EXHIBIT 10.62.1
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND CONDITIONAL DEFAULT WAIVER
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONDITIONAL
DEFAULT WAIVER (this "Amendment"), dated as of June 10, 2004, is entered into
among CONGRESS FINANCIAL CORPORATION (WESTERN), a California corporation
("Agent"), as administrative and collateral agent for the lenders party to the
Loan Agreement (as defined below) from time to time ("Lenders"), CONGRESS
FINANCIAL CORPORATION (WESTERN), a California corporation, as a Lender
("Congress"), ROCKFORD CORPORATION, an Arizona corporation ("Rockford"), and
AUDIO INNOVATIONS, INC., an Oklahoma corporation ("AII" and together with
Rockford, collectively, "Borrowers").
RECITALS
A. Agent, Congress, Wachovia Bank, National Association, as arranger, and
Borrowers have previously entered into that certain Loan and Security Agreement
dated March 29, 2004 (the "Loan Agreement"), pursuant to which Congress 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. As Borrowers have advised Agent, an Event of Default has occurred and
is continuing under Section 10.1(i) of the Loan Agreement by virtue of the
Borrowers' failure to maintain the minimum Fixed Charge Coverage Ratio during
the two (2) months ended April 30, 2004 as required in Section 9.17 of the Loan
and Security Agreement dated March 29, 2004 among Hilco Capital LP ("Hilco") and
Borrowers (the "Known Existing Default").
C. Borrowers now desire to repay the Hilco Note in full from the proceeds
of the 4.5% Convertible Senior Subordinated Secured Notes due 2009 to be issued
by Rockford in an aggregate principal sum not less than $7,500,000 (the
"Convertible Notes") pursuant to the Indenture dated as of June 10, 2004 (the
"Indenture") between Rockford and BNY Western Trust Company, as trustee
thereunder ("Trustee").
D. Borrowers have requested Agent and Congress to waive the Known Existing
Default and to consent to the issuance of the Convertible Notes, and Agent,
Congress and Borrowers are now willing to amend the Loan Agreement on the terms
and conditions set forth herein.
E. 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. Conditional Default Waiver. Agent and Congress hereby waive enforcement
of their rights and remedies against Borrowers arising from the Known Existing
Default, so long as Hilco does not provide Agent or Congress with a "Lien
Enforcement Notice" as defined in the Intercreditor Agreement dated as of March
29, 2004 between Agent and Hilco; provided that Agent may (on account of the
Known Existing Default) charge the higher Interest Rate as set forth in the
proviso of the definition of "Interest Rate" in Section 1.52 of the Loan
Agreement, and the higher letter of credit fee as set forth in Section 2.2(b) of
the Loan Agreement, during the period from and including May 1, 2004 to the date
on which this Amendment becomes effective; and provided further that in lieu of
the Reserves described in the third and fourth sentences of Section 1.86 of the
Loan Agreement, Agent will establish a permanent Reserve in the amount of Eight
Million Dollars ($8,000,000). This waiver shall be effective only for the
specific default comprising the Known Existing Default, and in no event shall
this waiver be deemed to be a waiver of enforcement of Agent's or Congress'
rights with respect to any other Defaults or Events of Default now existing or
hereafter arising. Nothing contained in this Amendment nor any communications
between Borrowers and Agent or Congress shall be a waiver of any rights or
remedies Agent or Congress has or may have against Borrowers, except as
specifically provided herein. Except as specifically provided herein, Agent and
Congress hereby reserve and preserve all of their rights and remedies against
Borrowers under the Loan Agreement and the other Financing Agreement.
2. Consent to the Convertible Notes. Agent and Congress hereby consent to
the issuance of the Convertible Notes and to the subordinate security interests
granted by Borrowers as security therefor, provided that (a) the Trustee (as
collateral agent for the holders of the Convertible Notes) and Borrowers duly
execute and deliver an Intercreditor Agreement in form and substance
satisfactory to Agent, and (b) the net proceeds of the Convertible Notes are
applied first to the repayment of the Hilco Note in full.
3. Amendments to Loan Agreement.
(a) Section 1.34 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"1.34 `Eurodollar Rate Margin' shall mean three percent (3.00%) per
annum, provided that so long as no Default or Event of Default has
occurred and is continuing, and subject to Agent's receipt of Borrower
Agent's Form 10-K (as filed with the Securities and Exchange Commission)
and its audited financial statements as required hereunder for the fiscal
year ending December 31, 2004, and subject further to Agent's receipt of
Borrower Agent's Form 10-Q or Form 10-K (as applicable and as filed with
the Securities and Exchange Commission) and its financial statements as
required hereunder for each fiscal quarter commencing with the fiscal
quarter ending March 31, 2005, the Eurodollar Rate Margin shall be
adjusted (effective as of the first day of the month immediately following
Agent's receipt of those documents) as follows based upon the average
daily Excess Availability hereunder during such fiscal quarter:
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Excess Availability Eurodollar Rate Margin
------------------------------------ ----------------------
Greater than or equal to $10,000,000 2.50%
Greater than or equal to $ 9,000,000 2.75%
Greater than or equal to $ 8,000,000 3.00%
Less than $ 8,000,000 3.25%"
(b) Section 1.52 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"1.52 `Interest Rate' shall mean, as to Prime Rate Loans, a rate
equal to the sum of the Prime Rate Margin plus the Prime Rate and, as to
Eurodollar Rate Loans, a rate equal to the sum of the Eurodollar Rate
Margin plus the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrowers as in effect
three (3) Business Days after the date of receipt by Agent of the request
of Borrowers for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously
quoted to Borrowers) and, as to the Term Loans, a rate equal to one and
one-half percent (1.50%) per annum in excess of the Prime Rate; provided,
that, notwithstanding anything to the contrary contained herein, the
Interest Rate shall mean a rate two percent (2.00%) higher than those
provided above, at Agent's option, without notice, (a) either (i) for the
period on and after the date of termination or non-renewal hereof until
such time as all Obligations are indefeasibly paid and satisfied in full
in immediately available funds, or (ii) for the period from and after the
date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing as reasonably determined by Agent and (b)
on the Revolving Loans at any time outstanding in excess of the amounts
available to Borrowers under Section 2 (whether or not such excess(es)
arise or are made with or without Agent's or any Lender's knowledge or
consent and whether made before or after an Event of Default)."
(c) Section 1.56 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"1.56 `Letter of Credit Rate' shall mean three percent (3.00%) per
annum, provided that so long as no Default or Event of Default has
occurred and is continuing, and subject to Agent's receipt of Borrower
Agent's Form 10-K (as filed with the Securities and Exchange Commission)
and its audited financial statements as required hereunder for the fiscal
year ending December 31, 2004, and subject further to Agent's receipt of
Borrower Agent's Form 10-Q or Form 10-K (as applicable and as filed with
the Securities and Exchange Commission) and its financial statements as
required hereunder for each fiscal quarter commencing with the fiscal
quarter ending March 31, 2005, the Letter of Credit Rate shall be adjusted
(effective as of the first day of the month immediately following Agent's
receipt of those documents) as follows based upon the average daily Excess
Availability hereunder during such fiscal quarter:
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Excess Availability Letter of Credit Rate
------------------------------------ ---------------------
Greater than or equal to $10,000,000 2.50%
Greater than or equal to $ 9,000,000 2.75%
Greater than or equal to $ 8,000,000 3.00%
Less than $8,000,000 3.25%"
(d) Section 1.60 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"1.60 `Maximum Credit' shall mean the amount of Thirty-Five Million
Dollars ($35,000,000) until the date on which Congress Financial
Corporation (Western) as a Lender has assigned not less than $15,000,000
of its Total Commitment to a new Lender or new Lenders hereunder, and
shall mean Forty-Five Million Dollars ($45,000,000) on and after such
date."
(e) Section 1.76 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"1.76 `Prime Rate Margin' shall mean one percent (1.00%) per annum,
provided that so long as no Default or Event of Default has occurred and
is continuing, and subject to Agent's receipt of Borrower Agent's Form
10-K (as filed with the Securities and Exchange Commission) and its
audited financial statements as required hereunder for the fiscal year
ending December 31, 2004, and subject further to Agent's receipt of
Borrower Agent's Form 10-Q or Form 10-K (as applicable and as filed with
the Securities and Exchange Commission) and its financial statements as
required hereunder for each fiscal quarter commencing with the fiscal
quarter ending March 31, 2005, the Prime Rate Margin shall be adjusted
(effective as of the first day of the month immediately following Agent's
receipt of those documents) as follows based upon the average daily Excess
Availability hereunder during such fiscal quarter:
Excess Availability Prime Rate Margin
------------------------------------ ---------------------
Greater than or equal to $10,000,000 0.50%
Greater than or equal to $ 9,000,000 0.75%
Greater than or equal to $ 8,000,000 1.00%
Less than $8,000,000 1.25%"
(f) Section 9.17 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:
"9.17 Fixed Charge Coverage Ratio. Borrowers and their Subsidiaries,
on a consolidated basis, shall maintain a Fixed Charge Coverage Ratio of
not less than 1.50 to one for each period of twelve (12) consecutive
months ending on the last day of a fiscal quarter commencing with the
fiscal quarter ending June 30, 2005."
(g) A new Section 9.17.1 is hereby added to the Loan Agreement as
follows:
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"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 or, if less,
the number of months that have elapsed from and including June 2004, of
not less then the amount set forth opposite such month:
Month Amount
--------------------- ----------
August 2004 $ 300,000
September 2004 $1,500,000
October 2004 $2,500,000
November 2004 $3,000,000
December 2004 $3,150,000
January 2005 $3,500,000
February 2005 $4,150,000
March 2005 $4,300,000
April 2005 $4,500,000
May 2005 $5,000,000
Each Month Thereafter $5,500,000
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)."
(h) New clauses (n) and (o) are hereby added to Section 10.1 of the
Loan Agreement as follows, and existing clauses (n) and (o) thereof are hereby
re-designated as clauses (p) and (q), respectively:
"(n) the common stock of Rockford shall not be authorized for
quotation or listing on The New York Stock Exchange, Inc., the American
Stock Exchange, Inc. or The Nasdaq National Market or SmallCap Market;"
"(o) without Agent's prior written consent, Rockford exercises any
optional right to redeem all or any portion of the 4.5% Convertible Senior
Subordinated Secured Notes due 2009 issued by Rockford pursuant to the
Indenture dated as of June 10, 2004 between Rockford and BNY Western Trust
Company, as trustee thereunder;"
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4. Effectiveness of this Amendment. Agent must have received the following
items, in form and content acceptable to Agent, before this Amendment and the
waivers and consents 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) Waiver Fee. A waiver fee in the amount of Ninety Thousand
Dollars ($90,000), which fee is fully earned as of, and due and payable on, the
date hereof.
(c) Representations and Warranties. The representations and
warranties set forth herein and in the Loan Agreement must be true and correct,
other than representations and warranties relating to the Known Existing
Default.
(d) 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.
5. 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, other than representations and
warranties relating to the Known Existing Default.
(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. Except for the Known Existing Default, no event has
occurred and is continuing that constitutes an Event of Default.
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6. 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.
7. 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.
8. 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.
9. 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.
10. 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: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
AUDIO INNOVATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
CONGRESS FINANCIAL CORPORATION (WESTERN),
as Agent and as a Lender
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: V.P.
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ACKNOWLEDGEMENT BY GUARANTORS
Dated as of June 10, 2004
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
First Amendment to Loan and Security Agreement and Conditional Default Waiver
(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.
ROCKFORD SINGAPORE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
ROCKFORD XXXXX.XXX, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
MB QUART SHANGHAI, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: CFO
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