SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 29, 2002
AUDIOVOX CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 1-9532 13-1964841
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(State or other jurisdiction (Commission (IRS Employer
of Incorporation or File Number) Identification
organization) Number)
150 Marcus Boulevard, Hauppauge, New York 11788
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (631) 231-7750
----------------
NONE
(Former name, former address and former fiscal year, if
changed since last report)
Page 1
Item 5. Other Events
On May 29, 2002, Audiovox Corporation (the "Company") announced that
Toshiba Corporation ("Toshiba") increased its minority interest in the Company's
wireless subsidiary, Audiovox Communications Corp. ("ACC") to 25%. ACC received
$32 million from Toshiba for the additional shares of ACC bringing Toshiba's
ownership to 25% and an $8.1 million Subordinated Convertible Note of ACC.
As part of the transaction, ACC and Toshiba have entered into a
Distribution Agreement pursuant to which ACC, among other things, will receive
thirty-day trade terms and sell Toshiba Communications Company products for
carrier channels on an exclusive basis in North and South America.
In addition, the Company gave ACC a non-exclusive license to use the
Audiovox name in connection with its sale of products in North and South
America. ACC and its Chief Executive Officer and President, Philip Christopher,
also entered into an employment agreement in connection with the sale of the
minority interest to Toshiba.
In connection with the foregoing, the Company entered into the Sixth
Amendment and Consent, dated as of May 28, 2002 to the Fourth Amended and
Restated Credit Agreement, dated as of July 28, 1999 (as amended, the "Credit
Agreement") among Audiovox Corporation, the several banks and other financial
institutions from time to time parties thereto (the "Lenders") and JPMorgan
Chase Bank, as administrative and collateral agent for the Lenders (in such
capacity, the "Agent"). The Sixth Amendment and Consent, among other things,
provided for the issuance to the subordinated note to Toshiba Corporation, the
sale or issuance of the Capital Stock of Audiovox Communications Corp. to
Toshiba Corporation and the release of the Capital Stock of Audiovox
Communications Corp. from the Lien of the Agent.
Item 7. Exhibits.
99.1 Press release dated May 29, 2002, of Audiovox Corporation
Page 2
99.2 Securities Purchase Agreement made and entered into as of
May 29, 2002, by and among Toshiba Corporation, Audiovox
Communications Corp. and Audiovox Corporation
99.3 Stockholders Agreement made and entered into as of May 29, 2002,
by and among Toshiba Corporation, Audiovox Communications Corp.
and Audiovox Corporation
99.4 Distribution Agreement made and entered into as of May 29, 2002, by and
between Toshiba Corporation and Audiovox Communications Corp.
99.5 Non-Negotiable Subordinated Convertible Promissory Note dated
May 31, 2002 by Audiovox Communications Corp. in favor of
Toshiba Corporation
99.6 Employment Agreement effective as of May 29, 2002 by and among
Audiovox Communications Corp., Philip Christopher and Audiovox
Corporation
99.7 Trademark License Agreement made as of May 29, 2002 between
Audiovox Corporation and Audiovox Communications Corp.
99.8 Non-Negotiable Demand Note dated May 29, 2002 by Audiovox
Communications Corp. in favor of Audiovox Corporation
99.9 Amended and Restated Certificate of Incorporation of Audiovox
Communications Corp.
99.10 Sixth Amendment and Consent, dated as of May 28, 2002 to the Fourth
Amended and Restated Credit Agreement, dated as of July 28, 1999 (as
amended) among Audiovox Corporation, the several banks and other
financial institutions from time to time parties thereto (collectively
the "Lenders") and JPMorgan Chase Bank, as administrative and
collateral agent for the Lenders
Page 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on it behalf by the undersigned
hereunto duly authorized.
AUDIOVOX CORPORATION
Dated: June 5, 2002 By: s/ Charles M. Stoehr
---------------------------
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
Page 4
TOSHIBA INCREASES INVESTMENT IN AUDIOVOX WIRELESS SUBSIDIARY
Hauppauge, NY, May 29, 2002 ... Audiovox Corporation (Nasdaq: VOXX) today
announced that Toshiba Corporation has increased its minority interest in the
Company's wireless subsidiary, Audiovox Communications Corp. (ACC), to 25%.
Toshiba has held a 5% interest in ACC since 1999. As part of the transaction,
ACC and Toshiba Corporation have entered into a distribution agreement under
which ACC will, among other things, sell Toshiba Mobile Communications Company
products for carrier channels, on an exclusive basis, in North and South
America. In addition, the Toshiba brand name will be on certain wireless
products sold by ACC.
Under the financial terms of the transaction, Toshiba Corporation has acquired,
for aggregate consideration of $32 million, additional shares of ACC bringing
its current ownership to 25% and an $8.1 million Subordinated Convertible Note
of ACC.
Commenting on the announcement, John Shalam, Chairman, President and CEO of
Audiovox Corporation said, "We began our partnership with Toshiba back in 1984
when together we were among the first companies to enter the cellular industry.
Over the years that partnership has provided us with the technology that has
helped us achieve a leadership position in the wireless industry. I am very
pleased that Toshiba Corporation has chosen to increase its investment in our
company. It is indicative of Toshiba's commitment to our marketing strategies
and distribution. I believe that we are now stronger than ever and that this
investment should allow us to compete more effectively in the fast-paced
wireless market."
Philip Christopher, President and CEO of Audiovox Communications Corp. stated,
"Success in the wireless market today depends more and more on strategic
alliances that combine the key elements of technology and distribution. Toshiba
provides us with access to technology that should prove valuable as the 3G
market develops."
Christopher further stated, "The addition of the well known Toshiba brand to our
product line should help us increase market share, particularly in the new
personal digital assistant (PDA) products as Toshiba has a solid reputation in
the PC market." "
Mr. Tetsuya Mizoguchi, President of Toshiba's Mobile Communications Company
stated, "With our technology tied firmly together with Audiovox's strong
marketing and sales force, we expect this
Exhibit 99.1
1
enhanced partnership to strengthen our competitiveness in the CDMA market in
which we have been participating from the very beginning. We are excited about
our future together with Audiovox as our strategic partner."
TOSHIBA INCREASES INVESTMENT....
Berenson Minella & Company served as financial advisor to Audiovox Corporation
and Goldman Sachs (Japan) Ltd. served as financial advisor to Toshiba
Corporation in connection with this transaction.
Audiovox Corporation is an international leader in the marketing of cellular
telephones, vehicle security, mobile video, autosound systems, and consumer
electronics products. The Company conducts its business through two subsidiaries
and markets its products both domestically and internationally under its own
brands. It also functions as an OEM (Original Equipment Manufacturer) supplier
to several customers. For additional information, please visit Audiovox on the
Web at http://www.audiovox.com.
Toshiba Corporation is a leader in information and communications systems,
electronic components, consumer products and power systems. Worldwide, Toshiba
employs over 176,000 employees, and generates annual sales of over US$40
billion. Toshiba's Mobile Communications Company delivers solutions and
innovations in cellular systems and personal digital assistants. Visit Toshiba's
website at http://www.toshiba.co.jp/index.htm.
Except for historical information contained herein, statements made in this
release that would constitute forward-looking statements may involve certain
risks such as our ability to keep pace with technological advances, significant
competition in the wireless, mobile and consumer electronics businesses, quality
and consumer acceptance of newly introduced products, our relationships with key
suppliers and customers, market volatility, non-availability of product, excess
inventory, price and product competition, new product introductions and other
risks detailed in the Company's Quarterly Report on Form 10-Q for the period
ended February 28 2002 and in the Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 2001. These factors among others may cause actual
results to differ materially from the results suggested in the forward-looking
statements.
Exhibit 99.1
2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of May 29, 2002 by and among TOSHIBA CORPORATION, a Japanese
corporation, acting through its Mobile Communications Company ("TOSHIBA"),
AUDIOVOX COMMUNICATIONS CORP., a Delaware corporation ("ACC"), and AUDIOVOX
CORPORATION, a Delaware corporation ("AUDIOVOX"). Toshiba, ACC and Audiovox are
referred to herein collectively as the "PARTIES" and each individually as a
"PARTY".
RECITALS
A. Toshiba desires to purchase shares of Class B Common Stock and a
convertible promissory note from ACC, and ACC desires to issue and sell such
securities to Toshiba, on the terms and subject to the conditions set forth
herein.
B. Certain terms used herein have the meanings set forth for such terms in
the text of this Agreement or in Annex I hereto.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties hereby agree as follows:
AGREEMENT
1. PURCHASE AND SALE OF THE SHARES AND THE NOTE.
Subject to the terms and conditions hereof, at the Closing, ACC shall sell
and issue to Toshiba, and Toshiba shall subscribe for and purchase from ACC, (a)
30.877192 shares (the "SHARES") of ACC's Class B Common Stock, no par value per
share ("CLASS B COMMON STOCK"), and (b) a Convertible Promissory Note dated the
date that ACC receives the Purchase Price pursuant to Section 2.2(b) in the
principal amount of $8,106,667 (the "NOTE"), which note shall be in the form of
Exhibit 1. The aggregate purchase price for the Shares and the Note shall be
Thirty-two Million Dollars ($32,000,000) (the "PURCHASE PRICE"), consisting of
an aggregate purchase price of $23,893,333 for the Shares and a purchase price
of $8,106,667 for the Note. The Purchase Price shall be payable in cash at the
Closing as provided in Section 2.2(b).
2. THE CLOSING.
2.1 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") is taking place as of the date hereof at the offices
of Audiovox Communications Corp., 555 Wireless Blvd., Hauppauge, New York 11788.
The date and time of the Closing are referred to herein as the "CLOSING DATE".
2.2 ACTIONS OCCURRING AT THE CLOSING. At the Closing:
(A) DELIVERY OF THE SHARES AND THE NOTE. Concurrently with ACC's
receipt of the Purchase Price pursuant to Section 2.2(b), ACC shall issue
and deliver to Toshiba (i) a stock certificate or certificates registered
in the name of Toshiba, representing the Shares purchased hereunder, and
(ii) the Note, executed by ACC.
(B) PURCHASE PRICE. Toshiba shall deliver the Purchase Price within
five (5)
Exhibit 99.2
1
Business Days following the Closing Date by wire transfer of immediately
available funds to an account specified by ACC at least four (4) Business Days
prior to the Closing.
(C) TRANSACTION AGREEMENTS. Each of the following agreements and
instruments (collectively with this Agreement, the "TRANSACTION
AGREEMENTS") shall be entered into by each of the parties thereto:
(I) The Stockholders Agreement among the Parties in the form of
Exhibit 2.2(c)(i);
(II) The Distribution Agreement between Toshiba and ACC in the
form of Exhibit 2.2(c)(ii);
(III) The Employment Agreement between ACC and Philip Christopher
in the form of Exhibit 2.2(c)(iii);
(IV) The Trademark License Agreement between ACC and Audiovox in
the form of Exhibit 2.2(c)(iv);
(V) The Shared Services Agreement between ACC and Audiovox in the
form of Exhibit 2.2(c)(v);
(VI) The Note, which will be executed by ACC and delivered to
Toshiba in accordance with Section 2.2(a); and
(VII) The Intercompany Note in the form of Exhibit 2.2(c)(vii),
which will be executed by ACC and delivered to Audiovox in accordance
with Section 3.
(D) PERMITS AND APPROVALS. Toshiba shall receive satisfactory written
evidence that the Approvals described on Section 4.3(b) of the Disclosure
Schedule have been made or obtained.
(E) OFFICER'S CERTIFICATE OF ACC. ACC shall deliver to Toshiba:
(I) a copy of the Certificate of Incorporation and Bylaws of each
of ACC and Quintex Mobile Communications Corp., a Delaware corporation
("QUINTEX");
(II) a copy of the resolutions or minutes of the meetings of
ACC's board of directors and stockholders evidencing approval of the
Transaction Agreements and the matters contemplated thereby;
(III) a certificate of the Chief Financial Officer of ACC, dated
as of the Closing Date and in form and substance satisfactory to
Toshiba, as to the accuracy of the documents delivered to Toshiba
under clauses (i) and (ii), and the incumbency and signature of the
officers of ACC and Audiovox executing this Agreement and each other
Transaction Agreement to which ACC or Audiovox is a party; and
(IV) other documents as may reasonably be requested by Toshiba.
Exhibit 99.2
2
(F) AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
OF ACC. ACC shall adopt its Amended and Restated Certificate of
Incorporation and Bylaws in the forms attached to the Stockholders
Agreement as Exhibit 1.9(a) and Exhibit 1.9(b), respectively.
(G) BOARD OF DIRECTORS. Concurrently with the Closing, the Board
of Directors of ACC shall be reconstituted as contemplated by Section
1.1 of the Stockholders Agreement.
(H) OFFICER'S CERTIFICATE OF TOSHIBA. Toshiba shall deliver to
ACC:
(I) a copy of the resolutions or minutes of the meetings of
Toshiba's board of directors evidencing approval of the
Transaction Agreements and the matters contemplated thereby;
(II) a certificate of an authorized officer of the Mobile
Communications Company of Toshiba, dated as of the Closing Date
and in form and substance satisfactory to ACC, as to the accuracy
of the documents delivered to ACC under clause (i), and the
incumbency and signature of the officers of Toshiba executing
this Agreement and each other Transaction Agreement to which
Toshiba is a party; and
(III) other documents as may reasonably be requested by ACC.
3. CLOSING PAYMENT OF INTERCOMPANY DEBT.
Promptly after receipt of the Purchase Price pursuant to Section 2.2(b),
ACC shall use the entire Purchase Price to make a repayment of Thirty-two
Million Dollars ($32,000,000) of the debt owed by ACC to Audiovox (the
"INTERCOMPANY DEBT"). At the Closing, ACC shall execute and deliver to Audiovox
a note (the "INTERCOMPANY NOTE") that evidences the Intercompany Debt and sets
forth its terms and conditions.
4. REPRESENTATIONS AND WARRANTIES OF ACC AND AUDIOVOX.
Except as otherwise indicated on ACC's disclosure schedule delivered to
Toshiba concurrently herewith, which is hereby incorporated as an integral
component of this Agreement (the "DISCLOSURE SCHEDULE"), ACC and Audiovox hereby
jointly and severally represent and warrant to Toshiba as follows:
4.1 ORGANIZATION AND RELATED MATTERS.
(A) ACC and Quintex (collectively, the "ACC ENTITIES") each is a
corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Delaware. Except for Quintex, none of ACC's
controlled Affiliates conduct material business activities. Section 4.1(a)
of the Disclosure Schedule sets forth each foreign jurisdiction in which
the ACC Entities are qualified to do business. Audiovox is a corporation
duly incorporated, validly existing and in good standing under the Laws of
the State of Delaware.
(B) Each ACC Entity has all requisite organizational power and
authority to own its properties and to carry on its business. To ACC's
Knowledge, each ACC Entity is duly qualified or licensed to do business in
good standing in all jurisdictions in which the character or the location
of the assets owned or leased by it or the nature of its business requires
such licensing
Exhibit 99.2
3
or qualification. True and correct copies of the Organizational
Documents of each ACC Entity have been provided or made available to
Toshiba.
4.2 AUTHORITY; ENFORCEABILITY; EFFECT OF TRANSACTION AGREEMENTS. ACC and
Audiovox each has all necessary organizational power and authority to execute,
deliver and perform each Transaction Agreement to which it is a party. Each
Transaction Agreement to which ACC or Audiovox is a party has been duly
authorized by all necessary organizational action of ACC or Audiovox, as
applicable. Each Transaction Agreement to which ACC or Audiovox is a party has
been duly executed and delivered by ACC or Audiovox, as applicable. Assuming the
due authorization, execution and delivery by the other party or parties thereto,
each Transaction Agreement to which ACC or Audiovox is a party constitutes a
valid and legally binding obligation of ACC or Audiovox, enforceable against ACC
or Audiovox, as applicable, in accordance with its terms, subject to limitations
imposed by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other Laws relating to or affecting creditors' rights generally
and general equitable principles.
4.3 NO CONFLICTS.
(A) The execution and delivery by ACC and Audiovox of each Transaction
Agreement to which it is a party does not, and the performance by ACC and
Audiovox of its obligations thereunder will not, conflict with, result in
any violation of or default (with or without notice or lapse of time or
both) under, give rise to a right of termination, cancellation or
acceleration of any obligation (in each case by any third party) or to the
loss of any benefit by any ACC Entity or Audiovox under, or result in or
require the creation, imposition or extension of any Lien (excluding
Permitted Liens) upon any asset of any ACC Entity or Audiovox under, (1)
the Organizational Documents of any ACC Entity or Audiovox, (2) any
Contract or Governmental Approval to which any ACC Entity or Audiovox is a
party or is otherwise bound, or to which any of their assets is subject, or
(3) any Legal Requirement applicable to any ACC Entity or Audiovox, except
in the case of Audiovox for any matters that would not be reasonably
expected to have a Material Adverse Effect.
(B) Section 4.3(b) of the Disclosure Schedule lists all Approvals
required to be made or obtained by or with respect to Audiovox or any ACC
Entity to consummate the transactions contemplated by this Agreement,
except in the case of Audiovox for any Approvals the failure of which to be
made or obtained would not have a Material Adverse Effect. Except as set
forth in Section 4.3(b) of the Disclosure Schedule and except in the case
of Audiovox for any Approvals the failure of which to be made or obtained
would not have a Material Adverse Effect, the execution and delivery of the
Transaction Agreements by Audiovox and ACC, the performance of their
respective obligations thereunder and the consummation of the transactions
contemplated thereby will not require any Approvals of or with any Person.
Exhibit 99.2
4
4.4 CAPITALIZATION.
(A) Section 4.4(a) of the Disclosure Schedule sets forth the
authorized, issued and outstanding capital stock and other Securities of
each ACC Entity. Section 4.4(a) of the Disclosure Schedule also identifies
each holder of outstanding Securities of each ACC Entity and the type and
amount of such Securities held (including with respect to any options,
warrants, conversion rights or other rights to acquire capital stock, the
unexpired term and the exercise, conversion or exchange price relating to
such rights). Other than as set forth in Section 4.4(a) of the Disclosure
Schedule, there are no issued or outstanding Securities of any ACC Entity,
or any subscription rights (including preemptive rights), calls or
Contracts obligating any ACC Entity now or at any time in the future to
issue Securities. There are no outstanding Contracts of any ACC Entity to
repurchase, redeem or otherwise acquire any Securities.
(B) All of the outstanding Securities of each ACC Entity have been
duly authorized and validly issued and are fully paid and non-assessable
and were not issued in violation of any preemptive rights, Liens or Legal
Requirements. The issuance of the Shares to Toshiba at the Closing
hereunder and the issuance of Class B Common Stock upon the conversion of
the Note in accordance with its terms have been duly authorized by all
necessary action of ACC and its shareholders. At the Closing, upon payment
therefor in accordance with the terms of this Agreement, the Shares will be
validly issued and fully paid and non-assessable and not issued in
violation of any preemptive rights, Liens or Legal Requirements. Upon the
conversion of the Note in accordance with its terms, the shares of Class B
Common Stock issuable upon such conversion shall be validly issued and
fully paid and non-assessable and not issued in violation of any preemptive
rights, Liens or currently existing Legal Requirements.
4.5 SEC DOCUMENTS AND PUBLIC DISCLOSURES. In each case to the extent that
the SEC Documents described in this Section, the information contained therein
and the exhibits thereto relate to ACC Entities:
(A) Except as set forth in Section 4.5(a) of the Disclosure Schedule,
Audiovox has timely filed all filings and reports filed or required to be
filed by Audiovox with the SEC pursuant to the Securities Laws, and has
provided Toshiba with true and correct copies of all such filings and
reports, together with all exhibits thereto (collectively, the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the applicable Securities
Laws.
(B) To ACC's Knowledge, the statements made in the SEC Documents are
true and correct.
4.6 FINANCIAL STATEMENTS.
(A) ACC has delivered to Toshiba true and correct copies of the
following unaudited financial statements (the "FINANCIAL STATEMENTS"):
(I) the consolidated balance sheet of ACC and its subsidiaries as
of November 30, 2001, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the
fiscal year then ended;
(II) the consolidated balance sheet of ACC and its subsidiaries
as of
Exhibit 99.2
5
February 28, 2002, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the
three-month period then ended; and
(III) the consolidated balance sheet of ACC and its subsidiaries
as of April 30, 2002, the related consolidated statements of
operations for the one-month period and the five-month periods then
ended, and the related consolidated statement of cash flows for the
five-month period then ended.
(B) To ACC's Knowledge:
(I) The Financial Statements have been prepared in conformity
with U.S. generally acceptable accounting principles ("GAAP") applied
on a consistent basis and have been certified to Toshiba by the Chief
Financial Officer of ACC.
(II) The statements of income and cash flows contained in the
Financial Statements present fairly in all material respects the
results of operations and the sources and uses of cash, respectively,
of ACC and its consolidated subsidiaries for the respective periods
covered by such statements of income and cash flows. The balance
sheets contained in the Financial Statements present fairly in all
material respects the financial condition of ACC and its consolidated
subsidiaries as of the respective dates of such balance sheets.
(III) The interim financial statements contained in the Financial
Statements reflect all adjustments necessary for a fair presentation.
Since November 30, 2001, there has been no change in any of the
significant accounting policies, practices or procedures of ACC and
its consolidated subsidiaries.
(C) Section 4.6(c) of the Disclosure Schedule contains a complete and
accurate description of all Liabilities of ACC to its customers and other
third parties with respect to cooperative advertising and market
development funds that are currently outstanding or were outstanding at any
time since December 1, 2000 (collectively, "MDF"). MDF is accurately
reflected in the Financial Statements, and to the Company's Knowledge, no
Person has challenged or threatened to challenge any reversals of
accounting accruals previously made by ACC with respect to any MDF. ACC has
adopted and is in the process of implementing all of KPMG's recommendations
in its reportable conditions letter dated March 8, 2002 with respect to
MDF.
4.7 LIABILITIES. To ACC's Knowledge, ACC and its subsidiaries have no
off-balance sheet financing or similar financial arrangements and no Liabilities
which are required to be provided for or reserved against on a balance sheet
prepared in accordance with GAAP, other than the following Liabilities:
(A) Liabilities provided for or reserved against in the Financial
Statements;
(B) Liabilities incurred in the ordinary course of business consistent
with past practice since November 30, 2001; and
(C) Liabilities identified in Section 4.7(c) of the Disclosure
Schedule.
4.8 NO MATERIAL ADVERSE CHANGES. Except as set forth in the Financial
Statements described in Section 4.6(a)(iii), to ACC's Knowledge, since November
30, 2001, whether or not
Exhibit 99.2
6
in the ordinary course of business, there has not been, occurred or arisen any
change in or event affecting any ACC Entity, Audiovox or their respective
business, assets or activities that has had or may reasonably be expected to
have a Material Adverse Effect.
4.9 TAXES.
(A) To ACC's Knowledge, each Tax Return required to be filed by any of
the ACC Entities or by Audiovox relating in whole or in part to any ACC
Entity or the Business ("BUSINESS TAX RETURNS"), to the extent required by
applicable Law to be filed before the date hereof (taking into account any
applicable extensions), has been filed, and each filed Business Tax Return
is true, correct and complete in all material respects. To ACC's Knowledge,
all Taxes shown to be payable on such Business Tax Returns or on subsequent
assessments with respect thereto have been paid in full on a timely basis,
and no other Taxes are payable relating in whole or in part to any ACC
Entity or the Business, whether or not shown on such Business Tax Returns,
for any period ending prior to or including the Closing Date, except for
Taxes shown as a current liability in the Financial Statements.
(B) ACC has delivered or made available to Toshiba correct and
complete copies of all Business Tax Returns filed by the ACC Entities or
Audiovox for all periods ending on or after December 31, 1998, and copies
of all Tax examination reports and notices of deficiency or assessment with
respect to any Business Tax Returns received by any ACC Entity or Audiovox
after December 31, 1998.
(C) To ACC's Knowledge: (i) no ACC Entity has any Liability for Taxes
by Contract with any other Person (including any tax sharing or tax
indemnity agreement); (ii) there are no Liens for Taxes on the assets of
any ACC Entity, other than Permitted Liens, statutory liens for Taxes not
yet due or Liens for Taxes being contested in good faith; and (iii) no ACC
Entity has ever been the member of any group for Tax purposes other than a
group consisting solely of Audiovox, ACC and/or any ACC Entity.
(D) Except as indicated in Section 4.9(d) of the Disclosure Schedule,
no Business Tax Return filed or required to be filed within seven (7) years
prior to the date hereof has been audited or is currently the subject of
audit or any Tax-related Proceeding by any Governmental Authority and, to
ACC's Knowledge, no such audit or Proceeding is threatened. Except as
indicated in Section 4.9(d) of the Disclosure Schedule, none of the ACC
Entities or Audiovox has waived any statute of limitations in respect of
any Tax related to the Business, which waiver remains in effect.
(E) Except as indicated in Section 4.9(e) of the Disclosure Schedule,
no ACC Entity is the party to or the subject of any closing agreement,
private letter ruling, technical advice memoranda or advance pricing
agreement relating to Taxes with any Governmental Authority.
4.10 MATERIAL CONTRACTS.
(A) Section 4.10(a) of the Disclosure Schedule lists each Material
Contract. True copies of all written Material Contracts and summaries of
all oral Material Contracts, including all amendments and supplements
thereto, have been delivered to Toshiba.
(B) To ACC's Knowledge:
Exhibit 99.2
7
(I) Each Material Contract is valid and in full force and effect.
Each ACC Entity has duly performed its obligations under each Material
Contract. No breach of or default under any Material Contract by any
ACC Entity, and no event which would (with the passage of time, the
giving of notice or otherwise) cause or give rise to such a breach or
default by any ACC Entity, has occurred or as a result of the
Transaction Agreements will occur.
(II) No breach of or default under any Material Contract by any
Person other than the ACC Entities, and no event which would (with the
passage of time, the giving of notice or otherwise) cause or give rise
to such a breach or default by any such Person, has occurred or as a
result of the Transaction Agreements will occur.
4.11 REAL AND PERSONAL PROPERTY. To ACC's Knowledge, each ACC Entity has
good and marketable title to or other valid right to use, free of Liens, all
items of real property (including fees, leaseholds and all other interests in
real property) and such other assets and properties owned or used by the ACC
Entity in its business, subject only to Permitted Liens and Liens described in
Section 4.11 of the Disclosure Schedule. All material tangible properties of the
ACC Entities are generally in a good state of maintenance and repair (except for
ordinary wear and tear) and are generally adequate for the purpose for which
they are used. All real and material personal properties held by the ACC
Entities as lessee are held under valid, binding and enforceable leases. To the
Knowledge of ACC, there is no pending or threatened Proceeding that would
materially interfere with the use of any such leased property by any ACC Entity.
4.12 INTELLECTUAL PROPERTY. Each ACC Entity owns or otherwise has the valid
right to use, as presently used in the ordinary course of its business, all of
its Intellectual Property, and such ownership rights and rights to use are not
subject to any Liens that limit or restrict any ACC Entity from using its
Intellectual Property as currently used in its business in any material respect.
Section 4.12 of the Disclosure Schedule contains a complete list of all
registered trademarks, patents and registered copyrights of the ACC Entities,
all pending applications therefor, and all Material Contracts of the ACC
Entities to use their Intellectual Property. The ACC Entities have taken
commercially reasonable measures to protect all of their Intellectual Property.
To the Knowledge of ACC, there is no infringement of any Intellectual Property
of the ACC Entities by any Person.
4.13 ACCOUNTS RECEIVABLE. To ACC's Knowledge:
(A) Section 4.13(a) of the Disclosure Schedule sets forth an accurate,
correct and complete list as of April 30, 2002 of all accounts receivable
of the ACC Entities. Each such account receivable is fairly valued as of
April 30, 2002 in accordance with GAAP.
(B) Each such account receivable is a valid and legally binding
obligation of the account debtor, enforceable in accordance with its terms,
and represents products or services actually provided to and accepted by or
on behalf of the account debtor.
4.14 INVENTORY. To ACC's Knowledge, all items of inventory of the ACC
Entities, whether physically held by the ACC Entities or by third parties (other
than inventory purchased from Toshiba, which shall not be covered by this
Section) are fairly valued in the Financial Statements as of the respective
dates of such Financial Statements in accordance with GAAP. To ACC's Knowledge,
the physical inventory has been counted and is on hand as of February 28, 2002.
Exhibit 99.2
8
4.15 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Section 4.15 of the Disclosure
Schedule sets forth an accurate, correct and complete list of (i) the 20 largest
customers of the ACC Entities, determined on the basis of revenues, for each of
the fiscal years ended November 30, 1999, 2000 and 2001; and (ii) the 20 largest
suppliers of the ACC Entities, determined on the basis of costs of items
purchased, for each of the fiscal years ended November 30, 1999, 2000 and 2001.
Except as set forth in the Contracts listed on Section 4.15 of the Disclosure
Schedule, no ACC Entity is restricted by Contract from selling, licensing or
otherwise providing products or services to any customers, in any geographic
area, during any period of time or in any market segment. No ACC Entity is
subject to any Contract which provides that any supplier will be the exclusive
supplier of any ACC Entity to any customers, in any geographic area, during any
period of time or in any market segment. No ACC Entity is subject to any
Contract requiring any ACC Entity to purchase the entire output of a supplier.
4.16 WARRANTIES. Section 4.16 of the Disclosure Schedule identifies the
standard warranties and warranty policies of the ACC Entities currently in
effect. True and correct copies of such warranties and warranty policies have
been provided or made available to Toshiba.
4.17 PROCEEDINGS. Section 4.17 of the Disclosure Schedule identifies each
pending Proceeding against or affecting any of the ACC Entities, their
respective assets or businesses or the transactions contemplated by this
Agreement. ACC has delivered to Toshiba true, accurate and complete copies of
all pleadings, correspondence and other documents relating to such Proceedings.
4.18 LEGAL REQUIREMENTS. To ACC's Knowledge, each of the ACC Entities has
substantially complied, and is in substantial compliance, with all Legal
Requirements that are applicable to the Business.
4.19 ACCOUNTING RECORDS; INTERNAL CONTROLS. To ACC's Knowledge: the ACC
Entities (a) make and keep books and records that are accurate in all material
respects, and (b) maintain internal accounting controls which provide reasonable
assurance that (i) transactions are executed in accordance with management's
authorization, (ii) transactions are recorded as necessary to permit preparation
of their financial statements and to maintain accountability for their assets,
(iii) access to their assets is permitted only in accordance with management's
authorization, and (iv) reported accountability for their assets is compared
with existing assets at reasonable intervals.
4.20 INSURANCE. Section 4.20 of the Disclosure Schedule lists all insurance
policies and bonds with respect to the ACC Entities, including, without
limitation, all policies insuring directors and officers of the ACC Entities.
ACC has delivered to Toshiba true, accurate and complete copies of all such
policies and bonds. To ACC's Knowledge, the ACC Entities have timely filed
claims with their respective insurers with respect to all material matters and
occurrences for which they believe they have coverage. Except as set forth in
Section 4.20 of the Disclosure Schedule, Audiovox has received no written notice
or other written indication from any insurer or agent of any intent to cancel or
not renew any of such insurance policies or bonds.
4.21 GOVERNMENTAL APPROVALS. To ACC's Knowledge, each ACC Entity has
obtained and is in compliance with all Governmental Approvals that are necessary
in connection with its ownership and operation of its assets and business, and
all of such Governmental Approvals are
Exhibit 99.2
9
in full force and effect. To ACC's Knowledge, there is no pending or threatened
Proceeding with respect to the suspension, termination, revocation,
cancellation, limitation or impairment of any such Governmental Approval, and no
fines or penalties are due and payable in respect of any such Governmental
Approval or any violation thereof.
4.22 EMPLOYEE MATTERS.
(A) Except as indicated in Section 4.22(a) of the Disclosure Schedule,
none of the employees of the ACC Entities ("EMPLOYEES") has been granted
the right to continued employment or engagement by any ACC Entity or to any
compensation following or in connection with termination of employment or
engagement with any ACC Entity, subject to any rights to receive such
compensation pursuant to applicable Legal Requirements.
(B) Except as indicated in Section 4.22(b) of the Disclosure Schedule,
neither the execution and delivery of the Transaction Agreements nor the
consummation of the transactions contemplated thereby will result in or
give rise to (i) any liability by any Person to make any severance,
retention, termination, "golden parachute" or other payment to any
Employee, or (ii) the acceleration of any other rights or benefits to any
Employee (including vesting and payments with respect to equity incentives
and other rights under Benefits Plans), in each case whether pursuant to
Benefit Plan, Contract, Legal Requirement or otherwise.
(C) Except as indicated in Section 4.22(c) of the Disclosure Schedule,
to ACC's Knowledge, there are no claims, disputes, controversies or
Proceedings against or affecting any ACC Entity pending or threatened by or
pertaining to any Employee. Each ACC Entity has substantially complied with
all Legal Requirements related to the employment or engagement of its
employees, including Legal Requirements related to wages, hours, leaves of
absence, equal opportunity, occupational health and safety, workers'
compensation, severance, employee handbooks or manuals, collective
bargaining, unfair labor practices and the payment of social security and
other Taxes and withholding obligations relating thereto.
(D) None of the ACC Entities is a party to or is otherwise subject to
any obligations relating to any collective bargaining Contract. There is no
labor strike, slowdown or stoppage and there are currently no union
organizing activities among the Employees pending or threatened against any
of the ACC Entities.
4.23 BENEFIT PLANS.
(A) Section 4.23(a) of the Disclosure Schedule lists all employee
benefit plans, collective bargaining, employment and severance Contracts
and other similar arrangements to which any ACC Entity is a party or is
otherwise subject, including plans and arrangements provided by Audiovox
(the "BENEFIT PLANS"), including, without limitation, (i) profit-sharing,
deferred compensation, bonus, stock option, stock purchase, pension,
retainer, consulting, retirement, severance, welfare or incentive plans or
Contracts, (ii) benefits relating to vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life insurance
and other types of insurance, and (iii) employment Contracts.
(B) ACC has delivered to Toshiba true and complete copies of all
documents and summary plan descriptions with respect to the Benefit Plans,
or summary descriptions of any Benefit Plans not in writing. ACC Entities
and Audiovox are in substantial compliance with all
Exhibit 99.2
10
Legal Requirements applicable to the Benefit Plans and have performed
in all material respects all of their obligations under the Benefit Plans.
To ACC's Knowledge, there are no Proceedings pending or threatened against
or with respect to any Benefit Plans.
4.24 CERTAIN INTERESTS. To the extent that Audiovox is required to disclose
certain relationships and related transactions pursuant to Legal Requirements
and assuming that such disclosure is complete and accurate through the date
hereof, Section 4.24 of the Disclosure Schedule accurately identifies all
Contracts, courses of dealing and other relationships with and between any ACC
Entity, on the one hand, and Audiovox or any of its Affiliates or Associates, on
the other hand, and ACC has delivered to Toshiba true, accurate and complete
copies of all written Contracts relating thereto. Except as set forth in Section
4.24 of the Disclosure Schedule, neither Audiovox nor any of its Associates or
Affiliates has any ownership interest in any property used in or pertaining to
the business of the ACC Entities; no such Person is indebted or otherwise
obligated to the ACC Entities; and none of the ACC Entities is indebted or
otherwise obligated to any such Person. Except as set forth in Section 4.24 of
the Disclosure Schedule, no ACC Entity is subject to any liability to Audiovox
or any of its Affiliates or Associates that is required to be disclosed pursuant
to Legal Requirements and assuming that such disclosure is complete and accurate
through the date hereof.
4.25 ENVIRONMENTAL COMPLIANCE. Except as provided for or reserved against
on the Financial Statements or as have not had and would not reasonably be
likely to have a Company Material Adverse Effect, to ACC's Knowledge:
(A) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by Audiovox or any ACC
Entity at, upon or from any of the properties now or previously owned or
leased by Audiovox or any ACC Entity in violation of any Legal Requirement
or Approval, or which would require remedial action under any Legal
Requirement or Approval.
(B) There has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or
into the environment surrounding such property of any toxic wastes, medical
wastes, solid wastes, hazardous wastes or hazardous substances due to or
caused by Audiovox or any ACC Entity. The terms "hazardous wastes", "toxic
wastes", "hazardous substances" and "medical wastes" shall have the
meanings specified for such terms or any similar terms in any applicable
local, state, federal and foreign Laws with respect to environment
protection.
4.26 NO BROKERS OR FINDERS. Except for Berenson Minella & Company, whose
fees will be borne by Audiovox, no agent, broker, finder, investment or
commercial banker, or other Person engaged by or acting on behalf of any ACC
Entity in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions.
4.27 ACCURACY OF INFORMATION. To ACC's Knowledge, all information provided
by ACC or its agents and representatives to Toshiba or its agents and
representatives in connection with this Agreement is true and correct in all
material respects as of the respective dates of such information and does not
omit any material fact necessary to make the statements therein, in light
Exhibit 99.2
11
of the circumstances under which they were made, not misleading as of the
respective dates of such information; provided that no representation or
warranty is made by ACC or Audiovox as to any financial forecasts or projections
furnished to Toshiba or its agents or representatives, except that such
financial forecasts and projections have been prepared in good faith based on
assumptions that are believed by ACC to have been reasonable at the time or
times made.
5. REPRESENTATIONS AND WARRANTIES OF TOSHIBA.
Toshiba hereby represents and warrants to Audiovox and ACC as follows:
5.1 ORGANIZATION; AUTHORITY; ENFORCEABILITY; EFFECT OF TRANSACTION
AGREEMENTS. Toshiba is a corporation duly organized and validly existing under
the Laws of Japan. Toshiba has all necessary organizational power and authority
to execute, deliver and perform the Transaction Agreements to which it is a
party. Each Transaction Agreement to which Toshiba is a party has been duly
authorized by all necessary organizational action of Toshiba. Each Transaction
Agreement to which Toshiba is a party has been duly executed and delivered by
Toshiba. Assuming the due authorization, execution and delivery by the other
party or parties thereto, each Transaction Agreement to which Toshiba is a party
constitutes a valid and legally binding obligation of Toshiba, enforceable
against Toshiba in accordance with its terms, subject to limitations imposed by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other Laws relating to or affecting creditors' rights generally and general
equitable principles.
5.2 NO CONFLICTS.
(A) The execution and delivery by Toshiba of each Transaction
Agreement to which it is a party does not, and the performance by Toshiba
of its obligations thereunder will not, conflict with, result in any
violation of or default (with or without notice or lapse of time or both)
under, give rise to a right of termination, cancellation or acceleration of
any obligation (in each case by any third party) or to the loss of any
benefit by Toshiba under, or result in or require the creation, imposition
or extension of any Lien upon any asset of Toshiba under, (1) the
Organizational Documents of Toshiba, (2) any Contract or Governmental
Approval to which Toshiba is a party or is otherwise bound, or to which any
of its assets is subject, or (3) any Law applicable to Toshiba, except for
any matters that would not be reasonably expected to have a material
adverse effect on Toshiba's ability to perform its obligations under the
Transaction Agreements.
(B) Toshiba's execution and delivery of the Transaction Agreements to
which it is a party, Toshiba's performance of its obligations thereunder
and the consummation of the transactions contemplated thereby will not
require any Approvals of or with any Person, except for Toshiba's
post-Closing filing under the Foreign Exchange and Foreign Trade Law of
Japan relating to its acquisition of the Shares and the Note, and for any
matters that would not be reasonably expected to have a material adverse
effect on Toshiba's ability to perform its obligations under the
Transaction Agreements.
5.3 NO BROKERS OR FINDERS. Except for any entities affiliated with Goldman
Sachs (Japan) Ltd., whose fees will be borne by Toshiba, no agent, broker,
finder, investment or commercial banker, or other Person engaged by or acting on
behalf of Toshiba in connection with the negotiation, execution or performance
of this Agreement or the transactions contemplated by
Exhibit 99.2
12
this Agreement, is or will be entitled to any brokerage or finder's or similar
fee or other commission as a result of this Agreement or such transactions.
5.4 PURCHASE FOR TOSHIBA'S OWN ACCOUNT. The Shares and the Note are being
acquired hereunder for investment for Toshiba's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof.
Toshiba is not subject to any Contract and has no present intention to sell,
grant any participation in or otherwise distribute any of the Shares or the
Note.
5.5 SOPHISTICATED INVESTOR.
(A) Toshiba acknowledges that it is able to fend for itself with
respect to evaluating its investment in the Shares and the Note; can bear
the economic risk of its investment in the Shares and the Note; can hold
the Shares and the Note for an indefinite period of time; and has such
knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of its investment in the Shares
and the Note.
(B) Toshiba has undertaken its own due diligence investigation of the
ACC Entities and the Business, has had a complete opportunity to discuss
the ACC Entities and the Business with ACC's management, and has been
provided with and has evaluated such documents and information as it has
deemed necessary to enable it to make an informed and intelligent decision
with respect to the execution, delivery and performance of this Agreement
and the purchase of the Shares and the Note hereunder. Toshiba acknowledges
that the ACC Entities have given Toshiba reasonable access to the ACC
Entities and the key employees, documents and facilities of the Business.
Toshiba has undertaken such further investigation and has requested such
additional documents and information as it deems necessary. Toshiba agrees
to accept the Shares and the Note on the Closing Date upon the terms and
conditions contained herein based upon its own examination and
determination with respect to the ACC Entities and the Business as to all
matters, and without reliance upon any express or implied representations
or warranties of any nature made by or on behalf of or imputed to Audiovox
or the ACC Entities, except as expressly set forth in this Agreement.
Notwithstanding the foregoing, this Section shall not affect in any manner
the representations or warranties of ACC and Audiovox contained herein, or
Toshiba's ability to rely thereon or Toshiba's rights with respect thereto.
5.6 RESTRICTED SECURITIES. Toshiba understands that the Shares and the Note
are characterized as "restricted securities" under the Securities Laws inasmuch
as they are being acquired from ACC in a transaction not involving a public
offering, and that under the Securities Laws, the Shares and the Note may be
resold without registration under the Securities Act only in certain limited
circumstances. Toshiba is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act. Toshiba understands that no public market now exists for the Shares or the
Note, and that ACC has made no assurances that a public market will ever exist
for the Shares or the Note.
5.7 LEGENDS. Toshiba understands that, in addition to any legend required
by the Stockholders Agreement or applicable Laws, the certificates evidencing
the Shares and the Note at Closing shall bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
Exhibit 99.2
13
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE UNITED STATES FEDERAL,
STATE AND FOREIGN SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
5.8 AVAILABILITY OF FUNDS. Toshiba has sufficient funds available to enable
it to pay the Purchase Price to ACC in full pursuant to the terms of this
Agreement and to perform its other obligations hereunder. Toshiba represents and
warrants that its obligations under this Agreement are not subject to any
condition regarding its ability to obtain funding.
6. SURVIVAL; INDEMNIFICATION.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Parties contained in or made pursuant to this Agreement shall
expire one (1) year after the Closing, except that (i) the representations and
warranties contained in Section 4.4 (Capitalization), Section 4.9 (Taxes),
Section 4.16 (Warranties), Section 4.23 (Benefit Plans) and Section 4.25
(Environmental Compliance) shall continue through the expiration of the
applicable statute of limitations as the same may be extended, and (ii) if a
claim or notice is given under this Section 6 with respect to any representation
or warranty prior to the applicable expiration date, such representation or
warranty shall continue indefinitely until such claim is finally resolved.
6.2 INDEMNIFICATION BY ACC AND AUDIOVOX. ACC and Audiovox shall jointly and
severally indemnify and hold harmless Toshiba and its employees, Associates,
Affiliates, representatives, advisors, agents and assigns (collectively, the
"TOSHIBA INDEMNIFIED PERSONS") from and against any and all Losses as a result
of, based upon or arising from:
(A) Any inaccuracy in or breach of any representation or warranty by
ACC or Audiovox contained herein or in any schedule or certificate
delivered by or on behalf of ACC or Audiovox at or prior to the Closing
pursuant hereto.
(B) Any breach by ACC or Audiovox of, or any failure by either of them
to perform or comply with, any of their respective obligations contained in
this Agreement.
6.3 INDEMNIFICATION BY TOSHIBA. Toshiba shall indemnify and hold harmless
ACC, Audiovox and their respective employees, Associates, Affiliates,
representatives, advisors, agents and assigns from and against any and all
Losses as a result of, based upon or arising from:
(A) Any inaccuracy in or breach of any representation or warranty by
Toshiba contained herein or in any schedule or certificate delivered by or
on behalf of Toshiba at or prior to the Closing pursuant hereto.
(B) Any breach by Toshiba of, or any failure by Toshiba to perform or
comply with, any of its obligations contained in this Agreement.
6.4 LIMITS ON INDEMNIFICATION. Notwithstanding anything herein to the
contrary, ACC and Audiovox shall not be obligated to indemnify the Toshiba
Indemnified Persons under this Section 6 (i) unless the aggregate of
indemnifiable Losses incurred by the Toshiba Indemnified Parties exceeds
$500,000 (the "INDEMNIFICATION THRESHOLD"), in which case the Indemnified
Persons shall be entitled to recover the difference between their aggregate
indemnifiable Losses
Exhibit 99.2
14
and a deductible amount of $100,000, or (ii) to the extent that the aggregate of
all of the indemnifiable Losses of the Toshiba Indemnified Parties exceeds the
Purchase Price (the "INDEMNIFICATION CAP"); provided, however, that the
Indemnification Threshold, the Indemnification Cap and the deductible amount
shall not apply to any indemnification obligation of ACC or Audiovox (1) arising
out of, relating to or resulting from fraud or intentional misrepresentation by
ACC or Audiovox, or (2) from a breach of any of the representations or
warranties of ACC and Audiovox contained in Section 4.4 (Capitalization) or
Section 4.9 (Taxes).
6.5 INDEMNIFICATION PROCEDURE.
(A) CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification under this Section 6, the indemnified person making such
claim shall promptly notify the indemnifying person in writing of the claim
and, when known, the facts constituting the basis for such claim; provided
that failure to give such notice shall not affect any rights or remedies of
the indemnified person hereunder except to the extent that the indemnifying
person is materially prejudiced thereby.
(B) DEFENSE. In connection with any claim giving rise to indemnity
hereunder and upon request of the indemnified person seeking
indemnification, the indemnifying person at its sole cost and expense shall
assume the defense of any such claim and thereafter diligently conduct the
defense thereof with counsel reasonably acceptable to the indemnified
person. The indemnified person shall be entitled to participate in the
defense of any claim assumed by an indemnifying person with the indemnified
person's counsel and at its own expense. If the indemnifying person does
not assume the defense of such action within thirty (30) days after written
notice thereof from the indemnified person, and if the indemnified person
elects at its option to assume the claim itself, the indemnified person may
defend against such claim in such manner and on such terms as it may deem
appropriate, including but not limited to settling such claim, such defense
to be at the sole cost and expense of the indemnifying person.
Notwithstanding the foregoing, without the prior written consent of the
indemnified person, the indemnifying person shall not consent to the entry
of any judgment or enter into any settlement (or have any liability for
Losses with respect thereto) which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the indemnified
persons a release from all liability with respect to such claims.
(C) REASONABLE COOPERATION. The indemnified persons shall reasonably
cooperate at the indemnifying person's expense in any Proceedings with
respect to any claim in respect of which indemnity is provided pursuant to
this Section 6, including, but not limited to, by providing the
indemnifying person with reasonable access to employees and officers
(including as witnesses) and other information.
6.6 NOTICE BY INDEMNIFYING PERSONS. The indemnifying persons shall notify
the indemnified persons of any Liabilities, claims or misrepresentations,
breaches or other matters covered by this Section 6 upon discovery or receipt of
notice thereof, whether before or after the Closing.
6.7 REDUCTION OF INTERCOMPANY NOTE. Audiovox may, at its option and to the
extent that there are amounts outstanding under the Intercompany Note, satisfy
its indemnification obligations hereunder by reducing the outstanding balance of
the Intercompany Note by the amount of any Losses suffered by a Toshiba
Indemnified Person that are indemnifiable by
Exhibit 99.2
15
Audiovox under this Section 6; provided that the Toshiba Indemnified Persons
shall be entitled to receive cash as reimbursement for any cash payments made to
third parties in respect of Losses that are indemnifiable by Audiovox under this
Section 6.
6.8 NO RIGHT OF SUBROGATION. Audiovox shall have no right of subrogation,
reimbursement or similar right against any ACC Entity with respect to Audiovox's
indemnity obligations under this Section 6. Audiovox hereby irrevocably waives
all such rights, and agrees not to institute any Proceedings against Toshiba or
the ACC Entities with respect to the same.
6.9 NOT EXCLUSIVE REMEDY. This Section 6 shall not be deemed to preclude or
otherwise limit in any way the exercise of any other rights or the pursuit of
any other remedies for the breach of this Agreement or with respect to any
inaccuracy of representations or warranties contained herein.
6.10 NO DUPLICATION. No indemnified person shall be entitled to any
duplication of reimbursement or indemnification with respect to any claims which
constitute a breach of more than one representation, warranty, covenant or
agreement contained in this Agreement, provided that such claims are reimbursed
or indemnified to the full extent provided for hereunder.
7. CONFIDENTIALITY; PUBLICITY.
7.1 CONFIDENTIAL INFORMATION. The Parties recognize that, in connection
with the performance of the transactions contemplated hereby, each Party (in
such capacity, the "DISCLOSING PARTY") may disclose Confidential Information to
the other Parties (each in such capacity, the "RECEIVING PARTY"). For purposes
of this Agreement, "CONFIDENTIAL INFORMATION" means any and all information
(whether owned by the Disclosing Party or any Person to whom the Disclosing
Party owes a non-disclosure obligation) regarding the Disclosing Party and its
business which is (i) in written or other tangible form and marked with a legend
which identifies the information as confidential, or (ii) in oral or visual
form, identified as being confidential at the time of disclosure and thereafter
summarized in a writing which identifies the information as confidential and is
transmitted to a Receiving Party within thirty (30) days after such oral or
visual disclosure.
7.2 CONFIDENTIALITY OBLIGATION. Each Receiving Party agrees for a period of
two (2) years after the receipt of any Confidential Information (i) to protect
the Confidential Information and not to disclose the Confidential Information to
any Person, utilizing the same degree of care the Receiving Party utilizes to
protect its own confidential information of a similar nature, and (ii) not to
utilize the Confidential Information for any purpose other than in connection
with the transactions contemplated hereby. The Parties agree to restrict
distribution of the Confidential Information to those Persons involved in the
subject of the discussions who have a "need to know" such information in
connection with the discussions.
7.3 EXCEPTIONS. Notwithstanding the provisions of Section 7.2, each
Receiving Party shall have no obligation to maintain the confidentiality of any
information, and the Confidential Information shall not include any information,
that (i) is or becomes generally available in the public domain other than
through unauthorized or improper disclosure by the Receiving Party, (ii) was
validly in the Receiving Party's possession prior to disclosure by a Disclosing
Party, (iii) was independently developed by the Receiving Party, or (iv) was
received by the Receiving Party from another Person without violation of any
confidentiality obligations.
Exhibit 99.2
16
7.4 DISPOSAL OF CONFIDENTIAL INFORMATION. Within thirty (30) days of the
termination of this Agreement, upon the applicable Disclosing Party's request,
each Receiving Party shall return to the Disclosing Party or destroy all
Confidential Information (including copies and electronic records thereof).
7.5 PUBLICITY. Subject to applicable Law and the applicable rules or
regulations of any stock exchange on which the securities of any Party are then
traded, no Party shall issue any press release, publicity statement,
communication with stockholders, public notice or other public disclosure
relating directly to this Agreement or the transactions contemplated hereby
without prior notice to, consultation with, and the consent of the other Party.
Notwithstanding the foregoing, so long as the disclosing Party reasonably
attempts to consult with and obtain the consent of the other Parties, limits the
applicable disclosure to the extent practicable and provides a copy of the
disclosure to the non-disclosing Party concurrently with or in advance of its
public release, such consultation and consent shall not be required if a Party
must make a public disclosure on an emergency basis in order to comply with
applicable securities Laws.
8. GENERAL PROVISIONS.
8.1 GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with and governed by the Laws of the State of New York, U.S.A.,
including, without limitation, Section 5-1401 of the General Obligations Law of
the State of New York (without regard to the choice of law provisions thereof).
Judgement upon an award rendered by the arbitrators pursuant to Section 8.2
shall be entered in the courts of the State of New York, and the Parties hereby
submit to the exclusive jurisdiction of such courts for the purpose of any such
entry. The Parties agree and consent that services of process may be made upon
the Parties in any legal proceedings relating hereto by any means allowed under
applicable Law.
8.2 DISPUTE RESOLUTION.
(A) The Parties intend that all disputes between the Parties arising
out of this Agreement shall be settled by the Parties amicably through good
faith discussions upon the written request of either Toshiba or Audiovox.
In the event that any such dispute cannot be resolved thereby within a
period of sixty (60) calendar days after such notice has been given, such
dispute shall be finally settled by binding arbitration at the request of
Toshiba or Audiovox.
(B) Each arbitration hereunder shall be conducted in the English
language in New York, New York, and shall be administered by the American
Arbitration Association under its Commercial Arbitration Rules then in
effect, before three (3) independent arbitrators to be appointed as
follows. Toshiba and Audiovox shall each appoint one (1) arbitrator, and
the two (2) arbitrators so appointed shall appoint a third arbitrator in
accordance with paragraph (c) of AAA Rule R-15 (Appointment of Neutral
Arbitrator by Party-Appointed Arbitrators or Parties) currently in effect.
However, in all events, these arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the applicable
rules.
(C) Toshiba and Audiovox each may demand arbitration by filing a
written demand with the other Party within one hundred eighty (180)
calendar days after the expiration of the sixty (60) day period described
above. The arbitrators shall have the authority to grant any equitable and
legal remedies that would be available in any judicial proceeding intended
to resolve a dispute, including the termination of this Agreement.
Notwithstanding the foregoing, Toshiba
Exhibit 99.2
17
and Audiovox each shall be entitled to seek preliminary injunctive
relief from any court of competent jurisdiction, pending the final decision
or award of the arbitrators. The award rendered in an arbitration hereunder
shall be final and non-appealable.
8.3 NOTICES AND OTHER COMMUNICATIONS. Any and all notices, requests,
demands and other communications required or otherwise contemplated to be made
under this Agreement shall be in writing and in English and shall be provided by
one or more of the following means and shall be deemed to have been duly given
(a) if delivered personally, when received, (b) if transmitted by facsimile, on
the first (1st) Business Day following receipt of a transmittal confirmation, or
(c) if by international courier service, on the third (3rd) Business Day
following the date of deposit with such courier service, or such earlier
delivery date as may be confirmed in writing to the sender by such courier
service. All such notices, requests, demands and other communications shall be
addressed as follows:
If to Toshiba:
Toshiba Corporation
Mobile Communications Company
1-1, Shibaura 1-chome, Minato-ku
Tokyo 105-8001
Japan
Attention: General Manager, International Operations
Telephone: -81-3-3457-3241
Facsimile: -81-3-3457-8194
If to Audiovox:
Audiovox Corporation
150 Marcus Blvd.
P.O. Box 18000
Hauppauge, NY 11788-1800
U.S.A.
Attention: Charles M. Stoehr
Telephone: (631) 436-6505
Facsimile: (631) 231-1370
If to ACC:
Audiovox Communications Corp.
555 Wireless Boulevard
Hauppauge, New York 11788
U.S.A.
Attention: Philip Christopher
Telephone: (631) 233-3300
Facsimile: (631) 951-0784
Exhibit 99.2
18
With a copy to:
Levy & Stopol, LLP
East Tower, 14th Floor
190 EAB Plaza
Uniondale, NY 11556-0190
Telephone: (516) 802-7007
Facsimile: (516) 802-7008
or to such other address or facsimile number as a Party may have specified to
the other Parties in writing delivered in accordance with this Section 8.3.
8.4 SEVERABILITY. If any provisions of this Agreement shall be held to be
illegal, invalid or unenforceable, the Parties agree that such provisions will
be enforced to the maximum extent permissible so as to effect the intent of the
Parties, and the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. If necessary to effect the intent of the Parties, the Parties will
negotiate in good faith to amend this Agreement to replace the unenforceable
language with enforceable language which as closely as possible reflects such
intent.
8.5 AMENDMENTS. This Agreement may be amended or modified only by a written
instrument signed by each Party.
8.6 WAIVER. Any waiver by a Party of an instance of another Party's
noncompliance with any obligation or responsibility herein contained shall be in
writing and signed by the waiving Party and shall not be deemed a waiver of
other instances of another Party's noncompliance hereunder.
8.7 NO ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and permitted assigns
of the Parties. Nothing in this Agreement shall confer any rights upon any
Person other than the Parties and their respective successors and permitted
assigns. No Party may assign this Agreement or its rights hereunder to any
Person without the written consent of the other Parties. No assignment by any
Person of this Agreement or of any of such Person's rights hereunder shall
release such Person from any of its obligations hereunder. Any attempted
assignment of this Agreement in violation of this Section 8.7 shall be void and
of no effect.
8.8 EXPENSES. Toshiba shall bear all out-of-pocket costs and expenses
(including, without limitation, attorney's, accountant's and financial advisor's
fees) incurred by it in connection with the negotiation and execution of the
Transaction Agreements. Audiovox shall bear all out-of-pocket costs and expenses
(including, without limitation, attorney's, accountant's and financial advisor's
fees) incurred by it, the ACC Entities or their respective Affiliates or
Associates in connection with the negotiation and execution of the Transaction
Agreements.
8.9 CONSTRUCTION. This Agreement has been negotiated by the Parties and
their respective counsel and shall be fairly interpreted in accordance with its
terms and without any strict construction in favor of or against any Party.
8.10 INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT. Unless the context
shall
Exhibit 99.2
19
otherwise require, any pronoun shall include the corresponding masculine,
feminine and neuter forms, and words using the singular or plural number shall
also include the plural or singular number, respectively. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Annexes, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement unless the context shall
otherwise require. The headings of the Articles and Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretations of this Agreement. Unless the context shall
otherwise require, any reference to any agreement or other instrument or statute
or regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any successor provision). Any reference in this Agreement to a "day" or a
number of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given, on the next Business Day.
8.11 DISCLAIMER OF AGENCY. This Agreement shall not constitute any Party as
a legal representative or agent of any other Party, nor shall a Party have the
right or authority to assume, create or incur any Liability of any kind,
expressed or implied, against or in the name or on behalf of another Party or
any of its Affiliates.
8.12 LANGUAGE. The Parties have negotiated this Agreement in the English
language, which shall be the governing language of this Agreement.
8.13 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended to, or shall be deemed to, create a partnership or joint venture
relationship among the Parties or any of their Affiliates for any purpose,
including tax purposes. None of the Parties nor any of their respective
Affiliates will take a position contrary to the foregoing.
8.14 SPECIFIC PERFORMANCE. The Parties agree that each other Party shall be
entitled to obtain an injunction or injunctions in accordance with the dispute
resolution procedures contained in Section 8.2 to prevent breaches of the
provisions of this Agreement, or any agreement contemplated hereunder and to
enforce specifically the terms and provisions hereof, in each instance without
being required to post bond or other security, without being required to prove
irreparable harm, and in addition to, and without having to prove the adequacy
of, other remedies at Law.
8.15 CONSEQUENTIAL AND OTHER DAMAGES. No Party shall be liable to the other
Party under any contract, negligence, strict liability or other theory for any
indirect, incidental, consequential, punitive or other special damages
(including without limitation lost profits) asserted by the other Party.
8.16 ENTIRE AGREEMENT. The provisions of this Agreement, the Schedules and
Exhibits hereto and the other Transaction Agreements set forth the entire
agreement and understanding among the Parties as to the subject matter hereof
and supersede all prior agreements, oral or written, and all other prior
communications among the Parties relating to the subject matter hereof.
Exhibit 99.2
20
8.17 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such
counterpart shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Exhibit 99.2
21
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Securities Purchase Agreement as of
the date first above written.
TOSHIBA CORPORATION,
a Japanese corporation, acting through its
Mobile Communications Company
By: s/ Tetsuya Mizoguchi
--------------------------------------
Name: Tetsuya Mizoguchi
Title: President and CEO,
Mobile Communications
Company
AUDIOVOX COMMUNICATIONS
CORP.,
a Delaware corporation
By: s/ Philip Christopher
--------------------------------------
Name: Philip Christopher
Title: Chief Executive Officer
AUDIOVOX CORPORATION,
a Delaware corporation
By: s/ John J. Shalam
--------------------------------------
Name: John J. Shalam
Title: Chief Executive Officer
Exhibit 99.2
22
ANNEX I
CERTAIN DEFINITIONS
"ACC'S KNOWLEDGE" or the "KNOWLEDGE OF ACC" shall mean the knowledge of
Philip Christopher, Michael Stoehr and Neil Levine after reasonable
investigation of the matter in question.
"AFFILIATE" of a specified Person means any Person that controls, is
controlled by or is under common control with such specified Person. For
purposes of this definition, "CONTROL" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or other ownership interests, by
contract or otherwise).
"APPROVAL" means, as to any Person, any consent, approval, authorization,
waiver, grant, concession, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, such Person.
"ASSOCIATE" of a Person means:
(i) any officer or director of such Person, or other Person serving in
a similar role with respect to such Person;
(ii) any corporation or other entity (other than Audiovox or any ACC
Entity) of which such Person or any Person specified in clause (i) is an
officer, partner, manager or Person serving in a similar role, or is,
directly or indirectly, the beneficial owner of 5% or more of any class of
equity securities;
(iii) any trust or other estate in or as to which such Person or any
Person specified in clauses (i) or (ii) has a 10% or greater beneficial
interest or serves as trustee or in a similar capacity; or
(iv) any relative or spouse of such Person or any Person specified in
clause (i), or any relative of such spouse.
"BUSINESS" means the research, development, design, manufacture, marketing,
sale and/or service of Products.
"BUSINESS DAY" means a day on which commercial banks in New York City are
generally open to conduct their regular banking business.
"CONTRACT" means any contract, agreement, lease, plan, instrument or other
document, commitment, arrangement, undertaking, practice, understanding or
authorization, in each case whether or not in writing.
"GOVERNMENT APPROVAL" means any Approval of, to or with any Governmental
Authority.
"GOVERNMENTAL AUTHORITY" shall mean any federation, nation, state,
sovereign or government, any federal, supranational, regional, state, local or
municipal political subdivision,
Exhibit 99.2
23
any governmental or administrative body, instrumentality, department or agency,
or any court, administrative hearing body, arbitrator, commission or other
similar dispute resolving panel or body, and any other entity exercising
executive, legislative, judicial, regulatory or administrative functions of a
government.
"INTELLECTUAL PROPERTY" means all patents, trademarks, service marks, trade
names, copyrights, trade secrets, know-how, technology, software and other
intellectual property and proprietary rights owned by the ACC Entities that are
material to or reasonably necessary to the conduct of the ACC Entities' business
as presently conducted or presently proposed by the Company to be conducted;
provided, however, that computer software, computer programs and source disks,
and related program documentation, tapes, manuals, forms, guides and other
materials that are licensed to Audiovox or any ACC Entity shall not constitute
or be deemed to constitute Intellectual Property for any purposes of this
Agreement.
"LAWS" means all applicable provisions of all (i) constitutions, treaties,
statutes, laws (including common law), rules, regulations, ordinances or codes
of any Governmental Authority, and (ii) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
"LEGAL REQUIREMENT" shall mean any federal, state, regional, local,
municipal, foreign or other Law, statute, legislation, constitution, principle
of common law or equity, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, permit, ruling, directive,
pronouncement, requirement (licensing or otherwise), specification,
determination, decision, opinion or interpretation that is, has been or may in
the future be issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Authority.
"LIABILITY" shall mean any direct or indirect liability, indebtedness,
obligation, expense, cost, claim, loss, damage, deficiency, guaranty or
endorsement of or by any Person, absolute or contingent, accrued or unaccrued,
due or to come due, liquidated or unliquidated, whether or not made or asserted,
in each case to the extent required by GAAP to be reflected or reserved against
on a balance sheet.
"LIEN" shall mean any lien, mortgage, security interest, pledge,
restriction on transferability, defect of title or other claim, charge or
encumbrance of any nature whatsoever on any property or property interest,
including any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"LOSS" means any Proceeding, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including, without limitation, interest or other carrying costs, penalties,
legal, accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified Person.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the ACC
Entities or their respective business, assets, results of operation, financial
condition or prospects, taken as a whole, or the ability of Audiovox or ACC to
perform its respective obligations under the Transaction Agreements.
Exhibit 99.2
24
"MATERIAL CONTRACTS" means all Contracts that are material to the ACC
Entities, including all Contracts (i) obligating any ACC Entity to pay an amount
of $1,000,000 or more; (ii) expressly limiting or restricting the ability of any
ACC Entity to compete or otherwise to conduct its business in any manner or
place; (iii) pursuant to which any ACC Entity has incurred or may incur money
indebtedness of $1,000,000 or more; (iv) providing for the use of or limiting
the use of any Intellectual Property; (v) all leases of real property or
material personal property; (vi) any joint venture, partnership, cooperative
arrangement or any other Contract involving a sharing of profits; and (vii) any
Contract related to the acquisition of a business of or an ownership interest in
any other Person.
"ORGANIZATIONAL DOCUMENTS" of a Person means its Certificate of
Incorporation, Bylaws or other organizational documents.
"PERMITTED LIENS" means (i) Liens reserved against in the Financial
Statements (including any notes thereto) to the extent so reserved, (ii)
mechanics', carriers', workers', repairers', materialmen's, warehousemen's and
other similar Liens arising out of operation of Law with respect to a Liability
incurred in the ordinary course of business, (iii) Liens for Taxes which are
being contested in good faith by appropriate Proceedings or Liens for Taxes not
yet due, (iv) Liens disclosed on Section 4.11 of the Disclosure Schedule, and
(v) such other Liens that have not had and would not be reasonably likely to
materially detract from the value of or impair the use of the property subject
thereto.
"PERSON" means a natural individual, Governmental Authority, partnership,
firm, corporation or other entity.
"PROCEEDING" shall mean any action, litigation, arbitration, suit, claim,
proceeding or investigation or review of any nature, civil, criminal, regulatory
or otherwise, before any Governmental Authority.
"PRODUCTS" shall have the meaning set forth in the Distribution Agreement.
"SEC" means the U.S. Securities Exchange Commission.
"SECURITIES" of a Person means shares of capital stock, other equity
securities of the Person, and options, warrants, convertible securities,
exchangeable securities or other rights to acquire capital stock or other equity
securities of the Person.
"SECURITIES ACT" means the U.S. Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SECURITIES LAWS" means the Securities Act, the U.S. Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"TAX RETURN" shall mean any return, statement, declaration, notice,
certificate or other document that is or has been filed with or submitted to, or
required to be filed with or submitted to, any Governmental Authority in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement related to any Tax.
Exhibit 99.2
25
"TAXES" shall mean (i) all taxes, charges, fees, levies, or other
assessments, imposed by any taxing authority, including income, gross receipts,
excise, property, sales, use, transfer, payroll, license, ad valorem, value
added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments), (ii) liability of a Person for the payment of any amounts of the
type described in clause (i) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group, and (iii) liability of a
Person for the payment of any amounts of the type described in clause (i) as a
result of any express or implied obligation to indemnify any other Person.
Exhibit 99.2
26
LIST OF EXHIBITS
Exhibit 1 Non-Negotiable Subordinated Convertible Promissory Note
- ------- -
Exhibit 2.2(c)(i) Stockholders Agreement
Exhibit 2.2(c)(ii) Distribution Agreement
Exhibit 2.2(c)(iii) Philip Christopher Employment Agreement
Exhibit 2.2(c)(iv) Trademark License Agreement
Exhibit 2.2(c)(v) Shared Services Agreement
Exhibit 2.2(c)(vii) Non-Negotiable Demand Note
Exhibit 99.2
27
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "AGREEMENT") is made and entered into as
of May 29, 2002 by and among TOSHIBA CORPORATION, a Japanese corporation, acting
through its Mobile Communications Company ("TOSHIBA"), AUDIOVOX CORPORATION, a
Delaware corporation ("AUDIOVOX"), and AUDIOVOX COMMUNICATIONS CORP., a Delaware
corporation ("ACC"). Toshiba and Audiovox are referred to herein collectively as
the "PARTIES" and each individually as a "PARTY".
RECITALS
A. ACC, Audiovox and Toshiba have entered into the Securities Purchase
Agreement dated as of the date hereof (the "SECURITIES PURCHASE AGREEMENT"),
pursuant to which Toshiba is acquiring (i) shares of ACC's Class B Common Stock,
no par value per share, and (ii) a subordinated convertible promissory note of
ACC (the "NOTE"). After giving effect to such acquisition, Audiovox will own
seventy-five percent (75%) and Toshiba will own twenty-five percent (25%),
respectively, of ACC's outstanding capital stock.
B. The Parties and ACC desire to enter into this Agreement at the Closing
as contemplated by the Securities Purchase Agreement.
C. Certain terms used herein have the meanings set forth for such terms in
the text of this Agreement or in Annex I hereto. Unless otherwise defined
herein, terms used herein that are defined in the Securities Purchase Agreement
shall have the same meanings set forth for such terms in the Securities Purchase
Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties and ACC hereby agree as follows:
AGREEMENT
1. OPERATION AND MANAGEMENT OF ACC.
1.1 BOARD OF DIRECTORS. ACC will be managed by its Board of Directors (the
"BOARD") in accordance with the terms of this Agreement, ACC's Organizational
Documents and applicable Law. The Board shall consist of five (5) directors
("DIRECTORS"), four (4) of whom shall be appointed by Audiovox and one (1) of
whom shall be appointed by Toshiba. Toshiba shall also have the right to appoint
one (1) Board observer, who shall be entitled to attend Board proceedings. Such
Board observer may share information with Toshiba and its representatives but
shall otherwise treat all information learned at such proceedings in confidence.
Each Party shall exercise all voting rights with respect to its Securities and
take such other necessary action in order to ensure that the composition of the
Board is as set forth in this Section 1.1. The Directors and all observers shall
be individuals of good moral character and unaffiliated with any competitor of
ACC.
1.2 REMOVAL; REAPPOINTMENT OF DIRECTORS. Each Party shall have the right,
in its
Exhibit 99.3
1
sole discretion, to remove at any time any Director appointed by such Party
pursuant to Section 1.1, effective upon delivery of written notice to ACC and
the other Party. In the case of a vacancy in the office of a Director for any
reason (including removal pursuant to the preceding sentence), the vacancy shall
be filled by the Party that appointed the Director to which such vacancy
relates. Toshiba may remove and/or replace its Board observer described in
Section 1.1 at any time at its sole discretion, effective upon delivery of
written notice to ACC and Audiovox.
1.3 BOARD MEETINGS.
(A) Each Director shall have the authority to convene Board meetings.
Absent a contrary decision by the Board, meetings shall be held on Business
Days at the offices of ACC. Directors may attend Board meetings in person
or by any other means of attendance permitted under applicable Law,
including by telephone.
(B) The Board shall meet at least quarterly, and written notice of all
Board meetings shall be given to each Director and each Party not less than
ten (10) days in advance of each meeting. The ten (10)-day period may be
shortened by written waiver of the Director in question or actual
attendance by such Director, without objection, at a Board meeting.
Additionally, each Director shall promptly cooperate in good faith to
attend or waive notice with respect to Board meetings that must be held on
less than ten (10) days notice due to operational emergencies (a Director's
failure to so cooperate in good faith with respect to any Board meeting
shall be deemed to constitute such Director's waiver of notice with respect
to such meeting). Minutes of Board meetings shall be prepared by ACC in
English, and shall be distributed to each Director reasonably promptly
following such meeting.
1.4 BOARD QUORUM; VOTING; RESOLUTIONS. Subject to Section 1.5, (a) a quorum
shall be deemed to exist for purposes of Board actions so long as at least three
(3) Directors are present, and (b) any action, determination or resolution of
the Board shall require the affirmative vote of a majority of Directors present
at a meeting at which a valid quorum pursuant to this Section 1.4 is present.
1.5 EXTRAORDINARY APPROVAL ITEMS. ACC shall not take or agree to take, and
shall not permit any of its controlled Affiliates to take or agree to take,
directly or indirectly, any of the following actions ("EXTRAORDINARY APPROVAL
ITEMS") without the prior written approval of Toshiba.
(A) Subject to Section 4.5, amend or modify any of its Organizational
Documents.
(B) Engage in any line of business that is outside the scope of the
Business.
(C) Other than in the ordinary course of the Business, make any
capital or other expenditures that, individually or together with all
related expenditures, exceed twenty percent (20%) of the fair value of the
total assets of ACC.
(D) Other than in the ordinary course of the Business, incur,
guarantee or
Exhibit 99.3
2
otherwise become liable for, or grant Liens with respect to, any
indebtedness that, individually or together with all related
indebtedness, exceeds twenty percent (20%) of the fair value of the
total assets of ACC.
(E) Issue or sell capital stock (or any rights to acquire capital
stock) other than common stock.
(F) Declare or pay any dividends or other distributions (in cash or
other property) on account of any equity securities, or redeem, retire,
purchase or otherwise acquire any equity securities, other than to or from
all stockholders on a pro rata basis in accordance with their respective
holdings.
(G) Other than in the ordinary course of the Business, pay, purchase,
redeem, retire or otherwise acquire, directly or indirectly, any
indebtedness (including debt securities) that, individually or together
with all related indebtedness, exceeds twenty percent (20%) of the fair
value of the total assets of ACC, other than at maturity or pursuant to
fixed or mandatory prepayments, redemptions or sinking funds in accordance
with the terms of the applicable indebtedness.
(H) Merge or consolidate with or into another Person.
(I) Other than in the ordinary course of the Business, sell, lease or
otherwise dispose of assets that, individually or together with all related
disposed assets, exceed twenty percent (20%) of the fair value of the total
assets of ACC.
(J) Other than in the ordinary course of the Business, (1) purchase or
otherwise acquire (whether through a stock purchase, asset purchase, stock
swap or otherwise) any business or assets that, individually or together
with all related acquired businesses or assets, exceed twenty percent (20%)
of the fair value of the total assets of ACC, or (2) enter into, terminate
or materially amend the terms of any joint venture, partnership or similar
transaction that, individually or together with all related transactions
being undertaken, represent assets of ACC exceeding twenty percent (20%) of
the fair value of the total assets of ACC.
(K) Except for Contracts with underwriters in connection with an IPO,
enter into or amend any Contract that is outside the ordinary course of
ACC's Business and, individually or together with related Contracts,
involves aggregate commitments in excess of twenty percent (20%) of the
fair value of the total assets of ACC.
(L) Change its independent accountants.
(M) Enter into or amend any Contract between ACC or its controlled
Affiliates, on the one hand, and Audiovox or its Affiliates or their
respective Associates, on the other hand, except for any Contracts or
amendments thereto that are in good faith, in the ordinary course of the
Business, and on terms that are at least as favorable to ACC as those
available from third parties that are unaffiliated with Audiovox.
Exhibit 99.3
3
(N) File a petition for bankruptcy, dissolution or liquidation, make a
general assignment for the benefit of creditors, appoint a receiver or
trustee to take possession of all or substantially all of its assets, or
take any other action with respect to winding up and dissolution.
(O) Adopt or amend any employee equity incentive plan providing that
the holders' rights under the plan will be triggered or exercisable in case
of a change of control of ACC (whether through an acquisition of a majority
of ACC's capital stock, an acquisition of all or substantially all of ACC's
assets or a similar event conveying control of ACC).
1.6 OFFICERS.
(A) Toshiba shall have the right to designate individuals as officers
of ACC in the following capacities: Executive Vice President; Chief
Technology Officer for Toshiba Products; and Vice President for
Merchandizing -- Toshiba Products. Toshiba shall also have the right to
remove and replace its designees in a manner consistent with Section 1.2.
Such officers designated by Toshiba shall have the duties set forth on
Exhibit 1.6(a). Subject to the following conditions, the Board shall
appoint Toshiba's designees to these positions. Such individuals shall be
(1) qualified and competent in their positions in terms of experience,
expertise, moral character, ability to interface with other ACC officers
and employees and other relevant attributes, (2) unaffiliated with a
competitor of ACC, (3) not impose an unreasonable expense on ACC, and (4)
have the approval of the Chief Executive Officer (who may not withhold or
withdraw his approval without reasonable cause). The Chief Executive
Officer, in his discretion, may also hire additional individuals proposed
by Toshiba as employees of ACC, and the Board, in its discretion, may
appoint one or more of such individuals as officers of ACC.
(B) All other officers of ACC shall be appointed by the Board, in its
discretion, including the Chief Executive Officer and the Chief Financial
Officer.
(C) Each officer of ACC shall be qualified and competent for his
position in terms of experience, expertise, moral character and other
relevant attributes.
1.7 STOCKHOLDERS' MEETINGS. Each fiscal year ACC shall have an annual
stockholders meeting and such other stockholders meetings as may be convened by
the Board. Each stockholders meeting shall be convened at such time and place
determined by the Board. Stockholders of ACC shall receive notice of each
stockholders' meeting at least two (2) weeks before the scheduled date of the
meeting. Minutes of stockholders meetings shall be prepared by ACC in English,
and shall be distributed to each Party reasonably promptly following each
meeting.
1.8 BUDGETS AND PLANS. The CEO and the Executive Vice President appointed
by Toshiba shall prepare in consultation with Toshiba and submit to the Board
for its review and approval, and the Board shall approve (with such amendments
and modifications as it deems appropriate), the budgets and plans described in
this Section 1.8 based on ACC's Product roadmap and Product Plan provided for
under Section 7.3 and Section 7.4 of the Distribution Agreement.
Exhibit 99.3
4
(A) ANNUAL AND SEMI-ANNUAL BUDGETS. Annual and semi-annual budgets,
setting forth (1) profit and loss information, including sales and units
sold by supplier and gross margin by supplier, (2) balance sheet
information, including inventory by supplier, accounts receivable, accounts
payable and borrowings, (3) cash flow information, and (4) other budget
information determined by the Parties.
(B) MID-TERM BUSINESS PLAN. A mid-term business plan covering a three-
year period and setting forth ACC's business, sales and service strategy
and the information described in clauses (1) through (4) of Section 1.8(a).
1.9 ORGANIZATIONAL DOCUMENTS. The Organizational Documents of ACC shall be
in the form of Exhibit 1.9(a) (Certificate of Incorporation) and Exhibit 1.9(b)
(Bylaws), with such amendments and modifications as may be adopted in accordance
herewith.
1.10 TERMINATION UPON ACC'S QUALIFIED IPO. This Section 1 shall terminate
upon the consummation by ACC of a Qualified IPO. Notwithstanding the foregoing,
so long as the shares of Common Stock owned by Toshiba and/or issuable to
Toshiba upon the conversion of the Note (to the extent that Toshiba is then
entitled to convert the Note into Common Stock in accordance with its terms)
collectively constitute at least ten percent (10%) of ACC's Common Stock then
issued and outstanding, Toshiba shall have the right to appoint one (1) Director
following the Qualified IPO; provided that Toshiba shall not have such Director
appointment right if, notwithstanding Audiovox's good faith efforts to preserve
Toshiba's Director appointment right, the managing underwriter for the Qualified
IPO advises the Board in writing that Toshiba's retention of its Director
appointment right following a Qualified IPO would harm ACC's prospects for
achieving a Qualified IPO.
2. FINANCING MATTERS.
2.1 PREEMPTIVE RIGHTS.
(A) Each Party shall have a preemptive right to purchase a pro rata
portion (equal to such Party's then current Company Interest) of any new
issuances of Securities by ACC, except for (i) warrants, stock options and
shares issued or granted to employees of ACC for services rendered or to be
rendered in accordance with equity incentive plans adopted by the Board,
and (ii) Common Stock issued by ACC in a Qualified IPO. ACC agrees to
notify each Party in writing of any proposed new issuance of Securities to
which the Parties have preemptive rights under this Section, setting forth
the terms of such issuance. Each Party shall notify the other Party and
ACC, within fourteen (14) days after receipt of such notice, of its
decision to participate in any proposed new issuance of Securities (failure
to provide such notification during such period shall constitute an
election not to participate). In the event that a Party elects not to
subscribe for such Party's full pro rata share of any newly issued
Securities, the other Party shall be entitled to purchase any of the
unsubscribed Securities.
(B) This Section 2.1 shall terminate upon the consummation by ACC of,
and shall not apply to ACC's issuance of shares in, a Qualified IPO.
Exhibit 99.3
5
2.2 DEBT FINANCING. Notwithstanding anything contained herein to the
contrary, neither Party shall be obligated to provide financing or financial
support to ACC of any kind or nature, including loans or guarantees to third
parties for ACC's benefit. This Section 2.2 shall not affect in any manner the
rights and obligations of Toshiba and ACC under Section 8.2 (Payment) of the
Distribution Agreement.
3. TRANSFER RESTRICTIONS; IPO; REGISTRATION RIGHTS.
3.1 GENERAL.
(A) Neither Party shall, directly or indirectly, sell, assign, dispose
of, pledge, collateralize, encumber or otherwise transfer ("TRANSFER") all
or any portion of its Securities or any interest therein other than in
accordance with this Section 3. Any transfer of Securities or any interest
therein contrary to the provisions of this Section 3 shall be null and
void. Notwithstanding the foregoing, transfers among members of each
Party's Control Group shall be permitted, provided that (i) no such
transfer shall be made unless the proposed Control Group transferee has
agreed in a writing satisfactory to the other Party to be bound by the
terms of this Agreement, and (ii) the Party who is the direct or indirect
parent of the Control Group transferee shall remain fully bound by the
terms hereof following such transfer and shall be responsible for any
breach by its Control Group transferee of the terms hereof.
(B) Each certificate representing Securities held by a Party shall
bear the following legend:
"Transfer of the securities represented by this certificate is
restricted pursuant to the Certificate of Incorporation of Audiovox
Communications Corp. and the Stockholders Agreement dated as of May
29, 2002, by and among Audiovox Corporation, Toshiba Corporation and
Audiovox Communications Corp., copies of which are on file at the
principal office of Audiovox Communications Corp."
3.2 NO TRANSFERS FOR ONE YEAR. Except for transfers among Control Group
members made in accordance with Section 3.1(a), neither Party shall transfer all
or any portion of its Securities or any interest therein for one (1) year
following the date hereof without the prior written consent of the other Party.
3.3 IPO. An initial public offering of ACC's Securities ("IPO") shall not
occur prior to the first anniversary of the date hereof.
3.4 FIRST REFUSAL AND TAG-ALONG RIGHTS PRIOR TO AN IPO.
(A) In the event that either Party wishes to transfer Securities at
any time after one (1) year following the date hereof, such Party (the
"TRANSFERRING PARTY") shall first deliver to the other Party (the "NOTIFIED
PARTY") a written notice (an "OFFER NOTICE") stating the Transferring
Party's desire to transfer Securities. The Offer Notice shall set out the
number of
Exhibit 99.3
6
Securities proposed to be transferred (the "OFFERED SECURITIES"), the
identity of the proposed transferee and the price and all other material
terms and conditions of the proposed transfer.
(B) For a period of thirty (30) days following receipt of an Offer
Notice, the Notified Party shall have the right to elect either (i) to
purchase, at the same price and on the same terms and conditions set forth
in the Offer Notice, all, but not less than all, of the Offered Securities,
or (ii) to include in the proposed transfer the Notified Party's pro rata
share (equal to its then current Company Interest) of the Securities
covered by the Offer Notice (and there shall be a corresponding reduction
in the number of Offered Securities which the Transferring Party may
include in the proposed transfer). Any election by a Notified Party under
this Section 3.4(b) shall be made by delivering written notice of such
election to the Transferring Party prior to the expiration of the thirty
(30)-day exercise period. A Notified Party electing to purchase Offered
Securities may effect such purchase by directing ACC to consummate the
purchase, and if so directed ACC shall consummate the purchase in
accordance with this Section 3.4, subject to compliance with applicable
Law.
(C) Upon a Notified Party's valid delivery of its election notice to
purchase Offered Securities under clause (i) of Section 3.4(b), the
Transferring Party shall be legally obligated to sell, and the Notified
Party shall be legally obligated to purchase, the Offered Securities on the
terms and conditions set forth in the Offer Notice and in any event within
thirty (30) days from the delivery date of the exercise notice, subject to
the receipt of Approvals under applicable Law. If a Notified Party
exercises its right to include Securities in a transfer pursuant to clause
(ii) of Section 3.4(b), the Notified Party shall reasonably cooperate with
the Transferring Party in connection with the consummation of the transfer,
including by executing agreements relating to such transfer, making any
filings or applications required under applicable Law and delivering to the
transferee certificates (as applicable) representing the Notified Party's
Securities to be included in the transfer. Promptly after the consummation
of the transfer, the Transferring Party shall notify the Notified Party,
shall remit to the Notified Party the total consideration for the Notified
Party's Securities included in the transfer, and shall furnish such other
evidence of the completion and time of completion of the transfer as may be
reasonably requested by the Notified Party. Following any such transfer,
such Offered Securities shall continue to be Securities subject to the
terms of this Agreement. To evidence more fully that the Offered Securities
remain subject to this Agreement, the transferee party shall acknowledge
its agreement in writing to be bound by the terms of this Agreement as a
condition to such transfer, such acknowledgement to be in a form reasonably
acceptable to the Notified Party and its counsel. Upon satisfaction of such
condition, the transferee party shall be subject to all of the obligations
of the Transferring Party under this Agreement, subject to necessary
adjustments.
(D) If the Notified Party (i) fails within the applicable thirty
(30)-day period to deliver notice effecting the exercise of its rights to
purchase Offered Securities under clause (i) of Section 3.4(b) or include
Securities in a transfer under clause (ii) of Section 3.4(b) or (ii)
exercises its rights to purchase Offered Securities but fails to satisfy
its obligation to purchase all of the Offered Securities within thirty (30)
days from the delivery date of the exercise notice (subject to the receipt
of Approvals under applicable Law), then the Transferring Party shall have
the right for ninety (90) days after the expiration of the applicable
thirty (30)-day period to
Exhibit 99.3
7
transfer the Offered Securities on terms and conditions no less favorable
to the Transferring Party than those specified in the Offer Notice. If the
Offered Securities are not transferred within such ninety (90)-day period, such
Offered Securities shall again become subject to the rights of the Notified
Party set forth in Section 3.4(b).
3.5 REGISTRATION RIGHTS. Each Party shall have the registration rights and
related indemnity rights and obligations set forth in the attached Exhibit 3.5.
3.6 NO TRANSFERS OF INTERCOMPANY NOTE. Audiovox shall not, directly or
indirectly, transfer all or any portion of the Non-Negotiable Demand Note by ACC
to Audiovox dated the date hereof (the "INTERCOMPANY NOTE") or any interest
therein without the prior written consent of Toshiba, provided that transfers
among Audiovox's Control Group members made in accordance with Section 3.1(a)
shall be permitted. The Intercompany Note shall bear a legend consistent with
Section 3.1(b) giving notice of this transfer restriction.
3.7 TERMINATION UPON ACC'S QUALIFIED IPO. Sections 3.1, 3.2, 3.3, 3.4 and
3.6 shall terminate upon the consummation by ACC of, and shall not apply to
sales of ACC shares by a Party included in, a Qualified IPO; provided that:
(A) So long as a Party holds at least ten percent (10%) of ACC's
issued and outstanding shares of Common Stock (by way of clarification,
Toshiba's holdings of Common Stock for purposes of this Section 3.7 shall
include the shares issuable upon conversion of the Note, to the extent that
Toshiba is then entitled to convert the Note in accordance with its terms),
such Party shall have the first refusal and tag-along rights set forth in
Section 3.4 with respect to transfers of ACC Securities by the other Party
following the Qualified IPO, except for sales of Common Stock by a Party to
the public in one or more brokers transactions (as defined in Rule 144(g)
of the Securities Act) or other non-negotiated transactions at the market
price for the Common Stock then prevailing.
(B) Each Party shall be entitled to purchase any ACC shares that the
other Party would otherwise include for sale in a Qualified IPO, pursuant
to and subject to the purchasing Party's compliance with the following
procedures.
(I) At least thirty (30) days prior to ACC's filing with the SEC
of the registration statement containing the preliminary prospectus
that is used for the "road show" for the Qualified IPO (the
"PROSPECTUS FILING"), a Party that intends to include ACC shares for
sale in the Qualified IPO shall provide written notice to ACC and the
other Party of such intention and the number of ACC shares that the
Party intends to include for sale (the "INCLUDED SHARES") (such
Included Shares not to exceed the number of such Party's shares that
the managing underwriter believes can be included for sale in the
Qualified IPO without harming its prospects for success).
(II) Within ten (10) Business Days following the Prospectus
Filing, if the other Party desires at its option to purchase such
Included Shares, it shall deliver a written notice to ACC and the
selling Party firmly committing the purchasing Party to purchase all
(but not less than all) of the Included Shares at the IPO Price;
provided that the purchasing Party shall
Exhibit 99.3
8
have no obligation to purchase the Included Shares if the
Qualified IPO is not consummated within one hundred twenty (120) days
following the Prospectus Filing. The selling Party's receipt of such
notice shall firmly obligate the selling Party to sell its Included
Shares to the purchasing Party on the terms set forth in the notice.
Within ten (10) Business Days following the consummation of the
Qualified IPO, the purchasing Party shall make payment in full for the
Included Shares in immediately available funds against delivery of
such shares.
(III) The "IPO PRICE" means the price per share to the public for
shares issued by ACC in the Qualified IPO, less underwriting discounts
and commissions and offering expenses per share, in each case as
disclosed in the final prospectus for the Qualified IPO.
4. ADDITIONAL COVENANTS.
4.1 CONFIDENTIALITY; PUBLICITY.
(A) CONFIDENTIAL INFORMATION. The Parties (all references to "Party"
and "Parties" in this Section 4.1 shall be deemed to include ACC) recognize
that, in connection with the performance of the transactions contemplated
hereby, each Party (in such capacity, the "DISCLOSING PARTY") may disclose
Confidential Information to the other Parties (each in such capacity, the
"RECEIVING PARTY"). For purposes of this Agreement, "CONFIDENTIAL
INFORMATION" means any and all information (whether owned by the Disclosing
Party or any Person to whom the Disclosing Party owes a non-disclosure
obligation) regarding the Disclosing Party and its business which is (i) in
written or other tangible form and marked with a legend which identifies
the information as confidential, or (ii) in oral or visual form, identified
as being confidential at the time of disclosure and thereafter summarized
in a writing which identifies the information as confidential and is
transmitted to a Receiving Party within thirty (30) days after such oral or
visual disclosure.
(B) CONFIDENTIALITY OBLIGATION. Each Receiving Party agrees for a
period of two (2) years after the receipt of any Confidential Information
(i) to protect the Confidential Information and not to disclose the
Confidential Information to any Person, utilizing the same degree of care
the Receiving Party utilizes to protect its own confidential information of
a similar nature, and (ii) not to utilize the Confidential Information for
any purpose other than in connection with the transactions contemplated
hereby. The Parties agree to restrict distribution of the Confidential
Information to those Persons involved in the subject of the discussions who
have a "need to know" such information in connection with the discussions.
(C) EXCEPTIONS. Notwithstanding the provisions of Section 4.1(b), each
Receiving Party shall have no obligation to maintain the confidentiality of
any information, and the Confidential Information shall not include any
information, that (i) is or becomes generally available in the public
domain other than through unauthorized or improper disclosure by the
Receiving Party, (ii) was validly in the Receiving Party's possession prior
to disclosure by a Disclosing Party, (iii) was independently developed by
the Receiving Party, or (iv) was received by the Receiving Party from
another Person without violation of any confidentiality obligations.
(D) DISPOSAL OF CONFIDENTIAL INFORMATION. Within thirty (30) days of
the
Exhibit 99.3
9
termination of this Agreement, upon the applicable Disclosing Party's
request, each Receiving Party shall return to the Disclosing Party or
destroy all Confidential Information (including copies and electronic
records thereof).
(E) PUBLICITY. Subject to applicable Law and the applicable rules or
regulations of any stock exchange on which the securities of any Party are
then traded, no Party shall issue any press release, publicity statement,
communication with stockholders, public notice or other public disclosure
relating directly to this Agreement or the transactions contemplated hereby
without prior notice to, consultation with, and the consent of the other
Party. Notwithstanding the foregoing, so long as the disclosing Party
reasonably attempts to consult with and obtain the consent of the other
Party, limits the applicable disclosure to the extent practicable and
provides a copy of the disclosure to the non-disclosing Party concurrently
with or in advance of its public release, such consultation and consent
shall not be required if a Party must make a public disclosure on an
emergency basis in order to comply with applicable securities Laws.
4.2 FINANCIAL STATEMENTS.
(A) ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the end
of each fiscal year (or such shorter period for Form 10-K reporting that
may be required by the SEC in the future), the Board shall cause to be
prepared and delivered to each Party the statement of income (loss) and
statement of cash flows of ACC for such fiscal year, the balance sheet of
ACC as of the end of such fiscal year, and accompanying notes thereto. Such
financial statements shall be audited by an internationally recognized
accounting firm retained by ACC.
(B) QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days after
the end of each quarter (or such shorter period for Form 10-Q reporting
that may be required by the SEC in the future), the Board shall cause to be
prepared and delivered to each Party an unaudited statement of income
(loss) and statement of cash flows of ACC for such quarter, an unaudited
balance sheet of ACC as of the end of such quarter and, if applicable,
accompanying notes thereto.
(C) MONTHLY FINANCIAL STATEMENTS. Within fifteen (15) days after the
end of each month, ACC shall prepare and deliver to each Party an unaudited
statement of income (loss) and statement of cash flows of ACC for such
month, an unaudited balance sheet of ACC as of the end of such month and,
if applicable, accompanying notes thereto. Monthly financial statements
issued after the end of a quarter shall be subject to adjustment after
review by ACC's officers responsible for financial affairs in the course of
preparing the applicable quarterly or annual financial statements of ACC.
4.3 INSPECTION RIGHTS. ACC shall permit Audiovox and Toshiba to visit and
inspect ACC's properties, to examine its financial books of account, records and
other information requested by a Party and to discuss ACC's affairs, finances
and accounts with ACC's Directors and employees, all at such reasonable times
and upon reasonable notice as may be requested by a Party, provided that ACC's
obligations of confidentiality to third parties are honored.
4.4 D&O LIABILITY INSURANCE. ACC shall maintain at all times a policy of
directors' and officers' insurance with coverage amounts and other terms and
conditions no less favorable
Exhibit 99.3
10
to ACC and its directors and officers than Audiovox's directors' and officers'
insurance policy in effect on the date hereof.
4.5 COOPERATION IN CONNECTION WITH IPO. In connection with ACC's efforts to
achieve an IPO, Toshiba and Audiovox shall reasonably cooperate in good faith
and take such action as is reasonably necessary to effect the IPO. Without
limiting the foregoing, notwithstanding Section 1.5(a), at a time reasonably
prior to ACC's anticipated Qualified IPO, Toshiba shall agree to, shall cause
its Director appointee to approve and shall vote its Securities to approve any
amendments, modifications or restatements to ACC's Organizational Documents that
are required in the good faith judgment of the Board upon consultation with
ACC's counsel to achieve the Qualified IPO, such amendments, modifications and
restatements to become effective immediately prior to the consummation of the
Qualified IPO. Toshiba acknowledges and agrees that such amendments,
modifications and restatements may include, without limitation, the
reclassification of ACC's Class A Common Stock and Class B Common Stock into a
single class of Common Stock. Notwithstanding the foregoing, except as provided
in the foregoing sentence and except to the extent that Toshiba's rights
hereunder terminate in case of a Qualified IPO in accordance with their terms,
Toshiba shall not be obligated to amend, waive or forfeit any of its rights
contained in the Transaction Agreements in order to achieve an IPO by ACC.
4.6 TERMINATION UPON ACC'S QUALIFIED IPO. Sections 4.2, 4.3 and 4.4 shall
terminate upon the consummation by ACC of a Qualified IPO.
5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
Each Party hereby represents and warrants to the other Party as follows:
5.1 ORGANIZATION. Such Party is a corporation duly organized and validly
existing under the Laws of its jurisdiction of organization and has the
corporate power and authority to enter into and perform each Transaction
Agreement to which it is a party.
5.2 PERMITS; APPROVALS. Such Party holds all Approvals, the absence of
which would have a material adverse effect on such Party's ability to perform
its obligations under the Transaction Agreements (a "MATERIAL ADVERSE EFFECT"),
and there has been no default or violation under any such Approvals and there is
no proceeding or investigation that is pending or, to such Party's knowledge,
threatened under which any such Approval may be revoked, terminated or
suspended, except for matters that would not have a Material Adverse Effect with
respect to such Party.
5.3 AUTHORIZATION; EXECUTION AND DELIVERY; ENFORCEABILITY. All corporate
action on the part of such Party necessary for the authorization, execution and
delivery of each Transaction Agreement to which such Party is a party and for
the performance of all of such Party's obligations thereunder has been taken.
This Agreement has been duly executed and delivered by such Party. This
Agreement constitutes a valid and legally binding obligation of such Party,
enforceable against such Party in accordance with its terms.
5.4 GOVERNMENT AND OTHER CONSENTS. No Approvals of any Governmental
Exhibit 99.3
11
Authority or any other Person is required in connection with such Party's
execution, delivery and performance of the Transaction Agreements to which such
Party is a party, or if any such consent is required, such Party has satisfied
the applicable requirements, except in each case for matters that would not have
a Material Adverse Effect with respect to such Party.
5.5 EFFECT OF AGREEMENT. Such Party's execution, delivery and performance
of each Transaction Agreement to which it is a party will not (i) violate the
Organizational Documents of such Party or any provision of applicable Law, (ii)
violate any judgment, order, writ, injunction or decree of any Governmental
Authority applicable to such Party, (iii) result in the breach of, give rise to
a right of termination, cancellation or acceleration of any obligation with
respect to (presently or with the giving of notice, the passage of time or
both), or otherwise be in conflict with any term of, or affect the validity or
enforceability of, any Approval, Contract or commitment to which such Party is a
party or is otherwise subject, or (iv) result in the creation of any Lien upon
any assets of such Party, except in the case of clauses (ii), (iii) and (iv) for
matters that would not have a Material Adverse Effect with respect to such
Party.
5.6 PROCEEDINGS. There are no Proceedings pending or, to such Party's
knowledge, threatened, against such Party before any Governmental Authority
which question such Party's right to enter into or perform any Transaction
Agreement to which such Party is a party, or which question the validity of this
Agreement or any of the other Transaction Agreements.
6. TERM AND TERMINATION.
6.1 TERM. This Agreement shall become effective as of the date hereof and
shall continue in effect hereafter until terminated pursuant to Section 6.2.
6.2 TERMINATION. This Agreement may only be terminated as follows:
(A) Upon the mutual written agreement of the Parties.
(B) At the election of either Party, if the other Party commences a
voluntary case or other proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or taking possession by any such official in any involuntary
case or other proceeding commenced against it, or makes a general
assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or take any corporate action to authorize any of
the foregoing.
(C) At the election of either Party, if an involuntary case or other
proceeding is commenced against the other Party seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official for such Party or any substantial part of its
property, and such involuntary case or other proceeding remains undismissed
and unstayed for a period of one hundred twenty (120) days.
(D) At the election of Toshiba, if the Distribution Agreement is
terminated by
Exhibit 99.3
12
ACC in accordance with Section 17.2(f) thereof and, at the time of
such termination, Toshiba is in material compliance with all of its
obligations under the Distribution Agreement.
(E) At the election of Toshiba, if the Distribution Agreement is
terminated by Toshiba in accordance with Section 17.2(e) thereof.
(F) At the election of Audiovox, if the Distribution Agreement is
terminated by Toshiba in accordance with Section 17.2(f) thereof and, at
the time of such termination, ACC is in material compliance with all of its
obligations under the Distribution Agreement.
6.3 EFFECT. A Party may exercise an election to terminate this Agreement
pursuant to Section 6.2(b), 6.2(c), 6.2(d), 6.2(e) or 6.2(f), as applicable, by
giving ACC and the other Party ten (10) days notice in accordance with Section
8.4. In the event of the termination of this Agreement pursuant to Section 6.2,
this Agreement shall cease to have further force or effect and no Party shall
have any liability to any other Party in respect to this Agreement, provided
that:
(A) Termination of this Agreement for any reason shall not release any
Party from any liability which has already accrued as of the effective date
of such termination, and shall not constitute a waiver or release of, or
otherwise be deemed to prejudice or adversely affect, any rights, remedies
or claims, whether for damages or otherwise, which a Party may have
hereunder, at Law, equity or otherwise or which may arise out of or in
connection with such termination; and
(B) Section 4.1, Section 7 and Section 8 (other than Section 8.1)
shall survive such termination and remain in full force and effect.
7. PUT AND CALL RIGHTS UPON TERMINATION.
7.1 TOSHIBA PUT RIGHT. In the event that Toshiba elects to terminate this
Agreement in accordance with Section 6.2(d) or 6.2(e), Toshiba shall have the
right (exercisable by written notice delivered within thirty (30) days following
the termination hereof) to require Audiovox to purchase all (but not less than
all) of the Securities of ACC then held by Toshiba for an amount equal to the
fair market value of such Securities, as determined pursuant to Section 7.3.
Upon delivery of such notice, Audiovox shall be bound to purchase and Toshiba
shall be bound to sell Toshiba's Securities for such fair market value as
provided in this Section 7.
7.2 AUDIOVOX CALL RIGHT. In the event that Audiovox elects to terminate
this Agreement in accordance with Section 6.2(f), Audiovox shall have the right
(exercisable by written notice delivered within thirty (30) days following the
termination hereof) to require Toshiba to sell to Audiovox all (but not less
than all) of the Securities of ACC then held by Toshiba for an amount equal to
the fair market value of such Securities, as determined pursuant to Section 7.3.
Upon delivery of such notice, Audiovox shall be bound to purchase and Toshiba
shall be bound to sell Toshiba's Securities for such fair market value as
provided in this Section 7.
7.3 DETERMINATION OF FAIR MARKET VALUE. In case of Toshiba's exercise of
its put right pursuant to Section 7.1 or Audiovox's exercise of its call right
pursuant to Section 7.2, the
Exhibit 99.3
13
fair market value of Toshiba's Securities shall be determined as follows:
(A) As soon as practicable after delivery of the put or call notice,
as applicable, the Parties shall engage in mutual good faith discussions to
determine the fair market value of Securities to be purchased or sold.
(B) If the Parties are unable to agree on the fair market value of
Toshiba's Securities within fifteen (15) days after delivery of the
applicable notice, then each Party shall select an independent appraiser
with international experience to determine the fair market value of
Toshiba's Securities. Each appraiser will promptly render a written good
faith appraisal of the fair market value of Toshiba's Securities in light
of all relevant factors (if the appraiser provides a valuation range, the
midpoint of the range shall be the fair market value of the appraised
Securities). Each appraiser shall be instructed to complete its appraisal
as promptly as possible and, in any event, within thirty (30) days after
its appointment. The appraisals shall be submitted to the Parties
simultaneously. The Parties shall take all actions reasonably necessary to
cause the appraisers to complete their appraisals in an expeditious and
competent manner within such period.
(C) The fair market value of Toshiba's Securities to be purchased
shall be the average of the two appraisals submitted by the independent
appraisers under Section 7.3(b); provided that, if the two appraisals
differ in value by more than twenty percent (20%), the two independent
appraisers shall jointly appoint a third independent appraiser, who will
promptly render a written good faith appraisal of the fair market value of
Toshiba's Securities in light of all relevant factors and in accordance
with the timing and procedures contained in Section 7.3(b). In case of an
appraisal by a third independent appraiser, the fair market value of the
Securities to be purchased shall be the average of (1) the appraisal
submitted by the third independent appraiser and (2) the appraisal
submitted under Section 7.3(b) that is closest in value to the appraisal of
the third independent appraiser. Any determination of fair market value
pursuant to this Section 7.3 shall be conclusive and binding upon the
Parties for purposes of determining the fair market value of Toshiba's
Securities to be purchased under this Section 7. Each Party shall bear
fifty percent (50%) of the costs of any appraisal pursuant to this Section
7.3.
7.4 CLOSING OF PUT OR CALL EXERCISE. The Parties shall consummate the
purchase and sale of Toshiba's Securities under this Section 7 as soon as
practicable following the determination of the appraised purchase price pursuant
to Section 7.3 by Toshiba's receipt of cash via wire transfer of immediately
available funds equal to the purchase price. At Audiovox's option some or all of
Toshiba's Securities may be purchased by ACC, provided that Audiovox shall
remain responsible for the timely payment of the purchase price for Toshiba's
Securities.
8. GENERAL PROVISIONS.
8.1 VOTING AGREEMENT. Each Party shall hold and exercise all voting rights
with respect to its Securities subject to and in accordance with the provisions
of this Agreement, and to the extent legally permissible shall cause the
Directors nominated by such Party to act to effect the terms hereof.
Exhibit 99.3
14
8.2 GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with and governed by the Laws of the State of New York, U.S.A.,
including, without limitation, Section 5-1401 of the General Obligations Law of
the State of New York (without regard to the choice of law provisions thereof).
Judgement upon an award rendered by the arbitrators pursuant to Section 8.3
shall be entered in the courts of the State of New York, and the Parties hereby
submit to the exclusive jurisdiction of such courts for the purpose of any such
entry. The Parties agree and consent that services of process may be made upon
the Parties in any legal proceedings relating hereto by any means allowed under
applicable Law.
8.3 DISPUTE RESOLUTION.
(A) The Parties intend that all disputes between the Parties arising
out of this Agreement shall be settled by the Parties amicably through good
faith discussions upon the written request of either Party. In the event
that any such dispute cannot be resolved thereby within a period of sixty
(60) calendar days after such notice has been given, such dispute shall be
finally settled by binding arbitration at the request of any Party.
(B) Each arbitration hereunder shall be conducted in the English
language in New York, New York, and shall be administered by the American
Arbitration Association under its Commercial Arbitration Rules then in
effect, before three (3) independent arbitrators to be appointed as
follows. Each Party shall appoint one (1) arbitrator, and the two (2)
arbitrators appointed by the Parties shall appoint a third arbitrator in
accordance with paragraph (c) of AAA Rule R-15 (Appointment of Neutral
Arbitrator by Party-Appointed Arbitrators or Parties) currently in effect.
However, in all events, these arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the applicable
rules.
(C) Each Party may demand arbitration by filing a written demand with
the other Party within one hundred eighty (180) calendar days after the
expiration of the sixty (60) day period described above. The arbitrators
shall have the authority to grant any equitable and legal remedies that
would be available in any judicial proceeding intended to resolve a
dispute, including (notwithstanding Section 6.2) the termination of this
Agreement. Notwithstanding the foregoing, either Party shall be entitled to
seek preliminary injunctive relief from any court of competent
jurisdiction, pending the final decision or award of the arbitrators. The
award rendered in an arbitration hereunder shall be final and
non-appealable.
8.4 NOTICES AND OTHER COMMUNICATIONS. Any and all notices, requests,
demands and other communications required or otherwise contemplated to be made
under this Agreement shall be in writing and in English and shall be provided by
one or more of the following means and shall be deemed to have been duly given
(a) if delivered personally, when received, (b) if transmitted by facsimile, on
the first (1st) Business Day following receipt of a transmittal confirmation, or
(c) if by international courier service, on the third (3rd) Business Day
following the date of deposit with such courier service, or such earlier
delivery date as may be confirmed in writing to the sender by such courier
service. All such notices, requests, demands and other communications shall be
addressed as follows:
Exhibit 99.3
15
If to Toshiba:
Toshiba Corporation
Mobile Communications Company
1-1, Shibaura 1-chome, Minato-ku
Tokyo 105-8001
Japan
Attention: General Manager, International Operations
Telephone: -81-3-3457-3241
Facsimile: -81-3-3457-8194
If to Audiovox:
Audiovox Corporation
150 Marcus Blvd.
P.O. Box 18000
Hauppauge, NY 11788-1800
U.S.A.
Attention: Charles M. Stoehr
Telephone: (631) 436-6505
Facsimile: (631) 231-1370
If to ACC:
Audiovox Communications Corp.
555 Wireless Boulevard
Hauppauge, New York 11788
U.S.A.
Attention: Philip Christopher
Telephone: (631) 233-3300
Facsimile: (631) 951-0784
With a copy to:
Levy & Stopol, LLP
East Tower, 14th Floor
190 EAB Plaza
Uniondale, NY 11556-0190
Telephone: (516) 802-7007
Facsimile: (516) 802-7008
or to such other address or facsimile number as a Party may have specified to
the other Parties in writing delivered in accordance with this Section 8.4.
8.5 SEVERABILITY. If any provisions of this Agreement shall be held to be
illegal, invalid or unenforceable, the Parties agree that such provisions will
be enforced to the maximum extent
Exhibit 99.3
16
permissible so as to effect the intent of the Parties, and the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby. If necessary to effect the
intent of the Parties, the Parties will negotiate in good faith to amend this
Agreement to replace the unenforceable language with enforceable language which
as closely as possible reflects such intent.
8.6 AMENDMENTS. This Agreement may be amended or modified only by a written
instrument signed by each Party.
8.7 WAIVER. Any waiver by a Party of an instance of the other Party's or
ACC's noncompliance with any obligation or responsibility herein contained shall
be in writing and signed by the waiving Party and shall not be deemed a waiver
of other instances of the other Party's or ACC's noncompliance hereunder.
8.8 NO ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and permitted assigns
of the Parties and ACC. Nothing in this Agreement shall confer any rights upon
any Person other than the Parties, ACC and their respective successors and
permitted assigns. Neither Party nor ACC may assign this Agreement or its rights
hereunder to any Person without the written consent of the other Party; provided
that the registration rights provided for in Section 3.5 shall be exercisable by
any holders of Registrable Shares, including after transfers of Registrable
Shares. No assignment by any Person of this Agreement or of any of such Person's
rights hereunder shall release such Person from any of its obligations
hereunder. Any attempted assignment of this Agreement in violation of this
Section 8.8 shall be void and of no effect.
8.9 CONSTRUCTION. This Agreement has been negotiated by the Parties, ACC
and their respective counsel and shall be fairly interpreted in accordance with
its terms and without any strict construction in favor of or against either of
the Parties or ACC.
8.10 INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT. Unless the context
shall otherwise require, any pronoun shall include the corresponding masculine,
feminine and neuter forms, and words using the singular or plural number shall
also include the plural or singular number, respectively. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Annexes, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement unless the context shall
otherwise require. The headings of the Articles and Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretations of this Agreement. Unless the context shall
otherwise require, any reference to any agreement or other instrument or statute
or regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any successor provision). Any reference in this Agreement to a "day" or a
number of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given, on the next Business Day.
Exhibit 99.3
17
8.11 DISCLAIMER OF AGENCY. This Agreement shall not constitute any Party or
ACC as a legal representative or agent of any other Party or ACC, nor shall a
Party or ACC have the right or authority to assume, create or incur any
Liability of any kind, expressed or implied, against or in the name or on behalf
of the other Party, ACC or any of their respective Affiliates.
8.12 LANGUAGE. The Parties and ACC have negotiated this Agreement in the
English language, which shall be the governing language of this Agreement.
8.13 RELATIONSHIP OF THE PARTIES AND ACC. Nothing contained in this
Agreement is intended to, or shall be deemed to, create a partnership or joint
venture relationship among the Parties, ACC or any of their respective
Affiliates for any purpose, including tax purposes. Neither of the Parties, ACC
nor any of their respective Affiliates will take a position contrary to the
foregoing.
8.14 SPECIFIC PERFORMANCE. The Parties and ACC agree that each other Party
and ACC, as applicable, shall be entitled to obtain an injunction or injunctions
in accordance with the dispute resolution procedures contained in Section 8.3 to
prevent breaches of the provisions of this Agreement, or any agreement
contemplated hereunder and to enforce specifically the terms and provisions
hereof, in each instance without being required to post bond or other security,
without being required to prove irreparable harm, and in addition to, and
without having to prove the adequacy of, other remedies at Law.
8.15 CONSEQUENTIAL AND OTHER DAMAGES. Neither Party nor ACC shall be liable
under any contract, negligence, strict liability or other theory for any
indirect, incidental, consequential, punitive or other special damages
(including without limitation lost profits) asserted by the other Party or ACC,
as applicable.
8.16 ENTIRE AGREEMENT. The provisions of this Agreement and the other
Transaction Agreements set forth the entire agreement and understanding between
the Parties and ACC as to the subject matter hereof and supersede all prior
agreements, oral or written, and all other prior communications between the
Parties and ACC relating to the subject matter hereof. Without limiting the
generality of the foregoing, Articles VIII (Information Rights), IX (Public
Offering), X (Right of First Refusal) and XI (Registration Rights) of the Stock
Purchase Agreement dated March 15, 1999 between the Parties are hereby
terminated and shall cease to have further force or effect.
8.17 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such
counterpart shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Exhibit 99.3
18
IN WITNESS WHEREOF, the Parties and ACC have caused their respective duly
authorized representatives to execute this Stockholders Agreement as of the date
first above written.
TOSHIBA CORPORATION,
a Japanese corporation, acting through its
Mobile Communications Company
By: s/ Tetsuya Mizoguchi
Name: Tetsuya Mizoguchi
Title: President and CEO,
Mobile Communications
Company
AUDIOVOX COMMUNICATIONS
CORP.,
a Delaware corporation
By: s/ Philip Christopher
Name: Philip Christopher
Title: Chief Executive Officer
AUDIOVOX CORPORATION,
a Delaware corporation
By: s/ John J. Shalam
-----------------
Name: John J. Shalam
Title: Chief Executive Officer
Exhibit 99.3
19
ANNEX I
CERTAIN DEFINITIONS
"AFFILIATE" of a specified Person means any Person that controls, is
controlled by or is under common control with such specified Person. For
purposes of this definition, "CONTROL" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or other ownership interests, by
contract or otherwise).
"APPROVAL" means, as to any Person, any consent, approval, authorization,
waiver, grant, concession, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, such Person.
"ASSOCIATE" of a Person means:
(i) any officer or director of such Person, or other Person serving in
a similar role with respect to such Person;
(ii) any corporation or other entity of which such Person or any
Person specified in clause (i) is an officer, partner, manager or Person
serving in a similar role, or is, directly or indirectly, the beneficial
owner of 5% or more of any class of equity securities;
(iii) any trust or other estate in or as to which such Person or any
Person specified in clauses (i) or (ii) has a 10% or greater beneficial
interest or serves as trustee or in a similar capacity; or
(iv) any relative or spouse of such Person or any Person specified in
clause (i), or any relative of such spouse.
"BUSINESS" means the research, development, design, manufacture, marketing,
sale and/or service of Products.
"BUSINESS DAY" means a day on which commercial banks in New York City are
generally open to conduct their regular banking business.
"COMMON STOCK" shall mean collectively the Class A Common Stock of the
Company, no par value per share, and the Class B Common Stock of the Company, no
par value per share (in each case as the same may be reclassified, recapitalized
or similarly affected).
"COMPANY INTEREST" means, as to any Party at any time, the number of shares
of Fully Diluted Common Stock that such Party owns at such time, divided by the
total number of shares of Fully Diluted Common Stock at such time.
"CONTRACT" means any contract, agreement, lease, plan, instrument or other
document,
Exhibit 99.3
20
commitment, arrangement, undertaking, practice, understanding or authorization,
in each case whether or not in writing.
"CONTROL GROUP" of a Party means the Party and its direct and indirect
wholly-owned subsidiaries.
"DISTRIBUTION AGREEMENT" means the Distribution Agreement dated as of the
date hereof between Toshiba and ACC.
"FULLY DILUTED" means at any time, with respect to Common Stock and without
duplication, (a) all shares of Common Stock then outstanding and (b) all shares
of Common Stock issuable upon the exercise of all options, warrants, convertible
securities, exchangeable securities and other outstanding rights to acquire
Common Stock, with or without consideration, but only to the extent that the
applicable Party is then entitled to exercise such rights to acquire Common
Stock pursuant to the terms of such rights.
"GOVERNMENT APPROVAL" means any Approval of, to or with any Governmental
Authority.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign government,
governmental authority, court, tribunal, agency or other regulatory,
administrative or judicial agency, commission or organization, and any
subdivision, branch or department of any of the foregoing.
"LAWS" means all applicable provisions of all (i) constitutions, treaties,
statutes, laws (including common law), rules, regulations, ordinances or codes
of any Governmental Authority, and (ii) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
"LIEN" means any lien, mortgage, security interest, pledge, restriction on
transferability, defect of title or other claim, charge or encumbrance of any
nature whatsoever on any property or property interest, including any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"ORGANIZATIONAL DOCUMENTS" of a Person means its Certificate of
Incorporation, Bylaws or other organizational documents.
"PERSON" means a natural individual, Governmental Authority, partnership,
firm, corporation or other entity.
"PROCEEDING" means any action, litigation, arbitration, suit, claim,
proceeding or investigation or review of any nature, civil, criminal, regulatory
or otherwise, before any Governmental Authority.
"QUALIFIED IPO" means a public offering of Common Stock by ACC registered
under the Securities Act in which (i) the proceeds received by ACC for the sale
of shares is at least Fifty Million Dollars ($50,000,000) net of underwriting
discounts and commissions, or (ii) Common Stock sold to public investors (which
for purposes of clarification shall not include Audiovox or
Exhibit 99.3
21
its Affiliates or Associates) represents at least ten percent (10%) of the
outstanding Common Stock upon the consummation of the offering.
"SECURITIES" means shares of Common Stock, other equity securities of ACC,
and options, warrants, convertible securities, exchangeable securities or other
rights to acquire Common Stock or other equity securities of ACC.
"STRATEGIC PERSON" means any of Motorola, Nokia, Ericsson, Kyocera, Sanyo,
Sharp or other similar companies that compete with a Party in the Business.
"TRANSACTION AGREEMENTS" means this Agreement; the Securities Purchase
Agreement; the Distribution Agreement; the Employment Agreement dated as of the
date hereof between ACC and Philip Christopher; the Trademark License Agreement
dated as of the date hereof between Audiovox and ACC; the Shared Services
Agreement dated as of the date hereof between Audiovox and ACC; the
Non-Negotiable Subordinated Convertible Promissory Note by ACC to Toshiba; and
the Intercompany Note.
Exhibit 99.3
22
EXHIBIT 1.6(A)
DUTIES OF TOSHIBA'S OFFICER DESIGNEES
Executive Vice President
Supervises the Chief Technology Officer for Toshiba Products and the Vice
President for Merchandizing -- Toshiba Products.
Participates in the decision making of ACC, including through executive
meetings.
Chief Technology Officer for Toshiba Products
Responsible for technology matters for Toshiba Products.
Represents ACC on matters relating to Toshiba technology in coordination
with Hino Works and other applicable Toshiba facilities.
Vice President for Merchandizing -- Toshiba Products
Coordinates and participates in the production, sale and inventory of
Toshiba Products.
Coordinates and participates in product planning for Toshiba Products,
including concept proposals for Toshiba Products.
Supports sale promotion of Toshiba Products.
Exhibit 99.3
23
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "AGREEMENT") is made and entered into as
of May 29, 2002 by and between TOSHIBA CORPORATION, a Japanese corporation,
acting through its Mobile Communications Company ("TOSHIBA"), and AUDIOVOX
COMMUNICATIONS CORP., a Delaware corporation ("ACC"). Toshiba and ACC are
referred to herein collectively as the "PARTIES" and each individually as a
"PARTY".
RECITALS
A. The Parties and Audiovox Corporation have entered into a Securities
Purchase Agreement (the "SECURITIES PURCHASE AGREEMENT") and a Stockholders
Agreement (the "STOCKHOLDERS AGREEMENT"), each dated as of the date hereof. At
the Closing under the Securities Purchase Agreement occurring today, Toshiba is
acquiring shares of Class B Common Stock of ACC and a non-negotiable
subordinated convertible promissory note of ACC.
B. As contemplated by the Securities Purchase Agreement, the Parties desire
to enter into this Agreement with respect to ACC's distribution of Toshiba
Products in the Territory as provided hereunder.
C. Certain terms used herein have the meanings set forth for such terms in
the text of this Agreement or in Annex I hereto.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Parties hereby agree as follows:
AGREEMENT
1. DEFINITIONS.
For purposes of this Agreement:
1.1 "PRODUCTS" means mobile cellular handset systems and other wireless
communications devices that use the infrastructure of wireless communication
carriers ("CARRIERS") and are sold through the Carrier distribution channel. The
"CARRIER DISTRIBUTION CHANNEL" is comprised of:
(A) A direct channel through which ACC sells Products to
Carriers. The direct channel consists of (i) retail stores owned by
Carriers and (ii) the Carriers' sales organizations for corporate
enterprise customers; and
(B) An indirect channel through which ACC sells Products to
retailers, distributors and agents that are authorized by Carriers to
activate Products, to sell air time on behalf of Carriers, to promote
Products to end users and to perform other activities that support the
sale of Products to end users on behalf of Carriers.
Exhibit 99.4
1
1.2 "TOSHIBA PRODUCTS" means all Products that are (a) marketed and
procured by the Mobile Communications Company of Toshiba, an in-house company of
Toshiba that conducts the business of mobile cellular handsets and Personal
Digital Assistants (including any successor of such Company, through internal
reorganization or otherwise) ("MCC"), (b) marketed, developed and procured by
MCC, or (c) marketed, developed and manufactured by MCC from time to time during
the term of this Agreement.
1.3 "TERRITORY" means the United States, Canada, Mexico and all countries
in Central America, the Caribbean and South America.
2. APPOINTMENT OF ACC.
Toshiba hereby appoints ACC as Toshiba's exclusive distributor for the sale
of Toshiba Products in the Territory, and ACC hereby accepts such appointment.
ACC shall use its commercially reasonable, good faith efforts to include
entities owned in part by Toshiba (including SEMP Toshiba) in the distribution
of Toshiba Products in Brazil. ACC shall not distribute any Toshiba Products
except in the Territory in accordance with this Agreement.
3. MINIMUM PURCHASE TARGETS.
3.1 GENERAL. The Parties shall establish annual minimum purchase targets
("MINIMUM PURCHASE TARGETS") for ACC's purchase of Toshiba Products for each
fiscal year during the term hereof. Separate Minimum Purchase Targets shall be
established for Toshiba Products in the CDMA, GPRS and PDA Product categories
(and in any new or replacement categories that the Parties may agree to in
connection with technology or other applicable Product developments) in the
following regions: (a) U.S. and Canada; (b) Mexico; (c) Brazil; and (d) Central
America, the Caribbean and South America other than Mexico and Brazil.
3.2 ESTABLISHMENT. The Minimum Purchase Targets shall be based upon
intended market size, the applicable roadmap and concept for Products described
in Section 7.3, and the applicable Product Plan described in Section 7.4. The
first effective Minimum Purchase Targets under this Agreement shall be for the
fiscal year ending November 30, 2003, and are contained in Exhibit 3.2 attached
hereto. The Parties shall establish Minimum Purchase Targets for each subsequent
fiscal year prior to the commencement of such fiscal year. If the Parties are
unable to agree on the Minimum Purchase Targets for any fiscal year prior to the
beginning of the fiscal year, the Parties shall submit the dispute to
arbitration pursuant to Section 18.2. Until the new Minimum Purchase Targets are
determined through arbitration, the Minimum Purchase Targets for the prior
fiscal year will apply to the subsequent fiscal year, as equitably adjusted in
case of force majeure circumstances as described in Section 18.16.
3.3 COMPETITIVE TOSHIBA PRODUCTS. The condition that ACC must satisfy the
Minimum Purchase Targets applicable to each Toshiba Product category in a region
of the Territory to maintain its exclusive distribution rights for such Toshiba
Product category in such
Exhibit 99.4
2
region shall be subject to the reasonable competitiveness of the Toshiba
Products in such category with respect to feature, function, quality and price,
the approval of such Toshiba Products by the intended Carrier customers, and
Toshiba's timely supply of such Toshiba Products in sufficient quantity in
accordance with the terms hereof.
3.4 CONVERSION TO NON-EXCLUSIVE DISTRIBUTORSHIP. If ACC fails to meet the
applicable Minimum Purchase Target for a category of Toshiba Products in a
geographical territory, Toshiba shall have the right (which right is to be
exercised within thirty (30) days after the end of the fiscal year for which
such Minimum Purchase Target has not been met) to convert ACC's exclusive
distributorship for such category of Toshiba Product in such geographical
territory to a non-exclusive distributorship for the remaining term of this
Agreement.
4. MOST PREFERRED SUPPLIER.
Toshiba shall be the most preferred supplier of Products to ACC. ACC shall
use Toshiba Products in preference to the Products of all other suppliers,
subject to Toshiba's ability to reasonably meet ACC's Product requirements with
respect to feature, function, cost, quality, quantity of supply and availability
on reasonably competitive terms.
5. BRANDING.
All Toshiba Products supplied by Toshiba hereunder shall be Toshiba-branded
Products; provided that, at Toshiba's direction and subject to Toshiba's
consent, certain Toshiba Products may bear the brands of Carrier customers
and/or ACC, and certain Toshiba Products may not bear the Toshiba brand. ACC
shall have the right to utilize other brands on non-Toshiba Products.
6. MEETINGS; TOSHIBA'S OFFICER DESIGNEES.
6.1 TOSHIBA'S OFFICER DESIGNEES. Toshiba shall have the right to designate
individuals as officers of ACC in the following capacities: Executive Vice
President (the "EVP"); Chief Technology Officer for Toshiba Products; and Vice
President for Merchandizing -- Toshiba Products. Toshiba shall also have the
right to remove and replace its designees at any time in its sole discretion
upon written notice to ACC. Such officers designated by Toshiba shall have the
duties set forth on Schedule 6.1. ACC's board of directors shall appoint
Toshiba's officer designees to their positions, subject to the following: such
officers shall be (a) qualified and competent in their positions in terms of
experience, expertise, moral character, ability to interface with other ACC
officers and employees and other relevant attributes, (b) unaffiliated with a
competitor of ACC, (c) not impose an unreasonable expense on ACC, and (d) have
the approval of ACC's Chief Executive Officer (who may not withhold or withdraw
his approval without reasonable cause).
6.2 EXECUTIVE MEETINGS. The CEO, the EVP and the Chief Financial Officer of
ACC shall hold executive meetings to review, discuss and reach conclusions on
significant matters
Exhibit 99.4
3
relating to ACC's supply relationship with Toshiba, which shall generally
include the matters identified on Schedule 6.2. Such executive meetings shall be
held at least monthly and at such other times as may be requested by the CEO,
the EVP or the Chief Financial Officer, upon reasonable prior notice to the
other two executives.
6.3 PURCHASE, SALE AND INVENTORY MEETINGS. To enhance supply chain
management and other operational matters relating to the Parties' supply
relationship hereunder, ACC shall hold meetings to discuss purchase, sale,
inventory (including inventory held by Carriers) and related matters and
activities. The meetings shall generally cover past performance and projected
future performance over the succeeding six-month period, and ACC's projected
need for Products during such period. The meetings shall occur at least monthly
and at such other times as may be requested by the CEO or the EVP. The EVP and
other staff members designated by Toshiba shall be entitled to attend and
participate in such meetings.
6.4 PERFORMANCE AND FORECAST MEETINGS. ACC shall hold meetings to review
and confirm the business, operational and financial performance (including
profit and loss performance) of ACC, and ACC's forecasted future performance in
these areas. Such meetings shall occur at least monthly and at such other times
as may be specified by ACC's CEO, EVP or Chief Financial Officer. The EVP and
other staff members designated by Toshiba shall be entitled to attend and
participate in such meetings.
7. PRODUCT PLANNING.
7.1 PRODUCT MEETINGS. The Parties shall hold meetings to review and address
the matters discussed below in this Section 7 and other relevant matters
concerning the Toshiba Products to be supplied by Toshiba for distribution by
ACC hereunder. Such meetings shall occur at least quarterly and at such other
times as may be specified by the Parties. Such meetings shall be attended by the
CEO, the EVP and other appropriate representatives of the Parties.
7.2 CARRIERS. The Parties recognize that ACC's relationships and close
coordination with Carriers are critical to meeting the Carriers' Product needs
and increasing the sales of Toshiba Products to Carriers. The Parties shall
jointly cooperate in working with Carriers to develop Toshiba Product plans
(including plans for next generation Toshiba Products), effective distribution
practices and other activities to enhance the success of the Parties' supply
relationship and the sale of Toshiba Products to Carriers.
7.3 TOSHIBA PRODUCT ROADMAP AND CONCEPT. The Parties shall jointly develop
a roadmap and concept for the Toshiba Products to be distributed by ACC, taking
into account ACC's overall Product roadmap and concept in order to give effect
to Toshiba's most preferred supplier rights set forth in Section 4. The roadmap
and concept shall cover the introduction schedule for Toshiba Products
distributed by ACC; target pricing; product features; performance
specifications; product quantity; and other important aspects of Toshiba Product
development. The roadmap and concept shall be reviewed and updated quarterly,
and shall generally cover a
Exhibit 99.4
4
rolling three-year period following the quarter during which the review occurs.
7.4 PRODUCT PLAN. The Parties shall jointly develop a plan for the supply
of Toshiba Products hereunder (the "PRODUCT PLAN"). The Product Plan shall
include a one-year rolling forecast of Toshiba's expected supply of Toshiba
Products hereunder, setting forth the anticipated price, quantity and other
material information relating to the applicable Toshiba Products. The Product
Plan will be reviewed and updated by the Parties at least on a quarterly basis.
8. PRICING AND PAYMENT.
8.1 PRICING. The Parties anticipate that pricing for Toshiba Products
supplied hereunder shall be based upon market conditions existing at the time
that the Parties enter into binding purchase orders for the applicable Toshiba
Products. Final pricing shall be as set forth in the binding purchase orders for
Toshiba Products; provided that the Parties shall discuss in good faith on a
case by case basis any pricing revisions that may be appropriate based on a
significant change in market conditions.
8.2 PAYMENT. Toshiba shall issue invoices to ACC for all Toshiba Products
supplied hereunder. ACC shall make payment of such invoices within thirty (30)
days of documents against acceptance for the applicable Toshiba Products.
8.3 DUTIES AND CHARGES. ACC shall be responsible, at its sole expense, for
all import duties and custom charges with respect to its importation of Toshiba
Products in the Territory.
9. ADDITIONAL AGREEMENTS.
9.1 CARRIER ACCEPTANCE OF TOSHIBA PRODUCTS. In order to accelerate the time
to market of Toshiba Products, ACC and Toshiba shall consult, cooperate and
jointly participate in all activities relating to Carrier testing and acceptance
of Toshiba Products.
9.2 QUALITY CONTROL FOR NON-TOSHIBA PRODUCTS. ACC shall give consideration
in good faith to any reasonable standards of quality control that Toshiba may
recommend for non- Toshiba Products. Toshiba acknowledges and agrees, however,
that it shall have no other involvement in this aspect of ACC's business.
9.3 PRODUCT LIABILITY INSURANCE. Toshiba shall maintain at all times a
policy of product liability insurance covering the Toshiba Products supplied
hereunder with coverage amounts and other terms and conditions no less favorable
to ACC than those applicable to Toshiba's products liability insurance policy in
effect on the date hereof.
10. INTELLECTUAL PROPERTY RIGHTS.
Each Party agrees to acknowledge at all times the other Party's exclusive
right, title and interest in and to any existing and future patents, patent
applications, trademarks, trade secrets,
Exhibit 99.4
5
copyrights and other intellectual property which the other Party has claimed
and/or registered with respect to Products (the "INTELLECTUAL PROPERTY RIGHTS").
Each Party agrees to promptly bring to the other Party's attention any
activities in the Territory that a Party becomes aware of and believes may
constitute an infringement of the other Party's Intellectual Property Rights.
11. PURCHASE ORDERS AND FORECASTS.
11.1 PURCHASE ORDERS. ACC shall order Toshiba Products by issuing firm
purchase orders to Toshiba as contemplated by Section 11.2. Each purchase order
shall be binding upon the Parties upon acceptance by Toshiba. Each purchase
order shall be in the form of Exhibit 11.1 or another form reasonably acceptable
to the Parties. Toshiba's acceptance shall be evidenced by Toshiba issuing to
ACC an acknowledgement within seven (7) Business Days after Toshiba's receipt of
the applicable purchase order; provided that Toshiba shall be deemed to have
accepted any purchase order that it has not rejected in writing within such
seven (7) Business Day period after receipt. Each purchase order shall specify
the Toshiba Product, price, quantity, sale amount, delivery schedule and any
other information reasonably requested by Toshiba, and shall be delivered to
Toshiba in accordance with Section 18.3. In the event of any inconsistency
between the terms and conditions of this Agreement and the terms and conditions
of a purchase order, the terms and conditions of this Agreement shall prevail.
11.2 EXPECTED TIMING OF PURCHASE ORDERS AND FORECASTS. The Parties
generally contemplate that within five (5) Business Days following the beginning
of each month during the term hereof (each, a "BASE MONTH"), ACC shall issue to
Toshiba (1) one or more purchase orders for Toshiba Products to be delivered to
ACC during the third month following the Base Month, subject in each case to
Toshiba's acceptance of the purchase order(s) in accordance with Section 11.1,
and (2) a rolling, non-binding forecast for ACC's expected demand for Toshiba
Products for the fourth, fifth and sixth months following the Base Month. As an
example, within five (5) Business Days following January 1, 2003, ACC will
deliver firm purchase orders for Toshiba Products to be delivered during April
2003, and a non-binding forecast for Toshiba Products to be delivered during
May, June and July 2003.
12. DELIVERY AND RISK OF LOSS.
Delivery of all Toshiba Products purchased by ACC shall be made F.O.B. at a
location agreed upon by the Parties, in accordance with the terms and conditions
of INCOTERMS in the version effective as of the date of this Agreement. In case
INCOTERMS is revised following the date hereof, at the request of either Party,
the Parties shall discuss in good faith whether to incorporate any applicable
revised provisions of INCOTERMS as part of this Section 12.
Exhibit 99.4
6
13. PRODUCT MATTERS AND EPIDEMIC FAILURE.
13.1 PRODUCT MATTERS.
(A) Toshiba shall warrant and be responsible for the Toshiba
Products as to testing, quality, design, performance and workmanship.
(B) After the Carrier customer has approved the applicable
Toshiba Products for purchase and the Toshiba Products have been
distributed to end users, ACC shall be responsible for warranty
repairs and Toshiba shall provide support in the form of training,
manuals, spare parts lists and related matters.
13.2 EPIDEMIC FAILURE.
(A) In addition to the Parties' respective obligations under
Section 13.1, and provided that ACC notifies Toshiba in writing of an
Epidemic Failure promptly after becoming aware of the Epidemic Failure
and also provides Toshiba with the evidence or information that ACC
has on the subject, Toshiba shall promptly investigate the situation
so that if an Epidemic Failure has occurred, the Parties can consult
as soon as possible on the best way to resolve the situation to the
customer's satisfaction while minimizing the damages that might
result. If an Epidemic Failure occurs, Toshiba shall, in consultation
with ACC and at Toshiba's election:
(i) repair the defective Toshiba Products at Toshiba's cost; or
(ii) replace the defective Toshiba Products at Toshiba's cost.
Subject to Section 13.2(c), Toshiba shall also reimburse ACC for its
reasonable expenses actually incurred in addressing the Epidemic Failure.
(B) An "EPIDEMIC FAILURE" shall occur if one percent (1%) or more
of the total units of any Toshiba Products (such units to be
identified by lot number, manufacturer product date code or other
reasonable method) delivered by Toshiba to ACC reveal identical
defects in material, design or workmanship.
(C) In case of an Epidemic Failure, ACC shall be responsible for
the first one percent (1%) of the units that are the subject of the
Epidemic Failure, and Toshiba shall be responsible for the remaining
defective units in accordance with this Section 13.2.
(D) Except for any additional actions that a Party may agree to
take in resolving a particular Epidemic Failure, each Party's
responsibility for an Epidemic Failure shall be limited to its
obligations set forth in this Section 13.2.
13.3 EXCLUSIONS. Toshiba's obligations pursuant to this Section 13 shall
not apply if the applicable Toshiba Product(s) fail to properly perform because
of any of the following:
Exhibit 99.4
7
(A) The Toshiba Products are subjected to abnormal use or
conditions, accident, mishandling, neglect, unauthorized alteration,
misuse, or improper installation, repair or storage;
(B) The mechanical serial numbers or electronic serial numbers of
the Toshiba Products have been removed, altered or defaced;
(C) Damage from exposure to moisture, humidity, excessive
temperatures or extreme environmental conditions;
(D) Damage resulting from connection to or use of any accessory
or other product not approved or authorized by Toshiba; or
(E) Damage resulting from external causes such as fire, flooding,
dirt, sand, weather conditions, battery leakage, blown fuse, theft or
improper use of any electrical source.
13.4 GENERAL DISCLAIMER OF WARRANTY. THE WARRANTIES AND OBLIGATIONS OF TOSHIBA
SET FORTH IN THIS SECTION 13 AND SECTION 15 CONSTITUTE TOSHIBA'S SOLE
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS SUPPLIED BY TOSHIBA
HEREUNDER. THE WARRANTIES AND OBLIGATIONS CONTAINED IN THIS SECTION 13 AND
SECTION 15 ARE IN LIEU OF, AND TOSHIBA EXPRESSLY DISCLAIMS AND WAIVES, ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE
OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING
WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE,
NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR USE.
14. GOOD FAITH EFFORTS.
14.1 TOSHIBA. During the term of this Agreement, Toshiba shall use its
commercially reasonable, good faith efforts to supply competitive Toshiba
Products to ACC and to obtain approval of such Toshiba Products by applicable
Carriers. Toshiba's obligations under this Section 14.1 shall not apply to any
Toshiba Products and/or territories as to which ACC does not have exclusive
distribution rights hereunder.
14.2 ACC. During the term of this Agreement, ACC shall use its commercially
reasonable, good faith efforts to market and promote the sale of Toshiba
Products to Carriers and to obtain approval of such Toshiba Products by
applicable Carriers.
15. TRADEMARKS AND OTHER RIGHTS.
15.1 USE OF TOSHIBA NAME. Toshiba hereby permits ACC to use the trademark
Exhibit 99.4
8
"Toshiba" on a non-exclusive and nontransferable basis solely in connection with
the sale, distribution and service of Toshiba Products in the Territory during
the term of this Agreement. Such use shall be made in accordance with the
guidelines furnished by Toshiba, such as "Visual Corporate Identity Manual" and
"Advertising Manual". ACC shall use its commercially reasonably, good faith
efforts to further the goodwill and reputation of Toshiba Products and the
Toshiba brand. Upon the expiration or termination of this Agreement for any
reason whatsoever, ACC shall immediately discontinue the use of such trademark.
15.2 OTHER USE OF TOSHIBA NAME. Any use of the trademark "Toshiba" by ACC
other than that in accordance with Section 15.1 shall be permitted only upon
Toshiba's prior written consent and in accordance with Toshiba's directions.
15.3 NO REGISTRATION. ACC shall not apply for the registration of any
trademark, other identifying mark, emblem or design appearing in or on the
Toshiba Products or any imitation thereof. In addition, ACC shall not apply for
the registration of any trade name or corporate name including the word
"Toshiba".
15.4 ALLEGED INFRINGEMENT BY TOSHIBA PRODUCT. In the event ACC receives a
claim from any third party alleging infringement by the Toshiba Products of any
trademark, other identifying mark, design, utility model, copyright, patent or
other intellectual property right, ACC shall promptly notify Toshiba thereof
and, at Toshiba's request, direction and expense, reasonably cooperate in the
resolution of the claim.
15.5 PATENT PROTECTION.
(A) Toshiba shall indemnify and hold ACC harmless from any cost,
expense or liability arising out of any claim or action based on
actual or alleged direct infringement by a Toshiba Product alone and
furnished hereunder of any patent of any third party enforceable in
the Territory, provided that (i) ACC shall notify Toshiba promptly in
writing of such claim or action, (ii) Toshiba shall have sole control
of the defense and settlement of such claim or action, and (iii) ACC
shall give all reasonably necessary authority, information and
assistance to Toshiba and its counsel, at Toshiba's expense, for the
defense from such claim or action.
(B) Notwithstanding the provisions of Section 15.5(a), Toshiba
shall not be obligated to indemnify and hold ACC harmless in case the
alleged infringement is based upon:
(i) use of the Toshiba Product in combination with another
Person's circuits, components, devices, information, designs,
specifications, software, data, material or products; or
(ii) modification of the Toshiba Product by a Person other
than Toshiba after delivery by Toshiba.
Exhibit 99.4
9
15.6 INFRINGEMENT BY THIRD PARTIES. In the event ACC becomes aware that any
third party infringes or is likely to infringe any trademark, other identifying
mark, design, utility model, copyright, patent or other intellectual property
right appearing in or on the Toshiba Products, ACC shall promptly notify Toshiba
thereof, assist Toshiba (at Toshiba's expense) in proceeding with appropriate
measures, including legal measures, against such infringement and comply with
Toshiba's instructions.
16. CONFIDENTIALITY; PUBLICITY.
16.1 CONFIDENTIAL INFORMATION. The Parties recognize that, in connection
with the performance of the transactions contemplated hereby, each Party (in
such capacity, the "DISCLOSING PARTY") may disclose Confidential Information to
the other Party (each in such capacity, the "RECEIVING PARTY"). For purposes of
this Agreement, "CONFIDENTIAL INFORMATION" means any and all information
(whether owned by the Disclosing Party or any Person to whom the Disclosing
Party owes a non-disclosure obligation) regarding the Disclosing Party and its
business which is (i) in written or other tangible form and marked with a legend
which identifies the information as confidential, or (ii) in oral or visual
form, identified as being confidential at the time of disclosure and thereafter
summarized in a writing which identifies the information as confidential and is
transmitted to the Receiving Party within thirty (30) days after such oral or
visual disclosure.
16.2 CONFIDENTIALITY OBLIGATION. Each Receiving Party agrees for a period
of two (2) years after the receipt of any Confidential Information (i) to
protect the Confidential Information and not to disclose the Confidential
Information to any Person, utilizing the same degree of care the Receiving Party
utilizes to protect its own confidential information of a similar nature, and
(ii) not to utilize the Confidential Information for any purpose other than in
connection with the transactions contemplated hereby. The Parties agree to
restrict distribution of the Confidential Information to those Persons involved
in the subject of the discussions who have a "need to know" such information in
connection with the discussions.
16.3 EXCEPTIONS. Notwithstanding the provisions of Section 16.2, each
Receiving Party shall have no obligation to maintain the confidentiality of any
information, and the Confidential Information shall not include any information,
that (i) is or becomes generally available in the public domain other than
through unauthorized or improper disclosure by the Receiving Party, (ii) was
validly in the Receiving Party's possession prior to disclosure by a Disclosing
Party, (iii) was independently developed by the Receiving Party, or (iv) was
received by the Receiving Party from another Person without violation of any
confidentiality obligations.
16.4 DISPOSAL OF CONFIDENTIAL INFORMATION. Within thirty (30) days of the
termination of this Agreement, upon the applicable Disclosing Party's request,
each Receiving Party shall return to the Disclosing Party or destroy all
Confidential Information (including copies and electronic records thereof).
Exhibit 99.4
10
16.5 PUBLICITY. Subject to applicable Law and the applicable rules or
regulations of any stock exchange on which the securities of any Party are then
traded, no Party shall issue any press release, publicity statement,
communication with stockholders, public notice or other public disclosure
relating directly to this Agreement or the transactions contemplated hereby
without prior notice to, consultation with, and the consent of the other Party.
Notwithstanding the foregoing, so long as the disclosing Party reasonably
attempts to consult with and obtain the consent of the other Party, limits the
applicable disclosure to the extent practicable and provides a copy of the
disclosure to the non-disclosing Party concurrently with or in advance of its
public release, such consultation and consent shall not be required if a Party
must make a public disclosure on an emergency basis in order to comply with
applicable securities Laws.
17. TERM AND TERMINATION.
17.1 TERM. The term of this Agreement shall initially be five (5) years
from the date hereof, subject to earlier termination pursuant to Section 17.2
and extension as provided in the next sentence. The term of this Agreement shall
be automatically extended for successive one (1)- year periods unless either
Party gives termination notice to the other Party not earlier than 180 days and
not later than 120 days prior to the then current end of the term.
17.2 TERMINATION. This Agreement may be terminated as follows:
(A) Upon the mutual written agreement of the Parties.
(B) At the election of Toshiba, in case ACC fails to (i) comply with
its obligations to appoint Toshiba's officer designees in accordance with
Section 6.1, or (ii) make payment in accordance with Section 8.2 with
respect to an invoice for Toshiba Products accepted by ACC and which ACC is
not disputing in good faith, and in case of clause (i) or clause (ii), such
failure is not remedied within sixty (60) days after ACC receives written
notice from Toshiba, indicating that it is a notice of default and
describing the default in reasonable detail.
(C) At the election of either Party, if the other Party commences a
voluntary case or other proceeding seeking liquidation, reorganization, or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or taking possession by any such official in any involuntary
case or other proceeding commenced against it, or makes a general
assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or take any corporate action to authorize any of
the foregoing.
(D) At the election of either Party, if an involuntary case or other
proceeding is commenced against the other Party seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official for such Party or any substantial part of its
property, and such involuntary case or other
Exhibit 99.4
11
proceeding remains undismissed and unstayed for a period of one
hundred twenty (120) days.
(E) At the election of Toshiba, if a Strategic Person (other than
Toshiba or any of its Affiliates) acquires a direct or indirect equity
ownership interest in excess of twenty percent (20%) in Audiovox
Corporation, a Delaware corporation ("AUDIOVOX").
(F) At the election of either Party in accordance with the second
sentence of Section 17.1.
17.3 EFFECT. In the event of the termination of this Agreement pursuant to
Section 17.2, this Agreement shall cease to have further force or effect and no
Party shall have any liability to any other Party in respect to this Agreement,
provided that:
(A) Termination of this Agreement for any reason shall not release any
Party from any liability which has already accrued as of the effective date
of such termination, and shall not constitute a waiver or release of, or
otherwise be deemed to prejudice or adversely affect, any rights, remedies
or claims, whether for damages or otherwise, which a Party may have
hereunder, at law, equity or otherwise or which may arise out of or in
connection with such termination.
(B) ACC shall remain liable for and shall pay Toshiba for any purchase
orders hereunder that have been accepted by Toshiba, and Toshiba shall
fulfill such purchase orders.
(C) Section 16, Section 18 and the first sentence of Section 10 shall
survive such termination and remain in full force and effect.
18. GENERAL PROVISIONS.
18.1 GOVERNING LAW. This Agreement shall be construed and interpreted in
accordance with and governed by the Laws of the State of New York, U.S.A.,
including, without limitation, Section 5-1401 of the General Obligations Law of
the State of New York (without regard to the choice of law provisions thereof).
Judgement upon an award rendered by the arbitrators pursuant to Section 18.2
shall be entered in the courts of the State of New York, and the Parties hereby
submit to the exclusive jurisdiction of such courts for the purpose of any such
entry. The Parties agree and consent that services of process may be made upon
the Parties in any legal proceedings relating hereto by any means allowed under
applicable Law.
18.2 DISPUTE RESOLUTION.
(A) The Parties intend that all disputes between the Parties arising
out of this Agreement that do not involve claims by or against third
parties shall be settled by the Parties amicably through good faith
discussions upon the written request of either Party. In the event that any
such dispute cannot be resolved thereby within a period of sixty (60)
calendar days after such notice has been given, such dispute shall be
finally settled by binding arbitration at the request of
Exhibit 99.4
12
any Party.
(B) Each arbitration hereunder shall be conducted in the English
language in New York, New York, and shall be administered by the American
Arbitration Association under its Commercial Arbitration Rules then in
effect, before three (3) independent arbitrators to be appointed as
follows. Each Party shall appoint one (1) arbitrator, and the two (2)
arbitrators appointed by the Parties shall appoint a third arbitrator in
accordance with paragraph (c) of AAA Rule R-15 (Appointment of Neutral
Arbitrator by Party-Appointed Arbitrators or Parties) currently in effect.
However, in all events, these arbitration provisions shall govern over any
conflicting rules which may now or hereafter be contained in the applicable
rules.
(C) Each Party may demand arbitration by filing a written demand with
the other Party within one hundred eighty (180) calendar days after the
expiration of the sixty (60) day period described above. The arbitrators
shall have the authority to grant any equitable and legal remedies that
would be available in any judicial proceeding intended to resolve a
dispute, including (notwithstanding Section 17) the termination of this
Agreement. Notwithstanding the foregoing, either Party shall be entitled to
seek preliminary injunctive relief from any court of competent
jurisdiction, pending the final decision or award of the arbitrators. The
award rendered in an arbitration hereunder shall be final and
non-appealable.
18.3 NOTICES AND OTHER COMMUNICATIONS. Any and all notices, requests,
demands and other communications required or otherwise contemplated to be made
under this Agreement shall be in writing and in English and shall be provided by
one or more of the following means and shall be deemed to have been duly given
(a) if delivered personally, when received, (b) if transmitted by facsimile, on
the first (1st) Business Day following receipt of a transmittal confirmation, or
(c) if by international courier service, on the third (3rd) Business Day
following the date of deposit with such courier service, or such earlier
delivery date as may be confirmed in writing to the sender by such courier
service. All such notices, requests, demands and other communications shall be
addressed as follows:
If to Toshiba:
Toshiba Corporation
Mobile Communications Company
1-1, Shibaura 1-chome, Minato-ku
Tokyo 105-8001
Japan
Attention: General Manager, International Operations
Telephone: -81-3-3457-3241
Facsimile: -81-3-3457-8194
Exhibit 99.4
13
If to ACC:
Audiovox Communications Corp.
555 Wireless Boulevard
Hauppauge, New York 11788
U.S.A.
Attention: Philip Christopher
Telephone: (631) 233-3300
Facsimile: (631) 951-0784
With a copy to:
Levy & Stopol, LLP
East Tower, 14th Floor
190 EAB Plaza
Uniondale, New York 11556-0190
USA
Telephone: (516) 802-7007
Facsimile: (516) 802-7008
or to such other address or facsimile number as a Party may have specified to
the other Parties in writing delivered in accordance with this Section 18.3.
18.4 SEVERABILITY. If any provisions of this Agreement shall be held to be
illegal, invalid or unenforceable, the Parties agree that such provisions will
be enforced to the maximum extent permissible so as to effect the intent of the
Parties, and the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby. If necessary to effect the intent of the Parties, the Parties will
negotiate in good faith to amend this Agreement to replace the unenforceable
language with enforceable language which as closely as possible reflects such
intent.
18.5 AMENDMENTS. This Agreement may be amended or modified only by a
written instrument signed by each Party.
18.6 WAIVER. Any waiver by a Party of an instance of the other Party's
noncompliance with any obligation or responsibility herein contained shall be in
writing and signed by the waiving Party and shall not be deemed a waiver of
other instances of the other Party's noncompliance hereunder.
18.7 NO ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and permitted assigns
of the Parties. Nothing in this Agreement shall confer any rights upon any
Person other than the Parties and their respective successors and permitted
assigns. Neither Party may assign this Agreement or
Exhibit 99.4
14
its rights hereunder to any Person without the written consent of the other
Party. No assignment by any Person of this Agreement or of any of such Person's
rights hereunder shall release such Person from any of its obligations
hereunder. Any attempted assignment of this Agreement in violation of this
Section 18.7 shall be void and of no effect.
18.8 CONSTRUCTION. This Agreement has been negotiated by the Parties and
their respective counsel and shall be fairly interpreted in accordance with its
terms and without any strict construction in favor of or against either of the
Parties.
18.9 INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT. Unless the context
shall otherwise require, any pronoun shall include the corresponding masculine,
feminine and neuter forms, and words using the singular or plural number shall
also include the plural or singular number, respectively. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Annexes, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement unless the context shall
otherwise require. The headings of the Articles and Sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretations of this Agreement. Unless the context shall
otherwise require, any reference to any agreement or other instrument or statute
or regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any successor provision). Any reference in this Agreement to a "day" or a
number of "days" (without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice shall be
deferred until, or may be taken or given, on the next Business Day.
18.10 DISCLAIMER OF AGENCY. This Agreement shall not constitute any Party
as a legal representative or agent of any other Party, nor shall a Party have
the right or authority to assume, create or incur any Liability of any kind,
expressed or implied, against or in the name or on behalf of the other Party or
any of its Affiliates.
18.11 LANGUAGE. The Parties have negotiated this Agreement in the English
language, which shall be the governing language of this Agreement.
18.12 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended to, or shall be deemed to, create a partnership or joint venture
relationship among the Parties or any of their Affiliates for any purpose,
including tax purposes. Neither of the Parties nor any of its Affiliates will
take a position contrary to the foregoing.
18.13 SPECIFIC PERFORMANCE. Each Party agrees that each other Party shall
be entitled to obtain an injunction or injunctions in accordance with the
dispute resolution
Exhibit 99.4
15
procedures contained in Section 18.2 to prevent breaches of the provisions of
this Agreement, or any agreement contemplated hereunder and to enforce
specifically the terms and provisions hereof, in each instance without being
required to post bond or other security, without being required to prove
irreparable harm, and in addition to, and without having to prove the adequacy
of, other remedies at Law.
18.14 CONSEQUENTIAL AND OTHER DAMAGES. Neither Party shall be liable to the
other Party under any contract, negligence, strict liability or other theory for
any indirect, incidental, consequential, punitive or other special damages
(including without limitation lost profits) asserted by the other Party.
18.15 EXPORT CONTROL. Each Party shall comply with the Japanese Foreign
Exchange and Foreign Trade Laws, the U.S. Export Administration Regulations and
any other applicable export regulations with respect to Toshiba Products
supplied hereunder, and each Party shall not, directly or indirectly, export or
re-export Toshiba Products or any part thereof, any information, technical data,
or products received from the other Party, or any direct product thereof, to any
destination or country prohibited by such Laws and regulations, unless properly
authorized by the applicable Governmental Authorities.
18.16 FORCE MAJEURE. Neither Party shall be responsible for any defaults,
failures to assist, or delays in delivery which are due to causes beyond its
control, including, but without limitation, acts of God or of a public enemy,
acts or any order of a government, or any preference, priority, or any order of
such government, currency restrictions, fires, floods, epidemics, quarantine
restrictions, strikes, embargoes, unduly severe weather, or incidents of war.
18.17 ENTIRE AGREEMENT. The provisions of this Agreement and the other
Transaction Agreements set forth the entire agreement and understanding between
the Parties as to the subject matter hereof and supersede all prior agreements,
oral or written, and all other prior communications between the Parties relating
to the subject matter hereof; provided that this Agreement shall not apply to
Toshiba Products covered by purchase orders effective prior to the date hereof.
18.18 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such
counterpart shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Exhibit 99.4
16
IN WITNESS WHEREOF, the Parties have caused their respective duly
authorized representatives to execute this Distribution Agreement as of the date
first above written.
TOSHIBA CORPORATION,
a Japanese corporation, acting through its
Mobile Communications Company
By: s/ Tetsuya Mizoguchi
Name: Tetsuya Mizoguchi
Title: President and CEO,
Mobile Communications
Company
AUDIOVOX COMMUNICATIONS
CORP.,
a Delaware corporation
By: s/ Philip Christopher
-------------------------------
Name: Philip Christopher
Title: Chief Executive Officer
Exhibit 99.4
17
ANNEX I
CERTAIN DEFINITIONS
"AFFILIATE" of a specified Person means any Person that controls, is
controlled by or is under common control with such specified Person. For
purposes of this definition, "CONTROL" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or other ownership interests, by
contract or otherwise).
"BUSINESS" means the research, development, design, manufacture, marketing,
sale and/or service of Products.
"BUSINESS DAY" means a day on which commercial banks in New York City are
generally open to conduct their regular banking business.
"GOVERNMENTAL AUTHORITY" means any federation, nation, state, sovereign or
government, any federal, supranational, regional, state, local or municipal
political subdivision, any governmental or administrative body, instrumentality,
department or agency, or any court, administrative hearing body, arbitrator,
commission or other similar dispute resolving panel or body, and any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of a government.
"LAWS" means all applicable provisions of all (i) constitutions, treaties,
statutes, laws (including common law), rules, regulations, ordinances or codes
of any Governmental Authority, and (ii) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.
"PERSON" means a natural individual, Governmental Authority, partnership,
firm, corporation or other entity.
"STRATEGIC PERSON" means any of Motorola, Nokia, Ericsson, Kyocera, Sanyo,
Sharp or other similar companies that compete with a Party in the Business.
"TRANSACTION AGREEMENTS" means this Agreement; the Securities Purchase
Agreement; the Stockholders Agreement; the Employment Agreement dated as of the
date hereof between ACC and Philip Christopher; the Trademark License Agreement
dated as of the date hereof between Audiovox and ACC; the Shared Services
Agreement dated as of the date hereof between Audiovox and ACC; the
Non-Negotiable Subordinated Convertible Promissory Note by ACC to Toshiba; and
the Non-Negotiable Demand Note by ACC to Audiovox dated the date hereof.
Exhibit 99.4
18
EXHIBIT 6.1
DUTIES OF TOSHIBA'S OFFICER DESIGNEES
Executive Vice President
Supervises the Chief Technology Officer for Toshiba Products and the Vice
President for Merchandizing -- Toshiba Products.
Participates in the decision making of ACC, including through executive
meetings.
Chief Technology Officer for Toshiba Products
Responsible for technology matters for Toshiba Products.
Represents ACC on matters relating to Toshiba technology in coordination with
Hino Works and other applicable Toshiba facilities.
Vice President for Merchandizing -- Toshiba Products
Coordinates and participates in the production, sale and inventory of Toshiba
Products.
Coordinates and participates in product planning for Toshiba Products, including
concept proposals for Toshiba Products.
Supports sales promotion of Toshiba Products.
Exhibit 99.4
19
SCHEDULE 6.2 EXECUTIVE MEETINGS
Material change in organizational structure
Human resource planning and incentives
The launch plan for individual Toshiba Products (including specification,
cost and other factors) based on the product roadmap and concept made
by mutual cooperation between ACC and Toshiba
Service and maintenance operations
Major sales strategy for each Carrier in North America
Major regional sales channel strategy
Major general sales strategy and policy
Sales policy in the Territory (by country) in South America
Sales policy in the Territory (by country) outside North and South America
Sales promotion and advertisement policy
Pricing
Budget and Mid-Term Business Plan of ACC
Any other matters which are reasonably acceptable to the CEO
Exhibit 99.4
20
THIS NOTE AND THE EQUITY SECURITIES INTO WHICH THIS NOTE MAY BE CONVERTED HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE
UNITED STATES FEDERAL, STATE AND FOREIGN SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM.
TRANSFER OF THIS NOTE AND THE EQUITY SECURITIES INTO WHICH THIS NOTE MAY BE
CONVERTED ARE RESTRICTED PURSUANT TO THE STOCKHOLDERS AGREEMENT DATED AS OF MAY
29, 2002, BY AND AMONG AUDIOVOX CORPORATION, TOSHIBA CORPORATION AND AUDIOVOX
COMMUNICATIONS CORP., COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
AUDIOVOX COMMUNICATIONS CORP.
AUDIOVOX COMMUNICATIONS CORP.
NON-NEGOTIABLE SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$8,106,667
May 31, 2002
For value received, Audiovox Communications Corp., a Delaware corporation
("ACC"), promises to pay to Toshiba Corporation, a Japanese corporation (the
"HOLDER"), or to the Holder's successors or assigns, the principal amount of
Eight Million One Hundred Six Thousand Six Hundred Sixty-Seven Dollars
($8,106,667) in accordance with the terms of this Subordinated Convertible
Promissory Note (this "NOTE").
1. INTEREST. This Note shall bear interest at a per annum rate equal to
1.75%, computed on the basis on the actual number of days elapsed and a year of
365 days. Interest hereunder shall be payable annually on May 31 of each year,
commencing May 31, 2003.
2. MATURITY. Subject to Sections 4 and 5, the unpaid principal amount
hereof shall be due and payable on May 31, 2007 (the "MATURITY DATE"), together
with all interest then accrued and unpaid hereunder; provided that if this Note
has not been converted in full into Convertible Shares pursuant to Section 4 on
or prior to May 31, 2007, the Maturity Date shall be automatically extended
until May 31, 2012 without any further action of ACC or the Holder. All payments
hereunder (including pursuant to Section 4) shall be credited first against
accrued and unpaid interest and then against principal.
3. NO PREPAYMENT. Subject to Section 4, no prepayment of any amount under
this Note may be made prior to the Maturity Date without the Holder's prior
written consent.
Exhibit 99.5
1
4. CONVERSION.
(A) OPTIONAL CONVERSION. At any time and from time to time following
the date hereof, the Holder shall have the right at its election to convert
all or any portion of the unpaid principal amount hereof and the accrued
and unpaid interest hereunder into a number of shares ("CONVERSION SHARES")
of ACC's Class B Common Stock, no par value per share, equal to the amount
hereunder to be converted divided by $773,818.19 (subject to adjustment as
provided in Section 4(d), the "CONVERSION PRICE"); provided that (i) the
Holder may not convert this Note under this Section 4(a) if, after giving
effect to the proposed conversion, the outstanding shares of ACC capital
stock held by the Holder would exceed 25% of the total outstanding shares
of ACC capital stock and (ii) prior to and in connection with such
conversion, Borrower may pay in cash all or any portion of the accrued and
unpaid interest hereunder.
(B) MANDATORY CONVERSION. ACC may require the Holder to convert all or
any portion of the unpaid principal amount hereof and the accrued and
unpaid interest hereunder into a number of Conversion Shares equal to the
amount hereunder to be converted divided by the Conversion Price if, after
giving effect to the proposed conversion, the outstanding shares of ACC
capital stock held by the Holder would not exceed 25% of the total
outstanding shares of ACC capital stock.
(C) PROCEDURE FOR CONVERSION. In connection with any conversion of
this Note, the Holder shall deliver written notice of the conversion to ACC
at its principal office, specifying the amount hereunder to be converted,
and together with the original Note, duly endorsed for conversion. ACC
shall, as soon as practicable thereafter, issue and deliver to the Holder a
certificate or certificates for the Conversion Shares to be issued to the
Holder, together with a Note in the form hereof in the principal amount of
any unconverted and outstanding portion of this Note following the
conversion.
(D) ADJUSTMENT TO CONVERSION PRICE. The Conversion Price shall be
subject to appropriate adjustment so as to protect the rights of the Holder
upon the occurrence on or after the date hereof of any stock dividend,
stock split, reverse stock split, recapitalization, reclassification,
merger, combination, consolidation or other similar transaction affecting
the capital stock of ACC. Upon each occurrence of any event described in
the immediately preceding sentence, the Conversion Price in effect
immediately prior to such event shall be adjusted (and any other
appropriate actions shall be taken by ACC) so that the Holder, upon any
conversion, shall be entitled to receive the number of shares of ACC
capital stock or other property, including cash or securities, that the
Holder would have owned or would have been entitled to receive upon or by
reason of any of the events described above, had this Note been converted
immediately prior to the date of such event, or if such event has a record
date, then the record date applicable to such event. An adjustment made
pursuant to this Section shall become effective retroactively to the close
of business on the day upon which the applicable event is consummated.
(E) CONVERSION SHARES. ACC covenants and agrees that, so long as any
amount owing under this Note remains outstanding, ACC shall reserve and
keep available for issue upon conversion of this Note such number of ACC's
authorized but
Exhibit 99.5
2
unissued shares of capital stock as will be sufficient to permit the
conversion in full of this Note. All Conversion Shares that are issued upon
conversion of this Note shall be duly and validly issued, fully paid and
nonassessable and free and clear of any liens, claims and restrictions.
5. ACCELERATION. The entire unpaid principal amount hereof and all accrued
and unpaid interest hereunder shall become automatically and immediately due and
payable without any notice, demand or other action by the Holder upon the
occurrence of any of the following:
(A) ACC commences a voluntary case or other proceeding seeking
liquidation, reorganization, or other relief with respect to itself or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for ACC or any substantial
part of its property, or taking possession by any such official in any
involuntary case or other proceeding commenced against ACC, or makes a
general assignment for the benefit of creditors, or fails generally to pay
its debts as they become due, or takes any corporate action to authorize
any of the foregoing; or
(B) An involuntary case or other proceeding is commenced against ACC
seeking liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for ACC or any substantial
part of its property, and such involuntary case or other proceeding remains
undismissed and unstayed for a period of one hundred twenty (120) days.
6. SUBORDINATION.
(A) The Holder of this Note, for itself and its successors and
assigns, agrees that this Note and the obligations represented thereby (the
"SUBORDINATED OBLIGATIONS") shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to
the prior payment in full of all Senior Indebtedness hereinafter defined.
The term "Senior Indebtedness" means (a) all indebtedness of ACC, including
the principal of and premium, if any, and interest on such indebtedness
whether outstanding on the date of this Note or thereafter created, (i) for
borrowed money, together with all amounts for fees and expenses and other
amounts due to any banks or like financial institutions, (ii) constituting
purchase money indebtedness for the payment of which ACC is directly or
contingently liable, (iii) constituting reimbursement obligations under
bank letters of credit and standby letters of credit, (iv) under steamship
guarantees and airway releases, (v) under any lease of real or personal
property, whether outstanding on the date of execution of this Note or
thereafter created, incurred or assumed, which obligations are capitalized
on the books of ACC in accordance with generally accepted accounting
principles, (vii) for accounts payable, accrued expenses and taxes payable,
(viii) relating to indebtedness of others of the kinds referred to in the
foregoing clauses (i) through (vii) guaranteed or assumed, directly or
indirectly, by ACC, and (b) any modifications, refundings, deferrals,
renewals or extensions of any such Senior Indebtedness, or securities,
notes, debentures or other evidences of indebtedness issued in exchange for
such Senior Indebtedness. As used in the preceding sentence the term
Exhibit 99.5
3
"purchase money indebtedness" means indebtedness evidenced by a note,
debenture, bond or other similar instrument (whether or not secured by a
lien or other security interest) given in connection with the acquisition
of any business, properties or assets of any kind acquired by ACC or any
subsidiary.
(B) Except as set forth in Section 1 and subject to Section 4, no
payment in respect of the Subordinated Obligations (including, without
limitation, at any time after the Subordinated Obligations shall have been
declared due and payable prior to the Maturity Date) or any judgment with
respect thereto shall be made by or on behalf of ACC until the Senior
Indebtedness shall have been paid in full and the Holder of this Note shall
not make any demand for such payment; provided that this Section 6 shall
not restrict the right of the holders of the Subordinated Obligations to
receive payment thereon upon the stated Maturity Date thereof, except with
respect to any Senior Indebtedness that is due and owing (whether by
maturity, acceleration or otherwise) or with respect to which ACC is in
default on such stated Maturity Date. For purposes of this Note, "payment
in full" and "paid in full" as used with respect to any Senior
Indebtedness, means the receipt of cash equal to the amount of all such
Senior Indebtedness, or the receipt of cash equivalents in an equal amount
reasonably satisfactory to such holders of Senior Indebtedness or such
payment in full shall have been duly provided for in a manner satisfactory
to such holders of Senior Indebtedness in the sole discretion of such
holders.
(C) In the event that notwithstanding the foregoing provisions of this
Section 6, any holder of Subordinated Obligation shall have received any
payment or distribution with respect to the Subordinated Obligation
contrary to the foregoing provisions of this Section 6, then and in any
such event such payment or distribution shall be held in trust for the
benefit of, and shall be immediately paid or delivered by such holder to,
as the case may be, the holders of the Senior Indebtedness remaining unpaid
for application to the payment of the Senior Indebtedness remaining unpaid.
The subordination provisions in this Section 6 are for the benefit of and
shall be enforceable directly by the holders of Senior Indebtedness and
each such holder of Senior Indebtedness shall be deemed to have acquired
such Senior Indebtedness in reliance upon the subordination provisions in
this Section 6. No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by any act or omission in good faith
by any such holder, or by any noncompliance by ACC with the terms and
provisions and covenants herein regardless of any knowledge thereof any
such holder may have or otherwise be charged with.
(D) In no event shall any term or condition in this Note be amended or
otherwise modified without the consent of the Required Lenders under (and
as defined in) the Fourth Amended and Restated Credit Agreement, dated as
of July 28, 1999, among Audiovox Corporation, the Lenders parties thereto
and JPMorgan Chase Bank, as administrative agent and collateral agent (as
amended, supplemented, otherwise modified or refinanced, refunded, renewed
or extended). In the event that any payment or any part thereof of any
Senior Indebtebtedness is rescinded or must otherwise be restored or
returned to the holder of such Senior Indebtedness upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of ACC or upon or as
a result of the appointment
Exhibit 99.5
4
of a receiver, intervenor or conservator or, trustee or similar officer for ACC
or any substantial part of any of its property, or otherwise, the holders of the
Senior Indebtedness shall be entitled to the full benefits of the subordination
provisions of this Section 6 and such subordination provisions shall be
reinstated, all as though such payments had not been made. The provisions set
forth in this Section 6 shall (i) remain in full force and effect until payment
is made in full of all of the Senior Indebtedness, in cash, or such payment is
duly provided for in a manner satisfactory to the holders of the Senior
Indebtedness, (ii) be binding upon the holders of Subordinated Obligations, ACC
and their respective successors, transferees and assigns, and (iii) inure to the
benefit of, and be enforceable directly by, each of the holders of Senior
Indebtedness and their respective successors, transferees and assigns.
7. GOVERNING LAW. This Note shall be construed and interpreted in
accordance with and governed by the laws of the State of New York, U.S.A.,
including, without limitation, Section 5-1401 of the General Obligations Law of
the State of New York (without regard to the choice of law provisions thereof).
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Exhibit 99.5
5
IN WITNESS WHEREOF, ACC has caused its duly authorized representative to
execute this Non-Negotiable Subordinated Convertible Promissory Note as of the
date first above written.
AUDIOVOX COMMUNICATIONS
CORPORATION,
a Delaware corporation
By: s/ Philip Christopher
-----------------------------------
Name: Philip Christopher
Title: Chief Executive Officer
Exhibit 99.5
6
EMPLOYMENT AGREEMENT
BETWEEN
AUDIOVOX COMMUNICATIONS CORPORATION
AND
PHILIP CHRISTOPHER
THIS EMPLOYMENT AGREEMENT, effective as of May 29, 2002 ("Effective Date"),
is by and among Audiovox Communications Corporation ("ACC"), a corporation
organized and existing under the laws of the State of Delaware, Philip
Christopher ("Executive"), and for purposes of Sections 5.3, 5.4 and 5.7 only,
Audiovox Corporation, a Delaware corporation ("Audiovox").
WHEREAS, ACC wishes to employ Executive pursuant to the terms and
conditions and for the consideration set forth in this Agreement, and Executive
wishes to be employed by ACC pursuant to such terms and conditions and for such
consideration.
NOW, THEREFORE, for and in consideration of the respective promises,
covenants, and obligations contained herein, ACC and Executive agree as follows:
1. Introduction. ACC agrees to employ Executive, and Executive agrees to be
employed by ACC, subject to the terms and conditions of this Agreement.
2. Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth below or as defined throughout this Agreement:
2.1. "Agreement" means this Employment Agreement effective as of the
Effective Date.
2.2. [Intentionally Omitted]
2.3. "Board of Directors" or "Board" means the Board of Directors of
ACC or any successor entity.
Exhibit 99.6
1
2.4. "Cause" shall mean termination due to any of the following reasons:
2.4.1 The entry of a final judgment of conviction of the Executive by
a trial court for a felony committed after the date hereof regardless of
whether the Executive appeals the judgment, or entry of a plea of nolo
contendere by the Executive to a felony;
2.4.2 The failure of Executive, other than by reason of his Disability
or legal incompetence, to carry out the reasonable business directions of
the Board, and the failure continues for more than thirty (30) days after
the Board gives written notice to the Executive specifying the nature of
the failure and, if such failure is capable of cure, requesting Executive
to cure it;
2.4.3 Executive's breach of his material obligations under this
Agreement; or
2.4.4 Any act of intentional misconduct by Executive materially and
adversely affecting ACC, Audiovox or any of their respective affiliates.
2.5. "Consumer Price Index" means the Consumer Price Index for All
Urban Consumers, U.S. City Average, All Items, as reported by the Bureau of
Labor Statistics of the U.S. Department of Labor.
2.6. "Code" means the Internal Revenue Code of 1986, as amended.
References to any section of the Code include corresponding successor
provisions.
2.7. "Confidential Information" means any confidential information,
not generally known to the public, related to the business or operations
(past, present or future) of ACC, Audiovox or any of their respective
affiliates that Executive has possession or knowledge of through his
employment with ACC, Audiovox or any of their respective affiliates.
2.8. "Disabled" or "Disability" means a determination by an
independent competent medical authority that Executive is unable to perform
his duties as President and Chief Executive
Exhibit 99.6
2
Officer of ACC and in all reasonable medical likelihood such inability
will continue for more than one year. Unless otherwise agreed by Executive
and the Board, Executive and ACC each shall select a board certified
licensed physician, and the two physicians selected shall designate the
independent medical authority, whose determination of Disability shall be
binding upon Executive and ACC. ACC shall be entitled to request such a
determination in the event that Executive has been unable to perform his
duties hereunder by reason of physical or mental incapacity for a period of
ninety (90) consecutive days or for ninety (90) days during any six
(6)-month period during the term of this Agreement.
2.9. "Separation Payment" means a payment equal to the sum of (a) an
amount equal to the remainder of the base salary required to be paid to
Executive through the initial five- year term of this Agreement (assuming a
percentage increase in the Consumer Price Index per year equal to the
average percentage increase per year in the Consumer Price Index during the
previous four calendar years prior to such calculation), plus (b) the
product of (i) the greater of (xx) the number one (1) and (yy) the number
of years (including fractions thereof) remaining from the date of
Executive's termination until May 29, 2007, multiplied by (ii) the average
of all annual bonus payments made to Executive pursuant to Section 5.8,
plus (c) an amount in cash equal to one million dollars ($1,000,000).
2.10. "Stock Option" means an option to purchase capital stock of
Audiovox pursuant to any of the stock option plans maintained by Audiovox.
2.11. "Toshiba" means Toshiba Corporation, a Japanese corporation.
3. Term of Employment. The initial term of this Agreement commences on the
Effective Date and, unless terminated at an earlier date in accordance with
Section 7.2 or 7.3, shall continue until May 29, 2007. The term of this
Exhibit 99.6
3
Agreement shall automatically extend by consecutive twelve- month periods
unless, prior to April 29, 2007, and prior to each April 29 thereafter, ACC
notifies Executive in writing of ACC's intention to terminate this Agreement. If
ACC so notifies Executive, then this Agreement terminates on May 29 of the year
such written notice is delivered to Executive. If ACC elects not to renew this
Agreement for any one-year extension period in accordance with this Section 3,
or if ACC elects to terminate Executive for Cause pursuant to Section 2.4.2 or
Section 2.4.3, then within thirty (30) days after the expiration of this
Agreement pursuant to such election, ACC shall pay Executive an amount in cash
equal to the product of (x) the base salary and annual bonus payment paid to
Executive during the immediately preceding calendar year pursuant to this
Agreement, multiplied by (y) .50; provided, however, that Executive shall be
subject to the provisions of Section 8 in the event this Agreement expires
pursuant to this Section 3, or if ACC terminates Executive for Cause pursuant to
Section 2.4.2 or Section 2.4.3.
4. Duties and Responsibilities.
4.1. Service. ACC shall employ Executive as ACC's President and Chief
Executive Officer. Executive shall faithfully and diligently serve as ACC's
President and Chief Executive Officer.
4.2. Other Activities. Executive shall not during the term of this
Agreement, without the consent of the Board of Directors, (a) act as
advisor, consultant, officer, partner, or in any other capacity, for any
person or entity other than ACC or Audiovox, if such activity is for profit
or pecuniary advantage; (b) engage in any other business activity other
than business activity for ACC or Audiovox; or (c) cause or allow ACC or
Audiovox to participate in any transaction with Executive or any of his
relatives or with any entity in which Executive or any of his relatives has
an interest other than holding less than five (5%) percent of an entity
whose stock is publicly traded. Executive may make and manage his personal
investments, provided the investments do not violate the
Exhibit 99.6
4
provisions of Section 6 and, further provided, the investments do not
violate ACC's or Audiovox's policies as in effect from time to time on
conflict of interest, insider trading, and any trading restriction policy
applicable to ACC's or Audiovox's executive officers.
4.3. Director. During the term of this Agreement, Executive shall
serve as a voting member and Chairman of the Board of Directors of ACC. In
addition, the parties acknowledge that it is their intention that Executive
shall retain his membership on the Board of Directors of Audiovox, subject
to the future nomination decisions by the Board of Directors of Audiovox
and the election decisions of the stockholders of Audiovox.
5. Compensation and Benefits.
5.1. Benefits. Executive shall be eligible to participate in all
deferred compensation, disability insurance, life insurance, retirement,
and welfare benefit plans generally offered to executive officers of ACC.
5.2. Base Salary. Commencing on the Effective Date, Executive's annual
base salary shall be five hundred thousand dollars ($500,000), which shall
be paid in installments in accordance with ACC's standard payroll
practices. On each anniversary of the Effective Date, ACC shall increase
Executive's annual base salary by the positive percentage change, if any,
in the Consumer Price Index during the previous year.
5.3. Equity Incentives. During the term of this Agreement, Executive
shall be eligible to receive equity incentives under the plans and programs
applicable to ACC executive officers, which issuances shall, except as
provided herein, be in the Board's discretion and subject to the terms and
conditions of such plans and programs as in effect from time to time. As
soon as possible after the Effective Date, the Board of Directors shall
adopt an employee equity incentive plan reflecting the terms set forth in
the document attached hereto as Exhibit A (the "Equity Incentive
Exhibit 99.6
5
Plan"). Executive shall allocate equity incentives issued under the
Equity Incentive Plan as provided for in the document attached hereto as
Exhibit A in his sole discretion, including equity incentives representing
the equivalent of up to 45.45 percent of such equity incentives to himself;
provided, however, that Audiovox shall have the right to review such
allocation (other than the allocation made to Executive) and make changes
to such allocation as Audiovox deems appropriate, in its sole discretion.
5.4. Vesting of Stock Options. As of the Effective Date, Executive
shall become fully vested in all Stock Options previously granted to him
under the Audiovox Corporation 1999 Stock Option Plan.
5.5. Reimbursement. ACC shall reimburse Executive for reasonable
business expenses that he incurs in the performance of services under this
Agreement on presentation to ACC of an itemized account of such expenses
together with supporting documentation. In addition, ACC shall, within
thirty (30) days after execution of this Agreement, pay or reimburse
Executive for the reasonable attorney's and paralegal's fees and
disbursements incurred by Executive in the negotiation, drafting, and
execution of this Agreement.
5.6. Automobile. ACC shall provide Executive with exclusive use of a
late model luxury class automobile leased and insured by ACC.
5.7. Bonus Pool. Within (30) days after Effective Date, Audiovox shall
establish a bonus pool of three million, two hundred thousand dollars
($3,200,000). Executive shall allocate the bonus pool among the key
employees of ACC, including himself. Audiovox shall pay the appropriate key
employees of ACC, including Executive, bonuses in the amount allocated
pursuant to the immediately preceding sentence. Executive agrees that he
shall, promptly following receipt of such bonus, use all or a portion of
the amounts paid to him pursuant to this Section 5.7 to repay
Exhibit 99.6
6
to Audiovox any remaining outstanding principal amount and accrued but
unpaid interest owed by Executive pursuant to the unsecured promissory note
in favor of Audiovox for an amount equal to $650,954.
5.8. Annual Bonus. During the term of this Agreement, ACC shall pay
Executive an annual bonus equal to two (2%) percent of ACC's annual
earnings before income taxes, determined in accordance with generally
accepted accounting principles. The direct and indirect stockholders of ACC
shall not allocate overhead and other expenses in a manner inconsistent
with prior practices. ACC shall pay the annual bonus within ninety (90)
days after the end of its fiscal year.
5.9. Vacation. Executive is entitled to four (4) weeks of vacation
during each year of the term of this Agreement without diminution of
compensation.
5.10. Insurance and Indemnification.
5.10.1 ACC shall provide coverage for Executive to the same
extent as ACC's other officers for all insurance that ACC maintains to
indemnify its directors and officers and to indemnify ACC for any
obligations that it incurs from its undertakings to indemnify its
directors and officers. ACC shall maintain the insurance for so long
as Executive is subject to personal liability for service as an
officer of ACC.
5.10.2 ACC shall use commercially reasonable efforts to maintain
in force insurance indemnifying directors and officers from liability
for their service to it, at not less than its present coverage and
deductibles to the extent available to it on commercially reasonable
terms.
5.10.3 ACC shall indemnify and hold harmless Executive for and
from all assessments, costs, damages, expenses, fines, judgments,
liabilities, losses, penalties, and reasonable attorney's and
paralegal's fees and disbursements resulting from the Executive's
service as an officer of ACC to the fullest extent permitted by law
and on the most favorable terms that indemnification
Exhibit 99.6
7
is provided to any officer of ACC. ACC shall so indemnify the
Executive for so long as Executive is subject to personal liability
for service as an officer of ACC.
6. Confidential Information and Public Remarks.
6.1. Unique Position. Executive appreciates the unique position he will
hold as ACC's President and Chief Executive Officer and understands that because
of his position ACC will provide him unique and broad access to Confidential
Information. Executive acknowledges that the business of each of Audiovox and
ACC is competitive and that the Confidential Information of Audiovox and ACC
constitutes valuable and unique assets of Audiovox and ACC.
6.2. Therefore, Executive agrees as follows:
6.2.1 Disclosure and Misuse. Except in furtherance of his duties
to Audiovox or ACC, Executive shall not disclose to third-parties or
use either for himself or others, any Confidential Information without
first obtaining the written consent of Audiovox or ACC, as applicable.
Any records of Confidential Information prepared by Executive or that
come into his possession or to which he has access during his
employment with ACC or, if applicable, Audiovox, shall remain the
property of ACC or Audiovox, as applicable. Upon termination of his
employment with ACC or, if applicable, Audiovox, Executive shall not
remove any such records or copies thereof, and shall promptly deliver
such records and copies in his personal possession to Audiovox or ACC,
as applicable. The obligations of this Section 6.2.1 shall survive
termination of Executive's employment.
6.2.2 Public Statement Prohibition. Executive shall refrain from
publishing or making any oral or written statements about Audiovox,
ACC or any of their respective affiliates or any director, officer, or
holder of more than five (5%) percent of the voting securities of any
of the foregoing, that are derogatory or disparaging. The obligations
of this Section 6.2.2 shall survive
Exhibit 99.6
8
termination of Executive's employment.
6.2.3 Opportunities. During the term of his employment, Executive
may acquire knowledge of business opportunities pertaining to the
business in which ACC, Audiovox or their respective affiliates are
engaged. Executive shall promptly disclose to ACC or Audiovox, as
applicable, any such business opportunity and will refrain from
exploiting any such business opportunity for himself or any third
party without the prior written consent of ACC or Audiovox, as
applicable.
7. Termination of Employment.
7.1. Termination Date. For purposes of this Agreement, the Termination
Date with respect to Executive's employment hereunder shall be as follows:
7.1.1 the date of Executive's death;
7.1.2 the first business day following the date upon which the
determination of Executive's Disability is finally made;
7.1.3 subject to Section 2.4.2, the date on which ACC delivers notice
to Executive of the termination of his employment hereunder for Cause;
7.1.4 the date which is ten (10) business days following the date on
which ACC delivers notice to Executive of the termination of his employment
hereunder other than for Cause;
7.1.5 the date which is ten (10) business days following the date on
which Executive delivers notice to ACC of the termination of his employment
hereunder for any reason other than as set forth in Section 7.2; or
7.1.6 subject to Sections 7.2.4 and 7.2.6, the date which is ten (10)
Exhibit 99.6
9
business days following the date on which Executive delivers notice to
ACC of the termination of his employment pursuant to Sections 7.2.2 through
7.2.7.
7.2. Separation Payment. ACC shall pay Executive the Separation
Payment within thirty (30) days after the date of termination of his
employment hereunder if he is terminated prior to the fifth anniversary of
the Effective Date due to any one or more of the following events:
7.2.1 ACC terminates Executive's employment without Cause;
7.2.2 Executive resigns his employment within ninety (90) days
after (i) he is removed as President or Chief Executive Officer of ACC
(except in connection with the termination of his employment by ACC,
or (ii) after he is assigned duties that result in a significant
adverse change or diminution in the Executive's authority and
responsibilities, except in the event that as a result of a
reasonable, good faith determination made by ACC that Executive is
unable to perform his duties by reason of a physical or mental
incapacity, ACC temporarily assigns Executive's duties to another
person during the period of such physical or mental incapacity;
provided, however, that the parties acknowledge and agree that, for
purposes of this Agreement, in no event shall the fact that Executive
ceases to be a member of the Board of Directors of Audiovox, for any
reason whatsoever, be deemed to be an event that results in a
significant adverse change or diminution in Executive's authority and
responsibilities;
7.2.3 Executive resigns his employment within ninety (90) days
after ACC notifies Executive in writing that the Board has decided to
reduce Executive's base salary or any annual bonus payable pursuant to
Section 5.8 or will not grant the increase in base salary under
Section 5.2;
7.2.4 Executive resigns his employment within ninety (90) days
after nonpayment of base salary when due other than for an inadvertent
failure that is cured within thirty
Exhibit 99.6
10
(30) days after the Executive notifies the Board in writing of the nonpayment;
7.2.5 Executive resigns his employment within ninety (90) days
after the failure of ACC to timely pay the annual bonus under Section
5.8;
7.2.6 Executive resigns his employment within ninety (90) days
after the material breach by ACC of any obligation under this
Agreement (other than those set forth in Sections 7.2.1 through
7.2.5), and the failure of ACC to cure the breach within thirty (30)
days after the Executive notifies the Board in writing of the breach;
or
7.2.7 Executive resigns his employment within ninety (90) days
after ACC consummates a merger, reorganization, sale of all or
substantially all of its assets, or other similar transaction
(excluding a merger where ACC is the surviving entity) where the
successor entity fails to expressly assume all of ACC's obligations
under this Agreement.
7.3. No Separation Payment. Executive shall not be entitled to a
Separation Payment if his employment with ACC terminates (i) for any reason
after the fifth year anniversary of the Effective Date, or (ii) prior to
the fifth year anniversary of the Effective Date due to any of the
following events:
7.3.1 Executive dies during the term of this Agreement;
7.3.2 Executive retires or resigns his employment at any time for
any reason other than as set forth in Section 7.2;
7.3.3 Executive resigns his employment after he becomes Disabled
or his employment is terminated after he becomes Disabled; or
7.3.4 ACC terminates Executive's employment for Cause. Upon
termination of Executive's employment under circumstances not
entitling him to a Separation Payment, for Cause, Executive shall be
entitled to receive the monthly installment of his
Exhibit 99.6
11
annual base salary being paid at the time of termination, and any
other reimbursements and payments required under this Agreement through the
Termination Date. Thereupon, this Agreement shall terminate and Executive
shall have no further rights under or be entitled to any other benefits and
payments under this Agreement; provided, however, that (a) the provisions
of Sections 5.10, 6, and 8 through 16 shall survive any termination of
Executive's employment hereunder except as may be required by law or under
any tax-qualified pension plan in which Executive participates at the
effective date of termination.
7.4. Equity Incentives.
7.4.1 Vesting Period. If Executive becomes entitled to a Separation
Payment under Section 7.2., Executive shall become fully vested in and
shall be entitled to exercise any unvested equity incentives ACC issued to
him prior to the Termination Date pursuant to the Equity Incentive Plan
and/or shall be entitled to any payment from the Equity Incentive Plan in
accordance with the terms of such plan.
7.4.2 Exercise Period. If Executive becomes entitled to a Separation
Payment under Section 7.2., the period during which Executive may exercise
vested equity incentives issued pursuant to the Equity Incentive Plan shall
be extended to the earlier of (a) the expiration of the term of the
applicable equity incentive, and (b) the twelve-month anniversary of the
Termination Date.
Exhibit 99.6
12
8. Noncompetition, Etc.
8.1. Noncompete. During the initial term and any renewal term of the
Executive's employment hereunder, and for a period of one year after the
termination of Executive's employment hereunder for any reason whatsoever
(such period being referred to herein as the "Restricted Period"),
Executive shall not, in absence of the written consent of the Board of
Directors, directly or indirectly, own any interest in, operate, join,
control or participate as a partner, director, principal, officer or agent
of, enter into the employment of, act as a consultant to or perform any
services for, any entity which competes, directly or indirectly, with any
business conducted by ACC or any of its subsidiaries in any country or
jurisdiction in which ACC or any of subsidiaries operates such business;
provided, however, that nothing in the foregoing shall prohibit Executive
from owning up to 2% of an entity whose stock is publicly traded.
8.2. Nonsolicitation of Customers. During the Restricted Period,
Executive shall not, in absence of the prior written consent of the Board
of Directors, directly or indirectly, request, induce or attempt to
influence any customer of ACC or any of its subsidiaries to terminate,
cancel or reduce or modify such customer's business relationship with ACC
or any of its subsidiaries, or divert its business with ACC or any of its
subsidiaries to any person or entity then in competition with any business
conducted by ACC or any of its subsidiaries.
8.3. Nonsolicitation of Employees. During the Restricted Period,
Executive shall not, in absence of the prior written consent of the Board
of Directors, directly or indirectly, employ, solicit for employment, or
advise, encourage or recommend to any other person or entity that such
person or entity employ or solicit for employment, or aid or assist any
other person or entity in the employment or soliciting for employment of,
any person who is then employed by ACC or any of its subsidiaries;
provided, however, that the foregoing shall not apply to persons who are
hired as a result
Exhibit 99.6
13
of the use of a general solicitation (such as an advertisement)
not specifically directed to any of the employees of ACC or any of its
subsidiaries.
8.4. Enforcement. In the event that any restriction against engaging
in the activities described in this Section 8 shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or by reason of its being too
extensive in any other respect, such restriction shall be interpreted to
extend only over the maximum period of time for which it may be enforceable
and to the maximum extent in all other respects as to which it may be
enforceable, all as determined by such court in such action.
8.5 Injunctions. Executive acknowledges that the services to be
rendered by him to ACC are of a special and unique character, which gives
this Agreement a peculiar value to ACC, the loss of which may not be
reasonably or adequately compensated for by damages in an action at law,
and that a breach or threatened breach by him of any of the provisions
contained in this Section 8 will cause ACC irreparable injury. Executive
therefore agrees that ACC shall be entitled, in addition to any other right
or remedy, to a seek temporary, preliminary or permanent injunction in a
federal or state court of competent jurisdiction in Suffolk County, New
York, notwithstanding the provisions of Section 9 hereof, without the
necessity of proving the inadequacy of monetary damages or the posting of
any bond or security, enjoining or restraining Executive from any such
breach or threatened breach.
Exhibit 99.6
14
9. Arbitration.
9.1. All claims and disputes arising out of or relating to this Agreement,
Executive's employment with ACC, and any other relationship between ACC and
Executive ("Arbitrable Claims"), other than a claim seeking a temporary,
preliminary or permanent injunction enjoining or restraining Executive from any
breach or threatened breach of the restrictive covenants set forth in Section 8,
shall be resolved by final and binding arbitration in New York, New York, under
the Federal Arbitration Act in accordance with the Employment Dispute Resolution
Rules then in effect with the American Arbitration Association. This Section 9
applies both during and after termination of Executive's employment. Either
party has the right to enforce this agreement to arbitrate in federal or state
court.
9.2. All proceedings and documents prepared in connection with any
Arbitrable Claim shall be Confidential Information and, unless otherwise
required by law, the contents and subject matter thereof shall not be disclosed
to any person or entity other than the parties to the proceedings, their
counsel, witnesses and experts, the arbitrator, and, if court enforcement of an
arbitration award is sought, the court hearing such matter.
9.3. If any party institutes a proceeding to compel arbitration, or
institutes arbitration, the party who substantially prevails in such proceeding
or arbitration, whether plaintiff or defendant, in addition to the remedy or
relief obtained in such proceeding or arbitration, shall be entitled to recover
the reasonable fees, disbursements, and expenses such prevailing party incurred
in such proceeding or arbitration, including without limitation reasonable
attorney's and paralegal's fees and disbursements, and the fees of the
arbitrators and the American Arbitration Association.
10. Notices. Notices and all other communications under this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered, or when mailed by United
Exhibit 99.6
15
States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
ACC or Audiovox:
Audiovox Communications Corp.
150 Marcus Boulevard
Hauppauge, NY 11788
U.S.A.
Attention: Charles M. Stoehr
Telephone: (631) 436-6505
Facsimile: (631) 231-1370
With a copy to:
Audiovox Communications Corp.
555 Wireless Boulevard
Hauppauge, NY 11788
U.S.A.
Attention: Neil Levine
Telephone: (631) 233-3338
Facsimile: (631) 233-3437
With a copy to:
Levy & Stopol, LLP East Tower, 14th Floor 190 EAB
Plaza Uniondale, NY 11556-0190 U.S.A.
Attention: Robert S. Levy, Esq.
Telephone: (516) 802-7007
Facsimile: (516) 802-7008
Exhibit 99.6
16
Executive:
Philip Christopher
108 Fairway View Drive
Commack, NY 11725
U.S.A.
Telephone: (631) 233-3342
Facsimile: (631) 951-0784
With a copy to:
Kerry M. Parker
Gibbons, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Plaza
Newark, NJ 07102
Telephone: (973) 596-4500
Facsimile: (973) 639-6346
Either ACC or Executive may provide a change of address to the other in writing,
and notices of changes of address shall be effective upon receipt.
11. Controlling Law. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE APPLY UNDER PRINCIPLES OF CONFLICT OF LAWS.
12. Separability and Construction. The provisions of this Agreement shall
be enforceable to the fullest extent permitted by law. If any provision or the
application thereof to any person or entity is, to any extent, determined by an
arbitrator or a court to be invalid or unenforceable in whole or in part, then
such provision shall be construed in a manner so as to permit its enforceability
under the applicable law to the fullest extent permitted by law. If an
arbitrator or a court declares void or unenforceable any remedy provided in this
Agreement, then the arbitrator or court shall award, instead of the invalid
remedy, such damages or other remedy as would ordinarily be available in law or
equity. In any case, the remaining provisions of this Agreement or the
application thereof shall
Exhibit 99.6
17
remain in full force and effect.
13. Nonwaiver. Any waiver by any party of any act or omission that is a
breach of any provision of this Agreement is a waiver only of that particular
act or omission at that particular time, and is not a waiver of any other act or
omission.
14. Entire Agreement. This Agreement and the exhibits attached hereto
constitutes the entire agreement between the parties pertaining to the subject
matter hereof, and supersedes and is in full substitution of all prior and
contemporaneous oral and written agreements
15. Modification in Writing. No addition to, or modification of, this
Agreement shall be effective unless it is in writing and signed by ACC, Audiovox
and the Executive.
16. Headings and Captions. The headings and captions in this Agreement are
solely for convenience of reference, and shall not be used in the construction
and interpretation of this Agreement.
17. Assumption of Obligations. Each of ACC or Audiovox may assign its
rights hereunder to any successor entity (whether by merger or acquisition of
substantially all the assets of ACC or Audiovox, as applicable, or otherwise)
provided that the assignment shall not adversely affect any benefits,
compensation, and rights of Executive. Except as set forth in this Section 17,
none of ACC, Audiovox or Executive may assign its or his rights under this
Agreement without the written consent of the other parties.
18. Execution. The parties may execute this Agreement in multiple
counterparts, each of which is deemed to be an original, and all of which
constitute one Agreement.
Exhibit 99.6
18
IN WITNESS WHEREOF, the parties have executed this Agreement on this 29th
day of May, 2002 and effective as of the Effective Date.
AUDIOVOX COMMUNICATIONS CORP.
By: s/ Charles M. Stoehr
-----------------------------
Name: Charles M. Stoehr
Title: Secretary
AUDIOVOX CORPORATION
(For Purposes of Sections 5.3, 5.4 and 5.7 Only)
By: s/ John J. Shalam
-----------------------------------
Name: John J. Shalam
Title: Chief Executive Officer
EXECUTIVE:
By: s/ Philip Christopher
-----------------------------------
PHILIP CHRISTOPHER
Exhibit 99.6
19
TRADEMARK LICENSE AGREEMENT
AGREEMENT made as of this 29th day of May, 2002 between AUDIOVOX
CORPORATION, a Delaware corporation, having a principal office at 150 Marcus
Boulevard, Hauppauge, NY 11788 ("Licensor") and AUDIOVOX COMMUNICATIONS CORP., a
Delaware corporation, having a principal office at 555 Wireless Blvd.,
Hauppauge, NY 11788 ("Licensee"):
W I T N E S S E T H :
WHEREAS, Licensor is the owner of the valuable trademark "AUDIOVOX" as a
word mark in various logos and designs, which is the subject of a registered
trademark in the United States (Patent & Trademark Office Registration Numbers
1,234,338; 1,432,756 and 2,138,694) and many other countries (the "Trademark"),
and
WHEREAS, Licensee has expressed a desire to be licensed to use the
Trademark in connection with the manufacture and sale of Products (as
hereinafter defined) for distribution to Licensee's Market (as hereinafter
defined).
NOW, THEREFORE, it is agreed as follows:
1. LICENSE.
--------
Subject to the terms and conditions of this Agreement, Licensor hereby
grants to Licensee, and Licensee hereby accepts, a royalty free, non-exclusive
and non-transferable license to use the trademark "AUDIOVOX" solely in
connection with the sale, distribution and service of mobile cellular handset
systems and other wireless communications devices that use the infrastructure of
wireless communications carriers (the "Products") and to sell, distribute and
service the same within Licensee's Market and Territory as hereinafter
described, provided that all of said Products produced
Exhibit 99.7
1
by Licensee shall be produced in accordance with the specifications and
instructions submitted by Licensee to Licensor and approved by Licensor and
provided further that all requirements of Licensor with respect to quality of
Products sold under the Trademark shall be at all times strictly observed by
Licensee and by its production facilities. Licensee may apply such Trademark
only in connection with the Products produced by manufacturers approved by
Licensor in accordance with such specifications and instructions, and the
quality thereof shall at all time be satisfactory to Licensor. Upon request of
Licensor, Licensee shall require that any production facility producing the
Products to be sold under the Trademark shall in writing acknowledge the
validity of the Trademark and agree to refrain from any use thereof for its own
account or for the account of anyone other than Licensee or Licensor.
2. QUALITY CONTROL.
---------------
Licensee will permit or will arrange for permission to duly authorized
representatives of the Licensor, at all reasonable times, to inspect the
premises of the Licensee or of the production facilities which Licensee shall
use and to inspect and test the Products in connection with which Licensee uses
or intends to use the Trademark.
3. PACKAGING AND ADVERTISING.
-------------------------
Licensee shall so package the Products in connection with which it uses the
said Trademark as to conform to the packaging design approved by the Licensor.
Licensee agrees to submit to Licensor for its approval all designs for packaging
which Licensee proposes to use and agrees that it will not use any packaging
design which shall not have been previously approved by Licensor. Licensee
further agrees that all advertising and other promotional material which it
proposes to use
Exhibit 99.7
2
with respect to Products to be sold under the Trademark shall be subject to
review and approval of Licensor and that no such advertising will be published
without such approval, which approval Licensor will not unreasonably withhold,
provided that the same generally conforms to advertising standards observed by
Licensor and provided further that all such advertising and all packaging of
said Products shall contain a statement to the effect that said Trademark is the
property of Licensor and that the Product so advertised or enclosed in any such
package is manufactured and sold under license from Licensor.
4. PRODUCT LIABILITY INSURANCE AND INDEMNITY.
-----------------------------------------
Licensee agrees to maintain product liability insurance in limits
satisfactory to Licensor insuring both Licensee and Licensor against all
liability which may arise or be asserted against either Licensor or Licensee or
both, arising out of or connected with the use of Products produced and sold by
Licensee under the said Trademark, and Licensee shall furnish to Licensor upon
demand, and from time to time, certificates evidencing the continued maintenance
of such product liability insurance. Notwithstanding such insurance, Licensee
hereby indemnifies Licensor against any liability or loss which may be asserted
or incurred through claims of third persons against the Licensor arising out of
or related to the manufacture or sale of Products sold by Licensee under said
Trademark.
5. EXTENT OF LICENSE.
-------------------
The license granted by Licensor to Licensee hereunder shall be
non-exclusive and is limited to the Products that are sold through the Carrier
Distribution Channel. The Carrier Distribution Channel is comprised of:
(a) A direct channel through which ACC sells Products to Carriers. The
direct channel consists of (a) retail stores owned by Carriers and (b)
the Carriers'
Exhibit 99.7
3
sales organizations for corporate enterprise customers; and
(b) An indirect channel through which ACC sells Products to retailers,
distributors and agents that are authorized by Carriers to activate
Products, to sell air time on behalf of Carriers, to promote Products
to end users and to perform other activities that support the sale of
Products to end users on behalf of Carriers.
The Carrier Distribution Channel is referred herein as "Licensee's Market".
Licensee's Territory is the United States, Canada, Mexico and all countries in
Central America, the Caribbean and South America. This license shall be
non-divisible and non-transferable without Licensor's prior consent. Nothing
herein contained shall be construed to bar the Licensor from selling products
bearing the Trademark in any market or anywhere in the world. Licensee agrees
that it will not sell Products bearing the Trademark in any market or territory
other than the Licensee's Market and Territory.
6. MAINTENANCE OF TRADEMARK.
-------------------------
Licensor owns title to the Trademark and believes the use of the Trademark
on the Products in Licensee's Market and Territory will not constitute an
infringement of any other trademark used by a third party. In the event that
Licensee receives notice, or is informed of any claim, suit or demand against
Licensee on account of any alleged infringement relating to its use of the
Trademark owned by Licensor and used by Licensee in accordance with the terms of
this Agreement, Licensee shall promptly notify Licensor of any such claim, suit
or demand. Thereupon, Licensor shall take such action as it may deem necessary
to protect and defend Licensee against any such claim by any third party and
shall indemnify Licensee against any loss, costs or expenses incurred in
connection therewith. Licensee shall not settle or compromise any such claim by
a third party without the prior written consent of Licensor. Licensor shall have
the sole right to defend, compromise or settle any
Exhibit 99.7
4
such claim, in its discretion, at Licensor's sole cost and expense, using
attorneys of its own choosing, and Licensee agrees to cooperate fully with
Licensor in connection with the defense of any such claim. Licensee may
participate at its own expense in such defense or settlement, but Licensor's
decision with regard thereto shall be final.
7. DURATION OF LICENSE.
-------------------
(a) This agreement and the license granted hereby shall take effect on the
date hereof and unless sooner terminated, this agreement and the
license granted hereby shall remain in full force and effect as long
as AUDIOVOX CORPORATION owns more than fifty (50%) percent of the
issued and outstanding shares of Licensee.
(b) Notwithstanding any other provision of this agreement, either party
shall have the right to terminate this agreement upon written notice
to the other for failure to comply with any provision of this
agreement, provided, however, that the party so notified shall have
the right to cure any such default during a period of 60 days
following the mailing of the notice of default, and that upon such
correction, the said notice of termination shall have no further force
or effect.
(c) The license granted hereby shall terminate forthwith and without prior
notice in the event that Licensee shall make any assignment of its
assets or business for the benefit of creditors or shall take the
benefit of any insolvency statute of the United States or any country,
or if a trustee or receiver be appointed to administer or conduct its
business or affairs, or if it be adjudged a bankrupt in any legal
proceeding, or if any involuntary petition under any insolvency
statute of the United States be filed against Licensee which shall not
have been dismissed within thirty (30) days following the filing
thereof.
Exhibit 99.7
5
(d) This agreement and the license granted hereby shall terminate
forthwith and without prior notice in the event of the termination or
dissolution of the Licensee.
8. OWNERSHIP OF TRADEMARK.
----------------------
Licensee acknowledges that Licensor is the sole and exclusive owner of all
right, title and interest in and to the Trademark and all variations and
derivations thereof. Licensee recognizes the value of the goodwill associated
with the Trademark and acknowledges that all rights in and the goodwill
pertaining to the Trademark, belong exclusively to Licensor. Licensee agrees
that during the term of this Agreement, or thereafter, it will not attack the
title or any rights of Licensor in the Trademark or otherwise take any action to
damage the Trademark or the validity of the license. Licensee's use of the
Trademark shall inure to the benefit of Licensor for trademark purposes.
Licensee shall not, at any time, acquire any rights in the Trademark by virtue
of any use it may make of the Trademark. Licensee shall use the Trademark with
such words qualifying or identifying that Licensee's use of the Trademark is
pursuant to this license agreement.
Licensee further acknowledges that it has not obtained and will not obtain
any ownership, right, title or interest in or to the Trademark by reason of the
fact that the Trademark or the word "AUDIOVOX" was used or will be used in the
name under which the Licensee was formed or authorized to conduct business.
Upon termination of the license granted by this agreement for any reason
whatsoever, Licensee will immediately cease and desist from any and all use of
the Trademark for all purposes including but not limited to the sale,
distribution and service of the Product. In addition, Licensee at its own
expense will immediately take whatever steps are necessary and file whatever
applications,
Exhibit 99.7
6
amendments or documents necessary with the proper office of the State of
Delaware or any other jurisdiction in which Licensee has recorded the word
"AUDIOVOX" as part of its corporate name, to effect a change of its corporate
name to a name without and dissimilar to the word "AUDIOVOX".
Licensee further agrees that in the event of such termination, Licensee
will at no time adopt or use any word or mark which is likely to be similar to
or confusing with the Trademark.
Nothing contained in this agreement shall be construed as an assignment to
Licensee of any right, title or interest in and to the Licensed Trademark, it
being understood that all right, title and interest relating thereto are
expressly reserved by Licensor except for the rights being licensed hereunder,
and as to such rights, only as expressly herein limited.
9. BOOKS AND RECORDS.
-----------------
Licensee will keep accurate books and records covering all activities
relating to the license being granted.
10. NOTICES.
-------
Any notice required or permitted to be given by either party to the other
under this agreement shall be deemed sufficiently given upon delivery in person
or upon mailing by registered or certified mail, postage prepaid, return receipt
requested, addressed to the party to be notified at its address shown at the
beginning of this agreement or at such other address as may be furnished by
notice similarly given.
11. MISCELLANEOUS.
-------------
This agreement may not be orally modified and no amendment thereof shall be
Exhibit 99.7
7
effective except upon the signature of a duly authorized representative of each
of the parties hereto.
12. 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.
Exhibit 99.7
8
IN WITNESS WHEREOF, this Agreement has been executed by the duly authorized
representatives of the parties hereto as of the day and year first written
above.
AUDIOVOX COMMUNICATIONS CORP.
(Licensee)
By: s/ Philip Christopher
-----------------------------------------
Its: Chief Executive Officer
AUDIOVOX CORPORATION
(Licensor)
By: s/ John J. Shalam
-----------------------------------------
Its: Chief Executive Officer
Exhibit 99.7
9
TRANSFER OF THIS NOTE IS RESTRICTED PURSUANT TO THE STOCKHOLDERS AGREEMENT DATED
AS OF MAY 29, 2002, BY AND AMONG AUDIOVOX CORPORATION, TOSHIBA CORPORATION AND
AUDIOVOX COMMUNICATIONS CORP., COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL
OFFICE OF AUDIOVOX COMMUNICATIONS CORP.
NON-NEGOTIABLE DEMAND NOTE
May 29, 2002
Hauppauge, New York
FOR VALUE RECEIVED, the undersigned, AUDIOVOX COMMUNICATIONS CORP., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
the order of Audiovox Corporation (the "Lender") at the office of 150 Marcus
Blvd., Hauppauge, NY, in lawful money of the United States of America and in
immediately available funds, the aggregate unpaid principal amount of all loans
("Loans") made by Lender to Borrower under this Note. Borrower further agrees to
pay interest in like money at such office on the unpaid principal amount hereof
from time to time outstanding at the same rate of interest that is available to
Lender under the Fourth Amended and Restated Credit Agreement, dated as of July
28, 1999, among Audiovox Corporation, the lenders parties thereto and JPMorgan
Chase Bank, as administrative agent and collateral agent (as amended,
supplemented, otherwise modified or refinanced, refunded, renewed or extended,
the "Credit Agreement").
The principal amount of this Note from time to time outstanding and all
accrued and unpaid interest thereon shall be due and payable upon written demand
in whole or in part by Lender to Borrower, such demand to take into account the
financial condition of Borrower and other relevant factors.
Borrower acknowledges and agrees that Lender may make demand for payment
hereunder for up to the full amount that Borrower is then able to borrow under
credit facilities that Borrower may obtain in the future from third party
financing sources.
Lender is authorized to endorse on Schedule 1 annexed hereto and made a
part hereof (or in its internal records) or on a continuation thereof which
shall be attached
Exhibit 99.8
1
hereto and made a part hereof the date, type and amount of each Loan made
hereunder and the date and amount of each payment or prepayment of principal
thereof. Each such endorsement shall constitute prima facie evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
(or any error therein) shall not affect the obligations of Borrower under this
Note.
This Note may be prepaid at any time, in whole or in part and without
premium or penalty. All payments hereunder shall be applied first to unpaid
interest, next to expenses and last to principal payments.
All unpaid amounts hereunder shall automatically accelerate and immediately
become due and payable by Borrower to Lender if:
(a) Borrower commences a voluntary case or proceeding seeking liquidation,
reorganization, or other relief with respect to itself, or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official for Borrower or any substantial part of its
property, or taking possession by any such official in any involuntary case
or other proceeding commenced against Borrower, or makes a general
assignment for the benefit of creditors, or fails generally to pay its
debts as they become due, or takes any corporate action to authorize any of
the foregoing; or
(b) An involuntary case or proceeding is commenced against Borrower seeking
liquidation, reorganization or other relief with respect to it or its debts
under bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official for Borrower or any substantial part of
its property and such involuntary case or other proceeding remains in
undismissed and unstayed for a period of one hundred twenty (120) days; or
(c) Any Person (directly or indirectly through one or more Affiliates)
other than Lender and its Affiliates and Associates becomes the owner of a
majority of Borrower's capital stock or acquires all or substantially all
of Borrower's assets (whether through merger, stock purchase, asset
purchase or another form of transaction).
Borrower agrees to pay Lender the same fees for banking transactions as
Lender is charged under the Credit Agreement, provided that the fees charged to
Borrower will only be for banking services used by Borrower including, without
limitation, letter of credit commissions, activity fees, commitment fees, and
bank transfer fees.
Borrower agrees to pay or reimburse Lender for all of its out-of-pocket
costs
Exhibit 99.8
2
and expenses incurred in connection with the collection of this Note, including,
without limitation, fees and disbursements of Lender's counsel incurred in
connection with any claim, action or any other proceeding seeking to enforce or
preserve Lender's rights under this Note.
Borrower will continue to provide, as long as debt is outstanding to Lender
hereunder, any guarantees and pledges of assets that are needed by Lender to
maintain its Credit Agreement in effect; provided that such guarantee and pledge
arrangements shall comply with the conditions contained in Section 1.5(m) of the
Stockholders Agreement dated as of the date hereof among Borrower, Lender and
Toshiba Corporation (the "STOCKHOLDERS AGREEMENT") relating to transactions
involving Borrower and Lender and their Affiliates and Associates.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser other otherwise, hereby waive
presentment, demand, protest and other notices of any kind.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION, SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CHOICE OF LAW PROVISIONS THEREOF).
This Note is a binding obligation enforceable against Borrower and its
successors and assigns and shall inure to the benefit of the Lender and its
successors and assigns. If a court deems any provision of this Note invalid, the
remainder of the Note shall remain in effect.
In any action or other legal proceeding relating to this Note, Borrower (a)
consents to the personal jurisdiction of any State or Federal court located in
the State of New York, and (b) agrees that a copy of this Note kept in the
Lender's course of business may be admitted into evidence as an original.
Unless otherwise defined herein, terms used herein that are defined in the
Stockholders Agreement shall have the same meanings set forth for such terms in
the Stockholders Agreement.
BORROWER AND LENDER EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION IN
CONNECTION WITH THIS NOTE.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Exhibit 99.8
3
IN WITNESS WHEREOF, Borrower has caused its duly authorized representative
to execute this Note as of the date first above written.
AUDIOVOX COMMUNICATIONS CORP.,
a Delaware corporation
By: s/Philip Christopher
----------------------------------------
Name: Philip Christopher
Title: Chief Executive Officer
Exhibit 99.8
4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AUDIOVOX COMMUNICATIONS CORP.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
We the undersigned, being, respectively, the President and Secretary,
hereby certify as follows:
The name of the corporation (the "Corporation") is Audiovox Communications
Corp., formerly known as Audiovox Cellular Communications Corp.
The original Certificate of Incorporation was filed with the Secretary of
State of the State of Delaware on May 26, 1995.
A Certificate of Amendment of the Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware on
April 22, 1996 changing the name to Audiovox Communications Corp..
In accordance with Sections 242 and 245 of the General Corporation Law of
the State of Delaware (the "DGCL"), this Amended and Restated Certificate of
Incorporation (a) has been duly proposed by resolutions adopted and declared
advisable by the Board of Directors of the Corporation, (b) approved by the
stockholders of the Corporation at a special meeting of stockholders, duly
called and held upon notice in accordance with Section 222 of the DGCL, and (c)
duly executed by an officer of the Corporation in accordance with Section 103 of
the DGCL and, upon filing with the Secretary of State in accordance with Section
103, shall supersede the original Certificate of Incorporation, as amended, and
shall, as it may thereafter be amended in accordance with its terms and
applicable law, be the Certificate of Incorporation of the Corporation.
Pursuant to Section 103(d) of the DGCL, this Amended and Restated
Certificate of
Exhibit 99.9
1
Incorporation shall become effective immediately upon filing.
The text of the Certificate of Incorporation of the Corporation, as amended
heretofore, is hereby amended and restated to read as stated on Exhibit A
hereto.
7. The restated certificate was authorized and adopted by the Board of
Directors in accordance with Section 245(B) of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, we have hereunto signed our names and affirm that the
statements made herein are true under the penalties of perjury, this 29th day of
May, 2002.
AUDIOVOX COMMUNICATIONS CORP.,
a Delaware corporation
By: s/ Philip Christopher
-------------------------------
Philip Christopher, President
By: s/ Charles M. Stoehr
-------------------------------
Charles M. Stoehr, Secretary
Exhibit 99.9
2
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AUDIOVOX COMMUNICATIONS CORP.
FIRST: The name of the Corporation is Audiovox Communications Corp. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is 2 West Lockerman Street, in the City of Dover, County of Kent,
19904, and the name of its registered agent at such address is National
Corporate Services, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock the Corporation has authority
to issue is sixteen hundred (1,600) shares, of which fifteen hundred (1,500)
shall be Class A Common Stock, no par value per share (the "Class A Common
Stock"), and one hundred (100) shall be Class B Common Stock, no par value per
share (the "Class B Common Stock").
The Class A Common Stock and the Class B Common Stock shall be identical in
all respects and shall have equal rights and privileges, except as otherwise
hereinafter provided.
1. Election of Directors
(a) The Board of Directors of the Corporation shall consist of five (5)
directors.
(b) With respect to the election of directors, holders of a
majority-in-interest of Class A Common Stock voting as a separate class
shall be entitled to elect four (4) directors. Holders of a
majority-in-interest of Class B Common Stock voting as a separate class
shall be entitled, subject to section 1(e) of this Article Fourth, to elect
one (1) director. Directors elected by the holders of Class A Common Stock,
voting as a separate class, shall be designated as "Class A Directors".
Directors elected by the holders of Class B Common Stock, voting as a
separate class, shall be designated as "Class B Directors". Directors
elected by the holders of Class A Common Stock and Class B Common Stock,
voting together as a single class pursuant to section 1(e) of this Article
Fourth, shall be designated as "Joint Directors".
(c) Holders of Class A Common Stock shall vote as a separate class on the
removal, without cause, of any Class A Director. Holders of Class B Common
Stock shall vote as a separate class on the removal, without cause, of any
Class B Director. Holders of Class A Common Stock and Class B Common Stock
shall vote together as a single class on the removal, with cause, of any
Class A Director or Class B Director and on the removal, with or without
cause, of any Joint Director.
Exhibit 99.9
3
(d) Any vacancy in the office of a Class A Director may be filled by a vote of
the holders of Class A Common Stock voting as a separate class. Any vacancy
in the office of a Class B Director shall be filled by a vote of the
holders of Class B Common Stock voting as a separate class. Any vacancy in
the office of a Joint Director shall be filled by a vote of holders of
Class A Common Stock and Class B Common Stock, voting together as a single
class.
(e) Following a Qualified IPO, so long as the shares of Class B Common Stock
that are outstanding or then issuable upon conversion collectively
constitute at least ten percent (10%) of the Corporation's Common Stock
then issued and outstanding, the holders of Class B Common Stock shall
continue to have the right voting as a separate class to elect one (1)
Class B Director as provided in this section 1 of this Article Fourth;
provided that the holders of Class B Common Stock shall not have such Class
B Director election right if, notwithstanding the Corporation's good faith
efforts to preserve such Class B Director election right, the managing
underwriter for the Qualified IPO advises the Board of Directors of the
Corporation in writing that the retention of the Class B Director election
right following a Qualified IPO would harm the Corporation's prospects for
achieving a Qualified IPO. In such case, the holders of the Class B Common
Stock shall cease to have the right to elect one (1) Class B Director, and
holders of Class A Common Stock and holders of Class B Common Stock voting
together as a single class shall be entitled to elect all of the directors.
(f) Except as otherwise specifically stated in this Article Fourth, shares of
Class A Common Stock may be issued by the Corporation from time to time as
approved by the Board of Directors without the approval of the
stockholders. No shares of Class B Common Stock may be issued by the Board
of Directors without the prior approval of a majority-in-interest of the
holders of Class B Common Stock, voting as a separate class.
(g) The holders of the Class A Common Stock and the holders of the Class B
Common Stock shall be entitled to vote as separate classes only (i) when
required by law to do so irrespective of the limitations placed herein on
the voting rights of such stockholders, or (ii) where a separate class vote
is required by specific provisions therefor in this Certificate of
Incorporation.
(h) Notwithstanding anything in this section 1 of Article Fourth to the
contrary, the holders of Class A Common Stock shall have exclusive voting
power on all matters at any time when no Class B Common Stock is issued and
outstanding, and the holders of Class B Common Stock shall have exclusive
voting power on all matters at any time when no Class A Common Stock is
issued and outstanding.
2. Extraordinary Approval Items
Notwithstanding any other provision contained in this Certificate of
Incorporation, the Corporation shall not take or agree to take, and shall not
permit any of its controlled Affiliates to take or agree to take, directly or
indirectly, any of the following actions ("Extraordinary Approval Items")
without the prior written approval of the holders of a majority- in-interest of
the then outstanding shares of Class B Common Stock:
(a) Amend or modify any of its Organizational Documents;
Exhibit 99.9
4
(b) Engage in any line of business that is outside the scope of the
Corporation's business;
(c) Other than in the ordinary course of the Corporation's business, make any
capital or other expenditures that, individually or together with all
related expenditures, exceed twenty percent (20%) of the fair value of the
total assets of the Corporation;
(d) Other than in the ordinary course of the Corporation's business, incur,
guarantee or otherwise become liable for, or grant Liens with respect to,
any indebtedness that, individually or together with all related
indebtedness, exceeds twenty percent (20%) of the fair value of the total
assets of the Corporation;
(e) Issue or sell capital stock (or any rights to acquire capital stock) other
than common stock;
(f) Declare or pay any dividends or other distributions (in cash or other
property) on account of any equity securities, or redeem, retire, purchase
or otherwise acquire any equity securities, other than to or from all
stockholders on a pro rata basis in accordance with their respective
holdings;
(g) Other than in the ordinary course of the Corporation's business, pay,
purchase, redeem, retire or otherwise acquire, directly or indirectly, any
indebtedness (including debt securities) that, individually or together
with all related indebtedness, exceeds twenty percent (20%) of the fair
value of the total assets of the Corporation, other than at maturity or
pursuant to fixed or mandatory prepayments, redemptions or sinking funds in
accordance with the terms of the applicable indebtedness;
(h) Merge or consolidate with or into another Person;
(i) Other than in the ordinary course of the Corporation's business, sell,
lease or otherwise dispose of assets that, individually or together with
all related disposed assets, exceed twenty percent (20%) of the fair value
of the total assets of the Corporation;
(j) Other than in the ordinary course of the Corporation's business, (1)
purchase or otherwise acquire (whether through a stock purchase, asset
purchase, stock swap or otherwise) any business or assets that,
individually or together with all related acquired business or assets,
exceed twenty percent (20%) of the fair value of the total assets of the
Corporation, or (2) enter into, terminate or materially amend the terms of
any joint venture, partnership or similar transaction that, individually or
together with all related transactions being undertaken, represent assets
of the Corporation exceeding twenty percent (20%) of the fair value of the
total assets of the Corporation;
(k) Except for Contracts with underwriters in connection with the Corporation's
initial public offering, enter into or amend any Contract that is outside
the ordinary course of the Corporation's business and, individually or
together with related Contracts, involves aggregate commitments in excess
of twenty percent (20%) of the fair value of the total assets of the
Corporation;
Exhibit 99.9
5
(l) Change its independent accountants;
(m) Enter into or amend any Contract between the Corporation or its controlled
Affiliates, on the one hand, and Audiovox or its Affiliates or their
respective associates, on the other hand, except for any Contracts or
amendments thereto that are in good faith, in the ordinary course of
business, and on terms that are at least as favorable to the Corporation as
those available from third parties that are unaffiliated with Audiovox;
(n) File a petition for bankruptcy, dissolution or liquidation, make a general
assignment for the benefit of creditors, appoint a receiver or trustee to
take possession of all or substantially all of its assets, or take any
other action with respect to winding up and dissolution; or
(o) Adopt or amend any employee equity incentive plan providing that the
holders' rights under the plan will be triggered or exercisable in case of
a change of control of the Corporation (whether through an acquisition of a
majority of Corporation's capital stock, an acquisition of all or
substantially all of Corporation's assets or a similar event conveying
control of the Corporation).
3. Definitions
"Affiliate" of a specified Person means any Person that controls, is
controlled by or is under common control with such specified Person. For
purposes of this definition, "control" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or other ownership interests, by
contract or otherwise).
"Associate" of a Person means:
(i) any officer or director of such Person, or other Person serving in
a similar role with respect to such Person;
(ii) any corporation or other entity of which such Person or any
Person specified in clause (i) is an officer, partner, manager or Person
serving in a similar role, or is, directly or indirectly, the beneficial
owner of 5% or more of any class of equity securities;
(iii) any trust or other estate in or as to which such Person or any
Person specified in clauses (i) or (ii) has a 10% or greater beneficial
interest or serves as trustee or in a similar capacity; or
(iv) any relative or spouse of such Person or any Person specified in
clause (i), or any relative of such spouse.
"Audiovox" means Audiovox Corporation, a Delaware corporation.
"Contract" means any contract, agreement, lease, plan, instrument or
other document, commitment, arrangement, undertaking, practice,
understanding or authorization, in each case whether or not in writing.
Exhibit 99.9
6
"Lien" means any lien, mortgage, security interest, pledge, restriction on
transferability, defect of title or other claim, charge or encumbrance of any
nature whatsoever on any property or property interest, including any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Organizational Documents" of a Person means its certificate of
incorporation, bylaws or other organizational documents.
"Person" means a natural individual, governmental authority, partnership,
firm, corporation or other entity.
"Qualified IPO" means a public offering of Common Stock by the Corporation
registered under the Securities Act of 1933 in which (i) the proceeds received
by the Corporation for the sale of shares is at least Fifty Million Dollars
($50,000,000) net of underwriting discounts and commissions, or (ii) Common
Stock sold to public investors (which for purposes of clarification shall not
include Audiovox or its Affiliates or Associates) represents at least ten
percent (10%) of the outstanding Common Stock upon the consummation of the
offering.
4. Conversion
(a) Each share of Class B Common Stock may at any time be converted by the
holder thereof into one (1) fully paid and nonassessable share of Class A Common
Stock. Any such conversion shall be effected by the surrender by the record
holder thereof of the certificate representing such share of Class B Common
Stock to be converted, duly endorsed, to the Corporation, at the principal
executive offices of the Corporation, or any transfer agent for the
Corporation's Common Stock, together with a written notice of the election by
the record holder thereof to convert, and (if so required by the Corporation or
the transfer agent) by instruments of transfer in form satisfactory to the
Corporation or the transfer agent. Such written notice shall state the name or
names in which such holder desires the certificate or certificates for such
Class A Common Stock to be issued and the number of shares of Class B Common
Stock to be converted. A conversion shall be deemed to have occurred at the
close of business on the date when the Corporation or the transfer agent has
received the prescribed written notice, the required certificate or certificates
and any such instruments of transfer and the person or persons entitled to
receive the Class A Common Stock issuable on such conversion shall be treated
for all purposes as the record holder or holders of such Class A Common Stock on
that date. The Corporation or the transfer agent shall issue and deliver to such
holder, or such holder's nominee or nominees, a certificate or certificates
representing the number of shares of Class A Common Stock to which such holder
shall be entitled as soon as practicable thereafter. In no event, upon
conversion of any shares of Class B Common Stock into shares of Class A Common
Stock, shall any allowance or adjustment be made in respect of dividends on the
Class B Common Stock or Class A Common Stock. Any such conversion shall be made
without charge for any stamp or similar tax in respect of the issuance of the
certificate or certificates for the shares of Class A Common Stock issued in
connection with such conversion, unless such certificate is to be issued in a
name other than that of the record holder of the share or shares of Class B
Common Stock converted, in which case such record holder shall pay to the
Corporation or the transfer agent the amount of any tax which may be payable in
respect of any transfer involved in such conversion.
Exhibit 99.9
7
(b) The Corporation covenants that it will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the outstanding
shares of Class B Common Stock, such number of shares of Class A Common Stock as
shall be issuable upon the conversion of all such outstanding shares of Class B
Common Stock, provided that nothing contained herein shall be construed to
preclude the Corporation from satisfying its obligations in respect of the
conversion of the outstanding shares of Class B Common Stock by delivery of
shares of Class A Common Stock which are held in the treasury of the
Corporation.
(c) The Corporation shall not be required to convert Class B Common Stock,
and no surrender of Class B Common Stock shall be effective for that purpose,
while the stock transfer books of the Corporation are closed for any purpose,
but the valid presentation of Class B Common Stock for conversion during any
period such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been made
on the date such Class B Common Stock was surrendered.
(d) Shares of the Class B Common Stock converted as herein provided shall
resume the status of authorized but unissued shares of Class B Common Stock.
5. Dividends
The holders of Class A Common Stock and Class B Common Stock shall be
entitled to receive such dividends and distributions, payable in cash or
otherwise, as may be declared thereon (subject in each case to section 2(f) of
this Article Fourth ) by the Board of Directors from time to time out of assets
or funds of the Corporation legally available therefor, provided that (a) all
such dividends or distributions shall be paid or made in equal amounts, share
for share, to the holders of Class A Common Stock and Class B Common Stock as if
a single class; and (b) in the event that any dividend is declared in shares of
Class A Common Stock or Class B Common Stock, such dividend shall be declared at
the same rate per share on Class A Common Stock and Class B Common Stock, but
the dividend payable on shares of Class A Common Stock shall be payable in
shares of Class A Common Stock, and the dividend payable on shares of Class B
Common Stock shall be payable in shares of Class B Common Stock.
6. Stock Splits and Other Transactions
Shares of Class A Common Stock or Class B Common Stock may not be split up,
subdivided, combined or reclassified, unless at the same time the shares of such
other class are proportionately so split up, subdivided, combined or
reclassified in a manner which maintains the same proportionate equity ownership
between the holders of Class A Common Stock and Class B Common Stock as
comprised on the record date for any such transaction.
7. Liquidation Rights
(a) In the event of any dissolution, liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
assets of the Corporation shall be divided among and paid ratably to the holders
of Class A Common Stock and Class B Common Stock, as if such classes constituted
a single class.
Exhibit 99.9
8
(b) For any and all purposes of this Certificate of Incorporation, neither
the merger or consolidation of the Corporation into or with any other
corporation nor the merger or consolidation of any other corporation into or
with the Corporation, nor a sale, transfer or lease of all or substantially all
of the assets of the Corporation, nor any other transaction or series of
transactions having the effect of a reorganization shall be deemed to be a
liquidation, dissolution or winding-up of the Corporation.
FIFTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article Fifth to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall be prospective only and shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
SIXTH:
(a) Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any other capacity
while serving as a director or officer shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith and such indemnification
shall continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b)
hereof with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. The right
to indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that an advancement of
expenses incurred by an indemnitee in his
Exhibit 99.9
9
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of (i) an undertaking, by or on behalf of such indemnitee, to repay
all amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this section or otherwise
(hereinafter an "undertaking) and (ii) assurances that the indemnitee can
fulfill such undertaking, in form and substance satisfactory to the Board of
Directors by a majority vote of a quorum consisting of directors who are not
party to the proceeding; provided, however, that in the event all of the
directors are party to the proceeding, no such assurances shall be required.
(b) If a claim under section (a) of this Article Sixth is not paid in full
by the Corporation within sixty days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty days, the indemnitee may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. In any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. In any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this section or otherwise shall be on the Corporation.
(c) The rights to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, this Certificate of
Incorporation, By-law, agreement, vote of stockholders or disinterested
directors or otherwise.
(d) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such
Exhibit 99.9
10
expense, liability or loss under the Delaware General Corporation Law.
(e) The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and/or to the advancement of
expenses, to any person who was or is an employee or agent of the Corporation or
was or is serving at the request of the Corporation as an employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, to the
fullest extent of the provisions of this Article Sixth and applicable law with
respect to the indemnification and advancement of expenses.
Exhibit 99.9
11
CONFORMED COPY
SIXTH AMENDMENT AND CONSENT, dated as of May 28, 2002 (this "Amendment and
Consent"), to the Fourth Amended and Restated Credit Agreement, dated as of July
28, 1999 (as amended pursuant to the First Amendment and Consent thereto, dated
as of October 12, 1999, the Second Amendment thereto, dated as of December 20,
1999, the Third Amendment thereto, dated as of April 14, 2000, the Fourth
Amendment and Waiver thereto, dated as of June 5, 2001, and the Fifth Amendment
and Waiver thereto, dated as of March 14, 2002, and as the same may further be
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Audiovox Corporation, a Delaware corporation (the
"Borrower"), the several banks and other financial institutions from time to
time parties thereto (collectively, the "Lenders"; individually, a "Lender"),
and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), a New York
banking corporation, as administrative and collateral agent for the Lenders (in
such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit
Agreement;
WHEREAS, the Borrower has requested that the Lenders amend certain terms in
the Credit Agreement in the manner provided for herein;
WHEREAS, the Borrower has also requested that the Agent and the Lenders
consent to the release of the Capital Stock of Audiovox Communications Corp., a
Subsidiary of the Borrower, from the Lien of the Collateral Agent, for the
benefit of the Lenders on such Capital Stock; and
WHEREAS, the Agent and the Lenders are willing to agree to the requested
amendments and to provide the requested consent, on the terms and conditions
provided for herein;
NOW, THEREFORE, in consideration of the premises contained herein, the
parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are defined
in the Credit Agreement and used herein (and in the recitals hereto) as defined
terms are so used as so defined.
2. Amendments to Section 1. Subsection 1.1 of the Credit Agreement is
hereby amended as follows:
(a) by deleting therefrom the definition of the following defined term
in its entirety and substituting in lieu thereof the following definition:
"Borrowing Base": on any date of determination thereof, the sum
of (a) 75% of the aggregate amount of Eligible Accounts of the
Borrower and its consolidated Domestic and Canadian Subsidiaries on
such date of determination and (b) the lesser of (i) 30% of the
aggregate amount of Eligible Inventory of the Borrower and its
consolidated Domestic and Canadian Subsidiaries on such date of
determination and (ii) $25,000,000. The Borrowing Base shall be
reduced from time to time by an amount equal to the Foreign Exchange
Liabilities of the Borrower as most recently determined prior to such
time by the Agent pursuant to subsection 6.16. The Borrowing Base
shall be determined by the Agent in its sole discretion exercising
reasonable judgment from time to time by reference to the most recent
Exhibit 99.10
1
monthly Borrowing Base Certificate delivered to the Agent
pursuant to subsection 9.2(g). The Agent shall determine the Borrowing
Base in effect on the first Business Day of each month during the
Commitment Period and shall send a Borrowing Base Notice on such
Business Day of the Borrower and each Lender setting forth the
Borrowing Base as so determined. The Agent shall also send a Borrowing
Base Notice to the Borrower and each Lender on each Business Day on
which the Borrowing Base is changed other than pursuant to the
immediately preceding sentence setting forth the Borrowing Base as so
changed.
(b) by adding thereto the following definitions is their
appropriate alphabetical order:
"Sixth Amendment and Consent": the Sixth Amendment and
Consent, dated as of May 28, 2002, to this Agreement.
"Sixth Amendment Effective Date": May 28, 2002.
"Toshiba Note": the subordinated convertible promissory note
issued by Audiovox Communications Corp., substantially in the
form of Exhibit A to the Sixth Amendment and Consent, in an
aggregate principal amount not to exceed $10,000,000.
3. Amendment to Subsection 10.2 (Limitation on Indebtedness). Subsection
10.2 of the Credit Agreement is hereby amended by deleting clause (g) in its
entirety and substituting in lieu thereof the following:
(g) Indebtedness of the Borrower which is subordinated and junior in
right of payment to the Obligations (as defined in the Borrower Security
Agreement) on terms and conditions satisfactory to the Agent and the
Required Lenders (including, without limitation, Indebtedness of the
Borrower under the Talk Note and Indebtedness of Audiovox Communications
Corp. under the Toshiba Note);
4. Amendment to Subsection 10.3 (Limitation on Liens). Subsection 10.3 of
the Credit Agreement is hereby amended by deleting the sentence at the end
thereof in its entirety and substituting in lieu thereof the following:
In no event shall the Borrower create, incur, assume or suffer to exist any
Lien upon the Capital Stock of CellStar or Audiovox Communications Corp.
now owned or hereafter acquired by the Borrower, other than Liens in favor
of the Collateral Agent for the benefit of the Lenders created pursuant to
clause (g) above.
5. Amendment to Subsection 10.6 (Limitation on Sale of Assets). Subsection
10.6 of the Credit Agreement is hereby amended by deleting clause (i) in its
entirety and substituting in lieu thereof the following:
(i) the sale or issuance of up to 30% of the Capital Stock of Audiovox
Communications Corp. to Toshiba Corporation; and
6. Consent. The Agent and the Lenders parties hereto hereby consent to the
release of the Capital Stock of Audiovox Communications Corp. from the Lien of
the Collateral Agent, for the benefit of the Lenders, on such Capital Stock
created pursuant to the Audiovox Pledge Agreement.
7. Representations and Warranties. On and as of the date hereof, the
Borrower hereby confirms, reaffirms and restates the representations and
warranties set forth in Section 7 of the Credit Agreement mutatis mutandis,
except to the extent that such representations and warranties expressly relate
to a specific earlier date in which case the Borrower hereby confirms, reaffirms
and restates such representations
Exhibit 99.10
2
and warranties as of such earlier date.
8. Conditions to Effectiveness. This Amendment and Consent shall become
effective as of the date first written above upon receipt by the Agent of (i)
counterparts to this Amendment and Consent duly executed by the Borrower and the
Required Lenders, (ii) an amendment fee in the amount of $150,000 for the
account of Lenders which have executed and delivered to the Agent this Amendment
and Consent prior to Noon (New York City time) on May 28, 2002 (and will be paid
to such Lenders pro rata according to their respective Commitments), (iii) an
Acknowledgement and Consent in the form of Exhibit B hereto duly executed by
each of the Guarantors, (iv) a prepayment of the Loans in an aggregate principal
amount equal to the Net Cash Proceeds from the issuance of the Toshiba Note and
any sale or issuance of the Capital Stock of Audiovox Communications Corp. and
(v) all documentation relating to the issuance of the Toshiba Note and the sale
or issuance of Capital Stock of Audiovox Communications Corp. to Toshiba
Corporation, in each case satisfactory to the Agent, and evidence that such
transactions shall have been consummated for aggregate cash consideration not
less than $32,000,000; provided that Section 2(a) of this Amendment and Consent
shall become effective as of the date first written above upon satisfaction of
the foregoing clauses (i) and (iii).
9. Continuing Effect. Except as expressly provided herein, all of the terms
and provisions of the Credit Agreement are and shall remain in full force and
effect. The amendments and consent provided for herein is limited to the
specific subsections of the Credit Agreement specified herein and shall not
constitute a consent, waiver or amendment of, or an indication of the Agent's or
the Lenders' willingness to consent to any action requiring consent under or to
waive or amend, any other provisions of the Credit Agreement or the same
subsections for any other date or time period (whether or not such other
provisions or compliance with such subsections for another date or time period
are affected by the circumstances addressed in this Amendment and Consent).
10. Expenses. The Borrower agrees to pay and reimburse the Agent for all
its reasonable costs and out-of-pocket expenses incurred in connection with the
preparation and delivery of this Amendment and Consent, including, without
limitation, the reasonable fees and disbursements of counsel to the Agent.
11. Counterparts. This Amendment and Consent may be executed in any number
of counterparts by the parties hereto (including by facsimile transmission),
each of which counterparts when so executed shall be an original, but all the
counterparts shall together constitute one and the same instrument.
12. GOVERNING LAW. THIS AMENDMENT AND CONSENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Exhibit 99.10
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Consent to be executed and delivered by their respective duly authorized
officers as of the date first above written.
AUDIOVOX CORPORATION
By: s/ Charles M. Stoehr
----------------------------------------
Name: Charles M. Stoehr
Title: Senior Vice President/Chief Financial Officer
JPMORGAN CHASE BANK,
as Agent and as a Lender
By: s/ John Budzynski
-------------------------------------------------
Name: John Budzynski
Title: Vice President
Exhibit 99.10
4
FLEET NATIONAL BANK, as a Lender
By: s/ Steven J. Melicharek
------------------------------------
Name: Steven J. Melicharek
Title: Senior Vice President
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By: s/ Renee M. Singer
----------------------------------------
Name: Renee M. Singer
Title: Vice President
CITIBANK, N.A., as a Lender
By: s/ Stephen Kelly
------------------------------------
Name: Stephen Kelly
Title: Vice President
MELLON BANK, N.A., as a Lender
By: s/ Donald G. Cassidy, Jr.
------------------------------------
Name: Donald G. Cassidy, Jr.
Title: Senior Vice President
DEUTSCHE FINANCIAL SERVICES
CORPORATION,
as a Lender
By: s/ David J Lynch
------------------------------------
Name: David J. Lynch
Title: Vice President - Operations
Exhibit 99.10
5
ISRAEL DISCOUNT BANK OF NEW YORK,
as a Lender
By: s/ Alan B. Lefkowitz
----------------------------------------
Name: Alan B. Lefkowitz
Title: First Vice President
By: s/ Karen Chen
----------------------------------------
Name: Karen Chen
Title: Assistant Manager
PNC BANK, as a Lender
By: s/ Kysha A. White
----------------------------------------
Name: Kysha A. White
Title: Assistant Vice President
WASHINGTON MUTUAL BANK, FA,
as a Lender
By: s/ Brian Stone
----------------------------------------
Name: Brian Stone
Title: Senior Vice President
BANK LEUMI USA, as a Lender
By: s/ Paul Tine Glenn Kreutzer
----------------------------------------
Name: Paul Tine Glenn Kreutzer
Title: Vice President Banking Officer
FIRSTAR BANK, N.A., as a Lender
By: _____________________________________
Name:
Title:
Exhibit 99.10
6
ACKNOWLEDGMENT AND CONSENT
Each of the undersigned corporations (i) as a guarantor under that certain
Amended and Restated Subsidiaries Guarantee, dated as of March 15, 1994 (as
amended, supplemented or otherwise modified from time to time, the "Guarantee"),
made by each of such corporations in favor of the Collateral Agent, (ii) as a
grantor under that certain Amended and Restated Security Agreement, dated as of
March 15, 1994 (as amended, supplemented or otherwise modified from time to
time, the "Security Agreement"), made by each of such corporations in favor of
the Collateral Agent, and (iii) in the case of Audiovox Holding Corp., as the
pledgor under that certain Pledge Agreement, dated as of February 9, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Pledge
Agreement"), made by Audiovox Holding Corp. in favor of JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as pledge agent for the secured
parties thereunder, hereby consents to the execution and delivery of the Sixth
Amendment and Consent to which this Acknowledgment and Consent is attached and
hereby confirms and agrees that the Guarantee, the Security Agreement and the
Pledge Agreement are, and shall continue to be, in full force and effect and are
hereby ratified and confirmed in all respects and the Guarantee, the Security
Agreement, the Pledge Agreement and all of the Subsidiaries Collateral (as
defined in the Security Agreement) and Collateral (as defined in the Pledge
Agreement) do, and shall continue to, secure the payment of all of the
Obligations (as defined in the Guarantee and the Security Agreement, as the case
may be) pursuant to the terms of the Guarantee or the Security Agreement, as the
case may be, or, in the case of the Pledge Agreement, secure the payment of the
Secured Obligations (as defined in the Pledge Agreement) pursuant to the terms
of the Pledge Agreement. Capitalized terms not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement referred to in the
Sixth Amendment and Consent to which this Acknowledgment and Consent is
attached.
QUINTEX MOBILE COMMUNICATIONS
CORP.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Vice President
AMERICAN RADIO CORP.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Vice President
Exhibit 99.10
7
AUDIOVOX INTERNATIONAL CORP.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Vice President
AUDIOVOX CANADA LIMITED
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Vice President
AUDIOVOX HOLDING CORP.
By: s/ Chris Lazarides
--------------------------------
Name: Chris Lazarides
Title: President
AUDIOVOX ASIA INC.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: President
AUDIOVOX LATIN AMERICA LTD.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: President
AUDIOVOX COMMUNICATIONS CORP.
By: s/ Charles M. Stoehr
-------------------------------
Name: Charles M. Stoehr
Title: Secretary
Dated as of May 28, 2002
Exhibit 99.10
8