AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15 ,
1997
REGISTRATION NO. 333- 26983
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
AMENDMENT NO. 1 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, as amended (the "Securities
Act") 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
MAXIMUM PROPOSED
AMOUNT OFFERING MAXIMUM AMOUNT
TITLE OF EACH CLASS OF TO BE PRICE AGGREGATE OF
SECURITIES REGISTE PER OFFERING REGISTRA
TO BE REGISTERED RED SHARE(1) PRICE(1) TION FEE
- ------------------------------- ------- --------- ---------- --------
Class A Common Stock, par value
$.01 per share............... 352,194 $5.91 $2,081,467 $6,938
(1) Estimated pursuant to Rule 457(c) solely for the
purpose of calculating the registration fee. The proposed
maximum offering price per share and the proposed maximum
aggregate offering price are based on the average of the high and
low sales price on May 12, 1997 of the Registrant's Common Stock
as reported on the American Stock Exchange.
------------------------
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 the Registration Statement shall
become effective on such date as the Securities and Exchange
Commission, acting pursuant to said section 8(a), may determine.
==========================================================================
[RED HERRING]
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 MAY 15 , 1997
352,194 SHARES OF COMMON STOCK
AUDIOVOX CORPORATION
COMMON STOCK
--------------------------------
This Prospectus relates to the offer and sale (the
"Offering") from time to time of up to 352,194 shares (the
"Shares") of Class A Common Stock, par value $.01 per share (the
"Class A Common Stock"), of Audiovox Corporation (the "Company")
by a stockholder of the Company named herein (the "Selling
Stockholder"). See "Selling Stockholder" and "Plan of
Distribution." Shares may be offered until [ ], 1998
[365 days after the effective date hereof] for the account of the
Selling Stockholder.
The Company will not receive any proceeds from the sale of
the Shares by the Selling Stockholder unless the proceeds received
by the Selling Stockholder are subject to adjustment pursuant to
the Stock Purchase Agreement (as defined below). The Company's
Class A Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol "VOX." On May 12, 1997, the last
reported sale price of the Class A Common Stock was $5.875.
The Shares covered by this Prospectus were issued to the
Selling Stockholder pursuant to the terms of a Stock Purchase
Agreement (the "Stock Purchase Agreement"), dated March 7, 1997,
between the Company and the Selling Stockholder. Pursuant to the
Stock Purchase Agreement, the Company has agreed to register the
Shares under the Securities Act of 1933, as amended (the
"Securities Act") and to endeavor to cause a Registration
Statement (as defined herein), of which this Prospectus
constitutes a part, to be declared and remain effective until the
earlier of (i) such time as all of the Shares have been sold by
the Selling Stockholder, or (ii) 365 days following the effective
date of such registration statement. The Selling Stockholder has
advised the Company that he proposes to sell, from time to time,
all or part of the Shares covered by the Prospectus on the AMEX,
in ordinary brokerage transactions, in negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at
prices related to such market prices or at negotiated prices.
All expenses (estimated to be $58,000) of the registration of
the Shares covered by this Prospectus will be borne by the Company
pursuant to the Stock Purchase Agreement, except that the Company
will not pay (i) any Selling Stockholder's underwriting discounts
or selling commission, or (ii) fees and expenses of any Selling
Stockholder's counsel. The Company and the Selling Stockholder
have each agreed to indemnify the other with respect to the
Offering pursuant to the Stock Purchase Agreement.
The Selling Stockholder and any broker-dealers, agents or
underwriters that participate with the Selling Stockholder in
the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act in which event any
commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the 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 Shares will be sold by the Selling Stockholder.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS IN EVALUATING 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 date of this Prospectus is __________, 1997
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 Securities and Exchange Commission (the
"Commission") . Such reports and other information may be
inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington D.C. 20549 and at the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington
D.C. 20549, at prescribed rates. In addition, the Company is
required to file electronic versions of these documents through
the Commission's Electronic Data Gathering Analysis and Retrieval
System ("EDGAR"). The Commission maintains a World Wide Web site
at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding
registrants that file electronically with the Commission. The
Company's outstanding Class A Common Stock and its 6%
Convertible Subordinated Debentures due 2001 (the "Convertible
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 Commission 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, for
the registration under the Securities Act of the Shares offered
by the Selling Stockholder 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 Commission. 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 Commission.
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, 1996, (the "1996 Form 10-K"); (ii)
the Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1997 (the "First Quarter 1997 Form 10-Q"); (iii) the
Company's Current Report on Form 8-K, dated December 4, 1996;
(iv) the Company's Current Report on Form 8-K, dated January 22,
1997; (v) the Company's Current Report on Form 8-K, dated
April 8, 1997; and (vi) 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 Commission (File No. 1-9532).
The Company also incorporates herein by reference all
documents and reports subsequently filed by the Company with
the Commission 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.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Some of the information presented in connection with 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 Exchange Act, including statements regarding, among other
things, (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. In
addition, when used in this Prospectus, the words "intends to,"
"believes," "anticipates," "expects" and similar expressions
are intended to identify forward-looking statements. 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 (a) changes in the
cellular and other industries as a result of political,
economic or regulatory influences; (b) changes in regulations
governing the cellular and other industries; (c) changes in the
competitive marketplace and (d) 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.
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............. 352,194 shares of Class A Common
Stock, par value $.01 per share
(the "Class A Common Stock), of
the Company.
On May 12, 1997, the reported
closing sales price of the Class
A Common Stock, as reported on
the AMEX, was $5.875 per share.
Use of Proceeds................ The Company will not receive any
cash proceeds from the sale of
the Shares by the Selling
Stockholder except, if the
Shares are sold prior to 90 days
from the effective date of this
Prospectus at a higher price
than that paid by the Selling
Stockholder for such Shares (the
"Purchase Price"), the Company
will, as more fully described
under the caption "Plan of
Distribution" and as set forth
in the Stock Purchase Agreement,
receive from the Selling
Stockholder a payment generally
based on the excess of the
proceeds received by the Selling
Stockholder in the sale of the
Common A Common over such
Purchase Price. See "Plan of
Distribution."
Original Issuance of Shares.... The Shares covered by this
Prospectus were issued to the
Selling Stockholder pursuant to
the terms of the Stock Purchase
Agreement dated March 7, 1997,
between the Company and the
Selling Stockholder. Pursuant
to the Stock Purchase Agreement,
the Company has agreed to
register the Shares under the
Securities Act and to endeavor
to cause the Registration
Statement, of which this
Prospectus constitutes a part,
to be declared and remain
effective until the earlier of
(i) such time as all of the
Shares have been sold by the
Selling Stockholder, or (ii) 365
days following the effective
date of the Registration
Statement.
Transfer 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 8.
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
Although the Company reported net income of $4,203,000 million
for the first fiscal quarter of 1997, the Company reported a net
loss for the fiscal year ended November 30, 1996 of $26,469,000
due to a charge of $29,206,000 in connection with the Company
exchanging 6,806,580 shares of its Class A Common Stock for
$41,252,000 of its outstanding Convertible Debentures pursuant to
an exchange offer made on October 18, 1996, to exchange each
$1,000 principal amount of Convertible Debentures for 165 shares
of Class A Common Stock (the "Exchange Offer") (the Exchange
Offer, together with certain subsequent privately negotiated
exchanges (in the first fiscal quarter of 1997) of an aggregate
2,860,925 shares of Class A Common Stock for $21,479,000 of the
Convertible Debentures, collectively referred to as the
"Debenture Repurchases").
In addition, although the Company was profitable for the fiscal
year ended November 30, 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 certain warrants of the Company and an
$11,800,000 charge for inventory write downs and other costs
associated with the downsizing of the Company's retail
operations. There can be no assurance that the Company will
maintain its 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
1996 Form 10-K and the First Quarter 1997 Form 10-Q.
CASH FLOW DEFICITS FROM OPERATIONS
The Company had positive cash flows from operations for the
fiscal year ended November 30, 1996 of $24,011,000 and for the
three months ended February 28, 1997 of $3,350,000. However,
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 write
downs 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 continue 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 by the Company increased by 1,564,000 units or 312.3%
from fiscal 1993 through the end of fiscal 1996, over this same
period of time average unit selling prices dropped from $324 per
unit to $155 per unit, a decrease of 52.2%. The average unit
cost of goods sold decreased by only 50.2% over the same period
of time. Unit gross profits as a percentage of
unit gross revenues have increased from 8.4% in 1994 to 9.0% in
fiscal 1996. In fiscal 1995, the Company took an inventory write-
off of $9.3 million to adjust the carrying value of its inventory
to market. 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 write downs 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."
COMPETITION
The Company operates in a highly competitive environment and
believes that such competition will continue to 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., Ericcson Mobile Communications, Sony Wireless
Telecommunications Co., Mitsubishi Wireless Communications, Oki
Telecom Corporation, NEC America, Matsushita 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 1996 Form 10-K and the First
Quarter 1997 Form 10-Q.
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 1994, 1995 and 1996 and the three months ended February
28, 1997, the Company purchased 91.8%, 97.0%, 47.3% and 32.2%,
respectively, of its total dollar amount of cellular product
purchases from Japanese suppliers, and revenues from cellular
products from Japanese suppliers comprised 47.8%, 51.8%, 54.3%
and 59.3%, 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 May
31, 1997 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 May 12, 1997 was 119.25 yen; over the five
years preceding that date the value of the United States dollar
ranged from 159.85 yen to 80.15 yen. The Chinese currency is
also becoming more important to the Company as its purchases of
Chinese products increases.
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.
The Company purchases product from Shintom Co., Limited
("Shintom"), a stockholder who, on November 30, 1995 and November
30, 1996, owned approximately 3.5% and 1.7%, respectively, of the
outstanding Class A Common Stock and all of the Preferred Stock
of the Company, and from Talk Corporation ("Talk"), a 31.6% owned
joint venture in Japan with Shintom and other companies.
Inventory purchases from Shintom and Talk approximated 7.0%, 20%,
26% and 28% of total inventory purchases for the years ended
November 30, 1994, 1995 and 1996 and the three months ended
February 28, 1997.
DEPENDENCE ON TOSHIBA
Since 1984, Toshiba has been the principal supplier of cellular
telephone products to the Company, accounting for approximately
83.7%, 67.3%, 44.9% and 42.3% of the total dollar amount of the
Company's cellular product purchases and approximately 45.5%,
44.1%, 28.0% and 32.2% of the total dollar amount of all product
purchases by the Company in fiscal 1994, 1995 and 1996 and the
three months ended February 28, 1997. 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. During 1996, Toshiba withdrew
its U.S. distribution subsidiary from the United States cellular
telephone market. 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.
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 or
reduction in value. 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, 1994, 1995 and 1996 and
the three months ended February 28, 1997, approximately 13.8%,
18.6%, 24.5% and 22.5%, respectively, of the Company's net sales
were generated from sales in Canada, Europe, Latin America, Asia,
the Middle East and Australia. The Company is seeking to
continue this trend of increasing foreign sales as a percentage
of total sales. 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 28, 1997, the Company had outstanding total
interest bearing indebtedness of approximately $15.8 million
(down $90.3 million from the comparable period in 1996) and a
total debt-to-total capital ratio of .08 to 1. Although the
Company's total interest bearing indebtedness has been reduced by
85.1% compared to the same period in 1996, there is no assurance
that such indebtedness and its total debt-to-total capital ratio
will not increase in the future. In addition, the ability of the
Company to make principal and interest payments under the
Company's long-term indebtedness (including 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.
RESTRICTIVE COVENANTS
The Amended 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. The
Amended Credit Agreement also requires that the Company satisfy
certain financial tests, maintain certain financial ratios,
maintain minimum pre-tax earnings, and maintain minimum net
worth. Failure to comply with such covenants could result in a
default under the Amended Credit Agreement which could have a
material adverse effect on the financial condition and results of
operations of the Company.
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION
As of May 2, 1997, the Company had approximately 13,894,890
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 materially adversely effect the market price of the
Class A Common Stock. As of May 2, 1997, 200,000 shares of Class
A Common Stock were issuable upon exercise of the Blau Warrants
(as defined herein), 50,000 shares of Class A Common Stock were
issuable upon exercise of the Maxim Warrant (as defined herein),
1,668,875 shares of Class A Common Stock were issuable upon
exercise of the Warrants (as defined herein), and 128,192 shares
of Class A Common Stock were issuable upon conversion of the
remaining Convertible Debentures outstanding. The shares of
Class A Common Stock issuable upon the exercise of such
securities (other than the Maxim Warrant and a portion of the
Blau Warrant) should all be freely tradable without restriction.
Exercise or conversion, as the case may be, of a substantial
amount of the Company's presently outstanding warrants or the
Convertible 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. In addition, as of
May 2, 1997, 1997, (i) John J. Shalam owned 3,351,741 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 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. All of such shares (other than the shares subject to the
Shalam Option) may be sold pursuant to Rule 144 under the
Securities Act ("Rule 144"). Also, Mr. Shalam has granted the
Company the Shalam Option to acquire 1,668,875 shares held by Mr.
Shalam. Pursuant to the Debenture Repurchases (as defined
below), 9,667,505 shares of Common Stock have been issued since
October, 1996, increasing the total outstanding number of shares
of Common Stock by 134%. 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. See "Possible
Volatility of Stock Price."
In general, under Rule 144 as currently in effect, any affiliate
of the Company or any person (or persons whose shares are
aggregated in accordance with the Rule) who has beneficially
owned Class A Common Stock which is treated as "Restricted
Securities" (as such term is defined under Rule 144) for at least
one year would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of 1% of the
outstanding shares of Class A Common Stock or the reported
average weekly trading volume in the Class A Common Stock during
the four weeks preceding the date on which notice of such sale
was filed under Rule 144. Sales under Rule 144 are also subject
to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning
the Company. In addition, affiliates of the Company must comply
with the restrictions and requirements of Rule 144 (other than
the one-year holding period requirements) in order to sell Class
A Common Stock that are not Restricted Securities (such as Class
A Common Stock acquired by affiliates in market transactions).
Further, if a period of at least two years has elapsed from the
date Restricted Securities were acquired from the Company or an
affiliate of the Company, a holder of such Restricted Securities
who is not an affiliate at the time of the sale and who has not
been an affiliate for at least three months prior to such sale
would be entitled to sell the shares immediately without regard
to the volume, manner of sale, notice and public information
requirements of Rule 144.
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 of the
Company and President of its cellular subsidiary, Audiovox
Communications Corporation, Charles M. Stoehr, Senior Vice
President and Chief Financial Officer and Patrick Lavelle, Senior
Vice President, Automotive Electronics. 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.
VOTING RIGHTS OF CLASS A COMMON STOCK AND VOTING CONTROL BY
PRINCIPAL STOCKHOLDER
The voting rights of holders of Class A Common Stock 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 3,351,741 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 27.36% 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 of the Company
do 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."
POSSIBLE VOLATILITY OF STOCK PRICE
Since 1991, the market price of the Class A Common Stock has
experienced a high degree of 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 materially
adversely effect the market price of the Class A Common Stock
without regard to the operating performance of the Company.
Also, primarily as a result of the Debenture Repurchases,
9,667,505 additional shares of Common Stock were issued since
October, 1996, increasing the total outstanding number of shares
of Common Stock by 134%. The Company believes that factors such
as quarterly fluctuations in the financial results of the
Company, the significant increase in the number of shares
outstanding, 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 to fluctuate
substantially.
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company has not paid any dividends on the Class A Common
Stock in the past and does not anticipate paying dividends on the
Common Stock at any time in the foreseeable future. Moreover,
the Company's Credit Agreement, as amended on September 10, 1996
(the "Amended Credit Agreement") restricts the Company from
declaring or paying cash dividends on the Class A Common Stock.
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 Shares offered by the Selling Stockholder are not being
sold by the Company, and the Company will not receive any
proceeds from the sale thereof except, if the Shares are sold
prior to 90 days from the effective date of this Prospectus at a
higher price than that paid by the Selling Stockholder for such
Shares, the Company will, as more fully described under the
caption "Plan of Distribution" and as set forth in the Stock
Purchase Agreement, receive from the Selling Stockholder a
payment generally based on the excess of the proceeds received by
the Selling Stockholder in the sale of the Class A Common Stock
over the amount paid by the Selling Stockholder to purchase such
the Shares. See "Plan of Distribution."
SELLING STOCKHOLDER
The Shares covered by this Prospectus were issued to the
Selling Stockholder pursuant to the terms of a Stock Purchase
Agreement. Pursuant to the Stock Purchase Agreement, the Company
has agreed to register the Shares under the Securities Act and to
endeavor to cause the Registration Statement, of which this
Prospectus constitutes a part, to be declared and remain
effective until the earlier of (i) such time as all of the shares
have been sold by the Selling Stockholder, or (ii) 365 days
following the effective date of the Registration Statement. The
following table sets forth information concerning the number of
Shares beneficially owned by the Selling Stockholder which may be
offered from time to time pursuant to this Prospectus. Other
than as a result of the ownership of Class A Common Stock and the
joint venture described below, the Selling Stockholder has not
had any material relationship with the Company within the past
three years. On March 7, 1997, the Company formed Audiovox
Specialized Applications, LLC, a 50% owned equity investment, a
consolidation of the Company's Heavy Duty Sound division, ASA
Electronics and Audiovox Speciality Markets Co. The new company
will market audio, video and security products to the heavy
truck, RV, van, limousine, bus, marine, agricultural and aviation
industries. In connection with such transaction, the Selling
Stockholder purchased the 352,194 shares being offered under this
Prospectus for $2.3 million. Mr. Irions owned 100% of ASA
Electronics prior to the formation of Audiovox Specialized
Applications, LLC and currently owns or controls 50% of Audiovox
Specialized Applications, LLC. The table has been prepared based
upon information furnished to the Company by the Transfer Agent,
by The Depositor Trust Company, and by and on behalf of the
Selling Stockholder.
NUMBER OF
SHARES TO BE PERCENT OF
NUMBER OF SOLD UNDER OUTSTANDING
NAME SHARES OWNED PROSPECTUS SHARES
- ---- -------------- -------------- -------------
Thomas Irions 352,194 352,194 2.0%
Because the Selling Stockholder may offer all, some or none
of the Shares 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 Shares that will be held by the Selling Stockholder after
completion of this Offering, no estimate can be given as to the
number of Shares that will be held by the Selling Stockholder
after completion of this Offering. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the
offering of the Shares by the Selling Stockholder unless, as
described below, the proceeds received by the Selling Stockholder
are subject to adjustment pursuant to the Stock Purchase
Agreement. The Company has been advised by the Selling
Stockholder that the distribution of all or part of the Shares
covered by this Prospectus by the Selling Stockholder may be
effected from time to time on the AMEX, in one or more
transactions, in ordinary brokerage transactions, in negotiated
transactions or otherwise, at market prices prevailing at the
time of the sale, at prices related to such market prices or at
negotiated prices. The Selling Stockholder may effect such
transactions by selling shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the
Selling Stockholder and/or purchases of shares for whom they may
act as agent (which compensation may be in excess of customary
commissions).
There can be no assurance that any of the Shares will be
sold by the Selling Stockholder. To the extent required, the
Shares to be sold hereby, the name of the Selling Stockholder,
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.
Except as described below, the aggregate proceeds to the Selling
Stockholder from the sale of the Shares offered by them hereby
will be the purchase price of such Shares less discounts and
commissions, if any. Such proceeds to be received by the Selling
Stockholder may be subject to the following adjustment as set
forth in the Stock Purchase Agreement: (a) The Company shall pay
the Selling Stockholder for any Market Loss (as defined below)
incurred by the Selling Stockholder with respect to the number of
shares sold by the Selling Stockholder (up to a maximum of 50% of
the Shares) (such shares sold referred to as the "Adjustment
Shares") sold in a bona fide market transaction through the AMEX
to a non-affiliate of the Selling Stockholder (a "Market
Transaction") during the 90 days following the effectiveness of
the Registration Statement (the "Adjustment Period") of which
this Prospectus is a part or (b) the Selling Stockholder shall
pay the Company for any Market Gain (as defined below) with
respect to the Adjustment Shares sold in a Market Transaction
during the Adjustment Period. "Market Loss" means the amount by
which (i) the product of the Adjustment Shares multiplied by the
price paid by the Selling Stockholder to acquire the Shares
pursuant to the Stock Purchase Agreement (such product referred
to as the "Fixed Price Amount"), exceeds (ii) the net proceeds
(i.e., after commissions) received by the Selling Stockholder
from the sale of such Shares sold in the Adjustment Period (such
amount referred to as the "Adjustment Proceeds"). "Market Gain"
shall mean the amount by which the Adjustment Proceeds exceed the
Fixed Price Amount. The Selling Stockholder selling such 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
pursuant to the Stock Purchase Agreement that are applicable to
such Selling Stockholder (including certain indemnification
obligations).
In order to comply with the securities laws of certain
states, if applicable, the Shares offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states, the 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 Stockholder and any broker-dealers, agents or
underwriters that participate with the Selling Stockholder in the
distribution of the 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 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 Stockholder 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 Shares offered hereby by
the Selling Stockholder to the public, other than broker's
commissions and underwriting discounts and commissions and fees
and expenses associated with the Selling Stockholder's legal
counsel.
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 (the "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 May 2,
1997, there were 17,253,533 shares of Class A Common Stock
outstanding. As of May 2, 1997, 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 (as
defined below), Series Preferred Stock (as defined below), the
Blau Warrant (as defined below), the Maxim Warrant (as defined
below) and the Warrants (as defined below) 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, the Maxim
Warrant and the Warrants are contained in their respective
warrant agreements. Reference is made to such Certificate of
Incorporation and, with respect to the Warrants, the warrant
agreement for a detailed description of the provisions thereof
summarized below.
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 88.41% of the shares of both classes outstanding,
and the holders of Class A Common Stock have approximately 43.28%
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. See "Risk Factors - Voting Rights of Class A
Common Stock and Voting Control by Principal Stockholder."
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, New York, New York.
PREFERRED STOCK
PREFERRED STOCK
- ---------------
The Company is authorized to issue up to 50,000 shares of
Preferred Stock (the "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 (the "Series
Preferred Stock"), 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 a warrant (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.
On January 29, 1997, the Company issued a warrant to Harvey
Blau (the "1997 Blau Warrant") to purchase 100,000 shares of
Class A Common Stock at a purchase price of $6.75 per share
(subject to adjustment upon certain events described in the 1997
Blau Warrant). The Blau Warrant is exercisable in whole or in
part from time to time, until January 29, 2002. The Warrant was
issued in consideration of Mr. Blau's consulting services and
advice with regard to the Company's Debenture Exchange.
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 a warrant (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.
OTHER WARRANTS
- --------------
On May 9, 1995 (the "Warrant Closing Date"), the Company
closed an offering of warrants (the "Warrants") pursuant to the
Warrant Agreement between the Company and Continental Stock
Transfer & Trust Company, as Warrant Agent, a copy of which is
included as an exhibit to this Registration Statement, and is
incorporated herein by reference. 1,668,875 warrants (the
"Warrants") were issued with 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 prior to March 15, 2001 (the "Expiration Date"). The
exercise price of each Warrant is $7-1/8 per share (the "Warrant
Exercise Price"). 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.
Each beneficial holder of the Convertible Debentures as of
June 3, 1994 who elected to invest in the Warrants acquired 30
Warrants per $1,000 principal amount of Convertible Debentures
(except for Oppenheimer & Co., Inc., which acquired 25 Warrants
per $1,000 principal amount of Convertible Debentures) held as of
such date in consideration for the delivery by such person of a
release which released the Company, the Initial Purchasers, and
their respective directors, officers, partners, employees and
agents, from liability for any and all potential claims, if any,
such beneficial holder may have against such persons in
connection with such purchaser's investment in the Convertible
Debentures and the offering of the Convertible Debentures.
The Warrants are currently exercisable but may not be
exercised after March 15, 2001, the expiration date of such
Warrants.
The Company filed with the SEC within 300 days of the
Warrant Closing Date of the offering and caused such filing to
become effective within 365 days of the Warrant Closing Date, a
registration statement with respect to the issuance of the
Class A Common Stock underlying the Warrants upon exercise
thereof. The Warrant Exercise Price will also decrease by $1/8
per share of Class A Common Stock should such registration
statement cease 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 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 "Warrant
Registration Default"). 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.
If less than 5% of the Warrants initially issued remain
outstanding, 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.
In connection with the Warrant offering, John J. Shalam,
Chief Executive Officer of the Company, granted the Company the
Shalam Option to purchase 1,668,875 shares of Class A Common
Stock. The Shalam Option Price 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 such 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 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.
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.
SHARES ELIGIBLE FOR FUTURE SALE
As of May 2, 1997, the Company had approximately 13,894,890
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 materially adversely effect the market price of the
Class A Common Stock. As of May 2, 1997, 200,000 shares of Class
A Common Stock were issuable upon exercise of the Blau Warrants
(as defined herein), 50,000 shares of Class A Common Stock were
issuable upon exercise of the Maxim Warrant (as defined herein),
1,668,875 shares of Class A Common Stock were issuable upon
exercise of the Warrants (as defined herein), and 128,192 shares
of Class A Common Stock were issuable upon conversion of the
Convertible Debentures. The shares of Class A Common Stock
issuable upon the exercise of such securities (other than the
Maxim Warrant) should all be freely tradable without restriction.
Exercise or conversion, as the case may be, of a substantial
amount of the Company's presently outstanding warrants or the
Convertible 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. In addition, as of
May 2, 1997, (i) John J. Shalam owned 3,351,741 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 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. All of such
shares (other than the shares subject to the Shalam Option) may
be sold pursuant to Rule 144 under the Securities Act
("Rule 144"). Also, Mr. Shalam has granted the Company the
Shalam Option to acquire 1,668,875 shares held by Mr. Shalam.
Pursuant to the Debenture Repurchases (as defined below),
9,667,505 shares of Common Stock have been issued since October,
1996, increasing the total outstanding number of shares of Common
Stock by 134%. 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. See "Possible Volatility of
Stock Price."
In general, under Rule 144 as currently in effect, any
affiliate of the Company or any person (or persons whose shares
are aggregated in accordance with the Rule) who has beneficially
owned Class A Common Stock which is treated as "Restricted
Securities" (as such term is defined under Rule 144) for at least
one year would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of 1% of the
outstanding shares of Class A Common Stock or the reported
average weekly trading volume in the Class A Common Stock during
the four weeks preceding the date on which notice of such sale
was filed under Rule 144. Sales under Rule 144 are also subject
to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning
the Company. In addition, affiliates of the Company must comply
with the restrictions and requirements of Rule 144 (other than
the one-year holding period requirements) in order to sell Class
A Common Stock that are not Restricted Securities (such as Class
A Common Stock acquired by affiliates in market transactions).
Further, if a period of at least two years has elapsed from the
date Restricted Securities were acquired from the Company or an
affiliate of the Company, a holder of such Restricted Securities
who is not an affiliate at the time of the sale and who has not
been an affiliate for at least three months prior to such sale
would be entitled to sell the shares immediately without regard
to the volume, manner of sale, notice and public information
requirements of Rule 144.
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 as of November 30, 1996 and 1995, and for each of the
years in the three year period ended November 30, 1996, 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, 1996, 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 6
Risk Factors 8
The Company 19
Use of Proceeds 19
Selling Stockholder 19
Plan of Distribution 20
Description of Capital Stock 22
Shares Eligible for Future Sale 30
Legal Matters 32
Experts 32
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 Shares being registered. All
amounts are estimates except the registration fee and the AMEX
listing fee.
Commission registration fee.......................... $ 6,938
AMEX Listing Fee..................................... 13,500
Legal fees and expenses.............................. 25,000
Transfer Agent's fees................................ 2,500
Accounting fees and expenses......................... 10,000
Miscellaneous........................................ 62
Total...................................... $58,000
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).
In the Stock Purchase Agreement, the Selling Stockholder has
agreed to indemnify the Company, its directors, officers and any
persons controlling the Company, from and against any and all
losses, claims, damages, judgments, liabilities and expenses
(including the reasonable fees and expenses of counsel and other
reasonable expenses in connection with investigating, defending
or settling any such action or claim) as they are incurred
arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in this
Registration Statement or the Prospectus included herein, or any
supplement or amendment thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but only with respect to information
relating to the Selling Stockholder furnished to the Company in
writing by such Selling Stockholder expressly for the use in this
Registration Statement or the Prospectus included herein, or any
supplement or amendment thereto or for any losses arising out of
any misstatement or omission contained in a Prospectus delivered
by the Selling Stockholder and which the Company has advised such
Selling Stockholder that such Prospectus contains a misstatement
or omission or that a Disadvantageous Condition (as defined in
the Stock Purchase Agreement) exists and that such Prospectus
shall not be used until the Selling Stockholder has been advised
by the Company.
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)).
*4(b) Amendment to the Certificate of Incorporation
(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
(incorporated by reference to Exhibit 99(c) to
the Registration Statement on Form S-3, dated
May 2, 1996, File No. 333-00811).
** 99(d) Stock Purchase Agreement, dated as of March 7,
1997, between Audiovox Corporation and Thomas
Irions.
* Incorporated by reference.
** Previously filed.
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) (Section 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 registration statement is on Form S-3 (Section 239.13 of this
chapter) or Form S-8 (Section 239.16b of this chapter), and 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.
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, 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. 1 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 15 th day of May, 1997.
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. 1 to the Registration Statement has been
signed below by the following persons in the capacities indicated
on this 15 th day of May, 1997.
Name Title Date
* President and Chief May 15, 1997
- ----------------- Executive Officer, Director
John J. Shalam
/s/Charles M. Stoehr Senior Vice President and May 15, 1997
- -------------------- Chief Financial Officer
Charles M. Stoehr (Principal Accounting
Officer), Director
* Vice President, Marketing, May 15, 1997
- --------------- Director
Ann Boutcher
* Executive Vice President, May 15, 1997
- --------------------- Director
Philip Christopher
Director
- ----------------
Irving Halevy
Director
- ----------------------
Paul C. Kreuch, Jr.
* Senior Vice President, May 15, 1997
- ------------------ Automotive Electronics,
Patrick Lavelle Director
* Vice President, MIS, May 15, 1997
- ----------------- Director
Richard Maddia
Director
- ----------------
Gordon Tucker
*By: /s/ Charles M. Stoehr
---------------------
Charles M. Stoehr
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
May 15, 1997
