Exhibit 3
WARRANT AGREEMENT
between
AUDIOVOX CORPORATION
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
________________________
1,889,695 Warrants to Purchase Class A Common Stock
Page
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Article I Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.0. Definitions. . . . . . . . . . . . . . . . . . . 1
Article 2 The Warrant Agent. . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Appointment of Warrant Agent . . . . . . . . . . 4
Section 2.2. Duties of Warrant Agent. . . . . . . . . . . . . 5
Section 2.3. Compensation; Indemnification. . . . . . . . . . 7
Section 2.4. Resignation; Successor Warrant Agents. . . . . . 7
Article 3 The Warrants . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1. Number of Warrants . . . . . . . . . . . . . . . 9
Section 3.2. Issuance of Warrants . . . . . . . . . . . . . . 9
Section 3.3. Form of Warrant Certificate. . . . . . . . . . . 10
Section 3.4. Registration of Transfer and Exchange. . . . . . 20
Section 3.5 Execution and Delivery . . . . . . . . . . . . . 30
Section 3.6. Destroyed, Lost, Mutilated or Stolen Warrant
Certificates. . . . . . . . . . . . . . . . . . 31
Section 3.7. Persons Deemed Owners. . . . . . . . . . . . . . 32
Section 3.8. Cancellation of Warrant Certificates . . . . . . 32
Section 3.9. No Rights as Stockholders. . . . . . . . . . . . 32
Article 4 EXERCISE OF WARRANTS . . . . . . . . . . . . . . . . . . . 33
Section 4.1. Exercise Period33
Section 4.2. Shares Issuable Upon Exercise; Exercise Price. . 33
Section 4.3. Method of Exercise . . . . . . . . . . . . . . . 34
Section 4.4. Issuance of Class A Common Stock . . . . . . . . 35
Section 4.5. Fractions of Shares. . . . . . . . . . . . . . . 35
Section 4.6. Adjustment of Exercise Price . . . . . . . . . . 36
Section 4.7. Notice of Adjustments of Exercise Price, the
Reduction Amount and the Redemption Price . . . 38
Section 4.8. Notice of Certain Corporate Action . . . . . . . 38
Section 4.9. Company to Reserve Class A Common Stock. . . . . 39
Section 4.10. Taxes on Exercises . . . . . . . . . . . . . . . 39
Section 4.11. Covenant as to Class A Common Stock. . . . . . . 40
Section 4.12. Provisions in Case of Consolidation, Merger or
Sale of Assets. . . . . . . . . . . . . . . . . 40
Section 4.13. No Change of Warrant Necessary . . . . . . . . . 41
Section 4.14. Enforcement of Rights. . . . . . . . . . . . . . 41
Section 4.15. Available Information. . . . . . . . . . . . . . 41
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Page
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Article 5 Mandatory Redemption. . . . . . . . . . . . . . . . . . . 42
Section 5.1. Right of Redemption . . . . . . . . . . . . . . 42
Section 5.2. Election to Redeem; Notice of Redemption. . . . 42
Section 5.4. Deposit of Redemption Price . . . . . . . . . . 43
Section 5.5. Surrender of Warrant Certificate. . . . . . . . 43
Article 6 Termination of Warrants . . . . . . . . . . . . . . . . . 43
Section 6.1. Termination . . . . . . . . . . . . . . . . . . 43
Section 6.2. Notice. . . . . . . . . . . . . . . . . . . . . 43
Article 7 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.1. Amendment of Agreement. . . . . . . . . . . . . 45
Section 7.2. Record Date . . . . . . . . . . . . . . . . . . 45
Article 8 Miscellaneous Provisions. . . . . . . . . . . . . . . . . 46
Section 8.1. Counterparts. . . . . . . . . . . . . . . . . . 46
Section 8.2. Governing Law . . . . . . . . . . . . . . . . . 46
Section 8.3. Descriptive Headings. . . . . . . . . . . . . . 46
Section 8.4. Notices . . . . . . . . . . . . . . . . . . . . 46
Section 8.5. Maintenance of Office . . . . . . . . . . . . . 47
Section 8.6. Successors and Assigns. . . . . . . . . . . . . 47
Section 8.7. Separability. . . . . . . . . . . . . . . . . . 48
Section 8.8. Persons Having Rights under Agreement . . . . . 48
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Conformed Copy
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WARRANT AGREEMENT
Agreement, dated as of the date set forth on the signature page, by
and between Audiovox Corporation, a Delaware corporation with an office at 150
Marcus Boulevard, Hauppauge, New York 11788 (the "Company"), and Continental
Stock Transfer & Trust Company, with an office at Two Broadway, New York, New
York 10004 (the "Warrant Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company is offering for sale warrants ("Warrants") to
purchase up to 1,889,695 shares of Class A Common Stock, par value $.01 per
share, of the Company; and
WHEREAS, the Company desires to appoint the Warrant Agent to act on
its behalf in connection with the issuance, transfer, exchange and exercise of
the certificates representing the Warrants and other matters as provided herein;
and
WHEREAS, the Company and the Warrant Agent wish to define the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the holders of Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties hereto hereby agree as follows:
Article 1
Definitions
Section 1.0. Definitions.
-----------
Capitalized terms used herein and not otherwise defined shall have the
following meanings:
Business Day: Each Monday, Tuesday, Wednesday, Thursday and Friday which
------------
is not a day on which banking institutions in the City of New York are
authorized or obligated by federal, state or local law or executive order to
close.
CEDEL: Centrale de Livraison de Valeurs Mobilieres S.A.
-----
Class A Common Stock: The Company's Class A Common Stock, par value $.01
--------------------
per share or any class of securities into which all of such Class A Common Stock
has been converted or combined.
Commission: Securities and Exchange Commission.
----------
Common Stock: The Class A Common Stock, and any other stock of any class
------------
of the Company which has no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which is not subject to redemption by the Company.
However, subject to the provisions of Section 4.12, shares issuable on exercise
of Warrants shall include only shares of Class A Common Stock or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more than one such
--------
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
Corporate Trust Office: The principal office of the Warrant Agent at Two
----------------------
Broadway, New York, New York 10004, or such other address in New York, New York
at which at any particular time its corporate trust business shall be
administered.
Corporation: A corporation, association, company, joint-stock company or
-----------
business trust.
Definitive Warrant Certificates: A Warrant Certificate that is in the form
-------------------------------
set forth in Section 3.3 and that does not include the information called for by
footnote 1 of Section 3.3.
Depository: The Depository Trust Company as the depository with respect to
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the Warrants issuable or issued in whole or in part in global form, until a
successor shall have been appointed and become such pursuant to the applicable
provision of this Agreement, and thereafter "Depository" shall mean or include
such successor.
Disadvantageous Condition: As defined in the Registration Statement.
-------------------------
2
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Global Warrant Certificate: A Warrant Certificate that is in the form set
--------------------------
forth in Section 3.3 and that includes the information called for by footnote 1
of Section 3.3.
Holder: A Person in whose name a Warrant Certificate is registered in the
------
Warrant Register.
Person: An individual, limited or general partnership, Corporation, joint
------
venture, trust or unincorporated organization, or any other entity, including a
government or agency or political subdivision thereof.
QIB: A "qualified institutional buyer" as defined in Rule 144A.
---
Redemption Date: With respect to any Warrant to be redeemed, means the
---------------
date fixed for such redemption by or pursuant to this Agreement.
Redemption Price: With respect to any Warrant to be redeemed, means the
----------------
price at which it is to be redeemed pursuant to this Agreement.
Registration Default: As defined in the Registration Rights Agreement.
--------------------
Registration Rights Agreement: The Registration Rights Agreement, dated as
-----------------------------
of the date hereof, among the Company and the initial purchasers of the
Warrants.
Rule 144: Rule 144 promulgated under the Securities Act.
--------
Rule 144A: Rule 144A promulgated under the Securities Act.
---------
Securities Act: The Securities Act of 1933, as amended.
--------------
Shelf Registration Statement: Any registration statement of the Company
----------------------------
with respect to the Class A Common Stock issuable upon exercise of the Warrants
that is filed pursuant to Section 3 of the Registration Rights Agreement.
Subsidiary: A Person more than 50% of the outstanding voting stock (or, if
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not a corporation, the equivalent common equity) of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting stock" or "common equity" means stock or another ownership interest
which ordinarily has voting power for the election of directors (or other
governing body that controls the management and policies
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of such Person), whether at all times or only so long as no senior class of
stock or common equity has such power by reason of any contingency.
Trading Day: Any day other than a Saturday or Sunday or a day on which
-----------
securities are not traded on any national securities exchange.
Transfer Restricted Warrants: Each Warrant until the date on which such
----------------------------
Warrant (i) has been disposed of pursuant to an effective registration statement
under the Securities Act, (ii) is distributed to the public pursuant to Rule 144
or is salable pursuant to Rule 144(k) (or any similar provisions then in force),
(iii) is otherwise freely tradeable or (iv) has been acquired by the Company.
Warrant Agent: Continental Stock Transfer & Trust Company until a
-------------
successor Warrant Agent shall have become such pursuant to the applicable
provisions of this Agreement, and thereafter "Warrant Agent" shall mean such
successor Warrant Agent.
Warrant Certificate: A certificate representing Warrants issued under this
-------------------
Agreement.
Warrant Custodian: The Warrant Agent or such other entity that is a "fast
-----------------
agent" meeting the requirements of the Depository as the Warrant Agent shall
designate from time to time, to act as custodian with respect to the Warrants in
global form, or any successor entity thereto.
Article 2
The Warrant Agent
Section 2.1. Appointment of Warrant Agent.
----------------------------
The Company hereby appoints the Warrant Agent as its agent in respect of
the Warrants and the Warrant Certificates, upon the terms and subject to the
conditions set forth herein, and subject to resignation or removal of the
Warrant Agent as provided herein. The Warrant Agent agrees to accept such
appointment, upon the terms and subject to the conditions set forth herein. The
Warrant Agent shall have the powers and authority granted to it by this
Agreement and such further powers and authority to act on behalf of the Company
as the Company may hereafter grant to or confer upon it.
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Section 2.2. Duties of Warrant Agent.
-----------------------
The Warrant Agent accepts its obligations set forth herein upon the terms
and conditions hereof, including the following, to all of which the Company
agrees and to all of which the rights hereunder of the Holders from time to time
of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall act hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by the
provisions hereof. In acting under this Agreement and with respect to the
Warrant Certificates, the Warrant Agent does not assume any obligation or
relationship of agency or trust for or with any Holder.
(b) The Warrant Agent shall be obligated to perform such duties as are
specifically set forth herein and in the Warrant Certificates and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance of its
covenants or agreements contained in this Agreement or the Warrant Certificates
or in the case of the receipt of any written demand from any Holder with respect
to such default, including, without limiting the generality of the foregoing,
any duty or responsibility to initiate or attempt to initiate any proceeding at
law or otherwise, or to make any demand upon the Company.
(c) The Warrant Agent is hereby authorized and directed to accept written
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, the Chief Financial Officer,
the Chief Accounting Officer or Senior Vice President of the Company (each a
"Responsible Officer"), and to apply to such Responsible Officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions from any Responsible Officer with respect to any matter arising in
connection with the Warrant Agent's duties and obligations arising under this
Agreement.
(d) The Warrant Agent shall not be liable for any action taken, suffered
or omitted to be taken by it in good faith in accordance with any notice,
statement, instruction, request, direction, order or demand of a Responsible
Officer of the Company believed by it to be genuine. Any such notice,
statement, instruction, request, direction, order or demand of the Company shall
be sufficiently evidenced by an instrument signed by a Responsible Officer.
(e) Whenever in the performance of its duties under this Agreement, the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established
5
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by a Responsible Officer, and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(f) The Warrant Agent, to the extent permitted by applicable law, may
engage or be interested in any financial or other transaction with the Company
and may act on, or as depository, trustee or agent for, any committee or body of
holders of shares or other obligations of the Company as freely as if it were
not the Warrant Agent hereunder. Nothing in this Agreement shall be deemed to
prevent the Warrant Agent from acting in any other capacity for the Company.
(g) The Warrant Agent shall not, by countersigning or delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property issued or issuable upon exercise of any Warrant or whether any stock
issued upon exercise of any Warrant is fully paid and nonassessable.
(h) The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any fact exists which may
require any adjustment to the Exercise Price, or with respect to the nature or
extent of any adjustment, when made, or with respect to the method employed in
making the same.
(i) The Warrant Agent shall not be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
(j) The Warrant Agent may at any time consult with counsel satisfactory to
it and shall incur no liability or responsibility in respect of any action
taken, suffered or omitted to be taken by it in good faith in accordance with
the opinion or advice of such counsel.
(k) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(l) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder unless it has
obtained an indemnity reasonably satisfactory to it to reimburse it for such
expenditure.
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(m) The Warrant Agent shall not be under any liability for interest on,
and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
Section 2.3. Compensation; Indemnification.
-----------------------------
The Company agrees to pay the Warrant Agent from time to time such
compensation as shall be agreed upon by the Company and the Warrant Agent, and
the Company agrees to reimburse the Warrant Agent for its reasonable out-of-
pocket expenses and disbursements incurred without negligence or willful
misconduct on its part in connection with the services rendered by it hereunder.
The Company also agrees to indemnify the Warrant Agent for, and to hold it
harmless against, any loss, liability or expense, including judgments, costs and
reasonable counsel fees, incurred without negligence or willful misconduct on
the part of the Warrant Agent, arising out of or in connection with its acting
as Warrant Agent hereunder. The obligations of the Company under this Section
shall survive the exercise and the expiration of the Warrants and the
resignation and removal of the Warrant Agent.
Section 2.4. Resignation; Successor Warrant Agents.
-------------------------------------
The Warrant Agent may at any time resign as Warrant Agent and be discharged
from all further duties and liabilities hereunder (except liabilities arising as
a result of the Warrant Agent's own negligence or willful misconduct), by giving
written notice to the Company and each holder of Warrants of such resignation,
specifying the date on which such resignation shall be effective; provided, that
such notice shall be given no less than ninety (90) days prior to such effective
date. Upon receiving such notice of resignation, the Company shall promptly
appoint a successor Warrant Agent by written instrument in duplicate signed on
behalf of the Company by a Responsible Officer, one copy of which shall be
delivered to the resigning Warrant Agent and one copy to the successor Warrant
Agent. Such resignation shall become effective upon the acceptance of the
appointment by the successor Warrant Agent.
The Company may, at any time and for any reason, remove the Warrant Agent
and appoint a successor Warrant Agent by written instrument in duplicate,
specifying such removal and the date on which it is to become effective, signed
by a Responsible Officer of the Company, one copy of which shall be delivered to
the Warrant Agent being removed and one copy to the successor Warrant Agent.
7
Upon resignation or removal of the Warrant Agent, if the Company shall fail
to appoint a successor Warrant Agent within a period of ninety (90) days after
receipt of such notice of resignation or removal, then any Holder may apply to a
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to the Warrant Agent, either
by the Company or by such a court, the duties of the Warrant Agent shall be
carried out by the Company.
Any appointment of a successor Warrant Agent shall become effective upon
acceptance of appointment by the successor Warrant Agent as provided in this
Section. As soon as practicable after the appointment of the successor Warrant
Agent, the Company shall cause written notice of the change in the Warrant Agent
to be given to each of Holder.
Each successor Warrant Agent shall execute and deliver to its predecessor
and to the Company an instrument accepting such appointment hereunder and all
the provisions of this Agreement, and thereupon such successor Warrant Agent
shall, without any further act, deed or conveyance, become vested with the same
powers, rights, duties and responsibilities of its predecessor hereunder, with
like effect as if it had been originally named herein, and the Warrant Agent
shall thereupon become obligated to transfer, deliver and pay over, and such
successor Warrant Agent shall be entitled to receive, all moneys, securities,
records or other property on deposit with or held by the Warrant Agent
hereunder.
Any Person into which the Warrant Agent may be converted or merged, or any
corporation resulting from any consolidation to which the Warrant Agent shall be
a party, or any corporation succeeding to the trust business of the Warrant
Agent, shall be a successor Warrant Agent under this Agreement without any
further act on the part of any party. Any such successor Warrant Agent shall
promptly cause notice of its succession as Warrant Agent to be mailed to the
Company and to each Holder.
Article 3
The Warrants
Section 3.1. Number of Warrants.
------------------
The number of Warrants which may be issued and delivered under this
Agreement is limited to 1,889,695 Warrants, except for Warrants issued and
delivered in connection with any transfer of, in exchange for, or in lieu of,
other Warrants (which shall be canceled) in accordance with the terms of this
Agreement.
8
Section 3.2. Issuance of Warrants.
--------------------
Warrants offered and sold in reliance on Regulation S will be issued,
except as provided in the last paragraph of this Section 3.2, initially in the
form of a single, permanent Global Warrant Certificate in definitive, fully
registered form, in substantially the form set forth in Section 3.3 (including
the information called for by footnotes 1, 2, 3 and 4 thereof) (the "Regulation
S Global Warrant Certificate"), which will be deposited on behalf of the
purchasers of the Warrants represented thereby with the Warrant Custodian and
registered in the name of the Depository or the nominee of the Depository for
the account of Citibank, N.A. as depository of CEDEL. Warrants offered and sold
to QIBs will be, except as provided in the last paragraph of this Section 3.2,
issued initially in the form of a single, permanent Global Warrant Certificate
in definitive, fully registered form, in substantially the form set forth in
Section 3.3 (including the information called for by footnotes 1, 2, 3, and 4
thereof) (the "Restricted Global Warrant Certificate"), which will be deposited
with the Warrant Custodian and registered in the name of the Depository or a
nominee of the Depository.
Warrants transferred pursuant to an effective registration statement under
the Securities Act or in reliance on Rule 144 (and, in each such case, in
accordance with Section 3.4) will be, upon request of the transferor,
represented by a single, permanent Global Warrant Certificate in definitive,
fully registered form without interest coupons, in substantially the form set
forth in this Section (including the information called for by footnotes 1, 3
and 4 thereof) (the "Unrestricted Global Warrant Certificate"), which will be
held by the Warrant Custodian and registered in the name of the Depository or a
nominee of the Depository.
Each Global Warrant Certificate shall represent such of the outstanding
Warrants as shall be specified therein and each shall provide that it shall
represent the aggregate number of outstanding Warrants from time to time
endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges, transfers and exercises. Any endorsement of
a Global Warrant Certificate to reflect the amount of any increase or decrease
in the amount of outstanding Warrants represented thereby shall be made by the
Warrant Agent or the Warrant Custodian, at the direction of the Warrant Agent,
in accordance with instructions given by the Holder of the Global Warrant
Certificate and in accordance with Section 3.4.
Warrants offered and sold (i) to "accredited investors" (as defined under
the Securities Act) who are not QIBs, (ii) to QIBs who elect by written notice
to the Company to take physical delivery of Definitive Warrant Certificates
rather than a beneficial interest in a Global Warrant Certificate or (iii) in
reliance on Regulation S
9
under the Securities Act to Persons who elect by written notice to the Company
to take physical delivery of Definitive Warrant Certificates rather than a
beneficial interest in a Global Warrant Certificate, will be issued initially in
the form of Definitive Warrant Certificates. Definitive Warrant Certificates may
also be issued in accordance with Section 3.4.
Section 3.3. Form of Warrant Certificate.
---------------------------
Certificate Number
____________ Warrants
- ------------------
VOID AFTER MARCH 15, 2001
(OR SUCH EARLIER DATE AS SET FORTH
IN THE WARRANT AGREEMENT)
WARRANTS TO PURCHASE
SHARES OF CLASS A COMMON STOCK
AUDIOVOX CORPORATION
1UNLESS AND UNTIL EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED EXCEPT
AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF
THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
- --------------------
1 Paragraph to be included in a Warrant Certificate issued in the form of a
Global Warrant Certificate.
10
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
2THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED HEREBY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CERTIFICATE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER ANY SECURITY EVIDENCED HEREBY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF
(X) THE ORIGINAL ISSUE DATE HEREOF AND (Y) THE LAST DATE ON WHICH THE COMPANY OR
ANY AFFILIATED PERSON OF THE COMPANY WAS THE OWNER OF SUCH SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER,"
AS SUCH TERM IS DEFINED IN, AND IN COMPLIANCE WITH, RULE 144A PROMULGATED UNDER
THE SECURITIES ACT, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF AND IN COMPLIANCE WITH
REGULATION S PROMULGATED UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7)
OF RULE
- --------------------
2 Paragraph to be included in a Warrant Certificate representing Transfer
Restricted Warrants.
11
501 PROMULGATED UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR,"
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR
TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F), TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
This Warrant Certificate certifies that _________, or registered assigns,
is the Holder of _________ Warrants (the "Warrants") to purchase shares of Class
A Common Stock, par value $.01 per share (the "Class A Common Stock"), of
Audiovox Corporation, a Delaware corporation (the "Company"). Each Warrant
entitles the Holder, at any time on any Business Day during the period
commencing on the date of the Warrant Agreement (as defined below) and ending
5:00 p.m., New York City time, on March 15, 2001 (or such earlier date as set
forth in the Warrant Agreement) (the "Expiration Date") to purchase from the
Company one share of Class A Common Stock of the Company at an Exercise Price of
$7-1/8 per share (as such Exercise Price may be amended in accordance with this
Warrant Certificate or the Warrant Agreement) upon surrender of this Warrant
Certificate and payment of the Exercise Price at any office or agency maintained
for that purpose by the Company; provided, however, that (a) Warrants may only
-------- -------
be exercised if a Shelf Registration Statement is effective under the Securities
Act at the time of such exercise, (b) the Exercise Price shall decrease by $1/8
per share (the "Reduction Amount") of Class A Common Stock if (i) the Shelf
Registration Statement has not been filed with the Commission within 300 days
after the date hereof or declared effective within 365 days after the date
hereof, or (ii) if the Shelf Registration Statement is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
immediately by an additional effective Shelf Registration Statement for a period
which shall exceed 90 days (or 180 days in the event of a Disadvantageous
Condition) in the aggregate per year (defined as a period of 365 days commencing
on the date that the applicable Registration Statement is declared effective),
such exercise price to decline an additional Reduction Amount per share of Class
A Common Stock for each subsequent six-month period until the applicable
Registration Statement is filed, declared effective or becomes effective again,
(c) notwithstanding the foregoing, in no event shall there be more than (i) 10
reductions in the Exercise Price during the period beginning on
12
the date of the initial issuance of Warrants under the Warrant Agreement and
ending on the Expiration Date or (ii) one reduction in the Exercise Price during
any six-month period during the Exercise Period, in either case, in respect of
the events described in clause (b) above and (d) such Exercise Price shall not
decrease with respect to any Warrants which the Company is not required to
register under the Registration Rights Agreement if the Commission has declared
effective a registration statement with respect to other shares of Class A
Common Stock.
In the event of an Exercise Price Adjustment (as defined in the Warrant
Agreement), the Reduction Amount as then in effect shall also be adjusted so
that the same shall equal the Reduction Amount as then in effect multiplied by a
fraction of which the numerator shall be the Exercise Price in effect
immediately following the Exercise Price Adjustment and the denominator shall be
the Exercise Price immediately prior to such Exercise Price Adjustment.
Any Warrants not exercised on or prior to 5:00 p.m., New York City time, on
the Expiration Date shall thereafter be null and void, subject to the rights of
redemption set forth in Section 5.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW
PROVISIONS THEREOF.
Reference is hereby made to the further provisions of this Warrant
Certificate on the reverse hereof which provisions shall for all purposes have
the same effect as though fully set forth at this place.
This Warrant Certificate shall not be entitled to any benefit under the
Warrant Agreement between the Company and Continental Stock Transfer & Trust
Company, as Warrant Agent (the "Warrant Agreement") or valid for any purpose
unless countersigned by the Warrant Agent.
13
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed and a facsimile of its corporate seal to be imprinted thereon.
Dated:
AUDIOVOX CORPORATION
By:_________________________
Attest:
______________________
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY, as
Warrant Agent
By:_________________________
Authorized Officer
14
[Reverse Side]
The Warrants represented by this Warrant Certificate are part of a duly
authorized issue of Warrants of Audiovox Corporation (the "Company") expiring
5:00 p.m., New York City time, on the Expiration Date. The Warrants represented
hereby are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), by and
between the Company and Continental Stock Transfer & Trust Company (the "Warrant
Agent"), which Warrant Agreement and any amendments thereto are hereby
incorporated by reference in and made a part of this instrument, and to which
reference is hereby made for a description of the respective rights, limitations
of rights, obligations, duties and immunities thereunder of the Company, the
Warrant Agent and the Holders of Warrants. A copy of the Warrant Agreement may
be obtained from the Company at 150 Marcus Boulevard, Hauppauge, New York 11788
or the Warrant Agent at Two Broadway, New York, New York 10004, by a written
request from the Holder hereof or which may be inspected by any Holder or such
Holder's agent at the principal office of the Company or the Warrant Agent.
[The Warrants represented hereby are entitled to the benefits of a Registration
Rights Agreement dated as of ______, 1995.]3
Subject to and upon compliance with the provisions of the Warrant
Agreement, each Warrant entitles the Holder, at any time on any Business Day
during the period commencing on the date of the issuance of the Warrant and
ending 5:00 p.m., New York City time, on the Expiration Date, to purchase from
the Company one share of Class A Common Stock, $.01 par value ("Class A Common
Stock")(or such other number of shares of Common Stock if an adjustment has been
made as provided in the Warrant Agreement), of the Company at an Exercise Price
of $7-1/8 per share (or at the current adjusted Exercise Price if an adjustment
has been made as provided in the Warrant Agreement); provided, however, that
--------
Warrants may only be exercised if a Shelf Registration Statement is effective
under the Securities Act at the time of such exercise. The Warrants may be
exercised upon the presentation and surrender of this Warrant Certificate to the
Company at its office or agency maintained for that purpose, with the form of
Notice of Exercise set forth hereon duly completed and executed, accompanied by
payment of the Exercise Price for each such Warrant exercised and any other
amounts required to be paid, as provided in the Warrant Agreement. In the event
the holder exercising its Warrants holds an interest in a Global Warrant
Certificate, such holder shall obtain a Definitive Warrant Certificate in
accordance with Section 3.4(c) of the Warrant Agreement prior to the exercise of
such Warrants or, with the consent of the Company, exercise Warrants owned of
record by such holder and represented by a Global Warrant Certificate by
delivering (i) proof of record ownership of such Warrants if required by the
- --------------------
3 Bracketed language to be included if the Warrant Certificate represents
Transfer Restricted Warrants.
15
Company and (ii) a notice of exercise in substantially the form set forth below
as appropriately adjusted. The Exercise Price shall be payable by certified
check or official bank check or by such other means as is acceptable to the
Company in the lawful currency of the United States of America which as of the
time of payment is legal tender for payment of public or private debts. The
Exercise Price and the number and kind of securities or other property issuable
upon exercise of each Warrant is subject to adjustment as provided in the
Warrant Agreement.
The Warrant is subject to mandatory redemption at a price of $1.60 per
Warrant (as such price may be adjusted as set forth in the Warrant Agreement) if
the Shelf Registration Statement has not been declared effective at any time on
or prior to the Expiration Date.
As soon as practicable after the exercise of any Warrants, the Company
shall issue and deliver, or cause to be delivered, to the Holder, at such office
or agency maintained for such purpose pursuant to the Warrant Agreement, a
certificate or certificates evidencing the number of full shares of Class A
Common Stock to which such Holder is entitled, registered in such name or names
as may be directed by such Holder pursuant to the Notice of Exercise set forth
on this Warrant Certificate. No fractional shares of Class A Common Stock will
be issued upon exercise of any Warrant, but instead of any fractional interest,
the Company shall pay to the Holder a cash adjustment as provided in the Warrant
Agreement.
In the case of the exercise of less than all the Warrants represented
hereby, this Warrant Certificate shall be canceled upon the surrender hereof and
a new Warrant Certificate or Warrant Certificates shall be issued and delivered
for the balance of such Warrants represented hereby.
Prior to the exercise of any Warrant represented hereby, the Holder shall
not be entitled to any rights of a stockholder of the Company by reason of such
Person being a Holder, including, without limitation, the right to vote or to
receive dividends or other distributions, and shall not be entitled to receive
any notice of any proceedings of the Company, except as provided in the Warrant
Agreement.
The Warrant Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of Warrants under the Warrant Agreement at
any time by the Company and the Warrant Agent with the consent of the Holders of
at least a majority of the Warrants at the time outstanding. Any such consent
shall be conclusive and binding upon the Holder of this Warrant Certificate and
upon all future Holders of any Warrant Certificate issued upon the registration
of transfer of the Warrants evidence hereby, or in
16
exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made thereon.
As provided in the Warrant Agreement and subject to the limitations set
forth therein, transfer of the Warrants represented by this Warrant Certificate
is registrable upon surrender of this Warrant Certificate at the office or
agency of the Company maintained for that purpose, and thereupon one or more new
Warrant Certificates representing the Warrants so transferred will be issued to
the designated transferee or transferees. As provided in the Warrant Agreement
and subject to the limitations set forth therein, this Warrant Certificate is
exchangeable for new Warrant Certificates representing a like number of
Warrants, as requested by the Holder surrendering the same.
In the event that less than 5% of the aggregate number of Warrants issued
under the Warrant Agreement remain outstanding, the Company shall have the right
to cause the Warrants remaining outstanding to expire at 5:00 p.m. (New York
City time) on the 30th day (or such later date as set forth in the Termination
Notice (as defined below) (the "New Termination Date")) after the date of
delivery of a notice to such holders of Warrants setting forth the information
required by Section 6.2 of the Warrant Agreement and delivered in accordance
with Section 7.4 of the Warrant Agreement. Any Warrants not properly exercised
prior to the New Termination Date shall expire and be null and void.
No service charge shall be payable by a Holder for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Warrant Certificate for registration of
transfer, the Company and the Warrant Agent and any agent of the Company or the
Warrant Agent may treat the Person in whose name this Warrant Certificate is
registered as the absolute, true and lawful owner hereof and of the Warrants
represented hereby (notwithstanding any notation or ownership or other writing
hereon made by any Person) for all purposes, and shall not be affected by any
notice or knowledge to the contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
17
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise ________ of the
Warrants represented by this Warrant Certificate and purchase the whole number
of shares issuable and deliverable upon exercise of such Warrants, and herewith
tenders payment for such shares in accordance with the terms of the Warrant
Agreement. The undersigned hereby directs that the certificate or certificates
for the shares issuable and deliverable upon exercise, together with any check
in payment for fractional shares and any Warrant Certificate representing any
unexercised Warrants represented by this Warrant Certificate, be issued in the
name of and delivered to the undersigned, unless a different name is indicated
below. The undersigned will pay any transfer taxes or other governmental charge
payable with respect to any such shares to be issued in the name of a person
other than the undersigned.
INSTRUCTIONS FOR REGISTRATION OF SHARES
(please typewrite or print)
Name_____________________________________________________________
Address__________________________________________________________
Social Security or Other
Taxpayer Identification Number___________________________________
Dated:____________________
Signature:______________________________
Note: signature must conform to
name of Holder appearing on face
hereof)
18
Signature must be guaranteed by a member
of an accepted medallion guarantee program
if shares of Class A Common Stock are to be
issued, or Warrant Certificate(s) are to be
delivered, other than to and in the name of
the Holder.
- ---------------
Signature Guarantee
Fill in for registration of shares of Class A Common Stock and Warrant
Certificate(s) if to be issued otherwise than to the Holder:
Social Security or other
- -------------------------
(Name) Taxpayer Identification
Number:
- ------------------------- --------------------
(Name)
- -------------------------
Please print name and address
(including zip code)
Section 3.4. Registration of Transfer and Exchange.
-------------------------------------
(a) General. The Company shall cause to be kept at the Corporate Trust
-------
Office of the Warrant Agent a register (the register maintained in such office
and in any other office or agency designated pursuant to Section 7.5 being
herein collectively referred to as the "Warrant Register") in which the Warrant
Agent shall provide for the registration of Warrant Certificates and of
transfers and exchanges of Warrants.
(b) Transfer of a Beneficial Interest in a Global Warrant Certificate.
-----------------------------------------------------------------
The transfer and exchange of a beneficial interest in a Global Warrant
Certificate shall be effected through the Depository or CEDEL, as the case may
be, in accordance with this
19
Agreement (including the restrictions on transfer set forth herein) and the
procedures of the Depository or CEDEL, as the case may be, therefor.
(c) Transfer and Exchange of Definitive Warrant Certificates. A Holder of
--------------------------------------------------------
a Definitive Warrant Certificate may at any time transfer such Definitive
Warrant Certificate or exchange such Definitive Warrant Certificate for
Definitive Warrant Certificates representing an equal number of Warrants in
accordance with this subsection (c). Upon receipt by the Warrant Agent of:
(i) a Definitive Warrant Certificate, duly endorsed or accompanied by
appropriate instruments of transfer, in form reasonably satisfactory to the
Warrant Agent, and
(ii) if such Definitive Warrant Certificate represents Transfer
Restricted Warrants, a certificate in substantially the form set forth in
subsection (o) of this Section 3.4 from the Holder thereof requesting
Definitive Warrant Certificates and stating that such Warrants are being:
(A) delivered to the Warrant Agent for registration in the name
of such Holder, without transfer; or
(B) transferred pursuant to an effective registration statement
under the Securities Act; or
(C) transferred to a QIB in accordance with Rule 144A; or
(D) transferred in reliance on Regulation S or an exemption from
the registration requirements of the Securities Act other than that
provided by Rule 144A (in which case the Definitive Warrant
Certificate surrendered shall also be accompanied by an opinion of
counsel reasonably acceptable to the Company and the Warrant Agent to
the effect that such transfer is in compliance with the Securities
Act),
then the Warrant Agent will cancel the surrendered Definitive Warrant
Certificate, the Company will execute one or more Definitive Warrant
Certificates representing the amount of Warrants to be transferred or exchanged
and the Warrant Agent will countersign and deliver to the transferee or Holder
such Definitive Warrant Certificates and the Warrant Agent will register such
Definitive Warrant Certificates in the name of the transferee or Holder.
(d) Transfer of a Definitive Warrant Certificate for a Beneficial Interest
----------------------------------------------------------------------
in a Global Warrant Certificate. A Holder of a Definitive Warrant Certificate
- -------------------------------
may at any
20
time, subject to the rules and procedures of CEDEL and the Depository, transfer
such Definitive Warrant Certificate for an equivalent beneficial interest in the
appropriate Global Warrant Certificate in accordance with this subsection (d).
Upon receipt by the Warrant Agent of:
(i) a Definitive Warrant Certificate, duly endorsed or accompanied by
appropriate instruments of transfer, in form reasonably satisfactory to the
Warrant Agent, together with an instruction of the transferor thereof
requesting an equivalent beneficial interest in the appropriate Global
Warrant Certificate; and
(ii) if such Definitive Warrant Certificate represents Transfer
Restricted Warrants, a certificate in substantially the form set forth in
subsection (o) of this Section 3.4 from the transferor thereof stating that
such Warrants are being transferred:
(A) to a QIB in accordance with Rule 144A (in which case the
appropriate Global Warrant Certificate shall be the Restricted Global
Warrant Certificate);
(B) pursuant to an exemption from registration in accordance
with Regulation S under the Securities Act (in which case the
appropriate Global Warrant Certificate shall be the Regulation S
Global Warrant Certificate and the Warrant Agent shall also receive an
opinion of counsel reasonably acceptable to the Company and to the
Warrant Agent to the effect that such transfer is in compliance with
the Securities Act); or
(C) pursuant to an effective registration statement under the
Securities Act or in reliance on Rule 144 (in each of which cases the
appropriate Global Warrant Certificate shall be the Unrestricted
Global Warrant Certificate and, in the case of a transfer in reliance
on Rule 144, the Warrant Agent shall also receive an opinion of
counsel reasonably acceptable to the Company and to the Warrant Agent
to the effect that such transfer is in compliance with the Securities
Act),
then the Warrant Agent will cancel the surrendered Definitive Warrant
Certificate, the Warrant Custodian, in accordance with the standing instructions
and procedures existing among the Depository, CEDEL and the Warrant Custodian,
will increase the aggregate number of Warrants covered by the appropriate Global
Warrant Certificate in the amount to be transferred, and the Depository or
CEDEL, as the case may be, will effect the transfer in accordance with its
procedures therefor.
21
(e) Transfer or Exchange of a Beneficial Interest in a Global Warrant
-----------------------------------------------------------------
Certificate for a Definitive Warrant Certificate. A Holder of a beneficial
- ------------------------------------------------
interest in a Global Warrant Certificate may at any time, subject to the rules
and procedures of CEDEL and the Depository, transfer or exchange such beneficial
interest for one or more Definitive Warrant Certificates in accordance with this
subsection (e). Upon receipt by the Warrant Custodian of:
(i) an instruction given in accordance with the procedures of the
Depository or CEDEL, as the case may be, on behalf of a Holder of a
beneficial interest in a Global Warrant Certificate to reduce the Global
Warrant Certificate by the number of Warrants to be transferred or
exchanged; and
(ii) if such Global Warrant Certificate is the Regulation S Global
Warrant Certificate or the Restricted Global Warrant Certificate, a
certificate (which may be submitted by facsimile promptly followed by an
original) in substantially the form set forth in subsection (o) of this
Section 3.4 from the Holder of such beneficial interest stating that such
Warrants are being:
(A) delivered to the Warrant Agent for registration in the name
of such Holder, without change of beneficial ownership; or
(B) transferred pursuant to an effective registration statement
under the Securities Act; or
(C) transferred to a QIB in accordance with Rule 144A; or
(D) transferred in reliance on Regulation S or an exemption from
the registration requirements of the Securities Act other than that
provided by Rule 144A (in which case the Warrant Custodian shall also
receive an opinion of counsel reasonably acceptable to the Company and
to the Warrant Custodian to the effect that such transfer is in
compliance with the Securities Act),
then the Warrant Custodian, in accordance with the standing instructions and
procedures existing among the Depository, CEDEL and the Warrant Custodian, will
reduce the amount of Warrants covered by the appropriate Global Warrant
Certificate, the Company will execute one or more Definitive Warrant
Certificates in the aggregate amount of Warrants to be transferred or exchanged
and the Warrant Agent will countersign and deliver to the transferee or Holder
such Definitive Warrant Certificates and the Warrant Agent shall register the
Definitive Warrant Certificates in the name of such transferee or Holder.
22
(f) Transfer of a Beneficial Interest in the Regulation S Global Warrant
--------------------------------------------------------------------
Certificate for a Beneficial Interest in the Restricted Global Warrant
- ----------------------------------------------------------------------
Certificate. A Holder of a beneficial interest in the Regulation S Global
- -----------
Warrant Certificate may at any time, subject to the rules and procedures of
CEDEL and the Depository, transfer all or part of its interest in the Regulation
S Global Warrant Certificate for an equivalent interest in the Restricted Global
Warrant Certificate in accordance with this subsection (f). Upon receipt by the
Warrant Custodian of:
(i) an instruction given in accordance with the procedures of CEDEL
on behalf of a Holder of a beneficial interest in the Regulation S Global
Warrant Certificate, to reduce the Regulation S Global Warrant Certificate
by the amount of the interest to be transferred and increase the Restricted
Global Warrant Certificate by a like amount, and
(ii) a certificate (which may be submitted by facsimile promptly
followed by an original) in substantially the form set forth in subsection
(o) of this Section 3.4 from the Person designated by CEDEL as such Holder,
stating that such beneficial interest is being transferred to a QIB in
accordance with Rule 144A,
then the Warrant Custodian, in accordance with the standing instructions and
procedures existing among the Depository, CEDEL and the Warrant Custodian, will
so reduce the Regulation S Global Warrant Certificate and increase the
Restricted Global Warrant Certificate, and the transfer and exchange of such
beneficial interest shall be effected through the Depository, the Warrant
Custodian and CEDEL, as the case may be, in accordance with this Agreement and
the procedures of the Depository, the Warrant Custodian and CEDEL, as the case
may be, therefor.
(g) Transfer of a Beneficial Interest in the Restricted Global Warrant
------------------------------------------------------------------
Certificate for a Beneficial Interest in the Regulation S Global Warrant
- ------------------------------------------------------------------------
Certificate. A Holder of a beneficial interest in the Restricted Global Warrant
- -----------
Certificate may at any time, subject to the rules and procedures of CEDEL and
the Depository, transfer all or part of its interest in the Restricted Global
Warrant Certificate for an equivalent interest in the Regulation S Global
Warrant Certificate in accordance with this subsection (g). Upon receipt by the
Warrant Custodian of:
(i) an instruction given in accordance with the procedures of the
Depository on behalf of a Holder of a beneficial interest in the Restricted
Global Warrant Certificate to reduce the Restricted Global Warrant
Certificate by the amount of the interest to be transferred and increase
the Regulation S Global Warrant Certificate by a like amount, and
23
(ii) a certificate (which may be submitted by facsimile promptly
followed by an original) in substantially the form set forth in subsection
(o) of this Section 3.4 from the Person designated by the Depository as
such Holder, to the effect that such interest is being transferred pursuant
to an exemption from registration in accordance with Regulation S under the
Securities Act, and an opinion of counsel reasonably acceptable to the
Company and the Warrant Custodian to the effect that such transfer is in
compliance with the Securities Act,
then the Warrant Custodian, in accordance with the standing instructions and
procedures existing among the Depository, CEDEL and the Warrant Custodian, will
so reduce the Restricted Global Warrant Certificate and increase the Regulation
S Global Warrant Certificate, and the transfer and exchange of such beneficial
interest shall be effected through the Depository, the Warrant Custodian and
CEDEL, as the case may be, in accordance with this Agreement and the procedures
of the Depository, the Warrant Custodian and CEDEL, as the case may be,
therefor.
(h) Transfer of a Beneficial Interest in the Regulation S Global Warrant
--------------------------------------------------------------------
Certificate or the Restricted Global Warrant Certificate for a Beneficial
- -------------------------------------------------------------------------
Interest in the Unrestricted Global Warrant Certificate. A Holder of a
- -------------------------------------------------------
beneficial interest in the Regulation S Global Warrant Certificate or the
Restricted Global Warrant Certificate may at any time, subject to the rules and
procedures of Euroclear, CEDEL and the Depository, transfer all or part of its
interest in the Regulation S Global Warrant Certificate or the Restricted Global
Warrant Certificate, as the case may be, for an equivalent interest in the
Unrestricted Global Warrant Certificate in accordance with this subsection (h).
Upon receipt by the Warrant Custodian of:
(i) an instruction given in accordance with the procedures of the
Depository on behalf of a Holder of a beneficial interest in the Regulation
S Global Warrant Certificate or the Restricted Global Warrant Certificate,
as the case may be, to reduce such Global Warrant Certificate by the amount
of the interest to be transferred and increase the Unrestricted Global
Warrant Certificate by a like amount, and
(ii) a certificate (which may be submitted by facsimile promptly
followed by an original) in substantially the form set forth in subsection
(o) of this Section 3.4 from the Person designated by the Depository as
such Holder, to the effect that such interest is being transferred in
reliance on Rule 144 (in which case the Warrant Custodian shall also
receive an opinion of counsel reasonably acceptable to the Company and to
the Warrant Custodian to the effect that such transfer is in compliance
with the Securities Act) or pursuant to an effective registration statement
under the Securities Act,
24
then the Warrant Custodian, in accordance with the standing instructions and
procedures existing among the Depository, CEDEL and the Warrant Custodian, will
so reduce the Regulation S Global Warrant Certificate or the Restricted Global
Warrant Certificate, as the case may be, and increase the Unrestricted Global
Warrant Certificate, and the transfer and exchange of such beneficial interest
shall be effected through the Warrant Custodian , the Depository and CEDEL, as
the case may be, in accordance with this Agreement and the procedures of the
Depository, the Warrant Custodian and CEDEL, as the case may be, therefor.
(i) Restrictions on Transfer of Global Warrant Certificates.
-------------------------------------------------------
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (j) of this Section 3.4), a Global Warrant
Certificate may not be transferred except as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(j) Issuance of Definitive Warrant Certificates in the Absence of a
---------------------------------------------------------------
Depository. If at any time the Depository notifies the Company that the
- ----------
Depository is unwilling or unable to continue as Depository for the Global
Warrant Certificates and a successor Depository for the Global Warrant
Certificates is not appointed by the Company within 90 days after delivery of
such notice, then the Warrant Custodian, in accordance with the standing
instructions and procedures existing among the Depository, CEDEL and the Warrant
Custodian, will cancel the Global Warrant Certificates, the Company will execute
Definitive Warrant Certificates representing an aggregate number of Warrants
equal to the aggregate number of Warrants evidenced by the Global Warrant
Certificates, and the Warrant Agent countersign and deliver to each Person
designated by the Depository and CEDEL and Euroclear as a Holder of a beneficial
interest in the Global Warrant Certificates a Definitive Warrant Certificate
evidencing a number of Warrants equal to such interest.
(k) Legends. Except as permitted by this subsection (k), the Regulation S
-------
Global Warrant Certificate, the Restricted Global Warrant Certificate and the
Definitive Warrant Certificates (and all Warrant Certificates issued in exchange
therefor or substitution thereof) shall bear a legend in substantially the form
set forth in Section 3.3. A Definitive Warrant Certificate that does not bear
the legends set forth above will be executed, countersigned and delivered in the
case of (i) a transfer pursuant to an effective registration statement under the
Securities Act of a Transfer Restricted Warrant in accordance with subsection
(c)(ii)(B) of this Section 3.4, (ii) a transfer in reliance on Rule 144 of a
Transfer Restricted Warrant in accordance with subsection (c)(ii)(D) of this
Section 3.4; (iii) a transfer pursuant to an effective registration statement
under the Securities Act of a beneficial interest in the Regulation S Global
Warrant Certificate or the Restricted Global Warrant Certificate in accordance
with subsection (e)(ii)(D) of this
25
Section 3.4; (iv) a transfer in reliance on Rule 144 of a beneficial interest in
the Regulation S Global Warrant Certificate or the Restricted Global Warrant
Certificate in accordance with subsection (e)(ii)(D) of this Section 3.4; or (v)
a transfer or exchange of a beneficial interest in the Unrestricted Global
Warrant Certificate or of a Warrant represented by a Definitive Warrant
Certificate that is not a Transfer Restricted Warrant.
(l) Cancellation and/or Adjustment of Global Warrant Certificate. At such
------------------------------------------------------------
time as all interests in a Global Warrant Certificate have either been exchanged
for Definitive Warrant Certificates, exercised for shares of Class A Common
Stock or canceled, such Global Warrant Certificate shall be returned to or
retained and canceled by the Warrant Agent. At any time prior to such
cancellation, if any beneficial interest in a Global Warrant Certificate is
exchanged for Definitive Warrant Certificates, exercised for shares of Class A
Common Stock or canceled, the number of Warrants represented by such Global
Warrant Certificate shall be reduced and an endorsement shall be made on such
Global Warrant Certificate, by the Warrant Agent or the Warrant Custodian, at
the direction of the Warrant Agent, to reflect such reduction.
(m) No service charge shall be payable by any Holder for any registration
of transfer or exchange of Warrant Certificates, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of,
Warrant Certificates other than exchanges not involving any transfer.
(n) The certificate required by subsections (c), (d),(e),(f),(g) and (h) of
this Section 3.4 shall be in substantially the following form:
26
RE: AUDIOVOX CORPORATION - WARRANTS
Reference is made to the Warrant Agreement dated as of
_______________, 1995 relating to the Warrants (the "Agreement"). This
Instruction and Certification relates to Warrants held by
__________________________________ (the "Transferor/Holder"). Capitalized terms
not otherwise defined herein have the meanings set forth in the Agreement.
Instruction of Transfer or Exchange
-----------------------------------
(to be completed whether or not the Warrants to be
transferred or exchanged are Transfer Restricted Warrants)
1. The Transferor/Holder hereby instructs the Warrant Agent to
(check one box):
[] Transfer or exchange one or more Definitive Warrant
Certificates in accordance with Section 3.4(c) of the
Agreement; or
[] Transfer one or more Definitive Warrant Certificates for a
beneficial interest in a Global Warrant Certificate in
accordance with Section 3.4(d) of the Agreement; or
[] Transfer or exchange a beneficial interest in a Global
Warrant Certificate for one or more Definitive Warrant
Certificates in accordance with Section 3.4(e) of the
Agreement; or
[] Transfer a beneficial interest in the Regulation S Global
Warrant Certificate for a beneficial interest in the
Restricted Global Warrant Certificate in accordance with
Section 3.4(f) of the Agreement; or
[] Transfer a beneficial interest in the Restricted Global
Warrant Certificate for a beneficial interest in the
Regulation S Global Warrant Certificate in accordance with
Section 3.4(g) of the Agreement; or
[] Transfer a beneficial interest in the Regulation S Global
Warrant Certificate or the Restricted Global Warrant
Certificate for a beneficial interest in the Unrestricted
Global
27
Warrant Certificate in accordance with Section 3.4(h) of the
Agreement.
2. The Transferor/Holder has requested Definitive Warrant
Certificates above and hereby further instructs the Warrant Agent to issue such
Definitive Warrant Certificates without the restrictive legends referenced in
Section 3.4(k) of the Agreement (check box if applicable): []
Certification
-------------
(to be completed for a transfer or exchange of
Transfer Restricted Warrants only)
3. In connection with the transfer or exchange requested above, the
Transferor/Holder does hereby certify that (check one box):
[] One or more Definitive Warrant Certificates, or an interest in a
Global Warrant Certificate, is being obtained by the
Transferor/Holder, without transfer or change in beneficial
ownership (in accordance with Section 3.4(c)(ii)(A) or Section
3.4(e)(ii)(A) of the Agreement); or
[] one or more Definitive Warrant Certificates, or an interest in a
Global Warrant Certificate, is being transferred pursuant to an
effective registration statement under the Securities Act (in
satisfaction of Section 3.4(c)(ii)(B), Section 3.4(d)(ii)(C),
Section 3.4(e)(ii)(B) or Section 3.4(h) of the Agreement).
[] one or more Definitive Warrant Certificates, or an interest in a
Global Warrant Certificate, is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A) in reliance on
Rule 144A (in satisfaction of Section 3.4(c)(ii)(C), Section
3.4(d)(ii)(A), Section 3.4(e)(ii)(C) or Section 3.4(f) of the
Agreement); or
[] one or more Definitive Warrant Certificates, or an interest in a
Global Warrant Certificate, is being transferred pursuant to an
exemption from registration in accordance with Regulation S under
the Securities Act, and an opinion of counsel to the effect that
such transfer does not require registration under the Securities
Act accompanies this Instruction and Certification (in
satisfaction of Section 3.4(c)(ii)(D), Section 3.4(d)(ii)(B),
Section 3.4(e)(ii)(D) or Section 3.4(g) of the Agreement); or
28
[] one or more Definitive Warrant Certificates, or an interest in a
Global Warrant Certificate, is being obtained in reliance on and
in compliance with an exemption from the registration
requirements of the Securities Act, other than Rule 144A or
Regulation S under the Securities Act, and an opinion of counsel
to the effect that such transfer complies with, and does not
require registration under, the Securities Act accompanies this
Instruction and Certification (in satisfaction of Section
3.4(c)(ii)(D), Section 3.4(d)(ii)(C), Section 3.4(e)(ii)(D) or
Section 3.4(h) of the Agreement).
----------------------------------------------------
[INSERT NAME OF TRANSFEROR/HOLDER]
Date: By:
-------------------------- ----------------------------
Section 3.5 Execution and Delivery.
----------------------
The Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon, attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Warrant
Certificates may be manual or facsimile. Warrant Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
delivery of such Warrant Certificates or the date they are countersigned by the
Warrant Agent.
No Warrant Certificate or the Warrants represented thereby shall be valid
or be entitled to any benefit under this Agreement unless such Warrant
Certificate has been countersigned by an authorized officer of the Warrant Agent
by manual signature. All Warrant Certificates shall be dated the date they are
countersigned by the Warrant Agent.
At any time and from time to time after the execution and delivery of this
Agreement, the Company shall deliver Warrant Certificates executed by the
Company in accordance with this Section to the Warrant Agent. Subject to
Section 3.1, the Warrant Agent shall, upon the written request of a Responsible
Officer of the Company, countersign and deliver Warrant Certificates
representing such number of Warrants,
29
registered in such names and such legends as may be specified in such request.
The Warrant Agent shall also countersign and deliver Warrant Certificates as
otherwise provided in this Agreement.
Section 3.6. Destroyed, Lost, Mutilated or Stolen Warrant Certificates.
---------------------------------------------------------
If there shall be delivered to the Company and the Warrant Agent evidence
to their satisfaction of the destruction, loss, mutilation or theft of any
Warrant Certificate and such security and indemnity as may be required by them
to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, and in the case of
mutilation, upon surrender of such Warrant Certificate to the Warrant Agent for
cancellation, the Company shall execute and the Warrant Agent shall countersign
and deliver, in lieu of or exchange for any such destroyed, lost, mutilated or
stolen Warrant Certificate, a new Warrant Certificate for a like number of
Warrants, bearing a number not contemporaneously outstanding.
Upon the issuance of any new Warrant Certificate under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Warrant Agent) connected
therewith.
Every substitute Warrant Certificate issued and delivered pursuant to this
Section in lieu of any destroyed, lost or stolen Warrant Certificate shall
constitute an original additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Warrant Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of, and be
subject to all the limitations of rights set forth in, this Agreement equally
and proportionately with any and all other Warrant Certificates duly issued and
delivered hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) any and all other rights and remedies with respect to the
replacement of destroyed, lost, mutilated or stolen Warrant Certificates
notwithstanding any law or statute existing or hereafter enacted to the
contrary.
Section 3.7. Persons Deemed Owners.
---------------------
The Company and the Warrant Agent, and any agent of the Company or the
Warrant Agent, may deem and treat the Person in whose name a Warrant Certificate
is registered in the Warrant Register as the absolute, true and lawful owner of
such Warrant Certificate and the Warrants represented thereby (notwithstanding
any notation or ownership or other writing thereon made by any Person) for all
purposes, and neither the
30
Company nor the Warrant Agent nor any of their respective agents shall be
affected by any notice or knowledge to the contrary.
Section 3.8. Cancellation of Warrant Certificates.
------------------------------------
All Warrant Certificates surrendered for registration of transfer, exchange
or exercise shall be delivered to the Warrant Agent and shall be promptly
canceled by the Warrant Agent. The Company may at any time deliver to the
Warrant Agent for cancellation any Warrant Certificates previously delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Warrant Certificates so delivered shall be promptly canceled by the Warrant
Agent. No Warrant Certificates shall be delivered in lieu of or in exchange for
any Warrant Certificates canceled by the Warrant Agent, except as expressly
permitted by this Agreement.
Section 3.9. No Rights as Stockholders.
-------------------------
Nothing contained in this Agreement or in the Warrant Certificates shall be
construed as conferring upon the Holders or any transferees any of the rights of
stockholders of the Company, including without limitation, the right to vote or
to receive dividends or to receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter. Nothing contained in this Agreement shall be construed as
imposing any liabilities on such holder to purchase any securities or as a
stockholder of the Company, whether such liabilities are assumed by the Company
or by creditors or stockholders of the Company or otherwise.
Article 4
EXERCISE OF WARRANTS
Section 4.1. Exercise Period.
---------------
Subject to and upon compliance with the provisions of this Agreement, at
the option of the Holder thereof, a Warrant may be exercised at the Exercise
Price in effect at the time of exercise, at any time on any Business Day during
the period (the "Exercise Period") commencing on the date of issuance of the
Warrant and ending 5:00 P.M., New York time, on March 15, 2001 (unless such
Warrant is sooner terminated in accordance with Section 6 hereof) (the
"Expiration Date"), unless the Exercise Period is extended by the Company;
provided, however, that Warrants may only be exercised if a Shelf Registration
- -------- -------
Statement is effective under the Securities Act at the time of such exercise.
Following the Expiration Date, any Warrant not previously exercised shall expire
and be
31
null and void, and all rights of the Holder under the Warrant Certificate
evidencing such Warrant and under this Agreement shall cease.
Section 4.2. Shares Issuable Upon Exercise; Exercise Price.
---------------------------------------------
Subject to and upon compliance with the provisions of this Agreement, each
Warrant shall entitle the Holder thereof to purchase from the Company one share
of Class A Common Stock of the Company at an exercise price (the "Exercise
Price") of $7-1/8 per share of Class A Common Stock; provided, however, that
-------- -------
(a) Warrants may only be exercised if a Shelf Registration Statement is
effective under the Securities Act at the time of such exercise, (b) the
Exercise Price shall decrease by $1/8 per share (the "Reduction Amount") of
Class A Common Stock if (i) the Shelf Registration Statement has not been filed
with the Commission within 300 days after the date hereof or declared effective
within 365 days after the date hereof, or (ii) if the Shelf Registration
Statement is filed and declared effective but shall thereafter cease to be
effective (without being succeeded immediately by an additional effective Shelf
Registration Statement for a period which shall exceed 90 days (or 180 days in
the event of a Disadvantageous Condition) in the aggregate per year (defined as
a period of 365 days commencing on the date that the applicable Registration
Statement is declared effective), such exercise price to decline an additional
Reduction Amount per share of Class A Common Stock for each subsequent six-month
period until the applicable Registration Statement is filed, declared effective
or becomes effective again, (c) notwithstanding the foregoing, in no event shall
there be more than (i) 10 reductions in the Exercise Price during the period
beginning on the date of the initial issuance of Warrants under the Warrant
Agreement and ending on the Expiration Date or (ii) one reduction in the
Exercise Price during any six-month period during the Exercise Period, in either
case in respect of the events described in clause (b) above and (d) such
Exercise Price shall not decrease with respect to any Warrants which the Company
is not required to register under the Registration Rights Agreement if the
Commission has declared effective a registration statement with respect to other
shares of Class A Common Stock. The Exercise Price and the number and kind of
securities or other property issuable upon exercise of the Warrants shall also
be adjusted in certain instances as provided in Section 4.6.
In the event of an Exercise Price Adjustment (as defined in the Warrant
Agreement), the Reduction Amount as then in effect shall also be adjusted so
that the same shall equal the Reduction Amount as then in effect multiplied by a
fraction of which the numerator shall be the Exercise Price in effect
immediately following the Exercise Price Adjustment and the denominator shall be
the Exercise Price immediately prior to such Exercise Price Adjustment.
32
Section 4.3. Method of Exercise.
------------------
Each Warrant may be exercised in whole or in part. In order to exercise
any Warrants, the Holder thereof shall present and surrender the Warrant
Certificate evidencing the Warrants to the Warrant Agent at the office or agency
of the Company maintained for that purpose pursuant to Section 7.5, with the
Notice of Exercise on the Warrant Certificate duly completed and executed by the
Holder or by the Holder's legal representative or attorney duly authorized in
writing to the satisfaction of the Warrant Agent, and accompanied by payment in
full of the aggregate Exercise Price for the number of shares of Class A Common
Stock specified in the Notice of Exercise, and of any other amounts required to
be paid in connection with such exercise, by certified or official bank check or
by such other means as is acceptable to the Company in the lawful currency of
the United States of America which as of the time of payment is legal tender for
payment of public or private debts. In the event the holder exercising its
Warrants holds an interest in a Global Warrant Certificate, such holder shall
obtain a Definitive Warrant Certificate in accordance with Section 3.4(c) of the
Warrant Agreement prior to the exercise of such Warrants or, with the consent of
the Company, exercise Warrants owned of record by such holder and represented by
a Global Warrant Certificate by delivering (i) proof of record ownership of such
Warrants if required by the Company and (ii) a notice of exercise in
substantially the form set forth in the Warrant as appropriately adjusted. No
payment or adjustment shall be made on account of any dividends on the shares of
Class A Common Stock issued upon exercise of any Warrants.
Warrants shall be deemed to have been exercised immediately prior to the
close of business on the date of surrender of the Warrant Certificate
representing such Warrants for exercise in accordance with the foregoing
provisions, and at such time the Person or Persons entitled to receive the Class
A Common Stock issuable upon exercise shall be treated for all purposes as the
record holder or holders of such Class A Common Stock at the close of business
on the date of such surrender, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Class A Common Stock shall not then be actually delivered to such Person or
Persons.
If any Warrant Certificate is surrendered for the exercise of less than all
the Warrants represented thereby, the Company shall execute, and the Warrant
Agent shall countersign and deliver to the Holder thereof, at the expense of the
Company, a new Warrant Certificate, dated the date of such exercise, evidencing
the number of Warrants remaining unexercised unless such Warrants shall have
expired.
Section 4.4. Issuance of Class A Common Stock.
--------------------------------
Upon the exercise of any Warrants, the Warrant Agent shall (i) cause an
amount equal to the amount paid by the Holder upon exercise to be paid to the
Company by
33
depositing the same in an account designated by the Company for that purpose or
delivering such payment in such other manner as is acceptable to the Company,
and (ii) immediately inform the Company in writing of such exercise and deposit
or delivery, including the number of Warrants exercised and the instructions of
the exercising Holder with respect to delivery of the shares of Class A Common
Stock issuable upon such exercise. The Company shall then issue within five
days and deliver or cause to be delivered at such office or agency maintained
pursuant to Section 7.5 a certificate or certificates evidencing the number of
full shares of Class A Common Stock issuable upon exercise of such Warrants,
registered in such name or names as may be directed by such Holder in the Notice
of Exercise, together with a check for payment in lieu of any fractional share,
as provided in Section 4.5.
Section 4.5. Fractions of Shares.
-------------------
No fractional shares of Class A Common Stock shall be issued upon exercise
of any Warrants. If more than one Warrant shall be exercised at one time by the
same Holder, the number of full shares which shall be issuable upon exercise
thereof shall be computed on the basis of the aggregate number of shares of
Class A Common Stock issuable under the Warrants so exercised. In lieu of any
fractional share of Class A Common Stock which would otherwise be issuable upon
exercise of any Warrant or Warrants, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the market
price per share of Class A Common Stock (as determined by the Board of Directors
of the Company or in any manner prescribed by the Board of Directors) at the
close of business on the day such exercise is deemed to have occurred.
Section 4.6. Adjustment of Exercise Price.
----------------------------
The Exercise Price and the number and kind of securities or other property
issuable upon exercise of any Warrant shall be subject to adjustment and
modification as follows in the circumstances provided:
(a) In case the Company shall pay or make a dividend or other distribution
on or in respect of any class of Class A Common Stock in shares of Class A
Common Stock, the Exercise Price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction of which the numerator shall be the number of
shares of Class A Common Stock outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such number
of shares of Class A Common Stock and the total number of shares of Class A
Common Stock constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
34
following the date fixed for such determination. For the purposes of this
paragraph (a), the number of shares of Class A Common Stock at any time
outstanding shall not include shares held in the treasury of the Company or
shares of Class A Common Stock issuable pursuant to any right, option, warrant
or convertible security (including the Warrants) but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of shares
of Class A Common Stock. The Company will not pay any dividend or make any
distribution on shares of Class A Common Stock held in the treasury of the
Company.
(b) In case outstanding shares of Class A Common Stock shall be subdivided
into a greater number of shares of Class A Common Stock, the Exercise Price in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and, conversely,
in case outstanding shares of Class A Common Stock shall be combined into a
smaller number of shares of Class A Common Stock, the exercise price in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(c) The reclassification of shares of Class A Common Stock into securities
of the Company other than Class A Common Stock (other than any reclassification
upon a consolidation or merger to which Section 4.12 applies) shall (x) be
deemed to involve (i) a distribution of Class A Common Stock to all holders of
Class A Common Stock (and the effective date of such reclassification shall be
deemed to be "the date fixed for the determination of stockholders entitled to
receive such distribution" and "the date fixed for such determination" within
the meaning of paragraph (a) of this Section), and (ii) if the number of shares
of Class A Common Stock outstanding is changed as a result of such
reclassification, then a subdivision or combination, as the case may be, of the
number of shares of Class A Common Stock outstanding immediately prior to such
reclassification into the number of shares of Class A Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective," as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph (b) of this Section) and (y) result in the Warrants becoming
exercisable for the securities to which the Class A Common Stock was
reclassified as if originally exercisable for such securities and such security
shall be deemed substituted for the phrase "Class A Common Stock" for all
purposes under this Warrant Agreement and the Warrants.
(d) The Company may, in its sole discretion, make such reductions in the
Exercise Price, in addition to those required by paragraphs (a) or (b) of this
Section, as it considers to be advisable.
35
(e) No adjustment will be made in the Exercise Price as required by
paragraphs (a) or (b) of this Section unless such adjustment would require a
change of at least 1% in the 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.
(f) If any adjustment in the Exercise Price is made pursuant to a
provision of this Section 4.6, no further adjustment in the Exercise Price shall
be made on account of the same event.
(g) In the event of an adjustment in the Exercise Price pursuant to this
Section 4.6 (a) or (b) (an "Exercise Price Adjustment"), the number of shares of
Class A Common Stock issuable upon exercise of such Warrant shall also be
adjusted so that the same shall equal (i) the number of shares of Class A Common
Stock for which the Warrant was exercisable immediately prior to the Exercise
Price Adjustment, multiplied by (ii) a fraction, of which the numerator shall be
the Exercise Price in effect immediately prior to the Exercise Price Adjustment,
and the denominator shall be the Exercise Price immediately following such
Exercise Price Adjustment. Any adjustment to the number of shares of Class A
Common Stock pursuant to this paragraph (g) shall become effective at the same
time as such Exercise Price Adjustment.
Section 4.7. Notice of Adjustments of Exercise Price, the Reduction Amount and
-----------------------------------------------------------------
the Redemption Price.
- ---- ----------------
Whenever the Exercise Price, the number of shares of Class A Common Stock
issuable upon exercise of a Warrant (the "Warrant Shares"), the Reduction Amount
or the Redemption Price is adjusted pursuant to Section 4.6 or otherwise or
other rights are granted as herein provided:
(a) the Company shall compute the adjusted Exercise Price and,
if applicable, number of Warrant Shares in accordance with Section 4.2
or 4.6, as applicable, and the adjusted Reduction Amount and
Redemption Price and shall prepare a certificate signed by the Chief
Financial Officer, Chief Accounting Officer or Controller of the
Company setting forth the adjusted Exercise Price and number of
Warrant Shares and the adjusted Reduction Amount and Redemption Price
and in the case of an adjustment pursuant to Section 4.6 showing in
reasonable detail the facts upon which such adjustment is based, and
such certificate shall forthwith be filed with the Warrant Agent and,
at each office or agency maintained for the purpose of exercise of
Warrants pursuant to Section 7.5; and
36
(b) a notice stating that the Exercise Price and, if applicable,
the number of Warrant Shares, the Reduction Amount and the Redemption
Price has been adjusted and setting forth the adjusted Exercise Price,
Warrant Shares, Reduction Amount and Redemption Price shall forthwith
be prepared by the Company, and as soon as practicable after it is
prepared, such notice shall be mailed by the Company to all Holders at
their last addresses as they shall appear in the Warrant Register.
The Warrant Agent shall not be responsible for determining when such
notice is required to be given or for verifying the computation of the
adjusted Exercise Price, Warrant Shares, Reduction Amount and
Redemption Price .
Section 4.8. Notice of Certain Corporate Action.
----------------------------------
In case:
(a) the Company shall declare a dividend (or any other distribution)
on the Class A Common Stock payable otherwise than exclusively in cash; or
(b) the Company shall authorize the granting to the holders of the
Class A Common Stock of rights, options or warrants to subscribe for or
purchase any shares of capital stock of any class or of any other rights;
or
(c) of any reclassification of the Class A Common Stock of the
Company (other than a merger which is effected solely to change the
jurisdiction of incorporation of the Company), or of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the sale or transfer of all
or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall, if notice of such event is sent to the holders of the
Company's Class A Common Stock generally, cause to be filed at each office or
agency maintained pursuant to Section 7.5 for the purpose of exercising
Warrants, and shall cause to be mailed to all Holders at their last addresses as
they shall appear in the Warrant Register, on or prior to the date information
regarding such corporate action is sent to holders of the Company's Class A
Common Stock generally, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of Class A Common Stock of record to be entitled to such dividend, distribution,
rights, options or warrants are to be determined, or (y) the date on which such
reclassification,
37
consolidation, merger, transfer, dissolution, liquidation or winding up (or
amendment thereto) is expected to become effective, and the date as of which it
is expected that holders of record of such class of Common Stock shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding up. The Warrant Agent shall not be
responsible for giving such notice or for the contents of any such notice to the
Holders.
Section 4.9. Company to Reserve Class A Common Stock.
---------------------------------------
The Company shall, at all times during the Exercise Period, reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Class A Common Stock, for the purpose of effecting the exercise of Warrants, the
full number of shares of Class A Common Stock then issuable upon the exercise of
all outstanding Warrants.
Section 4.10. Taxes on Exercises.
------------------
The Company shall pay any and all taxes that may be payable in respect of
the issue or delivery of shares of Class A Common Stock on exercise of Warrants
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of (i) income of the Holder or (ii) any transfer
involved in the issue and delivery of shares of Class A Common Stock in name
other than that of the Holder of the Warrant or Warrants to be exercised, and no
such issue or delivery shall be made unless and until the Person requesting such
issue has paid to the Company the amount of any such taxes or has established to
the satisfaction of the Company that such tax has been paid.
Section 4.11. Covenant as to Class A Common Stock.
-----------------------------------
The Company covenants that all shares of Class A Common Stock which may be
issued upon exercise of any Warrants will, upon issue and payment of the
Exercise Price therefor, be fully paid and nonassessable and free and clear from
all taxes, liens, charges, security interests, encumbrances and other
restrictions created by or through the Company.
Section 4.12. Provisions in Case of Consolidation, Merger or Sale of Assets.
-------------------------------------------------------------
In case of any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Class A Common Stock of the
Company) or any sale or transfer
38
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 this 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 this Warrant Agreement, to
exercise such Warrant only into the kind and amount of securities, cash and
other property (collectively, the "Consideration") receivable upon such
Transaction by a holder of the number of shares of Class A Common Stock of the
Company into which such Warrant might have been exercised immediately prior to
such Transaction, assuming such holder of Class A Common Stock of the Company
(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, as to the kind or amount of Consideration receivable upon such
Transaction (provided that if the kind or amount of Consideration receivable
upon such Transaction is not the same for each share of Class A Common Stock
held immediately prior to such Transaction by Persons other than a constituent
person or an affiliate thereof and in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purpose of
this Section the kind and amount of Consideration receivable upon such
Transaction by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). Such
warrant agreement shall provide for adjustments upon the occurrence of events
with respect to the Acquiror similar to the events described in Section 4(a) and
(b) hereof which, for events subsequent to the effective date of such warrant
agreement, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article and in Article Five. The above
provisions of this Section shall similarly apply to successive Transactions.
Section 4.13. No Change of Warrant Necessary.
------------------------------
Irrespective of any adjustment in the Exercise Price or in the number or
kind of shares or other property issuable upon exercise of the Warrants, the
Warrant Certificates theretofore or thereafter issued may continue to express
the same Exercise Price and number and kind of shares issuable upon exercise per
Warrant as are stated in the Warrant Certificates initially issued pursuant to
this Agreement.
Section 4.14. Enforcement of Rights.
---------------------
Notwithstanding any of the provisions of this Agreement, any Holder,
without the consent of the Warrant Agent or any other Holder, may enforce, and
may institute and maintain any suit, action or proceeding against the Company to
enforce, such Holder's
39
right to exercise the Warrants evidenced by such Holder's Warrant Certificate in
the manner provided in such Warrant Certificate and this Agreement.
Section 4.15. Available Information.
---------------------
The company shall promptly file with the Warrant Agent (and cause the
Warrant Agent to deliver to the holders of the Warrants upon request to the
Company) copies of its annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the
commission may by rules and regulations prescribe) that the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
40
Article 5
Mandatory Redemption
Section 5.1. Right of Redemption.
-------------------
All Outstanding Warrants shall be redeemed by the Company at a redemption
price of $1.60 (the "Redemption Price") per Warrant if the Shelf Registration
Statement has not been declared effective at any time on or prior to the
Expiration Date. In the event of an Exercise Price Adjustment (as defined in
the Warrant Agreement), the Redemption Price as then in effect shall also be
adjusted so that the same shall equal the Redemption Price as then in effect
multiplied by a fraction of which the numerator shall be the Exercise Price in
effect immediately following the Exercise Price Adjustment and the denominator
shall be the Exercise Price immediately prior to such Exercise Price Adjustment.
Section 5.2. Election to Redeem; Notice of Redemption.
----------------------------------------
In the event the Company shall be required to redeem the Warrants pursuant
to Section 5.1, the Company shall notify the Warrant Agent in writing that the
Warrants shall be redeemed 30 days after the Expiration Date (the "Redemption
Date"). A notice of redemption (the "Redemption Notice") shall also be given
not less than twenty (20) days prior to the Redemption Date, to each Holder of
Warrants to be redeemed. The Redemption Notice shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Warrant to be redeemed; and
(4) the place or places where such Warrants are to be surrendered for
payment of the Redemption Price.
The Redemption Notice shall be given by the Company or, at the Company's
request, by the Warrant Agent in the name and at the expense of the Company.
Section 5.3. Deposit of Redemption Price.
---------------------------
At least one Business Day prior to any Redemption Date, the Company shall
deposit with the Warrant Agent (or, alternatively, segregate and hold in trust)
an amount
41
of money sufficient to pay the Redemption Price of all the Warrants which are to
be redeemed on that date other than any Warrants called for redemption on that
date which have been properly exercised prior to the date of such deposit.
If any Warrant called for redemption is properly exercised, any money
deposited with the Warrant Agent or so segregated and held in trust for the
redemption of such Warrant shall be paid to the Company or shall be discharged
from such trust, as applicable.
Section 5.4. Surrender of Warrant Certificate.
--------------------------------
The Warrant Certificate evidencing any Warrant which is to be redeemed
shall be surrendered at an office or agency of the Company designated for such
purpose pursuant to Section 7.5 (with, if the Company or the Warrant Agent so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Warrant Agent duly executed by, the Holder
thereof or the Holder's attorney duly authorized in writing).
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Article 6
Termination of Warrants
Section 6.1. Termination.
-----------
In the event that less than 5% of the aggregate number of Warrants issued
under the Warrant Agreement remain outstanding, the Company shall have the
right, by delivery of the notice described in Section 6.2 below, to cause the
Warrants remaining outstanding to expire at 5:00 p.m. (New York City time) on
the 30th day (or such later date as set forth in the Termination Notice), (as
defined below) (the "New Expiration Date") after the date of delivery of such
notice to such holder of Warrants setting forth the information required by
Section 6.2 of the Warrant Agreement and delivered in accordance with
Section 7.4 of the Warrant Agreement.
Section 6.2. Notice.
------
In the event the Company elects to cause the Warrants to expire prior to
March 15, 2001 pursuant to Section 6.1, the Company shall notify the Warrant
Agent and deliver a notice to each holder of outstanding Warrants not less than
30 days prior to the New Expiration Date. The Termination Notice shall state:
1. the New Expiration Date;
2. that, at 5:00 p.m. (New York City time) on the New Expiration Date,
the Warrants shall terminate and, accordingly, all Warrants not
exercised prior to such time shall be null and void; and
3. the then current exercise price for the Warrants and the mechanics for
exercising the Warrants prior to 5:00 p.m. (New York City time) on the
New Expiration Date.
The Termination Notice shall be given by the Company or, at the Company's
request, by the Warrant Agent in the name and expense of the Company.
43
Article 7
Amendments
Section 7.1. Amendment of Agreement.
----------------------
The Warrant Agent and the Company may, without the consent of any Holders,
amend this Agreement in such manner as they shall deem appropriate to cure any
ambiguity, to correct any defective or inconsistent provision or manifest
mistake or error herein contained, or in any other manner that they may deem
necessary or desirable and which shall not adversely affect the rights of the
Holders of Warrants. This Agreement shall not otherwise be modified,
supplemented or amended in any respect by the Warrant Agent and the Company,
except with the consent in writing of the Holders of outstanding Warrants
representing not less than a majority of the Warrants then outstanding;
provided, however, that the consent in writing of each and every Holder shall be
required for any such modification, supplement or amendment which (a) changes
the Exercise Period (except to extend the expiration of the Exercise Period to a
later date) or increases the Exercise Price, (b) reduces the Reduction Amount
which shall occur upon a Registration Default, (c) reduces the Redemption Price,
or (d) reduces the percentage of Holders of outstanding Warrants the consent of
who is required to modify, supplement or amend this Agreement.
Any modification, supplement or amendment pursuant to this Section shall be
binding upon all present and future Holders, whether or not they have consented
to such modification, supplement or amendment, and whether or not notation of
such modification, supplement or amendment is made upon any Warrant Certificate
issued to such Holder.
Section 7.2. Record Date.
-----------
The Company may set a record date for purposes of determining the identity
of Holders entitled to consent to any modification, supplement or amendment to
this Agreement. If the Company does not set a record date, the record date
shall be thirty (30) days prior to the first solicitation of such consent.
44
Article 8
Miscellaneous Provisions
Section 8.1. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed and original, and all of which together shall constitute the
same instrument.
SECTION 8.2. GOVERNING LAW.
-------------
THIS AGREEMENT AND THE WARRANT CERTIFICATES ISSUED HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF.
Section 8.3. Descriptive Headings.
--------------------
The descriptive headings of this Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.
Section 8.4. Notices.
-------
Any notice, request or other document permitted or required hereunder to be
given to any Holder shall be sufficiently given if in writing and mailed first-
class postage prepaid, to each Holder affected by such event, at its address as
it appears in the Warrant Register. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holders shall affect the sufficiency of such
notice with respect to other Holders. Any notice required hereunder to be given
to any Holder may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Warrant Agent, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
Any notice, request, waiver, consent or other document provided or
permitted by this Agreement to be given to (i) the Warrant Agent by any Holder
or by the Company shall be sufficient for every purpose hereunder if in writing
and mailed, first-class postage prepaid, to and received by the Warrant Agent at
its Corporate Trust Office, and (ii) the Company by the Warrant Agent or by any
Holder shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
the Company at the address of its principal office specified in
45
the first paragraph of this Agreement or at any other address previously
furnished in writing to the Warrant Agent by the Company.
In the event the Warrant Agent shall receive any notice, demand or other
document addressed to the Company by any Holder, the Warrant Agent shall
promptly forward such notice or demand to the Company.
Section 8.5. Maintenance of Office.
---------------------
So long as any of the Warrants remain outstanding, the Company shall
designate and maintain in the State of New York an office or agency where
Warrant Certificates may be surrendered for registration of transfer or for
exchange, where Warrants may be surrendered for exercise and where notices and
demands to or upon the Company in respect of the Warrants and this Warrant
Agreement may be served. The Company may from time to time change or rescind
such designation as it may deem desirable or expedient. The Company will give
prompt written notice to the Warrant Agent of the location, and any change in
the location, of such office or agency. The Company hereby designates the
Corporate Trust Office of the Warrant Agent as the initial agency maintained for
each such purpose. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to notify the Warrant Agent of the
location thereof or of any change in the location thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Warrant Agent, and the Company hereby appoints the Warrant Agent
as its agent to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside the State of New York) where Warrant Certificates may
be presented or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such designation or
------------------
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the State of New York for such purposes. The Company
shall give prompt written notice to the Warrant Agent of any such designation or
rescission, and of any change in the location of, any such other office or
agency.
Section 8.6. Successors and Assigns.
----------------------
All covenants and agreements in this Agreement by the Company shall bind
its successors and assigns, whether so expressed or not.
46
Section 8.7. Separability.
------------
In case any provision in this Agreement or in the Warrant Certificates
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 8.8. Persons Having Rights under Agreement.
-------------------------------------
Nothing in this Agreement or in the Warrant Certificates, expressed or
implied, is intended, or shall be construed, to give any Person, other than the
parties hereto and their successors hereunder, and the Holders of Warrants, any
benefit, right, remedy or claim under or by reason of this Agreement.
47
IN WITNESS WHEREOF, the Company and the Warrant Agent have caused this
Agreement to be executed by their duly authorized officers as of the date first
set forth above.
AUDIOVOX CORPORATION
By /s/ Charles M. Stoehr
---------------------
Name: Charles M. Stoehr
Title: SVP, CFO
Witness:
Dated: May 4, 1995
-----------
By: /s/ Patricia Fandozzi
---------------------
Name: Patricia Fandozzi
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By /s/ William F. Seegraber
------------------------
Name: William F. Seegraber
Title: Vice President
Witness:
Dated: May 10, 1995
------------
By: /s/ Thomas Jennings
-------------------
Name: Thomas Jennings
48