FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT
Exhibit 10.70
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND CONSENT
THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT (this “Amendment”),
dated as of March 21, 2006, is entered into among WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a
California corporation formerly known as Congress Financial Corporation (Western)
(“Agent”), as administrative and collateral agent for the Lenders party to the Loan
Agreement (as defined below) from time to time (“Lenders”), WACHOVIA CAPITAL FINANCE
CORPORATION (WESTERN), a California corporation formerly known as Congress Financial Corporation
(Western), as a Lender (“Wachovia”), ROCKFORD CORPORATION, an Arizona corporation
(“Borrower Agent”), and AUDIO INNOVATIONS, INC., an Oklahoma corporation (“AII” and
together with Rockford, collectively, “Borrowers”).
RECITALS
A. Agent, Wachovia, Wachovia Bank, National Association, as arranger, and Borrowers have
previously entered into that certain Loan and Security Agreement dated March 29, 2004 as amended by
the First Amendment to Loan and Security Agreement and Conditional Default Waiver dated as of June
10, 2004, the Second Amendment to Loan and Security Agreement dated as of December 30, 2004 and the
Third Amendment to Loan and Security Agreement dated as of August 31, 2005 (the “Loan
Agreement”), pursuant to which Wachovia has made certain loans and financial accommodations
available to Borrowers. Terms used herein without definition shall have the meanings ascribed to
them in the Loan Agreement.
B. Borrowers now desire that substantially all of the assets of AII be sold to, and
substantially all of the liabilities of AII be assumed by, Advanced Integration, LLC
(“Purchaser”) for the total sale price of $1,750,000, of which $750,000 will be paid in
cash at the closing of such sale and $1,000,000 will be paid over thirty (30) months following the
closing of such sale (the “Sale”).
C. Borrowers have requested Agent and Wachovia to amend the Loan Agreement in certain respects
and to consent to the Sale, and Agent and Wachovia are now willing to accommodate such request on
the terms and conditions set forth herein.
D. Borrowers are entering into this Amendment with the understanding and agreement that,
except as specifically provided herein, none of Agent’s or Lenders’ rights or remedies as set forth
in the Loan Agreement is being waived or modified by the terms of this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Amendment to Loan Agreement. Section 9.17.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
“9.17.1 EBITDA. Borrowers and their Subsidiaries, on a consolidated basis,
shall earn EBITDA, calculated as of the last day of each month set forth below on the basis
of the trailing twelve (12) months, of not less then the amount set forth opposite such
month:
| Month | Amount | |||
February 2006 |
$ | 3,200,000 | ||
March 2006 |
$ | 2,400,000 | ||
April 2006 |
$ | 1,900,000 | ||
May 2006 |
$ | 2,200,000 | ||
June 2006 |
$ | 2,300,000 | ||
July 2006 |
$ | 2,500,000 | ||
August 2006 |
$ | 2,400,000 | ||
September 2006 |
$ | 2,300,000 | ||
October 2006 |
$ | 2,600,000 | ||
November 2006 |
$ | 3,100,000 | ||
Each month thereafter |
$ | 3,800,000 | ||
For the purposes hereof, ‘EBITDA’ shall mean the net income of Borrowers and
their Subsidiaries determined on a consolidated basis in accordance with GAAP consistently
applied, but excluding any extraordinary or one-time gains, plus (a) depreciation,
amortization and other non-cash charges (to the extent deducted in the computation of such
net income), plus (b) Interest Expense (to the extent deducted in the computation of
such net income), plus (c) charges for federal, state, local and foreign income
taxes (to the extent deducted in the computation of such income).”
2. Consent. Agent and Wachovia hereby consent to the Sale and authorize the transfer
of the assets covered thereby to Purchaser free and clear of the security interests of Agent
therein, provided that, (a) Agent shall retain its security interests in the
proceeds of the Sale, (b) any such proceeds received by Borrowers in cash shall be remitted to
Agent in accordance with the Loan Agreement for application to the Obligations, and (c) any
instrument evidencing the deferred payment of the purchase price shall be duly endorsed and
delivered by Borrowers to Agent in accordance with the Loan Agreement to be held by Agent as
Collateral thereunder. This consent shall apply only to the Sale and not to any other or further
transactions, and except as specifically set forth herein, Agent and Wachovia reserve and preserve
their rights to require the strict compliance by Borrowers with all of the terms and provisions of
the Loan Agreement and other Financing Agreements.
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3. Effectiveness of this Amendment. Agent must have received the following items, in
form and content acceptable to Agent, before this Amendment and the consent provided herein are
effective.
(a) Amendment; Acknowledgement. This Amendment and the attached Acknowledgement by
Guarantors, each fully executed in a sufficient number of counterparts for distribution to all
parties.
(b) Representations and Warranties. The representations and warranties set forth
herein and in the Loan Agreement must be true and correct.
(c) Other Required Documentation. All other documents and legal matters in connection
with the transactions contemplated by this Amendment shall have been delivered or executed or
recorded and shall be in form and substance satisfactory to Agent.
4. Representations and Warranties. Each Borrower represents and warrants as follows:
(a) Authority. Such Borrower has the requisite corporate power and authority to
execute and deliver this Amendment, and to perform its obligations hereunder and under the
Financing Agreements (as amended or modified hereby) to which it is a party. The execution,
delivery and performance by such Borrower of this Amendment have been duly approved by all
necessary corporate action and no other corporate proceedings are necessary to consummate such
transactions.
(b) Enforceability. This Amendment has been duly executed and delivered by such
Borrower. This Amendment and each Financing Agreement (as amended or modified hereby) is the
legal, valid and binding obligation of such Borrower, enforceable against such Borrower in
accordance with its terms, and is in full force and effect.
(c) Representations and Warranties. The representations and warranties contained in
each Financing Agreement (other than any such representations or warranties that, by their terms,
are specifically made as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.
(d) Due Execution. The execution, delivery and performance of this Amendment are
within the power of such Borrower, have been duly authorized by all necessary corporate action,
have received all necessary governmental approval, if any, and do not contravene any law or any
contractual restrictions binding on such Borrower.
(e) No Default. No event has occurred and is continuing that constitutes an Event of
Default.
5. Choice of Law. The validity of this Amendment, its construction, interpretation
and enforcement, and the rights of the parties hereunder, shall be determined under, governed by,
and construed in accordance with the internal laws of the State of California governing contracts
only to be performed in that State.
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6. Counterparts. This Amendment may be executed in any number of counterparts and by
different parties and separate counterparts, each of which when so executed and delivered, shall be
deemed an original, and all of which, when taken together, shall constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this Amendment by
telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment.
7. Reference to and Effect on the Financing Agreements.
(a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement
to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement,
and each reference in the other Financing Agreements to “the Loan Agreement”, “thereof” or words of
like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as
modified and amended hereby.
(b) Except as specifically amended above, the Loan Agreement and all other Financing
Agreements, are and shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations
of Borrowers to Agent and Lenders.
(c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under any
of the Financing Agreements, nor constitute a waiver of any provision of any of the Financing
Agreements.
(d) To the extent that any terms and conditions in any of the Financing Agreements shall
contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving
effect to this Amendment, such terms and conditions are hereby deemed modified or amended
accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended
hereby.
8. Integration. This Amendment, together with the other Financing Agreements,
incorporates all negotiations of the parties hereto with respect to the subject matter hereof and
is the final expression and agreement of the parties hereto with respect to the subject matter
hereof.
9. Severability. In case any provision in this Amendment shall be invalid, illegal or
unenforceable, such provision shall be severable from the remainder of this Amendment and the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above
written.
| ROCKFORD CORPORATION | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| AUDIO INNOVATIONS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| WACHOVIA CAPITAL FINANCE | ||||||
| CORPORATION (WESTERN), | ||||||
| as Agent and as a Lender | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
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ACKNOWLEDGEMENT BY GUARANTORS
Dated as of March 21, 2006
Each of the undersigned, being a guarantor (each a “Guarantor” and collectively, the
“Guarantors”) under their Guaranty and Security Agreement dated March 29, 2004, made in
favor of Agent and Lenders (as amended, modified or supplemented, the “Guaranty”) hereby
acknowledges and agrees to the foregoing Fourth Amendment to Loan and Security Agreement and
Consent (the “Amendment”) and confirms and agrees that the Guaranty is and shall continue
to be, in full force and effect and is hereby ratified and confirmed in all respects except that,
upon the effectiveness of, and on and after the date of the Amendment, each reference in the
Guaranty to the Loan Agreement (as defined in the Amendment), “thereunder”, “thereof” or words of
like import referring to the “Loan Agreement”, shall mean and be a reference to the Loan Agreement
as amended or modified by the Amendment. Although Lender has informed Guarantors of the matters
set forth above, and Guarantors have acknowledged the same, each Guarantor understands and agrees
that Lender has no duty under the Loan Agreement, the Guaranty or any other agreement with any
Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained
herein is intended to or shall create such a duty as to any advances or transaction hereafter.
If any action or proceeding is filed in a court of the State of California by or against any
Guarantor in connection with any of the transactions contemplated by the Loan Agreement or any
document related thereto, the court shall, and is hereby directed to, make a general reference
pursuant to California Code of Civil Procedure Section 638 to a referee or referees to hear and
determine all of the issues in such action or proceeding (whether of fact or of law) and to report
a statement of decision, provided that at the option of Lender, any such issues pertaining to a
“provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard
and determined by the court.
| ROCKFORD SINGAPORE CORPORATION | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| ROCKFORD XXXXX.XXX, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
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| MB QUART SHANGHAI, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
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