Audiovox 2004 Annual Report Download - page 104

AUDIOVOX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
November 30, 2002, 2003 and 2004
(Dollars in thousands, except share and per share data)
Corporation Derivative Litigation". The complaint seeks (a) rescission of:
agreements; amendments to long−term incentive awards; and severance
payments pursuant to which Audiovox and ACC executives were paid from the
net proceeds of the sale of certain assets of ACC to UTStarcom, Inc., (b)
disgorgement to ACC of $16 million paid to Philip Christopher pursuant to a
Personally Held Intangibles Purchase Agreement in connection with the
UTStarcom transaction, (c) disgorgement to Audiovox of $4 million paid to
Philip Christopher as compensation for termination of his Employment
Agreement and Award Agreement with ACC, (d) disgorgement to ACC of
$1,916,477 paid to John Shalam pursuant to an Award Agreement with ACC, and
(e) recovery by ACC of $5 million in severance payments distributed by
Philip Christopher to ACC's former employees. ACC is sued as a nominal
defendant only. Defendants have filed a motion to dismiss the complaint.
Defendants intend to vigorously defend this matter. However, no assurances
regarding the outcome of this matter can be given at this point in the
litigation.
During the first quarter of 2005, the litigation commenced by Compression
Labs, Incorporated in the United States District Court for the Eastern
District of Texas, Marshall Division, against the Company and its
subsidiary Audiovox Electronics Corp. ("AEC") was dismissed without
prejudice as to the Company and settled with respect to AEC. The litigation
against Audiovox Communications Corp. ("ACC") is still pending and although
ACC intends to vigorously defend this matter, no assurances regarding the
outcome can be given at this point in the litigation.
During the third quarter of 2004, an arbitration proceeding was commenced
by the Company and several of its subsidiaries against certain Venezuelan
employees and two Venezuelan companies ("Respondents") before the American
Arbitration Association, International Centre in New York, New York,
seeking recovery of monies alleged to have been wrongfully taken by
individual Respondents and damages for fraud. Respondents asserted
counterclaims alleging that the Company engaged in certain business
practices that caused damage to Respondents. The matter was submitted to
mediation during the fourth quarter of fiscal 2004 and settled subsequent
to year end. The settlement provides, in pertinent part, for a payment (to
be made upon satisfaction of certain pre− closing conditions) from the
Company to the Respondents of $1,700,000 in consideration of which the
Company will acquire all of Respondents' ownership in the Venezuelan
companies and a release of any and all claims.
On September 17, 2004, Shintom Co. Ltd. commenced action against Audiovox
Corporation in the Chancery Court of the State of Delaware, New Castle
County, seeking recovery of the sum of $2,500,000 or the value of Audiovox
preferred stock determined as of April 16, 1987 (the date of the merger of
Audiovox Corp., a New York corporation, with Audiovox Corporation, a
Delaware corporation) which preferred stock was purchased by Shintom from
Audiovox in April 1981. In lieu of answering, the Company has moved to
dismiss the complaint. That motion is currently pending. The Company
believes that the lawsuit is baseless and it intends to vigorously defend
this matter. However, no assurance regarding the outcome of this matter can
be given at this point in the litigation.
During the second quarter of fiscal 2004, the Company, AEC and one of its
distributors of car security products, were named as defendants in a
lawsuit brought by Magnadyne Corporation in the United States District
Court, Central District of California alleging patent infringement and
seeking
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