Document:

exv10w79

 

Exhibit-10.79

SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

     THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of
November ___, 2007, is entered into among WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a
California corporation formerly known as Congress Financial Corporation (Western)
(“Agent”), as administrative and collateral agent for the Lenders party to the Loan
Agreement (as defined below) from time to time (“Lenders”), WACHOVIA CAPITAL FINANCE
CORPORATION (WESTERN), a California corporation formerly known as Congress Financial Corporation
(Western), as a Lender (“Wachovia”), ROCKFORD CORPORATION, an Arizona corporation
(“Borrower Agent”), and AUDIO INNOVATIONS, INC., an Oklahoma corporation (“AII” and
together with Rockford, collectively, “Borrowers”).

RECITALS

     A. Agent, Wachovia, Wachovia Bank, National Association, as arranger, and Borrowers have
previously entered into that certain Loan and Security Agreement dated March 29, 2004 as amended by
the First Amendment to Loan and Security Agreement and Conditional Default Waiver dated as of June
10, 2004, the Second Amendment to Loan and Security Agreement dated as of December 30, 2004, the
Third Amendment to Loan and Security Agreement dated as of August 31, 2005, the Fourth Amendment to
Loan and Security Agreement and Consent dated as of March 21, 2006, the Fifth Amendment to Loan and
Security Agreement dated as of August 31, 2006 and the Sixth Amendment to Loan and Security
Agreement dated as of March 7, 2007 (the “Loan Agreement”), pursuant to which Wachovia has
made certain loans and financial accommodations available to Borrowers. Terms used herein without
definition shall have the meanings ascribed to them in the Loan Agreement.

     B. Borrowers have requested Agent and Wachovia to amend the Loan Agreement in certain
respects, and Agent and Wachovia are willing to accommodate such request on the terms and
conditions set forth herein.

     C. Borrowers are entering into this Amendment with the understanding and agreement that,
except as specifically provided herein, none of Agent’s or Lenders’ rights or remedies as set forth
in the Loan Agreement is being waived or modified by the terms of this Amendment.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

 

 

     1. Amendments to Loan Agreement.

          (a) Permanent Reserve. The amount of the Reserve established pursuant to Section 1 of
the First Amendment to Loan and Security Agreement and Conditional Default Waiver dated as of June
10, 2004, as amended by the Third Amendment to Loan and Security Agreement dated as of August 31,
2005 and the Fifth Amendment to Loan and Security Agreement dated as of August 31, 2006, is hereby
reduced to One Million Dollars ($1,000,000). Such Reserve is a permanent Reserve under the Loan
and Security Agreement and shall not be reduced or eliminated without the written consent of Agent,
and will be referred to as the “Permanent Reserve”.

          (b) Eligible In Transit Inventory. The amount “One Million Dollars ($1,000,000)” in
clause (m) of the definition of “Eligible Inventory” in Section 1.25 of the Loan Agreement (as
amended by the Second Amendment to Loan and Security Agreement dated as of December 30, 2004) is
hereby replaced with “Three Million Dollars ($3,000,000)”.

          (c) Eurodollar Rate Margin. The definition of “Eurodollar Rate Margin” in Section
1.34 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

     “1.34 ‘Eurodollar Rate Margin’ shall mean five percent (5.00%) per annum;
provided, that, on December 1, 2007, then on January 1, 2008, and on the
first day of each fiscal quarter (March 1, July 1, October 1 and January 1) thereafter, the
Eurodollar Rate Margin shall be adjusted as follows based upon the average daily Excess
Availability during the immediately preceding sixty (60) days as determined by Agent after
giving effect to the Permanent Reserve:

	 	 	 
	Excess Availability	 	Eurodollar Rate Margin
	 
	 	 
	Equal to or greater than $4,000,000

	 	Two percent (2.00%)
	 
	 	 
	Less than $4,000,000 but equal to or
greater than $1,000,000

	 	Two and one-half percent (2.50%)
	 
	 	 
	Less than $1,000,000

	 	Three percent (3.00%)”

          (d) Final Maturity Date. The definition of “Final Maturity Date” in Section 1.39 of
the Loan Agreement is hereby amended and restated to read in its entirety as follows:

     “1.39 ‘Final Maturity Date’ shall mean March 24, 2011, as such date may be
extended from year to year pursuant to Section 14.1(a) hereof.”

          (e) Letter of Credit Rate. The definition of “Letter of Credit Rate” in Section 1.56
of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

2

 

     “1.56 ‘Letter of Credit Rate’ shall mean five percent (5.00%) per annum;
provided, that, on December 1, 2007, then on January 1, 2008, and on the
first day of each fiscal quarter (March 1, July 1, October 1 and January 1) thereafter, the
Letter of Credit Rate shall be adjusted as follows based upon the average daily Excess
Availability during the immediately preceding sixty (60) days as determined by Agent after
giving effect to the Permanent Reserve:

	 	 	 
	Excess Availability	 	Eurodollar Rate Margin
	 
	 	 
	Equal to or greater than $4,000,000

	 	Two percent (2.00%)
	 
	 	 
	Less than $4,000,000 but equal to or
greater than $1,000,000

	 	Two and one-half percent (2.50%)
	 
	 	 
	Less than $1,000,000

	 	Three percent (3.00%)”

          (f) Prime Rate Margin. The definition of “Prime Rate Margin” in Section 1.76 of the
Loan Agreement is hereby amended and restated to read in its entirety as follows:

     “7.76 ‘Prime Rate Margin’ shall mean one percent (1.00%) per annum;
provided, that, on December 1, 2007, then on January 1, 2008, and on the
first day of each fiscal quarter (March 1, July 1, October 1 and January 1) thereafter, the
Prime Rate Margin shall be adjusted as follows based upon the average daily Excess
Availability during the immediately preceding sixty (60) days as determined by Agent after
giving effect to the Permanent Reserve:

	 	 	 
	Excess Availability	 	Eurodollar Rate Margin
	 
	 	 
	Equal to or greater than $4,000,000

	 	Zero percent (0.00%)
	 
	 	 
	Less than $4,000,000 but equal to or
greater than $1,000,000

	 	One-half of one percent (0.50%)
	 
	 	 
	Less than $1,000,000

	 	One percent (1.00%)”

          (g) Eurodollar Rate Loans. Clause (v) of Section 3.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:

     “(v) each Eurodollar Rate Loan must be in the amount of One Million Dollars
($1,000,000) or an integral multiple of Five Hundred Thousand Dollars ($500,000) in excess
thereof,”

          (h) Servicing Fee. The amount “Four Thousand Dollars ($4,000)” in Section 3.4 of the
Loan Agreement is hereby replaced with “Two Thousand Dollars ($2,000)”.

3

 

          (i) Unused Line Fee. The percentage “three-eighths of one percent (0.375%)” in
Section 3.5 of the Loan Agreement is hereby replaced with “one-quarter of one percent (0.25%)”.

          (j) Inventory Appraisals. Clause (d) of Section 7.3 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:

     “(d) upon Agent’s request, Borrowers shall, at their expense, no more than one (1) time
in any twelve (12) month period if the average daily Excess Availability after giving effect
to the Permanent Reserve exceeded $3,000,000 during the sixty (60) days immediately
preceding the subject request by Agent, and no more than two (2) times in any twelve (12)
month period if the average daily Excess Availability after giving effect to the Permanent
Reserve was equal to or less than $3,000,000 during the sixty (60) days immediately
preceding the subject request by Agent, but at any time or times as Agent may request on or
after an Event of Default, deliver or cause to be delivered to Agent full written appraisals
as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an
appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which
Agent and Lenders are expressly permitted to rely;”

          (k) EBITDA. Section 9.17.1 of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:

     “9.17.1 EBITDA. Borrowers and their Subsidiaries, on a consolidated basis,
shall earn EBITDA, during each period of twelve (12) consecutive months ending on the last
day of any fiscal quarter, of not less than $4,000,000. Notwithstanding the foregoing, if
on the last day of any of the foregoing periods, the Excess Availability before giving
effect to the Permanent Reserve, minus the sum of (a) all of the Borrowers’ trade payables
that are then more than thirty (30) days past due, plus (b) all of the Borrowers’
obligations and liabilities (other than trade payables) that are then past due, exceeds
$3,000,000, then Borrowers will not be required to comply with the foregoing minimum
consolidated EBITDA covenant for the specific period then ending.

     For the purposes hereof, ‘EBITDA’ shall mean the net income of Borrowers and
their Subsidiaries determined on a consolidated basis in accordance with GAAP consistently
applied, but excluding any extraordinary or one-time gains, plus (a) depreciation,
amortization and other non-cash charges (to the extent deducted in the computation of such
net income), plus (b) Interest Expense (to the extent deducted in the computation of
such net income), plus (c) charges for federal, state, local and foreign income
taxes (to the extent deducted in the computation of such income).”

          (l) Early Termination Fee. Clauses (i) and (ii) of Section 14.1(c) of the Loan
Agreement are hereby amended and restated to read in their entirety, and a new clause (iii) is
hereby added to read in its entirety, as follows:

4

 

	 	 	 
	“(i) One percent (1.00%) of the Maximum Credit

	 	On or before March 24, 2009
	 
	 	 
	(ii) One-half of one percent
(0.50%) of the Maximum Credit

	 	After March 24, 2009 but on or before
March 24, 2010
	 
	 	 
	(iii) Zero

	 	After March 24, 1010.”

     2. Consent.

          (a) Notwithstanding anything to the contrary contained in Sections 9.10 and 9.11 of the Loan
Agreement, Agent and Wachovia hereby consent to Borrower Agent fully or partially paying the
principal balances owing on its 4.5% Convertible Senior Subordinated Secured Notes due 2009 and to
Borrower Agent redeeming, purchasing or otherwise acquiring its Capital Stock, in consideration of
its cash payments not to exceed $1,500,000 in the aggregate, provided that in each case,
(a) the Excess Availability, after giving effect to the Permanent Reserve and any such payment,
would be greater than $1,000,000 and (b) no Default or Event of Default has occurred and is
continuing or would result therefrom. The foregoing consent shall apply only to the specific
transactions described above and shall be subject to the conditions set forth above, and in all
other respects, Agent and Lenders shall reserve and preserve their rights to require the Borrowers’
strict compliance with Sections 9.10 and 9.11 of the Loan Agreement and all other terms and
provisions of the Financing Agreements.

          (b) Notwithstanding anything to the contrary contained in the Loan Agreement or in any
Guaranty and Security Agreement dated March 29, 2004 (a “Guaranty”), Agent and Wachovia hereby
acknowledge that in order to simplify its corporate structure Borrower Agent is in the process of
dissolving each of its subsidiaries, including AII and each Guarantor. Borrower Agent has
determined that such subsidiaries no longer hold material assets and serve no continuing business
purpose. Borrower Agent confirms and represents that, upon such dissolution, Borrower Agent will
succeed to all of the assets of AII and each Guarantor and will assume all obligations to Agent and
Lenders of AII and each Guarantor. In consideration of such confirmation and representation, Agent
and Wachovia consent to the dissolution of the subsidiaries, including AII and each Guarantor.
Upon completion of the dissolutions, the Loan Agreement is amended to remove each reference to AII
and each Guarantor, so that all references to “Borrowers” will refer solely to Borrower Agent as
the sole remaining entity in Borrower Agent’s corporate organization, and each Guaranty of the
Guarantors is terminated and merged into the Loan Agreement.

     3. Effectiveness of this Amendment. Agent must have received the following items, in
form and content acceptable to Agent, before this Amendment is effective.

          (a) Amendment; Acknowledgement. This Amendment and the attached Acknowledgement by
Guarantors, each fully executed in a sufficient number of counterparts for distribution to all
parties.

5

 

          (b) Amendment Fee. An amendment fee in the amount of Fifty Thousand Dollars
($50,000), which fee shall be paid to Agent by Borrowers on or before the date hereof and is fully
earned as of the date hereof.

          (c) Representations and Warranties. The representations and warranties set forth
herein and in the Loan Agreement must be true and correct.

          (d) Other Required Documentation. All other documents and legal matters in connection
with the transactions contemplated by this Amendment shall have been delivered or executed or
recorded and shall be in form and substance satisfactory to Agent.

     4. Representations and Warranties. Each Borrower represents and warrants as follows:

          (a) Authority. Such Borrower has the requisite corporate power and authority to
execute and deliver this Amendment, and to perform its obligations hereunder and under the
Financing Agreements (as amended or modified hereby) to which it is a party. The execution,
delivery and performance by such Borrower of this Amendment have been duly approved by all
necessary corporate action and no other corporate proceedings are necessary to consummate such
transactions.

          (b) Enforceability. This Amendment has been duly executed and delivered by such
Borrower. This Amendment and each Financing Agreement (as amended or modified hereby) is the
legal, valid and binding obligation of such Borrower, enforceable against such Borrower in
accordance with its terms, and is in full force and effect.

          (c) Representations and Warranties. The representations and warranties contained in
each Financing Agreement (other than any such representations or warranties that, by their terms,
are specifically made as of a date other than the date hereof) are correct on and as of the date
hereof as though made on and as of the date hereof.

          (d) Due Execution. The execution, delivery and performance of this Amendment are
within the power of such Borrower, have been duly authorized by all necessary corporate action,
have received all necessary governmental approval, if any, and do not contravene any law or any
contractual restrictions binding on such Borrower.

          (e) No Default. No event has occurred and is continuing that constitutes an Event of
Default.

     5. Choice of Law. The validity of this Amendment, its construction, interpretation
and enforcement, and the rights of the parties hereunder, shall be determined under, governed by,
and construed in accordance with the internal laws of the State of California governing contracts
only to be performed in that State.

     6. Counterparts. This Amendment may be executed in any number of counterparts and by
different parties and separate counterparts, each of which when so executed and

6

 

delivered, shall be deemed an original, and all of which, when taken together, shall
constitute one and the same instrument. Delivery of an executed counterpart of a signature page to
this Amendment by telefacsimile shall be effective as delivery of a manually executed counterpart
of this Amendment.

     7. Reference to and Effect on the Financing Agreements.

          (a) Upon and after the effectiveness of this Amendment, each reference in the Loan Agreement
to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan Agreement,
and each reference in the other Financing Agreements to “the Loan Agreement”, “thereof” or words of
like import referring to the Loan Agreement, shall mean and be a reference to the Loan Agreement as
modified and amended hereby.

          (b) Except as specifically amended above, the Loan Agreement and all other Financing
Agreements, are and shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations
of Borrowers to Agent and Lenders.

          (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of Agent or any Lender under any
of the Financing Agreements, nor constitute a waiver of any provision of any of the Financing
Agreements.

          (d) To the extent that any terms and conditions in any of the Financing Agreements shall
contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving
effect to this Amendment, such terms and conditions are hereby deemed modified or amended
accordingly to reflect the terms and conditions of the Loan Agreement as modified or amended
hereby.

     8. Integration. This Amendment and the Loan Agreement as amended, together with the
other Financing Agreements, incorporates all negotiations of the parties hereto with respect to the
subject matter hereof and is the final expression and agreement of the parties hereto with respect
to the subject matter hereof.

     9. Severability. In case any provision in this Amendment shall be invalid, illegal or
unenforceable, such provision shall be severable from the remainder of this Amendment and the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

7

 

     IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above
written.

	 	 	 	 	 
	 	ROCKFORD CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	AUDIO INNOVATIONS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	WACHOVIA CAPITAL FINANCE 

CORPORATION (WESTERN),

as Agent and as a Lender

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

8

 

	 	 	 	 	 

ACKNOWLEDGEMENT BY GUARANTORS

Dated as of November      , 2007

     Each of the undersigned, being a guarantor (each a “Guarantor” and collectively, the
“Guarantors”) under their Guaranty and Security Agreement dated March 29, 2004, made in
favor of Agent and Lenders (as amended, modified or supplemented, the “Guaranty”) hereby
acknowledges and agrees to the foregoing Seventh Amendment to Loan and Security Agreement (the
“Amendment”) and confirms and agrees that the Guaranty is and shall continue to be, in full
force and effect and is hereby ratified and confirmed in all respects except that, upon the
effectiveness of, and on and after the date of the Amendment, each reference in the Guaranty to the
Loan Agreement (as defined in the Amendment), “thereunder”, “thereof” or words of like import
referring to the “Loan Agreement”, shall mean and be a reference to the Loan Agreement as amended
or modified by the Amendment. Although Lender has informed Guarantors of the matters set forth
above, and Guarantors have acknowledged the same, each Guarantor understands and agrees that Lender
has no duty under the Loan Agreement, the Guaranty or any other agreement with any Guarantor to so
notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended
to or shall create such a duty as to any advances or transaction hereafter.

	 	 	 	 	 
	 	ROCKFORD SINGAPORE CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	ROCKFORD SALES.COM, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	MB QUART SHANGHAI, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

9exv10w80

 

Exhibit 10.80

Non-Compete and Change in Control Agreement

This Agreement is between the individual named on the signature page of this Agreement
(“Executive”) and Rockford Corporation, an Arizona corporation, (“Rockford”). Executive and
Rockford agree as follows:

	1	 	Background and Purpose

	 	1.1	 	Executive’s Position.  Executive is currently a member of Rockford’s
senior management team, with the title identified on the signature page of this
Agreement.
	 
	 	1.2	 	Confidential Information.  Executive has access to confidential
information that might be of substantial help to Rockford’s competitors, including
information that could harm Rockford if used to compete with Rockford.
	 
	 	1.3	 	Potential Change of Control.  Rockford is a public company and this
position subjects Executive to significant risks associated with a change of control
at Rockford. Subject to the limitations in this Agreement, Rockford desires to
protect Executive from such risks.
	 
	 	1.4	 	Non-compete and Non-Disclosure.  Rockford also desires to secure
Executive’s promise not to disclose confidential information and not to compete with
Rockford for a reasonable period after any termination of Executive’s employment.
	 
	 	1.5	 	Definitions.  In this agreement, the following terms have the
meanings given below:

	 	(a)	 	Benefits Date is the date Executive becomes entitled to
receive Severance Benefits because an event occurs that satisfies the
conditions stated in Section 2.1.
	 
	 	(b)	 	Business Reason exists if any of the following occur:

	 	(1)	 	Executive acts with personal dishonesty,
related to Executive’s responsibilities to Rockford, that results in
Executive’s substantial and unjust personal enrichment,
	 
	 	(2)	 	Executive is charged with committing a
felony, other offense involving moral turpitude, or other offense
that is injurious to Rockford or its reputation, and the Board finds
that such charge has consequences for Rockford that create a Business
Reason,

 

 

	 	(3)	 	Executive’s willful or gross misconduct is
injurious to Rockford or its reputation,
	 
	 	(4)	 	Executive substantially breaches
Executive’s obligations and duties as a member of Rockford’s senior
management, or under any agreement with Rockford, and fails to
correct the breach after reasonable notice from Rockford.

	 	(c)	 	Change of Control means any merger, consolidation, sale of
assets or other similar transaction or series of transactions involving
Rockford, but excluding any transaction if

	 	(1)	 	Rockford’s shareholders immediately before
the transaction or series of transactions continue to own a majority
of the combined voting power of the entity that survives the
transaction, or
	 
	 	(2)	 	Rockford directors who

	 	(a)	 	were Rockford directors
immediately before the transaction or series of transaction;
and
	 
	 	(b)	 	continue to serve on the
board of directors of the surviving entity

constitute a majority of the directors of that entity for not less
than one year after the transaction.

	 	(d)	 	Competitive Business means a business that manufactures or
distributes mobile audio products that are competitive with the products
Rockford (directly or through any division or subsidiary) manufactures or
distributes during the term of Executive’s employment at Rockford.
	 
	 	(e)	 	Confidential Information means trade secrets and other
proprietary information that

	 	(1)	 	is not generally known to the public,
	 
	 	(2)	 	Rockford has used, developed, or obtained,
and
	 
	 	(3)	 	relates to Rockford’s business or the
business of any Rockford customer or supplier.

Confidential Information includes, but is not limited to, information
contained in or about:

2

 

	 	○	 	Products or services,
	 
	 	○	 	Fees, costs and pricing structure,
	 
	 	○	 	Designs, drawings, and photographs,
	 
	 	○	 	Analyses, formulae, and reports,
	 
	 	○	 	Computer software, including operating systems, applications, databases, program listings, flow charts, manuals and documentation;
	 
	 	○	 	Accounting and business methods,
	 
	 	○	 	Inventions and new developments and methods, whether patentable or not and whether reduced to practice or not,
	 
	 	○	 	Copyrightable works,
	 
	 	○	 	Customers and customer lists, and
	 
	 	○	 	all similar and related information in whatever form.

Confidential Information excludes information that is or was

	 	○	 	Rightfully known by Executive before Rockford employed Executive,
	 
	 	○	 	Publicly available through no fault or action of Executive, or
	 
	 	○	 	Published in a form generally available to the public through no fault or action of Executive.

	 	(f)	 	Good Reason exists if any of the following occur without
Executive’s consent and the notice and cure conditions stated below are
satisfied:

	 	(1)	 	Rockford substantially reduces Executive’s
overall scope of duties, authorities and responsibilities. Executive
acknowledges that a new position in a larger combined company is not
a reduction if it is in the same area of operations and involves a
similar scope of management responsibility, even if the formal
position is less senior within the larger combined company,
	 
	 	(2)	 	Rockford requires that Executive materially
change Executive’ s place of employment. A change is not material if
it involves a move of 50 miles or less from Executive’s current
business location, or
	 
	 	(3)	 	Rockford materially reduces Executive’s
base salary, except that it is not a material reduction in any year
if

	 	(a)	 	Executive’s base salary
after the reduction is equal to or greater than the average
of Executive’s base

3

 

	 	 	 	salary in the 3 years before the reduction minus 10
percent; or

	 	(b)	 	a reduction in Executive’s
base salary that is consistent with a general reduction of
pay across Rockford’s senior management as a group due to
poor financial performance or failure to meet financial
objectives.

Good Reason exists only if:

	 	(x)	 	Executive provides Rockford notice that at
least one of the conditions described in this Section (f) exists
within 90 days after the condition arises; and
	 
	 	(y)	 	Rockford has a period of not less than 30
days nor more than 60 days to remedy the condition and Rockford does
not do so; and
	 
	 	(z)	 	Executive elects to terminate Executive’s
employment at Rockford within 10 days after Rockford’s period to cure
the condition expires.

	 	(g)	 	Rockford means Rockford Corporation and any division,
subsidiary, joint venture, or other business entity that Rockford owns
directly or indirectly.
	 
	 	(h)	 	Severance Benefits has the meaning given in Section 2.2.

	2	 	Change in Control Benefits.

	 	2.1	 	Right to Benefits.  If, while this Agreement is in force:

	 	(a)	 	Executive is an employee on the date of a Change of Control
at Rockford, and
	 
	 	(b)	 	Within one year after the Change of Control, either

	 	(1)	 	Rockford terminates Executive’s employment
without a Business Reason, or
	 
	 	(2)	 	Executive terminates Executive’s employment
with Good Reason

4

 

then Executive will receive the Severance Benefits. For purposes of this
Agreement, termination of employment means separation from service as defined under
Section 409A of the Code and regulations hereunder.

	 	2.2	 	Severance Benefits.  If the conditions in Section 2.1 are satisfied
then Executive will receive the following Severance Benefits:

	 	(a)	 	Payment of the larger of

	 	(1)	 	Executive’s annual base salary and bonus as
of the date of the Change of Control, or
	 
	 	(2)	 	Executive’s annual base salary and bonus as
of the Benefits Date times the multiple stated on the signature page
of this Agreement.

For purposes of this Section 2.2(a), the amount of Executive’s bonus will
be computed based on the average of the highest 2 bonuses paid to
Executive during the 3 full years before Benefits Date (for example, if
Executive’s bonuses in the 3 years before the Benefits Date were $30,000,
$10,000, and $50,000, then Executive’s bonus under this agreement is
$40,000).

	 	(b)	 	Payment of Executive’s vacation accrued through the Benefits
Date,
	 
	 	(c)	 	Rockford will allow Executive to exercise all of the stock
options Rockford has granted to Executive that are vested as of the Benefits
Date in accordance with the terms of the stock option plan and the stock
option grant given to Executive. In addition, to the extent Executive elects
to be paid Executive’s base salary in accordance with Rockford’s ordinary
payroll policies, Rockford will permit Executive’s stock options to vest
during the period when Rockford is paying the base salary component of
Executive’s Severance Benefits; provided that such options cannot be exercised
later than the latest date in which they were otherwise exercisable under any
circumstances, or the 10th anniversary of the original date of
grant, if earlier. (This treatment will not require that Rockford permit
Executive to participate in any other Rockford benefit programs), and
	 
	 	(d)	 	If required by COBRA, and only to the extent Executive elects
under applicable COBRA procedures, continuation of Executive’s group health
benefits under Rockford’s standard health benefit plans as of the Benefits
Date until the earlier of:

5

 

	 	(1)	 	the expiration of the period required by
COBRA (generally 18 months, but may be longer if required by COBRA);
or
	 
	 	(2)	 	the date Executive becomes eligible to be
covered under a group health plan of another employer.

Rockford will reimburse Executive for the cost of Executive’s group health
benefits during this period.

	 	2.3	 	Exclusivity.  The Severance Benefits are exclusive. If there is a
Change of Control and the conditions in Section 2.1 are satisfied, Rockford’s sole
obligation to Executive is to pay the Severance Benefits. Executive acknowledges that
Executive is not entitled to any other benefits, compensation or other payments or
rights upon termination and Executive releases all claims against Rockford relating to
any termination under the conditions stated in Section 2.1.
	 
	 	2.4	 	Payment and Withholding.  

	 	(a)	 	At Executive’s option, documented as described below,
Rockford will pay the base salary component of Executive’s Severance Benefits
either:

	 	(1)	 	beginning on the 1st payroll
period after Executive’s termination of employment in accordance with
Rockford’s ordinary payroll policies over the period such payments
would be made at Executive’s base salary in the year before the
Change of Control event (for example, if the multiple is two times
base salary, such payments would be made over a two-year period), or
	 
	 	(2)	 	any balance in a lump sum payable on the
first day of any month elected by the Executive within the payment
period described in (a), above.

An election under this Section 2.4(a) will be made when this Agreement is
executed. Executive may change the election in the manner specified by
Rockford, but it will be effective only if made not less than six months
before a Change of Control.

	 	(b)	 	The election under Section 2.4(a) is not available with
respect to any amount that is subject to Section 409A. However, prior to a
Change of Control, in accordance with transition rules under Section 409A,
Executive may elect whether to receive any Severance Benefits that are based
on base salary and subject to Section 409A in a lump sum or as salary
continuation. Such

6

 

	 	 	 	election, if made in 2007, will be valid for terminations occurring in
2008 or afterwards, and any election made in 2008 will be valid for any
terminations occurring in 2009 and afterwards. Any additional election
made after 2008 for amounts subject to Section 409A will be made in the
time and manner required under Section 409A.

	 	(c)	 	Absent an election under either Section 2.4(a) or 2.4(b),
benefits will be paid under Section 2.4(a)(1).
	 
	 	(d)	 	Rockford will compute and pay the bonus component of
Executive’s Severance Benefits set forth in Section 2.2(a) at the time it
computes and pays annual bonuses to its executive team, which will be during
the period of January 1 through March 15 of the year after the year for which
the current year bonus is earned, However, if the multiple set forth in this
Agreement is 2 or more, one-half of the bonus amount will be paid during the
period set forth in the previous sentence, and one-half will be paid during
the period of January 1 through March 15 of the year following the first
payment.
	 
	 	(e)	 	All payments of Severance Benefits are subject to withholding
for applicable taxes.

	3	 	Other Terms of Employment.

	 	3.1	 	Agreement not Exclusive.  This Agreement governs only Executive’s
rights to Severance Benefits if the conditions in Section 2.1 are satisfied and the
other matters specifically addressed elsewhere in this Agreement. Other terms of
Executive’s employment are governed by Rockford’s employee manual and general
employment policies. Except for the express obligations stated in this Agreement,
this Agreement does not change the terms of Rockford’s employment of Executive.
	 
	 	3.2	 	Employment is At-Will.  In particular, Rockford and Executive
acknowledge that Executive’s employment is and will continue to be at-will, as defined
under applicable law. Either Rockford or Executive may terminate this Agreement and
Executive’s employment at any time for any reason by giving written notice of
termination.
	 
	 	3.3	 	No General Severance Rights.  This Agreement does not establish a
general right to severance benefits. If Executive’s employment ends for any reason
other than the occurrence of a Benefits Date, Executive will receive only the payments
and benefits due under Rockford’s employee plans and policies as in effect at the time
of termination and will not receive any Severance Benefits under this Agreement.

7

 

	 	3.4	 	Other Agreements.  Executive has signed the agreements and documents
relating to Executive’s employment at Rockford identified on the signature page to
this Agreement. These documents discuss other terms of Executive’s employment at
Rockford. If there is any conflict between this Agreement and the other documents,
this Agreement will control.

	4	 	Executive’s Obligations.

	 	4.1	 	Non-Competition and Non-Solicitation.  During the term of Executive’s
employment at Rockford (including any period when Executive is treated as an employee
under Rockford’s stock option plans and Section 2.2(c)), and for one year after any
termination of Executive’s employment at Rockford, Executive will not:

	 	(a)	 	Engage in, plan for, organize, work for, or assist, directly
or indirectly, any Competitive Business. Executive will not violate this
restriction if Executive owns less than 1% of a publicly traded company that
competes with Rockford, so long as Executive has no active participation in
its business,
	 
	 	(b)	 	Directly or indirectly

	 	(1)	 	induce or attempt to induce any Rockford
employee to leave Rockford,
	 
	 	(2)	 	induce or attempt to induce any Rockford
customer, supplier, licensee or other business relation to cease
doing business with Rockford, or
	 
	 	(3)	 	interfere with the relationship between
Rockford and any Rockford employee, customer, supplier, licensee or
business relation.

	 	4.2	 	Confidential Information.  During and after the term of Executive’s
employment at Rockford, Executive will not disclose, use (either alone or with
others), copy, or encourage anyone else to disclose to any other person or firm any of
Rockford’s Confidential Information unless the use, copying, or disclosure is:

	 	(a)	 	within the scope of Executive’s duties and responsibilities
for Rockford,
	 
	 	(b)	 	done with Rockford’s consent, or

8

 

	 	(c)	 	required by law, but if Executive believes a disclosure is
required by law then Executive will first give Rockford notice of the proposed
disclosure and the opportunity to seek a protective order or take other action
to maintain the confidentiality to the maximum extent the law permits.

Executive will take appropriate steps to safeguard the Confidential Information and
prevent its inadvertent disclosure or theft.

	 	4.3	 	Return of Documents.  Upon termination of Executive’s employment, or
upon Rockford’s request, Executive will return to Rockford all memoranda, notes,
plans, records, documentation and other materials (including copies and information
stored on computer) containing any of Rockford’s Confidential Information. Executive
will not make, retain, or give to any other person any copy or extract of any item
Executive may be obligated to return to Rockford.
	 
	 	4.4	 	Actions.  Executive acknowledges that it would be difficult to
determine damages, and Rockford will not have an adequate remedy at law, if Executive
breaches this Agreement. Accordingly, if Executive breaches this Agreement, Rockford
may seek injunctive relief to enforce this Agreement. Nothing in this section limits
or excludes any and all other rights, including rights to money damages, granted to
Rockford in law or equity.

	5	 	Reformation and Severability.  If a section of this Agreement is deemed unreasonable as to
time or scope by any court or arbitrator, then the court or arbitrator may modify the section
so that it is reasonable and must then enforce the section as modified. If a section of this
Agreement is deemed unreasonable by a court or arbitrator and cannot be modified so that it is
reasonable, the section is severable from the remainder of this Agreement, which must be
enforced according to its terms.
	 
	6	 	Compliance with Section 409A  

	 	6.1	 	Intent to Comply; Interpretation.  Payments under this Agreement are
intended to comply with or be exempt from Section 409A of the Code and this Agreement
shall be interpreted to comply with Section 409A. For purposes of the Agreement, the
salary continuation payments described in Section 2.4(a)(1) shall be treated as a
series of separate payments.
	 
	 	6.2	 	Amounts Exempt from Section 409A.  Because the payments under this
Agreement are the result of an involuntary termination as defined under Section 409A,
to the extent the payments under this Agreement are

	 	(a)	 	totally exempt from Section 409A; or

9

 

	 	(b)	 	exempt up to the Applicable Amount and are paid within a
period no later than the last day of the second taxable year following the
Executive’s termination of employment,

Executive may make the election in Section 2.4(a) with respect to such exempt
payments and such payments will be paid without regard to the six-month delay
described in Section 6.3 below, if applicable. As used in this Agreement,
“Applicable Amount” means two times the lesser of:

	 	(A)	 	Executive’s annualized compensation for the year prior to
Executive’s termination (as adjusted and within the meaning of Section 409A of
the Code); or
	 
	 	(B)	 	the maximum amount that may be taken into account under a
qualified plan in accordance with Section 401(a)(17) of the Code for the year
in which Executive’s employment is terminated.

	 	6.3	 	Six-month Delay for Certain “specified employees.”  Any payments
under this Agreement that are paid to a “specified employee” as defined under Section
409A and that are not exempt as an involuntary severance payment, short-term deferral,
nontaxable or exempt health care benefit, or otherwise, shall be paid no earlier than
the first day of the seventh month after the Executive’s termination of employment
(“Delayed Payment Date”). Any non-exempt lump sum payment delayed under the previous
sentence shall be paid on the Delayed Payment Date. Salary continuation payments
shall be made in accordance with the schedule set forth in this Agreement, and with
respect to the total of such payments, the Applicable Amount shall be paid first,
followed by non-exempt amounts in excess of the Applicable Amount, but in no event
will amounts in excess of the Applicable Amount be paid before the Delayed Payment
Date. If a delay of payment is required under the preceding sentence, any delayed
payments that were otherwise due before the Delayed Payment Date under this Agreement
will be made to the Executive in a lump sum on the Delayed Payment Date.

	7	 	Term and Termination.

	 	7.1	 	Term.  This Agreement is effective during the term while Rockford
employs Executive. This Agreement is also effective after termination of Executive’s
employment to the extent any of its terms require performance after termination.
	 
	 	7.2	 	Termination.  At any time before:

10

 

	 	(a)	 	Rockford enters into an agreement that would result in a
Change of Control, or
	 
	 	(b)	 	Any other event occurs that results in an actual Change of
Control

Rockford’s board of directors may terminate this Agreement for any reason other
than as restricted in the next sentence. Rockford’s board of directors may not
terminate this Agreement in anticipation of, or to facilitate, a Change of Control.
In connection with any termination, Rockford’s board of directors must resolve in
good faith that the termination is not in anticipation of, or to facilitate, a
Change of Control. Termination is effective when Rockford gives Executive notice
of the board’s vote to terminate.

	8	 	Miscellaneous.

	 	8.1	 	Non-delegation of Executive’s Rights.  Executive’s obligations,
rights and benefits under this Agreement are personal and may not be delegated,
assigned, or transferred without written consent from Rockford.
	 
	 	8.2	 	Notices.  Notices are effective:

	 	(a)	 	upon delivery to the recipient if sent in person, by e-mail,
or by facsimile, or
	 
	 	(b)	 	three days after mailing, certified or registered mail,
return receipt requested.

Notices must be sent to the addresses stated on the signature page of this
Agreement. A party may change its address by giving notice of the new address.

	 	8.3	 	Governing Law.  Arizona law will govern this Agreement.
	 
	 	8.4	 	Attorneys’ Fees.  In any proceeding arising out of this Agreement
the prevailing party is entitled to reasonable attorneys’ fees, costs and other
expenses incurred in connection with such proceeding. Rockford will pay amounts due
Executive under this provision, if any, on or before the end of the year after
Rockford is declared legally obligated by a court or other forum of applicable
jurisdiction to make such payments (and after any period for appeal expires or any
appeal is completed and affirms the obligation to pay), and this provision shall exist
for the life of the Executive.
	 
	 	8.5	 	Arbitration.  Disputes arising out of this Agreement or out of
Executive’s employment at Rockford will be submitted to binding arbitration in

11

 

metropolitan Phoenix, Arizona, before a single arbitrator or, if the parties cannot
agree upon a single arbitrator, before a panel of three arbitrators, one selected
by each party (within 10 days after notice of a dispute and failure to agree upon a
single arbitrator) and a third appointed by the arbitrators selected by the
parties. The selection of arbitrators and all arbitration proceedings will be in
accordance with the rules for commercial arbitration of the American Arbitration
Association, as amended to the date of the proceedings, and judgment upon the award
may be entered in any court having jurisdiction. The arbitrators must render a
decision within 30 days after their appointment and may award the costs of
arbitration as they see fit. 

	 	8.6	 	Amendment and Waiver.  The parties may amend this Agreement, and a
party may waive another party’s obligations under this Agreement, but the amendment or
waiver must be in writing and signed by all parties to this Agreement. If a party
waives any breach, the waiver applies only to the specific breach waived. It will not
waive any other breach (including a subsequent breach of the same obligation).
	 
	 	8.7	 	Counterparts.  The parties may execute this Agreement in counterparts.
Each counterpart will be deemed an original, but all counterparts together constitute
one and the same instrument.
	 
	 	8.8	 	Termination of Prior Agreement.  Rockford and Executive are parties
to a Change of Control Agreement covering substantially the same subject matter as
this Agreement and dated the date indicated on the signature page (the “Prior
Agreement”). This Agreement is intended to supercede the Prior Agreement and the
parties agree that the Prior Agreement is terminated in all respects.

[Remainder of Page Intentionally Left Blank]

12

 

	9	 	Execution and Effective Date.  This Agreement is executed and effective on __________, 2007.

	 	 	 	 	 
	 	Rockford Corporation, an Arizona corporation

 	 
	 
	 	By  	 	 
	 	 	President 	 
	 	 	 	 

	 	 	 	 	 	 	 
	 
	 	Address:	 	600 S. Rockford Dr.	 	 
	 
	 	 	 	Tempe, AZ 85281	 	 
	 
	 	Phone:	 	(480) 967 - 3565	 	 
	 
	 	Fax:	 	(480) ___ - ____	 	 
	 
	 	 	 	 	 	 
	 
	 	Executive	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 
	 
	 	     Signature	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 
	 
	 	     Printed Name	 	 
	 
	 	 	 	 	 	 
	 
	 	Address:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	Phone:	 	(480) ___ - ____	 	 
	 
	 	Fax:	 	(480) ___ - ____	 	 

	 	 	 	 	 	 
	Title:
	 	 	 	 	 
	 
	 
	 	 
	Salary Multiple under Section 2.2:
	 	 	 	 
	 
	 	 	 	 	 

Other agreements and documents relating to Executive’s employment:

	 	○	 	Employee Agreement (relating to Invention ownership and disclosure), signed on
__________, ____.
	 
	 	○	 	Offer Letter signed on __________, ____.

Date of Prior Change of Control Agreement (terminated by this Agreement): __________, 20__.

13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}]]