As filed with the Securities and Exchange Commission on July 13, 1995
Registration No. 33-53519
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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Audiovox Corporation
(Exact Name of Registrant as Specified in its Charter)
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Delaware
(State or Other Jurisdiction of Incorporation or Organization)
13-1964841
(I.R.S. Employer Identification Number)
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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)
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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)
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Please send copies of all communications to:
Robert S. Levy, Esq.
Levy & Stopol, LLP
One Pennsylvania Plaza, 49th Floor
New York, New York 10119
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Approximate date of commencement of proposed sale to public: From time to
time after the effective date of the Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-----------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED JULY 13, 1995
PROSPECTUS
$65,000,000
3,772,317 Shares
AUDIOVOX CORPORATION
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2001
(Interest payable March 15 and September 15)
Class A Common Stock, par value $.01 per share
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This Prospectus relates to the resale of $65,000,000 aggregate
principal amount of 6 1/4% Convertible Subordinated Debentures due 2001 (the
"Debentures") of Audiovox Corporation, a Delaware corporation (the "Company"),
issued in a private placement on March 15, 1994 (the "Debenture Offering"), and
the resale of up to 3,672,317 shares of the Class A Common Stock, par value $.01
per share (the "Class A Common Stock"), of the Company which are initially
issuable upon conversion of Debentures by any holders of Debentures that did
not purchase the Debentures under the Registration Statement (of which this
Prospectus is a part). The Registration Statement (of which this Prospectus is a
part) does not cover the issuance of shares of Class A Common Stock upon
conversion of the Debentures into shares of Class a Common Stock. This
Prospectus also relates to the resale of 100,000 shares of Class A
Common Stock (the "Blau Warrant Shares") initially issuable upon
exercise of an outstanding warrant, dated April 1, 1993 (the "Blau Warrant"),
issued by the Company. The Blau Warrant Shares may be resold from time to
time after the Blau Warrant is exercised. The Debentures and such shares of
Class A Common Stock issued upon conversion of the Debentures may be
offered from time to time for the accounts of holders of Debentures named
herein (the "Selling Securityholders"). See "Plan of Distribution."
Information concerning the Selling Securityholders may change from time to
time and will be set forth in Supplements to this Prospectus. The Company will
not receive any proceeds from the offering of the Debentures or the shares of
Class A Common Stock issuable upon conversion thereof.
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The aggregate principal amount of Debentures that may be offered by the
Selling Securityholders pursuant to this Prospectus is $65,000,000. As of the
date of this Prospectus, the aggregate principal amount of Debentures
outstanding is $65,000,000.
The Blau Warrant is exercisable, in whole or in part, at any time on or
prior to December 31, 1998 at an initial exercise price of $7.50 per share,
subject to adjustment under certain circumstances. The Debentures are
convertible at any time prior to maturity, unless previously redeemed, into
shares of Class A Common Stock at an initial conversion price of $17.70 per
share (equivalent to an initial conversion rate of approximately 56.4972 shares
per $1,000 principal amount of Debentures), subject to adjustment under certain
circumstances. The outstanding Class A Common Stock is traded on the American
Stock Exchange (Symbol: "VOX"). On June 28, 1995, the last reported sale price
of the Class A Common Stock on the American Stock Exchange was $45/8 per share.
Interest on the Debentures is payable on March 15 and September 15 of
each year. The Debentures are not redeemable by the Company prior to March 15,
1997. On or after March 15, 1997, the Debentures are redeemable, in whole or in
part, at the option of the Company on at least 30 days' prior written notice, at
the redemption prices set forth herein, plus accrued interest and certain
payments made to holders of the Debentures and shares of Class A Common Stock
issued in exchange thereof where the Company has failed to meet certain
obligations under the Registration Rights Agreement between the Company and
Oppenheimer & Co., Inc., Furman Selz Incorporated and Chemical Securities Inc.,
the initial purchasers of the Debentures (the "Initial Purchasers") in the
Debenture Offering ("Liquidated Damages"), if any, until March 15, 2000, and
thereafter at par, plus accrued interest and Liquidated Damages, if any, all in
accordance with the terms of the Indenture governing the Debentures (the
"Indenture"). The Debentures are redeemable at the option of the holder upon the
occurrence of a Risk Event or a Redemption Event (as each such term is
hereinafter defined) at 101% of the principal amount thereof, plus accrued
interest and Liquidated Damages, if any. The Debentures are unsecured
obligations of the Company and are subordinated in the right of payment to all
Senior Indebtedness (as such term is hereinafter defined). As of May 31, 1995,
the total amount of Senior Indebtedness outstanding was approximately $52.9
million. See "Description of the Debentures."
Prior to this Offering, there has not been any public market for the
Debentures, although the Debentures have been eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
Market. The Company has applied for listing of the Debentures and the underlying
shares of Class A Common Stock on the American Stock Exchange (the "AMEX"). The
Company has been informed by the AMEX that the Debentures and the underlying
shares of Class A Common Stock will be listed on the AMEX upon effectiveness of
the Registration Statement (of which this
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Prospectus is a part). Oppenheimer & Co., Inc. has advised the Company that
it presently intends to make a market in the Debentures. Oppenheimer & Co.,
Inc., however, is not obligated to do so and any such market-making may be
discontinued at any time without notice, in the sole discretion of Oppenheimer &
Co., Inc. No assurance can be given that any market for the Debentures will
develop or be maintained.
SEE "RISK FACTORS" ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CAREFULLY CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The Company has been advised by the Selling Securityholders that the
Selling Securityholders, acting as principals for their own account, directly,
through agents designated from time to time, or through dealers or underwriters
also to be designated, may sell all or a portion of the Debentures or shares of
Class A Common Stock which may be offered hereby by them from time to time on
terms to be determined at the time of sale. The aggregate proceeds to the
Selling Securityholders from the sale of Debentures and Class A Common Stock
which may be offered hereby by the Selling Securityholders will be the
purchase price of such Debentures or Class A Common Stock less commissions, if
any. For information concerning indemnification arrangements between the Company
and the Selling Securityholders, see "Plan of Distribution."
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or shares of Class A Common Stock may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Class A Common Stock purchased by them may be deemed to
be underwriting commissions or discounts under the Securities Act.
________________
The date of this Prospectus is July 13, 1995
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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 "SEC") . Such reports and other information may be
inspected and copied at the public reference facilities maintained by the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the SEC's
Regional Offices located at 7 World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material can be obtained from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates. The Company's outstanding Class A Common Stock is listed on the American
Stock Exchange, and such reports and other information can also be inspected at
the offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
The Company has filed with the SEC a registration statement on Form S-3
(such registration statement, together with all amendments and exhibits thereto,
being hereinafter referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
under the Securities Act of the Debentures and shares of Class A Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. Reference is hereby made
to the Registration Statement for further information with respect to the
Company and the securities offered hereby. Statements contained herein
concerning the provisions of documents filed as exhibits to the Registration
Statement are necessarily summaries of such documents, and each such statement
is qualified in its entirety by reference to the copy of the applicable document
filed with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus: (i)
the Company's Annual Report on Form 10-K for the fiscal year ended November 30,
1994; (ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended
February 28, 1995 and May 31, 1995; (iii) the Company's Current Report on Form
8-K dated May 31, 1995; (iv) the Company's Current Report on Form 8-K dated June
5, 1995; and (v) the description of the Company's Class A Common Stock contained
in the Company's Registration Statement on Form 8-A dated May 21, 1987, all of
which have been filed with the SEC (File No. 1-9532).
The Company also incorporates herein by reference all documents and
reports subsequently filed by the Company with the SEC pursuant to Section
13(a), 13(c), 14 or
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15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of this offering. Such documents and reports shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded, except as so modified or superseded, shall not be deemed to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents unless they are specifically incorporated
by reference into such documents. Requests for such copies should be directed
to: Chris L. Johnson, Secretary, Audiovox Corporation, 150 Marcus Boulevard,
Hauppauge, New York 11788, telephone 516-231-7750.
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this Prospectus and in the documents incorporated herein by reference.
The Company
Audiovox Corporation (together with its subsidiaries, the "Company")
designs and markets cellular telephones and accessories, automotive aftermarket
sound and security equipment, other automotive aftermarket accessories, and
certain other products. The Company's corporate headquarters is located at 150
Marcus Boulevard, Hauppauge, New York 11788, and its telephone number at that
address is 516-231-7750.
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The Offering
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Securities Offered......................... The resale of $65,000,000 aggregate principal amount of 6 1/4%
Convertible Subordinated Debentures due 2001 (the "Debentures") and
the resale of up to 3,672,317 shares of Class A Common Stock, par
value $.01 per share, of the Company (the "Class A Common Stock")
issuable upon conversion thereof by any holders of Debentures that
did not purchase the Debentures under the Registration Statement (of
which this Prospectus is a part)) to be offered by the selling
securityholders named herein (the "Selling Securityholders"), and
the resale of 100,000 shares (the "Blau Warrant
Shares") of Class A Common Stock to be issued by the Company upon
exercise of an outstanding warrant, dated April 1, 1993 (the "Blau
Warrant"). The Registration Statement does not cover the issuance of
shares of Class A Common Stock conversion of the Debentures into
shares of Class A Common Stock.
Interest Payment Dates of
Debentures................................. March 15 and September 15.
Conversion of Debentures................... Convertible into shares of Class A Common Stock at any time prior to
maturity, unless previously redeemed, in whole or in part, at $17.70
per share, subject to adjustment under certain circumstances as
described herein (the "Conversion Price"). Debentures called for
redemption are convertible up to and including the date fixed for
redemption.
Optional Redemption of Debentures.......... Nonredeemable prior to March 15, 1997. Redeemable on or after March
15, 1997, in whole or in part, at the option of the Company on at
least 30 days' prior written notice, at a redemption price of
103.12% of the principal amount plus accrued interest and
Liquidated Damages, if any, declining annually to par plus
accrued interest and Liquidated Damages, if any, on March 15, 2000.
</TABLE>
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Purchase of Debentures at Option of
Debentureholder Upon Risk Event or
Redemption Event........................... In the event of the occurrence of a Risk Event or a Redemption Event
(as each such term is hereinafter defined), Holders (as such term is
defined in the Indenture governing the Debentures (the "Indenture"))
may require the Company to purchase all or a portion of their
Debentures at 101% of their principal amount, plus accrued
interest and Liquidated Damages, if any, to the date of purchase.
However, such rights of Holders will be effectively precluded for
at least two years from May 5, 1995 by agreements between the Company
and holders of Senior Indebtedness (as such term is defined in the
Indenture) of the Company. In general, the following events
constitute a Risk Event: (i) substantially all of the Company's
assets are sold to any person; (ii) a plan relating to the liquidation
or dissolution of the Company is adopted; or (iii) any person other
than John J. Shalam and/or his affiliates and associates becomes
the beneficial owner of a majority in interest of the voting power of
the Company. In general, a Redemption Event will be deemed to
have occurred at such time as the Class A Common Stock (or other
securities into which the Debentures are then convertible) is
not listed for trading on a United States national securities exchange
or on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"). The
foregoing provisions would not necessarily protect Holders of
Debentures in the event of highly leveraged or other transactions
involving the Company that may adversely affect Holders of
Debentures.
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Subordination of Debentures................ The Debentures are subordinated in right of payment to all existing
and future Senior Indebtedness of the Company and effectively
subordinated to all liabilities of the Company's Subsidiaries (as
such term is defined in the Indenture). The Indenture does not
include any covenants limiting or restricting the Company's or its
Subsidiaries' ability to incur any additional indebtedness. As of May
31, 1995, the total amount of outstanding Senior Indebtedness of the
Company was approximately $52.9 million.
Selling Securityholders.................... The Debentures were issued by the Company to Oppenheimer & Co., Inc.,
Furman Selz Incorporated and Chemical Securities Inc. (the "Initial
Purchasers") on March 15, 1994 (the "Closing Date") pursuant to a
private placement, and were acquired by the Selling Securityholders
(other than the Initial Purchasers) in connection with resale
transactions with the Initial Purchasers pursuant to Rule 144A and
Regulation S under the Securities Act or from other holders acquiring
such Debentures from prior holders thereof. In the case of
Oppenheimer & Co., Inc., the Debentures were acquired from both the
Company and third parties in the market. See "Selling
Securityholders."
Registration Rights Agreement.............. Pursuant to the Registration Rights Agreement between the Company
and the Initial Purchasers, the Company has agreed to file with
the SEC on or prior to the date 90 days after the Closing
Date, a shelf registration statement(the "Shelf Registration
Statement") under the Securities Act to cover resales of
Transfer Restricted Securities (as defined below) by the holders
thereof who satisfy certain conditions relative to the provision
of information in connection with the Shelf Registration Statement.
For purposes of the foregoing, "Transfer Restricted Securities"
means each Debenture and share of Class A Common Stock issued upon
conversion thereof until the date on which such Debenture or share
of Class A Common Stock has been effectively registered under the
Securities Act
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and disposed of in accordance with the Shelf Registration Statement,
or the date on which such Debenture or share of Class A Common
Stock is distributed to the public pursuant to Rule 144 promulgated
under the Securities Act or is salable pursuant to Rule 144(k)
promulgated under the Securities Act (or any similar provisions then
in force) or is otherwise freely tradable. The Company agreed to
use its best efforts to cause such Shelf Registration Statement
to be declared effective on or prior to the date 180 days after the
Closing Date and use its best efforts to keep such Shelf
Registration Statement continuously effective, subject to certain
conditions, for a period of three years following the date such Shelf
Registration Statement is declared effective under the Securities Act
or such shorter period that will terminate when all of the Transfer
Restricted Securities covered by the Shelf Registration Statement
shall cease to be Transfer Restricted Securities. Failure to have
the Shelf Registration Statement declared effective or to again
become effective, as the case may be, within the specified time
period (a "Registration Default") will result in the Company being
required to pay Liquidated Damages, as described below.
Liquidated Damages......................... Pursuant to the Registration Rights Agreement between the Company and
the Initial Purchasers, the Company agreed to pay Liquidated Damages
to each Debentureholder if, among other things, the Shelf Registration
Statement had not been declared effective by the SEC within 180 days
after the Closing Date. The amount of Liquidated Damages resulting from
such Registration Default in connection with the Debentures is,
for the first 90 days after the Registration Default, equal to $0.05
per week per $1,000 principal amount of Debenture, and increases for
each 90-day period thereafter by an additional $0.05 per week per
$1,000 principal amount of Debentures up to a maximum of $0.25 per
week per $1,000 principal amount of Debenture. As of June 30,
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1995, the Company was paying Liquidated Damages of $.20 per week per
$1,000 principal amount of Debentures or an equivalent additional
interest payment of approximately 0.78% per annum. Once this Shelf
Registration Statement becomes effective, the Company will no
longer be required to pay Liquidated Damages.
Risk Factors............................... For a discussion of certain factors that should be carefully
considered in connection with an investment in the securities
offered hereby, including possible United States trade
sanctions, see "Risk Factors" on page 11.
American Stock Exchange
Symbol of Class A Common
Stock...................................... VOX
Proposed American Stock
Exchange Symbol for
Debentures................................. VOXA
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RISK FACTORS
The following factors should be carefully considered, together with the
other information in this Prospectus and the documents incorporated by reference
herein, in evaluating an investment in the securities offered hereby.
History of Losses. The Company reported net losses of approximately
$1,554,000, $3,192,000, and $14,658,000 for the fiscal years ended November 30,
1989, 1990 and 1991, respectively. These losses were primarily attributable to
both operating losses and to charges incurred in connection with the
restructuring of the Company's operations and the cessation of operations of two
unsuccessful ventures, Hermes Telecommunications, Inc. ("Hermes") (a
majority-owned subsidiary) and Park Plus Corp. ("Park Plus") (a 50% owned joint
venture). Such charges included costs incurred in the closing of certain sales
and distribution facilities, write-downs of assets associated with the Hermes
and Park Plus product lines, employee termination expenses and certain other
charges. During the fiscal years ended November 30, 1989, 1990 and 1991,
earnings were insufficient to cover fixed charges by approximately $2,642,000,
$4,792,000 and $15,098,000, respectively. See "Coverage Ratios." Although the
Company was profitable for the fiscal years ended November 30, 1992, 1993 and
1994, there can be no assurance that it will continue to operate profitably, or
have earnings or cash flow sufficient to cover its fixed charges. For the six
months ended May 31, 1995, the Company reported a net loss of $3.2 million which
was primarily attributable to a charge of $2.9 million for a private placement
of warrants. See "Description of Capital Stock -- Other Warrants" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Form 10-Q dated May 31, 1995.
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. 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
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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. More recently, the U.S. government has announced
its intention to impose sanctions on certain automobiles imported from Japan
because of the continuing inability to gain access to the Japanese market for
specific U.S. products. Though the Company is not affected by these proposed
sanctions it is indicative of the continued trade issues between the U.S. and
Japan.
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 1992, 1993 and 1994 and the first six months of fiscal 1995,
the Company purchased 94.6%, 89.7%, 91.8% and 76.8%, respectively, of its total
dollar amount of cellular product purchases from Japanese suppliers, and
revenues from cellular products from Japanese suppliers comprised 46.6%, 46.3%,
47.8% and 51.5%, 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 90 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
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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 extension of "most favored nation" trade
status for China. 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 June 28, 1995 was 85.90 yen; over the five years preceding that date the
value of the United States dollar ranged from 159.85 yen to 80.15 yen.
A decrease in the value of the United States dollar relative to a
foreign currency increases the cost in United States dollars of products which
the Company purchases from foreign manufacturers. Such an increase could reduce
the Company's margins or make the Company's products less price competitive. No
assurance is given that, if the value of the United States dollar continues to
decrease relative to the yen, because of potential trade sanctions or otherwise,
the Company will be able to competitively obtain or market the products it
purchases from Japanese sources.
Dependence on Foreign Suppliers. The Company's business is dependent
upon its suppliers' continuing to provide it with adequate quantities of salable
product on a timely basis and on competitive pricing terms. Substantially all of
the Company's products are imported from suppliers in the Pacific Rim. There are
no agreements in effect that require any manufacturer to supply the Company with
product. Accordingly, there can be no assurance that the Company's relationships
with its suppliers will continue as presently in effect. The loss of any
significant supplier, substantial price increases imposed by any such supplier
or the inability to obtain sufficient quantities of product on a timely basis,
could have a material adverse effect on the Company's financial condition and
results of operations.
The Company's arrangements with its suppliers are subject to the risks
of purchasing products from foreign suppliers, including risks associated with
economic and/or political instability in countries in which such suppliers are
located, and risks
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associated with potential import restrictions, currency fluctuations, foreign
tax laws, import/export regulations, tariff, duty and freight rates and work
stoppages. These risks may be increased in the Company's case by the
concentration of its purchases of cellular products from suppliers in
Japan and China. In addition, the Company may be subject to risks associated
with the availability of and time required for the transportation of products
from foreign countries. Because of the Company's dependence on such foreign
suppliers, the Company is required to order products further in advance of
customers' orders than would be the case if its products were manufactured
domestically.
Dependence on Toshiba. Since 1984, Toshiba has been the principal
supplier of cellular telephone products to the Company, accounting for
approximately 86.4%, 83.7%, 83.7% and 73.7% of the total dollar amount of the
Company's cellular product purchases and approximately 48.0%, 46.9%, 45.5% and
49.8% of the total dollar amount of all product purchases by the Company in
fiscal 1992, fiscal 1993, fiscal 1994 and the first six months of fiscal 1995,
respectively. During fiscal 1992 and 1993, the Company was the sole distributor
of Toshiba cellular telephone products in the United States. In 1994, Toshiba
began to compete directly with the Company in the United States by marketing
cellular telephone products through Toshiba's United States distribution
subsidiary. The Company anticipates that Toshiba will continue to sell products
to the Company as an original equipment customer; however, there is no agreement
in effect that requires Toshiba to supply the Company with products, and there
can be no assurance that Toshiba will continue to supply products to the Company
or that any products supplied will be competitive with others in the market. In
that regard, products that Toshiba develops for its distribution subsidiary may
be similar or superior to those which it sells to the Company. Such direct
competition from Toshiba could have a material adverse effect on the Company's
financial condition and results of operations.
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.
-14-
<PAGE>
Impact of Elimination of Management Fees from and Reduction in Equity
in CellStar; Sale of CellStar Common Stock. For the fiscal years ended November
30, 1991, 1992 and 1993, approximately $4,825,000, $5,124,000 and $5,147,000,
respectively, of the Company's income was generated by management fees and
equity in undistributed earnings from the operations of CellStar Corporation
("CellStar"), a 50% owned joint venture. In December 1993, CellStar completed
the initial public offering (the "CellStar Offering") of CellStar common stock,
par value $.01 per shares ("CellStar Common Stock"). In connection with the
CellStar Offering, the Company sold 2,875,000 of its 6,750,000 shares of
CellStar Common Stock. After the CellStar Offering, the Company owned 20.88% of
the issued and outstanding CellStar Common Stock and stopped accruing such
management fees in July, 1993; however, the Company was entitled to its portion
of the income from the equity in undistributed earnings of CellStar, if any, for
such time as the Company continued to own at least 20% of CellStar's outstanding
common stock. If the CellStar Offering had occurred on November 30, 1992, this
accounting treatment would have resulted in net earnings being reduced by
approximately $1,692,000 for the fiscal year ended November 30, 1993.
On June 2, 1995, the Company sold 1,500,000 shares of CellStar Common
Stock to Alan H. Goldfield, President of CellStar, for $11.50 per share upon
exercise of an option for such shares by Mr. Goldfield. As a result thereof, the
Company's ownership percentage in CellStar was reduced below 20% and will no
longer account for its investment in CellStar under the equity method of
accounting. On a pro forma basis, this change would have decreased pretax
earnings for fiscal 1994 and the six months ended May 31, 1995 by approximately
$3,393,000 and $2,046,000, respectively. There can be no assurance that income
from other sources will offset the loss of this income from CellStar. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Form 10-Q dated May 31, 1995.
Competition. The Company operates in a highly competitive environment
and believes that such competition will intensify in the future. Many of the
Company's competitors are larger and have greater capital and management
resources than the Company. Competition often is based on price, and therefore
wholesale distributors and retailers, including the Company, generally operate
with low gross margins. The Company also is affected by competition between
cellular carriers. Increased price competition relating not only to cellular
telephone products, but also to services provided by the Company to retail
customers on behalf of cellular carriers, may result in downward pressure on the
Company's gross margins (including that resulting from the loss of residual fees
attributable to customers who change cellular carriers) and could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's cellular products compete principally with
cellular telephones supplied by Motorola, Inc., Nokia Mobile Phones, Inc.,
Fujitsu Network
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<PAGE>
Transmission Systems, Inc., Oki Electric Industry Co., Nippon Electric
Corp. and Toshiba. The Company's non-cellular products compete with
other suppliers including Matsushita Electric Corp., Sony Corp. of America,
Directed Electronics, Inc. and Code Alarm, Inc., as well as divisions of
well-known automobile manufacturers. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" of the Form 10-Q dated May 31,
1995.
Risk of Inventory Obsolescence and Technological Change. The markets in
which the Company competes are characterized by rapid technological change,
frequent new product introductions, declining prices and intense competition.
The Company's success depends in large part upon its ability to identify and
obtain products necessary to meet the demands of the marketplace. There can be
no assurance that the Company will be able to identify and offer products
necessary to remain competitive. The Company maintains a significant investment
in its product inventory and, therefore, is subject to the risk of inventory
obsolescence. If a significant amount of inventory is rendered obsolete, the
Company's business and operating results would be materially and adversely
affected. Alternative technologies to cellular, including enhanced specialized
mobile radio ("ESMR") and personal communications service ("PCS"), may reduce
the demand for cellular telephone products. The implementation of communications
systems based upon any of these or other technologies could materially change
the types of products sold by the Company and the service providers with whom
the Company presently does business. Competing communications technologies also
may result in price competition which could result in lower activation
commission or residual fee rates payable to the Company and could have a
material adverse effect on the financial condition and results of operations of
the Company. From time to time, cellular carriers' technological limitations may
result in a shortage of available cellular phone numbers, which could have the
effect of inhibiting sales of the Company's cellular products.
Possible Health Risks From Cellular Telephones. There have been
lawsuits filed (including one such lawsuit against the Company and others) in
which claims have been made alleging a link between the non-thermal
electromagnetic field emitted by portable cellular telephones and the
development of cancer, including brain cancer. To date, there have been
relatively few medical studies relating to cellular telephones and the effects
of non-thermal electromagnetic fields on health, nor are there any widely
accepted theories regarding how exposure to a non-thermal electromagnetic field,
such as the type emitted by a portable cellular telephone, could affect living
cells or threaten health. The scientific community is divided on whether there
is any risk associated with the use of portable cellular telephones and the
magnitude of any such risk. There can be no assurance that medical studies or
other findings, or continued litigation in this area, will not have a material
adverse impact upon the financial condition and results of operations of the
cellular telephone industry and the Company.
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<PAGE>
Risks Attributable to Foreign Sales. For the fiscal years ended
November 30, 1992, 1993 and 1994 and the six months ended May 31, 1995,
approximately 12.4%, 12.6%, 13.8% and 18.5%, respectively, of the Company's net
sales were generated from sales in Canada, Europe, Latin America, Asia, the
Middle East and Australia. Foreign sales are subject to political and economic
risks, including political instability, currency controls, exchange rate
fluctuations, increased credit risks, foreign tax laws, changes in import/export
regulations and tariff and freight rates. Political and other factors beyond the
control of the Company, including trade disputes among nations or internal
instability in any nation where the Company sells products, could have a
material adverse effect on the financial condition and results of operations of
the Company.
Risk 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 May 31, 1995, the Company had
outstanding total interest bearing indebtedness of approximately $141.3 million
and a total debt-to-total capital ratio of .61 to 1. Although a portion of the
net proceeds from the sale of the Debentures and the CellStar Offering was used
to retire a significant portion of the Company's existing indebtedness, the
Company continues to have substantial annual fixed debt service requirements
including those attributable to the Company's Series AA 10.80% Convertible
Debentures due February 9, 1996 (the "Series AA Convertible Debentures") and
Series BB 11.00% Convertible Debentures due February 9, 1996 (the "Series BB
Convertible Debentures"), the Debentures and the Company's Credit Agreement, as
amended in May, 1995 (the "Second Amended and Restated Credit Agreement"). The
ability of the Company to make principal and interest payments under the
Company's long-term indebtedness and bank loans will be dependent upon the
Company's future performance, which is subject to financial, economic and other
factors affecting the Company, some of which are beyond its control. There can
be no assurance that the Company will be able to meet its fixed charges as such
charges become due. See " -- History of Losses."
Subordination of Debentures. The Debentures are effectively
subordinated to all current and future Senior Indebtedness of the Company and
its subsidiaries. Senior Indebtedness includes all indebtedness of the Company,
whether existing on or created or incurred after the date of issuance of the
Debentures, that is not made subordinate to or
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<PAGE>
pari passu with the Debentures by the instrument creating the indebtedness.
Since the Debentures contain no restrictions on the incurrence of further
indebtedness, the Company would be permitted to incur additional subordinated
or Senior Indebtedness. See "Descriptions of the Debentures--Subordination."
Restrictive Covenants. The Second Amended and Restated Credit Agreement
contains certain restrictive covenants which impose prohibitions or limitations
on the Company with respect to, among other things, (i) the ability to make
payments of principal, interest or premium on, subordinated indebtedness of the
Company, (ii) the incurrence of indebtedness, (iii) capital expenditures, (iv)
the creation or incurrence of liens, (v) the declaration or payment of dividends
or other distributions on, or the acquisition, redemption or retirement of, any
shares of capital stock of the Company and (vi) mergers, consolidations and
sales or purchases of substantial assets, and require that the Company satisfy
certain financial tests and maintain certain financial ratios. Failure to comply
with such covenants could result in a default under the Second Amended and
Restated Credit Agreement which could have a material adverse effect on the
financial condition and results of operations of the Company.
Absence of Existing Market for the Debentures. Prior to this Offering,
there has not been any public market for the Debentures, although the Debentures
have been eligible for trading through PORTAL. There can be no assurance that an
active trading market for the Debentures will develop or, if such market
develops, as to the liquidity or sustainability of such a market. Oppenheimer
& Co., Inc. has informed the Company that it intends to make a market in the
Debentures; however, Oppenheimer & Co., Inc. is not obligated to do so and any
such market-making activity may be terminated at any time without notice to the
holders of the Debentures. In addition, such market-making activity will be
subject to the limits of the Securities Act. Accordingly, no assurance can be
given that a holder of the Debentures or the underlying Class A Common Stock
will be able to sell such Debentures or the underlying Class A Common Stock in
the future or as to the price at which any sale may occur.
Possible Volatility of Stock Price. Since 1991, the market price of the
Class A Common Stock has experienced a high degree of volatility. There can be
no assurance that such volatility will not continue or become more pronounced.
In addition, recently the stock market has experienced, and is likely to
experience in the future, significant price and volume fluctuations which could
adversely affect the market price of the Class A Common Stock without regard to
the operating performance of the Company. The Company believes that factors such
as quarterly fluctuations in the financial results of the Company or its
competitors and general conditions in the industry, the overall economy and the
financial markets could cause the price of the Class A Common Stock to fluctuate
substantially.
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<PAGE>
Shares Eligible for Future Sale; Dilution. The Company has
approximately 3,406,326 shares of Class A Common Stock held by members of the
public that are able to trade without restriction. Sales of a substantial number
of additional shares of Class A Common Stock in the public market could
adversely affect the market price of the Class A Common Stock. As of June 28,
1995, 3,672,317 shares of Class A Common Stock were issuable upon conversion of
the Debentures, 1,023,028 shares of Class A Common Stock were issuable upon
conversion of the Series AA Convertible Debentures and Series BB Convertible
Debentures, 100,000 shares of Class A Common Stock were issuable upon exercise
of the Blau Warrant, 50,000 shares of Class A Common Stock were issuable upon
exercise of the warrant issued to James Maxim (the "Maxim Warrant") and
1,668,875 shares of Class A Common Stock were issuable upon exercise of certain
warrants issued in a private placement that closed on May 9, 1995 (the
"Warrants"). Exercise or conversion, as the case may be, of a substantial amount
of the company's presently outstanding warrants, the Debentures, the Series AA
Convertible Debentures or the Series BB Convertible Debentures or sale of the
Class A Common Stock underlying such debentures or warrants also could adversely
affect the market price of the Class A Common Stock, due to the large number of
shares issuable upon conversion or exercise of such debentures or warrants in
comparison to the relatively small number of shares held by members of the
public that are able to trade without restriction. The Company has granted the
holders of the Series AA Convertible Debentures, the Series BB Convertible
Debentures and the warrants certain registration rights relating to the Class A
Common Stock issuable upon conversion or exercise of such debentures or
warrants, as the case may be. In addition, as of June 28, 1995, (i) John J.
Shalam, President and Chief Executive Officer of the Company, owned 3,366,762
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 the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of the Company owned 4,700 shares of
Class A Common Stock and 377,756 shares of Class B Common Stock, which are
convertible into an equal number of shares of Class A Common Stock. Sales by
such persons of a substantial number of shares of Class A Common Stock or Class
B Common Stock (collectively, "Common Stock") could adversely affect the market
price of the Class A Common Stock.
John J. Shalam, Chief Executive Officer of the Company, granted the
Company an option (the "Shalam Option") to purchase 1,668,875 shares of Class A
Common Stock. The purchase price per share of the Class A Common Stock (the
"Shalam Option Price") is equal to the sum of (a) the Warrant exercise price of
$71/8 plus (b) an additional amount intended to reimburse Mr. Shalam for any
additional taxes per share required to be paid
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<PAGE>
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 rather than as a payment to Mr. Shalam for the
sale of his Class A Common Stock to the Company pursuant to the Shalam Option.
See "Description of Capital Stock--Other Warrants."
The independent members of the Board of Directors may elect not to
exercise the Shalam Option in whole or in part in connection with the exercise
of Warrants if such board members believe it is in the best interests of the
Company not to exercise all or part of the Shalam Option. The decision by the
independent members of the Board of Directors not to exercise the Shalam Option,
in whole or in part, would result in an increase in the number of shares of
Class A Common Stock outstanding and available for future sale and could result
in dilution to the holders of Common Stock.
Dependence on Existing Management. The continued success of the Company
is substantially dependent on the efforts of John J. Shalam, President and Chief
Executive Officer, Philip Christopher, Executive Vice President, and Charles M.
Stoehr, Senior Vice President and Chief Financial Officer. The loss or
interruption of the continued full time services of any of such individuals
could have a material adverse impact on the Company's business operations,
prospects and relations with its suppliers. The Company does not have employment
contracts with any of these persons, nor have any of these persons signed
agreements binding them not to compete with the Company following the
termination of their employment with the Company. The Company maintains a "key
man" life insurance policy only on John J. Shalam.
Voting Rights of Class A Common Stock and Voting Control by Principal
Stockholder. The voting rights of holders of Class A Common Stock into which the
Debentures are convertible and for which all of the Company's outstanding
warrants are exercisable are limited by the Company's Certificate of
Incorporation. Each share of Class A Common Stock is 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. The rights of holders of
Class A Common Stock and Class B Common Stock with respect to the election of
directors will be subject to certain adjustments under specified circumstances.
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
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<PAGE>
his ownership of 3,366,762 shares of Class A Common Stock (including the
shares of Class A Common Stock subject to the Shalam Option) and
1,883,198 shares of Class B Common Stock, which gives him approximately
85.5% of the aggregate voting power of the issued and outstanding
Common Stock. Pending exercise of the Shalam Option, Mr. Shalam will have voting
control of the shares of Class A Common Stock subject to the Shalam Option. The
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--Effects of Disproportionate
Voting Rights."
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 Debentures and the shares of Class A Common Stock offered by the
Selling Securityholders are not being sold by the Company, and the Company
will not receive any proceeds from the sale thereof. The Company will receive
proceeds of $750,000 in the event the Blau Warrant is exercised in full prior to
expiration. These proceeds will be used, as and if received by the Company, to
purchase inventory and for other working capital or general corporate needs. The
Company will not receive any proceeds from the resale of the Blau Warrant
Shares.
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<PAGE>
COVERAGE RATIOS
The Company's Ratio of Earnings (Loss) to Fixed Charges for each of the
periods indicated is as follows:
<TABLE><CAPTION>
Six Months Ended
Years Ended November 30, May 31, 1995
------------------------ ------------
1990 1991 1992 1993 1994
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(1) (1) 2.0x 2.9x 6.3x (1)
</TABLE>
- --------------
(1) During fiscal years 1990 and 1991 and the six months ended May 31, 1995,
earnings were insufficient to cover fixed charges by approximately $4,792,000,
$15,098,000 and $3,157,000, respectively.
The Ratio of Earnings (Loss) to Fixed Charges represents the number of
times earnings cover fixed charges. Earnings consists of income (losses) before
the provision for (recovery of) income taxes and fixed charges. Fixed charges
consist of gross interest expense and related bank charges, amortization of debt
issuance costs and an estimation of that portion of rental expense from
operating leases deemed to be attributable to interest.
SELLING SECURITYHOLDERS
The Debentures were issued by the Company to the Initial Purchasers on
March 15, 1994 pursuant to a private placement, and, except as set forth below,
were acquired by the Selling Securityholders offering Debentures hereby in
connection with resale transactions with the Initial Purchasers pursuant to Rule
144A and Regulation S under the Securities Act or from other holders acquiring
such Debentures from prior holders thereof. In the case of Oppenheimer & Co.,
Inc., the Debentures were acquired from both the Company and third parties in
the market. The following table sets forth information concerning the principal
amount of Debentures beneficially owned by each Selling Securityholder which
may be offered from time to time pursuant to this Prospectus. Other than as a
result of the ownership of Debentures or Class A Common Stock, none of the
Selling Securityholders has had any material relationship with the Company
within the past three years. The table has been prepared based upon information
furnished to the Company by the Trustee for the Debentures, by The Depository
Trust Company and by or on behalf of the Selling Securityholders.
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<TABLE><CAPTION>
Principal Amount of Principal
Debentures Amount of Percent of
Beneficially Debentures than Outstanding
Name Owned($) May be Sold($) Debentures
<S> <C> <C> <C>
SC Fundamental Value Fund, L.P. 12,067,000 12,067,000 18.6
SC Fundamental Value BVI, Ltd. 7,458,000 7,458,000 11.5
Oppenheimer & Co., Inc. 6,165,000 6,165,000 9.5
Commonwealth Life Ins. Co. - Stocktrac (Teamsters I) 3,200,000 3,200,000 4.9
Drouot Securite 3,000,000 3,000,000 4.6
Nap & Co. 2,625,000 2,625,000 4.0
Rochester Fund Series - The Bond Fund for Growth 2,500,000 2,500,000 3.8
Dean Witter Convertible Securities Trust 2,500,000 2,500,000 3.8
Offshore Strategies 1,750,000 1,750,000 2.7
TCW Convertible Securities Fund 1,455,000 1,455,000 2.2
JMG Capital Partners, L.P. 1,400,000 1,400,000 2.2
State of Michigan Employees Retirement Fund 1,010,000 1,010,000 1.6
Paresco, Inc. 1,000,000 1,000,000 1.5
Kellner, DiLeo & Co. 1,000,000 1,000,000 1.5
Zazove Convertible Fund, L.P. 980,000 980,000 1.5
Northman & Co. 765,000 765,000 1.2
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<PAGE>
BKP Convertible Trading, L.P. 750,000 750,000 1.2
Sage Capital 700,000 700,000 1.1
TCW Convertible Strategy Fund 660,000 660,000 1.0
Connecticut Mutual Life Insurance Company 645,000 645,000 1.0
North Dakota State Workers 555,000 555,000 0.9
Fuelship & Co. 510,000 510,000 0.8
Blazemaster & Co. 500,000 500,000 0.8
Angelo, Gordon & Co., L.P. 500,000 500,000 0.8
Winchester Convertible Plus, Ltd. 450,000 450,000 0.7
Owk & Co. 425,000 425,000 0.7
Quasar International Partners, C.V. 420,000 420,000 0.6
Davos Partners, L.P. 420,000 420,000 0.6
TCW/DW Income and Growth Fund 405,000 405,000 0.6
North Dakota State Employees 330,000 330,000 0.5
Octant & Co. 300,000 300,000 0.5
Hare & Co. FBO Christian Science Trustees for Gifts and 300,000 300,000 0.5
Endowments
Catholic Mutual Relief Society Retirement Income Trust 290,000 290,000 0.4
(Plan)
Catholic Mutual Relief Society of America 260,000 260,000 0.4
Libertyview Plus Fund 250,000 250,000 0.4
Verdant Investors Group 250,000 250,000 0.4
St. Claire, L.P. 250,000 250,000 0.4
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<PAGE>
Palladin Partners 250,000 250,000 0.4
Colonial Penn Life Ins. Co. 250,000 250,000 0.4
Colonial Penn Insurance Co. 250,000 250,000 0.4
Community National Assurance Company 150,000 150,000 0.2
Parsenn Partners Limited 80,000 80,000 0.1
SC Fundamental Inc. Employee Profit Sharing 75,000 75,000 0.1
Adrienne Partners, L.P. 60,000 60,000 0.1
Nikolas Pappis 50,000 50,000 0.1
Khurshid Khan 50,000 50,000 0.1
Georgios Petrou 50,000 50,000 0.1
Erinyes & Co. 50,000 50,000 0.1
Bost & Co. 50,000 50,000 0.1
Vasilios Leonardos 25,000 25,000 -
Vasilios Kalantzis 25,000 25,000 -
Georgios Nikolopoulos 25,000 25,000 -
Georgios Arsenis 25,000 25,000 -
Anastasios Pantos 25,000 25,000 -
Richcourt & Strategies, Inc. 20,000 20,000 -
Potoula Kosteas 20,000 20,000 -
Emanouil Papadogiannakis 15,000 15,000 -
Ioannis Rozakos 10,000 10,000 -
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<PAGE>
Georgios Papagounos 10,000 10,000 -
Other Selling Securityholders 5,390,000 5,390,000 8.4
Total 65,000,000 65,000,000 100.0
</TABLE>
Information concerning the Selling Securityholders may change from
time to time and will be set forth in Supplements to this Prospectus. As of the
date of this Prospectus, the aggregate principal amount of Debentures
outstanding is $65,000,000 which may be converted into 3,672,317 shares of Class
A Common Stock.
Because the Selling Securityholders may offer all or some of the
Debentures and shares of Class A Common Stock issued upon conversion thereof
pursuant to the offering contemplated by this Prospectus, and because there are
currently no agreements, arrangements or understandings with respect to the sale
of any of the Debentures or shares of Class A Common Stock that will be held by
the Selling Securityholders after completion of this offering, no estimate can
be given as to the principal amount of Debentures or shares of Class A Common
Stock that will be held by the Selling Securityholders after completion of
this offering. See "Plan of Distribution."
DESCRIPTION OF THE DEBENTURES
The Debentures have been issued under an Indenture, dated as of March
15, 1994 (the "Indenture"), between the Company and Continental Stock Transfer &
Trust Company, as trustee (the "Trustee"). As used in this "Description of the
Debentures," the term "Company" refers only to Audiovox Corporation and the term
"Subsidiary" refers to any Person (as herein defined) of which more than 50% of
the outstanding voting stock is owned by the Company and/or one or more other
Subsidiaries of the Company.
The following summary of certain provisions of the Indenture, the
Debentures and the Registration Rights Agreement, dated as of March 15, 1994
(the "Registration Rights Agreement"), by and among the Company and the Initial
Purchasers does not purport to be complete, and where reference is made to
particular provisions of the Indenture, the Debentures or the Registration
Rights Agreement, such provisions are qualified in their entirety by reference
to all of the provisions of the Indenture, the Debentures and the Registration
Rights Agreement, as the case may be, including the definitions therein of
certain terms.
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<PAGE>
General
The Debentures are limited to $65,000,000 aggregate principal amount,
are unsecured subordinated obligations of the Company and will mature on March
15, 2001. As of the date hereof, the aggregate principal amount of Debentures
outstanding is $65,000,000. The Debentures bear interest from the date of
issuance and authentication at the rate per annum shown on the cover page of
this Prospectus. Interest is payable semiannually on March 15 and September 15
(each, an "Interest Payment Date"), which payments commenced September 15, 1994,
to the person in whose name the Debentures are registered, subject to certain
exceptions, at the close of business on February 28 and August 31 (each, a
"Regular Record Date"), as the case may be, next preceding such Interest Payment
Date. Principal of (and premium and any Liquidated Damages, if any) and interest
on the Debentures are payable, and the Debentures are convertible and transfers
thereof are registrable, at the office of the Trustee, Two Broadway, New York,
New York 10004, Attention: Steven G. Nelson, provided that, at the option of the
Company, payments of interest and Liquidated Damages may be made by check mailed
to the address of the person entitled thereto as it appears on the Security
Register (as such term is defined in the Indenture). (Sections 202 and 301.)
There is no established trading market for the Debentures. The Company
has been advised by Oppenheimer & Co., Inc. that it intends to make a market in
the Debentures; however, it is not obligated to do so and Oppenheimer & Co.,
Inc. may discontinue any market-making activities at any time without notice. No
assurance can be given as to the liquidity of the trading market for the
Debentures. The Company has applied for listing of the Debentures and the
underlying Class A Common Stock on the American Stock Exchange. The Company has
been informed by the AMEX that the Debentures and the underlying shares of Class
A Common Stock will be listed on the AMEX upon effectiveness of the Registration
Statement (of which this Prospectus is a part).
The covenants and provisions contained in the Indenture and the
Debentures would not necessarily afford the Holders of the Debentures protection
in the event of a highly leveraged transaction involving the Company, including
a leveraged transaction initiated or supported by the Company, the management of
the Company or any Affiliate of such Persons (as such terms are hereinafter
defined).
Conversion Rights
The Debentures or portions thereof (which are $1,000 or integral
multiples thereof), unless called for prior redemption, are convertible into
shares of Class A Common Stock, at the Holders' option, at any time prior to
maturity, at the initial Conversion Price stated on the cover page of this
Prospectus, subject to adjustment as
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described below. The right to convert Debentures, or portions thereof (which
are $1,000 or integral multiples thereof), will terminate at the close of
business on the Redemption Date or the Purchase Date (as each such term is
hereinafter defined). (Section 1201.)
No adjustment will be made on conversion of any Debenture for interest
or dividends. Debentures surrendered for conversion during the period from the
close of business on any Regular Record Date to the next succeeding Interest
Payment Date (unless called for redemption during that period) must be
accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of Debentures being surrendered
for conversion. In the case of any Debenture which has been converted after any
Regular Record Date but on or before the next Interest Payment Date, interest
payable on such Interest Payment Date shall be paid to the registered Holder of
such Debenture on the Regular Record Date notwithstanding such conversion.
Fractional shares of Class A Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon the
market price of the Class A Common Stock. (Section 1202 and Section 1203.)
The Conversion Price is subject to adjustment in certain events under
formulas set forth in the Indenture, including: (i) the issuance of any shares
of Common Stock to holders of any class of Common Stock as a dividend or
distribution; (ii) the issuance to the holders of any class of Common Stock of
rights, options or warrants entitling them to subscribe for or purchase shares
of any class of Common Stock for a price per share less than the then current
market price per share of Class A Common Stock (excluding for this purpose
rights, options and warrants issued under the Company's existing benefit plans
("Existing Options"), additional rights, options and warrants issued to
employees to purchase up to an aggregate of 500,000 shares of Common Stock
exercisable on a per share basis for at least 85% of the current per share
market price of Class A Common Stock on the date of grant ("Additional
Options"), and certain rights, options and warrants ("Special Stockholder
Rights") which are not exercisable until the occurrence of a specified event or
events (the adjustment for the issuance of such Special Stockholder Rights to be
made if and when such Special Stockholders Rights become exercisable)); (iii)
subdivisions, combinations and reclassifications of any class of Common Stock;
(iv) the distribution to holders of Common Stock of evidences of indebtedness or
assets of the Company (including securities, but excluding those rights,
warrants, dividends and distributions referred to above, Existing Options,
Additional Options, Special Stockholder Rights and the cash portion of any
dividends and distributions paid in whole or in part in cash); (v) distributions
consisting of cash (excluding any cash distributed upon a merger or
consolidation to which the third succeeding paragraph applies or cash paid in
connection with the purchase of outstanding Common Stock at a per share price
equal to or less than the then current market price per share of Class A Common
Stock or purchases of Debentures upon the occurrence of a Risk Event or
Redemption Event (as
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such terms are defined herein)) to holders of Common Stock in
an aggregate amount that, combined together with (a) other such cash
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (b) the amount by which any cash and the fair
market value (as determined in good faith by the Company's Board of Directors)
of other consideration paid in excess of the then current aggregate market price
of shares tendered in respect of any tender offer by the Company or any of its
Subsidiaries for any shares of Common Stock concluded within the preceding 12
months in respect of which no adjustment has been made, exceeds 12.5% of the
then current aggregate market price of the Common Stock (assuming the market
price of each share of Common Stock is equal to the per share market price of
Class A Common Stock) then outstanding; and (vi) the successful completion of a
tender offer made by the Company or any of its Subsidiaries for all or a portion
of any class of Common Stock to the extent the fair market value (as determined
in good faith by the Company's Board of Directors) of the aggregate
consideration paid in excess of the current aggregate market price of the shares
tendered in connection with such tender offer, together with (a) the amount by
which any cash and other consideration paid in excess of the then current market
price of shares tendered in any tender offers by the Company or any of its
Subsidiaries for any class of Common Stock concluded within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment has been made and (b) the aggregate amount of any cash distributions
referred to in (v) above to holders of Common Stock within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustments have been made, exceeds 12.5% of the then current aggregate market
price of the Common Stock on the expiration of such tender offer (assuming the
market price of each share of Common Stock is equal to the per share market
price of Class A Common Stock). If previously adjusted in respect of any rights,
options or warrants referred to in (ii) above, the Conversion Price shall be
re-adjusted to the extent any such rights, options or warrants expire
unexercised. (Section 1204.)
Except as stated in the preceding provisions, the initial Conversion
Price will not be adjusted for issuances of shares of Class A Common Stock at
less than the then current market price of the Class A Common Stock or the then
current Conversion Price of the Debentures upon the exercise of present or
future stock options granted by the Company to its employees. Moreover, no
adjustment will be made unless such adjustment would require a change of at
least 1% in the Conversion Price then in effect, but any adjustment that would
otherwise be required to be made shall be carried forward and taken into account
in any subsequent adjustment. The Company has reserved the right to make such
reductions in the Conversion Price in addition to those required in the
foregoing provisions as it considers to be advisable in order that any event
treated for Federal tax purposes as a dividend of stock or stock rights shall
not be taxable to the recipients. (Section 1204.)
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In the event that the Company shall distribute rights, options or
warrants (other than those referred to in (ii) in the second preceding
paragraph) ("Rights") pro rata to holders of the Class A Common Stock, so long
as any such Rights have not expired or been redeemed, the Holder of any
Debenture surrendered for conversion, in whole or in part, will be entitled to
receive upon such conversion, in addition to the shares of Class A Common Stock
issuable upon such conversion (the "Conversion Shares"), a number of Rights to
be determined as follows: (i) if such conversion occurs on or prior to the date
for the distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same number of Rights to
which a holder of a number of shares of Class A Common Stock equal to the number
of Conversion Shares is entitled at the time of such conversion in accordance
with the terms and provisions of and applicable to the Rights; and (ii) if such
conversion occurs after such Distribution Date, the same number of Rights to
which a holder of the number of shares of Class A Common Stock into which such
Debenture, or portion thereof, so converted was convertible immediately prior to
such Distribution Date would have been entitled on such Distribution Date in
accordance with the terms and provisions of and applicable to the Rights. The
Conversion Price of the Debentures will not be subject to adjustment on account
of any declaration, distribution or exercise of such Rights. (Section 1204.)
In case either of the following occurs: (i) any consolidation or merger
involving the Company other than a consolidation or merger which does not result
in any reclassification, conversion, exchange or cancellation of outstanding
shares of Class A Common Stock; or (ii) any sale or transfer of all or
substantially all of the assets of the Company, each Debenture will, without the
consent of any Holder thereof, become convertible only into the kind and amount
of securities, cash or other property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of Class A Common
Stock into which such Debenture could have been converted immediately prior to
such consolidation, merger, sale or transfer (assuming such holder of shares of
Class A Common Stock is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made (or an Affiliate of such Person), and failed to exercise
any rights of election and received per share of Class A Common Stock the kind
and amount of cash or other property received per share of Class A Common Stock
by a plurality of non-electing shares). The foregoing provision will not affect
the right of any Holder of the Debentures to receive the Purchase Price (as such
term is hereinafter defined) in the event of such Holder's election to require
the Company to purchase the Debentures upon a Risk Event or a Redemption Event
(as each such term is hereinafter defined). (Section 1211.)
In the event of a distribution of property to the Company's
stockholders which would be taxable as a dividend for Federal income tax
purposes (e.g., distributions of
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evidences of indebtedness or assets of the Company, but generally not stock
dividends on or rights to subscribe for Class A Common Stock) to holders of
the Class A Common Stock that results in an adjustment of the Conversion Price
of the Debentures pursuant to the antidilution provisions described above, the
Holders of the Debentures may, in certain circumstances, be deemed to have
received a taxable dividend for Federal income tax purposes.
The Company will use its best efforts to cause all registrations with,
and to obtain any approvals by, any governmental authority under any Federal or
state law of the United States that may be required in connection with the
conversion of the Debentures into shares of Class A Common Stock. If at any time
during the three-year period following the Closing Date a registration statement
under the Securities Act covering the Conversion Shares is not effective, such
shares (the "Restricted Shares") may not be sold or otherwise transferred except
in accordance with or pursuant to an exemption from or otherwise in a
transaction not subject to, the registration requirements of the Securities Act,
and, if a registration statement under the Securities Act is not effective at
the time of a conversion, the Restricted Shares will bear a legend to that
effect. The transfer agent for the Class A Common Stock will not be required to
accept for registration or transfer any Restricted Shares, except upon
presentation of satisfactory evidence that these restrictions on transfer have
been complied with, all in accordance with such reasonable regulations as the
Company may from time to time agree with the transfer agent. Under certain
circumstances, the Holders of the Debentures and shares of Class A Common Stock
issued in exchange therefor will be entitled to Liquidated Damages with respect
to such period. See "Registration Rights; Liquidated Damages" below.
The Indenture contains a covenant which prevents the Company from
granting any voting rights (other than as required by applicable law) to any
share of Preferred Stock (as such term is defined in the Certificate of
Incorporation of the Company). (Section 1007.)
Redemption at Option of the Company
The Debentures are not redeemable by the Company prior to March 15,
1997. On or after March 15, 1997, the Debentures are redeemable on at least 30
days' notice and not more than 60 days' notice, at the option of the Company, in
whole at any time or in part from time to time at the redemption prices set
forth below. (Sections 1101 and 1105.)
The redemption prices (expressed as percentages of principal amount),
to which are added accrued interest and Liquidated Damages, if any, to the date
fixed for redemption (the "Redemption Date"), if redeemed during the 12-month
period beginning March 15 of the years indicated, are as follows:
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YEAR PERCENTAGE
- ---- ----------
1997...................................................... 103.12%
1998...................................................... 102.08%
1999...................................................... 101.04%
and from March 15, 2000 and thereafter at 100% of the principal amount.
(Section 203.)
If less than all of the Debentures are to be redeemed, the Trustee will
select the Debentures or portions thereof to be redeemed on a pro rata basis, or
by such other method that complies with the requirements of any exchange or
market, if any, on which the Debentures are listed or traded, as the Trustee
deems fair and appropriate, that provides for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of the Debentures of a denomination larger than $1,000. In the event of
redemption of a Debenture in part only, a new Debenture of like tenor for the
unredeemed portion will be issued in the name of the Holder of the Debenture
upon the cancellation thereof. (Sections 1104 and 1108.)
Any Debentures called for redemption, unless surrendered for conversion
on or before the Redemption Date, are subject to being purchased from the Holder
at the then applicable redemption price set forth above plus accrued interest
and Liquidated Damages, if any, by one or more investment banks or other
purchasers who may agree with the Company to purchase such Debentures and
convert them into shares of Class A Common Stock. The Company will, at least 60
days (in case of any redemption at the election of the Company of less than all
of the Debentures) or 45 days (in the case of a redemption at the election of
the Company of all of the Debentures) prior to the Redemption Date fixed by the
Company (unless a shorter notice is satisfactory to the Trustee), notify the
Trustee in writing of such Redemption Date and of the principal amount of
Debentures to be redeemed.
(Sections 1103 and 1109.)
Purchase at Option of Debentureholders Upon a Risk Event or a Redemption Event
In the event that a Risk Event or a Redemption Event (as such terms are
hereinafter defined) shall occur, each Holder of Debentures will have the right,
at the Holder's option, to require the Company to purchase such Holder's
Debentures, in whole or in part (which are $1,000 or integral multiples
thereof), on the date (the "Purchase Date") that is 45 days after the date of
the Company Notice (as such term is hereinafter defined), at 101% of the
principal amount of the Debentures to be purchased, plus accrued interest and
any accrued Liquidated Damages to the Purchase Date (the "Purchase Price").
However, the Company's bank credit facility includes as an event of default the
occurrence of a Risk Event or a Redemption Event, and any repurchase of
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Debentures by the Company from any Holder following the occurrence of a Risk
Event or a Redemption Event could be blocked pursuant to the subordination
provisions of the Indenture (See "Subordination" below). Thus, Holders of
Debentures would be effectively precluded from exercising their rights to
require the Company to repurchase Debentures following a Risk Event or a
Redemption Event during the effectiveness of the credit facility. Future credit
facilities the Company may enter into are also likely to contain provisions
which would allow the lenders thereunder to prevent repurchase of the Debentures
following a Risk Event or Redemption Event.
In the event that a Risk Event or a Redemption Event shall occur and
the Company shall have not called for the redemption of all the outstanding
Debentures prior to the occurrence of such Risk Event or Redemption Event, the
Company (or at the Company's request, the Trustee) shall give notice (the
"Company Notice") of such occurrence on or before the thirtieth day after the
occurrence of such Risk Event or Redemption Event. The Company Notice shall
state the Purchase Date, the date by which the Holder must notify the Company of
such Holder's intention to exercise the purchase right, the procedure which such
Holder must follow to exercise such right, the Conversion Price then in effect,
the Purchase Price and, in the case of a Risk Event, that the Company will pay
all or a portion of the Purchase Price in cash, and if not all in cash, that the
non-cash portion will be paid in shares of Class A Common Stock having a current
market price not less than the non-cash portion of the Purchase Price, or, in
the case of a Redemption Event, that the Purchase Price shall be paid all in
cash. The Company must deliver a copy of such Company Notice to the Trustee. To
exercise such purchase right, the Holder of a Debenture must deliver written
notice to the Trustee on or before the thirtieth day after the date of the
Company Notice, together with the Debenture or Debentures with respect to which
the right is being exercised, duly endorsed for transfer. An exercise of the
option to require the Company to purchase a Debenture is irrevocable, except
that a Holder retains the right to require Debentures submitted for such
purchase to be converted into shares of Class A Common Stock prior to the close
of business on the Purchase Date so long as the Holder has complied with the
procedures for conversion. (Sections 1401 and 1402.)
A "Risk Event" will be deemed to have occurred at such time after the
original issuance of the Debentures as: (i) all or substantially all of the
Company's assets are sold, leased or transferred, in one or a series of related
transactions, to any Person other than to the Company or any of its
Subsidiaries; (ii) a plan relating to the liquidation or dissolution of the
Company is adopted other than following a transaction in compliance with the
Merger and Sale of Assets by the Company restrictions described below; or (iii)
any Person other than John J. Shalam and/or any of his Affiliates or Associates
becomes the beneficial owner, directly or indirectly, of more than 50% of the
voting power of the
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voting Equity Interests (as such term is defined hereinafter) of the Company.
(Section 1403.)
A "Redemption Event" will be deemed to have occurred at such time after
the original issuance of the Debentures as the Class A Common Stock (or other
common stock or securities into which the Debentures are then convertible) is
not listed for trading on a United States national securities exchange or
admitted for trading in the NASDAQ-National Market System. (Section 1403.)
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of the aggregate voting power of such
Person's voting Equity Interests or any officer or director of any such Person;
or (iii) with respect to any natural Person, any natural Person having a
relationship with such Person by blood, marriage or adoption, not more remote
than first cousin. For the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. (Section 101.)
"Associate" means, with respect to John J. Shalam: (i) any Person
having a relationship with John J. Shalam by blood, marriage or adoption, not
more remote than first cousin ("Family Members"); (ii) any trust or other estate
in which John J. Shalam or any Family Member or Family Members have,
individually or in the aggregate, a substantial beneficial interest; (iii) upon
his death or incapacity, the legal representative (or any Person acting in a
similar fiduciary capacity) of John J. Shalam's estate or assets and the
beneficiaries, heirs and distributees thereof; or (iv) any Person as to which
John J. Shalam and/or any Family Member or Family Members are the beneficial
owners of more than 50% of the voting power of the voting Equity Interests of
such Person. For the purposes of this definition, "beneficial ownership" shall
be determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
(Section 1403.)
"Corporation" means a corporation, association, company, joint-stock
company or business trust. (Section 101.)
"Equity Interest" of: (i) a partnership means any and all interests,
units, participations or other equivalents (however designated and whether or
not voting) of partnership interests in such partnership, including all classes
and series of such interests; and (ii) a Corporation means any and all shares,
interests and participations (however designated and whether or not voting) in
such Corporation's preferred or common equity
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(or comparable equity interests), including all classes and series of such
equity. (Section 101.)
"Person" means any individual, Corporation, limited or general
partnership, joint venture, trust, unincorporated organization, "group" (as such
term is used in Section 13(d)(3) of the Exchange Act) or any other entity,
including a government or any agency or political subdivision thereof. (Section
101.)
The right to require the Company to purchase Debentures as a result of
a Risk Event or a Redemption Event is limited by the terms of the Company's bank
credit facility, and may be limited by the terms of loan or credit agreements
which the Company may enter into from time to time. As a result, any purchase
could, absent a waiver, be prohibited by the subordination provisions of the
Indenture. Accordingly, the purchase of the Debentures as a result of a Risk
Event or a Redemption Event could be subject to the prior payment by the Company
of outstanding Senior Indebtedness. Failure by the Company to purchase the
Debentures within 30 days of when required upon a Risk Event or a Redemption
Event, absent a waiver, will result in an Event of Default under the Indenture
whether or not such purchase is permitted by the subordination provisions of the
Indenture.
The purchase option of a Holder upon a Risk Event or a Redemption Event
could constitute an "issuer tender offer" as defined in Rule 13e-4 promulgated
under the Exchange Act. Rule 13e-4 requires the dissemination of certain
information to security holders in such an event. The Company will be obligated
to comply with this Rule to the extent applicable at that time.
Subordination of Debentures
The payment on account of the principal (and premium, if any), interest
on, Liquidated Damages with respect to, and the Redemption Price or Purchase
Price of, the Debentures is subordinated in right of payment to the extent set
forth in the Indenture to the prior payment in full of all Senior Indebtedness
of the Company.
(Section 1301.)
Senior Indebtedness means: (a) all indebtedness of the Company,
including the principal of and premium, if any, and interest on such
indebtedness, whether outstanding on the date of the Indenture, or thereafter
created, (i) for borrowed money (including certain fees and expenses and other
amounts owing under the Company's bank credit facility), (ii) constituting
purchase money indebtedness for which the Company is liable; (iii) for
reimbursement obligations under bank letters of credit and standby letters of
credit, (iv) under any lease of any real or personal property, which obligations
are capitalized on the Company's books, (v) in respect of periodic, settlement
or maturity
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payments under interest rate and currency swaps, caps, floors,
collars or similar agreements or arrangements, (vi) under documentary
acceptances and bankers' acceptances, (vii) under airway releases and steamship
guarantees, (viii) relating to indebtedness of others of the kinds referred to
in (i) through (vii) above guaranteed or assumed, directly or indirectly, by the
Company, and (ix) under the Series AA Convertible Debentures or the Series BB
Convertible Debentures, or the agreement pursuant to which such debentures are
outstanding, unless in each such case the instrument creating or evidencing such
indebtedness provides that such indebtedness is not superior in right of payment
to the Debentures or other indebtedness which is pari passu with, or
subordinated to, the Debentures; and (b) any modifications, refundings,
deferrals, renewals or extensions of any such Senior Indebtedness, or
securities, notes or other evidences of indebtedness issued in exchange for such
Senior Indebtedness. At May 31, 1995, approximately $52.9 million of Senior
Indebtedness was outstanding. The Debentures are effectively subordinated to all
liabilities of the Company's Subsidiaries. The Indenture does not limit the
amount of Senior Indebtedness which the Company may incur nor the amount of
liabilities such Subsidiaries may incur. (Section 1301.)
No payment on account of principal, premium, if any, or interest on, or
Liquidated Damages with respect to, or redemption or purchase of, the Debentures
shall be made if, at the time of such payment or immediately after giving effect
thereto: (i) there shall exist a default in the payment of principal, premium,
if any, or interest (including a default under any purchase, reimbursement or
redemption obligations, or in respect of any periodic, settlement or maturity
payments under interest rate and currency swaps, caps, floors, collars or
similar agreements and arrangements) with respect to any Senior Indebtedness; or
(ii) there shall have occurred an event of default (other than a default
referred to in clause (i) above) with respect to any Senior Indebtedness, as
defined therein or in the instrument under which the same is outstanding,
permitting the holders thereof to accelerate the maturity thereof, and written
notice of such existence or occurrence shall have been given to the Company and
to the Trustee under the Indenture by the holder or holders of such Senior
Indebtedness and such event of default shall not have been cured or waived or
shall not have ceased to exist; provided, however, that payments on account of
principal, premium or Liquidated Damages, if any, or interest on, or a
redemption or purchase of, the Debentures shall resume in the case of any
nonpayment default referred to in clause (ii) above, notwithstanding cure or
waiver, 179 days after notice of such default is given if the default is not the
subject of judicial proceedings or the holders of such Senior Indebtedness have
not accelerated the maturity thereof. Notwithstanding the foregoing, the Company
may make and the Trustee may receive and shall apply any payment in respect of
the Debentures (for principal, premium or Liquidated Damages, if any, or
interest, or purchase or redemption) if such payment was made prior to the
occurrence of any of the contingencies specified in clauses (i) and (ii) above.
By reason of such
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subordination, in the event of insolvency, creditors of the Company
who are not Holders of the Debentures may recover more ratably than
Holders of the Debentures. The Company's ability to pay, redeem or purchase the
Debentures may be limited in certain circumstances by restrictions on the
ability of its Subsidiaries and Affiliates to pay dividends and certain fees.
(Section 1302.)
Modification of the Indenture
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of at least a majority
in principal amount of the outstanding Debentures; provided that no such
modification or amendment may, without the consent of the Holder of each
outstanding Debenture affected thereby: (i) change the stated maturity date of
the principal of, or any installment of interest on, the Debentures; (ii) reduce
the principal amount of, the premium, if any, or interest on, or the Liquidated
Damages with respect to, any Debenture; (iii) change the place or currency of
payment; (iv) impair the right to institute suit for the enforcement of any such
payment when due; (v) adversely affect the conversion rights of the Holders of
the Debentures; (vi) reduce the percentage in principal amount of Debentures,
the consent of whose Holders is required for modification or amendment of the
Indenture or the waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults; (vii) impair the right of any Holder to
require the Company to purchase such Holder's Debentures upon the occurrence of
a Risk Event or a Redemption Event; or (viii) modify any provision of the
Indenture with respect to the subordination of the Debentures so as to affect
adversely the rights of any Holder of the Debentures under the Indenture.
(Section 902.)
The Indenture (including the terms and conditions of the Debentures)
may be modified or amended by the Company and the Trustee without the consent of
the Holder of any Debenture, for certain specified purposes not adversely
affecting the rights of the Holders of the Debenture. (Section 901.)
Events of Default, Notice and Waiver
The following are defined in the Indenture as Events of Default: (i)
default in the payment of any interest on any Debenture, when due, continuing
for 30 days, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (ii) default in the payment of principal of,
premium or Liquidated Damages, if any, with respect to any Debenture, when due,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (iii) failure on the part of the Company to observe or perform the
covenant contained in Section 1007 of the Indenture relating to the granting of
voting rights to the Preferred Stock (See "Conversion Rights" above); (iv)
default in the payment of any amounts due to the Holder of any Debenture
pursuant to the
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exercise of the purchase right upon the occurrence of any Risk
Event or Redemption Event continuing for 30 days; (v) default in the performance
of any other covenant or breach of any other warranty in the Indenture
continuing for 60 days after notice of such default is provided to the Company
by Holders of at least 25% in principal amount of the outstanding Debentures;
(vi) default by the Company or any Subsidiary under any instrument or
instruments governing or securing debt of the Company for borrowed money (other
than the Debentures), which default shall have resulted in indebtedness in an
amount in excess of $10,000,000 not being paid at the stated maturity thereof or
the maturity of such debt being accelerated and such acceleration shall not have
been rescinded or such indebtedness shall not have been paid within five
business days; (vii) final judgments or orders rendered against the Company or
any Subsidiary to the extent not fully covered by insurance and which require
the payment of more than an aggregate of $6,500,000, assuming such judgments or
orders remain unstayed, unbonded or unsatisfied for specified periods; and
(viii) certain events in bankruptcy, insolvency or reorganization with respect
to the Company or a Subsidiary; provided, however, that an event specified in
clauses (vi), (vii) and (viii) with respect to any Subsidiary shall not be
deemed an Event of Default if, after the occurrence of such event, (i) the
consolidated net worth of the Company (excluding any amount attributable to such
Subsidiary) is at least $70,000,000, (ii) (a) there shall be no Rating Decline
(as herein defined) and (b) the Debentures shall not be rated below B- by
Standard & Poor's Corporation ("S&P") or B3 by Moody's Investor Service, Inc.
("Moody's") (or the equivalent by another nationally recognized securities
rating agency), in the case of either (a) or (b), at any time during the 12
months prior to and the 90 days after public notice of such event, or (iii) the
reduction in the consolidated net worth of the Company as a result of the
occurrence of such event, together with any other reductions in such net worth
during the 12 months preceding such event attributable to the Subsidiary with
respect to which such event has occurred, shall be equal to or less than
$10,000,000. If an Event of Default shall occur and be continuing, the Trustee
or the Holders of not less than 25% in principal amount of the outstanding
Debentures may declare due and payable the principal amount of, premium and
Liquidated Damages, if any, plus any accrued interest on, the outstanding
Debentures. At any time after a declaration of acceleration with respect to the
Debentures has been made, but before a judgment or decree based on acceleration
has been obtained, the Holders of not less than a majority in principal amount
of the outstanding Debentures may, under certain circumstances, rescind and
annul such acceleration and its consequences. (Sections 501 and 502.)
A "Rating Decline" shall mean a decrease in the rating of the
Debentures by two or more gradations (including gradations within Rating
Categories as well as between Rating Categories) with the effect that the
Debentures shall be rated lower than the rating of the Debentures as of the date
of their original issuance by S&P or by Moody's (or the
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equivalent of any such rating used by another nationally recognized securities
rating agency), as the case may be. (Section 101.)
"Rating Category" shall mean (i) with respect to S&P, any of the
following categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent
successor categories); (ii) with respect to Moody's, any of the following
categories: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor
categories); and (iii) the equivalent of any such category of S&P or Moody's
used by another nationally recognized securities rating agency. In determining
whether the rating of the Debentures has decreased by two or more gradations,
gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or
the equivalent gradations for another nationally recognized securities rating
agency) shall be taken into account (e.g., with respect to S&P, a decline in a
rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of
one gradation). (Section 101.)
The Indenture provides that the Trustee will be under no obligation
(subject to the duty of the Trustee while an Event of Default is continuing to
act with the required standard of care) to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee security and indemnification
reasonably satisfactory to the Trustee. Subject to such provisions for
indemnification of the Trustee, the Holders of a majority in principal amount of
the outstanding Debentures have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee. (Sections 602 and 512.)
The Holders of a majority in principal amount of the Debentures may, on
behalf of the Holders of the Debentures, waive compliance by the Company with
certain covenants of the Company in the Indenture. The Holders of a majority in
principal amount of the outstanding Debentures may on behalf of the Holders of
all Debentures waive any defaults except a default in payment of the principal
of (or premium, if any), interest on, or Liquidated Damages with respect to, any
Debenture or in respect of a provision which under the Indenture cannot be
modified or amended without the consent of the Holder of each outstanding
Debenture affected thereby.
(Sections 513 and 1009.)
The Company is required to notify the Trustee in writing promptly upon
the occurrence of any default (or Event of Default) in the performance by the
Company of its obligations under the Indenture. The Company is also required to
inform the Trustee within 90 days after the end of each fiscal year of the
Company whether the Company is in default of any of its covenants under the
Indenture, specifying any such defaults and the nature and status thereof.
(Sections 517 and 1008.)
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Merger and Sale of Assets by the Company
The Indenture provides that the Company may not consolidate or merge
with any other Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless: (i) the Person formed by
such consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and assets
of the Company substantially as an entirety shall be a corporation, partnership,
limited liability company or trust organized and existing under the laws of the
United States, any state thereof or the District of Columbia and such Person
shall assume by a supplemental indenture the due and punctual payment of the
principal of (and premium, if any), interest on, and Liquidated Damages with
respect to, all of the Debentures and the performance of every covenant of the
Indenture required to be performed or observed by the Company and shall have
provided for conversion rights in accordance with the terms of the Indenture;
(ii) immediately after giving effect to such transaction, no Event of Default
(and no event which after notice or lapse of time or both would become an Event
of Default) shall have happened and be continuing; and (iii) certain other
conditions are met. Upon compliance with these provisions by such Person, the
Company would be relieved of its obligations under the Indenture and the
Debentures (except in the case of a lease).
(Sections 801 and 802.)
Transfer and Exchange
A Holder may transfer or exchange the Debentures in accordance with the
Indenture. The Company may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and to pay any taxes and fees
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Debenture selected for redemption except the unredeemed
portion of any Debenture being redeemed in part.
(Section 305.)
The registered Holder of a Debenture may be treated as the owner of it
for all purposes. (Section 308.)
Book Entry; Delivery and Form
Certificates representing the Debentures are issued in fully registered
form without interest coupons. The Debentures were initially issued in book
entry form through the facilities of The Depository Trust Company, New York, New
York ("DTC"), and are represented by permanent global certificates in
definitive, fully registered form without interest coupons (the "Initial Global
Debentures") which have been deposited with the Trustee as custodian for DTC and
registered in the name of a nominee of DTC, Cede & Co. The Debentures sold by
the Selling Securityholders will also be initially issued in
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book entry form and represented by a permanent global certificate (the "New
Global Debenture"; together with the Initial Global Debentures, the "Global
Debentures") that will be deposited with the Trustee and registered in the
name of Cede & Co. Beneficial interests in the Global Debentures may be
exchanged for definitive securities ("Certificated Debentures") in accordance
with the terms of the Indenture.
DTC or its custodian will credit, on its internal system, the
respective principal amount of Debentures of the individual beneficial interests
represented by the New Global Debenture to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in the New Global Debenture
will be limited to persons who have accounts with DTC ("participants") or
persons who hold interests through participants. Ownership of beneficial
interests in the New Global Debenture will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants). So long as DTC, or its
nominee, is the registered owner or holder of the New Global Debenture, DTC or
such nominee, as the case may be, will be considered the sole owner or holder of
the Debentures represented by the New Global Debenture for all purposes under
the Indenture and the Debentures. No beneficial owner of an interest in the New
Global Debenture will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, premium (if any), interest on, and
Liquidated Damages with respect to, the New Global Debenture, will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. Neither
the Company, the Trustee nor any agent of the Trustee or the Company will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the New Global
Debenture or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal, premium, interest or Liquidated Damages in respect of the
New Global Debenture, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amounts of the New Global Debenture as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the New Global Debenture held through such participants
will be governed by standing instructions and customary practice, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
participants.
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Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds. If a
person holding a beneficial interest in the New Global Debenture requires
physical delivery of a Certificated Debenture for any reason, including to sell
Debentures to persons in states which require physical delivery of a
Certificated Debenture or to pledge such Debentures, such Holder must transfer
its interest in the New Global Debenture in accordance with the normal
procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Debentures only at the direction of one or more
participants to whose account the DTC interests in the New Global Debenture is
credited and only in respect of such portion of the aggregate principal amount
of Debentures as to which such participant or participants has or have given
such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the New Global Debenture among participants
of DTC, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
will have any responsibility for the performance by DTC or its participants or
indirect participants of their respective obligations under the rules and
procedures governing their respective operations.
If DTC is at any time unwilling or unable to continue as a depositary
for the Global Debentures and a successor depositary is not appointed by the
Company within 90 days, the Company will issue Certificated Debentures in
exchange for the Global Debentures.
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Registration Rights; Liquidated Damages
Pursuant to the Registration Rights Agreement, the Company agreed to
file with the SEC a shelf registration statement under the Securities Act (the
"Shelf Registration Statement") on Form S-1, Form S-2 or Form S-3, as determined
by the Company, if the use of such form is then available, to cover resales of
Transfer Restricted Securities by the holders thereof who satisfy certain
conditions relating to the provision of information in connection with the Shelf
Registration Statement. The Company has filed a Registration Statement on Form
S-3, of which this Prospectus is a part, in compliance with its obligations
under the Registration Rights Agreement. The Company also agreed to use its best
efforts to cause the Shelf Registration Statement to remain effective for three
years following the date it is declared effective.
The Registration Rights Agreement provides, among other things, that if
(i) the Shelf Registration Statement has not been declared effective by the SEC
on or prior to the date 180 days after the Closing Date or (ii) the Shelf
Registration Statement shall cease to be effective (without being succeeded
immediately by an additional Shelf Registration Statement filed and declared
effective) for a period of time which shall exceed 90 days in the aggregate per
year (defined as a period of 365 days beginning on the date the Shelf
Registration Statement is declared effective) (a "Registration Default"), the
Company will pay Liquidated Damages to each Holder of Transfer Restricted
Securities, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $0.05 per week per
$1,000 principal amount of Debentures and, if applicable, $0.01 per week per
share (subject to adjustment in the event of stock splits, stock recombinations,
stock dividends and the like) of Class A Common Stock constituting Transfer
Restricted Securities held by such Holder. The amount of the Liquidated Damages
will increase by an additional $0.05 per week per $1,000 principal amount of
Debentures or $0.01 per week per share (subject to adjustments as set forth
above) of Class A Common Stock constituting Transfer Restricted Securities with
respect to each subsequent 90-day period until the Shelf Registration Statement
is declared effective or again becomes effective, as the case may be, up to a
maximum amount of Liquidated Damages with respect to any Registration Default of
$0.25 per week per $1,000 principal amount of Debentures or $0.05 per week per
share (subject to adjustment as set forth above) of Class A Common Stock
constituting Transfer Restricted Securities. All accrued Liquidated Damages
shall be paid to holders of Debentures by the Company on each Damages Payment
Date (as such term is defined in the Registration Rights Agreement) in
accordance with the terms of the Debenture. Following the cure of a Registration
Default or when the Debentures or the shares of Class A Common Stock issued upon
conversion thereof cease to be Transfer Restricted Securities, Liquidated
Damages will cease to accrue with respect to such Registration Default.
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Although the Company filed a Registration Statement in connection with
the Debentures on May 6, 1994, the Registration Statement was not declared
effective by the date 180 days after the Closing Date. Accordingly, as of June
30, 1995, the Company was paying Liquidated Damages of $.20 per week per $1,000
principal amount of Debentures or equivalent additional interest payments of
approximately 0.78%. Upon the effectiveness of this Registration Statement, the
effective interest rate on the Debentures will be reduced to 6-1/4% as the
Liquidated Damages will cease to accrue.
Concerning the Trustee
Continental Stock Transfer & Trust Company acts as Trustee under the
Indenture. The address of the Trustee's corporate trust office is Two Broadway,
New York, New York 10004, Attention: Steven G. Nelson.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000
shares of Class A Common Stock, 10,000,000 shares of Class B Common Stock,
50,000 shares of Preferred Stock, par value $50 per share, and 1,500,000 shares
of Series Preferred Stock, par value $.01 per share. As of June 28, 1995, there
were 6,777,788 shares of Class A Common Stock outstanding. As of June 28, 1995,
2,260,954 shares of Class B Common Stock and 50,000 shares of Preferred Stock
were issued and outstanding. There are no shares of Series Preferred Stock
outstanding.
The following summary description relating to the Class A Common Stock,
the Class B Common Stock, the Preferred Stock, Series Preferred Stock, the Blau
Warrant, the Maxim Warrant (as herein defined) and the Warrants 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
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Stock vote as a single class on all matters, including amendment of the
Certificate of Incorporation to increase or decrease the aggregate number
of authorized shares of any class or classes of stock. In all cases, each
share of Class A Common Stock is entitled to cast one vote per share and
each share of Class B Common Stock is entitled to cast ten votes per
share.
Holders of Class A Common Stock, voting separately as a class, are
entitled to elect 25% of the Board of Directors (rounded up to the nearest whole
number) so long as the number of outstanding shares of Class A Common Stock is
at least 10% of the total number of outstanding shares of both classes of Common
Stock. If the number of outstanding shares of Class A Common Stock should become
less than 10% of the total number of outstanding shares of both classes of
Common Stock, directors would then be elected by all stockholders voting as one
class, except holders of Class A Common Stock would have one vote per share and
holders of Class B Common Stock would have ten votes per share. In such event,
the American Stock Exchange may consider delisting the Class A Common Stock.
The holders of a majority of the Class B Common Stock, voting
separately as a class, will continue to be able to elect the directors not
elected by holders of the Class A Common Stock, so long as the number of
outstanding shares of Class B Common Stock is at least 12.5% of the number of
outstanding shares of both classes of Common Stock. If the number of outstanding
shares of Class B Common Stock falls below that percentage, directors not
elected by the holders of Class A Common Stock will be elected by the holders of
both classes of Common Stock, with holders of Class A Common Stock having one
vote per share and holders of Class B Common Stock having ten votes per share.
Directors may be removed, with or without cause, provided that any
removal of directors without cause may be made only by the holders of the class
or classes of Common Stock that elected them. Vacancies in a directorship may be
filled by the vote of the class of shares that had previously filled that
vacancy, or by the remaining directors elected by that class however, if there
are no such directors, the vacancy may be filled by the remaining directors.
The outstanding shares of Class A Common Stock equal approximately
75.0% of the shares of both classes outstanding, and the holders of Class A
Common Stock have approximately 23.0% of the combined voting power of both
classes of Common Stock. The holders of Class B Common Stock, therefore, have
the power to amend the Company's Certificate of Incorporation to authorize the
issuance of enough additional Class B Common Stock to decrease the outstanding
amount of Class A Common Stock to less than 10%. Because of limitations on
dividends in shares of Class A Common Stock
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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.
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Other Rights
Stockholders of the Company have no preemptive or other rights to
subscribe for additional shares. Subject to any rights of holders of any
Preferred Stock and Series Preferred Stock, all holders of Common Stock,
regardless of class, are entitled to share ratably in any assets available for
distribution on liquidation, dissolution or winding up of the Company. No shares
of either class of Common Stock are subject to redemption. All outstanding
shares are, and all shares issuable upon conversion of the Debentures offered
hereby will be, when issued upon such conversion in accordance with the terms of
the Debentures, legally issued, fully paid and nonassessable. The Company may
not subdivide or combine shares of either class of Common Stock without at the
same time proportionally subdividing or combining shares of the other class of
Common Stock.
Effects of Disproportionate Voting Rights
The disproportionate voting rights of Class A Common Stock and Class B
Common Stock could have an adverse effect on the market price of the Class A
Common Stock. Such disproportionate voting rights may effectively preclude the
Company from being taken over in a transaction not supported by holders of Class
B Common Stock, may render more difficult or discourage a merger proposal or
tender offer or may preclude a successful proxy contest, even if such actions
were favored by stockholders of the Company other than the holders of the Class
B Common Stock. Accordingly, such disproportionate voting rights may deprive
stockholders of an opportunity to sell their shares at a premium over prevailing
market prices, since takeover bids frequently involve purchases of stock
directly from stockholders at such a premium price.
Transfer Agent
The transfer agent and registrar for shares of the Class A Common Stock
and Class B Common Stock is Continental Stock Transfer & Trust Company, New
York, New York.
Preferred Stock
Preferred Stock
The Company is authorized to issue up to 50,000 shares of Preferred
Stock, all of which have been issued and are outstanding. Such shares are
nonvoting and have preference over the Common Stock in the event of liquidation,
dissolution or winding up of the Company to the extent of its par value of $50
per share.
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Series Preferred Stock
The Company is authorized to issue up to 1,500,000 shares of Series
Preferred Stock, par value $.01 per share, none of which has been issued. The
Certificate of Incorporation provides that the Board of Directors may issue by
resolution shares of Series Preferred Stock from time to time in one or more
series and fix, as to each such series, the designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions pertaining thereto, including voting
rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation and conversion rights. However, the
Company may not issue shares of Series Preferred Stock carrying in excess of one
vote per share or convertible into Class B Common Stock without prior approval
of a majority in interest of the holders of Class B Common Stock. The Company
has no present plans for the issuance of any shares of Series Preferred Stock.
It is not possible to state the actual effect of the authorization of
the Series Preferred Stock upon the rights of holders of Class A Common Stock,
Class B Common Stock and Preferred Stock until the Board determines the specific
rights thereof. However, such effects might include (a) restrictions on
dividends on either class of Common Stock if dividends on Series Preferred Stock
have not been paid; (b) dilution of the voting power of the Class A Common Stock
to the extent that the Series Preferred Stock has voting rights; (c) dilution of
the equity interest of the Class A Common Stock to the extent that the Preferred
Stock is convertible into Class A Common Stock; or (d) either class of Common
Stock and Preferred Stock not being entitled to share in the Company's assets
upon liquidation, dissolution or winding up until satisfaction of any
liquidation preference granted to holders of Series Preferred Stock. The Company
has been advised that under its current listing requirements the American Stock
Exchange would consider delisting the Class A Common Stock if any Series
Preferred Stock diluted the class voting rights of the Class A Common Stock.
Issuance of Series Preferred Stock, while providing desirable flexibility in
connection with possible acquisition and other corporate purposes, could make it
more difficult for a third party to acquire a majority of the outstanding voting
stock. Accordingly, the issuance of Series Preferred Stock may be used as an
antitakeover device without further action on the part of the stockholders of
the Company.
Warrants
Blau Warrant
The Company and Harvey R. Blau ("Blau") have entered into a letter
agreement, dated April 1, 1993 (the "Consulting Agreement"). Pursuant to the
Consulting
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Agreement, the term of which was from April 1, 1993 to March 31, 1995, Blau
was to render up to 20 hours of consulting services to the Company per year.
In connection with the Consulting Agreement, Blau was awarded the Blau
Warrant to purchase 100,000 shares of Class A Common Stock at a purchase price
of $7.50 per share (subject to adjustment upon certain events described in the
Blau Warrant). The Blau Warrant is exercisable in whole or in part, from
time-to-time, until December 31, 1998. On December 15, 1993, the Company and
Blau executed a letter agreement pursuant to which it was agreed that Blau had
performed in excess of 40 aggregate hours of consulting services under the
Consulting Agreement, that no further services were required to be performed by
Blau under the Consulting Agreement and that the consideration for the Blau
Warrant was deemed fully paid.
Maxim Warrant
The Company and James Maxim ("Maxim") have entered into an Agreement,
dated September 23, 1993 and effective December 1, 1993, pursuant to which the
Company acquired all of the issued and outstanding stock of H & H Eastern
Distributors, Inc. owned by Maxim, and as a result, the Company became the sole
stockholder of H & H Eastern Distributors, Inc. In connection with such
Agreement, the Company issued to Maxim the Maxim Warrant to purchase 50,000
shares of Class A Common Stock, at a purchase price of $14.375 per share. The
per share purchase price and number of shares purchasable pursuant to the Maxim
Warrant are each subject to adjustment upon the occurrence of certain events
described in the Maxim Warrant. The Maxim Warrant is exercisable, in whole or in
part, from time-to-time, until September 22, 2003. In connection with the Maxim
Warrant, Maxim has the right to require the Company to file with the SEC, on or
after September 22, 1995, a registration statement relating to the sale by Maxim
of the Class A Common Stock purchasable pursuant to the Maxim Warrant.
Other Warrants
On May 9, 1995 (the "Warrant Closing Date"), the Company closed a
private placement 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.
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Each beneficial holder of the Company's 6 1/4% Convertible Subordinated
Debenture due 2001 (the "Debentures") as of June 3, 1994 who elected to invest
in the Warrants acquired 30 Warrants per $1,000 principal amount of Debentures
(except for Oppenheimer & Co., Inc., which acquired 25 Warrants per $1,000
principal amount of 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 Debentures and the offering of the Debentures.
The Warrants may not be exercised (a) until the later of (x) one year
after issuance and (y) the date a registration statement with respect to the
Class A Common Stock issuable upon exercise of the Warrants has been filed and
declared effective by the Securities and Exchange Commission (the "SEC") or (b)
after March 15, 2001 (the "Expiration Date") unless the Warrants are terminated
sooner under certain circumstances.
The Company has agreed to file with the SEC within 300 days of the
Warrant Closing Date of the offering and use its reasonable best efforts to
cause to become effective within 365 days of the Warrant Closing Date, a
registration statement or statements with respect to the issuance of the Class A
Common Stock underlying the Warrants upon exercise thereof. If the registration
statement with respect to the Common Stock is not filed within such 300-day
period or declared effective within such 365-day period, the exercise price of
the Warrants will decrease by $1/8 per share of Class A Common Stock; subject to
additional decreases of $1/8 per share for each additional six-month period for
which such registration statement is not filed or declared effective, as the
case may be. In addition, if such registration is declared effective, the
Warrant Exercise Price will also decrease by $1/8 per share of Class A Common
Stock if such registration statement ceases to be effective for more than 90
days (180 days in certain circumstances) in any 365-day period, subject to
additional decreases of $1/8 per share of Class A Common Stock for each
additional six-month period for which such registration statement ceases to be
effective. Notwithstanding the foregoing, the maximum number of $1/8 per share
decreases shall be 10 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 a registration statement relating to the Class A Common Stock
underlying the Warrants has not been effective at any time on or prior to the
Expiration Date of the
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<PAGE>
Warrants, the Company will be required to redeem all of the outstanding
Warrants for $1.60 per Warrant. Additionally, 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
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
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<PAGE>
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."
PLAN OF DISTRIBUTION
The Debentures and Conversion Shares
This Prospectus relates to the resale of $65,000,000 of Debentures
issued in a private placement on March 15, 1994 and the resale of up to
3,672,317 shares of Class A Common Stock which are initially issuable upon
conversion of Debentures by any holders of Debentures that did not purchase the
Debentures under the Registration Statement (of which this Prospectus is a
part). The Registration Statement (of which this Prospectus is a part) does not
cover the issuance of shares of Class A Common Stock upon conversion of the
Debentures into shares of Class A Common Stock.
The Company will not receive any of the proceeds from the offering of
Debentures and the shares of Class A Common Stock issuable upon conversion
thereof by the Selling Securityholders and which are sold pursuant to the
Registration Statement (of which this Prospectus is a part). The Company has
been advised by the Selling Securityholders that the Selling Securityholders
may sell all or a portion of the Debentures and shares of Class A Common Stock
beneficially owned by them and which may be offered hereby from time to time on
any exchange on which the securities are listed on terms to be determined at the
times of such sales. The Selling Securityholders may also make private sales
directly or through a broker or brokers. Alternatively, any of the Selling
Securityholders may from time to time offer the Debentures or shares of Class A
Common Stock which may be offered hereby and beneficially owned by them through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts,
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<PAGE>
commissions or concessions from the Selling Securityholders and the purchasers
of the Debentures or shares of Class A Common Stock for whom they may act as
agent. To the extent required, the aggregate principal amount of Debentures
and number of shares of Class A Common Stock to be sold hereby, the names of
the Selling Securityholders, the purchase price, the name of any such agent,
dealer or underwriter and any applicable commissions, discounts or other terms
constituting compensation with respect to a particular offer will be set forth
in an accompanying Prospectus Supplement. The aggregate proceeds to the
Selling Securityholders from the sale of the Debentures or shares of Class
A Common Stock offered by them hereby will be the purchase price of such
Debentures or shares of Class A Common Stock less discounts and commissions,
if any.
The Debentures and the shares of Class A Common Stock (including the
Blau Warrant Shares described below) which may be offered hereby may be sold
from time to time in one or more transactions at fixed offering prices, which
may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the holders of such
securities or by agreement between such holders and underwriters or dealers
who may receive fees or commissions in connection therewith.
The outstanding Class A Common Stock is listed for trading on the
American Stock Exchange, and the Company has also applied for listing of the
Debentures and the underlying shares of Class A Common Stock on the American
Stock Exchange. The Company has been informed by the AMEX that the Debentures
and the underlying shares of Class A Common Stock will be listed on the AMEX
upon effectiveness of the Registration Statement (of which this Prospectus is a
part). Oppenheimer & Co., Inc. has advised the Company that it intends to make
a market in the Debentures; however, it is not obligated to do so and any such
market-making may be discontinued at any time without notice, in the sole
discretion of Oppenheimer & Co., Inc. Accordingly, no assurance can be given
as to the development or liquidity of any trading market that may develop for
the Debentures.
In order to comply with the securities laws of certain states, if
applicable, the Debentures and shares of Class A Common Stock (including the
Blau Warrant Shares described below) offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Debentures and shares of Class A Common Stock
(including the Blau Warrant Shares described below) offered hereby may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Debentures or shares
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<PAGE>
of Class A Common Stock 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 Debentures or shares of Class A Common
Stock offered hereby and purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company and the Selling Securityholders have agreed to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay all expenses incident to the offer and sale of the
Debentures and Class A Common Stock offered hereby by the Selling
Securityholders to the public, other than broker's commissions and underwriting
discounts and commissions.
The Debentures were originally sold to the Initial Purchasers on March
15, 1994 in a private placement at a purchase price of 97% of their principal
amount, representing a discount of $1,950,000. The Company agreed to indemnify
and hold the Initial Purchasers harmless against certain liabilities under the
Securities Act that could arise in connection with the sale of the Debentures by
the Initial Purchasers.
The Registration Statement does not cover the issuance of shares of
Class A Common Stock upon conversion of the Debentures into shares of Class A
Common Stock.
The Blau Warrant Shares
The Blau Warrant Shares may be resold from time to time prior to the
expiration of the Blau Warrant after exercise of the Blau Warrant and payment in
full of the exercise price. The Company will not receive any proceeds from the
resale of the Blau Warrant Shares. The Blau Warrant Shares may be resold from
time to time on any exchange on which the Class A Common Stock is listed or
privately in direct sales or through brokers. The holders of the Blau Warrant
Shares may also offer such securities through underwriters, dealers or agents,
who may receive compensation in the form of underwriting discounts, commissions
or concessions from such holders for whom they act as agent. The price at
which the Blau Warrant Shares will be resold will be determined by agreement at
the time of sale. To the extent required, information regarding the resale of
the Blau Warrant Shares will be set forth in a Prospectus Supplement.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
6,777,788 shares of Class A Common Stock (assuming no exercise of options or
warrants or conversion of other securities after June 28, 1995). Of these
shares, the Company has approximately 3,406,326 shares of Class A Common Stock
held by members of the public that are able to trade without restriction or
further registration under the Securities Act except for any shares purchased by
any affiliates of the Company, which will be subject to the resale limitations
of Rule 144 promulgated under the Securities Act. Sales of a substantial number
of additional shares of Class A Common Stock in the public market could
adversely affect the market price of the Class A Common Stock. As of
June 28, 1995, 3,672,316 shares of Class A Common Stock were issuable upon
conversion of the Debentures, 1,023,028 shares of Class A Common Stock were
issuable upon conversion of the Series AA Convertible Debentures and Series
BB Convertible Debentures, 100,000 shares of Class A Common Stock were
issuable upon exercise of the Blau Warrant, 50,000 shares of Class A Common
Stock were issuable upon exercise of the Maxim Warrant and 1,668,875 shares
of Class A Common Stock were issuable upon exercise of the Warrants. Exercise
or conversion, as the case may be, of a substantial amount of the presently
outstanding warrants, the Debentures, the Series AA Convertible Debentures
or the Series BB Convertible Debentures or sale of the Class A Common Stock
underlying such debentures or warrants also could adversely affect the market
price of the Class A Common Stock, due to the large number of shares issuable
upon conversion or exercise of such debentures or warrants in comparison to
the relatively small number of shares held by members of the public that are
able to trade without restriction. The Company has granted the holders of the
Series AA Convertible Debentures, the Series BB Convertible Debentures and the
warrants certain registration rights relating to the Class A Common Stock
issuable upon conversion or exercise of such debentures or warrants, as the
case may be. In addition, as of June 28, 1995, (i) John J. Shalam, President
and Chief Executive Officer of the Company, owned 3,366,762 shares of Class A
Common Stock (including for this purpose all of the shares subject to the
Shalam Option) and 1,883,198 shares of Class B Common Stock of the Company,
par value $.01 per share ("Class B Common Stock"), which are convertible into
an equal number of shares of Class A Common Stock and (ii) other affiliates
(as such term is defined the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of the Company owned 4,700 shares of Class A Common
Stock and 377,756 shares of Class B Common Stock, which are convertible into
an equal number of shares of Class A Common Stock. Sales by such persons of a
substantial number of shares of Class A Common Stock or Class B Common Stock
(collectively, "Common Stock") could adversely affect the market price of the
Class A Common Stock.
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<PAGE>
John J. Shalam, Chief Executive Officer of the Company, granted the
Company the Shalam Option to purchase 1,668,875 shares of a Class A Common
Stock. The Shalam Option Price is equal to the sum of (a) the Warrant Exercise
Price plus (b) an additional 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 rather than
as a payment to Mr. Shalam for the sale of his Class A Common Stock to the
Company pursuant to the Shalam Option. See "Description of Capital Stock--Other
Warrants."
The independent members of the Board of Directors may elect not to
exercise the Shalam Option in whole or in part in connection with the exercise
of Warrants if such board members believe it is in the best interests of the
Company not to exercise all or part of the Shalam Option. The decision by the
independent members of the Board of Directors not to exercise the Shalam Option,
in whole or in part, would result in an increase in the number of shares of
Class A Common Stock outstanding and available for future sale and could
result in dilution to the holders of Common Stock.
In general, under Rule 144 as currently in effect, affiliates of the
Company would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the number of shares
of Class A Common Stock then outstanding or the average weekly trading volume of
the Class A Common Stock during the four calendar weeks preceding the filing of
a Form 144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company.
The Company is unable to estimate accurately the number of shares that
will be sold under Rule 144 since this will depend in part on the market price
for the Class A Common Stock, the personal circumstances of the sellers and
other factors.
The Company has registered Class A Common Stock under the Securities
Act for issuance to certain of its directors, officers and employees pursuant to
the Company's stock option plans. Shares issued pursuant to such stock option
plans after the effective date of any registration statement covering such
shares generally will be available for sale in the open market (except that such
shares held by affiliates will be subject to compliance with the volume
restrictions of Rule 144 under the Securities Act).
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
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York, New York. Fried, Frank, Harris, Shriver & Jacobson has in the past and
may in the future render legal services to the Company.
EXPERTS
The consolidated financial statements and schedules of the Company have
been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing. The report of KPMG Peat Marwick LLP
covering the November 30, 1994, financial statements refers to a change in the
method of accounting for income taxes.
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<PAGE>
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 ................................................................... 5
Risk Factors .............................................................. 11
The Company ............................................................... 21
Use Of Proceeds ........................................................... 21
Coverage Ratios ........................................................... 22
Selling Securityholders ................................................. 22
Description Of The Debentures ............................................. 26
Description Of Capital Stock .............................................. 44
Plan Of Distribution ...................................................... 52
Shares Eligible For Future Sale ........................................... 55
Legal Matters ............................................................. 56
Experts ................................................................... 57
<PAGE>
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 Debentures and the Class A Common Stock being registered. All amounts are
estimates except the registration fee and the AMEX listing fee.
SEC Registration Fee ................................... 22,673
AMEX listing fee ....................................... 6,500
Printing and engraving expenses ........................ 5,000
Legal fees and expenses ................................ 30,000
Trustee's fees ......................................... 2,500
Accounting fees and expenses ........................... 15,000
Blue Sky fees and expenses (including counsel fees) .... 2,500
Miscellaneous .......................................... 1,000
---------
Total ................................ $85,173
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
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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).
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<PAGE>
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) 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).
*4(d) Form of 6 1/4% Convertible Subordinated Debentures
due 2001 (included in Indenture filed as
Exhibit 4(c)).
*4(e) Registration Rights Agreement, dated as of
March 15, 1994, among Audiovox Corporation,
Oppenheimer & Co., Inc., Furman Selz Incorporated
and Chemical Securities Inc. (incorporated by
reference to Exhibit B of the Company's Current
Report on Form 8-K dated March 15, 1994,
File No. 1-9532).
*4(f) 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).
*5 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
*12 Statement re computation of ratios.
*22 Subsidiaries (incorporated by reference to Exhibit
22 to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1994, File
No. 1-9532).
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*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.
*26 Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of Continental
Stock Transfer & Trust Company.
*99 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, File No. 1-9532).
* 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) (ss. 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;
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<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs 1(i) and 1(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form S-3 and has duly caused this 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 30th day of
June, 1995.
AUDIOVOX CORPORATION
(Registrant)
By: /s/ John J. Shalam
---------------------------
John J. Shalam, President and
Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons in the
capacities indicated on this 30th day of June, 1995.
/s/ John J. Shalam /s/ Charles M. Stoehr
- -------------------------- ---------------------------
John J. Shalam Charles M. Stoehr
Director Director
President and Chief Executive Senior Vice President
Officer and Chief Financial Officer
(Principal Accounting Officer)
/s/ Patrick Lavelle /s/ Philip Christopher
- -------------------------- ---------------------------
Patrick Lavelle Philip Christopher
Director Director
/s/ Ann Boutcher /s/ Martin Novick
- -------------------------- ---------------------------
Ann Boutcher Martin Novick
Director Director
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<PAGE>
/s/ Irving Halevy /s/ Gordon Tucker
- -------------------------- ---------------------------
Irving Halevy Gordon Tucker
Director Director
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<PAGE>
EXHIBIT INDEX
-------------
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) 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).
*4(d) Form of 6 1/4% Convertible Subordinated Debentures
due 2001 (included in Indenture filed as
Exhibit 4(c)).
*4(e) Registration Rights Agreement, dated as of
March 15, 1994, among Audiovox Corporation,
Oppenheimer & Co., Inc., Furman Selz Incorporated
and Chemical Securities Inc. (incorporated by
reference to Exhibit B of the Company's Current
Report on Form 8-K dated March 15, 1994,
File No. 1-9532).
*4(f) 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).
*5 Opinion of Fried, Frank, Harris, Shriver & Jacobson.
*12 Statement re computation of ratios.
*22 Subsidiaries (incorporated by reference to Exhibit
22 to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1994, File
No. 1-9532).
<PAGE>
*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.
*26 Form T-1 Statement of Eligibility and Qualification
under the Trust Indenture Act of 1939 of Continental
Stock Transfer & Trust Company.
*99 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, File No. 1-9532).
* Previously filed.
