Document:

exv10w71

 

Execution Copy

EXHIBIT 10.71

Asset Purchase Agreement

between

Rockford Corporation, Audio Innovations, Inc.

and

Advanced Integration, LLC

Dated as of March 31, 2006

 

 

Asset Purchase Agreement

This Asset Purchase Agreement (“Agreement”) is between:

	 	(a)	 	Rockford Corporation (“Rockford”) and its wholly owned subsidiary Audio
Innovations, Inc. (“AI” and, with Rockford, “Seller”); and
	 
	 	(b)	 	Advanced Integration, LLC (“Purchaser”).

Seller and Purchaser agree as follows:

	1.	 	Background and Definitions.

	 	1.1	 	Company Business. AI is in the business of designing,
manufacturing, marketing and distributing branded aftermarket car-audio enclosures
under the names of Q-Logic, Q-Forms, and Q-Customs (the “Business”).
	 
	 	1.2	 	Asset Sale. Seller desires to sell, and Purchaser has agreed to
acquire all or substantially all of Seller’s tangible and intangible assets used
exclusively in the Business and specifically listed in Schedule 1.2 (the “Assets”),
including:
	 
	 	(a)	 	the Business’ inventory as it exists on the Effective Date and as
updated and acquired through the Closing Date, except for inventory sold in the
ordinary course of business (the “Inventory”);
	 
	 	(b)	 	all accounts receivable related to the Business as of the Effective
Date as updated and created through the Closing Date, except for accounts
receivable sold in the ordinary course of business (the “Accounts Receivable”)
	 
	 	(c)	 	the Intellectual Property used exclusively in connection with the
Business, including those trademarks and trade names identified on Schedule 1.2
and any federal, state, or foreign registrations relating to these names (the
“Names”), and the goodwill associated with such Names. Purchaser will not acquire
any interest in any of Seller’s trademarks, names or other Intellectual Property
other than the Names and Intellectual Property identified on Schedule 1.2;
	 
	 	(d)	 	the additional assets of the Business, including owned or leased
property and equipment, supplies, trade show fixtures specific to the Business,
and other assets listed in Schedule 1.2.

     The Assets specifically exclude the Excluded Assets.

	 	1.3	 	Definitions. In this Agreement:

	 	(1)	 	Affiliate means any individual or Business Entity which, directly
or indirectly, alone or together with others, controls, is controlled by, or is
under common

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	 	 	 	control with, another individual or Business Entity;
	 
	 	(b)	 	Agreement means this Agreement and each of the Schedules and
certificates delivered with this Agreement. The Schedules and certificates are a
part of this Agreement;
	 
	 	(c)	 	Assets has the meaning given in Section 1.2;
	 
	 	(d)	 	Assumed Liabilities means those debts, obligations and other
liabilities assumed by Purchaser, as specifically listed in Schedule 2.4.
	 
	 	(e)	 	Business has the meaning given in Section 1.1;
	 
	 	(f)	 	Business Entity means any person, corporation, partnership, joint
venture, limited liability company, or other entity;
	 
	 	(g)	 	Closing means the consummation of the transactions contemplated by
this Agreement;
	 
	 	(h)	 	Closing Date means the day on which the Closing takes place;
	 
	 	(i)	 	Contract means any contract, indenture, mortgage or deed of trust,
lease, purchase order, guaranty, insurance policy, bond, license, instrument,
understanding, obligation, or other agreement, written or oral;
	 
	 	(j)	 	Employment Contracts means all employment agreements, consulting
agreements, and collective bargaining agreements;
	 
	 	(k)	 	Employment Plans means all executive compensation plans, bonus plans,
holiday and other bonus practices, deferred compensation agreements, pension or
retirement plans, employee stock option or stock purchase plans, employee life,
health, and accident insurance, and other employee benefit plans, agreements,
arrangements or commitments;
	 
	 	(l)	 	Encumbrance means any mortgage, pledge, lien, claim, charge, security
interest, restriction, easement, right of way, or other encumbrance;
	 
	 	(m)	 	Environmental Laws means all Laws relating to the environmental or
Hazardous Materials, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986 (“CERCLA”), 42 U.S.C. §9601 et seq.; the Toxic
Substance Control Act (“TSCA”), 15 U.S.C. §2601 et seq; the Hazardous Materials
Transaction Act, 49 U.S.C. §1802 et seq; the Resource Conservation and Recovery
Act (“RCRA”), 42 U.S.C. §9601 et seq; the Clean
Water Act (“CWA”), 33 U.S.C. §1251 et seq; the Safe Drinking Water Act, 42 U.S. C.
§300(f) et seq; the Clean Air Act (“CAA”), 42 U.S.C. §7401 et seq;

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	 	 	 	Federal
Insecticide, Fungicide and Rodentcide Act (“FIFRA), 7 U.S.C. §136 et seq; and
Solid Waste Disposal Act (“SVVDA”) §6901 et seq;
	 
	 	(n)	 	Excluded Assets means the assets used in the Business that are not
being sold to or acquired by Purchaser, including any assets used in the Business
that are not listed as Assets on Schedule 1.2 or that are listed as Excluded
Assets on Schedule 1.2;
	 
	 	(o)	 	Financial Statements and Financial Statement Date have the meaning
given in Section 5.5;
	 
	 	(p)	 	Government means any legislature, executive, department,
administrative agency, municipality, subdivision, instrumentality, or other
authority of the United States, any state, any locality, or any foreign country or
political subdivision of a foreign country;
	 
	 	(q)	 	Hazardous Materials means hazardous wastes, hazardous substances,
hazardous constituents, toxic substances, pollutants, contaminants, radioactive
materials, related materials, and any other substances, constituents or wastes,
whether solids, liquids or gases, subject to regulation under any Environmental
Laws;
	 
	 	(r)	 	Information means information Seller has supplied to Purchaser under
Section 7.7 of this Agreement;
	 
	 	(s)	 	Intellectual Property means patents, trademarks, trade names, service
marks, other trade rights, copyrights, licenses, and similar intangibles;
	 
	 	(t)	 	Knowledge means and an individual will be deemed to have “knowledge”
of a particular fact or other matter if such individual is actually aware of such
fact or other matter after due inquiry that is reasonable under the circumstances.
	 
	 	(u)	 	Laws means any law, statute, ordinance, rule, regulation, or Order;
	 
	 	(v)	 	Liabilities shall mean, without limitation, any direct or indirect
liability, indebtedness, guaranty, endorsement, claim, loss, damage, either
accrued, absolute, contingent, mature, unmature or otherwise and whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
	 
	 	(w)	 	Loss means all expenses (including reasonable attorneys’ and
accountants’ fees), losses, taxes, claims, damages, awards, fines, interest,
penalties, and liabilities;
	 
	 	(x)	 	Material Adverse Change or Material Adverse Effect means any change
or effect that is or would be materially adverse to a party and its Affiliates,

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	 	•	 	taking into account the business, properties, assets, employees, financial
condition and results of operations of the party and its Affiliates; but
	 
	 	•	 	excluding those changes, effects, and developments that directly result from
(1) the announcement of this Agreement, or (2) any act or omission of Purchaser
(if the event has an effect on Seller) or Seller (if the event has an effect on
Purchaser)
	 
	 	(y)	 	Order means any order, decree, decision, injunction, finding, or
judgment;
	 
	 	(z)	 	Permits means all approvals, permits, licenses, filings,
registrations, certificates, orders, authorizations, qualifications, or other
consents from any Government, self-regulatory authority, or any other third party;
	 
	 	(aa)	 	Proceeding means any claim, action, suit, mediation, arbitration,
labor grievance, Government investigation, or other legal or administrative
proceeding;
	 
	 	(bb)	 	Purchase Price means the purchase price for the Assets, in a total
amount of $1,750,000, including $750,000 payable in cash at the Closing (the
“Cash Purchase Price”) and $1,000,000 payable in 30 monthly installments after the
closing (the “Deferred Purchase Price”);
	 
	 	(cc)	 	Purchaser means Advanced Integration, LLC, an Oklahoma corporation;
	 
	 	(dd)	 	Seller means Rockford Corporation, an Arizona corporation, and
Rockford’s wholly owned subsidiary Audio Innovations, Inc., an Oklahoma
corporation; and
	 
	 	(ee)	 	Tax means any tax, assessment, duty, or governmental charge or
deposit (including income, property, ad valorem, gross receipts, sales, use, value
added, occupation, franchise, transfer, excise, goods and services, payroll,
employment, profits, capital, severance, production, premium, payroll, stamp,
unemployment insurance, disability, workers’ compensation, withholding, and social
security tax), and all interest and penalties, whether disputed or not, imposed by
any Government.

     Other terms used as defined terms have the meanings used in this Agreement.

	2.	 	Purchase and Sale of Assets. At the Closing, and subject to the terms and conditions of this
Agreement:

	 	2.1	 	Purchase of Assets. Seller will sell to Purchaser, and
Purchaser will purchase from Sellers, the Assets free and clear of all
Encumbrances, except the Assumed Liabilities.

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	 	2.2	 	No Purchase of Other Assets. Other than the Assets, Purchaser
will not acquire any other asset of Seller.
	 
	 	2.3	 	No General Assumption of Certain Liabilities. Except for the
Assumed Liabilities, Purchaser will not assume any liabilities of Seller. Seller
will be solely responsible for paying all liabilities (except for the Assumed
Liabilities) related to the Business and the Assets, including executory contracts,
purchase orders, judgments, obligations and debts.
	 
	 	2.4	 	Assumption of Assumed Liabilities. Purchaser will assume
liability only for the leases, accounts payable, contract obligations, warranty
obligations, and other liabilities specifically described in Schedule 2.4 (the
“Assumed Liabilities”).

	3.	 	Closing. The Closing will take place at 10:00 A.M., local time, on or before March 31, 2006,
at the offices of Steptoe & Johnson, 201 E. Washington St., Suite 1600, Phoenix, Arizona
85004, or at another agreed upon time and place.
	 
	4.	 	Purchase Price.

	 	4.1	 	Purchase Price; Closing Adjustments. At the Closing, Purchaser
will pay to Seller the Purchase Price for the Assets in the following manner:
	 
	 	(a)	 	Cash Purchase Price. The Cash Purchase Price by wire transfer of
immediately available funds to the account Seller designates; and
	 
	 	(b)	 	Deferred Purchase Price. The Deferred Purchase Price by delivery to
Seller of the Loan and Security Agreement providing for payment of $1,000,000 in
30 equal monthly installments beginning on the first day of the month following
the closing and continuing for 30 months. The Deferred Purchase Price will be
secured by (a) a first priority security interest in the receivables owed to AI or
to Purchaser by Best Buy or any Affiliate of Best Buy and (b) a second priority
security interest in all other assets of Purchaser including the Assets.
	 
	 	4.2	 	Allocation of Purchase Price. The Parties will allocate the
Purchase Price among the Assets for tax purposes in accordance with Section 1060 of
the Internal Revenue Code. Purchaser and Seller will each prepare and file on a
timely basis with the Internal Revenue Service substantially identical initial and
supplemental Internal Revenue Service Forms 8594 “Asset Acquisition Statements
Under Section 1060” consistent with such allocation. 

	5.	 	Representations and Warranties by Seller. To the extent information on which the following
representations are made depend upon information supplied by AI management located at AI’s
facility in Oklahoma, Buyer’s representations and warranties are made in reliance upon such
management and are made to Seller’s Knowledge. Because such members of management are also
principals of Buyer, Buyer acknowledges that this reliance is reasonable and that Seller is
not responsible for errors, inaccuracies or misrepresentations 

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	 	 	resulting from Seller’s
reliance upon information from such management, unless Seller has Knowledge of such errors,
inaccuracies or misrepresentations prior to Closing. Except as stated otherwise in a Schedule
to this Agreement, and subject to the disclaimer made above, Seller represents and warrants to
Purchaser that:

	 	5.1	 	Organization and Authority to Conduct Business. Rockford is
duly organized, validly existing and in good standing under the laws of Arizona and
AI is duly organized, validly existing and in good standing under the laws of
Oklahoma. Each Seller is qualified to do business and is in good standing in each
of the jurisdictions identified on Schedule 5.1. Each Seller has all requisite
corporate power and authority to carry on its business as now being conducted, to
own, lease, or operate its properties and to carry out the transactions
contemplated by this Agreement. Each Seller has delivered to Purchaser complete
copies of Seller’s articles or certificate of incorporation and bylaws as amended.
	 
	 	5.2	 	Authorization and Approval of Agreement. Seller:
	 
	 	(a)	 	has taken, or will take before the Closing, all actions; and
	 
	 	(b)	 	has secured, or will secure before the Closing, all material Permits

required to authorize the execution, delivery, and consummation of this Agreement and
the transactions contemplated by this Agreement.

	 	5.3	 	Binding Effect. This Agreement, and each document executed by
Seller in connection with this Agreement:
	 
	 	(a)	 	constitutes the legal, valid, binding, and enforceable obligation of
Seller;
	 
	 	(b)	 	has been duly executed and delivered by Seller; and
	 
	 	(c)	 	has been duly authorized by all necessary corporate action.
	 
	 	5.4	 	Execution, Delivery and Performance of Agreement. The
execution, delivery, and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not (with or without the
giving of
notice or the passage of time or both) conflict with, result in a default under,
result in the creation of any Encumbrance on the Assets pursuant to, or result in
the acceleration of any obligation under or permit the termination of:
	 
	 	(a)	 	Seller’s certificate of incorporation or bylaws; or
	 
	 	(b)	 	any material Contract or Law to which Seller is a party or by which
it, the Business or the Assets may be bound.

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	 	5.5	 	Required Filings and Consents. No waiver, consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity or any other person is required by or with respect to Seller in
connection with the execution and delivery of this Agreement or the consummation by
Seller of any of the transactions contemplated by this Agreement, except for:
	 
	 	(a)	 	the consents identified as required on Schedule 5.5, which are:

	 	(1)	 	all consents, waivers and approvals required in connection with
the consummation of the transactions contemplated by this Agreement under any
of Seller’s Contracts or Permits; and
	 
	 	(2)	 	will be secured before the Closing;

	 	(b)	 	such other waivers, consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate:

	 	(1)	 	have a material adverse effect on AI;
	 
	 	(2)	 	impair Seller’s ability to perform its obligations under this
Agreement; or
	 
	 	(3)	 	prevent the consummation of any of the transactions
contemplated by this Agreement.

	 	5.6	 	Financial Statements.
	 
	 	(a)	 	Sellers have delivered to Purchaser financial information relating to
the Business for the periods ending December 31, 2005, and February 28, 2006. The
last such date is the Financial Statements Date. The financial information
includes asset and liability information and income and expense information
derived from Rockford’s consolidated financial statements, but are not audited.
Because Rockford prepares its financial statements on a consolidated basis, and
because the Business is only a small part of Rockford’s total operations, the
financial information was not prepared in accordance with GAAP. The financial
information was derived from Rockford’s financial statements (which were prepared
in accordance with GAAP) and other financial records.
	 
	 	(b)	 	Except as contemplated by this Agreement, there are no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
related to the Business, except liabilities:
	 
	 	(1)	 	provided for in the Business’ financial information delivered to
Buyer as of the Financial Statements Date; or

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	 	(2)	 	incurred since the Financial Statement Date in the ordinary course
of business consistent with past practices.
	 
	 	5.7	 	Absence of Undisclosed Liabilities. As of the Financial
Statements Date, Seller does not have any debts or liabilities related to the
Business except as disclosed in the financial information delivered under Section
5.6 or in Schedule 5.7 or elsewhere in this Agreement. Since the Financial
Statements Date Seller has not incurred additional debts or liabilities related to
the Business except as disclosed in Schedule 5.7 or elsewhere in this Agreement;
	 
	 	5.8	 	Litigation.
	 
	 	(a)	 	There is no Proceeding pending or, to Seller’s Knowledge, threatened
against; and
	 
	 	(b)	 	There is no Order in effect or, to its Knowledge, threatened against
or relating to

(1) the Business, (2) Seller’s officers, directors, or employees who participate in the
Business, (3) the properties, assets, or operations related to the Business, or (4) the
transactions contemplated by this Agreement. Seller does not know, or have reason to
know, of any basis for such a Proceeding or Order;

	 	5.9	 	Bankruptcy Proceedings. Seller is not involved in any
Proceeding by or against it (a) under the Bankruptcy Code, 11 U.S.C. § 101 et seq.,
(b) under any other insolvency or debtors’ relief act, or (c) for the appointment
of a trustee, receiver, liquidator, assignee, sequestrator or other similar
official.
	 
	 	5.10	 	Taxes.
	 
	 	(a)	 	Seller has paid, or will pay before their due date, all Taxes related
to the Business due on or before the Closing and has reserved, or will reserve
before the Closing, amounts necessary to pay Taxes due after the Closing in
respect of periods ending on or before the Closing;
	 
	 	(b)	 	Seller has timely filed, or will timely file, all tax returns
required in connection with any Taxes related to the Business, and has not made
any requests for
extensions. All such returns are accurate and comply with applicable Law;
	 
	 	(c)	 	Seller has made all deposits required by Law and (1) has not been
delinquent in the payment of any Tax or (2) has paid any penalty associated with a
delinquency;
	 
	 	(d)	 	Seller has no reassessment of any Tax proposed and knows of no basis
for any such reassessment; and

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	 	(e)	 	To the Knowledge of Seller, there is no pending property, sales, use
or other tax dispute relating to or arising out of the Business or affecting the
Assets.
	 
	 	5.11	 	Compliance with Laws, Permits, and Contracts.
	 
	 	(a)	 	Seller has complied in all material respects with all Laws applicable
to the Business, Assets, or operations of the Business as presently conducted;
	 
	 	(b)	 	Seller has secured and is in compliance with all material Permits
required for the Assets and the Business as presently conducted;
	 
	 	(c)	 	Seller is not in default concerning any Order, writ, injunction or
decree of any federal, state or municipal court, or other governmental department
or agency affecting the Assets or the Business;
	 
	 	(d)	 	Seller has not offered, paid, or agreed to pay money or anything of
value for the purpose of or with the intent of obtaining or maintaining business
for Seller or otherwise benefiting Seller in violation of any Law (including
Section 30A(a) of the Securities Exchange Act of 1934, as amended); and
	 
	 	(e)	 	The ownership and present use of Seller’s properties related to the
Business and the conduct of the Business,
	 
	 	(1)	 	does not materially conflict with the rights of any other person;
and
	 
	 	(2)	 	will not (with or without the giving of notice or the passage of
time or both) conflict with or result in a default under:

	 	•	 	Seller’s certificate of incorporation or bylaws; or
	 
	 	•	 	any material Contract or Law to which Seller is a party or by which it is
affected.

	 	5.12	 	Enforceability of Contracts, No Defaults.
	 
	 	(a)	 	All Contracts identified in any schedule to this Agreement, or
required to be so identified, to which Seller is a party are effective, valid,
binding, and enforceable in accordance with their terms;
	 
	 	(b)	 	Seller is not in material default under any such Contracts; and
	 
	 	(c)	 	Seller does not know, or have reason to know, of any material default
(or event which, after notice or lapse of time, would constitute a material
default) of such Contracts.

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	 	5.13	 	Product Recalls. Seller has not within the past 5 years:
	 
	 	(a)	 	been party to any Proceeding brought by a Government; or
	 
	 	(b)	 	been subject to any Order;

that related to the Business and required, or sought to require, that Seller recall any
products designed, manufactured, assembled, shipped, sold, distributed, installed,
repaired or maintained by Seller in connection with the Business. Seller does not know, or
have reason to know, of any voluntary recall undertaken to avoid a Proceeding or Order or
of any pending or threatened Proceeding or Order that would require such a recall.

	 	5.14	 	Environmental Matters.
	 
	 	(a)	 	The Business is in material compliance with Environmental Laws;
	 
	 	(b)	 	Seller has secured all material Permits required under Environmental
Laws for the operation of the Business (and such Permits are listed on Schedule
5.14);
	 
	 	(c)	 	Seller does not know, or have reason to know, of any pending or
threatened Proceedings against Seller related to the Business with respect to
Environmental Laws;
	 
	 	(d)	 	Seller does not know, or have reason to know, of any act related to
the Business and attributable to Seller that could give rise to material liability
under CERCLA or any other Environmental Law. Seller has not submitted notice
pursuant to Section 103 of CERCLA with respect to any of the Assets;
	 
	 	(e)	 	To Seller’s Knowledge, Seller does not own or operate in connection
with the Business an underground storage tank except for tanks in material
compliance with Environmental Laws; and
	 
	 	(f)	 	Seller does not know, or have reason to know, of any Hazardous
Materials that have been released, discharged, deposited, emitted, leaked,
spilled, poured,
emptied, injected, dumped or disposed of in a manner that materially violates any
applicable Environmental Law on, in, or under real property owned or occupied by
Seller and related to the Business.
	 
	 	5.15	 	Ownership of Assets; No Encumbrances. Seller has good and
marketable title to the Assets free and clear of any Encumbrance. There are no
undisclosed interests in the Assets, nor does Seller know, or have reason to know,
of any assertion of such an interest, or of any facts or circumstances that would
give rise to such an interest. Schedule 5.15 lists:

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	 	(a)	 	Real Property.
	 
	 	(1)	 	all real property that Seller uses in the Business and owns or
leases;
	 
	 	(2)	 	a summary of the terms on which Seller owns, leases, or uses such
real property; and
	 
	 	(3)	 	a summary of the terms of any Encumbrances affecting such real
property.
	 
	 	(b)	 	Personal Property.
	 
	 	(1)	 	all tangible personal property (other than inventory and supplies)
that Seller uses in the Business and owns or leases, except for owned items
having a value of less than $10,000 and leased items requiring lease payments of
less than $10,000 annually;
	 
	 	(2)	 	a summary of the terms on which Seller owns, leases, or uses such
personal property; and
	 
	 	(3)	 	a summary of the terms of any Encumbrances affecting such personal
property.
	 
	 	(c)	 	Title. Seller has title to all the Assets reflected in the Financial
Statements or in Schedule 5.15, free of any Encumbrance, except:
	 
	 	(1)	 	items sold or otherwise disposed of in the ordinary course of
business consistent with past practice after the date hereof; or
	 
	 	(2)	 	as set forth in the Financial Statements or in Schedule 5.15.
	 
	 	(d)	 	The Assets are in good operating condition and repair (ordinary wear
and tear excepted), are suitable for the purposes used, and are adequate for the
current operations of the Business. The Assets constitute all of the properties
and assets used or held for use in connection with, necessary for the conduct of,
or otherwise material to, the Business. Seller does not know, or have reason to
know, of any pending or threatened condemnation affecting the Assets.
	 
	 	5.16	 	Insurance. Schedule 5.16 lists all material insurance policies
insuring, and all material performance bonds related to, the Business issued in
favor of Seller specifying:
	 
	 	(a)	 	the name of the insurer or bonding company;
	 
	 	(b)	 	the risk insured or bonded;
	 
	 	(c)	 	the limits of coverage;

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	 	(d)	 	the deductible (if any);
	 
	 	(e)	 	the premium (including any proposed premium increases known to
Seller);
	 
	 	(f)	 	any notice of cancellation or nonrenewal received by Seller; and
	 
	 	(g)	 	the date through which coverage will continue by virtue of premiums
already paid.
	 
	 	5.17	 	Distribution Agreements. Schedule 5.17 lists all material
sales agency agreements, distributorship agreements, and agreements providing for
the services of an independent sales representative relating to the Business to
which Seller is a party.
	 
	 	5.18	 	Other Contracts. Schedule 5.18 lists:
	 
	 	(a)	 	Each loan, conditional sales, or security agreement of Seller
relating to the Business with an unpaid balance more than $10,000;
	 
	 	(b)	 	Each material license agreement relating to intellectual property of
Seller relating to the Business (other than licenses incident to leases of
computers, software, or office or photographic equipment used in the ordinary
course of business); and
	 
	 	(c)	 	All material Contracts of Seller relating to the Business, but
excluding:
	 
	 	(1)	 	Contracts listed or excluded elsewhere in this Agreement; and
	 
	 	(2)	 	any Contract entered into in the ordinary course of business
terminable by Seller in less than 30 days or involving payment or receipt of less
than $10,000.
	 
	 	5.19	 	Employment Matters.
	 
	 	(a)	 	Employment Contracts and Plans. Schedule 5.19 lists all material
Employment Contracts and Employment Plans to which Seller is a party or by which
it is
bound and which relate to the operation of the Business.
	 
	 	(b)	 	Compliance with Employment Laws. Seller, in connection with the
Business:
	 
	 	(1)	 	is in material compliance with all Laws regulating employment
practices, terms and conditions of employment and wages and hours;
	 
	 	(2)	 	is not subject to any unfair labor practice complaint or other
petition before the National Labor Relations Board;
	 
	 	(3)	 	is not subject to any material labor strike, dispute, slow-down or
stoppage;

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	 	(4)	 	is not subject to any material Proceeding arising out of or under a
collective bargaining agreement; and
	 
	 	(5)	 	has not experienced any primary work stoppage or other labor
difficulty involving its employees during the past three years.
	 
	 	(c)	 	Plan Compliance. Seller has administered and maintained the
Employment Plans in material compliance with all applicable Laws with respect to
employees working in connection with the Business. Seller does not know, or have
reason to know, of any prohibited transaction (as defined in ERISA, 29 U.S.C. §
1001) relating to any Employment Plan.
	 
	 	(d)	 	Severance. Seller has not entered into any severance or similar
arrangement with respect of any present or former personnel who work exclusively
in the Business that will result in any obligation (absolute or contingent) of
Purchaser or Seller to make any payment to any present or former personnel who
work exclusively in the Business following termination of employment.
	 
	 	5.20	 	No Guaranties. Seller has not guaranteed the obligations or
liabilities of any person or business entity in connection with the Business.
	 
	 	5.21	 	Intellectual Property. Schedule 5.21 lists all material
patents, trademarks, trade names, service marks, other trade rights, copyrights,
licenses, and similar intangibles (the “Intellectual Property”) that Seller owns,
uses, or has registered in connection with the Business.
	 
	 	(a)	 	Seller is not obligated to pay any royalty with respect to
Intellectual Property that Seller owns, uses, or has registered in connection with
the Business.
	 
	 	(b)	 	Seller does not know, or have reason to know, of any pending or
threatened Proceedings alleging that the Business has infringed any third party’s
Intellectual Property rights (or of any basis for such a Proceeding).
	 
	 	(c)	 	Seller does not know, or have reason to know of any person
challenging or infringing on or otherwise violating any right of the Seller with
respect to any Intellectual Property that Seller owns, uses, or has registered in
connection with the Business.
	 
	 	5.22	 	Inventory. Seller’s inventory and related supplies are
merchantable or suitable for sale in the ordinary course of business, except to the
extent of the allowance for excess and obsolete inventory as reflected on the
Financial Statements.
	 
	 	5.23	 	Receivables. All receivables reflected in the Financial
Statements, and all receivables which have arisen since the Financial Statement
Date, arose from

- 14 -

 

	 	 	 	transactions in the ordinary course of business. The Seller
expects such receivables to be (or to have been) fully collected when due, except
to the extent of the normal allowance for doubtful accounts as reflected on the
Financial Statements.
	 
	 	5.24	 	Records. The books of account (“Books”) of Seller related to
the Business are complete and correct in all material respects. Seller knows of no
material transactions involving the Business of Seller, which properly should have
been, but are not, set forth in the Books.
	 
	 	5.25	 	Official Filings Complete. Seller has made all material
required Government filings related to the Business.
	 
	 	5.26	 	Absence of Changes or Events. Since the Financial Statements
Date, Seller has conducted the Business only in the ordinary course and has not
taken, or entered into any agreement or made any commitment to take, any of the
following actions in connection with the Business:
	 
	 	(a)	 	Incurred any obligation or liability related to the Business, except
liabilities (1) for trade or business obligations incurred in the ordinary course
of business or (2) which do not materially affect the Business or the Business’
financial condition;
	 
	 	(b)	 	Paid any obligation or liability related to the Business other than
current liabilities (1) shown on the Financial Statements or (2) incurred since
the Financial Statements Date in the ordinary course of business;
	 
	 	(c)	 	Subjected any Assets to any Encumbrance, except in the ordinary
course of business;
	 
	 	(d)	 	Sold or otherwise disposed of any Assets, except in the ordinary
course of business;
	 
	 	(e)	 	Cancelled, compromised, waived, or released any material debt, claim,
or right related to the Business, except in the ordinary course of business;
	 
	 	(f)	 	Received or given notice of termination of any Contract whose
termination has had, or may have, a material adverse effect on the Business or its
financial condition;
	 
	 	(g)	 	To its Knowledge, experienced any labor union organizing activity or
had any actual or threatened employee strikes, work stoppages, slow-downs, or
lock-outs;
	 
	 	(h)	 	Had any material change in the terms of agreements with employees,
agents, customers or suppliers;

- 15 -

 

	 	(i)	 	Made or agreed to make any change in the compensation payable to any
manager or employee working exclusively for the Business, except for normal
periodic bonus accruals and normal periodic increases in regular compensation;
	 
	 	(j)	 	Acquired any capital assets related to the Business which cost in
excess of an aggregate of $250,000;
	 
	 	(k)	 	Declared any dividends or made any distributions to its shareholders,
other than transactions in the ordinary course of business consistent with past
practices;
	 
	 	(l)	 	Instituted, settled or agreed to settle any material Proceeding
related to the Business; or
	 
	 	(m)	 	Suffered any change, event, condition, damage, destruction, or loss
having a material adverse affect on the Business.

	6.	 	Representations and Warranties by Purchaser. Except as stated otherwise in a Schedule to
this Agreement, Purchaser represents and warrants to Seller that:

	 	6.1	 	Organization and Authority. Purchaser is a limited liability
company duly organized, validly existing and in good standing under the laws of
Oklahoma. Purchaser has all requisite power and authority to carry on its business
as now being conducted, to enter into this Agreement, and to carry out the
transactions contemplated by this Agreement. Purchaser is qualified to do business
and is in good standing in each of the jurisdictions where the nature of its
business or the properties it owns or leases makes such qualification necessary or
advisable.
	 
	 	6.2	 	Authorization and Approval of Agreement. Purchaser:
	 
	 	(a)	 	has taken, or will take before the Closing, all actions; and
	 
	 	(b)	 	has secured, or will secure before the Closing, all material Permits

required to authorize the execution, delivery, and consummation of this Agreement and the
transactions contemplated by this Agreement.

	 	6.3	 	Binding Effect. This Agreement, and each document executed by
Purchaser in connection with this Agreement, constitutes the valid, binding, and
enforceable obligation of Purchaser, has been duly executed and delivered by
Purchaser, and has been duly authorized by all necessary corporate action.
	 
	 	6.4	 	Execution, Delivery and Performance of Agreement. The
execution, delivery, and performance of this Agreement by Purchaser will not (with
or without the giving of notice or the passage of time) conflict with, result in a
default under, or result in the creation of any Encumbrance pursuant to:

- 16 -

 

	 	(a)	 	Purchaser’s articles of organization or operating agreement; or
	 
	 	(b)	 	any material Contract or Law to which Purchaser is a party or by
which it may be bound.
	 
	 	6.5	 	Purchaser’s Independent Investigation. Purchaser and its
representatives have independently investigated Seller and the Business. Purchaser
acknowledges that there are no representations or warranties, express or implied,
about the Seller or the Business except for the representations and warranties in
this Agreement and each certificate and instrument furnished in connection with
this Agreement. Purchaser is not relying on any written or oral information about
the Seller or the Business (including financial or forward-looking information)
except for the representations and warranties in this Agreement and each
certificate and instrument furnished in connection with this Agreement.
	 
	 	6.6	 	Plant Closing. Purchaser has no definite plans to implement
any mass lay-off, plant closing, or other covered employment loss (a “Lay-off”), as
those terms are defined by the Worker Adjustment and Retraining Notification Act,
229 U.S.C. § 2101-2109 (the “Act”), within sixty-one (61) days of the Closing Date.
If it implements a Lay-off after the Closing, Purchaser will comply with the Act to
the extent the Act applies to its operations (including the Business as operated
after the Closing).
	 
	 	6.7	 	Litigation. There is no material Proceeding pending or, to
its Knowledge, threatened; and there is no material Order in effect relating to the
transactions contemplated by this Agreement. Purchaser does not know of any basis
for such a Proceeding or Order.
	 
	 	6.8	 	Required Filings and Consents. No waiver, consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity or any other person is required by or with respect to Purchaser
in connection with the execution and delivery of this Agreement or the consummation
by Purchaser of any of the transactions contemplated by this Agreement, except for:

	 	(a)	 	the consents identified as required on Schedule 6.8, which are:

	 	(1)	 	all consents, waivers and approvals required in connection with the
consummation of the transactions contemplated by this Agreement under any of
Purchaser’s Contracts or Permits; and
	 
	 	(2)	 	will be secured before the Closing;

	 	(b)	 	such other waivers, consents, approvals, orders, authorizations,
registrations, declarations and filings as would not individually or in the
aggregate:

- 17 -

 

	 	(1)	 	have a material adverse effect on Purchaser;
	 
	 	(2)	 	impair Purchaser’s ability to perform its obligations under this
Agreement; or
	 
	 	(3)	 	prevent the consummation of any of the transactions contemplated by
this Agreement.

	7.	 	Pre-Closing Covenants. After the execution of this Agreement and before the earlier of the
Closing or termination of this Agreement:

	 	7.1	 	Consents and Approvals. Purchaser and Seller will cooperate
	 
	 	(a)	 	to obtain as expeditiously as possible all material Permits necessary
to carry out the transactions contemplated by this Agreement; and
	 
	 	(b)	 	to comply with all material Laws regulating or restricting the
transactions contemplated by this Agreement.
	 
	 	7.2	 	Conduct of Business. Seller will conduct the Business only in
the ordinary course consistent with past practice, will maintain and preserve the
Assets, and will use commercially reasonable efforts
to:
	 
	 	(a)	 	preserve the Business and its internal organization;
	 
	 	(b)	 	maintain the general character of the Business and conduct the
Business operations, activities, and practices in a reasonable manner in
accordance with past practices;
	 
	 	(c)	 	keep available to Purchaser the services of the managers, employees,
agents and independent contractors who work exclusively for the Business;
	 
	 	(d)	 	preserve for the benefit of Purchaser the goodwill of suppliers,
customers, landlords and others having business relations material to the
Business; and
	 
	 	(e)	 	consult with Purchaser about material changes in the conduct of the
Business.

   Seller is not required to take or refrain from taking any action that, in Seller’s
reasonable judgment, is likely to result in:

	 	(1)	 	a substantial penalty;
	 
	 	(2)	 	a claim for damages by any third party against Seller;
	 
	 	(3)	 	losses to Seller;

- 18 -

 

	 	(4)	 	prejudice to or interference with the Business; or
	 
	 	(5)	 	a breach by any of the Seller of any of the representations and
warranties made by it in this Agreement.
	 
	 	7.3	 	Approval of Certain Transactions. Seller will not, without
Purchaser’s prior written approval, take or agree to take the following actions in
connection with the Business:
	 
	 	(a)	 	incur any additional debt related to the Business, other than trade
debt and normal intercompany payables and receivables incurred in the ordinary
course of business;
	 
	 	(b)	 	increase the compensation of any managers or employees working
exclusively for the Business, except for normal periodic bonus accruals and normal
periodic increases in regular compensation;
	 
	 	(c)	 	declare or pay any dividends to its shareholders or make any
distributions to its shareholders, other than transactions in the ordinary course
of business consistent with past practices;
	 
	 	(d)	 	take any action which would breach any of its representations and
warranties in this Agreement;
	 
	 	(e)	 	sell or otherwise dispose of any of the Assets except in the ordinary
course of business;
	 
	 	(f)	 	subject any Assets to an Encumbrance, other than in the ordinary
course of business; or
	 
	 	(g)	 	enter into or terminate any material Contract related to the Business
except in the ordinary course of business and except for those of the type which
would not have to be listed or described in any schedule to this Agreement;
	 
	 	7.4	 	Material Changes. Seller will give Purchaser written notice of
the occurrence or non-occurrence of any event known to Seller (excluding matters
known only to Seller’s personnel who are expected to be employed by Buyer after the
closing), the occurrence or non-occurrence of which would be reasonably likely to
cause any representations and warranties made by it in this Agreement to be untrue
or inaccurate in any material respect or any Schedule hereto to be untrue or
inaccurate in any material respect (in which case Seller shall provide Purchaser
with an updated Schedule). Any supplement or amendment to a schedule or schedules
made with respect to matters occurring on or after the date of this Agreement will
not be indemnifiable as a breach of any representation or warranty made in this
Agreement; provided, in the event any supplement or amendment would constitute a
material breach if it had occurred prior to the

- 19 -

 

	 	 	 	date hereof, the Purchaser may
terminate this Agreement pursuant to Section 12.1(c); provided, however, that the
delivery of any notice or updated Schedule pursuant to this Section 7.4 shall not
limit or otherwise affect the remedies available hereunder to the party receiving
such notice with respect to any matter occurring prior to the date of this
Agreement or otherwise resulting from a breach of covenant in this Agreement.
	 
	 	7.5	 	Asset Restrictions. Seller will take no action that would
encumber or restrict the Assets or their sale or transfer, except actions to
enforce rights under this Agreement;
	 
	 	7.6	 	Confidentiality.
	 
	 	(a)	 	Agreement. Purchaser and Seller have entered into and remain bound by
the Confidentiality Agreement attached as Schedule 7.6. Each party will comply
with its obligations under the Confidentiality Agreement; and
	 
	 	(b)	 	Press Releases. A party may make a public announcement of the
transactions contemplated in this Agreement only with the prior written consent of
all other parties. A party will not unreasonably withhold consent if an
announcement is
required by applicable Law.
	 
	 	7.7	 	Investigations. Upon reasonable notice and during regular
business hours, Seller will give Purchaser and Purchaser’s attorneys, accountants
and other representatives:
	 
	 	(a)	 	access to Seller’s officers, directors, employees, independent
contractors, counsel, and independent accountants related to the Business;
	 
	 	(b)	 	access to Seller’s Assets, material Contracts, and Books related to
the Business;
	 
	 	(c)	 	copies of documents of Seller reasonably requested by Purchaser
related to the Business; and
	 
	 	(d)	 	information Purchaser reasonably requests with respect to the affairs
of Seller related to the Business.
	 
	 	(e)	 	Information supplied by Seller to Purchaser is subject to the
Confidentiality Agreement. Seller does not assume responsibility for the accuracy
or completeness of the Information except and to the extent specifically provided
in this Agreement. Neither the Information nor Purchaser’s investigation affects
Purchaser’s right to rely on the representations and warranties made in this
Agreement.

- 20 -

 

	8.	 	Post-Closing Covenants.

	 	8.1	 	Delivery of Information. After the Closing, Seller shall use
reasonable commercial efforts to transfer, forward or deliver the following to
Purchaser:
	 
	 	(a)	 	all sales calls pertaining to the Business;
	 
	 	(b)	 	all electronic mail pertaining to the Business;
	 
	 	(c)	 	all notices and communications from any customers relating to the
Business;
	 
	 	(d)	 	all invoices and bills from any suppliers or vendors relating to the
Business;
	 
	 	(e)	 	all purchase orders relating to the Business; and
	 
	 	(f)	 	all payments made to Seller by customers of the Business for payment
of accounts receivable of the Business.

	9.	 	Conditions to each Party’s Obligations. No party is obligated to close the transactions
contemplated by this
Agreement unless the following conditions are satisfied on or before the Closing Date:

	 	9.1	 	Consents and Approvals. All Permits, consents and approvals
required pursuant to Section 7.1 must have been obtained; and
	 
	 	9.2	 	Proceedings. No Proceeding seeking to enjoin or prohibit, and
no Order enjoining or prohibiting the consummation of the transactions contemplated
by this Agreement may be in effect.

	10.	 	Conditions to Purchaser’s Obligations. Purchaser is not obligated to close the transactions
contemplated by this Agreement unless the following conditions are satisfied or waived by
Purchaser on or before the Closing Date:

	 	10.1	 	Accuracy of Representations and Warranties. The
representations and warranties of Seller in this Agreement must be true and
correct, both when made and on the Closing Date.
	 
	 	10.2	 	Performance of Obligations . Seller must have performed all
material covenants, agreements, and obligations required of it by this or prior to
the Closing.
	 
	 	10.3	 	Material Adverse Effect. There shall not have occurred after
the date hereof any event having a Material Adverse Effect on the Business or the
Asset.

- 21 -

 

	 	10.4	 	Loan and Security Agreement. Purchaser must have received a
Loan and Security Agreement executed by Seller in substantially the form attached
as Schedule 10.4.
	 
	 	10.5	 	Bill of Sale. Purchaser must have received an executed bill of
sale from Seller in a form reasonably acceptable to the parties covering all
personal property included in the Assets.
	 
	 	10.6	 	Assignment and Assumption Agreement. Purchaser must have
received an executed assignment and assumption agreement from Seller in a form
reasonably acceptable to the parties.

	11.	 	Conditions to Seller’s Obligations. Seller is not obligated to close the transactions
contemplated by this Agreement unless the following conditions are satisfied or waived by
Seller on or before the Closing Date:

	 	11.1	 	Accuracy of Representations and Warranties. The
representations and warranties of Purchaser in this Agreement must be true and
correct, both when made and on the Closing Date.
	 
	 	11.2	 	Performance of Obligations . Purchaser must have performed all
covenants, agreements, and obligations required of it by this Agreement.
	 
	 	11.3	 	Loan and Security Agreement. Seller must have received a Loan
and Security Agreement executed by Purchaser in substantially the form attached as
Schedule 10.4.
	 
	 	11.4	 	Promissory Note. Seller must have received a Promissory
executed by Purchaser in substantially the form attached as Schedule 11.4.
	 
	 	11.5	 	Assignment and Assumption Agreement. Seller must have received
an executed assignment and assumption agreement from Purchaser in a form reasonably
acceptable to the parties.

	12.	 	Obligations at and after Closing.

	 	12.1	 	Seller Deliveries. At the Closing, Seller will deliver to
Purchaser all documents required to be delivered to Purchaser under this Agreement
including this Agreement, the Loan and Security Agreement, and all other documents
identified in Section 10.
	 
	 	12.2	 	Purchaser Deliveries. At the Closing, Purchaser will deliver:
	 
	 	(a)	 	the Cash Purchase Price to Seller; and

- 22 -

 

	 	(b)	 	all other documents required to be delivered to Seller under this
Agreement including this Agreement, the Loan and Security Agreement, and all other
documents identified in Section 11.
	 
	 	12.3	 	Additional Documents. After the Closing, each party will
execute and deliver other documents and take further action, as any other party
reasonably deems necessary to carry out the transactions contemplated by this
Agreement.

	13.	 	Termination.

	 	13.1	 	Rights to Terminate. A party may terminate this Agreement at
any time before the Closing:
	 
	 	(a)	 	by mutual written consent of Seller and Purchaser;
	 
	 	(b)	 	if the Closing has not occurred on or before April 30, 2006; or
	 
	 	(c)	 	if (1) a material representation or warranty of the another party was
or has become materially inaccurate or untrue or (2) another party has failed
materially to comply with or perform under this Agreement (except that, if the
misrepresentation or breach is curable then this Agreement will not terminate
until the responsible party has failed for 10 days after notice to cure the
misrepresentation or breach).

This Agreement will terminate when a party who is authorized to terminate it gives the
other parties notice of the termination.

	 	13.2	 	Effect of Termination. If this Agreement is terminated, no
party has any liability or further obligation unless the termination was a result
of such party’s
	 
	 	(a)	 	breach;
	 
	 	(b)	 	violation of its duties, obligations, representations, or warranties;
or
	 
	 	(c)	 	fraud, bad faith, or willful misconduct.

	14.	 	Indemnification.

	 	14.1	 	By Purchaser. Purchaser will indemnify Seller from, and will
pay on its behalf, all Loss (whether or not resulting from third party claims)
incurred as a result of (a) any untrue representation, breach of warranty or
non-fulfillment of any of Purchaser’s covenants or agreements stated in this
Agreement or (b) Purchaser’s operation of the Business after the Closing.
	 
	 	14.2	 	By Seller. Seller will indemnify and hold harmless Purchaser
from, and will pay on its behalf, all Loss (whether or not resulting from third
party claims) (a)

- 23 -

 

	 	 	 	incurred as a result of any untrue representation, breach of warranty, or non-fulfillment of any covenant
or agreement of the Seller in this Agreement, (b) arising out of or resulting from any Liabilities other than the Assumed
Liabilities, and (c) arising out of or resulting from the Excluded Assets.

	 
	 	(a)	 	“Basket” Deductible. Except as otherwise provided in this Agreement,
the Seller will have no obligation to indemnify the Purchaser under this Section
14.2 unless the Purchaser has suffered Losses in excess of $50,000 (the “Basket”)
in the aggregate and then only to the extent of such excess. Claims by Purchaser
under Section 5.15 shall not be subject to the Basket.
	 
	 	(b)	 	Liability Limit. Except as otherwise provided in this Agreement, the
aggregate liability of Seller under this Section 14.2 will not exceed, and Seller
will have not liability for indemnification except to the extent of $200,000 (the
“Cap”). Claims by Purchaser under Section 5.15 shall not be subject to the Cap.
The obligations of Seller under this section are subject to Section 15 below.
	 
	 	14.3	 	Procedure. Procedures for making a claim for indemnity are set
forth in Schedule 14.3.

	15.	 	Expiration of Representations and Warranties. All representations and warranties made by the
parties in this Agreement, or in any instrument or document furnished in connection with this
Agreement, will survive the Closing and any investigation at any time made by or on behalf of
the parties.

	 	15.1	 	Survival of Certain Representations and Warranties. The
representations and warranties set forth in Section 5 and Section 6 will survive
until twelve months after the Closing Date except for Sections 5.1, 5.2, 5.3, 5.4,
and 5.10, which shall survive until twenty four months after the Closing Date and
Section 5.15, which shall survive indefinitely.
	 
	 	15.2	 	Limit on Claims. A party may maintain a claim or action for
indemnity pursuant to Section 14 after the expiration of the representation or
warranty under Section 15.1 only if the party made the claim in writing before
expiration.
	 
	 	15.3	 	Application of Claims. Claims for indemnity pursuant to
Section 14.2 will be applied in the following order:
	 
	 	(a)	 	the first $100,000 aggregate amount of Losses for breaches of
representations and warranties are subject to the “basket” and no claim may be
made against Seller for them except as otherwise provided in this Agreement; and
	 
	 	(b)	 	the Losses up to the limit specified in Section 14.2(b) and in excess
of the “basket” will be paid by Seller to Purchaser, either in cash or by
reduction in the principal amount due under the Loan and Security Agreement.

- 24 -

 

	 	 	 	Except as otherwise provided in this Agreement, no claim for Losses for a breach of
this Agreement may be made in excess of the amounts set forth in (a) and (b) above.
Purchaser acknowledges that it has accepted the risk that claims will exceed this
amount.

	16.	 	Notices. Notices under this Agreement must be in writing. Notices are deemed given:

	 	16.1	 	when personally delivered;
	 
	 	16.2	 	when received by facsimile or by overnight courier service; or
	 
	 	16.3	 	on the fifth business day after mailing by first class registered mail,
return receipt requested.

	 	 	Notices must be sent to the parties at the addresses stated on the signature page of this
Agreement (or at any other address designated in a notice given by a party to change its
address).
	 
	17.	 	Certain Costs.

	 	17.1	 	Costs of Proceedings. In any Proceeding arising under or
related to this Agreement the prevailing party is entitled, in addition to other
amounts it recovers, to have the other party pay all costs and expenses (including
reasonable attorneys’ fees) incurred in connection with the Proceeding.
	 
	 	17.2	 	Expenses. Each party is solely responsible for its own
expenses relating to the preparation, execution, and consummation of this Agreement
and the transactions contemplated by this Agreement, including any fees payable to
an investment banker or broker.

	18.	 	Miscellaneous.

	 	18.1	 	Integration and Amendment. This Agreement, together with the
Loan and Security Agreement, constitutes the entire agreement of the parties, and
supersedes all prior agreements or understandings among the parties, with respect
to their subject matter. This Agreement may be amended only in a written agreement
signed by all of the parties.
	 
	 	18.2	 	Waivers. No waiver under this Agreement is valid unless it is
in writing and signed by the party giving the waiver. A waiver of a particular
matter does not waive a subsequent or similar matter.
	 
	 	18.3	 	Binding Effect. This Agreement is binding upon, and inures to
the benefit of, each party and its successors and assigns.

- 25 -

 

	 	18.4	 	No Benefit to Others. This Agreement is solely for the benefit
of the parties (and their successors and assigns) and does not confer any rights on
any other persons.
	 
	 	18.5	 	Severability. The invalidity or unenforceability of any
provision of this Agreement does not affect the other provisions. This
Agreement is to be construed in all respects as if it excluded any invalid or
unenforceable provision.
	 
	 	18.6	 	Construction and Headings. Whenever a singular word is used in
this Agreement it also includes the plural if required by the context, and vice
versa. Paragraph headings are for convenience only and do not define or limit the
contents of a paragraph.
	 
	 	18.7	 	Cooperation. In order to carry out this Agreement, each party
will cooperate, will take further action, and will execute and deliver further
documents as reasonably requested by any other party.
	 
	 	18.8	 	Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together are one original.
	 
	 	18.9	 	Governing Law. This Agreement is governed by the internal Laws
of Arizona. Exclusive jurisdiction and venue for any litigation arising under this
Agreement is in the federal and state courts located in Maricopa County, Arizona.

	19.	 	Effective Date. This Agreement is executed and effective as of March 31, 2006.

	 	 	 	[Signatures Follow]

- 26 -

 

Advanced Integration, LLC, an Oklahoma limited liability company

	 	 	 	 	 	 	 	 	 
	 

	 	 By:
	 	 	 	/s/ Steven E. Frazier	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Steven E. Frazier, Member-Manager	 	 

Address:

2805 E. 6th Avenue

Stillwater, Oklahoma 74074

Attention: Steven E. Frazier

Telephone: (405) 533-1629

Facsimile: (405) 624-2248

Rockford Corporation, an Arizona corporation

	 	 	 	 	 	 	 	 	 
	 

	 	 By:
	 	 	 	/s/ Gary Suttle	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Gary Suttle, President	 	 

Address:

Rockford Corporation

600 S. Rockford Drive

Tempe, Arizona 85281

Attention: W. Gary Suttle, President

Telephone: (480) 967-3565

Facsimile: (480) 966-3639

with a copy to:

Kevin Olson

Steptoe & Johnson LLP

201 E. Washington St., Suite 1600

Phoenix, Arizona 85004

Telephone: (602) 257-5275

Facsimile: (602) 257-5299

Audio Innovations, Inc., an Oklahoma corporation

	 	 	 	 	 	 	 	 	 
	 

	 	  By:
	 	 	 	/s/ Gary Suttle	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Gary Suttle, President	 	 

Address:

Rockford Corporation

600 S. Rockford Drive

- 27 -

 

Tempe Arizona 85281

Attention: W. Gary Suttle, President

Telephone: (480) 967-3565

Facsimile: (480) 966-3639

with a copy to:

Kevin Olson

Steptoe & Johnson LLP

201 E. Washington St., Suite 1600

Phoenix, Arizona 85004

Telephone: (602) 257-5275

Facsimile: (602) 257-5299

- 28 -exv10w72

 

Execution Copy

EXHIBIT 10.72

Loan And Security Agreement

          This Loan and Security Agreement is between Advanced Integration, LLC (“Borrower”) and
Rockford Corporation, an Arizona corporation (“Lender”). Borrower and Lender agree as follows:

	 	1.	 	     Recitals.

	 	1.1	 	      Audio Innovations Business. Lender manufactures high quality mobile audio
equipment, including amplifiers, speakers, and accessories. Under the “Audio Innovations”
name, one part of Borrower’s business operates out of facilities in Stillwater, Oklahoma,
to design, manufacture, market and distribute branded aftermarket mobile audio enclosures
under the names of Q-Logic, Q-Forms, and Q-Customs. The Audio Innovations enclosure
business is referred to in this Agreement as the “Business.”
	 
	 	1.2	 	     Sale of Business to Borrower. Lender has agreed to sell the assets related
to the Business to Borrower. The purchase will be completed pursuant to the terms of the
Asset Purchase Agreement (“APA”) among Borrower, Lender, and Lender’s wholly owned
subsidiary Audio Innovations, Inc.
	 
	 	1.3	 	     Loan. In connection with the sale of the Business to Borrower, Borrower has
sought and Lender has agreed to provide a $1,000,000 loan to Borrower to finance
$1,000,000 of the purchase price for the Business.
	 
	 	1.4	 	     Purpose. The purpose of this Agreement is to set forth the terms of Lender’s
agreement to lend to Borrower, and Borrower’s agreement to pay to Lender, $1,000,000,
which shall be further evidenced by a promissory note of even date herewith (the
“Promissory Note”).

	 	2.	 	     Loan Agreement and Promise to Pay. Lender agrees to loan Borrower $1,000,000 (the
“Loan”) on the terms set forth in this agreement and as the Deferred Purchase Price under the
APA. Borrower promises to pay to Lender the amount of the Loan on the schedule established in
this Agreement.
	 
	 	3.	 	     No Interest, Except After Event of Default. So long as there is no Event of Default
that is not cured or waived within the time periods allowed under Section 7 of this Agreement,
Borrower is not required to pay interest on the Loan. If Borrower defaults on any obligation
under the Loan and such default is not cured or waived within the time periods allowed under
Section 7 of this Agreement, then the outstanding principal and unpaid interest under this
Agreement will bear interest at the rate of 6% per annum in excess of the “prime rate” as
published from time to time in The Wall Street Journal. Interest, if due, will be payable
monthly on the first day of each month and in addition to the amount of any required principal
payment.
	 
	 	4.	 	     Repayment of Principal. Borrower will pay the principal of the Loan in 30 equal
monthly installments of $33,333, payable monthly on the first day of each month beginning on
May 1, 2006, and ending on October 1, 2008. Borrower shall have the right to prepay the Loan
in whole or in part at any time without premium or penalty.

1

 

	 	5.	 	     Grant of Security Interest. Borrower grants to Lender a security interest in the
Collateral, as security for the payment of all amounts due, and performance of all of
Borrower’s obligations, under the Loan.

	 	5.1	 	      Definition of Collateral. The Collateral includes all personal and real
property and fixtures and interests in property and fixtures of Borrower, whether now
owned or hereafter acquired or existing, and wherever located, including:

	 	(a)	 	     all Accounts;
	 
	 	(b)	 	     all General Intangibles;
	 
	 	(c)	 	     all goods, including, without limitation, Inventory and Equipment;
	 
	 	(d)	 	     all real property and fixtures;
	 
	 	(e)	 	     all chattel paper (including all tangible and electronic chattel paper);
	 
	 	(f)	 	     all instruments (including all promissory notes);
	 
	 	(g)	 	      all documents;
	 
	 	(h)	 	     all deposit accounts;
	 
	 	(i)	 	     all letters of credit, banker’s acceptances and similar instruments and
including all letter-of-credit rights;
	 
	 	(j)	 	     all supporting obligations and all present and future liens, security
interests, rights, remedies, title and interest in, to and in respect of Receivables
and other Collateral, including (1) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (2) rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, (3) goods described in invoices, documents, contracts or instruments with
respect to, or otherwise representing or evidencing, Receivables or other Collateral,
including returned, repossessed and reclaimed goods, and (4) deposits by and property
of account debtors or other persons securing the obligations of account debtors;
	 
	 	(k)	 	     all (1) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts or
commodity accounts) and (2) monies, credit balances, deposits and other property of
such Borrower now or hereafter held or received by or in transit to Borrower, any
Lender or any of their respective Affiliates or at any other depository or other
institution from or for the account of such Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;

2

 

	 	(l)	 	     all commercial tort claims;
	 
	 	(m)	 	     to the extent not otherwise described above, all Receivables;
	 
	 	(n)	 	     all Records; and
	 
	 	(o)	 	     all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or all of
the other Collateral.

	 	5.2	 	     Categories of Collateral. The following definitions apply with respect to
the Collateral:

	 	(a)	 	     Accounts means all present and future rights of Borrower to payment of a
monetary obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (1) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (2) for services rendered or to
be rendered, (3) for a secondary obligation incurred or to be incurred, or (4)
arising out of the use of a credit, charge or debit card along with all information
contained on or for use with such card.
	 
	 	(b)	 	     Equipment means all of Borrower’s now owned and hereafter acquired
equipment, wherever located, including machinery, data processing and computer
equipment and computer hardware and software, whether owned or licensed, and
including embedded software, vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed to or used in connection with the
Equipment, and substitutions and replacements of the Equipment, wherever located.
	 
	 	(c)	 	     General Intangibles means all of the Borrower’s general intangibles, as
such term is defined in the UCC, whether now owned or hereafter acquired, including
(without limitation) all present and future patents, patent applications, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use the Borrower’s
name, and the goodwill of the Borrower’s business.
	 
	 	(d)	 	     Inventory means all of Borrower’s now owned and hereafter existing or
acquired goods, wherever located, which (a) are leased by Borrower as lessor; (b) are
held by Borrower for sale or lease or to be furnished under a contract of service;
(c) are furnished by Borrower under a contract of service; or (d) consist of raw
materials, work in process, finished goods or materials used or consumed in its
business.
	 
	 	(e)	 	     Receivables means mean all of the following now owned or hereafter arising
or acquired property of Borrower: (a) all Accounts; (b) all interest, fees,

3

 

	 	 	 	late charges, penalties, collection fees and other amounts due or to become due or
otherwise payable in connection with any Account; and (c) all payment intangibles of
Borrower and other contract rights, chattel paper, instruments, notes, and other
forms of obligations owing to Borrower, whether from the sale and lease of goods or
other property, licensing of any property (including intellectual property or other
general intangibles), rendition of services or from loans or advances by Borrower or
to or for the benefit of any third person or otherwise associated with any Accounts,
Inventory or general intangibles of Borrower. Receivables include, without
limitation, choses in action, causes of action, tax refunds, tax refund claims, any
funds which may become payable to Borrower in connection with the termination of any
employee benefit plan and any other amounts payable to Borrower from any employee
benefit plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty or
any similar types of insurance and any proceeds thereof and proceeds of insurance
covering the lives of employees on which Borrower is a beneficiary.
	 
	 	(f)	 	     Best Buy Receivables means Receivables arising out of transactions with (a)
Best Buy Co., Inc. or any successor to its business (“Best Buy”) or (b) any affiliate
of Best Buy. The Best Buy Receivables include amounts outstanding at the date of
this Agreement and amounts generated in transactions at any time after the date of
this Agreement.

	 	5.3	 	     Other Security Interests and Priority. Except for purchase money security
interests acquired by lenders with respect to equipment purchased by Borrower after the
date of this Agreement, Borrower will not allow any other person to have a security
interest in the Collateral, except that Borrower may grant a security interest in the
Collateral to Stillwater National Bank and its successors and assigns (the “Bank”) as
security for a revolving line of credit from Bank of up to $750,000 outstanding principal
(the “Bank Loan”). Bank’s security interest in the Best Buy Receivables (together with
proceeds of the Best Buy Receivables) must be subordinate to Lender’s security interest in
the Best Buy Receivables (together with proceeds of the Best Buy Receivables). Lender
agrees that its security interest in the Collateral, other than the Best Buy Receivables
(and proceeds of the Best Buy Receivables), shall be subordinated to the Bank’s security
interest. Lender and Bank have entered into an Intercreditor Agreement of even date
herewith setting forth their relative rights and obligations with respect to the
Collateral.
	 
	 	5.4	 	     Financing Statements. Borrower irrevocably and unconditionally authorizes
Lender (or its agent) to file financing statements with respect to the Collateral naming
Lender as the secured party and Borrower as debtor. The financing statements may be filed
in any jurisdiction Lender determines to be appropriate and may include other information
required by the UCC of the jurisdiction where the financing statement is filed. This
authorization applies to all financing statements filed on, prior to or after the date of
this Agreement. Borrower authorizes Lender to adopt on behalf of Borrower any symbol
required for authenticating any electronic filing.

4

 

	 	5.5	 	     Accounts Covenants. For as long as there is no Event of Default pending,
Borrower may deal with the Collateral in the ordinary course of business, including
collecting the Receivables and selling the Inventory.

	 	(a)	 	     Certain Agreements on Receivables. The Borrower will not make or
agree to make any discount, credit, rebate, or other reduction in the original amount
owing on a Receivable or accept in satisfaction of a Receivable less than the
original amount thereof, except that, prior to the occurrence of an Event of Default,
the Borrower may reduce the amount of Accounts arising from the sale of Inventory in
accordance with its present policies and in the ordinary course of business.
	 
	 	(b)	 	     Collection of Receivables. The Borrower will collect and enforce,
in the ordinary course of business in accordance with past practices, all amounts due
or hereafter due to the Borrower under the Receivables.
	 
	 	(c)	 	     The Borrower will deliver to the Lender promptly upon its request after the
occurrence of an Event of Default duplicate invoices with respect to each Account
bearing such language of assignment as the Lender shall specify.
	 
	 	(d)	 	     Disclosure of Counterclaims on Receivables. If (i) any discount,
credit, or agreement to make a rebate or to otherwise reduce the amount owing on a
Receivable exists or (ii) to the knowledge of the Borrower, any dispute, setoff,
claim, counterclaim, or defense exists or has been asserted or threatened with
respect to a Receivable, the Borrower will disclose such fact to the Lender in
writing in connection with the inspection by the Lender of any record of the Borrower
relating to such Receivable and in connection with any invoice or report furnished by
the Borrower to the Lender relating to such Receivable.

	 	5.6	 	     Collateral Reports. Borrower will keep accurate records of the Collateral
and any impairment or other issues relating to the Collateral. Borrower will provide
reports of the Collateral, and of any impairment or other issues, to Lender upon Lender’s
reasonable request.
	 
	 	5.7	 	     Authorization for Lender to Take Certain Action. Borrower hereby irrevocably
constitutes and appoints Lender and any officer or agent of Lender, with full power of
substitution, as Borrower’s true and lawful attorneys-in-fact with full irrevocable power
and authority in the place and stead of Borrower or in Lender’s own name, for the purpose
of carrying out the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments that may be necessary or useful to
accomplish the purposes of this Agreement, and, without limiting the generality of the
foregoing, hereby gives such attorneys the power and right, on behalf of Borrower, without
notice to or assent by Borrower, to do the following: (i) to indorse and collect any cash
proceeds of the Collateral, (ii) to contact and enter into one or more agreements with the
issuers of uncertificated securities which are Collateral and which are securities or with
financial

5

 

	 	 	 	intermediaries holding other investment property as may be necessary or advisable to give
Lender control over such securities or other investment property, (iii) to enforce payment
of the Receivables in the name of Lender or Borrower, (iv) to apply the proceeds of any
Collateral received by Lender to the Obligations as provided in Section 5.8, and (v) to
discharge past due taxes, assessments, charges, fees or liens on the Collateral. Borrower
shall reimburse Lender on demand for any payment made or any expense incurred by Lender in
connection therewith, provided that this authorization shall not relieve Borrower of any
of its obligations under this Agreement.
	 
	 	5.8	 	     Lender’s Collection Rights During Event of Default.

	 	(a)	 	     Collection of Receivables. By giving Borrower written notice,
Lender may elect to require that the Receivables be paid directly to Lender during
the existence of any Default or Event of Default. In such event, Borrower shall, and
shall permit Lender to, promptly notify the account debtors or obligors under the
Receivables of Lender’s interest therein and direct such account debtors or obligors
to make payment of all amounts then or thereafter due under the Receivables directly
to Lender. Upon receipt of any such notice from Lender, Borrower shall thereafter
hold in trust for Lender all amounts and proceeds received by it with respect to the
Receivables and other Collateral and immediately and at all times thereafter deliver
to Lender all such amounts and proceeds in the same form as so received, whether by
cash, check, draft or otherwise, with any necessary endorsements.
	 
	 	(b)	 	     Application of Proceeds. The proceeds of the Collateral shall be
applied by Lender to payment of the Obligations in the following order unless a court
of competent jurisdiction shall otherwise direct:

     FIRST, to payment of all reasonable costs and expenses of Lender incurred in
connection with the collection and enforcement of the Obligations or of the
security interest granted to Lender pursuant to this Security Agreement;

     SECOND, to payment of that portion of the Obligations constituting accrued
and unpaid interest and fees;

     THIRD, to payment of the principal of the Obligations then due and unpaid
from Borrower to Lender;

     FOURTH, to payment of any Obligations (other than those listed above) to
Lender; and

     FIFTH, the balance, if any, after all of the Obligations have been
satisfied, shall be deposited by Lender into Borrower’s general operating account
with Lender.

6

 

	 	(c)	 	     Compromises and Collection of Collateral. Borrower and Lender
recognize that setoffs, counterclaims, defenses and other claims may be asserted by
obligors with respect to certain of the Receivables, that certain of the Receivables
may be or become uncollectible in whole or in part and that the expense and
probability of success in litigating a disputed Receivable may exceed the amount that
reasonably may be expected to be recovered with respect to a Receivable. In view of
the foregoing, Borrower agrees that Lender may at any time and from time to time, if
an Event of Default has occurred and is continuing, compromise with the obligor on
any Receivable, accept in full payment of any Receivable such amount as Lender in its
sole discretion shall determine or abandon any Receivable, and any such action by
Lender shall be commercially reasonable so long as Lender acts in good faith based on
information known to it at the time it takes any such action.

	 	6.	 	     Additional Documents. Borrower will execute and deliver to Lender additional
documents as necessary to carry out the purposes of this Agreement.
	 
	 	7.	 	     Events of Default. The following events are “Events of Default”:

	 	7.1	 	     Borrower fails to pay any amount under this Agreement when due and payable,
and such failure has not been cured by Borrower or waived by Lender within five days
after Lender’s notice thereof to Borrower;
	 
	 	7.2	 	     Borrower fails or neglects to perform, keep, or observe any term, provision,
condition, covenant, representation, or warranty contained in this Agreement and the
continuation of such failure for 30 days after Lender’s notice thereof to Borrower;
	 
	 	7.3	 	     Borrower becomes insolvent; or
	 
	 	7.4	 	     A complaint or case is filed by or against Borrower as a debtor under federal
bankruptcy laws and is not dismissed within 60 days of filing; Borrower admits to
inability to pay or fails to pay Borrower’s debts generally as they mature; Borrower makes
an assignment for the benefit of creditors; a receiver is appointed for Borrower; or any
other insolvency proceedings are instituted by or against Borrower and are not dismissed
within 60 days of filing.

	 	8.	 	      Acceleration of Obligations and Remedies. If there is an event of default the
outstanding Loan balance and all other amounts owed by Borrower to Lender will, if Lender
elects, become immediately due and payable without notice to or demand upon Borrower of any
kind. Any acceleration, if elected by Lender, is subject to all applicable laws.
	 
	 	9.	 	     Remedies. At any time an Event of Default exists or has occurred and is continuing,
Lender shall have all rights and remedies provided in this Agreement, any related agreements,
the UCC and other applicable law. All of these rights and remedies may be exercised without
notice to or consent by Borrower, except as such notice or consent is

7

 

	 	 	 	expressly provided for under this Agreement or required by applicable law. All rights,
remedies and powers granted to Lender under this Agreement or any related agreement, the UCC or
other applicable law (a) are cumulative, not exclusive, (b) are enforceable, in Lender’s
discretion, alternatively, successively, or concurrently on any one or more occasions, and (c)
include, without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower of this Agreement or any related agreement.
	 
	 	10.	 	     Right of Offset. Borrower shall be entitled to offset its payment
obligations under this Agreement and the Promissory Note against any and all payments which
Lender is required to make to Borrower pursuant to the indemnification provisions contained in
Section 13 of the APA. If the existence of or the extent of Lender’s indemnification
obligations are in dispute (an “Indemnification Dispute”), Borrower shall be entitled to make
payments under this agreement and the Promissory Note to an escrow fund, which shall hold such
payments until the Indemnification Dispute has been resolved. Except with respect to breaches
of the representations and warranties set forth in Section 5.15 of the APA, the maximum amount
Borrower may withhold and pay into the escrow fund is the lesser of (a) the Cap under the APA
or (b) the amount Borrower claims is required to be indemnified under the APA. Borrower and
Lender shall mutually agree on the escrow agent and the terms of the escrow agreement
governing the final distribution of such escrowed funds. During an Indemnification Dispute,
Borrower shall not be in default under this Agreement or the Promissory Note so long as it
makes timely payments to the escrow fund of the amounts due under the Loan and authorized to
be paid to the escrow fund by this section.
	 
	 	11.	 	     Usury Savings Clause. Borrower will not, upon acceleration of maturity by Lender
or otherwise, be required to pay any interest in excess of the maximum amount permitted by
law.
	 
	 	12.	 	     Miscellaneous.

	 	12.1	 	     Waiver of Defaults. Lender may, in its sole discretion, waive a default or
cure at Borrower’s expense a default. Any waiver in a particular instance or of a
particular default is not a waiver of other defaults or of the same kind of default at
another time.
	 
	 	12.2	 	     Entire Agreement; Amendments. This Agreement is the entire Agreement of the
parties with respect to its subject matter and may not be changed or amended without the
written consent of each party.
	 
	 	12.3	 	     Severability. If any part (or parts) of this Agreement is invalid, illegal,
or unenforceable in any respect, such invalidity, illegality or unenforceability will not
effect any other provisions of this Agreement, and this Agreement will be construed as if
the invalid, illegal, or unenforceable provision were omitted, provided that such
construction and omission is consistent with the general intent of the parties as
evidenced by this Agreement considered as an entirety.

8

 

	 	12.4	 	      Notices. Notices required under this Agreement are effective upon delivery
or three days after mailing by registered or certified mail, return receipt requested, to
the address of the parties shown on the signature page of this Agreement (which may be
changed by notice).
	 
	 	12.5	 	     Governing Law. This Agreement is governed by the laws of Arizona, except as
otherwise provided by Section 1-9-301 of the Oklahoma Uniform Commercial Code.
	 
	 	12.6	 	     Assignability. This Agreement may not be assigned without the prior written
consent of each party.
	 
	 	12.7	 	     Counterparts. This Agreement may be executed in counterparts and all
counterparts so executed constitute one Agreement.
	 
	 	12.8	 	     Attorneys’ Fees. In any proceeding arising under this Agreement, the
prevailing party is entitled to recover the attorneys’ fees, costs, and expenses in
connection with such proceeding.

	 	13.	 	     Execution and Effective Date. This Agreement is executed and effective March 31,
2006.

Advanced Integration, LLC, an Oklahoma limited liability company

	 	 	 	 	 	 	 
	 

	 	 By:
	 	     /s/ Steven E. Frazier	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Steven E. Frazier, Member-Manager
	 	 

	 	 	 	 	 
	 

	 	Address:
	 	2805 E. 6th Avenue
	 

	 	 	 	Stillwater, OK 74074
	 

	 	Attention:
	 	Steven E. Frazier
	 

	 	Telephone:
	 	(405) 533-1629
	 

	 	Facsimile:
	 	 (405) 624-2248

Rockford Corporation, an Arizona corporation

	 	 	 	 	 	 	 
	 

	 	 By:
	 	     /s/ Gary Suttle
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Gary Suttle, President	 	 

	 	 	 	 	 
	 

	 	Address:
	 	Rockford Corporation
	 

	 	 	 	600 S. Rockford Drive
	 

	 	 	 	Tempe, Arizona 85281
	 

	 	Attention:
	 	W. Gary Suttle, President
	 

	 	Telephone:
	 	(480) 967-3565

9

 

	 	 	 	 	 
	 

	 	Facsimile:
	 	(480) 966-3639
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Kevin Olson
	 

	 	 	 	Steptoe & Johnson LLP
	 

	 	 	 	201 E. Washington St., Suite 1600
	 

	 	 	 	Phoenix, Arizona 85004
	 

	 	Telephone:
	 	(602) 257-5275
	 

	 	Facsimile:
	 	(602) 257-5299

10

 

PROMISSORY NOTE

	 	 	 
	Principal Amount: $1,000,000

	 	Tempe, Arizona
	 

	 	March 31, 2006

          For value received, Advanced Integration, LLC (“Maker”) promises to pay to the order of
Rockford Corporation (“Lender”), the principal amount stated above plus interest, if any, on the
unpaid balance of the principal as hereinafter provided. This Promissory Note (“Note”) is given by
Maker to evidence Maker’s obligation to make payments under and is subject to all the terms and
condition of the Loan and Security Agreement between Lender and Maker of even date with this Note
(the “Agreement”).

          Interest and Interest Payments. The outstanding principal under this Note will not
bear interest for so long as there is not and Event of Default outstanding under the Agreement. If
there is an Event of Default, the outstanding principal under this Note will bear interest at the
rate of 6% per annum in excess of the “Prime Rate” published from time to time in the Wall Street
Journal. During any period when interest is payable, Maker will pay interest in monthly
installments equal to the accrued interest, with each payment due on or before the first day of
each month in which interest is due.

          Principal Payments. Maker will pay the principal due under this Note in 30 equal
monthly installments of $33,333, payable monthly on the first day of each month beginning on May 1,
2006, and ending on October 1, 2008.

          Default. A default will occur upon an “Event of Default” as defined in the Agreement.

          Remedies. Upon any Event of Default, the entire principal and any accrued but unpaid
interest will, at Lender’s option, become due and payable on demand and Lender will have any other
remedies granted to it under the Agreement.

          Crediting of Payments. Lender may credit all payments received first against the
accrued but unpaid interest, if any, then against any costs of collection, then against the unpaid
principal then due or delinquent.

          Prepayment. Maker reserves the right to prepay all or any portion of the principal
sum without penalty of any kind, but will pay all accrued but unpaid interest, if any, on the date
of such a prepayment.

          Right of Offset. Maker shall be entitled to offset its payment obligations under this
Note in the manner set forth in the Agreement.

          Form of Payments. Principal and interest are payable only in lawful money of the
United States of America.

          Attorneys’ Fees. If this Note is placed in the hands of an attorney for collection,
Maker promises to pay, in addition to the unpaid principal and accrued but unpaid interest, the
costs of collection including reasonable attorneys’ fees.

          Waivers. Maker and any endorsers hereof waive demand, notice of presentment, protest,
notice of dishonor and protest, rights of exemption, and any defense by reason of extension of time
or other indulgences granted by Lender. The obligations under this Note are binding and
enforceable upon and against the successors and assigns of Maker.

 

 

	 	 	 	 	 
	 	“MAKER”

Advanced Integration, LLC

 	 
	 	By:  	/s/ Steven E. Frazier
 	 
	 	 	Steven E. Frazier, Member-Manager

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