Document:

exv10w78

 

Exhibit 10.78

SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER

     THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND WAIVER (this “Amendment”),
dated as of March ___, 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 and the Fifth Third Amendment to
Loan and Security Agreement dated as of August 31, 2006 (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. The following Event of Default has occurred and is continuing under the Loan Agreement:
Borrowers and their Subsidiaries failed to earn a minimum consolidated EBITDA during the six (6)
months ended December 31, 2006 as required in Section 9.17.1 of the Loan Agreement (the foregoing
Event of Default will be referred to herein as the “Known Existing Default”).

     C. Borrowers have requested Agent and Wachovia to amend the Loan Agreement in certain respects
and to waive the Known Existing Default, and Agent and Wachovia are now willing to accommodate such
request on the terms and conditions set forth herein.

     D. 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. Amendment to Loan Agreement. 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 set forth below, of not less then the amount set forth
opposite such period:

	 	 	 	 	 
	Period	 	Amount
	Three months ending March 31, 2007
	 	 	<$500,000>	 
	Six months ending June 30, 2007
	 	$	1,250,000	 
	Nine months ending September 30, 2007
	 	$	3,000,000	 
	Twelve months ending December 31, 2007
	 	$	4,000,000	 

     Notwithstanding the foregoing, if on the last day of any of the foregoing periods, the
difference between the Excess Availability (before giving effect to the $3,500,000 permanent
Reserve but after giving effect to any other Reserves) 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 $7,000,000 in the case of March 31, 2007, June 30, 2007 and September 30, 2007,
and $8,000,000 in the case of December 31, 2007, 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).

     On or before December 15 of each year (commencing with December 15, 2007), Borrowers
shall furnish Agent with projected consolidated and consolidating financial

2

 

statements (including in each case, forecasted balance sheets and statements of income
and loss, statements of cash flow, and statements of shareholders’ equity) of Borrowers and
their Subsidiaries for the next fiscal year, all in reasonable detail, and in a format
consistent with the projections previously delivered by Borrowers to Agent, together with
such supporting information as Agent may reasonably request. Such projected financial
statements shall be prepared on a monthly basis for the next succeeding fiscal year. Such
projections shall represent the reasonable estimate by Borrowers of the future financial
performance of Borrowers and their Subsidiaries for the periods set forth therein and shall
have been prepared on the basis of the assumptions set forth therein which Borrowers believe
are fair and reasonable as of the date of preparation in light of current and reasonably
foreseeable business conditions (it being understood that actual results may differ from
those set forth in such projected financial statements). Based upon each such projected
financial statement, Agent shall reasonably set minimum EBITDA levels for Borrowers and
their Subsidiaries for the subject fiscal year, and Borrowers and their Subsidiaries shall
earn EBITDA of not less than such minimum EBITDA levels.”

     2. Waiver of Known Existing Default. Agent and Wachovia hereby waive enforcement of
their rights against Borrowers arising from the Known Existing Default; provided, however, nothing
herein shall be deemed a waiver with respect to any failure of Borrowers to comply fully with
Section 9.17.1 of the Loan Agreement as amended and modified by this Amendment. This waiver shall
be effective only for the specific default comprising the Known Existing Default, and in no event
shall this waiver be deemed to be a waiver of enforcement of Agent’s or Wachovia’s rights with
respect to any other Defaults or Events of Default now existing or hereafter arising. Nothing
contained in this Amendment nor any communications between any Borrower and Agent or Wachovia shall
be a waiver of any rights or remedies Agent or Wachovia has or may have against Borrowers, except
as specifically provided herein. Except as specifically provided herein, Agent and Wachovia hereby
reserve and preserve all of their rights and remedies against Borrowers under the Loan Agreement
and the other Financing Agreements. Subject to the conditions set forth in Section 3 below, the
waiver contained in this Section 2 shall be effective retroactively to December 31, 2006.

     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.

          (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.

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          (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, except for the Known Existing 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 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.

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          (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, 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.

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     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:	 	 	 	 
	 

	 	 	 	 	 	 

6

 

ACKNOWLEDGEMENT BY GUARANTORS

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

     If any action or proceeding is filed in a court of the State of California by or against any
Guarantor in connection with any of the transactions contemplated by the Loan Agreement or any
document related thereto, the court shall, and is hereby directed to, make a general reference
pursuant to California Code of Civil Procedure Section 638 to a referee or referees to hear and
determine all of the issues in such action or proceeding (whether of fact or of law) and to report
a statement of decision, provided that at the option of Lender, any such issues pertaining to a
“provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard
and determined by the court.

	 	 	 	 	 	 	 	 	 
	 	 	ROCKFORD SINGAPORE CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	ROCKFORD SALES.COM, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

7

 

	 	 	 	 	 	 	 	 	 
	 	 	MB QUART SHANGHAI, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 

	 	 	 	 	 
	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 
	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

8exv10w01

 

EXHIBIT 10.01

CAMOFI Letter Agreement

March 22, 2007

Las Vegas Gaming, Inc.

4000 W. Ali Baba Lane

Las Vegas, Nevada 89118

Attn: Bruce Shepard, Chief Executive Officer

Dear Bruce:

Reference is hereby made to (i) the Senior Secured Convertible Note due January 1, 2008 (the
“Note”) in the aggregate principal amount of $5,000,000 made by Las Vegas Gaming, Inc. (the
“Company”) in favor of CAMOFI Master LDC (“CAMOFI”), (ii) the Registration Rights Agreement (the
“Registration Rights Agreement”) dated as of March 31, 2006 between the Company and CAMOFI, and
(iii) the additional transactions documents related thereto (the “Transaction Documents”). In
consideration of the Company compensating CAMOFI (or its designee) through the issuance of five
year warrants to purchase 175,000 shares of Common Stock Series A with an exercise price of $1.48
per share and the payment of $25,000, each of the Company and CAMOFI wish to amend the terms of the
Note, the Registration Rights Agreement and the Transaction Documents as follows:

	 	1.	 	The definition of “Maturity Date” in the first paragraph of the Note is hereby deleted
in its entirety and replaced with the following new definition;

	 	 	 	“Maturity Date” shall mean January 1, 2009.

	 	2.	 	The definition of “Monthly Redemption Date” in the Note is hereby deleted in its
entirety and replaced with the following new definition;

	 	 	 	“Monthly Redemption Date” means the first Business Day of each month, commencing on
the first Business Day of October 2007 and ending upon the full redemption of this Note.

	 	3.	 	Sections 2(a) and 2(b) in the Note are hereby deleted in their entirety and replaced
with the following new Sections 2(a) and 2(b);

a) Optional Prepayment. The Company shall have the right to prepay, in cash, on ten
days prior written notice to the Holder (during which time the Holder shall have the right
to convert this Note into Common Stock or preferred stock, at the option of the Holder, in
accordance with the terms hereof) all or a portion of the Notes for an amount equal to 115%
of the principal amount to be repaid plus that portion of the Commitment Fee that would be
otherwise payable had the prepayment not been made.

b) Mandatory Prepayment. On the closing of a Qualified Financing (for the sake of
clarity, this Section 2(b) applies to such portion of the Note not subject to the Automatic
Conversion provisions of Section 5(b) hereof) or, in the event that no Qualified Financing

 

 

occurs prior to the Maturity Date, the Company will be required to prepay or repay, in cash,
on ten days prior written notice to the Holder (during which time the Holder shall have the
right to convert this Note into Common Stock or preferred stock, at the option of the
Holder, in accordance with the terms hereof) the aggregate principal amount of the Notes not
converted to Common Stock or preferred stock at 110% of the principal amount thereof plus
that portion of the Commitment Fee that would be otherwise payable had the prepayment not
been made.

	 	4.	 	Section 5(b) in the Note is hereby deleted in its entirety and replaced with the
following new Section 5(b);

b) Automatic Conversion. Upon the completion of a Qualified Financing, 30% of the
aggregate principal amount of this Note shall automatically convert into shares of Common
Stock or preferred stock (at the option of the Holder) at the Conversion Price. The
remaining 70% of the aggregate principal amount of this Note shall be subject to the
provisions of Section 2(b) hereof.

	 	5.	 	The definition of “Effectiveness Date” in the Registration Rights Agreement is
hereby deleted in its entirety and replaced with the following new definition;

“Effectiveness Date” means, with respect to the initial Registration Statement
required to be filed hereunder, the 635th calendar day following the date hereof
and, with respect to any additional Registration Statements which may be required pursuant
to Section 3(c), the 635th calendar day following the date on which the Company
first knows, or reasonably should have known, that such additional Registration Statement is
required hereunder; provided, however, in the event the Company is notified
by the Commission that one of the above Registration Statements will not be reviewed or is
no longer subject to further review and comments, the Effectiveness Date as to such
Registration Statement shall be the fifth Trading Day following the date on which the
Company is so notified if such date precedes the dates required above; and

	 	6.	 	The definition of “Filing Date” in the Registration Rights Agreement is hereby
deleted in its entirety and replaced with the following new definition;

“Filing Date” means, with respect to the initial Registration Statement required to
be filed hereunder, the 575th calendar day following the date hereof and, with respect to
any additional Registration Statements which may be required pursuant to Section 3(c), the
575th calendar day following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required hereunder.

	 	7.	 	All references in the Registration Rights Agreement to “180th day” shall be
amended to read “635th day”.

	 	8.	 	Section 2(a) in the Registration Rights Agreement is hereby amended to provide that the
Registration Statement shall be on Form SB-2 or such other similar form.

	 	9.	 	Section 2(b)(iii) in the Registration Rights Agreement is hereby deleted in its
entirety and replaced with the following new Section 2(b)(iii);

 

 

“(iii) prior to its Effectiveness Date, the Company fails to file a pre-effective amendment
and otherwise respond in writing to comments made by the Commission in respect of such
Registration Statement within 90 calendar days after the receipt of comments by or notice
from the Commission that such amendment is required in order for a Registration Statement to
be declared effective; or”

	 	10.	 	Section 2(b)(iii) in the Registration Rights Agreement is further amended to
acknowledge the filing by the Company of a Registration Statement with respect to the
Registrable Securities, the receipt of written comments thereto from the Commission and the
agreement to not respond to the written comments received from the Commission unless
necessary to have the Registration declared effective by the Commission by the
Effectiveness Date.

	 	11.	 	Section 6(b) in the Registration Rights Agreement is hereby amended to not prohibit the
inclusion of securities of the Company in the Registration Statement filed for any
Registrable Securities.

Based on the foregoing, the Company and CAMOFI acknowledge and agree that, as of the date hereof,
each party is in good standing under the Note, the Registration Rights Agreement and the
Transaction Documents and that, as of the date hereof, there are no defaults under the Note, the
Registration Rights Agreement or any of the Transaction Documents by either party.

If this letter is accordance with your understanding, please sign your name in the space provided
below.

Very truly yours,

/s/ Keith D. Wellner

Keith D. Wellner

General Counsel

ACCEPTED AND AGREED TO:

Las Vegas Gaming, Inc.

	 	 	 
	By:

	 	/s/ Bruce Shepard
	 
	 	 
	Name:

	 	Bruce Shepard
	Title:

	 	Chief Executive Officer

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