Audiovox 1997 Annual Report Download - page 30

(c) Employee Stock Purchase Plan
In May 1993, the stockholders approved the 1993 Employee Stock
Purchase Plan. The stock purchase plan provides eligible employees
an opportunity to purchase shares of the Company’s Class A
Common Stock through payroll deductions up to 15% of base salary
compensation. Amounts withheld are used to purchase Class A
Common Stock on or about the last business day of each month at a
price equal to 85% of the fair market value. This Plan provides for
purchases of up to 1,000,000 shares.
(d) Stock Warrants
During the third quarter of fiscal 1993, pursuant to a consulting
agreement effective April 1993, the Company granted warrants to
purchase 100,000 shares of Class A Common Stock, which have been
reserved, at $7.50 per share. The warrants, which are exercisable in
whole or in part at the discretion of the holder, expire on December
31, 1998. There were no warrants exercised as of November 30, 1997.
The consulting agreement, valued at $100, was expensed in 1994
when the services to be provided, pursuant to the consulting agree-
ment, were completed.
In December 1993, the Company granted warrants to purchase
50,000 shares of Class A Common Stock at a purchase price of
$14.375 per share as part of the acquisition of H & H Eastern
Distributors, Inc. The per share purchase price and number of shares
purchasable are each subject to adjustment upon the occurrence of
certain events described in the warrant agreement. The warrants are
exercisable, in whole or in part, from time-to-time, until September
22, 2003. If the warrants are exercised in whole, the holder thereof
has the right to require the Company to file with the Securities
Exchange Commission a registration statement relating to the sale by
the holder of the Class A Common Stock purchasable pursuant to the
warrant.
On May 9, 1995, the Company issued 1,668,875 warrants in a pri-
vate placement, each convertible into one share of Class A Common
Stock at $7 1/8, subject to adjustment under certain circumstances.
The warrants were issued to the beneficial holders as of June 3, 1994,
of approximately $57,600 of the Company’s Subordinated
Debentures in exchange for a release of any claims such holders may
have against the Company, its agents, directors and employees in
connection with their investment in the Subordinated Debentures.
As a result, the Company incurred a warrant expense of $2,900 and
recorded a corresponding increase to paid in capital. The warrants
are not exercisable after March 15, 2001, unless sooner terminated
under certain circumstances. John J. Shalam, Chief Executive Officer
of the Company, has granted the Company an option to purchase
1,668,875 shares of Class A Common Stock from his personal hold-
ings. The exercise price of this option is $7 1/8, plus the tax impact, if
any, should the exercise of this option be treated as dividend income
rather than capital gains to Mr. Shalam.
During fiscal 1997, the Company granted warrants to purchase
100,000 shares of Class A Common Stock, which have been reserved,
at $6.75 per share. The warrants, which are exercisable in whole or in
part at the discretion of the holder, expire on January 29, 2002. There
were no warrants exercised as of November 30, 1997.
(e) Profit Sharing Plans
The Company has established two non-contributory employee
profit sharing plans for the benefit of its eligible employees in the
United States and Canada. The plans are administered by trustees
appointed by the Company. A contribution of $500 and $150 was
made by the Company to the United States plan in fiscal 1997 and
1996, respectively. No contributions were made to the plan for fiscal
year 1995. Contributions required by law to be made for eligible
employees in Canada were not material.
(14) Export Sales
Export sales of approximately $102,659 and $87,334 for the years
ended November 30, 1997 and 1996, respectively, exceeded 10% of
sales. Export sales for the year ended November 30, 1995 did not
exceed 10% of sales.
(15) Lease Obligations
At November 30, 1997, the Company was obligated under non-can-
celable leases for equipment and warehouse facilities for minimum
annual rental payments as follows:
Operating Leases
1998 $1,377
1999 904
2000 504
2001 217
2002 25
Thereafter 2
Total $3,029
Rental expense for the above-mentioned operating lease agree-
ments and other leases on a month-to-month basis approximated
$2,516, $2,292 and $4,080 for the years ended November 30, 1997,
1996 and 1995, respectively.
The Company leases certain facilities from its principal stock-
holder and several officers. Rentals for such leases are considered by
management of the Company to approximate prevailing market
rates. At November 30, 1997, minimum annual rental payments on
these related party leases, which are included in the above table, are
as follows:
1998 $162
1999 23
(16) Financial Instruments
(a) Derivative Financial Instruments
(1) Forward Exchange Contracts
At November 30, 1997 and 1996, the Company had contracts to
exchange foreign currencies in the form of forward exchange con-
tracts in the amount of $26,502 and $5,451, respectively. These con-
tracts have varying maturities with none exceeding one year as of
November 30, 1997. For the years ended November 30, 1997, 1996
and 1995, gains and losses on foreign currency transactions which
were not hedged were not material. For the years ended November
30, 1997, 1996 and 1995, there were no gains or losses as a result of
terminating hedges prior to the transaction date.
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