Audiovox 2003 Annual Report Download - page 105

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AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
November 30, 2001, 2002 and 2003
(Dollars in thousands, except share and per share data)
beginning six months subsequent to the date of the loans. The loans
from Vitec and Pearl were subordinated completely to the loan from the
Company and, in liquidation, the Company receives payment first.
Upon the expiration of six months after the transfer of the title to
the Property to AX Japan, Shintom had the option to repurchase the
Property or purchase all of the shares of stock of AX Japan. This
option could be extended for one additional six month period. The
option to repurchase the building was at a price of 770,000,000 Yen
plus the equity capital of AX Japan (which in no event can be less
than 60,000,000 Yen) and could only be made if Shintom settles any
rent due AX Japan pursuant to the lease agreement. The option to
purchase the shares of stock of AX Japan was at a price not less than
the aggregate par value of the shares and, subsequent to the purchase
of the shares, AX Japan must repay the outstanding loan due to the
Company. If Shintom did not exercise its option to repurchase the
Property or the shares of AX Japan, or upon occurrence of certain
events, AX Japan could dispose of the Property as it deemed
appropriate. The events which result in the ability of AX Japan to be
able to dispose of the Property include Shintom petitioning for
bankruptcy, failing to honor a check, failing to pay rent, etc. If
Shintom failed, or at any time became financially or otherwise unable
to exercise its option to repurchase the Property, Vitec had the
option to repurchase the Property or purchase all of the shares of
stock of AX Japan under similar terms as the Shintom options.
AX Japan had the option to delay the repayment of the loans for an
additional six months if Shintom extended its options to repurchase
the Property or stock of AX Japan. In September 2000, Shintom extended
its option to repurchase the Property and AX Japan delayed its
repayment of the loans for an additional six months.
In March 2001, upon the expiration of the additional six−month period,
the Company and Shintom agreed to extend the lease for an additional
one−year period. In addition, Shintom was again given the option to
purchase the Property or shares of stock of AX Japan after the
expiration of a six−month period or extend the option for one
additional six−month period. AX Japan was also given the option to
delay the repayment of the loans for an additional six months if
Shintom extended its option for an additional six months.
In October 2002, the Company sold all of its shares in AX Japan to RMS
Co., Ltd., an unrelated party to the Company. The purchase price of
the shares was 60,000 Yen. As a result of this transaction, the
purchaser repaid in full 113,563 Yen which represented the full
balance of amounts then owed to the Company by AX Japan. The agreement
(Continued)
104