Audiovox 2005 Annual Report Download - page 99

(16) Related Party Transactions
The Company leases facilities from its principal stockholder (Note 12).
In addition, the Company entered into various transactions with Toshiba
Corporation in the prior years (Note 2 and 3).
(17) Contingencies
The Company is currently, and has in the past been, a party to various
routine legal proceedings incident to the ordinary course of business.
If management determines, based on the underlying
facts and circumstances, that it is probable a loss will result from a
litigation contingency and the amount of the loss can be reasonably
estimated, the estimated loss is accrued for. The Company believes its
outstanding litigation matters disclosed below will not have a material
adverse effect on the Company's financial statements, individually or
in the aggregate; however due to the uncertain outcome of these
matters, the Company disclosed these specific matters below:
During 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 $16,000 paid to Philip Christopher pursuant to a
Personally Held Intangibles Purchase Agreement in connection with the
UTStarcom transaction, (c) disgorgement to Audiovox of $4,000 paid to
Philip Christopher as compensation for termination of his Employment
Agreement and Award Agreement with ACC, (d) disgorgement to ACC of
$1,916 paid to John Shalam pursuant to an Award Agreement with ACC, and
(e) recovery by ACC of $5,000 in severance payments distributed by
Philip Christopher to ACC's former employees. Defendants filed a motion
to dismiss the complaint, which was withdrawn. The Company understands
that the individual 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. The Company anticipates that
defense costs, in excess of any applicable retention, will be covered
by the Company's insurance policies. Any damages recovered by
plaintiffs will be paid to the Company. Accordingly, no estimated loss
has been recorded for the aforementioned case.
During 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 agreement provides for a payment (to be
made upon satisfaction of certain pre−closing conditions) from the
Company to the Respondents of $1,700 in consideration of which the
Company will acquire all of Respondents' ownership. In addition, the
Company and Respondents will release all
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