<PAGE>   1
                                                                  EXHIBIT 10.20

                              ROCKFORD CORPORATION


              CONVERTIBLE SUBORDINATED DEBENTURE PURCHASE AGREEMENT

                                   May 1, 1995

To the Purchasers of
Rockford Corporation
Convertible Subordinated Debentures
Identified on Exhibit A Below

Ladies and Gentlemen:

         The undersigned Rockford Corporation, an Arizona corporation (the
"Company"), agrees with you as follows:

1.       PURCHASE AND SALE OF DEBENTURES.

         1.1      Authorization by the Company. The Company has authorized the
                  issue and sale to you of its 8.5% Convertible Subordinated
                  Debentures (the "Debentures"), with the terms and rights set
                  forth in the form of the Debenture attached to this Agreement
                  as Exhibit B. The Debentures will be in the total principal
                  amount, and will be divided among you, as shown on Exhibit A.

         1.2      Agreement of Purchase and Sale. Subject to the terms and
                  conditions of this Agreement, and on the basis of the
                  representations and warranties set forth herein, the Company
                  will sell to you and you will purchase from the Company, on
                  the Closing Date, the principal amount of the Debentures set
                  forth on Exhibit A at a price equal to the principal amount.
                  The Debentures will be divided among you as set forth on
                  Exhibit A.

         1.3      Closing of Purchase and Sale. The purchase and sale of the
                  Debentures (the "Closing") will take place at the office of
                  Lewis and Roca, 40 North Central Avenue, Phoenix, Arizona, on
                  May 1, 1995 (or on another date if you and the Company agree
                  in writing) (the "Closing Date"). On the Closing Date, the
                  Company will deliver to you Debentures against payment of the
                  purchase price by your certified or cashiers checks payable to
                  the order of the Company or wire transfer of immediately
                  available federal funds. The Debentures purchased by you will
                  be evidenced by appropriate certificates issued to each of
                  you, in definitive form as set forth in Exhibit B, divided
                  among you as set forth in Exhibit B, and registered in your
                  names or the names of your nominee or nominees.

2.       REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents
         and warrants to you as follows:
<PAGE>   2
         2.1      Organization. The Company is a corporation duly organized,
                  validly existing and in good standing under the laws of
                  Arizona. The Company has all requisite corporate power and
                  authority to own, lease, and operate its properties and to
                  carry on its business as now conducted and as proposed to be
                  conducted. On the Closing Date the Company will be duly
                  qualified or authorized to do business and in good standing in
                  each jurisdiction where the character of the property owned or
                  leased or the nature of the business transacted makes such
                  qualification or authorization necessary. The Company has no
                  subsidiaries or any direct or indirect interest (by way of
                  stock ownership or otherwise) in any firm or business except
                  as disclosed in Schedule 2.1. The Company has furnished you
                  with certified copies of its Certificate of Incorporation and
                  By-Laws, as amended to the date hereof.

         2.2      Capitalization. The Company's authorized and outstanding
                  capital stock, and the outstanding securities convertible into
                  the Company's capital stock, is as set forth in Schedule 2.2.
                  All of the issued and outstanding shares of the Company's
                  Common Stock are duly authorized, validly issued, fully paid
                  and nonassessable. The Company has reserved the number of
                  shares of its Common Stock shown on Exhibit A for issuance
                  upon conversion of the Debentures. All outstanding shares of
                  the Common Stock of the Company were issued in compliance with
                  all applicable Federal and state securities or "blue sky"
                  laws. There are in existence or contemplated no options,
                  warrants, agreements or similar rights granted by the Company
                  for the issue or sale by it of any securities, other than the
                  transactions contemplated by this Agreement and the
                  transactions disclosed in Schedule 2.2.

         2.3      Financial Position. The Company's Balance Sheets as at
                  September 30, 1993 and 1994, and Statements of Income and
                  Retained Earnings and of changes in Financial Position for its
                  two fiscal years then ended, as audited by Ernst & Young LLP
                  and in the form set forth in Schedule 2.3, are true and
                  correct in all material respects as at such dates and for the
                  periods then ended.

         2.4      Duly Issued. The shares of the Common Stock issuable upon
                  conversion of the Debentures, upon such conversion, will be
                  validly issued, fully paid and nonassessable.

         2.5      Authorization. The Company has duly authorized, executed and
                  delivered this Agreement. This Agreement constitutes the valid
                  and binding agreement of the Company, enforceable in
                  accordance with its terms except as enforcement may be limited
                  by bankruptcy, insolvency, moratorium and equitable principles
                  applicable to creditors generally. The Company has full power
                  and lawful authority to issue and sell the Debentures on the
                  terms and conditions set forth in this Agreement and to issue
                  the Common Stock issuable upon conversion of the Debentures.

         2.6      Compliance with Laws. The Company is in compliance with all
                  laws, regulations and orders applicable to its business and
                  properties, and has all necessary permits and licenses.


                                      -2-
<PAGE>   3
         2.7      Governmental Consents. Neither the execution and delivery of
                  this Agreement, nor the performance of the terms or
                  consummation of the transactions contemplated by the Company
                  under this Agreement, require any consent, approval,
                  authorization, or other order of any court, regulatory body,
                  administrative agency, or other governmental body, or any
                  filings pursuant to the Securities Act of 1933, as amended
                  (the "Securities Act"), or the securities laws of any state
                  other than those obtained prior to and effective as of the
                  Closing Date. Neither the Company nor any agent acting on its
                  behalf has offered, or will offer, to sell (or has solicited
                  or will solicit any offer to buy) the Debentures or any shares
                  of the Common Stock of the Company issuable upon the
                  conversion of the Debentures so as to require the registration
                  of any of such securities under the Securities Act other than
                  as contemplated by Article 4 of this Agreement. Based in part
                  on your representations which are set forth in Article 3 of
                  this Agreement, the offer, sale, and issuance of the
                  Debentures pursuant to this Agreement and the shares of the
                  Common Stock of the Company to be issued upon conversion of
                  the Debentures are exempt from the registration requirements
                  of the Securities Act.

3.       REPRESENTATIONS AND WARRANTIES OF PURCHASERS. You represent and warrant
         to the Company and to the other purchasers of the Debentures:

         3.1      Investment Representation. You are acquiring the Debentures,
                  together with the shares of the Common Stock issuable upon the
                  conversion of the Debentures, for your own account and not
                  with a view to or for sale in connection with any
                  distribution. You have no present intention of distributing
                  the Debentures or the shares of the Common Stock issuable upon
                  the conversion of the Debentures.

         3.2      Stock Not Registered. You acknowledge that;

                  (a)      neither the Debentures nor the shares of the Common
                           Stock issuable upon conversion of the Debentures have
                           been registered under the Securities Act or
                           applicable state securities laws on the ground that
                           the issuance to you is exempt from registration under
                           the Securities Act;

                  (b)      the Company's reliance on such exemption is
                           predicated on your representations;

                  (c)      the Debentures and shares of Common Stock must be
                           held indefinitely unless the offer and sale are
                           registered under the Securities Act, and applicable
                           state securities laws, or an exemption from
                           registration is available. In particular, you
                           acknowledge that the Debentures, and any Common Stock
                           issued on conversion, may not be sold pursuant to
                           Rule 144 promulgated under the Securities Act unless
                           all of the conditions of such rule are met. Among the
                           conditions for use of Rule 144 is the availability to
                           the public of current information about the Company.
                           Such information is not now available and the Company
                           has no present plans to make such information
                           available;


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<PAGE>   4
                  (d)      in the absence of an effective registration statement
                           covering the Debentures, or any Common Stock issued
                           on conversion thereof, you will sell, transfer, or
                           otherwise dispose of the Debentures, or any Common
                           Stock issued on conversion, only in a manner
                           consistent with your representations and then only in
                           accordance with the provisions of Section 4.1 of this
                           Agreement;

                  (e)      any certificate representing the Debentures, and the
                           shares of the Common Stock issuable upon conversion
                           of the Debentures, will bear the legend set forth in
                           Section 4.2 and that the Company may issue
                           appropriate "stop transfer" instructions to its
                           transfer agent, if any, with respect to such shares
                           or make appropriate notations to such effect in its
                           own stock transfer records; and

                  (f)      any certificate representing the Debentures, and the
                           shares of the Common Stock issuable upon conversion
                           of the Debentures, may bear any legends required by
                           applicable state securities laws.

3.3               Investment Experience. You (a) have such knowledge and
                  experience in financial and business matters that you are
                  capable of evaluating the merits and risks of the purchase of
                  the Debentures, (b) have a net worth significantly in excess
                  of the amount of your investment in the Debentures and are
                  able to bear the economic risk of the purchase of the
                  Debentures, and (c) have had access to information with
                  respect to the Company necessary to permit you to make an
                  informed investment decision.

3.4               Organization. On the date of this Agreement, and on the
                  Closing Date, (a) if you are a corporation, you are duly
                  organized and validly existing under the laws of your state of
                  incorporation, you are and will be in good standing under such
                  laws and you have the requisite corporate power and authority
                  to enter into this Agreement, (b) if you are a general or
                  limited partnership, you are and will be a general or limited
                  partnership duly organized and validly existing under the laws
                  of your state of formation, and you are and will be in good
                  standing under such laws, and you have and will have all
                  requisite partnership power and authority to enter into this
                  Agreement, (c) you have duly authorized, executed and
                  delivered this Agreement to the Company, and (4) upon
                  execution and delivery by the Company, this Agreement
                  constitutes your valid and binding agreement, enforceable in
                  accordance with its terms. Enforceability of any agreement may
                  be limited by bankruptcy, insolvency, moratorium and equitable
                  principles applicable to creditors generally.

4.       SECURITIES ACT AND RELATED MATTERS.

         4.1      Transfer Restrictions. You will not offer for sale, sell or
                  transfer all or any part of the Debentures, or the shares of
                  the Common Stock or other securities into which the Debentures
                  are convertible, unless (1) the sale is registered under the
                  Securities Act, and all other qualifications and proceedings
                  required under other


                                      -4-
<PAGE>   5
                  state or federal laws or regulations have been obtained or
                  taken, or (2) an exemption from registration or qualification
                  under the Securities Act and any applicable state securities
                  or "blue sky" laws is available and the Company has received
                  an opinion of counsel reasonably satisfactory to the Company
                  that registration is not required.

         4.2      Legend on Certificate. Each certificate representing the
                  Debentures, or any shares of the Common Stock or other
                  securities issued upon conversion of the Debentures, will bear
                  a legend in substantially the following form (unless the
                  Company has received in the opinion of counsel reasonably
                  satisfactory to the Company that a legend is not necessary):

                           "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
                           NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
                           AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. THE
                           SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
                           HYPOTHECATED IN THE ABSENCE OF EFFECTIVE REGISTRATION
                           STATEMENTS OR AN OPINION OF COUNSEL ACCEPTABLE TO
                           THIS COMPANY THAT REGISTRATION IS NOT REQUIRED."

                  Each certificate will also bear any legends required by
                  applicable state securities laws. In this Agreement
                  "Restricted Security" means the Debentures and shares of the
                  Common Stock or other securities issued upon conversion of the
                  Debentures and represented by certificates bearing the legend
                  set forth in this Section 4.2 and "Restricted Stock" means
                  shares of Common Stock issued upon conversion of the
                  Debentures and represented by certificates bearing the legend
                  set forth in this Section 4.2.

         4.3      Registration Proposed by Company.

                  (a)      Notice of Registration. If the Company proposes to
                           register any of its securities under the Securities
                           Act it will give written notice to every holder of a
                           Restricted Security except that the Company need not
                           give notice of (1) a registration solely to implement
                           an employee benefit plan, (2) a transaction to which
                           Rule 145 under the Securities Act is applicable, or
                           (3) a registration using any form that does not
                           permit secondary sales of securities.

                  (b)      Participation by Holders. If any holder of a
                           Restricted Security delivers to the Company, within
                           30 days of the Company's notice to the holders, a
                           notice stating the number of shares of Restricted
                           Stock to be registered and the intended method of
                           disposition, the Company will use its best efforts to
                           register under the Securities Act the shares of
                           Restricted Stock requested to be registered (1) in
                           connection with the registrations of securities to be
                           sold for the Company's account, (2) at its own
                           expense to


                                      -5-
<PAGE>   6
                           the extent provided in Section 4.5, and (3) to the
                           extent required to permit disposition in accordance
                           with the intended method.

                 (c)       Limitations on Company's Obligation. If the Company's
                           proposed registration relates to an underwritten
                           public offering by the Company, the Company is not
                           required to register shares of Restricted Stock
                           unless the requesting holders agree to include them
                           in the underwriting. If the sole or managing
                           underwriter of the offering determines that the
                           aggregate number of shares of Restricted Stock
                           included in the registration should be limited due to
                           market conditions or the necessity of including
                           shares to be sold for the account of the Company,
                           then each holder who has requested that shares of
                           Restricted Stock be included may sell only a prorata
                           portion of shares of Restricted Stock.

         4.4      Registration Requested by Purchasers.

                  (a)       Request for Registration. The holder or holders of
                            50% of the Restricted Securities may request that
                            the Company register Restricted Stock at any time
                            (1) before the Company gives written notice of its
                            intention to register its securities under Section
                            4.3 (but only if the registration becomes effective
                            within six months after the Company gives the
                            notice) and (2) after the later of (i) May ___, 1997
                            or (ii) 12 months after the effective date of any
                            prior registration statement covering shares of the
                            Company's stock. In determining whether 50% of the
                            holders of Restricted Securities have made a
                            request, Restricted Stock and other securities
                            issued upon conversion of the Debentures will be
                            counted on the basis of the amount of Debentures
                            from which they were converted.

                   (b)      Content of Request. The request must state the
                            number of shares of Restricted Stock to be
                            registered and the intended method of disposition.
                            The Company is not obligated to file a registration
                            statement if the expected price to the public of the
                            offering of Restricted Stock is less than
                            $15,000,000.

                   (c)      Required Registration. Upon receipt of a request
                            that satisfies the requirements stated above, the
                            Company will upon one occasion (1) promptly give
                            written notice of the proposed registration to every
                            other holder of Restricted Securities and (2) as
                            expeditiously as possible (and in any event within
                            90 days) use its best efforts, at its own expense to
                            the extent provided in Section 4.5, to effect
                            registration under the Securities Act of

                           (i)      the sale of the Restricted Stock which is
                                    the subject of the written request referred
                                    to above, and


                                      -6-
<PAGE>   7
                           (ii)     all other Restricted Stock whose holders
                                    make written request for registration to the
                                    Company within 30 days after the Company
                                    gives them notice of the proposed
                                    registration

                  all to the extent required to permit the disposition by the
                  holders of the securities so registered. In connection with
                  any registration, the Company will execute any required
                  undertakings to file post-effective amendments.

                  (d)      Limitations on Company's Obligation. The Company is
                           not obligated under this Section 4.4 after (1) one
                           registration, filed pursuant to any holder's request
                           under this Section 4.4 (other than a delayed
                           registration as described below), has become
                           effective or (2) you and your permitted transferees
                           hold less than 10% of the Restricted Securities
                           initially issued and sold pursuant to this Agreement.

                  (e)      Delay of Registration. If, within ten days after the
                           Company receives a request for registration under
                           subsection (a), the Company furnishes a certificate
                           stating that the Company intends to file within 60
                           days a registration statement for an underwritten
                           public offering of securities for the Company's
                           account, then the Company is not obligated to file a
                           registration under this Section 4.4 for six months
                           from the date of the Company's certificate. The
                           Company must make all reasonable efforts to cause the
                           registration statement for the underwritten public
                           offering to become effective as soon as reasonably
                           practicable. The Company may invoke this subsection,
                           and delay a registration requested under Section 4.4,
                           only one time.

         4.5      Costs and Expenses. The Company will pay all its costs and
                  expenses in connection with a registration of securities under
                  Sections 4.3 or 4.4, including Federal and state registration
                  and filing fees, printing expenses (including a reasonable
                  number of preliminary and final prospectuses, post-effective
                  amendments, and supplements requested by the holders of
                  Restricted Stock), and the fees and disbursements of counsel,
                  independent accountants, and other experts of the Company. The
                  Company will not pay underwriter's discounts and commissions
                  or the fees and disbursements of counsel, independent
                  accountants, or other experts of the holders of Restricted
                  Stock. The Company will use its best efforts to keep effective
                  any registration for the period reasonably necessary to effect
                  disposition in accordance with the intended methods described
                  in the requests for registration. If the Company is requested
                  or required to maintain the registration effective for more
                  than six months the holders of securities who have requested
                  that effectiveness be maintained, in order to continue with
                  the distribution, will pay (in such proportions as they may
                  agree upon) all out-of-pocket expenses of the Company incurred
                  in maintaining effectiveness after the initial six-month
                  period.

         4.6      Information. The holders of Restricted Stock covered by a
                  registration statement under Sections 4.3 or 4.4 will furnish
                  to the Company (in writing) any


                                      -7-
<PAGE>   8
                  information regarding them, Restricted Securities held by
                  them, and the intended method of disposition of the Restricted
                  Stock as the Company reasonably requests or as is required in
                  connection with the registrations under Sections 4.3 or 4.4.

         4.7      Blue Sky Registrations. In any registration under this Section
                  4, the Company will use its best efforts to register or
                  qualify the Restricted Stock for sale under the securities
                  laws of those states in which registration or qualification is
                  required, except that the Company is not required (a) to
                  execute a general consent to service or (b) to qualify to do
                  business in any state.

         4.8      Lockup Agreement. In connection with any registration of the
                  Company's securities, upon request of the underwriters
                  managing the offering, each holder of Restricted Securities
                  will execute an agreement not to sell, make a short sale of,
                  loan, grant an option for the purchase of, or otherwise
                  dispose of any Restricted Stock (other than shares included in
                  the registration or shares sold with the underwriters' prior
                  written consent) for up to 90 days after the effective date of
                  the registration.

         4.9      Transferability. If the requirements of Section 4.1 have been
                  satisfied for the sale or transfer of a Restricted Security,
                  the transferee will be entitled to the rights and benefits of,
                  and will be subject to the requirements of, Sections 4.1
                  through 4.8.

5.       COMPANY'S AFFIRMATIVE COVENANTS. The Company will comply with the
         following requirements unless holders of more than 50% of the
         outstanding Restricted Securities agree otherwise in writing. These
         requirements will terminate upon the earlier of (1) the closing date of
         an underwritten public offering of the Company's common stock pursuant
         to an effective registration statement under the Securities Act or (2)
         the date when less than 25% of the Restricted Securities are held by
         the original holders of the Debentures or their permitted transferees.
         These requirements may be amended by a written agreement between the
         Company and holders of more than 50% of the outstanding Restricted
         Securities. The financial covenants below are substantially the same as
         the covenants established in the revolving credit facility entered into
         between the Company and Norwest Business Credit, Inc. ("NBCI") as of
         May 1994; you agree that, upon any revision or refinancing of the
         Company's principal credit facility it is your intention to consent to
         the amendment of the financial covenants in this Agreement so that they
         are consistent with the terms of the new or revised credit facility.

         5.1      Reporting Requirements. The Company will deliver to you each
                  of the following:

                  (a)      Annual Financial Statements. No later than 90 days
                           after the end of each Company fiscal year, audited
                           financial statements including

                           (1)      the Company's balance sheet as at the end of
                                    the fiscal year, and

                           (2)      the related statements of income, retained
                                    earnings, and cash flows of the Company for
                                    the fiscal year.


                                      -8-
<PAGE>   9
                           The financial statements will be in reasonable detail
                           and prepared in accordance with generally accepted
                           accounting principles consistently applied. The
                           financial statements will be accompanied by the
                           unqualified opinion of independent public accountants
                           selected by the Company and a certificate of the
                           Company's chief financial officer stating (i) that
                           the financial statements were prepared in accordance
                           with generally accepted accounting principles
                           consistently applied, (ii) whether such officer has
                           knowledge of the occurrence of any default under this
                           Agreement and, if so, a statement in reasonable
                           detail of the nature of the default, and (iii)
                           computations showing whether the Company is in
                           compliance with the financial covenants set forth in
                           this Agreement;

                  (b)      Shareholder Information. Promptly upon their
                           distribution, copies of all financial statements,
                           reports and proxy statements the Company sends to its
                           stockholders;

                  (c)      SEC Filings. Promptly after their filing, copies of
                           all regular and periodic financial reports the
                           Company files with the Securities and Exchange
                           Commission or any national securities exchange;

                  (d)      Notice of Violations. Promptly upon knowledge
                           thereof, notice of the Company's violation of any
                           law, rule or regulation which could materially and
                           adversely affect the Company's business or financial
                           condition; and

                  (e)      Other Information. From time to time, with reasonable
                           promptness, all other materials, reports, records, or
                           information relating to Company's financial
                           condition, operations, or affairs as you may
                           reasonably request.

         5.2      Books and Records. The Company will keep accurate books,
                  records, and accounts of the Company's business and financial
                  condition.

         5.3      Compliance with Laws; Environmental Indemnity. The Company
                  will

                  (a)      comply with the requirements of applicable laws and
                           regulations whose violation would materially and
                           adversely affect the Company's business or financial
                           condition, and

                  (b)      comply with all applicable Environmental Laws and
                           obtain any permits, licenses, or approvals required
                           by any such Environmental Laws. The Company will
                           indemnify, defend, and hold you harmless from and
                           against any claims, loss, or damage resulting from
                           any past, present, or future existence, use,
                           handling, storage, transportation, or disposal of any
                           hazardous waste, hazardous substance, or toxic
                           substance by the Company or on property owned,
                           leased, or controlled by the Company. This
                           indemnification agreement will survive the
                           termination of this Agreement and payment of the
                           indebtedness hereunder.


                                      -9-
<PAGE>   10
         5.4      Payment of Taxes and Other Claims. The Company will pay or
                  discharge, when due,

                  (a)      all taxes, assessments, and governmental charges
                           levied or imposed upon it, upon its income or
                           profits, or upon any properties belonging to it. Such
                           amounts will be paid before the date when penalties
                           attach thereto,

                  (b)      all federal, state, and local taxes required to be
                           withheld by it, and

                  (c)      all lawful claims for labor, materials and supplies
                           which, if unpaid, might by law become a lien or
                           charge upon any properties of the Company.

                  The Company is not required to pay any tax, assessment,
                  charge, or claim whose amount, applicability or validity is
                  being contested in good faith by appropriate proceedings.

         5.5      Maintenance of Properties. The Company will maintain the
                  properties used in its business in good condition, repair, and
                  working order (normal wear and tear excepted). The Company
                  will replace or repair worn, defective, or broken parts, but
                  nothing in this section prevents the Company from
                  discontinuing the operation and maintenance of any of its
                  properties if such discontinuance is in its judgment
                  desirable.

         5.6      Insurance. The Company will obtain and at all times maintain
                  insurance with insurers believed by the Company to be
                  responsible and reputable, in such amounts and against such
                  risks as is usually carried by companies engaged in similar
                  business and owning similar properties in the same general
                  areas in which the Company operates.

         5.7      Preservation of Corporate Existence. The Company will preserve
                  and maintain its corporate existence and all rights,
                  privileges, and franchises necessary or desirable in the
                  conduct of its business. The Company will conduct its business
                  in an orderly, efficient, and regular manner.

         5.8      Book Net Worth. The Company will maintain on the last day of
                  each quarter occurring in each of the periods set forth below,
                  a Book Net Worth (as that term is defined in the Company's
                  credit agreement with NBCI dated May 3, 1994) greater than or
                  equal to the amount set forth opposite such period:

<TABLE>
<CAPTION>
                           PERIOD                                      BOOK NET WORTH
                           ------                                      --------------
<S>                                                                    <C>
                  Through June 29, 1995                                ($2,650,000)
                  June 30, 1995 through September 29, 1995             ($1,000,000)
                  September 30, 1995 through December 30, 1995         ($  800,000)
                  December 31, 1995 through March 30, 1996             ($  900,000)
                  March 31, 1996 through June 29, 1996                 ($  400,000)
                  June 30, 1996 through September 29, 1996             $1,000,000
</TABLE>


                                      -10-
<PAGE>   11
<TABLE>
<S>                                                                    <C>
                  September 30, 1996 and thereafter                    $1,600,000
</TABLE>

         5.9      Earnings Before Interest and Taxes. The Company will maintain
                  on each date set forth below operating income (determined in
                  accordance with generally accepted accounting principles but
                  before any deduction for interest expenses and income taxes
                  and calculated for the twelve months ending on such date)
                  greater than or equal to the amount set forth opposite such
                  date:

<TABLE>
<CAPTION>
                          DATE                                            EBIT
<S>                                                                    <C>
                  June 30, 1995                                        $3,600,000
                  September 30, 1995                                   $3,800,000
                  December 31, 1995                                    $3,800,000
                  March 31, 1996                                       $4,000,000
                  June 30, 1996                                        $4,300,000
                  September 30, 1996 and each fiscal quarter           $4,300,000
                           end thereafter
</TABLE>

         5.10     Interest Coverage. The Company will maintain on each date set
                  forth below, the ratio of (i) the sum of its pre-tax net
                  income, to (ii) interest expense (in each case determined in
                  accordance with generally accepted accounting principles, and
                  calculated for the twelve months ending on such date) greater
                  than or equal to the ratio set forth opposite such date:

<TABLE>
<CAPTION>
                          DATE                                           RATIO
                          ----                                           -----
<S>                                                                    <C>
                  June 30, 1995                                        2.00 to 1
                  September 30, 1995                                   2.00 to 1
                  December 31, 1995                                    2.00 to 1
                  March 31, 1996                                       2.00 to 1
                  June 30, 1996                                        2.00 to 1
                  September 30, 1996 and each fiscal quarter           2.00 to 1
                           end thereafter
</TABLE>

         5.11     Minimum Debt Service Coverage. The Company will maintain on
                  each date set forth below, the ratio of (i) the sum of its
                  after-tax net income, depreciation, and amortization expense
                  and interest expense, to (ii) the sum of its interest, capital
                  expenditures, and current maturities of long term debt
                  (excluding as long term debt, the indebtedness of the Company
                  to NBCI incurred pursuant to the credit agreement between
                  Company and NBCI, or any replacement of such indebtedness) (in
                  each case determined in accordance with generally accepted
                  accounting principles, and calculated for the twelve months
                  ending on such date) greater than or equal to the ratio set
                  forth opposite such date:


                                      -11-
<PAGE>   12
<TABLE>
<CAPTION>
                          DATE                                          RATIO
                          ----                                          -----
<S>                                                                   <C>
                  June 30, 1995                                       1.50 to 1
                  September 30, 1995                                  1.50 to 1
                  December 31, 1995                                   1.50 to 1
                  March 31, 1996                                      1.50 to 1
                  June 30, 1996                                       1.50 to 1
                  September 30, 1996 and each fiscal quarter          1.50 to 1
                           end thereafter
</TABLE>

6.       COMPANY'S NEGATIVE COVENANTS. The Company will comply with the
         following requirements unless holders of more than 50% of the
         outstanding Restricted Securities agree otherwise in writing. These
         requirements will terminate upon the earlier of (1) the closing date of
         an underwritten public offering of the Company's common stock pursuant
         to an effective registration statement under the Securities Act or (2)
         the date when less than 25% of the Restricted Securities are held by
         the original holders of the Debentures or their permitted transferees.
         These requirements may be amended by a written agreement between the
         Company and holders of more than 50% of the outstanding Restricted
         Securities.

         6.1      Dividends and Stock Repurchases. The Company will not declare
                  or pay any dividends (other than dividends payable solely in
                  stock of the Company) on any class of its stock or make any
                  payment on account of the purchase, redemption or other
                  retirement of any shares of such stock or make any
                  distribution in respect thereof, either directly or
                  indirectly. If the Company becomes an S Corporation (with your
                  consent and after first providing such supporting
                  documentation as you may request) the Company may pay
                  dividends equal to the amount of state and federal income tax
                  which would be due for each shareholder with respect to income
                  allocated to each shareholder as a result of the Company's
                  status as an S Corporation at the highest marginal income tax
                  rate for federal and state income tax purposes (after taking
                  into account any deduction for state income taxes in
                  calculating the federal income tax liability and for the state
                  or states in which each shareholder is liable for income
                  taxes).

         6.2      Sale or Transfer of Assets; Suspension of Business Operations.
                  The Company will not sell, lease, assign, transfer, or
                  otherwise dispose of (a) the stock of any domestic Subsidiary
                  or (b) all or a substantial part of its assets to any other
                  person (other than the sale of Inventory in the ordinary
                  course of business) and will not liquidate, dissolve or
                  suspend business operations. The Company will not transfer any
                  material property without receipt of full and adequate
                  consideration. This Agreement does not restrict any sale or
                  other disposition of Company subsidiaries organized in
                  connection with the Company's operations outside the United
                  States.

         6.3      Accounting. The Company will not adopt any material change in
                  accounting principles other than as required by generally
                  accepted accounting principles. The Company will not adopt,
                  permit or consent to any change in its fiscal year.

7.       CONDITIONS OF OBLIGATION TO ISSUE AND SELL. The obligation of the
         Company to issue and sell the Debentures to you at the Closing is
         subject to the condition that the


                                      -12-
<PAGE>   13
         representations and warranties stated in Article 3 of this Agreement
         must be correct when made and as of the time of the Closing.

8.       CONDITIONS OF OBLIGATION TO PURCHASE. Your obligation to purchase and
         pay for the Debentures at the Closing is subject to the following
         conditions:

         8.1      Representations and Warranties Correct. The representations
                  and warranties contained in Article 2 of this Agreement must
                  be correct when made and as of the time of the Closing.

         8.2      Performance. The Company must have performed and complied with
                  all agreements and conditions contained in this Agreement and
                  required to be performed or complied with by it prior to or at
                  the Closing.

         8.3      Closing Certificate. The Company must have delivered to you a
                  certificate, dated the Closing Date, certifying that the
                  conditions specified in Sections 8.1 and 8.2 have been
                  fulfilled.

         8.4      Directors and Officers. The persons named in Schedule 8.4 must
                  have been duly elected to the respective positions of
                  directors and officers of the Company as set forth in Schedule
                  8.4.

         8.5      Opinion of Counsel. The Company must have delivered to you the
                  opinion of Lewis and Roca in substantially the form set forth
                  in Schedule 8.5.

9.       MISCELLANEOUS.

         9.1      Expenses. The parties will each pay their own expenses
                  incurred in connection with the purchase and sale of the
                  Debentures.

         9.2      Survival of Representations and Warranties. All covenants,
                  agreements, representations and warranties made in writing in
                  this Agreement will survive the execution and delivery of this
                  Agreement and the issuance, sale, and delivery of the
                  Debentures.

         9.3      Binding Effect. All covenants, agreements, representations,
                  and warranties in this Agreement bind, and inure to the
                  benefit of, the respective heirs, legal representatives,
                  successors, and assigns of the parties. The rights of any
                  transferee of a Restricted Security, however, are subject to
                  compliance with Section 4.1.

         9.4      Notices. All notices and other communications under this
                  Agreement must be in writing. They will be deemed given and
                  received when delivered or five days after deposit in the
                  United States mail, first class postage prepaid, addressed to
                  Company at:

                           648 South River Drive
                           Tempe, Arizona 85281


                                      -13-
<PAGE>   14
                           Attention:       President

                           with a copy to:

                           Lewis and Roca
                           40 North Central Avenue, Suite 1500
                           Phoenix, Arizona 85004
                           Attention:       Kevin Olson, Esq.

                  and addressed to you at the address stated in Exhibit A. Any
                  party may change the person, officer, or address to which
                  notices and communications are to be sent to it by giving
                  notice.

         9.5      Amendments and Waivers. Neither this Agreement nor any of its
                  terms may be changed, waived, discharged, or terminated except
                  in a writing signed by the Company and by holders of more than
                  50% of the outstanding Restricted Securities.

         9.6      Controlling Law. This Agreement is being executed and
                  delivered, and the Debentures are being delivered, in Arizona
                  and will be governed by the laws of Arizona.

         9.7      Counterparts. This Agreement may be executed in several
                  counterparts and each counterpart, when executed and delivered
                  and whether or not each counterpart is executed by all the
                  parties, will constitute an original instrument. All the
                  separate counterparts will together constitute this Agreement
                  and are parts of the same instrument.

         If you are in agreement with the foregoing, please sign the form of
acceptance appearing as part of the Subscription Agreement for purchase of the
Debentures and return the same to the Company. This Agreement will become a
binding agreement between you and the undersigned upon the Company's acceptance
of your executed Subscription Agreement for the Debentures.

                                            Yours very truly,


                                      -14-
<PAGE>   15
                                            ROCKFORD CORPORATION



                                            By: /s/
                                                --------------------------------
                                                            President


                                            Attest /s/
                                                   -----------------------------
                                                        Assistant Secretary

<PAGE>   16
                                    EXHIBIT A

               LIST OF DEBENTURE PURCHASERS AND AMOUNTS PURCHASED




<TABLE>
<CAPTION>
                                                                      NUMBER OF
 NAME OF                               PRINCIPAL AMOUNT              SHARES UPON
PURCHASER         ADDRESS                OF DEBENTURES               CONVERSION
---------         -------                -------------               ----------
<S>               <C>                  <C>                           <C>
</TABLE>
<PAGE>   17
                                    EXHIBIT B

                           "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
                           NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
                           AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. THE
                           SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
                           HYPOTHECATED IN THE ABSENCE OF EFFECTIVE REGISTRATION
                           STATEMENTS OR AN OPINION OF COUNSEL ACCEPTABLE TO
                           THIS COMPANY THAT REGISTRATION IS NOT REQUIRED."


                              ROCKFORD CORPORATION

             8.5% CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 1, 2002

$1,760.00                                                            May 1, 1995

1.       PAYMENT OF PRINCIPAL AND INTEREST. Rockford Corporation, an Arizona
         corporation (the "Company"), for value received, promises to pay to
         Mark Albers or transferee, (the "Holder") the principal amount of
         $1,760.00 on May 1, 2002 and to pay interest thereon at the rate of
         eight and one-half percent (8.5%) per annum. Interest will accrue from
         the date hereof and will be paid quarterly, on each January 15th, April
         15th, July 15th, and October 15th hereafter (commencing on July 15,
         1995) until the principal is fully paid. Interest will be paid on the
         basis of a 360-day year of twelve 30-day months.

2.       REDEMPTION PRIOR TO MATURITY. Subject to the following conditions, the
         Company may, at its option, redeem all or part of this Debenture prior
         to maturity at a redemption price of par (plus any interest accrued but
         unpaid to the date fixed for redemption).

         2.1      Conditions. The Company may redeem this Debenture only after
                  (a) the Company's Common Stock becomes publicly traded and
                  trades at a bid or closing price at least equal to one hundred
                  fifty percent (150%) of the then applicable Conversion Price
                  of this Debenture for a period of 30 consecutive trading days
                  or (b) the sale of all or substantially all of the Company's
                  business and assets to, or the merger or consolidation of the
                  Company with or into, any company whose stock is publicly
                  traded and whose stock trades at a bid or closing price at
                  least equal to one hundred fifty percent (150%) of the then
                  applicable Conversion Price of this Debenture for a period of
                  30 consecutive trading days.

         2.2      Notice of Redemption. The Company must give notice of a
                  redemption not less than thirty (30) days, but not more than
                  ninety (90) days, before the date fixed for redemption. By the
                  date fixed for redemption, the Holder must surrender this
                  Debenture to the Company at its principal executive offices in
                  exchange for payment therefor. Upon due tender of the
                  redemption price by the Company, this Debenture will not be
                  deemed to be outstanding for any purpose subsequent to the
                  close of business on the date fixed for redemption.



                                      -1-
<PAGE>   18
3.       SUBORDINATION AND PRIORITY. The indebtedness evidenced by this
         Debenture, including the principal and accrued interest, is expressly
         subordinate and subject in right of payment and upon liquidation to the
         prior payment in full of all "Senior Debt," whether now outstanding or
         hereafter created, incurred, assumed, or guaranteed.

         3.1      Definition of "Senior Debt". The term "Senior Debt" means the
                  principal, premium (if any), and interest on (a) indebtedness
                  (other than this Debenture or any previously subordinated
                  debenture) of the Company evidenced by notes or similar
                  obligations for money borrowed from or guaranteed to persons,
                  firms, or corporations which engage in lending money,
                  including, but without limitation, individuals, banks, trust
                  companies, insurance companies and other financing
                  institutions, and charitable trusts, pension trusts, and other
                  investing entities or organizations, (b) indebtedness of the
                  Company evidenced by notes or debentures issued under the
                  provisions of an indenture or similar instrument between the
                  Company and a bank or trust company, (c) the indebtedness of
                  the Company evidenced by the Company's Senior Notes in an
                  aggregate principal amount of $2,000,000 (due January 12,
                  1998) and $1,680,000 (due February 3, 1999), and (d)
                  indebtedness incurred, assumed or guaranteed by the Company in
                  connection with the acquisition by it of any property or asset
                  unless, in each case, by the terms of the instrument creating
                  or evidencing the indebtedness it is expressly provided that
                  such indebtedness is not superior in right of payment to this
                  Debenture.

         3.2      Exclusions from Senior Debt. Senior Debt excludes, and the
                  indebtedness evidenced by this Debenture is expressly senior
                  and entitled to priority in payment and upon liquidation with
                  respect to, all capital stock of the Company. Senior Debt
                  excludes, and the indebtedness evidenced by this Debenture is
                  expressly of equal priority in payment and upon liquidation
                  with respect to, (a) indebtedness outstanding on the original
                  issue date of this Debenture and convertible into shares of
                  the Company's Common Stock and (b) any indebtedness issued
                  after the date of this Debenture and convertible into shares
                  of the Company's Common Stock.

4.       EVENTS OF DEFAULT. An Event of Default will be deemed to occur upon the
         occurrence of any of the following events:

         4.1      Default in the payment of interest on this Debenture when it
                  becomes due and payable, and continuance of such default for a
                  period of ten (10) days after notice;

         4.2      Default in the payment of the principal of this Debenture when
                  it becomes due and payable;

         4.3      Default by the Company under an acceleration prior to maturity
                  of, or the failure to pay at maturity, any third party
                  indebtedness of the Company aggregating $250,000 or more for a
                  period of thirty (30) days after the same may become payable;

                                      -2-
<PAGE>   19
         4.4      The failure of the Company to comply, for a period of 30 days
                  after notice of default, with any affirmative or negative
                  covenant contained in the Purchase Agreement of even date
                  herewith between the Company and the original Holder hereof;

         4.5      The failure of the Company to pay final judgments (not covered
                  by insurance or then subject to any appeal) aggregating
                  $500,000 or more for 30 days;

         4.6      The entry of a decree or order by a court having jurisdiction
                  adjudging the Company a bankrupt or insolvent, or approving as
                  properly filed a petition seeking reorganization, arrangement,
                  adjustment, or composition of or in respect of the Company
                  under the Federal Bankruptcy Act or any other applicable
                  Federal or State law, or appointing a receiver, liquidator,
                  assignee, trustee, or other similar official of the Company or
                  of any substantial part of its property, or ordering the
                  winding up or liquidation of its affairs, and the continuance
                  of any such decree or order unstayed and in effect for a
                  period of 60 days; or

         4.7      The institution by the Company of proceedings to be
                  adjudicated a bankrupt or insolvent, or the consent by it to
                  the institution of bankruptcy or insolvency proceedings
                  against it, or the filing by it of a petition or answer or
                  consent seeking reorganization or relief under Federal or
                  State law, or the consent by it to the filing of any such
                  petition or to the appointment of a receiver, liquidator,
                  assignee, trustee, or other similar official of the Company or
                  of any substantial part of its property, or the making by it
                  of an assignment for the benefit of creditors, or the
                  admission by it in writing of its inability to pay its debts
                  generally as they become due, or the taking of corporate
                  action by the Company in furtherance of any such action.

5.       RIGHTS UPON DEFAULT; ACCELERATION OF INDEBTEDNESS. Upon the occurrence
         of an Event of Default:

         5.1      The entire outstanding balance of the Debenture, including the
                  entire balance of principal and all accrued interest, will
                  accelerate and become immediately due and payable upon written
                  notice to the Company by the Holder; and

         5.2      The Company may not pay dividends or make distributions to
                  holders of any class of its stock, or redeem or repurchase all
                  or any part of any class of its stock.

6.       CONVERSION OF DEBENTURE. This Debenture is convertible, at the option
         of the Holder, into shares of the Company's Common Stock on the
         following basis:

         6.1      Conversion Price. A conversion may be made, at any time before
                  the close of business on the business day before the maturity
                  or redemption date, at the rate of $10.50 per share, subject
                  to adjustment as provided in this Debenture (the "Conversion
                  Price"). The Company is not required to issue fractional
                  shares of Common Stock or other capital stock upon conversion
                  of this Debenture and, in lieu thereof, will pay a cash
                  adjustment based upon the then current fair market


                                      -3-
<PAGE>   20
                  value of the Common Stock as determined by the Board of
                  Directors on the last business day before the date of
                  conversion.

         6.2      Adjustment Based Upon Stock Dividends Combination of Shares or
                  Recapitalization. The Conversion Price and the number of
                  Shares will be adjusted if the Company, at any time after the
                  original issuance of this Debenture,

                  (a)      pays a stock dividend on its Common Stock,

                  (b)      subdivides its outstanding shares of Common Stock
                           into a greater number of shares,

                  (c)      combines its outstanding shares of Common Stock into
                           a smaller number of shares,

                  (d)      issues by reclassification of its shares of Common
                           Stock any other special capital stock of the Company,
                           or

                  (e)      distributes to all holders of its Common Stock
                           evidences of indebtedness or assets (excluding cash
                           dividends) or rights or warrants to subscribe for
                           Common Stock (other than those mentioned above).

                  On or after the occurrence of an event or events requiring
                  adjustment of the Conversion Price, the Holder upon surrender
                  of this Debenture for conversion will be entitled to receive
                  the number of shares of Common Stock or other securities of
                  the Company which the Holder would have owned or been entitled
                  to receive had this Debenture been converted immediately
                  before the happening of the event requiring adjustment of the
                  Conversion Price.

         6.3      Adjustment Based Upon Stock Issuances. The Conversion Price
                  will be adjusted if, at any time after the original issuance
                  of this Debenture, the Company issues Common Stock, issues
                  rights or warrants to subscribe for or purchase Common Stock,
                  or issues securities convertible into or exchangeable for
                  Common Stock at less than the Conversion Price. Upon the
                  occurrence of an event or events requiring adjustment of the
                  Conversion Price under this section the Conversion Price will
                  be adjusted to be equal to the price of the new issue. An
                  adjustment under this section will not increase the number of
                  shares of Common Stock, or other securities, which the Holder
                  will be entitled to receive upon surrender of this Debenture
                  for conversion, but will only reduce the Conversion Price
                  which the Holder must pay to acquire such Common Stock or
                  other securities. Any amount of this Debenture not required to
                  be used in a conversion, because of an adjustment of the
                  Conversion Price under this section, must be paid by the
                  Company to the Holder upon any redemption or upon maturity of
                  this Debenture.

         6.4      Adjustment Based Upon Merger or Consolidation. In case of any
                  consolidation or merger to which the Company is a party (other
                  than a merger in which the Company is the surviving entity and
                  which does not result in any reclassification


                                      -4-
<PAGE>   21
                  of or change in the outstanding Common Stock of the Company)
                  or in case of any sale or conveyance to another person, firm,
                  or corporation of the property of the Company as an entirety
                  or substantially as an entirety, the Holder will have the
                  continuing right to convert this Debenture into the kind and
                  amount of securities and property (including cash) receivable
                  upon such consolidation, merger, sale, or conveyance by a
                  holder of the number of shares of Common Stock into which this
                  Debenture might have been converted immediately before the
                  consolidation, merger, sale, or conveyance.

         6.5      No Adjustment for Outstanding Conversion and Option Rights and
                  Certain Other Securities. Notwithstanding any other section of
                  this Agreement, no adjustment of the Conversion Price will be
                  made upon the issuance by the Company of

                  (a)      Common Stock upon conversion or exchange of
                           securities convertible or exchangeable into Common
                           Stock and outstanding on or before the date of this
                           Debenture,

                  (b)      Common Stock upon exercise of any employee's stock
                           option outstanding on or before the date of this
                           Debenture, or

                  (c)      Common Stock or securities convertible into Common
                           Stock, not amounting to more than 10% of the
                           Company's issued and outstanding Common Stock, issued
                           after the date of this Debenture pursuant to an
                           employee benefit plan of the Company.

         6.6      Exercise of Conversion Privilege. The Conversion Privilege is
                  exercisable by the Holder upon written notice to the Company
                  (or its successor) and the surrender of this Debenture in
                  exchange for the number of shares of Common Stock (or other
                  securities and property, including cash, in the event of an
                  adjustment of the Conversion Price) into which this Debenture
                  is convertible based upon the Conversion Price. Conversion
                  rights will expire at the close of business on the business
                  day before the maturity or redemption date.

7.       CORPORATE STATUS OF SHARES TO BE ISSUED. All shares of the Company's
         Common Stock (or other securities in the event of an adjustment of the
         Conversion Price) issued upon the conversion of this Debenture will,
         upon issuance, be fully paid and nonassessable.

8.       ISSUANCE OF STOCK CERTIFICATE. Upon conversion of this Debenture, the
         Company will forthwith issue to the Holder a certificate or
         certificates representing the number of shares of its Common Stock (or
         other securities in the event of an adjustment of the Conversion Price)
         to which the conversion relates.

9.       STATUS OF HOLDER OF DEBENTURE. This Debenture does not entitle the
         Holder to any voting rights or other rights as a shareholder of the
         Company. No dividends are payable or accrue in respect of this
         Debenture, or the securities issuable upon conversion, unless and until
         this Debenture is converted. Upon the conversion of this Debenture, the
         Holder will (to the extent permitted by law) be deemed to be the holder
         of record of the shares of


                                      -5-
<PAGE>   22
         Common Stock issuable upon conversion, notwithstanding that the stock
         transfer books of the Company are then closed or that the certificates
         representing the shares of Common Stock are not then actually
         delivered.

10.      LOSS OR DESTRUCTION OF DEBENTURE. The Company will execute and deliver
         a new debenture of like tenor and date upon receipt by the Company of
         evidence satisfactory to it of the loss, theft, destruction, or
         mutilation of this Debenture and (a) in the case of loss, theft, or
         destruction, of an indemnity by the Holder, (b) in case of any
         transfer, upon such terms as are satisfactory to the Company, or (c) in
         the case of mutilation, upon surrender and cancellation of this
         Debenture.

11.      RESERVATION OF SHARES. The Company will reserve out of its authorized
         shares of Common Stock (and other securities in the event of an
         adjustment of the Conversion Price) a number of shares sufficient to
         enable it to comply with its obligation to issue shares of Common Stock
         (and other securities in the event of an adjustment of the Conversion
         Price) upon the conversion of this Debenture.

12.      STATUS UNDER SECURITIES LAWS.

         12.1     No Registration. This Debenture has not been, and the
                  securities issuable upon conversion hereof will not be,
                  registered under the Securities Act of 1933 (the "1933 Act"),
                  the Arizona Securities Act (the "Arizona Act") or the
                  securities laws of any other jurisdiction. This Debenture, and
                  such securities, must be held indefinitely without any
                  transfer, sale, or other disposition unless (a) subsequently
                  registered under the 1933 Act, the Arizona Act and the
                  securities laws of any other applicable jurisdiction or (b) in
                  the opinion of counsel acceptable to the Company, registration
                  is not required under such Acts or laws.

         12.2     Legend. There will be endorsed on this Debenture, and on the
                  certificates evidencing any securities issued upon the
                  conversion of this Debenture, a legend substantially to the
                  following effect:


                           "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
                           NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
                           AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. THE
                           SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
                           HYPOTHECATED IN THE ABSENCE OF EFFECTIVE REGISTRATION
                           STATEMENTS OR AN OPINION OF COUNSEL ACCEPTABLE TO
                           THIS COMPANY THAT REGISTRATION IS NOT REQUIRED."

         12.3     Restriction on Other Securities. Except in certain limited
                  circumstances, the restrictions on the transfer of this
                  Debenture will also apply to (a) securities issued upon
                  conversion of this Debenture and (b) shares of capital stock
                  or other securities issued or otherwise acquired on account of
                  the Debenture (or securities issued upon conversion of the
                  Debenture) including, without limitation, shares


                                      -6-
<PAGE>   23
                  and securities issued or acquired as a result of a stock
                  dividend, stock split or exchange, or any distribution of
                  shares or securities pursuant to any corporate reorganization,
                  reclassification, or similar event.

         12.4     Refusal to Transfer. The Company may refuse to effect a
                  transfer, sale or other disposition of this Debenture, or the
                  shares issuable upon conversion, by the Holder or its
                  successors or assigns otherwise than as expressly permitted by
                  this Debenture.

13.      MISCELLANEOUS.

         13.1     Purchase Agreement. This Debenture, and the indebtedness
                  evidenced hereby, is issued and incurred subject to the terms
                  of the Purchase Agreement between the Company and the original
                  Holder, the terms and conditions of which are binding upon any
                  subsequent Holder or transferee of this Debenture.

         13.2     Governing Law. This Debenture, and all questions relating to
                  its validity, interpretation, performance, and enforcement is
                  governed by and will be construed in accordance with the laws
                  of Arizona, notwithstanding any Arizona or other
                  conflict-of-law provisions to the contrary.

         13.3     Binding Nature of Debenture. This Debenture is binding upon
                  any successors and assigns of the Company and will inure to
                  the benefit of the Holder and its successors and assigns,
                  except that the Holder may not assign or transfer its rights
                  under this Debenture otherwise than by gift or bequest, by
                  operation of law, or as expressly permitted by this Debenture.

         13.4     Notices. All notices and other communications under this
                  Debenture must be in writing and will be deemed given and
                  received when delivered or five days after they are deposited
                  in the United States mails, first class postage prepaid
                  addressed as set forth in the Purchase Agreement. Either party
                  may alter the person, office or address to which
                  communications or copies are to be sent by giving notice.

         13.5     Amendment and Waivers. Neither this Agreement nor any of its
                  terms may be changed, waived, discharged, or terminated except
                  in a writing signed by the Company and by holders of more than
                  50% of the outstanding Restricted Securities (as that term is
                  defined in the Purchase Agreement).



                                      -7-
<PAGE>   24
14.      EXECUTION DATE. The Company has caused this Debenture to be duly
         executed on the date written above.


                                   ROCKFORD CORPORATION


                                   By:/s/
                                      ------------------------------------------
                                                      President

                                   Attest:  /s/
                                      ------------------------------------------
                                                      Secretary


                                      -8-
<PAGE>   25

                                [ROCKFORD LOGO]


                                  Schedule 2.1

                              Rockford Corporation
                                  Subsidiaries




1.   Rockford Europe b.v.

2.   Rockford Foreign Corporation

3.   Rockford Hong Kong

4.   Rockford Europe Elektonik Vertriebs GmbH

5.   Rockford Japan Corporation




<PAGE>   26

                                  SCHEDULE 2.2

                        AUTHORIZED AND OUTSTANDING STOCK
                                      AND
                             CONVERTIBLE SECURITIES


AUTHORIZED STOCK:           10,000,000 Shares of Common Stock, par value $0.01
                            per shares

OUTSTANDING COMMON STOCK:   809,011 Shares

CONVERTIBLE SECURITIES:

    $150,000                7% Convertible Subordinated Debentures,
                            due March 31, 1996, convertible into
                            15,000 Shares of Common Stock

    $2,000,000              Senior Note, due January 12, 1998, with associated
                            warrants to purchase 167,400 Shares of Common Stock

    $1,640,000              Senior Notes, due February 3, 1999, with
                            associated warrants to purchase 71,305
                            Shares of Common Stock

    $1,640,000              Senior Notes, due February 3, 1999, with
                            associated warrants to purchase 71,305
                            Shares of Common Stock

                            Warrants to purchase 39,161 Shares of Common
                            Stock, issued to Bank of America Arizona

                            Option to purchase 50,000 Shares of Common
                            Stock, issued to Grisanti, Galef & Goldress

                            Options to purchase 133,204 Shares of Common
                            Stock, issued under the Company's 1994
                            Stock Option Plan

Total Common Stock issuable if all debentures, warrants and options were
converted: 611,070 Shares

Fully diluted Common Stock:   1,420,081 Shares




<PAGE>   27
                                 SCHEDULE 2.3




                                        Consolidated Financial Statements
                                        and Other Financial Information

                                        ROCKFORD CORPORATION

                                        September 30, 1994
<PAGE>   28
                              Rockford Corporation

                        Consolidated Financial Statements
                         and Other Financial Information

                     Years ended September 30, 1994 and 1993




                                    CONTENTS

<TABLE>
<S>                                                                           <C>
Report of Independent Auditors.............................................    1

Audited Consolidated Financial Statements

Consolidated Balance Sheets................................................    2
Consolidated Statements of Operations......................................    3
Consolidated Statements of Stockholders' Equity (Deficit)..................    4
Consolidated Statements of Cash Flows......................................    5
Notes to Consolidated Financial Statements.................................    6


Other Financial Information

Report of Independent Auditors on Other Financial Information..............   16
Consolidating Balance Sheet................................................   17
Consolidating Statement of Operations......................................   19
</TABLE>
<PAGE>   29
                         [ERNST & YOUNG LLP letterhead]




                         Report of Independent Auditors

The Board of Directors and Stockholders
Rockford Corporation

We have audited the accompanying consolidated balance sheets of Rockford
Corporation and subsidiaries as of September 30, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial positions of Rockford
Corporation and subsidiaries at September 30, 1994 and 1993, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.


                                                           /s/ Ernst & Young LLP

November 23, 1994


                                      -1-
<PAGE>   30
                              Rockford Corporation
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                   SEPTEMBER 30
                                                                               1994            1993
                                                                             --------        --------
                                                                                  (IN THOUSANDS)
<S>                                                                          <C>             <C>
ASSETS
Current assets:
   Cash                                                                      $    120        $    765
   Accounts receivable, less allowances of $715,000 in 1994 and
     $733,000 in 1993                                                          10,539           9,601
   Inventories, net                                                             5,885           6,289
   Prepaid expenses, insurance receivable, and other                              634           1,835
   Deferred income taxes                                                        2,100              --
                                                                             --------        --------
Total current assets                                                           19,278          18,490

Property and equipment, net                                                     3,015           3,052
Deferred income taxes                                                             170              --
Other assets, net of accumulated amortization of $683,000 in 1994 and
   $506,000 in 1993                                                               282             371
                                                                             --------        --------
Total assets                                                                 $ 22,745        $ 21,913
                                                                             ========        ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Bank overdraft                                                            $    300        $    917
   Accounts payable                                                             5,264           6,463
   Current portion of notes payable, long-term debt, and capital lease
     obligations                                                                1,587          13,240
   Accrued payroll, commissions, and other                                      2,750           2,370
   Accrued warrant                                                              1,570           1,300
   Income taxes payable                                                           400             231
                                                                             --------        --------
Total current liabilities                                                      11,871          24,521

Notes payable and long-term debt, less current portion                         10,778           2,133
Capital lease obligations, less current portion                                    51              48
                                                                             --------        --------
                                                                               10,829           2,181

Lease commitments and contingencies                                                --              --

Stockholders' equity (deficit):
     Common stock, $.01 par value
       Authorized shares - 10,000,000
       Issued and outstanding shares - 608,061                                      6               6
   Additional paid-in-capital                                                     765             770
   Deferred stock grants                                                           --             (29)
   Accumulated deficit                                                           (531)         (5,436)
   Currency translation adjustments                                              (195)           (100)
                                                                             --------        --------
Total stockholders' equity (deficit)                                               45          (4,789)
                                                                             --------        --------
Total liabilities and stockholders' equity (deficit)                         $ 22,745        $ 21,913
                                                                             ========        ========
</TABLE>

See accompanying notes.


                                      -2-
<PAGE>   31
                              Rockford Corporation

                      Consolidated Statements of Operations


<TABLE>
<CAPTION>
                                                                                YEAR ENDED SEPTEMBER 30
                                                                                 1994            1993
                                                                               --------        --------
                                                                                    (In thousands)
<S>                                                                            <C>             <C>
Sales, net of returns and discounts of $12,215,000 in 1994 and
   $11,171,000 in 1993                                                         $ 63,051        $ 57,449
Cost of goods sold                                                               39,565          41,479
                                                                               --------        --------
Gross profit                                                                     23,486          15,970

Operating expenses:
   Engineering                                                                    1,347           1,435
   Commissions                                                                    4,159           4,010
   Marketing expenses                                                             5,076           6,137
   Freight programs                                                               1,450           1,465
   General and administrative                                                     6,430           5,262
                                                                               --------        --------
                                                                                 18,462          18,309
                                                                               --------        --------
Operating income (loss)                                                           5,024          (2,339)
Other income (expense):
   Interest expense                                                              (1,593)         (1,591)
   Other                                                                            (96)          1,048
                                                                               --------        --------
Income (loss) before benefit (provision) for income taxes and cumulative
   effect of a change in accounting for income taxes                              3,335          (2,882)

Benefit (provision) for income taxes                                              1,570             (90)
                                                                               --------        --------
Income (loss) before cumulative effect of accounting change                       4,905          (2,972)

   Cumulative effect as of September 30, 1992 of change in method of
     accounting for income taxes                                                     --            (827)
                                                                               --------        --------
Net income (loss)                                                              $  4,905        $ (3,799)
                                                                               ========        ========
</TABLE>

See accompanying notes.


                                      -3-
<PAGE>   32
                              Rockford Corporation

            Consolidated Statements of Stockholders' Equity (Deficit)


                                 (In thousands)

<TABLE>
<CAPTION>

                                                 Common Stock       Additional    Deferred                  Currency
                                               -----------------     Paid-In       Stock     Accumulated   Translation
                                               Shares    Amount      Capital       Grants      Deficit     Adjustments    Total
                                               ------    ------      -------       ------      -------     -----------    -----
<S>                                            <C>       <C>        <C>           <C>        <C>           <C>           <C>
Balance at October 1, 1992                       608     $     6     $   770      $   (58)     $(1,637)     $    89      $  (830)
   Amortization of deferred stock grants          --          --          --           29           --           --           29
   Currency translation                           --          --          --           --           --         (189)        (189)
   Net loss                                       --          --          --           --       (3,799)          --       (3,799)
                                               -----     -------     -------      -------      -------      -------      -------
Balance at September 30, 1993                    608           6         770          (29)      (5,436)        (100)      (4,789)
   Amortization of deferred stock grants          --          --          --           24           --           --           24
   Deferred stock grants canceled                 --          --          (5)           5           --           --           --
   Currency translation                           --          --          --           --           --          (95)         (95)
   Net income                                     --          --          --           --        4,905           --        4,905
                                               -----     -------     -------      -------      -------      -------      -------
Balance at September 30, 1994                    608     $     6     $   765      $    --      $  (531)     $  (195)     $    45
                                               =====     =======     =======      =======      =======      =======      =======
</TABLE>



See accompanying notes.


                                      -4-
<PAGE>   33
                              Rockford Corporation

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                             YEAR ENDED SEPTEMBER 30
                                                               1994          1993
                                                             --------      --------
                                                                 (In thousands)
<S>                                                          <C>           <C>
OPERATING ACTIVITIES
Net income (loss)                                            $  4,905      $ (3,799)
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Cumulative effect of accounting change                        --           827
     Depreciation and amortization                              1,484         1,499
     Deferred income taxes                                     (2,270)           --
     Provision for doubtful accounts                               --           753
     Provision for inventory allowances                           513         1,765
     Currency translation                                         (95)         (189)
     Amortization of deferred stock grants                         24            29
     Changes in operating assets and liabilities:
       Accounts receivable                                       (938)       (1,768)
       Inventories                                               (109)           92
       Prepaid expenses, insurance receivable, and other        1,201          (964)
       Bank overdraft                                            (617)          229
       Accounts payable                                           208         2,438
       Accrued payroll, bonus, commissions, and other             380            73
       Accrued warrant                                            270         1,100
       Discontinued operations                                     --          (240)
       Income taxes payable                                       169           231
                                                             --------      --------
Net cash provided by operating activities                       5,125         2,076

INVESTING ACTIVITIES
Purchases of property and equipment                            (1,204)       (1,224)
Increase in other assets                                          (88)          (26)
                                                             --------      --------
Net cash used by investing activities                          (1,292)       (1,250)

FINANCING ACTIVITIES
Proceeds from notes payable and long-term debt                  8,436           322
Payments on notes payable and long-term debt                  (12,569)         (479)
Payments on capital lease obligations                            (345)         (674)
                                                             --------      --------
Net cash used by financing activities                          (4,478)         (831)
                                                             --------      --------
Net decrease in cash                                             (645)           (5)
Cash at beginning of year                                         765           770
                                                             --------      --------
Cash at end of year                                          $    120      $    765
                                                             ========      ========
</TABLE>

See accompanying notes.


                                      -5-
<PAGE>   34
                              Rockford Corporation

                   Notes to Consolidated Financial Statements

                               September 30, 1994


1. ACCOUNTING POLICIES

ORGANIZATION AND DESCRIPTION OF BUSINESS

Rockford Corporation (Company) is presently engaged in the business of
manufacturing and distributing car audio electronics and speaker systems under
the division names of "Rockford Fosgate," "Rockford Acoustic Designs (formerly
Carbonneau)," "Hafler" and "Perfect Interface." The Company was organized and
incorporated under the laws of the State of Arizona on July 22, 1980, and has
manufacturing facilities in Tempe, Arizona and Grand Rapids, Michigan.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned and majority owned subsidiaries in Germany and Japan.
Significant intercompany accounts and transactions have been eliminated in
consolidation.

RECEIVABLES

The Company sells its products principally to automotive stereo dealers
primarily in the United States, Europe and Asia. At September 30, 1994 and 1993,
net accounts receivable include approximately $475,000 and $247,000,
respectively, due from overseas businesses.

The Company also offers a prompt pay discount for certain invoices paid under 40
days of issuance and has included in its allowance for receivables at September
30, 1994 and 1993, approximately $180,000 with respect to accounts utilizing
such discounts after year-end.

INVENTORIES

Inventories consist principally of raw materials of electronic and mechanical
components used in the manufacturing of amplifier and speaker systems and
finished goods. Inventories are carried at the lower of cost or market using the
first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation and amortization are
computed principally on the straight-line method for financial reporting
purposes over a three to five year life.


                                      -6-
<PAGE>   35
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)




1.  ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

The Company accounted for income taxes under the provisions of Accounting
Principles Board Opinion Number 11 through September 30, 1992. Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" was issued
by the Financial Accounting Standards Board in February 1992 and was adopted by
the Company as of October 1, 1992 (see Note 6).

RESEARCH AND DEVELOPMENT

During the years ended September 30, 1994 and 1993, research and development
expense of approximately $1,347,000 and $1,435,000, respectively, was charged to
expense as incurred.

FOREIGN CURRENCY TRANSLATION

The financial statements of foreign subsidiaries have been translated into U.S.
dollars in accordance with FASB Statement No. 52. All balance sheet accounts
have been translated using the current exchange rates at the balance sheet date.
Income statement amounts have been translated using the average exchange rate
for the year. The gains and losses resulting from the change in exchange rates
from year to year have been reported separately as a component of stockholders'
equity (deficit). The effect on the statement of operations of transaction gains
and losses is insignificant.

RECLASSIFICATIONS

Certain amounts in the 1993 financial statements have been changed to conform
them to the 1994 presentation.


                                      -7-
<PAGE>   36
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



2.  INVENTORIES

Inventories consisted of the following at September 30:

<TABLE>
<CAPTION>
                                                       1994               1993
                                                     -------            -------
                                                            (In thousands)
<S>                                                  <C>                <C>
         Raw materials                               $ 4,019              4,847
         Work in progress                                222                572
         Finished goods                                3,046              2,835
                                                     -------            -------
                                                       7,287              8,254
         Less allowances                              (1,402)            (1,965)
                                                     -------            -------
                                                       5,885            $ 6,289
                                                     =======            =======
</TABLE>

3.  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30:

<TABLE>
<CAPTION>
                                                              1994         1993
                                                            -------      -------
                                                               (In thousands)
<S>                                                         <C>          <C>
         Machinery and equipment                            $ 6,353      $ 5,842
         Furniture and fixtures                                 191          185
         Leasehold improvements                                 597          477
         Vehicles                                                74           85
         Demo equipment                                         108          108
         Drawings and technical data                            146          127
         Tooling equipment                                    1,410          817
                                                            -------      -------
                                                              8,879        7,641
         Less accumulated depreciation and amortization      (5,864)      (4,589)
                                                            -------      -------
                                                            $ 3,015      $ 3,052
                                                            =======      =======
</TABLE>


                                      -8-
<PAGE>   37
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



4.  NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consisted of the following at September 30:

<TABLE>
<CAPTION>
                                                                                      1994       1993
                                                                                     ------     ------
                                                                                       (In thousands)
<S>                                                                                  <C>        <C>
$12,000,000 line of credit with a lender, paid in full during 1994                   $   --     $8,888

$9,500,000 line of credit with a lender collateralized by substantially all
   assets, with interest payments due monthly at the prime rate plus three
   percent through December 31, 1994 (10.75 percent at September 30, 1994) and
   at the prime rate plus two percent effective January 1, 1995 until April 1997
   when all remaining principle and interest is due. Borrowings under this line
   of credit are limited to the borrowing base defined substantially as a
   percentage of inventory, as defined, and 75 percent of eligible accounts
   receivable, as defined and adjusted in the agreement                               6,848         --

10.5 percent senior note payable to a bank, collateralized by substantially all
   assets, payable in monthly installments of $50,243, including interest until
   May 31, 1995 when all remaining principal and interest is due and payable. In
   connection with this senior note payable, warrants were issued to purchase up
   to 39,161 shares of the Company's common stock at $36.00 per share, expiring
   June 1995; the exercisable warrants are being reduced pro rata based on
   payments on the outstanding loan balance                                           1,322      1,622

10 percent subordinated, convertible debentures, unsecured, interest payable
   semiannually until January 1998 when all remaining principal and interest is
   due and payable, convertible into common shares at $11.95 per share
   Subsequent to year-end, the subordinated convertible debentures were amended
   to senior notes, unsecured, subordinated, no conversion rights, with interest
   payable quarterly. In connection with the amendment, detachable warrants were
   issued to purchase up to 167,400 shares of the Company's commons stock at
   $6.50 per share, expiring February 2000                                            2,000      2,000
</TABLE>


                                      -9-
<PAGE>   38
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



4.  NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                       1994       1993
                                                                                       (In thousands)
<S>                                                                                  <C>        <C>
10.5 percent subordinated, convertible debentures, unsecured, interest payable
   quarterly until February 1999 when all remaining principal and interest is
   due and payable, convertible into common shares at $23.00 per share
   Subsequent to year-end, the subordinated convertible debentures were amended
   to senior notes, unsecured, subordinated, with no conversion rights. In
   connection with the amendment, detachable warrants were issued to purchase up
   to 54,696 shares of the Company's common stock at $6.50 per share, expiring
   February 2000                                                                     $1,258     $1,258

7.5 percent subordinated, convertible debentures to a related parties,
   unsecured, interest payable quarterly until January 1995, when all remaining
   principal and interest is due and payable, convertible into common shares at
   $.75 per share                                                                       150        150

7 percent subordinated, convertible debentures to a related parties, unsecured,
   interest payable quarterly until March 1996 when all remaining principal and
   interest is due and payable, convertible into common shares at rates ranging
   from $.01 share to $1 per share                                                      150        150

10.5 percent subordinated, convertible debentures to a related parties,
   unsecured, interest payable quarterly until February 1999 when all remaining
   principal and interest is due and payable, convertible into common shares at
   $23.00 per share. Subsequent to year-end, the subordinated convertible
   debentures were amended to senior notes, unsecured, subordinated, with no
   conversion rights. In connection with the amendment, detachable warrants were
   issued to purchase up to 16,609 shares of the Company's common stock at $6.50
   per share, expiring February 2000                                                    382        382
</TABLE>


                                      -10-
<PAGE>   39
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



4.  NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                       1994       1993
                                                                                       (In thousands)
<S>                                                                                  <C>        <C>
7 percent promissory note to a vendor, paid in full during 1994                      $    --    $   296

8.75 percent note payable to a financing company collateralized by equipment,
   payable in monthly installments of $5,576, including interest, until February
   1998 when all remaining principal and interest is due and payable                     193        241

Other                                                                                      4          6
                                                                                     -------    -------
                                                                                      12,307     15,033
Less current portion                                                                   1,529     12,900
                                                                                     -------    -------
                                                                                     $10,778    $ 2,133
                                                                                     =======    =======
</TABLE>

Maturities of notes payable and long-term debt for the five years succeeding
September 30, 1994 are $1,529,000 in 1995, $200,000 in 1996, $6,896,000 in 1997,
$2,048,000 in 1998, and $1,634,000 in 1999. Interest payments were approximately
$1,490,000 and $1,597,000 for the years ended September 30, 1994 and 1993,
respectively.

During 1994, the Company converted $1,407,000 of vendor payables to short-term
promissory notes in noncash transactions. The promissory notes were paid in full
during the fiscal year ended September 30, 1994.

The Company's $9,500,000 line of credit, its 10.5 percent senior note payable
with an outstanding balance at September 30, 1994 of $1,322,000, and its 10
percent subordinated, convertible debentures contain convenants which place
various restrictions on financial ratios, levels of indebtedness and capital
expenditures, among other things.

5.  LEASES

The Company leases equipment under capital leases. The Company also leases
certain manufacturing, warehouse and office facilities and computer hardware and
software under noncancelable operating leases that expire in various years
through April 1999.


                                      -11-
<PAGE>   40
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



5.  LEASES (CONTINUED)

Property and equipment includes the following amounts for leases that have been
capitalized at September 30:

<TABLE>
<CAPTION>
                                                          1994            1993
                                                        -------         -------
                                                             (In thousands)
<S>                                                     <C>             <C>
         Equipment                                      $   625         $ 2,249
         Less accumulated amortization                     (478)         (1,818)
                                                        -------         -------
                                                        $   147         $   431
                                                        =======         =======
</TABLE>

Amortization of leased assets is included in depreciation and amortization
expense.

Future minimum payments under capital leases and noncancelable operating leases
with initial terms of one year or more consisted of the following at September
30, 1994:

<TABLE>
<CAPTION>
                                                                             CAPITAL         OPERATING
                                                                             LEASES           LEASES
                                                                             ------           ------
                                                                                  (In thousands)
<S>                                                                          <C>              <C>
         1995                                                                $   74           $1,319
         1996                                                                    25            1,230
         1997                                                                    24            1,238
         1998                                                                    --              601
         1999                                                                    --              157
         Thereafter                                                              --              111
                                                                             ------           ------
         Total minimum lease payments                                           123           $4,656
                                                                                              ======
         Amounts representing interest                                           14
                                                                             ------
         Present value of net minimum lease payments (including
             current portion of $58,000)                                     $  109
                                                                             ======
</TABLE>

Total rental expense for all operating leases was approximately $995,000 and
$740,000 for the years ended September 30, 1994 and 1993, respectively.


                                      -12-
<PAGE>   41
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



6.  INCOME TAXES

Effective October 1, 1992, the Company changed its method of accounting for
income taxes from the deferred method too the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes" (FAS 109). As permitted under
the new rules, prior years' financial statements have not been restated. The
cumulative effect of adopting FAS 109 as of October 1, 1992 was to increase the
net loss by $827,000.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of September 30, 1994 are as follows:

<TABLE>
<CAPTION>
                                                                1994         1993
                                                              -------      -------
                                                                 (In thousands)
<S>                                                           <C>          <C>
         Deferred tax assets:
            Inventory allowances                              $   556      $   736
            Receivables allowances                                258          214
            Book over tax depreciation                            170          124
            Accrued liabilities and other                         636          485
            Research and development                              208          219
            Alternative minimum tax credit carryforward           244          315
            Net operating loss carryforwards - state              198          300
                                                              -------      -------
         Total deferred tax assets                              2,270        2,393
         Less valuation allowance for deferred tax assets          --       (2,393)
         Less current portion of deferred tax assets           (2,100)          --
                                                              -------      -------
         Deferred tax assets long-term                        $   170      $    --
                                                              =======      =======
</TABLE>

The valuation allowance decreased by $2,393,000 during 1994 based upon
management's assessment that a valuation allowance was no longer required with
the recent improvements in the Company's financial results. During 1993, the
valuation allowance was increased by $1,330,000 from the amount existing at
adoption based on that year's losses.


                                      -13-
<PAGE>   42
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



6.  INCOME TAXES (CONTINUED)

Significant components of the federal and state income tax expense (benefit)
are:

<TABLE>
<CAPTION>
                                                           1994            1993
                                                         -------         -------
                                                              (In thousands)
<S>                                                      <C>             <C>
         Current:
            Federal expense                              $   590         $    50
            State expense                                    110              40
                                                         -------         -------
         Total current                                       700              90
         Deferred:
            Federal (benefit)                             (2,135)             --
            State (benefit)                                 (135)             --
                                                         -------         -------
         Total deferred (benefit)                         (2,270)             --
                                                         -------         -------
         Deferred tax assets long-term                   $(1,570)        $    90
                                                         =======         =======
</TABLE>

The Company's effective tax rate differs from the statutory rates primarily due
to the noninclusion of foreign income and (losses) of approximately $223,000,
net, in 1994 and $(159,000), net, in 1993, utilization of net operating loss
carryforwards, as well as the deferred tax asset valuation allowance changes
during 1994 and 1993.

At September 30, 1994, the Company had a net operating loss carryforward of
approximately $3,950,000 for state income tax purposes which expires during 1996
through 1998.

7.  COMMON STOCK GRANTS AND OPTIONS

In May 1990, the Board of Directors granted certain officers and employees
common stock grants as compensation and additional incentive to provide
continued services to the Company. The stock was granted at its fair market
value as determined by management at the date of the grant. If the officers' or
employees' employment with the Company is terminated during the four year
incentive period for any reason, the officer or employee shall be required to
forfeit all unvested stock issued under the stock grant program. The Company
charged to expense, under the stock grant program, $24,000 and $29,000 as
compensation in 1994 and 1993, respectively.

The Board of Directors of the Company granted a certain consulting firm, which
is providing executive and other consulting services to the Company, options to
purchase 50,000 shares of its authorized but unissued common stock at a price of
$23 per share (amended to $6.50 per share subsequent to year-end), protected
against dilution, as defined, and expiring in August 1999. The price per share
exceeded the fair market value at the date of the grant. These stock options
shall be contingent upon the Company's stock being publicly traded, or the
Company being


                                      -14-
<PAGE>   43
                              Rockford Corporation

             Notes to Consolidated Financial Statements (continued)



7.  COMMON STOCK GRANTS AND OPTIONS (CONTINUED)

merged into or acquired by a private or publicly owned concern, and if such
event occurs, the stock options will vest 100 percent and shall be exercisable
only within 90 days after such event. The stock options shall vest 25 percent on
August 1, 1992, and 25 percent each year thereafter provided that the consulting
firm shall be, each vesting date, still performing the services required of
them.

Subsequent to year-end, the Board authorized the implementation of an incentive
stock option plan for certain employees. Under the plan, options to purchase
common stock of the Company will be granted to certain employees at the fair
market value of the underlying common stock. Up to 250,000 shares may be offered
under this plan.

8.  LIFE INSURANCE PROCEEDS

During 1993, the Company received proceeds of approximately $1,000,000 from a
claim filed under a key man life insurance policy due to the death of a member
of the Board of Directors. The proceeds are recorded in other income in the 1993
financial statements.

9.  CONTINGENCIES

The Company is a party to legal proceedings which arise out of the ordinary
course of business. Based upon advice from outside legal counsel, management is
of the opinion that these matters will have no material effect on the Company's
consolidated financial position.

10.  BENEFIT PLAN

During 1990, the Company's Board of Directors elected to establish the Rockford
Corporation 401(k) Retirement Savings Plan (Plan) covering substantially all
employees who have completed six consecutive months of service without regard to
hours of service. Under the terms of the Plan, employees may make voluntary
contributions, subject to Internal Revenue Service limitations. The company will
match employee contributions up to three percent of the employee's annual
compensation. Additional contributions to the Plan can be made at the discretion
of the Board of Directors. Contributions to the Plan during the years ended
September 30, 1994 and 1993 were approximately $140,000 and $71,000,
respectively.


                                      -15-
<PAGE>   44
                           OTHER FINANCIAL INFORMATION
<PAGE>   45
                         [ERNST & YOUNG LLP letterhead]




                        Report of Independent Auditors on
                           Other Financial Information

The Board of Directors and Stockholders
Rockford Corporation

Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The following financial information,
included on pages 17 through 19, is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.


                                                           /s/ Ernst & Young LLP

November 23, 1994


                                      -16-
<PAGE>   46
                              Rockford Corporation
                           Consolidating Balance Sheet
                               September 30, 1994
                                 (In thousands)

<TABLE>
<CAPTION>
                                                             Consolidation        Rockford         Rockford          Rockford
                                           Consolidated       Adjustments       Corporation         Germany           Japan
                                           ------------       -----------       -----------         -------           -----
<S>                                        <C>               <C>                <C>                <C>               <C>
ASSETS
Current assets:
Cash                                         $    120          $     --          $     60          $     34          $     26
Accounts receivable                            11,254            (1,844)           12,604               121               373
Less allowance for doubtful accounts             (715)               --              (696)              (19)               --
                                             --------          --------          --------          --------          --------
Net accounts receivable                        10,539            (1,844)           11,908               102               373
Inventories                                     7,287              (109)            7,105                --               291
Less allowances                                (1,402)               --            (1,402)               --                --
                                             --------          --------          --------          --------          --------
Net inventories                                 5,885              (109)            5,703                --               291
Prepaid expenses and other                        634                --               522                32                80
Notes receivable                                   --              (564)              564                --                --
Deferred income taxes                           2,100                --             2,100                --                --
                                             --------          --------          --------          --------          --------
Total current assets                           19,278            (2,517)           20,857               168               770

Property and equipment, net                     3,015                --             2,895                38                82

Deferred income taxes                             170                --               170                --                --

Other assets, net                                 282              (175)              377                50                30
                                             --------          --------          --------          --------          --------
Total assets                                 $ 22,745          $ (2,692)         $ 24,299          $    256          $    882
                                             ========          ========          ========          ========          ========
</TABLE>


                                      -17-
<PAGE>   47
                              Rockford Corporation
                    Consolidating Balance Sheet -- Continued
                               September 30, 1994
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                           Consolidation     Rockford     Rockford       Rockford
                                                             Consolidated   Adjustments    Corporation     Germany        Japan
                                                             ------------   -----------    -----------     -------        -----
<S>                                                          <C>           <C>             <C>            <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Bank overdraft                                            $    300        $     --       $    300      $     --       $     --
   Accounts payable                                             5,264          (1,844)         5,185         1,060            863
   Current portion of notes payable, long-term debt, and           --
     capital lease obligations                                  1,587              --          1,587            --
   Accrued payroll, bonus, commissions, and other               2,750              --          2,749           (24)            25
   Accrued warranty                                             1,570              --          1,570            --             --
   Income taxes payable                                           400              --            400            --             --
                                                             --------        --------       --------      --------       --------
Total current liabilities                                      11,871          (1,844)        11,791         1,036            888

Notes payable and long-term debt, less current portion         10,778            (564)        10,778           454            110
Capital lease obligations, less current portion                    51              --             51            --             --
                                                             --------        --------       --------      --------       --------
                                                               10,829            (564)        10,829           454            110
Stockholders' equity (deficit):
   Common stock                                                     6            (216)             6           117             99
   Additional paid-in capital                                     765              --            765            --             --
   Deferred stock grants                                           --              --             --            --             --
   Retained earnings (accumulated deficit)                       (531)            (68)           980        (1,047)          (324)
   Currency translation adjustments                              (195)             --             --          (304)           109
                                                             --------        --------       --------      --------       --------
Total stockholders' equity (deficit)                               45            (284)         1,679        (1,234)          (116)
                                                             --------        --------       --------      --------       --------
Total liabilities and stockholders' equity (deficit)         $ 22,745        $ (2,692)      $ 24,299      $    256       $    882
                                                             ========        ========       ========      ========       ========
</TABLE>


                                      -18-