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Exhibit 10.32
BRIDGE LOAN CONVERSION AND EXTENSION AGREEMENT
This Agreement is between Rockford Corporation, an Arizona corporation
("Borrower") and Xxxxxxxx X. Xxxxxx ("Lender"). Borrower and Lender agree as
follows:
1. RECITALS.
1.1 Borrower Business. Borrower manufacturers high quality auto and
professional audio equipment, including amplifiers, speakers, source
units, and accessories.
1.2 Loan. Lender provided a $2,000,000 loan (the "Bridge Loan") to
Borrower to help finance working capital and general corporate needs
of Borrower pursuant to a Bridge Loan Agreement (the "Original
Agreement") attached as Exhibit A.
1.3 Conversion and Extension. Lender and Borrower have agreed to (a)
convert $999,999 of the Bridge Loan principal into 67,340 shares of
Borrower's common stock (a price of $14.85 per share) and (b) extend
the balance of the Bridge Loan, or $1,000,001 of principal, so that
its due date is December 31, 1996.
1.4 Purpose. The purpose of this Agreement is to set forth the terms of
the agreement to convert and extend the terms of the Bridge Loan.
2. CONVERSION AGREEMENT. Lender subscribes to purchase, and Borrower promises
to issue, 67,340 shares of Borrower's common stock, par value $0.01 per
share (the "Shares"), for a purchase price of $14.85 per share or $999,999
in the aggregate. The purchase price is payable by conversion of $999,999
of the Bridge Loan principal into capital of Borrower and Lender instructs
Borrower to convert such principal into capital upon issuance and delivery
of the Shares to Lender.
In connection with the purchase of the Shares, Lender represents and
acknowledges as follows:
2.1 Investment Intent. Lender is acquiring the Shares for investment and
not with a view to their resale or distribution. Lender has no
contract, undertaking, agreement, or arrangement with any person to
sell, transfer or pledge the Shares and has no present plans to
enter into any such contract, undertaking, agreement, or
arrangement.
2.2 Securities Registration. The Shares are offered and sold without
registration under the Securities Act of 1933 (the "Act") or the
Arizona Securities Act, in reliance upon one or more exemptions
available under the Act and under Arizona Law for non-public
offerings.
2.3 Legend on Shares. The certificates evidencing the Shares will bear a
legend giving notice of the restrictions on transfer of the Shares
resulting from their sale in reliance on exemptions from
registration under applicable state securities laws.
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2.4 Accredited Investor. Lender is an Accredited Investor as that term
is defined in the rules of the Securities and Exchange Commission.
2.5 Risk. Lender has the financial ability to bear the economic risk of
Lender's investment in the Shares (including its possible loss).
Lender has adequate means for providing for Lender's current needs
and personal contingencies and has no need for liquidity with
respect to Lender's investment in the Shares. Lender has (alone or
together with Lender's advisers and family) such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in the Shares and
has obtained, in Lender's judgment, sufficient information to
evaluate the merits and risks of an investment in the Shares.
2.6 Information Supplied. Lender (alone or with representatives) has had
opportunity to ask questions of and receive satisfactory answers
from the Borrower and its officers and directors concerning the
business and prospects of the Borrower and has had the opportunity
to review such documents, records, books, and other information as
Lender has deemed necessary in order to make an investment decision
with respect to the purchase of the Shares. In making the decision
to purchase the Shares subscribed for, Lender has relied solely on
independent investigations and on documents supplied by Company.
3. EXTENSION AGREEMENT. Lender extends the balance of the Bridge Loan after
conversion, $1,000,001 (the "Loan") on the terms set forth in this
agreement. Borrower will execute and deliver to Lender a promissory note
(the "Note") in the form of Exhibit A, in exchange for Lender's delivery
to Borrower of the original promissory note evidencing the Bridge Loan.
Borrower will (a) maintain accurate records of the original principal
amount, payments made, and interest and other charges in connection with
the Loan and (b) render to Lender on request, and at least monthly, an
account statement showing such amounts.
4. INTEREST. The outstanding principal and unpaid interest under this
Agreement will bear interest at the rate of 9% per annum. Interest is
payable monthly on the first day of each month.
5. REPAYMENT OF PRINCIPAL AND OPTION. Borrower will pay the principal on the
Note on December 31, 1996. Borrower grants Lender an option to purchase
additional shares of Borrower's Common Stock (the "Option Shares") by
conversion of the Loan at any time before its repayment by Borrower. The
price for the Option Shares will be (a) the most recent price at which
Borrower has sold its shares to an unaffiliated third party in a
transaction concluded after the date of this Agreement of (b) $14.85 per
share, if Borrower has not sold its shares in such a transaction. Lender
may purchase up to the number of Option Shares computed by dividing the
outstanding principal of the Loan by the price per share established in
the immediately preceding sentence. In connection with any purchase of
Option Shares, Lender will provide Borrower with representations
comparable to those set forth in Section 2 above.
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6. SUBORDINATION TO BANK LOAN. The Loan is subordinate to Borrower's
obligations under its loan (the "Bank Loan") with its principal lender,
Xxxxx Fargo Bank, formerly First Interstate Bank of Arizona (the "Bank").
All Borrower's obligations to Bank must be first paid to Bank in full
before any payments may be made under this Loan, except for:
6.1 payments of interest when due;
6.2 payments of principal paid from proceeds of a capital investment by
Lender or its affiliates in Borrower; and
6.3 payments of principal when due on December 31, 1996, but only if (a)
Bank has not given Borrower notice that it is in default or
non-compliance under the Bank Loan and (b) the payment of principal
would not cause Borrower to be out of compliance under the Bank Loan
either (i) as of the date made, (ii) as of the most recent quarterly
compliance date under the Bank Loan (assuming the payment had been
made on the last day of such quarter), or (iii) as of the next
quarterly compliance date under the Bank Loan (based on Borrower's
current projected financial statements). If Borrower makes a payment
of principal, Borrower will deliver to Lender and Bank a certificate
confirming that these conditions are satisfied.
6.4 If there is an Event of Default under Section 9.4 below, then
Borrower and its officers, assigns, trustee, receiver, and other
representative are directed to pay Bank the full amount of the Bank
Loan before making any payments to Lender other than payments of
principal out of proceeds of the investment by Lender or its
affiliates in Borrower.
7. NO SECURITY. The Loan is unsecured but constitutes a general obligation of
Borrower.
8. MANAGEMENT BONUS PLAN. If Borrower establishes a management bonus plan for
its fiscal years 1997, 1998, or 1999 Borrower's compensation committee and
management will provide Lender with a written explanation of any
differences between (a) the income projections used to establish fiscal
1997, 1998, and 1999 bonus levels in the plan and (b) the income
projections used by Vrolyk and Company in its evaluation of the value of
Borrower's common stock.
9. ADDITIONAL DOCUMENTS. Borrower will execute and deliver to lender
additional documents as necessary to carry out the purposes of this
Agreement.
10. EVENTS OF DEFAULT. The following events are "Events of Default":
10.1 Borrower fails to pay any amount under this Agreement when due
and payable;
10.2 Borrower fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, representation, or warranty
contained in this Agreement;
10.3 Borrower becomes insolvent; or
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10.4 A complaint or case is filed by or against borrower under federal
bankruptcy laws and is not dismissed within 60 days of filing;
Borrower admits to inability to pay or fails to pay Borrower's debts
generally as they mature; Borrower makes an assignment for the
benefit of creditors; a receiver is appointed for Borrower; or any
other insolvency proceedings are instituted by or against Borrower
and are not dismissed within 60 days of filing.
11. ACCELERATION OF OBLIGATIONS AND REMEDIES. If there is an event of default,
the outstanding Loan balance and all other amounts owed by Borrower to
Lender will, if Lender elects, become immediately due and payable without
notice to or demand upon Borrower of any kind. Any acceleration, if
elected by Lender, is subject to all applicable laws.
12. USURY SAVINGS CLAUSE. Borrower will not, upon acceleration of maturity by
Lender or otherwise, be required to pay any interest in excess of the
maximum amount permitted by law.
13. MISCELLANEOUS.
13.1 Waiver of Defaults. Lender may, in its sole discretion, waive a
default or cure at Borrower's expense a default. Any waiver in a
particular instance or of a particular default is not a waiver of
other defaults or of the same kind or default at another time.
13.2 Entire Agreement; Amendments. This Agreement is the entire Agreement
of the parties with respect to its subject matter and may not be
changed or amended without the written consent of each party.
13.3 Severability. If any part (or parts) of this Agreement is invalid,
illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability will not effect any provisions of
this Agreement, and this Agreement will be construed as if the
invalid, illegal, or unenforceable provision were omitted, provided
that such construction and omission is consistent with the general
intent of the parties as evidenced by this Agreement considered as
an entirety.
13.4 Notices. Notices required under this Agreement are effective upon
delivery or three days after mailing by registered or certified
mail, return receipt requested, to the address of the parties shown
on the signature page of this Agreement (which may be changed by
notice).
13.5 Governing Law. This Agreement is governed by the laws of Arizona.
13.6 Assignability. This Agreement may not be assigned without the prior
written consent of each party.
13.7 Counterparts. This Agreement may be executed in counterparts and all
counterparts so executed constitute one Agreement.
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13.8 Attorneys' Fees. In any proceeding arising under this Agreement, the
prevailing party is entitled to recover the attorneys' fees, costs,
and expenses in connection with such proceeding.
14. EXECUTION AND EFFECTIVE DATE. This Agreement is executed ,
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1996 and effective as of July 1, 1996.
"BORROWER"
Rockford Corporation
By: /s/
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Chief Financial Officer
Address: 000 X. Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
"LENDER"
/ s /
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Xxxxxxxx X. Xxxxxx
Address: 00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
P.O. Box 1209
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