1
Exhibit 10.24
SERVICES & OPTION AGREEMENT
This AGREEMENT is between W. Xxxx Xxxxxx ("Xxxxxx"), Xxxxxxxx X.
Xxxxxx for herself individually and as representative of the estate of Xxxx
X. Xxxxxx ("Xxxxxx"), and Rockford Corporation, an Arizona corporation
("Rockford"). Suttle, Bartol, and Rockford agree as follows:
1 RECITALS.
1.1 Rockford Business. Rockford is in the business of manufacturing
and distributing high quality car and home audio products under various brand
names including "Rockford-Fosgate", "Hafler", "Rockford Xxxxxxxxxx", and
"Perfect Interface".
1.2 Xxxxxx'x Ownership. Xxxxxx, individually or as representative of
the estate of Xxxx X. Xxxxxx owns 51.7% of the issued and outstanding shares of
Rockford common stock and, together with trusts for the benefit of members of
her family (the "Family"), owns 64.1% of the issued and outstanding shares of
Rockford common stock. Assuming conversion of all of outstanding Rockford
debentures, exercise of all outstanding Rockford stock options and warrants, and
vesting of all "stock grants" outstanding prior to the date of this Agreement,
Xxxxxx will own 40.75%, and together with the Family 51.9%, of Rockford's fully
diluted stock issue.
1.3 Xxxxxx Services to Rockford. Subject to the terms of this
Agreement, Xxxxxx has agreed to make himself available to perform certain
services to be performed by him under the Contract between Xxxxxxxx, Galef &
Goldress, Inc. ("3G") and Rockford (the "Contract"), a copy of which is attached
hereto as Exhibit A and made a part hereof.
1.4 Stock Option. Xxxxxx desires to grant to Xxxxxx an option to buy
up to 185,000 shares of Rockford common stock (currently a 14.9% interest in
Rockford on a fully diluted basis) as consideration for (1) Xxxxxx'x agreement
to provide services to Rockford under the Contract and (2) Xxxxxx'x undertaking
of the obligations provided in this Agreement.
1.5 Rockford Participation. Rockford is a party to this Agreement in
order to consent to the grant of the option, to permit it to enforce Xxxxxx'x
obligations under this Agreement, and to permit it to withhold shares purchased
by Xxxxxx for the purpose of paying any required withholding taxes.
2 XXXXXX SERVICES. Xxxxxx agrees to serve as a Director, President and
CEO of Rockford, or in such other capacity as Suttle, Bartol, Rockford and 3G
may mutually determine, on a "full time" basis for a period of not less than
three years from August 1, 1992.
2.1 Definition of "Full Time". The term "full time" shall mean that
Xxxxxx will devote four out of five business days (averaged in each month) to
his services for Rockford, including work at Rockford's headquarters, work for
Rockford in the field, and travel time on Rockford's behalf. Xxxxxx is a
"partner" in, and shall continue his affiliation with, 3G. Xxxxxx will not take
on any Interim Management assignments for 3G as president or CEO of
2
another company, but may perform advisory and assessment services on behalf of
3G for its clients including Xxxxxx Financial, subject to the non-competition
obligation established in this Agreement and the time limitation set forth
above. Xxxxxx may also continue as a director of Image Carpets and advise former
clients who seek his advice, subject to the time limitation set forth above. If
it is necessary for Xxxxxx to spend more than one consecutive day serving 3G or
other clients, Xxxxxx shall arrange to be in communication with his Executive
Secretary at Rockford, and other appropriate Rockford representatives, in order
to carry out his responsibilities for Rockford.
2.2 Executive Secretary. Xxxxxx agrees during the term of this
Agreement to employ at Rockford's expense a Confidential or Executive Secretary
to assist him in the performance of his duties for Rockford and to facilitate
communications between him and other members of Rockford's management. Such
secretary may assist other members of Rockford's management, but shall be
perceived to be Xxxxxx'x "eyes & ears" in running the organization.
2.3 Xxxxxx Compensation and Benefits. Xxxxxx shall not receive any
salary or other compensation from Rockford for his services, or become eligible
for any bonus or other benefit made available to Rockford employees or to
Rockford's executive cadre; but instead he shall be compensated exclusively by
3G for his services to Rockford. Xxxxxx will not participate in any Rockford
employee benefit plans, but may take reasonable vacations (consistent with the
needs of Rockford's business) and sick leaves (when he is actually
incapacitated). Such vacation and sick leave shall not be counted in determining
whether Xxxxxx has worked "full time" under section 2.1 above. Xxxxxx
acknowledges that Rockford is paying compensation directly to 3G pursuant to the
Contract.
2.4 Indemnification. Xxxxxx shall be entitled to be exonerated,
indemnified and held harmless by Rockford from any damages, costs and expenses
resulting from his services to Rockford; however, neither Xxxxxx nor the Family
shall have any responsibility for such indemnification and Xxxxxx agrees to look
solely to Rockford under the Contract if he has any claim for such
indemnification.
3 OPTION GRANT. Xxxxxx hereby grants to Xxxxxx the right to purchase
up to 185,000 shares of Rockford common stock at a price of $1.59 per share on
or before August 1, 1995 and $1.95 per share thereafter until August 1, 1999,
provided that either (1) Xxxxxx shall be an "accredited investor" as that term
is defined in the regulations of the Securities and Exchange Commission ("SEC")
on the dates of exercise of such options and shall give investment
representations reasonably satisfactory to Xxxxxx and Rockford with respect to
his purchase(s) or (2) Xxxxxx provides other evidence reasonably satisfactory to
Rockford (such as an opinion of counsel) that a proposed exercise is exempt from
registration under, and otherwise complies with, applicable federal and state
securities laws.
3.1 Vesting and Exercise. The number of shares with respect to
which, and the dates when the foregoing options may be exercised (subject to the
further provisions of this Agreement), shall be as follows:
-2-
3
On and After Vested and Exercisable
------------ ----------------------
August 1, 1992 Up to 46,250 shares
August 1, 1993 Up to 92,500 shares
August 1, 1994 Up to 138,750 shares
August 1, 1995 Up to 185,000 shares
provided that on each vesting date Xxxxxx must be then performing his
obligations to Rockford under this Agreement and the Contract. Vesting shall
cease, and Xxxxxx shall be permitted to exercise the options only with
respect to shares already vested, as of any date when Xxxxxx'x obligation to
provide full time services to Rockford is terminated pursuant to Section 4 of
the Contract.
3.2 Special Vesting and Exercise If Shares Become Publicly Traded.
If, at any time prior to April 1, 1999, Rockford common stock becomes publicly
traded (or Rockford is merged into or acquired by any publicly owned corporation
and the Rockford common stock is exchanged for securities that are publicly
traded), Xxxxxx shall have the right to exercise all 185,000 options (to the
extent not previously exercised) on the day of such event but the options shall
expire and may not be exercised after such day.
3.3 Expiration. All options shall expire if not exercised on or
before the earlier of (1) August 1, 1999, (2) on the day Rockford common stock
becomes publicly traded (or Rockford is merged into or acquired by any publicly
owned corporation and the Rockford common stock is exchanged for securities that
are publicly traded), (3) 150 days after Xxxxxx'x death, (4) upon any attempted
or purported assignment of Xxxxxx'x obligations or rights under this Agreement
or (5) 150 days after Xxxxxx'x death.
3.4 Adjustment of Number of Shares. The number of shares subject to
Xxxxxx'x options shall be adjusted upwards or downwards to reflect all stock
dividends, stock splits, reverse splits, mergers, consolidations,
recapitalizations and corporate adjustments effected by Rockford between the
date of this Agreement and the date of any option exercise.
3.5 Notice of Exercise and Payment for Shares. Xxxxxx shall give
Xxxxxx and Rockford written notice of his intention to exercise his options, of
the date on which he intends to exercise his options (the "Exercise Date" or
"Closing Date"), and of the number of shares to be purchased, not less than 10
nor more than 90 days before the Closing Date. The written notice shall create a
binding obligation on Xxxxxx to purchase the specified number of shares on the
Closing Date. All shares purchased shall be delivered by Xxxxxx and paid for in
cash by Xxxxxx on the Closing Date.
3.6 Taxes and Cancellation of Shares. Xxxxxx acknowledges that, as
an independent contractor, upon exercise of the options he may become subject to
(and is solely responsible for) payment of tax on the excess of the fair market
value of the shares purchased over the option exercise price. Rockford may
become entitled to a deduction in the same amount pursuant to provisions of the
Internal Revenue Code of 1986 and Internal Revenue Service ("IRS") regulations
thereunder (the "Code") that attribute to Rockford the options granted by
Xxxxxx. Xxxxxx agrees that Rockford may elect to cancel (from the shares
presented by Xxxxxx for
-3-
4
transfer of record to Xxxxxx pursuant to an option exercise) up to that
percentage of shares that is equal to the maximum marginal rate of taxes Xxxxxx
would be required by the Code to pay to the IRS upon exercise of the options;
Rockford shall then pay the fair market value of any canceled shares to the IRS
for Xxxxxx'x account. At Xxxxxx'x option Xxxxxx may pay to Rockford the cash
value attributed to the canceled shares, at the time of the transfer of record,
in which event Rockford shall transfer to Xxxxxx all the shares presented for
transfer. Rockford represents that it will make an election to cancel shares
only upon advice of its professional advisors that such action is necessary to
protect its deduction (and then only in the amount required by the Code); such
an election shall not constitute an admission by either Xxxxxx or Rockford that
Xxxxxx is an employee of Rockford and Xxxxxx shall at all times be an
independent contractor to Rockford.
4 ELECTION OF DIRECTORS. Xxxxxx and Xxxxxx agree to vote as Directors
and to cast their ballots as shareholders of Rockford (to the extent they are
now or, during the term of this Agreement, become Directors or shareholders) so
as to set the number of Directors at 5 and to elect Xxxx X. Xxxxx, Xxxxxxxx
Xxxxxx, Xxxxxxxx X. Xxxxxx Xxxx X. Xxxxxx, and Xxxxxx to serve as Directors.
This Voting Agreement shall be subject, however, to the approval in advance of
Xxxx X. Xxxxx, representing Provident Mutual Life Insurance Company.
5 OWNERSHIP OF WORKS. All ideas, artworks, compositions, conceptions,
and materials ("Works") prepared by Xxxxxx during the term of his engagement for
Rockford, pursuant to this Agreement and the Contract, and usable in Rockford's
business shall be the property of Rockford. Xxxxxx hereby assigns to Rockford
all of Xxxxxx'x right, copyright, title and interest in such Works. Xxxxxx shall
not use, or transfer to others, any Works other than in connection with
Rockford's business or with Rockford's written consent; provided that Rockford
hereby grants Xxxxxx a non-exclusive right to use the Works personally in any
activity that is not competitive with Rockford.
6 CONFIDENTIAL INFORMATION. During and after the term of Xxxxxx'x
engagement pursuant to this Agreement and the Contract, Xxxxxx will keep
confidential, and will not reproduce, copy or disclose to any other person or
firm, any trade secrets and other proprietary or confidential information and
data concerning Rockford or its business ("Confidential Information"). Xxxxxx
will not, during or after the term of this Agreement, use (either alone or with
others), disclose to any person, or encourage anyone else to disclose, any
Confidential Information except within the scope of Xxxxxx'x duties and
responsibilities for Rockford or with Rockford's consent.
7 RETURN OF ROCKFORD DOCUMENTS. Upon termination of Xxxxxx'x
engagement pursuant to this Agreement and the Contract, Xxxxxx shall return to
Rockford all records and documents of or pertaining to Rockford (including, but
not limited to, customer, distributor, and supplier lists, names, or addresses)
and shall not make, retain or give to any other person any copy or extract of
any such record or document. "Record" includes, but is not limited to,
information stored on computer.
8 NON-COMPETE AND SOLICITATION. During the term of Xxxxxx'x engagement
for Rockford pursuant to this Agreement and the Contract, and for 2 years
thereafter, Xxxxxx will not engage in, plan for, organize, work for, acquire an
ownership interest in, or assist, directly or indirectly, any business that
competes with Rockford in the United States or elsewhere. During
-4-
5
and after the term of Xxxxxx'x engagement for Rockford pursuant to this
Agreement and the Contract, Xxxxxx will not solicit, or assist others to
solicit, any customers, distributors, suppliers, or employees of Rockford who
did business or agreed to do business with Rockford at any time before or during
the term of Xxxxxx'x engagement for Rockford pursuant to this Agreement and the
Contract. If this section is deemed unreasonable as to time or scope by any
court or arbitrator, then such court or arbitrator shall have authority to
modify this section as to time or scope, or both, so that this section is
reasonable and shall then enforce this section as modified. Xxxxxx acknowledges
and agrees that the market for Rockford's product is limited and international
in scope, so that any competitive activities in violation of this section would
cause material harm to Rockford and Xxxxxx.
9 ACTIONS. Xxxxxx acknowledges that it would be difficult to determine
damages, and Rockford and Xxxxxx will not have an adequate remedy at law, if
Xxxxxx breaches this Agreement. Accordingly, if Xxxxxx breaches this Agreement,
Rockford or Xxxxxx may seek injunctive relief to enforce this Agreement. Nothing
in this section shall limit or exclude any and all other rights, including
rights to money damages, granted to Rockford or Xxxxxx in law or equity.
10 SEVERABILITY. If any section of this Agreement is deemed
unreasonable by a court or arbitrator, such section shall be severable from the
remainder of this Agreement, which shall be enforced according to its terms
irrespective of the enforceability of the unreasonable section provided such
enforcement is consistent with the general intent of the parties as evidenced by
this Agreement taken as a whole.
11 NON-ASSIGNABILITY. The obligations and rights of Xxxxxx under this
Agreement shall not be assignable nor shall Xxxxxx'x options be exercisable by
anyone except Xxxxxx or the personal representative of his estate. In the event
of Xxxxxx'x death, all options vested in him on such date and not previously
exercised shall be exercised within 150 days of his death or else they will
lapse. Any attempted or purported assignment of Xxxxxx'x obligations or rights
under this Agreement shall be a material breach and shall result in the
immediate termination of his options.
12 PERFORMANCE BY XXXXXX. Xxxxxx'x obligations under this Agreement
shall be performed by Xxxxxx individually, by her estate, or by the estate of
Xxxx X. Xxxxxx. In order to guarantee performance of the option obligations to
Xxxxxx under this Agreement, Xxxxxx upon request by Xxxxxx will place in escrow
with a mutually acceptable third party selected by Xxxxxx (and pursuant to
documentation approved by Xxxxxx and Xxxxxx) a certificate for not less than
185,000 shares of Rockford common stock, with four or more signed stock powers
attached, and instructions to deliver to Xxxxxx up to 185,000 of such shares
upon proper exercise of his options and payments of the option price to Xxxxxx
in cash. In the event of the death of Xxxxxx before August 2, 1999, Xxxxxx may
exercise all of his vested options which do not expire on an earlier date
pursuant to this Agreement until 150 days after Xxxxxx'x death.
13 CONFLICTS WITH CONTRACT. In the event of any conflict between this
Agreement and the Contract, this Agreement shall rule the relations between
Xxxxxx and Xxxxxx and the Contract shall regulate the dealings between Rockford
and 3G inter sese.
-5-
6
14 NOTICES. Notices under this Agreement shall be effective upon
delivery or three days after mailing, certified or registered mail, return
receipt requested, to the addresses stated on the signature page of this
Agreement (which may be changed by notice).
15 INTEGRATION AND AMENDMENT. This Agreement is the entire agreement of
the parties with respect to the grant of options to Xxxxxx by Xxxxxx and may be
amended only by a written document signed by all the parties.
16 GOVERNING LAW. Arizona law shall govern this Agreement and any
disputes arising out of or related in any way to this Agreement.
17 ATTORNEYS' FEES. In any proceeding arising out of or related to this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs and other expenses incurred in connection with such proceeding.
18 ARBITRATION. Disputes not resolved by agreement of the parties and
arising out of or related in any way to this Agreement shall be submitted to
binding arbitration in metropolitan Phoenix, Arizona, before a single arbitrator
or, if the parties cannot agree upon a single arbitrator, before a panel of
three arbitrators, one selected by each party (within 10 days after notice of a
dispute and failure to agree upon a single arbitrator) and a third appointed by
the arbitrators selected by the parties. The selection of arbitrators and all
arbitration proceedings shall be in accordance with the rules of the American
Arbitration Association, as amended to the date of the proceedings, and judgment
upon the award may be entered in any court having jurisdiction. The arbitrators
shall render a decision within 30 days after their appointment and may award the
costs of arbitration as they see fit.
19 EXECUTION AND EFFECTIVE DATE. This Agreement is executed and
effective as of the 10th day of March , 1993.
/s/ /s/
---------------------------------- -------------------------------------
Xxxxxxxx X. Xxxxxx W. Xxxx Xxxxxx
Address: 00000 Xxxxxxxx Xx. Address: 000 X. Xxxxx Xx.
Xxxxxxxx, XX 00000 Xxxxx, XX 00000
Date: March 10, 1993 Date: 8 March, 1993
------------------------------ -------------------------------
Rockford Corporation
By/s/ Xxxxxx X. Xxxxx
Its Vice President-Operations
Address: 000 Xxxxx Xxxxx Xxxxx
Xxxxx, XX 00000
Date: 3/9/93
-------------------------------------
-6-
