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EXHIBIT 10.13.1
AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
This Amendment No. 1 to Loan and Security Agreement (this
"Amendment") is entered into as of this 30th day of December, 1998 (the "First
Amendment Effective Date"), by and between FINOVA CAPITAL CORPORATION, a
Delaware corporation ("Lender"), and ROCKFORD CORPORATION, an Arizona
corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, BORROWER and Lender entered into a Loan and Security
Agreement dated as of June 20, 1997 (the aforementioned Loan and Security
Agreement collectively the "Loan Agreement"), that evidences a loan from Lender
to Borrower; and
WHEREAS, Borrower has asked Lender to modify the Loan
Agreement in accordance with the terms of, and subject to the conditions
contained in, this Amendment and Lender is willing so to amend the Loan
Agreement, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of these recitals, the
covenants contained in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lender and Borrower agree as follows-,
1. Definitions. Unless otherwise defined in this Amendment,
all capitalized terms used herein which are defined in the Loan Agreement have
the same meaning as set forth in the Loan Agreement.
2. Loan Agreement. The Loan Agreement is amended as follows:
2.1 Section 13. 10. This Section shall be amended to
read as follows;
Promptly notify Lender in writing of the making of
Capital Expenditures exceeding the amount of Five Hundred Thousand Dollars
($500,000) for any one (1) item or One Million Dollars ($ 1,000,000) in the
aggregate.
2.2 Definitions.
2.2.1 Section 18.1 is hereby amended by
adding the following definition:
"Best Buy" means Best Buy Stores, Inc., a
Minnesota corporation.
2.2.2 The definition of Capital Expenditures
found in Section 18.1 shall be amended by adding the following
at the end of the current definition:
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and including software capitalized under FASB.
2.2.3 The definition of Eligible Receivables
found in Section 18.1 shall be amended and restated in its
entirety to read as follows:
"Eligible Receivables" means Receivables
which Lender, in its sole judgment, shall deem eligible based
on such considerations as Lender may from time to time deem
appropriate. Without limiting the foregoing, a Receivable
shall not be deemed to be an Eligible Receivable if (i) the
account debtor has failed to pay the Receivable within a
period of one hundred and twenty (120) days after invoice
date, to the extent of any amount remaining unpaid after such
period; (ii) the account debtor has failed to pay more than
twenty-five percent (25.0%) of all outstanding Receivables
owed by it to Borrower within one hundred and twenty (120)
days after invoice date; (iii) the account debtor is an
Affiliate of Borrower; (iv) the goods relating thereto are
placed on consignment, guaranteed sale, "xxxx and hold" or
other terms pursuant to which payment by the account debtor
may be conditional; (v) the account debtor is not located in
the United States or Canada, unless the Receivable is
supported by foreign credit 'insurance, a letter of credit or
other form of guaranty or security, in each case in form and
substance satisfactory to, and in the possession of, Lender;
(vi) the account debtor is the United States or any
department, agency or instrumentality thereof (unless such
Receivable is subject to Lender's first priority security
interest and is otherwise properly assigned to Lender pursuant
to the Assignment of Claims Act of 1940, 31 U.S.C. Section
3727 et sEq., as amended), or any State, city or municipality
of the United States; (vii) Borrower is or may become liable
to the account debtor for goods sold or services rendered by
the account debtor to Borrower; (viii) the account debtor's
total obligations to Borrower exceed fifteen percent (15.0%)
of all Eligible Receivables, to the extent of such excess,
however, for so long as Best Buy maintains a Dun & Bradstreet
rating of at least 5A2, the total obligations of Best Buy can
constitute up to twenty-five percent (25%) of all Eligible
Receivables except during the months of February and March
1999 when such accounts can constitute up to thirty percent
(30%) of all Eligible Receivables; (ix) the account debtor
disputes liability or makes any claim with respect thereto (up
to the amount of such liability or claim), or is subject to
any insolvency or bankruptcy proceeding, or becomes insolvent,
fails or goes out of a material portion of its business; (x)
the amount thereof consists of late charges or finance
charges; (xi) the face amount thereof exceeds $100,000, unless
accompanied by evidence of shipment of the goods relating
thereto satisfactory to Lender in its sole discretion; or
(xii) the Receivable is a "cash on delivery" (or "C.O.D.")
account.
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3. Schedule.
3.1 The Section of the Schedule to the Loan Agreement entitled
"Loans" is shall be amended in the following respects:
3.1.1 The definition of Receivables Loans is
amended and restated in its entirety to read as
follows:
RECEIVABLES LOANS: A revolving line of
credit consisting of loans against Borrower's Eligible
Receivables ("Receivable Loans") in an aggregate outstanding
principal amount not to exceed the lesser of:
(a) the total of.
(i) the Total Facility
(ii) the aggregate outstanding and
unpaid principal balance of all
Inventory Loans; minus
(iii) the outstanding and unpaid
principal balance of Term Loan A;
minus
(iv) the aggregate outstanding and
unpaid balance of all Capex Loans;
minus
(v) the aggregate sum of the
outstanding and unpaid principal
balance of all Senior Notes on and
after October 10, 1997;
or
(b) the total of:
(i) an amount equal to eighty-five
percent (85%) of the net amount of
the Eligible Receivables (after
first deducting from such Eligible
Receivables a dilution reserve to
account for dilution 'in excess of
five percent (5%) to be established
at Lender's sole discretion and to
be adjusted quarterly at Lender's
sole discretion on a trailing
twelve-month basis); minus
(ii) the aggregate sum of the
outstanding and unpaid principal
balance of all Senior Notes on and
after October 10, 1997.
Lender may change the applicable advance
rate set forth above from time to time in
its sole discretion.
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3.1.2. The definition of Inventory Loans and
Seasonal Loans is amended and restated in its entirety to read
as follows:
INVENTORY LOANS AND SEASONAL LOANS: A revolving line of credit
consisting of loans against Borrower's Eligible Inventory in
an aggregate outstanding principal amount not to exceed the
lesser of
(a) the amount of Six Million and No/l 00 Dollars
(S6,000,000.00); or
(b) (i) the sum of:
(A) fifty percent (50,0%) of the value of
Borrower's Eligible Raw Materials Inventory; plus
(B) sixty-five percent (65,0%) of the value
of Borrower's Eligible U.S. Finished Goods Inventory
(as such term has been amended by Paragraph 3.7 of
this Amendment); plus
(C) the lesser of (1) sixty-five percent
(65.0%) of the value of Borrower's Eligible Foreign
Finished Goods Inventory, or (2) the amount of Two
Million One Hundred Thousand and No/100 Dollars
($2,100,000,00); or
(ii) during the four consecutive calendar months of
November through February, the sum of:
(A) an additional ten percent (10.0%), over
and above the provisions of paragraph (b)(i)(A) and
paragraph (b)(i)(B) above, of the value of each of
Borrower's Eligible Raw Materials Inventory and
Borrower's Eligible U.S. Finished Goods Inventory,
respectively; plus
(B) the lesser of (i) an additional ten
percent (10.0%), over and above the provisions of
paragraph (b)(1)(C)(1) above, of the value of
Borrowers Eligible Foreign Finished Goods Inventory,
or (fi) any positive amount obtained by subtracting
the value of sixty-five percent (65.0%) of the value
of Borrower's Eligible Foreign Finished Goods
Inventory, from Two Million One Hundred Thousand and
NO/100 Dollars ($2, 100,000.00).
The value of Borrower's Eligible Inventory shall in all
instances be calculated at the lower of cost or market value
and determined on a first-in, first-out basis. Lender may
change the applicable advance rate set forth above from time
to time in its sole discretion.
Loans advanced pursuant to paragraph (b)(i) above are herein
called the "Inventory Loam." Loans advanced pursuant to
paragraph (b)(ii) above are herein
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called the "Seasonal Loans." The Inventory Loans, Seasonal
Loans and Receivables Loans are herein called the "Revolving
Loans."
3.2 The Section of the Schedule entitled "Negative Covenants"
shall be amended in the following respects,
3.2.1 The definition of Capital Expenditures shall be
amended and restated in its entirety to read as follows:
Borrower shall not make or incur any Capital
Expenditure (exclusive of (i) Capital Expenditures
financed solely by one or more Capex Loans and (ii)
the Equipment Lease Termination Advance) if, after
giving effect thereto, the aggregate amount of all
such Capital Expenditures by Borrower in any fiscal
year would exceed the sum of (a) Three Million and
No/100 Dollars ($3,000,000.00) plus (b) from and
after the first (1st) anniversary of the date hereof
but before the third anniversary of the date hereof,
purchase money Indebtedness, Capital Lease
expenditures and so-called "off-balance sheet"
obligations with respect to Equipment financing
(collectively, "Financed Capex") in the aggregate
amount of Two Million and No/100 Dollars
($2,000,000.00). However, with respect to the 1998
and 1999 fiscal years of the Borrower only, the
Lender consents to the Borrower entering into a
manufacturing equipment capital lease transaction
with Bank One (the "Bank One Lease") in an aggregate
amount not to exceed $2,000,000.00. The "Equipment
Lease Termination Advance" means the advance that was
made at the June 20, 1997 Closing under the Loan
Agreement in full and complete satisfaction of
Borrower's Equipment leases with First Interstate
Bank of Arizona, N.A. and its successors-in-interest
in the approximate aggregate amount of $562,904
covering Equipment identified in UCC File Nos. 861145
& 890606, filed with the Arizona Secretary of State
on January 3, 1996 and March 267 1996, respectively,
and UCC File No. D079670, filed with the Michigan
Secretary of State on April 1, 1996. Borrower shall
give Lender not less than thirty (30) days written
notice of any proposed Financed Capex expenditure.
3.2.2 The definition of Subsidiaries shall be amended
by adding the following at the end of the current definition:
Notwithstanding the foregoing, Borrower
shall have the right, subject to the Lendees
prior written approval, to create a
Subsidiary in Canada.
3.2.3 The definition of Indebtedness shall be amended
and replaced in its entirety with the following:
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Borrower shall not create, incur, assume or
permit to exist any Indebtedness (including
Indebtedness in connection with Capital
Leases), other than (i) from and after the
first (1st) anniversary of the date hereof
but before the third anniversary of the date
hereof, no more than the amount of Two
Million and No/100 ($2,000,000) per fiscal
year of Borrower solely in connection with
permitted Financed Capex expenditures as
more fully described 'in the paragraph
labeled "Capital Expenditures" in this
Section 14, (ii) the Obligations, (iii)
trade payables and other contractual
obligations to suppliers and customers
incur-red in the ordinary course of business
(iv) other Indebtedness existing on the date
of this Agreement and reflected in the
Prepared Financials (other than Indebtedness
paid on the date of this Agreement from
proceeds of the initial advances hereunder);
and (v) for the 1998 fiscal year of Borrower
only, the Bank One Lease.
3.3 The Section of the Schedule entitled "Term" is amended
arid restated in its entirety and replaced with the following:
The initial term of this Agreement shall be commenced
on June 20, 1997 and shall expire on June 19, 2001
(the "Initial Term") and shall be automatically
renewed at the discretion of Lender for successive
periods of one (1) year each (each, a "Renewal
Term"), unless earlier terminated as provided in
Section 16 or 17 above or elsewhere in this
Agreement.
Upon the expiration of the Initial Term (if not
renewed) or any Renewal Term (if not renewed), or the
earlier termination of this Agreement as provided in
Section 16 or 17 above or elsewhere in this
Agreement, all Obligations shall be immediately due
and payable.
3.4 The Section of the Schedule entitled "Termination Fee" is
amended and restated in its entirety and replaced with the following:
The Termination Fee provided in Section 16.4 shall
be, with respect to the Revolving Loans, an amount
equal to the following percentage of the average
daily outstanding balance of the Obligations for the
180-day period (or lesser period if applicable)
preceding the date of termination, and with respect
to the Term Loans, an amount equal to the following
percentage of the principal amount of such Term Loans
prepaid:
(1) three percent (3%), if such early
termination occurs on or prior to
June 19, 1999;
(ii) two percent (2%), if such early
termination occurs after June 20,
1998 but on or prior to June 19,
1999;
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(iii) one percent (1%), if such early
termination occurs after June 20,
1999, but on or prior to June 19,
2000; and
(1v) one-half percent (.5%), if such
early termination occurs after June
20, 2000.
Notwithstanding the foregoing, in the event that
such termination and prepayment is financed by
Borrower's concluding a successful initial public
offering, then the Termination Fee under paragraph
(a)(i) above shall be one percent (1%), and under
paragraphs (a)(ii), (a)(iii) and (a)(iv) shall be
zero percent (0%).
3.5 In addition to the locations set forth in the
Schedule, the Borrower may maintain Inventory at c/o Korbon Trading
Ltd., 6800 Kitimat Road, Units 19 and 20, Xxxxxxxxxxx, Xxxxxxx, X0X 0X0
(the "Canadian Location"). All Inventory located in the Canadian
Location and all Receivables associated with the sale of such Inventory
are collectively called the "Canadian Collateral," The Canadian
Collateral constitutes part of the Collateral to which the Borrower
has, pursuant to the Loan Documents, granted to the Lender a lien and
security interest subject only to the Permitted Encumbrances. The
Borrower reaffirms the foregoing grant to the Lender:
3.6 The Section of the Schedule entitled "Borrower
Information" shall be amended to include the Canadian Location as a
Borrower Location.
3.7 The Section of the Schedule entitled "Additional
Definitions" shall be amended so that the definition of "Eligible U.S.
Finished Goods Inventory" shall now be read to include the Finished
Goods Inventory located at the Canadian Location.
4. Amendment Fee. In consideration of Lender's agreement to
enter into this Amendment and to the modification to the Loan Documents
described herein, Borrower agrees to pay on or before the First Amendment
Effective Date the amount of EIGHT THOUSAND FIVE HUNDRED DOLLARS ($8,500) (the
"Amendment Fee").
5. Effect as an Amendment. Other than as specifically set
forth in this Amendment, the remaining terms of the Loan Agreement and the other
Loan Documents shall remain in full force and effect and shall remain unaffected
and unchanged except as specifically amended hereby. In the event of any
conflict between the terms and conditions of this Amendment and any of the other
Loan Documents, the provisions of this Amendment shall control. Each reference
to in the Loan Agreement to "this Agreement" shall be deemed to refer to the
Loan Agreement as amended through and including this Amendment, and each
reference in any other Loan Document to the Loan Agreement as amended through
and including this Amendment.
6. No Waiver. This Amendment in no way acts as a waiver by
Lender of any breach, default, Event of Default or condition which, with the
giving of notice or passing of time or both, would constitute an Event of
Default, of Borrower (whether known or unknown to
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Lender) or as a release or relinquishment of any of the liens, security
interests, rights or remedies securing payment and performance of the
Obligations or the enforcement thereof Nothing contained in this Amendment is
intended to or shall be construed as relieving any person or entity, whether a
party to this Amendment or not, of any of such person's or entity's obligations
to Lender.
7. Conditions Precedent. This Amendment will not be effective
unless and until each of the following conditions precedent have been satisfied,
in form, manner and substance satisfactory to Lender prior to the First
Amendment Effective Date:
(a) Borrower shall have delivered or caused to be
delivered to Lender the following documents, all of which shall be
properly completed, executed and otherwise satisfactory to Lender:
(i) This Amendment;
(ii) Consent of Guarantors in the form
attached hereto and incorporated herein by this reference;
(iii) A corporate resolution and good
standing certificates of each of Borrower and Guarantor,
approving the transactions contemplated hereby to which it is
a party;
(iv) Lender receiving from the lessor of the
Canadian location executed Landlord's Waiver and Consent in
form and substance satisfactory to Lender;
(v) Lender shall have received searches
reflecting the filing of its financing statements and fixture
filings for the Canadian Collateral in such jurisdictions as
it shall determine, and shall have received certificates of
title with respect to the Canadian Collateral which shall have
been duly executed in a manner sufficient to perfect all of
the security interests granted to Lender;
(vi) Lender shall have received an opinion
of Lender's special Canadian counsel covering all such matters
as Lender shall determine in its sole discretion;
(vii) Such other items as Lender may
reasonably require or reasonably deem necessary; and
(viii) The Amendment Fee.
(b) There shall not then exist an Event of Default or
any act or event which with notice, passage of time, or both would
constitute an Event of Default.
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(c) All the representations and warranties of each
and every Loan Party shall be true and correct, in all material
respects, before and after giving effect to the making of this
Amendment.
(d) Borrower shall have paid all closing costs,
recording fees and taxes, appraisal fees and expenses, travel expenses,
fees and expenses of Lender's counsel, and all other costs and expenses
incurred by Lender in connection with The preparation of, closing of
and disbursement of the advances pursuant to this Amendment, which
costs, fees and expenses may be payable from the first advance made
pursuant to this Amendment.
8. Indebtedness Acknowledged. Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and agrees to pay
such 'indebtedness in accordance with the terms of the Loan Documents. Borrower
further acknowledges and represents that no event has occurred and no condition
presently exists that would constitute a default or event of default by Lender
under the Loan Agreement or any of the other Loan Documents, with or without
notice or lapse of time.
9. Validity of Documents. Borrower hereby ratifies, reaffirms,
acknowledges and agrees that the Loan Agreement and the other Loan Documents
represent valid, enforceable and collectable obligations of Borrower, and that
Borrower presently has no existing claims, defenses (personal or otherwise) or
rights of setoff whatsoever with respect to the Obligations of Borrower under
the Loan Agreement or any of the other Loan Documents. Borrower furthermore
agrees that it has -no defense, counterclaim, offset, cross-complaint, claim or
demand of any nature whatsoever which can be asserted as a basis to seek
affirmative relief or damages from Lender.
10. Reaffirmation of Warranties. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements of
Borrower as set forth in each of the Loan Documents with the same force and
effect as if each were separately stated herein and made as of the date hereof.
Borrower represents and warrants to Lender that with respect to the financing
transaction herein contemplated, no Person is entitled to any brokerage fee or
other commission and Borrower agrees to indemnify and hold Lender harmless
against any and all such claims.
11. Other Writings. Lender and Borrower will execute such
other writings as may be necessary to confirm or carry out the intentions of
Lender and Borrower evidenced by this Amendment.
12. Entire Agreement. The Loan Documents as modified by this
Amendment embody the entire agreement and understanding between Borrower and
Lender, and supersede all prior agreements and understandings between said
par-ties relating to the subject matter thereof
13. Counterparts; Telefacsimile Execution. This Amendment
(including the consents attached hereto) may be executed 'in any number of
separate counterparts, all of which
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when taken together shall constitute one and the same *instrument, admissible
into evidence, notwithstanding the fact that all parties have not signed the
same counterpart. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile shall also deliver a manually executed
counterpart of this Amendment, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and biding effect of
this Amendment.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first written above.
FINOVA CAPITAL CORPORATION, a Delaware
corporation
By: /s/
-------------------------------------
Name: X. X. Xxxxx
Title: V.P.
ROCKFORD CAPITAL CORPORATION, an Arizona
Corporation
By: /s/
-------------------------------------
Name: Vice President Finance & CFO
-----------------------------------
Title: Xxxxx X. Xxxxxxx
----------------------------------
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CONSENT OF GUARANTOR
The undersigned ("Guarantor") hereby executes this Consent for
the purpose of (i) evidencing Guarantor's consent to the execution and
performance of the foregoing Amendment No. I to Loan and Security Agreement (the
"First Amendment") by Lender and Borrower, (ii) reaffirming the terms of the
Continuing Guaranty Agreement executed by Guarantor in favor of Lender, (iii)
evidencing Guarantor's agreement that the Liabilities as set forth and defined
in the Continuing Guaranty Agreement shall, for all purposes, include the Loan
'Documents, as amended by the First Amendment, and shall further include all
additional amounts which may be funded or advanced to Borrower pursuant to the
Loan Agreement described above as amended by the First Amendment, and (iv)
ratifying and affirming all terms and provisions of the Continuing Guaranty
Agreement. Except to the extent otherwise indicated, terms used herein with
initial capital letters shall have the meanings set forth in the Loan Agreement,
as amended by the First Amendment.
Guarantor agrees that it has no defense, counterclaim, offset,
cross-complaint, claim or demand of any nature whatsoever which can be asserted
as a basis to seek affirmative relief or damages from Lender,
IN WITNESS WHEREOF, the undersigned has hereunto executed this
Consent as of This 30 day of December , 1998.
ROCKFORD EUROPE ELEKTRONIK,
VERTRIEBS, GmBH, a German Limited Liability
Corporation
By: /s/
------------------------------------------
Name: Xxxxx X. Xxxxxxx
---------------------------------------
Title: Vice President-Finance & CFO
---------------------------------------
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CONSENT OF GUARANTOR
The undersigned ("Guarantor") hereby executes this Consent for
the purpose of (i) evidencing Guarantor's consent to the execution and
performance of the foregoing Amendment No. 1 to Loan and Security Agreement (the
"First Amendment") by Lender and Borrower, (ii) reaffirming the terms of the
Continuing Guaranty Agreement executed by Guarantor in favor of Lender, (iii)
evidencing Guarantor's agreement that the Liabilities as set forth and defined
in the Continuing Guaranty Agreement shall, for all purposes, include the Loan
Documents, as amended by the First Amendment, and shall further include all
additional amounts which may be funded or advanced to Borrower pursuant to the
Loan Agreement described above as amended by the First Amendment, and (iv)
ratifying and affirming all terms and provisions of the Continuing Guaranty
Agreement. Except to the extent otherwise indicated, terms used herein with
initial capital letters shall have the meanings set forth in the Loan Agreement,
as amended by the First Amendment.
Guarantor agrees that it has no defense, counterclaim, offset,
cross-complaint, claim or demand of any nature whatsoever which can be asserted
as a basis to seek affirmative relief or damages from Lender.
IN WITNESS WHEREOF, the undersigned has hereunto executed this
Consent as of This 30 day of December , 1998.
ROCKFORD JAPAN CORPORATION, a Japanese\
corporation
By: /s/
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
----------------------------------------
Title: Vice President-Finance & CFO
----------------------------------------
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CONSENT OF GUARANTOR
The undersigned ("Guarantor") hereby executes this Consent for
the purpose of (i) evidencing Guarantor's consent to the execution and
performance of the foregoing Amendment No. I to Loan and Security Agreement (the
"First Amendment") by Lender and Borrower, (ii) reaffirming the terms of the
Continuing Guaranty Agreement executed by Guarantor in favor of Lender, (iii)
evidencing Guarantor's agreement that the Liabilities as set forth and defined
in the Continuing Guaranty Agreement shall, for all purposes, include the Loan
Documents, as amended by the First Amendment, and shall further include all
additional amounts which may be funded or advanced to Borrower pursuant to the
Loan Agreement described above as amended by the First Amendment, and (iv)
ratifying and affirming all terms and provisions of the Continuing Guaranty
Agreement. Except to the extent otherwise indicated, terms used herein with
initial capital letters shall have the meanings set forth in the Loan Agreement,
as amended by the First Amendment.
Guarantor agrees that it has no defense, counterclaim, offset,
cross-complaint, claim or demand of any nature whatsoever which can be asserted
as a basis to seek affirmative relief or damages from Lender.
IN WITNESS WHEREOF, the undersigned has hereunto executed this
Consent as of This 30 day of December , 1998.
ROCKFORD SINGAPORE CORPORATION, an Arizona
corporation
By: /s/
------------------------------------------
Name: Xxxxx X. Xxxxxxx
----------------------------------------
Title: Vice President-Finance & CFO
---------------------------------------
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