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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 11, 2004
AUDIOVOX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-28839 13-1964841
(State or other jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification
Number)
150 Marcus Boulevard, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 231-7750
NONE
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
On June 14, 2004 Audiovox Corporation (the "Company") announced that its
majority owned subsidiary, Audiovox Communications Corp. ("ACC") had entered
into a definitive agreement to sell selected assets and liabilities to
UTStarcom, Inc. (the "Asset Purchase Agreement"). Annexed to the Asset Purchase
Agreement as Exhibits were forms of, among other documents, an Escrow Agreement,
a Transition Services Agreement and a Trademark License Agreement, all of which
are attached as an exhibit to this report (the "Agreements"). At the closing of
the Asset Purchase Agreement, Seller and Purchaser shall enter into the
Agreements substantially in the form attached hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
Exhibit 99.1Form of Escrow Agreement
Exhibit 99.2Form of Transition Services Agreement
Exhibit 99.3Form of Trademark License Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AUDIOVOX CORPORATION
Dated: August 10, 2004 By: /s/ Charles M. Stoehr
---------------------------------
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
EXHIBIT 2.08
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of June __, 2004 (this "Agreement"), among
AUDIOVOX COMMUNICATIONS CORP., a Delaware corporation ("ACC") and UTSTARCOM,
INC., a Delaware corporation (the "Purchaser"), and JPMorgan Chase Bank, a New
York banking corporation, in its capacity as escrow agent hereunder (the "Escrow
Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Purchaser, its wholly owned subsidiary UTStarcom Canada
Company, a Nova Scotia company, ACC, Quintex Mobile Communications Corporation,
a Delaware corporation and a wholly owned subsidiary of ACC ("Quintex"),
Audiovox Communications Canada Co., a Nova Scotia company ("ACCC"; and, together
with ACC and Quintex, collectively, the "Seller"), and, for certain sections
only, Audiovox Corporation, a Delaware corporation ("Audiovox"), have entered
into an Asset Purchase Agreement, dated as of June __, 2004 (the "Purchase
Agreement"; terms defined in the Purchase Agreement and not otherwise defined
herein are used herein as therein defined), pursuant to which, among other
things, the Purchaser has agreed to purchase from the Seller, and the Seller has
agreed to sell to the Purchaser, the Purchased Assets;
WHEREAS, it is contemplated under Section 2.08 of the Purchase Agreement
that the Purchaser shall deposit or cause to be deposited into escrow the sum of
$[____________] in cash at the Closing (the "Escrow Amount") to be held and
disbursed by the Escrow Agent in accordance with Sections 4 and 5 of this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein and in the Purchase Agreement, and intending to be legally
bound hereby, the parties hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. The Purchaser and ACC hereby
appoint the Escrow Agent to serve as, and the Escrow Agent hereby agrees to act
as, escrow agent upon the terms and conditions of this Agreement.
2. Establishment of the Escrow Fund. (a) Pursuant to Section 2.08 of the
Purchase Agreement, the Purchaser shall deliver to the Escrow Agent on the date
hereof the Escrow Amount. The Purchaser shall deposit the Escrow Amount in
Account No. 507953312 at 4 New York Plaza, NY, NY 10004, ABA No. 021000021, FFC:
10207868 Audiovox/UTStar Attn: Vicky Caldas (the "Escrow Account"). The Escrow
Agent shall hold the Escrow Amount and all interest and other amounts earned
thereon (the "Escrow Fund") in escrow pursuant to this Agreement, in the Escrow
Account.
(b) Each of the Purchaser and ACC confirms to the Escrow Agent and to each
other that the Escrow Fund is free and clear of all Encumbrances except as may
be created by this Agreement and the Purchase Agreement.
Exhibit 99.1
3. Purpose of the Escrow Fund. The Escrow Agent shall hold the Escrow
Amount to secure (i) the indemnification obligations of the Seller and Audiovox
contained in Article VIII of the Purchase Agreement and (ii) the obligations of
the Seller pursuant to Sections 2.07(c)(i) and (ii) of the Purchase Agreement
regarding any payment of a downward adjustment of the Purchase Price (each a
"Purchase Price Adjustment Amount") as determined in accordance with Section
2.07(c) of the Purchase Agreement.
4. Payments from the Escrow Fund; Indemnification. (a) If, at any time on
or prior to the date that is five (5) Business Days after the Closing Statement
of Net Assets and the Closing Statement of Inventories are determined finally in
accordance with Section 2.07(c) of the Purchase Agreement (the "Expiration
Date"), the Purchaser shall deliver to the Escrow Agent and to ACC a certificate
of the Purchaser, executed by an authorized officer of the Purchaser (a
"Purchaser's Certificate"), which Purchaser's Certificate shall:
(i) state that the Purchaser has paid or incurred a Loss and is
entitled to indemnification under Article VIII of the Purchase Agreement
(an "Indemnification Item");
(ii) state the aggregate amount of each such Indemnification Items;
and
(iii) specify in reasonable detail the nature and amount of each
individual Indemnification Item.
(b) If ACC shall object to any amount claimed in connection with any
Indemnification Item specified in any Purchaser's Certificate, ACC shall, within
15 Business Days after receipt of such Purchaser's Certificate, deliver to the
Escrow Agent and the Purchaser a certificate of ACC, executed by an authorized
officer of ACC (a "ACC's Certificate"), (i) specifying each such amount to which
ACC objects and (ii) specifying in reasonable detail the nature and basis for
each such objection. If the Escrow Agent shall not have received an ACC's
Certificate objecting to the amount claimed with respect to an Indemnification
Item within 15 Business Days after delivery to ACC of a Purchaser's Certificate
specifying such Indemnification Item, ACC shall be deemed to have acknowledged
the correctness of the amount claimed on such Purchaser's Certificate with
respect to such Indemnification Item, and the Escrow Agent shall promptly
thereafter transfer to the Purchaser, by wire transfer in immediately available
funds, out of the Escrow Account an amount in cash equal to the amount claimed
in the Purchaser's Certificate with respect to such Indemnification Item.
(c) If the Escrow Agent shall receive, within 15 Business Days after
delivery to ACC of a Purchaser's Certificate, an ACC's Certificate objecting to
the amount claimed with respect to any Indemnification Item specified in such
Purchaser's Certificate, the amount so objected to shall be held by the Escrow
Agent and shall not be released from the Escrow Account except in accordance
with either (i) written instructions executed by an authorized officer of each
of the Purchaser and ACC or (ii) the final and binding award of the arbitrator
conducting an arbitration of the matter relating to the claim in accordance with
Section 10.09 of the Purchase Agreement, promptly after which time the Escrow
Agent shall transfer to the Purchaser, by wire transfer in immediately available
funds, out of the Escrow Account, an amount in cash equal to the portion of such
amount set forth in such joint written instructions or in such judgment, as the
case may be.
(d) Notwithstanding the limitations set forth in Section 4(a), following
the Expiration Date, the Purchaser shall be entitled to assert claims against
the Escrow Fund under this Section 4 in respect of all Losses that were included
in determining the Reserved Amount (as defined below).
(e) On the Expiration Date, the Escrow Agent shall transfer to the Seller,
by wire transfer in immediately available funds, an amount in cash equal to the
then remaining balance of the Escrow Fund less the sum of (the "Reserved
Amount"):
(i) the aggregate of the amounts claimed in all Purchaser's Certificates
delivered to the Escrow Agent prior to the Expiration Date (which claims shall
not have been resolved on or prior to the Expiration Date); and
(ii) the aggregate of the estimated total Losses incurred or anticipated to
be incurred by the Purchaser that could reasonably be expected to give rise to a
right of indemnification under Article VIII of the Purchase Agreement, which
shall have been specified in one or more notices (a "Notice of Loss") delivered
to the Seller and the Escrow Agent by the Purchaser pursuant to Section 8.05 of
the Purchase Agreement which notice shall include a reasonably detailed
description of the Losses and which shall not have been resolved (or been
superceded by a Purchaser's Certificate) on or prior to the Expiration Date.
(f) Upon the termination of this Agreement in accordance with Section 10,
the Escrow Agent shall promptly liquidate all investments of the Escrow Fund and
transfer to the Seller, by wire transfer in immediately available funds, the
amount in cash then remaining in the Escrow Fund.
(g) In the event fund transfer instructions are given (other than in
writing at the time of the execution of the Agreement), whether in writing, by
telecopier or otherwise the Escrow Agent is authorized to seek confirmation of
such instructions by telephone call-back to the person or persons designated on
the call-back schedule attached hereto, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in writing
actually received and acknowledged by the Escrow Agent. If the Escrow Agent is
unable to contact any of the authorized representatives identified in the
Call-Back Schedule, the Escrow Agent is hereby authorized to seek confirmation
of such instructions by telephone call-back to any one or more of your executive
officers, ("Executive Officers"), which shall include the title of General
Counsel, as the Escrow Agent may select. Such "Executive Officer" shall deliver
to the Escrow Agent a fully executed Incumbency Certificate, and the Escrow
Agent may rely upon the confirmation of anyone purporting to be any such
officer. The Escrow Agent and the beneficiary's bank in any funds transfer may
rely solely upon any account numbers or similar identifying numbers provided by
the Purchaser or ACC to identify (i) the beneficiary, (ii) the beneficiary's
bank, or (iii) an intermediary bank. The Escrow Agent may apply any of escrowed
funds for any payment order it executes using any such identifying number, even
when its use may result in a person other than the beneficiary being paid, or
the transfer of funds to a bank other than the beneficiary's bank or an
intermediary bank designated. The parties to this Agreement acknowledge that
such security procedure is commercially reasonable.
5. Payments from the Escrow Fund; Purchase Price Adjustment. If, at any
time on or prior to the Expiration Date, the Purchaser shall, pursuant to
Section 2.07(c)(i) or Section 2.07(c)(ii) of the Purchase Agreement, deliver to
the Escrow Agent a written notice certified by an officer of the Purchaser and
specifying the Purchase Price Adjustment Amount, the Escrow Agent shall, within
three Business Days of its receipt of such notice, transfer to the Purchaser by
wire transfer in immediately available funds, out of the Escrow Account, an
amount in cash equal to the Purchase Price Adjustment Amount.
6. Maintenance of the Escrow Fund; Termination of the Escrow Fund. (a) The
Escrow Agent shall continue to maintain the Escrow Fund until the earlier of (i)
the time at which there shall be no funds in such Escrow Fund and (ii) the
termination of this Agreement.
(b) Notwithstanding any other provision of this Agreement to the contrary,
at any time prior to the termination of the Escrow Fund, the Escrow Agent shall,
if so instructed in a joint writing signed by the Purchaser and ACC, pay from
the Escrow Fund, as instructed, to the Seller or the Purchaser, as directed in
such writing, the amount of cash so instructed (and if such cash is not
available, shall liquidate such investments of the relevant Escrow Fund as are
necessary to make such payment).
7. Investment of the Escrow Fund. (a) The Escrow Agent shall invest and
reinvest moneys on deposit in the Escrow Fund in the Money Market Account with
the JPMorgan Chase Bank.
(b) The Escrow Agent shall have the power to sell or liquidate the
foregoing investments whenever the Escrow Agent shall be required to distribute
the Escrow Fund pursuant to the terms of this Agreement or as otherwise
contemplated in this Agreement.
8. Interest on the Escrow Fund. (a) Notwithstanding anything herein to the
contrary, all amounts paid by the Escrow Agent out of the Escrow Fund in
accordance with this Agreement shall include, on a pro rata basis, the interest
earned on the portion of the Escrow Amount relating to such amount paid.
(b) For Tax purposes, all income earned on or with respect to the
investment of the Escrow Fund shall be allocable between the Purchaser and ACC
in accordance with the payment of interest pursuant to this Section 8.
9. Assignment of Rights to the Escrow Fund; Assignment of Obligations;
Successors. Each of the Purchaser and ACC may assign, transfer, pledge or
otherwise dispose of its rights to any portion of the Escrow Fund. Except as
provided in the immediately preceding sentence, this Agreement may not be
assigned by operation of Law or otherwise without the express written consent of
the other parties hereto (which consent may be granted or withheld in the sole
discretion of such other parties); provided, however, that each of the Purchaser
and ACC may assign this Agreement to its Affiliate without the consent of the
other parties. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their permitted assigns.
10. Escrow Agent. (a) Except as expressly contemplated by this Agreement or
by joint written instructions from the Purchaser and ACC, the Escrow Agent shall
not sell, transfer or otherwise dispose of in any manner all or any portion of
the Escrow Fund, except pursuant to an order of a court of competent
jurisdiction.
(b) The duties and obligations of the Escrow Agent shall be determined
solely by this Agreement, and the Escrow Agent shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Agreement.
(c) In the performance of its duties hereunder, the Escrow Agent shall be
entitled to rely upon any document, instrument or signature believed by it in
good faith to be genuine and signed by any party hereto or an authorized officer
or agent thereof, and shall not be required to investigate the truth or accuracy
of any statement contained in any such document or instrument. The Escrow Agent
may assume that any person purporting to give any notice in accordance with the
provisions of this Agreement has been duly authorized to do so.
(d) The Escrow Agent shall not be liable for any error of judgment, or any
action taken, suffered or omitted to be taken, hereunder except in the case of
its gross negligence, bad faith or willful misconduct. The Escrow Agent may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the collection or protection
of the Escrow Fund or income thereon, nor as to the preservation of any rights
pertaining thereto, beyond the safe custody of any such funds actually in its
possession.
(f) As compensation for its services to be rendered under this Agreement,
for each year or any portion thereof, the Escrow Agent shall receive a fee in
the amount specified in Schedule A to this Agreement and shall be reimbursed
upon request for all expenses, disbursements and advances, including reasonable
fees of outside counsel, if any, incurred or made by it in connection with the
preparation of this Agreement and the carrying out of its duties under this
Agreement. ACC and the Purchaser shall each pay 50% of all such fees and
expenses, including any fees, costs and expenses, associated with liquidating
investments in anticipation of a transfer contemplated in Section 4(e) or
Section 4(f) hereof.
(g) ACC and the Purchaser shall jointly and severally reimburse and
indemnify the Escrow Agent for, and hold it harmless against, any loss,
liability or expense, including, without limitation, reasonable attorneys' fees,
incurred without gross negligence, bad faith or willful misconduct on the part
of the Escrow Agent arising out of, or in connection with the acceptance of, or
the performance of, its duties and obligations under this Agreement.
(h) Anything in this agreement to the contrary notwithstanding, in no event
shall the Escrow Agent be liable for special, indirect or consequential damage
of any kind whatsoever (including but not limited to lost profits), even if the
Escrow Agent has been advised of the likelihood for such loss or damage and
regardless of the form of action.
(i) The Escrow Agent may at any time resign by giving 20 Business Days'
prior written notice of resignation to ACC and the Purchaser. ACC and the
Purchaser may at any time jointly remove the Escrow Agent by giving ten Business
Days' written notice signed by each of them to the Escrow Agent. If the Escrow
Agent shall resign or be removed, a successor Escrow Agent, which shall be a
bank or trust company having its principal executive offices in [state location]
and assets in excess of $[2 billion], and which shall be reasonably acceptable
to ACC, shall be appointed by the Purchaser by written instrument executed by
ACC and the Purchaser and delivered to the Escrow Agent and to such successor
Escrow Agent and, thereupon, the resignation or removal of the predecessor
Escrow Agent shall become effective and such successor Escrow Agent, without any
further act, deed or conveyance, shall become vested with all right, title and
interest to all cash and property held hereunder of such predecessor Escrow
Agent, and such predecessor Escrow Agent shall, on the written request of ACC,
the Purchaser or the successor Escrow Agent, execute and deliver to such
successor Escrow Agent all the right, title and interest hereunder in and to the
Escrow Fund of such predecessor Escrow Agent and all other rights hereunder of
such predecessor Escrow Agent. If no successor Escrow Agent shall have been
appointed within 20 Business Days of a notice of resignation by the Escrow
Agent, the Escrow Agent's sole responsibility shall thereafter be to hold the
Escrow Fund until the earlier of receipt of designation of a successor Escrow
Agent, a joint written instruction by ACC and the Purchaser and termination of
this Agreement in accordance with its terms.
(j) Any corporation into which the Escrow Agent in its individual capacity
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Escrow Agent in its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be transferred, shall be the Escrow Agent under this
Escrow Agreement without further act.
11. Termination. This Escrow Agreement shall terminate on the earlier of:
(a) the date on which there are no funds remaining in the Escrow Fund and (b)
the Expiration Date, unless on such date claims made in Purchaser's Certificates
or Notices of Loss delivered to the Escrow Agent and the Seller prior to such
date have not been resolved and any amounts owing therein paid from the Escrow
Fund, in which case, the date under this clause (b) shall be [10] Business Days
following the date after the Expiration Date on which all such claims shall have
been resolved and any amounts owing thereon paid from the Escrow Fund.
12. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
11):
(a) if to ACC:
Audiovox Communications Corp.
555 Wireless Blvd.
Hauppauge, NY 11788
Attention: Philip Christopher
with a copy to:
Levy, Stopol & Camelo, LLP
190 EAB Plaza
East Tower-14th fl.
Uniondale, NY 11556
Attention: Robert S. Levy
(b) if to Audiovox:
Audiovox Corporation
150 Marcus Blvd.
Hauppauge, NY 11788
Attention: Charles M. Stoehr
with a copy to:
Levy, Stopol & Camelo, LLP
190 EAB Plaza
East Tower-14th fl.
Uniondale, NY 11556
Attention: Robert S. Levy
(c) if to the Purchaser:
UTStarcom Inc.
1275 Harbor Bay Parkway
Alameda, CA 94502
USA
Telecopy: (510) 864-8802
Attention: General Counsel
with a copy to:
Shearman & Sterling LLP
1080 Marsh Road
Menlo Park, CA 94025
USA
Telecopy: (650) 838-3699
Attention: Carmen Chang, Esq.
(d) if to the Escrow Agent, to:
JPMorgan Chase Bank
4 New York Plaza - 21st Floor
NY, NY 10004
Telecopy: (212) 623-6168
Attention: Vicky Caldas
13. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
executed and to be performed entirely within that State.
14. Amendments. This Agreement may not be amended or modified except (a) by
an instrument in writing signed by, or on behalf of, ACC, the Purchaser and the
Escrow Agent or (b) by a waiver in accordance with Section 15 of this Agreement.
15. Waiver. Any term or condition to this Agreement may be waived, or the
time for the performance of any of the obligations may be extended, at any time
by the party that is entitled to the benefit thereof. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. The failure of any party hereto to assert any of its rights hereunder
shall not constitute a waiver of any of such rights. Except as otherwise set
forth in this Agreement, all rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
16. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
17. No Third Party Beneficiaries. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted assigns
and nothing herein, express or implied, is intended to or shall confer upon any
other person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
18. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto in separate counterparts, each of
which when executed shall be deemed to be an original but all of which when
taken together shall constitute one and the same agreement.
20. TAX Ids. Upon execution of this agreement, each party shall provide the
Escrow Agent with a fully executed W-8 or W-9 Internal Revenue Service form,
which shall include their Tax Identification Number (TIN) as assigned by the
Internal Revenue Service. All interest or other income earned under the Escrow
Agreement shall be allocated and paid as provided herein and reported by the
recipient to the Internal Revenue Service as having been so allocated and paid.
21. Force Majeure. In the event that any party the Escrow Agent is unable
to perform its obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage reasonably beyond its
control, or other cause reasonably beyond its control, the Escrow Agent shall
not be liable for damages to the other parties for any damages resulting from
such failure to perform otherwise from such causes. Performance under this
Agreement shall resume when the Escrow Agent is able to perform substantially.
Remainder of page left blank intentionally
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
AUDIOVOX COMMUNICATIONS CORP.
By
---------------------------------------
Title:
UTSTARCOM, INC.
By
---------------------------------------
Title:
[ESCROW AGENT]
By
---------------------------------------
Title:
SCHEDULE A
(a) $5,000 per annum without pro-ration for partial years. Fees are payable
upon execution of the agreement.
Call-Back
Schedule
Telephone Number(s) for Call-backs and
Person(s) Designated to Confirm Funds Transfer Instructions
If to the Purchaser:
Address:
Wire Instructions:
Name Telephone Number
1. Michael Sophie, Chief Financial Officer (510) 749-1510
2. Russell Boltwood, General Counsel (510) 749-1530
If to ACC:
Address:
Wire Instructions
Name Telephone Number
1.
2.
3.
If to Seller:
Address:
Wire Instructions
Name Telephone Number
1.
2.
3.
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement ("Agreement") is made and entered into
this ___ day of _________, 2004, by and among AUDIOVOX CORPORATION,
("Audiovox"), UTSTARCOM, INC. ("UTStarcom") and UTSTARCOM CANADA COMPANY
("UTStarcom Canada" and, together with UTStarcom, "UTSI").
RECITALS:
(a) Audiovox and UTSI, among other parties, have entered into that certain
Asset Purchase Agreement dated ______________, 2004 (the "Purchase
Agreement") pursuant to which UTSI will purchase the Business (as
defined in the Purchase Agreement) and associated assets of Audiovox
Communications Corp., Quintex Mobile Communications Corporation and
Audiovox Communications Canada Co. (collectively, the "Seller") from
the Seller.
(b) Audiovox has heretofore provided certain administrative, information
technology, display and corporate services to the Seller.
(c) As a condition to its agreement to enter into the Purchase Agreement,
UTSI and Audiovox have agreed that for a limited period of time
following the Closing (as defined in the Purchase Agreement), Audiovox
continue to provide the services set forth on Schedule "A" (the
"Services") to UTSI in a manner consistent with the manner in which
such Services have heretofore been provided by Audiovox to the
Company.
(d) Audiovox is willing to enter into this Agreement and to provide the
Services to UTSI upon the terms and conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing recitals which are
incorporated with and made a part of this Agreement, and in further
consideration of the mutual covenants and agreements herein contained, the
parties agree as follows:
1. Services and Term. Audiovox agrees to provide the Services set forth
on Schedule "A" of this Agreement during the initial term commencing
on the date of the Closing and ending on the six month anniversary of
the date of the Closing (the "Initial Term"). The Initial Term shall
be automatically extended for successive one-month periods (not to
exceed six additional months) (the "Further Term" and, together with
the Initial Term, the "Term"); provided, however, that notwithstanding
any other provision of this Agreement, UTSI may terminate any or all
Services, either in whole or in part, under this Agreement upon
Exhibit 99.2
fifteen (15) business days' written notice. Audiovox may terminate the
Services hereunder effective upon not less than thirty (30) days after
the receipt of written notice of default from Audiovox to UTSI if UTSI
has failed to pay any amounts owing to Audiovox under Section 2 hereof
or if UTSI has failed to pay any amounts finally determined to be
owing to Audiovox under any other agreement between UTSI and Audiovox.
In the event that there is a dispute in any such amounts owing, the
parties shall negotiate in good faith to resolve such dispute as soon
as possible. Upon the termination of any Service pursuant to this
Section 1, Audiovox will have no further obligation to provide the
terminated Service (or any Service, in the case of termination of this
Agreement) and UTSI will remain liable to Audiovox for any amounts
owed to Audiovox under this Agreement prior to the effective date of
such termination; provided, however, that the monthly or weekly
service fee for such terminated Service (or any Service, in the case
of termination of this Agreement) set forth in Schedule B shall be
prorated. The provisions of Sections 4, 5 and 6 of this Agreement
shall not be terminated or affected by the termination of any Service
or this Agreement.
2. Consideration. As consideration for the performance of the Services
hereunder, UTSI shall pay Audiovox the amounts set forth on Schedule
"B". Payments for the Services will be made thirty (30) days from
receipt of invoice. In addition, UTSI shall pay all sales, use or
similar taxes payable with respect to the performance of the Services.
3. Cooperation. Audiovox and UTSI will cooperate with each other in good
faith in the request for, and the provision of, the Services hereunder
so as to minimize the disruption to, or additional record keeping
required by, Audiovox. Subject to applicable Law (as defined in the
Purchase Agreement), each party hereto covenants and agrees to provide
the other party with all information regarding itself and transactions
under this Agreement that the other party reasonably believes are
required to perform its obligations under this Agreement and to comply
with all applicable Law.
4. Standard of Services Provided. The parties hereby acknowledge that the
intent of this Agreement is to enable UTSI to receive the Services on
an interim basis in order to (i) permit UTSI to continue the
uninterrupted operation of the Business, (ii) permit Audiovox to
continue the uninterrupted operation of Audiovox's other businesses
and operations, (iii) assist in an orderly transfer of the Business
from the Seller to UTSI, and (iv) permit UTSI the opportunity to
obtain alternate sources of supply of such services within a
reasonable time after the date hereof. Audiovox shall provide, or
cause to be provided, the Services pursuant to this Agreement with
reasonable skill and care consistent with industry standards.
Notwithstanding the immediately preceding sentence, the standard of
care for the provision of the Services shall be no less than the level
of care, skill and quality as are currently being provided to and by
the Business and have been provided in the preceding twelve (12)
months (the "Service Level"). During the Term, UTSI and Audiovox shall
conduct formal monthly reviews to ensure that the Services are being
provided in accordance with the Service Level and, to the extent that
the Service Level is not being met for a particular Service, the
parties shall negotiate in good faith the amount that the fees (as set
forth in Schedule B) payable in respect of such Service shall be
adjusted downward. During the Term, to the extent permitted by
contract or applicable Law, Audiovox shall assist UTSI in the transfer
of responsibility for, and the knowledge relating to, the Services to
UTSI (including, without limitation, providing UTSI with all necessary
documentation and descriptions of the current process, procedures and
data definition that are required to perform daily operations using
the existing Audiovox system environment (including, without
limitation, JDEdwards, Cell Track, and any other application
systems)), and UTSI shall use all reasonable commercial efforts to
assume the responsibility for the Services as promptly as practicable.
The parties expressly agree that no warranty shall be implied under
this Agreement, whether warranties of utility or fitness for any
particular purpose or of merchantability or of any other type and no
warranties of any sort are made herein.
5. Indemnity.
5.1 Indemnity by UTSI. During the course of, and upon and after
termination of this Agreement for any reason whatsoever, UTSI hereby
agrees to indemnify and hold Audiovox harmless from and against any
loss, liability, damage or expense whatsoever (including court costs
and reasonable attorneys' fees) incident to any claim, action or
proceeding against Audiovox or any director, officer, employee,
subsidiary, or affiliates thereof which arise out of or relate to the
performance of the Services, except acts of gross negligence, willful
misconduct or bad faith of, or the violation of any Law by, any such
persons, or willful breach of any of Audiovox's obligations under this
Agreement.
5.2 Indemnity by Audiovox. During the course of, and upon and after
termination of this Agreement for any reason whatsoever, Audiovox
hereby agrees to indemnify and hold UTSI harmless from and against any
loss, liability, damage or expense whatsoever (including court costs
and reasonable attorneys' fees) incident to any claim, action or
proceeding against UTSI or any director, officer, employee,
subsidiary, or affiliates thereof which arise out of or relate to the
performance of the Services, and which constitute acts of gross
negligence, willful misconduct or bad faith of, or the violation of
any Law by, Audiovox or any of its directors, officers, employees,
subsidiaries, or affiliates, or willful breach of any of Audiovox's
obligations under this Agreement.
6. Miscellaneous.
6.1 Non-Assignability. Neither party shall assign its rights or delegate
its duties under this Agreement without the prior written consent of
the other party. Any attempted assignment or designation in
contravention of this provision shall be void. Subject to the
foregoing, this Agreement shall be binding on, and insure to the
benefit of, the parties and their respective affiliates, successors
and assigns.
6.2 Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York,
irrespective of the choice of laws principles of the State of New
York.
6.3 Third Party Beneficiaries; Compliance with Law. Except as otherwise
expressly provided in this Agreement, the provisions of this Agreement
are for the benefit of the parties hereto and not for any other
person. This Agreement shall not provide any third person with any
remedy, claim, reimbursement, claim of action or other right in excess
of those existing without reference to this Agreement. The parties
agree that the Services shall be provided in accordance with the
Seller's past practices and only with respect to the Business as it
was operated immediately prior to the Closing or as mutually agreed by
the parties. UTSI represents and agrees that it will use the Services
only in accordance with all applicable Law. Audiovox reserves the
right to take all actions, including termination of any particular
Service, that Audiovox reasonably believes to be necessary to assure
compliance with applicable Law and such actions will not constitute a
breach of this Agreement. Audiovox will notify UTSI promptly of any
decision to terminate such Services and the reasons for any such
termination of such Services.
6.4 No Partnership. Nothing contained in this Agreement shall be deemed or
construed to create a partnership or a joint venture between the
parties hereto or to cause Audiovox to be responsible in any way for
the debts or obligations of UTSI or any other party. The parties
acknowledge that Audiovox shall be an independent contractor in the
performance of the Services and shall maintain control over its
employees, its subcontractors and their employees and comply with all
withholding of income at source requirements, whether federal, state,
local or foreign. Furthermore, Audiovox shall not subcontract any of
the Services unless UTSI has pre-screened and pre-qualified such
subcontractor, which pre-screening and pre-qualification shall not be
unreasonably withheld.
6.5. Notices. All notices or other communications under this Agreement
(other than day-to-day communications between the parties by
authorized persons concerning the provision and performance of the
Services) shall be in writing and shall be deemed to be duly given
when delivered or mailed in accordance with Section 10.01 of the
Purchase Agreement.
6.6 Severability and Invalidity. Any provision of this Agreement which is
invalid or unenforceable in any jurisdiction, shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining provisions of this Agreement or affecting the validity or
enforceability of any of the provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad
as is enforceable.
6.7 Force Majeure. Audiovox shall not be deemed in default of this
Agreement to the extent that any delay or failure in the performance
of its obligation under Agreement results from any cause beyond its
reasonable control, such as power failures, computer equipment or
system failures, acts of God, acts of civil or military authority,
embargoes, epidemics, war, riots, insurrections, fires, explosions,
earthquakes, floods, or unusually severe weather conditions or labor
problems.
6.8 Captions. The paragraph headings and captions contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning of interpretation of this Agreement.
6.9 Authority. Each party represents and warrants that the officer
executing this Agreement on its behalf is duly authorized to so
execute this Agreement, and this Agreement, when executed and
delivered by such party, shall constitute the valid and binding
agreement of such party, enforceable in accordance with its terms.
6.10 Amendments. No provisions of this Agreement shall be deemed waived,
amended, supplemented or modified by either party, unless such waiver,
amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom it is sought to
enforce such waiver, amendment, supplement or modification.
6.11 Entire Agreement. This Agreement sets forth the entire agreement of
the parties with respect to the subject matter hereof and supersedes
all prior agreements, writings, communications, negotiations,
discussions and undertakings between the parties pertaining to the
subject matter hereof.
6.12 Omitted
6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which is to be deemed an original, and all of
which constitute, collectively, one agreement.
6.14 Arbitration. All disputes arising out of this Agreement shall be
subject to the arbitration provisions of the Purchase Agreement.
6.15 Confidentiality. Each of Audiovox and UTSI hereby acknowledges that
each party's confidential information (the "Information") may be
exposed to the other party's employees, subsidiaries, affiliates and
agents as a result of the activities contemplated by this Agreement.
Each party agrees that such party's obligation to keep confidential
the other parties' Information shall be governed by Section 5.03 of
the Purchase Agreement.
6.16 Specific Performance. The parties acknowledge and agree that remedies
at law would be an inadequate remedy for the breach of any agreement
contained herein and that in addition thereto, the parties shall be
entitled to specific performance of the terms hereof or other
equitable remedies in the event of any such breach.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
AUDIOVOX CORPORATION
By: ________________________________
UTSTARCOM, INC.
By: ________________________________
UTSTARCOM CANADA COMPANY
By: ________________________________
SCHEDULE A
1. IT Services (as defined in Section 1.1 of Schedule B)
2. Data Telecommunications Services
3. EDI Services
4. Internet Services
5. Project Services
SCHEDULE B
1. IT Services
1.1 IT Services shall comprise of the following services:
(a) System Administration: Provide operational support which includes all
required tasks performed to ensure uptime, reasonable performance and
functionality of hardware systems, which support the daily business
operations of the Business.
(b) Network Administration: Provide operational support which includes all
required tasks performed to ensure uptime, reasonable performance of the
LAN and WAN operations as well as the functionality of network equipment,
as required by the daily business operations of the Business.
(c) Database Administration: Provide operational support which includes
all required tasks performed to ensure uptime, reasonable performance
and functionality of the various database systems that house the
corporate data of the Business for support of the daily business
operations of the Business.
(d) Applications Management: Provide operational support which includes all
required tasks performed to ensure uptime, reasonable performance and
functionality of the various business systems that support all the business
processes and operations for the Business. The business systems include,
without limitation: JDEdwards, EDI, ACC Website, CellTrack, etc.
(e) Email Support: Provide operational support which includes all required
tasks performed to ensure uptime, reasonable performance and functionality
of the email systems and associated communication that support all the
Business' email usage.
(f) Helpdesk & Desktop Support: Provide first line troubleshooting and
support which includes all required tasks performed for all office
automation systems (hardware and software) as well as provide the necessary
first line fielding of any other IT Services related inquiries.
(g) Voice Communications Support: Interface with external service providers
to provide troubleshooting and support which includes all required tasks
performed for all telecommunications equipment for all the voice usage.
(h) Knowledge Transfer/On-the-job Training and Data Migration
o Provide documentation and walk through of business procedures to
familiarize the business operations of ACC
o Provide data definition documentation of current data usage of
the systems
o Provide data migration service to UTSI in the effort to migrate
current business systems onto the UTSI's standard platform.
Audiovox's responsibilities will include only the scope of the
current business systems and associated infrastructure. Examples
of such tasks may include data extract from current systems and
the associated documentation of data mapping, business flows and
applications setups, business and code logic, etc.
(i) Period End Processing Support:
o Troubleshoot any application functionality which may be required
for Period End processing
o Support account reconciliation process, include interfacing with
external entities such as banks, logistics firms, etc. o Support
subledger close process
o Support Consolidation process
o Perform data fixes to help in the above reconciliation and
consolidation processes
o Provide support in financial audits
o Support all business operations set forth in Section 1.1(j) of
this Schedule B
(j) Support all business operations by performing all required tasks that
encompass support of business flows as follows:
o Order to Cash (a.k.a. Quote to Collect)
o Procure to Pay
o Accounting to Reporting
o Call to Resolution (a.k.a. Services and Call Center Operations)
o Service Logistics (a.k.a. Depot Repair, RMA processing, etc.)
o Retail Stores operations and associated synchronization with
central processing
o Warehouse Management
o Demand to Build
o Forecast and Planning
o Commissions & Sales compensation
o Business to Business or Business to Consumer interaction in the
form of system transactions
(k) Provide support to the SOX 404 compliance initiative which includes
attendance of all required meetings, provide all required documentation and
participate in internal controls walk-throughs.
1.2 The IT Services shall be performed on software and hardware systems
including, without limitation: Peoplesoft/JDEdwards, IBM Websphere, IBM
Lotus Notes, Microsoft software, EDI, Novell, NT, IBM I-Series and any
other services required to provide full operation to support the normal
business functions of the Business.
1.3 The weekly charges for IT Services shall be as follows:
Option 1: 24 x 5 Operations Support: $9,750 per week
Option 2: 24 x 7 Operations Support: $11,430 per week
The fees for IT Services shall be billed on a monthly basis based on the
weekly rate, and will be pro-rated based on per actual week service usage
(number of business days in a calendar month).
Option 1 (24 x 5 Operations Support) shall be in effect upon the signing of
this Agreement; provided, however, that, at any time during the Term, UTSI
may change the weekly charge option set forth in this Section 1.3 by
written notice to Audiovox and, upon receipt by Audiovox of such
notification, the fees shall be adjusted accordingly on a pro-rata basis.
In the case of termination by UTSI of any IT Service under this Agreement,
the parties shall negotiate in good faith the amount that the weekly
charges payable in respect of the IT Services shall be adjusted downward to
take account of such termination. Notwithstanding the immediately preceding
sentence, the weekly charges for IT Services shall automatically be
adjusted downward upon termination by UTSI of the following IT Services as
follows:
--------------------------------------------------- --------------------
Terminated IT Service Decrease in Charges
($ per week)
------------------------------------------------------------------------
Lotus Notes 1,000
------------------------------------------------------------------------
Cell Track 1,500
------------------------------------------------------------------------
Web Services 375
------------------------------------------------------------------------
ERP System 5,000
------------------------------------------------------------------------
Desk Top Support 2,125
------------------------------------------------------------------------
2. Data Telecommunications Services
Frame Relay Remote and Host Locations and Dial Up Networking for the
Business: The monthly charges shall be based on actual usage, but not to
exceed $8,500 per month.
3. EDI Services
Based on actual usage, includes volume discount, Annually Monthly
-------- -------
but not to exceed: $ 84,000. $ 7,000.
4. Internet Services
The monthly charge shall be $1,500 per month.
5. Project Services
For any services other than services covered in Sections 1 to 4 (inclusive)
of this Schedule B, such services shall be charged on a project basis and
the labor effort shall be negotiated per project; provided, however, that
the hourly rate for labor shall be as follows:
Labor Rates ($ per hour):
A. Programming Services:
o Programmers $50
o Senior Programmers $60
o Managers $65
B. Network Services:
o Analyst $50
o System Analyst $60
o Manager $65
C. Operations Services:
o Desktop Support $35
o Operations Support $35
EXHIBIT 1.01(a)
FORM OF TRADEMARKS AND DOMAIN NAME ASSIGNMENT
This TRADEMARK ASSIGNMENT (this "Assignment") is made and entered into this
___ day of _______, 2004 by and between AUDIOVOX COMMUNICATIONS CORP., a
Delaware corporation ("ACC"), QUINTEX MOBILE COMMUNICATIONS CORPORATION, a
Delaware corporation and AUDIOVOX COMMUNICATIONS CANADA CO., a Nova Scotia
company ("ACCC"; and, together with ACC and Quintex, collectively, the
"Assignor"), to UTSTARCOM, INC., a Delaware corporation having a place of
business at 1275 Harbor Way Parkway, Suite 100, Alameda, CA 94502 ("UTStarcom")
and UTSTARCOM CANADA COMPANY, a Nova Scotia company ("UTStarcom Canada"; and,
together with UTStarcom, the "Assignee") (each a "Party," and collectively, the
"Parties").
WHEREAS, the Assignors are the owners of the domain names, trademarks,
trademark registrations and trademark applications set forth on Schedule A
hereto (the "Trademarks");
WHEREAS, the Assignors, the Assignee and Audiovox Corporation, a Delaware
corporation have entered an Asset Purchase Agreement dated June __, 2004 (the
"Asset Purchase Agreement") (capitalized terms used herein but not otherwise
defined herein shall have the meanings set forth in the Asset Purchase
Agreement);
WHEREAS, pursuant to the Asset Purchase Agreement, Assignee agreed to
purchase the Purchased Assets from Assignors, including all of Assignors' right,
title and interest in and to the Trademarks and any and all goodwill of the
business symbolized by the Trademarks;
WHEREAS, ACCC and UTStarcom Canada are parties to this Assignment solely
for purposes of the transfer of any Canadian assets of the Business; and
WHEREAS, the execution and delivery of this Assignment is a condition to
Closing.
NOW THEREFORE, for the consideration set forth in the Purchase Agreement,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. Assignment. Effective upon the Closing, each Assignor hereby assigns to
Assignee [note: the entities constituting the Assignee shall determine which
Trademarks are assigned to each of them] all of such Assignor's right, title and
interest in and to the Trademarks, and any and all goodwill of the business
symbolized by the Trademarks, and all rights to sue and recover damages for
past, present and future infringement, dilution, misappropriation, violation,
unlawful imitation or breach thereof.
2. No Warranties. Except as expressly provided in the Asset Purchase
Agreement, no Assignor makes any warranties, express or implied, with respect to
the Trademarks.
Exhibi 99.3
3. Further Assurances. Each Assignor shall, at the cost and expense of
Assignee and without incurring any legal liability not contemplated by the Asset
Purchase Agreement, take all actions and execute all documents necessary or
desirable to record and perfect the interest of Assignee in and to the
Trademarks, and shall not enter into any agreement in conflict with this
Assignment.
IN WITNESS WHEREOF, each Party has caused this Assignment to be executed as
of the date first written above by its duly authorized officer.
AUDIOVOX COMMUNICATIONS CORP.
By:
----------------------------------------
Name:
Title:
QUINTEX MOBILE COMMUNICATIONS CORPORATION
By:
----------------------------------------
Name:
Title:
AUDIOVOX COMMUNICATIONS CANADA CO.
By:
----------------------------------------
Name:
Title:
UTSTARCOM, INC.
By:
----------------------------------------
Name:
Title:
UTSTARCOM CANADA COMPANY
By:
----------------------------------------
Name:
Title:
SCHEDULE A
U.S. Trademarks
Mark Registration No. Application No. Filing Date Registration Date
- ---- ---------------- --------------- ----------- -----------------
Foreign Trademarks
Jurisdiction Mark Serial No. Filing Date Registration Date
------------ ---- ---------- ----------- -----------------
Domain Names