INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Merger among Recoton
Corporation, RC Acquisition Sub, Inc. and
International ▇▇▇▇▇▇ Incorporated, dated as of
January 3, 1996.
10.1 Exclusive World-Wide License and Option to Sell
and Option to Purchase Proprietary Rights by and
between International ▇▇▇▇▇▇ Incorporated and
Recoton Corporation, dated as of January 3, 1996
10.2 Shareholders' Agreement between ▇▇▇▇▇▇ ▇. ▇▇▇▇ and
Recoton Corporation, dated as of January 3, 1996.
99.1 Press Release dated January 3, 1996.
EXHIBIT 2.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JANUARY 3, 1996
AGREEMENT AND PLAN OF MERGER
dated as of January 3, 1996,
among
RECOTON CORPORATION,
RC ACQUISITION SUB, INC.,
and
INTERNATIONAL ▇▇▇▇▇▇ INCORPORATED
TABLE OF CONTENTS
ARTICLE I
THE MERGER
SECTION 1.1 The Merger
SECTION 1.2 Effective Time of the Merger
SECTION 1.3 Effects of the Merger
SECTION 1.4 Closing
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Certificate of Incorporation; Amendment
SECTION 2.2 By-Laws
SECTION 2.3 Directors and Officers
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Conversion of ▇▇▇▇▇▇ Shares in the Merger
SECTION 3.2 Exchange of Certificates
SECTION 3.3 Stock Transfer Books
SECTION 3.4 Stock Options and Other Rights
SECTION 3.5 Dissenting Shares
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
SECTION 4.1 Organization and Qualification
SECTION 4.2 ▇▇▇▇▇▇ Common Stock
SECTION 4.3 Subsidiaries
SECTION 4.4 Authority; Non-Contravention; Approvals
SECTION 4.5 Reports and Financial Statements; Derivative
Transactions
SECTION 4.6 Absence of Undisclosed Liabilities
SECTION 4.7 Absence of Certain Changes or Events
SECTION 4.8 Litigation
SECTION 4.9 Proxy Statement
SECTION 4.10 No Violation of Law
SECTION 4.11 Compliance with Agreements
SECTION 4.12 Taxes
SECTION 4.13 Customs
SECTION 4.14 Employee Benefit Plans; ERISA
SECTION 4.15 Material Defaults
SECTION 4.16 Labor Matters
SECTION 4.17 Environmental Matters
SECTION 4.18 Certain Business Practices
SECTION 4.19 No Excess Parachute Payments
SECTION 4.20 Trademarks, Etc.
SECTION 4.21 ▇▇▇▇▇▇ Stockholders' Approval
SECTION 4.22 State Takeover Statutes
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUB AND RECOTON
SECTION 5.1 Organization and Qualification
SECTION 5.2 Recoton Common Stock
SECTION 5.3 Authority; Non-Contravention; Approvals
SECTION 5.4 Reports and Financial Statements
SECTION 5.5 Absence of Undisclosed Liabilities
SECTION 5.6 Absence of Certain Changes or Events
SECTION 5.7 Registration Statement
SECTION 5.8 No Violation of Law
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business by ▇▇▇▇▇▇ Pending the Merger
SECTION 6.2 Site Testing and Evaluation
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information
SECTION 7.2 Registration Statement and Proxy Statement
SECTION 7.3 Stockholders' Approval
SECTION 7.4 Compliance with the Securities Act
SECTION 7.5 Nasdaq Listing
SECTION 7.6 Expenses
SECTION 7.7 Agreement to Cooperate
SECTION 7.8 Public Statements
SECTION 7.9 Accountants' Letters
SECTION 7.10 Indemnification of Certain Officers and Directors
SECTION 7.11 Employee Benefits
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Merger
SECTION 8.2 Conditions to Obligation of ▇▇▇▇▇▇ to Effect the
Merger
SECTION 8.3 Conditions to Obligation of Recoton and Acquisition
Sub to Effect the Merger
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination
SECTION 9.2 Effect of Termination
SECTION 9.3 Amendment
SECTION 9.4 Waiver
ARTICLE X
GENERAL PROVISION
SECTION 10.1 Non-Survival of Representations, Warranties and
Agreements
SECTION 10.2 Brokers
SECTION 10.3 Notices
SECTION 10.4 General Terms
SECTION 10.5 Interpretation
SECTION 10.6 Miscellaneous
SECTION 10.7 Counterparts
SECTION 10.8 Parties in Interest
SECTION 10.9 Right to Offset
AGREEMENT AND PLAN OF MERGER
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 ▇▇▇▇▇▇ INCORPORATED, a Delaware
corporation ("▇▇▇▇▇▇").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Recoton, Acquisition Sub and
▇▇▇▇▇▇ have approved the merger of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ and Recoton simultaneously herewith have entered
into an agreement (the "AR Agreement") by which Recoton has acquired
a license to and an option to purchase, and ▇▇▇▇▇▇ has acquired an
option to sell, the trademarks and associated copyrights and other
intellectual properties of ▇▇▇▇▇▇ associated with the name "Acoustic
Research" or "AR" (the "AR Rights"); and
WHEREAS, ▇▇▇▇▇▇ and IJI Acquisition Corp. ("IJI") simultaneous
herewith have entered into an agreement (the "OE Agreement") by which
IJI has agreed to acquire the assets associated with the original
equipment business of ▇▇▇▇▇▇ (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 ▇▇▇▇▇▇, 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") ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 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.
Section 1.4 Closing. The closing (the "Closing ") of the
transactions contemplated by this Agreement shall take place at the
offices of Stroock & Stroock & ▇▇▇▇▇, ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ on April 2, 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
▇▇▇▇▇▇ 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:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ Mont
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(b) At the Effective Time, the officers of the Surviving
Corporation shall be as follows:
Office Holder
Chairman ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President & ▇▇▇▇▇▇ ▇. ▇▇▇▇
CEO
Vice President & ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
CFO
Secretary Stuart Mont
Treasurer & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Secretary
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ ("▇▇▇▇▇▇ 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 $8.90
(hereinafter the "Per Share Cash Amount");
(ii) the right to receive such number of validly issued, fully
paid and nonassessable Common Shares, $0.20 par value, of Recoton
("Recoton Common Stock") as shall be determined by dividing the Per
Share Cash Amount by the Average Stock Price for Recoton Common
Stock (as defined in Section 3.1(b)) (such number divided by one
being referred to hereinafter as the "Exchange Ratio"); or
(iii) the right to receive a combination of shares of Recoton
Common Stock valued at the Average Stock Price and cash equal in
the aggregate to the Per Share Cash Amount;
provided, however, that if the Average Stock Price is below $16.00,
then the Acquisition Sub shall have the right at least three days
prior to the meeting of the stockholders of ▇▇▇▇▇▇ being held to vote
upon the Merger (the "▇▇▇▇▇▇ Stockholders' Meeting") to elect to have
each share of the ▇▇▇▇▇▇ Common Stock converted into the Per Share
Cash Amount (such election, or an election pursuant to Section 3.1(i)
or pursuant to Section 8.1(h) being hereinafter referred to as an
"All-Cash Election"). At the Effective Time, all shares of ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with
respect to shares of ▇▇▇▇▇▇ Common Stock except as otherwise provided
herein or by law. Certificates previously evidencing shares of
▇▇▇▇▇▇ Common Stock shall be exchanged for (i) certificates
evidencing whole shares of Recoton Common Stock issued in
consideration therefor, (ii) the Per Share Cash Amount multiplied by
the number of shares previously evidenced by the canceled
certificate, or (iii) a combination thereof, in each case in
accordance with the 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 shares of
Recoton Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 3.2(e). The recipients of
shares of Recoton Common Stock issued in accordance with this Section
3.1 shall also by receiving shares of Recoton Common Stock thereby
receive an associated Common Stock 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 Stock Price" shall mean the average of the per
share closing prices of the Recoton Common Stock on the Nasdaq Stock
Exchange ("Nasdaq") during the 20 consecutive trading days ending the
fifth trading day prior to the ▇▇▇▇▇▇ Stockholders' Meeting,
discarding the three highest and three lowest closing prices.
(c) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Recoton
Common Stock or ▇▇▇▇▇▇ 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 and the
Per Share Cash Amount shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(d) Unless Recoton has made an All-Cash Election pursuant to
Sections 3.1(a), 3(i), or 8.1(h) or otherwise elects pursuant to
Section 3.1(g) to increase the Target Stock Election Number (as
defined below), the number of shares of ▇▇▇▇▇▇ Common Stock to be
converted into the right to receive cash in the Merger (including
Dissenting Shares and Fractional Shares) shall be 60% of the number
of shares of ▇▇▇▇▇▇ Common Stock outstanding immediately prior to the
Effective Time (the "Target Cash Election Number") and the number of
shares of ▇▇▇▇▇▇ Common Stock to be converted into the right to
receive Recoton Common Stock in the Merger shall be 40% of the number
of shares of ▇▇▇▇▇▇ Common Stock outstanding immediately prior to the
Effective Time (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 ▇▇▇▇▇▇ Common Stock will be entitled (i)
to elect to receive cash for all of such shares (a "Cash Election")
or (ii) to elect to receive Recoton Common Stock for 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
Stock for such shares (a "Non-Election"). All such elections shall
be made on a form designed for that purpose (a "Form of Election").
Holders of record of shares of ▇▇▇▇▇▇ Common Stock who hold such
shares as nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided
that such Representative certifies that each such Form of Election
covers all the shares of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock covered by Stock Elections (the
"Stock Election Shares") and all shares of ▇▇▇▇▇▇ Common Stock
covered by Non-Elections (the "Non-Election Shares") shall be
converted into the right to receive Recoton Common Stock, 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 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 shares of Recoton Common Stock equal to
the product of (x) the Exchange Ratio 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, Recoton shall have the right to elect
to increase the Target Stock Election Number up to an amount equal to
the aggregate number of Stock Election Shares. If the aggregate
number of Stock Election Shares exceeds the Target Stock Election
Number and Recoton does not elect to increase the Target Stock
Election Number up to the aggregate number of Stock Election Shares,
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
shares of Recoton Common Stock equal to the product of (x) the
Exchange Ratio and (y) a fraction (the "Stock Fraction"), the
numerator of which shall be the Target Stock Election Number (as
increased pursuant to Recoton's election, if applicable) 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 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
(including, by reason of an election by Recoton to increase the
Target Stock Election Number), 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 Stock,
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 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 amount by
which (A) the number of shares of ▇▇▇▇▇▇ 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 shares of Recoton Common Stock
equal to the product of (x) the Exchange Ratio and (y) a fraction
equal to one minus the Non-Election Fraction.
(i) Notwithstanding the foregoing, if the difference between the
Average Share Price for Recoton Common Stock and the actual share
price for Recoton Common Stock as of the Effective Time would render
the Merger ineligible for treatment as a reorganization under
Sections 368(a)(1)(A) and 368(a)(1)(D) of the Code, Recoton shall
immediately prior to the Effective Time elect in writing either to
(1) issue shares of Recoton Common Stock in lieu of payments of the
Per Share Cash Amount as shall be required to achieve such tax
treatment (the methodology for such election being substantially as
set forth in Section 3.1(f)) or (2) make an All-Cash Election on the
terms set forth in Section 3.1(a).
(j) Elections shall be made by holders of ▇▇▇▇▇▇ Common Stock by
mailing to the Exchange Agent 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Common Stock, absent manifest error.
(k) For the purposes hereof, a holder of ▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ shall use its best efforts to mail the Form of Election
to all persons who become holders of ▇▇▇▇▇▇ Common Stock during the
period between the record date for the ▇▇▇▇▇▇ Stockholders' Meeting
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock held in the treasury of
▇▇▇▇▇▇ and each share of ▇▇▇▇▇▇ Common Stock owned by Recoton or any
direct or indirect wholly owned subsidiary of Recoton or of ▇▇▇▇▇▇
immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be
made with respect thereto.
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 ▇▇▇▇▇▇ Common Stock, for exchange in accordance with this
Article III, through the Exchange Agent, (i) certificates evidencing
such number of shares of Recoton Common Stock equal to (x) the
Exchange Ratio multiplied by (y) the Target Stock Election Number and
(ii) cash in the amount equal to the 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 (such certificates for shares of Recoton Common Stock,
together with any dividends or distributions with respect thereto and
cash, being hereinafter referred to as the "Exchange Fund");
provided, however, that should Acquisition Sub make an All-Cash
Election, Recoton or Acquisition Sub only shall deposit in the
Exchange Fund cash in the amount equal to the number of shares of
▇▇▇▇▇▇ Common Stock outstanding multiplied by the Per Share Cash
Amount and provided, further, that the cash and Recoton Common Stock
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 Stock 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, 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 ▇▇▇▇▇▇ Common Stock (other than
Dissenting Shares) (the "Certificates") (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 shares of Recoton Common Stock 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 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,
in exchange therefor (A) certificates evidencing that number of whole
shares of Recoton Common Stock which such holder has the right to
receive in respect of the shares of ▇▇▇▇▇▇ 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 shares of Recoton Common
Stock to which such holder is entitled pursuant to Section 3.2(e) and
(D) any dividends or other distributions to which such holder is
entitled pursuant to Section 3.2(c) (the shares of Recoton Common
Stock, 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 ▇▇▇▇▇▇ Common Stock
which is not registered in the transfer records of ▇▇▇▇▇▇, a
certificate evidencing the proper number of shares of Recoton Common
Stock 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. No dividends or other distributions declared
or made after the Effective Time with respect to Recoton Common Stock
with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of
Recoton Common Stock 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 shares
of Recoton Common Stock 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 shares
of Recoton Common Stock. No interest shall be paid on the Merger
Consideration or any dividends or other distributions.
(d) No Further Rights in ▇▇▇▇▇▇ Common Stock. All shares of
Recoton Common Stock issued and cash paid upon conversion of the
shares of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock.
(e) No Fractional Shares. (i) No certificates or scrip evidencing
fractional shares of Recoton Common Stock 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 ▇▇▇▇▇▇ 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 Stock Price by (b) the fractional
interest to which such holder would otherwise be entitled (after
taking into account all shares of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock
with respect to any fractional share interests, the Exchange Agent
shall promptly pay such amounts to such holders of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common
Stock for one year after the Effective Time shall be delivered to the
Surviving Corporation, upon demand, and any holders of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock for
any such shares of Recoton Common Stock 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ shall be closed and there shall be no
further registration of transfers of shares of ▇▇▇▇▇▇ Common Stock
thereafter on the records of ▇▇▇▇▇▇. 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 ▇▇▇▇▇▇ Common Stock (a "▇▇▇▇▇▇ Stock Option") issued
pursuant to the ▇▇▇▇▇▇ Stock Option Plan (1989), the ▇▇▇▇▇▇ 1991
Stock Incentive Plan and the 1994 ▇▇▇▇▇▇ Stock Option and Purchase
Plan for Non-Employee Directors (together, the "▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Stock Options as provided in the
preceding sentence, each ▇▇▇▇▇▇ Stock Option shall be deemed to
constitute an option to acquire, on the same terms and conditions as
were applicable under such ▇▇▇▇▇▇ Stock Option, the same number of
shares of Recoton Common Stock as the holder of the ▇▇▇▇▇▇ 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 shares of
Recoton Common Stock equal to the number of shares of ▇▇▇▇▇▇ Common
Stock represented by such ▇▇▇▇▇▇ Stock Option multiplied by the
Exchange Ratio, at a price per share equal to (y) the aggregate
exercise price for the shares of ▇▇▇▇▇▇ Common Stock otherwise
purchasable pursuant to such ▇▇▇▇▇▇ Stock Option divided by (z) the
number of full shares of Recoton Common Stock deemed purchasable
pursuant to such ▇▇▇▇▇▇ Stock Option.
(b) As soon as practicable after the Effective Time, Recoton shall
deliver to the holders of ▇▇▇▇▇▇ Stock Options appropriate notices
setting forth such holders' rights pursuant to the ▇▇▇▇▇▇ Stock
Option Plans and the agreements evidencing the grants of such ▇▇▇▇▇▇
Stock Options shall continue in effect on the same terms and
conditions (subject to the adjustment required by this Section 3.4
after 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 ▇▇▇▇▇▇ Stock Option Plans with respect
to the ▇▇▇▇▇▇ Stock Options.
(c) Pursuant to Section 3.2 of the 1994 Stock Option and Purchase
Plan For Non-Employee Directors (the "▇▇▇▇▇▇ Directors Plan"),
certain directors of ▇▇▇▇▇▇ ("Deferred Holders") have elected to
defer the receipt of shares of ▇▇▇▇▇▇ Common Stock ("Deferred
Shares") owed to them in lieu of directors' fees pursuant to the
▇▇▇▇▇▇ Directors Plan. Immediately prior to the Effective Time,
▇▇▇▇▇▇ shall terminate each such director's right to receive the
Deferred Shares, and in consideration thereof, ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ represents and warrants to Recoton and Acquisition Sub as
follows:
Section 4.1 Organization and Qualification. ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Material Adverse Effect. For
purposes of this Agreement, a ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and its subsidiaries taken as a whole, excluding
the Original Equipment Business (except that for purposes of
determining whether a ▇▇▇▇▇▇ Material Adverse Effect arising out of
the matters described in Section 4.17 has occurred, "▇▇▇▇▇▇ Material
Adverse Effect" shall mean potential liabilities and costs that
reasonably may exceed $5,000,000). True and complete copies of
▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ Common Stock. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ simultaneous with the execution and
delivery of the Agreement ("▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of
the capital stock of ▇▇▇▇▇▇ or obligating ▇▇▇▇▇▇ or any subsidiary of
▇▇▇▇▇▇ to ▇▇▇▇▇, extend or enter into any such agreement or
commitment except pursuant to this Agreement.
Section 4.3 Subsidiaries. Each direct and indirect subsidiary of
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Material Adverse
Effect. Except as set forth in Section 4.3 of ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇'▇ Disclosure Schedule or
in ▇▇▇▇▇▇'▇ Annual Report on Form 10-K for the year ended February
28, 1995 or the exhibits and schedules thereto (the "▇▇▇▇▇▇ 10-K"
and, together with any reports filed by ▇▇▇▇▇▇ with the Securities
and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") after the ▇▇▇▇▇▇ 10-K and
prior to the date of this Agreement, the "▇▇▇▇▇▇ 1995 Reports"),
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule or in the
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇,
including any right of conversion or exchange under any outstanding
security, instrument or agreement. Section 4.3 of ▇▇▇▇▇▇'▇
Disclosure Schedule sets forth a list of all material corporations,
partnerships, joint ventures and other business entities in which
▇▇▇▇▇▇ 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) ▇▇▇▇▇▇
has full corporate power and authority to enter into this Agreement
and, subject to ▇▇▇▇▇▇ Stockholders' Approval (as defined in Section
4.18) and the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ of the transactions contemplated hereby have
been duly authorized by ▇▇▇▇▇▇'▇ Board of Directors, and no other
corporate proceedings on the part of ▇▇▇▇▇▇ are necessary to
authorize the execution and delivery of this Agreement and the
consummation by ▇▇▇▇▇▇ of the transactions contemplated hereby,
except for the ▇▇▇▇▇▇ Stockholders' Approval and the obtaining of the
▇▇▇▇▇▇ Required Approvals. This Agreement has been duly and validly
executed and delivered by ▇▇▇▇▇▇ and constitutes a valid and legally
binding agreement of ▇▇▇▇▇▇ enforceable against it in accordance with
its terms.
(b) Except as set forth in Section 4.4(b) of ▇▇▇▇▇▇'▇
Disclosure Schedule, the execution and delivery of this Agreement by
▇▇▇▇▇▇ does not, and the consummation by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or any of its subsidiaries under any of the terms,
conditions or provisions of (i) the respective charters or By-Laws of
▇▇▇▇▇▇ or any of its subsidiaries, (ii) subject to obtaining the
▇▇▇▇▇▇ Required Approvals and the receipt of the ▇▇▇▇▇▇ Stockholders'
Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or any of its
subsidiaries is now a party or by which ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Material
Adverse Effect.
(c) Except for (i) the filings by ▇▇▇▇▇▇ required by Title II
of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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 "▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or the consummation by ▇▇▇▇▇▇ of
the transactions contemplated hereby.
Section 4.5 Reports and Financial Statements; Derivative
Transactions. Since February 28, 1995, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
with the SEC from February 28, 1992 until the date hereof
(collectively, the "▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Financial
Statements") (collectively the "1995 ▇▇▇▇▇▇ Financial Statements").
As of their respective dates, the ▇▇▇▇▇▇ SEC Reports 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 consolidated financial
statements and unaudited interim financial statements of ▇▇▇▇▇▇
included in the ▇▇▇▇▇▇ SEC Reports and the 1995 ▇▇▇▇▇▇ Financial
Statements (collectively, the "▇▇▇▇▇▇ Financial Statements") fairly
present the financial position of ▇▇▇▇▇▇ 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.
▇▇▇▇▇▇ and its subsidiaries do not, and will not, use any derivative
financial instruments other than as disclosed in Section 4.5 of
▇▇▇▇▇▇'▇ Disclosure Schedule.
Section 4.6 Absence of Undisclosed Liabilities. Except as set
forth in Section 4.6 of ▇▇▇▇▇▇'▇ Disclosure Schedule or in the ▇▇▇▇▇▇
1995 Reports, neither ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule or in the ▇▇▇▇▇▇
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 ▇▇▇▇▇▇
and its subsidiaries, taken as a whole (excluding the original
equipment business), and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 1995
Reports, the 1995 ▇▇▇▇▇▇ Financial Statements, or Section 4.8 of
▇▇▇▇▇▇'▇ Disclosure Schedule, (a) there are no claims, suits, actions
or proceedings pending or, to the knowledge of ▇▇▇▇▇▇, threatened,
nor to the knowledge of ▇▇▇▇▇▇ are there any investigations or
reviews pending or threatened, against, relating to or affecting
▇▇▇▇▇▇ or any of its subsidiaries, which, if adversely determined,
would have a ▇▇▇▇▇▇ Material Adverse Effect; (b) there have not been
any developments since the date of the ▇▇▇▇▇▇ 10-K with respect to
such claims, suits, actions, proceedings, investigations or reviews
which, individually or in the aggregate, may have a ▇▇▇▇▇▇ Material
Adverse Effect; and (c) except as contemplated by the ▇▇▇▇▇▇ Required
Approvals, neither ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ Material Adverse Effect.
Section 4.9 Proxy Statement. The proxy statement to be
distributed in connection with the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 provisions
of the Exchange Act and the rules and regulations promulgated
thereunder. Notwithstanding the foregoing, no representation is made
by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule, neither ▇▇▇▇▇▇ nor any of its
subsidiaries is in violation of, or, to the knowledge of ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ Material Adverse Effect. ▇▇▇▇▇▇ and its
subsidiaries have all material permits, licenses, franchises and
other governmental authorizations, consents and approvals (the
"▇▇▇▇▇▇ Government Approvals") necessary to conduct their businesses
as presently conducted and, except as set forth in Section 4.10 of
▇▇▇▇▇▇'▇ Disclosure Schedule, all such ▇▇▇▇▇▇ Government Approvals
shall be transferred to the Surviving Corporation.
Section 4.11 Compliance with Agreements. Except as disclosed in
the ▇▇▇▇▇▇ 1995 Reports, the ▇▇▇▇▇▇ 1995 Financial Statements or
Section 4.11 of ▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Material Adverse Effect.
Section 4.12 Taxes. (a) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ balance sheets (x) as of February 28, 1995,
contained in the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule, (i) there are
no material liens for taxes upon any property or asset of ▇▇▇▇▇▇ 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
▇▇▇▇▇▇'▇ Disclosure Statement, which are being contested in good
faith through appropriate proceedings; (ii) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ in future periods; (iii)
during the past three years neither ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or any of its subsidiaries, except any
such notice of deficiency, proposed deficiency or assessment which
will not in the aggregate cause a ▇▇▇▇▇▇ Material Adverse Effect,
and, any such deficiency or assessment shown on such Section 4.12 of
▇▇▇▇▇▇'▇ Disclosure Schedule has been paid or is being contested in
good faith through appropriate proceedings; (iv) the income tax
returns for ▇▇▇▇▇▇ 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 the assessment of any
taxes or deficiencies against ▇▇▇▇▇▇ or any of its subsidiaries, and
no power of attorney granted by either ▇▇▇▇▇▇ or any of its
subsidiaries with respect to any taxes is currently in force; and
(vi) neither ▇▇▇▇▇▇ nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of taxes. Neither
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇
will not have any carryovers subject to limitation under Section 382
or Section 383 of the Code immediately after the Merger. ▇▇▇▇▇▇ 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, 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.
Section 4.13 Customs. Except as set forth in the ▇▇▇▇▇▇ 1995
Reports or in Section 4.13 of ▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ Material Adverse Effect.
Section 4.14 Employee Benefit Plans; ERISA. (a) Section 4.14 of
▇▇▇▇▇▇'▇ Disclosure Schedule lists all material employee benefit
plans, employment contracts or other arrangements for the provision
of benefits for employees or former employees of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇
Disclosure Schedule, neither ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ and its subsidiaries (the "▇▇▇▇▇▇ Plans"), other
than ▇▇▇▇▇▇ Plans which are described in ▇▇▇▇▇▇ 1995 Reports or the
Proxy Statement for the 1995 Annual Meeting of Stockholders of
▇▇▇▇▇▇. 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 ▇▇▇▇▇▇ and its
subsidiaries described in the ▇▇▇▇▇▇ SEC Reports, the ▇▇▇▇▇▇ Plans
listed on Section 4.14(a) of ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ Plan, or benefit arrangement has been provided to
Recoton by ▇▇▇▇▇▇, and there have been no material changes in the
financial condition in the respective plans, ▇▇▇▇▇▇ Plans or benefit
arrangements from that stated in such annual report and actuarial
reports.
(b) Except as disclosed in the ▇▇▇▇▇▇ 1995 Reports or as set
forth in Section 4.14(b) of ▇▇▇▇▇▇'▇ 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
▇▇▇▇▇▇ Plans which, assuming that the taxable period of such
transaction expired as of the date hereof, could subject ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or any
of its subsidiaries under Title IV of ERISA with respect to any of
the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ under
Section 4001 of ERISA or Section 414 of the Code (a "▇▇▇▇▇▇ ERISA
Affiliate"); (iii) all amounts which ▇▇▇▇▇▇ or its subsidiaries are
required to pay as contributions to the ▇▇▇▇▇▇ Plans have been timely
made or have been reflected in the ▇▇▇▇▇▇ Financial Statements; (iv)
none of the ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
10-K as of February 28, 1995; (vi) each of the ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Plans; (x) neither ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ ERISA affiliate); and (xi) neither ▇▇▇▇▇▇
nor its subsidiaries has any liability or contingent liability for
retiree life and health benefits under any of the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇
Disclosure Schedule.
(c) Except as set forth in Section 4.14(c) of ▇▇▇▇▇▇'▇
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 ▇▇▇▇▇▇
employee agreement, plan or arrangement.
Section 4.15 Material Defaults. Except as set forth on Section
4.15 of ▇▇▇▇▇▇'▇ Disclosure Schedule, neither ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ or any of its subsidiaries is a party or
by which ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule, there are no material controversies
pending or, to the knowledge of ▇▇▇▇▇▇, threatened between ▇▇▇▇▇▇ or
its subsidiaries and any representatives of its employees, and, to
the knowledge of ▇▇▇▇▇▇, there are no material organizational efforts
presently being made involving any of the presently unorganized
employees of ▇▇▇▇▇▇ or its subsidiaries. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, asserted that ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 1995 Reports or in Section
4.17 to ▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇ and its subsidiaries
have complied in all respects with all Environmental Laws (as defined
below in this Section). ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule.
(b) Except as set forth in the ▇▇▇▇▇▇ 1995 Reports or in Section
4.17 to ▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇ and its subsidiaries are
in compliance in all respects with all permits, licenses and authori-
zations 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 ▇▇▇▇▇▇ thereunder. All
products manufactured and services provided by ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and its
subsidiaries.
(c) Except as set forth in the ▇▇▇▇▇▇ 1995 Reports or Section 4.17
to ▇▇▇▇▇▇'▇ Disclosure Schedule, there is no pending or, to ▇▇▇▇▇▇'▇
knowledge, threatened civil, criminal or administrative Action,
demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter that affects or applies to ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ or its subsidiaries thereunder.
(d) Except as set forth in the ▇▇▇▇▇▇ 1995 Reports or in Section
4.17 to ▇▇▇▇▇▇'▇ Disclosure Schedule, there are no past or present
(or, to the knowledge of ▇▇▇▇▇▇, anticipated) events, conditions,
circumstances, activities, practices, incidents, Actions or plans
which may interfere with or prevent compliance or continued
compliance by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Disclosure
Schedule and except in accordance with a valid governmental permit,
license, certificate or approval listed in Section 4.17 to ▇▇▇▇▇▇'▇
Disclosure Schedule there has been no emission, spill, release or
discharge by ▇▇▇▇▇▇ or its subsidiaries, from any of their assets,
from any site at which any of such assets are or were located, 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 here-
inafter 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 ▇▇▇▇▇▇'▇
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 Sec-
tion 3001 of the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. Section 6901 et seq.; (iv) any toxic pollutant listed under Sec-
tion 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 ▇▇▇▇▇▇
Material Adverse Effect, neither ▇▇▇▇▇▇ nor any of its subsidiaries
not any directors, officer, agents, or employees of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule set forth all
written contracts, arrangements, or undertakings (excluding ▇▇▇▇▇▇
Stock Options (as defined in Section 3.4)) pursuant to which any
person may receive any amount or entitlement from ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ Disclosure Schedule, no person is entitled to
receive any additional payment from ▇▇▇▇▇▇, the Surviving
Corporation, their respective subsidiaries, or any other person (a
"Parachute Gross-Up Payment") in the event that the 20 percent
parachute excise tax of Section 4999(a) of the Code is imposed on
such person. The Board of Directors of ▇▇▇▇▇▇ has not during the six
months prior to the date of this Agreement granted to any officer,
director, or employee of ▇▇▇▇▇▇ any right to receive any Parachute
Gross-Up Payment.
Section 4.20 Trademarks, etc. Section 4.20 of ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇, 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇'▇ Disclosure Schedule, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ Material Adverse Effect. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Stockholders' Approval. ▇▇▇▇▇▇ will take all
necessary action so that stockholder approval of this Agreement and
the transactions contemplated hereby, including the Merger, will
require the affirmative vote of (i) a majority of the outstanding
shares of ▇▇▇▇▇▇ Common Stock, and (ii) a majority of the outstanding
shares of ▇▇▇▇▇▇ Common Stock which are voted at the ▇▇▇▇▇▇
Stockholders' Meeting other than shares held directly or indirectly
by ▇▇▇▇▇▇ ▇. ▇▇▇▇.
Section 4.22 State Takeover Statutes. The Board of Directors of
▇▇▇▇▇▇ has approved the Merger. The Certificate of Incorporation of
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 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 ▇▇▇▇▇▇.
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 Stock. Recoton has 25,000,000
authorized shares of Common Stock, 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 shares of Recoton Common Stock
sufficient to convert ▇▇▇▇▇▇ Common Stock to Recoton Common Stock
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 shares of Recoton
Common Stock to be issued to stockholders of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇,
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 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 ▇▇▇▇▇▇ or any of its
subsidiaries is now a party or by which ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
shares of Recoton Common Stock 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 ▇▇▇▇▇▇ 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, 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 shares of Recoton Common Stock to be issued in the Merger,
including Recoton Common Stock that may be issued upon the exercise
of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Pending the Merger.
Except as set forth in Section 6.1 of ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ shall be solely responsible for its
operations and those of its subsidiaries in accordance with the
provisions of this Agreement), ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Common Stock on Nasdaq;
(c) not (i) except for the issuance of shares of Common
Stock upon the exercise of currently outstanding ▇▇▇▇▇▇ 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, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ advises the Board of
Directors of ▇▇▇▇▇▇ or any of its subsidiaries that the failure to
take such action or actions might reasonably subject ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ 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,
▇▇▇▇▇▇ or any of its subsidiaries, other than with respect to the
Original Equipment Business or the transactions contemplated hereby
(collectively, a "▇▇▇▇▇▇ Acquisition Transaction"); provided,
however, that ▇▇▇▇▇▇ or any of its subsidiaries may take any of the
actions otherwise prohibited by this Section 6.1(h) if counsel to
▇▇▇▇▇▇ advises the Board of Directors of ▇▇▇▇▇▇ or any of its
subsidiaries that the failure to take such action or actions might
reasonably subject ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇ Acquisition Transaction, ▇▇▇▇▇▇ may take and
disclose to ▇▇▇▇▇▇'▇ stockholders the position of the Board of
Directors of ▇▇▇▇▇▇ contemplated by Rule 14e-2 under the Exchange
Act or otherwise make appropriate disclosures to its stockholders,
(b) ▇▇▇▇▇▇ may furnish or cause to be furnished information
concerning its business, properties or assets to a third party, and
(c) ▇▇▇▇▇▇ may engage in discussions or negotiations with a third
party concerning a ▇▇▇▇▇▇ Acquisition Transaction provided that
▇▇▇▇▇▇ shall notify Recoton promptly (orally and in writing) of any
such offer;
(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 ▇▇▇▇▇▇ and its subsidiaries;
(l) not introduce any new product or plan which would
substantially increase the risk exposure of ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ or substantially less advantageous to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ prior to the date of the
Proxy Statement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. (a) ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Material Adverse Effect.
(b) Recoton and its subsidiaries shall afford to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ (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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇, and such information shall be held in confidence by Recoton,
Acquisition Sub and ▇▇▇▇▇▇ 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. ▇▇▇▇▇▇ 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 Stock in the Merger; provided,
however, that with respect to such blue sky qualifications neither
Recoton nor ▇▇▇▇▇▇ 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 Stock. Recoton and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, respectively, (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) ▇▇▇▇▇▇ shall promptly submit this Agreement
and the transactions contemplated hereby for the approval of its
stockholders at the ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ under applicable law, shall use its best efforts
to obtain stockholder approval (the "▇▇▇▇▇▇ Stockholders' Approval")
of this Agreement and the transactions contemplated hereby in
accordance with Section 4.21. Subject to the fiduciary duties of the
Board of Directors of ▇▇▇▇▇▇ under applicable law and the provisions
of Section 6.1(h) and 9.1(e), ▇▇▇▇▇▇ shall, through its Board of
Directors, recommend to its stockholders approval of this Agreement
and the transactions contemplated by this Agreement.
Section 7.4 Compliance with the Securities Act. ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ to deliver to Recoton and ▇▇▇▇▇▇ 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 shares of Recoton Common Stock
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 ▇▇▇▇▇▇ 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 shares of Recoton Common Stock 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 ▇▇▇▇▇▇. 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).
Section 7.9 Accountants' Letters. Each of Recoton and ▇▇▇▇▇▇ shall
use its best efforts to cause to be delivered to the other letters of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P., independent auditors for Recoton,
and Coopers and ▇▇▇▇▇▇▇, independent auditors for ▇▇▇▇▇▇,
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 ▇▇▇▇▇▇
or any subsidiary of ▇▇▇▇▇▇ now existing in favor of the directors,
officers, employees or agents of ▇▇▇▇▇▇ and any subsidiary of ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ and the
subsidiaries of ▇▇▇▇▇▇ (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 ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇, or similar employee benefits on substantially
the same terms and conditions that Recoton may make available to its
own employees, 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 ▇▇▇▇▇▇. Employees of the Surviving Corporation
shall be given credit for prior service with ▇▇▇▇▇▇ for purposes of
crediting periods of service for eligibility and vesting of all such
substitute employee benefits offered by Recoton or the Surviving
Corporation.
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
shall have been approved and adopted by the requisite vote of the
stockholders of ▇▇▇▇▇▇ pursuant to Section 4.21;
(b) The additional shares of Recoton Common Stock 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;
(d) 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) ▇▇▇▇▇▇ shall have received an opinion, and such opinion
shall not have been withdrawn at or prior to the Effective Time, 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
▇▇▇▇▇▇ and Recoton, which opinion Recoton shall be allowed to rely
upon, subject to customary assumptions and based on representations
of ▇▇▇▇▇▇, ▇▇▇▇▇▇ Stockholders and Recoton and Acquisition Sub
dated the date of the Proxy Statement, to the effect that
Acquisition Sub and ▇▇▇▇▇▇ and their respective shareholders
(except to the extent any stockholders have perfected dissenters'
rights under Delaware law or ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and
Recoton has not been received by the date of the Proxy Statement or
is withdrawn prior to the Effective Time, Recoton shall have the
right to make an All-Cash Election, in which case the condition set
forth in this Section 8.1(h) shall be deemed satisfied; and
(i) ▇▇▇▇▇▇ shall have received letters from ▇▇▇▇▇▇ Brothers
dated the date of this Agreement and the date of the Proxy
Statement (or such other dates reasonably acceptable to ▇▇▇▇▇▇ and
Recoton), which letters shall be of the opinion that (1) the Merger
Consideration is "fair from a financial point of view" to ▇▇▇▇▇▇'▇
stockholders; and (2) that the proceeds received by ▇▇▇▇▇▇ from the
sale of the assets of the Original Equipment Business are "fair
from a financial point of view" to ▇▇▇▇▇▇.
Section 8.2 Conditions to Obligation of ▇▇▇▇▇▇ to Effect the
Merger. The obligation of ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
shall have received a certificate of the President and the Chief
Operating Officer of each of Acquisition Sub and Recoton to that
effect;
(b) ▇▇▇▇▇▇ shall have received an opinion addressed to
▇▇▇▇▇▇ from Stroock & Stroock & ▇▇▇▇▇, counsel to Recoton and
Acquisition Sub, or other counsel reasonably acceptable to ▇▇▇▇▇▇,
dated the Closing Date, substantially in the form set forth in
Exhibits 8.2(b);
(c) ▇▇▇▇▇▇ shall have received the letters of ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P. 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
Stock and cash into the Exchange Fund in accordance with Section
3.2(a) and the Exchange Agent shall have delivered to ▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ to that effect;
(b) Recoton and Acquisition Sub shall have received an
opinion from Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz, counsel to ▇▇▇▇▇▇,
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 & ▇▇▇▇▇▇▇ contemplated by Section 7.9;
(e) Since the date hereof, no ▇▇▇▇▇▇ 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;
(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 shares of Recoton Common Stock to be
issued in the Merger shall not equal or exceed 20% of the Recoton
Common Stock outstanding prior to the Effective Time;
(i) The number of Dissenting Shares shall not exceed 10%
of the ▇▇▇▇▇▇ Common Stock outstanding; and
(j) Recoton and Acquisition Sub shall have received letters
from ▇▇▇▇▇▇ ▇▇▇▇ Incorporated, dated the date of this Agreement and
the Effective Date of the Registration Statement (or such other
dates reasonably acceptable to Recoton), which letters 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 shareholders of ▇▇▇▇▇▇ or Acquisition Sub:
(a) by mutual written consent of Acquisition Sub and
▇▇▇▇▇▇; or
(b) by either Acquisition Sub or ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ to approve this Agreement pursuant to Section 8.1(a) and the
transactions contemplated hereby shall not be obtained at the
▇▇▇▇▇▇ Stockholders' Meeting, or any adjournments thereof, (iii)
any governmental or regulatory body, the consent of which is a
condition to the obligations of Acquisition Sub and ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, 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
▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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) ▇▇▇▇▇▇ 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
assets or capital stock of ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇'▇ Common Stock and ▇▇▇▇▇▇'▇ Board
of Directors does not recommend, or ceases to recommend, to
▇▇▇▇▇▇'▇ stockholders that they reject such offer; or
(d) by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Board of Directors shall
recommend a ▇▇▇▇▇▇ Acquisition Transaction or authorize or approve
the entering into by ▇▇▇▇▇▇ of a ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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), 8.1(h) (if caused by ▇▇▇▇▇▇'▇ willful act), 8.1(i)
(if caused by ▇▇▇▇▇▇'▇ willful act), 8.3(a) due to failure to obtain
officer's certificate under circumstances in which ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ 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
▇▇▇▇▇▇'▇ willful act), 8.3(c) (if caused by ▇▇▇▇▇▇'▇ willful act) or
8.3(d) (if caused by ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇'▇ willful act), (vi) Section
9.1(c)(iv) or (vii) Section 9.1(e), then ▇▇▇▇▇▇ shall pay Recoton
$6,000,000.
(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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇'▇ willful act), 8.1(i) (unless caused by
▇▇▇▇▇▇'▇ 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
▇▇▇▇▇▇'▇ willful act), 8.3(c) (unless caused by ▇▇▇▇▇▇'▇ willful
act), 8.3(d) (unless caused by ▇▇▇▇▇▇'▇ 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 ▇▇▇▇▇▇'▇
wilful act), (vi) Section 9.1(c)(iii)(y), or (vii) Section 9.1(d), no
payment shall be due from ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇, but, after any such approval, no amendment
shall be made which (a) changes the Exchange Ratio or Per Share Cash
Amount or (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. ▇▇▇▇▇▇ represents and warrants that, except
for its investment banking firm, ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. Acquisition Sub and
Recoton represent and warrant that, except for its investment banking
firm, ▇▇▇▇▇▇ ▇▇▇▇ Incorporated, whose fee arrangement has been
disclosed to ▇▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Stuart Mont, Chief Operating Officer
with a copy to:
Stroock & Stroock & ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(b) If to ▇▇▇▇▇▇, to:
International ▇▇▇▇▇▇ Incorporated
▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, 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,
▇▇▇▇ 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.
(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
▇▇▇▇▇▇.
(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; and (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) 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 ▇▇▇▇▇▇ (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.
IN WITNESS WHEREOF, Recoton, Acquisition Sub and ▇▇▇▇▇▇ have
caused this Agreement to be signed by their respective officers
thereunto duly authorized 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 ▇▇▇▇▇▇ INCORPORATED
By:/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President &
Chief Financial Officer
EXHIBIT 10.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JANUARY 3, 1996
EXCLUSIVE WORLD-WIDE LICENSE AND
OPTION TO SELL AND OPTION TO PURCHASE PROPRIETARY RIGHTS
THIS AGREEMENT made by and entered into as of the 3rd day of
January, 1996, by and between International ▇▇▇▇▇▇ Incorporated, a
Delaware corporation, with its principal place of business at ▇▇ ▇▇▇-
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
("▇▇▇▇▇▇") and Recoton Corporation, a New York corporation, with its
principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇ ("Recoton").
W I T N E S S E T H:
WHEREAS, ▇▇▇▇▇▇ is the owner of the trademarks "Acoustic Research"
and "AR" and certain other trademarks (registered or unregistered),
trademark applications, service marks, trade names, copyrights, trade
secrets, and similar intangible rights associated with such
trademarks, including the marks and other rights described on Exhibit
"A", and the good will associated therewith, whether or not reflected
on the books and records of ▇▇▇▇▇▇ (collectively, the "Intellectual
Property Rights"); and
WHEREAS, Recoton desires to obtain a license to, and acquire an
option to purchase, the Intellectual Property Rights and acquire
possession thereof in accordance with the terms and conditions
hereinafter set forth; and
WHEREAS, ▇▇▇▇▇▇ desires to grant a license to, and acquire an
option to sell, the Intellectual Property Rights and convey
possession thereof in accordance with the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants hereinafter set forth, the parties mutually agree as
follows:
(a) License of Proprietary Rights.
(a) ▇▇▇▇▇▇ herewith grants to Recoton an exclusive worldwide
license of the Intellectual Property Rights (the "License") in
consideration of a payment of $10,000 per month (the "License Fee")
by Recoton to ▇▇▇▇▇▇ during the term of the License. The License
shall commence upon the date hereof and expire upon the earlier of
(i) the Effective Time as defined in the Plan and Agreement of Merger
between, inter alia, Recoton and ▇▇▇▇▇▇ dated the date hereof (the
"Merger Agreement") or (ii) the date of the exercise of either the
Purchase Option (as defined below) or the Sale Option (as defined
below) (the Purchase Option and the Sale Option sometimes being
referred to collectively as the "Options") or (iii) the first
anniversary of this Agreement (the "Termination Date").
(b) Option to Purchase and Option to Sell the Proprietary Rights.
(a) ▇▇▇▇▇▇ herewith grants to Recoton an option to purchase
all of the Intellectual Property Rights on a world-wide basis from
▇▇▇▇▇▇ (the "Purchase Option"), exercisable by Recoton on at least
five days prior written notice given at any time after the date
hereof such that the purchase shall occur at a time stated (the
"Purchase Date") prior to the Termination Date. In consideration of
the grant of the Purchase Option, Recoton shall pay ▇▇▇▇▇▇ a fee of
$4,000 per month from the date hereof until exercise of either of the
Options or until the Termination Date.
(b) Recoton herewith grants to ▇▇▇▇▇▇ an option to sell all
of the Intellectual Property Rights on a world-wide basis to Recoton
(the "Sale Option"), exercisable by ▇▇▇▇▇▇ at any time after the
termination of the Merger Agreement and before the Termination Date.
The sale shall occur on the later of the fifth business day following
the day upon which the Merger Agreement is terminated or the second
business day following the exercise of the Sale Option (the "Purchase
Date"). In consideration of the grant of the Purchase Option, ▇▇▇▇▇▇
shall pay Recoton a fee of $4,000 per month from the date hereof
until exercise of either of the Options or until the Termination
Date.
(c) On the Purchase Date, Recoton shall pay to ▇▇▇▇▇▇ $6
million (the "Purchase Price") by wire transfer or by certified check
and ▇▇▇▇▇▇ shall execute and deliver to Recoton the Assignment of
Trademarks and Assignment of Copyrights and, if applicable, the
Assignment of Patents attached hereto as Exhibits "B", "C" and "D"
respectively. All assets of ▇▇▇▇▇▇ other than the Intellectual
Property Rights are specifically excluded from the assets subject to
the Options.
(c) Extension of Term of License and Options. If any dispute
should arise between ▇▇▇▇▇▇ and Recoton during the term of the
License or the Option regarding or otherwise affecting the ability of
Recoton or ▇▇▇▇▇▇ to exercise one or both of the Options, or
regarding the validity of the License, the License shall remain in
full force and effect notwithstanding any such dispute, and the
License and the Options shall otherwise continue on the terms and
conditions set forth herein, until the earlier of resolution of such
dispute by the parties or the expiration of 30 days following the
time within which to appeal any final judgement in any litigation
arising from such dispute has lapsed (the "Extended Termination
Date") and all references herein to the Termination Date shall be
deemed references to the Extended Termination Date.
(d) Effect of Termination of License and Options. If the License
should terminate other than pursuant to exercise of the Options or
effectiveness of the merger pursuant to the Merger Agreement, Recoton
shall cease manufacturing products bearing the licensed trademarks
and refrain from further use of the Intellectual Property Rights;
provided, however, that Recoton shall, for a period of 12 months
following the date of said termination have the right to continue to
sell products manufactured prior to such termination bearing the
licensed trademarks and use related advertising, promotion and
packaging materials on a non-exclusive basis.
(e) Terms of License or Sale
(a) The Intellectual Property Rights are being licensed or,
if either of the Options is exercised, sold by ▇▇▇▇▇▇ to Recoton free
and clear of all debts, mortgages, pledges, liens (including without
limitation federal, state, and local tax liens), taxes, claims,
defaults, assessments, fines, penalties, charges, security interests,
encumbrances, options or other restrictions (whether matured or
unmatured) (together, the "Restrictions").
(b) ▇▇▇▇▇▇ shall pay any applicable sales, gains,
documentary, use, filing, transfer and similar taxes payable as a
result of the licensing or, if either of the Options is exercised,
sale of the Intellectual Property Rights and file all appropriate
returns related thereto. Recoton shall reasonably cooperate in the
preparation of such returns, if necessary and, if required, sign such
returns if true and complete. All taxes on, or measured by, the net
income or revenues of Recoton or ▇▇▇▇▇▇ (including, without
limitation, income, gross receipts, and net-worth taxes) imposed or
levied by, or payable to, any federal, state, or local taxing
authority shall be paid or payable by the party upon which such taxes
are imposed or levied.
(c) ▇▇▇▇▇▇ shall promptly execute and deliver from time to
time at the request and expense of Recoton all such further
instruments and further assurances as may be required in order to
effect the license to, or, if either of the Options is exercised, the
sale to, Recoton of, and the right to use and enjoy, the Intellectual
Property Rights.
(d) During the term of the License, the nature and quality of
all products manufactured by Recoton bearing the licensed trademark
shall conform to the quality of those speakers and consumer
electronic products, as appropriate, currently held in the inventory
of ▇▇▇▇▇▇ which use the Acoustic Research brand.
(f) Representations and Warranties of ▇▇▇▇▇▇. ▇▇▇▇▇▇ represents
and warrants to Recoton as follows:
(a) ▇▇▇▇▇▇ has the corporate power to execute and deliver
this Agreement and has taken all action required by law, its
Certificate of Incorporation, its By-Laws or otherwise to authorize
such execution and delivery; this Agreement has been, and the other
agreements to be executed pursuant to this Agreement by ▇▇▇▇▇▇ will
be, duly executed and delivered by ▇▇▇▇▇▇; and this Agreement is a
valid and binding agreement, and all such agreements will be valid
and binding agreements, of ▇▇▇▇▇▇ enforceable in accordance with the
terms thereof.
(b) Neither the execution and delivery of this Agreement nor
the performance of its terms will conflict with, be a breach of, or
constitute a default under, any agreement or instrument to which
▇▇▇▇▇▇ is a party.
(c) To the best of ▇▇▇▇▇▇'▇ knowledge, the Intellectual
Property Rights which are trademark or copyright registrations are
valid, in good standing, and are not involved in any interferences,
litigation, oppositions, or cancellation proceedings, and are owned
by ▇▇▇▇▇▇, free and clear of all liens, encumbrances, equities, or
claims. ▇▇▇▇▇▇ owns or has the right to use, without payment to any
other party, trademarks, trade names, service marks, copyrights and
applications therefor referred to in such Exhibit A (all of which are
being licensed herewith), and the consummation of the transactions
contemplated hereby will not alter or impair such rights in any
material respect. ▇▇▇▇▇▇ has no patents or patent rights which are
currently used in connection with the Intellectual Property Rights.
▇▇▇▇▇▇ 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. 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.
(g) Representations and Warranties of Recoton. Recoton represents
and warrants to ▇▇▇▇▇▇ as follows:
(a) Recoton has the corporate power to execute and deliver
this Agreement and has taken all action required by law, its
Certificate of Incorporation, its By-Laws or otherwise to authorize
such execution and delivery; this Agreement has been, and the other
agreements to be executed pursuant to this Agreement by Recoton will
be, duly executed and delivered by Recoton; and this Agreement is a
valid and binding agreement, and all such agreements will be valid
and binding agreements, of Recoton enforceable in accordance with the
terms thereof.
(b) Neither the execution and delivery of this Agreement, nor
the performance of its terms, will conflict with, be a breach of or
constitute a default under any agreement or instrument to which
Recoton is a party.
(h) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter
contained herein and no modification or addition hereto shall be
binding unless in writing and signed by both parties.
(i) Parties in Interest. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto, and their
respective heirs, representatives and permitted assigns.
(j) Expenses. Except as otherwise provided in this Agreement,
▇▇▇▇▇▇ and Recoton shall pay their own expenses incidental to the
carrying out of this Agreement, including all fees and expenses of
counsel and accountants.
(k) General Laws; Service of Process. This Agreement shall be
governed by the laws of the State of New York without reference to
its choice-of-law rules. Service of process may be made upon each of
the parties hereto by using the notification procedure set forth in
Section 15.
(l) Survival. All warranties, representations, and covenants made
by each party in or pursuant to this Agreement shall survive for the
benefit of the other parties notwithstanding the significance thereof
or any examination, examination opportunity or knowledge (whether
implied or actual).
(m) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
(n) Execution in Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
(o) 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 Recoton, to:
c/o Recoton Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Stuart Mont, Chief Operating Officer
with a copy to:
Stroock & Stroock & ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(b) If to ▇▇▇▇▇▇, to:
International ▇▇▇▇▇▇ Incorporated
▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
Vedder, Price, ▇▇▇▇▇▇▇ & Kammholz
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Notice of any change in any such address shall be given in the manner
set forth above. Whenever the giving of notice is required, the
giving of such notice may be waived by the Party entitled to receive
such notice. Notice shall be effective upon receipt.
(p) Further Assurances. Recoton and ▇▇▇▇▇▇ shall execute all
documentation necessary or appropriate to effect the agreements set
forth in this Agreement, including without limitation any assignment
of patents or patent rights if the representation regarding the lack
of patents made in Section 6(c) is incorrect.
(q) Assignment. No party may assign its rights or obligations
hereunder without the written consent of the other parties.
(r) Exhibits. References to Exhibits and Schedules shall be
references to the exhibits of, and schedules, to this Agreement.
Such Exhibits and Schedules, whether attached to or provided
subsequent to the execution of, this Agreement form an integral part
of this Agreement and are hereby incorporated in this Agreement.
(s) Enforceability. If any provision of this Agreement is held
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect any other provision hereof. This
Agreement shall, in such circumstances, be deemed modified to the
extent necessary to render enforceable the provisions hereof.
(t) Costs of Collection. Each party shall pay all costs of
litigation, including reasonable attorney's fees, incurred by the
other party in successfully enforcing any provision of this
Agreement.
(u) Waiver. The failure of any party to insist upon strict
performance of any of the terms or conditions of this Agreement will
not constitute a waiver of any of its rights hereunder.
(v) Right to Offset. Payments due under this Agreement or any
other agreements between Recoton (or any affiliate thereof) and
▇▇▇▇▇▇ (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. If the provisions of
Section 3 hereof are applicable and the terms of the License and
Options are extended thereunder, payments otherwise due from ▇▇▇▇▇▇
(or any affiliate thereof) to Recoton (or any affiliate thereof) at
any time up to the amount of the Purchase Price shall not be due and
payable until the earlier of payment of the Purchase Price by Recoton
to ▇▇▇▇▇▇ or the Termination Date.
IN WITNESS WHEREOF, the parties have hereto executed this Agreement
as of the 3rd day of January, 1996.
INTERNATIONAL ▇▇▇▇▇▇ INCORPORATED
Witnesses:
▇▇▇▇▇ ▇. ▇▇▇▇ By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President and Chief
Financial Officer
RECOTON CORPORATION
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/Stuart Mont
Stuart Mont
Executive Vice President
and Chief Operating Officer
EXHIBIT A
TRADEMARKS REGISTRATIONS
Trademark Country Registration No.
Acoustic Research United States 1,778,708
AR United States 1,430,911
AR United States 927,195
Additional trademarks are on attachment.
UNREGISTERED TRADEMARKS
None
COPYRIGHT REGISTRATIONS AND APPLICATIONS
None
EXHIBIT 10.2 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JANUARY 3, 1996
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of January 3, 1996 (the
"Agreement") among Recoton Corporation, a New York corporation (the
"Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, a
shareholder of the Company, as the initial holder of the proxy
granted pursuant to Section 3 hereof.
WHEREAS, simultaneously with the execution of this Agreement,
International ▇▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇"), RC Acquisition Sub,
Inc. ("Acquisition Sub") and the Company have entered into a Merger
Agreement dated as of January 2, 1996 (the "Merger Agreement")
pursuant to which ▇▇▇▇▇▇ shall be merged into Acquisition Sub as of
the Effective Time (as defined in the Merger Agreement) if the
conditions set forth in the Merger Agreement are satisfied;
WHEREAS, ▇▇▇▇ currently holds approximately 2,096,854 shares of the
Common Stock, $0.01 par value, of ▇▇▇▇▇▇ ("▇▇▇▇▇▇ Stock");
WHEREAS, ▇▇▇▇ may acquire Common Shares, par value $.20 per share,
of the Company (the "Common Stock") in the conversion of his shares
of ▇▇▇▇▇▇ Stock; and
WHEREAS, the Company and ▇▇▇▇ desire to establish in this Agreement
certain terms and conditions of ▇▇▇▇'▇ relationship with the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Stock Purchase Agreement, the
parties hereto agree as follows:
1. Representations and Warranties.
(a) The Company represents and warrants to ▇▇▇▇ as follows:
(i) The Company has full power and authority to execute,
deliver and perform this Agreement;
(ii) This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that (x) the
enforceability hereof may be limited by bankruptcy, insolvency,
moratorium, fraudulent conveyance or other similar laws relating to
or affecting creditors' rights generally and court decisions with
respect thereto, (y) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court
before which any proceedings therefor may be brought, and (z) the
rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or the public policy underlying
such laws; and
(iii) The execution, delivery and performance of this
Agreement by the Company do not violate or conflict with or
constitute a default under the Company's Certificate of
Incorporation, By-Laws or any material agreement to which it is a
party or by which it or its property is bound.
(b) ▇▇▇▇ represents and warrants to the Company as follows:
(i) He has full power and authority to execute, deliver
and perform this Agreement;
(ii) This Agreement has been duly and validly
authorized, executed and delivered by him and constitutes a valid
and binding obligation of his, enforceable against him in
accordance with its terms, except that (x) the enforceability
hereof may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance or other similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, (y) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court
before which any proceedings therefor may be brought, and (z) any
rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or the public policy underlying
such laws;
(iii) The execution, delivery and performance of this
Agreement by him does not violate or conflict with or constitute a
default under any material agreement to which he is a party or by
which he or his property is bound; and
(iv) As of the date hereof, neither he nor any of his
"controlled affiliates" (as defined below) beneficially owns any
shares of Common Stock (or any options, warrants, rights or other
securities exercisable for, exchangeable for or convertible into
shares of Common Stock, whether immediately or after the passage of
time (collectively, "Conversion Securities")) other than shares to
be issued pursuant to the Merger Agreement.
(c) As used in this Agreement, the term "controlled
affiliate" means any corporation, partnership or other entity or
person that or who is "controlled by," "controlling" or "under common
control with" (as such terms are defined under Rule 405 under the
United States Securities Act of 1933, as amended (the "Securities
Act")) the applicable party.
2. Term of Agreement; Voting Securities.
(a) Subject to the provisions of Section 6 hereof, the term
of this Agreement (the "Term") shall commence at the Effective Time
and run for a period equal to the time which ▇▇▇▇ is an employee of
Recoton or any subsidiary thereof plus two years (but in no event in
excess of ten years). If the Merger Agreement shall be terminated
prior to the Effective Time this Agreement shall be of no force and
effect.
(b) For the purposes of this Agreement, the term "Voting
Securities" shall mean all securities of the Company entitled to vote
generally in the election of directors of the Company or on issues
submitted to the shareholders of the Company.
3. Voting and Other Rights. ▇▇▇▇ shall during the Term (a) use
reasonable efforts to be present and cause his controlled affiliates
to be present, in person or represented by proxy, at all shareholder
meetings of the Company, so that all Voting Securities beneficially
owned by him and his controlled affiliates shall be counted for the
purpose of determining the presence of a quorum for such meetings;
and (b) vote, and cause to be voted by his controlled affiliates, all
Voting Securities beneficially owned by him or his controlled
affiliates (i) in favor of all matters proposed by the Board of
Directors of the Company (the "Board") and presented to the Company's
shareholders, (ii) consistent with the recommendation of the Board on
all other matters as to which the Board shall take a position and
(iii) for all nominees for Directors of the Company recommended by
the Board. To effect the foregoing agreement, ▇▇▇▇ hereby grants to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ so long as he is an officer of Recoton, and, if
he no longer an officer of Recoton, to Stuart Mont so long as he is
an officer of Recoton, and, if he is no longer an officer of Recoton
to ▇▇▇▇▇ Wish so long as he is an officer of Recoton, and, if he is
no longer an officer of Recoton, to ▇▇▇▇▇▇ ▇▇▇▇▇ so long as he is an
officer of Recoton, and, if he is no longer an officer of Recoton, to
such officer or officers as may be designed by the Board of Directors
of Recoton from time to time, an irrevocable proxy, coupled with an
interest, to vote all Voting Securities beneficially owned by him
consistent with this Section 3.
4. Acquisition of Voting Securities. During the Term, ▇▇▇▇ shall
not, and shall cause each of his controlled affiliates not to,
acquire, offer or propose to acquire, or agree to acquire, directly
or indirectly, any Voting Securities or Conversion Securities unless
▇▇▇▇ causes such Voting Securities or Conversion Securities to become
subject to the terms of this Agreement; provided, however, that ▇▇▇▇
may acquire Voting Securities and/or Conversion Securities pursuant
to stock options or stock bonus plans of the Company.
5. Certain Prohibited Actions. During the Term, without the
prior written consent of the Company duly authorized by the Board or
except as otherwise required or authorized by this Agreement, ▇▇▇▇
will not, and will cause each of his controlled affiliates not to,
singly or as part of a "group," directly or indirectly, through one
or more intermediaries (i) make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the United States Securities
Exchange Act of 1934, as amended (the "Exchange Act")) with respect
to the Voting Securities (including by the execution of actions by
written consent), or become a "participant" in any "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to the Company or seek to advise or influence any
person or entity with respect to the voting of any Voting Securities
other than consistent with any proxy solicitation on behalf of the
Board of Directors of the Company; (ii) initiate, propose or
participate in the solicitation of shareholders for the approval of,
one or more shareholder proposals with respect to the Company (as
described in Rule 14a-8 under the Exchange Act) or induce any other
individual or entity to initiate any shareholder proposal relating to
the Company; (iii) form, join, influence or participate in a "group,"
act in concert with any other person or entity or otherwise become a
"person," for the purpose of taking any other actions prohibited
under this Section 5 or any other provision of this Agreement; (iv)
make any proposal or, except as may be required by law, any public
announcement relating to a tender or exchange offer for any Voting
Securities, or a merger, business combination, sale of assets,
liquidation, restructuring, recapitalization or other extraordinary
corporate transaction relating to the Company or its material assets;
(v) act alone or in concert with others (including by providing
financing for another party), to seek or offer to control the
Company; (vi) deposit any Voting Securities in a voting trust or
subject any Voting Securities to any arrangement or agreement with
respect to the voting thereof other than in connection with this
Agreement; or (vii) disclose any intention, plan or arrangement
inconsistent with the foregoing prohibitions or advise or consent any
other person in connection with the foregoing prohibitions; provided,
however, that nothing contained herein shall prohibit the Company
from publicly announcing its position with respect to any matter
concerning the Company or prohibit ▇▇▇▇ from making any disclosures
required to be made under applicable securities laws.
6. Disposition of Voting Securities.
(a) During the Term, so long as ▇▇▇▇ is an officer or
director of the Company or the Acquisition Sub (an "Affiliate of
Recoton"), ▇▇▇▇ shall not, and shall cause his respective controlled
affiliates not to, transfer any Voting Securities, whether by sale,
assignment, pledge, encumbrance, gift, bequest, appointment or
otherwise, without the prior written consent of the Company in each
instance except as specifically provided in, and subject to the
provisions of, Section 6(b), (c), (d) or (e) of this Agreement. Any
such transfers must be in compliance with federal and state and other
applicable securities law.
(b) ▇▇▇▇ and his controlled affiliates may transfer Voting
Securities in a bona fide private transaction to an unaffiliated
person if such transferee agrees to hold such shares subject to the
terms of this Agreement.
(c) ▇▇▇▇ and his controlled affiliates may, from time to
time, sell in open market transactions pursuant to Rule 144 or Rule
145 under the Securities Act (or any successor provision) the number
of Voting Securities then permitted under Rule 144 or Rule 145 (or
any successor provision) or pursuant to an offering registered under
the Securities Act of 1933 (the "Securities Act").
(d) ▇▇▇▇ and his controlled affiliates shall be free without
any restrictions at all times during the Term to sell or transfer any
Voting Securities, (i) if a third party makes a bona fide offer to
purchase Voting Securities which represent with such third parties'
then-current holdings more than 50% of the voting power of the
outstanding Voting Securities, which offer is approved and
recommended by the Board (if such recommendation shall not have been
withdrawn or adversely modified prior thereto) or (ii) to the Company
pursuant to any offer made by the Company generally to all
shareholders.
(e) ▇▇▇▇ and his controlled affiliates may from time to time
sell, transfer, pledge, gift over or otherwise dispose of any Voting
Securities to one or more of his spouse, children, grandchildren,
siblings or parents (each, a "Family Member") or to a company which
is (and during the term of this Agreement will be) wholly owned by,
or a trust the only beneficiaries of which are, ▇▇▇▇ or any of his
Family Members, on condition in any case that such transferees agree
to be bound by all of the provisions of this Agreement.
(f) During the Term so long as ▇▇▇▇ is an Affiliate of
Recoton, he shall not, at any time during the Term, sell or transfer
Voting Securities to (x) any person (including that person's
controlled affiliates and any group in which that person or its
controlled affiliates shall be a member if ▇▇▇▇ knows of the
existence of such group or affiliates), other than an underwriter in
connection with a public offering of Voting Securities or pursuant to
sales under Rule 144, which ▇▇▇▇ or his affiliate knows, or through
the exercise of reasonable diligence should have known, would, after
giving affect to such sale or transfer, beneficially own in the
aggregate more than 10% of the Voting Securities.
7. Legend on Certificates.
(a) During the Term, each of the certificates representing
Voting Securities received or acquired by ▇▇▇▇ or any of his
respective controlled affiliates in accordance with this Agreement
shall be subject to stop transfer instructions and shall include the
following legend, to the extent applicable:
The shares represented by this certificate may not be
transferred whether by sale, assignment, pledge, encumbrance,
gift, bequest, appointment or otherwise, and Recoton Corporation
("Recoton") will not register the transfer of such shares, except
pursuant to and subject to that certain Shareholders' Agreement
among Recoton and ▇▇▇▇▇▇ ▇. ▇▇▇▇ dated January 3, 1996. A copy
of such agreement is on file with the Secretary of Recoton.
The Company shall have such legend removed upon the expiration
of the Term.
8. Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain
damages for which it would not have an adequate remedy at law for
money damages, and therefore in the event of any such breach the
aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity.
9. Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by written
agreement of the Company and ▇▇▇▇.
10. Notices. Any and all notices or other communications required
or permitted to be given under any of the provisions of this
Agreement shall be in writing and shall be deemed to have been given
when given to the following addresses or telefax numbers:
(a) If to ▇▇▇▇, c/o
International ▇▇▇▇▇▇ Incorporated
▇▇ ▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not
constitute notice) to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Wildman, Harrold, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier: 312-201-2555
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company:
Recoton Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: Stuart Mont
with a copy (which shall not
constitute notice) to:
Stroock & Stroock & ▇▇▇▇▇
Seven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
(or at such other address or telefax numbers as any party may specify
by notice to all other parties given as aforesaid). Unless otherwise
specifically provided in this Agreement, such communications shall be
deemed to have been given (a) five days after mailing, when mailed by
registered or certified postage-paid mail, (b) on the second business
day after sending, when delivered to a recognized international
courier service such as Federal Express or DHL or, where applicable,
the U.S. Post Office Express Mail or (c) upon the date of
receipt by the addressee when delivered personally or dispatched 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.
11. Severability. In the event that any provision(s) of this
Agreement shall be held illegal, invalid or unenforceable under
applicable law, then such illegality, invalidity or unenforceability
shall not affect any other provision(s) hereof and this Agreement
shall remain in force and be effectuated as if such illegal, invalid
or unenforceable provision is not part of this Agreement.
12. 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, executors, administrators, legal
representatives, successors (including any successor by merger,
reorganization, consolidation or other business combination) and
permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other party.
13. Governing Law. This Agreement and its validity, construction
and performance shall be governed in all respects by the laws of the
State of New York without giving effect to principles of conflict of
law.
14. Jurisdiction and Venue. 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 before a panel of three arbitrators in New York, NY 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
courts of the State of New York, and of the United States District
Court for the Southern District of New York, for all purposes in
connection with arbitration. The application of either party to said
courts, and any paper in connection therewith may be delivered by
mail, 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 14 shall be final and binding upon the parties and judgment
thereon may be entered in any court having jurisdiction over such
party. In the event of litigation or arbitration hereunder, the
prevailing party in such action shall be entitled to reasonable
attorney fees and disbursements. Nothing in this Section 14,
however, shall limit the Company's rights to commence litigation for
equitable relief pursuant to Section 8.
15. Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed to evidence
one and the same agreement.
16. Headings. The headings of the Sections of this Agreement are
inserted for convenience only and shall not constitute a part hereof
or affect in any way the meaning or interpretation of this Agreement.
17. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect of the
subject matter contained herein, and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or
representative of any party hereto.
18. Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall
be construed to confer upon or give to any person or corporation,
other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on the day and year first above
written.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
RECOTON CORPORATION
By:/s/ Stuart Mont
Name: Stuart Mont
Title: Chief Operating Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
EXHIBIT 99.1 TO RECOTON
FORM 8-K FOR EVENT
OCCURRING JANUARY 3, 1996
FOR IMMEDIATE RELEASE
RECOTON TO ACQUIRE INTERNATIONAL ▇▇▇▇▇▇
IN STOCK AND CASH TRANSACTION
Lake Mary, FL -- January 3, 1996 - Recoton Corporation (NASDAQ
National Market: RCOT) and International ▇▇▇▇▇▇ Inc. ("IJI") (NASDAQ
National Market: IJIN) jointly announced today that the companies
have executed a definitive merger agreement in which Recoton, the
leading supplier of consumer electronic accessories, would acquire
IJI, a leading marketer of home and automotive loudspeakers, for
$8.90 per share in a cash and stock merger. As a condition of this
transaction, IJI has agreed to sell, contemporaneously, its OEM
(Original Equipment Manufacturing) manufacturing and marketing
business for automotive loudspeakers to ▇▇▇▇▇▇ ▇. ▇▇▇▇, IJI's
President, for $15 million. Net of the proceeds from the OEM sale,
Recoton will acquire IJI for approximately $36 million, or $6.27 per
share plus the assumption of IJI debt and agreed-upon transaction
expenses. For the trailing twelve months ended November 30, 1995,
IJI generated revenue of $160.3 million for the businesses to be
retained by Recoton.
Recoton will also receive a worldwide license to all rights to the
Acoustic Research ("AR") trademark prior to the Winter Consumer
Electronics show which begins January 5, 1996 in Las Vegas, plus an
option to purchase such trademark.
Under the terms of the agreement, each IJI stockholder may elect to
receive either Recoton stock or cash; however, the amount of Recoton
stock to be received will be adjusted, on a pro-rata basis, such that
the value of the total number of shares to be issued will equal 40%
of the purchase price. The number of Recoton shares to be issued
will be calculated based on an average closing share price for an
agreed-upon number of days prior to the required IJI shareholder
vote. In the event the average share price is lower than $16.00 and
in certain other circumstances, Recoton has the right to pay all
cash. Recoton expects the transaction to be earnings-per-share
neutral in 1996, with accretion in future years.
The transaction, which has been unanimously approved by both boards
of directors: (1) is intended to be tax-free to the extent that IJI
shareholders receive Recoton stock; (2) will be accounted for on a
purchase basis; (3) is subject to certain closing conditions,
including its approval by IJI shareholders, the effectiveness of a
Recoton registration statement for the shares to be issued and the
expiration of applicable waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act; and (4) is expected to close no earlier than the end of March
1996.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President of Recoton said "We believe this
transaction firmly establishes Recoton in several important new
product categories: home and automotive loudspeakers and audio
electronics. Our joining with IJI significantly enhances our
strategic plan for this market segment, which we entered in the Fall
of 1995 by establishing Christie Design Inc. as our loudspeaker
design, manufacturing and marketing group. The Advent, AR, ▇▇▇▇▇▇,
Phase Linear, Mac Audio, Magnat and NHT (Now Hear This) brand names
are some of the most well recognized in the industry, both
domestically and worldwide. We intend to use these names to promote
various product line extensions and will unveil an exciting new line
of AR speakers designed and manufactured by our Christie Design
subsidiary, headed by noted designer ▇▇▇▇ ▇▇▇▇▇▇▇▇, at the Winter
Consumer Electronics Show."
▇▇. ▇▇▇▇▇▇▇▇▇ added, "As one of the largest and most responsive
suppliers to consumer electronics stores, mass merchandisers and
other retailers, we can now distribute a much broader array of
speaker and audio accessory products for both home and automotive
applications. The transaction will allow Recoton to more readily
sell its branded products in the international markets, enhancing
Recoton's position as a global company. IJI has substantial
operations in Europe where the Magnat, Mac Audio and ▇▇▇▇▇▇ brands
are well established. Approximately one-third of IJI's sales for the
businesses Recoton will retain are attributable to the European operations."
▇▇▇▇▇▇ ▇. ▇▇▇▇, International ▇▇▇▇▇▇'▇ President, stated, "I am
delighted with the opportunities that this transaction presents for
IJI's aftermarket business prospects. The merging of our aftermarket
products into the Recoton organization will be a definite advantage
for the long-term growth of these well recognized brand names.
Recoton provides a compatible entrepreneurial management style,
enhanced customer relationships, broader sourcing capabilities and
certain additional technologies which will enhance IJI's business
opportunities. The combined strength of the two organizations should
create synergies that will benefit our customer base and the industry
as a whole."
In addition to heading the operations of the unaffiliated OEM
business, ▇▇. ▇▇▇▇ will join Recoton's executive management team as
President and CEO of Recoton Audio Corporation, the successor to IJI.
Both ▇▇. ▇▇▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇ contemplate that ▇▇. ▇▇▇▇ will devote
a substantial amount of time to furthering the growth of IJI brands
within the Recoton organization. ▇▇. ▇▇▇▇ stated, "The competitive
OEM environment requires an intensified focus in order to be more
responsive to customer needs. Accordingly, the OEM business will
operate as a stand-alone, properly capitalized company, which will
enhance OEM's business prospects and provide greater opportunities
for its employees. We are fortunate to have a very capable senior
management team at OEM, which will allow me the time to work with
Recoton to direct the future growth of IJI's product lines." ▇▇.
▇▇▇▇▇▇▇▇▇ added, "I am very much looking forward to having ▇▇▇ ▇▇▇▇
becoming an important member of our executive management team. I am
certain his talents will add considerable value to our efforts."
International ▇▇▇▇▇▇ Inc., located in Lincolnshire, Illinois, is
currently one of the largest, most vertically-integrated loudspeaker
companies in the world. The company designs its own products and
assembles them in its own factories. International ▇▇▇▇▇▇ markets
loudspeakers and other audio products for new automobiles (OEM), the
automotive aftermarket and for home listening under the brands names
AdventR, ARR (Acoustic Research), JensenR, Phase LinearR, Mac AudioTM,
MagnatR and NHTR (Now Hear This).
Recoton Corporation products, which are sold under the AmbicoR,
AmpersandTM, CalibronR, DiscwasherR, InteractTM, ParsecR, RembrandtR,
RecotonR, SoleControlR and SoundQuestTM brand names, encompass over
3,500 highly functional and versatile accessories. They are used for
the installation, enhancement, hook-up, interconnection, maintenance,
storage and replacement of consumer electronic equipment such as
audio, video, telephone, cellular, car audio, camcorder, multi-
media/computer, music, home office, video and computer games and 900
MHz wireless technology.
▇▇▇▇▇▇ ▇▇▇▇ LLC is acting as financial advisor to Recoton. ▇▇▇▇▇▇
Brothers Inc. is acting as financial advisor to International ▇▇▇▇▇▇.
