1
Exhibit 99.C
AMENDMENT
OF
SERVICES & OPTION AGREEMENT
This Agreement is between W. Xxxx Xxxxxx ("Xxxxxx"), Monument Investors Limited
Partnership ("Monument") as successor to Xxxxxxxx X. Xxxxxx and the estate of
Xxxx X. Xxxxxx ("Bartols"), and Rockford Corporation, an Arizona corporation
("Rockford"). Xxxxxx, Monument, and Rockford 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 Prior Agreement. Suttle, Bartols, and Rockford were parties to a
Services and Option Agreement, and Xxxxxx, Monument and Rockford
are parties to the Amendment and Renewal of Services and Option
Agreement effective as of August 1, 1995 (the "Prior Agreement")
under which Xxxxxx holds options to purchase up to 185,000 shares
of Rockford common stock from Monument (the "Prior Options").
Bartols assigned their shares of Rockford to Monument and
Monument has assumed Bartols' obligations under the Prior
Agreement and Prior Options. The Prior Agreement was for the
period August 1, 1992, through August 1, 1995.
1.3 Monument's Ownership. Monument, an Arizona limited partnership
formed for the benefit of members of the Bartols' family (the
"Family"), owns a majority of the issued and outstanding shares
of Rockford common stock. Monument together with the Family will
own 35.45% of Rockford's fully diluted stock issue assuming (a)
conversion of all of the outstanding Rockford debentures, (b)
exercise of all outstanding Rockford stock options and warrants
(including the Prior Options), and (c) vesting of all "stock
grants" outstanding prior to the date of this Agreement.
1.4 Xxxxxx Services to Rockford. Xxxxxx has made himself available to
perform certain services under the Contract between Xxxxxxxx,
Galef & Goldress, Inc. ("3G") and Rockford (the "Contract"), a
copy of which is attached as Exhibit A.
1.5 Stock Option. Monument desires to amend and extend the Prior
Options 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.
1.6 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
2 XXXXXX SERVICES.
2.1 Xxxxxx Services. Xxxxxx will serve as Director, President and
CEO of Rockford (or in another capacity agreed by Xxxxxx,
Monument, and Rockford) on a "full time" basis pursuant to the
terms of the Employment Agreement. In consideration of such
services, the parties agree that (1) all references in the
Prior Agreement to the Contract will, beginning on the date of
this Amendment, be deemed to refer in addition to the
Employment Agreement and (2) the requirements in the Prior
Agreement that Xxxxxx provide services to Rockford under the
Contract will be satisfied by Xxxxxx'x providing of service to
Rockford under the Employment Agreement.
2.2 Definition of "Full Time". "full time" means 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. Periods of vacation and sick leave
permitted under this Agreement do not count in determining
whether Xxxxxx has worked "full time".
2.3 Service to 3 G and its Clients. Xxxxxx is a "partners" in, and
plans to continue his affiliation with, 3G. Xxxxxx will not
take on any Interim Management assignments for 3G. Subject to
the non-competition obligation established in this Agreement
and the time limitation set forth above, Xxxxxx may (a)
perform advisory and assessment services on behalf of 3G for
its clients, (b) continue as a director of Image Carpets, and
(c) advise former clients who seek his advise.
2.4 Executive Secretary. Xxxxxx will employ (at Rockford's
expense) a Confidential or Executive Secretary to assist him
in the performance of his duties for Rockford.
2.5 Xxxxxx Compensation and Benefits. Xxxxxx will be compensated
exclusively by 3G for his services to Rockford and will not
receive compensation directly from Rockford. Xxxxxx will not
participate in any Rockford employee benefit plans except as
otherwise agreed by Rockford and Xxxxxx, but may take
reasonable vacations (consistent with the needs of Rockford"
business) and sick leaves (when he is actually incapacitated).
Xxxxxx acknowledges that Rockford is paying compensation
directly to 3G pursuant to the Contract.
2.6 Indemnification. Xxxxxx will be indemnified and held harmless
by Rockford from any damages, costs, and expenses resulting
from his services to Rockford. Neither Monument nor the Family
will have any responsibility for such indemnification and
Xxxxxx will look solely to Rockford under the Contract if he
has any claim for indemnification.
3 OPTION AMENDMENT. Monument amends and extends the Prior Option so that
Xxxxxx has the right to purchase up to 185,000 shares of Rockford common
stock at the following prices during the following terms:
-2-
3
Price Term
----- ----
$1.59 per share on or before August 1, 1995
$1.95 per share on or before August 1, 1999
$3.00 per share on or before August 1, 2002
This amends to Prior Option by adding the right to purchase shares during the
period after August 1, 1999, and before August 1, 2002. The Prior Option as
amended is referred to in this Agreement as the "Option".
3.1 Qualification to Purchase. In order to exercise the Option (a)
Xxxxxx must be an "accredited investor" on the dates of
exercise and must give investment representation reasonably
satisfactory to Monument and Rockford or (b) Xxxxxx must
provide other evidence reasonably satisfactory to Rockford
that a proposed exercise is exempt from registration under,
and otherwise complies with, applicable federal and state
securities laws.
3.2 Vesting and Exercise. The prior Option provided a vesting
period before Xxxxxx was permitted to exercise. The vesting
period was completed on August 1, 1995, and Xxxxxx may
exercise the Option at any time before expiration.
3.3 Expiration. The Option expires and may not be exercise after
the earliest of the following dates:
(a) August 1, 2002,
(b) 24 months after the day Rockford common stock becomes
publicly traded,
(c) 24 months after the day Rockford is merged into or
acquired by any publicly owned corporation and
Rockford common stock is exchanged for securities
that are publicly traded,
(d) 150 days after Xxxxxx'x death, or
(e) upon any attempted or purported assignment of the
Options other than an assignment to a trust for the
benefit of Xxxxxx or members of his family.
3.4 Adjustment of Number of Shares. The number of shares subject
to the Option, will 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 must give
Monument and Rockford written notice of his intention to
exercise the Option not less than 10 nor more than 90 days
before the date on which he intends to exercise his options
(the
-3-
4
"Exercise Date" or "Closing Date"). The notice must state the
Closing Date and the number of shares to be purchased. the
notice creates a binding obligation on Xxxxxx to purchase the
specified number of shares on the Closing Date. Monument must
deliver the shares, and Xxxxxx must pay for them in cash, 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
provision of the Internal Revenue Code of 1986 and Internal
Revenue Service ("IRS") regulations thereunder (the "Code")
that attribute to Rockford the options granted by Monument.
Rockford may elect to cancel (from the shares presented by
Monument for transfer 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
will then pay the fair market value of any canceled shares to
the IRS for Xxxxxx'x account. At the time of any exercise
Xxxxxx may pay the cash value attributed to the canceled
shares to Rockford and Rockford will then transfer to Xxxxxx
all the shares presented for transfer. Rockford will make an
election to cancel shares only upon advise 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 will not constitute an admission by either
Xxxxxx or Rockford that Xxxxxx is an employee of Rockford and
Xxxxxx will at all times be an independent contractor to
Rockford.
4 ELECTION OF DIRECTORS. Monument and Xxxxxx will vote as Directors and
shareholders of Rockford (to the extent they are OR 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 (or such other number of directors and candidates as
they agree upon).
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 will be the property of Rockford. Xxxxxx assigns to
Rockford all of Xxxxxx'x right, copyright, title and interest in such
Works. Xxxxxx will 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 grants Xxxxxx a non-exclusive right to use the
Works personally in any activity that is not competitive with Rockford.
-4-
5
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 or other proprietary or confidential
information of Rockford or about 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 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-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 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 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. 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 Monument.
9 ACTIONS. Xxxxxx acknowledges that it would be difficult to determine
damages, and Rockford and Monument will not have an adequate remedy at
law, if Xxxxxx breaches this Agreement. Accordingly, if Xxxxxx breaches
this Agreement, Rockford or Monument may seek injunctive relief to
enforce this Agreement. Nothing in this section limits or excludes any
and all other rights, including rights to money damages, granted to
Rockford or Monument in law or equity,
10 SEVERABILITY. If any section of this Agreement is deemed unreasonable by a
court or arbitrator, that section is severable from the remainder of this
Agreement, 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
Agreement taken as a whole.
-5-
6
11 NON-ASSIGNABILITY. Xxxxxx'x obligations and rights under this Agreement
are not assignable. Xxxxxx'x options are exercisable only by Xxxxxx or
by the personal representative of his estate. Any attempted or
purported assignment of Xxxxxx'x obligations oR rights under this
Agreement is a material breach and will result in the immediate
termination of the Option.
12 ESCROW OF SHARES. Upon request by Xxxxxx, Monument will place in escrow
with a mutually acceptable third party selected by Monument (and pursuant
to documentation approved by Monument 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 shares upon proper exercise of Ms options and payment of the
option price to Monument.
13 CONFLICTS WITH CONTRACT. If there is a conflict between this Agreement and
the Contract, this Agreement will regulate the relations between Monument
and Xxxxxx and the Contract will regulate the dealings between Rockford
and 3G.
14 NOTICES. Notices under this Agreement 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 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 the Option and may be amended only by
a written document signed by all the parties.
16 GOVERNING LAW. Arizona law will 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 is entitled to reasonable attorneys' fees,
costs and other expenses incurred in connection with such proceeding.
18 ARBITRATION. Disputes not resolved by the parties and arising out of or
related in any way to this Agreement 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.
19 EXECUTION AND EFFECTIVE DATE This Agreement is executed _______1995, and
is effective as of August 1, 1995.
-6-
7
/s/
-----------------------------------------
W. Xxxx Xxxxxx
Address: 000 X. Xxxxx Xx.
Xxxxx, XX 00000
Monument Investors Limited Partnership
By /s/
---------------------------------------
Xxxxxxxx Xxxxxx, General Partner
Address: 000 Xxxx Xxxxx
Xxxxxxx, XX 00000
Rockford Corporation
By /s/
---------------------------------------
Xxxx X. Xxxxxx, Chairman
Address: 000 Xxxxx Xxxxx Xxxxx
Xxxxx, XX 852
-7-
