1
FIN0VA
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: ROCKFORD CORPORATION
ADDRESS: 000 XXXXX XXXXX XXXXX
XXXXX, XXXXXXX 00000
DATE: JUNE 20, 1997
This Schedule forms an integral part of the Loan and Security Agreement between
the above Borrower and FINOVA Capital Corporation dated the above date, and all
references herein and therein to "this Agreement" shall be deemed to refer to
said Agreement and to this Schedule.
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TOTAL FACILITY (SECTION 1.1):
The Total Facility is the amount of Twenty Million and No/100
Dollars ($20,000,000.00).
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LOANS (SECTION 1.2):
RECEIVABLES LOANS: A revolving line of credit consisting of
loans against Borrower's Eligible Receivables ("Receivable
Loans") in an aggregate outstanding principal amount not to
exceed the lesser of:
(a) the total of:
(i) the Total Facility minus
(ii) the aggregate outstanding and unpaid
principal balance of all Inventory Loans; minus
(iii)the outstanding and unpaid principal balance
of Term Loan A; minus
(iv) the aggregate outstanding and unpaid balance
of all Capex Loans; minus
(v) the aggregate sum of the outstanding and
unpaid principal balance of all Senior Notes on and
after October 10, 1997;
or
(b) the total of:
(i) an amount equal to eighty percent (80.0%) of
the net amount of the Eligible Receivables (after first
deducting from such Eligible Receivables a dilution
reserve to account for dilution in excess of ten percent
(10.0%) to be established at Lender's sole
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discretion and to be adjusted quarterly at Lender's sole
discretion on a trailing twelve-month basis); minus
(ii) the aggregate sum of the outstanding and
unpaid principal balance of all Senior Notes on and
after October 10, 1997.
Lender may change the applicable advance rate set forth above
from time to time in its sole discretion.
INVENTORY LOANS AND SEASONAL LOANS: A revolving line of credit
consisting of loans against Borrower's Eligible Inventory in
an aggregate outstanding principal amount not to exceed the
lesser of:
(a) the amount of Six Million and No/100 Dollars
($6,000,000.00); or
(b) (i) the sum of:
(A) fifty percent (50.0%) of the value of
Borrower's Eligible Raw Materials Inventory; plus
(B) sixty-five percent (65.0%) of the value of
Borrower's Eligible U.S. Finished Goods Inventory; plus
(C) the lesser of (1) sixty-five percent (65.0%)
of the value of Borrower's Eligible Foreign Finished
Goods Inventory, or (2) the amount of One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00); or
(ii) during the four consecutive calendar months of
November through February, the sum of:
(A) an additional ten percent (10.0%), over and
above the provisions of paragraph (b)(i)(A) and
paragraph (b)(i)(B) above, of the value of each of
Borrower's Eligible Raw Materials Inventory and
Borrower's Eligible U.S. Finished Goods Inventory,
respectively; plus
(B) the lesser of (i) an additional ten percent
(10.0%), over and above the provisions of paragraph
(b)(i)(C)(1) above, of the value of Borrower's Eligible
Foreign Finished Goods Inventory, or (ii) the positive
amount by which the amount of One Million Five Hundred
Thousand and No/100 Dollars ($1,500,000.00) exceeds
sixty-five percent (65.0%) of the value of Borrower's
Eligible Foreign Finished Goods Inventory.
The value of Borrower's Eligible Inventory shall in all
instances be calculated at the lower of cost or market value
and determined on a first-in, first-out basis. Lender may
change the applicable advance rate set forth above from time
to time in its sole discretion.
Loans advanced pursuant to paragraph (b)(i) above are herein
called the "Inventory Loans." Loans advanced pursuant to
paragraph (b)(ii) above are herein called the "Seasonal
Loans." The Inventory Loans, Seasonal Loans and Receivables
Loans are herein called the "Revolving Loans."
TERM LOAN A: A single-advance term loan against the value of
Borrower's existing machinery and equipment ("Term Loan A") in
the original principal amount of Two Million and No/100
Dollars $2,000,000.00). Term Loan A shall be repayable upon
such terms and subject to such conditions as are set forth on
the promissory note of Borrower evidencing such Term Loan A
("Term Note A"), in form and substance satisfactory to Lender
in its sole discretion. The outstanding and unpaid principal
balance of and all accrued and unpaid interest on Term Loan A
shall in all events be due and payable on the earlier to occur
of (a) the Maturity Date or (b) the date on which this
Agreement is terminated and all Obligations become due and
payable as provided in Section 16 or Section 17 above or
otherwise pursuant to this Agreement.
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CAPEX LOANS: One or more term loans (each a "Capex Loan" and
collectively the "Capex Loans") to finance in part the
acquisition costs of Borrower's post-Closing Equipment
purchases. Each Capex Loan shall bear interest only (payable
monthly in arrears) to the nearest anniversary date of this
Agreement, and thereafter shall be repayable in monthly
installments of principal to be calculated based upon a
five-year straight-line amortization period plus interest
outstanding from time to time at the Capex Loans Interest
Rate, but in any event upon such terms and subject to such
conditions as are set forth on the promissory note of Borrower
evidencing the aggregate amount of all Capex Loans (the "Capex
Note"), in form and substance satisfactory to Lender in its
sole discretion, upon the following terms and subject to the
following conditions: (a) Lender shall have no obligation to
make a Capex Loan which, without giving effect to any
amortization or repayment of the Capex Loans, would cause the
aggregate amount of all Capex Loans advanced hereunder to
exceed the amount of One Million and No/100 Dollars
($1,000,000.00); (b) the Capex Loans, if any, shall be
evidenced by the Capex Note, and otherwise shall be made on
such terms and subject to such conditions as are set forth
herein, (c) Borrower shall have notified Lender in writing not
less than one (1) Business Day prior to the date upon which
the Capex Loan is to be made, specifying the amount of such
Capex Loan and the Capital Expenditure acquisition to be
financed thereby; (d) each Capex Loan (other than a Capex Loan
which makes the aggregate of all Capex Loans equal to
$1,000,000) shall be in the amount of at least Fifty Thousand
and No/100 Dollars (S50,000.00); (e) Lender shall be satisfied
that it will receive a purchase money security interest in the
Equipment to be financed by and acquired with the proceeds of
the Capex Loan; (f) no Capex Loan shall exceed the amount of
eighty percent (80.0%) of the "hard" acquisition costs
(excluding without limitation installation, training,
supplies, ancillary or accessory items or similar "soft"
costs) of the Equipment to be acquired with the proceeds of
such Capex Loan; (g) Borrower may not request more than two
(2) Capex Loans during any calendar month; (h) Lender may, in
its sole discretion, make any Capex Loan by funding directly
to the seller of the Equipment to be financed by such Capex
Loan and to require Borrower to execute and to deliver to
Lender prior to funding of such Capex Loan a UCC-I Financing
Statement concerning such Equipment to be acquired; (i) Lender
shall have no obligation to make any Capex Loan if, either
before or after giving effect to such requested Capex Loan,
Borrower would not be in compliance with the financial
covenants set forth in Section 13.14 of this Agreement or any
other term or condition of this Agreement; and (j) to the
extent not contrary to this paragraph, the terms and
conditions applicable to all advances of any Loans shall apply
to any Capex Loan. The outstanding and unpaid principal
balance of and all accrued and unpaid interest on all Capex
Loans shall in all events be due and payable on the earlier to
occur of (a) the Maturity Date or (b) the date on which this
Agreement is terminated and all Obligations become due and
payable as provided in Section 16 or Section 17 above or
otherwise pursuant to this Agreement.
The Revolving Loans and the Term Loans are collectively herein
called the "Loans."
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CONDITIONS PRECEDENT (SECTION 2.1):
The obligation of Lender to make the initial advance hereunder
is subject to the fulfillment, to the satisfaction of Lender
and its counsel, of each of the following conditions, in
addition to the conditions set forth in Sections 2.1 and 2.2
above: (a) Excess Availability. Borrower shall have excess
borrowing availability under the Receivables Loans facility of
not less than Five Hundred Thousand and No/100 Dollars
($500,000.00), after giving effect to the initial advance
hereunder and after giving effect to payment in full of all of
Borrower's suppliers to within sixty (60) days of such
suppliers' respective written or agreed-upon terms of payment.
(b) Opinions. To the extent any persons other than Borrower
and Lender shall be parties to the Loan Documents, Lender
reserves the right to require satisfactory opinions of counsel
for each such person concerning the proper organization of
such person and the due authorization, execution, delivery,
enforceability, validity and binding effect of the Loan
Documents to which such person is a party. Each such opinion
of counsel shall confirm, to the satisfaction of Lender, that
the opinion is being
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delivered to Lender at the instruction of the party
represented by such counsel, that Lender is entitled to rely
on such opinion, and that for purposes of such reliance Lender
is deemed to be in privity with the opining counsel. (c)
Review of Material Agreements. Prior to Closing, Lender shall
have reviewed and approved all material agreements to which
Borrower is a party, including, without limitation, all
documents in respect of the borrowing of money, all joint
venture agreements, royalty agreements, license agreements,
employment/management incentive agreements, all non-compete
agreements to which Borrower is a party, and such other
agreements as are requested by Lender for review. (d) Approval
of Employment and Other Agreements. Lender shall have reviewed
and approved all employment or sales agreements to be in
effect as of the Closing between Borrower and 3G. In addition,
Lender may require in its sole discretion that Borrower, enter
into one or more employment agreements with certain of
Borrower's employees. (e) Approval of Projections. Lender
shall have received and approved cash flow projections and a
pro forma balance sheet with adjusting entry showing (i) that
the proposed Loans, together with any equity investment
required of Borrower by Lender under this Agreement, will
satisfy Borrower's projected working capital needs; and (ii)
that following the Closing of the Loans, (A) the then present
fair market value of the assets of Borrower will be greater
than the total amount of liabilities, including contingent,
subordinated, absolute, fixed, matured or unmatured and
liquidated or unliquidated liabilities, of Borrower, (B) the
present fair market value of the assets of Borrower will be
sufficient to pay the probable liability of Borrower on its
existing debts as such debts become absolute and matured, (C)
Borrower will not be left with property which would constitute
an unreasonably small capital, (D) Borrower will not incur
debts beyond its ability to pay as they mature, (E) Borrower
will have a tangible net worth in a minimum amount to be
considered solvent immediately following the proposed initial
advance hereunder, or in the alternative Borrower may provide
a "solvency opinion" acceptable in all respects to Lender in
its sole discretion, and (F) Borrower will have reasonably
sufficient capital for the conduct of its business following
the initial advance hereunder. (f) UCC, Lien Searches. Lender
shall have received and approved the results of UCC, tax lien,
litigation, judgment, and bankruptcy searches regarding
Borrower, and shall have received satisfactory customer,
vendor and credit reference checks on Borrower and Guarantors.
In addition, Lender shall have received satisfactory personal
investigatory reports on each member of the senior management
of Borrower, including without limitation W. Xxxx Xxxxxx and
Xxxxx X. Xxxxxxx, as well as so-called "Xxxxxx" reports on
certain Persons associated with Borrower. (g) Cash
Collections. Lender shall have approved Borrower's proposed
methods for, and arrangements shall have been made for,
submission of Borrower's cash collections to Lender. (h) First
Priority Perfected Security Interest. Lender shall have
received and perfected a first priority security interest in
the Collateral. (i) Appraisal. Lender shall have received and
approved in its sole discretion an appraisal of (1) Borrower's
unencumbered Equipment located at Borrower's plants in Tempe,
Arizona and Grand Rapids, Michigan demonstrating a minimum
orderly liquidation value of not less than One Million and
No/100 Dollars ($1,000,000.00) and (2) Borrower's Inventory,
other Equipment and fixed assets which are to become
Collateral. ( j) Foreign Credit A/R Insurance. Lender shall
have received and approved a new policy of foreign credit
accounts receivable insurance, having a term and coverages
acceptable to Lender in its sole discretion.
Borrower shall cause the conditions precedent set forth in
Section 2.1 of this Agreement and set forth above in this
Schedule to be satisfied on or before June 30, 1997.
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INTEREST AND FEES (SECTION 3.1):
I. REVOLVING LOANS.
A. Interest.
(i) Rates of Interest. The Revolving Loans shall bear interest
on the unpaid principal amount thereof from the date such Revolving Loans
are made and until paid in full at one of the following rates, as selected
by Borrower from time to time as provided in this Section:
(a) Base Rate Option (Receivables Loans and Inventory
Loans only). That portion of the outstanding principal balance of
the Receivables Loans and the Inventory Loans subject to this option
shall bear interest at a fluctuating rate per annum equal at all
times to one percent (1.0%) in excess of the Base Rate;
(b) LIBO Rate Option (Receivables Loans and Inventory
Loans only). That portion of the outstanding principal balance of
the Receivables Loans and the Inventory Loans subject to this option
shall bear interest at a fixed rate per annum equal to three and
one-quarter percent (3.250%) in excess of the LIBO Rate applicable
to such LIBO Rate Portion;
(c) Base Rate Option (Seasonal Loans only). That portion
of the outstanding principal balance of the Seasonal Loans subject
to this option shall bear interest at a fluctuating rate per annum
equal at all times to three percent (3.0%) in excess of the Base
Rate; and
(d) LIBO Rate Option (Seasonal Loans only). That portion
of the outstanding principal balance of the Seasonal Loans subject
to this option shall bear interest at a fixed rate per annum equal
to five and one-quarter percent (5.250%) in excess of the LIBO Rate
applicable to such LIBO Rate Portion.
Notwithstanding the foregoing, if for Borrower's fiscal year ending
December 31, 1997 Borrower's EBITDA exceeds the amount of $5,500,000
and Borrower's Senior Debt Coverage exceeds 1.40 to 1.0, as
determined by the audited financial statements to be provided
pursuant to Section 5.2 of this Agreement, then (effective on the
first day of the calendar month first following Lender's review and
approval of such audited financial statements and the calculations
of EBITDA and Senior Debt Coverage Ratio) the applicable Margin
otherwise added to the Base Rate or the LIBO Rate, as applicable,
shall be reduced by subtracting therefrom one-quarter of one percent
(0.250%); provided, however, that if for any consecutive
twelve-calendar-month period ending after December 31, 1997
Borrower's EBITDA does not exceed the amount of $5,500,000 or
Borrower's Senior Debt Coverage Ratio does not exceed 1.40 to 1.0,
as determined by Lender, then (effective on the first day of the
calendar month first following such determination and at all times
thereafter) the applicable Margin shall revert to that provided in
subparagraphs (a) through (d) above.
The interest rate chargeable hereunder shall be
increased or decreased, as the case may be, without notice or demand
of any kind, upon the announcement of any change in the Base Rate.
Each change in the Base Rate shall be effective hereunder on the
first day following the announcement of such change, provided, that
a cumulative change of less than one-fourth of one percent (0.25%)
shall not be considered. Interest charges and all other fees and
charges herein shall be computed on the basis of a year of 360 days
and actual days elapsed and shall be payable to Lender in arrears on
the first day of each month.
If on any day notice has not been timely delivered by
Borrower to Lender in accordance with the terms of this Agreement
specifying the basis for determining the rate of interest on that
day, then for that day Borrower shall be deemed to have selected the
Base Rate Option. The outstanding principal
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balance of Obligations other than the Loans shall bear interest from
the date such Obligations are incurred until paid in full based upon
the Base Rate Option. Notwithstanding anything contained herein to
the contrary, Borrower may not select the LIBO Rate Option if an
Event of Default exists.
(ii) Interest Payments. With respect to any Base Rate
Portion, accrued interest shall be payable, in arrears, (A) on the first
day of each calendar month, and (B) at maturity (whether by acceleration
or otherwise) of the Revolving Loans. With respect to any LIBO Rate
Portion (and if the Interest Period applicable thereto is longer than
three (3) months, also ninety (90) days after the be-inning of such
Interest Period), accrued interest shall be payable (A) on the last day of
the applicable Interest Period for such LIBO Rate Portion, and (B) at
maturity (whether by acceleration or otherwise) of the Revolving Loans.
(iii) Conversion or Continuation.
(a) Subject to the provisions of this Agreement,
Borrower shall have the option (A) as of any date to convert all or
any part of its outstanding Base Rate Portion, if any, into one or
more LIBO Rate Portions; (B) as of the last day of its applicable
Interest Period, to convert all or any part of a LIBO Rate Portion
to a Base Rate Portion on such expiration date; or (C) as of the
last day of any Interest Period, to continue all or any part of a
LIBO Rate Portion, and, in the case of clauses (B) and (C) of this
paragraph, the succeeding Interest Period of such continued LIBO
Rate Portion shall commence on such expiration date; provided,
however, no outstanding portion of the Revolving Loans may be
continued as, or be converted into, a LIBO Rate Portion (i) if the
continuation of, or the conversion into such LIBO Rate Portion,
would violate any of the provisions of Section 3.1(1)(A)(v) of this
Schedule or (ii) if as of such date a Default or an Event of Default
would occur or has occurred and is continuing.
(b) To convert or continue a LIBO Rate Portion under
this Section 3.1(I)(A)(iii). Borrower shall deliver a Notice of
Conversion/Continuation, in the form of Exhibit A attached hereto
and incorporated herein by this reference, to Lender no later than
10:00 a.m. (Los Angeles time) at least three (3) Business Days in
advance of the proposed conversion/continuation date. A Notice of
Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B)
the amount of the principal portion of the Revolving Loans to be
converted/continued, and (C) whether such portion shall be converted
and/or continued. In lieu of delivering a Notice of
Conversion/Continuation, Borrower may give Lender telephonic notice
of any proposed conversion/continuation by the time required under
this Section 3.l(I)(A)(iii), and such notice shall be confirmed in
writing delivered to Lender promptly (but in no event later than
3:00 p.m. (Los Angeles time) on the same Business Day). Any Notice
of Conversion/Continuation delivered by Borrower (or telephonic
notice in lieu thereof) shall be irrevocable when given pursuant to
this clause (b) (whether given in writing or by telephone), and
Borrower shall be bound to convert or continue in accordance
therewith.
(iv) Computation of Interest. In computing interest, the date
of the making of the Revolving Loans, the first day of an Interest Period
or the date of any conversion into the Base Rate Portion, as the case may
be, shall be included and the date of payment, the expiration date of the
Interest Period or the date of any conversion from the Base Rate Portion,
as the case may be, shall be excluded so long as payment is timely
received in accordance with this Agreement.
(v) Special Provisions Governing Borrower's Selection of the
LIBO Rate-Option. With respect to the LIBO Rate Portion:
(a) Amount of LIBO Rate Portion. Each LIBO Rate Portion
shall be for a minimum amount of One Million Dollars ($1,000,000)
and in integral multiples of One Hundred Thousand Dollars ($100,000)
in excess of that amount. Further, the aggregate outstanding
principal amount of all LIBO Rate Portions shall not exceed the
amount of Eleven Million Five Hundred Thousand and No/100 Dollars
($11,500,000).
(b) Determination of Interest Period. By giving notice
as set fourth in Section 3.1(I)(A)(iii) of the Schedule, Borrower
shall have the option, subject to the other provisions of this
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Section 3.1(I)(A)(v), to select an interest period (each, an
"Interest Period") to apply to each LIBO Rate Portion described in
such notice, subject to the following provisions:
(1) Borrower may only select an Interest Period of
one (1), two (2), three (3) or six (6) months in duration;
(2) In the case of immediately successive Interest
Periods applicable to the LIBO Rate Portion, each successive
Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(3) If any Interest Period would otherwise expire
on a day which is not a Business Day, such Interest Period
shall be extended to expire on the next succeeding Business
Day if the next succeeding Business Day occurs in the same
calendar month, and if there will be no succeeding Business
Day in such calendar month, the Interest Period shall expire
on the immediately preceding Business Day;
(4) Borrower may not select an Interest Period as
to any LIBO Rate Portion if such Interest Period expires after
a scheduled date of termination of this Agreement; and
(5) There shall be no more than three (3) Interest
Periods in effect at any one time.
(c) Determination of LIBO Rate. As soon as practicable
on the second Business Day prior to the first day of each Interest
Period (the "Interest Rate Determination Date"), Lender shall
determine (pursuant to the definition of "LIBO Rate") the interest
rate which shall apply to the LIBO Rate Portion for which an
interest rate is then being determined and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to
Borrower. Lender's determination shall be presumed to be correct,
absent manifest error, and shall be binding upon Borrower, absent
manifest error.
(vi) Special Provisions Governing LIBO Rate Portions.
Notwithstanding any other provision of this Agreement, the following
provisions shall govern with respect to LIBO Rate Portions as to the
matters covered:
(a) In the event Lender shall have determined (which
determination shall be final and conclusive and binding upon all
parties hereto), on any Interest Rate Determination Date with
respect to any LIBO Rate Portions, that by reason of circumstances
affecting the interbank Eurodollar market, adequate and fair means
do not exist for determining the interest rate applicable to such
LIBO Rate Portions on the basis provided for in the definition of
LIBO Rate, Lender shall on such date give notice (by telecopy or by
telephone confirmed in writing) to Borrower of such determination,
whereupon (1) no Revolving Loans may be made as, or converted into,
LIBO Rate Portions until such time as Lender notifies Borrower that
the circumstances giving rise to such notice no longer exist and (2)
any Notice of Conversion/Continuation given by Borrower with respect
to the Revolving Loans in respect of which such determination was
made shall be deemed to be modified by Borrower and the LIBO Rate
Portions then being requested shall be made or continued by Lender
as Base Rate Portions.
(b) If Lender shall have determined (which determination
shall be final and conclusive and binding upon all parties), with
respect to any LIBO Rate Portion and any pending Interest Period
that by reason of (a) any change after the date hereof in any
applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law
or governmental rule, regulation or order) or (b) other
circumstances affecting Lender or the LIBO market or the position of
Lender or its affiliates in such market (such as for example, but
not limited to, official reserve requirements required by Regulation
D to the extent not given effect in the LIBO Rate), the LIBO Rate
shall no longer represent the effective pricing to Lender for U.S.
Dollar deposits of comparable amounts for the relevant period, then,
and in any such event, Lender shall promptly (and in any event as
soon as possible after being notified of a borrowing, conversion or
continuation) give notice (by telephone
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confirmed in writing) to Borrower of such determination. Thereafter,
Borrower shall pay to Lender, upon written demand therefor, such
additional amounts in the form of an increased interest rate of, or
a different method of calculating, interest or otherwise as Lender
shall reasonably determine. A certificate as to additional amounts
owed Lender, showing in reasonable detail the basis for the
calculation thereof, submitted in good faith and on a reasonable
basis to Borrower by Lender shall, absent manifest error, be final
and conclusive and binding upon all of the parties hereto.
(c) If on any date Lender shall have reasonably
determined (which determination shall be final and conclusive and
binding upon all parties) that the making or continuation of its
LIBO Rate Portions has become unlawful or impossible under any law,
governmental rule, regulation or order with which Lender believes,
in good faith, it must comply (whether or not having the force of
law and whether or not failure to comply therewith would be
unlawful), then, and in any such event, Lender shall promptly give
notice (by telephone confirmed in writing) to Borrower of that
determination. Subject to the prior withdrawal of a Notice of
Conversion/Continuation or prepayment of the LIBO Rate Portions as
contemplated by the following subsection, the obligation of Lender
to make or maintain the LIBO Rate Portions during any such period
shall be terminated at the earlier of the termination of the
Interest Period then in effect or when required by law and Borrower
shall no later than the termination of the Interest Period in effect
at the time any such determination pursuant to this subsection is
made or, earlier, when required by law, repay or prepay the LIBO
Rate Portions, together with all interest accrued thereon.
(d) In lieu of paying Lender such additional moneys as
are required by Section 3.1(I)(A)(vi)(b) or the prepayment of Lender
required by Section 3.1(I)(A)(vi)(c), Borrower may exercise any one
of the following options:
(1) If the determination by Lender relates only to
LIBO Rate Portions then being requested by Borrower pursuant
to a Notice of Conversion/Continuation, Borrower may by giving
notice (by telephone confirmed in writing) to Lender no later
than the date immediately prior to the date on which such LIBO
Rate Portions are to be made, withdraw that Notice of
Conversion/Continuation and the LIBO Rate Portions then being
requested shall be made by Lender as Base Rate Portions; or
(2) Upon written notice to Lender, Borrower may
terminate the obligations of Lender to make or maintain the
Revolving Loans as, and to convert the Revolving Loans into,
LIBO Rate Portions and in such event, Borrower shall, prior to
the time any payment pursuant to Section 3.1(I)(A)(vi)(c) is
required to be made or if the provisions of Section
3.1(I)(A)(vi)(b) are applicable, at the end of the then
current Interest Period, convert all of the LIBO Rate Portions
into Base Rate Portions but without satisfying the advance
notice requirements therein.
(e) Borrower shall compensate Lender, upon written
request by Lender (which request shall set forth in reasonable
detail the basis for requesting such amounts and which shall, absent
manifest error, be conclusive and binding upon all parties hereto),
for all reasonable losses, expenses and liabilities (including,
without limitation, any loss (including interest paid) sustained by
Lender in connection with the re-employment of such funds) Lender
may sustain: (1) if for any reason (other than a default by Lender)
a borrowing of any LIBO Rate Portions does not occur on a date
specified therefor in a Notice of Conversion/Continuation or a
telephonic request for borrowing or conversion/continuation therefor
is given pursuant to Section 3.1(I); (2) if any prepayment of any
LIBO Rate Portion occurs on a date that is not the last day of an
Interest Period applicable to that LIBO Rate; (3) if any prepayment
of any LIBO Rate Portion is not made on any date specified in a
notice of prepayment given by Borrower; or (4) as a consequence of
any other default by Borrower to repay any LIBO Rate Portions when
required by the terms of this Agreement.
(f) Except as provided in Section 3.1(I)(A)(vi)(b) with
respect to certain determinations on Interest Rate Determination
Dates, if, after the date hereof by reason of, (1) the introduction
of or any change (including, without limitation, any change by way
of imposition or increase of reserve requirements) in or in the
interpretation of any treaty, law, rule, or regulation, or (2) the
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compliance with any guideline or request from any central bank or
other governmental authority or quasi-governmental authority
exercising control over banks or financial institutions generally
(whether or not having the force of law):
(1) Lender (or its applicable lending office)
shall be subject to any tax, duty, levy, cost or other charge
(except for (i) taxes on the overall net income or alternative
minimum taxable income of Lender or its applicable lending
office imposed by the jurisdiction in which Lender's principal
executive office or applicable lending office is organized,
located or is doing business and (ii) any branch profits taxes
imposed by the United States of America or any similar tax
imposed by any other jurisdiction and (iii) in the case of a
foreign lender, any withholding tax that is imposed on amounts
payable to such foreign lender) with respect to any LIBO Rate
Portions or its obligations to make LIBO Rate Portions, or the
recording, registration, notarization or other formalization
of the LIBO Rate Portions or the basis of taxation of payments
to Lender of the principal of or interest or commitment fees
or any amount payable on any LIBO Rate Portions or its
obligation to make LIBO Rate Portions shall change; or
(2) any reserve (including, without limitation,
any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended
by, Lender's applicable lending office shall be imposed on
Lender or its applicable lending office or the interbank LIBO
market,
and as a result thereof there shall be any increase in the cost to
Lender of agreeing to make or making, funding or maintaining LIBO
Rate Portions, or there shall be a reduction in the amount received
or receivable by Lender or its lending office in respect of such
LIBO Rate Portions, then Borrower shall from time to time, upon
written notice from and demand by Lender, pay to Lender, within five
(5) Business Days after receipt of such notice, demand and
appropriate proof of such cost, additional amounts sufficient to
indemnify Lender against such increased cost or reduced amount. A
certificate as to the amount of such increased cost or reduced
amount, submitted to Borrower by Lender, shall except for manifest
error, be final, conclusive and binding for all purposes. Any
payments to be made by Borrower under Section 3.1(I)(A)(vi)(b),
3.1(I)(A)(vi)(e) or 3.1(I)(A)(vi)(f) in respect of LIBO Rate
Portions are to be without duplication.
(g) Calculation of all amounts payable to Lender under
this Section 3.1(I)(A) shall be made as though Lender had actually
funded its LIBO Rate Portion through the purchase of a LIBO deposit
bearing interest at the LIBO Rate in an amount equal to the amount
of that LIBO Rate Portion and having a maturity comparable to the
relevant Interest Period and through the transfer of such LIBO
deposit from an offshore office to a domestic office in the United
States of America; provided, however, that Lender may --------
------- fund each of its LIBO Rate Portion in any manner it sees fit
and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 3.1(1)(A).
B. [RESERVED].
II. TERM A LOAN.
Term Loan A shall bear interest (the "Term Loan A Interest Rate") at
either a fixed rate per annum or a variable rate per annum, to be
selected by Borrower no later than three (3) Business Days prior to
the Closing. In the event Borrower elects that the Term Loan A
Interest Rate throughout the term of the Loans shall be a fixed rate
of interest, the Term Loan A Interest Rate shall be equal to the per
annum rate offered on a five-year U.S. Treasury Note in effect as of
three (3) Business Days prior to the Closing plus four and
one-quarter percent (4.250%). The rate offered on a five-year U.S.
Treasury Note shall be defined as the rate shown under the column
heading "Ask Yld." for "Govt. Bonds & Notes" in the "Treasury Bonds,
Notes & Bills" Section of The Wall Street Journal - Western Edition
published on the third (3rd) Business Day prior to the Closing for
the government bond or note with a maturity date in the same month
and year as the Maturity Date, or, if there are more than one
government bonds or notes with a maturity date in the
- 9 -
10
same month and year as the Maturity Date, the highest of the rates
shown in the "Ask Yld." column for any such bond or note, or, if
there is no government bond or note with a maturity date in the same
month and year as the Maturity Date, the average (rounded to the
next highest basis point) of the rates shown in the "Ask Yld."
column for the bonds or notes in the months preceding and following,
the month in which the Maturity Date falls. In the event the
Borrower elects that the Term Loan A Interest Rate throughout the
term of the Loans shall be a variable rate of interest, (i) the Term
Loan A Interest Rate shall be equal to the Base Rate plus one and
one-quarter percent (1.250%), (ii) the interest rate chargeable
shall be increased or decreased, as the case may be, without notice
or demand of any kind, upon the announcement of any change in the
Base Rate and (iii) each change in the Base Rate shall be effective
hereunder on the first day following the announcement of such
change, provided that, a cumulative change of less than one fourth
of one percent (0.25%) shall not be considered. Regardless of
whether a fixed or variable rate is chosen, interest on Term Loan A
shall be calculated on the basis of a 360-day year and charged for
the actual number of days elapsed.
III. CAPEX LOANS.
The Capex Loans shall bear interest (the "Capex Loans Interest
Rate") at either a fixed rate per annum or a variable rate per
annum, to be selected by Borrower no later than three (3) Business
Days prior to the Closing. In the event Borrower elects that the
Capex Loans Interest Rate throughout the term of the Loans shall be
a fixed rate of interest, the Capex Loans Interest Rate shall be
equal to the per annum rate offered on a five-year U.S. Treasury
Note in effect as of three (3) Business Days prior to the Closing
plus four and one-quarter percent (4.250%). The rate offered on a
five-year U.S. Treasury Note shall be defined as the rate shown
under the column heading "Ask Yld." for "Govt. Bonds & Notes" in the
"Treasury Bonds, Notes & Bills" Section of The Wall Street Journal -
Western Edition published on the third (3rd) Business Day prior to
the Closing for the government bond or note with a maturity date in
the same month and year as the Maturity Date, or, if there are more
than one government bonds or notes with a maturity date in the same
month and year as the Maturity Date, the highest of the rates shown
in the "Ask Yld." column for any such bond or note, or, if there is
no government bond or note with a maturity date in the same month
and year as the Maturity Date, the average (rounded to the next
highest basis point) of the rates shown in the "Ask Yld." column for
the bonds or notes in the months preceding and following the month
in which the Maturity Date falls. In the event the Borrower elects
that the Capex Loans Interest Rate throughout the term of the Loans
shall be a variable rate of interest, (i) the Capex Loans Interest
Rate shall be equal to the Base Rate plus one and one-quarter
percent (1.250%), (ii) the interest rate chargeable shall be
increased or decreased, as the case may be, without notice or demand
of any kind, upon the announcement of any change in the Base Rate
and (iii) each change in the Base Rate shall be effective hereunder
on the first day following the announcement of such change, provided
that, a cumulative change of less than one fourth of one percent
(0.25%) shall not be considered. Regardless of whether a fixed or
variable rate is chosen, interest on the Capex Loans shall be
calculated on the basis of a 360-day year and charged for the actual
number of days elapsed.
IV. OTHER FEES.
A. Unused Line Fee. With respect to each calendar month or portion
thereof during the term of this Agreement (excluding the calendar month in
which this Agreement is executed), Borrower shall also pay Lender, on the
first day of the next month, one-half percent (0.50%) per annum of the
positive amount, if any, by which the Total Facility exceeded sum of the
average aggregate daily balances of outstanding and unpaid Revolving
Loans, Capex Loans and Term Loan A, which shall be deemed fully earned at
the time of each payment.
B. Collateral Monitoring, Fee. At the closing of this transaction
and on the first day of each calendar quarter thereafter, Borrower shall
pay Lender a collateral monitoring fee in an amount equal to one-quarter
percent (0.250%) per annum of the amount of the Total Facility, which
shall be deemed fully earned at the time of each payment.
- 10 -
11
C. Closing Fee. At the Closing of this transaction, Borrower shall
pay to Lender a closing fee in an amount equal to three-quarters percent
(0.750%) of the amount of the Total Facility, which shall be deemed fully
earned at the time of payment.
D. Examination Fees. Borrower agrees to pay to Lender an examination
fee in the amount of Six Hundred and No/100 Dollars ($600.00) per day per
auditor in connection with each audit or examination of Borrower performed
by Lender prior to or after the date hereof, plus all costs and expenses
incurred in connection therewith (the "Examination Fee"). Without limiting
the generality of the foregoing, Borrower shall pay to Lender an initial
Examination Fee in an amount equal to Six Hundred and No/100 Dollars
($600.00) per day per auditor, plus all costs and expenses incurred in
connection therewith. Such initial Examination Fee shall be deemed fully
earned at the time of payment and due and payable upon the closing of this
transaction, and shall be deducted from any good faith deposit paid by
Borrower to Lender prior to the date of this Agreement.
================================================================================
REPORTING REQUIREMENTS (SECTION 5.2):
Borrower shall provide Lender with (i) monthly agings and
reconciliations of Receivables within ten (10) days after the end of
each month; (ii) payables reports and inventory reports (including a
perpetual inventory listing) within fifteen (15) days after the end
of each month; and (iii) internally prepared, unaudited financial
statements within thirty (30) days after the end of each month.
================================================================================
BORROWER INFORMATION:
Borrower State of Incorporation (Section 12. 1): Arizona.
Fictitious Names/Prior Corporate Names/Surviving Corporation (Section
12.2):
Prior Corporate Names: Perfect Interface (a division of Rockford
Corporation).
Fictitious Names: Rockford Acoustic Design (a division of Rockford
Corporation); Rockford Corporation (a division of Rockford
Corporation), Hafler Professional (a division of Rockford
Corporation), Connecting Punch (a division of Rockford Corporation);
and Rockford Fosgate (a division of Rockford Corporation).
Company Merged, Consolidated, or whose Assets All Acquired:
Xxxxxxxxxx; Xxxxx Xxxxxx Company.
Borrower Locations (Section 12.16): (1) Chief Executive Office and Principal
Place of Business: 000 Xxxxx Xxxxx Xxxxx,
Xxxxx, Xxxxxxx 00000.
(2) 000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx,
Xxxxxxx 00000.
(3) 0000/0000 X. Xxxxx Xxxxxx, Xxxxx,
Xxxxxxxx Xxxxxx, Xxxxxxx 00000.
(4) 000 Xxxxxx XX, Xxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxxx 00000.
(5) 000 Xxxxxxx XX, Xxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxxxx 00000.
(6) Xx Xxxxxxx 0, 00000 Xxxxx, Xxxxxx,
Xxxxxxx.
(7) Citilink Warehouse Complex, 000X
Xxxxx Xxxxxxx Xxxx, #00-00, Xxxxxxxxx
000000.
(8) 514-1, Hiata, Kannami-cho,
Xxxxxx-xxx, Xxxxxxxx-Xxx, 000-00, Xxxxx.
- 11 -
12
================================================================================
PERMITTED ENCUMBRANCES (SECTION 11.1):
"Permitted Encumbrances" includes only (a) the Senior Notes, (b) purchase
money security interests in specific items of Equipment identified in the
following UCC Financing Statements:
ORIGINAL SECURED
JURISDICTION FILE NO. FILING PARTY COLLATERAL
DATE
------------ -------- -------- ---------------- --------------------------
Michigan Sec'y of State D224300 04/23/97 Breton Financial Copier
Company
Michigan Sec'y of State D164060 11/21/96 Crown Credit Forklift (filed against
Company Company Rockford Acoustic)
, and (c) leases of specific items of Equipment identified in the following UCC
Financing Statements:
ORIGINAL
JURISDICTION FILE NO. FILING SECURED PARTY
DATE
------------ -------- ------ -------------
Arizona Sec'y of State 665657 05/28/91 Xxxxx Financial Corporation
Arizona Sec'y of State 688004 12/09/91 Pitney Xxxxx Credit Corp.
Arizona Sec'y of State 768139 12/10/93 Toyota Motor Credit Corporation
Arizona Sec'y of State 777356 03/01/94 Center Capital Corporation
Arizona Sec'y of State 780892 03/29/94 Center Capital Corporation
Arizona Sec'y of State 784236 04/26/94 Center Capital Corporation/
New England Capital Corporation
Arizona Sec'y of State 795505 07/26/94 New England Capital Corporation
Arizona Sec'y of State 808969 11/15/94 Xxxxxx Financial Leasing, Inc.
Arizona Sec'y of State 813814 12/27/94 Norstan Financial Services, Inc.
Arizona Sec'y of State 827692 04/17/95 Norwest Equipment Finance, Inc.
Arizona Sec'y of State 834768 06/13/95 Newcourt Receivables Corporation
Arizona Sec'y of State 835245 06/16/95 Norwest Equipment Finance, Inc.
Arizona Sec'y of State 851741 10/24/95 Newcourt Receivables Corporation
Arizona Sec'y of State 861154 01/03/96 Newcourt Receivables Corporation
Arizona Sec'y of State 892561 04/08/96 Leasetec Systems Credit
Arizona Sec'y of State 892738 04/09/96 Pitney Xxxxx Credit Corporation
Arizona Sec'y of State 928332 07/30/96 Pitney Xxxxx Credit Corporation
Arizona Sec'y of State 938674 10/08/96 MetLife Capital Corporation
Arizona Sec'y of State 940168 10/21/96 M&I First National Leasing Corp.
Arizona Sec'y of State 940617 10/23/96 MetLife Capital Corporation
Arizona Sec'y of State 948997 12/24/96 First Sierra Financial
Arizona Sec'y of State 949848 12/31/96 Data General Corporation
Arizona Sec'y of State 962076 04/01/97 Data General Corporation
Arizona Sec'y of State 962077 04/01/97 Data General Corporation
Maricopa County, Arizona 88-484378 09/30/88 BancWest Equipment Leasing Services
Recorder's Office (re 000 X. Xxxxxxxx)
Xxxxxxxx Sec'y of State 54858B 04/17/95 Norwest Equipment Finance, Inc.
Michigan Sec'y of State 78935B 10/09/96 MetLife Capital Corporation
Michigan Sec'y of State 62517B 11/02/95 Data General Corporation
Michigan Sec'y of State 84166B 04/04/97 Data General Corporation
Michigan Sec'y of State C902716 11/04/94 Xxxxx Leasing Company
(filed against Rockford Acoustic Design)
- 12 -
13
================================================================================
FINANCIAL COVENANTS (SECTION 13.14):
Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each month,
except as otherwise specifically provided
below:
Debt Service Coverage Ratio. Maintain a Senior Debt Coverage Ratio of no
less than 1.30 to 1.0 and maintain a Total
Contractual Debt Coverage Ratio of no less
than 1.0 to 1.0. For Borrower's fiscal year
ending December 31, 1997, the foregoing
covenants shall be tested using Borrower's
fiscal year-to-date financial information
but on annualized basis; for Borrower'
fiscal years ending after such date, the
foregoing covenants shall be tested monthly
on a rolling and trailing twelve (12) month
basis.
EBITDA. Maintain, on a consolidated basis, EBITDA of
no less than Three Million Dollars
($3,000,000). The foregoing covenant shall
be tested monthly, beginning with the period
ending on December 31, 1997, on a rolling
and trailing twelve (12) month basis.
================================================================================
ADDITIONAL COVENANTS (SECTION 13.15):
Should any Person who has executed and
delivered to Lender a Support Agreement
cease employment with Borrower, Borrower
shall within 30 days following such
cessation obtain an executed Support
Agreement, in form and substance acceptable
to Lender in its sole discretion, from such
Person's replacement or another officer of
Borrower of similar responsibilities.
================================================================================
NEGATIVE COVENANTS (SECTION 14):
Capital Expenditures: Borrower shall not make or incur any Capital
Expenditure (exclusive of (i) Capital
Expenditures financed solely by one or more
Capex Loans and (ii) the Equipment Lease
Termination Advance) if, after giving effect
thereto, the aggregate amount of all such
Capital Expenditures by Borrower in any
fiscal year would exceed the sum of (a) One
Million Five Hundred Thousand and No/100
Dollars ($1,500,000.00) plus (b) from and
after the first (1st) anniversary of the
date hereof but before the third anniversary
of the date hereof, purchase money
Indebtedness, Capital Lease expenditures and
so-called "off-balance sheet" obligations
with respect to Equipment financing
(collectively, "Financed Capex") in the
aggregate amount of One Million and No/100
Dollars ($1,000,000.00). The "Equipment
Lease Termination Advance" means the advance
to be made at the Closing in full and
complete satisfaction of Borrower's
Equipment leases with First Interstate Bank
of Arizona, N.A. and its
successors-in-interest in the approximate
aggregate amount of $562,904 covering
Equipment identified in UCC File Nos. 861145
& 890606, filed with the Arizona Secretary
of State on January 3, 1996 and March 26,
1996, respectively, and UCC File No.
D079670, filed with the Michigan Secretary
of State on April 1, 1996. Borrower shall
give Lender not less than thirty (30) days
written notice of any proposed Financed
Capex expenditure.
Compensation: Borrower shall not pay total compensation,
including salaries, withdrawals, fees,
bonuses, commissions, drawing accounts and
other payments, whether directly or
indirectly, in money or otherwise, during
any fiscal year in an amount in excess of
One Million One Hundred Thousand and No/100
Dollars ($1,100,000.00) to the following
executives, officers and directors of
Borrower (and any relative and/or
- 13 -
14
replacement in title thereof): Xxx XxXxxx,
Xxxxx X. Xxxxxxx, Xxxxx Xxxxxx, Xxxxx
Xxxxxxxx, Xxx Xxxxx and Xxx Xxxxxxxxxx.
Subsidiaries: Borrower will not create or permit to exist
any Subsidiary, other than any Subsidiary in
existence on the date hereof and disclosed
to Lender in writing.
Management Fees: Borrower shall not pay to any Person any
fee, commission or other compensation
related to the management of Borrower's
business; provided, however, that Borrower
may pay a management fee to 3G, pursuant to
Borrower's agreement with 3G, in an amount
not to exceed Three Hundred Sixty Thousand
and No/100 Dollars ($360,000.00) per fiscal
year of Borrower (the "Base Management
Fee"), provided that such payments are made
solely in compensation for services rendered
to Borrower by W. Xxxx Xxxxxx; provided
further, however, that as long as no Default
or Event of Default exists (or would exist
as a result of such payment), Borrower may
pay an additional management fee to 3G (over
and about the amount of the Base Management
Fee), pursuant to Borrower's agreement with
3G, in an amount not to exceed One Hundred
Twenty Thousand and No/100 Dollars
($120,000.00) per fiscal year of Borrower,
provided that such payments are made solely
in compensation for services rendered to
Borrower by W. Xxxx Xxxxxx.
Change in Ownership: Without Lender's consent, which may be
withheld at Lender's sole discretion,
Borrower will not issue or sell any stock of
Borrower so as to cause the Control Group,
on a fully-diluted basis, to own less than
sixty-five percent (65.0%) of Borrower's
voting and non-voting stock, and Borrower
will not permit or suffer to occur the sale,
transfer, assignment, pledge or other
disposition of any or all of the issued and
outstanding shares of stock or other
evidence of ownership of Borrower so as to
cause the Control Group, on a fully-diluted
basis, to own less than sixty-five percent
(65.0%) of the issued and outstanding shares
of common stock or other evidence of
ownership of Borrower.
Indebtedness: Borrower shall not create, incur, assume or
permit to exist any Indebtedness (including
Indebtedness in connection with Capital
Leases), other than (i) from and after the
first (1st) anniversary of the date hereof
but before the third anniversary of the date
hereof, no more than the amount of One
Million and No/100 ($1,000,000) per fiscal
year of Borrower solely in connection with
permitted Financed Capex expenditures as
more fully described in the paragraph
labeled "Capital Expenditures" in this
Section 14, (ii) the Obligations, (iii)
trade payables and other contractual
obligations to suppliers and customers
incurred in the ordinary course of business
and (iv) other Indebtedness existing on the
date of this Agreement and reflected in the
Prepared Financials (other than Indebtedness
paid on the date of this Agreement from
proceeds of the initial advances hereunder).
================================================================================
TERM (SECTION 16.1):
The initial term of this Agreement shall be
three (3) years from the date hereof (the
"Initial Term") and shall be automatically
renewed at the discretion of Lender for
successive periods of one (1) year each
(each, a "Renewal Term"), unless earlier
terminated as provided in Section 16 or 17
above or elsewhere in this Agreement.
Upon the expiration of the Initial Term (if
not renewed) or any Renewal Term (if not
renewed), or the earlier termination of this
Agreement as provided in Section 16 or 17
above or elsewhere in this Agreement, all
Obligations shall be immediately due and
payable.
- 14 -
15
TERMINATION FEE (SECTION 16.4):
(a) Termination Fee. The Termination Fee
provided in Section 16.4 shall be, with
respect to the Revolving Loans, an amount
equal to the following percentage of the
average daily outstanding balance of the
Obligations for the 180-day period (or
lesser period if applicable) preceding the
date of termination, and with respect to the
Term Loans, an amount equal to the following
percentage of the principal amount of such
Term Loans prepaid:
(i) three percent (3.0%), if such early
termination occurs on or prior to the
first anniversary of this Agreement;
(ii) two percent (2.0%), if such early
termination occurs after the first
anniversary of this Agreement but on or
prior to the second anniversary of this
Agreement; and
(iii) one percent (1.0%), if such early
termination occurs alter the second
anniversary of this Agreement.
Notwithstanding the foregoing, in the event
that such termination and prepayment is
financed by Borrower's concluding a
successful initial public offering, then the
Termination Fee under paragraph (a)(i) above
shall be one percent (1.0%), and under
paragraphs (a)(ii) and (a)(iii) shall be
zero percent (0%).
(b) Loans Coterminous. Any termination of
any of the Revolving Loans facilities shall
be accompanied by (i) repayment in full of
such Loan facility, (ii) termination and
repayment in full of all other Loans and
(iii) payment of the applicable Termination
Fee.
(c) Prepayment. Term Loan A and all Capex
Loans then outstanding may be prepaid in
full (but not in part) upon the payment of
the applicable Termination Fee. Upon such
prepayment, the Capex Loans facility shall
be automatically terminated.
(d) Excess Cash Flow Prepayment. No
Termination Fee shall be payable with
respect to any prepayments required by
Lender to be made out of Borrower's Excess
Cash Flow pursuant to Section 7.7 hereof.
(e) Make Whole Premium; Other Premiums. In
the event Borrower elects that the Term Loan
A Interest Rate shall be a fixed rate of
interest, any prepayment of Term Loan A
otherwise permitted hereunder (other than a
prepayment made pursuant to Section 7.7 of
this Agreement) shall also be accompanied by
a payment equal to the Make Whole Premium
with respect to Term Loan A. In the event
Borrower elects that the Capex Loans
Interest Rate shall be a fixed rate of
interest, any prepayment of the Capex Loans
otherwise permitted hereunder (other than a
prepayment made pursuant to Section 7.7 of
this Agreement) shall also be accompanied by
a payment equal to the Make Whole Premium
with respect to the Capex Loans. In any
case, such Make Whole Premium shall be
payable even if there is no Termination Fee
due with respect to such prepayment. Any
prepayment made with respect to a LIBO Rate
Portion shall, among other things, be
accompanied by the applicable premiums
described in Section 3.1(I)(A)(vi)(e) of
this Schedule.
================================================================================
ADDITIONAL DEFINITIONS (SECTION 18.1):
"3G" means Xxxxxxxx, Galef & Goldress, Inc., a Nevada corporation.
"Xxxxxx" means those Persons who are descendants of or, in the case
of non-individual Persons, entities which are controlled by descendants
of, Xxxx X. and Xxxxxxx X. Xxxxxx.
- 15 -
16
"Xxxxxx Xxxxx" means that certain $1,000,001 promissory note of
Borrower, payable to Boulder Investors Limited Partnership, which note was
issued pursuant to that certain Bridge Loan Conversion and Extension
Agreement dated as of July 1, 1996 by and between Borrower and Boulder
Investors Limited Partnership.
"Base Rate" means the per annum rate of interest announced publicly
by Citibank, N.A., from time to time as its "base rate" (or any successor
thereto), which may not be such institution's lowest rate. Each change in
the shall be effective hereunder on the first day following the
announcement of such change, without notice of any kind.
"Base Rate Option" means the interest rate option described in
Section 3.1(I)(A)(i)(a) of the Schedule.
"Base Rate Portion" means the portion of the Revolving Loans, if
any, which bears interest at the rate described in Section 3.1(I)(A)(i)(a)
of the Schedule.
"Business Day" means any day on which commercial banks in both Los
Angels, California and Phoenix, Arizona are open for business; provided
that with respect to all notices, determinations, fundings and payments in
connection with any LIBO Rate Portion of the Revolving Loans, a Business
Day means any day that is also a day for trading by and between banks in
U.S. Dollar deposits in the London interbank eurodollar market.
"Capex Loans" has the meaning given to it in Section 1.2 of the
Schedule.
"Capex Loans Interest Rate" has the meaning given to it in Section
3.1(III) of the Schedule.
"Capex Note" has the meaning given to it in Section 1.2 of the
Schedule.
"Eligible Foreign Finished Goods Inventory" means that portion of
Eligible Inventory consisting of finished goods stored in warehouses
acceptable to Lender in its sole discretion and located in the cities of
Bremen, Germany or Singapore.
"Eligible Raw Materials Inventory" means that portion of Eligible
Inventory consisting of raw materials stored in warehouses acceptable to
Lender in its sole discretion and located in the cities of Tempe, Arizona
and Grand Rapids, Michigan.
"Eligible U.S. Finished Goods Inventory" means that portion of
Eligible Inventory consisting of' finished goods stored in warehouses
acceptable to Lender in its sole discretion and located in the cities of
Tempe, Arizona and Grand Rapids, Michigan.
"Excess Cash Flow" means Operating Cash Flow - Permitted less Total
Contractual Debt Service.
"Financed Capex" has the meaning given to it under the paragraph
captioned "Capital Expenditures" under Section 14 of this Schedule.
"Guarantor" means, jointly and severally, each Subsidiary.
"Interest Period" has the meaning set forth in Section
3.1(I)(A)(v)(b) of the Schedule.
"Interest Rate Determination Date" has the meaning set forth in
Section 3.1(I)(A)(v)(c) the Schedule.
"Inventory Loans" has the meaning given to it in Section 1.2 of the
Schedule.
"LIBO Rate" shall mean, for any LIBO Rate Portion the per annum rate
of interest which is ordinarily reported on page 3750 of the Telerate
Matrix (in U.S. Dollars) for a principal amount substantially equal to the
amount of such LIBO Rate Portion and having a maturity comparable to the
Interest Period proposed to be applicable to such LIBO Rate Portion, as
quoted to Borrower by Lender, provided, however, if, for whatever reason,
Lender shall be unable to ascertain the LIBO Rate pursuant to the
preceding provisions, the LIBO Rate in such circumstances shall be the
rate per annum determined by Lender by dividing (the resulting quotient to
be rounded upward to the nearest 1/100 of one percent) (i) the per annum
rate of interest at which deposits in U.S. Dollars in an amount
substantially equal to such LIBO Rate Portion and having a maturity
comparable to the Interest Period proposed for such LIBO Rate Portion are
offered Citibank, N.A. or its affiliates in the London interbank market at
approximately 11:00 a.m. (London time) on the
- 16 -
17
applicable Interest Rate Determination Date, by (ii) a number equal to 1.0
minus the aggregate (but without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in effect on the applicable
Interest Rate Determination Date (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as now and from time
to time in effect) for eurocurrency funding (currently referred to as
"Eurocurrency liabilities" in Regulation D of such Board) which are
required to be maintained by Lender.
"LIBO Rate Option" shall mean the interest rate option described in
Section 3.1(I)(A)(i)(b) of the Schedule.
"LIBO Rate Portion" shall mean the portion of the Revolving Loans,
if any, which bears interest at the rate described in subsection
3.1(I)(A)(i)(b) of the Schedule.
"Loans" has the meaning given to it in Section 1.2 of the Schedule.
"Margin" means, with respect to an advance of the Revolving Loans
only, the per annum rate of interest by which the per annum rate of
interest payable by Borrower to Lender exceeds the Base Rate or LIBO Rate,
as applicable.
"Maturity Date" means the third anniversary of the date of this
Agreement.
"Prepared Financials" means the balance sheets of Borrower as of May
31, 1997, and as of each subsequent date on which audited balance sheets
are delivered to Lender from time to time hereunder, and the related
statements of operations, changes in stockholder's equity and changes in
cash flow for the periods ended on such dates.
"Receivables Loans" has the meaning given to it in Section 1.2 of
the Schedule.
"Required Excess Cash Flow Payments" has the meaning set forth in
Section 7.7 of this Agreement.
"Revolving Loans" has the meaning given to it in Section 1.2 of the
Schedule.
"Seasonal Loans" has the meaning given to it in Section 1.2 of the
Schedule.
"Senior Debt Coverage Ratio" means, for the applicable period, the
ratio of Borrower's Operating, Cash Flow - Actual to Borrower's Senior
Contractual Debt Service, determined on a consolidated basis.
"Senior Note" means a Rockford Corporation Senior Note Due February
3, 1999 (Renaming, Amending, And Replacing A 10.5% Convertible Debenture
Due February 3, 1999) issued by Borrower to each of those holders of
record, and in the original principal amount, shown on Exhibit E attached
hereto and incorporated herein by this reference.
"Subordinating Creditor" means each of 3G, the holder(s) of the
Xxxxxx Note, each Guarantor and each holder of a Senior Note.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of
such corporation, irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of
the happening of any contingency, is at the time directly or indirectly
owned by Borrower, by Borrower and one or more other Subsidiaries, or by
one or more other Subsidiaries. Without in any way limiting the foregoing,
"Subsidiary" shall include each of Rockford Europe Elektronik Vertriebs
GmBH, Rockford Japan Corporation and Rockford Singapore Corporation.
"Term Loan" means, as the context requires, either Term Loan A or
the Capex Loans; and "Term Loans" means Term Loan A and the Capex Loans,
collectively.
"Term Loan A" has the meaning given to it in Section 1.2 of the
Schedule.
"Term Loan A Interest Rate" has the meaning given to it in Section
3.1(II) of the Schedule.
- 17 -
18
"Term Note A" has the meaning given to it in Section 1.2 of the
Schedule.
"Total Contractual Debt Coverage Ratio" means, for the applicable
period, the ratio of Borrower's Operating Cash Flow - Actual to Borrower's
Total Contractual Debt Service, determined on a consolidated basis.
"U.S. Dollars" means the currency of the United States of America.
================================================================================
TRADEMARKS, LICENSES AND PATENTS (SECTION 18.1):
See Exhibit B, Exhibit C and Exhibit D attached
hereto and incorporated herein by this
reference for all purposes.
================================================================================
DISBURSEMENT (SECTION 19.12):
Unless and until Borrower otherwise directs
Lender in writing, all loans shall be wired to
Borrower's operating account described in
Exhibit G attached hereto and incorporated
herein by this reference.
================================================================================
ADDITIONAL PROVISIONS:
1. The proceeds of the Loans shall be used to pay
Borrower's senior Indebtedness to Xxxxx Fargo Bank, to pay
subordinated Indebtedness to Provident Mutual, to pay
miscellaneous subordinated Indebtedness to certain noteholders
and to provide additional working capital for Borrower's ongoing
operational needs.
2. [RESERVED].
3. Notwithstanding anything to the contrary herein
contained, Borrower shall have until the thirtieth (30th) day
after the date hereof to complete the perfection of Lender's
security interest in the domestic Trademarks, Licenses and
Patents and those foreign Trademarks, Licenses and Patents
selected by Lender in its sole discretion, and to cure any
defects in title (if any) with respect to such Trademarks,
Licenses and Patents. Without limiting any other provision of
this Agreement, Borrower hereby agrees to execute such further
instruments as may be necessary to effect the perfection of
Lender's security interest pursuant to the Collateral
Assignments.
4. Notwithstanding anything to the contrary herein
contained, (a) Borrower shall have until October 1, 1997 to
retire in full the Indebtedness owed to each holder of a Senior
Note and evidenced by such Senior Note, (b) should Borrower fail
to retire all such Indebtedness by such date, Lender shall have
no further obligation to make any advances of the Loans until
Borrower has excess borrowing availability under the Receivables
Loans facility of not less than the aggregate sum of the
outstanding and unpaid principal balance of all Senior Notes ,
after giving effect to payment in full of all of Borrower's
suppliers to within sixty (60) days of such suppliers' respective
written or agreed-upon terms of payment, and (c) should Borrower
fail by the close of business on October 10, 1997 to either
establish such excess borrowing availability or to retire in full
all such Indebtedness, then Lender may, without limiting any
other remedy available to it under this Agreement, declare an
Event of Default.
5. Notwithstanding anything to the contrary herein
contained, Borrower may make payments with respect to the Xxxxxx
Note, but only upon the terms and subject to the conditions
herein contained: (a) provided no Default or Event of Default
exists or would exist after giving effect to the proposed
payment, Borrower may make regularly-scheduled monthly
installments of interest with respect to the Xxxxxx Note at a
rate of interest not exceeding 11.0% per annum; (b) Borrower may
make principal installments with respect to the Xxxxxx Note not
to exceed the amount of Two Hundred Thousand and No/100 Dollars
($200,000) in any one calendar month, but only upon the
satisfaction of the following
- 18 -
19
conditions precedent: (I) no Default or Event of Default exists
or would exist after giving effect to the proposed payment; (ii)
Borrower shall have excess borrowing ability (in addition to that
set forth in Section 2.1 of this Schedule) under the Receivables
Loans facility of not less of not less than Five Hundred Thousand
and No/100 Dollars ($500,000) after giving effect to the proposed
payment and after giving effect to payment in full of all of
Borrower's suppliers to within sixty (60) days of such suppliers'
respective written or agreed-upon terms of payment; (iii)
Borrower's Total Contractual Debt Coverage Ratio, on a rolling
and trailing twelve (12) month basis (and after annualizing the
then Total Contractual Debt Service amount from the date of this
Agreement to the then current date) shall be no less than 1.0 to
1.0 both before and after giving effect to the proposed payment;
and (iv) in no event may Borrower make any payment with respect
to the outstanding principal balance of the Xxxxxx Note before
September 1, 1997.
6. Within five (5) business days after Closing, Borrower
shall pay in full those Persons formerly holders of Senior Notes
and identified in Exhibit F attached hereto and incorporated
herein by this reference.
Borrower: Lender:
ROCKFORD CORPORATION FINOVA CAPITAL CORPORATION
By /ss/ By /ss/
---------------------------------- ----------------------------------
Name Xxxxx X. Xxxxxxx Name Xxxxxxxx X. Breed
-------------------------------- --------------------------------
Title Vice President Finance & CFO Title Vice President
------------------------------- -------------------------------
- 19 -
20
EXHIBIT A
NOTICE OF CONVERSION/CONTINUATION1
[TO BE RE-TYPED ON BORROWER'S LETTERHEAD]
____________________ , 199
FINOVA Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
We refer to the Loan and Security Agreement dated as of
June , 1997 (as the same may hereafter be amended, modified or supplemented, the
"Loan Agreement") between FINOVA Capital Corporation and corporation (the
"Borrower"). Capitalized terms used but not defined herein have the meanings
given to them in the Loan Agreement.
This letter represents the Borrower's request to [A: convert $
[must be a minimum of $1,000,000 and integral multiples of $100,000 in excess
thereof] in principal amount of presently outstanding Revolving Loans bearing
interest at the [Base Rate Option/LIBO Rate Option] [with an Interest Period
expiration date of , 199 ] to Revolving Loans bearing interest at the [Base Rate
Option/LIBO Rate Option] on , 199 .] [The Interest Period for such loans is
requested to be a [one/two/three/six] month period. [B: continue as Revolving
Loans bearing interest at the LIBO Rate Option $ [must be a minimum of
$1,000,000 and integral multiples of $100,000 in excess thereof] with an
Interest Period expiration date of , 199 . The interest Period for such loans is
requested to be a [one/two/three/six] month period.] The Borrower hereby
certifies that no Default or Event of Default has occurred and is continuing or
will result from the proposed [conversion/continuation].
Very truly yours,
[Borrower]
By______________________________________
Its_____________________________________
----------
(1) To be delivered no later than 10:00 a.m. (Los Angeles time) at least three
(3) Business Days in advance of the proposed conversion/continuation date.
21
EXHIBIT B
PATENTS AND PATENT APPLICATION REGISTERED OR PENDING
USA NUMBER NAME/DESCRIPTION
5,339,362 Symmetry Amplifier Housing
(Control/Configuration/Circuitry)
D315,832 Punch Heat Sink
4,467,288 TransNova Audiopile Circuitry
D368,253 Punch DSM
4,323,736 MK1 Interface
4,496,910 Pre-Amplifier Having Improved Sonic Performance
22
EXHIBIT C
TRADEMARKS, TRADEMARK REGISTRATION, TRADE NAMES,
TRADE NAME REGISTRATIONS, AND TRADEMARK
OR TRADE NAME APPLICATIONS
ROCKFORD CORPORATION
TRADEMARKS
JURISDICTION NUMBER NAME/DESCRIPTION
Argentina 1,563,069 ROCKFORD FOSGATE (Label)
Argentina 1,538,432 R (Label)
Argentina 1,532,622 ROCKFORD XXXXXXX
Xxxxxxx 000000 XXXXXXXX
Xxxxxxx 000000 PERFECT INTERFACE
Arizona 085787 ROCKFORD XXXXXXX
Xxxxxxx 000000 THE XXXXX XXXXXX COMPANY
Australia 633,189 DIAMOND R DESIGN
Australia 633187 ROCKFORD FOSGATE
Canada 446,636 DIAMOND R DESIGN
Canada 447,053 PUNCH
Canada 453,809 ROCKFORD FOSGATE
Chile 468,372 R (Label)
Columbia 188,834 DIAMOND R DESIGN
Columbia 188203 XXXXXXXX XXXXXXX
Xxxxxxx 000000 R (Diamond Design)
Finland 140186 ROCKFORD FOSGATE
Germany 1,143,651 PUNCH
Hong Kong 10769/96 DIAMOND R DESIGN
Indonesia 314.889 ROCKFORD FOSGATE & Device
Japan 04-120823 ROCKFORD FOSGATE (Stylized)
Korea 210057 HAFLER
Korea South 210056 ROCKFORD FOSGATE
Korea South 210061 THE PUNCH WITH R
Malaysia 2341/90 THE PUNCH
Mexico 494651 XXXXX
Xxxxxx 000000 R LOGO
Mexico 511146 ROCKFORD XXXXXXX
Xxxxxx 000000 THE PUNCH
New Zealand 238,328 DIAMOND R DESIGN
New Zealand 238,327 PUNCH
New Zealand 238,326 ROCKFORD XXXXXXX
Xxxxxx 000000 DIAMOND R DESIGN
Xxxxxx 000000 XXXXX
Xxxxxx 172971 XXXXXXXX XXXXXXX
Xxxxxxxx 000000 XXXXX
Xxxxxxxxx S/113/90 DIAMOND R DESIGN
Singapore 000/00 XXXXXXXX XXXXXXX
Xxxxxxxxx S/114/90 THE PUNCH
Sweden 264191 DIAMOND R DESIGN
Sweden 9,404,723 ROCKFORD XXXXXXX
Xxxxxx 000000 ACOUSTAT
23
Taiwan 526760 DIAMOND R DESIGN
Taiwan 526761 HAFLER
Xxxxxx 000000 XXXXX
Xxxxxx 000000 XXXXX XXXXX
Xxxxxx 000000 XXXXXXXX
Xxxxxx 381791 XXXXXXXX XXXXXXX (Xxxxxxxx)
Xxxxxx 000000 THE XXXXX
Xxxxxxxx 000000 HAFLER
Thailand 137875 R ACOUSTAT
Thailand 137874 R PERFECT INTERFACE
Thailand 147398 R XXXXXXXX
Xxxxxxxx 00000 ROCKFORD FOSGATE THE PUNCH
Turkey 160397 DIAMOND R DESIGN
Xxxxxx 000000 XXXXX
Xxxxxx 160238 ROCKFORD FOSGATE
United Kingdom 1,561,888 DIAMOND R DESIGN
United Kingdom 1,561,887 FOSGATE (Stylized)
United Kingdom 1,561,902 ROCKFORD (Stylized)
United Kingdom 1,561,782 ROCKFORD FOSGATE (Stylized)
United Kingdom 1,561,819 THE PUNCH (Stylized)
USA 1,364,265 ACOUSTAT
USA 1,695,594 BOOMER
USA 1,956,529 EPX
USA 1,573,000 HAFLER
USA 1,592,841 PERFECT INTERFACE
USA 1,514,462 PUNCH
USA 2,013,318 PUNCH DSM
USA 1,524,277 R (And Design)
USA 2,005,905 RF PUNCH AND DESIGN
USA 1,216,478 ROCKFORD FOSGATE
USA 1,526,601 ROCKFORD FOSGATE (Stylized)
USA 1,715,158 SERIES 1
USA 1,801,415 SERIES 1
USA 1,712,627 SYMMETRY
USA 1,515,245 THE PUNCH
USA 2,021,730 TOPAZ
USA 1,961,961 TRANS-NOVA
ROCKFORD EUROPE ELEKTRONIK VERTRIEBS GMBH
TRADEMARKS
JURISDICTION NUMBER NAME/DESCRIPTION
Germany 2,082,761 DIAMOND R DESIGN
Germany 2,076,321 PUNCH
Germany 2,076,872 ROCKFORD FOSGATE
Germany 2,076,871 THE PUNCH
International IR 646 247 DIAMOND R DESIGN
International IR 647 284 PUNCH
International IR 646 695 ROCKFORD FOSGATE
International IR 646 246 THE PUNCH
- 2 -
24
EXHIBIT D
LICENSE AGREEMENTS
None.
25
EXHIBIT E
SENIOR NOTE HOLDERS
Holder of Record Original Note Amount
---------------- --------------------
GST Exempt Trust $170,000
Boulder Investors Limited Partnership $125,000
Xxx Xxxxx $ 1,000
Xxxxxxx X. Xxxxxxx $ 4,000
Xxxxxx Xxxxx $ 40,000
Xxxxxxx X. & Xxxxxxx X. Xxxxx $ 20,000
Xxxxxx X. Xx. & Xxxxx X. XxxXxxxx $ 50,000
Xxxxxx Xxxxxxx $ 5,000
--------
TOTAL: $415,000
26
EXHIBIT F
FORMER HOLDERS OF SENIOR NOTES
Holder of Record Original Note Amount
---------------- --------------------
Xxxxxx X. & Xxxxx X. Xxxxxxx $20,000
Xxxxx X. & Xxxxx X. Xxxxxx $30,000
Xxxxxx X. & Xxx X. Xxxxxxxx $ 7,000
Xxxx X. Xxxxx $14,000
Xxxxxxxx X. Xxxxxxx $ 4,000
Xxxxxxx X. & Xxxxxx X. Xxxxx $ 2,000
-------
TOTAL: $77,000
27
EXHIBIT G
BORROWER'S WIRING INSTRUCTIONS
Rockford Corporation
Account Name: Rockford Corporation
Account Number: 000 000 0000
Bank Name: Xxxxx Fargo Bank Arizona -- Phoenix, Arizona
Bank Routing Number: 121 000 248
Swift Code: USFIAZ 55 (Arizona Swift ID)
