exhibit 8.5.
8.6 [INTENTIONALLY OMITTED.]
8.7 PAYMENT. The payment described in Section 1.3 shall have been made.
8.8 OTHER DOCUMENTS. Purchaser will furnish Seller with such other
documents and certificates to evidence compliance with the conditions set forth
in this Article as may be reasonably requested by Seller.
8.9 OTHER AGREEMENTS. The agreements described in Article VI shall have
been entered into and delivered.
8.10 CONSUMMATION OF MERGER WITH RECOTON. The transactions contemplated in
the Merger Agreement shall be consummated as contemplated on Section 7.7.
8.11 CONSENTS AND APPROVALS. All consents from and filings with third
parties, regulators and governmental agencies required to consummate the
transactions contemplated hereby, or which, either individually or in the
aggregate, if not obtained, would cause a materially adverse effect on Seller's
financial condition or business shall have been obtained and delivered to
Seller.
8.12 GOVERNMENTAL APPROVALS, ETC. Seller, its legal counsel, consultants
and others appointed by Seller shall have received satisfactory evidence that
all governmental, regulatory and third-party approvals required to complete the
acquisition of the Purchased Assets have been obtained.
ARTICLE IX
CLOSING
9.1 CLOSING. Unless this Agreement shall have been terminated or abandoned
pursuant to the provisions of Article X hereof, a closing (the "Closing") shall
be held at the location of the closing of the Merger, immediately prior to such
closing.
9.2 DELIVERIES AT CLOSING.
(a)At the Closing, Seller and/or FujiCone, as applicable, shall transfer and
assign to Purchaser all of the Purchased Assets, and the other
agreements, certifications and other documents required to be executed and
delivered hereunder at the Closing shall be duly and validly executed and
delivered by the parties thereto. Notwithstanding anything to the contrary
contained in this Agreement, Purchaser shall have the right at any time prior to
Closing to direct Seller and/or FujiCone, as applicable, to convey title to all
or any portion of the Subject Real Property to a corporation, limited
partnership, or limited liability company which is under common control with
Purchaser. In the event of such direction, the recipient of the Subject Real
Property shall become a party to the Noncompetition Agreement described in
Exhibit 6.7.
(b)At and after the Closing, Seller and/or FujiCone, as applicable, shall
have the right to review and obtain copies of any financial records of
Seller and/or FujiCone, as applicable, in the possession of Purchaser, necessary
for the preparation of Seller's and/or FujiCone's, as applicable, tax returns,
and Purchaser agrees to retain such records until the statute of limitations
pertaining to the final tax returns filed by Seller and/or FujiCone, as
applicable, expires, and Purchaser shall have the right to review and obtain
copies of the minute book, stock book and stock register of Seller and/or
FujiCone, as applicable.
(c)At the Closing, Seller and/or FujiCone shall deliver to Purchaser, in
form reasonably satisfactory to counsel for Purchaser, such bills of
sale, assignments, deeds or other conveyances and all third party consents as
may be appropriate or necessary to effect the transfer to Purchaser of the
property and rights as contemplated herein.
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(d)From time to time after the Closing, at Purchaser's request and without
further consideration from Purchaser, Seller and/or FujiCone shall
execute and deliver such other instruments of conveyance and transfer and take
such other action as Purchaser reasonably may require to convey, transfer to and
vest in Purchaser and to put Purchaser in possession of any assets or property
to be sold, conveyed, transferred and delivered hereunder.
(e)The assumption of liabilities and obligations hereunder shall be by
assumption agreement (as set forth in Exhibit 6.3). Purchaser and its
successors and assigns will forever defend, indemnify and hold Seller and/or
FujiCone harmless from any and all liabilities and obligations of Seller and/or
FujiCone which have been assumed by Purchaser at the Closing, or which shall
arise from any acts or omissions of Purchaser after the Closing. Purchaser
agrees at Seller's and/or FujiCone's request from time to time (but no earlier
than ninety (90) days after the Closing) to supply to Seller and/or FujiCone
proof of or a certificate by its Chief Financial Officer of the payment and
satisfaction by Purchaser of liabilities and obligations of Seller and/or
FujiCone due to date and assumed by Purchaser.
9.3 LEGAL ACTIONS. If, prior to the Closing Date, any action or proceeding
shall have been instituted by any third party before any court or governmental
agency to restrain or prohibit this Agreement or the consummation of the
transactions contemplated herein, the Closing shall be adjourned at the option
of any party hereto for a period of up to one hundred twenty (120) days. If, at
the end of such 120-day period, the action or proceeding shall not have been
favorably resolved, any party hereto may, by written notice thereof to the other
party or parties, terminate its obligation hereunder.
9.4 SPECIFIC PERFORMANCE. The parties agree that if any party hereto is
obligated to, but nevertheless does not, consummate this transaction, then any
other party, in addition to all other rights or remedies, shall be entitled to
the remedy of specific performance mandating that the other party or parties
consummate this transaction. In an action for specific performance by any party
against any other party, the other party shall not plead adequacy of damages at
law.
9.5 BULK SALES AND BULK TRANSFER LAWS. Subject to the indemnification
provisions set forth in this Agreement, Seller and Purchaser hereby waive all
filings required and/or permitted under the Illinois bulk sales statutes
(Section 9-902(d) of the Illinois Income Tax Act (35 ILCS 210/2(d), Section 5j
of the Illinois Retailers' Occupation Tax Act (35 ILCS 120/5j) and Section 2600
of the Illinois Unemployment Compensation Act (820 ILCS 405/2600)).
9.6 NAME CHANGE. Upon the Closing, Seller shall change its name to another
name different from its present name and do such other things as shall be
necessary or desirable to permit Purchaser to assume and use the corporate name
"International Jensen Incorporated" and the trade name "IJI" for corporate
identification purposes, including, without limitation, the filing of a charter
amendment with the Delaware Secretary of State and appropriate amendatory
documentation with the Secretaries of State of each State were Seller is
qualified to do business as a foreign corporation as of the Closing. Upon the
Closing, FujiCone shall change its name to another name different from its
present name and do such other things as shall be necessary or desirable to
permit Purchaser to assume and use the FujiCone name, including, without
limitation, (i) the filing of a charter amendment with the Delaware Secretary of
State and appropriate amendatory documentation with the Secretary of State of
each state where FujiCone is qualified to do business as a foreign corporation
as of the Closing, and (ii) the filing with the U.S. Patent and Trademark Office
and any state trademark office appropriate transfers of any trademark, trade
name or service mark registrations relating or pertaining to the FujiCone name,
to the extent requested by and prepared by Purchaser.
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ARTICLE X
TERMINATION AND ABANDONMENT
10.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time (notwithstanding
approval by the Board of Directors of Purchaser):
(a) by mutual consent of Purchaser and Seller;
(b) by either Seller or Purchaser if (i) such party is not in breach
hereunder and the other party is in breach hereunder, and (ii) this
Agreement is not consummated on or before the Closing Date, including
extensions; or
(c) by either Seller or Purchaser if (i) such party is not in breach
hereunder and (ii) this Agreement is not consummated because one or
more of the conditions contained in Article VII or Article VIII, whichever
is appropriate, was not satisfied and the other party did not waive such
condition.
10.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to Section 10.1 hereof, this Agreement shall terminate and
shall be abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party will upon request redeliver all documents and other
materials of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the party furnishing the same;
(b) no party hereto shall have any liability or further obligation to any
other party to this Agreement; and
(c) each party shall bear its own expenses; provided, however, that if
this Agreement is terminated as provided herein and Purchaser is not
in breach hereunder and the Merger has not occurred, all expenses incurred
by Purchaser and/or Robert G. Shaw in furtherance of this Agreement
(including, without limitation, reasonable attorneys' fees and costs) shall
be promptly reimbursed by Seller upon submission of invoices, statements or
other expense documentation by Purchaser and/or Robert G. Shaw.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION BY SELLER. Seller shall indemnify Purchaser and its
shareholders, officers and directors against, and save and hold them harmless
from, any and all liability, loss, cost, expense or damage (including reasonable
attorneys' fees) ("Damages") incurred or sustained by Purchaser or any of its
shareholders, officers or directors as a result of, by reason of, or arising
from: (a) the failure of Seller and/or FujiCone to perform promptly any covenant
or agreement made by Seller and/or FujiCone in this Agreement to be performed in
any period after the Closing Date; or (b) any liability of Purchaser arising out
of or in any way related to the Excluded Liabilities.
11.2 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify Seller and
its shareholders, officers and directors against, and save and hold them
harmless from, any and all Damages incurred or sustained by Seller or any of its
shareholders, officers or directors as a result of, by reason of, or arising
from: (a) the failure of Purchaser to perform promptly any covenant or agreement
made by Purchaser in this Agreement to be performed in any period after the
Closing Date; or (b) any Assumed Liability.
11.3 MECHANICS. Any notice of a claim by either party shall state the
facts giving rise to such claim and the alleged basis for the claim and, if
known by the party giving notice, the amount of liability asserted by reason
thereof. If an indemnified Party ("Indemnitee") shall give notice of claim for
indemnity to the other Party ("Indemnitor"), Indemnitor shall have the right, at
its own expense,
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to be represented by counsel of its choosing, and to contest or defend any claim
asserted by any third person (including any governmental agency or department)
against Indemnitee which constitutes the basis of the notice of claim made by
Indemnitee. If Indemnitor elects to make such contest or defense, it shall give
written notice of such election within fifteen (15) days following receipt of
the notice of claim from Indemnitee and indemnification shall be suspended until
the final determination of the claim asserted by such third person against
Indemnitee. Indemnitor shall have such access to records, files and personnel of
Indemnitee as it may reasonably require in connection with contesting or
defending any such claim, and Indemnitee shall reasonably cooperate in such
defense. If Indemnitor does not elect to make such contest or defense,
Indemnitee may, at Indemnitor's expense, contest or defend against, such claim
in such manner as it may deem appropriate including, but not limited to,
settling such claim on such terms as Indemnitee may deem appropriate, provided
that no settlement shall be made without the written consent of Indemnitor which
consent shall not be unreasonably withheld. Indemnitor shall reimburse
Indemnitee for its costs (including reasonable attorneys' fees and any cost of
settlement) and no action taken by Indemnitee in accordance with such defense
and settlement shall relieve Indemnitor of its indemnification obligations
herein provided.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified and supplemented only by written agreement of Seller
and Purchaser with the prior written consent of Recoton Corporation.
12.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of Seller on the one
hand, or Purchaser on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived in writing by Purchaser or by
Seller, respectively, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this Section
12.2.
12.3 EXPENSES. In the event the Closing under this Agreement and the
transactions contemplated in the Merger Agreement occur:
(a) Seller shall pay the following expenses related to the transaction
contemplated by this Agreement:
(i)
all legal (including all fees of Stroock & Stroock & Lavan and
Vedder Price Kaufman & Kammholz), accounting and other expenses
incurred by Seller and/or FujiCone or on its behalf in connection with
this Agreement and the transactions contemplated herein.
(ii)
all investment banking fees payable in connection with the
transactions contemplated herein, including without limitation,
all fees of Lehman Brothers, Inc. and Furman Selz Incorporated, but
excluding fees for any investment bankers retained by Purchaser.
(iii)
up to $43,000.00 for the cost of environmental site testing and
evaluation as contemplated by Section 7.9 hereof plus the cost of
any additional environmental site testing and evaluations commissioned
solely by Seller; and
(iv)
up to $100,000.00 for the following: (A) sales, transfer, stamp,
excise and other taxes (other than income taxes), foreign or
domestic, federal or state, required to be paid in respect to or as a
result of Seller's and/or FujiCone's conveyance, assignment or transfer
of the Purchased Assets to Purchaser; (B) costs of title policies and all
related endorsements, surveys, recording charges and escrow charges as
set forth in Section 4.13; (C) all costs of environmental site testing
and evaluation, to the extent such costs exceed the amounts
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incurred pursuant to Section 12.3(a)(iii) above, including, without
limitation, reasonable attorneys' fees related to the procurement and
evaluation of environmental reports incurred by Purchaser.
(b) Purchaser shall pay the following expenses:
(i)
all legal (including all fees of Wildman, Harrold, Allen & Dixon
(other than those set forth in Section 12.3(a)(iv)(C) above)),
accounting and other expenses incurred by or on its behalf in connection
with this Agreement and the transactions contemplated herein;
(ii)
all fees and expenses incurred by Purchaser in connection with
obtaining the financing described in Section 7.6 hereof; and
(iii)
to the extent the expenses listed in (a)(iv) above exceed
$100,000.00, Purchaser shall be responsible for such excess.
12.4 NOTICES. Any notice, request, consent or communication (collectively
a "Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered, (ii) sent by certified or registered mail, return
receipt requested, postage prepaid, (iii) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (iv) telexed or
telecopied, with receipt confirmed, addressed as follows:
(a) If to Seller and/or FujiCone:
International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
in each case with a copy to each of:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
Attention: John R. Obiala
Telecopier: (312) 609-5005
Telephone: (312) 609-7522
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
(b)If to Purchaser to:
IJI Acquisition Corp.
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
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with a copy to:
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies
Telecopier: (312) 201-2555
Telephone: (312) 201-2521
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
12.5 DEFINITIONS. For the purpose of this Agreement, "Laws" shall include,
without limitation, all foreign, federal, state and local laws, statutes, rules,
regulations, codes, ordinances, plans, orders, judicial decrees, writs,
injunctions, notices, decisions or demand letters issued, entered or promulgated
pursuant to any foreign, federal, state or local law. For the purpose of this
Agreement, "generally accepted accounting principles" shall mean such
principles, applied on a consistent basis, as set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting Standards Board
which are applicable in the circumstances as of the date in question, and the
requirement that such principles be applied on a "consistent basis" means that
accounting principles observed in the current period are comparable in all
material respects to those applied in the preceding periods, except as change is
permitted or required under or pursuant to such accounting principles. For
purposes of this Agreement, "material" means one or more matters having in
aggregate an economic consequence in excess of $25,000. References herein to
"Seller" shall mean the Surviving Corporation (as defined in the Merger
Agreement) after the Merger.
12.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and permitted assigns, but neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by Seller
without the prior written consent of Purchaser.
12.7 GOVERNING LAW; WAIVER OF JURY TRIAL. This Agreement shall be governed
by the laws of the state of Illinois (regardless of the laws that might
otherwise govern under applicable Illinois principles of conflicts of law of the
state of Illinois) as to all matters including, but not limited to, matters of
validity, construction, effect, performance and remedies. IN THE EVENT OF ANY
LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREUNDER THE PARTIES HERETO WAIVE ALL RIGHTS TO A
TRIAL BY JURY.
12.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 NEUTRAL INTERPRETATION. This Agreement constitutes the product of the
negotiation of the parties hereto and the enforcement hereof shall be
interpreted in a neutral manner, and not more strongly for or against any party
based upon the source of the draftsmanship hereof.
12.10 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.11 ENTIRE AGREEMENT. This Agreement, which term as used throughout
includes the Exhibits hereto, embodies the entire agreement and understanding of
the parties hereto in respect of the
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subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
12.12 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties and agreements in this Agreement shall survive
the Closing, except for the agreements contained in this Section 12.12, Sections
1.4, 1.5, 5.1, 5.2, 6.1, 6.2, 10.2, Article XI and Section 12.3. This Section
12.12 shall not limit any covenant or agreement of the parties which by its
terms, contemplates performance after the Closing Date.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement as
of the date first hereinabove set forth.
PURCHASER:
IJI ACQUISITION CORP.
__________/S/_Robert G. Shaw_________
By: Robert G. Shaw
Its: President
SELLER:
INTERNATIONAL JENSEN INCORPORATED
________/S/_Marc T. Tanenberg________
By: Marc T. Tannenberg
Its: Vice President
FUJICONE, INC.
________/S/_Marc T. Tanenberg________
By: Marc T. Tanenberg
Its: Vice President
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EXHIBIT 2.3
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement"), is made as of this
day of , 1996 (the "Effective Date"), by and
between IJI ACQUISITION CORP., an Illinois corporation, the name of which is
about to be changed to INTERNATIONAL JENSEN INCORPORATED ("Purchaser"), and
INTERNATIONAL JENSEN INCORPORATED, a Delaware corporation, the name of which is
about to be changed to RECOTON AUDIO CORPORATION ("Seller") after its merger
into a subsidiary of Recoton Corporation, a New York corporation ("Recoton") and
Recoton.
W I T N E S S E T H:
WHEREAS, Seller has agreed to sell to Purchaser and Purchaser has agreed to
purchase from Seller substantially all of the assets of Seller's original
equipment manufacturer's business on the terms and conditions as set forth in
the Amended and Restated Agreement for the Purchase and Sale of Assets of
International Jensen Incorporated, dated as of January 3, 1996, by and between
Purchaser and Seller (the "Purchase Agreement");
WHEREAS, Seller currently employs Robert G. Shaw ("Shaw"), Marc T. Tanenberg
("Tanenberg"), James E. Sula ("Sula"), Larry P. Bentley ("Bentley"), Jule DuBach
("DuBach"), and Rae Seeley ("Seeley") (Shaw, Tanenberg, Sula, Bentley, DuBach
and Seeley and any accepted replacements thereof together are the "Management
Service Providers" or "MSPs"); and
WHEREAS, Seller wishes to provide to Purchaser, and Purchaser wishes to
receive from Seller, the services of the MSPs.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SERVICES
1.1 SERVICES PERFORMED. During the Term, as defined herein, Seller shall
direct the following individuals, so long as they are employed by Seller or an
affiliate of Seller and so long as requested by Purchaser, to provide services
(the "Duties") to Purchaser as set forth below:
(A) SHAW: Shaw shall perform various managerial and administrative duties
for Purchaser as the Chief Executive Officer of Purchaser, which
duties are consistent with those typically performed by a Chief Executive
Officer in the OEM Business (as defined in the Purchase Agreement);
(B) TANENBERG: Tanenberg shall perform various managerial and
administrative duties for Purchaser which duties are consistent with
those typically performed by a Chief Financial Officer in the OEM Business;
(C) SULA: Sula shall perform various managerial and administrative duties
for Purchaser, which duties are consistent with those typically
performed by a Controller in the OEM Business;
(D) BENTLEY: Bentley shall perform various managerial and administrative
duties for Purchaser, which duties are consistent with those
typically performed by a Vice President of Human Resources in the OEM
Business;
(E) DUBACH: DuBach shall perform various managerial and administrative
duties for Purchaser, which duties are consistent with those
typically performed by an Administrative Assistant in the OEM Business; and
(F) SEELEY: Seeley shall perform various managerial and administrative
duties for Purchaser, which duties are consistent with those
typically performed by an Administrative Assistant in the OEM Business.
<PAGE>
1.2 STANDARD ALLOCATION. Seller shall cause each of the MSPs to devote
approximately twenty-five percent (25%) of his or her business time and
attention to the performance of his or her Duties if so required by Purchaser
(the "Standard Allocation").
1.3 METHOD OF DETERMINING TIME ALLOCATED TO DUTIES. Seller shall cause
each of the MSPs to submit a written report to Tanenberg, or his successor, and
to the Treasurer of Recoton, on a weekly basis, setting forth his or her
respective percentage time spent in the performance of his or her Duties
("Report") during such week.
1.4 REVIEW OF PERCENTAGE OF TIME ALLOCATED TO DUTIES. Promptly after the
conclusion of each calendar quarter after the Effective Date ("Quarterly"), the
parties to this Agreement shall review the Reports submitted with respect to the
quarter just ended in order to determine the actual percentage of time spent by
each of the MSPs in the performance of his or her Duties for such quarterly
period (the "Actual Allocation").
1.5 TERMINATION OF ONE OR MORE OF THE MSPS. If Seller terminates the
employment of any MSPs or any MSP terminates his or her employment with Seller,
Seller shall not be obligated to replace said terminated MSP. If Seller hires
any person to replace a terminated MSP, then Seller shall offer the services of
such newly hired person to Purchaser on the same terms and conditions as set
forth in this Agreement. Notwithstanding anything to the contrary contained in
the Agreement, Purchaser shall be under no obligation to either accept the
services of any such replacement MSP or to reimburse the costs to Seller of the
replacement MSP unless Purchaser accepts the services of such replacement MSP.
Furthermore, Purchaser may elect to exclude any MSP from the terms of this
Agreement, for any reason and at any time, upon Purchaser providing thirty (30)
days prior written notice to Seller. Under no circumstances shall Purchaser be
under any obligation to make severance or termination payments or other
separation benefits to an MSP which has been terminated by Seller or has been
excluded by Purchaser from this Agreement; PROVIDED, HOWEVER, that if Purchaser
employs an MSP (other than Shaw) who was not terminated (actually or
constructively) by Seller prior to the employment of the MSP (other than Shaw)
by Purchaser, Purchaser shall assume all obligations of Seller to such MSP
(other than Shaw) under any employment or severance agreement with such MSP
(other than Shaw) and Purchaser shall indemnify and hold harmless Seller for any
liability under any such agreements.
ARTICLE II
TERM
2.1 TERM. The term of this Agreement shall commence on the Effective Date
and shall continue for a period of twelve (12) consecutive months (the "Term"),
which Term shall renew automatically for additional twelve (12) month periods
unless otherwise terminated pursuant to this Agreement.
2.2 TERMINATION OF THIS AGREEMENT. Purchaser may terminate this Agreement
at any time upon giving Seller ninety (90) days prior written notice and Seller,
upon the expiration of the first six (6) months of the Term, may terminate this
Agreement at any time upon giving Purchaser one hundred eighty (180) days prior
written notice.
2.3 CHANGE IN CONTROL. Upon a change of control of Purchaser, this
Agreement shall terminate. A change of control of Purchaser shall have occurred
if Shaw shall not: (i) be a member of the Board of Directors of Purchaser; (ii)
be either an executive officer or Chairman of the Board of Purchaser; and (iii)
own beneficially more shares of the voting stock of Purchaser than any other
stockholder of Purchaser (or "group" of stockholders, as referred to in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) but in any event
more than 30% of the outstanding voting stock. For purposes of this Agreement, a
person shall be deemed to own beneficially any shares of Purchaser which are
owned by himself, his spouse, any descendant of his, or any trust, partnership,
corporation, joint venture, or limited liability company which has been created
primarily for his benefit and/or for
2
<PAGE>
the benefit of his spouse or any descendant of such person. Notwithstanding
anything to the contrary contained herein, if Shaw dies during the Term of this
Agreement, the Agreement shall continue for a period of six (6) months after his
death.
ARTICLE III
BASE COMPENSATION AND BENEFITS
3.1 BASE COMPENSATION AND BENEFITS.
(a) COMPENSATION. On the Effective Date and on each anniversary
thereafter (or annually on a date consistent with the date at which Recoton
generally awards annual salary increases), Seller shall determine the gross
compensation and benefits (including without limitation salary, benefits,
perquisites, car allowances, 401(k) pension and profit sharing arrangements)
to be paid to each of the MSPs for the subsequent twelve month period
("Compensation") and so advise Purchaser.
(b) PAYMENT. On a monthly basis, Purchaser shall pay to Seller an
amount equal to twenty-five percent (25%) of the Compensation of each MSP
for such month, the amount payable shall be subject to adjustment, pursuant
to the Actual Allocation as described below.
(i) If the Actual Allocation for any MSP is less than twenty-five
percent (25%), then Seller shall credit Purchaser an amount for such MSP
computed as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
(ai) Standard (-) Actual = Allocation
Allocation Allocation Difference
(aii) Quarterly
Allocation (x) Compensation = Amount
Difference for an MSP Credited
</TABLE>
Example:
Standard Allocation = 25%
Actual Allocation = 20%
Quarterly Compensation = $100,000
<TABLE>
<S> <C> <C> <C> <C> <C>
(ai) 25% (-) 20% = 5%
(aii) 5% (x) $100,000 = $5,000
</TABLE>
Result: $5,000 is the amount credited by Seller to Purchaser subject to
the netting provisions set forth in (iii) below;
(ii) If the Actual Allocation for any MSP exceeds twenty-five percent
(25%), then Purchaser shall remit to Seller an amount for such MSP
computed as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
(ai) Actual (-) Standard = Allocation
Allocation Allocation Difference
(aii) Quarterly
Allocation (x) Compensation = Amount
Difference for an MSP Reimbursed
</TABLE>
3
<PAGE>
Example:
Standard Allocation = 25%
Actual Allocation = 30%
Quarterly Compensation = $100,000
<TABLE>
<S> <C> <C> <C> <C> <C>
(ai) 30% (-) 25% = 5%
(aii) 5% (x) $100,000 = $5,000
</TABLE>
Result: $5,000 is the amount reimbursed by Purchaser to Seller,
subject to the netting provisions set forth in (iii) below;
(iii) All credits and reimbursements for the MSPs as a group shall be
netted prior to any credit or reimbursement accruing to Seller or
Purchaser, as the case may be.
(iv) All credits or reimbursements due to Purchaser shall be appended
to the next monthly payment due to Seller from Purchaser without
interest.
(v) Any amounts which remain due and owing as of the expiration of
the Term shall be paid to the owed party within thirty (30) days of the
expiration of the Term.
(c) THE COST OF BENEFITS. The cost of vacation days, sick days and
similar benefits, as set forth in Section 3.1(a), shall be allocated between
Seller and Purchaser on the basis of the Standard Allocation, unless
otherwise agreed upon by the parties.
3.2 PAYMENT OF BONUS. If Seller shall pay a bonus to an MSP (a "Bonus"),
Seller shall advise Purchaser of such Bonus in writing and after receipt of such
notice Purchaser shall promptly reimburse Seller for the amount of such Bonus
multiplied by the Actual Allocation for such MSP for the applicable bonus period
and multiplied by a fraction the numerator of which is the number of days in
such bonus period which are within the Term and the denominator of which is the
number of days in such bonus period. To the extent that such Bonus is awarded
under any formula plan requiring an evaluation of the MSP's performance, Seller
shall seek the advice of Purchaser regarding the performance of such MSP and
take such advice into account in determining the Bonus.
Notwithstanding anything to the contrary contained herein, Purchaser, in its
sole discretion and at its sole expense, may pay a bonus to an MSP (a
"Discretionary Bonus"). Seller shall have no obligation to pay all or a portion
of any Discretionary Bonus.
3.3 TRAVEL, DIRECT AND UNALLOCABLE EXPENSES. Travel and direct expenses
incurred by any MSP shall be paid or reimbursed by that entity for which the
travel or direct expenses were incurred. Any expenses which cannot be allocated
directly to Seller or Purchaser shall be reimbursed by Purchaser in an amount
equal to the Actual Allocation multiplied by the amount of the unallocable
expense.
ARTICLE IV
MISCELLANEOUS
4.1 NOT A CONTRACT OF EMPLOYMENT. The parties to this Agreement
acknowledge that this is not a contract of employment, that the MSPs are not
employees of Purchaser and the MSPs shall not be entitled to any employment
rights or other benefits from Purchaser except as otherwise provided herein.
4.2 INDEMNIFICATION.
(a) It is acknowledged by the parties to this Agreement that while the
MSPs are employees of Seller or Recoton, they shall be acting at the
direction of, or under instructions from, Purchaser or its designees or
other MSPs in performing their Duties. Accordingly, if, in the performance
of their Duties, any MSP takes any action or fails to take any action, which
action or failure to take action results in any loss, cost, damage or
expense (including reasonable attorneys fees) to
4
<PAGE>
Recoton or Seller, Purchaser shall indemnify and hold harmless Seller,
Recoton and their subsidiaries and respective officers, directors and
employees therefor, unless such action or failure to take action was at the
direction of or with the knowing approval of a Recoton executive officer
(other than Shaw).
(b) It is further acknowledged by the Parties to the Agreement that
while the MSPs may be operating under this Agreement at the direction of or
under instructions from Purchaser or its designee, or other MSPs, they
frequently will be acting at the direction of, or under instructions from,
Recoton or its designees (other than MSPs) in performing their duties.
Accordingly, if in the performance of their responsibilities on behalf of
Recoton, any MSP takes any action or fails to take any action, which action
or failure to take action results in any loss, cost, damage or expense
(including reasonable attorneys fees) to Purchaser, Recoton and Seller shall
indemnify and hold harmless Purchaser and its subsidiaries and its officers,
directors and employees therefore, unless such action or failure to take
action was at the direction or with the knowing approval of Purchaser or its
designees or another MSP.
4.3 NOTICE. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by certified or registered mail, return
receipt requested, postage prepaid, (c) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (d) telexed or
telecopied with receipt confirmed, addressed as follows:
If to Seller:
International Jensen Incorporated/Recoton Audio Corporation
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
and
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attention: Mr. Stuart Mont
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy to:
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn, Esq.
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
5
<PAGE>
If to Purchaser:
IJI Acquisition Corp./International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy to:
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone: (312) 201-2000
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
4.4 WAIVER. The failure of either of the parties to insist, in any one or
more instances, upon performance of any of the terms or conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any rights
granted hereunder or the future performance of any such term, covenant or
condition.
4.5 COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties. No alteration or modification of any of this
Agreement's provisions shall be valid unless made in writing and signed by all
the parties to this Agreement.
4.6 APPLICABLE LAW. The laws of the State of Illinois shall govern all
aspects of this Agreement, irrespective of the fact that one or more of the
parties now is or may become a resident of a different state, or that the one or
more of the parties now or hereafter locates its principal office outside the
State of Illinois. The parties shall submit all disputes which arise under this
Agreement to state or federal courts located in the City of Chicago, Illinois
for resolution. The parties acknowledge the aforesaid courts shall have
exclusive jurisdiction over this Agreement and specifically waive any claims
which they may have that involve jurisdiction or venue, including but not
limited to forum non conveniens. Service of process for any claim which arises
under this Agreement shall be valid if made in accordance with the notice
provisions set forth in Section 4.3 of this Agreement. If service of process is
made as aforesaid, the party served agrees that such service shall constitute
valid service, and specifically waives any objections the party served may have
under any state or federal law or rule concerning service of process. Service of
process in accordance with this Section shall be in addition to and not to the
exclusion of any other service of process method legally available.
4.7 DESCRIPTIVE HEADINGS. All section headings, titles and subtitles are
inserted in this Agreement for the convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
4.8 SEVERABILITY. If a court of competent jurisdiction rules that any one
or more of this Agreement's provisions are invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any of this Agreement's other provisions, and this Agreement shall be construed
as if it had never contained such invalid, illegal or unenforceable provision.
6
<PAGE>
4.9 SUCCESSORS AND ASSIGNS AND THIRD PARTY BENEFICIARIES. This Agreement
may not be assigned without the prior written consent of all parties hereto.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
4.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the Effective Date.
IJI ACQUISITION CORP.,
an Illinois corporation
<TABLE>
<S> <C>
By: ----------------------------------------
Its:
----------------------------------------
INTERNATIONAL JENSEN INCORPORATED,
a Delaware corporation
By:
----------------------------------------
Its:
----------------------------------------
RECOTON CORPORATION,
a New York corporation
By:
----------------------------------------
Its:
----------------------------------------
</TABLE>
7
<PAGE>
EXHIBIT 2.4
SUPPLY AND SERVICES AGREEMENT
THIS SUPPLY AND SERVICES AGREEMENT (the "Agreement") is made as of ,
1996 (the "Effective Date"), by and among IJI ACQUISITION CORP., an Illinois
corporation, the name of which is about to be changed to INTERNATIONAL JENSEN
INCORPORATED, an Illinois corporation ("Supplier"), and INTERNATIONAL JENSEN
INCORPORATED, a Delaware corporation, the name of which is about to be changed
to RECOTON AUDIO CORPORATION ("Customer").
W I T N E S S E T H:
WHEREAS, Customer has agreed to sell to Supplier and Supplier has agreed to
purchase from Customer substantially all of the assets of Customer's original
equipment manufacturer's business comprising (i) the loudspeaker assembly plant
facility and operations in Lumberton, North Carolina, (ii) the metal and plastic
parts manufacturing/home loudspeaker assembly plant facility and operations in
Punxsutawney, Pennsylvania, (iii) the magnet manufacturing facilities and
general offices of the General Magnetic division in Dallas, Texas, (iv) the cone
manufacturing facilities and general offices of Fuji Cone, Inc. in Clinton,
North Carolina, (v) the OEM value-add facility in Livonia, Michigan, (vi) the
Bingham Farms, Michigan sales office, and (vii) the original equipment
manufacturing portion of the engineering, research and development center and
distribution facility in Schiller Park, Illinois (the "OEM Business Assets"), on
the terms and conditions as set forth in the Amended and Restated Agreement For
the Purchase and Sale of Assets, dated as of January 3, 1996, by and between
Supplier and Customer (the "Purchase Agreement");
WHEREAS, the original equipment manufacturer's business consists of the
business of designing, manufacturing and marketing of speakers and speaker
components and related products for and to domestic and international
automotive, truck, recreational vehicle, aircraft or other motorized vehicle
("Vehicular") original equipment manufacturers (the "OEM Business"); and
WHEREAS, Supplier is not purchasing Customer's business which consists of
designing, manufacturing, and marketing of speakers and speaker components, and
related branded products in the domestic and international Vehicular aftermarket
and home audio market (the "Branded Business").
NOW, THEREFORE, in consideration of the above premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SUPPLY OBLIGATIONS
1.1 GENERAL DUTIES. Upon the terms and conditions set forth in this
Agreement, Customer shall purchase from Supplier all of its requirements for
products currently manufactured in Punxsutawney, Pennsylvania and Lumberton,
North Carolina for and as required by Customer's Branded Products Division and
IJI-European Holdings (the "Products"). The broad product groupings of the
Products are as follows: (a) Jensen Car Aftermarket Speakers; (b) Advent Mobile
Aftermarket Speakers; (c) Jensen Home Hi-Fi Speakers; and (d) Advent Home Hi-Fi
Speakers. The term "Supply Obligation" shall mean Supplier's obligation to
supply Customer with Seller's requirements for the Products which satisfy all
warranties and quality standards identified in this Agreement, within the time
periods agreed to by the parties, which time periods shall include adequate lead
time for production of Products and in a manner consistent with past practices
and for the prices identified in this Agreement. Supplier shall devote that
portion of its professional time, attention and personnel to the Supply
Obligation as is necessary for Supplier to fulfill said Supply Obligation in
accordance with the terms of this Agreement.
1.2 NEW PRODUCTS. Supplier shall have the opportunity to bid on new
products required by Customer during the Term (as that term is defined in
Section 1.5 of this Agreement).
<PAGE>
1.3 PRODUCT STANDARDS. All Products which Supplier supplies to Customer
under this Agreement shall satisfy quality and warranty standards which are
consistent with the Products produced by Supplier prior to this Agreement and
shall meet all applicable legal requirements.
1.4 RETENTION OF RIGHTS. If Supplier is unable to satisfy the Supply
Obligation for any Product in accordance with Customer's delivery requirements
and such inability is not cured within ten (10) days after written notice,
Customer may terminate its obligations under this Agreement to purchase its
requirements for such Product, unless the Supplier's inability to perform is due
to: (a) "Force Majeure," as defined herein; or (b) Customer's failure to fulfill
its obligations under this Agreement. For the purposes of this Agreement "Force
Majeure" means the consequences, direct or indirect, of strikes, lockouts or any
other labor disputes, fires, accidents, floods, hostilities, shortages of
transportation equipment or facilities, the failure, suspension or curtailment
of the production or delivery due to shortages of supply of components or
materials from any available sources or due to the acts, regulations,
allocations or other requirements of any federal, state or local government, and
any and all like or different causes, each of which is beyond the reasonable
control of the Supplier, to the extent performance is prevented thereby. During
any period of shortage due to any of said causes, the Supplier shall allocate
the supply of the Products to its customers in a fair and reasonable manner,
which takes into account the fact that Customer has an obligation to source from
Supplier.
1.5 TERM. The term of this Agreement shall commence on the Effective Date
and shall continue for a period of twelve (12) consecutive months (the "Term"),
unless otherwise terminated pursuant to this Agreement.
1.6 TERMINATION FOR CAUSE. The occurrence of any of the following events
shall give rise to the rights of the parties to terminate this Agreement for
cause:
a. Either party is in breach of any of the substantial and material
provisions of this Agreement, and such breach continues for thirty (30) days
after the non-breaching party has given notice in writing to the other party
demanding cure thereof;
b. (i) A court of competent jurisdiction shall enter a decree or
order, not stayed within sixty (60) days from the date of entry hereof,
appointing a trustee or receiver of a party, or any substantial part of its
property, or shall approve a petition for or effecting an arrangement in
bankruptcy, a reorganization pursuant to a bankruptcy act, or other judicial
modification or alteration of the rights of its creditors, (ii) a party
itself shall file such petition or take or consent to take any other action
seeking any such judicial decree or order, or shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to pay its
debts generally as they become due, or (iii) any court of competent
jurisdiction shall enter a decree or order adjudicating a party as bankrupt
or insolvent.
1.7 STATUS. Supplier and Customer expressly acknowledge that the status of
Supplier shall be that of an independent contractor and not that of an agent or
employee of Customer.
ARTICLE II
PRICING
2.1 PRICING. Supplier shall charge Customer for the Products at its cost
in an amount consistent with the current internal pricing policies of Customer
and which pricing policies shall be consistent with past practice ("Product
Cost"). Furthermore, Supplier shall charge Customer Five Thousand Dollars
($5,000) each month for costs associated with the purchasing agents' duties with
respect to Products supplied to Customer. The charge for each Product shall be
updated annually on each March 1 to reflect changes to the Product Costs. If the
charge for any Product or Products increases more than five percent (5%) from
the prior year and Customer gives Supplier ninety (90) days prior written notice
of its intent to discontinue purchasing such Product or Products, then
2
<PAGE>
Customer shall no longer be obligated to purchase such Product or Products under
this Agreement. Cancellation of the obligation to purchase certain Products
shall not eliminate or relieve Customer from the obligation to purchase Products
which are not subject to cancellation.
2.2 TAXES. The prices for Products and the increase in Product Cost are
exclusive of any taxes, excises or other governmental charges applicable to the
sale of the Products. Supplier's invoices shall include as a separate item all
taxes, excises or other governmental charges imposed on Supplier by reason of
the sale of the Products to Customer, except taxes based upon net income of
Supplier.
2.3 PAYMENT AND OTHER TERMS. Payment by Customer for Products delivered by
Supplier shall be made in full within ten (10) days of the Friday of each week
during which invoices were received from Seller, but in no event shall Customer
be obligated to issue more than one (1) check, with respect to the invoices
received, each week.
ARTICLE III
CERTAIN OBLIGATIONS OF SUPPLIER
3.1 INSURANCE. During the Term, Supplier shall obtain and maintain
products liability and general comprehensive insurance, in the minimum coverage
amount of One Million Dollars ($1,000,000) (the "Minimum Coverage"). Supplier
shall maintain such insurance with insurance companies having a Best's rating of
no less than A+.
3.2 TERMS AND CONDITIONS. The terms and conditions set forth in this
Agreement shall apply to and govern all sales from Supplier to Customer,
irrespective of any contrary terms and conditions stated on invoices, billing
notices, bills of lading or other forms of any type or nature which Supplier or
Customer may submit. Supplier shall have no right to alter the terms and
conditions set forth in this Agreement for sales from Supplier to Customer.
3.3 DELIVERY. Supplier shall deliver Product to Customer F.O.B. a common
carrier (a "Common Carrier") at Supplier's business premises. Customer assumes
all risk of loss from the time it deposits any such items with a Common Carrier,
until actual delivery to Customer. Risk of loss prior to actual receipt by
Customer shall be borne by Customer. Customer shall pay all shipping, freight,
transportation and related costs associated with shipping any items under this
Agreement.
3.4 WORKING CAPITAL MANAGEMENT. All raw material stock and piece parts
used in the manufacture of Products shall be billed to Customer at the time such
inventory is delivered to Supplier's premises. Supplier shall take all
appropriate actions requested by Customer to protect Customer's ownership
interest in any of these goods or to grant Customer a security interest in any
inventory financed by Customer.
ARTICLE IV
SERVICES
4.1 PERSONNEL. To the extent requested by Customer, Supplier shall make
available to Customer the services of Supplier's MIS Equipment, MIS Operations
Support, MIS Programming Support and Travel Agency personnel during the Term.
4.2 COST. Supplier shall charge Customer for such services at Supplier's
cost in an amount consistent with the current internal cost allocation practice
of Supplier. However, no direct charge shall be made to Customer for the
services of any Travel Agency personnel.
4.3 PAYMENT. Payment by Customer for such services shall be made within
ten (10) days after the beginning of a month with respect to invoiced services
in the prior month.
3
<PAGE>
ARTICLE V
GENERAL
5.1 NOTICE. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by certified or registered mail, return
receipt requested, postage prepaid, (c) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (d) telexed or
telecopied, with receipt confirmed, addressed as follows:
<TABLE>
<S> <C>
If to Customer: International Jensen Incorporated/Recoton Audio Corporation
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
AND
Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Mr. Stuart Mont
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy to: Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn, Esq.
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
If to Supplier: IJI Acquisition Corp./International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy to: Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone: (312) 201-2521
</TABLE>
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
5.2 PATENT INFRINGEMENT. Customer shall indemnify and hold harmless
Supplier, its successors and assigns, against any and all loss, damage or injury
arising out of a claim or suit for alleged
4
<PAGE>
infringement of any patents related to the Products to the extent such
infringement arises from Customer's specifications and Customer shall assume the
defense of any and all such suits and pay all costs and expenses incidental
thereto.
5.3 NONDISCLOSURE. Data, drawings, specifications or other technical
information furnished directly or indirectly, in writing or otherwise, to either
party hereto by the other party pursuant to this Agreement shall in no event
become the property of the recipient and shall be used only in fulfilling the
obligations imposed by this Agreement and shall not be duplicated or disclosed
to others or used in whole or in part for any other purpose. Such furnishing of
data, drawings, specifications or other technical information shall not be
construed as granting any rights whatsoever, express or implied, under any
patents of the furnishing party. The parties acknowledge the existence of a
certain Management Services Agreement dated as of , 1996 between Customer
and Supplier ("MS Agreement") and recognize that such agreement shall govern
information transmitted to either party as a result of the MS Agreement.
5.4 WAIVER. The failure of either of the parties to insist, in any one or
more instances, upon performance of any of the terms or conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any rights
granted hereunder for the future performance of any such term, covenant or
condition.
5.5 COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties. No alteration or modification of any of this
Agreement's provisions shall be valid unless made in writing and signed by all
the parties to this Agreement.
5.6 APPLICABLE LAW. The laws of the State of Illinois shall govern all
aspects of this Agreement, irrespective of the fact that one or more of the
parties now is or may become a resident of a different state, or that one or
more of the parties now or hereafter locates its principal office outside the
State of Illinois. The parties shall submit all disputes which arise under this
Agreement to state or federal courts located in the City of Chicago, Illinois
for resolution. The parties acknowledge the aforesaid courts shall have
exclusive jurisdiction over this Agreement and specifically waive any claims
which they may have that involve jurisdiction or venue, including but not
limited to forum non conveniens. Service of process for any claim which arises
under this Agreement shall be valid if made in accordance with the notice
provisions set forth in Section 5.1 of this Agreement. If service of process is
made as aforesaid, the party served agrees that such service shall constitute
valid service, and specifically waives any objections the party served may have
under any state or federal law or rule concerning service of process. Service of
process in accordance with this Section shall be in addition to and not to the
exclusion of any other service of process method legally available.
5.7 DESCRIPTIVE HEADINGS. All section headings, titles and subtitles are
inserted in this Agreement for convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
5.8 SEVERABILITY. If a court of competent jurisdiction rules that any one
or more of this Agreement's provisions are invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any of this Agreement's other provisions, and this Agreement shall be construed
as if it had never contained such invalid, illegal or unenforceable provision.
5.9 ASSIGNMENT. This Agreement shall not be assignable without the prior
written consent of all parties hereto. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the Effective Date.
IJI ACQUISITION CORP.,
an Illinois corporation
By: __________________________________
Its: _________________________________
INTERNATIONAL JENSEN INCORPORATED,
a Delaware corporation,
By: __________________________________
Its: _________________________________
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EXHIBIT 2.5
SHARED FACILITIES AGREEMENT
THIS SHARED FACILITIES AGREEMENT (the "Agreement") is made as of ,
1996 ("Effective Date"), by and between IJI ACQUISITION CORP., an Illinois
corporation the name of which is about to be changed to INTERNATIONAL JENSEN
INCORPORATED ("Licensee"), and INTERNATIONAL JENSEN INCORPORATED, a Delaware
corporation, the name of which is about to be changed to RECOTON AUDIO
CORPORATION ("Licensor").
W I T N E S S E T H:
WHEREAS, Licensor has agreed to sell to Licensee and Licensee has agreed to
purchase from Licensor substantially all of the assets of Licensor's original
equipment manufacturer's business (the "OEM Business") on the terms and
conditions as set forth in the Amended and Restated Agreement for Purchase and
Sale of Assets, dated as of January 3, 1996, by and between Licensee and
Licensor (the "Purchase Agreement").
WHEREAS, Licensor currently leases space at (i) 4136 North United Parkway,
Schiller Park, Illinois (the "Schiller Park Facility") pursuant to the terms as
outlined in the Schiller Park Facility Lease, a copy of which is attached hereto
and incorporated herein as Schedule A(i) (the "Schiller Lease"); and (ii) the
fourth (4th) floor in Building 25 of the Tri-State International Office Center,
Lincolnshire, Illinois (the "Lincolnshire Facility"), pursuant to the terms as
outlined in the Lincolnshire Facility Lease, a copy of which is attached hereto
and incorporated herein as Schedule A(ii), the ("Lincolnshire Lease") (the
Schiller Park Facility and the Lincolnshire Facility are collectively referred
to as the "Shared Facilities").
WHEREAS, Licensor desires to permit Licensee to utilize a portion of the
space located at the Schiller Park Facility and a portion of the space located
at the Lincolnshire Facility, and Licensee wishes to utilize a portion of the
space located at the Schiller Park Facility and a portion of the space located
at the Lincolnshire Facility, and in connection therewith Licensee and Licensor
shall share certain costs and expenses attributable to the Shared Facilities,
all in accordance with the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the above premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DESCRIPTION OF THE LICENSED PREMISES
1.1 SCHILLER PARK FACILITY. Subject to and in accordance with the terms
and conditions of this Agreement, Licensor hereby grants to Licensee, and
Licensee hereby accepts from Licensor, a non-transferable license (the "Schiller
License") to use and occupy that portion of the Schiller Park Facility (the
"Schiller Park Licensed Portion") for office use, engineering use and for no
other purpose. "Licensee's Schiller Park Proportionate Share" shall be based on
a fraction, the numerator of which is the total square footage of the office
portion of the Schiller Park Facility utilized exclusively by Licensee and the
denominator of which shall be the total square footage of the Schiller Park
Facility utilized exclusively by Licensee plus the total square footage of the
office portion of the Schiller Park Facility utilized exclusively by Licensor.
In no event shall any part of the warehouse portion of the Schiller Park
Facility be included within the Schiller Park Licensed Portion, and no expenses,
of any nature or kind, attributable to the warehouse portion of the Schiller
Park Facility shall be included as a portion of the License Fee (defined below)
or the Operation Costs (defined below). As of the date of this Agreement, based
upon the foregoing formula, the Licensee's Schiller Park Proportionate Share
shall be fifty-eight percent (58%).
1.2 LINCOLNSHIRE FACILITY. Subject to and in accordance with the terms and
conditions of this Agreement, Licensor hereby grants to Licensee, and Licensee
hereby accepts from Licensor, a non-transferable license (the "Lincolnshire
License") to use and occupy that portion of the Lincolnshire
<PAGE>
Facility described below (the "Lincolnshire Licensed Portion") for office use
and for no other purpose. "Licensee's Lincolnshire Proportionate Share" shall be
based on a fraction, the numerator of which is the square footage in the
Lincolnshire Facility to be utilized exclusively by Licensee (which shall
include, as of the date of this Agreement, the square footage occupied by the
IJI accounting department cubicles, the MIS department cubicles, the travel desk
cubicles plus twenty-five percent (25%) of the gross square footage of all
offices and cubicles utilized by persons subject to that certain Management
Services Agreement, of even date herewith, by and between Licensor and Licensee
(the "MS Agreement")) and the denominator shall be the total square footage of
the Lincolnshire Facility utilized exclusively by Licensee exclusively plus the
total square footage of the Lincolnshire Facility utilized exclusively by
Licensor. As of the date of this Agreement, based on the foregoing formula, the
Licensee's Lincolnshire Proportionate Share shall be twenty-one and 7/10ths
percent (21.7%). The Schiller Park Licensed Portion and the Lincolnshire
Licensed Portion are sometimes referred to as the "Licensed Premises."
1.3 ADJUSTMENT OF LICENSED PORTION. The Schiller Park Licensed Portion and
the Lincolnshire Licensed Portion, and the corresponding Schiller Park
Proportionate Share and Lincolnshire Proportionate Share, shall be adjusted from
time in accordance with the formulae set forth in Sections 1.1 and 1.2 hereof.
1.4 NOT A LEASE. This Agreement does not and shall not be deemed to
constitute a lease or a conveyance of the Licensed Premises by Licensor to
Licensee, or to confer upon Licensee any right, title, estate or interest in the
Licensed Premises. This Agreement grants to Licensee only a personal privilege
to use and occupy the Licensed Premises for the License Period on and subject to
the terms and conditions set forth herein. Licensee shall not permit the whole
or any portion of the Licensed Premises to be occupied by any person or entity
other than Licensee, and its officers, directors and employees in the
performance of their duties on behalf of Licensee and Licensee's invitees, in
the ordinary course of business.
1.5 LICENSOR'S DEPARTURE FROM LINCOLNSHIRE FACILITY. Licensor shall have
no obligation under this Agreement to remain in occupancy at the Lincolnshire
Facility. Licensor shall, however, give Licensee at least six month's prior
notice of its intention to vacate space at Lincolnshire and, if Licensor no
longer occupies the Lincolnshire Facility, Licensor shall offer Licensee
suitable space at the Schiller Park Facility or such other facilities to which
Licensor shall have moved the operation currently conducted at the Lincolnshire
Facility.
ARTICLE 2
SHARING OF RENT AND BUSINESS OPERATION COSTS
2.1 LICENSE FEE. Licensee shall pay to Licensor, on a monthly basis within
ten (10) days after Licensee's receipt of a written invoice from Licensor (but
in no event prior to the date that Licensor is required to pay monthly rent
pursuant to the Schiller Lease and the Lincolnshire Lease, as applicable) an
amount equal to (x) Licensee's Schiller Park Proportionate Share of the monthly
base rent, additional rent and all other charges payable by Licensor under the
Schiller Lease (exclusive of any portion of such items attributable or
apportioned or allocated to the warehouse portion of the Schiller Park
Facility), and (y) Licensee's Lincolnshire Proportionate Share of the monthly
base rent, additional rent and all other charges payable by Licensor under the
Lincolnshire Lease.
2.2 BUSINESS OPERATION COSTS. Licensee shall pay Licensor, on a monthly
basis within ten (10) days after Licensee's receipt of a written invoice from
Licensor, an amount equal to the sum of (x) Licensee's Schiller Park
Proportionate Share of all Operation Costs (as hereinafter defined) attributable
to the Schiller Park Facility, and (y) Licensee's Lincolnshire Proportionate
Share of all Operation Costs attributable to the Lincolnshire Facility. For
purposes of this Agreement, the term "Operation Costs" shall mean any and all
costs and expenses incurred in operating and maintaining the Shared Facilities
(exclusive of any and all amounts payable as or included within base rent or
additional rent or otherwise charged to Licensee pursuant to Section 2.1 above)
including without limitation utilities,
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property taxes, property and liability insurance to the extent payable by
Licensor under the Schiller Lease or the Lincolnshire Lease, maintenance,
repairs, telephone costs (including, without limitation, the telephone charges
attributable to facsimile machines, but specifically excluding, with respect to
the Lincolnshire Facility, the cost of the 800 telephone number and the cost of
all international calls and with respect to the Schiller Park Facility the cost
of all international calls), the cost of depreciation (based upon generally
accepted accounting principles) of all furniture and fixtures owned by Licensor
and located within the Shared Facilities (other than any furniture or equipment
located within the warehouse portion of the Schiller Park Facility and other
than MIS equipment located in the Lincolnshire Facility, which MIS equipment is
owned by Licensee), coffee service costs, mail room supply costs, the salary and
benefits payable to reception and mail room personnel employed by Licensor and
servicing the Shared Facilities (other than the warehouse portion of the
Schiller Park Facility) and costs of personnel providing building and similar
services, such as receptionists, housekeepers, custodians and operators and
similar support personnel. In no event shall licensee be responsible for any
Operation Costs attributable to the warehouse portion of the Schiller Park
Facility.
2.3 SUBSEQUENT ADJUSTMENTS. Any subsequent adjustments to the monthly base
rent, additional rent and all other charges pursuant to this Agreement shall be
borne and/or enjoyed by Licensee in an amount equal to the Licensee's Schiller
Park Proportionate Share and the Licensee's Lincolnshire Proportionate Share of
such adjustment, as such shares may be adjusted from time to time. In addition,
under no circumstances shall Licensee be liable to Licensor for any charges or
costs related to Licensor's failure to pay, or late payments made by Licensor of
any amounts due under the Schiller Lease or the Lincolnshire Lease.
2.4 AUDIT. Licensee, upon reasonable prior written request to Licensor,
may at its expense examine the books and records of the Licensor pertaining to
Operation Costs, monthly base rent, additional rent and all other charges
pursuant to this Agreement. Any such audit shall be conducted at the facility of
Licensor where such records are maintained and shall be during normal business
hours. Licensee shall maintain the results of any such audits in confidence
except as otherwise required by law.
ARTICLE 3
TERM
3.1 LICENSE PERIOD. The license period for each of the Licensed Premises
under this Shared Facilities Agreement will commence on the Effective Date and
will continue until such time as the lease term for such Shared Facility expires
(the "License Period"), subject to earlier termination as set forth in Section
5.1 below.
ARTICLE 4
CERTAIN COVENANTS
4.1 BUSINESS INTERFERENCE. Neither party shall take any action which would
violate the other's labor contracts, if any, affecting the building, or create
any unreasonable building construction interruption, work stoppage, picketing,
labor disruption or dispute, or take any action which is likely to interfere
with the business of the other party at the Shared Facilities without the prior
written consent of the other party, which consent shall not be unreasonably
withheld or delayed.
4.2 INDEMNIFICATION.
(a) Licensee shall, irrespective of whether it shall have been negligent
in connection therewith, indemnify, protect, defend and save harmless
Licensor and Licensor's officers, directors, contractors, agents and
employees from and against any and all liability (statutory or otherwise),
claims, suits, demands, damages (other than consequential damages),
judgments, costs, fines, penalties, interest and expenses (including
reasonable counsel and other professional fees and disbursements incurred in
any action or proceeding), to which Licensor and/or any such officer,
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director, contractor, agent or employee may be subject or suffer arising
from, or in connection with (i) the use and occupancy of the Licensed
Premises by Licensee, or from any work, installation or thing whatsoever
done or omitted (other than by Licensor or its agents or employees other
than MSPs acting on behalf of Licensee) in or about the Licensed Premises
during the License Period, (ii) any default by Licensee in the performance
of Licensee's obligations under this Agreement, or (iii) any act, omission,
carelessness, negligence or misconduct of Licensee or of Licensee's agents,
representatives, invitees, guests, and employees (including MSPs acting for
or with the knowing approval of Licensee).
(b) Licensor shall, irrespective of whether it shall have been negligent
in connection therewith, indemnify, protect, defend and save harmless
Licensee and Licensee's officers, directors, contractors, agents and
employees from and against any and all liability (statutory or otherwise),
claims, suits, demands, damages (other than consequential damages),
judgments, costs, fines, penalties, interest and expenses (including
reasonable counsel and other professional fees and disbursements incurred in
any action or proceeding), to which Licensee and/or any such officer,
director, contractor, agent or employee may be subject or suffer arising
from, or in connection with (i) the use and occupancy of the Shared
Facilities, or from any work, installation or thing whatsoever done or
omitted (other than by Licensee or its agents or employees) in or about the
Shared Facilities during the License Period, (ii) any default by Licensor in
the performance of Licensor's obligations under this Agreement, or (iii) any
act, omission, carelessness, negligence or misconduct of Licensor or
Licensor's agents, representatives, invitees, guests and employees (other
than MSPs acting for or with the knowing approval of Licensee).
4.3 INSURANCE. During the License Period, Licensee shall, at its own cost
and expense:
(a) Provide and keep in force commercial general liability insurance
against liability for death, personal injury and property damage in an
amount that shall not be less than (i) FIVE MILLION DOLLARS ($5,000,000.00)
in respect of injuries to any one person, (ii) FIVE MILLION DOLLARS
($5,000,000.00) in respect of injuries from any one occurrence, and (iii)
TWO MILLION DOLLARS ($2,000,000.00) in respect of property damage from any
one occurrence. Licensor shall be named as an additional insured and covered
under the insurance contracts.
(b) Provide and keep in force insurance providing against loss by fire,
lightning, the perils of extended coverage and malicious mischief covering
the assets of Licensee at the Shared Facilities and any other alterations,
improvements, equipment, furnishings, fixtures, property and contents in the
Licensed Premises (collectively, "Licensee's Property"), at full replacement
value.
Each of Licensee and Licensor shall cause each policy carried by such
parties insuring, as to Licensee, the Licensed Premises and Licensee's Property
and, as to Licensor, the Licensor's Premises and the Licensor's personal
property, against loss, damage, or destruction by fire or other casualty, to be
written in a manner so as to provide that the insurance company waives all
rights of recovery by way of subrogation against Licensor or Licensee, as the
case may be, in connection with any loss or damage covered by any such policy.
All policies of insurance required to be obtained and maintained pursuant to
Section 4.3(a) shall name Licensor as an additional insured. All policies of
insurance required hereunder shall be written and signed by solvent and
responsible insurance companies reasonably satisfactory to Licensor. Unless
otherwise provided herein, certificates of insurance for insurance coverages
required hereunder shall be deposited with Licensor prior to occupancy of either
of the Shared Facilities by Licensee. Not less than fifteen (15) days prior to
the expiration dates of said insurance coverages, renewal certificates shall be
deposited with Licensor. If Licensee fails to deposit with Licensor any
certificate of insurance required hereunder, after thirty (30) days advance
notice and prior to the provision of such certificate, Licensor may, at its
option, obtain the insurance coverages in respect of which the required policy
or certificate was not provided, at the expense of the Licensee, and the cost
thereof shall be paid to the Licensor upon written demand.
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4.4 ALTERATION OF LICENSED PREMISES. Licensor shall have no obligation to
alter, improve, decorate, or otherwise prepare the Licensed Premises for
Licensee's use and occupancy. Licensee shall make no installations, changes,
alterations, restorations, renovations, replacements, additions, improvements
and betterments, whether structural or non-structural, without Licensor's prior
written consent and then only by contractors or mechanics approved in writing by
Licensor.
4.5 USE OF LICENSED PREMISES. Licensee shall, at all times, use the
Licensed Premises only in a manner which is in full compliance with all present
and future laws, orders, rules and regulations of all state, federal, municipal
and local governments, departments, commissions and boards asserting
jurisdiction over Licensee, Licensor or the Shared Facilities, and any direction
of any public officer pursuant to law.
4.6 REPAIR OF LICENSED PREMISES. Licensee shall, throughout the License
Period, take good care of the Licensed Premises and the fixtures and
appurtenances therein. The parties acknowledge and agree that all repairs that
may arise in the ordinary course of business shall be made by Licensor, and the
cost thereof shall be included within the definition of Operation Costs. All
damage or injury to the Licensed Premises or to any other part of the Shared
Facilities or the buildings in which the Shared Facilities are located, or to
their fixtures, equipment and appurtenances, whether requiring structural or
non-structural repairs, but specifically excluding ordinary wear and tear,
caused by or resulting from carelessness, omission, neglect or improper conduct
of Licensee, or Licensee's agents, employees, contractors, representatives or
guests, shall be repaired promptly by Licensee at its sole cost and expense, to
the reasonable satisfaction of Licensor. All damage or injury to the Shared
Facilities or the buildings in which the Shared Facilities are located, or to
their fixtures, equipment and appurtenances, whether requiring structural or
non-structural repairs, but specifically excluding ordinary wear and tear,
caused by or resulting from carelessness, omission, neglect or improper conduct
of Licensor, or Licensor's agents, employees, contractors, representatives or
guests, shall be repaired promptly by Licensor at its sole cost and expense, to
the reasonable satisfaction of the Licensee. Licensee shall also repair all
damage to the Shared Facilities and the Licensed Premises and to the buildings
in which the Shared Facilities are located caused by the installation of any
improvements by or on behalf of Licensee or the moving of Licensee's Property.
All of the aforesaid repairs shall be of quality or class equal to the original
work or construction.
4.7 COVENANTS OF LICENSOR. Licensor covenants and agrees that throughout
the License Period, Licensor shall:
(a) Pay all minimum rent, additional rent and other charges due and
payable under the Schiller Park Lease and the Lincolnshire Lease and
otherwise full comply with all terms and conditions of the Schiller Park
Lease and the Lincolnshire Lease; and
(b) Cause Licensee to be named an additional insured under all liability
insurance policies covering the Shared Facilities.
ARTICLE 5
TERMINATION
5.1 TERMINATION.
(a) The license granted by this Agreement with respect to a Shared
Facility shall terminate upon the earlier of the following events:
(i) The expiration of the underlying lease term for each such Shared
Facility;
(ii) If all or a material portion of such Licensed Premises or such
Shared Facility shall be appropriated or taken under the power of eminent
domain by any public or quasi-public authority, or conveyance shall be
made in lieu of appropriation or taking, or are destroyed by fire, in
which case all items required to be paid by Licensee pursuant to Article
2 of this Agreement shall be prorated to the date of the taking;
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(iii) For any reason or no reason: (i) by Licensee, upon not less than
six (6) month's prior written notice to Licensor; and (ii) after the
first six (6) months of the Term, by Licensor, upon not less than six (6)
month's prior written notice to Licensee, provided that in no event shall
any such termination by Licensor be effective prior to the first
anniversary of the date of full execution and delivery of this Agreement
except as otherwise set forth in Section 1.5; or
(b) If Licensee shall default in fulfilling any of its covenants or
obligations hereunder and such default shall remain uncured for a period in
excess of ten (10) days after written notice of such default with respect to
monetary defaults and thirty (30) days after written notice of such default
with respect to non-monetary defaults (provided that if Licensee commences
any such cure of a non-monetary default within such thirty (30) day period
and thereafter diligently pursues such cure to completion, such thirty (30)
day cure period shall be automatically extended to such period as is
reasonably necessary to cure such non-monetary default but in no event
longer than 90 days), in addition to any other rights and remedies available
to Licensor, Licensor may terminate the license for either or both Licensed
Premises by the giving of written notice to Licensee, whereupon such license
shall terminate on the date set forth in said notice, and Licensee shall
vacate such Licensed Premise(s) on said date as if that date were the date
of the expiration of the License Period as set forth herein.
5.2 REMOVAL OF PURCHASED ASSETS. All of Licensee's Property, including the
Purchased Assets as that term is defined in the Purchase Agreement, shall be
removed by Licensee from a Shared Facility not later than thirty (30) days
following the termination of the license for such facility, at the expense of
Licensee.
ARTICLE 6
CONDEMNATION, DAMAGE OR DESTRUCTION OF PREMISES
6.1 CONDEMNATION. In the event of any condemnation or taking of all or a
portion of either of both of the Shared Facilities, Licensor shall, except as
specifically set forth in this sentence, be entitled to receive the entire award
in the condemnation proceeding, and Licensee hereby expressly assigns to
Licensor any and all right, title and interest of Licensor now or hereafter
arising in or to any award or any part thereof, and Licensee shall be entitled
to receive no part of any award except to the extent that any award is related
to the cost of Licensee moving out to the Licensed Premises. Licensor shall have
no obligation to relocate Licensee or substitute new facilities for the Shared
Facility.
6.2 DAMAGE OR DESTRUCTION OF THE PREMISES. Except as otherwise set forth
herein, Licensor shall have no obligation to relocate Licensee, restore any
damaged premises, or substitute new premises for any damaged or destroyed
portions of a Shared Facility in question.
ARTICLE 7
MISCELLANEOUS
7.1 LANDLORD CONSENT. If either or both of the Schiller Lease or the
Lincolnshire Lease require that Licensor obtain the consent of the landlord
thereunder in connection with the performance of this Agreement, Licensor shall
exercise commercially reasonable efforts to obtain such consent from the
landlord in question at Licensee's sole cost and expense. Licensee shall
exercise commercially reasonable efforts to cooperate with Licensor in obtaining
all such consents. If Licensor shall not be able to obtain such consent, the
License with respect to such Leased Premises shall be of no force or effect.
7.2 NOTICE. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by
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certified or registered mail, return receipt requested, postage prepaid, or (c)
sent by a nationally recognized overnight delivery service, with delivery
confirmed, or (d) telexed or telecopied with receipt confirmed, addressed as
follows:
<TABLE>
<S> <C>
If to International Jensen Incorporated/Recoton Audio Corporation
Licensor: 25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
AND
Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Mr. Stuart Mont
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy Stroock & Stroock & Lavan
to: Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn, Esq.
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
If to IJI Acquisition Corp.
Licensee: 25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy Wildman, Harrold, Allen & Dixon
to: 225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone: (312) 201-2000
</TABLE>
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
7.3 WAIVER. The failure of either of the parties to insist, in any one or
more instances, upon performance of any of the terms or conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any rights
granted hereunder or the future performance of any such term, covenant or
condition.
7.4 APPLICABLE LAW. The laws of the State of Illinois shall govern all
aspects of this Agreement, irrespective of the fact that one or more of the
parties now is or may become a resident of a different
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state, or that one or more of the parties now or hereafter locates its principal
office outside the State of Illinois. The parties shall submit all disputes
which arise under this Agreement to state or federal courts located in the City
of Chicago, Illinois for resolution. The parties acknowledge the aforesaid
courts shall have exclusive jurisdiction over this Agreement and specifically
waive any claims which they may have that involve jurisdiction or venue,
including but not limited to forum non conveniens. Service of process for any
claim which arises under this Agreement shall be valid if made in accordance
with the notice provisions set forth in Section 7.2 of this Agreement. If
service of process is made as aforesaid, the party served agrees that such
service shall constitute valid service, and specifically waives any objections
the party served may have under any state or federal law or rule concerning
service of process. Service of process in accordance with this Section shall be
in addition to and not to the exclusion of any other service of process method
legally available.
7.5 DESCRIPTIVE HEADINGS. All section headings, titles and subtitles are
inserted in this Agreement for the convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
7.6 SEVERABILITY. If a court of competent jurisdiction rules that any one
or more of this Agreement's provisions are invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any of this Agreement's other provisions, and this Agreement shall be construed
as if it had never contained such invalid, illegal or unenforceable provision.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
7.8 COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties with respect to the subject matter of this
Agreement. No alteration or modification of any of this Agreement's provisions
shall be valid unless made in writing and signed by all the parties to this
Agreement.
7.9 SURVIVAL. Notwithstanding anything herein to the contrary, the
provisions of Sections 2.4, 4.2, 4.6 and 5.2 shall survive termination of the
licenses granted herein.
7.10 NO AGENCY. Neither party shall be considered as, or hold itself out
to be, an agent of the other party or act for or bind the other party in any
dealing with a third party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the Effective Date.
LICENSEE:
IJI ACQUISITION CORP.,
an Illinois corporation
By: __________________________________
Its: _________________________________
LICENSOR:
INTERNATIONAL JENSEN INCORPORATED,
a Delaware corporation
By: __________________________________
Its: _________________________________
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EXHIBIT 2.6
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made as of , 1996
(the "Effective Date"), by and among IJI ACQUISITION CORP., an Illinois
corporation, the name of which is about to be changed to INTERNATIONAL JENSEN
INCORPORATED ("Purchaser"), INTERNATIONAL JENSEN INCORPORATED, a Delaware
corporation, the name of which is about to be changed to RECOTON AUDIO
CORPORATION after its acquisition by RC Acquisition Sub, Inc. ("Seller"),
RECOTON CORPORATION, a New York corporation ("Recoton"), RC ACQUISITION SUB,
INC., a Delaware corporation and wholly-owned subsidiary of Recoton
("Acquisition Sub"), and FUJI CONE, INC., a Delaware corporation and
wholly-owned subsidiary of Seller ("Fuji Cone") (Recoton, Acquisition Sub and
Fuji Cone together are the "Related Companies").
W I T N E S S E T H:
WHEREAS, Seller has agreed to sell to Purchaser and Purchaser has agreed to
purchase from Seller substantially all of the assets of Seller's original
equipment manufacturer's business (the "Purchased Assets"), on the terms and
conditions as set forth in the Amended and Restated Agreement for the Purchase
and Sale of Assets of International Jensen Incorporated, dated as of January 3,
1996, by and between Purchaser and Seller (the "Purchase Agreement");
WHEREAS, the original equipment manufacturer's business consists of the
business of designing, manufacturing and marketing of speakers and speaker
components and related products for and to domestic and international
automotive, truck, recreational vehicle, aircraft or other motorized vehicle
("Vehicular") original equipment manufacturers (the "OEM Business") (the term
"related products" shall include, without limitation, new products or extensions
of existing product lines which are complimentary to the OEM Business and not
competitive with the Branded Business (as defined below) as now conducted);
WHEREAS, Purchaser is not purchasing that portion of Seller's business which
consists of designing, manufacturing, and marketing of speakers and speaker
components and related branded products in the domestic and international
Vehicular aftermarket and home audio markets (the "Branded Business") (the term
"related branded products" shall include, without limitation, new products or
extensions of existing product lines which are complimentary to the Branded
Business and not competitive with the OEM Business as now conducted);
WHEREAS, the continued involvement by Seller in a business in competition
with Purchaser would diminish the value of the Purchased Assets;
WHEREAS, the involvement by Purchaser in a business in competition with
Seller would diminish the value of those assets retained and used by Seller with
respect to the Branded Business; and
WHEREAS, as an inducement to Purchaser to consummate its purchase of the OEM
Business, Seller is willing to not compete with Purchaser, or any of its
affiliates, with respect to the OEM Business, as more fully set forth herein,
and, as an inducement to Seller to consummate its sale of the OEM Business to
Purchaser, Purchaser is willing to not compete with Seller or any of its
affiliates with respect to the Branded Business, as more fully set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the above premises, the consideration
under the Purchase Agreement and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. RESTRICTIVE COVENANT BY SELLER AND RELATED COMPANIES. Except as
otherwise stated herein, for a period of time which is the lesser of (A) three
(3) consecutive years commencing as of the Effective Date, or (B) so long as a
change in control of Purchaser (within the meaning of Section 2.3 of the MS
Agreement), has not occurred, Seller and the Related Companies shall not:
(a) Directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever, engage in, assist
or have any active interest in a business that engages in the OEM Business
as it exists on the Effective Date, located anywhere in the United States of
America or any foreign country in which Purchaser, Seller or any of the
Related Companies have conducted business within the past three (3) years.
Notwithstanding anything to the contrary contained herein, this Section
shall not preclude Seller or any of the Related Companies from owning less
than five percent (5%) of the outstanding securities of a corporation which
is publicly traded either on a securities exchange or over-the-counter and
which engages in a business or lines of business similar to the OEM
Business.
(b) Directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever:
(i) divert or attempt to divert from Purchaser, or any of its
affiliates, any OEM Business with respect to any customer or account with
which Seller or any of the Related Companies had any contact or
association, or which was under the supervision of Seller or any of the
Related Companies or the identity of which was learned by Seller as a
result of Seller's ownership of the Purchased Assets, in each case within
three (3) years prior thereto; or
(ii) induce any employee, salesperson, distributor, supplier, vendor,
manufacturer, representative, agent, jobber or other person transacting
OEM Business with Purchaser or any of its affiliates, to terminate their
relationship or association with Purchaser, or any of its affiliates or
to represent, distribute or sell services or products in competition with
services or products relating to the OEM Business of Purchaser, or any of
its affiliates.
2. RESTRICTIVE COVENANT BY PURCHASER. Except as otherwise stated herein,
for a period of time which is the lesser of (A) three (3) consecutive years
commencing as of the Effective Date, or (B) so long as a change in control of
Purchaser (within the meaning of Section 2.3 of the MS Agreement), has not
occurred, Purchaser shall not:
(a) Directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever, engage in, assist
or have any active interest in a business that engages in the Branded
Business or any business of Recoton or its affiliates as it exists on the
Effective Date, located anywhere in the United States of America or any
foreign country in which Purchaser, Seller or any of the Related Companies
have conducted business within the past three (3) years. Notwithstanding
anything to the contrary contained herein, this Section shall not preclude
Purchaser from owning not more than five percent (5%) of the outstanding
securities of a corporation which is publicly traded either on a securities
exchange or over-the-counter and which engages in a business or lines of
business similar to the Branded Business.
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<PAGE>
(b) Directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever:
(i) divert or attempt to divert from Seller or any of the Related
Companies or any of their affiliates any Branded Business with respect to
any customer or account with which Seller or any of the Related Companies
had any contact or association, or which was under the supervision of
Seller or any of the Related Companies, in each case within three (3)
years prior thereto; or
(ii) induce any employee, salesperson, distributor, supplier, vendor,
manufacturer, representative, agent, jobber or other person transacting
business relating to the Branded Business with Seller, any of the Related
Companies, or any of their affiliates, to terminate their relationship or
association with Seller, any of the Related Companies, or any of their
affiliates, or to represent, distribute or sell services or products in
competition with services or products relating to the Branded Business of
Seller, any of the Related Companies, or any of their affiliates.
3. NON-DISCLOSURE BY SELLER. Seller and the Related Companies shall not at
any time or in any manner, directly or indirectly use or disclose to any party,
other than Purchaser, any OEM Business Confidential Information (as that term is
defined below). "OEM Business Confidential Information" means trade secrets or
other information known, learned or obtained by Seller and/or the Related
Companies or disclosed to Seller and/or the Related Companies as a consequence
of Seller's ownership of the OEM Business or otherwise, and which is not
generally known in the industry, and that relates solely to the OEM Business or
its products, processes, services, inventions (whether patentable or not),
formulas, techniques or know-how, including, but not limited to, information
relating to distribution systems and methods, research, development,
manufacturing, purchasing, accounting, engineering, marketing, merchandising and
selling.
4. NON-DISCLOSURE BY PURCHASER. Purchaser shall not at any time or in any
manner, directly or indirectly use or disclose to any party, other than Seller
and/or the Related Companies, any Branded Business Confidential Information (as
that term is defined below). "Branded Business Confidential Information" means
trade secrets or other information known, learned, or obtained by Purchaser or
disclosed to Purchaser as a consequence of its purchase of the OEM Business or
otherwise, and which is not generally known in the industry and which relates
solely to the Branded Business or its products, processes, services, inventions
(whether patentable or not), formulas, techniques or know-how, including, but
not limited to, information relating to distribution systems and methods,
research, development, manufacturing, purchasing, accounting, engineering,
marketing, merchandising and selling.
5. EXCEPTION TO NON-DISCLOSURE. The parties acknowledge the existence of a
certain Management Services Agreement dated as of , 1996 between
Purchaser and Seller (the "MS Agreement") and the Supply and Services Agreement
dated as of , 1996 between Purchaser and Seller (the "Supply Agreement")
and recognize that the non-disclosure provisions as set forth in Sections 3 and
4 of this Agreement will not apply to information properly transmitted to either
party pursuant to the MS Agreement and the Supply Agreement.
6. EXCLUSIONS TO AGREEMENT. Notwithstanding anything to the contrary
contained herein, the following activities shall be excluded from the scope of
this Agreement and shall not constitute a violation of this Agreement:
(a) Selling by Seller and/or the Related Companies of antennas and
airplane headsets and selling by Seller and/or the Related Companies of
12-Volt products to Vehicular customers for aftermarket applications;
(b) Designing, manufacturing, marketing and selling of "non-branded
speakers" and speaker components and related products by Purchaser to any
original equipment manufacturer
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customer, whether or not such customer competes with the Seller or any of
the Related Companies. For purposes of this Agreement "non-branded speakers"
shall mean any speakers to be sold under the trademark of an original
equipment manufacturer or without any trademark;
(c) Selling by Purchaser of assembled speakers to other speaker
companies for Vehicular installation;
(d) Selling of licensed trademarked speakers by Purchaser to Vehicular
original equipment manufacturers as permitted under the License Agreement,
dated , 1996 by and between Purchaser and Seller; and
(e) Purchaser inducing or causing any MSP, as that term is defined in
the MS Agreement, to leave the employ of Seller or any Related Company
within the period during of the term of employment of Robert G. Shaw by
Seller or any Related Company and ending six months thereafter on condition
that Purchaser shall assume all obligations to such employee (other than
Robert G. Shaw) under any then-existing employment or severance agreements
and shall indemnify and hold the prior employer harmless from any liability
under any such agreements. Notwithstanding the foregoing, if the MSP is
terminated (actually or constructively) by Seller or any Related Company,
Purchaser may employ such MSP and shall not be required to assume the
obligations to such MSP under any employment agreement or severance
agreement and shall not indemnify the Seller or any Related Company.
7. REMEDIES.
(a) The parties to this Agreement acknowledge that this Agreement is
intended to protect and preserve legitimate business interests of Seller, the
Related Companies and Purchaser. Each of Seller, the Related Companies and
Purchaser acknowledge that any violation of the provisions of this Agreement by
the other may cause serious and irreparable damage to the non-breaching party,
and further acknowledge that it might not be possible to measure such damages in
money in such event. Accordingly, the parties agree that, in the event of a
violation of the provisions of this Agreement, the non-breaching party may seek,
in addition to any other rights or remedies, including money damages, an
injunction or restraining order restraining the breaching party from doing or
continuing to do or performing any acts constituting such a violation.
(b) The parties' remedies under this Agreement shall be cumulative and not
exclusive and the recovery of money damages hereunder or under any other
agreement to which Seller and Purchaser are a party shall not preclude the
non-breaching party from pursuing temporary or permanent injunctive relief as
otherwise provided herein.
8. NOTICE. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by
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certified or registered mail, return receipt requested, postage prepaid, (c)
sent by a nationally recognized overnight delivery service, with delivery
confirmed addressed as follows, or (d) telexed or telecopied with receipt
confirmed, addressed as follows:
<TABLE>
<S> <C>
If to Seller and the International Jensen Incorporated/Recoton Audio Corporation
Related Companies: 25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
AND
Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Mr. Stuart Mont
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy to: Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn, Esq.
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
If to Purchaser: IJI Acquisition Corp./International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy to: Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone: (312) 201-2521
</TABLE>
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
(i) when personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
9. COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties. No alteration or modification of any of this
Agreement's provisions shall be valid unless made in writing and signed by all
the parties to this Agreement.
10. APPLICABLE LAW. The laws of the State of Illinois shall govern all
aspects of this Agreement, irrespective of the fact that one or more of the
parties now is or may become a resident of a different state, or that one or
more of the parties now or hereafter locates its principal office outside the
State of
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<PAGE>
Illinois. The parties shall submit all disputes which arise under this Agreement
to state or federal courts located in the City of Chicago, Illinois for
resolution. The parties acknowledge the aforesaid courts shall have exclusive
jurisdiction over this Agreement and specifically waive any claims which they
may have that involve jurisdiction or venue, including but not limited to forum
non conveniens. Service of process for any claim which arises under this
Agreement shall be valid if made in accordance with the notice provisions set
forth in Section 8 of this Agreement. If service of process is made as
aforesaid, the party served agrees that such service shall constitute valid
service, and specifically waives any objections the party served may have under
any state or federal law or rule concerning service of process. Service of
process in accordance with this Section shall be in addition to and not to the
exclusion of any other service of process method legally available.
11. DESCRIPTIVE HEADINGS. All section headings, titles and subtitles are
inserted in this Agreement for the convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
12. SEVERABILITY. If a court of competent jurisdiction rules that any one
or more of this Agreement's provisions are invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any of this Agreement's other provisions, and this Agreement shall be construed
as if it had never contained such invalid, illegal or unenforceable provision.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
14. WAIVER. The failure of either of the parties to insist, in any one or
more instances, upon performance of any of the terms or conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any rights
granted hereunder or the future performance of any such term, covenant or
condition.
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<PAGE>
IN WITNESS WHEREOF, the parties have made and entered into this Agreement as
of the Effective Date.
INTERNATIONAL JENSEN INCORPORATED,
a Delaware corporation
By: __________________________________
Its: _________________________________
IJI ACQUISITION CORP., an Illinois
corporation
By: __________________________________
Its: _________________________________
RECOTON CORPORATION, a New York
corporation
By: __________________________________
Its: _________________________________
RC ACQUISITION SUB, INC., a Delaware
corporation
By: __________________________________
Its: _________________________________
FUJI CONE, INC., a Delaware
corporation
By: __________________________________
Its: _________________________________
7
<PAGE>
EXHIBIT 2.7
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made as of , 1996 (the
"Effective Date"), by and between INTERNATIONAL JENSEN INCORPORATED, a Delaware
corporation the name of which is about to be changed to RECOTON AUDIO
CORPORATION ("Licensor"), and IJI ACQUISITION CORP., an Illinois corporation the
name of which is about to be changed to INTERNATIONAL JENSEN INCORPORATED
("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor has been engaged in the business of, inter alia,
designing, manufacturing and marketing speakers and speaker components and
related products, including, without limitation, new products or extensions of
existing product lines which are complimentary to the OEM Business as defined
below (collectively hereinafter "Speaker Equipment") for and to domestic and
international automotive, truck, recreational vehicle, aircraft or other
motorized vehicle ("Vehicular") original equipment manufacturers (the "OEM
Business");
WHEREAS, Licensor has used various trademarks in connection with the OEM
Business and its other businesses, including, but not limited to, the trademarks
identified in Schedule 1 of this Agreement (the "Trademarks") which are
registered in the countries noted in Schedule 1;
WHEREAS, Licensor has sold the OEM Business to Licensee pursuant to the
terms and conditions of that certain Amended and Restated Agreement for Purchase
and Sale of Assets by and between Licensor and Licensee, dated as of January 3,
1996; and
WHEREAS, Licensee desires to utilize the Trademarks in the conduct of the
OEM Business.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Licensor and Licensee agree as follows:
1. GRANT OF LICENSE. Licensor hereby grants to Licensee, and Licensee
hereby accepts, upon the terms and conditions set forth in this Agreement, the
exclusive right (the "License") to use the Trademarks in the countries where
Licensor has registered rights for the Trademarks (and in those countries where
Licensor subsequently acquires registered rights for the Trademarks) for Speaker
Equipment sold to Vehicular original equipment manufacturers through the OEM
Business ("OEM Speaker Equipment").
2. TERM OF LICENSE. Subject to the terms of Paragraph 5 hereof, the term
of the License is ten (10) years from the Effective Date (the "Original Term").
Upon written notice to Licensor given no earlier than one hundred eighty (180)
days or no later than thirty (30) days before the then-scheduled expiration of
the term, Licensee, in its sole discretion may elect to renew this Agreement for
two (2) additional five (5) year terms (the "Renewal Terms") (the Original Term
and the Renewal Terms, if applicable, hereinafter collectively are referred to
as the "Term") if Licensee is in compliance with the terms of this Agreement at
the time of such notice. Any written notice to renew the Term of the License
shall be made not less than thirty (30) days prior to the end of the Original
Term or the first Renewal Term, as the case may be.
3. ROYALTY.
(a) Licensee shall pay to Licensor during the Term the following
royalties (collectively hereinafter referred to as the "Royalty" or the
"Royalties"):
(i) with respect to OEM Speaker Equipment utilizing the mark "Jensen"
or any derivative of "Jensen," a royalty to be agreed upon by the parties
which shall be no less than one percent (1%) and no more than two percent
(2%) of Net Revenues (as defined below); and
(ii) with respect to OEM Speaker Equipment utilizing any Trademark
other than "Jensen" or any derivative of "Jensen," the royalty shall be
five percent (5%) of Net Revenues.
<PAGE>
OEM Speaker Equipment sold in connection with the use of any of the
Trademarks is hereinafter referred to as "Licensed Products."
(b) Such Royalty shall accrue when the Licensed Products are shipped by
Licensee or a wholly-owned subsidiary of Licensee to a party not wholly
owned by Licensee (a "Third Party"). If a Third Party is owned in part by
Licensee or an affiliate of Licensee, a further Royalty shall be due
(against which any prior Royalty may be credited) upon any further sale of a
Licensed Product by such Third Party.
(c) As used herein, the term "Net Revenues" shall mean gross sales to
Third Parties, less returns actually credited.
4. SUBLICENSE. Licensee may sublicense, subject to the terms of this
Agreement (including without limitation the right of Licensor to audit the books
of the sublicensee), any rights (other than the right to sublicense) granted to
it under this Agreement to any domestic or international Vehicular original
equipment manufacturer for the term of the license hereunder. Any royalties
derived from any such sublicense shall be divided equally between Licensor and
Licensee.
5. CHANGE IN CONTROL. Upon a "Change of Control of Licensee" (as defined
below), the terms and conditions governing the License granted to Licensee
hereunder shall change, as follows:
a. There shall be a minimum annual royalty for each trademark of One
Hundred Thousand Dollars ($100,000) commencing two (2) years after the
Change of Control (prior to the end of the two (2) year period, as described
herein and by written notice to Licensor, the successor licensee may elect
not to retain its License for any one or more Trademark or Trademarks);
b. No sublicenses shall be granted after the Change of Control of
Licensee other than with Licensor's prior written approval and the royalties
on such sublicenses shall be divided seventy percent (70%) to Licensor and
thirty percent (30%) to the Licensee;
c. The successor licensee may renew the Term of this Agreement for a
period of up to ten (10) years, which when added to the expired portion of
the Term does not exceed twenty (20) years; and
d. Royalties on the mark "Jensen" shall immediately increase to three
percent (3%).
A "Change of Control of Licensee" shall have occurred if Robert G. Shaw
("Shaw") shall not: (i) be a member of the Board of Directors of Licensee; (ii)
be either an executive officer or chairman of the Board of Licensee; and (iii)
own beneficially more shares of the voting stock of Licensee than any other
stockholder of Licensee (or "group" of stockholders, as referred to in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) but in any event
more than thirty percent (30%) of the outstanding voting stock; PROVIDED,
HOWEVER, that the death or permanent disability of Shaw shall not be considered
a "Change of Control of Licensee" so long as Shaw's estate or heirs, or any
trust for the benefit solely of the heirs of Shaw, collectively, meet the test
set forth above in clause (iii). For purposes of this Agreement, a person shall
be deemed to own beneficially any shares of Licensee which are owned by himself,
his spouse, any descendant of his, or any trust, partnership, corporation, joint
venture, or limited liability company which has been created primarily for his
benefit and/or for the benefit of his spouse or any descendant of such person.
6. ACCOUNTING.
(a) Licensee shall deliver to Licensor on the fifteenth (15th) day
following the end of each calendar year quarter, and on the thirtieth (30th)
day of the month following termination or expiration of this Agreement, a
complete and accurate statement (a "Royalty Statement") of sales of Licensed
Products (including sales by any sublicensee), for the immediately preceding
calendar year quarter or portion thereof by Licensee and its affiliates
thereof ("Royalty Period"). Each Royalty Statement shall be certified as
accurate by an officer of Licensee and shall include a computation of Gross
Revenues and Royalty due. A Royalty Statement shall be furnished to
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<PAGE>
Licensor with respect to each Royalty Period whether or not any Licensed
Products have been shipped, distributed or sold, and whether or not
Royalties have been earned during such Royalty Period.
(b) The amount shown in the Royalty Statements as being due Licensor,
unless otherwise directed in writing by Licensor, shall be paid by wire
transfer to an account designated in writing by Licensor on the dates
provided herein for submission of such statements and Licensee shall
transmit by facsimile to Licensor on such payment date a copy of the
applicable Royalty Statement.
7. BOOKS AND RECORDS.
(a) Licensee shall keep accurate books of account and records at its
principal place of business, or such other reasonable locations at it may
designate in writing to Licensor, covering all transactions relating to the
License. Licensor and its duly authorized representatives shall have the
right, upon two (2) business days written notice, during normal business
hours, to audit the books of account and records of Licensee and its
sublicensees, and to make copies and extracts thereof. If any underpayment
is in excess of five percent (5%) and Ten Thousand Dollars ($10,000), the
cost of any such audit shall be borne by Licensee.
(b) All books of account and records of Licensee concerning transactions
relating to the License granted herein shall be retained by Licensee for at
least five (5) years after the end of the year in which such transaction
occurs for possible inspection by Licensor in accordance with the terms
hereof.
Licensor shall not at any time or in any manner, directly or indirectly use
or disclose to any party other than Licensee, Books and Records Confidential
Information (as that term is defined below). "Books and Records Confidential
Information" means trade secrets or other information known, learned or obtained
by Licensor or disclosed to Licensor as a consequence of the inspection rights
as provided under this Section, which is not generally known in the industry.
8. OWNERSHIP OF TRADEMARKS. Licensee confirms and acknowledges, and each
sublicensee shall confirm and acknowledge, Licensor's exclusive ownership of
each of the Trademarks, and agrees, and each sublicensee shall agree, that at no
time will it take any actions which challenge, contest or otherwise dispute
Licensor's ownership, use, or registration of any of the Trademarks, and/or the
validity and/or enforceability thereof. Neither Licensee nor any sublicensee
shall seek to register, use, license, cancel or otherwise seek trademark
protection for any Trademarks in any jurisdiction where such marks are not
registered or otherwise protected by Licensor.
9. AGREEMENT TO ASSIGN. All use by Licensee and any sublicensee of any of
the Trademarks will inure to Licensor's benefit. If Licensee or any sublicensee
should acquire any rights in any of the Licensor Trademarks other than as a
result of the grant of rights made in this Agreement, upon thirty (30) days
written notice and at Licensor's expense, Licensee or such sublicensee shall
assign all such rights to Licensor.
10. ADDITIONAL AGREEMENT. Licensee will, at Licensor's expense, execute
and deliver such documents as Licensor reasonably deems necessary for Licensor
to register, and/or to protect Licensor's rights in, each of the Trademarks,
including, without limitation, any separate licenses for foreign Trademarks.
11. COOPERATION TO PROTECT RIGHT. Licensee and any sublicensee will inform
Licensor of any uses of any of the Trademarks by third parties which become
known to it. Licensor shall have no obligation to take any action against any
such infringement. Licensee and any sublicensee will take no action against such
third-party use, unless Licensor, within thirty (30) days of receiving notice of
such third party use from Licensee or such sublicensee, fails to file a civil
action against such use or to take other action which is intended to cause such
use to cease. If Licensor takes action respecting such use, it will be at
Licensor's cost and expense, and Licensor will be entitled to all monetary
awards granted therein, other than awards of damages based upon lost sales of
Licensee. If Licensee or a sublicensee
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<PAGE>
brings an action against such third party use, it will be at Licensee's or such
sublicensee's cost and expense (including attorneys' fees), and Licensee or such
sublicensee will be entitled to all monetary awards granted therein. Each party
hereto, at the other's request and expense, shall provide all reasonable
cooperation, including execution of all reasonably necessary documents, with
respect to the other's efforts to protect the Trademarks.
12. TERMINATION.
(a) Except as otherwise provided herein, the License may be terminated
by Licensor for a breach of any material term of this Agreement by Licensee,
provided that Licensor first gives Licensee written notice of such breach
and such breach is not cured within forty-five (45) days of delivery of such
written notice with respect to domestic trademarks and ninety (90) days of
delivery of such written notice with respect to foreign trademarks.
(b) The License may be terminated by Licensee upon ninety (90) days
written notice.
13. RIGHTS FOLLOWING TERMINATION. Upon the expiration or termination of
the License for any reason, Licensee will discontinue permanently all use of any
of the Trademarks, or any trademark confusingly similar thereto, provided,
however, that Licensee shall have the right to continue to sell Licensed
Products for the longer of (i) one hundred and eighty (180) days to exhaust its
existing inventory of Licensed Products, or (ii) such time as is reasonably
necessary to fill product orders or complete product programs in effect as of
the effective date of expiration or termination of this Agreement, on condition
that all obligations of Licensee with respect thereto, including, without
limitation, the obligation to pay Royalties, shall continue.
14. QUALITY. All Licensed Products and any products sold by any
sublicensee bearing any of the Trademarks shall be of a quality at least equal
to OEM Speaker Equipment sold by Licensor immediately prior to the date of this
Agreement and shall comply in all respects with all applicable federal, state
and local rules, regulations and other laws.
15. CLAIMS AND INDEMNIFICATION.
(a) Except to the extent that such claims fall within the scope of
subsection (b) of this section, Licensee shall indemnify and defend and hold
Licensor harmless, during the term of this Agreement and at any time
thereafter, from any and all claims, causes of action, costs, expenses,
fines, penalties, liabilities (including statutory and other liability under
worker's compensation and other employer's liability laws), damages, suits
or judgments, including costs of investigation, court costs and reasonable
attorney's fees (hereinafter collectively "Claims"), arising directly or
indirectly from, as a result of, or in connection with the manufacture,
marketing, advertising, distributing or sale of Licensed Products, and
Licensor will have no obligation or liability in connection therewith or
arising from such Claims. Licensee will, within ten (10) days of notice of
any such action in which Licensor is named, notify Licensor in writing
thereof.
(b) Licensor shall indemnify and defend and hold Licensee harmless,
during the term of this Agreement and at any time thereafter, from Claims
made by third parties against Licensee or Licensor for trademark
infringement or the like respecting any of the (i) U.S. Trademarks and (ii)
any foreign Trademarks obtained after the date of this Agreement and
Licensee will have no obligation or liability in connection therewith or
arising from such claims. Licensor will, within ten (10) days of notice of
any such action in which Licensee is named, notify Licensee in writing
thereof.
16. NO AGENCY. Neither party will be considered as, or hold itself out to
be, an agent of the other party, or act for or bind the other party in any
dealing with a third party.
17. NOTICES. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by
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certified or registered mail, return receipt requested, postage prepaid, or (c)
sent by a nationally recognized overnight delivery service, with delivery
confirmed addressed as follows, or (d) telexed or telecopied, with receipt
confirmed, addressed as follows:
<TABLE>
<S> <C>
If to International Jensen Incorporated/Recoton Audio Corporation
Licensor: 25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
AND
Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Mr. Stuart Mont
Telecopier: (407) 333-8903
Telephone: (407) 333-8900
with a copy Stroock & Stroock & Lavan
to: Seven Hanover Square
New York, New York 10004
Attention: Theodore S. Lynn, Esq.
Telecopier: (212) 806-6006
Telephone: (212) 806-5400
If to Jensen Acquisition Corp./International Jensen Incorporated
Licensor: 25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Robert G. Shaw
Telecopier: (847) 317-3774
Telephone: (847) 317-3777
with a copy Wildman, Harrold, Allen & Dixon
to: 225 West Wacker Drive
Chicago, Illinois 60606-1229
Attention: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone: (312) 201-2521
</TABLE>
or such other persons or addresses as shall be furnished in writing by any party
to the other party. A Notice shall be deemed to have been given as of the date
(i) when personally delivered, (ii) five (5) days after the date when deposited
with the United States mail properly addressed, (iii) when receipt of a Notice
sent by an overnight delivery service is confirmed by such overnight delivery
service, or (iv) when receipt of the telex or telecopy is confirmed, as the case
may be, unless the sending party has actual knowledge that a Notice was not
received by the intended recipient.
18. WAIVER. The failure of either of the parties to insist, in any one or
more instances, upon performance of any of the terms or conditions of this
Agreement, shall not be construed as a waiver or relinquishment of any rights
granted hereunder or the future performance of any such term, covenant or
condition.
19. COMPLETE UNDERSTANDING. This Agreement constitutes the complete
understanding among the parties. No alteration or modification of any of this
Agreement's provisions shall be valid unless made in writing and signed by all
the parties to this Agreement.
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20. APPLICABLE LAW. The laws of the State of Illinois shall govern all
aspects of this Agreement, irrespective of the fact that one or more of the
parties now is or may become a resident of a different state, or that the one or
more of the parties now or hereafter locates its principal office outside the
State of Illinois. The parties shall submit all disputes which arise under this
Agreement to state or federal courts located in the City of Chicago, Illinois
for resolution. The parties acknowledge the aforesaid courts shall have
exclusive jurisdiction over this Agreement and specifically waive any claims
which they may have that involve jurisdiction or venue, including but not
limited to forum non conveniens. Service of process for any claim which arises
under this Agreement shall be valid if made in accordance with the notice
provisions set forth in Section 17 of this Agreement. If service of process is
made as aforesaid, the party served agrees that such service shall constitute
valid service, and specifically waives any objections the party served may have
under any state or federal law or rule concerning service of process. Service of
process in accordance with this Section shall be in addition to and not to the
exclusion of any other service of process method legally available. In the event
of litigation hereunder, the court shall be authorized to award the prevailing
party in such action or proceeding any or all reasonable attorney fees and
disbursements paid by it in pursuing or defending such action.
21. DESCRIPTIVE HEADINGS. All section headings, titles and subtitles are
inserted in this Agreement for the convenience of reference only, and are to be
ignored in any construction of this Agreement's provisions.
22. SEVERABILITY. If a court of competent jurisdiction rules that any one
or more of this Agreement's provisions are invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any of this Agreement's other provisions, and this Agreement shall be construed
as if it had never contained such invalid, illegal or unenforceable provision.
23. SUCCESSORS AND ASSIGNS AND THIRD PARTY BENEFICIARIES. This Agreement
may not be assigned without the prior written consent of all parties hereto.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
24. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts for all purposes shall constitute an
original.
IN WITNESS WHEREOF, the parties have made and entered into this Agreement as
of the Effective Date.
INTERNATIONAL JENSEN INCORPORATED
By: __________________________________
Title: _______________________________
IJI ACQUISITION CORP.
By: __________________________________
Title: _______________________________
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EXHIBIT 2.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 1st day of May, 1996
(the "Commencement Date"), between RC Acquisition Sub, Inc., a Delaware
corporation to be renamed Recoton Audio Corporation (the "Corporation"), Robert
Shaw (the "Employee"), International Jensen Incorporated, a Delaware corporation
("Jensen") and Recoton Corporation, a New York corporation ("Recoton").
W I T N E S S E T H:
WHEREAS, the Employee is currently employed by Jensen as its President and
Chief Executive Officer;
WHEREAS, the Corporation, Recoton and Jensen have entered into a Second
Amended and Restated Agreement and Plan of Merger dated as of January 3, 1996
(the "Merger Agreement"), pursuant to which Jensen will merge with and into the
Corporation;
WHEREAS, the Corporation and the Employee desire to enter into an agreement
pursuant to which the Employee is employed by the Corporation effective as of
the filing date of the Merger Agreement with the Delaware Secretary of State's
office (the "Effective Time");
WHEREAS, in consideration for this Agreement, the Employee has agreed to
release Jensen and the Corporation from any and all compensation, benefits and
fees, payable or owing under the Employment Agreement dated December 19, 1991,
but effective as of January 1, 1992, by and between Jensen and the Employee (the
"1991 Employment Agreement") as of the Effective Time;
WHEREAS, Jensen, the Corporation and Recoton have agreed to release Employee
from any duties or obligations and any claims arising under the 1991 Employment
Agreement as of the Effective Time;
WHEREAS, the Employee also may serve as President, or in another executive
capacity, of IJI Acquisition Corporation, an Illinois Corporation ("IJI
Acquisition"); and
WHEREAS, the Corporation and the Employee desire to assure the service of
the Employee to the Corporation as of the Effective Time.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and conditions herein contained, the parties hereto
agree as follows:
1. EFFECT OF THIS AGREEMENT ON THE 1991 EMPLOYMENT AGREEMENT. As of the
Effective Time, the 1991 Employment Agreement shall automatically terminate. By
executing this Agreement, the Employee, on behalf of himself, his heirs,
executors, administrators and assigns, or anyone else acting on his behalf,
hereby unconditionally and irrevocably releases Jensen, the Corporation, and its
successors and assigns, subsidiaries, affiliates, directors, officers, agents
and employees, in both their individual and representative capacities, from any
obligations under the 1991 Employment Agreement, and unconditionally and
irrevocably waives any compensation, benefits, termination payments, or other
payments provided for in the 1991 Employment Agreement, as of the Effective
Time. By executing this Agreement, Jensen, Recoton and the Corporation, jointly
and severally, and on behalf of their respective successors and assigns,
subsidiaries affiliates, directors, officers, agents and employees, in their
representative capacities, hereby unconditionally and irrevocably release
Employee from any obligations or duties arising under the 1991 Employment
Agreement and any claims arising thereunder, as of the Effective Time. This
Agreement shall terminate AB INITIO if the Merger Agreement is terminated and
the 1991 Employment Agreement shall remain in full force and effect.
2. EMPLOYMENT AND DUTIES.
(a) The Corporation shall employ the Employee, and the Employee shall
accept employment, effective as of the Effective Time for the period of time
set forth in Section 3(a), upon such terms and conditions as set forth in
this Agreement. The Employee shall serve the Corporation as President and as
Chief Executive Officer subject to the conditions set forth in this
Agreement,
<PAGE>
under the direction of the Board of Directors of the Corporation, and shall
exercise such responsibilities and perform such duties for the Corporation
as the Board of Directors shall from time to time reasonably designate and
which are commensurate with the typical duties of a President or Chief
Executive Officer of a wholly-owned subsidiary of a public company in the
business in which the Corporation is engaged. The Employee also shall be
elected to the Board of Directors of Recoton and the Board of Directors of
the Corporation as of the Effective Date and shall serve as an executive
officer of Recoton (in which capacity he shall exercise such
responsibilities and perform such duties for Recoton as the
President/Co-Chief Executive Officer and the Chief Operating Officer shall
from time to time designate commensurate with the Employee's position as the
President and Chief Executive Officer of a significant subsidiary. As set
forth following this Agreement, Robert L. Borchardt ("Borchardt"), the
President and Co-Chief Executive Officer of Recoton, has agreed to vote the
common shares of Recoton, which he beneficially owns or as to which he has
discretionary voting authority in favor of the election and reelection of
the Employee to serve as a director of Recoton for so long as the Employee
is employed by Recoton or the Corporation or any affiliate thereof whether
during or after the termination of this Agreement. Recoton shall vote the
common shares of the Corporation in favor of the election and reelection of
the Employee to serve as a director of the Corporation, for so long as the
Employee is employed by the Corporation or any affiliate thereof whether
during or after the termination of this Agreement. For purposes of the
foregoing, Borchardt shall be deemed to own beneficially any common shares
of Recoton which are owned by himself, his spouse, any descendant of his,
any trust, partnership, corporation, joint venture, and limited liability
company which has been created primarily for his benefit or the benefit of
his spouse or any descendant of Borchardt, or over which he has
discretionary voting authority. At such time as the Employee ceases to be
employed by the Corporation, the Employee shall resign as a director of the
Corporation and Recoton.
(b) The Employee shall report to the President/Co-Chief Executive
Officer, or to the President/Co-Chief Executive Officer and the Chief
Operating Officer of Recoton, together, as an officer of Recoton and to the
Board of Directors of the Corporation as the President or as an executive
officer of the Corporation. With the exception of that business time which
will be devoted to the performance of the Employee's responsibilities to IJI
Acquisition pursuant to an agreement to be entered into between Recoton,
Jensen and IJI Acquisition captioned Management Services Agreement (the "MS
Agreement"), the form of which is attached to the Amended and Restated
Agreement for Purchase and Sale of the Assets of International Jensen
Incorporation by and between Jensen and IJI Acquisition dated as of January
3, 1996 (the "Purchase Agreement") and such other business time as is
devoted to other responsibilities as set forth herein, the Employee shall
devote all of his business time and attention to the performance of his
duties under this Agreement and to promoting the best interests of the
Corporation and Recoton and the Employee shall not, either during or outside
of such normal business hours, directly or indirectly engage in any activity
inimical to such best interests. The Employee shall not perform services for
compensation and/or bonuses for himself or for any entity or person other
than the Corporation, or Recoton, without the prior express written
permission of Recoton's Board of Directors. Notwithstanding anything to the
contrary contained herein, it shall not be a violation of this Agreement for
the Employee to (i) serve on civic or charitable boards; (ii) participate in
professional activities and organizations; (iii) manage his personal
investments and his real estate development concerns at a level of activity
currently so engaged so long as those activities do not interfere with the
Employee's performance of his responsibilities under this Agreement; and
(iv) be an officer of or serve on the Board of Directors and be an employee
of IJI Acquisition and receive compensation in connection therewith, so long
as those activities do not interfere with the Employee's performance of his
responsibilities under this Agreement. The Employee shall exert his best
efforts in the performance of his duties under this Agreement.
(c) The Employee and the Corporation acknowledge that there may be
situations which arise, in light of the Employee being an officer, director,
stockholder and/or employee of IJI Acquisition and an officer, director
and/or employee of Recoton or the Corporation, which would
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<PAGE>
constitute, or give rise to the possibility of, a conflict of interest or
the appearance of a conflict of interest. The Employee agrees that he shall
refrain from taking action which would constitute a violation of his
fiduciary duties to Recoton or the Corporation. To the extent that he is
aware of any conflicts (or potential conflicts) of interest, he shall
promptly so advise the Corporation and Recoton. Recoton and the Corporation
may take such reasonable efforts as they deem appropriate (including without
limitation the establishment of a "Chinese Wall" between the Employee and
other employees of Recoton and the Corporation working on, or with knowledge
of, the matter or matters in conflict or potential or possible conflict (the
"Conflicting Matters") and the reasonable exclusion of the Employee from
those portions of meetings which are relevant and from having access to
those portions of the files, documents, data bases and communications
regarding or relating to the Conflicting Matters) in order to reasonably
insulate the Employee from any such Conflicting Matters). The purpose of
this paragraph is to protect the Corporation and Recoton against injury due
to the Employee's conflict of interest. In no event shall the parties
construe this provision as a means to derogate the Employee's duties, as
described herein, or otherwise negate the Corporation's obligations and
responsibilities under the MS Agreement (as defined in Section 2(b)), or the
Supply Agreement (as defined in Section 5(a)). Any reasonable action taken
by Recoton or the Corporation in good faith, pursuant to this Section 2(c),
shall not constitute an event giving the Employee the right to terminate
this Agreement pursuant to the third sentence of Section 3(d). Subject to
the terms and conditions set forth in Section 5, the Employee shall not use
or transmit, to IJI Acquisition or others, Recoton or Corporation
Proprietary Information relating to any Conflicting Matters.
3. TERM; PAYMENT UPON TERMINATION.
(a) The term of the Employee's employment under this Agreement shall
commence as of the Effective Time and shall terminate on the earlier of the
death of the Employee, the Employee ceasing to be employed by the
Corporation other than by reason of breach by the Corporation of this
Agreement, or 5:00 p.m. on the second anniversary of the Effective Time (the
"Employment Term"). Except with respect to the provisions of Sections 2,
3(d) and 3(e) which expressly survive the termination of this Agreement, the
continued employment of the Employee following the expiration of the
Employment Term shall be other than pursuant to this Agreement.
(b) The Corporation, in the sole discretion of its Board of Directors,
may terminate the employment of the Employee, and its obligation to pay
compensation pursuant to Section 4, during the Employment Term at any time
for "cause." "Cause" as used in this Agreement shall mean (i) conviction of
a felony or any crime having larceny as an essential element, (ii) willful
conduct that is materially injurious to the Corporation or Recoton, (iii)
willful and repeated dereliction of duty or breach of the Employee's
material obligations under this Agreement, (iv) failure to perform any
material covenants under the agreement dated as of January 3, 1996 among the
Employee and the Corporation entitled Shareholders' Agreement (the
"Shareholders' Agreement") and (v) serious violation of law relating to the
Corporation's or Recoton's business or securities. For the purpose of this
section, no act or failure to act on the Employee's part will be considered
"willful" unless done, or omitted to be done, by him not in good faith and
without the reasonable belief that his action or omission was in the
interest of the Corporation or not opposed to the interests of the
Corporation. For termination for cause, written notice of the termination
shall be served upon the Employee and, except as otherwise provided herein,
shall be effective as of the date of such service ("Termination Notice").
With respect to items (iii) and (iv) of this subsection 3(b), Employee shall
have ten (10) days within receipt of the Termination Notice to cure the
cause violation, and his failure to do so shall result in his termination.
Such written notice shall specify in reasonable detail the act or acts of
the Employee underlying such termination.
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<PAGE>
(c) The Corporation may terminate the employment of the Employee for
reasons other than for cause provided that the Corporation shall continue to
pay or provide the Employee the salary and other benefits (including bonus
which would be paid if the Employee were still employed hereunder) provided
for in this Agreement until the expiration of the Employment Term.
(d) The Employee may terminate his employment hereunder at any time upon
sixty (60) days prior written notice. If the Employee has been employed by
the Corporation for a period of two (2) years or more, at the time he gives
his written notice of termination, the Corporation shall pay Employee a
severance payment in an amount equal to one (1) year of his then-current
Base Salary and Guaranteed Bonus, payable in one lump sum upon the
termination of his employment. If the Employee has been employed by the
Corporation for less than two (2) years, his compensation and benefits under
this Agreement shall cease at the time of the termination of his employment.
Notwithstanding anything herein to the contrary, the Employee's rights under
the Option Plan, shall be governed by the terms and conditions of the Option
Agreement, a form of which is attached hereto as Exhibit 4(d). If the
Employee terminates his employment hereunder or notifies the Corporation of
his intent to terminate his employment hereunder, the Corporation in its
sole discretion may require the Employee to cease the exercise of his
responsibilities and the performance of his services for the Corporation at
any time prior to the effective date of the notice of termination and to
refrain from entering the Corporation's premises but the Employee's
compensation hereunder shall continue until the effective date of
termination. If the Corporation shall: (i) materially breach any term of
this Agreement, which breach shall not have been cured within ten (10) days
after written notice thereof has been given to the Corporation by the
Employee, (ii) assign duties or a title to the Employee or delegate powers
to the Employee inconsistent, in any material respect with the Employee's
position as President or as an executive officer of the Corporation; (iii)
(A) relocate the Employee to an office or location outside of a radius of
ten (10) miles from the Lincolnshire office and which is further than two
(2) miles from an expressway (excluding the Employee's relocation to the
Corporation's Schiller Park Facility), or (B) require the Employee to travel
out-of-town in excess of an average of three (3) days per week over any
period of twelve (12) consecutive weeks, other than with the prior written
consent of the Employee, (iv) fail to require a successor of Recoton to
perform under the Employment Agreement; and/or (v) materially change the
Employee's reporting requirements; then the Employee may terminate his
employment under this Agreement and the Corporation shall continue to be
obligated to pay or provide to the Employee the salary and bonus provided
for in this Agreement until the expiration of the Employment Term and the
Corporation shall be obligated to provide to the Employee the payments and
benefits specified in Section 3(e).
(e) If the employment of the Employee is terminated by the Corporation
at any time, whether during the Employment Term or thereafter (including,
but not limited to, termination due to the death or disability of the
Employee and the "constructive termination" specified in the last sentence
of Section 3(d) above), unless terminated by the Corporation for cause, (i)
the Employee will receive a severance payment equal to twice the sum of the
Base Salary (as defined below) in effect at the time of termination and the
Guaranteed Bonus (as defined below), of which one-half shall be paid upon
the effective date of such termination and one-half of which shall be paid
in equal monthly installments over a 24-month period commencing upon the
effective date of such termination, (ii) all options to purchase the common
shares of the Corporation in the Employee's name shall immediately vest,
(iii) the Corporation shall pay (or, if desired by the Employee, reimburse
the Employee for) all premiums for COBRA insurance coverage for 18 months
and shall reimburse the Employee for any comparable coverage obtained
thereafter (but not for an amount in the aggregate in excess of the premiums
paid or reimbursed for COBRA coverage) until the second anniversary of such
termination and (iv) the Corporation shall pay the premiums for the life
insurance policy noted in Section 4(c) for two years. Recoton agrees to
guaranty the obligations of the Corporation under Sections 3 and 4.
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4. COMPENSATION; BENEFITS; AND EXPENSES. For all services to be rendered
to the Corporation or any affiliate thereof in any capacity, including services
as an officer, director, member of any committee or otherwise, so long as the
Employee is employed by the Corporation or Recoton during the Employment Term
pursuant to Section 3(a) or as otherwise set forth in the last sentence of
Section 3(d);
(a) The Corporation or the Surviving Corporation shall pay the Employee
a salary at the rate of $300,000 per year (the "Base Salary"). Such Base
Salary shall be payable in equal installments, less any usual payroll
deductions, in accordance with prevailing payroll practices of the
Corporation from time to time. The Board of Directors may in its sole
discretion increase the Employee's Base Salary and benefits over those
provided for hereunder. Other than as provided in this Agreement, in no
event may Employee's compensation or benefits be decreased by the Board of
Directors except to the extent that such benefits (other than Base Salary
and Guaranteed Bonus, as defined below) are provided to other employees and
such employee benefits are similarly generally reduced.
(b) The Employee shall receive an annual bonus in respect of services
for each twelve (12) month period during the Employment Term in the amount
of at least $150,000 (the "Guaranteed Bonus"). The Guaranteed Bonus shall be
paid in one (1) installment, payable on the fifteenth day following the end
of each twelve month period. The Employee also shall be eligible for an
additional annual performance-based bonus which may be granted by the Board
of Directors of the Corporation in its sole discretion (the "Performance
Bonus").
(c) The Employee shall be eligible to participate in all executive
medical, dental, life, long-term disability, and qualified or non-qualified
retirement benefit plans and all key executive and other employee benefit
plans or arrangements of the Corporation, including, without limitation, any
Section 401(k) savings and profit sharing plan, and any standard life,
disability, accidental death and dismemberment and retirement plans or
programs consistent with the terms and coverages of such plans or
arrangements and such other individual plans and arrangements applicable to
key executives or employees generally, each as may from time to time be
established, amended or terminated; PROVIDED, HOWEVER, that the value of all
such benefits shall not be less than the aggregate value of those benefits
provided to the Employee under Section 4(e) of the 1991 Employment Agreement
except that the key man life insurance policies with aggregate benefits
totalling $16.5 million can be terminated or assigned to IJI Acquisition but
the Corporation shall pay the premiums on the Transamerica Life insurance
policy owned by the Robert G. Shaw Trust in the principal amount of $2.5
million during the Employment Term, and for a period of two (2) years
following the termination of the Employment Term, to the extent required
pursuant to Section 3(e).
(d) On the Effective Date, the Employee shall be granted a nonqualified
option pursuant to the terms of the Recoton Corporation 1991 Stock Option
Plan (the "Option Plan") to purchase 50,000 Recoton Common Shares, par value
$.20 (the "Common Shares") at the closing price for the Common Shares on the
day prior to the Effective Time which option shall vest in five equal annual
installments, commencing on the first anniversary of the grant, and shall
have a term of ten years from the date hereof. The options granted under
this paragraph (d) shall be issued under the form of option agreement
attached hereto as Exhibit 4(d).
(e) The Corporation shall reimburse the Employee for all reasonable and
necessary expenses incurred by the Employee requested or authorized by the
Corporation in connection with the Corporation's business where such
expenses are properly documented and accounted for in accordance with the
current policy of the Corporation.
5. RESTRICTIONS ON THE DISCLOSURE OF PROPRIETARY INFORMATION; INVENTIONS.
(a) During the period from the Effective Time until the expiration of
the Employment Term and thereafter, and except as may be necessary in the
ordinary course of the Corporation's
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<PAGE>
business, the Employee shall not, without the prior written consent of the
Corporation, directly or indirectly (i) record, photograph, photocopy or by
any other means copy or cause to be copied any document, list, drawing,
writing, photograph, sketch, sound recording or other material that embodies
Proprietary Information as defined herein or (ii) use, or disclose or
divulge to any person, firm or corporation, any Proprietary Information.
Notwithstanding the above, the parties acknowledge that the MS Agreement
will be entered into pursuant to the Purchase Agreement and that a certain
Supply and Services Agreement will be entered into between Jensen and IJI
Acquisition (the "Supply Agreement"), the form of which is attached to the
Purchase Agreement, and recognize that the non-disclosure limitation as set
forth herein does not apply to information properly transmitted to any of
the parties in the performance of the MS Agreement and/or the Supply
Agreement and maintained in confidence by the recipient. As used in this
Agreement, "Proprietary Information" means information disclosed to or
obtained by the Employee, whether or not acquired during business hours,
concerning Jensen's, the Corporation's, Recoton's and/or their subsidiaries'
business, operations, products, manufacturing or other processes, services,
customers, vendors, costs and pricing policies, research, development,
formulae, specifications, methods, expertise, techniques, inventions,
equipment, purchasing, merchandising and selling including, but not limited
to, customer lists, financial and/or marketing reports and plans, product
configurations and compositions, pricing guidelines or information,
financial reports, financial projections and other financial information,
business plans and any other information not readily known or obtainable by
the general public, and any proprietary software. Notwithstanding the
foregoing sentence, Proprietary Information does not include (i) information
acquired by the Employee before the Employee became an employee of Jensen,
(ii) information acquired by the Employee pursuant to his employment by or
ownership of IJI Acquisition, (iii) information which is or becomes public
knowledge (except as may be disclosed by the Employee in violation of this
Agreement), (iv) information acquired by the Employee from a source other
than Jensen, the Corporation, Recoton or an affiliate thereof or a party
providing such information to Jensen, the Corporation, Recoton or such
affiliate that legally acquired such information and was free to disclose
the same or, (iv) information independently developed by the Employee
without the use of Proprietary Information or the Corporation's, Recoton's,
Jensen's or an affiliates' facilities. Upon termination of employment
hereunder for any reason, Employee shall, to the extent feasible, promptly
return to the Corporation that portion of all books, records, lists, tapes
and other written, typed, computer or printed materials or data and all
copies thereof which contain any Proprietary Information, and the Employee
shall not make or retain any copies thereof.
(b) If at any time during the term of employment by the Corporation the
Employee conceives, develops, participates in the development of or causes
to be developed any products, methods, techniques, inventions, improvements,
works, techniques, processes, programs, software, works of art, products,
ideas or formulae which are not related to any of the businesses conducted
by IJI Acquisition or any of its affiliates (collectively, the "Corporation
Intellectual Property"), whether or not patentable or copyrightable and
whether or not done within or after normal business hours or alone or in
conjunction with others, relating exclusively to the business of the
Corporation or any of its affiliates, or their affiliates or any part
thereof, such Corporation Intellectual Property shall be and remain the sole
and exclusive property of the Corporation. The Employee shall promptly
communicate and disclose all such Corporation Intellectual Property or
Employee Intellectual Property, as defined below, to the Corporation, and to
further effectuate the purposes of this provision, each of the Corporation
and the Employee shall execute and deliver to the other at the requesting
party's expense any instruments deemed necessary by the requesting party to
effect the disclosure thereof to, and ownership thereof by, the requesting
party, including without limitation any assignments of rights to patents,
copyrights and all other proprietary interests which the Employee or the
Corporation, as applicable, might have in any Corporation Intellectual
Property or Employee Intelectual Property, defined below, and shall further
assist the requesting party as the requesting party may reasonably request,
to obtain
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patent, trademark or copyright registration, or other protections for the
Corporation Intellectual Property/or Employee Intellectual Property, as
defined below, including testifying in any hearings, depositions or trials
related thereto.
If at any time during the term of employment the Employee conceives,
develops, participates in the development of or causes to be developed any
products, methods, techniques, inventions, improvements, works, techniques,
processes, programs, software, works of art, products, ideas or formulae
which are not related to any of the business conducted by the Corporation or
any of its affiliates (collectively, the "Employee Intellectual Property"),
whether or not patentable or copyrightable and whether or not done within or
after normal business hours or alone or in conjunction with others, relating
exclusively to the business of IJI Acquisition, or its affiliates or any
part thereof, such Employee Intellectual Property shall be and remain the
sole and exclusive property of the Employee. To the extent the Employee
conceives, develops, participates in the development of or causes to be
developed any products, methods, techniques, inventions, improvements,
works, techniques, processes, programs, software, works of art, products,
ideas or formulae which are related to the business conducted by both the
Corporation or any of its affiliates and IJI Acquisition or any of its
affiliates (collectively the "Shared Intellectual Property"), whether or not
patentable or copyrightable and whether or not done within or after normal
business hours or alone or in conjunction with others, which does not relate
exclusively to the business of IJI Acquisition, the Corporation or any of
their affiliates, shall be and remain the shared property of the Employee,
IJI Acquisition, and the Corporation, as the case may be. The parties shall,
in good faith, endeavor to agree on an appropriate bifurcation or other
allocation of such Shared Intellectual Property, to the extent the parties
cannot agree on such bifurcation or allocation or other appropriate
arrangement, the parties shall each hold a perpetual worldwide royalty free
license to use such Shared Intellectual Property on a non-exclusive basis.
6. RESTRICTIONS ON COMPETITION. During the period of time during which the
Employee is employed by the Corporation (for the purpose of this section, the
term "Corporation" shall include the Corporation's subsidiaries and Recoton)
(the "Employment Period") and for that period of time after the Employment
Period in which the Employee is deemed to receive benefits pursuant to Section
3(d) (i.e. one (1) year after termination of the Employment Agreement if the
severance payment referenced in the second sentence of Section 3(d) is made), or
Section 3(e), as applicable, the Employee shall not:
(a) directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever, engage in, assist
or have any active interest in a business that engages in the Branded
Business or any business of Recoton or its affiliates as that term is
defined in that certain Non-Competition Agreement to be entered into by and
among Jensen, IJI Acquisition, the Corporation, Recoton, and Fuji Cone,
Inc., a Delaware corporation (the "Non-Competition Agreement") the form of
which is attached to the Purchase Agreement as it exists on the Commencement
Date, located anywhere in the United States of America or any foreign
country in which the Corporation has conducted business in the last three
(3) years. Notwithstanding anything to the contrary contained herein: (A)
this Section shall not preclude the Employee from owning not more than 5% of
the outstanding securities of a corporation which is publicly traded, either
on a securities exchange or over-the-counter; and which engages in a
business or lines of business similar to the Branded Business, as that term
is defined in the Non-Competition Agreement; and (B) it shall not be a
violation of this Agreement for Employee (whether during employment or after
termination of employment of the Employee hereunder) to: (i) provide
services pursuant to the MS Agreement, (ii) act as an executive officer or
director of IJI Acquisition, so long as those activities do not interfere
with the Employee's performance of his responsibilities under this
Agreement, (iii) own stock in IJI Acquisition, or (iv) be employed by IJI
Acquisition so long as those activities do not interfere with the Employee's
performance of his responsibilities under this Agreement.
(b) directly or indirectly, either individually or as a principal,
partner, agent, employer, consultant, stockholder, joint venturer, or
investor, or in any other manner or capacity whatsoever:
7
<PAGE>
(i) divert or attempt to divert from the Corporation or an affiliate
any Branded Business, as that term is defined in the Non-Competition
Agreement, with respect to any customer or account, with which the
Corporation or any of its affiliates had any contact or association, or
which was under the supervision of the Corporation within three (3) years
prior thereto;
(ii) induce any employee, salesperson, distributor, supplier, vender,
manufacturer, representative, agent, jobber, or other person transacting
business relating to the Branded Business, as that term is defined in the
Non-Competition Agreement, with the Corporation, or any of the
affiliates, to terminate their relationship or association with the
Corporation or any of its affiliates, or to represent or sell services or
products in competition with services or products relating to the Branded
Business, as that term is defined in the Non-Competition Agreement, of
the Corporation or any of its affiliates, excluding, however, any
employee first hired after the Employee's employment with the Corporation
terminated (a "Prohibited Employee") for employment by any person,
business, firm or corporation, or any other entity;
(iii) employ or retain, directly or indirectly, a Prohibited Employee;
or
(iv) be an officer, director, partner, sole proprietor, the holder of
outstanding securities (except the holder of not more than 5% of the
securities of any corporation which is publicly traded, either on a
securities exchange or over-the-counter, or principal of any person,
business, firm, corporation or other entity that employs or retains a
Prohibited Employee; PROVIDED, HOWEVER, that nothing in this Section 6
shall be construed to in any way prohibit IJI Acquisition's right to hire
any of the persons named as Management Service Providers in the MS
Agreement as an officer, director, employee or agent of IJI Acquisition
during the course of the Employee's employment with the Corporation and
for six months after termination of such employment pursuant to the
Non-Competition Agreement.
Nothing contained in this Agreement shall prevent Employee during the
Employment Period or thereafter, from performing his duties as an employee of
IJI Acquisition while IJI Acquisition engages in activities consistent with the
Non-Competition Agreement, so long as such performance conforms with Section
2(c). The Employee acknowledges that the time, scope, geographic area and other
provisions of this Section 6 have been specifically negotiated by sophisticated
commercial parties and that all such provisions are reasonable under the
circumstances of the transactions contemplated by this Agreement. It is
understood that the Employee is agreeing to the terms of this Section 6 in order
to induce the Corporation and Recoton to enter into this Agreement. The parties
acknowledge that the business which the Corporation plans to conduct will be
conducted throughout the United States and worldwide and that, given the current
sophistication of the information and telecommunication "highway," a narrow
geographic limitation would deny the Corporation protection to which it is
entitled in this Agreement.
7. PRIOR AGREEMENTS. The Employee represents and warrants to the
Corporation that, except for his current employment by Jensen and the Purchase
Agreement and all ancillary documents thereto, he is not currently subject to
any agreements, obligations or restrictions regarding prior employment,
competition, solicitation of employees or customers or disclosure of proprietary
information.
8. CERTAIN BUSINESS PRACTICES. The Employee shall not during the term of
his employment by the Corporation take or cause or knowingly permit others to
take any action which would cause the Corporation or Recoton to be in violation
of the United States Foreign Corrupt Practices Act or any other similar
legislation of the United States or any other country or any subdivision
thereof.
9. GOVERNING LAW; ARBITRATION; ATTORNEYS FEES.
(a) This Agreement and its validity, construction and performance shall
be governed in all respects by the law of the State of Illinois, without
giving effect to principles of conflict of law.
8
<PAGE>
(b) The parties shall promptly cooperate in good faith to carry out the
provisions of this Agreement and the activities contemplated hereby and
shall also cooperate in good faith to resolve any disputes or differences
which may arise in connection with the provisions hereof and the activities
contemplated hereby. Except as otherwise noted in this Agreement, any
dispute, question, difference, controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be finally settled
by arbitration in the jurisdiction where the Corporation's main offices are
located at the time of institution of such action (the "Main Office") in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as then in effect at the time of filing of the notice of
demand. The parties consent to the jurisdiction of the trial court for the
county where the Main Office is located and of the United States Federal
District Court for the District where the Main Office is located for all
purposes in connection with arbitration. The parties consent that any
process or notice of motion or other application to either of said courts,
and any paper in connection with arbitration, may be served by certified
mail, return receipt requested or by personal service or in such other
manner as may be permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance is allowed.
The arbitrators shall not alter or disregard any express provisions of this
Agreement. Any arbitration award in accordance with this Section 9(b) shall
be final and binding upon the parties and judgment thereon may be entered in
any court having jurisdiction over such party. The arbitrators are hereby
authorized to award to the prevailing party the costs (including reasonable
attorneys' fees and expenses) of any such arbitration.
(c) In the event of litigation or arbitration hereunder, the court or
arbitration panel shall be authorized to award the prevailing party in such
action or proceeding any or all reasonable attorney fees and disbursements
paid by it in pursuing or defending such action.
10. ENFORCEABILITY. Any provision of this Agreement which is prohibited
by, or unlawful or unenforceable under, any applicable law of any jurisdiction
shall be ineffective as to such jurisdiction without affecting any other
provision of this Agreement in such jurisdiction or all of the provisions of
this Agreement in other jurisdictions. To the full extent, however, that the
provisions of such applicable law may be waived, or the provisions of this
Agreement "blue-penciled" or reformed by any competent court or arbitration
panel, so that they become enforceable, such provisions of law shall be hereby
deemed waived or such provisions of this Agreement shall be so blue-penciled or
reformed to the end that this Agreement is deemed to be a valid and binding
agreement enforceable in accordance with its terms. If any term or provision of
this Agreement shall be held invalid by a competent court or arbitration panel,
the remainder of this Agreement shall not be affected thereby and the parties
hereto shall continue to be bound by the remaining terms hereof. In such event,
the relevant term or provision (or should such term(s) or provision(s) be such a
material element of this Agreement, then the entire Agreement) shall be
renegotiated by the parties in a good faith effort to achieve mutual agreement
consistent with such holding and the parties shall continue to perform under
this Agreement in a manner consistent with the intent and objectives of the
parties to this Agreement.
11. EQUITABLE REMEDIES. The Employee acknowledges that because of the
nature of the business of the Corporation and the subject matter of this
Agreement, a breach of Section 5 or 6 of this Agreement will cause irreparable
injury to the Corporation for which money damages will not provide an adequate
remedy, and the Employee agrees that the Corporation shall have the right to
have the provisions of such Sections specifically enforced by a court having
equity jurisdiction, in addition to, and not in limitation of, any remedies at
law that the Corporation may have.
12. NO WAIVER. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or agreements
shall in no way affect the right to require such performance or compliance at
any time thereafter. The waiver by either party of a breach of any provision
hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of
any kind shall be effective or binding, unless it is in writing and is signed by
the party against which such waiver is sought to be enforced.
9
<PAGE>
13. ASSIGNMENT. This Agreement and all rights hereunder are personal to
the Employee and may not be transferred or assigned by the Employee at any time.
The Corporation may assign its rights to any parent or subsidiary or, with the
Employee's consent (not to be unreasonably withheld), any successor or in
connection with any sale, transfer or other disposition of all, or substantially
all, of its business and assets, provided, however, that any such assignee
assumes the Corporation's obligations hereunder and PROVIDED, FURTHER, that such
assignment and assumption shall not relieve the Corporation of its obligations
hereunder.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire and only
agreement between the parties relating to employment of the Employee by or with
the Corporation, and this Agreement supersedes and cancels any and all previous
contracts, arrangements or understandings with respect thereto.
15. AMENDMENT. This Agreement may be amended, modified, superseded,
canceled, renewed or extended only by a written instrument executed by both of
the parties hereto.
16. NOTICES. Any notice, request, consent or communication (collectively
"Notice") sent under this Agreement shall be effective only if it is in writing
and (a) personally delivered, (b) sent by certified or registered mail, return
receipt requested, postage prepaid, (c) sent by a nationally recognized
overnight delivery service, with delivery confirmed, or (d) telexed or
telecopied with receipt confirmed, addressed as follows:
<TABLE>
<S> <C>
(i) To the Employee: Robert G. Shaw
c/o International Jensen Incorporated/
Recoton Audio Corporation
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Telecopier: (847) 317-3855
Telephone No.: (847) 317-3700
-- copy to (which shall not constitute notice) --
Wildman Harrold Allen & Dixon
225 W. Wacker Drive
Chicago, IL 60606-229
Attn.: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone No.: (312) 201-2000
(ii) To the RC Acquisition Sub, Inc./Recoton Audio Corporation
Corporation: 2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Stuart Mont
Telecopier No.: (407) 333-8903
Telephone No.: (407) 333-8900
-- copy to (which shall not constitute notice) --
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: (212) 806-6006
Telephone No.: (212) 806-5400
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(iii) To Jensen International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Attention: Mr. Marc T. Tanenberg
Telecopier: (847) 317-3855
Telephone: (847) 317-3700
(iv) To the RC Acquisition Sub, Inc./Recoton Audio Corporation
Corporation: 2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Stuart Mont
Telecopier No.: (407) 333-8903
Telephone No.: (407) 333-8900
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
-- copy to (which shall not constitute notice) --
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: (212) 806-6006
Telephone No.: (212) 806-5400
</TABLE>
or such other persons or addresses as shall be furnished in writing by any party
to the other parties. A notice shall be deemed to have been given as of the date
when (i) personally delivered, (ii) five days after the date when deposited with
the United States mail properly addressed, (iii) when a receipt of a Notice sent
by a overnight delivery service is confirmed by such overnight delivery service,
or (iv) when receipt of the telex or telecopy is confirmed, as the case may be,
unless the sending party has actual knowledge that a Notice was not received by
the intended recipient.
17. BINDING NATURE. This Agreement shall be binding upon and inure to the
benefit of the personal representatives and successors of the respective parties
hereto.
18. HEADINGS; LANGUAGE. The headings contained in this Agreement are for
reference purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the plural, the
plural the singular and the word "or" is used in the inclusive sense and all
references to "including" shall mean "including without limitation," unless the
context requires otherwise.
19. SURVIVAL. Unless otherwise provided herein, the provisions of Sections
2, 3(d), 3(e), 4(b), 4(d), 5, 6, 9, 10, 11, 12, 13 and 16 of this Agreement
shall survive the termination of this Agreement as a continuing agreement of the
Corporation and the Employee.
20. CROSS-REFERENCES; EXHIBITS. References in this Agreement to Articles,
Sections, Schedules and Exhibits are references to Articles and Sections of this
Agreement and to Schedules and Exhibits attached to or delivered pursuant to
this Agreement. Any Schedules and Exhibits are hereby made a part of this
Agreement.
21. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original.
22. ADVICE OF COUNSEL. The Employee acknowledges that he was given the
opportunity to receive the advice of counsel before signing this Agreement and
has consulted counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
<TABLE>
<CAPTION>
INTERNATIONAL JENSEN INCORPORATED RECOTON CORPORATION
<S> <C>
By: /s/ Marc Tanenberg By: /s/ Stuart Mont
Name: /s/ Marc Tanenberg Name: Stuart Mont
Title: Executive Vice
Title: Vice President President--Operations
<CAPTION>
RC ACQUISITION SUB, INC.
<S> <C>
By: /s/ Stuart Mont /s/ Robert G. Shaw
Name: Stuart Mont Robert G. Shaw
Title: Secretary
</TABLE>
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<PAGE>
AGREEMENT REGARDING ELECTION AND RE-ELECTION
OF ROBERT G. SHAW AS A RECOTON CORPORATION DIRECTOR
The undersigned hereby agrees to vote the Common Shares of Recoton
Corporation beneficially held by him as set forth in this Employment Agreement
or as to which he has discretionary voting authority in favor of the election
and reelection of Robert G. Shaw as a director of Recoton Corporation so long as
Employee is employed by Recoton Corporation or any affiliate thereof.
/s/ Robert L. Borchardt
--------------------------------------
Robert L. Borchardt
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EXHIBIT 4(D)
No. of shares subject to option: 50,000 Option No.:
RECOTON CORPORATION
1991 STOCK OPTION PLAN AGREEMENT
This AGREEMENT dated as of the day of , 1996 between
RECOTON CORPORATION, a New York corporation (the "Company"), and Robert G. Shaw
(the "Optionee").
W I T N E S S E T H:
1. GRANT OF OPTION. Pursuant to the provisions of the Recoton Corporation
1991 Stock Option Plan (the "Plan"), the Company hereby grants to the Optionee,
subject to the terms and conditions set forth in the Plan and this Agreement,
the right and option (the "Option") to purchase from the Company all or any part
of an aggregate of 50,000 Common Shares, $.20 par value ("Common Shares"), of
the Company at the purchase price of $ per share. The Option is [not]*
intended to qualify as an incentive stock option pursuant to Section 422A of the
Internal Revenue Code of 1986, as amended.
2. TERMS AND CONDITIONS. The Option is subject to the following terms and
conditions:
(a) EXPIRATION DATE. The Option shall expire ten years after the date
of this Agreement (the "Expiration Date"), except as otherwise noted in
subparagraph (d) of this paragraph 2.
(b) EXERCISE OF OPTION. The Option may be exercised, to the extent
otherwise exercisable by its terms, in five equal annual cumulative
installments with the first installment occurring on the first anniversary
date of the Agreement; PROVIDED, HOWEVER, that no options granted to
executive officers, directors and beneficial owners of more than ten percent
of any class of the Company's equity securities ("Section 16 Persons") may
be exercised in part or in full prior to six months from the date of grant
of the Option. Notwithstanding the foregoing, all or any part of any
remaining unexercised Option (without regard to any installment limitations)
may be exercised in the following circumstances (but in the case of Section
16 Persons in no event during the six month period commencing on the date of
grant of the Option): (i) immediately upon Employee's termination of
employment with the Company (other than "for cause") pursuant to the
Employment Agreement (as defined in Section 2(d)(4)), (ii) immediately upon
(but prior to the expiration of the term of the Option) the Optionee's
retirement from the Company and all Subsidiaries on or after the Optionee's
65th birthday, (iii) upon the disability or death of the Optionee, (iv) upon
the occurrence of such special circumstances or event as in the opinion of
the Stock Option Committee constituted pursuant to the Plan (the
"Committee") merits special consideration, or (v) if, while the Optionee is
employed by the Company or a Subsidiary (as defined below), 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 Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder (the "Exchange Act"))
("Person"), including any Affiliate or Associate of such Person, as defined in
Rule 12b-2 of the Exchange Act, 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
Company representing 20% or more of the combined voting power of the then
outstanding securities of the Company; (ii) during any period of twelve months,
individuals who at the beginning of such period constitute the Board of
Directors of the Company ("Board"), and any new director whose election or
nomination was approved by the individuals who either were members of the Board
at the beginning of the period, cease for any reason to constitute at least a
majority of the
* optionee shall have the right prior to grant to designate all or any portion
of the options as incentive stock options within applicable legal limitations
14
<PAGE>
Board; (iii) a Person acquires ownership of Common Shares of the Company that,
together with Common Shares 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 Common Shares ("50% Ownership") of the Company, unless the
additional Common Shares is acquired by a Person possessing, immediately prior
to such acquisition, ownership of 40% or more of the Common Shares; 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 Company that
have a total fair market value equal to or more than one-third ( 1/3) of the
total fair market value of all of the assets of the Company immediately prior to
such acquisition. Notwithstanding the foregoing, for purposes of subsections (i)
and (ii) above, 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
Company is not transferred from a Person to another Person; and for purposes of
subsection (iv), a Change in Control will not be deemed to occur if the assets
of the Company are transferred: (A) to a shareholder in exchange for his stock,
(B) to an entity in which the Company has (directly or indirectly) 50%
Ownership, or (C) to a Person that has (directly or indirectly) at least 50%
ownership of the Company with respect to its stock outstanding, or to any entity
in which such Person possesses (directly or indirectly) 50% Ownership.
To the extent otherwise permitted by this Agreement, Common Shares with
respect to which the Option becomes exercisable may be purchased in whole or
from time to time in part at any time prior to the expiration of the Option. Any
exercise shall be accompanied by a written notice to the Company in a form
substantially as attached to this Agreement as Exhibit 1 (including the last
paragraph of such Exhibit if applicable), specifying the number of shares as to
which the Option is being exercised. Notation of any partial exercise shall be
made by the Company on Schedule 1 to this Agreement.
(c) PAYMENT OF PURCHASE PRICE UPON EXERCISE. At the time of any
exercise, the purchase price of the shares as to which the Option shall be
exercised shall be paid (i) in cash or by check (subject to clearance) made
payable to the Company, (ii) in stock of the Company valued at its fair
market value on the date of exercise by the Committee, (iii) by providing an
order to a designated broker to sell part or all of the shares being
purchased pursuant to exercise of the Option and to deliver sufficient
proceeds to the Company, in cash or by check payable to the order of the
Company, to pay the full purchase price of such shares and all applicable
withholding taxes, or (iv) by such other methods as the Committee may permit
from time to time. As soon as practicable following receipt of such cash,
check, stock, option or order, the Company shall issue to Optionee a
certificate for the number of shares as to which the Option is being
exercised. Delivery of such shares shall be at the principal office of the
Company and the obligation of the Company with respect to the purchase of
such shares shall be fulfilled by delivery of such shares registered in the
name of the Optionee.
(d) EXERCISE UPON DEATH OR TERMINATION OF EMPLOYMENT.
(i) In the event of the death of Optionee while an employee of the
Company or of a subsidiary of the Company as defined in the Plan (a
"Subsidiary") all unexercised Options may be exercised by the person or
persons to whom Optionee's rights under the Option pass by will or
applicable law, or if no such person has such right, by Optionee's
executors or administrators, at any time, or from time to time within one
year after the date of Optionee's death, but not later than the
Expiration Date.
(ii) If Optionee's employment by the Company or a Subsidiary shall
terminate because of Optionee's permanent disability, Optionee may
exercise all unexercised Options at any time, or from time to time within
one year after such termination, but not later than the Expiration Date.
(iii) If Optionee's employment by the Company or a Subsidiary shall
terminate for any reason other than death or permanent disability as
aforesaid, Optionee may exercise all unexercised Options, at any time, or
from time to time within three months from the date of termination, but
not later than the Expiration Date.
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<PAGE>
(iv) Notwithstanding anything in this subparagraph (d) to the
contrary, if Optionee's employment is terminated "for cause" as that term
is defined in the Employment Agreement between the Company and the
Optionee dated , 1996 ("Employment Agreement"), all
unexercised Options of Optionee shall terminate immediately upon such
termination of Optionee's employment by the Company and all subsidiaries,
the Optionee shall have no right after such termination "for cause" to
exercise any unexercised Option which Optionee might have exercised prior
to the termination of employment.
(e) NONTRANSFERABILITY. The Option and any rights hereunder shall not
be transferable or assignable other than by will or by the laws of descent
and distribution. During the lifetime of Optionee, the Option shall be
exercisable only by Optionee.
(f) ADJUSTMENTS. In the event of any change in the Common Shares of
the Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or any rights offering to purchase Common Shares at a price
substantially below fair market value, or of any similar change affecting
the Common Shares, then the number and kind of shares subject to the Option
and their purchase price per share shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to Optionee hereunder. Any adjustment so made shall be final and
binding upon Optionee.
(g) NO RIGHTS AS STOCKHOLDER. Optionee shall have no rights as a
stockholder with respect to any shares of Common Shares subject to the
Option prior to the date of issuance of a certificate or certificates for
such shares.
(h) NO RIGHT TO CONTINUED EMPLOYMENT. The Option shall not confer upon
Optionee any right with respect to continuance of employment by the Company
or any Subsidiary, nor shall it interfere in any way with the right of the
Company to terminate Optionee's employment pursuant to and in accordance
with the terms of the Employment Agreement.
(i) COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Option and the
obligation of the Company to sell shares and deliver certificates for shares
of Common Shares pursuant to the Option shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. No Option may be granted
pursuant to the Plan or exercised at any time when such Option, or the
granting, exercise or payment thereof, may result in the violation of any
law or governmental order or regulation. The Plan is intended to comply with
the Rule 16b-3 under the Exchange Act. Any provision inconsistent with such
Rule shall be inoperative and shall not affect the validity of the Plan. If
at any time the Committee shall determine in its discretion that the
listing, registration or qualification of the shares covered by the Plan
upon any national securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary as
a condition of, or in connection with, the sale or purchase of shares under
the Plan, no Common Shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable
to the Committee. If Common Shares are not required to be registered, but
are exempt from registration, upon exercising all or any portion of the
Option the Company may require Optionee (or any person acting under
subparagraph (d) of paragraph 2), to represent that the Common Shares is
being acquired for investment only and not with a view to their sale or
distribution, and to make such other representations and furnish such
information deemed appropriate by counsel to the
16
<PAGE>
Company. Stock certificates evidencing unregistered Common Shares acquired
upon exercise of an Option may be subject to stop orders and shall bear any
legend required by applicable state securities laws and a restrictive legend
substantially as follows:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended (the "Act"), and may not be
transferred in the absence of such registration or an opinion of
counsel acceptable to the Company that such transfer will not
require registration under such Act."
3. OPTIONEE BOUND BY PLAN. Optionee acknowledges receipt of a copy of the
Plan and agrees to be bound by all the terms and provisions of the Plan.
4. NOTICES. All notices, requests, demands and other communications
provided for in this Agreement shall be in writing and addressed to the address
(or telecopier number) of the parties stated below or to such changed address as
such party may have fixed by notice:
<TABLE>
<S> <C>
(a) To the Employee: Robert G. Shaw
c/o International Jensen Incorporated/
Recoton Audio Corporation
25 Tri-State International Office Center
Suite 400
Lincolnshire, Illinois 60069
Telecopier: (847) 317-3855
Telephone No.: (847) 317-3700
--copy to (which shall not constitute notice) --
Wildman Harrold Allen & Dixon
225 W. Wacker Drive
Chicago, IL 60606-229
Attn.: Richard B. Thies, Esq.
Telecopier: (312) 201-2555
Telephone No.: (312) 201-2521
(b) To the Recoton Corporation
Corporation: 2950 Lake Emma Road
Lake Mary, Florida 32746
Attn: Stuart Mont
Telecopier No.: (407) 333-8903
Telephone No.: (407) 333-0900
copy to (which shall not constitute notice) --
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Theodore S. Lynn, Esq.
Telecopier No.: (212) 806-6006
Telephone No.: (212) 806-5400
</TABLE>
(or to such other address or telecopier number as any party may specify by
notice to all other parties as aforesaid). Unless otherwise specifically
provided in this Agreement, such communications shall be deemed to have been
given (a) three days after mailing, when mailed by registered or certified
postage-paid mail, (b) on the next business day, when delivered to a same-day or
overnight national courier service or the U.S. Post Office Express Mail or (c)
upon the date of receipt by the addressee when delivered personally or by
telecopier; PROVIDED, HOWEVER, that any notice of change of address shall be
effective only upon receipt. Notice may be given on behalf of a party by his or
its counsel.
17
<PAGE>
5. COUNTERPARTS. This Agreement has been executed in two counterparts,
each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, Recoton Corporation has caused this Agreement to be
executed by its President or a Vice President and Optionee has executed this
Agreement, both as of the day and year first above written.
RECOTON CORPORATION
By:
--------------------------------------
Name:
Title:
- - --------------------------------------- (L.S.)
Optionee
18
<PAGE>
SCHEDULE 1 -- NOTATIONS AS TO PARTIAL EXERCISE
<TABLE>
<CAPTION>
NUMBER OF BALANCE OF
OPTION SHARES AUTHORIZED NOTATION
DATE OF EXERCISE PURCHASED SHARES SIGNATURE DATE
- - ---------------------------------------------------------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
</TABLE>
19
<PAGE>
EXHIBIT 1
STOCK OPTION EXERCISE FORM
[Date]
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attention: Secretary
Dear Sirs:
The undersigned elects to exercise the option to purchase shares,
$.20 par value, of the Common Shares ("Common Shares") of Recoton Corporation
(the "Company") under and pursuant to 1991 Stock Option Plan Agreement No.
between the Company and the undersigned dated .
Delivered herewith is a [check in the amount of $ ][certificate for
shares of Common Shares of the Company][order to a broker to sell part or
all of the shares being purchased and to deliver sufficient proceeds to the
Company, in cash or by check payable to the order of the Company, to pay the
full purchase price of the shares and all applicable withholding taxes]
[unexercised options sufficient to pay the full purchase price of the shares of
Common Shares and all applicable withholding taxes] in payment of the option
price.
[The undersigned hereby represents and agrees that all of the Common Shares
being purchased hereunder is being acquired for investment and not with a view
to the sale or distribution thereof and that the undersigned understands that
such Common Shares has not been registered under the Securities Act of 1933 (the
"Act"), as amended, and such Common Shares may not be sold, pledged,
hypothecated, alienated, or otherwise assigned or transferred in the absence of
registration under the Act, or an opinion of counsel which opinion is
satisfactory to the Company to the effect that such registration is not
required.]
Very truly yours,
[Optionee]
20
<PAGE>
Exhibit 2.9
ESCROW AGREEMENT
AGREEMENT (the "Agreement") made as of May 1, 1996 between
International Jensen Incorporated, a corporation organized and existing under
the laws of the State of Delaware ("Jensen"), and Recoton Corporation, a
corporation organized and existing under the laws of the State of New York
("Recoton").
WHEREAS, Recoton and Jensen have entered into an agreement dated as of
January 3, 1996 (the "License and Option Agreement") providing for the license
by Jensen to Recoton of rights in the trademarks Acoustic Research and AR and
granting to Recoton an option to purchase such trademarks from Jensen (the
"Purchase Option") and granting to Jensen an option to sell such trademarks to
Recoton (the "Sale Option");
WHEREAS, upon exercise of the Purchase Option or the Sale Option and
payment as required in the License and Option Agreement (including without
limitation payment by way of setoff), Jensen is required under the License and
Option Agreement to execute and deliver to Recoton a form of assignment attached
to the License and Option Agreement (the "Assignment");
WHEREAS, in order to ensure the full performance of the License and
Option Agreement, the parties desire that Jensen execute the Assignment at this
time and deliver the executed Assignment to an escrow agent to hold in escrow
pending receipt of certain notices as provided for herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the License and Option Agreement, the parties
hereto do hereby agree as follows:
1. APPOINTMENT. Vedder, Price, Kaufman & Kammholz is hereby
appointed escrow agent ("Escrow Agent") to hold and dispose of the Assignment
as provided for in this Section 1. Jensen has herewith delivered to the Escrow
Agent a fully executed copy of the Assignment, receipt of which is hereby
acknowledged by the Escrow Agent. The Escrow Agent shall deliver the Assignment
and any other items delivered hereafter to the Escrow Agent pursuant to this
Agreement as follows:
(a) upon receipt of a notice of exercise of the Purchase Option in
the form attached hereto as Exhibit 1 or a notice of exercise of
the Sale Option in the form attached hereto as Exhibit 2 and
payment of the purchase price for the Purchase Option or the Sale
Option by either (i) payment to the Escrow Agent by wire transfer
or certified check in the amount of $6 million or (ii) payment
<PAGE>
to the Escrow Agent by wire transfer or certified check in the
amount of $4 million and delivery to the Escrow Agent of a
notice, substantially in the form set forth in Exhibit 3 attached
hereto, of cancellation of $2 million of indebtedness of Jensen
owing to Recoton represented by that certain Promissory Note
dated January 3, 1996, in the original principal amount of $2
million, accompanied by the original canceled promissory note,
the Escrow Agent shall, within 20 days after its receipt of such
items, deliver the Assignment to Recoton and deliver to Jensen
the payments received by the Escrow Agent along with the notice
of cancellation and the original canceled promissory note, if
applicable; or
(b) within five business days after receipt of the joint written
instructions of Jensen and Recoton substantially in the form set
forth in Exhibit 4 attached hereto, the Escrow Agent shall act in
accordance therewith; or
(c) within five business days after receipt of a certified copy of a
determination by final order, decree or judgment of a court of
competent jurisdiction in the United States of America (the time
for appeal having expired with no appeal having been taken) in a
proceeding to which Jensen and Recoton are parties (the "Final
Decree") accompanied by a written notice from Jensen or Recoton
substantially in the form of Exhibit 5 attached hereto, the
Escrow Agent shall act in accordance with the requirements of the
Final Decree;
PROVIDED, HOWEVER, that the Escrow Agent shall have no obligation to deliver the
Assignment or any other items delivered into escrow to Recoton, Jensen or any
other person if it shall have been enjoined from performing hereunder.
2. NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if sent by registered mail or
certified mail, postage prepaid, or by telegraph, charges prepaid, addressed as
follows:
(a) If to Recoton:
Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn: Secretary
-2-
<PAGE>
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, NY 10004
Attn: Theodore S. Lynn, Esq.
(b) If to Jensen:
International Jensen Incorporated
25 Tri-State International Office Center
Suite 400
Lincolnshire, IL 60069
Attn: Mark T. Tanenberg
with a copy to:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
(c) If to Escrow Agent:
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, IL 60601-1003
Attn: John R. Obiala, Esq.
or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed or as of the date deposited with a public telegraph company for
transmittal with all charges prepaid except notices or communications to the
Escrow Agent which shall be deemed to have been given when received by it. Any
notice given in any other manner shall be deemed to have been duly given when
received.
3. TERMS AND CONDITIONS TO ESCROW AGENT'S ACCEPTANCE. (a) Acceptance
by the Escrow Agent of its duties under this Agreement is subject to the
following terms and conditions, which the parties to this Agreement hereby agree
shall govern and control the rights, duties and immunities of the Escrow Agent:
(i) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and the
Escrow Agent shall not be liable except for the performance of such
duties and obligations as are specifically set out in this Agreement;
-3-
<PAGE>
(ii) The Escrow Agent shall not be responsible in any manner
whatsoever for any failure or inability of the parties of this
Agreement, or of any one else, to deliver monies or other property to
the Escrow Agent or otherwise to honor any of the provisions of this
Agreement;
(iii) Each of Jensen and Recoton shall hold the Escrow Agent
harmless from, and indemnify the Escrow Agent against, any loss,
liability, expense (including reasonable attorneys' fees and
expenses), claim or demand arising out of or in connection with the
performance of its obligations under this Agreement, except for any of
the foregoing arising out of the bad faith or willful misconduct of
the Escrow Agent. The foregoing indemnification obligations shall
survive the termination of this Agreement. The Escrow Agent is
attorney for Jensen and, in the event of a dispute hereunder
(including a dispute concerning the disposition of the Assignment),
may represent Jensen while it continues to act as the Escrow Agent;
(iv) The Escrow Agent shall be equally reimbursed by Jensen and
Recoton for all fees, expenses, disbursements and advances, including
reasonable attorneys' fees, incurred by the Escrow Agent in connection
with carrying out its duties in administering this Agreement. Jensen,
on the one hand, and Recoton, on the other hand, agree that if the
Escrow Agent shall incur or suffer any other costs, charges, damages
or attorneys' fees on account of being the Escrow Agent or on account
of having received the Assignment hereunder (including, without
limitation, costs, charges, damages and reasonable attorneys' fees as
a result of litigation involving this Agreement or the Assignment
other than by reason of the bad faith or willful misconduct of the
Escrow Agent), then such costs, charges, damages or fees (including,
without limitation, reasonable attorneys' fees incurred by the Escrow
Agent in connection with any litigation) shall be paid one half by
Jensen and one half by Recoton, or, in the case of any cost, charge,
damage or fee arising as a result of litigation, in such manner as the
court in which such litigation occurs may direct;
(v) The Escrow Agent shall be fully protected in acting on and
relying upon any written notice, direction, request, waiver, consent,
receipt or other paper or document which the Escrow Agent in good
faith believes to be genuine and to have been signed or presented by
the proper party or parties;
-4-
<PAGE>
(vi) The Escrow Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good
faith or for any mistake in fact or law, or for anything which it may
do or refrain from doing in connection herewith, except its own
willful misconduct; and
(vii) The Escrow Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of
the provisions of this Agreement or its duties hereunder, and it shall
incur no liability and shall be fully protected in respect of any
action taken, omitted or suffered by it in good faith in accordance
with the advice of such counsel.
(b) If a controversy arises between the parties hereto, or
between the parties hereto and any person not a party hereto, as to whether or
not, or to whom, the Escrow Agent shall deliver the Assignment or any portion
thereof or as to any other matter arising out of or relating to this Escrow
Agreement or the Assignment deposited hereunder, the Escrow Agent shall not be
required to determine same and need not make any delivery of the Assignment but
may retain the same until the rights of the parties to the dispute shall have
finally been determined by agreement or by final order of a court of competent
jurisdiction, in accordance with Section 1(c) hereof. The Escrow Agent shall be
entitled to assume that no such controversy has arisen unless it has received a
written notice that such a controversy has arisen which refers specifically to
this Escrow Agreement and identifies by name and address the adverse claimants
to the controversy.
(c) This Agreement shall terminate upon the distribution of the
Assignment by the Escrow Agent in accordance with this Agreement.
Notwithstanding any termination of this Agreement, the provisions of Section
3(a) hereof shall survive such termination and remain in full force and effect.
(d) The Escrow Agent may resign and be discharged from its
duties hereunder at any time by giving at least 30 days' notice of such
resignation to Jensen and Recoton, specifying a date upon which such resignation
shall take effect (the "Resignation Notice"); PROVIDED, HOWEVER, that the Escrow
Agent shall continue to serve until its successor accepts the Assignment. Upon
receipt of any Resignation Notice, a successor Escrow Agent shall be appointed
by Jensen and Recoton, such successor Escrow Agent to become the Escrow Agent
hereunder on the later of the date set forth in the Resignation Notice and the
date on which the successor Escrow Agent accepts the Assignment. If an
instrument of acceptance by a successor Escrow Agent shall not have been
delivered to the resigning Escrow Agent within 15 days after delivery of the
Resignation Notice, the resigning
-5-
<PAGE>
Escrow Agent may petition any court of competent jurisdiction for the
appointment of a successor Escrow Agent. Jensen and Recoton, acting jointly,
may at any time substitute a new Escrow Agent by giving 20 days' notice
thereof to the current Escrow Agent and paying all fees and expenses of the
current Escrow Agent as provided in Section 3(a)(iii) hereof
4. BINDING AGREEMENT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, Recoton and Jensen have each caused this Agreement
to be executed on its behalf by a duly authorized officer as of the day and year
first above written.
RECOTON CORPORATION
By:
-----------------------------
Name: Stuart Mont
Title: Executive Vice
President-Operations
INTERNATIONAL JENSEN INCORPORATED
By:
-----------------------------
Name: Marc Tanenberg
Title: Vice President
The undersigned, by its duly
authorized partner, hereby
accepts appointment as Escrow
Agent pursuant to the foregoing
Agreement.
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
By:
---------------------------
Name: John R. Obiala
-6-
<PAGE>
EXHIBIT 1
____________, 199_
[NAME AND ADDRESS OF ESCROW AGENT]
Recoton Corporation ("Recoton") hereby exercises the Purchase Option
pursuant to Section 2(a) of the Exclusive World-Wide License and Option to Sell
and Option to Purchase Proprietary Rights between Recoton and International
Jensen Incorporated ("Jensen") dated as of January 3, 1996 (the "License and
Option Agreement").
Recoton herewith tenders to the Escrow Agent the Purchase Price by way of
[payment of $4,000,000 by [wire transfer] [certified check] payable to the
Escrow Agent and cancellation of $2,000,000 of indebtedness of Jensen owing to
Recoton pursuant to the enclosed Notice of Cancellation of Indebtedness]
[payment of $6,000,000 by [wire transfer] [certified check] payable to the
Escrow Agent].
The license under the License and Option Agreement shall continue pursuant
to the License and Option Agreement until the delivery of the executed
Assignment to Recoton.
RECOTON CORPORATION
By:
------------------------
Name:
Title:
cc: International Jensen Incorporated
25 Tri-State International Office Center, Suite 400
Lincolnshire, IL 60069
-7-
<PAGE>
EXHIBIT 2
____________, 199_
[NAME AND ADDRESS OF ESCROW AGENT]
International Jensen Incorporated ("Jensen") hereby exercises the Sale
Option pursuant to Section 2(b) of the Exclusive World-Wide License and Option
to Sell and Option to Purchase Proprietary Rights between Recoton Corporation
("Recoton") and Jensen dated as of January 3, 1996 (the "License and Option
Agreement").
Please deliver to Recoton the Assignment upon payment of the purchase price
to the Escrow Agent by way of either (a) delivery to the Escrow Agent of a
notice of cancellation of $2,000,000 of indebtedness of Jensen owing to Recoton
represented by that certain promissory note dated January 3, 1996 in the
original principal amount of $2,000,000 and surrender of the original canceled
promissory note and payment by wire transfer or certified check of $4,000,000 to
the Escrow Agent or (b) payment by wire transfer or certified check of
$6,000,000 to the Escrow Agent.
The license under the License and Option Agreement shall continue pursuant
to the License and Option Agreement until the delivery of the executed
Assignment to Recoton.
INTERNATIONAL JENSEN INCORPORATED
By:
--------------------------
Name:
Title:
cc: Recoton Corporation
2950 Lake Emma Road
Lake Mary, FL 32746
Attn:
-8-
<PAGE>
EXHIBIT 3
[Name and Address of Escrow Agent]
[Date]
NOTICE OF CANCELLATION OF INDEBTEDNESS
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the
"Escrow Agreement"), between International Jensen Incorporated, a Delaware
corporation ("Jensen"), and Recoton Corporation, a New York corporation
("Recoton").
Pursuant to Section 1(a) of the Escrow Agreement, the undersigned
hereby notifies you of the cancellation of $2 million of indebtedness of Jensen
owing to Recoton represented by that certain Promissory Note dated January 3,
1996, in the original principal amount of $2,000,000 (the "Note"). The original
canceled Note is enclosed herewith.
RECOTON CORPORATION
By:
-------------------------------
Name:
Title:
-9-
<PAGE>
EXHIBIT 4
[Name and Address of Escrow Agent]
Re: JOINT WRITTEN INSTRUCTIONS
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the
"Escrow Agreement"), between International Jensen Incorporated, a Delaware
corporation and Recoton Corporation, a New York corporation.
Pursuant to Section 1(b) of the Escrow Agreement, the undersigned
hereby instruct you to disburse the Assignment (as defined in the Escrow
Agreement) to .
-------------------------
INTERNATIONAL JENSEN INCORPORATED
By:
------------------------------
Name:
Title:
RECOTON CORPORATION
By:
------------------------------
Name:
Title:
-10-
<PAGE>
EXHIBIT 5
[Name and Address of Escrow Agent]
[Date]
NOTICE OF FINAL DECREE
Ladies and Gentlemen:
Reference is made to the Escrow Agreement dated May 1, 1996 (the "Escrow
Agreement"), between International Jensen Incorporated, a Delaware corporation,
and Recoton Corporation, a New York corporation.
Pursuant to Section 1(c) of the Escrow Agreement, the undersigned hereby
instructs you to disburse the Assignment (as defined in the Escrow Agreement) in
accordance with the Final Decree (as defined in the Escrow Agreement), a
certified copy of which is attached hereto.
[INTERNATIONAL JENSEN INCORPORATED
By:
----------------------------------
Name:
Title:]
[RECOTON CORPORATION
By:
-----------------------------------
Name:
Title:]
-11-
<PAGE>
Exhibit 2.10
AGREEMENT
RECOTON CORPORATION ("Recoton") and INTERNATIONAL JENSEN INCORPORATED
("Jensen") hereby agree as of May 1, 1996 as follows:
1. Recoton hereby consents to the execution of the Amended and Restated
Agreement for Purchase and Sale of Assets between Jensen and IJI
Acquisition Corp. ("IJI Acquisition") dated as of January 3, 1996 (the
"OE Agreement").
2. Jensen shall not agree to any amendment to the OE Agreement (including
without limitation any exhibits or schedules thereto), nor shall it
agree to any language for exhibits stated "to be attached subsequent
to execution" nor shall it agree to the sale of any portion of
Jensen's accounts receivable related to the OEM Business (as defined
in the OE Agreement) pursuant to Section 1.8 of the OE Agreement at a
discount in excess of an aggregate of $200,000 off of the face amount
of such receivables, without in each case Recoton's prior written
approval.
IN WITNESS WHEREOF, the parties hereto have entered into this agreement as
of the date set forth above.
RECOTON CORPORATION
By: /s/ Stuart Mont
---------------------------------
Name: Stuart Mont
Title: Executive Vice
President - Operations
INTERNATIONAL JENSEN INCORPORATED
By: /s/ Marc Tanenberg
---------------------------------
Name: Marc Tanenberg
Title: Vice President
