Document:

Exhibit 10.2

 

THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE ‘RESTRICTED
SECURITIES’ AS THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED
TO THE SATISFACTION OF THE COMPANY THROUGH REASONABLE MEANS AS DETERMINED BY
THE COMPANY, INCLUDING AN OPINION OF SELLER’S COUNSEL REASONABLY ACCEPTABLE TO
THE COMPANY.

 

INFOSONICS
CORPORATION

 

COMMON
STOCK PURCHASE WARRANT

 

InfoSonics Corporation, a Maryland corporation (the “Company”)
hereby certifies that, for value received,                                           
(the “Holder”) is entitled to the right and warrant (the “Warrant”) to purchase
all or any part of an aggregate of                             shares(1) of the authorized and unissued
Common Stock of the Company (the “Warrant Shares”) subject to adjustment as
provided in this Agreement, pursuant to the terms and conditions set forth in
this Agreement.  Capitalized terms not
defined herein shall have the meanings given them in that certain Securities
Purchase Agreement dated as of January 30, 2006 by and between the Holder
and the Company (the “Securities Purchase Agreement”).

 

1.                                       Warrant Price.  At any
time when shares are to be purchased pursuant to this Agreement, the exercise
price for each Warrant Share shall be equal to $18.38 (the “Warrant Price”),
subject to adjustment as provided in this Agreement.

 

2.                                       Exercise Period.  The
period for the exercise of the Warrant (the “Exercise Period”) shall commence
on August 2, 2006 and shall terminate at 5:00 p.m., Denver, Colorado time
on February 2, 2010, unless terminated earlier as provided herein.

 

3.                                       Exercise of Warrant.

 

(a)                                  The Warrant may be exercised in whole or in
part by delivering to the President of the Company at the address of the
Company’s principal office a Notice and Agreement of Exercise of Warrant,
substantially in the form attached hereto as Exhibit A, specifying
the number of Warrant Shares with respect to which the Warrant is exercised,
and either:

 

(i)                                                       full payment of an amount equal to the
Warrant Price multiplied by the number of Warrant Shares then being purchased
(such aggregate amount of money, the “Purchase Price”).  Payment shall be made by cleared funds.  The Warrant may not be exercised in part
unless the purchase price for the Warrant Shares purchased is at least $1,000
or unless the entire remaining portion of the Warrant is being exercised; or

 

(1)  30% warrant coverage.

 

1

 

(ii)                                                    notwithstanding any provisions herein to the
contrary, if during the Exercise Period (a) the fair market value of one
share of the Common Stock is greater than the Warrant Price (at the date of calculation
as set forth below), and (b) there is no effective registration statement
on file with the Securities Exchange Commission registering the resale of the
Warrant Shares available for use by Holder, then in lieu of exercising this
Warrant by payment of cash or by check, the Holder may elect to receive shares
equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Notice and Agreement of
Exercise of Warrant in which event the Company shall issue to the Holder a
number of shares of Common Stock computed using the following formula:

 

X = Y (A-B)

A

 

	
   

  	
  Where:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  X

  	
  =

  	
   

  	
  the number of shares of
  Common Stock to be issued to the Holder

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Y

  	
  =

  	
   

  	
  the number of shares of
  Common Stock purchasable under this Warrant or, if only a portion of this
  Warrant is being exercised, the portion of this Warrant being canceled (at
  the date of such calculation)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  A

  	
  =

  	
   

  	
  the average VWAP per
  share for the five Trading Days immediately preceding the date of such
  election; and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  B

  	
  =

  	
   

  	
  the Exercise Price (as
  adjusted to the date of such calculation)

  

 

For purposes of this Section 3(a) and
Section 9(b), “VWAP” means, for the Common Stock for any date or period of
days, the dollar volume-weighted average price for such security on the
American Stock Exchange (the “AMEX”), during the AMEX official trading period
for each such day, as reported by Bloomberg Financial Markets (“Bloomberg”)
through its “Volume at Price” functions, or, if the foregoing does not apply,
the dollar volume-weighted average price of such security in the
over-the-counter market on the electronic bulletin board for such security
during the official trading period for the electronic bulletin board for each
such day, as reported by Bloomberg, or if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours, the average of
the highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC.  If the VWAP cannot be calculated
for a security on a particular date on any of the foregoing bases, the VWAP of
such security on such date shall be the fair market value as determined by the
Company in good faith.  All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.

 

For any period of time, the
average VWAP of a security shall be calculated by (i) multiplying the
price of each trade during that period by the number of shares traded in that
trade, (ii) adding together the totals for each such trade, and (iii) dividing
the sum of all these totals by the aggregate number of shares traded in all the
trades.

 

2

 

(b)                                 Promptly upon receipt of the Notice and
Agreement of Exercise of Warrant together with the full payment of the Purchase
Price or pursuant to a cashless exercise described in 4(a) above, the
Company shall (i) deliver to the Holder a properly executed certificate or
certificates representing the Warrant Shares being purchased; or (ii) upon
request of the Holder, use its best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.  This Warrant is exercisable, either in its
entirety or, from time to time, for a portion of the number of Warrant
Shares.  Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue, or cause to
be issued, at its expense, a new warrant certificate evidencing the right of
Holder to purchase the remaining number of Warrants.

 

4.                                       Limitation on Exercise.  Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such
exercise (or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the Holder’s
for purposes of Section 13(d) of the Exchange Act, does not exceed
4.99% (the “Maximum Percentage”) of the total number of issued and outstanding
shares of Common Stock (including for such purpose the shares of Common Stock
issuable upon such exercise).  For such
purposes, beneficial ownership shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder.  Each delivery of a Notice
and Agreement of Exercise of Warrant hereunder will constitute a representation
by the Holder that it has evaluated the limitation set forth in this Section 4
and determined that issuance of the full number of shares of Common Stock
requested in such Notice and Agreement of Exercise of Warrant is permitted
under this Section 4.  The Company’s obligation to issue shares of Common Stock
in excess of the limitation referred to in this Section shall be suspended
(and shall not terminate or expire notwithstanding any contrary provisions
hereof) until such time, if any, as such shares of Common Stock may be issued
in compliance with such limitation, but in no event later than the termination
of the Exercise Period.  The Company
shall have no liability to Holder as a result of the Company’s reliance on
and/or compliance with either (i) a Notice and Agreement of Exercise of
Warrant delivered to the Company by Holder, or (ii) a notice from the
Company to the Holder that Holder may, or a request that Holder undertake to,
issue shares of its common stock to Holder or an Affiliate of Holder. By
written notice to the Company, the Holder may waive the provisions of this Section or
increase or decrease the Maximum Percentage to any other percentage specified
in such notice, but (i) any such waiver or increase will not be effective
until the 61st day after such notice is delivered to the Company, and (ii) any
such waiver or increase or decrease will apply only to the Holder and not to
any other holder of Warrants.

 

5.                                       Withholding Taxes.  The
Company may take such steps as it deems necessary or appropriate for the
withholding of any taxes which the Company is required by any law or regulation
or any governmental authority, whether federal, state or local, domestic or
foreign, to withhold in connection with the Warrant including, but not limited
to, the withholding of all or any portion of any payment owed by the Company to
the Holder or the withholding of issuance of Warrant Shares to be issued upon
the exercise of the Warrant.

 

6.                                       Securities Laws Requirements.  The
issuance of the Warrant has not been registered under the Securities Act of
1933, as amended (the “1933 Act”), in reliance upon an exemption from
registration.

 

7.                                       Restrictions on Transfer. 
There are substantial restrictions on the transferability of the Warrant
and the Warrant Shares.  The Warrant is
not transferable except to (a) direct members of Holder’s immediate
family; or (b) a trust or other entity owned or controlled by, or for the
benefit of, only Holder and/or members of Holder’s immediate family.  The Warrant Shares cannot otherwise be

 

3

 

transferred,
pledged, hypothecated, sold or otherwise disposed of unless they are registered
under the 1933 Act or an exemption from such registration is available and
established to the satisfaction of the Company; except as set forth in the
Securities Purchase Agreement, investors in the Company have no rights to
require that the Warrant Shares be registered; there is no right of presentment
of the Warrant Shares and there is no obligation by the Company to repurchase
any of the Warrant Shares; and, accordingly, Holder may have to hold the
Warrant Shares indefinitely and it may not be possible for Holder to liquidate
Holder’s investment in the Company.  Each
certificate issued representing the Warrant Shares shall be imprinted with a
legend that sets forth a description of the restrictions on transferability of
those securities, which legend will read substantially as follows:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND ARE ‘RESTRICTED
SECURITIES’ AS THAT TERM IS DEFINED IN RULE 144 UNDER THE 1933 ACT.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED
TO THE SATISFACTION OF THE COMPANY THROUGH REASONABLE MEANS AS DETERMINED BY
THE COMPANY, INCLUDING AN OPINION OF SELLER’S COUNSEL REASONABLY ACCEPTABLE TO
THE COMPANY.”

 

Except as provided in the Securities Purchase
Agreement, the restrictions described above, or notice thereof, may be placed
on the certificates representing the Warrant Shares purchased pursuant to the
Warrant, and the Company may refuse to issue the certificates or to transfer
the shares on its books unless it is satisfied that no violation of such
restrictions will occur.

 

8.                                       Redemption by Company.

 

(a)                                  Right of Redemption. 
Notwithstanding any other provision of this Agreement, the Company may repurchase, out of any funds legally
available therefor, any Warrants during the Exercise Period that have not been
exercised by Holder in the event that the closing market price of the Company’s
common stock as reported by Bloomberg equals or exceeds 150 percent of the
Warrant Price for any 20 out of 30 consecutive trading days.

 

(b)                                 Redemption Price.  The
redemption price per Warrant to be paid by the Company to the Holder pursuant
to Section 8(a) above shall be $0.2 (the “Redemption Price”).

 

(c)                                  Mechanics of Redemption.  At
least 30 but no more than 60 days prior to the date fixed by the Company for
any redemption of Warrants (the “Redemption Closing Date”), written notice
shall be mailed by the Company, postage prepaid, to each Holder of record (at
the close of business on the business day next preceding the day on which
notice is given) of the Warrants to be redeemed, at the address last shown on
the records of the Company for such Holder or given by the Holder to the
Company for the purpose of notice or, if no such address appears or is given,
at the place where the principal executive office of the Company is located,
notifying such Holder of the redemption to be

 

4

 

effected,
specifying the subsection hereof under which such redemption is being
effected, the Redemption Closing Date, the Redemption Price, the number of such
Holder’s Warrants to be redeemed, the place at which payment may be obtained
and the date on which such Holder’s Exercise Period (as set forth in Section 2)
as to such Warrants terminate (which date shall in no event be earlier than
three (3) days’ prior to the Redemption Closing Date) and calling upon
such Holder to surrender to the Company, in the manner and at the place
designated, the certificate or certificates representing the Warrants to be
redeemed (the “Redemption Notice”).  The
Holder may exercise any portion of this Warrant at any time following receipt
of a Redemption Notice and prior to the Redemption Closing Date.

 

(d)                                 Surrender of Certificates.  With
respect to a designated Redemption Closing Date, each Holder of Warrants to be
redeemed shall (unless such Holder has previously exercised his right to
exercise the Warrants into Common Stock as provided in Section 3 above)
surrender the certificate(s) representing the Warrants to be redeemed to the
Company, in the manner and at the place designated in the Redemption Notice,
and thereupon the Redemption Price for the Warrants shall be payable to the
order of the person whose name appears on such certificate(s) as the owner
thereof, and each surrendered certificate shall be canceled and retired.  If less than all of the Warrants represented
by such certificate are redeemed, then the Company shall promptly issue a new
certificate representing the unredeemed Warrants.

 

(e)                                  Effect of Redemption.  If
the Redemption Notice shall have been duly given, and if on the Redemption
Closing Date the certificates evidencing any of the Warrants so called for
redemption have not been surrendered pursuant to the provisions of Section 8(d) above,
then notwithstanding that the certificates evidencing any of the Warrants so
called for redemption shall not have been surrendered, all exercise rights with
respect to such Warrants shall be cancelled on the Company’s records after the
Redemption Closing Date, such Warrants shall not thereafter be transferred on
the Company’s books and all rights of the Holders of such Warrants with respect
to such Warrants shall terminate after the Redemption Closing Date, except only
the right of the Holders to receive the Redemption Price without interest upon
surrender of their certificate(s).

 

(f)                                    Other Conditions of Redemption. 
Notwithstanding the foregoing, the Company shall not have the right to
redeem the Warrants pursuant to this Section 8 unless the following
conditions are met:

 

(i)                                     there is an effective registration statement
on file with the Securities Exchange Commission registering the sale or other
transfer of the Warrant Shares by Holder that is available for use by Holder;
and

 

(ii)                                  the Warrant Shares have been approved for listing
on AMEX.

 

9.                                       Adjustments

 

(a)                                  Stock Dividends and Splits.  If
the Company, at any time while this Warrant is outstanding, (i) pays a
stock dividend on its Common Stock or otherwise makes a distribution on any
class of capital stock that is payable in shares of Common Stock, (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, or (iii) combines
outstanding shares of Common Stock into a smaller number of shares, then in
each such case the Exercise Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of
this paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of
this paragraph shall become effective immediately after the effective date of
such subdivision or combination.

 

5

 

(b)                                 Distributions Made Prior to Exercise.  If
the Company, at any time while this Warrant is outstanding, distributes to
holders of Common Stock (i) evidences of its indebtedness, (ii) any
security (other than a distribution of Common Stock covered by Section 9(a)),
(iii) rights or warrants to subscribe for or purchase any security, or (iv) any
other asset (in each case, a “Distribution”), then in each such case any
Warrant Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of Common Stock entitled to
receive the Distribution shall be reduced, effective as of the close of
business on such record date, to a price determined by multiplying such Warrant
Price by a fraction of which (i) the numerator shall be the VWAP (see
definition in Section 3(a) above) on the Trading Day immediately
preceding such record date minus the value of the Distribution (as determined
in good faith by the Company’s Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator shall be the VWAP on the Trading
Day immediately preceding such record date.

 

(c)                                  Fundamental Transactions.  If,
at any time while this Warrant is outstanding, (i) the Company effects any
merger or consolidation of the Company with or into (whether or not the Company
is the surviving corporation) another Person, (ii) the Company effects any
sale, assignment, transfer, conveyance or other disposition of all or
substantially all of its assets in one or a series of related transactions;
provided, however, that for avoidance of doubt, the granting of a lien on all
or substantially all of the Company’s assets as collateral shall not be deemed
a Fundamental Transaction hereunder, (iii) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
the 50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person
whereby such other Person acquires more than the 50% of the outstanding shares
of Common Stock (not including any shares of Common Stock held by the other
Person or other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock purchase agreement or other
business combination), or (v) the Company effects any reclassification of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property (other than as a result of a subdivision or combination of shares of
Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental
Transaction”), then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the same amount and kind of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon
exercise in full of this Warrant (the “Alternate Consideration”).  The aggregate Warrant Price for this Warrant
will not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Warrant Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  At the Holder’s
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof.  The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

6

 

10.                                 Common Stock to be Received upon Exercise. 
Holder understands that (a) the Company is under no obligation to
register the issuance of the Warrant Shares, (b) the Company’s obligation
to register the resale of the Warrant Shares under the 1933 Act is as set forth
in Section 6 of the Securities Purchase Agreement, and (c) in the
absence of any such registration, the Warrant Shares cannot be sold unless they
are sold pursuant to an exemption from registration under the 1933 Act.  Holder also understands that with respect to Rule 144,
routine sales of securities made in reliance upon such Rule can be made
only in limited amounts in accordance with the terms and conditions of the
Rule, and that in cases in which the Rule is inapplicable, compliance with
either Regulation A or another exemption under the 1933 Act will be
required.  Thus, the Warrant Shares will
have to be held indefinitely in the absence of registration under the 1933 Act
or an exemption from registration.

 

11.                                 Privilege of Ownership. 
Holder shall not have any of the rights of a stockholder with respect to
the shares covered by the Warrant except to the extent that one or more
certificates for such shares shall be delivered to him or her upon exercise of
the Warrant.

 

12.                                 Notices.  All notices, requests,
demands, directions and other communications (“Notices”) concerning this
Agreement shall be in writing and shall be mailed or delivered personally or
sent by telecopier or facsimile to the applicable party at the address of such
party set forth below in this Section 12. 
When mailed, each such Notice shall be sent by first class, certified
mail, return receipt requested, enclosed in a postage prepaid wrapper, and
shall be effective on the fifth business day after it has been deposited in the
mail.  When delivered personally, each
such Notice shall be effective when delivered to the address for the respective
party set forth in this Section 12, provided that it is delivered on a
business day and further provided that it is delivered prior to 5:00 p.m.,
local time of the party to whom the Notice is being delivered, on that business
day; otherwise, each such Notice shall be effective on the first business day occurring
after the Notice is delivered.  When sent
by telecopier or facsimile, each such Notice shall be effective on the day on
which it is sent provided that it is sent on a business day and further
provided that it is sent prior to 5:00 p.m., local time of the party to
whom the Notice is being sent, on that business day; otherwise, each such
Notice shall be effective on the first business day occurring after the Notice
is sent.  Each such Notice shall be
addressed to the party to be notified as shown below:

 

	
   

  	
  (a)

  	
  if to the Company:

  	
  InfoSonics Corporation

  
	
   

  	
   

  	
   

  	
  5880 Pacific Center
  Drive

  
	
   

  	
   

  	
   

  	
  San Diego, CA 92121

  
	
   

  	
   

  	
   

  	
  Facsimile: (858)
  373-1503

  
	
   

  	
   

  	
   

  	
  Attention: Jeffrey
  Klausner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (b)

  	
  if to the Holder:

  	
  At the address set forth
  on the Securities Purchase Agreement

  

 

Either
party may change its respective address for purposes of this Section 12 by
giving the other party Notice of the new address in the manner set forth above;
however the address set forth on the signature page to the Securities
Purchase Agreement is Holder’s true and correct residence

 

7

 

13.                                 General Provisions.  This
instrument (a) may not be amended nor may any rights hereunder be waived
except by an instrument in writing signed by the party sought to be charged
with such amendment or waiver, (b) shall be construed in accordance with
and governed by the laws of New York, with non-exclusive jurisdictions in the
U.S. federal and New York and California state courts sitting in the Cities of
New York, New York, and of San Diego, California, respectively, and (c) shall
be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and assigns, except as above set
forth.  All pronouns contained herein and
any variations thereof shall be deemed to refer to the masculine, feminine or
neuter, singular or plural as the identity of the parties hereto may require.

 

IN WITNESS WHEREOF, this Agreement is effective on the date set
forth above.

 

	
   

  	
  INFOSONICS CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   Name: Joseph Ram

  
	
   

  	
   

  	
   Title : President
  and Chief Executive Officer

  

 

 

8

 

EXHIBIT A

 

(To
InfoSonics Corporation

Common
Stock Purchase Warrant)

 

INFOSONICS
CORPORATION

 

NOTICE
AND AGREEMENT OF EXERCISE OF COMMON STOCK

PURCHASE WARRANT

 

The undersigned hereby exercises its InfoSonics
Common Stock Purchase Warrant dated as of February 1, 2006 as to                       
shares of the $.001 par value common stock (the “Warrant Shares”) of InfoSonics
Corporation (the “Company”) at a purchase price of $18.38 per share.

 

o                                    Enclosed is payment of the total exercise
price for these Warrant Shares of $                .

 

o                                    The undersigned hereby elects to purchase
shares of Common Stock of the Company pursuant to the terms of the cashless
exercise provisions set forth in Section 4(a)(ii) of the attached
Warrant and shall tender payment of all applicable transfer taxes, if any.

 

(a)                                  Following
this exercise, the Warrant shall be exercisable to purchase a total of                      
Warrant Shares.

 

(b)                                 Notwithstanding anything to the contrary
contained herein, this Notice shall constitute a representation by Holder that,
after giving effect to the exercise provided for in this Notice, the Holder
(together with its affiliates) will not have beneficial ownership (together
with the beneficial ownership of such Person’s affiliates) of a number of
shares of Common Stock which exceeds the Maximum Percentage of the total
outstanding shares of Common Stock as determined pursuant to the provisions of Section 4
of the Warrant.

 

(c)                                  All documents, records books and other
information pertaining to an investment in the Warrant Shares that have been
required by the Holder have been made available or delivered to Holder.

 

Warrant Shares in the amount specified above are to
be issued in the name or names set forth below.

 

	
   

  	
   

  	
   

  
	
   

  	
  Printed Name of Holder

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Printed Name and Title

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  City, State and Zip
  CodeEXHIBIT 10.1

 

CEPHALON,
INC.

2006
MANAGEMENT INCENTIVE COMPENSATION PLAN

 

SECTION 1.  PURPOSE. The purpose of the Cephalon, Inc. Management
Incentive Compensation Plan (the “Plan”) is to provide Participants (as
defined) employed by Cephalon, Inc. (the “Company”) and its affiliates
with incentive compensation based upon the level of achievement of financial
and other performance criteria. The Plan will enhance the ability of the
Company and its affiliates to attract and retain individuals of exceptional
managerial talent upon whom, in large measure, the sustained progress, growth
and profitability of the Company depends.

 

SECTION 2.  DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:

 

(a) “AWARD” means a cash payment.

 

(b) “BOARD” means the Board of Directors of
the Company.

 

(c) “COMMITTEE” means the Stock Option and Compensation
Committee of the Board (or any successor committee).

 

(d) “EXECUTIVE OFFICER” means an executive
officer of the Company as appointed by the Board of Directors or other key
employee.

 

(e) “MEASUREMENT PERIOD” means a period of
time selected by the Committee for which performance will be measured for
purposes of Section 4.

 

(f) “MAXIMUM AWARD” means the limitation on
awards payable under this Plan in any year, which for the Chairman/Chief
Executive Officer is 300% of his annual base salary and for any other
Participant is 110% of the Participant’s annual base salary.

 

(g) “PARTICIPANT”
means any Executive Officer selected by the Committee to participate in the
Plan.

 

(h) “PERFORMANCE
PERIOD” means a period of time selected by the Committee to which an Award
relates.

 

(i) “TARGET AWARD”
means an Award level that may be paid if certain performance criteria are
achieved.

 

(j) “THRESHOLD PERFORMANCE” means a level of
achievement of 85% of target performance for the Chairman/Chief Executive
Officer and 90% of target performance for other Participants.

 

 

SECTION 3.  ELIGIBILITY. Persons employed by the Company or any of its
affiliates during a Performance Period in active service in a managerial or
professional role for all or any part of the Performance Period are eligible to
be Participants under the Plan for such Performance Period (whether or not so
employed or living at the date an Award is made) and may be considered by the
Committee for an Award. An employee is not rendered ineligible to be a
Participant by reason of being a member of the Board.

 

SECTION 4.  AWARDS-GENERAL.

 

(a) Target Awards.  The Committee will establish the Target
Awards for Participants at the beginning of each Performance Period. For the Chairman/Chief
Executive Officer, the Target Award shall be 100% of annual base salary; for Participants
other than the Chairman/Chief Executive Officer, the Target Award shall be 50%
of annual base salary.

 

(b) Performance Criteria; Award
Levels.  The performance criteria
utilized by the Committee for the Chairman/Chief Executive Officer may be based
on individual performance, revenue, earnings per share, other Company and
business unit financial objectives, operational efficiency measures, and other
measurable objectives tied to the Company’s success or such other criteria as
the Committee shall determine in its discretion. The Committee shall each year also
determine specific levels of achievement of the established performance
criteria that correspond to Threshold Performance, Target Award and Maximum Award.  Performance criteria for Participants (other
than Chairman/Chief Executive Officer) will be established by management.  For the Performance Period fiscal year 2006, the
performance criteria for the Chairman/Chief Executive Officer and the other Participants,
and the relationship between achievement of such performance criteria and respective
Award levels, are set out in the Schedules 1 and 2, respectively, to the Plan.

 

(c) Awards.  Awards will be made by the Committee
following the end of each Performance Period. Awards shall be paid after the
end of the Performance Period, except to the extent that a Participant has made
an election to defer the receipt of such Award pursuant to the Company’s
deferred compensation plan. The Award amount determined in accordance with Schedule 2
may be increased or decreased by the Committee, provided, however, than any
Award may not exceed the applicable Maximum Award amount.

 

SECTION 5.  OTHER CONDITIONS.

 

(a) No person shall have any claim to an
Award under the Plan and there is no obligation for uniformity of treatment of
Participants under the Plan. Awards under the Plan may not be assigned or
alienated.

 

(b) Neither the Plan nor any action
taken hereunder shall be construed as giving to any Participant the right to be
retained in the employ of the Company or any affiliate.

 

 

(c) The Company or any affiliate shall
have the right to deduct from any Award to be paid under the Plan any federal,
state or local taxes required by law to be withheld with respect to such
payment.

 

(d) Awards under the Plan will not be
included in base compensation or covered compensation under the retirement
programs of the company for purposes of determining pensions, retirement and
death related benefits.

 

SECTION 6.  DESIGNATION OF BENEFICIARIES. A Participant may, if the
Committee permits, designate a beneficiary or beneficiaries to receive all or
part of the Award which may be made to the Participant, or may be payable,
after such Participant’s death. A designation of beneficiary shall be made in
accordance with procedures specified by the Company and may be replaced by a
new designation or may be revoked by the Participant at any time. In case of
the Participant’s death, an Award with respect to which a designation of
beneficiary has been made (to the extent it is valid and enforceable under
applicable law) shall be paid to the designated beneficiary or beneficiaries.
Any Award granted or payable to a Participant who is deceased and not subject
to such a designation shall be distributed to the Participant’s estate. If
there shall be any question as to the legal right of any beneficiary to receive
an Award under the Plan, the amount in question may be paid to the estate of
the Participant, in which event the Company or its affiliates shall have no
further liability to anyone with respect to such amount.

 

SECTION 7.
PLAN ADMINISTRATION.

 

(a) The Committee shall have full
discretionary power to administer and interpret the Plan and to establish rules for
its administration (including the power to delegate authority to others to act
for and on behalf of the Committee) subject to such resolutions, not
inconsistent with the Plan, as may be adopted by the Board. In making any
determinations under or referred to in the Plan, the Committee (and its
delegates, if any) shall be entitled to rely on opinions, reports, analysis or
statements of employees of the Company and its affiliates and of counsel,
public accountants and other professional or expert persons.

 

(b) The Plan shall be governed by the
laws of the State of Delaware and applicable Federal law.

 

SECTION 8.  MODIFICATION OR TERMINATION OF PLAN. The Board may modify or
terminate the Plan at any time, effective at such date as the Board may
determine.

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