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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 11, 2007
AUDIOVOX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-28839
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(State or other jurisdiction of incorporation) (Commission File Number)
13-1964841
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(I.R.S. Employer Identification No.)
150 Marcus Blvd., 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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of file
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(e))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The Company hereby incorporates by reference the disclosure made in item 5.02
below.
ITEM 5.02 COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
On June 11, 2007, Audiovox Corporation's Board of Directors authorized and
approved a three-year employment contract effective March 1, 2007 with Mr.
Patrick M. Lavelle (the "Employment Agreement"). The Employment Agreement will
be automatically renewed for successive one year periods unless, either party
notifies the other of his or its intention not to renew the agreement not less
than one hundred eighty (180) days prior to the expiration of the initial or any
renewal term, as the case may be.
During the term of the agreement Audiovox Corporation (the "Company") is to pay
Mr. Lavelle an annual base salary of Seven Hundred Fifty Thousand ($750,000.00)
Dollars per annum. The Company will also pay to Mr. Lavelle an annual bonus of
Two Hundred Fifty Thousand ($250,000.00) Dollars for each and every Five Million
($5,000,000.00) Dollars of pre-tax profit earned by the Company during the
fiscal year. In addition, the agreement provides for an annual discretionary
merit based bonus, at the sole discretion of the Board, based on the Company's
performance. Pursuant to the agreement, effective as of the first fiscal year
the Company achieves any year-end pre-tax profit, and for each fiscal year
thereafter during the employment period, the Company shall have credited to the
Company's Deferred Compensation Plan Two Hundred Fifty Thousand ($250,000.00)
Dollars for Mr. Lavelle's benefit, which sum shall be in addition to any other
amounts that the Company may be required to pay for Mr. Lavelle's benefit under
any deferred compensation plan established for the benefit of Mr. Lavelle and/or
any other key executives of the Company.
In the event of the termination of Mr. Lavelle's employment, by the Company with
or without cause, by Mr. Lavelle with or without good reason or by virtue of Mr.
Lavelle's death or disability, Mr. Lavelle will be entitled to certain payments,
continuation of benefits and vesting of stock based compensation depending on
the reason for termination and all as more specifically set forth in the
Employment Agreement filed herewith.
Mr. Lavelle is subject to a confidentiality restriction during his employment
and thereafter, and to non-compete, non-solicitation and non-disparagement
restrictions during his employment and for 24 months following termination.
The above is a summary of the terms of the Employment Agreement and is qualified
in its entirety by reference to the Employment Agreement, a copy of which has
been filed as Exhibit 10 to this Form 8-K.
In addition, on June 11, 2007 the Company's Board of Directors approved a
compensation arrangement for Thomas C. Malone, CEO and President of Audiovox
Electronics Corp. and Senior Vice President of the Company, which provides for
an annual salary for fiscal 2008 of Two Hundred Twenty five ($225,000.00)
Dollars with a guaranteed minimum annual aggregate salary and bonus of Four
Hundred Twenty Five ($425,000.00) Dollars. Mr. Malone's bonus for fiscal 2008
will be calculated by multiplying the return on sales percentage by the pre-tax
Audiovox Electronics Corp. income, with a cap on the return on sales percentage
of five (5%) percent.
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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 (Registrant)
Date: June 15, 2007 /s/ Charles M. Stoehr
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Charles M. Stoehr
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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10 Employment agreement between Audiovox Corporation
and Patrick M. Lavelle effective as of March 1, 2007.
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, executed this 31st day of May, 2007, by and
between Audiovox Corporation, 180 Marcus Boulevard, Hauppauge, New York 11788
(the "Company"), and Patrick M. Lavelle, an individual residing at 49 Sunset
Drive, Sayville, New York 11782 (the "Executive").
WITNESSETH:
WHEREAS, as of March 1, 2007 (the "Effective Date"), the Company desires to
employ the Executive as President and Chief Executive Officer and to enter into
a written employment agreement embodying the terms of such relationship; and
WHEREAS, the Executive is willing to be so employed by the Company as
President and Chief Executive Officer upon the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged by the Company and the
Executive, the parties agree as follows:
1. TERM OF AGREEMENT
-----------------
1.1 This Agreement shall constitute the binding obligation of the
Executive and the Company as of the Effective Date and shall continue
for a period of three (3) years thereafter (hereinafter referred to as
the "Initial Term"). Thereafter, this Agreement shall automatically
renew for additional one (1)-year terms (each, a Renewal Term" and,
together with the Initial Term, the "Employment Period") unless, not
less than one hundred eighty (180) days prior to the expiration of the
Initial or Renewal Term, as the case may be, either party notifies the
other in writing of his or its intention not to renew this Agreement.
2. EMPLOYMENT
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2.1 As of the Effective Date, the Executive shall be employed by the
Company as, and will perform the duties and responsibilities of,
President and Chief Executive Officer of the Company, reporting solely
and directly to the Board of Directors. In that capacity, Executive
shall perform such services, acts, and functions necessary or
advisable to oversee, manage and conduct the business of the Company,
and shall perform such other duties and responsibilities as may be
reasonably assigned by the Board of Directors. During the Employment
Period, the Executive shall not render services to any other person or
organization for compensation without the prior written approval of
the Company. The Executive's principal work location shall be in
Hauppauge, New York, but the Executive shall travel to the extent, and
to the places, reasonably necessary for the performance of the
Executive's duties hereunder.
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2.2 During the Employment Period, the Executive shall serve as a voting
member of the Board of Directors of the Company.
3. COMPENSATION AND OTHER BENEFITS
-------------------------------
During the Employment Period, the Executive shall be compensated as
follows:
3.1 BASE SALARY. The Company shall pay the Executive a base salary of
Seven Hundred Fifty Thousand Dollars ($750,000) per annum (the "Base
Salary"), payable in accordance with the standard payroll practices of
the Company as are in effect from time to time, less all deductions or
withholdings required by applicable law. The Board of Directors may
increase the Executive's Base Salary at any time and from time to
time.
3.2 ANNUAL INCENTIVE BONUS. During the Employment Period, the Executive
shall be paid an annual bonus (the "Annual Incentive Bonus") of Two
Hundred and Fifty Thousand ($250,000) Dollars (less all deductions or
withholdings required by applicable law) for each and every Five
Million ($5,000,000) Dollars of pre-tax profit earned by the Company
during the fiscal year. By way of example only, if the Company earns
Five Million ($5,000,000) Dollars of pre-tax profit, the Executive
shall be paid an Annual Incentive Bonus of Two Hundred Fifty Thousand
($250,000) Dollars for the fiscal year; if the Company earns Nine
Million Nine Hundred Thousand ($9,900,000) Dollars of pre-tax profit
for the fiscal year, the Executive shall be paid an Annual Incentive
Bonus of Two Hundred Fifty Thousand ($250,000) Dollars; if the Company
earns a pre-tax profit of Ten Million One Hundred Thousand
($10,100,000) Dollars for the fiscal year, the Executive shall be paid
an Annual Incentive Bonus of Five Hundred Thousand ($500,000) Dollars;
and if the Company earns Four Million ($4,000,000) Dollars of pre-tax
profit for the fiscal year, the Executive shall not be paid an Annual
Incentive Bonus. The Annual Incentive Bonus shall be determined at the
end of each fiscal year of the Company in accordance with generally
accepted accounting principles, as in effect from time to time in the
United States of America, consistently applied. The Annual Incentive
Bonus shall be due and payable not later than sixty (60) days
following the closing of the relevant fiscal year of the Company.
3.3 DISCRETIONARY BONUS. The Executive may also receive an annual
discretionary merit based bonus, at the sole discretion of the Board
(the "DISCRETIONARY BONUS"), based on the Company's performance. Any
Discretionary Bonus shall be in addition to any stock-based
compensation provided under this Agreement, but upon the request of
the Executive may be utilized as a vehicle for awarding any
stock-based compensation due the Executive, including, but not limited
to, that provided under Section 3.5. below. Any Discretionary Bonus
shall be paid no later than sixty (60) days following the closing of
the relevant fiscal year.
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3.4 DEFERRED COMPENSATION.
(1) Effective as of the first fiscal year that the Company achieves
any year-end pre-tax profit, and for each fiscal year thereafter
during the Employment Period, the Company shall credit the
Company's Deferred Compensation Plan for the Executive's benefit
(the "Deferred Compensation Account"), the sum of Two Hundred
Fifty Thousand ($250,000) Dollars (the "Deferred Compensation
Sum"), which Sum shall be credited in addition to any other
amounts that the Company may be required to pay for the
Executive's benefit under such Plan or any other deferred
compensation plan established for the benefit of the Executive
and/or other key executives of the Company, such as any Company
matching contributions. In the event that the Company's Deferred
Compensation Plan is discontinued, the Company shall make
arrangements to provide the Executive with another deferred
compensation vehicle so that the Executive shall realize the same
benefit as he would have if the Company's Deferred Compensation
Plan had been continued.
(2) The Executive's interest in the Deferred Compensation Account
shall fully vest immediately, and at all times shall remain one
hundred percent (100%) vested.
(3) The Company shall administer and interpret this Section 3.4 so as
to ensure the Executive is not taxed with respect to the Deferred
Compensation Sum until his actual receipt thereof.
3.5 STOCK OPTIONS. As of the Effective Date, the Executive holds options
to acquire 269,926 shares of common stock of the Company. The
Executive shall retain any and all rights to all such previously
awarded stock options to purchase shares of the common stock of the
Company. The Executive shall continue to participate in all
stock-based compensation programs at the Company available to
employees. Each fiscal year during the Employment Period the aggregate
of the incentive stock options, non qualified options, restrictive
stock awards, deferred shares, performance shares, stock appreciation
rights and any combination thereof that shall be awarded to the
Executive shall be appropriate to his position in the Company, as
determined by the Board of Directors in its sole discretion.
3.6 WELFARE BENEFIT PLANS. During the Employment Period, the Executive
(and, if permitted by the terms of the plans, his family) shall be
eligible to participate in all retirement, deferred compensation,
profit sharing, medical, disability and other welfare plans (the
"Employee Benefit Plans") applicable to senior officers of the Company
generally in accordance with the terms of such plans as in effect from
time to time. The foregoing shall not be construed to limit the
ability of the Company or any of its affiliates to amend, modify or
terminate any such benefit plans, policies or programs at any time or
from time to time; provided -------- that at all times the Company
shall, either by group or separate, individual plan for the benefit of
the Executive, provide Executive (including to the extent permitted
his family) with not less than the level of the benefits the Executive
is receiving on the Effective Date.
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3.7 EXECUTIVE LIFE INSURANCE. During the Employment Period, the Company
shall maintain and pay all premiums on one or more term life insurance
policies for the benefit of the Executive, providing a death benefit
of not less than Nine Hundred Fifty Thousand ($950,000) Dollars
(collectively the "Life Insurance Policy"') payable to the Executive's
designated beneficiaries.
3.8 PAID TIME OFF. During the Employment Period, the Executive shall be
entitled to not less than four (4) weeks paid vacation each fiscal
year at such times as will not materially interfere with the
performance of the Executive's duties.
3.9 AUTOMOBILE. The Company shall lease, and shall pay all insurance,
maintenance, repair and other charges relating to, a late model luxury
automobile for use by the Executive.
3.10 EXPENSE REIMBURSEMENT. During the Employment Period, the Executive
shall be entitled to utilize Company credit cards for Company business
related activities. Furthermore, the Company shall pay or promptly
reimburse the Executive for all reasonable expenses, including
reasonable business travel expenses, incurred by the Executive in
connection with his duties and responsibilities hereunder upon
submission of appropriate documentation or receipts in accordance with
the policies and procedures of the Company as are in effect from time
to time.
4. TERMINATION OF EMPLOYMENT
-------------------------
Subject to the notice and other provisions of this Section 4, the Company
shall have the right to terminate the Executive's employment hereunder, and
the Executive shall have the right to resign, at any time. The "Date of
Termination" (1) for Cause or by resignation without Good Reason shall be
determined in accordance with the provisions of Section 4.3.; (2) by death
or disability shall be the date of death or disability determined in
accordance with the provisions of Section 4.2; (3) without Cause or by
resignation with Good Reason shall be determined in accordance with the
provisions of Section 4.1; or (4) shall mean the date this Agreement
expires.
4.1 TERMINATION WITHOUT CAUSE, RESIGNATION FOR GOOD REASON OR EXPIRATION
OF THE AGREEMENT.
4.1A DISABILITY. For purposes of this Agreement, "disability" shall
have the same definition of disability as triggers payments to
the Executive under the Company provided disability insurance
policy covering the Executive, as in effect at the time the
determination of "disability" is to be made. If no such policy is
then in effect, then "disability" shall mean the Executive's
inability, by reason of any physical or mental injury or illness,
to substantially perform the services required by him hereunder
for a period in excess of ninety (90) Business Days in any three
hundred sixty (360) day period. In such event, Executive's
employment shall be deemed to have terminated by reason of
disability on the last day of such ninety (90) Business Day
period.
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4.1B CAUSE DEFINED. For purposes of this Agreement, "Cause" shall mean
a termination of the Executive's employment by the Company due to
any of the following reasons:
(1) the entry of a final non-appealable judgment of conviction
of the Executive by a court for a felony committed after the
Effective Date, or entry of a plea of no lo contendere by
the Executive to such a felony; or
(2) the Executive's willful failure, or gross negligence, other
than by reason of his disability or legal incompetence, to
substantially carry out his duties hereunder within ten (10)
Business Days of written notice from its Board of Directors,
specifying such failure or gross negligence; or
(3) the Executive's willful engagement in illegal or fraudulent
conduct or his willful violation of any material laws
applicable to the Executive.
For purposes of this Section 4.1B, no act or failure to act by the
Executive shall be considered "willful" if such act or failure to act
by the Executive is the result of the Executive's good faith belief
that the act or failure to act is or was in the best interests of the
Company.
4.1C CHANGE IN CONtROL. For purposes of this Agreement, a "Change in
Control of the Company" shall mean a merger, reorganization or
sale of all or substantially all of the assets of the Company or
similar transaction (excluding a merger where the Company is the
surviving entity), where the successor entity fails to expressly
assume all of the Company's obligations under this Agreement.
4.1D GOOD REASON. For purposes of this Agreement, a resignation for
"Good Reason" shall mean the Executive's resignation: (A) within
twelve (12) months of a Change in Control of the Company; or (B)
within one hundred eighty (180) days following: (1) the
Executive's not being a voting member of the Board of Directors
of the Company; or (2) Executive's written notice to the Company
of (i) a material reduction in the scope of the Executive's
powers, duties, title or responsibilities, (ii) the assignment to
the Executive of duties materially inconsistent with this
Agreement or an adverse change in his title or authority or (iii)
the Company's material breach of this Agreement; or (3)
Executive's written notice to the Company of a change in the
Executive's primary place of work, in each case which is not
cured by the Company within ten (10) Business Days of receiving
such notice.
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4.1E TERMINATION PROCEDURE. The Company may terminate the Executive's
employment hereunder at any time without Cause on twenty (20)
Business Days' prior written notice to the Executive (the term
"Business Day" meaning a day other than one on which commercial
banks in New York City are permitted or required to close). The
Executive may terminate his employment hereunder for Good Reason
at any time on twenty (20) Business Days prior written notice to
the Company. The Date of Termination in either such event shall
be the twentieth Business Day following the giving of such
notice. If the Agreement expires, the Date of Termination shall
be the date the Agreement expires.
4.1F POST-EMPLOYMENT BENEFITS. If the Company terminates the
Executive's employment hereunder without Cause (other than due to
death or disability), or if the Executive terminates his
employment hereunder for Good Reason or if the Employment
Agreement expires by reason of the Company not renewing the
Employment Period, the Executive, upon execution of mutual
releases reasonably satisfactory to the Executive and the
Company, and provided the Executive is in compliance with his
duties and obligations under Section 5 hereof, shall be entitled
to receive only:
(1) his Base Salary through and including the Date of
Termination;
(2) any bonus(es) actually awarded and earned for prior
completed fiscal years, but not yet paid as of the Date of
Termination, and a pro rata portion of the bonus set forth
in Section 3.2 hereof for the fiscal year in which the Date
of Termination occurs, determined based on the numbers of
full months in such fiscal year prior to the Date of
Termination divided by twelve, and the pre-tax profit for
such fiscal year through the last month ending prior to the
Date of Termination annualized for a full twelve month
period;
(3) an amount in cash equal to the average of the Annual
Incentive Bonuses awarded in the two years immediately
preceding the year in which the Date of Termination occurs
(the "Average Bonus"), payable in equal installments on a
monthly basis during the twelve months immediately following
the Date of Termination, and 50% of the amount of the
Average Bonus, payable in equal monthly installments during
the second twelve months following the Date of Termination
(the "Severance Bonus");
(4) any and all vested benefits, including payment of all
amounts in the Deferred Compensation Account, and a pro rata
payment of the Deferred Compensation Sum determined under
Section 3.4 based on the number of calendar days transpired
during the fiscal year (prior to the Date of Termination) in
which such termination or resignation occurs over 365 (the
"Pro-Rata Deferred Compensation Payment");
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(5) all stock based compensation previously awarded and
outstanding shall be vested except for those awards which
vest in whole or in part based on performance of the
Company, which awards shall remain outstanding and vest in
accordance with their terms (excluding any requirement for
continued employment) on a pro rata basis based on the
number of days prior to the Date of Termination in the
relevant performance period;
(6) reimbursement for all expenses incurred, but not yet paid,
as of the Date of Termination;
(7) payment of the per diem value of any unused vacation days
accruing during the Employment Period based upon Executive's
most recent level of Base Salary;
(8) for the greater of (a) the remainder of the Initial Term or
the Renewal Term, as the case may be, or (b) two years (the
"Separation Period"), the Base Salary plus Deferred
Compensation multiplied by the number of months of the
Separation Period divided by 12 that would be paid during
such Period to Executive (collectively, the "Separation
Payment"), which shall be paid in equal installments on a
monthly basis during the Separation Period;
(9) rights to indemnification as set forth in Section 7 of this
Agreement; and
(10) (a) continuation throughout the Separation Period of the
Life Insurance Policy, and upon completion of such period,
ownership of the Life Insurance Policy shall be transferred
to the Executive at no cost to the Executive; and (b)
continuation during the Separation Period or until the
Executive begins to participate in a subsequent employer's
medical plan, of medical, disability and other health
coverages at the level in effect on and at the same
out-of-pocket cost to the Executive as of, the Date of
Termination; it being understood that the period of coverage
under the Consolidated Omnibus Budget Reconciliation Act of
1985 shall commence on the first day following the Date of
Termination.
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4.2 TERMINATION DUE TO DEATH OR DISABILITY.
4.2A TERMINATION. Upon Executive's death or disability during the
Employment Period, the employment relationship created pursuant
to this Agreement shall immediately terminate, and no further
compensation shall be payable to Executive except as provided
herein in this Section 4.2.
4.2B POST-EMPLOYMENT BENEFITS. Date of Termination shall be the date
of death or disability, as the case may be, and in such event the
Executive shall be entitled to receive only:
(1) his Base Salary through and including the Date of
Termination;
(2) any bonus(es) actually awarded for prior completed fiscal
years, but not yet paid as of the Date of Termination and a
pro rata portion of the bonus set forth in Section 3.2
hereof for the fiscal year in which the Date of Termination
occurs, determined based on the numbers of full months in
such fiscal year prior to the Date of Termination divided by
twelve, and the pre-tax profit for such fiscal year through
the last month ending prior to the Date of Termination
annualized for a full twelve month period;;
(3) payment of the Severance Bonus;
(4) any and all vested benefits, including payment of all
amounts in the Deferred Compensation Account and the
Pro-Rata Deferred Compensation Payment;
(5) reimbursement for all expenses incurred, but not yet paid,
as of the Date of Termination;
(6) payment of the per diem value of any unused vacation days
accruing during the Employment Period based upon Executive's
most recent level of Base Salary;
(7) in the event of termination by reason of disability, (a)
payments equal to the Base Salary less amounts payable under
the Company's long-term disability policy during the one
year period following the Date of Termination, which shall
be paid in equal monthly installments during the 12 month
period following the Date of Termination; (b) continuation
throughout the Separation Period of the Life Insurance
Policy, and upon completion of such period, ownership of the
Life Insurance Policy shall be transferred to the Executive
at no cost to the Executive; and (c) continuation during the
Separation Period or until the Executive begins to
participate in a subsequent employer's medical plan, of
medical, disability and other health coverages at the level
in effect on, and at the same out-of-pocket cost to the
Executive as of, the Date of Termination; it being
understood that the period of coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985 shall
commence on the first day following the Date of Termination;
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(8) in the event of termination by reason of death, the Company
shall take the steps reasonably necessary to have all
proceeds from the Life Insurance Policy promptly paid to the
beneficiaries designated thereunder;
(9) rights to indemnification as set forth in Section 7 of this
Agreement; and
(10) all stock based compensation previously awarded and
outstanding shall vest on a pro rata basis based on the
number of days the Executive was employed during the vesting
period, except for those awards which vest in whole or in
part based on the performance of the Company, which awards
shall remain outstanding and vest in accordance with their
terms (excluding any requirement of continued employment),
on a pro rata basis based on the number of days prior to the
Date of Termination in the relevant performance period.
4.3 TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON.
4.3A PROCEDURE. The Company may terminate the Executive's employment
hereunder at any time for Cause on three (3) Business Days' prior
written notice to the Executive. The Executive may terminate his
employment hereunder without Good Reason at any time on Twenty
(20) Business Days prior written notice to the Company. The Date
of Termination in either such event shall be the twentieth
Business Day following the giving of such notice.
4.3B POST-EMPLOYMENT BENEFITS. If, prior to the expiration of the
Initial or any Renewal Term, the Executive's employment is
terminated by the Company for "Cause" or the Executive resigns
from his employment hereunder for any reason other than for "Good
Reason", the Executive shall be entitled to receive only the
following:
(1) his Base Salary up to and including the Date of Termination;
(2) any bonus(es) actually awarded for prior completed fiscal
years, but not yet paid as of the Date of Termination;
(3) reimbursement for all expenses incurred, but not yet paid,
as of the Date of Termination;
(4) payment of the per diem value of any unused vacation days
accruing during the Employment Period based upon Executive's
most recent level of Base Salary;
(5) any and all vested benefits, including payment of all
amounts in the Deferred Compensation Account;
(6) rights to indemnification as set forth in Section 7 of this
Agreement;
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(7) transfer of ownership of the Life Insurance Policy to the
Executive, without further obligation of the Company to pay
premiums; and
(8) retention of all stock-based compensation previously
awarded, which shall be held by the Executive until, and may
be executed at any time prior to, their expiration.
4.3C HEARING PROCEDURE. The existence of Cause must be confirmed by
not less than a majority of the Board of Directors at a meeting
called for such purpose prior to any termination.
(1) In the event the Board confirms the existence of Cause, the
Company shall notify the Executive that the Company intends
to terminate the Executive's employment for Cause under this
Section 4.A. (the "Confirmation Notice"). The Confirmation
Notice shall specify the act, or acts, upon the basis of
which the Board has confirmed the existence of Cause and the
Confirmation Notice must be delivered to the Executive
within fifteen (15) Business Days after the Board confirms
the existence of Cause.
(2) If the Executive notifies the Company in writing (the
"Opportunity Notice") within twenty (20) Business Days after
the Executive has received the Confirmation Notice, the
Executive (together with counsel) shall be provided the
opportunity to meet formally with the Board (or a sufficient
quorum thereof) to discuss such act or acts. The meeting
with the Board shall occur at a mutually agreed upon date,
but in no event more than twenty (20) Business Days after
the Company receives the Opportunity Notice from the
Executive, and at the Company's headquarters. If the Board
attends such meeting and in good faith does not rescind its
confirmation of Cause at such meeting, the Company shall
immediately upon the closing of such meeting, deliver to the
Executive a Notice of Termination for Cause under this
Section 4.3(C).
(3) If the Executive does not respond in writing to the
Confirmation Notice in the manner and within the time period
specified in Section 4.3C(2) above, the Company shall
thereafter issue a Notice of Termination for Cause which
shall set forth the date on which the Company intends to
terminate the Executive's employment.
(4) The Date of Termination shall be the date specified in the
Notice of Termination for Cause.
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(5) The procedure set forth in this Section 4.3C to determine
the existence of Cause shall at all times be subject to the
requirements of applicable law, regulation, regulatory
bulletin or other regulatory requirements.
4.3D RESIGNATION WITHOUT GOOD REASON. A resignation by the Executive
without Good Reason shall take effect on, and the Date of
Termination shall be, the date specified in the written notice of
resignation from the Executive to the Company provided that such
date shall be at least ninety (90) days after the date such
written notice is given.
4.4 NO MITIGATION; NO OFFSET. In the event of any termination of
employment under this Section 4, except if the termination is without
Good Reason, the Executive shall be under no obligation to seek other
employment or to mitigate damages and there shall be no offset against
any amounts due the Executive under this Agreement. Any amounts due
under this Section 4 are in the nature of separation benefits, or
liquidated damages, or both, and are not in the nature of a penalty.
Until the Date of Termination, the Executive shall be entitled, to the
extent not prohibited by applicable law, regulation, regulatory
bulletin, and/or any other regulatory requirement, as the same exists
or may hereafter be promulgated or amended, to be paid his then Base
Salary, and otherwise to continue to receive all other benefits to be
paid to him during the Employment Period, and there shall be no
reduction whatsoever of any amounts payable to the Executive,
hereunder.
4.5 NO OBLIGATION. Subject to the terms of this Agreement, the Company
shall have no obligation to continue or maintain any Employee Welfare
Benefit Plan for any other employees solely as a result of the
provisions of this Agreement.
4.6 409A. If the Executive is a "specified employee" (as defined in
Section 409A of the Internal Revenue Code of 1986, as amended) on the
Date of Termination, the Company shall not make any payments of
"nonqualified deferred compensation" (for purposes of Section 409A of
the Code) to the Executive pursuant to Section 4 until one day
following the six month anniversary of the Date of Termination, and
the amount payable on that day shall equal the sum of all amounts that
would otherwise have been paid during the first six months immediately
following the Date of Termination.
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5. RESTRICTIVE COVENANTS
---------------------
5.1 CONFIDENTIAL INFORMATION.
5.1A The Executive agrees and acknowledges that during the performance
of his duties with the Company he will receive and have access to
confidential, proprietary, and/or trade secret information
concerning the Company (hereinafter "Confidential Information").
"Confidential Information" means information which has
substantial value to the Company, regardless of form or
characteristic, and which: (a) the Company does not make
available to the public, industry, or third parties; (b) relates
to the Company's business operations, products, processes,
business plans, purchasing, marketing, clients, suppliers, or
service providers; and (c) may include (i) financial information
and data, (ii) information pertaining to personnel and
compensation, (iii) marketing plans and related information, (iv)
the names, lists, contact information, and practices of clients
and vendors, (v) plans, products, designs, design concepts,
drawings, software, developments, memoranda, data, improvements,
and methods of operation, (vi) computer software (including
object code and source code), data and databases, outcome
research, documentation, instructional material, inventions,
processes, formulas, technology, designs, drawings, engineering,
hardware, configuration information, models, manufacturing
processes, sales and cost information, and (vii) business
methods, techniques, plans, and the information contained
therein.
5.1B During the Employment Period and thereafter, the Executive agrees
that he will not publish, use or disclose Confidential
Information to anyone other than authorized Company personnel.
The Executive specifically agrees that he will not make use of
any such Confidential Information for his own purpose, or for the
benefit of any person, firm, company or other entity except for
the benefit of the Company.
5.1C During the Employment Period and thereafter, the Executive agrees
that he will not remove any printed, written, recorded, or
graphic material, or any reproduction thereof, constituting,
containing or reflecting Confidential Information from the
Company's premises, except for legitimate business purposes. At
the time his employment with the Company ceases, the Executive
agrees that he will return any and all materials and/or
reproductions constituting, containing or reflecting Confidential
Information in his possession or under his custody or control to
the Company.
5.2 COVENANT NOT TO COMPETE. For purposes of the covenant in this Section
5.2, a Competitive Enterprise is any business enterprise located in
the United States that engages in any activity, or owns a majority
voting interest in any entity that engages in any activity, that
competes with the Company. The Executive hereby covenants and agrees
that during the course of his employment and for 24 months thereafter
(the "Restricted Period"), Executive shall not directly or indirectly
(a) form, or acquire a ten percent (10%) or greater equity ownership
interest in, any Competitive Enterprise provided that this restriction
shall not apply to a Competitive Enterprise whose securities are
publicly traded; or (b) become an employee, officer, partner,
director, consultant, agent or advisor of any Competitive Enterprise
within the United States.
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5.3 NON-SOLICITATION. During the Restricted Period, the Executive
expressly agrees not to (1) call upon, solicit, sell or attempt to
sell any product or services in competition with those offered by the
Company to
(i) any person or firm that was a customer of the Company at any time
during the twelve (12) month period prior to the Date of
Termination; or
(ii) any person or firm that was a prospective customer of the Company
and whose account Executive helped directly to solicit during the
six (6) month period preceding the Date of Termination;
or (2) directly or indirectly, solicit, induce, or call upon any
employee of the Company to terminate his employment with the Company.
5.4 NON-DISPARAGEMENT. During the Employment Period and thereafter, the
Company and Executive agree that they shall not, directly or
indirectly, make or cause or assist any other person to make, any
statement or other communication which impugns or attacks, or is
otherwise critical of the reputation, business or character of the
other, including any of the officers, directors, employees, products
or services of the Company. Nothing herein shall prohibit truthful
statements to government agencies or testimony as compelled by
judicial or administrative process.
5.5 ENFORCEABILITY. Each covenant in this Section 5 shall be enforceable
against the Executive during the Employment Period and during the
Restricted Period. If any covenant in this Section 5 is held to be
unenforceable or against public policy by the tribunal designated in
Section 9 below or, if appropriate, by a court of competent
jurisdiction, such covenant will be considered to be divisible with
respect to scope, time and geographic area, and such lesser scope,
time or geographic area, or all of them, as a court of competent
jurisdiction may determine to be reasonable, will be binding and
enforceable against the Executive.
6. INDEMNIFICATION
---------------
To the fullest extent permitted by law, but subject to the provisions of
the Certificate of Incorporation of the Company and the By-laws of the Company
in effect from time to time (provided that no amendment thereto shall in any way
lessen the Executive's rights hereunder to less than is provided in the
Certificate of Incorporation and/or By-laws as of the Effective Date), the
Company shall promptly, after receipt of a request by the Executive, indemnify,
defend and hold harmless the Executive with respect to any claims (whether
litigated or not) against the Executive in his capacity as an employee, officer
or director of the Company, whether by or on behalf of the Company, its
shareholders or third parties, and the Company shall promptly advance to the
Executive an amount equal to the reasonable fees and expenses incurred in
defending such matters, promptly after receipt of a reasonably itemized request
for such advance. The Company may procure insurance with respect to the
obligations provided in this Section 7 and shall provide such additional
indemnification protection to the Executive as may be provided to other
directors or key executive officers of the Company.
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7. INJUNCTIVE RELIEF AND ADDITIONAL REMEDIES
-----------------------------------------
The parties acknowledge that the injury that would be suffered as a result
of a breach of Section 5 of this Agreement would be irreparable and that an
award of monetary damages for such a breach would be an inadequate remedy.
Consequently, each party acknowledges and expressly agrees that the other party
will have the right, in addition to any other rights it may have, to obtain
injunctive relief to restrain any breach or threatened breach or otherwise to
specifically enforce Section 5 of this Agreement providing the party posts an
adequate bond or other security in seeking such relief.
8. ALTERNATE DISPUTE RESOLUTION
----------------------------
Any dispute concerning the interpretation or enforcement of this Agreement
shall be resolved by a panel of three (3) arbitrators in accordance with the
rules of JAMS/ENDISPUTE, or if that organization shall cease to exist, of a
successor or similar organization, or if no such organization shall exist, then
in accordance with the rules of the American Arbitration Association. The
decision of the panel of three (3) arbitrators shall be final and binding on all
parties. All such matters involving the issue, as well as the proceedings at
issue, shall be kept strictly confidential, except as may be required by law, it
being expressly agreed by all parties hereto that the breach of the
confidentiality requirement hereunder shall be materially damaging, directly and
indirectly, to all parties hereto. If the panel determines that the
non-prevailing party in any such dispute acted in bad faith in connection
therewith, the panel may award to the prevailing party reasonable legal fees and
costs associated with the dispute.
9. VENUE
-----
All disputes shall be arbitrated in Nassau, New York or Suffolk Counties,
New York.
10. NOTICES
-------
Any notice, demand, request or other communication hereunder by either
party to the other shall be given in writing by personal delivery, certified
mail, return receipt requested, or (if to the Company) by facsimile, in any case
delivered to the applicable address set forth below:
To the Company:
Audiovox Corporation
180 Marcus Boulevard
Hauppauge, New York 11788
With a copy to:
Howard B. Adler, Esq.
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
New York, NY 10004
To the Executive:
Mr. Patrick M. Lavelle, CEO c/o Audiovox Corporation
150 Marcus Boulevard Hauppauge, New York 11788
With a copy to:
Thomas J. Killeen, Esq.
Farrell Fritz, P.C.
1320 Reckson Plaza, 14th Floor
Uniondale, New York 11556-1320
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Any such communication shall be deemed given and received on the date of
personal delivery or fax transmittal and three (3) Business Days after
being sent by certified mail, return receipt requested.
11. SUCCESSORS AND ASSIGNS
----------------------
This Agreement is personal to Executive and shall not be assignable by
Executive. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. Subject to the rights of the Executive
under this Agreement, the Company may assign and transfer its rights to, and
will require its obligations under this Agreement to be expressly assumed by, a
successor to all or substantially all of its equity ownership interests, assets
or business by dissolution, merger, consolidation, transfer of assets or stock,
or otherwise. Except as stated herein, nothing in this Agreement, expressed or
implied, is intended to confer on any person, other than the parties and their
respective successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.
12. VOLUNTARY AGREEMENT
-------------------
Executive and the Company represent and agree that each has reviewed all
aspects of this Agreement, has carefully read, and fully understands, all
provisions of this Agreement and is voluntarily entering into this Agreement.
Each party represents and agrees that such party has had opportunity to review
any and all aspects of this Agreement with the legal, tax, or other advisors of
such party's choice. Both parties represent that each has obtained advice
regarding the legal, tax, and other consequences of the terms and conditions of
this Agreement.
13. ENTIRE AGREEMENT
----------------
This is the entire agreement between the parties with respect to the
matters set forth herein and supersedes any and all prior or contemporaneous
agreements or understandings between them. Except as expressly provided herein,
this Agreement may not be changed or terminated orally, and no change,
termination, or attempted waiver of any of the provisions hereof shall be
binding unless in writing signed by both Executive and the Chairman or other
duly authorized representative of the Company. Any such written changes,
terminations, or waivers must specifically reference this Agreement, and such
changes as the Company may from time-to-time make in its general policies and
procedures shall not be deemed or construed to be written amendments to this
Agreement, whether such changes are in writing or not.
14. WAIVER
------
No provision of this Agreement may be waived in any manner except by
written agreement of the parties. In the event any provision is waived, the
balance of the provisions shall nevertheless remain in full force and effect and
shall in no way be waived, impaired or otherwise modified. No failure or delay
on the part of either the Executive or the Company hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right.
15. MODIFICATIONS
-------------
Neither this Agreement nor the provisions contained herein may be extended,
renewed, amended or modified other than by a written agreement executed by
Executive and the Chairman or other duly authorized representative of the
Company.
16. SEVERABILITY
------------
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision of this Agreement or the validity,
legality or enforceability of such provision in any other jurisdiction, but this
Agreement shall be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
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17. CONSTRUCTION
------------
The rule that a contract is to be construed against the party drafting the
contract is hereby expressly waived by the parties, and shall have no
applicability in construing this Agreement or the terms hereof. Any headings and
captions used herein are only for convenience and shall not affect the
construction or interpretation of this Agreement.
18. GOVERNING LAW
-------------
All issues concerning the enforceability, validity, and binding effect of
this Agreement shall be governed by and construed in accordance with the laws of
New York without giving effect to any choice of law or conflict of law provision
or rule (whether of New York or any other jurisdiction) that would cause the
application of the law of any jurisdiction other than New York.
19. COUNTERPARTS
------------
This Agreement may be executed in more than one counterpart, each of which
shall be deemed an original, but all of which together shall constitute but one
and the same instrument.
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IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE DATE
WRITTEN ABOVE.
AUDIOVOX CORPORATION
Date: May 31, 2007
By: /s/ John J. Shalam
---------------------------
Name: John J. Shalam
Title: Chairman
/s/Patrick M. Lavelle
---------------------------
Patrick M. Lavelle
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