<PAGE>
As filed with the Securities and Exchange Commission on April 9 , 1996
Registration No. 333-00811
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
___________________________________
Audiovox Corporation
(Exact Name of Registrant as Specified in its Charter)
___________________________________
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
13-1964841
(I.R.S. Employer Identification Number)
___________________________________
150 Marcus Boulevard, Hauppauge, New York 11788
516-231-7750
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
___________________________________
Charles M. Stoehr
Senior Vice President
150 Marcus Boulevard,
Hauppauge, New York 11788
516-231-7750
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Agent for Service)
___________________________________
Please send copies of all communications to:
Robert S. Levy, Esq.
Levy & Stopol, LLP
One Pennsylvania Plaza, 49th Floor
New York, New York 10119
___________________________________
Approximate date of commencement of proposed sale to public: From time
to time after the effective date of the Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, 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. [ ]
______________________________
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed Proposed
Title of Each Class of Securities Amount to Maximum Maximum Amount of
to be Registered be Offering Aggregate Registratio
Registere Price Per Offering n Fee
d(1) Security Price(2)
<S> <C> <C> <C> <C>
Class A Common Stock Purchase
Warrants.......................... 1,668,875 -- -- --
Class A Common Stock, par value
$.01 per share.................... 1,668,875 $7.125(2) 11,890,734 $ 4,101
(1) Pursuant to Rule 416 under the Securities Act of 1933, this
Registration Statement also covers such additional securities as may become
issuable upon the exercise of the Warrants being registered through the
antidilution provisions thereof.
(2) Calculated based upon the exercise price of the Warrants solely
for the purpose of calculating the registration fee pursuant to Rule
457(g).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
</TABLE>
===========================================================================
<PAGE>
*******************************************************************
*INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR *
*AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE *
*SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE *
*COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO *
*BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT *
*BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN *
*OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL *
*THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
*SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
*REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY *
*SUCH STATE. *
* *
*******************************************************************
SUBJECT TO COMPLETION, preliminary
PROSPECTUS, DATED APRIL 9 , 1996
1,668,875 Warrants
1,668,875 Shares of Common Stock
AUDIOVOX CORPORATION
COMMON STOCK PURCHASE WARRANTS AND COMMON STOCK
------------------------
This Prospectus relates to the registration of (i) 1,668,875 common
stock purchase warrants (the "Warrants") exercisable for shares of Class A
Common Stock, par value $.01 per share (the "Class A Common Stock"), of
Audiovox Corporation (the "Company") and (ii) the shares of Class A Common
Stock issuable upon the exercise of the Warrants (the "Warrant Shares").
The Warrants were issued by the Company in a private placement effected on
May 9, 1995 (the "Closing Date"). All of the Warrants and Warrant Shares
are being registered for resale from time to time by the holders thereof
(the "Selling Securityholders") and the Warrant Shares are also being
registered for their issuance by the Company to the Selling Securityholders
of the Warrants upon their exercise of the Warrants. See "Selling
Securityholders." Information concerning the Selling Securityholders may
change from time to time and will be set forth in
<PAGE>
Supplements to this Prospectus. The Company will not receive any of the
proceeds from the resale by the Selling Securityholders of the Warrants or
the Warrant Shares. The Company will receive proceeds of $7 1/8 per
Warrant Share (subject to adjustment in certain circumstances) issued upon
exercise of the Warrants. See "Use of Proceeds."
The Warrants are exercisable at the later of (a) May 9, 1996 (one year
after the issuance of the Warrants), and (b) the date a registration
statement with respect to the Warrant Shares has been filed and declared
effective by the Securities and Exchange Commission (the "SEC"), at an
initial exercise price of $7 1/8 per share, subject to adjustment under
certain circumstances. Unless exercised, the Warrants will automatically
expire at 5:00 p.m. (New York City time) on March 15, 2001 (the "Expiration
Date"). If less than 5% of the Warrants initially issued (i.e., 83,444
Warrants) remain outstanding at any given time, the Company may elect, by
written notice to each holder of the Warrants, that the Warrants will
expire on the 30th day after delivery of such notice. See "Description of
Warrants."
The outstanding Class A Common Stock is traded on the American Stock
Exchange ("AMEX") (Symbol: "VOX"). On April 5 , 1996, the last
reported sale price of the Class A Common Stock on the American Stock
Exchange was $4-13/16 per share. The AMEX, the National Association
of Securities Dealers Automated Quotation System Small Capitalization
Market, the Boston Stock Exchange, the Midwest Stock Exchange, the Pacific
Stock Exchange and the Philadelphia Stock Exchange (the "Exchanges") have
each informed the Company that the number of holders of the Warrants is
insufficient to list such Warrants. Among other listing requirements, each
such Exchange requires at least 250 holders of an equity security, such as
the Warrants, as a prerequisite for the approval of the listing of such
Warrants. Currently, the Company estimates that there are less
than 40 beneficial holders of the Warrants ("Warrantholders") . If and
when a sufficient number of holders exist and the Company satisfies the
other listing requirements, the Company presently intends to seek to list
the Warrants on one of the Exchanges.
If this Registration Statement has not been declared effective at any
time prior to the Expiration Date of the Warrants, the Company will be
required to redeem all of the outstanding Warrants for $1.60 per Warrant
(subject to adjustment in certain limited circumstances).
The Warrants have been approved for trading in the Private Offering
Resales and Trading through Automated Linkages ("PORTAL") Market since the
Closing Date. However, no public trading market for the Warrants exists
and no active trading market in PORTAL has developed. Josepthal, Lyon &
Ross Incorporated has advised the Company that it presently intends to make
a market in the Warrants after the effectiveness of this Registration
Statement. Josepthal, Lyon & Ross Incorporated, however, is not obligated
<PAGE>
to do so and any such market-making may be discontinued at any time without
notice, in the sole discretion of Josepthal, Lyon & Ross Incorporated. No
assurance can be given that any market for the Warrants will develop or be
maintained. Moreover, once the Warrants are registered under this
Registration Statement, the Warrants which are registered under this
Registration Statement will no longer be eligible for trading on PORTAL.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CAREFULLY CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Company has agreed to bear all expenses (other than selling
expenses) in connection with the registration of the securities hereby and
to indemnify the Selling Securityholders against certain liabilities
including liabilities under the Securities Act of 1933, as amended. See
"Plan of Distribution." The Company has been advised by the Selling
Securityholders that the Selling Securityholders, acting as principals for
their own account, directly, through agents designated from time to time,
or through dealers or underwriters also to be designated, may sell all or a
portion of the Warrants or Warrant Shares which may be offered hereby by
them from time to time on terms to be determined at the time of sale. The
aggregate proceeds to the Selling Securityholders from the sale of Warrants
and Warrant Shares which may be offered hereby by the Selling
Securityholders will be the purchase price of such Warrants or Warrant
Shares less commissions, if any. For information concerning
indemnification arrangements between the Company and the Selling
Securityholders, see "Plan of Distribution."
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Warrants or Warrant Shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the
Warrants or Warrant Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. There can
be no assurance that any of the Warrants or the Warrant Shares will be sold
by the Selling Securityholders.
<PAGE>
----------------------------
The date of this Prospectus is April ___ , 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the SEC .
Such reports and other information may be inspected and copied at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549 and at the SEC's Regional Offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates. The Company's outstanding Class A Common Stock and its
61/4% Convertible Subordinated Debentures due 2001 (the "Debentures") are
listed on the American Stock Exchange, and such reports and other
information can also be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
The Company has filed with the SEC a registration statement on Form S-
3 (such registration statement, together with all amendments and exhibits
thereto, being hereinafter referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), for
the registration under the Securities Act of the Warrants and Warrant
Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC.
Reference is hereby made to the Registration Statement for further
information with respect to the Company and the securities offered hereby.
Statements contained herein concerning the provisions of documents filed as
exhibits to the Registration Statement are necessarily summaries of such
documents, and each such statement is qualified by reference to the
copy of the applicable document filed with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus: (i)
the Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1995, as amended (the "1995 Form 10- K"); (ii) the
Company's Current Report on Form 8-K dated March 7, 1996; and
(iii) the description of the Company's Class A Common Stock contained in
the Company's Registration Statement on Form 8-A dated May 21, 1987, all of
which have been filed with the SEC (File No. 1-9532).
The Company also incorporates herein by reference all documents and
reports subsequently filed by the Company with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to termination of this offering. Such
documents and reports shall be deemed to be incorporated by
<PAGE>
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.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information appearing elsewhere
in this Prospectus and in the documents incorporated herein by reference.
The Company
Audiovox Corporation (together with its subsidiaries, the "Company")
designs and markets cellular telephones and accessories, automotive
aftermarket sound and security equipment, other automotive aftermarket
accessories, and certain other products. The Company's corporate
headquarters is located at 150 Marcus Boulevard, Hauppauge, New York 11788,
and its telephone number at that address is 516-231-7750.
The Offering
Securities Offered.......1,668,875 warrants (the "Warrants"), each Warrant
entitling the holder thereof to purchase one share
of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock), of the Company at any
time on or after the later of (x) one year after
issuance and (y) the date a registration statement
with respect to the Class A Common Stock issuable
upon exercise of the Warrants (the "Warrant
Shares") has been filed and declared effective by
the Securities and Exchange Commission (the "SEC")
and (ii) on or prior to March 15, 2001 unless the
Warrants are terminated earlier in certain
circumstances (the "Expiration Date"). The
initial exercise price of each Warrant (the
"Warrant Exercise Price") will be $7 1/8 per
share. The Warrant Exercise Price and the number
of shares of Class A Common Stock acquirable upon
exercise of a Warrant is subject to adjustment in
certain limited circumstances. See Description of
the Warrants--General ."
On April 5 , 1996, the reported closing
sales price of the Class A Common Stock, as
reported on the AMEX, was $4-13/16 per
share.
<PAGE>
Warrant Exercise Period..The Warrants may not be exercised (a) until
the later of (x) one year after issuance and (y)
the date a registration statement with respect to
the Warrant Shares has been filed and declared
effective by the SEC or (b) after the Expiration
Date. The Warrants will expire on the Expiration
Date; provided that if less than 5% of the
Warrants initially issued (i.e., 83,444 Warrants)
remain outstanding at any given time, the Company
may elect, by written notice to each holder of
Warrants, that the Warrants will expire on the
30th day after delivery of such notice.
Registration Rights for
Class A Common Stock;
Reduction in Exercise Price
for Failure to Register
Class A Common Stock.....The Company has agreed to file with the SEC by
March 4, 1996 (300 days of the closing of the
offering (the "Closing Date")) and use its
reasonable best efforts to cause to become
effective by (365 days of the Closing Date), a
shelf registration statement or statements with
respect to the issuance of the Warrant Shares.
This Registration Statement which covers the
issuance of the Warrant Shares was
initially filed on February 8, 1996. If the
registration statement with respect to the Warrant
Shares is not declared effective by May 8, 1996,
the exercise price of the Warrants will decrease
by $1/8 per share of Class A Common Stock; subject
to additional decreases of $1/8 per share for each
additional six-month period for which such
registration statement is not declared effective.
In addition, if such registration statement is
declared effective, the Warrant Exercise Price
will also decrease by $1/8 per share of Class A
Common Stock if such registration statement ceases
to be effective for more than 90 days (180 days in
certain circumstances) in any 365-day period,
subject to additional decreases of $1/8 per share
of Class A Common Stock for each additional six-
month period for which such registration statement
ceases to be effective. Notwithstanding the
foregoing, the maximum number of $1/8 per share
<PAGE>
decreases shall be 10 during the term of the
Warrants and there shall be no more than one such
decrease in any six month period. (Each of such
events which results in a decrease in the Warrant
Exercise Price being referred to herein as a
"Registration Default"). The reduction in the
Warrant Exercise Price upon a Registration Default
is subject to adjustment in certain limited
circumstances. The Company will be obligated to
use its reasonable best efforts to cause the
registration statement relating to the Class A
Common Stock to remain effective until the
Expiration Date. The Company will not be
obligated to register the Warrant Shares (a) which
the holder does not seek to register or (b) as to
which the Company determines that it is not
advisable or appropriate to register (based on
discussions with the SEC, advise of counsel or
otherwise) such Warrant Shares. In any such event
(a) or (b), the Warrant Exercise Price underlying
such Warrants will not decrease upon the failure
to register with the SEC the Warrant Shares if the
SEC has declared effective a registration
statement with respect to other shares of Class A
Common Stock. See "Description of the Warrants --
Registration Rights."
Mandatory Redemption.....If a registration statement relating to the
Warrant Shares has not been effective at any time
on or prior to the Expiration Date of the
Warrants, the Company will be required to redeem
all of the outstanding Warrants for $1.60 per
Warrant (the "Redemption Price"). The Redemption
Price is subject to adjustment in certain limited
circumstances.
Listing of Warrants;
Registration of Warrants.The Exchanges have each informed the Company that
the number of holders of the Warrants is
insufficient to list such Warrants. Among other
listing requirements, each such Exchange requires
at least 250 holders of an equity security, such
as the Warrants, as a prerequisite for approval of
the listing of such Warrants. Currently, the
Company estimates that there are less
than 40 Warrantholders. If and when a
sufficient number of holders exist and the Company
satisfies the other
<PAGE>
listing requirements, the Company presently
intends to seek to list the Warrants on one of the
Exchanges. If any of the Exchanges ultimately
agree to list the Warrants (a "Listing Approval"),
the Company is required, pursuant to a
Registration Rights Agreement between the Company
and the holders of the Warrants, to file a shelf
registration statement relating to the Warrants
upon the later of (a) March 4, 1996 (300 days
after the Closing Date) and (b) the date approval
of such listing is obtained (the "Approval Date")
and will use its reasonable best efforts to cause
such registration statement to become effective
upon the later of (a) May 8, 1996 (365 days after
the Closing Date) and (b) 60 days after the
Listing Approval Date. Although none of the
Exchanges has agreed to list the Warrants, the
Company is registering the Warrants pursuant to
this Registration Statement. Once effective, if a
Listing Approval occurs, the Company is obligated
to use reasonable best efforts to cause the
registration statement relating to the Warrants to
remain effective for three years following the
Closing Date.
Shalam Option............John J. Shalam, Chief Executive Officer of the
Company, granted the Company an option (the
"Shalam Option") to purchase 1,668,875 shares of
Class A Common Stock. The purchase price per
share of Class A Common Stock (the "Shalam Option
Price") under the Shalam Option is equal to the
sum of (a) the Warrant Exercise Price (without
giving effect to any decreases of such price as a
result of a Registration Default) plus (b) an
additional amount (the "Tax Amount") intended to
reimburse Mr. Shalam for any additional taxes per
share required to be paid by Mr. Shalam as a
result of the payment of the Shalam Option Price
being treated for federal, state and local income
tax purposes as the distribution to Mr. Shalam of
a dividend (taxed at ordinary income rates without
consideration of Mr. Shalam's basis), rather than
as a payment to Mr. Shalam for the sale of his
Class A Common Stock to the Company (taxed at the
capital gains rate with consideration of Mr.
Shalam's basis and
<PAGE>
considering any stepped up basis to Mr. Shalam's
heirs, successors or assigns (a "Successor"))
pursuant to the Shalam Option. The shares of
Class A Common Stock underlying the Shalam Option
have been legended with a description of the
Shalam Option. Any Successor acquiring the shares
of Class A Common Stock underlying the Shalam
Option (whether by sale, transfer or upon Mr.
Shalam's death) will acquire the shares subject to
the terms of the Shalam Option. Mr. Shalam and
any Successor will be entitled to the Tax Amount
upon delivery of a satisfactory notice to the
Company that the payment of a Tax Amount is
required to reimburse such person for such
additional taxes. The operative terms of the
Shalam Option (other than the exercise price in
certain circumstances) are similar to those of the
Warrants, however, the Shalam Option Price per
share for the Shalam Option will not decrease in
the event of a Registration Default. The Shalam
Option will be exercisable in the sole discretion
of the then-independent members of the Board of
Directors (which shall in no event include Mr.
Shalam). The Company will be able to exercise the
Shalam Option in whole or in part only if the
Warrants are exercised and then only for the same
number of shares of Class A Common Stock as are
purchased under the Warrants. The Shalam Option
may limit the dilutive effect of the Warrants on
the earnings per share or the book value per share
of the Company, if the Company elects to exercise
the Shalam Option. The Company has also agreed to
indemnify Mr. Shalam from any liabilities arising
from the Offering, including liabilities under any
federal or state securities laws. Mr. Shalam did
not receive any cash consideration in exchange for
granting the Shalam Option. The cost to Mr.
Shalam of the shares subject to the Shalam Option
was $166,887.50. See "Description of Capital
Stock -- Shalam Option."
Use of Proceeds..........The Company will not receive any cash proceeds
from the sale of the Warrants by the Selling
Securityholders.
<PAGE>
The proceeds received by the Company upon exercise
of the Warrants will be used toward the purchase
of shares of Class A Common Stock upon exercise of
the Shalam Option or, if the Board of Directors
determines not to exercise the Shalam Option, as,
when and if received by the Company, to purchase
inventory and for other working capital or general
corporate needs.
Original Issuance of
Warrants.................The Warrants were originally issued to the beneficial
holders (the "Debentureholders") of
the Debentures as of June 3, 1994 in consideration
of the delivery by such Debentureholder of a
release which released the Company, the
underwriters for the sale of the Debentures and
their respective directors, officers, partners,
employees and agents, from liability for any and
all potential claims, if any, such beneficial
holder may have had against such persons in
connection with such purchaser's investment in the
Debentures and the offering of the Debentures.
Each Debentureholder executing a release received
30 Warrants per $1,000 principal amount of
Debenture beneficially held as of June 3, 1994
(except Oppenheimer & Co., Inc., which
beneficially held $12,065,000 of the Debentures as
of June 3, 1994 and which received 25 Warrants per
$1,000 principal amount of its Debentures).
Warrant Agent............Continental Stock Transfer & Trust Company
Two Broadway
New York, New York 10004
Attention: William Seegraber
Telephone (212) 509-4000.
Risk Factors.............For a discussion of certain factors that should be
carefully considered in connection with an
investment in the securities offered hereby, see
"Risk Factors" beginning on page 13.
American Stock Exchange
Symbol of Class A Common
Stock....................VOX
<PAGE>
RISK FACTORS
The following factors should be carefully considered, together with
the other information in this Prospectus and the documents incorporated by
reference herein, in evaluating an investment in the securities offered
hereby.
History of Losses. The Company reported net losses of approximately
$1,554,000, $3,192,000, and $14,658,000 for the fiscal years ended November
30, 1989, 1990 and 1991, respectively. These losses were primarily
attributable to both operating losses and to charges incurred in connection
with the restructuring of the Company's operations and the cessation of
operations of two unsuccessful ventures, Hermes Telecommunications, Inc.
("Hermes") (a majority-owned subsidiary) and Park Plus Corp. ("Park Plus")
(a 50% owned joint venture). Such charges included costs incurred in the
closing of certain sales and distribution facilities, write-downs of assets
associated with the Hermes and Park Plus product lines, employee
termination expenses and certain other charges. During the fiscal years
ended November 30, 1989, 1990 and 1991, earnings were insufficient to cover
fixed charges by approximately $2,642,000, $4,792,000 and $15,098,000,
respectively. Although the Company was profitable for the fiscal years
ended November 30, 1992, 1993 and 1994, for the fiscal year ended
November 30 , 1995, the Company reported a net loss of
$9,256,000 which was primarily attributable to a charge of
$2,900,000 for the private placement of the Warrants and an
$11,800,000 charge for inventory writedowns and other costs
associated with the downsizing of the Company's retail operations. There
can be no assurance that the Company will return to profitably, or have
earnings or cash flow sufficient to cover its fixed charges. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1995 Form 10- K.
Cash Flow Deficits From Operations. During the fiscal years ended
November 30, 1994 and 1995, the Company experienced substantial cash flow
deficits from operations of $45,808,000 and $40,236,000, respectively. In
fiscal 1994, the primary components of this deficit were increases in
accounts receivable ($20,337,000) and inventory ($18,701,000). In fiscal
1995, the Company experienced an additional increase to inventory of
$16,950,000. During 1994, the Company experienced tremendous growth in the
cellular market place, particularly during the fourth quarter. The growth
in the fourth quarter resulted in an increase in accounts receivable as of
November 30, 1994. The cash flow deficits and the increased inventory
arose, in part, because the favorable growth in the market did not continue
in 1995. Due to the Company's lead time for ordering product and the
growth in the market during 1994, the Company continued to order cellular
product. When the product became available to sell, the growth in the
cellular
<PAGE>
market had slowed. Since the Company's lead time is approximately three
to four months depending on the country of origin, there is an inherent
risk that such deliveries may lag behind product demand. This is
indicative of the highly competitive market in which the Company operates
(see "Competition"). As a result of this highly competitive environment,
the Company recorded a charge of $11,800,000 during the third quarter of
1995. This charge was for inventory writedowns of $9,300,000, primarily
for cellular inventory, and $2,500,000 for the downsizing of the retail
operations, including the closing of several retail stores. There can be
no assurances that the Company will be able to generate positive cash flow
from operations in the future.
Downward Pressure on Selling Prices and Gross Margins. Since fiscal
1994, market and customer pricing pressure has required the Company to
reduce unit selling prices in order to maintain market share. The
Company's customers have continually reduced the cost of cellular telephone
products to the end users in order to increase their market penetration.
In addition, the Company's competitors have reduced the price of their
cellular products during this period. Even though unit sales of cellular
telephones increased by 708,000 units or 141.3% from fiscal 1993 through
the end of fiscal 1995, over this same period of time average unit selling
prices dropped from $324 per unit to $203 per unit, a decrease of 37.3%.
The average unit cost of goods sold decreased by only 32.3% over the same
period of time. Unit gross profits as a percentage of unit gross revenues
have decreased from 12.5% in 1993 to 5.5% in fiscal 1995. Since
the Company's lead time for ordering product is approximately three to four
months depending on the country of origin, there is an inherent risk that
selling prices may be lower than the purchase price from the vendor. This
situation may continue to result in lower than anticipated gross margins
and/or writedowns of the carrying value of the inventory on the Company's
balance sheet. There can be no assurance that continued downward pressure
on selling prices would not have a material adverse effect on the financial
condition and results of operations of the Company. Many of the Company's
competitors have greater capital resources than the Company and may
therefore be able to withstand downward pressure on selling prices better
than the Company. See "-- Competition."
United States Trade Sanctions Could Limit the Company's Sources of
Supply. The Company has historically been dependent on foreign sources,
particularly Japan and China, for a majority of its products.
The U.S. government historically has sought and is continuing to seek
greater access to Japanese markets for U.S. goods. As a result, the U.S.
government has threatened from time to time to impose trade sanctions on
products imported from Japan
<PAGE>
if it does not succeed in obtaining greater access for U.S. goods. For
example, during fiscal 1994, the United States government announced its
intention to publish a list of products imported from Japan on which it
might impose trade sanctions in connection with Motorola, Inc.'s inability
to obtain "comparable" access in Japan for its cellular products.
Thereafter, Motorola, Inc. announced an agreement with the Japanese
government, and the list was not published as announced. However, no
assurance can be given that the United States government will not, in the
future, publish a list of products imported from Japan upon which it may
impose trade sanctions, which could include cellular products. Such
products could also include products produced outside of Japan made from
Japanese components.
In addition, the U.S. government has held discussions with China
concerning violations of certain U.S. copyrights and trademarks. The U.S.
government proposed sanctions on Chinese products if a satisfactory
solution was not reached. Cellular products were included within the
proposed sanctions. Subsequently, China and the United States reached an
agreement and those sanctions were not imposed. There can be no assurance
that the U.S. government will not, in the future, propose a list of
products imported from China (or other countries), including cellular
products, on which it may impose trade sanctions.
If imposed, such sanctions may include, among other things, tariffs,
duties, import restrictions or other measures. These sanctions could also
include products produced outside of the sanctioned country with components
made in the sanctioned country. The imposition of such sanctions would
have a material adverse effect on the Company's financial condition and
results of operations, which would include reduced margins due to the
Company's inability to access alternative cellular products at a
competitive cost, and could also include loss of market share to
competitors that are less dependent on Japanese and Chinese suppliers
and/or loss of revenue due to unavailability of product.
In fiscal 1993 , 1994 and 1995, the Company
purchased 89.7%, 91.8% and 97.0% , respectively, of its total
dollar amount of cellular product purchases from Japanese suppliers, and
revenues from cellular products from Japanese suppliers comprised
46.3%, 47.8% and 51.8% , 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
<PAGE>
experience supply shortages as early as 60 days after such trade sanctions
were introduced. Additionally, it is likely that the Company would
experience interruptions in its supply of mobile, transportable and
portable cellular products before any alternative products could be
obtained. Any such supply interruptions would have a material adverse
effect on the Company's operating and earnings per share performance.
In addition, as a result of conditions in China, there has been, and
may be in the future, opposition to the continued extension of "most
favored nation" trade status for China. China's current status as "most
favored nation" will automatically expire on June 25, 1996 unless extended
by Congress and the President before such date. There can be no assurance
that Congress and the President will renew China's "most favored nation"
status at such time. Loss of China's "most favored nation" trade status
would materially increase the cost of the products purchased from Chinese
manufacturers, as such products would then become subject to substantially
higher rates of duty.
Risks of Currency Fluctuations. The prices that the Company pays for
the products purchased from its suppliers are principally denominated in
United States dollars. Price negotiations depend in part on the
relationship between the foreign currency of the foreign manufacturers and
the United States dollar. This relationship is determined by, among other
things, market, trade and political factors. Because the Company
historically has been dependent on Japanese suppliers for its cellular
products, the yen to dollar relationship has been the most significant to
the Company. The value of the United States dollar as of April
5, 1996 was 107.30 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
<PAGE>
imposed by any such supplier or the inability to obtain sufficient
quantities of product on a timely basis, could have a material adverse
effect on the Company's financial condition and results of operations.
The Company's arrangements with its suppliers are subject to the risks
of purchasing products from foreign suppliers, including risks associated
with economic and/or political instability in countries in which such
suppliers are located, and risks associated with potential import
restrictions, currency fluctuations, foreign tax laws, import/export
regulations, tariff, duty and freight rates and work stoppages. These
risks may be increased in the Company's case by the concentration of its
purchases of cellular products from suppliers in Japan and China. In
addition, the Company may be subject to risks associated with the
availability of and time required for the transportation of products from
foreign countries. Because of the Company's dependence on such foreign
suppliers, the Company is required to order products further in advance of
customers' orders than would be the case if its products were manufactured
domestically.
Dependence on Toshiba. Since 1984, Toshiba has been the principal
supplier of cellular telephone products to the Company, accounting for
approximately 86.4%, 83.7%, 83.7% and 67.3% of the total dollar
amount of the Company's cellular product purchases and approximately 48.0%,
46.9%, 45.5% and 44.1% of the total dollar amount of all product
purchases by the Company in fiscal 1992, fiscal 1993, fiscal 1994 and
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 but, in November, 1995,
Toshiba announced that its U.S. distribution subsidiary was withdrawing
from the United States cellular telephone market. Toshiba will continue
to sell products to the Company as an original equipment customer; however,
there is no agreement in effect that requires Toshiba to supply the Company
with products. There can be no assurance that Toshiba will not reenter the
United States cellular telephone market and again directly compete with the
Company in the United States.
Dependence on Cellular Carriers. The success of the Company's retail
cellular telephone business is dependent upon the Company's relationship
with certain cellular carriers. As a practical matter, the Company does
not believe that it can operate at the retail level on a profitable basis
without agency agreements with cellular carriers. The Company's agency
agreements with cellular carriers are subject to cancellation by the
carriers and give the carriers the right to unilaterally restructure or
revise activation commissions and residual fees, which they have done from
time-to-time. The agreements also provide that, for specified periods of
time following the expiration or termination of a specific agreement,
generally ranging from three months to two years, the Company
<PAGE>
cannot sell, solicit or refer cellular or wireless communication network
services of the kind provided by the cellular carriers to other competing
carriers in particular geographic areas. The cancellation or loss of one
or more of these agreements could have a material adverse effect on the
Company's financial condition and results of operations.
Impact of Elimination of Management Fees from and Reduction in Equity
in CellStar; Sale of CellStar Common Stock. For the fiscal years ended
November 30, 1991, 1992 and 1993, approximately $4,825,000, $5,124,000 and
$5,147,000, respectively, of the Company's income was generated by
management fees and equity in undistributed earnings from the operations of
CellStar Corporation ("CellStar"), a 50% owned joint venture. In December
1993, CellStar completed the initial public offering (the "CellStar
Offering") of CellStar common stock, par value $.01 per shares ("CellStar
Common Stock"). In connection with the CellStar Offering, the Company sold
2,875,000 of its 6,750,000 shares of CellStar Common Stock. After the
CellStar Offering, the Company owned 20.88% of the issued and outstanding
CellStar Common Stock and stopped accruing such management fees in July,
1993; however, the Company was entitled to its portion of the income from
the equity in undistributed earnings of CellStar, if any, for such time as
the Company continued to own at least 20% of CellStar's outstanding common
stock. If the CellStar Offering had occurred on November 30, 1992, this
accounting treatment would have resulted in net earnings being reduced by
approximately $1,692,000 for the fiscal year ended November 30, 1993.
On June 2, 1995, the Company sold 1,500,000 shares of CellStar Common
Stock to Alan H. Goldfield, President of CellStar, for $11.50 per share
upon exercise of an option for such shares by Mr. Goldfield. As a result
thereof, the Company's ownership percentage in CellStar was reduced below
20% and the Company will no longer account for its investment in CellStar
under the equity method of accounting. On a pro forma basis, this change
would have decreased pretax earnings for fiscal 1994 and fiscal 1995
by approximately $3,393,000 and $2,151,000 , respectively. There can
be no assurance that income from other sources will offset the loss of this
income from CellStar. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1995 Form 10-
K .
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
<PAGE>
pressure on the Company's gross margins (including that resulting from the
loss of residual fees attributable to customers who change cellular
carriers) and could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's
cellular products compete principally with cellular telephones supplied by
Motorola, Inc., Nokia Mobile Phones, Inc., Fujitsu Network Transmission
Systems, Inc., Oki Electric Industry Co., Nippon Electric Corp. and
Toshiba. The Company's non-cellular products compete with other suppliers
including Matsushita Electric Corp., Sony Corp. of America, Directed
Electronics, Inc. and Code Alarm, Inc., as well as divisions of well-known
automobile manufacturers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the 1995 Form 10-
K .
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
<PAGE>
scientific community is divided on whether there is any risk associated
with the use of portable cellular telephones and the magnitude of any such
risk. There can be no assurance that medical studies or other findings, or
continued litigation in this area, will not have a material adverse impact
upon the financial condition and results of operations of the cellular
telephone industry and the Company.
Risks Attributable to Foreign Sales. For the fiscal years ended
November 30, 1992, 1993 , 1994 and 1995, approximately 12.4%,
12.6%, 13.8% and 18.6% , respectively, of the Company's net sales
were generated from sales in Canada, Europe, Latin America, Asia, the
Middle East and Australia. Foreign sales are subject to political and
economic risks, including political instability, currency controls,
exchange rate fluctuations, increased credit risks, foreign tax laws,
changes in import/export regulations and tariff and freight rates.
Political and other factors beyond the control of the Company, including
trade disputes among nations or internal instability in any nation where
the Company sells products, could have a material adverse effect on the
financial condition and results of operations of the Company.
Risks Attributable to Retail Sales. A significant portion of the
Company's customer base may be susceptible to downturns in the retail
economy, particularly in the consumer electronics industry. Additionally,
customers specializing in certain automotive sound, security and accessory
products may be negatively impacted by fluctuations in automotive sales.
Certain of the Company's significant customers are also believed by the
Company to be highly leveraged. Accordingly, a downturn in the retail
economy could have a material adverse effect on the financial condition and
results of operations of the Company.
Leverage and Debt Service. As of November 30, 1995, the Company
had outstanding total interest bearing indebtedness of approximately
$133.1 million and a total debt-to-total capital ratio of .53 to 1.
Although a portion of the net proceeds from the sale of the Debentures and
the CellStar Offering was used to retire a significant portion of the
Company's existing indebtedness, the Company continues to have substantial
annual fixed debt service requirements including those attributable to the
Debentures and the Company's Credit Agreement, as amended on
February 9, 1996 (the "Second Amended and Restated Credit Agreement").
The ability of the Company to make principal and interest payments under
the Company's long-term indebtedness and bank loans will be dependent upon
the Company's future performance, which is subject to financial, economic
and other factors affecting the Company, some of which are beyond its
control. There can be no assurance that the Company will be able to meet
its fixed charges as such charges become due. See " -- History of
Losses " and "Cash Flow Deficits From Operations."
<PAGE>
Restrictive Covenants. The Second Amended and Restated Credit
Agreement contains certain restrictive covenants which impose prohibitions
or limitations on the Company with respect to, among other things, (i) the
ability to make payments of principal, interest or premium on, subordinated
indebtedness of the Company, (ii) the incurrence of indebtedness, (iii)
capital expenditures, (iv) the creation or incurrence of liens, (v) the
declaration or payment of dividends or other distributions on, or the
acquisition, redemption or retirement of, any shares of capital stock of
the Company and (vi) mergers, consolidations and sales or purchases of
substantial assets, and require that the Company satisfy certain financial
tests and maintain certain financial ratios. Failure to comply with such
covenants could result in a default under the Second Amended and Restated
Credit Agreement which could have a material adverse effect on the
financial condition and results of operations of the Company.
Absence of Existing Market for the Warrants; Listing of Warrants.
Prior to this Offering, there has not been any public market for the
Warrants. Although the Warrants have been eligible for trading through
PORTAL, no active trading market for the Warrants has developed. There can
be no assurance that an active trading market for the Warrants will develop
or, if such market develops, as to the liquidity or sustainability of such
a market. Moreover, once the Warrants are registered under this
Registration Statement, the Warrants which are registered under this
Registration Statement will no longer be eligible for trading on PORTAL.
The Warrants are not currently eligible for listing on the
Exchanges. Even if the Warrants are listed or approved for quotation on
any of the Exchanges , because of the small number of holders of
Warrants and the limited number of Warrants outstanding, there can be no
assurance that the Warrants will not be subject to delisting or in such
event, an investor may find it difficult to dispose of, or to obtain
accurate quotations as to the value of, the Warrants. See "Summary --
Listing of Warrants; Registration of Warrants" and "Description of Warrants
- -- Registration Rights".
Josepthal, Lyon & Ross Incorporated has informed the Company that it
intends to make a market in the Warrants; however, Josepthal, Lyon & Ross
Incorporated is not obligated to do so and any such market-making activity
may be terminated at any time without notice to the holders of the
Warrants. In addition, such market-making activity will be subject to the
limits of the Securities Act. Accordingly, no assurance can be given that a
holder of the Warrants will be able to sell such Warrants in the future or
as to the price at which any sale may occur.
Possible Volatility of Stock Price. Since 1991, the market price of
the Class A Common Stock has experienced a high degree of volatility. Due
to the volatility of the Class A Common Stock as well as the low volume of
Warrants traded, it can be expected that the Warrants will also experience
significant volatility. There can be no assurance
<PAGE>
that such volatility will not continue or become more pronounced. In
addition, recently the stock market has experienced, and is likely to
experience in the future, significant price and volume fluctuations which
could adversely affect the market price of the Class A Common Stock and the
Warrants without regard to the operating performance of the Company. The
Company believes that factors such as quarterly fluctuations in the
financial results of the Company or its competitors and general conditions
in the industry, the overall economy and the financial markets could cause
the price of the Class A Common Stock and the Warrants to fluctuate
substantially.
Shares Eligible for Future Sale; Dilution. The Company has
approximately 3,413,721 shares of Class A Common Stock held by members of
the public that are able to trade without restriction. Sales of a
substantial number of additional shares of Class A Common Stock in the
public market could adversely affect the market price of the Class A Common
Stock. As of March 31 , 1996, 3,672,317 shares of Class A Common
Stock were issuable upon conversion of the Debentures, 100,000
shares of Class A Common Stock were issuable upon exercise of the Blau
Warrant, 50,000 shares of Class A Common Stock were issuable upon exercise
of the warrant issued to James Maxim (the "Maxim Warrant") and 1,668,875
shares of Class A Common Stock were issuable upon exercise of the Warrants.
Exercise or conversion, as the case may be, of a substantial amount of the
Company's presently outstanding warrants or the Debentures, or
sale of the Class A Common Stock underlying such debenture or
warrants described above also could adversely affect the market price of
the Class A Common Stock, due to the large number of shares issuable upon
conversion or exercise of such debentures or warrants in comparison to the
relatively small number of shares held by members of the public that are
able to trade without restriction. The Company has granted the holders of
the warrants described above certain registration rights relating to
the Class A Common Stock issuable upon exercise of such
warrants . In addition, as of March 31 , 1996, (i) John
J. Shalam owned 3,359,367 shares of Class A Common Stock (including
for this purpose all of the shares subject to the Shalam Option (as defined
below)) and 1,883,198 shares of Class B Common Stock of the Company, par
value $.01 per share ("Class B Common Stock"), which are convertible into
an equal number of shares of Class A Common Stock and (ii) other affiliates
(as such term is defined in the Exchange Act) of the Company owned 4,700
shares of Class A Common Stock and 377,756 shares of Class B Common Stock,
which are convertible into an equal number of shares of Class A Common
Stock. Also, Mr. Shalam has granted the Company the Shalam Option.
See "Description of Capital Stock -- Shalam Option." Sales by such
persons of a substantial number of shares of Class A Common Stock or Class
B Common Stock (collectively, "Common Stock") could materially adversely
affect the market price of the Class A Common Stock.
<PAGE>
Dependence on Existing Management. The continued success of
the Company is substantially dependent on the efforts of John J. Shalam,
President and Chief Executive Officer, Philip Christopher, Executive Vice
President, and Charles M. Stoehr, Senior Vice President and Chief Financial
Officer. The loss or interruption of the continued full time services of
any of such individuals could have a material adverse impact on the
Company's business operations, prospects and relations with its suppliers.
The Company does not have employment contracts with any of these persons,
nor have any of these persons signed agreements binding them not to compete
with the Company following the termination of their employment with the
Company. The Company maintains a "key man" life insurance policy only on
John J. Shalam.
Forward-Looking Statements and Associated Risk. This Prospectus,
including the information incorporated by reference, contains forward-
looking statements within the meaning of Section 27A of the Securities Act
and Section 21E of the Securities Exchange Act of 1934, including
statements regarding, among other items, (i) the Company's growth
strategies; (ii) anticipated trends in the Company's business and
demographics; (iii) the Company's ability to continue to control costs and
maintain quality of products; (iv) the Company's ability to respond to
changes in regulations; and (v) the Company's ability to enter into
contracts with certain suppliers and customers. These forward-looking
statements are based largely on the Company's expectations and are subject
to a number of risks and uncertainties, certain of which are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements as a result of the factors described in "Risk
Factors" including, among others (i) changes in the cellular and other
industries as a result of political, economic or regulatory influences;
(ii) changes in regulations governing the cellular and other industries;
(iii) changes in the competitive marketplace and (iv) continuing downward
pressure on the prices of the Company's products. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this Prospectus will in fact transpire.
Risk of Amendment to Warrants. Under the terms of a Warrant
Agreement, the Warrants may be amended or modified by holders of a majority
of the Warrants in a manner which materially adversely affects holders of
the Warrants unless such amendment or modification would increase the
exercise price or reduce the shares of Class A Common Stock purchasable
upon exercise of the Warrants (other than pursuant to adjustments provided
in the Warrant Agreement), which amendments require the approval of each
holder of Warrants. Accordingly, the Warrants could be amended in a manner
materially adverse to the holder of a Warrant without such holder's
consent.
<PAGE>
Voting Rights of Class A Common Stock and Voting Control by Principal
Stockholder. The voting rights of holders of Class A Common Stock
for which all of the Company's outstanding warrants are exercisable
are entitled to one vote per share and each share of Class B Common
Stock is entitled to ten votes per share. Both classes vote together as a
single class except with respect to the election and removal without cause
of directors and as otherwise may be required by Delaware law. With
respect to the election of directors, the holders of shares of Class A
Common Stock, voting as a separate class, are entitled to elect 25%
(rounded up to the nearest whole number) of the authorized number of
directors of the Company and the holders of the Class B Common Stock,
voting as a separate class, are entitled to elect the remaining directors.
See "Description of Capital Stock--Class A Common Stock and Class B
Common Stock." John J. Shalam has effective voting control of the Company
and can elect a majority of the directors through his ownership of
3,359,367 shares of Class A Common Stock (including the shares of Class A
Common Stock subject to the Shalam Option) and 1,883,198 shares of Class B
Common Stock, which gives him approximately 85.5% of the aggregate voting
power of the issued and outstanding Common Stock. Pending exercise of the
Shalam Option, Mr. Shalam will have voting control of the shares of Class A
Common Stock subject to the Shalam Option. The holders of the Warrants
will not have any voting rights as shareholders of the Company prior to
exercise. The disproportionate voting rights of the Class A Common Stock
and the Class B Common Stock may effectively preclude the Company from
being taken over in a transaction not supported by John J. Shalam, may
render more difficult or discourage a merger proposal or a tender offer,
may preclude a successful proxy contest or may otherwise have an adverse
effect on the market price of the Class A Common Stock. See "Description
of Capital Stock-- Class A Common Stock and Class B Common Stock." and
"Description of Capital Stock-- Effects of Disproportionate Voting
Rights."
Certain Prospectus and State Blue Sky Registration Required to Sell or
Exercise Warrants. Holders of the Warrants will have the right to sell or
exercise the Warrants only if a current prospectus relating to the Warrants
and/or the shares of Class A Common Stock underlying the Warrants are
Warrants are qualified for sale or exempt under applicable state securities
laws of the states in which the various holders of the Warrants or Class A
Common Stock reside. There can be no assurance that the Company will be
able to keep this Prospectus or any Prospectus covering such securities
current. The Warrants and/or the underlying shares of Class A Common Stock
may be deprived of any value if a current prospectus covering the Warrants
and/or the shares of Class A Common Stock issuable upon exercise thereof is
not kept effective or if such securities are not registered or exempt in
the state in which holders of such securities reside.
<PAGE>
THE COMPANY
Audiovox Corporation (together with its subsidiaries, the "Company")
designs and markets cellular telephones and accessories, automotive
aftermarket sound and security equipment, other automotive aftermarket
accessories, and certain other products. The Company's corporate
headquarters is located at 150 Marcus Boulevard, Hauppauge, New York 11788,
and its telephone number at that address is 516-231-7750.
USE OF PROCEEDS
The Warrants offered by the Selling Securityholders are not being sold
by the Company, and the Company will not receive any proceeds from the sale
thereof. The Company will receive proceeds in the event the Warrants are
exercised prior to expiration. These proceeds will be used, as and if
received by the Company, to purchase the Option Shares underlying the
Shalam Option, inventory and for other working capital or general corporate
needs. The Company will not receive any proceeds from the resale of the
Warrant Shares.
SELLING SECURITYHOLDERS
The Warrants were originally issued on May 9, 1995 to the beneficial
holders (the "Debentureholders") of the Debentures as of June 3, 1994 in
consideration for the delivery by such Debentureholder of a release which
released the Company and their respective directors, officers, partners,
employees and agents, from liability for any and all potential claims, if
any, such beneficial holder may have had against such persons in connection
with such purchaser's investment in the debentures and the offering of the
Debentures. Each Debentureholder executing a release received 30 Warrants
per $1,000 principal amount of Debentures beneficially held as of June 3,
1994 (except Oppenheimer & Co., Inc., which held $12,065,000 of the
Debentures as of June 3, 1994, and which received 25 Warrants per $1,000
principal amount of the Debentures). The following table sets forth
information concerning the number of Warrants beneficially owned by each
Selling Securityholder which may be offered from time to time pursuant to
this Prospectus. Other than as a result of the ownership of Warrants or
Class A Common Stock, none of the Selling Securityholders has had any
material relationship with the Company within the past three years except
that Oppenheimer & Co., Inc. acted as an underwriter in the sale of the
Debentures for which it received a customary fee and reimbursement of
expenses. The table has been prepared based upon information furnished to
the Company by the Warrant Agent, by The Depository Trust Company and by or
on behalf of the Selling Securityholders.
<PAGE>
<TABLE>
<CAPTION>
Percent of
Name Number of Outstanding
Warrants Owned Warrants
<S> <C> <C>
Oppenheimer & Co., Inc. 1,022,250 61.3
Commonwealth Life Ins. Co. - Stocktrac
(Teamsters I) 213,325 12.8
KA Trading L.P. 126,500 7.6
Sage Capital 45,000 2.7
WG Trading Company L.P. 30,000 1.8
Offshore Strategies Ltd. 25,000 1.5
Zazove Convertible Fund, L.P. 16,800 1.0
Palladin Partners 15,000 .9
Colonial Penn Life Insurance 7,500 .4
Colonial Penn Insurance 7,500 .4
Verdant Investors Group, Ltd. 7,500 .4
Catholic Mutual Relief Society of
America 6,600 .4
Libertyview Plus Fund 6,500 .4
Catholic Mutual Relief Society 6,000 .4
Catholic Relief Insurance of America 5,400 .3
Other Selling Securityholders 128,000 7.7
Total 1,668,875 100.0
</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, 1,668,875 Warrants are outstanding which
may be converted into the same number of shares of Class A Common Stock.
Because the Selling Securityholders may offer all or some of the
Warrants and shares of Class A Common Stock issued upon conversion thereof
pursuant to the offering contemplated by this Prospectus, and because there
are currently no agreements, arrangements or understandings with respect to
the sale of any of the Warrants or shares of Class A Common Stock
underlying the Warrants that will be held by the Selling Securityholders
after completion of this offering, no estimate can be given as to the
<PAGE>
number of Warrants or shares of Class A Common Stock that will be held by
the Selling Securityholders after completion of this offering. See "Plan
of Distribution."
DESCRIPTION OF THE WARRANTS
The Warrants were issued under the Warrant Agreement. The following
summaries of certain provisions of the Warrant Agreement do not purport to
be complete and are subject to, and are qualified by reference to,
all the provisions of the Warrants and the Warrant Agreement, including the
definitions therein of certain terms. Wherever particular sections or
defined terms of the Warrant Agreement are referred to, such sections or
defined terms are incorporated by reference.
Copies of the form of Warrant and the Warrant Agreement been filed as
an exhibit to the Registration Statement of which this Prospectus is a
part. See "Available Information."
General
Each Warrant entitles the registered holder thereof (the "holder"),
subject to and upon compliance with the provisions thereof and of the
Warrant Agreement, at such holder's option, to purchase one share of Class
A Common Stock. The Warrant Exercise Price of each Warrant is $7 1/8 per
share, subject to adjustment in certain circumstances. The Warrants are
not be exercisable until the later of May 9, 1996 (one year after the
Closing Date) and the date a registration statement with respect to the
issuance of Class A Common Stock upon exercise of the Warrants shall be
effective under the Securities Act, and will expire, unless exercised, at
5:00 p.m., New York City time, on March 15, 2001 or such earlier date as
set forth in the next sentence (the "Expiration Date"). If less than
83,444 Warrants (i.e., 5% of the Warrants initially issued) remain
outstanding at any given time, the Company may elect, by notice to each
holder of Warrants, that the Warrants will expire on the 30th day after
delivery of such notice. See "Registration Rights" below. The Warrant
Exercise Price and the number of shares of Class A Common Stock for which
Warrants may be exercised is subject to adjustment as set forth below. See
"Adjustments" below.
Warrants may be exercised by surrendering the certificate evidencing
such Warrants (the "Warrant Certificate") with the form of election to
purchase shares set forth on the reverse side thereof duly completed and
executed by the holder thereof and paying in full the Warrant Exercise
Price for each such Warrant at the office or agency designated for such
purpose, which will initially be the corporate trust office of the Warrant
Agent in New York, New York. Warrants evidenced by the Global Warrant
Certificate (as defined) may be exercised by a holder by either obtaining a
definitive
<PAGE>
Warrant Certificate and following the procedure set forth above or by
following certain procedures set forth in the Warrant Agreement. Each
Warrant may only be exercised in whole, and the Warrant Exercise Price may
be paid only by certified or official bank check payable in accordance with
the Warrant Agreement or as otherwise agreed to by the Company.
No fractional shares of Class A Common Stock will be issued upon
exercise of the Warrants. In lieu thereof, the Company will pay a cash
adjustment based upon the market price of the Class A Common Stock.
The Warrants are eligible for trading on PORTAL. However, no active
public trading market for the Warrant has developed and no assurance can be
given as to the liquidity of the trading market for the Warrants.
Moreover, once the Warrants are registered under this Registration
Statement, the Warrants which are registered under this Registration
Statement will no longer be eligible for trading on PORTAL. The Exchanges
have each informed the Company that the number of holders of the Warrants
is insufficient to list such Warrants. Among other listing requirements,
each such Exchange requires at least 250 holders of an equity security,
such as the Warrants, as a prerequisite for the approval of the listing of
such Warrants. Currently, the Company estimates that there are
less than 40 Warrantholders. If and when a sufficient number of
holders exist and the Company satisfies the other listing requirements, the
Company presently intends to seek to list the Warrants on one of the
Exchanges. Even if the Warrants are listed or approved for quotation,
there can be no assurance that the Warrants will not become delisted. If
the Warrants have not been approved for listing (or quotation), the Company
is not required to register the Warrants under the Securities Act pursuant
to the Registration Rights Agreement; however, even though the Exchanges
have not agreed to list the Warrants, the Company is registering the
Warrants, pursuant to this Registration Statement. As described above, if
the Warrants are not registered under the Securities Act, they may not be
offered or be sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and applicable state securities laws. See "Risk Factors--Absence of
Existing Market for Warrants; Restrictions on Resale."
Mandatory Redemption
If a registration statement relating to the Warrant Shares is not
effective at any time on or prior to the Expiration Date, the Company is
required to redeem all of the outstanding Warrants for $1.60 per Warrant.
The Redemption Price is subject to adjustment in certain limited
circumstances. See "Description of Warrants -- Adjustments."
<PAGE>
Adjustments
The Warrant Exercise Price and the number of shares of Class A Common
Stock issuable upon exercise of the Warrants are subject to adjustment in
accordance with formulas set forth in the Warrant Agreement in the event
of: (i) the issuance of any shares of Common Stock to holders of any class
of Common Stock as a dividend or distribution; or (ii) subdivisions,
combinations and reclassifications of any class of Common Stock. The
Shalam Option will also contain the adjustments set forth in (i) and (ii)
above.
Except as stated in the preceding provisions, the initial Warrant
Exercise Price and the number of shares issuable upon exercise of the
Warrants will not be adjusted for any other events including issuances of
shares of Class A Common Stock, or options to acquire shares of Class A
Common Stock, at less than the then current market price of the Class A
Common Stock or the then current Warrant Exercise Price of the Warrants.
Moreover, no adjustment will be made unless such adjustment would require a
change of at least 1% in the Warrant Exercise Price then in effect, but any
adjustment that would otherwise be required to be made shall be carried
forward and taken into account in any subsequent adjustment. The Company
reserves the right to make such reductions in the Warrant Exercise Price in
addition to those required in the foregoing provisions as it considers to
be advisable in order that any event treated for Federal tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients.
In case either of the following occurs: (i) any consolidation or
merger involving the Company other than a consolidation or merger which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Class A Common Stock; or (ii) any
sale or transfer of all or substantially all of the assets of the Company
(each, a "Transaction"), the Person formed by such Transaction or which
acquires such assets, as the case may be (the "Acquiror"), shall execute
and deliver to the Warrant Agent prior to the consummation of the
Transaction a warrant agreement (or supplement to the Warrant Agreement)
providing that the Holder of each Warrant then outstanding shall have the
right thereafter, during the period such Warrant shall be exercisable in
accordance with the Warrant Agreement, to exercise such Warrant only into
the kind and amount of securities, cash or other property (collectively,
the "Consideration") receivable upon such Transaction by a holder of the
number of shares of Class A Common Stock into which such Warrant might have
been converted immediately prior to such Transaction (assuming such holder
of shares of Class A Common Stock (i) is not a person with which the
Company consolidated or into which the Company merged or which merged into
the Company or to which such sale or transfer was made, as the case may be
(a "constituent person") (or an affiliate of a constituent person), and
(ii) failed to exercise his or her rights of election, if any, and received
per share of Class A
<PAGE>
Common Stock the kind and amount of cash or other property received per
share of Class A Common Stock by a plurality of non-electing shares).
Modification of the Warrant Agreement
The Warrant Agreement permits, with certain exceptions, the amendment
thereof and the modification of the rights and obligations of the Company
and the rights of the holders of Warrant Certificates under the Warrant
Agreement at any time by the Company and the Warrant Agent with the consent
of the holders of Warrant Certificates representing a majority in number of
the then outstanding Warrants; provided that no such modification or
amendment may, without the consent of the holder of each outstanding
Warrant affected thereby: (i) change the Expiration Date (except to extend
the Expiration Date to a later date) or increase the Warrant Exercise
Price; (ii) reduce the reduction in the Warrant Exercise Price of a Warrant
upon a Registration Default or (iii) reduce the percentage of Holders of
Warrants the consent of who is required for modification or amendment of
the Warrant Agreement. See "Risk Factors--Amendment to the Warrants."
The Warrant Agreement (including the terms and conditions of the
Warrants) may be modified or amended by the Company and the Warrant Agent
without the consent of the holder of any Warrant, for certain specified
purposes not materially adversely affecting the rights of the holders of
the Warrants.
No Rights as Stockholder
Holders of Warrants are not entitled, by virtue of being such holders,
to receive dividends, vote, receive notice of any meetings of stockholders,
share in the assets of the Company in the event of liquidation, dissolution
or the winding up of the Company's affairs, or otherwise have any right of
stockholders of the Company.
Rule 144A Information Requirement; Financial Information
The Company agreed to furnish to the holders, the beneficial holders
of the Warrants designated by the Holders of the Warrants, or the
prospective purchasers of any such securities, the information required to
be delivered pursuant to Rule 144A(d)(4) promulgated under the Securities
Act, if applicable, until such time as such securities are no longer
"restricted securities" within the meaning of Rule 144 promulgated under
the Securities Act. Accordingly, such requirements will terminate upon the
effectiveness of this Registration Statement. Upon request, the Company
will also furnish to the holders of the Warrants all quarterly and annual
financial information furnished to the holders of the Class A Common Stock.
<PAGE>
Transfer and Exchange
A holder may transfer or exchange the Warrants in accordance with the
Warrant Agreement. The Warrant Certificates evidencing the Warrants may be
surrendered for exercise or exchange, and the transfer of Warrant
Certificates will be registrable, at the office or agency of the Company
maintained for such purpose, which initially will be the corporate trust
office of the Warrant Agent in New York, New York. The Warrant
Certificates will be issued only in fully registered form in denominations
of whole numbers of Warrants. No service charge will be made for any
exercise, exchange or registration of transfer of Warrant Certificates, but
the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith. The Company may
also require a holder, among other things, to furnish appropriate
endorsements and transfer documents.
The registered holder of a Warrant may be treated as the owner of it
for all purposes.
Book Entry; Delivery and Form
Upon registration of the Warrants, the interests in the global
warrants issued in the initial private placement of the Warrants (the
"Restricted Global Warrants"), will be cancelled upon the transfer of all
of the interests in such Restricted Global Warrants to one or more
permanent global certificates in fully registered form (the "Global
Warrant"), such Global Warrant to be deposited with the Warrant Agent as
custodian for the Depository Trust Company, New York, New York ("DTC") and
registered in the name of a nominee of DTC, Cede & Co. Warrants not
registered will remain represented by the Restricted Global Warrants.
Pursuant to the procedures set forth in the Warrant Agreement, interests in
the Global Warrant is exchangeable, at the option of the holder, for a
physical certificate in fully registered form (a "Certificated Warrant").
Upon the issuance of the Global Warrant, DTC or its custodian will
credit, on its internal system, the respective number of Warrants of the
individual beneficial interests represented by such Global Warrant to the
accounts of persons who have accounts with DTC (and make corresponding
debits to the accounts of persons who have interests in the Restricted
Global Warrants). Ownership of beneficial interests in a Global Warrant
will be limited to persons who had, or will have, accounts with DTC
("participants") or persons who will hold interests through participants.
Ownership of beneficial interests in a Global Warrant will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of
participants) for such Global Warrant, or by participants or persons that
hold interests through participants (with respect to interests of persons
other than participants).
<PAGE>
So long as DTC, or its nominee, is the registered owner or holder of a
Global Warrant, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Warrants represented by such Global Warrant
for all purposes under the Warrant Agreement and the Warrants. No
beneficial owner of an interest in the Global Warrant will be able to
transfer that interest except in accordance with DTC's applicable
procedures, in addition to those provided for under the Warrant Agreement.
Neither the Company, the Warrant Agent nor any agent of the Warrant
Agent or the Company will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Warrant or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment upon redemption in respect of the Global Warrant will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amounts of such Global Warrant as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Warrant held through such participants will be governed by standing
instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for
such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds. If
a person holding a beneficial interest in a Global Warrant requires
physical delivery of a Certificated Warrant for any reason, including to
sell Warrants to persons in states which require physical delivery of a
Certificated Warrant or to pledge such Warrants, such holder must transfer
its interest in the Global Warrant in accordance with the normal procedures
of DTC and the procedures set forth in the Warrant Agreement.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Warrants only at the direction of one or more
participants to whose account the DTC interests in Global Warrant is
credited and only in respect of such portion of the aggregate number of
Warrants as to which such participant or participants has or have given
such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the
<PAGE>
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC and CEDEL have agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global Warrants among
participants of DTC and CEDEL they are under no obligation to perform such
procedures, and such procedures may be discontinued at any time. Neither
the Company nor the Warrant Agent will have any responsibility for the
performance by DTC or CEDEL or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their respective operations.
If DTC is at any time unwilling or unable to continue as a depositary
for the Global Warrants and a successor depositary is not appointed by the
Company within 90 days, the Company will issue Certificated Warrants in
exchange for the Global Warrant.
Registration Rights
Pursuant to the Warrant Agreement, the Company agreed to file with the
SEC by March 4, 1996 a shelf registration statement or statements under the
Securities Act on Form S-1, Form S-2 or Form S-3, as determined by the
Company, if the use of such form is then available, to cover the issuance
of Class A Common Stock by the Company upon exercise of the Warrants (the
"Shelf Registration Statement"). The Registration Statement (of which this
Prospectus is a part) was filed within such time period. The Warrant
Agreement also provides that the Company will use reasonable best efforts
to cause the Shelf Registration Statement to be declared effective by the
SEC on or prior to one year after the Closing Date. If: (i) the Shelf
Registration Statement is not filed with the SEC on or prior to March 4,
1996 (this Registration Statement was filed by March 4, 1996); (ii) the
Shelf Registration Statement has not been declared effective by the SEC by
May 8, 1996; or (iii) the Shelf Registration Statement is filed and
declared effective but shall thereafter cease to be effective (without
being succeeded immediately by an additional Registration Statement filed
and declared effective) for a period of time which shall exceed 90 days
(180 days in the event of a Disadvantageous Condition (as defined below))
in the aggregate per year (defined as a period of 365 days beginning on the
date such Registration Statement is declared effective) (each such event
referred to in clauses (i) through (iii) above, a "Registration Default"),
the Warrant Exercise Price of the
<PAGE>
Warrants will be reduced by $1/8 per share of Class A Common Stock. The
Warrant Exercise Price of the Warrants will be reduced by an additional
$1/8 per share of Class A Common Stock, as applicable, with respect to each
subsequent six-month period until the applicable Registration Statement is
filed, is declared effective, or again becomes effective, as the case may
be. Notwithstanding the foregoing, the maximum number of $1/8 per share
decreases shall be 10 during the term of the Warrants and there shall be no
more than one such decrease in any six-month period. The reduction in the
Warrant Exercise Price upon a Registration Default is subject to adjustment
in certain limited circumstances. The Company is not obligated to register
Warrant Shares (a) which the holder does not seek to register or (b) if the
Company determines (based on discussions with the SEC, advice of counsel or
otherwise) that it is not advisable or appropriate to register such Warrant
Shares if the SEC has declared effective a registration statement with
respect to other shares of Class A Common Stock underlying the Warrants.
In any such event (a) or (b), the exercise price underlying such Warrants
will not decrease upon the failure to register with the SEC such underlying
shares of Class A Common Stock if the SEC has declared effective a
registration statement with respect to other shares of Class A Common
Stock. The Shalam Option does not contain a similar reduction in the
Warrant Exercise Price upon a Registration Default.
The Exchanges have each informed the Company that the number of
holders of the Warrants is insufficient to list such Warrants. Among other
listing requirements, each such Exchange requires at least 250 holders of
an equity security, such as the Warrants, as a prerequisite for the
approval of the listing of such Warrants. Currently, the Company
estimates that there are less than 40 Warrantholders. If and when
a sufficient number of holders exist, the Company presently intends to seek
to list the Warrants on one of the Exchanges. If an Exchange does list or
quote the Warrants (a "Listing Approval"), the Company is required,
pursuant to the Registration Rights Agreement, to file a shelf registration
statement (the "Resale Registration Statement") relating to the Warrants
upon the later of (a) 300 days after the Closing Date and (b) the date
approval of such listing or quotation is obtained (the "Approval Date") and
will use its reasonable best efforts to cause such Registration Statement
to become effective upon the later of (a) 365 days after the Closing Date
and (b) 60 days after the Listing Approval Date. Although none of the
Exchanges has agreed to list the Warrants, the Company is registering the
Warrants, pursuant to this Registration Statement. Once effective, and a
Listing Approval has occurred, the Company will be obligated to use
reasonable best efforts to cause the Resale Registration Statement to
remain effective until the date three years following the Closing Date.
Notwithstanding the foregoing, if the Company furnishes to the holders
of Warrants notice stating that in the Board of Directors' good faith
judgment it would be disadvantageous (a "Disadvantageous Condition") to the
Company or its stockholders for
<PAGE>
such a registration statement to be maintained effective, or to be filed
and become effective, the Company shall be entitled to cause any such
registration statement to be withdrawn and the effectiveness of such
registration statement terminated, or, in the event no such registration
statement has yet been filed, shall be entitled not to file any such
registration statement, until such Disadvantageous Condition no longer
exists (notice of which the Company shall promptly deliver to the Holders
of Warrants), such period not to extend beyond one hundred and eighty (180)
days. In the event that the Company shall give any notice of a
Disadvantageous Condition, the Company shall at such time as it in good
faith deems appropriate file a new registration statement covering the
securities that were covered by such withdrawn Registration Statement, and
such Registration Statement shall be maintained effective for such time as
may be necessary so that the period of effectiveness of such new
Registration Statement, when aggregated with the period during which such
initial Registration Statement was effective, shall be such time as may be
otherwise required by this Agreement.
Once effective, the Company is obligated to cause the Resale
Registration Statement to remain effective for three years following the
Closing Date, and to cause the Shelf Registration Statement to remain
effective until the Expiration Date.
Holders of the securities being sold under this Registration Statement
are required to indemnify the Company against certain liabilities,
including liabilities under the Securities Act, incurred as a result of
information provided by such Holders in connection with this Registration
Statement, and to contribute to payments the Company may be required to
make in respect of such liabilities.
Concerning the Warrant Agent
Continental Stock Transfer & Trust Company will act as Warrant Agent
under the Warrant Agreement. The address of the Warrant Agent's corporate
trust office is Two Broadway, New York, New York 10004, Attention: William
Seegraber. Continental Stock Transfer & Trust Company also acts as trustee
under the Indenture governing the Debentures, and as registrar and transfer
agent for the Class A Common Stock.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Class A Common Stock, 10,000,000 shares of Class B Common Stock, 50,000
shares of Preferred Stock, par value $50 per share, and 1,500,000 shares of
Series Preferred Stock, par value $.01 per share. As of March 31 ,
1996, there were 6,983,834 shares of Class A Common Stock
outstanding. As of March 31 , 1996, 2,260,954 shares of Class
<PAGE>
B Common Stock and 50,000 shares of Preferred Stock were issued and
outstanding. There are no shares of Series Preferred Stock outstanding.
The following summary description relating to the Class A Common
Stock, the Class B Common Stock, the Preferred Stock, Series Preferred
Stock, the Blau Warrant and the Maxim Warrant (all as herein defined) does
not purport to be complete. A description of the Company's Class A Common
Stock, Class B Common Stock, Preferred Stock and Series Preferred Stock is
contained in the Certificate of Incorporation of the Company.
Additionally, a description of the Blau Warrant and the Maxim Warrant are
contained in their respective warrant agreements. Reference is made to
such Certificate of Incorporation (a copy of which has been filed as an
exhibit to this Registration Statement (of which this Prospectus is a
part).
Class A Common Stock and Class B Common Stock
Voting Rights
Except for the election or removal without cause of directors, as
required by the Certificate of Incorporation, and except for such separate
class votes as may be required by Delaware law and the Certificate of
Incorporation, holders of both classes of Common Stock vote as a single
class on all matters, including amendment of the Certificate of
Incorporation to increase or decrease the aggregate number of authorized
shares of any class or classes of stock. In all cases, each share of Class
A Common Stock is entitled to cast one vote per share and each share of
Class B Common Stock is entitled to cast ten votes per share.
Holders of Class A Common Stock, voting separately as a class, are
entitled to elect 25% of the Board of Directors (rounded up to the nearest
whole number) so long as the number of outstanding shares of Class A Common
Stock is at least 10% of the total number of outstanding shares of both
classes of Common Stock. If the number of outstanding shares of Class A
Common Stock should become less than 10% of the total number of outstanding
shares of both classes of Common Stock, directors would then be elected by
all stockholders voting as one class, except holders of Class A Common
Stock would have one vote per share and holders of Class B Common Stock
would have ten votes per share. In such event, the American Stock Exchange
may consider delisting the Class A Common Stock.
The holders of a majority of the Class B Common Stock, voting
separately as a class, will continue to be able to elect the directors not
elected by holders of the Class A Common Stock, so long as the number of
outstanding shares of Class B Common Stock is at least 12.5% of the number
of outstanding shares of both classes of Common Stock. If
<PAGE>
the number of outstanding shares of Class B Common Stock falls below that
percentage, directors not elected by the holders of Class A Common Stock
will be elected by the holders of both classes of Common Stock, with
holders of Class A Common Stock having one vote per share and holders of
Class B Common Stock having ten votes per share.
Directors may be removed, with or without cause, provided that any
removal of directors without cause may be made only by the holders of the
class or classes of Common Stock that elected them. Vacancies in a
directorship may be filled by the vote of the class of shares that had
previously filled that vacancy, or by the remaining directors elected by
that class however, if there are no such directors, the vacancy may be
filled by the remaining directors.
The outstanding shares of Class A Common Stock equal approximately
75.0% of the shares of both classes outstanding, and the holders of Class A
Common Stock have approximately 23.0% of the combined voting power of both
classes of Common Stock. The holders of Class B Common Stock, therefore,
have the power to amend the Company's Certificate of Incorporation to
authorize the issuance of enough additional Class B Common Stock to
decrease the outstanding amount of Class A Common Stock to less than 10%.
Because of limitations on dividends in shares of Class A Common Stock and
Class B Common Stock, stock dividends will have the effect of strengthening
the control position of holders of Class B Common Stock.
Dividends
The holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends or distributions declared by the Board of
Directors in equal amounts, share for share, except as hereafter noted.
With respect to a cash dividend, the Board may pay an equal or greater
amount per share on the Class A Common Stock than on the Class B Common
Stock or declare and pay a cash dividend on the Class A Common Stock
without any such dividend being declared and paid on the Class B Common
Stock. The Company has never declared or paid cash dividends on this
Common Stock.
In addition, dividends paid in shares of Class A Common Stock or Class
B Common Stock may be paid only as follows:
(i) shares of Class A Common Stock may be paid only to holders of
shares of Class A Common Stock and shares of Class B Common Stock may be
paid only to holders of Class B Common Stock; and
(ii) the same number of shares shall be paid in respect of each
outstanding share of Class A Common Stock and Class B Common Stock.
<PAGE>
Conversion
At the option of the holder, each share of Class B Common Stock is
convertible at any time into one share of Class A Common Stock. Conversion
of a significant number of shares of Class B Common Stock into Class A
Common Stock could put control of the entire Board of Directors into the
hands of such holders of the Class B Common Stock who so convert.
Restrictions on Transfer of Class B Common Stock
Without the written consent of holders of two-thirds of the
outstanding shares of Class B Common Stock, shares of Class B Common Stock
may not be transferred except to another holder of Class B Common Stock,
certain family members of the holder and certain other permitted
transferees. Upon any nonpermitted sale or transfer, shares of Class B
Common Stock will automatically convert into an equal number of shares of
Class A Common Stock. Accordingly, no trading market will develop in the
Class B Common Stock and the Class B Common Stock will not be listed or
traded on any exchange or in any market.
Other Rights
Stockholders of the Company have no preemptive or other rights to
subscribe for additional shares. Subject to any rights of holders of any
Preferred Stock and Series Preferred Stock, all holders of Common Stock,
regardless of class, are entitled to share ratably in any assets available
for distribution on liquidation, dissolution or winding up of the Company.
No shares of either class of Common Stock are subject to redemption. All
outstanding shares are, and all shares issuable upon conversion of the
Debentures offered hereby will be, when issued upon such conversion in
accordance with the terms of the Debentures, legally issued, fully paid and
nonassessable. The Company may not subdivide or combine shares of either
class of Common Stock without at the same time proportionally subdividing
or combining shares of the other class of Common Stock.
Effects of Disproportionate Voting Rights
The disproportionate voting rights of Class A Common Stock and Class B
Common Stock could have an adverse effect on the market price of the Class
A Common Stock. Such disproportionate voting rights may effectively
preclude the Company from being taken over in a transaction not supported
by holders of Class B Common Stock, may render more difficult or discourage
a merger proposal or tender offer or may preclude a successful proxy
contest, even if such actions were favored by stockholders of the Company
other than the holders of the Class B Common Stock. Accordingly, such
disproportionate voting rights may deprive stockholders of an opportunity
to sell their
<PAGE>
shares at a premium over prevailing market prices, since takeover bids
frequently involve purchases of stock directly from stockholders at such a
premium price.
Transfer Agent
The transfer agent and registrar for shares of the Class A Common
Stock and Class B Common Stock is Continental Stock Transfer & Trust
Company, Two Broadway, New York, New York 10004.
Preferred Stock
Preferred Stock
The Company is authorized to issue up to 50,000 shares of Preferred
Stock, all of which have been issued and are outstanding. Such shares are
nonvoting and have preference over the Common Stock in the event of
liquidation, dissolution or winding up of the Company to the extent of its
par value of $50 per share.
Series Preferred Stock
The Company is authorized to issue up to 1,500,000 shares of Series
Preferred Stock, par value $.01 per share, none of which has been issued.
The Certificate of Incorporation provides that the Board of Directors may
issue by resolution shares of Series Preferred Stock from time to time in
one or more series and fix, as to each such series, the designations,
preferences and relative, participating, optional and other special rights,
and the qualifications, limitations or restrictions pertaining thereto,
including voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation and
conversion rights. However, the Company may not issue shares of Series
Preferred Stock carrying in excess of one vote per share or convertible
into Class B Common Stock without prior approval of a majority in interest
of the holders of Class B Common Stock. The Company has no present plans
for the issuance of any shares of Series Preferred Stock.
It is not possible to state the actual effect of the authorization of
the Series Preferred Stock upon the rights of holders of Class A Common
Stock, Class B Common Stock and Preferred Stock until the Board determines
the specific rights thereof. However, such effects might include (a)
restrictions on dividends on either class of Common Stock if dividends on
Series Preferred Stock have not been paid; (b) dilution of the voting power
of the Class A Common Stock to the extent that the Series Preferred Stock
has voting rights; (c) dilution of the equity interest of the Class A
Common Stock to the extent that the Preferred Stock is convertible into
Class A Common Stock; or (d) either class of Common Stock and Preferred
Stock not being entitled to share in the
<PAGE>
Company's assets upon liquidation, dissolution or winding up until
satisfaction of any liquidation preference granted to holders of Series
Preferred Stock. The Company has been advised that under its current
listing requirements the American Stock Exchange would consider delisting
the Class A Common Stock if any Series Preferred Stock diluted the class
voting rights of the Class A Common Stock. Issuance of Series Preferred
Stock, while providing desirable flexibility in connection with possible
acquisition and other corporate purposes, could make it more difficult for
a third party to acquire a majority of the outstanding voting stock.
Accordingly, the issuance of Series Preferred Stock may be used as an
antitakeover device without further action on the part of the stockholders
of the Company.
Warrants
Blau Warrant
The Company and Harvey R. Blau ("Blau") have entered into a letter
agreement, dated April 1, 1993 (the "Consulting Agreement"). Pursuant to
the Consulting Agreement, the term of which was from April 1, 1993 to March
31, 1995, Blau was to render up to 20 hours of consulting services to the
Company per year. In connection with the Consulting Agreement, Blau was
awarded the Blau Warrant to purchase 100,000 shares of Class A Common Stock
at a purchase price of $7.50 per share (subject to adjustment upon certain
events described in the Blau Warrant). The Blau Warrant is exercisable in
whole or in part, from time-to-time, until December 31, 1998. On December
15, 1993, the Company and Blau executed a letter agreement pursuant to
which it was agreed that Blau had performed in excess of 40 aggregate hours
of consulting services under the Consulting Agreement, that no further
services were required to be performed by Blau under the Consulting
Agreement and that the consideration for the Blau Warrant was deemed fully
paid.
Maxim Warrant
The Company and James Maxim ("Maxim") have entered into an Agreement,
dated September 23, 1993 and effective December 1, 1993, pursuant to which
the Company acquired all of the issued and outstanding stock of H & H
Eastern Distributors, Inc. owned by Maxim, and as a result, the Company
became the sole stockholder of H & H Eastern Distributors, Inc. In
connection with such Agreement, the Company issued to Maxim the Maxim
Warrant to purchase 50,000 shares of Class A Common Stock, at a purchase
price of $14.375 per share. The per share purchase price and number of
shares purchasable pursuant to the Maxim Warrant are each subject to
adjustment upon the occurrence of certain events described in the Maxim
Warrant. The Maxim Warrant is exercisable, in whole or in part, from time-
to-time, until September 22, 2003. In
<PAGE>
connection with the Maxim Warrant, Maxim has the right to require the
Company to file with the SEC, on or after September 22, 1995, a
registration statement relating to the sale by Maxim of the Class A Common
Stock purchasable pursuant to the Maxim Warrant.
Delaware Law
Section 203
The Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law. In general, this statute prohibits a
publicly held Delaware corporation from engaging, under certain
circumstances in a "business combination" with an "interested stockholder"
for a period of three years after the date of the transaction in which the
person becomes an interested stockholder, unless either: (i) prior to the
date at which the stockholder became an interested stockholder, the Board
of Directors approved either the business combination or the transaction in
which the person becomes an interested stockholder; (ii) the stockholder
acquires more than 85% of the outstanding voting stock of the corporation
(excluding shares held by directors who are officers or held in certain
employee stock plans) upon consummation of the transaction in which the
stockholder becomes in interested stockholder; or (iii) the business
combination is approved by the Board of Directors and by at least 66 2/3%
of the outstanding voting stock of the corporation (excluding shares held
by the interested stockholder) at a meeting of stockholders (and not by
written consent) held on or subsequent to the date of the business
combination. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or at any time within the prior three
years did own) 15% or more of the corporation's voting stock. Section 203
defines a "business combination" to include, without limitation, mergers,
consolidations, stock sales and asset based transactions and other
transactions resulting in a financial benefit to the interested
stockholder.
Section 203 of the Delaware General Corporation Law contains
provisions normally considered to have the effect of inhibiting a non-
negotiated merger or other business combination. Consequently, the market
price of the Class A Common Stock may be less likely to reflect a "premium
for control."
Limitations on Liability and Indemnification of Officers and Directors
The Delaware General Corporation Law provides that a corporation may
limit the liability of each director to the corporation or its stockholders
for monetary damages except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) in respect of
<PAGE>
certain unlawful dividend payments or stock redemptions or repurchases
and (iv) for any transaction from which the director derives an improper
personal benefit. The Company's Certificate of Incorporation limits the
liability of directors to the fullest extent permitted by Delaware General
Corporation Law. The effect of these provisions is to eliminate the rights
of the Company and its stockholders (through stockholders' derivative suits
on behalf of the Company) to recover monetary damages against a director
for breach of fiduciary duty as a director (including breaches resulting
from grossly negligent conduct). This provision does not exonerate the
directors from liability under federal securities laws nor does it limit
the availability of non-monetary relief in any action or proceeding against
a director. In addition, the Certificate of Incorporation provides that
the Company shall indemnify its officers and directors against liabilities,
cost and expenses to the fullest extent authorized by Delaware General
Corporation Law. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers or others
pursuant to the foregoing provisions, the Company has been informed that in
the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore
unenforceable.
Shalam Option
John J. Shalam, Chief Executive Officer of the Company, granted the
Company the Shalam Option to purchase 1,668,875 Option Shares at a purchase
price equal to the sum of (a) the Warrant Exercise Price plus (b) an
additional amount (the "Tax Amount") intended to reimburse Mr. Shalam or
his Successors for any additional taxes per share which may be required to
be paid by Mr. Shalam or his Successors as a result of the payment of the
Warrant Exercise Price being treated for federal income tax purposes as the
distribution to Mr. Shalam or his Successors of a dividend (taxed at
ordinary income rates without consideration of Mr. Shalam's or his
Successors', as the case may be, basis), rather than as a payment to Mr.
Shalam or his Successors, for the sale of his Class A Common Stock to the
Company (taxed at the capital gains rate with consideration of Mr. Shalam's
basis and considering any stepped up basis to Mr. Shalam's Successors)
pursuant to the Shalam Option. If Mr. Shalam or his Successors, as a
result of the receipt of the payment of the Warrant Exercise Price, are
taxed at a capital gains rate (with consideration given to their stepped up
basis), no Tax Amount will be included in the purchase price to be paid.
Any Successor acquiring the shares of Class A Common Stock underlying the
Shalam Option (whether by sale, transfer or upon Mr. Shalam's death) will
acquire such shares subject to the terms of the Shalam Option. The terms
of the Shalam Option (other than the initial exercise price) are similar to
those of the Warrants, however, the exercise price per share for the Shalam
Option will not decrease in the event of a Registration Default. Such
additional amount per share shall be calculated in accordance
<PAGE>
with the tax rates applicable to the date of exercise in accordance with
the following formula:
(A-B) x C + (B+D)
-----------------
1-A
where A equals Mr. Shalam's combined marginal U.S. federal, state and local
ordinary income tax rates after reduction of the federal rate for the
benefit of the deductions for state and local taxes; B equals Mr. Shalam's
combined marginal U.S. federal, state and local capital gains tax rates
after reduction of the federal rate for the benefit of the deductions for
state and local taxes; C equals the per share Warrant Exercise Price
without giving effect to any adjustment thereof resulting from a
Registration Default; and D equals Shalam's per share adjusted tax basis in
the Class A Common Stock purchasable by the Company pursuant to the Shalam
Option and includes any stepped-up basis of Mr. Shalam's Successors. Any
payment owing to Mr. Shalam's Successors will be based on the same formula
as it relates to such Successors.
The Shalam Option is exercisable, in whole or in part, for 1,668,875
shares of Common Stock. The basic terms of the Shalam Option are similar
to the basic terms of the Warrants; except that the exercise price of the
Shalam Option will not be reduced in the event of a Registration Default.
The Company is not required to exercise the Shalam Option upon exercise of
the Warrants and intends to do so only if the Board of Directors of the
Company (other than Mr. Shalam) at the time of exercise of the Warrants,
determines that it is in the best interests of the stockholders of the
Company to exercise such Shalam Option. The Company will be able to
exercise the Shalam Option only if the Warrants are exercised and then only
for the same number of shares as are purchased under the Warrants. The
Shalam Option may limit the dilutive effect of the Warrants on the earnings
per share or the book value per share if the Company elects to execute the
Shalam Option. The obligations of the Company under the Warrants are not
subject to compliance by Mr. Shalam with the terms of the Shalam Option.
The Tax Amount will be immediately due and payable upon receipt of a
satisfactory notice from the holder of the Option Shares stating that a Tax
Amount is required to reimburse such person for additional taxes in
accordance with the Shalam Option, setting forth the calculation of the Tax
Amount and confirming that such person will file its tax return with
respect to this period in accordance with the facts underlying this
calculation, but such Tax Amount is subject to readjustment in the event
the actual tax paid is different than the amount set forth in the notice.
Upon consummation of the Offering, a legend was placed on share
certificates representing 1,668,875 shares of Class A Common Stock which
provided that such shares are subject to the terms of the Shalam Option.
Such legend on the Option Shares will be removed with respect to the number
of Option Shares equal to the number of shares of Class A Common Stock
underlying the Warrants which have been exercised
<PAGE>
and with respect to which the independent members of the Board of Directors
of the Company have determined not to exercise the Shalam Option as well as
upon the expiration of the Shalam Option. Mr. Shalam did not receive any
cash consideration in exchange for granting the Company the Shalam Option.
The cost to Mr. Shalam of the shares subject to the Shalam Option was
$166,887.50.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have outstanding
6,983,834 shares of Class A Common Stock . Of these shares,
the Company has approximately 3,617,565 shares of Class A Common
Stock held by members of the public that are able to trade without
restriction or further registration under the Securities Act except for any
shares purchased by any affiliates of the Company, which will be subject to
the resale limitations of Rule 144 promulgated under the Securities Act.
Sales of a substantial number of additional shares of Class A Common Stock
in the public market could adversely affect the market price of the Class A
Common Stock. As of March 31 , 1996, 3,672,316 shares of Class A
Common Stock were issuable upon conversion of the Debentures,
100,000 shares of Class A Common Stock were issuable upon exercise
of the Blau Warrant, 50,000 shares of Class A Common Stock were issuable
upon exercise of the Maxim Warrant and 1,668,875 shares of Class A Common
Stock were issuable upon exercise of the Warrants. Exercise or conversion,
as the case may be, of a substantial amount of the presently outstanding
warrants, or the Debentures or sale of the Class A Common Stock
underlying such debentures or warrants also could adversely affect the
market price of the Class A Common Stock, due to the large number of shares
issuable upon conversion or exercise of such debentures or warrants in
comparison to the relatively small number of shares held by members of the
public that are able to trade without restriction. The Company has granted
the holders of the warrants described above certain
registration rights relating to the Class A Common Stock issuable upon
exercise of such warrants . In addition, as of
March 31 , 1996, (i) John J. Shalam, President and Chief Executive
Officer of the Company, owned 3,359,367 shares of Class A Common Stock
(including for this purpose all of the shares subject to the Shalam Option)
and 1,883,198 shares of Class B Common Stock of the Company, par value $.01
per share ("Class B Common Stock"), which are convertible into an equal
number of shares of Class A Common Stock and (ii) other affiliates (as such
term is defined the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of the Company owned 6,902 shares of Class A Common
Stock and 377,756 shares of Class B Common Stock, which are convertible
into an equal number of shares of Class A Common Stock. Also, Mr. Shalam
has granted the Company the Shalam Option. Sales by such persons of a
substantial number of shares of Class A Common Stock or Class B Common
<PAGE>
Stock (collectively, "Common Stock") could adversely affect the market
price of the Class A Common Stock. See "Description of Capital Stock-
Shalam Option.
In general, under Rule 144 as currently in effect, affiliates of the
Company would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of one percent of the number of
shares of Class A Common Stock then outstanding or the average weekly
trading volume of the Class A Common Stock during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about
the Company.
The Company is unable to estimate accurately the number of shares that
may be sold under Rule 144 since this will depend in part on the market
price for the Class A Common Stock, the personal circumstances of the
sellers and other factors.
The Company has registered Class A Common Stock under the Securities
Act for issuance to certain of its directors, officers and employees
pursuant to the Company's stock option plans. Shares issued pursuant to
such stock option plans after the effective date of any registration
statement covering such shares generally will be available for sale in the
open market (except that such shares held by affiliates will be subject to
compliance with the volume restrictions of Rule 144 under the Securities
Act).
PLAN OF DISTRIBUTION
This Prospectus relates to the registration of (i) 1,668,875 Warrants
and (ii) the Warrant Shares issuable upon the exercise of the Warrants.
The Warrants were issued by the Company in a private placement effected on
May 9, 1995 (the "Closing Date"). All of the Warrants and Warrant Shares
are being registered for resale from time to time by the Selling
Securityholders and the Warrant Shares are also being registered for their
issuance by the Company to the Selling Securityholders upon their exercise
of the Warrants.
The Company will not receive any of the proceeds from the offering of
Warrants and the Warrant Shares by the Selling Securityholders. The
Company has been advised by the Selling Securityholders that the Selling
Securityholders may sell all or a portion of the Warrants or Warrant Shares
beneficially owned by them and which may be offered hereby from time to
time on any exchange on which the securities are then listed, if any, on
terms to be determined at the times of such sales. The Selling
Securityholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the Selling Securityholders may from time
to time offer the Warrants or the Warrant Shares which may be offered
hereby and beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
<PAGE>
commissions or concessions from the Selling Securityholders and the
purchasers of the Warrants or the Warrant Shares for whom they may act as
agent. There can be no assurance that any of the Warrants or Warrant
Shares will be sold by the Selling Securityholders. To the extent
required, the Warrants and the Warrant Shares to be sold hereby, the names
of the Selling Securityholders, the purchase price, the name of any such
agent, dealer or underwriter and any applicable commissions, discounts or
other terms constituting compensation with respect to a particular offer
will be set forth in an accompanying Prospectus Supplement. The aggregate
proceeds to the Selling Securityholders from the sale of the Warrants or
the Warrant Shares offered by them hereby will be the purchase price of
such Warrants or Warrant Shares less discounts and commissions, if any. A
Selling Securityholder that sells such Warrants or Warrant Shares pursuant
to this Registration Statement of which this Prospectus is a part will be
required to deliver such Prospectus to purchasers and will be subject to
certain civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Registration
Rights Agreement that are applicable to such Selling Securityholder
(including certain indemnification obligations).
The Warrants and the Warrant Shares which may be offered hereby may be
sold from time to time in one or more transactions at fixed offering
prices, which may be changed, or at varying prices determined at the time
of sale or at negotiated prices. Such prices will be determined by the
holders of such securities or by agreement between such holders and
underwriters or dealers who may receive fees or commissions in connection
therewith.
The outstanding Class A Common Stock is listed for trading on the AMEX
(Symbol: "VOX"). On April 5 , 1996, the last reported sales price
of the Class A Common Stock on the AMEX was $4-13/16 per share. The
Exchanges have each informed the Company that the number of holders of the
Warrants is insufficient to list such Warrants. Among other listing
requirements, each such Exchange requires at least 250 holders of an equity
security, such as the Warrants, as a prerequisite for the approval of the
listing of such Warrants. Currently, the Company estimates
that there are less than 40 Warrantholders. If and when a
sufficient number of holders exist and the Company satisfies the other
listing requirements, the Company presently intends to seek to list the
Warrants on one of the Exchanges. The Warrants have been approved for
trading on PORTAL since the Closing Date. However, no public trading
market for the Warrants exists and no active trading market in PORTAL has
developed. Josephthal, Lyon & Ross, Incorporated has advised the Company
that it presently intends to make a market in the Warrants after the
effectiveness of this Registration Statement. Josephthal, Lyon & Ross,
Incorporated, however, is not obligated to do so and any such market-making
may be discontinued at any time without notice, in the sole discretion of
Josephthal, Lyon & Ross, Incorporated. No assurance can be given that any
market for
<PAGE>
the Warrants will develop or be maintained. Moreover, once the Warrants
are registered under this Registration Statement, the Warrants which are
registered under this Registration Statement will no longer be eligible for
trading on PORTAL.
In order to comply with the securities laws of certain states, if
applicable, the Warrants and the Warrant Shares offered hereby will be sold
in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states, the Warrants and the Warrant
Shares offered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied
with.
The Selling Securityholders and any broker-dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Warrants or the Warrant Shares offered hereby may be
deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions or discounts received by such broker-dealers,
agents or underwriters and any profit on the resale of the Warrants or the
Warrant Shares offered hereby and purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
The Company and the Selling Securityholders have agreed to indemnify
each other against certain liabilities arising under the Securities Act.
The Company has agreed to pay all expenses incident to the offer and sale
of the Warrants and the Warrant Shares offered hereby by the Selling
Securityholders to the public, other than broker's commissions and
underwriting discounts and commissions.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by
Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company
have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon
the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the November 30, 1995 ,
financial statements refers to changes in the methods of
accounting for certain investments in equity securities and income
taxes.
<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.............................................. 7
Risk Factors......................................... 13
The Company.......................................... 24
Use Of Proceeds...................................... 24
Selling Securityholders.............................. 25
Description Of The Warrants.......................... 27
Description Of Capital Stock......................... 35
Shares Eligible For Future Sale...................... 44
Plan Of Distribution................................. 45
Legal Matters........................................ 47
Experts.............................................. 47
<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 Warrants and the Warrant Shares being registered. All amounts
are estimates except the registration fee and the AMEX listing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee................................ $4,101
AMEX Listing Fee.................................... $17,500
Legal fees and expenses...................... $45,000
Warrant Agent's fees................................ $ 2,500
Accounting fees and expenses........................ $10,000
Miscellaneous....................................... $ 5,000
Total..................................... ____________
$84,101
</TABLE>
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
<PAGE>
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of the Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification may be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 further provides that to the extent a director or officer
of a corporation has been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a)
and (b) of Section 145, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive
of any other rights to which the indemnified party may be entitled; that
indemnification provided for by Section 145 shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such persons' heirs, executors and administrators; and empowers
the corporation to purchase and maintain insurance on behalf of a director
or officer of the corporation against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under Section 145.
Article Eighth of the Company's Certificate of Incorporation and
Article VIII of the Company's By-laws provide that the Company shall
indemnify its directors and officers to the fullest extent authorized by
the DGCL.
Section 102(b)(7) of DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director provided that such provision shall
not eliminate or limit the liability of a director
<PAGE>
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the
director derived an improper personal benefit. Article Fifth of the
Company's Certificate of Incorporation limits the liability of directors to
the fullest extent permitted by Section 102(b)(7).
Item 16. Exhibits.
The following exhibits are filed herewith or incorporated by
reference.
Exhibit No. Description
**4(a) Certificate of Incorporation of Audiovox
Corporation (incorporated by reference to Exhibit
3.1 to Company's Registration Statement on Form S-
1 (Registration No. 33-10726)).
Amendment to the Certificate of Incorporation
**4(b) (incorporated by reference to Exhibit 3.1a to the
Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1993, File No. 1-
9532).
**4(c) Registration Rights Agreement, dated as of May 9,
1995, among Audiovox Corporation and the holders
of the Warrants (incorporated by reference to
Exhibit 4 of the Company's Current Report on Form
8-K dated May 31, 1995, File No. 1-9532).
**4(d) Warrant Agreement, dated as of May 9, 1995,
between Audiovox Corporation and Continental
Stock Transfer & Trust Company, in respect of the
Warrants (incorporated by reference to Exhibit 3
of the Company's Current Report on Form 8-K dated
May 31, 1995, File No. 1-9532).
4(e) The form of Warrant is contained in the Warrant
Agreement filed as Exhibit 4(d)
above.
5 Opinion of Fried, Frank, Harris, Shriver &
Jacobson.
23(a) Consent of KPMG Peat Marwick LLP.
23(b) The consent of Fried, Frank, Harris, Shriver &
Jacobson is contained in their opinion filed as
Exhibit (5) to this Registration Statement.
<PAGE>
*(24) Power of Attorney .
**99(a) Second Amended and Restated Credit Agreement,
dated as of May 5, 1995, among Audiovox
Corporation and Chemical Bank, National
Westminster Bank USA, The Chase Manhattan Bank,
N.A., European American Bank and Bank of Boston
as lenders, and Chemical Bank, as Administrative
and Collateral Agent (incorporated by reference
to Exhibit 1 of the Company's Current Report on
Form 8-K dated May 31, 1995 File No. 1-9532).
Indenture, dated as of March 15, 1994, between
**99(b) Audiovox Corporation and Continental Stock
Transfer & Trust Company, in respect of the 61/4%
Convertible Subordinated Debentures due 2001
(incorporated by reference to Exhibit C of the
Company's Current Report on Form 8-K dated March
15, 1994, File No. 1-9532).
* 99(c) Option Agreement, dated as of May 9, 1995,
between Audiovox Corporation and John J. Shalam.
* Previously filed .
** Incorporated by reference.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ( 230.424(b) of this chapter) if, in the
aggregate, the changes in volume and price represent no more than a
<PAGE>
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs 1(i) and 1(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth
the results of the subscription offer, the transactions by the underwriters
during the subscription period, the amount of unsubscribed securities to be
purchased by the underwriters, and the terms of any subsequent reoffering
thereof. If any public offering by the underwriters is to be made on terms
differing from those set forth on the cover page of the prospectus, a post-
effective amendment will be filed to set forth the terms of such offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such
<PAGE>
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.
<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
Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Hauppauge, State of New York, on this 9th day of April, 1996.
AUDIOVOX CORPORATION
(Registrant)
By: /s/ John J. Shalam
- --------------------------
John J. Shalam, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
Amendment No. 1 to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated.
<PAGE>
Name Title Date
/s/ John J. Shalam President and Chief April 9, 1996
- -------------------------- Executive Officer, Director
John J. Shalam
* Senior Vice President and April 9, 1996
- -------------------------- Chief Financial Officer
Charles M. Stoehr (Principal Accounting
Officer), Director
* Director April 9, 1996
- --------------------------
Ann Boutcher
* Director April 9, 1996
- --------------------------
Philip Christopher
- -------------------------- Director
Irving Halevy
* Director April 9, 1996
- --------------------------
Patrick Lavelle
- -------------------------- Director
Martin Novick
- -------------------------- Director
Gordon Tucker
*By: April 9, 1996
/s/John J. Shalam
- --------------------------
John J. Shalam
Attorney-in-Fact
EXHIBIT 5
---------
[LETTERHEAD OF FRIED, FRANK, HARRIS, SHRIVER & JACOBSON]
212-859-8000
April 9, 1996 (FAX: 212-859-8587)
Audiovox Corporation
150 Marcus Boulevard
Hauppauge, New York 11788
Ladies and Gentlemen:
We are acting as special counsel to Audiovox
Corporation (the "Company"), in connection with the
registration pursuant to a Registration Statement on Form S-
3 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Act"), filed as of the date hereof,
of (i) 1,668,875 common stock purchase warrants (the
"Warrants") exercisable for shares of Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), of
the Company, such Warrants issued by the Company pursuant to
a Warrant Agreement (the "Warrant Agreement") dated May 9,
1995 between the Company and Continental Stock Transfer &
Trust Company (the "Warrant Agent"), and (ii) the shares of
Class A Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares").
In connection with this opinion, we have (i)
investigated such questions of law, (ii) examined originals
or certified, conformed or reproduction copies, of all such
agreements, instruments, documents and records of the
Company, such certificates of public officials and such
other documents, and (iii) received such information from
officers and representatives of the Company as we have
deemed necessary or appropriate for the purposes of this
opinion. In all such examinations, we have assumed the
genuineness of all signatures on original or certified
copies and the conformity to original or certified copies of
all copies submitted to us as conformed or reproduction
copies. As to various questions of fact relevant to such
opinions, we have relied upon certificates and
<PAGE>
Audiovox Corporation 2 April 9, 1996
statements of public officials and officers and
representatives of the Company and of others. We have
assumed, for purposes of the opinions expressed herein, that
(i) the Warrant Agent for the Warrants has the power and
authority to enter into and perform its obligations under
the Warrant Agreement, and (ii) the Warrant Agreement has
been duly authorized, executed and delivered by the Warrant
Agent and is a valid and binding obligation of the Warrant
Agent, enforceable against the Warrant Agent in accordance
with its terms.
Based upon the foregoing and subject to the
limitations set forth herein, (i) the Warrants constitute
valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and (ii)
the Warrant Shares, when issued, delivered and paid for in
accordance with the Warrant Agreement and this Registration
Statement, will be validly issued, fully paid and non-
assessable.
The opinion set forth above as to enforceability
is subject to the following:
(i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or
hereafter in effect affecting creditors' rights
generally;
(ii) general principles of equity (including,
without limitation, standards of materiality, good
faith, fair dealing and reasonableness) whether
such principles are considered in a proceeding in
equity or at law; and
(iii) the application of any applicable
fraudulent conveyance, fraudulent transfer,
fraudulent obligation, or preferential transfer
law or any law governing the distribution of
assets of any person.
This opinion is limited to the federal laws of the
United States of America and the laws of the State of New
York, as currently in effect.
We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement and to the
reference to this firm under the caption "Legal Matters" in
the Prospectus forming part of the Registration Statement.
In giving such consent, we do not thereby admit that we are
in the category of such persons
<PAGE>
Audiovox Corporation 3 April 9, 1996
whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
The opinions expressed herein are solely for your
benefit and may not be relied upon in any manner or for any
purpose except as specifically provided for herein.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Stuart H. Gelfond
------------------------
Stuart H. Gelfond
EXHIBIT 23(a)
Independent Auditors' Consent
-----------------------------
The Board of Directors
Audiovox Corporation:
We consent to the use of our reports incorporated herein by
reference and to the reference to our firm under the heading
"Experts" in the prospectus.
Our report refers to changes in the methods of accounting for
certain investments in equity securities and income taxes.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
April 9, 1996
