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EXHIBIT 10.28
AMENDMENT AND RENEWAL
OF
CONSULTING AND OPTION CONTRACT
This Contract is between Rockford Corporation, an Arizona corporation
("Rockford") and Xxxxxxxx, Xxxxx & Xxxxxxxx, Inc., a Nevada corporation ("3G").
Rockford and 3G agree as follows:
1 RECITALS.
1.1 Rockford Business. Rockford manufactures and distributes high
quality car and professional audio products under various brand
names including "Rockford-Fosgate", "Hafler Professional", "Rockford
Acoustic Designs", and "Connecting Punch."
1.2 3G Consulting Services. 3G is in the business of providing executive
and other consulting services. 3G has provided services to Rockford
pursuant to (a) a letter agreement dated February 8, 1992, and
accepted by 3G on February 10, 1992, and (b) a Consulting and Option
Contract dated March 10, 1993 (the "Prior Contracts"). Pursuant to
the Prior Contracts, 3G has provided executive and consulting
services to Rockford through W. Xxxx Xxxxxx ("Xxxxxx"), one of 3G's
associates.
1.3 Related Agreement. This Contract is related to a contemporaneous
Agreement (the "Agreement"), between Xxxxxx, Rockford, and Monument
Investors Limited Partnership ("Monument") the principal stockholder
of Rockford. The Agreement (a) grants to Xxxxxx an Option to
purchase 185,000 shares of Rockford common stock held by Monument,
(b) requires that Xxxxxx devote "full time" to his services for
Rockford, and (c) establishes certain non-compete and other
obligations. A copy of the Agreement is attached as Exhibit 1 and
made a part of this Contract.
2 CONSULTING SERVICES AGREEMENT. For a term of not less than 5 years from
August 1, 1995, 3G will provide executive and advisory services to
Rockford through Xxxxxx and through its other associates (with Rockford's
advance approval). Xxxxxx will work for Rockford on a "full time" basis as
defined in the Agreement.
2.1 Nature of Required Services. Xxxxxxxx, 0X, and Xxxxxx will from time
to time agree on the exact nature of the consulting services to be
performed under this Contract.
2.2 Xxxxxx'x Position. Xxxxxx will serve as Director, President, and CEO
of Rockford (or in another capacity agreed by Rockford, Monument,
Xxxxxx, and 3G). Xxxxxx will carry out the duties of such offices on
an independent contractor basis and not as Rockford's employee.
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2.3 Advisory Director. 3G will designate its associate Xxxxx Xxxxxxxx to
serve as an "Advisory Director" of Rockford, with the right to
receive notice of, to attend, and to speak at meetings of Rockford's
Directors, but not to vote on any matters.
2.4 Compensation of 3G Associates. 3G will pay, and bear exclusively,
all compensation of Suttle, Goldress, and any other 3G associate
working on the Rockford engagement.
3 ROCKFORD COOPERATION. Rockford will extend full cooperation to 3G and
Xxxxxx, will provide full access to its employees, officers, consultants
and Directors, and will provide full access to all of its files, books and
corporate and financial records. Rockford's Board of Directors will at all
times retain control of Rockford and its business.
4 TERMINATION. This Contract may be terminated at any time by Rockford or
3G. Termination requires 90 days written notice. Upon termination Xxxxxx
will withdraw and be released from his obligations to Rockford set forth
in Section 2 of the Agreement.
5 COMPENSATION AND EXPENSES.
5.1 Base Retainer. Rockford will pay 3G a retainer fee of $30,000 per
month payable in advance on the 8th day of each month. This retainer
fee is non-refundable, except that if this Contract is terminated by
3G effective on some day other than the 8th day of the month the
final fee payment will be pro-rated or a refund will be given for
any unearned portion.
5.2 Bonus Fees. As additional compensation for 3G's services under this
Contract, Rockford will pay 3G an annual bonus, with the amount and
timing of payment determined by Rockford's Board of Directors taking
into account (a) Xxxxxx'x compensation in prior positions and
Rockford's original plan to pay bonuses sufficient to increase the
base compensation by $120,000 per year, (b) the need to provide
substantial "upside" compensation to Xxxxxx if Rockford is
successful, and (c) the bonus paid by Rockford to the most senior
members of its management team. The initial bonus under this
Contract will be paid for Rockford's fiscal year ended September
1995 and will be in an amount consistent with the bonus declared for
the most senior members of Rockford's management other than Xxxxxx.
3G waives and relinquishes all right to payments under the bonus
formula established in the Prior Contracts.
5.3 Termination Fees. If this Contract is terminated by Rockford,
Rockford will continue to pay to 3G its base retainer for 9 months
after the date of termination.
5.4 Option Compensation.
5.4.1 Prior Option. As contingent compensation for 3G's services
under the Prior Contracts, Rockford granted to 3G an option
(the "Prior Option") on or before August 1, 1999, to purchase
50,000 of its authorized but unissued common stock at a price
of $23.00 per share (the "Exercise Price"), protected against
dilution only from stock dividends, stock splits,
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reverse stock splits, mergers, consolidations,
recapitalizations and corporate adjustments.
5.4.2 Amendment of Prior Option. As of October 28, 1994, Rockford
restructured its 10.5% Convertible Subordinated Debentures
into Senior Notes with Warrants and reduced the exercise price
of the Warrants from $23.00 to $6.50. In connection with such
restructuring, Rockford and 3G agreed to reduce the Exercise
Price to $6.50 per share; this Contract constitutes written
acknowledgment of Rockford and 3G that the Exercise Price was
reduced to $6.50 per share effective as of October 28, 1994.
Rockford further agrees to extend the Prior Option in
connection with the execution of this Contract, so that 3G may
exercise the Prior Option at any time before August 1, 2002
(unless the Prior Option expires earlier under a provision of
this Contract). As amended and extended, the Prior Option is
referred to in this Contract as the "Option."
5.4.3 [Intentionally Omitted].
5.4.4 Vesting. The Prior Contracts provided for vesting of the Prior
Option over a period ending August 1, 1995. The Option is now
100% vested.
5.4.5 Limited Assignment Right. 3G may assign the Options to and
among its associates (including Xxxxxx) or to any corporation,
firm or joint venture formed by them to hold the Option. No
other assignment is permitted.
5.4.6 Investment Representation. In order to exercise the Option 3G
or any permitted assignee (1) must qualify as an "accredited
investor" and must give reasonably satisfactory investment
representations or (2) must provide other evidence reasonably
satisfactory to Rockford that the proposed exercise is exempt
from registration under, and otherwise complies with,
applicable federal and state securities laws.
5.4.7 Notice of Exercise and Payment upon Exercise. 3G or its
permitted assignee must give Rockford written notice of its
intention to exercise the Option not less than 10 nor more
than 90 days before the date on which it intends to exercise
the Option (the "Closing Date" or "Exercise Date"). The notice
must state the Closing Date and the number of shares to be
purchased. The notice creates a binding obligation on 3G or
its permitted assignee to purchase the specified number of
shares on the Closing Date. Rockford must deliver the shares,
and 3G or its permitted assignee must pay for them in cash, on
the Closing Date.
5.4.8 Taxes and Election not to Issue Shares. 3G acknowledges that,
as an independent contractor, upon exercise of the options it
(or its permitted assignee) 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
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the same amount pursuant to provisions of the Internal Revenue
Code of 1986 and IRS regulations thereunder (the "Code").
Rockford may elect not to issue up to that percentage of
shares that is equal to the maximum marginal rate of taxes 3G
(or its permitted assignee) would be required by the Code to
pay to the IRS upon exercise of the options; Rockford will pay
the fair market value of any withheld shares to the IRS for
the account of 3G or its permitted assignee, as applicable. At
the time of any exercise 3G or its permitted assignee may pay
the cash value attributed to the withheld shares to Rockford
and Rockford will then issue all the shares for which the
Option is exercised. Rockford will make an election to
withhold shares only upon advice of its professional advisors
that such action is necessary to protect its deduction (and
then it will withhold only the amount required by the Code);
such an election will not constitute an admission by either 3G
or Rockford that 3G is an employee of Rockford and 3G will at
all times be an independent contractor to Rockford.
5.5 Split Dollar Life Insurance. Upon 3G's request, Rockford will
institute a program of "split dollar" life insurance covering Xxxxxx
providing for payments by Rockford of up to $36,000 per year.
5.6 Expense Reimbursement. In addition to compensation provided
hereunder, Rockford will reimburse 3G or Xxxxxx for reasonable out
of pocket expenses incurred on Rockford's behalf, subject to
Rockford's right to require adequate documentation of expenses.
6 CONFIDENTIAL INFORMATION. During and after the term of 3G's engagement
pursuant to this Contract, 3G and its associates will keep confidential,
and will not reproduce, copy or disclose to any other person or firm, any
trade secrets or other proprietary or confidential information and data of
Rockford or about its business ("Confidential Information"). 3G and its
associates 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
3G's duties and responsibilities for Rockford or with Rockford's consent.
7 RETURN OF ROCKFORD DOCUMENTS. Upon termination of 3G's engagement pursuant
to this Contract, 3G will 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 will 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-SOLICITATION. During and after the term of 3G's engagement for
Rockford pursuant to this Contract, 3G 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 3G's engagement for Rockford pursuant to
this Contract.
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If this section is deemed unreasonable as to time or scope by any court or
arbitrator, then such court or arbitrator is directed to modify this
section as to time or scope, or both, so that this section is reasonable
and to then enforce this section as modified. 3G acknowledges and agrees
that the market for Rockford's product is limited and international in
scope, so that any solicitation activities in violation of this section
would cause material harm to Rockford.
9 ACTIONS. 3G acknowledges that it would be difficult to determine damages,
and Rockford will not have an adequate remedy at law, if 3G breaches this
Contract. Accordingly, if 3G breaches this Contract, Rockford may seek
injunctive relief to enforce this Contract. Nothing in this section limits
or excludes any and all other rights, including rights to money damages,
granted to Rockford in law or equity.
10 SEVERABILITY. If any section of this Contract is deemed unreasonable by a
court or arbitrator, that section is severable from the remainder of this
Contract, which is to be enforced according to its terms irrespective of
the enforceability of the unreasonable section so long as enforcement is
consistent with the general intent of the parties as evidenced by this
Contract taken as a whole.
11 RELEASE AND INDEMNIFICATION.
11.1 Release. Rockford releases 3G (and its employees, representatives,
and associates working on the Rockford engagement, including Xxxxxx)
from any and all liability to Rockford so long as such liability
arises out of an action, or failure to take action, which 3G (or its
employees, representatives, and associates) believed in good faith
to be in Rockford's best interest and not in contravention of this
Contract or the Agreement.
11.2 Indemnity. Rockford indemnifies and holds harmless 3G, its
employees, representatives and associates, including Xxxxxx (an
"Indemnified Party"), from and against any and all losses, damages,
costs and expenses, including all legal fees, court costs, and
out-of-pocket expenses (a "Loss") in any way arising out of or in
connection with an Indemnified Party's activities on Rockford's
behalf and asserted against an Indemnified Party by Rockford, any of
its officers, Directors, debenture owners or stockholders, or any
other person, so long as the Loss arises out of an action, or
failure to take action, which the Indemnified Party in good faith
believed to be in Rockford's best interest.
11.3 Procedure, Expenses, and Defense. If there is a Loss, an Indemnified
Party must notify Rockford promptly of the claim and Rockford will
advance expenses incurred in connection with the claim on behalf of
the Indemnified Party. Rockford may decline to advance expenses if
its Board of Directors determines, in good faith and within 30 days
after receiving notice of the claim from the Indemnified Party, that
the Indemnified Party is not entitled to indemnification under the
circumstances; however, such determination is not binding upon the
Indemnified Party in any action for indemnification. Rockford is
entitled to assume the defense of any claim, using counsel of its
choice reasonably
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satisfactory to the Indemnified Party, and will not be responsible
for the fees of counsel to the Indemnified Party after it assumes
the defense.
12 NON-ASSIGNABILITY. The rights and obligations of Rockford and 3G under
this Contract are not assignable, except 3G's may assign its option rights
to the extent expressly permitted. Any other purported or attempted
assignment of 3G's or Rockford's rights is a material breach of this
Contract.
13 EMPLOYMENT OF 3G PERSONNEL BY ROCKFORD . If Rockford employs Xxxxxx (or
any other person working for 3G) during the term of this Contract,
Rockford will pay 3G 35% of such person's salary and incentive bonus
during the first year of such person's employment.
14 CONFLICTS WITH AGREEMENT. If there is a conflict between this Contract and
the Agreement, this Contract will regulate the relations between Rockford
and 3G and the Agreement will regulate the relations between Xxxxxx and
Monument.
15 NOTICES. Notices under this Contract are 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 Contract
(which may be changed by notice).
16 INTEGRATION AND AMENDMENT. This Contract is the entire agreement of the
parties with respect to the engagement of 3G by Rockford, supersedes all
prior agreements between 3G and Rockford (including the Prior Contracts),
and may be amended only by a written document signed by both parties.
17 GOVERNING LAW. Arizona law will govern this Contract and any disputes
arising out of or related in any way to this Contract.
18 ATTORNEYS' FEES. In any proceeding arising out of or related to this
Contract, the prevailing party is entitled to reasonable attorneys' fees,
costs and other expenses incurred in connection with such proceeding.
19 ARBITRATION. Disputes not resolved by the parties and arising out of or
related in any way to this Contract will 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 will 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 will render a decision within
30 days after their appointment and may award the costs of arbitration as
they see fit.
20 ASSIGNMENT TO XXXXXX. If Xxxxxx terminates his association with 3G for any
reason then, at Xxxxxx'x option, 3G will assign all of its obligations and
rights under this Contract to Xxxxxx and Xxxxxx will assume all such
rights and obligations. Rockford consents to any
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such assignment and agrees that 3G will then be released from its
obligations under this Contract.
21 EXECUTION AND EFFECTIVE DATE. This Contract is executed _______________,
1995, and is effective as of August 1, 1995.
Xxxxxxxx, Galef & Goldress, Inc.
By /s/ ________________________________
Xxxxx Xxxxxxxx, Chairman
Address: 000 Xxxxx Xxxx #000
Xxxxxxx Xxxxxxx, XX 00000
Rockford Corporation
By /s/ ________________________________
Xxxx Xxxxxx, Chairman
Address: 000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
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