As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 333-00811
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
___________________________________
AUDIOVOX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
___________________________________
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
13-1964841
(I.R.S. Employer Identification Number)
___________________________________
150 MARCUS BOULEVARD, HAUPPAUGE, NEW YORK 11788
516-231-7750
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
___________________________________
Charles M. Stoehr
SENIOR VICE PRESIDENT
150 MARCUS BOULEVARD,
HAUPPAUGE, NEW YORK 11788
516-231-7750
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Agent for Service)
___________________________________
Please send copies of all communications to:
ROBERT S. LEVY, ESQ.
LEVY & STOPOL, LLP
ONE PENNSYLVANIA PLAZA, 49TH FLOOR
NEW YORK, NEW YORK 10119
___________________________________
Approximate date of commencement of proposed sale to public:
From time to time after the effective date of the Registration
Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered
only in connection with dividend or interest reinvestment plans,
check the following box. [x]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ] ___________
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ] ___________
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
___________________________________
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum
Title of Each Class of Maximum Aggregate Amount of
Securities Amount to be Offering Price Offering Registration
to be Registered Registered(1) Per Security Price(2) Fee
- ------------------------------- ------------ -------------- ------------- -----------
Class A Common Stock Purchase
Warrants...................... 1,668,875 -- -- --
Class A Common Stock, par value
$.01 per share................ 1,668,875 $7.125(2) 11,890,734 $ 4,101
(1) Pursuant to Rule 416 under the Securities Act of 1933, this Registration
Statement also covers such additional securities as may become issuable upon the
exercise of the Warrants being registered through the antidilution provisions
thereof.
(2) Calculated based upon the exercise price of the Warrants solely for the
purpose of calculating the registration fee pursuant to Rule 457(g).
The Registrant hereby amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933 or
until this Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
=============================================================================
*******************************************************************
*INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR *
*AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE *
*SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE *
*COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO *
*BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT *
*BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN *
*OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL *
*THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
*SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
*REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY *
*SUCH STATE. *
*******************************************************************
SUBJECT TO COMPLETION, preliminary
PROSPECTUS, DATED APRIL 29, 1996
1,668,875 Warrants
1,668,875 Shares of Common Stock
AUDIOVOX CORPORATION
COMMON STOCK PURCHASE WARRANTS AND COMMON STOCK
------------------------
This Prospectus relates to the registration of (i) 1,668,875
common stock purchase warrants (the "Warrants") exercisable for
shares of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), of Audiovox Corporation (the "Company")
and (ii) the shares of Class A Common Stock issuable upon the
exercise of the Warrants (the "Warrant Shares"). The Warrants
were issued by the Company in a private placement effected on May
9, 1995 (the "Closing Date"). All of the Warrants and Warrant
Shares are being registered for resale from time to time by the
holders thereof (the "Selling Securityholders") and the Warrant
Shares are also being registered for their issuance by the
Company to the Selling Securityholders of the Warrants upon their
exercise of the Warrants. See "Selling Securityholders."
Information concerning the Selling Securityholders may change
from time to time and will be set forth in Supplements to this
Prospectus. The Company will not receive any of the proceeds
from
the resale by the Selling Securityholders of the Warrants or the
Warrant Shares. The Company will receive proceeds of $7 1/8 per
Warrant Share (subject to adjustment in certain circumstances)
issued upon exercise of the Warrants. See "Use of Proceeds."
The Warrants are exercisable at the later of (a) May 9, 1996
(one year after the issuance of the Warrants), and (b) the date a
registration statement with respect to the Warrant Shares has
been filed and declared effective by the Securities and Exchange
Commission (the "SEC"), at an initial exercise price of $7 1/8
per share, subject to adjustment under certain circumstances.
Unless exercised, the Warrants will automatically expire at 5:00
p.m. (New York City time) on March 15, 2001 (the "Expiration
Date"). If less than 5% of the Warrants initially issued (i.e.,
83,444 Warrants) remain outstanding at any given time, the
Company may elect, by written notice to each holder of the
Warrants, that the Warrants will expire on the 30th day after
delivery of such notice. See "Description of Warrants."
The outstanding Class A Common Stock is traded on the
American Stock Exchange ("AMEX") (Symbol: "VOX"). On April 25,
1996, the last reported sale price of the Class A Common Stock on
the American Stock Exchange was $4 3/16 per share. The AMEX,
the National Association of Securities Dealers Automated Quotation
System Small Capitalization Market, the Boston Stock Exchange, the
Midwest Stock Exchange, the Pacific Stock Exchange and the
Philadelphia Stock Exchange (the "Exchanges") have each informed
the Company that the number of holders of the Warrants is
insufficient to list such Warrants. Among other listing
requirements, each such Exchange requires at least 250 holders of
an equity security, such as the Warrants, as a prerequisite for
the approval of the listing of such Warrants. Currently, the
Company estimates that there are less than 40 beneficial holders
of the Warrants ("Warrantholders"). If and when a sufficient
number of holders exist and the Company satisfies the other
listing requirements, the Company presently intends to seek to
list the Warrants on one of the Exchanges.
If this Registration Statement has not been declared
effective at any time prior to the Expiration Date of the
Warrants, the Company will be required to redeem all of the
outstanding Warrants for $1.60 per Warrant (subject to adjustment
in certain limited circumstances).
The Warrants have been approved for trading in the Private
Offering Resales and Trading through Automated Linkages ("PORTAL")
Market since the Closing Date. However, no public trading market
for the Warrants exists and no active trading market in PORTAL has
developed. Josepthal, Lyon & Ross Incorporated has advised the
Company that it presently intends to make a market in the Warrants
after the effectiveness of this Registration Statement.
Josepthal, Lyon & Ross Incorporated, however, is not obligated to
do so and any such market-making may be discontinued at any time
without notice, in the sole discretion of Josepthal, Lyon & Ross
Incorporated. No assurance can be given that
any market for the Warrants will develop or be maintained.
Moreover, once the Warrants are registered under this
Registration Statement, the Warrants which are registered under
this Registration Statement will no longer be eligible for
trading on PORTAL.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Company has agreed to bear all expenses estimated to
be approximately $84,500 (other than selling expenses) in
connection with the registration of the securities hereby and to
indemnify the Selling Securityholders against certain liabilities
including liabilities under the Securities Act of 1933, as
amended. See "Plan of Distribution." The Company has been
advised by the Selling Securityholders that the Selling
Securityholders, acting as principals for their own account,
directly, through agents designated from time to time, or through
dealers or underwriters also to be designated, may sell all or a
portion of the Warrants or Warrant Shares which may be offered
hereby by them from time to time on terms to be determined at the
time of sale. The aggregate proceeds to the Selling
Securityholders from the sale of Warrants and Warrant Shares
which may be offered hereby by the Selling Securityholders will
be the purchase price of such Warrants or Warrant Shares less
commissions, if any. For information concerning indemnification
arrangements between the Company and the Selling Securityholders,
see "Plan of Distribution."
The Selling Securityholders and any broker-dealers, agents
or underwriters that participate with the Selling Securityholders
in the distribution of the Warrants or Warrant Shares may be
deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), in which event
any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Warrants or
Warrant Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. There can be
no assurance that any of the Warrants or the Warrant Shares will
be sold by the Selling Securityholders.
------------------------
The date of this Prospectus is May ___, 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports and other
information with the SEC . Such reports and other information may
be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at the SEC's Regional Offices located
at 7 World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549, at prescribed rates. The Company's
outstanding Class A Common Stock and its 6 1/4% Convertible
Subordinated Debentures due 2001 (the "Debentures") are listed on
the American Stock Exchange, and such reports and other
information can also be inspected at the offices of the American
Stock Exchange, 86 Trinity Place, New York, New York 10006.
The Company has filed with the SEC a registration statement
on Form S-3 (such registration statement, together with all
amendments and exhibits thereto, being hereinafter referred to as
the "Registration Statement") under the Securities Act of 1933,
as amended (the "Securities Act"), for the registration under the
Securities Act of the Warrants and Warrant Shares offered hereby.
This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted
in accordance with the rules and regulations of the SEC.
Reference is hereby made to the Registration Statement for
further information with respect to the Company and the
securities offered hereby. Statements contained herein
concerning the provisions of documents filed as exhibits to the
Registration Statement are necessarily summaries of such
documents, and each such statement is qualified by reference to
the copy of the applicable document filed with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1995, as amended (the "1995 Form
10-K"); (ii) the Company's Current Report on Form 8-K dated March
7, 1996; (iii) the Company's Quarterly Report on Form 10-Q for
the quarter ended February 29, 1996 (the "First Quarter 1996 Form
10-Q"); and (iv) the description of the Company's Class A Common
Stock contained in the Company's Registration Statement on Form 8-
A dated May 21, 1987, all of which have been filed with the SEC
(File No. 1-9532).
The Company also incorporates herein by reference all
documents and reports subsequently filed by the Company with
the SEC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus
and prior to termination of this offering. Such documents and
reports shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of
such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded,
except as so modified or superseded, shall not be deemed to
constitute a part of this Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the
written or oral request of such person, a copy of any or all of
the documents incorporated herein by reference, other than
exhibits to such documents unless they are specifically
incorporated by reference into such documents. Requests for
such copies should be directed to: Chris L. Johnson,
Secretary, Audiovox Corporation, 150 Marcus Boulevard,
Hauppauge, New York 11788, telephone 516-231-7750.
SUMMARY
The following summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information
appearing elsewhere in this Prospectus and in the documents
incorporated herein by reference.
The Company
Audiovox Corporation (together with its subsidiaries, the
"Company") designs and markets cellular telephones and
accessories, automotive aftermarket sound and security equipment,
other automotive aftermarket accessories, and certain other
products. The Company's corporate headquarters is located at 150
Marcus Boulevard, Hauppauge, New York 11788, and its telephone
number at that address is 516-231-7750.
The Offering
Securities Offered.......1,668,875 warrants (the "Warrants"),
each Warrant entitling the holder
thereof to purchase one share of Class A
Common Stock, par value $.01 per share
(the "Class A Common Stock), of the
Company at any time on or after the
later of (x) one year after issuance and
(y) the date a registration statement
with respect to the Class A Common Stock
issuable upon exercise of the Warrants
(the "Warrant Shares") has been filed
and declared effective by the Securities
and Exchange Commission (the "SEC") and
(ii) on or prior to March 15, 2001
unless the Warrants are terminated
earlier in certain circumstances (the
"Expiration Date"). The initial
exercise price of each Warrant (the
"Warrant Exercise Price") will be $7 1/8
per share. The Warrant Exercise Price
and the number of shares of Class A
Common Stock acquirable upon exercise of
a Warrant is subject to adjustment in
certain limited circumstances. See
Description of the Warrants--General."
On April 25, 1996, the reported
closing sales price of the Class A
Common Stock, as reported on the AMEX,
was $4 3/16 per share.
Warrant Exercise Period..The Warrants may not be exercised
(a) until the later of (x) one year
after issuance and (y) the date a
registration statement with respect to
the Warrant Shares has been filed and
declared effective by the SEC or
(b) after the Expiration Date. The
Warrants will expire on the Expiration
Date; provided that if less than 5% of
the Warrants initially issued (i.e.,
83,444 Warrants) remain outstanding at
any given time, the Company may elect,
by written notice to each holder of
Warrants, that the Warrants will expire
on the 30th day after delivery of such
notice.
Registration Rights for
Class A Common Stock;
Reduction in Exercise Price
for Failure to Register
Class A Common Stock.....The Company has agreed to file with the
SEC by March 4, 1996 (300 days of the
closing of the offering (the "Closing
Date")) and use its reasonable best
efforts to cause to become effective by
(365 days of the Closing Date), a shelf
registration statement or statements
with respect to the issuance of the
Warrant Shares. This Registration
Statement which covers the issuance of
the Warrant Shares was initially filed
on February 8, 1996. If the
registration statement with respect to
the Warrant Shares is not declared
effective by May 8, 1996, the exercise
price of the Warrants will decrease by
$1/8 per share of Class A Common Stock;
subject to additional decreases of $1/8
per share for each additional six-month
period for which such registration
statement is not declared effective. In
addition, if such registration statement
is declared effective, the Warrant
Exercise Price will also decrease by
$1/8 per share of Class A Common Stock
if such registration statement ceases to
be effective for more than 90 days (180
days in certain circumstances) in any
365-day period, subject to additional
decreases of $1/8 per share of Class A
Common Stock for each additional six-
month period for which such registration
statement ceases to be effective.
Notwithstanding the foregoing, the
maximum number of $1/8 per share
decreases shall be 10 during the term of
the Warrants and there shall be no more
than one such decrease in any six month
period. (Each of such events which
results in a decrease in the Warrant
Exercise Price being referred to herein
as a "Registration Default"). The
reduction in the Warrant Exercise Price
upon a Registration Default is subject
to adjustment in certain limited
circumstances. The Company will be
obligated to use its reasonable best
efforts to cause the registration
statement relating to the Class A Common
Stock to remain effective until the
Expiration Date. The Company will not
be obligated to register the Warrant
Shares (a) which the holder does not
seek to register or (b) as to which the
Company determines that it is not
advisable or appropriate to register
(based on discussions with the SEC,
advise of counsel or otherwise) such
Warrant Shares. In any such event (a)
or (b), the Warrant Exercise Price
underlying such Warrants will not
decrease upon the failure to register
with the SEC the Warrant Shares if the
SEC has declared effective a
registration statement with respect to
other shares of Class A Common Stock.
See "Description of the Warrants --
Registration Rights."
Mandatory Redemption.....If a registration statement relating to
the Warrant Shares has not been
effective at any time on or prior to the
Expiration Date of the Warrants, the
Company will be required to redeem all
of the outstanding Warrants for $1.60
per Warrant (the "Redemption Price").
The Redemption Price is subject to
adjustment in certain limited
circumstances.
Listing of Warrants;
Registration of
Warrants.................The Exchanges have each informed the
Company that the number of holders of
the Warrants is insufficient to list
such Warrants. Among other listing
requirements, each such Exchange
requires at least 250 holders of an
equity security, such as the Warrants,
as a prerequisite for approval of the
listing of such Warrants. Currently,
the Company estimates that there are
less than 40 Warrantholders. If and
when a sufficient number of holders
exist and the Company satisfies the
other
listing requirements, the Company
presently intends to seek to list the
Warrants on one of the Exchanges. If
any of the Exchanges ultimately agree to
list the Warrants (a "Listing
Approval"), the Company is required,
pursuant to a Registration Rights
Agreement between the Company and the
holders of the Warrants, to file a shelf
registration statement relating to the
Warrants upon the later of (a) March 4,
1996 (300 days after the Closing Date)
and (b) the date approval of such
listing is obtained (the "Approval
Date") and will use its reasonable best
efforts to cause such registration
statement to become effective upon the
later of (a) May 8, 1996 (365 days after
the Closing Date) and (b) 60 days after
the Listing Approval Date. Although
none of the Exchanges has agreed to list
the Warrants, the Company is registering
the Warrants pursuant to this
Registration Statement. Once effective,
if a Listing Approval occurs, the
Company is obligated to use reasonable
best efforts to cause the registration
statement relating to the Warrants to
remain effective for three years
following the Closing Date.
Shalam Option............John J. Shalam, Chief Executive Officer
of the Company, granted the Company an
option (the "Shalam Option") to purchase
1,668,875 shares of Class A Common
Stock. The purchase price per share of
Class A Common Stock (the "Shalam Option
Price") under the Shalam Option is equal
to the sum of (a) the Warrant Exercise
Price (without giving effect to any
decreases of such price as a result of a
Registration Default) plus (b) an
additional amount (the "Tax Amount")
intended to reimburse Mr. Shalam for any
additional taxes per share required to
be paid by Mr. Shalam as a result of the
payment of the Shalam Option Price being
treated for federal, state and local
income tax purposes as the distribution
to Mr. Shalam of a dividend (taxed at
ordinary income rates without
consideration of Mr. Shalam's basis),
rather than as a payment to Mr. Shalam
for the sale of his Class A Common Stock
to the Company (taxed at the capital
gains rate with consideration of Mr.
Shalam's basis and
considering any stepped up basis to Mr.
Shalam's heirs, successors or assigns (a
"Successor")) pursuant to the Shalam
Option. The shares of Class A Common
Stock underlying the Shalam Option have
been legended with a description of the
Shalam Option. Any Successor acquiring
the shares of Class A Common Stock
underlying the Shalam Option (whether by
sale, transfer or upon Mr. Shalam's
death) will acquire the shares subject
to the terms of the Shalam Option.
Mr. Shalam and any Successor will be
entitled to the Tax Amount upon delivery
of a satisfactory notice to the Company
that the payment of a Tax Amount is
required to reimburse such person for
such additional taxes. The operative
terms of the Shalam Option (other than
the exercise price in certain
circumstances) are similar to those of
the Warrants, however, the Shalam Option
Price per share for the Shalam Option
will not decrease in the event of a
Registration Default. The Shalam Option
will be exercisable in the sole
discretion of the then-independent
members of the Board of Directors (which
shall in no event include Mr. Shalam).
The Company will be able to exercise the
Shalam Option in whole or in part only
if the Warrants are exercised and then
only for the same number of shares of
Class A Common Stock as are purchased
under the Warrants. The Shalam Option
may limit the dilutive effect of the
Warrants on the earnings per share or
the book value per share of the Company,
if the Company elects to exercise the
Shalam Option. The Company has also
agreed to indemnify Mr. Shalam from any
liabilities arising from the Offering,
including liabilities under any federal
or state securities laws. Mr. Shalam
did not receive any cash consideration
in exchange for granting the Shalam
Option. The cost to Mr. Shalam of the
shares subject to the Shalam Option was
$166,887.50. See "Description of
Capital Stock -- Shalam Option."
Use of Proceeds..........The Company will not receive any cash
proceeds from the sale of the Warrants
by the Selling Securityholders. The
proceeds received by the Company upon
exercise
of the Warrants will be used toward the
purchase of shares of Class A Common
Stock upon exercise of the Shalam Option
or, if the Board of Directors determines
not to exercise the Shalam Option, as,
when and if received by the Company, to
purchase inventory and for other working
capital or general corporate needs.
Original Issuance of
principal................The Warrants were originally issued to the
beneficial holders (the "Debentureholders")
of the Debentures as of June 3, 1994 in
consideration of the delivery by such
Debentureholder of a release which released
the Company, the underwriters for the sale
of the Debentures and their respective
directors, officers, partners, employees and
agents, from liability for any and all
potential claims, if any, such beneficial
holder may have had against such persons
in connection with such purchaser's investment
in the Debentures and the offering of the
Debentures. Each Debentureholder executing
a release received 30 Warrants per $1,000
principal amount of Debenture beneficially
held as of June 3, 1994 (except Oppenheimer
& Co., Inc., which beneficially held
$12,065,000 of the Debentures as of June 3,
1994 and which received 25 Warrants per $1,000
principal amount of its Debentures).
Warrant Agent............Continental Stock Transfer & Trust
Company
Two Broadway
New York, New York 10004
Attention: William Seegraber
Telephone (212) 509-4000.
Risk Factors.............For a discussion of certain factors that
should be carefully considered in
connection with an investment in the
securities offered hereby, see "Risk
Factors" beginning on page 13.
American Stock Exchange
Symbol of Class A Common
Stock....................VOX
RISK FACTORS
The following factors should be carefully considered,
together with the other information in this Prospectus and the
documents incorporated by reference herein, in evaluating an
investment in the securities offered hereby.
HISTORY OF LOSSES. The Company reported net losses of
approximately $1,554,000, $3,192,000, and $14,658,000 for the
fiscal years ended November 30, 1989, 1990 and 1991,
respectively. These losses were primarily attributable to both
operating losses and to charges incurred in connection with the
restructuring of the Company's operations and the cessation of
operations of two unsuccessful ventures, Hermes
Telecommunications, Inc. ("Hermes") (a majority-owned
subsidiary) and Park Plus Corp. ("Park Plus") (a 50% owned joint
venture). Such charges included costs incurred in the closing of
certain sales and distribution facilities, write-downs of assets
associated with the Hermes and Park Plus product lines, employee
termination expenses and certain other charges. During the
fiscal years ended November 30, 1989, 1990 and 1991, earnings
were insufficient to cover fixed charges by approximately
$2,642,000, $4,792,000 and $15,098,000, respectively. Although
the Company was profitable for the fiscal years ended November
30, 1992, 1993 and 1994, for the fiscal year ended November 30,
1995, the Company reported a net loss of $9,256,000 which was
primarily attributable to a charge of $2,900,000 for the private
placement of the Warrants and an $11,800,000 charge for inventory
writedowns and other costs associated with the downsizing of the
Company's retail operations. There can be no assurance that the
Company will return to profitably, or have earnings or cash flow
sufficient to cover its fixed charges. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the 1995 Form 10-K and the First Quarter 1996 Form
10-Q.
CASH FLOW DEFICITS FROM OPERATIONS. During the fiscal years
ended November 30, 1994 and 1995, the Company experienced
substantial cash flow deficits from operations of $45,808,000 and
$40,236,000, respectively. In fiscal 1994, the primary
components of this deficit were increases in accounts receivable
($20,337,000) and inventory ($18,701,000). In fiscal 1995, the
Company experienced an additional increase to inventory of
$16,950,000. During 1994, the Company experienced tremendous
growth in the cellular market place, particularly during the
fourth quarter. The growth in the fourth quarter resulted in an
increase in accounts receivable as of November 30, 1994. The
cash flow deficits and the increased inventory arose, in part,
because the favorable growth in the market did not continue in
1995. Due to the Company's lead time for ordering product and
the growth in the market during 1994, the Company continued to
order cellular product. When the product became available to
sell, the growth in the cellular market had slowed. Since the
Company's lead time is approximately three to four
months depending on the country of origin, there is an inherent
risk that such deliveries may lag behind product demand. This is
indicative of the highly competitive market in which the Company
operates (see "Competition"). As a result of this highly
competitive environment, the Company recorded a charge of
$11,800,000 during the third quarter of 1995. This charge was
for inventory writedowns of $9,300,000, primarily for cellular
inventory, and $2,500,000 for the downsizing of the retail
operations, including the closing of several retail stores.
There can be no assurances that the Company will be able to
generate positive cash flow from operations in the future.
DOWNWARD PRESSURE ON SELLING PRICES AND GROSS MARGINS.
Since fiscal 1994, market and customer pricing pressure has
required the Company to reduce unit selling prices in order to
maintain market share. The Company's customers have continually
reduced the cost of cellular telephone products to the end users
in order to increase their market penetration. In addition, the
Company's competitors have reduced the price of their cellular
products during this period. Even though unit sales of cellular
telephones increased by 708,000 units or 141.3% from fiscal 1993
through the end of fiscal 1995, over this same period of time
average unit selling prices dropped from $324 per unit to $203
per unit, a decrease of 37.3%. The average unit cost of goods
sold decreased by only 32.3% over the same period of time. Unit
gross profits as a percentage of unit gross revenues have
decreased from 12.5% in 1993 to 5.5% in fiscal 1995. Since
the Company's lead time for ordering product is approximately
three to four months depending on the country of origin, there is
an inherent risk that selling prices may be lower than the
purchase price from the vendor. This situation may continue to
result in lower than anticipated gross margins and/or writedowns
of the carrying value of the inventory on the Company's balance
sheet. There can be no assurance that continued downward
pressure on selling prices would not have a material adverse
effect on the financial condition and results of operations of
the Company. Many of the Company's competitors have greater
capital resources than the Company and may therefore be
able to withstand downward pressure on selling prices better than
the Company. See "-- Competition."
UNITED STATES TRADE SANCTIONS COULD LIMIT THE COMPANY'S
SOURCES OF SUPPLY. The Company has historically been dependent
on foreign sources, particularly Japan and China, for a majority
of its products.
The U.S. government historically has sought and is
continuing to seek greater access to Japanese markets for U.S.
goods. As a result, the U.S. government has threatened from time
to time to impose trade sanctions on products imported from Japan
if it does not succeed in obtaining greater access for U.S.
goods. For example, during fiscal 1994, the United States
government announced its intention to publish a list of products
imported from Japan on which it might impose trade sanctions in
connection
with Motorola, Inc.'s inability to obtain "comparable" access in
Japan for its cellular products. Thereafter, Motorola, Inc.
announced an agreement with the Japanese government, and the list
was not published as announced. However, no assurance can be
given that the United States government will not, in the future,
publish a list of products imported from Japan upon which it may
impose trade sanctions, which could include cellular products.
Such products could also include products produced outside of
Japan made from Japanese components.
In addition, the U.S. government has held discussions with
China concerning violations of certain U.S. copyrights and
trademarks. The U.S. government proposed sanctions on Chinese
products if a satisfactory solution was not reached. Cellular
products were included within the proposed sanctions.
Subsequently, China and the United States reached an agreement
and those sanctions were not imposed. There can be no assurance
that the U.S. government will not, in the future, propose a list
of products imported from China (or other countries), including
cellular products, on which it may impose trade sanctions.
If imposed, such sanctions may include, among other things,
tariffs, duties, import restrictions or other measures. These
sanctions could also include products produced outside of the
sanctioned country with components made in the sanctioned
country. The imposition of such sanctions would have a material
adverse effect on the Company's financial condition and results
of operations, which would include reduced margins due to the
Company's inability to access alternative cellular products at a
competitive cost, and could also include loss of market share to
competitors that are less dependent on Japanese and Chinese
suppliers and/or loss of revenue due to unavailability of
product.
In fiscal 1993, 1994 and 1995 and in the first quarter of
fiscal 1996, the Company purchased 89.7%, 91.8%, 97.0% and 69.6%,
respectively, of its total dollar amount of cellular product
purchases from Japanese suppliers, and revenues from cellular
products from Japanese suppliers comprised 46.3%, 47.8%, 51.8%
and 53.9%, respectively, of the total revenues of the Company
during those periods.
NO ASSURANCE OF ALTERNATIVE SUPPLY SOURCES. If trade
sanctions similar to those referenced above are imposed, there is
no assurance that the Company will be able to obtain adequate
alternatives to its Japanese and Chinese supply sources. There
is no assurance that, if obtained, alternatively sourced products
or components would be delivered on a timely basis, of
satisfactory quality, competitively priced, comparably featured
or acceptable to the Company's customers. The Company believes
that it could experience supply shortages as early as 60 days
after such trade sanctions were introduced. Additionally, it is
likely that the Company would experience interruptions in its
supply of mobile, transportable and portable cellular products
before any alternative
products could be obtained. Any such supply interruptions would
have a material adverse effect on the Company's operating and
earnings per share performance.
In addition, as a result of conditions in China, there has
been, and may be in the future, opposition to the continued
extension of "most favored nation" trade status for China.
China's current status as "most favored nation" will
automatically expire on June 25, 1996 unless extended by Congress
and the President before such date. There can be no assurance
that Congress and the President will renew China's "most favored
nation" status at such time. Loss of China's "most favored
nation" trade status would materially increase the cost of the
products purchased from Chinese manufacturers, as such products
would then become subject to substantially higher rates of duty.
RISKS OF CURRENCY FLUCTUATIONS. The prices that the
Company pays for the products purchased from its suppliers are
principally denominated in United States dollars. Price
negotiations depend in part on the relationship between the
foreign currency of the foreign manufacturers and the United
States dollar. This relationship is determined by, among other
things, market, trade and political factors. Because the Company
historically has been dependent on Japanese suppliers for its
cellular products, the yen to dollar relationship has been the
most significant to the Company. The value of the United States
dollar as of April 25, 1996 was 106.7 yen; over the five years
preceding that date the value of the United States dollar ranged
from 159.85 yen to 80.15 yen.
A decrease in the value of the United States dollar relative
to a foreign currency increases the cost in United States dollars
of products which the Company purchases from foreign
manufacturers. Such an increase could reduce the Company's
margins or make the Company's products less price competitive.
No assurance is given that, if the value of the United States
dollar continues to decrease relative to the yen, because of
potential trade sanctions or otherwise, the Company will be able
to competitively obtain or market the products it purchases from
Japanese sources.
DEPENDENCE ON FOREIGN SUPPLIERS. The Company's business is
dependent upon its suppliers' continuing to provide it with
adequate quantities of salable product on a timely basis and on
competitive pricing terms. Substantially all of the Company's
products are imported from suppliers in the Pacific Rim. There
are no agreements in effect that require any manufacturer to
supply the Company with product. Accordingly, there can be no
assurance that the Company's relationships with its suppliers
will continue as presently in effect. The loss of any
significant supplier, substantial price increases imposed by any
such supplier or the inability to obtain sufficient quantities of
product on a timely basis, could have a material adverse effect
on the Company's financial condition and results of operations.
The Company's arrangements with its suppliers are subject to
the risks of purchasing products from foreign suppliers,
including risks associated with economic and/or political
instability in countries in which such suppliers are located, and
risks associated with potential import restrictions, currency
fluctuations, foreign tax laws, import/export regulations,
tariff, duty and freight rates and work stoppages. These risks
may be increased in the Company's case by the concentration of
its purchases of cellular products from suppliers in Japan and
China. In addition, the Company may be subject to risks
associated with the availability of and time required for the
transportation of products from foreign countries. Because of
the Company's dependence on such foreign suppliers, the Company
is required to order products further in advance of customers'
orders than would be the case if its products were manufactured
domestically.
DEPENDENCE ON TOSHIBA. Since 1984, Toshiba has been the
principal supplier of cellular telephone products to the Company,
accounting for approximately 86.4%, 83.7%, 83.7%, 67.3% and 40.6%
of the total dollar amount of the Company's cellular product
purchases and approximately 48.0%, 46.9%, 45.5%, 44.1% and 25.1%
of the total dollar amount of all product purchases by the
Company in fiscal 1992, fiscal 1993, fiscal 1994 and fiscal 1995
and in the first quarter of fiscal 1996, respectively. During
fiscal 1992 and 1993, the Company was the sole distributor of
Toshiba cellular telephone products in the United States. In
1994, Toshiba began to compete directly with the Company in the
United States by marketing cellular telephone products through
Toshiba's United States distribution subsidiary but, in November,
1995, Toshiba announced that its U.S. distribution subsidiary was
withdrawing from the United States cellular telephone market.
Toshiba will continue to sell products to the Company as an
original equipment customer; however, there is no agreement in
effect that requires Toshiba to supply the Company with products.
There can be no assurance that Toshiba will not reenter the
United States cellular telephone market and again directly
compete with the Company in the United States.
DEPENDENCE ON CELLULAR CARRIERS. The success of the
Company's retail cellular telephone business is dependent upon
the Company's relationship with certain cellular carriers. As a
practical matter, the Company does not believe that it can
operate at the retail level on a profitable basis without agency
agreements with cellular carriers. The Company's agency
agreements with cellular carriers are subject to cancellation by
the carriers and give the carriers the right to unilaterally
restructure or revise activation commissions and residual fees,
which they have done from time-to-time. The agreements also
provide that, for specified periods of time following the
expiration or termination of a specific agreement, generally
ranging from three months to two years, the Company cannot sell,
solicit or refer cellular or wireless communication network
services of the kind provided by the cellular carriers to other
competing carriers in particular geographic
areas. The cancellation or loss of one or more of these
agreements could have a material adverse effect on the Company's
financial condition and results of operations.
IMPACT OF ELIMINATION OF MANAGEMENT FEES FROM AND REDUCTION
IN EQUITY IN CELLSTAR; SALE OF CELLSTAR COMMON STOCK. For the
fiscal years ended November 30, 1991, 1992 and 1993,
approximately $4,825,000, $5,124,000 and $5,147,000,
respectively, of the Company's income was generated by management
fees and equity in undistributed earnings from the operations of
CellStar Corporation ("CellStar"), a 50% owned joint venture. In
December 1993, CellStar completed the initial public offering
(the "CellStar Offering") of CellStar common stock, par value
$.01 per shares ("CellStar Common Stock"). In connection with
the CellStar Offering, the Company sold 2,875,000 of its
6,750,000 shares of CellStar Common Stock. After the CellStar
Offering, the Company owned 20.88% of the issued and outstanding
CellStar Common Stock and stopped accruing such management fees
in July, 1993; however, the Company was entitled to its portion
of the income from the equity in undistributed earnings of
CellStar, if any, for such time as the Company continued to own
at least 20% of CellStar's outstanding common stock. If the
CellStar Offering had occurred on November 30, 1992, this
accounting treatment would have resulted in net earnings being
reduced by approximately $1,692,000 for the fiscal year ended
November 30, 1993.
On June 2, 1995, the Company sold 1,500,000 shares of
CellStar Common Stock to Alan H. Goldfield, President of
CellStar, for $11.50 per share upon exercise of an option for
such shares by Mr. Goldfield. As a result thereof, the Company's
ownership percentage in CellStar was reduced below 20% and the
Company will no longer account for its investment in CellStar
under the equity method of accounting. On a pro forma basis,
this change would have decreased pretax earnings for fiscal 1994
and fiscal 1995 by approximately $3,393,000 and $2,151,000,
respectively. There can be no assurance that income from other
sources will offset the loss of this income from CellStar. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the 1995 Form 10-K and the First
Quarter 1996 Form 10-Q.
COMPETITION. The Company operates in a highly competitive
environment and believes that such competition will intensify in
the future. Many of the Company's competitors are larger and
have greater capital and management resources than the Company.
Competition often is based on price, and therefore wholesale
distributors and retailers, including the Company, generally
operate with low gross margins. The Company also is affected by
competition between cellular carriers. Increased price
competition relating not only to cellular telephone products, but
also to services provided by the Company to retail customers on
behalf of cellular carriers, may result in downward pressure on
the Company's gross margins (including that resulting from the
loss of residual fees attributable to customers who change
cellular carriers) and could have a
material adverse effect on the Company's business, financial
condition and results of operations. The Company's cellular
products compete principally with cellular telephones supplied by
Motorola, Inc., Nokia Mobile Phones, Inc., Fujitsu Network
Transmission Systems, Inc., Oki Electric Industry Co., Nippon
Electric Corp. and Toshiba. The Company's non-cellular products
compete with other suppliers including Matsushita Electric Corp.,
Sony Corp. of America, Directed Electronics, Inc. and Code
Alarm, Inc., as well as divisions of well-known automobile
manufacturers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1995 Form
10-K and the First Quarter 1996 Form 10-Q.
RISK OF INVENTORY OBSOLESCENCE AND TECHNOLOGICAL CHANGE.
The markets in which the Company competes are characterized by
rapid technological change, frequent new product introductions,
declining prices and intense competition. The Company's success
depends in large part upon its ability to identify and obtain
products necessary to meet the demands of the marketplace. There
can be no assurance that the Company will be able to identify and
offer products necessary to remain competitive. The Company
maintains a significant investment in its product inventory and,
therefore, is subject to the risk of inventory obsolescence. If
a significant amount of inventory is rendered obsolete, the
Company's business and operating results would be materially and
adversely affected. Alternative technologies to cellular,
including enhanced specialized mobile radio ("ESMR") and personal
communications service ("PCS"), may reduce the demand for
cellular telephone products. The implementation of
communications systems based upon any of these or other
technologies could materially change the types of products sold
by the Company and the service providers with whom the Company
presently does business. Competing communications technologies
also may result in price competition which could result in lower
activation commission or residual fee rates payable to the
Company and could have a material adverse effect on the financial
condition and results of operations of the Company. From time to
time, cellular carriers' technological limitations may result in
a shortage of available cellular phone numbers, which could have
the effect of inhibiting sales of the Company's cellular
products.
POSSIBLE HEALTH RISKS FROM CELLULAR TELEPHONES. There have
been lawsuits filed (including one such lawsuit against the
Company and others) in which claims have been made alleging a
link between the non-thermal electromagnetic field emitted by
portable cellular telephones and the development of cancer,
including brain cancer. To date, there have been relatively few
medical studies relating to cellular telephones and the effects
of non-thermal electromagnetic fields on health, nor are there
any widely accepted theories regarding how exposure to a non-
thermal electromagnetic field, such as the type emitted by a
portable cellular telephone, could affect living cells or
threaten health. The scientific community is divided on whether
there is any risk associated with the use of portable cellular
telephones and the magnitude of any such risk. There can be no
assurance that medical studies or other findings, or continued
litigation in this area, will not have a material adverse impact
upon the financial condition and results of operations of the
cellular telephone industry and the Company.
RISKS ATTRIBUTABLE TO FOREIGN SALES. For the fiscal
years ended November 30, 1992, 1993, 1994 and 1995 and in the
first quarter of fiscal 1996, approximately 12.4%, 12.6%, 13.8%,
18.6% and 27.6%, respectively, of the Company's net sales were
generated from sales in Canada, Europe, Latin America, Asia, the
Middle East and Australia. Foreign sales are subject to political
and economic risks, including political instability, currency
controls, exchange rate fluctuations, increased credit risks,
foreign tax laws, changes in import/export regulations and tariff
and freight rates. Political and other factors beyond the
control of the Company, including trade disputes among nations or
internal instability in any nation where the Company sells
products, could have a material adverse effect on the financial
condition and results of operations of the Company.
RISKS ATTRIBUTABLE TO RETAIL SALES. A significant portion
of the Company's customer base may be susceptible to downturns in
the retail economy, particularly in the consumer electronics
industry. Additionally, customers specializing in certain
automotive sound, security and accessory products may be
negatively impacted by fluctuations in automotive sales. Certain
of the Company's significant customers are also believed by the
Company to be highly leveraged. Accordingly, a downturn in the
retail economy could have a material adverse effect on the
financial condition and results of operations of the Company.
LEVERAGE AND DEBT SERVICE. As of February 29, 1996, the
Company had outstanding total interest bearing indebtedness of
approximately $106.1 million and a total debt-to-total capital
ratio of .50 to 1. Although a portion of the net proceeds from
the sale of the Debentures and the CellStar Offering was used to
retire a significant portion of the Company's existing
indebtedness, the Company continues to have substantial annual
fixed debt service requirements including those attributable to
the Debentures and the Company's Credit Agreement, as amended on
February 9, 1996 (the "Second Amended and Restated Credit
Agreement"). The ability of the Company to make principal and
interest payments under the Company's long-term indebtedness and
bank loans will be dependent upon the Company's future
performance, which is subject to financial, economic and other
factors affecting the Company, some of which are beyond its
control. There can be no assurance that the Company will be able
to meet its fixed charges as such charges become due. See " --
History of Losses" and "Cash Flow Deficits From Operations."
RESTRICTIVE COVENANTS. The Second Amended and Restated
Credit Agreement contains certain restrictive covenants which
impose prohibitions or limitations on the Company with respect
to, among other things, (i) the ability to make payments of
principal, interest or premium on, subordinated indebtedness of
the Company, (ii) the incurrence of indebtedness, (iii) capital
expenditures, (iv) the creation or incurrence of liens, (v) the
declaration or payment of dividends or other distributions on, or
the acquisition, redemption or retirement of, any shares of
capital stock of the Company and (vi) mergers, consolidations and
sales or purchases of substantial assets, and require that the
Company satisfy certain financial tests and maintain certain
financial ratios. Failure to comply with such covenants could
result in a default under the Second Amended and Restated Credit
Agreement which could have a material adverse effect on the
financial condition and results of operations of the Company.
ABSENCE OF EXISTING MARKET FOR THE WARRANTS; LISTING OF
WARRANTS. Prior to this Offering, there has not been any public
market for the Warrants. Although the Warrants have been
eligible for trading through PORTAL, no active trading market for
the Warrants has developed. There can be no assurance that an
active trading market for the Warrants will develop or, if such
market develops, as to the liquidity or sustainability of such a
market. Moreover, once the Warrants are registered under this
Registration Statement, the Warrants which are registered under
this Registration Statement will no longer be eligible for
trading on PORTAL. The Warrants are not currently eligible for
listing on the Exchanges. Even if the Warrants are listed or
approved for quotation on any of the Exchanges, because of the
small number of holders of Warrants and the limited number of
Warrants outstanding, there can be no assurance that the Warrants
will not be subject to delisting or in such event, an investor
may find it difficult to dispose of, or to obtain accurate
quotations as to the value of, the Warrants. See "Summary --
Listing of Warrants; Registration of Warrants" and "Description
of Warrants -- Registration Rights".
Josepthal, Lyon & Ross Incorporated has informed the Company
that it intends to make a market in the Warrants; however,
Josepthal, Lyon & Ross Incorporated is not obligated to do so and
any such market-making activity may be terminated at any time
without notice to the holders of the Warrants. In addition, such
market-making activity will be subject to the limits of the
Securities Act. Accordingly, no assurance can be given that a
holder of the Warrants will be able to sell such Warrants in the
future or as to the price at which any sale may occur.
POSSIBLE VOLATILITY OF STOCK PRICE. Since 1991, the market
price of the Class A Common Stock has experienced a high degree
of volatility. Due to the volatility of the Class A Common Stock
as well as the low volume of Warrants traded, it can be expected
that the Warrants will also experience significant volatility.
There can be no assurance that such volatility will not continue
or become more pronounced. In addition, recently
the stock market has experienced, and is likely to experience in
the future, significant price and volume fluctuations which could
adversely affect the market price of the Class A Common Stock and
the Warrants without regard to the operating performance of the
Company. The Company believes that factors such as quarterly
fluctuations in the financial results of the Company or its
competitors and general conditions in the industry, the overall
economy and the financial markets could cause the price of the
Class A Common Stock and the Warrants to fluctuate substantially.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION. The Company
has approximately 3,413,721 shares of Class A Common Stock held
by members of the public that are able to trade without
restriction. Sales of a substantial number of additional shares
of Class A Common Stock in the public market could adversely
affect the market price of the Class A Common Stock. As of
April 25, 1996, 3,672,317 shares of Class A Common Stock were
issuable upon conversion of the Debentures, 100,000 shares of
Class A Common Stock were issuable upon exercise of the Blau
Warrant, 50,000 shares of Class A Common Stock were issuable upon
exercise of the warrant issued to James Maxim (the "Maxim
Warrant") and 1,668,875 shares of Class A Common Stock were
issuable upon exercise of the Warrants. Exercise or conversion,
as the case may be, of a substantial amount of the Company's
presently outstanding warrants or the Debentures, or sale of the
Class A Common Stock underlying such debenture or warrants
described above also could adversely affect the market price of
the Class A Common Stock, due to the large number of shares
issuable upon conversion or exercise of such debentures or
warrants in comparison to the relatively small number of shares
held by members of the public that are able to trade without
restriction. The Company has granted the holders of the warrants
described above certain registration rights relating to the Class
A Common Stock issuable upon exercise of such warrants. In
addition, as of April 25, 1996, (i) John J. Shalam owned
3,359,367 shares of Class A Common Stock (including for this
purpose all of the shares subject to the Shalam Option (as
defined below)) and 1,883,198 shares of Class B Common Stock of
the Company, par value $.01 per share ("Class B Common Stock"),
which are convertible into an equal number of shares of Class A
Common Stock and (ii) other affiliates (as such term is defined
in the Exchange Act) of the Company owned 4,700 shares of Class A
Common Stock and 377,756 shares of Class B Common Stock, which
are convertible into an equal number of shares of Class A Common
Stock. Also, Mr. Shalam has granted the Company the Shalam
Option. See "Description of Capital Stock -- Shalam Option."
Sales by such persons of a substantial number of shares of Class
A Common Stock or Class B Common Stock (collectively, "Common
Stock") could materially adversely affect the market price of the
Class A Common Stock.
DEPENDENCE ON EXISTING MANAGEMENT. The continued success of
the Company is substantially dependent on the efforts of John J.
Shalam, President and Chief Executive
Officer, Philip Christopher, Executive Vice President, and
Charles M. Stoehr, Senior Vice President and Chief Financial
Officer. The loss or interruption of the continued full time
services of any of such individuals could have a material adverse
impact on the Company's business operations, prospects and
relations with its suppliers. The Company does not have
employment contracts with any of these persons, nor have any of
these persons signed agreements binding them not to compete with
the Company following the termination of their employment with
the Company. The Company maintains a "key man" life insurance
policy only on John J. Shalam.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK. This
Prospectus, including the information incorporated by reference,
contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, including statements regarding,
among other items, (i) the Company's growth strategies;
(ii) anticipated trends in the Company's business and
demographics; (iii) the Company's ability to continue to control
costs and maintain quality of products; (iv) the Company's
ability to respond to changes in regulations; and (v) the
Company's ability to enter into contracts with certain suppliers
and customers. These forward-looking statements are based
largely on the Company's expectations and are subject to a number
of risks and uncertainties, certain of which are beyond the
Company's control. Actual results could differ materially from
these forward-looking statements as a result of the factors
described in "Risk Factors" including, among others (i) changes
in the cellular and other industries as a result of political,
economic or regulatory influences; (ii) changes in regulations
governing the cellular and other industries; (iii) changes in the
competitive marketplace and (iv) continuing downward pressure on
the prices of the Company's products. In light of these risks
and uncertainties, there can be no assurance that the forward-
looking information contained in this Prospectus will in fact
transpire.
RISK OF AMENDMENT TO WARRANTS. Under the terms of a Warrant
Agreement, the Warrants may be amended or modified by holders of
a majority of the Warrants in a manner which materially adversely
affects holders of the Warrants unless such amendment or
modification would increase the exercise price or reduce the
shares of Class A Common Stock purchasable upon exercise of the
Warrants (other than pursuant to adjustments provided in the
Warrant Agreement), which amendments require the approval of each
holder of Warrants. Accordingly, the Warrants could be amended
in a manner materially adverse to the holder of a Warrant without
such holder's consent.
VOTING RIGHTS OF CLASS A COMMON STOCK AND VOTING CONTROL BY
PRINCIPAL STOCKHOLDER. The voting rights of holders of Class A
Common Stock for which all of the Company's outstanding warrants
are exercisable are entitled to one vote per share and each share
of Class B Common Stock is entitled to ten votes per share. Both
classes vote together as a single class except with respect to
the election and removal without cause of
directors and as otherwise may be required by Delaware law. With
respect to the election of directors, the holders of shares of
Class A Common Stock, voting as a separate class, are entitled to
elect 25% (rounded up to the nearest whole number) of the
authorized number of directors of the Company and the holders of
the Class B Common Stock, voting as a separate class, are
entitled to elect the remaining directors. See "Description of
Capital Stock--Class A Common Stock and Class B Common Stock."
John J. Shalam has effective voting control of the Company and
can elect a majority of the directors through his ownership of
3,359,367 shares of Class A Common Stock (including the shares of
Class A Common Stock subject to the Shalam Option) and 1,883,198
shares of Class B Common Stock, which gives him approximately
85.5% of the aggregate voting power of the issued and outstanding
Common Stock. Pending exercise of the Shalam Option, Mr. Shalam
will have voting control of the shares of Class A Common Stock
subject to the Shalam Option. The holders of the Warrants will
not have any voting rights as shareholders of the Company prior
to exercise. The disproportionate voting rights of the Class A
Common Stock and the Class B Common Stock may effectively
preclude the Company from being taken over in a transaction not
supported by John J. Shalam, may render more difficult or
discourage a merger proposal or a tender offer, may preclude a
successful proxy contest or may otherwise have an adverse effect
on the market price of the Class A Common Stock. See
"Description of Capital Stock--Class A Common Stock and Class B
Common Stock." and "Description of Capital Stock--Effects of
Disproportionate Voting Rights."
CERTAIN PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED
TO SELL OR EXERCISE WARRANTS. Holders of the Warrants will have
the right to sell or exercise the Warrants only if a current
prospectus relating to the Warrants and/or the shares of Class A
Common Stock underlying the Warrants are Warrants are qualified
for sale or exempt under applicable state securities laws of the
states in which the various holders of the Warrants or Class A
Common Stock reside. There can be no assurance that the Company
will be able to keep this Prospectus or any Prospectus covering
such securities current. The Warrants and/or the underlying
shares of Class A Common Stock may be deprived of any value if a
current prospectus covering the Warrants and/or the shares of
Class A Common Stock issuable upon exercise thereof is not kept
effective or if such securities are not registered or exempt in
the state in which holders of such securities reside.
THE COMPANY
Audiovox Corporation (together with its subsidiaries, the
"Company") designs and markets cellular telephones and
accessories, automotive aftermarket sound and security equipment,
other automotive aftermarket accessories, and certain other
products. The
Company's corporate headquarters is located at 150 Marcus
Boulevard, Hauppauge, New York 11788, and its telephone number at
that address is 516-231-7750.
USE OF PROCEEDS
The Warrants offered by the Selling Securityholders are not
being sold by the Company, and the Company will not receive any
proceeds from the sale thereof. The Company will receive
proceeds in the event the Warrants are exercised prior to
expiration. These proceeds will be used, as and if received by
the Company, to purchase the Option Shares underlying the Shalam
Option, inventory and for other working capital or general
corporate needs. The Company will not receive any proceeds from
the resale of the Warrant Shares.
SELLING SECURITYHOLDERS
The Warrants were originally issued on May 9, 1995 to the
beneficial holders (the "Debentureholders") of the Debentures as
of June 3, 1994 in consideration for the delivery by such
Debentureholder of a release which released the Company and their
respective directors, officers, partners, employees and agents,
from liability for any and all potential claims, if any, such
beneficial holder may have had against such persons in connection
with such purchaser's investment in the debentures and the
offering of the Debentures. Each Debentureholder executing a
release received 30 Warrants per $1,000 principal amount of
Debentures beneficially held as of June 3, 1994 (except
Oppenheimer & Co., Inc., which held $12,065,000 of the Debentures
as of June 3, 1994, and which received 25 Warrants per $1,000
principal amount of the Debentures). The following table sets
forth information concerning the number of Warrants beneficially
owned by each Selling Securityholder which may be offered from
time to time pursuant to this Prospectus. Other than as a result
of the ownership of Warrants or Class A Common Stock, none of the
Selling Securityholders has had any material relationship with
the Company within the past three years except that Oppenheimer &
Co., Inc. acted as an underwriter in the sale of the Debentures
for which it received a customary fee and reimbursement of
expenses. The table has been prepared based upon information
furnished to the Company by the Warrant Agent, by The Depository
Trust Company and by or on behalf of the Selling Securityholders.
Percent of
Number of Outstanding
Name Warrants Owned Warrants
Oppenheimer & Co., Inc. 1,022,250 61.3
Commonwealth Life Ins. Co. - 213,325 12.8
Stocktrac (Teamsters I)
KA Trading L.P. 126,500 7.6
Sage Capital 45,000 2.7
Dean Witter Convertible Securities Trust 45,000 2.7
WG Trading Company L.P. 30,000 1.8
Offshore Strategies Ltd. 25,000 1.5
Furman Selz Incorporated 21,000 1.3
Zazove Convertible Fund, L.P. 16,800 1.0
Palladin Partners 15,000 .9
Colonial Penn Life Insurance 7,500 .4
Colonial Penn Insurance 7,500 .4
Verdant Investors Group, Ltd. 7,500 .4
Catholic Mutual Relief Society of America 6,600 .4
Libertyview Plus Fund 6,500 .4
Catholic Mutual Relief Society 6,000 .4
Catholic Relief Insurance of America 5,400 .3
Community National Assurance Co. 3,000 .2
Other Selling Securityholders 59,000 3.5
Total 1,668,875 100.0
Information concerning the Selling Securityholders may
change from time to time and will be set forth in Supplements to
this Prospectus. As of the date of this Prospectus, 1,668,875
Warrants are outstanding which may be converted into the same
number of shares of Class A Common Stock.
Because the Selling Securityholders may offer all or some of
the Warrants and shares of Class A Common Stock issued upon
conversion thereof pursuant to the offering contemplated by this
Prospectus, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of
the Warrants or shares of Class A Common Stock underlying the
Warrants that will be held by the Selling Securityholders after
completion of this offering, no estimate can be given as to the
number of Warrants or shares of Class A Common Stock that will be
held by the Selling Securityholders after completion of this
offering. See "Plan of Distribution."
DESCRIPTION OF THE WARRANTS
The Warrants were issued under the Warrant Agreement. The
following summaries of certain provisions of the Warrant
Agreement do not purport to be complete and are subject to, and
are qualified by reference to, all the provisions of the Warrants
and the Warrant Agreement, including the definitions therein of
certain terms. Wherever particular sections or defined terms of
the Warrant Agreement are referred to, such sections or defined
terms are incorporated by reference.
Copies of the form of Warrant and the Warrant Agreement been
filed as an exhibit to the Registration Statement of which this
Prospectus is a part. See "Available Information."
GENERAL
Each Warrant entitles the registered holder thereof (the
"holder"), subject to and upon compliance with the provisions
thereof and of the Warrant Agreement, at such holder's option, to
purchase one share of Class A Common Stock. The Warrant Exercise
Price of each Warrant is $7 1/8 per share, subject to adjustment
in certain circumstances. The Warrants are not be exercisable
until the later of May 9, 1996 (one year after the Closing Date)
and the date a registration statement with respect to the
issuance of Class A Common Stock upon exercise of the Warrants
shall be effective under the Securities Act, and will expire,
unless exercised, at 5:00 p.m., New York City time, on March 15,
2001 or such earlier date as set forth in the next sentence (the
"Expiration Date"). If less than 83,444 Warrants (i.e., 5% of
the Warrants initially issued) remain outstanding at any given
time, the Company may elect, by notice to each holder of
Warrants, that the Warrants will expire on the 30th day after
delivery of such notice. See "Registration Rights" below. The
Warrant Exercise Price and the number of shares of Class A Common
Stock for which Warrants may be exercised is subject to
adjustment as set forth below. See "Adjustments" below.
Warrants may be exercised by surrendering the certificate
evidencing such Warrants (the "Warrant Certificate") with the
form of election to purchase shares set forth on the reverse side
thereof duly completed and executed by the holder thereof and
paying in full the Warrant Exercise Price for each such Warrant
at the office or agency designated for such purpose, which will
initially be the corporate trust office of the Warrant Agent in
New York, New York. Warrants evidenced by the Global Warrant
Certificate (as defined) may be exercised by a holder by either
obtaining a definitive
Warrant Certificate and following the procedure set forth above
or by following certain procedures set forth in the Warrant
Agreement. Each Warrant may only be exercised in whole, and the
Warrant Exercise Price may be paid only by certified or official
bank check payable in accordance with the Warrant Agreement or as
otherwise agreed to by the Company.
No fractional shares of Class A Common Stock will be issued
upon exercise of the Warrants. In lieu thereof, the Company will
pay a cash adjustment based upon the market price of the Class A
Common Stock.
The Warrants are eligible for trading on PORTAL. However,
no active public trading market for the Warrant has developed and
no assurance can be given as to the liquidity of the trading
market for the Warrants. Moreover, once the Warrants are
registered under this Registration Statement, the Warrants which
are registered under this Registration Statement will no longer
be eligible for trading on PORTAL. The Exchanges have each
informed the Company that the number of holders of the Warrants
is insufficient to list such Warrants. Among other listing
requirements, each such Exchange requires at least 250 holders of
an equity security, such as the Warrants, as a prerequisite for
the approval of the listing of such Warrants. Currently, the
Company estimates that there are less than 40 Warrantholders. If
and when a sufficient number of holders exist and the Company
satisfies the other listing requirements, the Company presently
intends to seek to list the Warrants on one of the Exchanges.
Even if the Warrants are listed or approved for quotation, there
can be no assurance that the Warrants will not become delisted.
If the Warrants have not been approved for listing (or
quotation), the Company is not required to register the Warrants
under the Securities Act pursuant to the Registration Rights
Agreement; however, even though the Exchanges have not agreed to
list the Warrants, the Company is registering the Warrants,
pursuant to this Registration Statement. As described above, if
the Warrants are not registered under the Securities Act, they
may not be offered or be sold except pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state
securities laws. See "Risk Factors--Absence of Existing Market
for Warrants; Restrictions on Resale."
MANDATORY REDEMPTION
If a registration statement relating to the Warrant Shares
is not effective at any time on or prior to the Expiration Date,
the Company is required to redeem all of the outstanding Warrants
for $1.60 per Warrant. The Redemption Price is subject to
adjustment in certain limited circumstances. See "Description of
Warrants -- Adjustments."
ADJUSTMENTS
The Warrant Exercise Price and the number of shares of Class
A Common Stock issuable upon exercise of the Warrants are subject
to adjustment in accordance with formulas set forth in the
Warrant Agreement in the event of: (i) the issuance of any shares
of Common Stock to holders of any class of Common Stock as a
dividend or distribution; or (ii) subdivisions, combinations and
reclassifications of any class of Common Stock. The Shalam
Option will also contain the adjustments set forth in (i) and
(ii) above.
Except as stated in the preceding provisions, the initial
Warrant Exercise Price and the number of shares issuable upon
exercise of the Warrants will not be adjusted for any other
events including issuances of shares of Class A Common Stock, or
options to acquire shares of Class A Common Stock, at less than
the then current market price of the Class A Common Stock or the
then current Warrant Exercise Price of the Warrants. Moreover,
no adjustment will be made unless such adjustment would require a
change of at least 1% in the Warrant Exercise Price then in
effect, but any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any
subsequent adjustment. The Company reserves the right to make
such reductions in the Warrant Exercise Price in addition to
those required in the foregoing provisions as it considers to be
advisable in order that any event treated for Federal tax
purposes as a dividend of stock or stock rights shall not be
taxable to the recipients.
In case either of the following occurs: (i) any
consolidation or merger involving the Company other than a
consolidation or merger which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of Class A Common Stock; or (ii) any sale or
transfer of all or substantially all of the assets of the Company
(each, a "Transaction"), the Person formed by such Transaction or
which acquires such assets, as the case may be (the "Acquiror"),
shall execute and deliver to the Warrant Agent prior to the
consummation of the Transaction a warrant agreement (or
supplement to the Warrant Agreement) providing that the Holder of
each Warrant then outstanding shall have the right thereafter,
during the period such Warrant shall be exercisable in accordance
with the Warrant Agreement, to exercise such Warrant only into
the kind and amount of securities, cash or other property
(collectively, the "Consideration") receivable upon such
Transaction by a holder of the number of shares of Class A Common
Stock into which such Warrant might have been converted
immediately prior to such Transaction (assuming such holder of
shares of Class A Common Stock (i) is not a person with which the
Company consolidated or into which the Company merged or which
merged into the Company or to which such sale or transfer was
made, as the case may be (a "constituent person") (or an
affiliate of a constituent person), and (ii) failed to exercise
his or her rights of election, if any, and received per share of
Class A
Common Stock the kind and amount of cash or other property
received per share of Class A Common Stock by a plurality of non-
electing shares).
MODIFICATION OF THE WARRANT AGREEMENT
The Warrant Agreement permits, with certain exceptions, the
amendment thereof and the modification of the rights and
obligations of the Company and the rights of the holders of
Warrant Certificates under the Warrant Agreement at any time by
the Company and the Warrant Agent with the consent of the holders
of Warrant Certificates representing a majority in number of the
then outstanding Warrants; provided that no such modification or
amendment may, without the consent of the holder of each
outstanding Warrant affected thereby: (i) change the Expiration
Date (except to extend the Expiration Date to a later date) or
increase the Warrant Exercise Price; (ii) reduce the reduction in
the Warrant Exercise Price of a Warrant upon a Registration
Default or (iii) reduce the percentage of Holders of Warrants the
consent of who is required for modification or amendment of the
Warrant Agreement. See "Risk Factors--Amendment to the
Warrants."
The Warrant Agreement (including the terms and conditions of
the Warrants) may be modified or amended by the Company and the
Warrant Agent without the consent of the holder of any Warrant,
for certain specified purposes not materially adversely affecting
the rights of the holders of the Warrants.
NO RIGHTS AS STOCKHOLDER
Holders of Warrants are not entitled, by virtue of being
such holders, to receive dividends, vote, receive notice of any
meetings of stockholders, share in the assets of the Company in
the event of liquidation, dissolution or the winding up of the
Company's affairs, or otherwise have any right of stockholders of
the Company.
RULE 144A INFORMATION REQUIREMENT; FINANCIAL INFORMATION
The Company agreed to furnish to the holders, the beneficial
holders of the Warrants designated by the Holders of the
Warrants, or the prospective purchasers of any such securities,
the information required to be delivered pursuant to Rule
144A(d)(4) promulgated under the Securities Act, if applicable,
until such time as such securities are no longer "restricted
securities" within the meaning of Rule 144 promulgated under the
Securities Act. Accordingly, such requirements will terminate
upon the effectiveness of this Registration Statement. Upon
request, the Company will also furnish to the holders of the
Warrants all quarterly and annual financial information furnished
to the holders of the Class A Common Stock.
TRANSFER AND EXCHANGE
A holder may transfer or exchange the Warrants in accordance
with the Warrant Agreement. The Warrant Certificates evidencing
the Warrants may be surrendered for exercise or exchange, and the
transfer of Warrant Certificates will be registrable, at the
office or agency of the Company maintained for such purpose,
which initially will be the corporate trust office of the Warrant
Agent in New York, New York. The Warrant Certificates will be
issued only in fully registered form in denominations of whole
numbers of Warrants. No service charge will be made for any
exercise, exchange or registration of transfer of Warrant
Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable
in connection therewith. The Company may also require a holder,
among other things, to furnish appropriate endorsements and
transfer documents.
The registered holder of a Warrant may be treated as the
owner of it for all purposes.
BOOK ENTRY; DELIVERY AND FORM
Upon registration of the Warrants, the interests in the
global warrants issued in the initial private placement of the
Warrants (the "Restricted Global Warrants"), will be canceled
upon the transfer of all of the interests in such Restricted
Global Warrants to one or more permanent global certificates in
fully registered form (the "Global Warrant"), such Global Warrant
to be deposited with the Warrant Agent as custodian for the
Depository Trust Company, New York, New York ("DTC") and
registered in the name of a nominee of DTC, Cede & Co. Warrants
not registered will remain represented by the Restricted Global
Warrants. Pursuant to the procedures set forth in the Warrant
Agreement, interests in the Global Warrant is exchangeable, at
the option of the holder, for a physical certificate in fully
registered form (a "Certificated Warrant").
Upon the issuance of the Global Warrant, DTC or its
custodian will credit, on its internal system, the respective
number of Warrants of the individual beneficial interests
represented by such Global Warrant to the accounts of persons who
have accounts with DTC (and make corresponding debits to the
accounts of persons who have interests in the Restricted Global
Warrants). Ownership of beneficial interests in a Global Warrant
will be limited to persons who had, or will have, accounts with
DTC ("participants") or persons who will hold interests through
participants. Ownership of beneficial interests in a Global
Warrant will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) for such
Global Warrant, or by participants or persons that hold interests
through participants (with respect to interests of persons other
than participants).
So long as DTC, or its nominee, is the registered owner or
holder of a Global Warrant, DTC or such nominee, as the case may
be, will be considered the sole owner or holder of the Warrants
represented by such Global Warrant for all purposes under the
Warrant Agreement and the Warrants. No beneficial owner of an
interest in the Global Warrant will be able to transfer that
interest except in accordance with DTC's applicable procedures,
in addition to those provided for under the Warrant Agreement.
Neither the Company, the Warrant Agent nor any agent of the
Warrant Agent or the Company will have any responsibility or
liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests in the Global
Warrant or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of
any payment upon redemption in respect of the Global Warrant will
credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the
amounts of such Global Warrant as shown on the records of DTC or
its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global
Warrant held through such participants will be governed by
standing instructions and customary practice, as is now the case
with securities held for the accounts of customers registered in
the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in
the ordinary way in accordance with DTC rules and will be settled
in same-day funds. If a person holding a beneficial interest in
a Global Warrant requires physical delivery of a Certificated
Warrant for any reason, including to sell Warrants to persons in
states which require physical delivery of a Certificated Warrant
or to pledge such Warrants, such holder must transfer its
interest in the Global Warrant in accordance with the normal
procedures of DTC and the procedures set forth in the Warrant
Agreement.
DTC has advised the Company that it will take any action
permitted to be taken by a holder of Warrants only at the
direction of one or more participants to whose account the DTC
interests in Global Warrant is credited and only in respect of
such portion of the aggregate number of Warrants as to which such
participant or participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of
New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code
and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the
Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of
securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect
participants").
Although DTC and CEDEL have agreed to the foregoing
procedures in order to facilitate transfers of interests in the
Global Warrants among participants of DTC and CEDEL they are
under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company
nor the Warrant Agent will have any responsibility for the
performance by DTC or CEDEL or their respective participants or
indirect participants of their respective obligations under the
rules and procedures governing their respective operations.
If DTC is at any time unwilling or unable to continue as a
depositary for the Global Warrants and a successor depositary is
not appointed by the Company within 90 days, the Company will
issue Certificated Warrants in exchange for the Global Warrant.
REGISTRATION RIGHTS
Pursuant to the Warrant Agreement, the Company agreed to
file with the SEC by March 4, 1996 a shelf registration statement
or statements under the Securities Act on Form S-1, Form S-2 or
Form S-3, as determined by the Company, if the use of such form
is then available, to cover the issuance of Class A Common Stock
by the Company upon exercise of the Warrants (the "Shelf
Registration Statement"). The Registration Statement (of which
this Prospectus is a part) was filed within such time period.
The Warrant Agreement also provides that the Company will use
reasonable best efforts to cause the Shelf Registration Statement
to be declared effective by the SEC on or prior to one year after
the Closing Date. If: (i) the Shelf Registration Statement is
not filed with the SEC on or prior to March 4, 1996 (this
Registration Statement was filed by March 4, 1996); (ii) the
Shelf Registration Statement has not been declared effective by
the SEC by May 8, 1996; or (iii) the Shelf Registration Statement
is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional
Registration Statement filed and declared effective) for a period
of time which shall exceed 90 days (180 days in the event of a
Disadvantageous Condition (as defined below)) in the aggregate
per year (defined as a period of 365 days beginning on the date
such Registration Statement is declared effective) (each such
event referred to in clauses (i) through (iii) above, a
"Registration Default"), the Warrant Exercise Price of the
Warrants will be reduced by $1/8 per share of Class A Common
Stock. The Warrant Exercise Price of the Warrants will be
reduced by an additional $1/8 per share of Class A Common Stock,
as applicable, with respect to each subsequent six-month period
until the applicable Registration Statement is filed, is declared
effective, or again becomes effective, as the case may be.
Notwithstanding the foregoing, the maximum number of $1/8 per
share decreases shall be 10 during the term of the Warrants and
there shall be no more than one such decrease in any six-month
period. The reduction in the Warrant Exercise Price upon a
Registration Default is subject to adjustment in certain limited
circumstances. The Company is not obligated to register Warrant
Shares (a) which the holder does not seek to register or (b) if
the Company determines (based on discussions with the SEC, advice
of counsel or otherwise) that it is not advisable or appropriate
to register such Warrant Shares if the SEC has declared effective
a registration statement with respect to other shares of Class A
Common Stock underlying the Warrants. In any such event (a) or
(b), the exercise price underlying such Warrants will not
decrease upon the failure to register with the SEC such
underlying shares of Class A Common Stock if the SEC has declared
effective a registration statement with respect to other shares
of Class A Common Stock. The Shalam Option does not contain a
similar reduction in the Warrant Exercise Price upon a
Registration Default.
The Exchanges have each informed the Company that the number
of holders of the Warrants is insufficient to list such Warrants.
Among other listing requirements, each such Exchange requires at
least 250 holders of an equity security, such as the Warrants, as
a prerequisite for the approval of the listing of such Warrants.
Currently, the Company estimates that there are less than 40
Warrantholders. If and when a sufficient number of holders
exist, the Company presently intends to seek to list the Warrants
on one of the Exchanges. If an Exchange does list or quote the
Warrants (a "Listing Approval"), the Company is required,
pursuant to the Registration Rights Agreement, to file a shelf
registration statement (the "Resale Registration Statement")
relating to the Warrants upon the later of (a) 300 days after the
Closing Date and (b) the date approval of such listing or
quotation is obtained (the "Approval Date") and will use its
reasonable best efforts to cause such Registration Statement to
become effective upon the later of (a) 365 days after the Closing
Date and (b) 60 days after the Listing Approval Date. Although
none of the Exchanges has agreed to list the Warrants, the
Company is registering the Warrants, pursuant to this
Registration Statement. Once effective, and a Listing Approval
has occurred, the Company will be obligated to use reasonable
best efforts to cause the Resale Registration Statement to remain
effective until the date three years following the Closing Date.
Notwithstanding the foregoing, if the Company furnishes to
the holders of Warrants notice stating that in the Board of
Directors' good faith judgment it would be disadvantageous (a
"Disadvantageous Condition") to the Company or its stockholders
for
such a registration statement to be maintained effective, or to
be filed and become effective, the Company shall be entitled to
cause any such registration statement to be withdrawn and the
effectiveness of such registration statement terminated, or, in
the event no such registration statement has yet been filed,
shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of
which the Company shall promptly deliver to the Holders of
Warrants), such period not to extend beyond one hundred and
eighty (180) days. In the event that the Company shall give any
notice of a Disadvantageous Condition, the Company shall at such
time as it in good faith deems appropriate file a new
registration statement covering the securities that were covered
by such withdrawn Registration Statement, and such Registration
Statement shall be maintained effective for such time as may be
necessary so that the period of effectiveness of such new
Registration Statement, when aggregated with the period during
which such initial Registration Statement was effective, shall be
such time as may be otherwise required by this Agreement.
Once effective, the Company is obligated to cause the Resale
Registration Statement to remain effective for three years
following the Closing Date, and to cause the Shelf Registration
Statement to remain effective until the Expiration Date.
Holders of the securities being sold under this Registration
Statement are required to indemnify the Company against certain
liabilities, including liabilities under the Securities Act,
incurred as a result of information provided by such Holders in
connection with this Registration Statement, and to contribute to
payments the Company may be required to make in respect of such
liabilities.
CONCERNING THE WARRANT AGENT
Continental Stock Transfer & Trust Company will act as
Warrant Agent under the Warrant Agreement. The address of the
Warrant Agent's corporate trust office is Two Broadway, New York,
New York 10004, Attention: William Seegraber. Continental Stock
Transfer & Trust Company also acts as trustee under the Indenture
governing the Debentures, and as registrar and transfer agent for
the Class A Common Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
30,000,000 shares of Class A Common Stock, 10,000,000 shares of
Class B Common Stock, 50,000 shares of Preferred Stock, par value
$50 per share, and 1,500,000 shares of Series Preferred Stock,
par value $.01 per share. As of April 25, 1996, there were
6,983,834 shares of Class A Common Stock outstanding. As of
April 25, 1996, 2,260,954 shares of Class B
Common Stock and 50,000 shares of Preferred Stock were issued and
outstanding. There are no shares of Series Preferred Stock
outstanding.
The following summary description relating to the Class A
Common Stock, the Class B Common Stock, the Preferred Stock,
Series Preferred Stock, the Blau Warrant and the Maxim Warrant
(all as herein defined) does not purport to be complete. A
description of the Company's Class A Common Stock, Class B Common
Stock, Preferred Stock and Series Preferred Stock is contained in
the Certificate of Incorporation of the Company. Additionally, a
description of the Blau Warrant and the Maxim Warrant are
contained in their respective warrant agreements. Reference is
made to such Certificate of Incorporation (a copy of which has
been filed as an exhibit to this Registration Statement (of which
this Prospectus is a part).
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights
- -------------
Except for the election or removal without cause of
directors, as required by the Certificate of Incorporation, and
except for such separate class votes as may be required by
Delaware law and the Certificate of Incorporation, holders of
both classes of Common Stock vote as a single class on all
matters, including amendment of the Certificate of Incorporation
to increase or decrease the aggregate number of authorized shares
of any class or classes of stock. In all cases, each share of
Class A Common Stock is entitled to cast one vote per share and
each share of Class B Common Stock is entitled to cast ten votes
per share.
Holders of Class A Common Stock, voting separately as a
class, are entitled to elect 25% of the Board of Directors
(rounded up to the nearest whole number) so long as the number of
outstanding shares of Class A Common Stock is at least 10% of the
total number of outstanding shares of both classes of Common
Stock. If the number of outstanding shares of Class A Common
Stock should become less than 10% of the total number of
outstanding shares of both classes of Common Stock, directors
would then be elected by all stockholders voting as one class,
except holders of Class A Common Stock would have one vote per
share and holders of Class B Common Stock would have ten votes
per share. In such event, the American Stock Exchange may
consider delisting the Class A Common Stock.
The holders of a majority of the Class B Common Stock,
voting separately as a class, will continue to be able to elect
the directors not elected by holders of the Class A Common Stock,
so long as the number of outstanding shares of Class B Common
Stock is at least 12.5% of the number of outstanding shares of
both classes of Common Stock. If
the number of outstanding shares of Class B Common Stock falls
below that percentage, directors not elected by the holders of
Class A Common Stock will be elected by the holders of both
classes of Common Stock, with holders of Class A Common Stock
having one vote per share and holders of Class B Common Stock
having ten votes per share.
Directors may be removed, with or without cause, provided
that any removal of directors without cause may be made only by
the holders of the class or classes of Common Stock that elected
them. Vacancies in a directorship may be filled by the vote of
the class of shares that had previously filled that vacancy, or
by the remaining directors elected by that class however, if
there are no such directors, the vacancy may be filled by the
remaining directors.
The outstanding shares of Class A Common Stock equal
approximately 75.0% of the shares of both classes outstanding,
and the holders of Class A Common Stock have approximately 23.0%
of the combined voting power of both classes of Common Stock. The
holders of Class B Common Stock, therefore, have the power to
amend the Company's Certificate of Incorporation to authorize the
issuance of enough additional Class B Common Stock to decrease
the outstanding amount of Class A Common Stock to less than 10%.
Because of limitations on dividends in shares of Class A Common
Stock and Class B Common Stock, stock dividends will have the
effect of strengthening the control position of holders of Class
B Common Stock.
Dividends
- ---------
The holders of Class A Common Stock and Class B Common Stock
are entitled to receive dividends or distributions declared by
the Board of Directors in equal amounts, share for share, except
as hereafter noted. With respect to a cash dividend, the Board
may pay an equal or greater amount per share on the Class A
Common Stock than on the Class B Common Stock or declare and pay
a cash dividend on the Class A Common Stock without any such
dividend being declared and paid on the Class B Common Stock.
The Company has never declared or paid cash dividends on this
Common Stock.
In addition, dividends paid in shares of Class A Common
Stock or Class B Common Stock may be paid only as follows:
(i) shares of Class A Common Stock may be paid only to
holders of shares of Class A Common Stock and shares of Class B
Common Stock may be paid only to holders of Class B Common Stock;
and
(ii) the same number of shares shall be paid in respect of
each outstanding share of Class A Common Stock and Class B Common
Stock.
Conversion
- ----------
At the option of the holder, each share of Class B Common
Stock is convertible at any time into one share of Class A Common
Stock. Conversion of a significant number of shares of Class B
Common Stock into Class A Common Stock could put control of the
entire Board of Directors into the hands of such holders of the
Class B Common Stock who so convert.
Restrictions on Transfer of Class B Common Stock
- ------------------------------------------------
Without the written consent of holders of two-thirds of the
outstanding shares of Class B Common Stock, shares of Class B
Common Stock may not be transferred except to another holder of
Class B Common Stock, certain family members of the holder and
certain other permitted transferees. Upon any nonpermitted sale
or transfer, shares of Class B Common Stock will automatically
convert into an equal number of shares of Class A Common Stock.
Accordingly, no trading market will develop in the Class B Common
Stock and the Class B Common Stock will not be listed or traded
on any exchange or in any market.
Other Rights
- ------------
Stockholders of the Company have no preemptive or other
rights to subscribe for additional shares. Subject to any rights
of holders of any Preferred Stock and Series Preferred Stock, all
holders of Common Stock, regardless of class, are entitled to
share ratably in any assets available for distribution on
liquidation, dissolution or winding up of the Company. No shares
of either class of Common Stock are subject to redemption. All
outstanding shares are, and all shares issuable upon conversion
of the Debentures offered hereby will be, when issued upon such
conversion in accordance with the terms of the Debentures,
legally issued, fully paid and nonassessable. The Company may not
subdivide or combine shares of either class of Common Stock
without at the same time proportionally subdividing or combining
shares of the other class of Common Stock.
Effects of Disproportionate Voting Rights
- -----------------------------------------
The disproportionate voting rights of Class A Common Stock
and Class B Common Stock could have an adverse effect on the
market price of the Class A Common Stock. Such disproportionate
voting rights may effectively preclude the Company from being
taken over in a transaction not supported by holders of Class B
Common Stock, may render more difficult or discourage a merger
proposal or tender offer or may preclude a successful proxy
contest, even if such actions were favored by stockholders of the
Company other than the holders of the Class B Common Stock.
Accordingly, such disproportionate voting rights may deprive
stockholders of an opportunity to sell their
shares at a premium over prevailing market prices, since takeover
bids frequently involve purchases of stock directly from
stockholders at such a premium price.
Transfer Agent
- --------------
The transfer agent and registrar for shares of the Class A
Common Stock and Class B Common Stock is Continental Stock
Transfer & Trust Company, Two Broadway, New York, New York 10004.
PREFERRED STOCK
Preferred Stock
- ---------------
The Company is authorized to issue up to 50,000 shares of
Preferred Stock, all of which have been issued and are
outstanding. Such shares are nonvoting and have preference over
the Common Stock in the event of liquidation, dissolution or
winding up of the Company to the extent of its par value of $50
per share.
Series Preferred Stock
- ----------------------
The Company is authorized to issue up to 1,500,000 shares of
Series Preferred Stock, par value $.01 per share, none of which
has been issued. The Certificate of Incorporation provides that
the Board of Directors may issue by resolution shares of Series
Preferred Stock from time to time in one or more series and fix,
as to each such series, the designations, preferences and
relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions pertaining
thereto, including voting rights (including the right to vote as
a series on particular matters), preferences as to dividends and
liquidation and conversion rights. However, the Company may not
issue shares of Series Preferred Stock carrying in excess of one
vote per share or convertible into Class B Common Stock without
prior approval of a majority in interest of the holders of Class
B Common Stock. The Company has no present plans for the issuance
of any shares of Series Preferred Stock.
It is not possible to state the actual effect of the
authorization of the Series Preferred Stock upon the rights of
holders of Class A Common Stock, Class B Common Stock and
Preferred Stock until the Board determines the specific rights
thereof. However, such effects might include (a) restrictions on
dividends on either class of Common Stock if dividends on Series
Preferred Stock have not been paid; (b) dilution of the voting
power of the Class A Common Stock to the extent that the Series
Preferred Stock has voting rights; (c) dilution of the equity
interest of the Class A Common Stock to the extent that the
Preferred Stock is convertible into Class A Common Stock; or (d)
either class of Common Stock and Preferred Stock not being
entitled to share in the
Company's assets upon liquidation, dissolution or winding up
until satisfaction of any liquidation preference granted to
holders of Series Preferred Stock. The Company has been advised
that under its current listing requirements the American Stock
Exchange would consider delisting the Class A Common Stock if any
Series Preferred Stock diluted the class voting rights of the
Class A Common Stock. Issuance of Series Preferred Stock, while
providing desirable flexibility in connection with possible
acquisition and other corporate purposes, could make it more
difficult for a third party to acquire a majority of the
outstanding voting stock. Accordingly, the issuance of Series
Preferred Stock may be used as an antitakeover device without
further action on the part of the stockholders of the Company.
WARRANTS
Blau Warrant
- ------------
The Company and Harvey R. Blau ("Blau") have entered into a
letter agreement, dated April 1, 1993 (the "Consulting
Agreement"). Pursuant to the Consulting Agreement, the term of
which was from April 1, 1993 to March 31, 1995, Blau was to
render up to 20 hours of consulting services to the Company per
year. In connection with the Consulting Agreement, Blau was
awarded the Blau Warrant to purchase 100,000 shares of Class A
Common Stock at a purchase price of $7.50 per share (subject to
adjustment upon certain events described in the Blau Warrant).
The Blau Warrant is exercisable in whole or in part, from time-to-
time, until December 31, 1998. On December 15, 1993, the Company
and Blau executed a letter agreement pursuant to which it was
agreed that Blau had performed in excess of 40 aggregate hours of
consulting services under the Consulting Agreement, that no
further services were required to be performed by Blau under the
Consulting Agreement and that the consideration for the Blau
Warrant was deemed fully paid.
Maxim Warrant
- -------------
The Company and James Maxim ("Maxim") have entered into an
Agreement, dated September 23, 1993 and effective December 1,
1993, pursuant to which the Company acquired all of the issued
and outstanding stock of H & H Eastern Distributors, Inc. owned
by Maxim, and as a result, the Company became the sole
stockholder of H & H Eastern Distributors, Inc. In connection
with such Agreement, the Company issued to Maxim the Maxim
Warrant to purchase 50,000 shares of Class A Common Stock, at a
purchase price of $14.375 per share. The per share purchase
price and number of shares purchasable pursuant to the Maxim
Warrant are each subject to adjustment upon the occurrence of
certain events described in the Maxim Warrant. The Maxim Warrant
is exercisable, in whole or in part, from time-to-time, until
September 22, 2003. In
connection with the Maxim Warrant, Maxim has the right to require
the Company to file with the SEC, on or after September 22, 1995,
a registration statement relating to the sale by Maxim of the
Class A Common Stock purchasable pursuant to the Maxim Warrant.
DELAWARE LAW
Section 203
- -----------
The Company is subject to the provisions of Section 203 of
the Delaware General Corporation Law. In general, this statute
prohibits a publicly held Delaware corporation from engaging,
under certain circumstances in a "business combination" with an
"interested stockholder" for a period of three years after the
date of the transaction in which the person becomes an interested
stockholder, unless either: (i) prior to the date at which the
stockholder became an interested stockholder, the Board of
Directors approved either the business combination or the
transaction in which the person becomes an interested
stockholder; (ii) the stockholder acquires more than 85% of the
outstanding voting stock of the corporation (excluding shares
held by directors who are officers or held in certain employee
stock plans) upon consummation of the transaction in which the
stockholder becomes in interested stockholder; or (iii) the
business combination is approved by the Board of Directors and by
at least 66 2/3% of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder)
at a meeting of stockholders (and not by written consent) held on
or subsequent to the date of the business combination. An
"interested stockholder" is a person who, together with
affiliates and associates, owns (or at any time within the prior
three years did own) 15% or more of the corporation's voting
stock. Section 203 defines a "business combination" to include,
without limitation, mergers, consolidations, stock sales and
asset based transactions and other transactions resulting in a
financial benefit to the interested stockholder.
Section 203 of the Delaware General Corporation Law contains
provisions normally considered to have the effect of inhibiting a
non-negotiated merger or other business combination.
Consequently, the market price of the Class A Common Stock may be
less likely to reflect a "premium for control."
Limitations on Liability and Indemnification of Officers and Directors
- ----------------------------------------------------------------------
The Delaware General Corporation Law provides that a
corporation may limit the liability of each director to the
corporation or its stockholders for monetary damages except for
liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) in respect of certain unlawful
dividend
payments or stock redemptions or repurchases and (iv) for any
transaction from which the director derives an improper personal
benefit. The Company's Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by
Delaware General Corporation Law. The effect of these provisions
is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company)
to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from
grossly negligent conduct). This provision does not exonerate
the directors from liability under federal securities laws nor
does it limit the availability of non-monetary relief in any
action or proceeding against a director. In addition, the
Certificate of Incorporation provides that the Company shall
indemnify its officers and directors against liabilities, cost
and expenses to the fullest extent authorized by Delaware General
Corporation Law. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers or others pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Commission,
such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
SHALAM OPTION
John J. Shalam, Chief Executive Officer of the Company,
granted the Company the Shalam Option to purchase 1,668,875
Option Shares at a purchase price equal to the sum of (a) the
Warrant Exercise Price plus (b) an additional amount (the "Tax
Amount") intended to reimburse Mr. Shalam or his Successors for
any additional taxes per share which may be required to be paid
by Mr. Shalam or his Successors as a result of the payment of the
Warrant Exercise Price being treated for federal income tax
purposes as the distribution to Mr. Shalam or his Successors of a
dividend (taxed at ordinary income rates without consideration of
Mr. Shalam's or his Successors', as the case may be, basis),
rather than as a payment to Mr. Shalam or his Successors, for the
sale of his Class A Common Stock to the Company (taxed at the
capital gains rate with consideration of Mr. Shalam's basis and
considering any stepped up basis to Mr. Shalam's Successors)
pursuant to the Shalam Option. If Mr. Shalam or his Successors,
as a result of the receipt of the payment of the Warrant Exercise
Price, are taxed at a capital gains rate (with consideration
given to their stepped up basis), no Tax Amount will be included
in the purchase price to be paid. Any Successor acquiring the
shares of Class A Common Stock underlying the Shalam Option
(whether by sale, transfer or upon Mr. Shalam's death) will
acquire such shares subject to the terms of the Shalam Option.
The terms of the Shalam Option (other than the initial exercise
price) are similar to those of the Warrants, however, the
exercise price per share for the Shalam Option will not decrease
in the event of a Registration Default. Such additional amount
per share shall be calculated in accordance with the tax rates
applicable to the date of exercise in accordance with the
following formula:
(A-B) x C + (B+D)
-----------------
1-A
where A equals Mr. Shalam's combined marginal U.S. federal, state
and local ordinary income tax rates after reduction of the
federal rate for the benefit of the deductions for state and
local taxes; B equals Mr. Shalam's combined marginal U.S.
federal, state and local capital gains tax rates after reduction
of the federal rate for the benefit of the deductions for state
and local taxes; C equals the per share Warrant Exercise Price
without giving effect to any adjustment thereof resulting from a
Registration Default; and D equals Shalam's per share adjusted
tax basis in the Class A Common Stock purchasable by the Company
pursuant to the Shalam Option and includes any stepped-up basis
of Mr. Shalam's Successors. Any payment owing to Mr. Shalam's
Successors will be based on the same formula as it relates to
such Successors.
The Shalam Option is exercisable, in whole or in part, for
1,668,875 shares of Common Stock. The basic terms of the Shalam
Option are similar to the basic terms of the Warrants; except
that the exercise price of the Shalam Option will not be reduced
in the event of a Registration Default. The Company is not
required to exercise the Shalam Option upon exercise of the
Warrants and intends to do so only if the Board of Directors of
the Company (other than Mr. Shalam) at the time of exercise of
the Warrants, determines that it is in the best interests of the
stockholders of the Company to exercise such Shalam Option. The
Company will be able to exercise the Shalam Option only if the
Warrants are exercised and then only for the same number of
shares as are purchased under the Warrants. The Shalam Option
may limit the dilutive effect of the Warrants on the earnings per
share or the book value per share if the Company elects to
execute the Shalam Option. The obligations of the Company under
the Warrants are not subject to compliance by Mr. Shalam with the
terms of the Shalam Option. The Tax Amount will be immediately
due and payable upon receipt of a satisfactory notice from the
holder of the Option Shares stating that a Tax Amount is required
to reimburse such person for additional taxes in accordance with
the Shalam Option, setting forth the calculation of the Tax
Amount and confirming that such person will file its tax return
with respect to this period in accordance with the facts
underlying this calculation, but such Tax Amount is subject to
readjustment in the event the actual tax paid is different than
the amount set forth in the notice. Upon consummation of the
Offering, a legend was placed on share certificates representing
1,668,875 shares of Class A Common Stock which provided that such
shares are subject to the terms of the Shalam Option. Such
legend on the Option Shares will be removed with respect to the
number of Option Shares equal to the number of shares of Class A
Common Stock underlying the Warrants which have been exercised
and with respect to which the independent members of the Board of
Directors of the Company have determined not to exercise the
Shalam Option as well as upon the expiration of the Shalam
Option. Mr. Shalam did not receive any cash consideration in
exchange for granting the Company the Shalam Option. The cost to
Mr. Shalam of the shares subject to the Shalam Option was
$166,887.50.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have
outstanding 6,983,834 shares of Class A Common Stock. Of these
shares, the Company has approximately 3,617,565 shares of Class A
Common Stock held by members of the public that are able to trade
without restriction or further registration under the Securities
Act except for any shares purchased by any affiliates of the
Company, which will be subject to the resale limitations of Rule
144 promulgated under the Securities Act. Sales of a substantial
number of additional shares of Class A Common Stock in the public
market could adversely affect the market price of the Class A
Common Stock. As of April 25, 1996, 3,672,316 shares of Class A
Common Stock were issuable upon conversion of the Debentures,
100,000 shares of Class A Common Stock were issuable upon
exercise of the Blau Warrant, 50,000 shares of Class A Common
Stock were issuable upon exercise of the Maxim Warrant and
1,668,875 shares of Class A Common Stock were issuable upon
exercise of the Warrants. Exercise or conversion, as the case
may be, of a substantial amount of the presently outstanding
warrants, or the Debentures or sale of the Class A Common Stock
underlying such debentures or warrants also could adversely
affect the market price of the Class A Common Stock, due to the
large number of shares issuable upon conversion or exercise of
such debentures or warrants in comparison to the relatively small
number of shares held by members of the public that are able to
trade without restriction. The Company has granted the holders
of the warrants described above certain registration rights
relating to the Class A Common Stock issuable upon exercise of
such warrants. In addition, as of April 25, 1996, (i) John J.
Shalam, President and Chief Executive Officer of the Company,
owned 3,359,367 shares of Class A Common Stock (including for
this purpose all of the shares subject to the Shalam Option) and
1,883,198 shares of Class B Common Stock of the Company, par
value $.01 per share ("Class B Common Stock"), which are
convertible into an equal number of shares of Class A Common
Stock and (ii) other affiliates (as such term is defined the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of the Company owned 6,902 shares of Class A Common Stock and
377,756 shares of Class B Common Stock, which are convertible
into an equal number of shares of Class A Common Stock. Also,
Mr. Shalam has granted the Company the Shalam Option. Sales by
such persons of a substantial number of shares of Class A Common
Stock or Class B Common Stock (collectively, "Common Stock")
could adversely affect the market price of the Class A Common
Stock. See "Description of Capital Stock-Shalam Option.
In general, under Rule 144 as currently in effect,
affiliates of the Company would be entitled to sell within any
three-month period a number of shares that does not exceed the
greater of one percent of the number of shares of Class A Common
Stock then outstanding or the average weekly trading volume of
the Class A Common Stock during the four calendar weeks preceding
the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public
information about the Company.
The Company is unable to estimate accurately the number of
shares that may be sold under Rule 144 since this will depend in
part on the market price for the Class A Common Stock, the
personal circumstances of the sellers and other factors.
The Company has registered Class A Common Stock under the
Securities Act for issuance to certain of its directors, officers
and employees pursuant to the Company's stock option plans.
Shares issued pursuant to such stock option plans after the
effective date of any registration statement covering such shares
generally will be available for sale in the open market (except
that such shares held by affiliates will be subject to compliance
with the volume restrictions of Rule 144 under the Securities
Act).
PLAN OF DISTRIBUTION
This Prospectus relates to the registration of (i) 1,668,875
Warrants and (ii) the Warrant Shares issuable upon the exercise
of the Warrants. The Warrants were issued by the Company in a
private placement effected on May 9, 1995 (the "Closing Date").
All of the Warrants and Warrant Shares are being registered for
resale from time to time by the Selling Securityholders and the
Warrant Shares are also being registered for their issuance by
the Company to the Selling Securityholders upon their exercise of
the Warrants.
The Company will not receive any of the proceeds from the
offering of Warrants and the Warrant Shares by the Selling
Securityholders. The Company has been advised by the Selling
Securityholders that the Selling Securityholders may sell all or
a portion of the Warrants or Warrant Shares beneficially owned by
them and which may be offered hereby from time to time on any
exchange on which the securities are then listed, if any, on
terms to be determined at the times of such sales. The Selling
Securityholders may also make private sales directly or through a
broker or brokers. Alternatively, any of the Selling
Securityholders may from time to time offer the Warrants or the
Warrant Shares which may be offered hereby and beneficially owned
by them through underwriters, dealers or agents, who may receive
compensation in the form of underwriting discounts, commissions
or concessions from the Selling Securityholders and the
purchasers of the Warrants or the Warrant Shares for whom they
may act as agent. There can be no assurance that any of the
Warrants or Warrant Shares will be sold by the Selling
Securityholders. To the extent required, the Warrants and the
Warrant Shares to be sold hereby, the names of the Selling
Securityholders, the purchase price, the name of any such agent,
dealer or underwriter and any applicable commissions, discounts
or other terms constituting compensation with respect to a
particular offer will be set forth in an accompanying Prospectus
Supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Warrants or the Warrant
Shares offered by them hereby will be the purchase price of such
Warrants or Warrant Shares less discounts and commissions, if
any. A Selling Securityholder that sells such Warrants or
Warrant Shares pursuant to this Registration Statement of which
this Prospectus is a part will be required to deliver such
Prospectus to purchasers and will be subject to certain civil
liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such Selling
Securityholder (including certain indemnification obligations).
The Warrants and the Warrant Shares which may be offered
hereby may be sold from time to time in one or more transactions
at fixed offering prices, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices.
Such prices will be determined by the holders of such securities
or by agreement between such holders and underwriters or dealers
who may receive fees or commissions in connection therewith.
The outstanding Class A Common Stock is listed for
trading on the AMEX (Symbol: "VOX"). On April 25, 1996, the
last reported sales price of the Class A Common Stock on the AMEX
was $4 3/16 per share. The Exchanges have each informed the
Company that the number of holders of the Warrants is
insufficient to list such Warrants. Among other listing
requirements, each such Exchange requires at least 250 holders of
an equity security, such as the Warrants, as a prerequisite for
the approval of the listing of such Warrants. Currently, the
Company estimates that there are less than 40 Warrantholders. If
and when a sufficient number of holders exist and the Company
satisfies the other listing requirements, the Company presently
intends to seek to list the Warrants on one of the Exchanges.
The Warrants have been approved for trading on PORTAL since the
Closing Date. However, no public trading market for the Warrants
exists and no active trading market in PORTAL has developed.
Josephthal, Lyon & Ross, Incorporated has advised the Company
that it presently intends to make a market in the Warrants after
the effectiveness of this Registration Statement. Josephthal,
Lyon & Ross, Incorporated, however, is not obligated to do so and
any such market-making may be discontinued at any time without
notice, in the sole discretion of Josephthal, Lyon & Ross,
Incorporated. No assurance can be given that any market for the
Warrants will develop or be maintained. Moreover, once the
Warrants are registered under this Registration Statement, the
Warrants which are registered under this Registration Statement
will no longer be eligible for trading on PORTAL.
In order to comply with the securities laws of certain
states, if applicable, the Warrants and the Warrant Shares
offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in
certain states, the Warrants and the Warrant Shares offered
hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is
complied with.
The Selling Securityholders and any broker-dealers, agents
or underwriters that participate with the Selling Securityholders
in the distribution of the Warrants or the Warrant Shares offered
hereby may be deemed to be "underwriters" within the meaning of
the Securities Act, in which event any commissions or discounts
received by such broker-dealers, agents or underwriters and any
profit on the resale of the Warrants or the Warrant Shares
offered hereby and purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Company and the Selling Securityholders have agreed to
indemnify each other against certain liabilities arising under
the Securities Act. The Company has agreed to pay all expenses
incident to the offer and sale of the Warrants and the Warrant
Shares offered hereby by the Selling Securityholders to the
public, other than broker's commissions and underwriting
discounts and commissions.
LEGAL MATTERS
The validity of the securities offered hereby will be passed
upon by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), New York, New York.
EXPERTS
The consolidated financial statements and schedules of the
Company have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG
Peat Marwick LLP covering the November 30, 1995, financial
statements refers to changes in the methods of accounting for
certain investments in equity securities and income taxes.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN
CONNECTION WITH THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH
SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO
DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
TABLE OF CONTENTS
Page
SUMMARY..................................................7
RISK FACTORS.............................................13
THE COMPANY..............................................24
USE OF PROCEEDS..........................................25
SELLING SECURITYHOLDERS..................................25
DESCRIPTION OF THE WARRANTS..............................27
DESCRIPTION OF CAPITAL STOCK.............................35
SHARES ELIGIBLE FOR FUTURE SALE..........................44
PLAN OF DISTRIBUTION.....................................45
LEGAL MATTERS............................................47
EXPERTS..................................................47
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than
underwriting discounts and commissions, payable by the Company in
connection with the sale of the Warrants and the Warrant Shares
being registered. All amounts are estimates except the
registration fee and the AMEX listing fee.
SEC Registration Fee...................................... $4,101
AMEX Listing Fee.......................................... $17,500
Legal fees and expenses................................... $45,000
Warrant Agent's fees...................................... $ 2,500
Accounting fees and expenses.............................. $10,000
Miscellaneous............................................. $ 5,000
Total........................................... $ 399
$84,500
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law
of the State of Delaware (the "DGCL") empowers a corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Subsection (b) of the Section 145 empowers a corporation to
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or
completed action, or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above,
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification
may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 further provides that to the extent a director
or officer of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) of Section 145, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may
be entitled; that indemnification provided for by Section 145
shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such persons'
heirs, executors and administrators; and empowers the corporation
to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against
him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the
power to indemnify him against such liability under Section 145.
Article Eighth of the Company's Certificate of Incorporation
and Article VIII of the Company's By-laws provide that the
Company shall indemnify its directors and officers to the fullest
extent authorized by the DGCL.
Section 102(b)(7) of DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director provided that such provision shall not eliminate or
limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal
benefit. Article Fifth of the Company's Certificate of
Incorporation limits the liability of directors to the fullest
extent permitted by Section 102(b)(7).
ITEM 16. EXHIBITS.
The following exhibits are filed herewith or incorporated by
reference.
Exhibit No. Description
---------- -----------
**4(a) Certificate of Incorporation of Audiovox
Corporation (incorporated by reference to Exhibit
3.1 to Company's Registration Statement on Form S-
1 (Registration No. 33-10726)).
Amendment to the Certificate of Incorporation
**4(b) (incorporated by reference to Exhibit 3.1a to the
Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1993, File No. 1-
9532).
**4(c) Registration Rights Agreement, dated as of May 9,
1995, among Audiovox Corporation and the holders
of the Warrants (incorporated by reference to
Exhibit 4 of the Company's Current Report on Form
8-K dated May 31, 1995, File No. 1-9532).
**4(d) Warrant Agreement, dated as of May 9, 1995,
between Audiovox Corporation and Continental
Stock Transfer & Trust Company, in respect of the
Warrants (incorporated by reference to Exhibit 3
of the Company's Current Report on Form 8-K dated
May 31, 1995, File No. 1-9532).
4(e) The form of Warrant is contained in the Warrant
Agreement filed as Exhibit 4(d) above.
*5 Opinion of Fried, Frank, Harris, Shriver &
Jacobson.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) The consent of Fried, Frank, Harris, Shriver &
Jacobson is contained in their opinion filed as
Exhibit (5) to this Registration Statement.
*(24) Power of Attorney.
**99(a) Second Amended and Restated Credit Agreement,
dated as of May 5, 1995, among Audiovox
Corporation and Chemical Bank, National
Westminster Bank USA, The Chase Manhattan Bank,
N.A., European American Bank and Bank of Boston
as lenders, and Chemical Bank, as Administrative
and Collateral Agent (incorporated by reference
to Exhibit 1 of the Company's Current Report on
Form 8-K dated May 31, 1995 File No. 1-9532).
**99(b)
Indenture, dated as of March 15, 1994, between
Audiovox Corporation and Continental Stock
Transfer & Trust Company, in respect of the 6 1/4%
Convertible Subordinated Debentures due 2001
(incorporated by reference to Exhibit C of the
Company's Current Report on Form 8-K dated March
15, 1994, File No. 1-9532).
*99(c) Option Agreement, dated as of May 9, 1995,
between Audiovox Corporation and John J. Shalam.
* Previously filed.
** Incorporated by reference.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) ( 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement;
provided, however, that paragraphs 1(i) and 1(ii) do not apply if
the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes to supplement
the prospectus, after the expiration of the subscription period,
to set forth the results of the subscription offer, the
transactions by the underwriters during the subscription period,
the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof.
If any public offering by the underwriters is to be made on terms
differing from those set forth on the cover page of the
prospectus, a post-effective amendment will be filed to set forth
the terms of such offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all the requirements of filing on Form S-3
and has duly caused this Amendment No. 2 to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hauppauge, State of New
York, on this 29th day of April, 1996.
AUDIOVOX CORPORATION
(Registrant)
By: /s/ Charles M. Stoehr
----------------------------
Charles M. Stoehr, Senior Vice
President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of
1933, Amendment No. 2 to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated.
Name Title Date
- ---- ----- ----
* President and Chief April 29, 1996
- -------------------------- Executive Officer, Director
John J. Shalam
/s/ Charles M. Stoehr Senior Vice President and April 29, 1996
- -------------------------- Chief Financial Officer
Charles M. Stoehr (Principal Accounting
Officer), Director
* Director April 29, 1996
- --------------------------
Ann Boutcher
* Director April 29, 1996
- --------------------------
Philip Christopher
Director
- --------------------------
Irving Halevy
* Director April 29, 1996
- --------------------------
Patrick Lavelle
Director
- --------------------------
Martin Novick
Director
- --------------------------
Gordon Tucker
*By:/s/Charles M. Stoehr April 29, 1996
----------------------
Charles M. Stoehr
Attorney-in-Fact
EXHIBIT 23(a)
Independent Auditors' Consent
-----------------------------
The Board of Directors
Audiovox Corporation:
We consent to the use of our reports incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
Our report refers to changes in the methods of accounting for
certain investments in equity securities and income taxes.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
April 29, 1996
