Audiovox 2004 Annual Report Download - page 23

Other Risks
Other risks and uncertainties include:
o changes in U.S. federal, state and local law, and
o our ability to implement operating cost structures that align with
revenue growth.
Item 2−Properties
A portion of the Company's owned Corporate headquarters is located at 180
Marcus Blvd in Hauppauge, New York. In addition, as of November 30, 2004, the
Company leased a total of seventeen operating facilities or offices located in
nine states as well as Germany and Venezuela. The leases have been classified as
operating leases, with the exception of one, which is recorded as a capital
lease. These facilities are located in California, Florida, Georgia,
Massachusetts, New York, Ohio, Tennessee, Texas and Michigan. These facilities
serve as offices, warehouses, distribution centers or retail locations.
Additionally, the Company utilizes public warehouse facilities located in
Norfolk, Virginia, and Sparks, Nevada.
Item 3−Legal Proceedings
The Company is currently, and has in the past been, a party to various
routine legal proceedings incident to the ordinary course of business. The
Company believes that the outcome of all such pending legal proceedings in the
aggregate is unlikely to have a material adverse effect on the business or
consolidated financial condition of the Company.
During the fourth quarter of 2004, several purported derivative and class
actions were filed in the Court of Chancery of the State of Delaware, New Castle
County. On January 10, 2005, Vice Chancellor Steven Lamb of the Court of
Chancery of the State of Delaware, New Castle County, granted an order
permitting the filing of a Consolidated Complaint by several shareholders of
Audiovox Corporation derivatively on behalf of Audiovox Corporation against
Audiovox Corporation, ACC and the directors of Audiovox Corporation captioned
"In Re Audiovox 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 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
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