UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended February 28, 1995
Commission file number 1-9532
AUDIOVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-1964841
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Marcus Blvd., Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 231-7750
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Number of shares of each class of the registrant's Common Stock
outstanding as of the latest practicable date.
Class Outstanding at April 6, 1995
Class A Common Stock 6,777,788 Shares
Class B Common Stock 2,260,954 Shares
AUDIOVOX CORPORATION
I N D E X
Page
Number
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements:
Consolidated Balance Sheets at
November 30, 1994 and February 28, 1995
(unaudited) 3
Consolidated Statements of Earnings
for the Three Months Ended February 28,
1994 and February 28, 1995 (unaudited) 4
Consolidated Statements of Cash Flows
for the Three Months Ended February 28,
1994 and February 28, 1995 (unaudited) 5
Notes to Consolidated Financial Statements 6-7
ITEM 2 Management's Discussion and Analysis of
Financial Operations and Results of
Operations 8-15
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 16
ITEM 5 Other Information 16-17
ITEM 6 Reports on Form 8-K 17
SIGNATURES 18
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
November 30, February 28,
1994 1995
(unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 5,495 $ 3,547
Accounts receivable, net 94,242 76,400
Inventory, net 83,430 106,724
Prepaid expenses and other current assets 6,065 7,040
Deferred income taxes 2,247 2,719
Total current assets 191,479 196,430
Restricted cash 6,559 6,409
Property, plant and equipment, net 6,180 6,518
Equity investments 25,902 27,209
Debt issuance costs, net 4,840 4,553
Excess cost over fair value of assets
acquired and other intangible assets, net 1,032 1,006
Other assets 3,106 2,973
$ 239,098 $ 245,098
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 21,088 $ 26,131
Accrued expenses and other current liabilities 13,063 14,607
Income taxes payable 834 1,639
Bank obligations 1,084 27,834
Current installments of long-term debt 159 5,621
Total current liabilities 36,228 75,832
Bank obligations 29,100 -
Deferred income taxes 5,945 6,131
Long-term debt, less current installments 75,653 70,327
Total liabilities 146,926 152,290
Minority interest 138 148
Stockholders' equity:
Preferred stock 2,500 2,500
Common Stock:
Class A 68 68
Class B 22 22
Paid-in capital 39,715 39,814
Retained earnings 50,254 50,790
92,559 93,194
Cumulative foreign currency translation
and adjustment (525) (534)
Total stockholders' equity 92,034 92,660
Commitments and contingencies
$ 239,098 $ 245,098
See accompanying notes to consolidated financial statements.
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
(In thousands, except per share data)
Three Months Ended
February 28, February 28,
1994 1995
(unaudited) (unaudited)
Net sales $ 115,337 $ 131,391
Cost of sales 93,159 108,805
Gross profit 22,178 22,586
Operating expenses:
Selling 7,485 9,057
General and administrative 7,397 9,196
Warehousing, assembly and repair 2,068 2,470
16,950 20,723
Operating income 5,228 1,863
Other income (expenses):
Interest and bank charges (1,523) (2,050)
Equity in income of equity investments 685 1,187
Management fees and related income 210 396
Gain on sale of equity investment 27,783 -
Gain on public offering of equity investment 10,565 -
Other, net (308) (313)
37,412 (780)
Income before provision for
income taxes and cumulative effect of a change
in an accounting principle 42,640 1,083
Provision for income taxes 18,477 547
Income before cumulative effect of a change in
accounting for income taxes 24,163 536
Cumulative effect of change in accounting for
income taxes (178) -
Net income $ 23,985 $ 536
Net income per common share (primary):
Income before cumulative effect of change in
accounting for income taxes $ 2.63 $ 0.06
Cumulative effect of change in accounting for
income taxes $ (0.02) -
Net income $ 2.61 $ 0.06
Net income per common share (fully diluted):
Income before cumulative effect of change in
accounting for income taxes $ 2.38 $ 0.06
Cumulative effect of change in accounting for
income taxes $ (0.02) -
Net income $ 2.36 $ 0.06
Weighted average number of common shares outstanding,
primary 9,176,592 9,070,392
Weighted average number of common shares outstanding,
fully diluted 10,218,770 10,125,070
See accompanying notes to consolidated financial statements.
AUDIOVOX CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended
February 28, February 28,
1994 1995
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 23,985 $ 536
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 981 980
Provision for bad debt expense (503) 393
Equity in income of equity investments (685) (1,187)
Minority interest 55 10
Gain on sale of business - -
Gain on sale of equity investment (27,783) -
Gain on public offering of equity investment (10,565) -
Provision for deferred income taxes, net of
extraordinary item 5,127 (286)
Provision for unearned compensation 72 99
Cumulative effect of change in accounting for
income taxes 178 -
Changes in:
Accounts receivable 5,791 17,422
Inventory (9,238) (23,324)
Income taxes receivable 228 -
Accounts payable, accrued expenses
and other current liabilities (1,122) 6,594
Income taxes payable 12,728 802
Prepaid expenses and other assets (3,530) (796)
Net cash (used in) provided by
operating activities (4,281) 1,243
Cash flows from investing activities:
Purchase of equity investments
Purchases of property, plant and equipment, net (572) (886)
Notes receivable from equity investment 7,973 -
Net proceeds from sale of equity investment 29,433 -
Payment for purchase of subsidiary (148) -
Net cash provided by (used in) investing
activities 36,686 (886)
Cash flows from financing activities:
Net (repayments) borrowings under line of
credit agreements (22,054) (2,350)
Net (repayments) borrowings under documentary
acceptances (6,713) -
Principal payments on long-term debt (3,681) -
Debt issuance costs - (32)
Proceeds from exercise of stock options 170 -
Principal payments on capital lease obligation (29) (70)
Proceeds from release of restricted cash - 150
Net cash used in financing activities (32,307) (2,302)
Effect of exchange rate changes on cash (29) (3)
Net increase (decrease) in cash and cash
equivalents 69 (1,948)
Cash and cash equivalents at beginning of period 1,372 5,495
Cash and cash equivalents at end of period $ 1,441 $ 3,547
See accompanying notes to consolidated financial statements.
AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Months Ended February 28, 1994 and February 28, 1995
(1) The accompanying consolidated financial statements were
prepared in accordance with generally accepted accounting
principles and include all adjustments which, in the opinion of
management, are necessary to present fairly the consolidated
financial position of Audiovox Corporation and subsidiaries (the
"Company") as of November 30, 1994 and February 28, 1995 and the
results of operations and consolidated statement of cash flows for
the three month periods ended February 28, 1994 and February 28,
1995.
Accounting policies adopted by the Company are identified in
Note 1 of the Notes to Consolidated Financial Statements included
in the Company's 1994 Annual Report filed on Form 10-K.
(2) The information furnished in this report reflects all
adjustments (which include only normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement
of the results for the interim period. The interim figures are not
necessarily indicative of the results for the year.
(3) Certain reclassifications have been made to the 1994
Consolidated Financial Statements to conform to the 1995
presentation.
(4) The following is supplemental information relating to the
consolidated statements of cash flows:
Three Months Ended
February 28,
1994 1995
(In thousands)
Cash paid during the period:
Interest (excluding bank
charges) $1,325 $ 859
Income taxes $ 454 $ 95
During 1995, the Company entered into a lease agreement to
acquire new computer equipment. As a result, a capital lease
obligation of $86 was incurred.
(5) The Financial Accounting Standards Board (FASB) has issued
Statement 115, "Accounting for Certain Investment in Debt and
Equity Securities" (Statement 115). This Statement addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in
debt securities. Those investments are to be classified in three
categories and accounted for as follows: 1) debt securities that
the enterprise has the positive intent and ability to hold to
maturity are classified as "held-to-maturity securities", 2) debt
and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with realized gains and
losses included in earnings, 3) debt and equity securities not
classified as either held-to-maturity securities or trading
securities are classified as "available-for-sale securities" and
reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of shareholders'
equity.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated,
certain items from the Company's consolidated statements of
earnings, expressed as percentages of net sales:
Three Months Ended
February 28,
1994 1995
Net sales 100.0% 100.0%
Gross profit 19.2 17.2
Operating expenses 14.7 15.8
Income before provision for
income taxes and cumulative
effect of change in accounting
for income taxes 37.0 0.8
Cumulative effect of change in
accounting for income taxes 0.1 -
Net income 20.8 0.4
Net sales by product line for the three month periods ended
February 28, 1994 and February 28, 1995 are reflected in the
following table:
Three Months Ended
February 28,
1994 1995
(In Millions)
Cellular Product - Wholesale $ 54.3 $ 71.6
Cellular Product - Retail 7.1 6.1
Activation Commissions 15.2 13.4
Residual Revenues on Customer Usage 0.8 1.1
Total Cellular 77.4 92.2
Automotive Sound Equipment 22.7 24.5
Automotive Security and Accessory
Equipment 13.5 14.7
Other 1.7 -
$115.3 $131.4
RESULTS OF OPERATIONS
Net sales increased $16.1 million or 13.9% for the three month
period ended February 28, 1995 compared to the same period last
year. This increase was attributable to increases in cellular
($14.8 million or 19.1%), automotive sound equipment ($1.8 million
or 7.9%) and automotive accessories ($1.2 million or 8.9%). There
was a decrease in other sales, primarily consumer electronics, of
$1.7 million or 100.0% for the three month period as the Company
has discontinued the sale of facsimile machines. The wholesale
business increased 22.2% or $19.7 million and was partially offset
by a $3.6 million decline (13.7%) in the retail business.
The improvement in cellular revenues was a combination of
increased unit sales and residuals, partially offset by a decrease
in activation commissions. Unit sales of cellular telephones
increased by 97,000 (49%) from 201,000 for the three month period
ended February 28, 1995 from the respective period in 1994,
primarily in the portable telephone lines, although there was a
slowdown in sales growth during the latter part of the quarter.
This increase was partially offset by decreases in the sales of
installed mobile and transportable telephones. The average revenue
per unit decreased approximately 13% for the three month period
compared to last year. This decrease in unit selling price is
primarily attributable to increased market competition in hand-held
portable cellular telephones and the introduction of lower priced
hand-held portables by competitors. During the first quarter, one
of the Company's major competitors over-produced product in
anticipation of strong sales during the Christmas season. As a
result, this competitor reduced their selling prices in order to
relieve its inventory over-supply situation. This put additional
pressure on the market which further affected the Company's unit
selling prices of cellular telephones. The Company believes this
over-supply of cellular telephones in the U.S. will continue to
affect its performance in the second quarter. However, the Company
believes this over-supply will begin to dissipate and the market
will regain its balance during the second half of the fiscal year.
As a result of continuing market competition, unit sales prices and
average activation commissions are anticipated to continue to
decline in fiscal 1995.
Cellular revenues for activations decreased by $1.8 million
(11.7%) for the three month period ended February 28, 1995 compared
to the same period in 1994. This decrease was primarily
attributable to an 8% decrease in the Company's average payment
received from the carriers for activation commissions compared to
1994. In addition, there was a 4% decrease in new cellular
subscriber activations. The reduction in activation commission
revenue was partially offset by increased residual revenues on
customer phone usage of approximately 40.2%.
Sales of automotive sound equipment for the quarter ended
February 28, 1995 increased to $24.5 million from $22.7 million for
the same period in 1994 or 7.9%. The increase was primarily in the
Prestige, Heavy Duty Sound, Private Label and non-Audiovox
categories. Automotive accessories sales increased $1.2 million
(8.9%) for the three month period ended February 28, 1995 compared
to 1994, principally due to increases in the Prestige and Protector
product lines, partially offset by decreases in AA security
products. The Company believes there will not be any growth in
consumer electronics sales in 1995 as the Company has discontinued
its facsimile machine product line.
Gross margins for the quarter ended February 28, 1995
decreased to 17.2% from 19.2% for the same period in 1994. This
decline in margins is principally due to a decrease in the cellular
product line, partially offset by increases in automotive sound and
accessories. The gross margins in the wholesale business decreased
from 14.6% to 13.6%, principally in the cellular wholesale
business. The retail gross margins also declined slightly compared
to last year. The decrease in cellular margins is a result of the
decline in the selling price of portable telephones due to
increased competition and introduction of lower priced products.
The decrease in retail gross margins was primarily due to the
aforementioned loss of activation commissions partially offset by
residual revenues of customer usage. During the first quarter of
1995, in an effort to maintain market share, the Company reduced
the selling prices of available models to meet the competition.
Cellular margins were further affected by additional promotions by
the Quintex retail group to increase sales.
Automotive sound margins increased from 20.8% for the first
quarter of 1994 to 22.0% in 1995. The AV product line experienced
a decrease in margins which was offset by an increase in Heavy Duty
Sound. Automotive accessory margins increased to 28.4% from 27.9%
for the three month period, primarily in the Prestige and Hardgoods
product lines, partially offset by a decrease in margins in AA
security products. The Company operates in a highly-competitive
environment and believes that such competition will intensify in
the future. Increased price competition relating to products and
services provided to the Company's retail customers on behalf of
cellular carriers may result in downward pressure on the Company's
gross profit margins.
Total operating expenses increased by approximately $3.8
million or 22.3% for the three month period ended February 28, 1995
compared to the respective period in 1994. Of this increase, $2.1
million (55%) was experienced in the wholesale business and $1.7
million (45%) was in the retail business. Warehousing,
manufacturing, and repair expenses increased by $402,000 or 19.4%
($289,000 in wholesale, $113,000 in retail) for the three month
period ended February 28, 1995, due to increases in field
warehousing costs, principally due to increased inventory levels
and sales volume and payroll taxes and benefits, partially offset
by reductions in warehouse production expenses. Selling expenses
increased by $1.6 million or 21.0% ($173,000 in wholesale, $1.4
million in retail) for the three month period ended February 28,
1995 over the prior year's comparable period due to increases in
advertising, commissions paid to outside sales representatives,
salesmen's salaries, and payroll taxes and benefits. General and
administrative expenses increased by $1.8 million or 24.3% ($1.6
million in wholesale, $149,000 in retail) for the three month
period ended February 28, 1995 over the respective period in 1994,
resulting from increases in occupancy costs primarily associated
with the retail expansion, professional fees and provision for bad
debt. The Company has increased its provision for bad debt based
upon its evaluation of its accounts receivable considering current
and potential market conditions.
Net interest expense and bank charges increased by $527,000 or
34.6% for the three month period ended February 28, 1995, compared
to the respective period of 1994 as a result of an increase in
interest costs from increased borrowing. Management fees and
related income and equity in income from joint venture investments
decreased by approximately $9.9 million for the three-month period
ended February 28, 1995, as compared to the same period of 1994,
principally due to 1994's increase in the carrying value of the
investment in CellStar after their public offering.
For the three months ended February 28, 1995 and 1994, the
Company recorded an income tax provision of $547,000 as compared to
a provision of $18.5 million, respectively. The first quarter of
1994 was higher due to the aforementioned CellStar transaction and
higher operating profits.
As discussed in Note 5 to the financial statements, the
Financial Accounting Standards Board (FASB) has issued Statement
115, "Accounting for Certain Investment in Debt and Equity
Securities" (Statement 115). This Statement addresses the
accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in
debt securities. Those investments are to be classified in three
categories and accounted for as follows: 1) debt securities that
the enterprise has the positive intent and ability to hold to
maturity are classified as "held-to-maturity securities", 2) debt
and equity securities that are bought and held principally for the
purpose of selling them in the near term are classified as "trading
securities" and reported at fair value, with realized gains and
losses included in earnings, 3) debt and equity securities not
classified as either held-to-maturity securities or trading
securities are classified as "available-for-sale securities" and
reported at fair value, with unrealized gains and losses excluded
from earnings and reported in a separate component of shareholders'
equity.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position at February 28, 1995 was
approximately $1.9 million below the November 30, 1994 level.
Operating activities provided approximately $1.2 million, primarily
due to decreases in accounts receivable and profitable operations,
partially offset by increases in inventory and accounts payable and
accrued expenses. Investing activities used approximately $886,000
for the purchase of property, plant and equipment. Financing
activities used approximately $2.3 million, primarily from a
reduction of bank obligations under line of credit agreements.
During March 1995, the Company amended its credit agreement
with its lenders. The amendments increase the amount available for
direct borrowings of the Company from $40 million to $65 million
until June 1, 1995 when direct borrowings will be stepped down to
$20 million. The amendments also provided for an increased
borrowing availability based on inventory from $20 million to $30
million until June 1, 1995 when it will be stepped down to $15
million. The Company's wholly-owned subsidiary, Audiovox Holding
Corp., pledged 1,050,000 of its shares of CellStar to obtain the
amendment. Following such amendments, the Company believes that it
has sufficient liquidity to satisfy its anticipated working capital
and capital expenditure needs in the reasonably foreseeable future.
On March 23, 1995, CellStar filed a registration statement
relating to a public offering for approximately 3.5 to 4 million
shares of common stock to be issued by CellStar and for 1,075,000
shares of its common stock which may be sold by the Company
pursuant to its piggyback registration rights contained in its
registration rights agreement with CellStar. No assurance can be
given that such public offering will be consummated or at what
price such public offering will be consummated and that, if
consummated, Audiovox will elect to sell its shares in such public
offering. If the Company elects to sell its shares in such public
offering, the Company will no longer receive equity income from
CellStar. The Company believes that the loss of such income will
not have a material adverse effect on its liquidity since such
equity income was a non-cash accrual.
The Company believes that is has sufficient liquidity to
satisfy its anticipated working capital and capital expenditure
needs through November 30, 1995 and for the reasonable foreseeable
future.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The action commenced in February 1995 by Thunderball
Marketing, Inc. against Quintex Communications Corp., Nynex Mobile
Communications Company, and others in the United States District
Court of the Southern District of New York has been settled.
Item 5 - Other Information
On March 16, 1995 Audiovox Corporation (the "Company") entered
into the Sixth Amendment to the Credit Agreement dated as of March
15, 1994 (the "Sixth Amendment") whereby the Company's direct
borrowing was increased from $40,000,000 to $50,000,000 and its
maximum inventory reliance under the borrowing base was increased
from $15,000,000 to $20,000,000 until June 1, 1995 when the direct
borrowing and maximum inventory reliance will be stepped down to
$20 million and $15 million, respectively.
The Sixth Amendment was entered into by the Company and
acknowledged and consented to by certain of its subsidiaries. A
copy of the Sixth Amendment and the Acknowledgement and Consent are
annexed as Exhibit A.
On March 31, 1995, the Company entered into the Seventh
Amendment to the Credit Agreement dated as of March 15, 1994 (the
"Seventh Amendment") whereby the Company's direct borrowing was
increased from $50,000,000 to $65,000,00 and its maximum inventory
reliance under the borrowing base was increased from $20,000,000 to
$30,000,000 until June 1, 1995 when direct borrowing and maximum
inventory reliance will be stepped down to $20 million and $15
million, respectively.
The Seventh Amendment was entered into by the Company and
acknowledged and consented to by certain of its subsidiaries. A
copy of the Seventh Amendment and the Acknowledgment and Consent
are annexed as Exhibit B.
In addition, the Seventh Amendment provides for a pledge of
1,050,000 shares of common stock of CellStar Corporation for the
benefit of the several banks and financial institutions party to
the Credit Agreement dated as of March 15, 1994 as amended (the
"Lenders"). The form of Pledge Agreement is an Exhibit to the
Seventh Amendment which is annexed hereto as Exhibit B.
Item 6. Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended February
28, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AUDIOVOX CORPORATION
By:s/John J. Shalam
John J. Shalam
President and Chief
Executive Officer
Dated: April 13, 1995
By:s/Charles M. Stoehr
Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5
1,000
QTR-1
NOV-30-1995
FEB-28-1995
3,547
0
77,735
1,335
106,724
196,430
23,000
16,482
245,098
75,832
70,327
90
0
2,500
90,604
245,098
116,886
131,391
104,760
108,805
0
393
2,050
1,083
547
536
0
0
0
536
.06
.06
SIXTH AMENDMENT, dated as of March 16, 1995 (this
"Amendment"), to the Credit Agreement dated as of March 15, 1994
(as amended pursuant to the First Amendment thereto dated as of
May 13, 1994, the Second Amendment thereto dated as of August 17,
1994, the Third Amendment thereto dated as of August 26, 1994,
the Fourth Amendment and Waiver thereto dated as of January 31,
1995, the Fifth Amendment thereto dated as of February 24, 1995,
and as the same may be further 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 CHEMICAL 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 the Credit Agreement in the manner provided for herein;
WHEREAS, the Agent and the Lenders are willing to agree
to the requested amendments;
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
as defined terms are so used as so defined.
2. Amendments to Subsection 1.1. Subsection 1.1 of
the Credit Agreement is hereby amended as follows:
(a) by deleting clause (ii) of the definition of
"Borrowing Base" appearing in such subsection and
substituting in lieu thereof the following:
"(ii) at any time on or prior to May 31, 1995,
$20,000,000 and, at any time thereafter, $15,000,000";
and
(b) by deleting the definition of "Maximum Direct
Extensions of Credit" in its entirety and substituting in
lieu thereof the following new definition:
"Maximum Direct Extensions of Credit": at any
time on or prior to May 31, 1995, $50,000,000, and, at
any time thereafter, $20,000,000.
EXHIBIT A
3. 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 6 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 and warranties as of
such earlier date, provided that the references to the Credit
Agreement in such representations and warranties shall be deemed
to refer to the Credit Agreement as amended prior to the date
hereof and as amended pursuant to this Amendment.
4. Effectiveness. This Amendment shall become
effective as of the date first written above upon receipt by the
Agent counterparts of this Amendment duly executed by the
Borrower and the Required Lenders and acknowledged and consented
to by each Subsidiary.
5. Continuing Effect; No Other Amendments. Except as
expressly amended hereby, all of the terms and provisions of the
Credit Agreement are and shall remain in full force and effect.
The amendments provided for herein are limited to the specific
subsections of the Credit Agreement specified herein and shall
not constitute an amendment of, or an indication of the Agent's
or the Lenders' willingness to 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).
6. 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, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent.
7. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which
counterparts when so executed shall be an original, but all the
counterparts shall together constitute one and the same
instrument.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly
authorized officers as of the date first above written.
AUDIOVOX CORPORATION
By:s/
Name: Charles M. Stoehr
Title: Senior Vice President
CHEMICAL BANK, as Agent and as a
Lender
By:s/
Name:
Title:
NATIONAL WESTMINSTER BANK USA, as a
Lender
By:s/
Name:
Title:
THE CHASE MANHATTAN BANK, N.A., as
a Lender
By:s/
Name:
Title:
FLEET BANK, as a Lender
By:s/
Name:
Title:
EUROPEAN AMERICAN BANK,
as a Lender
By:s/
Name:
Title:
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned corporations (i) as a guarantor
under that certain Amended and Restated Subsidiaries Guarantee,
dated as of March 15, 1992 (the "Guarantee"), made by each of
such corporations in favor of the Collateral Agent and (ii) as a
grantor under that certain Amended and Restated Security
Agreement, dated as of March 15, 1992 (the "Security Agreement"),
made by each of such corporations in favor of the Collateral
Agent, confirms and agrees that the Guarantee and the Security
Agreement are, and shall continue to be, in full force and effect
and are hereby ratified and confirmed in all respects and the
Guarantee and the Security Agreement and all of the Subsidiaries
Collateral (as defined in the Security 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. Capitalized terms not otherwise
defined herein shall have the meanings assigned to them in the
Credit Agreement referred to in the Sixth Amendment to which this
Consent is attached.
QUINTEX COMMUNICATIONS CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
QUINTEX MOBILE COMMUNICATIONS CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
H & H EASTERN DISTRIBUTORS, INC.
By: s/
Name: Charles M. Stoehr
Title: Secretary
HERMES TELECOMMUNICATIONS INC.
By: s/
Name: Philip Christopher
Title: Vice President
LENEX CORPORATION
By: s/
Name: Chris Lis Johnson
Title: Secretary
AMERICAN RADIO CORP.
By: s/
Name: Charles M. Stoehr
Title: Secretary
AUDIOVOX INTERNATIONAL CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
AUDIOVOX CANADA LIMITED
By: s/
Name: Charles M. Stoehr
Title: Vice President
WESTERN AUDIOVOX CORP.
By: s/
Name: Philip Christopher
Title: Vice President
CELL HOLDING CORPORATION
By: s/
Name: Charles M. Stoehr
Title: President
AUDIOVOX ASIA INC.
By: s/
Name: Charles M. Stoehr
Title: President
AUDIOVOX LATIN AMERICA LTD.
By: s/
Name: Charles M. Stoehr
Title: President
Dated as of March 16, 1995
SEVENTH AMENDMENT, dated as of March 30, 1995 (this
"Amendment"), to the Credit Agreement dated as of March 15, 1994
(as amended pursuant to the First Amendment thereto dated as of
May 13, 1994, the Second Amendment thereto dated as of August 17,
1994, the Third Amendment thereto dated as of August 26, 1994,
the Fourth Amendment and Waiver thereto dated as of January 31,
1995, the Fifth Amendment thereto dated as of February 24, 1995,
the Sixth Amendment thereto dated as of March 16, 1995, this
Amendment and as the same may be further 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 CHEMICAL 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 the Credit Agreement in the manner provided for herein; and
WHEREAS, the Agent and the Lenders are willing to agree
to the requested amendments;
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
as defined terms are so used as so defined.
2. Amendments to Subsection 1.1. Subsection 1.1 of
the Credit Agreement is hereby amended as follows:
(a) by deleting clause (ii) of the definition of
"Borrowing Base" appearing in such subsection and
substituting in lieu thereof the following:
(ii) at any time on or prior to May 31, 1995,
$30,000,000 and, at any time thereafter, $15,000,000.
(b) by deleting the definition of "Maximum Direct
Extensions of Credit" in its entirety and substituting in
lieu thereof the following new definition:
"Maximum Direct Extensions of Credit": at any
time on or prior to May 31, 1995, $65,000,000, and, at
any time thereafter, $20,000,000.
EXHIBIT B
(c) by inserting the words ", the Subsidiary Stock
Pledge Agreement" after the word "Guarantee" in the
definition of "Security Documents".
(d) by inserting the following definitions in the
proper alphabetical order:
"CellStar Option Agreements": the collective
reference to the Option Agreement - I dated as of
December 3, 1993, between the Borrower and Alan H.
Goldfield and the Option Agreement - II dated as of
December 3, 1993, between the Borrower and Alan H.
Goldfield.
"Subsidiary Stock Pledge Agreement": the Pledge
Agreement, dated as of March 30, 1995, made by Audiovox
Holding Corp. in favor of the Collateral Agent, as the
same may be amended, supplemented or otherwise modified
from time to time.
3. 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 6 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 and warranties as of
such earlier date, provided that the references to the Credit
Agreement in such representations and warranties shall be deemed
to refer to the Credit Agreement as amended prior to the date
hereof and as amended pursuant to this Amendment.
4. Effectiveness. This Amendment shall become
effective as of the date first written above upon satisfaction of
the following conditions precedent:
(a) the Agent shall have received counterparts of this
Amendment duly executed by the Borrower and the Required
Lenders and acknowledged and consented to by each Guarantor;
(b) the Agent shall have received a Pledge Agreement,
substantially in the form of Exhibit A hereto, duly executed
and delivered by Audiovox Holding Corp. (the "Pledge
Agreement") pursuant to which Audiovox Holding Corp. will
pledge 1,050,000 shares of CellStar to the Collateral Agent
for the benefit of the Lenders (the "Pledged Shares");
(c) the Agent shall have received the certificates
representing the Pledged Shares together with an undated
stock power for each such certificate executed in blank by a
duly authorized officer of Audiovox Holding Corp.;
(d) the Agent shall have received evidence
satisfactory to it that any consents required in connection
with the pledge of the Pledged Shares pursuant to the Pledge
Agreement have been obtained and are in full force and
effect; and
(e) the Agent shall have received, for the account of
the Lenders, an amendment fee of $25,000 to be shared
ratably by the Lenders.
5. Continuing Effect; No Other Amendments. Except as
expressly amended hereby, all of the terms and provisions of the
Credit Agreement are and shall remain in full force and effect.
The amendments provided for herein are limited to the specific
subsections of the Credit Agreement specified herein and shall
not constitute an amendment of, or an indication of the Agent's
or the Lenders' willingness to 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).
6. 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, including, without limitation, the reasonable fees and
disbursements of counsel to the Agent.
7. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which
counterparts when so executed shall be an original, but all the
counterparts shall together constitute one and the same
instrument.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly
authorized officers as of the date first above written.
AUDIOVOX CORPORATION
By:s/
Name: Charles M. Stoehr
Title: Senior Vice President
CHEMICAL BANK, as Agent and as a
Lender
By:s/
Name:
Title:
NATIONAL WESTMINSTER BANK USA, as a
Lender
By:s/
Name:
Title:
THE CHASE MANHATTAN BANK, N.A., as
a Lender
By:s/
Name:
Title:
FLEET BANK, as a Lender
By:s/
Name:
Title:
EUROPEAN AMERICAN BANK,
as a Lender
By:s/
Name:
Title:
ACKNOWLEDGEMENT 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 (the "Guarantee"), made by each of
such corporations in favor of the Collateral Agent and (ii) as a
grantor under that certain Amended and Restated Security
Agreement, dated as of March 15, 1994 (the "Security Agreement"),
made by each of such corporations in favor of the Collateral
Agent, confirms and agrees that the Guarantee and the Security
Agreement are, and shall continue to be, in full force and effect
and are hereby ratified and confirmed in all respects and the
Guarantee and the Security Agreement and all of the Subsidiaries
Collateral (as defined in the Security Agreement) do, and shall
continue to, secure the payment of all of the Obligations (as
defined in the Guarantee) and the Secured Obligations (as defined
in the Security Agreement), as the case may be, pursuant to the
terms of the Guarantee or the Security Agreement, as the case may
be. Capitalized terms not otherwise defined herein shall have
the meanings assigned to them in the Credit Agreement referred to
in the Seventh Amendment to which this Consent is attached.
QUINTEX COMMUNICATIONS CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
QUINTEX MOBILE COMMUNICATIONS CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
H & H EASTERN DISTRIBUTORS, INC.
By: s/
Name: Charles M. Stoehr
Title: Secretary
HERMES TELECOMMUNICATIONS INC.
By: s/
Name: Philip Christopher
Title: Vice President
LENEX CORPORATION
By: s/
Name: Chris Lis Johnson
Title: Secretary
AMERICAN RADIO CORP.
By: s/
Name: Charles M. Stoehr
Title: Secretary
AUDIOVOX INTERNATIONAL CORP.
By: s/
Name: Charles M. Stoehr
Title: Vice President
AUDIOVOX HOLDING CORP.
By: s/
Name: Chris Lazarides
Title:
AUDIOVOX CANADA LIMITED
By: s/
Name: Charles M. Stoehr
Title: Vice President
CELL HOLDING CORPORATION
By: s/
Name: Charles M. Stoehr
Title: President
AUDIOVOX ASIA INC.
By: s/
Name: Charles M. Stoehr
Title: President
AUDIOVOX LATIN AMERICA LTD.
By: s/
Name: Charles M. Stoehr
Title: President
Dated as of March 30, 1995
EXHIBIT A TO
SEVENTH AMENDMENT
[FORM OF PLEDGE AGREEMENT]
PLEDGE AGREEMENT, dated as of March 30, 1995, made by
AUDIOVOX HOLDING CORP., a New York corporation (the "Pledgor"),
in favor of CHEMICAL BANK, a New York banking corporation, as
collateral agent (in such capacity, the "Collateral Agent") for
the several banks and other financial institutions (collectively,
the "Lenders"; individually, a "Lender") from time to time
parties to the Credit Agreement, dated as of March 15, 1994 (as
amended prior to the date hereof and as the same may be further
amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among Audiovox Corporation, a Delaware
corporation (the "Borrower"), the Lenders and Chemical 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, pursuant to the Credit Agreement, the Lenders
have severally agreed to make loans to, and to issue and/or
participate in letters of credit and to create and/or participate
in acceptances issued or created for the account of, the Borrower
upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower has requested that the Lenders
amend certain provisions of the Credit Agreement pursuant to the
Seventh Amendment thereto dated as of the date hereof (the
"Seventh Amendment");
WHEREAS, one of the requested amendments might result
in an increase in the amount of Eligible Inventory included in
the determination of the Borrowing Base and thereby increase the
amount available to be borrowed under the Credit Agreement;
WHEREAS, in connection with such amendment, the Lenders
have requested that additional collateral be provided to secure
repayment of the Obligations; and
WHEREAS, it is a condition precedent to the
effectiveness of the Seventh Amendment that the Pledgor shall
have executed and delivered this Pledge Agreement to secure
payment and performance of the Pledgor's obligations under that
certain Guarantee, dated as of March 15, 1994 (as amended,
supplemented or otherwise modified from time to time, the
"Guarantee"), entered into by, among others, the Pledgor;
NOW, THEREFORE, in consideration of the premises and to
induce the Agent and the Lenders to enter into the Seventh
Amendment to the Credit Agreement and to induce the Lenders to
make their respective extensions of credit to the Borrower, the
Pledgor hereby agrees with the Collateral Agent, for the ratable
benefit of the Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement.
(b) The following terms shall have the following
meanings:
"Agreement": this Pledge Agreement, as the same may be
amended, modified or otherwise supplemented from time to
time.
"Code": the Uniform Commercial Code from time to time
in effect in the State of New York.
"Collateral": the Pledged Stock and all Proceeds
thereof.
"Collateral Account": any account established to hold
money Proceeds, maintained under the sole dominion and
control of the Collateral Agent, subject to withdrawal by
the Collateral Agent for the account of the Lenders only as
provided in Section 8(a).
"Issuer": CellStar.
"Obligations": as defined in the Guarantee, provided
that the amount of Obligations secured hereunder shall in no
event exceed the maximum amount which can be guaranteed by
the Pledgor under applicable federal and state laws relating
to the insolvency of debtors.
"Pledged Stock": the shares of capital stock listed on
Schedule 1 hereto, together with all stock certificates,
options or rights of any nature whatsoever that may be
issued or granted by the Issuer to the Pledgor in respect of
the Pledged Stock while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in
Section 9-306(1) of the Uniform Commercial Code in effect in
the State of New York on the date hereof of the Pledged
Stock and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"Secured Obligations": the collective reference to (a)
the Obligations and (b) all obligations and liabilities of
the Pledgor which may arise under or in connection with this
Agreement or any other Loan Document to which the Pledgor is
a party, whether on account of reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to
the Agent, the Collateral Agent or to the Lenders that are
required to be paid by the Pledgor pursuant to the terms of
this Agreement or any other Loan Document to which the
Pledgor is a party).
"Securities Act": the Securities Act of 1933, as
amended.
"Voting Trust Agreement" as defined in Section 6.
(c) The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and section and paragraph references are to
this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
2. Pledge; Grant of Security Interest. (a) The
Pledgor hereby delivers to the Collateral Agent, for the ratable
benefit of the Lenders, all the Pledged Stock and hereby grants
to Collateral Agent, for the ratable benefit of the Lenders, a
first security interest in the Collateral, as collateral security
for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of
the Secured Obligations.
(b) In the event that on or prior to June 30, 1995,
the Pledgor shall not have sold at least 1,000,000 shares of
common stock of the Issuer in a registered public offering of
such shares, the Pledgor shall deliver to the Collateral Agent on
June 30, 1995, in lieu of the shares of Pledged Stock then
pledged to the Collateral Agent pursuant to this Agreement,
1,075,000 shares of common stock of the Issuer which are then
subject to resale without restriction under the Securities Act or
the Securities Exchange Act of 1934, as amended and which are not
subject to the Voting Trust Agreement (the "Unrestricted
Shares"). In connection with such substitution, the Collateral
Agent and the Pledgor agree to enter into a Supplement to this
Agreement in form and substance reasonably satisfactory to the
Collateral Agent and the Pledgor pursuant to which the
Unrestricted Shares shall be deemed to be and shall become
"Pledged Stock" under this Agreement.
3. Stock Powers. Concurrently with the delivery to
the Collateral Agent of each certificate representing one or more
shares of Pledged Stock (including the Unrestricted Shares) to
the Collateral Agent, the Pledgor shall deliver an undated stock
power covering such certificate, duly executed in blank by the
Pledgor with, if the Collateral Agent so requests, signature
guaranteed.
4. Representations and Warranties. The Pledgor
represents and warrants that:
(a) The Pledgor has the corporate power and authority
and the legal right to execute and deliver, to perform its
obligations under, and to grant the security interest in the
Collateral pursuant to, this Agreement and has taken all
necessary corporate action to authorize its execution,
delivery and performance of, and grant of the security
interest in the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and
binding obligation of the Pledgor, enforceable in accordance
with its terms, and upon delivery to the Collateral Agent of
the stock certificates evidencing the Pledged Stock, the
security interest created pursuant to this Agreement will
constitute a valid, perfected first priority security
interest in the Collateral, enforceable in accordance with
its terms against all creditors of the Pledgor and any
Persons purporting to purchase any Collateral from the
Pledgor, except in each case as enforceability may be
affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and
fair dealing.
(c) The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement
of Law or Contractual Obligation of the Pledgor and will not
result in the creation or imposition of any Lien on any of
the properties or revenues of the Pledgor pursuant to any
Requirement of Law or Contractual Obligation of the Pledgor,
except the security interest created by this Agreement.
(d) Except for such consents as have been obtained and
are in full force and effect, no consent or authorization
of, filing with, or other act by or in respect of, any
arbitrator or Governmental Authority and no consent of any
other Person (including, without limitation, any stockholder
or creditor of the Pledgor), is required in connection with
the execution, delivery, performance, validity or
enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Pledgor, threatened by or
against the Pledgor or against any of its properties or
revenues with respect to this Agreement or any of the
transactions contemplated hereby.
(f) All the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable.
(g) The Pledgor is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock,
free of any and all Liens or options in favor of, or claims
of, any other Person, except the security interest created
by this Agreement and, with respect to the Pledged Stock not
constituting Unrestricted Shares, the rights granted under
the Voting Trust Agreement.
5. Covenants. The Pledgor covenants and agrees with
the Collateral Agent and the Lenders that, from and after the
date of this Agreement until this Agreement is terminated and the
security interests created hereby are released:
(a) If the Pledgor shall, as a result of its ownership
of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification,
increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion
of, or in exchange for any shares of the Pledged Stock, or
otherwise in respect thereof, the Pledgor shall accept the
same as the agent of the Collateral Agent and the Lenders,
hold the same in trust for the Collateral Agent and the
Lenders and deliver the same forthwith to the Collateral
Agent in the exact form received, duly indorsed by the
Pledgor to the Collateral Agent, if required, together with
an undated stock power covering such certificate duly
executed in blank by the Pledgor and with, if the Collateral
Agent so requests, signature guaranteed, to be held by the
Collateral Agent, subject to the terms hereof, as additional
collateral security for the Secured Obligations. Any sums
paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of the Issuer shall be paid over
to the Collateral Agent to be held by it hereunder as
additional collateral security for the Secured Obligations,
and in case any distribution of capital shall be made on or
in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock
pursuant to the recapitalization or reclassification of the
capital of the Issuer or pursuant to the reorganization
thereof, the property so distributed shall be delivered to
the Collateral Agent to be held by it hereunder as
additional collateral security for the Secured Obligations.
If any sums of money or property so paid or distributed in
respect of the Pledged Stock shall be received by the
Pledgor, the Pledgor shall, until such money or property is
paid or delivered to the Collateral Agent, hold such money
or property in trust for the Lenders, segregated from other
funds of the Pledgor, as additional collateral security for
the Secured Obligations.
(b) Without the prior written consent of the
Collateral Agent, the Pledgor will not (i) vote to enable,
or take any other action to permit, the Issuer to issue any
stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right
to purchase or exchange for any stock or other equity
securities of any nature of the Issuer (it being agreed that
action taken by Alan Goldfield pursuant to the Voting Trust
Agreement will not violate this clause), (ii) sell, assign,
transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral, (iii) create, incur
or permit to exist any Lien or option in favor of, or any
claim of any Person with respect to, any of the Collateral,
or any interest therein, except for the security interests
created by this Agreement or (iv) enter into any agreement
or undertaking restricting the right or ability of the
Pledgor or the Collateral Agent to sell, assign or transfer
any of the Collateral.
(c) The Pledgor shall maintain the security interest
created by this Agreement as a first, perfected security
interest and shall defend such security interest against
claims and demands of all Persons whomsoever. At any time
and from time to time, upon the written request of the
Collateral Agent, and at the sole expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver such
further instruments and documents and take such further
actions as the Collateral Agent may reasonably request for
the purposes of obtaining or preserving the full benefits of
this Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory
note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered
to the Collateral Agent, duly endorsed in a manner
satisfactory to the Collateral Agent, to be held as
Collateral pursuant to this Agreement.
(d) The Pledgor shall pay, and save the Collateral
Agent and the Lenders harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be
payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions
contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Collateral
Agent shall have given notice to the Pledgor of the Collateral
Agent's intent to exercise its corresponding rights pursuant to
Section 7 below, the Pledgor shall be permitted to receive all
cash dividends paid in the normal course of business of the
Issuer and consistent with past practice in respect of the
Pledged Stock and to exercise all voting and corporate rights
with respect to the Pledged Stock; provided, however, that (i) no
vote shall be cast or corporate right exercised or other action
taken which, in the Collateral Agent's reasonable judgment, would
impair the Collateral or which would be inconsistent with or
result in any violation of any provision of the Credit Agreement,
any Notes, this Agreement or any other Loan Document and (ii) the
parties hereto acknowledge that the Pledged Stock is currently
subject to the Voting Trust Agreement, dated as of December 3,
1993 (the "Voting Trust Agreement"), among the Borrower, Alan
Goldfield and CellStar, which shall not be a violation of this
Agreement.
7. Rights of the Lenders and the Collateral Agent.
(a) All money Proceeds received by the Collateral Agent
hereunder shall be held by the Collateral Agent for the benefit
of the Lenders in a Collateral Account. All Proceeds while held
by the Collateral Agent in a Collateral Account (or by the
Pledgor in trust for the Collateral Agent and the Lenders) shall
continue to be held as collateral security for all the Secured
Obligations and shall not constitute payment thereof until
applied as provided in Section 8(a).
(b) If an Event of Default shall occur and be
continuing and the Collateral Agent shall give notice of its
intent to exercise such rights to the Pledgor, (i) the Collateral
Agent shall have the right to receive any and all cash dividends
paid in respect of the Pledged Stock and make application thereof
to the Secured Obligations in such order as the Collateral Agent
may determine and (ii) all shares of the Pledged Stock shall be
registered in the name of the Collateral Agent or its nominee,
and the Collateral Agent or its nominee may thereafter exercise,
subject to the terms and conditions of the Voting Trust
Agreement, (A) all voting, corporate and other rights pertaining
to such shares of the Pledged Stock at any meeting of
shareholders of the Issuer or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to such shares of the
Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its
discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Issuer, or
upon the exercise by the Pledgor or the Collateral Agent of any
right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee,
depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Collateral Agent may
determine), all without liability except to account for property
actually received by it, but the Collateral Agent shall have no
duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or
delay in so doing.
8. Remedies. (a) If an Event of Default shall have
occurred and be continuing, at any time at the Collateral Agent's
election, the Collateral Agent may apply all or any part of
Proceeds held in any Collateral Account in payment of the Secured
Obligations in such order as the Collateral Agent may elect.
(b) If an Event of Default shall occur and be
continuing, the Collateral Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted in
this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations but subject to
the terms and conditions of the Voting Trust Agreement, all
rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, subject to the terms
and conditions of the Voting Trust Agreement, the Collateral
Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except
any notice required by law referred to below) to or upon the
Pledgor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-
counter market, at any exchange, broker's board or office of the
Collateral Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Collateral Agent or any
Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Pledgor,
which right or equity is hereby waived or released. The
Collateral Agent shall apply any Proceeds from time to time held
by it and the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights
of the Collateral Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements
of counsel to the Collateral Agent, to the payment in whole or in
part of the Secured Obligations, in such order as the Collateral
Agent may elect, and only after such application and after the
payment by the Collateral Agent of any other amount required by
any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Collateral Agent account for
the surplus, if any, to the Pledgor. To the extent permitted by
applicable law, the Pledgor waives all claims, damages and
demands it may acquire against the Collateral Agent or any Lender
arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other
disposition.
(c) The Pledgor waives and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of
the Code. The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of Collateral are
insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Agent, the
Collateral Agent or any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the
Collateral Agent shall determine to exercise its right to sell
any or all of the Pledged Stock pursuant to Section 8(b) hereof,
and if in the opinion of the Collateral Agent it is necessary or
advisable to have the Pledged Stock, or that portion thereof to
be sold, registered under the provisions of the Securities Act,
the Pledgor will use its best efforts to cause the Issuer thereof
to (i) execute and deliver, and cause the directors and officers
of the Issuer to execute and deliver, all such instruments and
documents, and do or cause to be done all such other acts as may
be, in the opinion of the Collateral Agent, necessary or
advisable to register the Pledged Stock, or that portion thereof
to be sold, under the provisions of the Securities Act, (ii) to
use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period
of one year from the date of the first public offering of the
Pledged Stock, or that portion thereof to be sold, and (iii) to
make all amendments thereto and/or to the related prospectus
which, in the opinion of the Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities
and Exchange Commission applicable thereto. The Pledgor agrees
to use its best efforts to cause the Issuer to comply with the
provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Collateral Agent shall designate and to
make available to its security holders, as soon as practicable,
an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Collateral Agent
may be unable to effect a public sale of any or all the Pledged
Stock, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise,
and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other
terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially
reasonable manner. The Collateral Agent shall be under no
obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the Issuer thereof to register
such securities for public sale under the Securities Act, or
under applicable state securities laws, even if the Issuer would
agree to do so.
(c) The Pledgor further agrees to use its best efforts
to do or cause to be done all such other acts as may be necessary
to make such sale or sales of all or any portion of the Pledged
Stock pursuant to this Section valid and binding and in
compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the
Agent, the Collateral Agent and the Lenders, that the Agent, the
Collateral Agent and the Lenders have no adequate remedy at law
in respect of such breach and, as a consequence, that each and
every covenant contained in this Section shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for
specific performance of such covenants except for a defense that
no Event of Default has occurred under the Credit Agreement.
10. Irrevocable Authorization and Instruction to
Issuer. The Pledgor hereby authorizes and instructs the Issuer
to comply with any instruction received by it from the Agent or
the Collateral Agent in writing that (a) states that an Event of
Default has occurred and (b) is otherwise in accordance with the
terms of this Agreement, without any other or further
instructions from the Pledgor, and the Pledgor agrees that the
Issuer shall be fully protected in so complying.
11. Collateral Agent's Appointment as Attorney-in-
Fact. (a) The Pledgor hereby irrevocably constitutes and
appoints the Collateral Agent and any officer or agent of the
Collateral Agent, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Pledgor and in the name
of the Pledgor or in the Collateral Agent's own name, from time
to time in the Collateral Agent's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, including, without limitation, any
financing statements, endorsements, assignments or other
instruments of transfer.
(b) The Pledgor hereby ratifies all that said
attorneys shall lawfully do or cause to be done pursuant to the
power of attorney granted in Section 11(a). All powers,
authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement
is terminated and the security interests created hereby are
released.
12. Duty of Collateral Agent. The Collateral Agent's
sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section
9-207 of the Code or otherwise, shall be to deal with it in the
same manner as the Collateral Agent deals with similar securities
and property for its own account, except that the Collateral
Agent shall have no obligation to invest funds held in any
Collateral Account and may hold the same as demand deposits.
Neither the Collateral Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be
liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon
the request of the Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part
thereof.
13. Execution of Financing Statements. Pursuant to
Section 9-402 of the Code, the Pledgor authorizes the Collateral
Agent to file financing statements with respect to the Collateral
without the signature of the Pledgor in such form and in such
filing offices as the Collateral Agent reasonably determines
appropriate to perfect the security interests of the Collateral
Agent under this Agreement. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
14. Authority of Collateral Agent. The Pledgor
acknowledges that the rights and responsibilities of the
Collateral Agent under this Agreement with respect to any action
taken by the Collateral Agent or the exercise or non-exercise by
the Collateral Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Collateral Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as
may exist from time to time among them, but, as between the
Collateral Agent and the Pledgor, the Collateral Agent shall be
conclusively presumed to be acting as agent for the Lenders with
full and valid authority so to act or refrain from acting, and
neither the Pledgor nor the Issuer shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
15. Notices. Notices may be given by hand, by
telecopy, or by nationally recognized overnight courier service,
addressed or transmitted to the Person to which it is being given
at such Person's address or transmission number set forth in the
Credit Agreement or the Guarantee and shall be effective (a) when
delivered by hand, (b) in the case of a nationally recognized
overnight courier service, one Business Day after delivery to
such courier service, and (c) in the case of telecopy notice when
received. The Pledgor may change its address and transmission
number by written notice to the Collateral Agent, and the
Collateral Agent or any Lender may change its address and
transmission number by written notice to the Pledgor and, in the
case of a Lender, to the Collateral Agent.
16. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative
Remedies. (a) None of the terms or provisions of this Agreement
may be waived, amended, supplemented or otherwise modified except
by a written instrument executed by the Pledgor and the
Collateral Agent (with the consent of the Required Lenders),
provided that any provision of this Agreement may be waived by
the Collateral Agent (with the consent of the Required Lenders)
in a letter or agreement executed by the Collateral Agent or by
telex or facsimile transmission from the Collateral Agent.
(b) Neither the Collateral Agent nor any Lender shall
by any act (except by a written instrument pursuant to Section
17(a) hereof), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of
any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Collateral Agent
or any Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Collateral Agent or any
Lender of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the
Collateral Agent or such Lender would otherwise have on any
future occasion.
(c) The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not
exclusive of any other rights or remedies provided by law.
18. Section Headings. The section headings used in
this Agreement are for convenience of reference only and are not
to affect the construction hereof or be taken into consideration
in the interpretation hereof.
19. Successors and Assigns. This Agreement shall be
binding upon the successors and assigns of the Pledgor and shall
inure to the benefit of the Collateral Agent and the Lenders and
their successors and assigns.
20. Governing Law. This Agreement shall be governed
by, and construed and interpreted in accordance with, the law of
the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Agreement to be duly executed and delivered as of the date first
above written.
AUDIOVOX HOLDING CORP.
By
Title
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
Stock
Class of Certificate No. of
Issuer Stock* No. Shares
CellStar
Corporation 1,050,000
___________________
*Stock is assumed to be common stock unless otherwise
indicated.
