Audiovox 2006 Annual Report Download - page 66

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 28, 2007
(Dollars in thousands, except share and per-share data)
subordinated note. In addition, Audiovox repurchased from Toshiba, its remaining
minority interest in ACC for $5,483. As a result of this purchase ACC released Toshiba
from its obligation to continue to supply wireless handsets to ACC and released Toshiba
from all claims that ACC or Audiovox have or may have against Toshiba (Note 3).
• Upon the closing, ACC’s Chief Executive Officer’s employment agreement with ACC
was terminated and pursuant to his employment agreement and his long-term incentive
compensation award he received $4,000. ACC also purchased certain of his personally
held intangibles for $16,000 in order for ACC to have the ability to convey all of the
assets used in connection with the conduct of the Cellular business to UTSI (Note 17).
• Upon the closing, ACC paid $5,019 to certain employees of ACC and its subsidiaries as a
severance payment and in exchange for which Audiovox received a release from such
employees (Note 17).
• Pursuant to the terms of the Agreement, 5%(or $8,255) of the Purchase Price was placed
in escrow by UTSI for 120 days after Closing. The Company collected the full escrow
amount during the year ended November 30, 2005.
• The Company’s Chairman received $1,916 upon the closing of the asset sale pursuant to
an amendment of a long-term incentive compensation award, which clarified that such
payment would be paid pursuant to a sale of the Cellular business pursuant to an asset
sale. This payment was recorded in general and administrative expenses on the
accompanying consolidated statement of operations for the year ended
November 30, 2004 (Note 17).
• Taxes of approximately $36,311 were paid in connection with the asset sale.
• Acquisition costs for legal, accounting and other of $4,603 were incurred to effectuate the
sale.
The Company also retained and collected certain accounts receivable related to the Cellular
business, which approximated $148,494 as of the closing.
After the closing on November 1, 2004, the following additional agreements became
effective:
• The Company agreed to indemnify UTSI for any breach or violation of ACC’s and its
representations, warranties and covenants contained in the asset purchase agreement and
for other matters, subject to certain limitations. Significant indemnification claims by
UTSI could have a material adverse effect on the Company’s financial condition. The
Company is not aware of any such claim(s) for indemnification.
• For a period of five-years after November 1, 2004, the Company entered into a royalty
free licensing agreement permitting UTSI to use the Audiovox brand name on certain
products. During such period, the Company will not conduct, directly or indirectly, in the
Cellular business without the prior written consent of UTSI. The Company has no
separate accounting treatment for the royalty-free license agreement with UTSI as this
agreement cannot be separated from the sale of net assets to UTSI.
• Certain ACC employee stock options under the 1997 Stock Option Plan and 1999 Stock
Compensation Plan were extended for one year from the closing. This extension resulted
in a non-cash compensation charge of $98 due to the remeasurement of stock options in
accordance with FIN 44 ‘‘Accounting for Certain Transactions involving Stock
Compensation’’.
F-26