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[AUDIOVOX CORPORATION LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 24, 2003
To our Shareholders:
The 2003 annual meeting of shareholders of Audiovox Corporation will be
held on July 24, 2003, at the Sheraton Smithtown, the Seminar Room, 110
Vanderbilt Motor Parkway, Smithtown, NY 11788 at 10 a.m. At the meeting, you
will be asked to vote on the following matters:
1. The election to our Board of ten Directors;
2. Any other matters that may properly come before the meeting.
If you were a shareholder of record at the close of business on June 10,
2003 you are entitled to vote at the meeting or at any adjournment of the
meeting. This notice and proxy statement are first being mailed to shareholders
on or about June 24, 2003. Please follow the instructions on the enclosed Proxy
Card to vote either by mail, telephone or electronically via the Internet.
A copy of the Annual Report for the year ended November 30, 2002 is also
enclosed.
By order of the Board of Directors,
CHRIS LIS JOHNSON,
Secretary
Dated: Hauppauge, New York
June 23, 2003
AUDIOVOX CORPORATION
150 MARCUS BOULEVARD
HAUPPAUGE, NEW YORK 11788
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, JULY 24, 2003
PROXY STATEMENT
The annual meeting of shareholders will be held on Thursday, July 24, 2003
at the Sheraton Smithtown, the Seminar Room, 110 Vanderbilt Motor Parkway,
Smithtown, NY 11788 at 10:00 a.m. This proxy statement contains information
about the matters to be considered at the meeting or any adjournments of the
meeting.
THE MEETING
At the meeting, you will be voting on the election of ten directors.
Our management will also report on our performance during fiscal 2002 and
will be available to answer your questions.
You may vote if you owned stock as of the close of business on June 10,
2003. On June 10, 2003 there were 20,651,374 shares of Class A common stock and
2,260,954 shares of Class B common stock issued and outstanding. Each share of
Class A common stock is entitled to one vote and each share of Class B common
stock is entitled to ten votes.
You can vote: by attending the meeting; by completing, signing and mailing
the enclosed proxy; by telephone or electronically via the Internet. The
deadline for voting by telephone or electronically is 11:59 p.m. on July 23,
2003. You may change your vote at any time before the meeting by voting another
proxy with a later date and returning it to us prior to the meeting or by
attending and voting at the meeting. Any proxy that is signed and returned to
us without voting instructions will be voted for the election of the nominated
directors.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION OF DIRECTORS
Each of the nominees for director named below, has continuously served as
a director since the year indicated. The directors will hold office until the
next annual meeting of Shareholders and until their successors are elected and
qualified. The Class A Directors are elected by the Class A Shareholders voting
separately as a class. The joint directors are elected by the Class A and Class
B Shareholders voting together, with the Class B Shareholders entitled to 10
votes per share and the Class A Shareholders entitled to one vote per share.
If any nominee becomes unable or unwilling to accept nomination or
election, the proxies will be voted for another person designated by the Board
of Directors. The management has no reason to believe that any of said nominees
will be unable or unwilling to serve if elected to office.
The following persons have been nominated and are proposed to be elected:
DIRECTOR
NAME AND PRINCIPAL OCCUPATION AGE SINCE
----------------------------- ----- ---------
CLASS A DIRECTORS
Paul C. Kreuch, Jr.*
Managing Director, WJM Associates, Inc. ................... 64 1997
Dennis F. McManus*
V.P.-New Product Marketing, LSSI Corporation .............. 52 1998
Irving Halevy *
Retired Professor and Arbitrator .......................... 86 2001
Peter A. Lesser
President, X-10 (USA) Inc ................................. 67 --
JOINT DIRECTORS
John J. Shalam
President and Chief Executive Officer ..................... 69 1960
Philip Christopher
Executive Vice President .................................. 54 1973
Charles M. Stoehr
Senior Vice President and Chief Financial Officer ......... 57 1987
Patrick M. Lavelle
Senior Vice President ..................................... 51 1993
Ann M. Boutcher
Vice President ............................................ 52 1995
Richard Maddia
Vice President ............................................ 44 1996
----------
* Member of the Audit and Compensation Committees
Paul C. Kreuch, Jr. was elected to the Board of Directors in February
1997. Mr. Kreuch is a Managing Director of WJM Associates, Inc., a leading
executive development firm. Prior career responsibilities include Executive
Vice President of Natwest Bank, N.A. from 1993 to 1996, and before that,
President of National Westminster Bank, USA.
Dennis F. McManus was elected to the Board of Directors in March 1998. Mr.
McManus is currently the Vice President, New Product Marketing at LSSI
Corporation. Prior to that Mr. McManus was self-employed as a
telecommunications consultant. Before that, he was employed by NYNEX Corp. for
over 27 years, most recently as a Senior Vice President and Managing Director.
Mr. McManus held this position from 1991 through December 31, 1997.
2
Irving Halevy served on the Board of Directors from 1987 to 1997 and was
re-elected to the Board of Directors in 2001. Mr. Halevy is a retired professor
of Industrial Relations and Management at Fairleigh Dickinson University where
he taught from 1952 to 1986. He was also a panel member of the Federal
Mediation and Conciliation Service.
Peter A. Lesser is nominated for election as a Class A director to hold
office until our annual meeting of stockholders in 2004. Mr. Lesser is the
President of X-10 (USA) Inc., a wholesaler of electronic home control and
security systems. Mr. Lesser is the founder of and has also served as a
director and been stockholder of X-10 Limited, the Hong Kong parent company of
X-10 (USA) Inc. since 1979. He is a Member-at-Large of the Executive Board of
the Consumer Electronics Association. From 1997 through 1999 Mr. Lesser served
as the President of the Security Industry Association and currently serves as a
member of its Board of Directors.
John J. Shalam has served as President, Chief Executive Officer and as
Director of Audiovox or its predecessor since 1960. Mr. Shalam also serves as
President and a Director of most of Audiovox's operating subsidiaries. Mr.
Shalam is on the Board of Directors of the Electronics Industry Alliance.
Philip Christopher, our Executive Vice President, has been with Audiovox
since 1970 and has held his current position since 1983. Before 1983 he served
as Senior Vice President of Audiovox. Mr. Christopher is also Chief Executive
Officer of Audiovox's wireless subsidiary, Audiovox Communications Corp. From
1973 through 1987, he was a Director of our predecessor, Audiovox Corp. Mr.
Christopher serves on the Executive Committee of the Cellular Telephone
Industry Association.
Charles M. Stoehr has been our Chief Financial Officer since 1979 and was
elected Senior Vice President in 1990. Mr. Stoehr has been a Director of
Audiovox since 1987. From 1979 through 1990 he was a Vice President of
Audiovox.
Patrick M. Lavelle has been a Vice President of the Company since 1980 and
was appointed Senior Vice President in 1991. Mr. Lavelle is Chief Executive
Officer and President of Audiovox's subsidiary, Audiovox Electronics
Corporation. Mr. Lavelle is also a member of the Board of Directors and
Executive Committee of the Consumer Electronics Association and serves as
Chairman of its Mobile Electronics Division.
Ann M. Boutcher has been the Company's Vice President of Marketing since
1984. Ms. Boutcher's responsibilities include the development and
implementation of the Company's advertising, sales promotion and public
relations programs. Ms. Boutcher was elected to the Board of Directors in 1995.
Richard A. Maddia has been our Vice President of Information Systems since
1992. Prior thereto, Mr. Maddia was Assistant Vice President, MIS. Mr. Maddia's
responsibilities include development and maintenance of information systems.
Mr. Maddia was elected to the Board of Directors in 1996.
MANAGEMENT RECOMMENDS VOTING "FOR" THE ELECTION OF KREUCH, MCMANUS,
HALEVY, LESSER, SHALAM, CHRISTOPHER, STOEHR, LAVELLE, BOUTCHER AND MADDIA, AS
DIRECTORS. UNLESS OTHERWISE DIRECTED BY A SHAREHOLDER, PROXIES WILL BE VOTED
"FOR" THE ELECTION OF SUCH NOMINEES.
3
SECURITIES BENEFICIALLY OWNED
ITEM 12 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 30, 2003, certain information
with respect to shares beneficially owned by (i) each person who is known by
the Company to be the beneficial owner of more than five percent (5%) of the
Company's outstanding shares of Common Stock, (ii) each of the Company's
directors and the executive officers named in the Summary Compensation Table
below and (iii) all current directors and executive officers as a group.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire shares (for example, upon exercise of an option or warrant) within
sixty (60) days of the date as of which the information is provided. In
computing the percentage ownership of any person, the number of shares is
deemed to include the number of shares beneficially owned by such person (and
only such person) by reason of such acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in the following table
does not necessarily reflect the person's actual voting power at any particular
date.
SOLE VOTING OR PERCENT OF
INVESTMENT OUTSTANDING
NAME AND ADDRESS (1) POWER (2) SHARES
-------------------- ------------------ ------------
John J. Shalam ............................................. 4,590,577(3) 21.7%
Philip Christopher ......................................... 983,474 4.6%
Patrick M. Lavelle ......................................... 183,078 *
Charles M. Stoehr .......................................... 144,549 *
Richard Maddia ............................................. 37,040 *
Ann M. Boutcher ............................................ 16,323 *
Paul C. Kreuch, Jr ......................................... 13,000 *
Dennis F. McManus .......................................... 11,000 *
Irving Halevy .............................................. -- *
Peter Lesser ............................................... -- *
All directors and officers as a group (10 persons) ......... 5,979,041 26.8%
NAME AND ADDRESS OF OTHER 5% HOLDERS OF COMMON STOCK
Dimensional Fund Advisors, Inc. (4)
1299 Ocean Ave, 11th Floor
Santa Monica, CA 90401 .................................... 1,245,721 6.0%
Kahn Brothers & Co., Inc. (5)
1299 Ocean Ave, 11th Floor
Santa Monica, CA 90401 .................................... 1,340,265 6.5%
* Represents less than 1%
(1) The address of each person, unless otherwise noted, is c/o Audiovox
Corporation, 150 Marcus Blvd., Hauppauge, NY 11788. In presenting shares
beneficially owned and in calculating each holder's percentage ownership,
only options exercisable by that person within 60 days of February 1,
2003 and no options exercisable by any other person are deemed to be
outstanding.
(2) The number of shares stated as "beneficially owned" includes stock
options currently exercisable as follows: Mr. Shalam -- 525,000, Mr.
Christopher -- 779,000, Mr. Lavelle -- 165,700, Mr. Stoehr -- 132,500,
Mr. Maddia -- 32,000, Ms. Boutcher -- 11,000, Mr. Kreuch -- 11,000 and
Mr. McManus -- 11,000.
(3) Includes 2,144,152 shares of Class B common stock held by Mr. Shalam that
he may convert into Class A common stock at any time. Excludes 116,802
shares of Class B common stock and 2,002 shares of Class A common stock
that are held in irrevocable trusts for the benefit of Mr. Shalam's three
sons.
4
(4) Information reported is derived from a Schedule 13G dated February 3,
2003 of Dimensional Fund Advisors Inc. and filed with the Securities and
Exchange Commission on February 11, 2003.
(5) Information reported is derived from a Schedule 13G of Kahn Brothers &
Co., Inc. filed with the Securities and Exchange Commission on February
6, 2003.
Section 16(a) of the Exchange Act requires our executive officers,
directors and persons who own more than ten percent of a registered class of
our equity securities ("Reporting Persons") to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission (the "SEC") and the Nasdaq Stock Market (the "Nasdaq"). These
Reporting Persons are required by SEC regulation to furnish us with copies of
all Forms 3, 4 and 5 they file with the SEC and Nasdaq. Based solely upon our
review of the copies of the forms it has received, we believe that all
Reporting Persons complied on a timely basis with all filing requirements
applicable to them with respect to transactions during fiscal 2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
We lease some of our equipment, office, warehouse and distribution
facilities from entities in which our executive officers own controlling
interests. The following table identifies leases that result in payments in
excess of $60,000 to any of the related entities.
REAL PROPERTY RENT PAID DURING
LOCATION EXPIRATION DATE OWNER OF PROPERTY FISCAL YEAR 2002
-------- --------------- ----------------- ----------------
150 Marcus Blvd ............ November 30, 2008 150 Marcus Blvd. Realty LLC(1) $530,000
Hauppauge, NY
16808 Marquardt Avenue ..... June 30, 2008 Marquardt Associates(2) 563,399
Cerritos, CA
555 Wireless Blvd .......... December 1, 2026 Wireless Blvd. Realty LLC(3) 589,340
Hauppauge, NY
110 Marcus Blvd ............ May 31, 2006 110 Marcus Blvd. Realty LLC(4) 113,220
Hauppage, NY
EQUIPMENT
LOCATION
--------
555 Wireless Blvd .......... Month to Month Wireless Blvd. Realty LLC(3) 410,640
Hauppauge, NY
----------
(1) Property owned by 150 Marcus Blvd. Realty, LLC, a New York limited
liability company, of which John J. Shalam owns 99% and Mr. Shalam's
three sons own the remaining 1%.
(2) Property owned by Marquardt Associates, a California partnership, owned
60% by John J. Shalam and 40% by Ardama Capital LLC, a New York limited
liability company owned by Mr. Shalam's three sons.
(3) Property owned or leased by Wireless Blvd. Realty, LLC, a New York
limited liability company, owned 98% by the Shalam Long Term Trust, 2% by
John J. Shalam. The Shalam Long Term Trust is a grantor trust of which
Mr. Shalam is the Grantor and his three sons are the beneficiaries.
(4) Property owned by 110 Marcus Blvd. Realty, LLC, a New York limited
liability company, of which John J. Shalam owns 1% and Mr. Shalam's three
sons own the remaining 99%.
We believe that the terms of each of the leases are no less favorable to
us than those that could have been obtained from unaffiliated third parties. To
the extent that conflicts of interest arise between us and such persons in the
future, such conflicts will be resolved by a committee of disinterested
directors.
5
INDEBTEDNESS OF MANAGEMENT
From December 1, 2001 through June 21, 2002, Philip Christopher, Director
and Executive Vice President of Audiovox, was indebted to Audiovox for
$650,954. On June 21, 2002 Mr. Christopher paid the debt in full. In addition,
as of February 28, 2002, Mr. Christopher was also indebted to Audiovox for
$133,699 pursuant to an unsecured note which bears interest at the LIBOR rate
plus 0.5% per annum.
THE BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, an Audit Committee and
a Compensation Committee but does not have a standing nominating committee. The
Board of Directors held five meetings and acted by consent three times during
the fiscal year ended November 30, 2002. All incumbent directors attended 75%
or more of the aggregate number of Board and related committee meetings during
the year. Directors who are not our employees receive an annual fee of $15,000
and a fee of $500 for each meeting attended.
EXECUTIVE COMMITTEE
The Executive Committee which held no meetings during fiscal 2002,
consisted of five members, namely, John J. Shalam, Philip Christopher, Charles
M. Stoehr, Paul C. Kreuch, Jr. and Dennis F. McManus. The primary function of
the Executive Committee is to act upon matters when the Board is not in
session. The Committee has full power and authority of the Board in the
management and conduct of the business and affairs of the Company.
AUDIT COMMITTEE
The Audit Committee, which held ten meetings in fiscal 2002, consists of
three members, namely, Paul C. Kreuch, Jr., Dennis F. McManus and Irving
Halevy. The Board of Directors has determined that each of the three members is
independent and able to read and understand fundamental financial statements in
accordance with the rules of the National Association of Securities Dealers
("NASD"). The Board of Directors has also determined that at least one member
of the audit committee has past employment experience in finance or accounting.
The functions of the Audit Committee are described below under the heading
Audit Committee Report.
COMPENSATION COMMITTEE
The Compensation Committee, which held five meetings and acted by consent
once in fiscal 2002, consisted of three members, namely, Messrs. Kreuch,
McManus and Halevy. The Compensation Committee recommends to the Board of
Directors remuneration arrangements for senior management and the directors,
approves and administers other compensation plans, including the profit sharing
plan of the Company, in which officers, directors and employees participate.
6
AUDIT COMMITTEE REPORT
The following Audit Committee Report, Compensation Committee Report on
Executive Compensation and Performance Graph do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference therein.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the quality and integrity of the Company's accounting
and auditing functions, internal controls and financial reporting practices.
The full responsibilities of the Audit Committee are set forth in its written
charter which was approved by the Company's Board of Directors.
In fulfillment of its responsibilities, the Audit Committee met with
management and the Company's independent auditors, KPMG LLP, to review and
discuss all financial statements included or to be included in the Company's
quarterly and annual reports for the fiscal year ended November 30, 2002 (the
"Financial Statements"). The Audit Committee also discussed with KPMG LLP the
matters required to be discussed by the Statement on Auditing Standards No. 61,
received the written disclosure from KPMG LLP required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and discussed with KPMG LLP that firm's independence.
Finally, the Audit Committee continued to monitor the integrity of the
Company's financial reporting processes and its internal procedures and
controls.
Based upon the Audit Committee's discussions with management and the
independent accountants and the Audit Committee's review of the representations
of management and KPMG LLP, the Audit Committee is satisfied that its
responsibilities under the charter for the period ended November 30, 2002, were
met and that the financial reporting processes of the Company are functioning
efficiently.
Members of the Audit Committee
Paul C. Kreuch, Jr. (Chairman)
Dennis F. McManus
Irving Halevy
7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
RESPONSIBILITIES OF THE COMMITTEE
The Compensation Committee of the Board of Directors reviews and approves
compensation for Audiovox's executive officers and oversees and administers
Audiovox's stock option and restricted stock plans. The Compensation Committee
recommends compensation for the Chief Executive Officer subject to the Board of
Directors approval of such recommendations. The Chief Executive Officer submits
recommended compensation levels for other executive officers of Audiovox to the
Compensation Committee for its review and approval, subject to applicable
employment agreements. Each member of the Compensation Committee is a
non-employee Director of Audiovox. The Compensation Committee of the Board of
Directors has furnished the following report on executive compensation for
fiscal 2002.
WHAT IS AUDIOVOX'S PHILOSOPHY OF EXECUTIVE OFFICER COMPENSATION?
Our compensation programs are designed to attract and retain talented
executives and motivate them to achieve corporate and business objectives that
will increase stockholder value. To attain both near and long term corporate
goals, it is our policy to provide incentives to senior management and reward
outstanding performance and contributions to Audiovox's businesses.
Consequently, Audiovox's compensation program for its executives includes a
competitive base salary, a performance-based annual bonus and stock-based
compensation.
This approach to executive compensation enables Audiovox to attract and
retain executives of outstanding ability while ensuring that our executives'
compensation advances the interests of our shareholders. Consequently, a large
proportion of our executives' compensation, the annual bonus, is dependent in
significant part on Audiovox's performance. Although Audiovox does not have
employment agreements with any of its executive officers, Mr. Philip
Christopher's compensation is governed by an employment agreement with Audiovox
Communications Corp.
BASE SALARY
Salaries for the executive officers are designed to attract and retain
qualified and dedicated executive officers. Annually, the Committee reviews
salary recommendations made by Audiovox's Chief Executive Officer, and
evaluates individual responsibility levels, experience, performance and length
of service. Base salaries for Audiovox's executive officers are fixed at levels
commensurate with competitive amounts paid to senior executives with comparable
qualifications at companies engaged in the same or similar businesses.
ANNUAL BONUS
Bonus compensation provides Audiovox with a means of rewarding performance
based upon attainment of corporate profitability during the fiscal year. For
fiscal 2002, the Compensation Committee established bonus compensation formulas
for its executives based upon the pre-tax earnings of the Company. The annual
bonus paid to Mr. Lavelle is based upon the achievement of fiscal goals within
Audiovox Electronics Corp. Mr. Christopher's annual bonus for fiscal 2002 was
paid pursuant to his employment agreement.
STOCK OPTIONS
During fiscal 2002, no stock options were granted to the Company's
employees, including the Company's executive officers.
HOW IS THE CHIEF EXECUTIVE OFFICER COMPENSATED?
The Compensation Committee has fixed the base salary of the Chief
Executive Officer based on competitive compensation data, the Committee's
assessment of Mr. Shalam's past performance and its expectation as to his
future contributions in guiding and directing Audiovox and its business. Mr.
Shalam's
8
bonus for fiscal 2002 was calculated on Audiovox's pre-income tax profit before
extraordinary items, other non-recurring transactions and income taxes of the
Company in accordance with Audiovox's Executive Officer Bonus Plan that was
approved by the shareholders in 2000.
HOW IS AUDIOVOX ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation over $1,000,000 paid for any
fiscal year to the corporation's chief executive officer and four other most
highly compensated executive officers as of the end of any fiscal year.
However, the statute exempts qualifying performance-based compensation from the
deduction limit if certain requirements are met. The Compensation Committee
currently intends to structure performance-based compensation, including stock
option grants and annual bonuses, to executive officers who may be subject to
Section 162(m) in a manner that satisfies those requirements.
The Board and the Compensation Committee reserve the authority to award
non-deductible compensation in other circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Company's efforts, that
compensation intended by the Company to satisfy the requirements for
deductibility under Section 162(m) does in fact do so.
Members of the Compensation Committee
PAUL C. KREUCH, JR.
DENNIS F. MCMANUS
IRVING HALEVY
9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation
earned by each individual who served as the Company's Chief Executive Officer
during fiscal 2002 and the four most highly compensated executive officers who
were serving as such as of November 30, 2002 (collectively, the "Named
Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1)
----------------------------------------
NAME AND ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY(2) BONUS COMPENSATION(3)
--------------------- ---- --------- ----- ---------------
John J. Shalam,
President and CEO ................ 2002 $ 450,677 $ 128,669 $11,025
2001 450,000 122,000 9,185
2000 450,000 1,273,000 16,616
Philip Christopher,
Executive Vice President ......... 2002 476,419(4) 1,800,000 2,762
2001 450,000 117,000 8,234
2000 450,000 897,000 8,721
Charles M. Stoehr,
Senior Vice President and
CFO .............................. 2002 326,418 242,890 4,253
2001 325,000 41,000 8,234
2000 325,000 449,000 10,902
Patrick M. Lavelle,
Senior Vice President ............ 2002 201,277 1,204,508 1,980
2001 200,000 655,636 7,998
2000 200,000 781,365 8,709
Richard A. Maddia,
Vice President,
Information Systems .............. 2002 176,209 37,500 1,213
2001 175,000 65,000 7,409
2000 150,500 52,500 8,313
----------
(1) No other annual compensation was paid and no restricted stock awards or
options were granted to the named individuals in 2002, 2001 and 2000 and
the "Other Annual Compensation", "Restricted Stock" and "Securities
Underlying Options" columns have been omitted.
(2) For fiscal 2002, salary includes: for Mr. Shalam $677 in 401(k) Company
matching contribution; for Mr. Christopher $1,419 in 401(k) Company
matching contribution; for Mr. Stoehr $1,418 in 401(k) Company matching
contribution; for Mr. Lavelle $1,277 in 401(k) Company matching
contribution; and for Mr. Maddia $709 in 401(k) Company matching
contribution.
(3) For fiscal 2002, this only includes executive life insurance premiums
paid for the benefit of the named executive.
(4) Mr. Christopher's base salary for the first six (6) months of fiscal 2002
was $450,000. Effective May 29, 2002 Mr. Christopher's base salary was
increased to $500,000 pursuant to an employment agreement (see discussion
below under caption "Employment Agreements").
10
EMPLOYMENT AGREEMENTS
Effective May 29, 2002, Audiovox Communications Corporation ("ACC")
entered into an employment agreement with Philip Christopher (the "Agreement").
The Agreement, unless terminated earlier, shall continue until May 29, 2007 and
thereafter shall automatically extend by consecutive twelve-month periods
unless terminated by ACC on written notice.
Pursuant to the Agreement, Mr. Christopher receives a base salary of
$500,000, subject to annual Consumer Price Index increases, and an annual bonus
equal to two (2%) percent of ACC's annual earnings before income taxes.
The Agreement further provides for equity incentives, vesting of stock
options, reimbursement of reasonable business expenses and use of an
automobile. The Agreement also provided for a bonus pool of $3.2 million, of
which Mr. Christopher received $1.8 million (see Bonus disclosure in Executive
Compensation Table).
In the event ACC terminates Mr. Christopher's employment without cause or
if Mr. Christopher resigns his employment within ninety (90) days after: a
significant adverse change in his authority and responsibilities; a reduction
in his base salary; nonpayment of his bonus; material breach by ACC of any
obligation under the agreement; or, a change in control where the successor
entity fails to assume ACC's obligations under this Agreement, Mr. Christopher
is entitled to receive a separation payment equal to his salary for the
remainder of the contract term, plus an average annual bonus plus a cash
payment of one million dollars. Mr. Christopher will not be entitled to a
separation payment if his employment with ACC is terminated for any reason
after the fifth anniversary of the effective date.
The Agreement also contains non-competition and non-solicitation covenants
that are effective for one year following termination of employment for any
reason.
OPTION GRANTS IN LAST FISCAL YEAR (2002)
No options were granted in the fiscal year ended November 30, 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises in
fiscal year 2002 and option holdings as of November 30, 2002 with respect to
each of the Named Officers. No stock appreciation rights were outstanding at
the end of that year.
NUMBER OF SECURITIES
UNDERLYING VALUE* OF
SHARES ACQUIRED VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME ON EXERCISE REALIZED($) NOVEMBER 30, 2002 NOVEMBER 30, 2002
---- ---------------- ------------- --------------------- ------------------------
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
--------------------- ------------------------
John J. Shalam ............. -- -- 525,000/0 $1,945,125/$0
Philip Christopher ......... -- -- 1,011,000/0 $1,158,538/$0
Charles M. Stoehr .......... -- -- 172,500/0 $ 193,538/$0
Patrick M. Lavelle ......... -- -- 245,700/0 $ 217,253/$0
Richard A. Maddia .......... -- -- 40,000/0 $ 62,050/$0
----------
* Based on the fair market value of the Company's Common Stock at November
30, 2002 less the exercise price payable for such shares.
11
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
NUMBER OF SHARES, PERFORMANCE OR OTHER PERIOD
NAME UNITS OF OTHER RIGHTS (1) UNTIL MATURATION OR PAYOUT
---- ------------------------- ---------------------------
John J. Shalam 7.1428571364 Units (2) An initial public offering by Audiovox
Communications Corp. ("ACC") or an
acquisition of a controlling interest in ACC
Philip Christopher 7.1428571364 Units (2) An initial public offering by ACC -- or the plan
termination date, May 28, 2007
Charles M. Stoehr N/A N/A
Patrick M. Lavelle N/A N/A
Richard A. Madia N/A N/A
----------
(1) The awards relate to the Class A Common Stock of Audiovox Communications
Corp., (the "Stock") a subsidiary of Audiovox Corporation, which has
146.666666 shares issued and outstanding. Audiovox Corporation owns 75%
of those shares. Each unit is equivalent to one share of Stock.
(2) The value of these appreciation units shall be equivalent to the value of
one outstanding share of Stock at such time that the performance criteria
is achieved.
COMPENSATION OF DIRECTORS
For their service, members of the Board of Directors who are not our
salaried employees receive an annual retainer of $15,000 and $500 for each
meeting attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is currently comprised of three independent
directors, Paul C. Kreuch, Jr., Dennis McManus and Irving Halevy.
12
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG AUDIOVOX CORPORATION,
NASDAQ MARKET INDEX AND SIC CODE INDEX
1997 1998 1999 2000 2001 2002
AUDIOVOX CORPORATION 100.00 73.05 337.59 109.20 81.82 122.44
SIC CODE INDEX 100.00 75.93 84.07 64.27 64.72 55.98
NASDAQ MARKET INDEX 100.00 123.61 202.45 168.13 125.82 98.47
ASSUMES $100 INVESTED ON NOV. 28, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING NOV. 30, 2002
The annual changes for the five year period are based on the assumption
that $100 had been invested on December 1, 1997, and that all quarterly
dividends were reinvested. The total cumulative dollar returns shown on the
graph represent the value that such investments would have had on November 30,
2002.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board has appointed the firm of KPMG LLP to serve as independent
auditors for the fiscal year ending November 30, 2003. KPMG LLP has served as
the Company's independent auditors for many years and is considered by
management to be well qualified.
Fees for the last annual financial statement audit, excluding audit
related fees, were $1,875,856, and all other fees were $761,300, including fees
for non-audit services of $200,000 and audit-related services of $561,300.
Non-audit services consisted of tax consultation and compliance services.
Audit-related services consisted of audits of financial statements of employee
benefit plans and other consulting services.
One or more representatives of KPMG LLP will be present at this year's
Annual Meeting of Shareholders. The representatives will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
Management does not know of any matters to be presented for action at the
meeting other than as set forth in Item 1 of the Notice of Annual Meeting.
However, if any other matters come before the meeting, it is intended that the
holders of the proxies will vote thereon in their direction.
13
DATE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the next Annual
Meeting of Shareholders currently scheduled for May 6, 2004, must be received
by the Secretary of the Company not later than February 4, 2004 for inclusion
in the proxy statement.
The proposals must comply with all applicable statutes and regulations.
REQUEST TO VOTE, SIGN AND RETURN PROXIES
If you do not intend to be present at the Annual Meeting of Shareholders
on July 24, 2003 please vote the enclosed proxy at your earliest convenience.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 2002 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE REQUIRED FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, WILL BE FURNISHED WITHOUT CHARGE,
BY FIRST CLASS MAIL, UPON THE WRITTEN OR ORAL REQUEST OF ANY STOCKHOLDER,
INCLUDING ANY BENEFICIAL OWNER, ENTITLED TO VOTE AT THE MEETING. ANY SUCH
REQUEST SHOULD BE DIRECTED TO THE ATTENTION OF CHRIS LIS JOHNSON, THE COMPANY'S
SECRETARY, 150 MARCUS BOULEVARD, HAUPPAUGE, NEW YORK 11788, TELEPHONE: (631)
231-7750.
BY ORDER OF THE BOARD OF DIRECTORS
CHRIS LIS JOHNSON
Secretary
Audiovox Corporation
Hauppauge, New York
June 23, 2003
14
PROXY BY MAIL Please mark
your votes [X]
THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS like this
WITHHELD
1. ELECTION OF DIRECTORS. FOR FOR ALL Class A. Stockholder: 2. In their discretion, the Proxies are
To elect Directors as set 01 Paul C. Kreuch, Jr. 02 Dennis McManus authorized to vote upon such other
forth in the Proxy statement [ ] [ ] 03 Irving Halevy, 04 Peter A. Lesser business as may properly come before
the meeting.
Class A and Class B Shareholders:
01 John J. Shalam, 02 Philip Christopher,
03 Charles M. Stoehr, 04 Patrick M. Lavelle,
WITHHELD FOR: (Write that nominee's name in 05 Ann M. Boutcher, 06 Richard A. Madda
the space provided below).
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IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
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COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
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SIGNATURE SIGNATURE DATE
--------------------------------------------------- --------------------------------------- ----------------
NOTE: When signing as Executor, Administrator, Trustee, Guardian, etc. please add full title. (Sign exactly as name appears on
this proxy.)
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^ FOLD AND DETACH HERE AND READ THE REVERSE SIDE ^
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[GRAPHIC OMITTED] VOTE BY TELEPHONE OR INTERNET [GRAPHIC OMITTED]
QUICK *** EASY *** IMMEDIATE
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AUDIOVOX CORPORATION
o You can now vote your shares electronically through the Internet or the telephone.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and
returned the proxy card.
TO VOTE YOUR PROXY BY INTERNET
------------------------------
www.audiovox.com
Have your proxy card in hand when you access the above website. You will be prompted to enter the company number, proxy number
and account number to create an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
--------------------------
Mark, sign and date your proxy card above, detach it and return it in the postage-paid envelope provided.
TO VOTE YOUR PROXY BY PHONE
---------------------------
1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call. You will be prompted to enter the
company number, proxy number and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
--------------------------------------------
ELECTRONICALLY
--------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
AUDIOVOX CORPORATION
The undersigned appoints each of Phillip Christopher and Charles M. Stoehr
as proxies, with power to act without the other and with power of
substitution, hereby authorizes them to represent and vote, as designated
on the other side, all the shares of stock of Audiovox Corporation standing
in the name of the undersigned with all powers which the undersigned would
possess if present at the Annual Meeting of Stockholders of the Company to
be held July 24, 2003 or any adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
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^ FOLD AND DETACH HERE ^