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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
________________, 1996 and effective as of July 1, 1996.
"BORROWER"
Rockford Corporation
By: / s /
-------------------------------------
Chief Financial Officer
Address: 000 X. Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
"LENDER"
/ s /
-------------------------------------
Xxxxxxxx X. Xxxxxx
Address: 00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
X.X. Xxx 0000
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EXHIBIT A
PROMISSORY NOTE
Principal Amount: $2,000,000 Tempe, Arizona
March 18, 1996
For value received, Rockford Corporation ("Maker") promises to pay
to the order of Xxxxxxxx X. Xxxxxx ("Lender"), the principal amount stated above
plus interest on the unpaid balance of the principal as hereinafter provided.
This Promissory Note ("Note") is given by Maker to evidence Maker's obligation
to make payments under the Loan Agreement between Lender and Maker of even date
with this Note (the "Agreement").
INTEREST AND INTEREST PAYMENTS. The outstanding principal under
this Note will bear interest at the rate of 9% per annum. Interest is payable in
monthly installments equal to accrued interest, with the first installment due
on or before May 1, 1996, and each subsequent installment due on or before the
first day of each month thereafter.
PRINCIPAL PAYMENTS. Maker will pay the principal on the Note on the
earlier of (a) receipt of the proceeds of the capital investment in Maker
committed by Lender or its affiliates or (b) September 30, 1996.
DEFAULT. A default will occur upon an "Event of Default" as defined
in the Agreement.
REMEDIES. Upon any Event of Default, the entire principal and any
accrued but unpaid interest will, at Lender's option, become due and payable on
demand and Lender will have any other remedies granted to it under the
Agreement.
CREDITING OF PAYMENTS. Lender may credit all payments received
first against the accrued but unpaid interest, then against any costs of
collection, then against the unpaid principal then due or delinquent.
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PREPAYMENT. Maker reserves the right to prepay all or any portion
of the principal sum without penalty of any kind, but will pay all accrued but
unpaid interest on the date of such a prepayment.
FORM OF PAYMENTS. Principal and interest are payable only in lawful
money of the United States of America in immediately available funds.
ATTORNEYS FEES. If this Note is placed in the hands of an attorney
for collection, Maker promises to pay, in addition to the unpaid principal and
accrued but unpaid interest, the costs of collection including reasonable
attorneys fees.
WAIVERS. Maker and any endorsers hereof waive demand, notice of
presentment, protest, notice of dishonor and protest, rights of exemption, and
any defense by reason of extension of time or other indulgences granted by
Lender. The obligations under this Note are binding and enforceable upon and
against the successors and assigns of Maker.
"MAKER"
Rockford Corporation
By: /s/ Xxxxx X. Xxxxxxx
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Chief Financial Officer
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