Exhibit 10.50
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
SIMPLEDEVICES, INC.
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STOCK PURCHASE AGREEMENT
__________________________
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is by and between Simple
Devices, Inc., a Delaware corporation ("Company"), and Rockford Corporation, an
Arizona corporation ("Purchaser"). Company and Purchaser hereby agree as
follows:
1. BACKGROUND AND DEFINITIONS.
1.1 Company Business. Company develops, manufactures, markets and
distributes wireless electronic systems for the delivery of Internet
and personal computer content to audio and other electronic devices
and systems and engages in other related business (the "Business").
1.2 Purchaser Business. Purchaser develops, manufactures, markets and
distributes high quality mobile, professional and home theatre audio
systems and equipment.
1.3 Acquisition. Company has agreed to sell to Purchaser *** shares of
the Company's common stock (the "Shares") at a purchase price per
share of $*** and at the aggregate purchase price of ***,
representing *** of Company's fully-diluted capital stock. Purchaser
and Company have agreed to complete the acquisition and sale of the
Shares on the terms described in this Agreement.
1.4 Purpose. The purpose of this Agreement is to state the terms of
Purchaser's acquisition of the Shares.
1.5 Definitions. In this Agreement:
Affiliate means any Person who controls, is controlled by, or is
under common control with another Person (directly or indirectly,
alone or together with others).
Agreement means this Agreement and each of the Schedules, Exhibits
and certificates delivered with this Agreement. The Schedules,
Exhibits and certificates are a part of this Agreement.
Business has the meaning given in Section 1.1 and includes all
operating lines, products and services of Company.
Closing means the consummation of the transactions contemplated by
this Agreement.
Closing Date means the day on which the Closing actually takes
place.
Company means Simple Devices, Inc., a Delaware corporation.
Contract means any contract, indenture, mortgage or deed of trust,
lease, purchase order, guaranty, insurance policy, bond, license,
instrument, understanding, obligation, or other agreement. A
Contract may be written or oral.
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Employment Contracts means all Contracts related to employment,
including both individual agreements and collective bargaining
agreements.
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, heath, and accident insurance,
and other employee benefit plans, agreements, arrangements or
commitments.
Encumbrance means any mortgage, pledge, lien, claim, charge,
security interest, restriction, easement, right of way, or other
liability that is a charge against an asset.
Environmental Laws means all Laws relating to the environment 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. Section 9601 et seq.; the Toxic Substance Control Act, 15
U.S.C. Section 2601 et seq; the Hazardous Materials Transaction Act,
49 U.S.C. Section 1802 et seq; the Resource Conservation and
Recovery Act, 42 U.S.C. Section 9601 et seq; the Clean Water Act, 33
U.S.C. Section 1251 et seq; the Safe Drinking Water Act, 42 U.S. C.
Section 300(f) et seq; the Clean Air Act, 42 U.S.C. Section 7401 et
seq; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Section 136 et seq; and the Solid Waste Disposal Act, 42
U.S.C. Section 6901 et seq.
Financial Statements and Financial Statements Date have the meanings
given in Section 6.8.
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.
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.
Information means information Company supplies to Purchaser under
Section 8.10 of this Agreement.
Laws means any law, statute, ordinance, rule, regulation, or Order.
Loss means all expenses (including reasonable attorneys and
accountants fees), losses, taxes, claims, damages, awards, fines,
interest, penalties, and liabilities net of related income tax
benefits, if any.
Order means any order, decree, decision, injunction, finding, or
judgment.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Permits means approvals, permits, licenses, filings, registrations,
certificates, orders, authorizations, qualifications, or other
consents from any Government, self-regulatory authority, or any
other third party.
Person means any individual person and any corporation, partnership,
joint venture, limited liability company, trust or other entity.
Proceeding means any claim, action, suit, mediation, arbitration,
labor grievance, Government investigation, or other legal or
administrative proceeding.
Properties means all properties and assets reflected in the
Financial Statements or in Schedule 6.17.
Purchase Price means the purchase price for the Shares in the amount
of $***, payable as set forth in Section 4 of this Agreement.
Purchaser means Rockford Corporation, an Arizona corporation.
Security Rights means all subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities, preemptive
rights or other agreements or arrangements to acquire common stock
or other securities of a Person.
Stockholders means each of the Persons who own shares (of record or
beneficially) of the capital stock of Company. All Stockholders are
identified on Schedule 6.6.
Shares means the *** shares of common stock of Company to be
acquired by Purchaser pursuant to this Agreement, representing ***
of the capital stock of Company on a fully-diluted basis.
Tax means any tax, assessment, duty, or governmental charge or
deposit, including income, property, ad valorem, gross receipts,
sales, use, value added, transaction privilege, 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. Tax also
includes all interest and penalties, whether disputed or not,
imposed by any Government.
2. PURCHASE AND SALE OF SHARES. At the Closing and subject to this Agreement,
Purchaser will purchase from Company, and Company will issue and sell to
Purchaser, the Shares. As a result of the purchase, Purchaser will become
the owner of *** of the capital stock of Company on a fully-diluted basis.
Attached as Exhibit 2 is a table showing the post-acquisition capital
structure of the Company.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
3. CLOSING. The Closing will take place at 10:00 A.M., local time, on or
before October ___, 2002, at the offices of Steptoe & Johnson LLP, counsel
for Purchaser, 201 East Washington Street, Suite 1600, Phoenix, Arizona
85004, or at another agreed upon time and place.
4. PAYMENT OF PURCHASE PRICE.
4.1 Purchase Price. Purchaser will pay the Purchase Price of $*** to
Company at the Closing by cashier's check or wire transfer in
accordance with wiring instructions given to Purchaser at least 72
hours prior to Closing (the "Closing Payment"). Out of the Closing
Payment, Company will use approximately $*** to redeem in full the
Company's convertible notes, including principal and accrued
interest. After such payment, Company will have no further
obligations to the holders of the convertible notes.
4.2 Use of Proceeds. The proceeds for the Shares will be used by Company
for working capital and other corporate purposes. Company may not
make any distributions of the proceeds to the Stockholders.
5. EMPLOYEES AND OPTIONS. At the Closing, Company will enter into the
following agreements or arrangements:
5.1 Employment of Key Employees. Company will enter into an Employment
and Non-Competition Agreement with each of the employees identified
on Schedule 5.1 (the "Key Employees") substantially in the form of
Exhibit 5.1;
5.2 Employment of Other Employees. Company will continue to employ the
employees of Company identified on Schedule 5.2 (the "Other
Employees") but is not obligated to enter into an employment
agreement with any of the Other Employees or to employ any of the
Other Employees for any length of time. As a condition to his or her
continued employment, Purchaser may require that each Other Employee
sign and deliver to Company an invention agreement in the form of
Exhibit 5.2.
5.3 Management Options.
(a) At or prior to Closing, Company will grant options (or reserve
shares for future options to be granted) to Company's
employees to acquire up to an aggregate of *** shares of
Company's common stock, representing up to *** of the capital
stock of Company on a fully-diluted basis. The options will be
distributed among Company's employees as mutually agreed by
Company's President and Chairman, subject to the approval of
Purchaser. The employees shall receive the option to purchase
that number of shares of the Common Stock of the Company as
set forth on Exhibit 5.3 attached hereto.
(b) The options will be issued pursuant to Company's existing
stock option plan, which may be amended by Company as
necessary to comply with
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
the terms of this Agreement. The options will be issued at a
strike price of not less than $*** per share. All options will
vest over *** on a monthly pro-rata basis beginning *** after
the grant date.
(c) Company will account for any compensation expense resulting
from the issuance of the options in a period ending at or
before the Closing Date.
6. REPRESENTATIONS AND WARRANTIES BY COMPANY. Company represents and warrants
to Purchaser that as of the date of this Agreement and as of the Closing
Date:
6.1 Organization and Authority to Conduct Business.
(a) Company is duly organized, validly existing and in good
standing under the Laws of Delaware.
(b) Company is qualified to do business and is in good standing in
each of the jurisdictions identified on Schedule 6.1. These
are all the jurisdictions in which Company must be qualified
or in which the lack of such qualification would have a
material adverse effect on the financial condition, business
or prospects of Company.
(c) Company has all requisite corporate power and authority to
carry on its business as now conducted, to own, lease, or
operate its properties, and to carry out the transactions
contemplated by this Agreement.
(d) Company has delivered to Purchaser complete copies of
Company's certificate of incorporation and bylaws as amended.
6.2 Authorization and Approval of Agreement. Company:
(a) has taken, or will take before the Closing, all actions; and
(b) has secured, or will secure before the Closing, all 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 or instrument
executed by Company in connection with this Agreement:
(a) constitutes the valid, binding, and enforceable obligation of
Company;
(b) has been duly executed and delivered by Company; and
(c) 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 Company will not
(with or without the giving of notice or the passage of time)
conflict with, result in a default under,
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
result in the creation of any Encumbrance pursuant to, or
result in the acceleration of any obligation under or permit
the termination of:
(a) Company's certificate of incorporation or bylaws; or
(b) any Contract or Law to which Company is a party or by which it
may be bound.
6.5 Subsidiaries. Except as disclosed on Schedule 6.5, Company does not
own or have any investment in any other Person.
6.6 Capitalization and Share Ownership.
(a) The authorized, issued, and outstanding capital stock of
Company, and the record and beneficial owners of such capital
stock, are as set forth on Schedule 6.6.
(b) Except as set forth on Schedule 6.6, and as provided in this
Agreement, there are no outstanding Security Rights under
which Company is or may become obligated to issue, assign or
transfer any shares of the capital stock of Company.
(c) Upon payment of the Purchase Price, the Shares will be validly
issued and outstanding, fully paid, and non-assessable and
will be issued in compliance with all applicable securities
laws.
(d) Upon payment of the Purchase Price, Purchaser will acquire
good and valid title to the Shares free and clear of all
Encumbrances, rights of first refusal, preemptive rights or
other restrictions.
6.7 Transactions with Affiliates.
(a) Company has not, directly or indirectly,
(1) purchased, sold, leased, or otherwise acquired any
property from;
(2) disposed of any property to;
(3) obtained any services from or furnished any services to;
or
(4) otherwise dealt with
any Stockholder, or any Affiliate of Company or any
Stockholder, except as set forth on Schedule 6.7(a).
(b) Company:
(1) does not owe any amount to;
(2) is not owed any amount by; and
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(3) does not have any Contract with or commitment to
any Stockholder, director, officer, employee, consultant or
Affiliate, except for Contracts for current services not yet
due or as set forth on Schedule 6.7(b).
(c) Company does not possess or use any properties or assets of
any Stockholder or any Affiliate of any Stockholder, except as
set forth on Schedule 6.7(c).
6.8 Financial Statements.
(a) Company has delivered to Purchaser copies of the following
financial statements (the "Financial Statements"):
(1) balance sheets as of its fiscal years ending December
31, 1999, 2000, and 2001, as well as interim statements
through August 31, 2002 (the "Financial Statements
Date), and
(2) statements of earnings and (to the extent reasonably
available) sources and application of funds for the
periods then ended.
(b) The Financial Statements:
(1) fairly present Company's financial condition and results
of operations for the periods reported;
(2) were prepared in accordance with Generally Accepted
Accounting Principles, consistently applied ("GAAP"),
except for exceptions noted in the Financial Statements,
in Schedule 6.8, or elsewhere in this Agreement; and
(3) in the case of year end statements, said statements were
audited by Fish & Associates, the Company's independent
accountants.
6.9 Absence of Undisclosed Liabilities. As of the Financial Statements
Date, Company had no material debts or liabilities except as
disclosed in the Financial Statements or this Agreement or on
Schedule 6.9. Since the Financial Statements Date, Company has not
incurred additional material debts or liabilities except as
disclosed in Schedule 6.9 or elsewhere in this Agreement.
6.10 Litigation. Except as set forth in Schedule 6.10,
(a) There is no Proceeding pending or, to Company's knowledge,
threatened; and
(b) There is no Order in effect or, to Company's knowledge,
threatened
against or relating to:
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(1) Company or Company's properties, assets, or business;
(2) Company's officers, directors, or employees in their
capacities as such or on account of any action taken or
done in such capacities; or
(3) the transactions contemplated by this Agreement.
Company does not know, or have reason to know, any basis for
such a Proceeding or Order.
6.11 Bankruptcy Proceedings. Company is not involved in any Proceeding by
or against it:
(a) under the Bankruptcy Code;
(b) under any other insolvency or debtors' relief Laws; or
(c) for the appointment of a trustee, receiver, liquidator,
assignee, sequestrator or other similar official.
6.12 Taxes. Except as set forth in Schedule 6.12:
(a) Company has paid, or will pay before their due date, all Taxes
due in respect of Company's operations;
(b) Company has timely filed, or will timely file, all tax returns
required in connection with any Taxes, and has not made any
requests for extensions. All such returns are accurate and
comply with applicable Law;
(c) Company has made all material deposits required by Law;
(d) Company has not been delinquent in the payment of any Tax or
has paid any penalty and interest associated with a
delinquency; and
(e) Company is not currently the subject of any Tax audit, has no
reassessment of any Tax proposed, and knows of no basis for
any such reassessment.
6.13 Compliance with Laws, Permits, and Contracts. To Company's
knowledge, and except as set forth in Schedule 6.13:
(a) Company has complied in all material respects with all Laws
applicable to its Business, Properties, or operations as
presently conducted and as conducted in the past;
(b) Company has secured and is in material compliance with all
Permits required for its Business, Properties, and operations
as presently conducted;
(c) Company 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
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
business for Company, or otherwise benefiting Company, in
violation of any Law (including Section 30A(a) of the
Securities Exchange Act of 1934, as amended); and
(d) The ownership and present use of Company's Properties, and the
conduct of its 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) conflict with or result in a default
under:
(i) Company's certificate of incorporation or bylaws;
or
(ii) any Contract or Law to which Company is a party or
by which it is affected.
6.14 Enforceability of Contracts; No Defaults. Except as set forth on
Schedule 6.14:
(a) all Contracts identified in this Agreement to which Company is
a party are effective, valid, binding, and enforceable in
accordance with their terms; and
(b) Company does not know, or have reason to know, of any default
(or event which, after notice or lapse of time, would
constitute a default) under such Contracts.
6.15 Product Recalls. Except as set forth on Schedule 6.15, Company 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 required, or sought to require, that Company recall any
products that Company designed, manufactured, assembled, shipped,
sold, distributed, installed, repaired or maintained. Company 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.
6.16 Environmental Matters. Except as set forth on Schedule 6.16:
(a) Company is in compliance with all Environmental Laws;
(b) Company has secured all Permits required under Environmental
Laws for the operation of the Business (and such Permits are
listed on Schedule 6.16);
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(c) Company does not know, or have reason to know, of any pending
or threatened Proceedings against Company with respect to any
Environmental Laws;
(d) Company does not know, or have reason to know, of any act
attributable to Company that could give rise to liability
under CERCLA or any other Environmental Law. Company has not
submitted notice pursuant to Section 103 of CERCLA with
respect to any of its Properties;
(e) To its knowledge, Company does not own or operate any
underground storage tank except for tanks in compliance with
all Environmental Laws. All of Company's underground storage
tanks are identified on Schedule 6.16; and
(f) Company 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 on, in, or under its
Properties by Company or any other Person in a manner that
violates any applicable Environmental Law.
6.17 Properties.
(a) Real Property. Schedule 6.17(a) lists:
(1) all real property Company owns, leases, or uses in the
Business;
(2) the terms on which Company owns, leases, or uses such
property; and
(3) the terms of any Encumbrances affecting Company's
interest in such property.
(b) Personal Property. Schedule 6.17(b) lists:
(1) all tangible personal property (other than inventory and
supplies) Company owns, leases or uses in the Business,
except for owned items having a value of less than
$1,000 and leased items requiring annual lease payments
less than $1,000;
(2) the terms on which Company owns, leases, or uses such
property; and
(3) the terms of any Encumbrances affecting Company's
interest in such property.
(c) Title. Company has satisfactory title to all properties and
assets reflected in the Financial Statements or in Schedule
6.17(a) or (b) (the "Properties"), free of any Encumbrance,
except:
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(1) Properties sold or otherwise disposed of in the ordinary
course of business consistent with past practice after
the Financial Statements Date; or
(2) as set forth in the Financial Statements or in Schedule
6.17(a) or (b).
(d) Condition. The Properties are in good operating condition and
repair, are suitable for the purposes used, and are adequate
for the current operations of Company. Together with inventory
and supplies, the Properties are all of the properties and
tangible assets used in connection with, necessary for the
conduct of, or otherwise material to the Business. Company
does not know, or have reason to know, of any pending or
threatened condemnation affecting the Properties.
6.18 Insurance. Schedule 6.18 lists all material insurance policies
insuring, and all material performance bonds issued in favor of,
Company, specifying:
(a) the name of the insurer or bonding company;
(b) the risk insured or bonded;
(c) the limits of coverage;
(d) the deductible (if any);
(e) the premium (including any proposed premium increases known to
Company);
(f) any notice of cancellation or nonrenewal; and
(g) the date through which coverage will continue by virtue of
premiums already paid.
6.19 Development and Distribution Agreements. Schedule 6.19 lists all
Contracts of Company relating to development of Company's products,
Company's development of products for others, distribution of
products, or the services of an independent contractor, but
excluding any Contract entered into in the ordinary course of
business terminable by Company in less than 30 days or involving
payment or receipt of less than $10,000.
6.20 Other Contracts. Schedule 6.20 lists:
(a) Each loan, conditional sales, or security agreement of Company
with an unpaid balance more than $10,000;
(b) Each material license agreement relating to intellectual
property of Company (other than licenses incident to leases of
computers, software, or
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
office or photographic equipment used in the ordinary course
of business); and
(c) All other Contracts of Company 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 Company in less than 30 days or
involving payment or receipt of less than $10,000.
6.21 Employment Matters.
(a) Employment Contracts and Plans. Schedule 6.21 lists:
(1) all Employment Contracts and Employment Plans of
Company; and
(2) the names and current annual rates of compensation of
all personnel (including employees and independent
contractors) whose 2002 compensation is expected to be
$75,000 or more.
(b) Compliance with Employment Laws. Company:
(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 labor strike, dispute, slow-down
or stoppage;
(4) is not subject to any 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. Company has administered and maintained the
Employment Plans in material compliance with all applicable
Laws. Company does not know, or have reason to know, of any
prohibited transaction (as defined in ERISA) relating to any
Employment Plan.
6.22 No Guaranties. Except as disclosed on Schedule 6.22, Company has not
guaranteed the obligations or liabilities of any Person.
6.23 Intellectual Property. Schedule 6.23 lists all material patents,
patent applications, trademarks, trade names, service marks, other
trade rights, copyrights, licenses,
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
and similar intangibles (the "Intellectual Property") that Company
owns, uses, or has registered. Except as disclosed on Schedule 6.23:
(a) Company is not obligated to pay any royalty with respect to
Intellectual Property; and
(b) Company does not know, or have reason to know, of any pending
or threatened Proceedings (or of any basis for such a
Proceeding) alleging that Company has infringed on any third
party's Intellectual Property.
6.24 Inventory. Except as disclosed on Schedule 6.24, Company's inventory
and related supplies are merchantable or suitable for sale in the
ordinary course of business.
6.25 Receivables. Schedule 6.25 lists all accounts receivable of the
Company as of the date indicated. All receivables listed, and all
receivables that have arisen since such date, arose from
transactions in the ordinary course of business. Company has
received no notice, and has no knowledge, that any obligor of any
such receivables contests or disputes the validity or the amount
owed.
6.26 Records. Except as set forth in Schedule 6.26, the books of account,
minute books, stock certificate books, and stock transfer ledgers
("Books") of Company are complete and correct in all material
respects. Company knows of no material transactions involving the
business of Company that properly should have been but are not set
forth in the Books.
6.27 Official Filings Complete. Company has made all required Government
filings.
6.28 Absence of Changes or Events. Except as disclosed on Schedule 6.28,
as expressly permitted or contemplated by the terms of this
Agreement, or with Purchaser's written consent, since the Financial
Statements Date, Company has conducted business only in the ordinary
course and, since the Financial Statements Date, has not taken, or
entered into any agreement or made any commitment to take, any of
the following actions:
(a) incurred any obligation or liability, except liabilities
(1) for trade or business obligations incurred in the
ordinary course of business; or
(2) which do not materially affect its business or financial
condition;
(b) paid any obligation or liability other than current
liabilities incurred in the ordinary course of business;
(c) declared or paid dividends or other distributions to the
Stockholders;
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(d) purchased, retired or redeemed, or obligated itself to
purchase, retire or redeem, any of its capital stock;
(e) issued or sold any shares of capital stock or other
securities;
(f) acquired any capital stock of, interest in, or other
securities of any Person, or otherwise made any loan or
advance to or investment in any Person;
(g) subjected any Properties to any Encumbrance, except in the
ordinary course of business;
(h) sold or otherwise disposed of any Properties, except in the
ordinary course of business;
(i) cancelled, compromised, waived, or released any debt, claim,
or right, except in the ordinary course of business;
(j) received or given notice of termination of any Contract whose
termination has had, or may have, a material adverse effect on
its business or financial condition;
(k) to its knowledge, experienced any labor union organizing
activity, had any actual or threatened employee strikes, work
stoppages, slow-downs, or lock-outs, or had any material
change in the terms of agreements with its employees, agents,
customers or suppliers;
(l) made or agreed to make any change in the compensation payable
to any director, officer, or employee, except for normal
periodic bonus accruals and normal periodic increases in
regular compensation;
(m) acquired any capital assets that cost in excess of an
aggregate of $50,000;
(n) instituted, settled or agreed to settle any material
Proceeding; or
(o) suffered any change, event, condition, damage, destruction, or
loss having a material adverse affect on its business or
financial condition.
6.29 Disclosure. No representation or warranty by Company in this
Agreement and no certificate or other instrument furnished by or on
behalf of Company to Purchaser:
(a) contains or will contain any untrue statement of a material
fact; or
(b) omits or will omit to state any material fact required to make
the statements made in this Agreement and such certificate or
instrument, taken as a whole, not misleading.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
The representations and warranties contained in this Agreement will
not be affected or deemed waived by reason of any investigation by
Purchaser or its representatives.
7. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Company that as of the date of this Agreement and as of the
Closing Date:
7.1 Organization and Authority. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of
Arizona. Purchaser has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement,
and to carry out the transactions contemplated by this Agreement.
7.2 Authorization and Approval of Agreement. Purchaser has taken all
actions required to authorize the execution, delivery, and
consummation of this Agreement and the transactions contemplated by
this Agreement.
7.3 Binding Effect. This Agreement, and each document or instrument
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.
7.4 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:
(a) Purchaser's articles of incorporation or bylaws; or
(b) any material Contract or Law to which Purchaser is a party or
by which it may be bound.
7.5 Investment Intent. Purchaser acknowledges that:
(a) the Shares are not registered under the Securities Act of
1933, as amended (the "Securities Act");
(b) Purchaser may not resell the Shares unless they are registered
or exempt from registration; and
(c) Purchaser is acquiring the Shares for its own account, for
investment purposes only, and not with a view toward their
distribution.
(d) Purchaser is an "accredited investor" within the meaning of
SEC Rule 501 of Regulation D, as presently in effect and
understands the meaning of that term.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(e) Purchaser understands that the shares of Common Stock it is
purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable
regulations such securities may be resold without registration
under the Securities Act of 1933, as amended (the "Act") only
in certain limited circumstances. In this regard, the
Purchaser represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations
imposed thereby and by the Act.
7.6 Purchaser's Independent Investigation. Purchaser and its
representatives have independently investigated Company and the
Business. Purchaser acknowledges that there are no representations
or warranties, express or implied, about Company 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 Company 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.
7.7 Disclosure of Information. The Purchaser believes it has received
all the information it considers necessary or appropriate for
deciding whether to enter into this Agreement. The Purchaser further
warrants that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the
Agreement. The foregoing, however, does not limit or modify the
representations and warranties of the Company set forth in Section 6
of this Agreement, or the right of the Purchaser to rely thereon.
7.8 Litigation. There is no Proceeding pending or, to Purchaser's
knowledge, threatened, and there is no Order in effect, relating to
the transactions contemplated by this Agreement. Purchaser does not
know of any basis for such a Proceeding or Order.
7.9 Disclosure. No representation or warranty by Purchaser in this
Agreement:
(a) contains or will contain any untrue statement of a material
fact; or
(b) omits or will omit to state any material fact required to make
the statements made in this Agreement not misleading.
The representations and warranties contained in this Agreement will
not be affected or deemed waived by reason of any investigation by
Company or its representatives.
8. PRE-CLOSING COVENANTS. After the execution of this Agreement and before
the earlier of the Closing or termination of this Agreement:
17
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
8.1 Conversion of Existing Preferred Stock and Security Rights. Company
will take all steps necessary to cause
(a) all outstanding Series A and Series B preferred stock of
Company; and
(b) all outstanding Security Rights of Company (other than options
under Company's existing stock option plan)
to be converted into or exchanged for Company common stock and all
existing preferences relating to the Series A and Series B preferred
stock to be terminated. Subject to Purchaser's prior written
approval, Company will amend its certificate of incorporation and
bylaws as necessary to effect such conversion or exchange.
8.2 Pre-paid Asset. Company will expense the pre-paid asset Company
carried on its Balance Sheet as of the Financial Statements Date in
the amount of $***.
8.3 Consents and Approvals. Purchaser and Company will cooperate:
(a) to obtain as expeditiously as possible all Permits necessary
to carry out the transactions contemplated by this Agreement;
and
(b) to comply with all Laws regulating or restricting the
transactions contemplated by this Agreement.
8.4 Conduct of Business. Company will conduct business only in the
ordinary course consistent with past practice or as otherwise
specifically permitted by this Agreement except for changes to which
Purchaser consents in writing. Company will maintain and preserve
the Properties and will use best efforts:
(a) to preserve the business and organization of Company;
(b) to maintain the general character of the Business and conduct
its business, operations, activities, and practices in a
reasonable manner in accordance with its past practices;
(c) to keep available to Purchaser the services of Company's
officers, employees, agents and independent contractors; and
(d) to preserve for the benefit of Purchaser the goodwill of
Company's suppliers, customers, landlords and others having
business relationships with it.
8.5 Consultation. Company will consult with Purchaser about material
changes in the conduct of Company's business. Company is not
required to take or fail to take any action that, in Company's
reasonable judgment, is likely to result in:
(a) a substantial penalty;
18
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(b) a claim for damages by any third party against Company;
(c) losses to Company;
(d) prejudice to or interference with Company's business and
operations; or
(e) a breach by Company of any of the representations and
warranties made by it in this Agreement.
8.6 Approval of Certain Transactions; Operating Requirements. Company
will not, without Purchaser's prior written approval, take or agree
to take any of the following actions:
(a) amend its certificate of incorporation or bylaws;
(b) merge or consolidate (or agree to merge or consolidate) with
or into any Person;
(c) sell or purchase any shares of capital stock or any other
securities;
(d) declare or pay any dividend or other distribution;
(e) authorize or effect any split-up or recapitalization, or make
any changes in its authorized or issued capital stock;
(f) incur any additional debt, other than trade debt incurred in
the ordinary course of business;
(g) increase the compensation of any officers, directors, or
employees, except for normal periodic bonus accruals and
normal periodic increases in regular compensation;
(h) assume or guarantee the obligations of any party except for
Company;
(i) take any action which would breach any of its representations
and warranties in this Agreement;
(j) sell or otherwise dispose of any of its assets except in the
ordinary course of business;
(k) subject any Properties to an Encumbrance, other than in the
ordinary course of business; or
(l) enter into or terminate any Contract except in the ordinary
course of business and except for those of the type which
would not have to be listed and described in Schedule 6.20 or
any other schedule to this Agreement.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
8.7 Material Changes. Company will give Purchaser written notice of any
material change known to Company in any representations and
warranties made by it in this Agreement.
8.8 Share Restrictions. Company will take no action that would encumber
or restrict the Shares or their sale or transfer, except actions to
enforce rights under this Agreement.
8.9 Confidentiality.
(a) Agreement. Purchaser and Company have entered into and remain
bound by the Confidentiality Agreement attached as Exhibit
8.9. Each party will comply with its obligations under the
Confidentiality Agreement.
(b) Press Release. Company acknowledges that Purchaser will make a
public announcement of the transactions contemplated in this
Agreement immediately after execution of the Agreement. Such
an announcement, and later announcements required by
applicable securities laws, will not be a violation of
Purchaser's confidentiality obligations.
(c) Communication Plans. The parties will develop, and
cooperatively implement, communication plans to disclose the
planned acquisition of Shares by Purchaser and its
consequences and benefits to Company's employees and
customers.
8.10 Investigations. Upon reasonable notice and during regular business
hours, Company will give Purchaser and Purchaser's attorneys,
accountants and other representatives:
(a) access to Company's officers, directors, employees,
independent contractors, counsel, and independent accountants;
(b) access to Company's Properties, Contracts, and Books;
(c) copies of Company documents to the extent Purchaser reasonably
requests; and
(d) all other information ("Information") Purchaser reasonably
requests with respect to the affairs of Company.
Information that Company supplies to Purchaser or its attorneys,
accountants or other representatives is subject to the
Confidentiality Agreement. Company does not assume responsibility
for the accuracy or completeness of the Information except and to
the extent specifically provided in this Agreement. The Information,
and Purchaser's investigation, does not affect Purchaser's right to
rely on the representations and warranties made in this Agreement.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
9. LIMITATIONS ON DISPOSITION. The Purchaser agrees not to make any
disposition of all or any portion of the Common Stock (i) other than
pursuant to this paragraph 9 hereof or Rule 144 (defined below), or (ii)
unless the transferee has agreed in writing for the benefit of the Company
to be bound by this Section 9 and:
(a) There is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is
made in accordance with such Registration Statement; or
(b) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the
proposed disposition, and (ii) the Purchaser shall have
furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not
require registration of such shares under the Act (defined
below). It is agreed that the Company will not require
opinions of counsel for transactions made pursuant to Rule 144
(defined below) or for transfers to affiliates of the
Purchaser.
10. "MARKET STAND-OFF" AGREEMENT. The Purchaser hereby agrees that, during the
period of duration specified by the Company and an underwriter of Common
Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not,
to the extent requested by the Company and such underwriter, directly or
indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such
period except Common Stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common
Stock to be sold on its behalf to the public in an
underwritten offering;
(b) all officers and directors of the Company and all other
persons which hold greater than five percent (5%) of the
Company's equity securities enter into similar agreements or
are similarly bound; and
(c) such market stand-off time period shall not exceed 180 days
from the effective date of the registration statement.
In the event that any officer, director, or holder of greater than
five percent (5%) of the Company's equity securities is released
from the restrictions set forth in this Section 4 prior to the end
of the 180 day maximum market stand-off time period, than all
Stockholders shall similarly be released on a pro rata basis to the
same extent as such officer, director, or holders of greater than
five percent (5%) of the Company's equity securities. In order to
enforce the foregoing covenant,
21
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
the Company may impose stop-transfer instructions with respect to
the Registrable Securities of the Purchaser (and the shares or
securities of every other person subject to the foregoing
restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 10 shall not apply to a registration relating solely to
employee benefit plans on Form S-l or Form S-8 or similar forms
which may be promulgated in the future, or a registration relating
solely to a Commission Rule 145 transaction on Form S-14 or Form
S-15 or similar forms which may be promulgated in the future.
11. RESTRICTED SECURITIES. The Purchaser understands that the shares of Common
Stock it holds are characterized as "restricted securities" under the
federal securities laws inasmuch as they were acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration
under the Securities Act of 1933, as amended (the "Act"), only in certain
limited circumstances. In this connection, each Investor represents that
it is familiar with SEC Rule 144 ("Rule 144"), as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
12. LEGENDS. It is understood that the certificates evidencing the Common
Stock issuable may bear one or all of the following legends:
22
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF SUCH ACT."
(b) Any legend required by any applicable state or federal
securities laws.
The Company further agrees, at the request of the Purchaser, to
remove any of the foregoing legends at such time as they are no
longer applicable.
13. 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:
13.1 Board Approval. Company's board of directors must approve the
transaction contemplated by this Agreement and recommend it to the
Stockholders.
13.2 Consent of Stockholders. The Stockholders, including the Series A
and Series B preferred stockholders, must approve the transaction
contemplated by this Agreement and must waive or surrender any
liquidation preferences, anti-dilution rights, preemptive rights, or
other restrictions that would limit or impair the transaction
contemplated by this Agreement. This approval must include the
approval of the Series A and Series B preferred stockholders to the
conversion of their shares into shares of common stock. With the
prior written approval of Purchaser, Company may amend its
certificate of incorporation and bylaws as necessary to give effect
to such waiver or surrender of Stockholder rights.
13.3 Consents and Approvals. All Governmental consents and approvals
required pursuant to Section 13.1 must have been obtained.
13.4 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.
14. 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:
14.1 Accuracy of Representations and Warranties. The representations and
warranties of Company in Section 6 of this Agreement must be true
and correct, both when made and on the Closing Date.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
14.2 Right of Purchase Agreement. Company and Stockholders holding at
least *** of the capital stock of Company on a full-diluted basis
must have executed and delivered a Right of Purchase Agreement in
substantially the form of Exhibit 10.2 (the "Right of Purchase
Agreement") providing for the right of Purchaser to acquire
Company's remaining shares and Security Rights.
14.3 Performance of Obligations and Delivery of Documents. Company must
have:
(a) performed all covenants, agreements, and obligations required
of it by this Agreement; and
(b) executed and delivered to Purchaser all documents required to
be delivered at or prior to the Closing, including this
Agreement.
14.4 Opinion of Counsel. Purchaser must have received an opinion of
Company's counsel, dated as of the Closing Date, substantially in
conformance with the form of opinion attached as Exhibit 14.4.
14.5 Certificate. Company must deliver to Purchaser a certificate, in the
form attached as Exhibit 14.5, that the conditions stated in this
Section 10 have been fulfilled.
15. CONDITIONS TO COMPANY'S OBLIGATIONS. Company is not obligated to close the
transactions contemplated by this Agreement unless the following
conditions are satisfied (or waived by Company) on or before the Closing
Date:
15.1 Accuracy of Representations and Warranties. The representations and
warranties of Purchaser in Section 7 of this Agreement must be true
and correct, both when made and on the Closing Date.
15.2 Right of Purchase Agreement. Purchase must have executed and
delivered the Right of Purchase Agreement.
15.3 Performance of Obligations and Delivery of Documents. Purchaser must
have:
(a) performed all covenants, agreements, and obligations required
of it by this Agreement; and
(b) executed and delivered to Company all documents required to be
delivered at or prior to the Closing.
15.4 Opinion of Counsel. Company must have received an opinion of
Purchaser's counsel, dated as of the Closing Date, substantially in
conformance with the form of opinion attached as Exhibit 11.3.
15.5 Certificate. Purchaser must deliver to Company a certificate, in the
form attached as Exhibit 11.4, that the conditions stated in this
Section 11 have been fulfilled.
16. OBLIGATIONS AT AND AFTER CLOSING.
24
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
16.1 Company Deliveries. At the Closing, Company will deliver to
Purchaser:
(a) Certificates for the Shares;
(b) an Employment and Non-Competition Agreement in the form of
Exhibit 5.1 executed by Company and each Key Employee; and
(c) all documents required to be delivered to Purchaser under this
Agreement including this Agreement and all other documents
identified in Section 14.
16.2 Purchaser Deliveries. At the Closing, Purchaser will deliver to
Company:
(a) the Closing Payment; and
(b) all other documents required to be delivered to Company under
this Agreement including this Agreement and all other
documents identified in Section 15.
16.3 Board of Directors. From and after the Closing, the board of
directors of Company will have *** members:
(a) ***; and
(b) ***.
Company will take all steps necessary, including amending its
certificate of incorporation and bylaws, as appropriate, to cause
the board of directors to be constituted in such manner. Purchaser
and each Stockholder will agree, in the Right of Purchase Agreement,
to vote their shares for this board of directors in each election of
directors held within *** after the Closing Date.
16.4 Administrative Services. After the Closing, Purchaser will assume
responsibility to support Company's finance and administration
requirements. Company will pay a reasonable fee to support
Purchaser's implementation of Oracle and other administrative
services for Company.
17. TERMINATION.
17.1 Rights to Terminate. A party may terminate this Agreement at any
time before the Closing:
(a) by mutual written consent of Company and Purchaser;
(b) by written notice to the other parties if the Closing has not
occurred on or before October 14, 2002;
(c) by written notice to Company if Company fails to offer
Purchaser its first right of refusal as provided in Section
17.3(a); or
25
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(d) by written notice to the other party if:
(1) a material representation or warranty of the other party
was or has become inaccurate or untrue (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); or
(2) the other party has failed 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).
17.2 Effect of Termination. If this Agreement is terminated, neither
party will have any liability or further obligation except for the
Break-Up Fee established in Section 17.3(b) below, unless the
termination was a result of a party's (a) breach, (b) violation of
its duties, obligations, representations, or warranties, or (c)
fraud, bad faith, or willful misconduct. The Confidentiality
Agreement will survive any termination and govern the parties'
obligations with respect to Information and confidentiality.
17.3 First Right of Refusal and Break-Up Fee.
(a) First Right of Refusal. Until the Closing, Company may engage
in negotiations with, or otherwise market itself or the
Business to, other potential buyers or investors on the
following terms:
(1) If Company receives a firm offer to buy all or
substantially all of Company's assets, or to acquire at
least a majority of the fully-diluted capital stock of
Company, Company must give Purchaser a first right of
refusal to purchase the assets or acquire such stock on
the terms proposed by the offeror.
(2) Upon receipt of written notice from Company specifying
the offeror and the proposed terms, Purchaser will have
15 days in which to elect to exercise it first right of
refusal by providing written notice of such election to
Company. If Purchaser exercises its first right of
refusal, the closing will take place at the time and
place specified in Section 3.
(3) If Purchaser fails to provide notice, Purchaser will
have elected not to exercise its first right of refusal
and Company or the Stockholders may proceed to sell the
assets or capital stock within 90 days after the date
Purchaser received notice of the proposed transaction on
terms no more favorable to the offeror than set forth in
the notice of the offer given to Purchaser.
26
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(b) Break-Up Fee. If this Agreement is terminated by Purchaser
pursuant to Section 17.1(c), then Company will pay to
Purchaser a Break-Up Fee in the amount of $***, and will
reimburse Purchaser's due diligence and other expenses
incurred in connection with the transaction contemplated
by this Agreement up to $***, within two business days of
the termination date.
18. INDEMNIFICATION.
18.1 By Purchaser. Purchaser will indemnify Company from, and will
pay on its behalf, all Loss (whether or not resulting from
third party claims) incurred as a result of any untrue
representation made by Purchaser, any breach of warranty by
Purchaser, or non-fulfillment of any of Purchaser's covenants
or agreements stated in this Agreement.
18.2 By Company. Company will indemnify and hold harmless Purchaser
from, and will pay on its behalf, all Losses incurred as a
result of any untrue representation made by Company, any
breach of warranty made by Company, or non-fulfillment of any
covenant or agreement of Company in this Agreement to be
performed at or prior to Closing.
(a) Deductible. Except as otherwise provided in this
Agreement, Company will have no obligation to indemnify
Purchaser under this Section 18.2 unless the Losses
suffered exceed $*** in the aggregate (and then only to
the extent of the excess).
(b) Liability Limit. The aggregate liability of Company under
this Section 18.2 will not exceed *** of the Purchase
Price except in the case of Losses resulting from
Company's fraud or willful misrepresentation (in which
case the liability will be the amount of Loss resulting
from Company's fraud or willful misrepresentation). The
obligations of Company under this Section 14.2 are subject
to Section 19 below.
18.3 Procedure.
(a) Notice and Assumption of Defense. Promptly after an
indemnified party receives notice of any potential Loss,
the party must give notice in writing to the indemnifying
party. The indemnifying party must assume the defense of
the Loss and the indemnified party will reasonably
cooperate in connection with such defense.
(b) Payment of Defense Costs. If the indemnified party
reasonably determines that separate counsel is necessary
(whether due to the existence of different defenses,
potential conflicts of interest or otherwise), or if the
indemnifying party does not assume the defense, then the
indemnified party may employ separate counsel, and the
indemnifying party will pay such counsel's reasonable fees
and disbursements as incurred.
27
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(c) Settlement. An indemnifying party is not obligated to
reimburse the costs of a settlement unless it has agreed to
the settlement. An indemnifying party may not settle a claim
unless the indemnified party consents, but if an indemnified
party does not consent to a settlement agreed to by the
opposing party and the indemnifying party, then the
indemnifying party's indemnification obligation will not
exceed (1) the amount of the agreed settlement plus (2)
expenses incurred before the settlement could have been
effected.
19. 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 by or on behalf of the parties
as provided in this Section.
19.1 Survival of Certain Representations and Warranties. The
representations and warranties set forth in Section 6 and Section 7
will survive only until six months after the Closing Date except to
the extent that prior to that time one or more claims is submitted
in writing to the indemnified party and identified as a claim for
indemnification pursuant to this Agreement.
19.2 Limit on Claims. A party may maintain a claim or action for
indemnity under Section 14 after the expiration of the
representation or warranty only if the party made the claim in
writing before expiration.
19.3 Exclusive Remedy. The indemnification provided by Company in Section
18.2 is Purchaser's exclusive remedy for breach of any
representation, warranty or covenant by Company, except that nothing
in this Section limits Purchaser's remedies against an officer or
director of Company in respect of fraud, intentional
misrepresentations, or intentional omissions engaged in personally
by such officer or director.
20. NOTICES. Notices under this Agreement must be in writing. Notices are
deemed given:
- when personally delivered;
- when received by facsimile, e-mail, or overnight courier service; or
- 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).
21. CERTAIN COSTS.
21.1 Costs of Proceedings. In any Proceeding arising under or related to
this Agreement the prevailing party is entitled, in addition to
other amounts it
28
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
recovers, to have the other party pay all costs and expenses
(including reasonable attorneys' fees) incurred in connection with
the Proceeding.
21.2 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,
except that expenses are recoverable as part of the damages owed by
a party whose failure to perform its obligations results in the
termination of this Agreement.
21.3 Finders' Fees. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. The Purchaser agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which
the Purchaser or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and
hold harmless the Purchaser from any liability for any commission or
compensation in the natures of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employers, or
representative is responsible.
22. MISCELLANEOUS.
22.1 Integration and Amendment. This Agreement, together with the
Confidentiality 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 each of the
parties.
22.2 Attorney's Fees. If any action in law or in equity (including
arbitration) is instituted to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs, and necessary disbursements in addition to
any other relief to which such party may be entitled.
22.3 Expenses. The Company and the Purchaser shall bear their own
expenses incurred with respect to the negotiation, execution,
delivery and performance of this Agreement and the transactions
contemplated thereby.
22.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
22.5 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.
22.6 Binding Effect. This Agreement is binding upon, and inures to the
benefit of, each party and its successors and assigns.
29
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
22.7 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.
22.8 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.
22.9 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.
22.10 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 the other party.
22.11 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together are one original.
22.12 Governing Law. This Agreement is governed by the internal Laws of
Delaware. Exclusive jurisdiction and venue for any litigation
arising under this Agreement is in the federal and state courts
located in Wilmington, Delaware.
[Signature Page is on the following page]
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
EFFECTIVE DATE. This Agreement is executed and effective as of October __, 2002.
SIMPLEDEVICES, INC., a Delaware corporation
By: ______________________________
Louis S. Hughes, III,
President, CEO and Co-Founder
Address: Bay View Plaza
2121 El Camino Real, 2nd Floor
San Mateo, CA 94403
ROCKFORD CORPORATION, an Arizona corporation
By: ______________________________
Name: W. Gary Suttle
Its: President and CEO
By: ______________________________
Name: ______________________________
Its: Secretary
Address: 546 South Rockford Drive
Tempe, AZ 85281
Phone: (480) 967-3565
Facsimile: (480) 967-8132
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 2
Capitalization Table
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 5.1
Employment and Non-Competition Agreement
EMPLOYMENT AGREEMENT
This Agreement is between SimpleDevices, a Delaware corporation,
("Simple") and *** ("Employee"). Simple and Employee agree as follows:
1. RECITALS.
1.1 Simple's Business. Simple's principal business is the design,
manufacture, and sale of wireless electronic systems for the
delivery of Internet and personal computer content to audio and
other electronic devices and systems. Rockford Corporation, an
Arizona Corporation, has purchased a *** ownership interest in
Simple in order to finance the continued development of Simple's
business.
1.2 Employee Experience. Employee has worked for Simple to develop
Simple's business and was an officer of Simple before Rockford
bought its shares of Simple.
1.3 Agreement for Employment. In connection with Rockford's purchase of
Simple, Rockford recognizes Employee's continued contribution to
Simple's growth and desires to have Simple enter into an employment
agreement with Employee.
1.4 Agreement Purpose. This Agreement states the terms of Simple's
continued employment of Employee.
2. EMPLOYMENT. Simple employs Employee and Employee accepts employment,
subject to the terms and conditions of this Agreement.
3. TITLE AND DUTIES.
3.1 Title and Reporting. Employee will serve as Simple's *** ("***").
Employee will have the responsibilities and duties assigned by, and
will report to the person designated by Simple's Board of Directors.
3.2 Initial Duties. Employee's initial duties are to:
(a) serve in the office designated above, focusing on development
of Simple's business and technology;
(b) participate as a member of Simple's management group with
duties as assigned by Simple's Board of Directors;
(c) participate with other members of the Simple management team,
responsible to Simple's Board of Directors, to:
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(1) direct all aspects of Simple's business activities and
ensure the adequacy and soundness of its financial
structure, operations, employee relations, and short and
long-range growth;
(2) establish Simple's overall objectives, policies, and
plans;
(3) develop new business; and
(4) develop programs to encourage successful future
management.
3.3 No Reduction of Duties; Limitation on Moves. Simple may not change
Employee's duties in a manner that would substantially reduce
Employee's responsibilities for management of Simple's business
unless Employee consents to the change. Simple may not require
Employee to move to a location outside the Silicon Valley area
unless Employee consents.
4. COMPENSATION.
4.1 Base Compensation. Simple will pay Employee a base salary of $***
gross per month. Simple will pay Employee using its regular payroll
practices. Payments are subject to the normal and regular deduction
of Employee's portion of withholding tax, workers' compensation and
unemployment tax, and other lawful deductions in the state where
Employee is located.
4.2 Changes of Compensation. After the first year of the Agreement,
Simple and Employee will meet and adjust Employee's compensation to
take account of changes in the cost of living and of Employee's
duties for and performance at Simple. Simple's Board of Directors
may increase Employee's compensation in excess of the cost of
living, at its discretion.
5. TERM AND TERMINATION.
5.1 Employment Term. The period of Employee's employment pursuant to
this Agreement is for a term commencing on the effective date of
Rockford's purchase of Simple shares and expiring 4 years
thereafter, unless terminated earlier pursuant to Paragraph 5.2
below.
5.2 Termination. Either party may terminate Employee's employment
pursuant to this Agreement and the Employment Term provided for
herein (a) for any reason at any time by giving 30 days' written
notice of termination or (b) for Cause or Good Reason by giving
written notice of termination. Termination will not affect the
obligations of Employee and Simple which survive termination.
(a) For all purposes under this Agreement, "Cause" for termination
means:
(1) Employee's indictment, conviction or plea of guilty to
any act or acts constituting a felony under the laws of
the United States, any
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
state or any foreign jurisdiction,
(2) Employee's failing or refusing, after a 30-day written
notice from Simple and an opportunity for Employee to
cure, to comply in a material respect with Simple's
policies, written or otherwise, or with the material
duties and obligations imposed under this Agreement,
(3) any act by Employee that is unlawful or brings Simple
into disrepute unless Employee believed in good faith
that the act was lawful and not opposed to Simple's best
interests, or
(4) any act by Employee involving theft or dishonesty and
affecting $1,000 or more of Simple's property.
(b) For all purposes under this Agreement, "Good Reason" for
termination means:
(1) relocation of Simple's executive offices more than forty
(40) miles from the Silicon Valley area, without
Employee's concurrence;
(2) any material breach by Simple of any provision of this
Agreement and Simple's failure, after notice to Simple
and Rockford, to cure the breach within 30 days of the
notice;
(3) any reduction in Employee's base salary or any material
reduction in his total compensation or benefit package,
without Employee's concurrence; or
(4) any material reduction in Employee's job duties without
Employee's concurrence.
5.3 Continuation of Base Compensation and Medical Insurance. If
(a) Simple terminates Employee's employment for Cause,
(b) Employee resigns his employment without Good Reason, or
(c) Employee dies or becomes permanently disabled
then Employee will not be entitled to any additional compensation or
other rights or benefits from Simple, and Simple shall be obligated to pay
Employee only that portion of his base salary that he has earned prior to the
termination date. If Employee's employment is terminated for any other reason,
subject to Employee executing and not revoking a general release of claims with
Simple in the form attached as Exhibit A, then Simple will continue (1) to pay
Employee his base compensation under section 4.1 for the longer of (a) the
remaining term of this Agreement or (b) six months and (2) to provide medical
insurance comparable to that
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
provided on the termination date for 6 months after the termination of
Employee's employment.
6. BENEFITS AND POLICIES.
6.1 Benefit Plans. In addition to the compensation described above,
Employee may participate in all fringe benefit plans made available
to Simple employees located at Simple's location. To the extent
permitted by law and the applicable benefit plans, Employee will be
credited with time of service based on continuous periods of
employment for Simple.
6.2 Leave. Employee may take reasonable vacation, holiday, and sick
leave, subject to Simple's reasonable limits and procedures as
applied to all Simple employees. For purposes of computing the
amount of leave available to Employee, Employee will be credited
with time of service based on all prior periods of employment for
Simple. Employee must adjust his vacation and holiday schedule as
necessary to satisfy Simple's reasonable business needs.
6.3 Expenses. Simple will reimburse Employee for reasonable expenses
incurred in connection with Employee's employment, on a basis
consistent with Simple's reimbursement of other employees and
subject to Simple's right to approve all expenses in advance. Simple
may adopt reasonable policies for reimbursement of expenses, may
require receipts or other appropriate evidence of each expense, and
may review the reasonableness of each expense.
6.4 Employee Policies and Procedures. All other terms of Employee's
employment will be governed by Simple's employee policies and
procedures. Simple reserves the right unilaterally to amend the
employee policies and procedures, from time to time, and Employee
will be subject to changes made so long as they are applied to all
Simple employees at Employee's location.
6.5 Stock Options. Employee will participate in Simple's stock option
plan on the same basis as other Simple management employees.
Simple's Board of Directors will determine the amount and terms of
options awarded to Employee. All options are subject to the terms of
the plan.
(a) In the event Simple terminates Employee's employment other
than for Cause or Employee resigns his employment for Good
Reason, 50% of Employee's then unvested options shall vest in
full.
(b) In the event Employee's employment is terminated other than
for Cause within 12 months of a Change in Control, 100% of
Employee's then unvested options shall vest in full.
(c) For all purposes under this Agreement, a "Change in Control"
shall mean:
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(1) a merger or consolidation of Simple, in which the stockholders
of Simple do not control 50% or more of the total voting power of
the surviving entity (other than a mere reincorporation merger); or
(2) the sale, transfer or other disposition of all or substantially
all of Simple's assets in liquidation or dissolution of Simple.
6.6 No Car. Employee acknowledges that Simple policy is not to provide a
company car to any employee.
7. NON-COMPETITION. During:
(a) the term of this Agreement and for one year after this
Agreement terminates or expires; and
(b) any period after the term when Employee is receiving payments
of base compensation (but Employee may elect to terminate
payments of base compensation to terminate this period)
Employee will not engage in, plan for, organize, work for, or
assist, directly or indirectly, any business that develops,
manufactures, or distributes wireless electronic systems for the
delivery of Internet and personal computer content to audio and
other electronic devices and systems.
8. CONFIDENTIAL INFORMATION. During and after the term of Employee's
employment, Employee will keep confidential, and will not reproduce, copy
or disclose to any other person or firm, all trade secrets and other
proprietary or confidential information and data concerning Simple,
Rockford, or their businesses ("Confidential Information"). Employee will
not, during or after the term of this Agreement, use (either alone or with
others), disclose to any person, or encourage anyone else to disclose any
Confidential Information except within the scope of Employee's duties and
responsibilities for Simple and Rockford or with Simple's consent.
9. RETURN OF SIMPLE DOCUMENTS. Upon termination of this Agreement, Employee
will return to Simple all records and documents of or pertaining to Simple
or Rockford (including, but not limited to, customer lists, names, or
addresses). Employee will not make, retain, or give to any other person
any copy or extract of any such record or document. "Record" includes but
is not limited to, information stored on computer.
10. NON SOLICITATION. During the term of Employee's employment and for one
year thereafter, Employee will not solicit, or assist others to solicit,
any persons who were, at any time during the term of Employee's
employment, employed by, customers of, or solicited to become customers of
Simple or Rockford.
11. ACTIONS. Employee acknowledges that it would be difficult to determine
damages, and Simple will not have an adequate remedy at law, if Employee
breaches this Agreement. Accordingly, if Employee
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
breaches this Agreement, Simple 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 Simple in law or
equity.
12. REFORMATION AND SEVERABILITY. If a section of this Agreement is deemed
unreasonable as to time or scope by any court or arbitrator, then such
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, such section is severable from the remainder of
this Agreement, which must be enforced according to its terms.
13. NON-DELEGABILITY OF EMPLOYEE'S RIGHTS. The obligations, rights and
benefits of Employee under this Agreement are personal and may not be
delegated, assigned, or transferred without written consent from Simple.
14. ASSIGNMENT BY SIMPLE. Simple may assign its rights under this Agreement to
another business that (1) is controlled by or affiliated with Simple or
(2) acquires Simple or the assets of Simple used in connection with
Employee's employment. After any such assignment all references in this
Agreement to "Simple" will, where appropriate, be deemed to refer to the
assignee.
15. NOTICES. Notices under this Agreement must be in writing and are effective
upon delivery or three days after mailing, certified or registered mail,
return receipt requested, to the party's addresses stated on the signature
page of this Agreement. A party may change its address by giving the other
party notice of the change.
16. ENTIRE AGREEMENT AND AMENDMENT. This Agreement is the entire agreement of
the parties with respect to Employee's employment and may be amended only
by a written document signed by both parties.
20. GOVERNING LAW. Delaware law, excluding Delaware law relating to conflicts
of laws, will govern this Agreement.
21. 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.
22. ARBITRATION. If the parties cannot resolve a dispute arising out of this
Agreement or out of Employee's employment, they will submit it to binding
arbitration in metropolitan Phoenix, Arizona. The arbitration will be
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 rules for commercial arbitration of the American
Arbitration Association, as amended to the date of the proceedings,
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
will govern selection of arbitrators and all arbitration proceedings. Any
court having jurisdiction may enter judgment upon the award. The
arbitrators must render a decision within 30 days after their appointment
and may award the costs of arbitration as they see fit.
23. EXECUTION AND EFFECTIVE DATE. This Agreement is executed on October 15,
2002 and is effective as of October 1, 2002.
SIMPLEDEVICES, INC., a Delaware corporation
By: _________________________________
Louis S. Hughes, III,
President and CEO
Address: Bay View Plaza
2121 El Camino Real, 2nd Floor
San Mateo, CA 94403
EMPLOYEE
By: _________________________________
Name: ***
Address: ***
8
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
[Exhibit A - Form of Release]
GENERAL RELEASE OF ALL CLAIMS
In consideration of the severance benefit to be paid to me by
SimpleDevices in accordance with the Employment Agreement entered into as of
((Date)), I hereby fully and forever release and discharge SimpleDevices and its
directors, officers, employees, agents, successors, predecessors, subsidiaries,
shareholders, employee benefit plans and assigns (together the "Company"), from
all claims and causes of action arising out of or relating in any way to my
employment with the Company, including the termination of my employment.
1. I understand and agree that this RELEASE is a full and complete
waiver of all claims, known and unknown, including (without limitation) claims
of wrongful discharge, breach of contract, breach of the covenant of good faith
and fair dealing, violation of public policy, defamation, personal injury or
emotional distress and claims under Title VII of the Civil Rights Act of 1964,
as amended, the Fair Labor Standards Act, the Equal Pay Act of 1963, the
Americans with Disabilities Act, the Civil Rights Act of 1866, the Age
Discrimination in Employment Act of 1967, as amended (ADEA), the California Fair
Employment and Housing Act, the Family and Medical Leave Act or any federal or
state law or regulation relating to employment or employment discrimination. I
further understand and agree that this RELEASE is a full and complete waiver of
all claims, including (without limitation) claims under the Employee Retirement
Income Security Act of 1974 (ERISA) related to severance benefits. I further
understand that by this RELEASE I agree not to assist, encourage, institute or
cause to be instituted the filing of any administrative charge or legal
proceeding against the Company relating to employment discrimination.
2. I also hereby agree that nothing contained in this RELEASE shall
constitute or be treated as an admission of liability or wrongdoing by me or the
Company. This RELEASE does not relieve the company of its obligations to comply
with the terms of the Employment Agreement, any stock option agreement or any
employee benefit plan or similar program in which I am a participant or eligible
for benefits.
3. In addition, I hereby expressly waive any and all rights and
benefits conferred upon me by the provisions of Section 1542 of the Civil Code
of the State of California (or any analogous law of any other state), which
states as follows:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which, if known by him, must have materially affected
his settlement with the debtor.
4. I hereby acknowledge that I have read and understand the
foregoing RELEASE and that I sign it voluntarily and without coercion. I further
acknowledge that I was given an opportunity to consider and review this RELEASE
and to consult with an attorney of my own choosing concerning the waivers
contained in this RELEASE and that the waivers are knowing, conscious and with
full appreciation that I am forever foreclosed from pursuing any of the rights
that I waived.
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
5. I understand that I may have up to twenty-one (21) days after
receipt of this letter within which I may review and consider, discuss with an
attorney of my own choosing, and decide to execute or not execute it. I also
understand for a period of seven (7) days after I sign this RELEASE, I may
revoke this RELEASE and that the RELEASE will not become effective until seven
(7) days after I sign it, and only then if I do not revoke it. In order to
revoke this agreement, I must deliver to the Chairman of the Board of the
Company within seven (7) days after I have executed this RELEASE, a letter
stating that I ma revoking it. [Note: remove Section 5 if employee is under 40
years old.]
6. I understand that if I choose to revoke this RELEASE within seven
(7) days after I signed it, I will not receive any severance benefit and the
RELEASE will have no effect. [Note: remove Section 6 if employee is under 40
years old.]
7. Before signing my name to this RELEASE, I state that:
- I have read it,
- I understand it,
- I know that I am giving up important rights,
- I am aware of my right to consult an attorney before
signing it, and
- I have signed it knowingly and voluntarily.
Dated: _____________________________ Signature: _______________________________
2
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 5.2
Invention Agreement
EMPLOYEE AGREEMENT
In exchange for being employed (both past and future) by ROCKFORD
Corporation, its subsidiaries, affiliates, or successors ("ROCKFORD"), I agree
that while working for ROCKFORD:
1. I have and will continue to perform my assigned duties, comply
with all ROCKFORD instructions and regulations, and devote my best
efforts to ROCKFORD's interests. I will not, without ROCKFORD's
prior written consent, engage in any other job or activity
detrimental to ROCKFORD's interests.
2. I have and will continue to promptly disclose and do hereby
assign to ROCKFORD my entire rights in all designs, trademarks,
copyrights, discoveries, formulae, processes, manufacturing
techniques, trade secrets, inventions, improvements, ideas or
copyrightable works:
(a) related in any way to my work at ROCKFORD (whether or not during
normal working hours);
(b) related in any way to ROCKFORD's business or to ROCKFORD's actual or
demonstrably anticipated research or development; or
(c) aided by the use of ROCKFORD equipment, supplies, facilities or
trade secret information.
This disclosure and assignment is and will be made without additional
compensation and solely in consideration of the compensation paid for my
usual work. I am not conveying rights in designs, trademarks, copyrights,
discoveries, formulae, processes, manufacturing techniques, trade secrets,
inventions, improvements, ideas or copyrightable works I made prior to
working for ROCKFORD which are identified in an attached sheet (which
contains no confidential information). I understand that I am not required
to assign any design, trademark, copyright, discovery, formula, process,
manufacturing technique, trade secret, invention, improvement, idea or
copyrightable work where:
(1) no ROCKFORD equipment, supplies, facilities or trade secret
information were used;
(2) the invention was developed entirely on my own time;
(3) the invention does not relate to ROCKFORD's business or to
ROCKFORD's actual or demonstrably anticipated research or
development; and
(4) the invention does not result from my ROCKFORD work.
3. I will during and after my ROCKFORD employment, do whatever is
requested by ROCKFORD, at its expense to sign documents or otherwise
assist in obtaining and enforcing ROCKFORD's rights throughout the
world in the assigned items.
4. I have and will continue to hold in confidence and not use or
disclose without ROCKFORD's written authorization any confidential
information (technical or otherwise) I obtain or create during the
period of my employment. Confidential
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
information includes all information that pertains to any aspect of
ROCKFORD's business and is either:
(a) unknown to actual or potential competitors of ROCKFORD; or
(b) proprietary information of ROCKFORD, its customers or suppliers.
I will hold this information in confidence until it becomes
generally known (other than through breaches of this agreement
or other similar agreements) or until three (3) years from the
date of my termination, whichever is earlier. I will not make
unauthorized copies of such information and will return to
ROCKFORD upon my termination or upon ROCKFORD's request, all
tangible forms of such information including drawings,
computerized data or programs, specifications, documents,
devices, models or any other material.
5. I represent that I have not brought and will not bring or use in
the performance of my duties at ROCKFORD any proprietary or
confidential information (whether or not in writing) of a former
employer without that employer's written authorization.
6. This agreement (a) survives my employment by ROCKFORD, (b) does
not in any way restrict my right or the right of ROCKFORD to
terminate my employment, (c) inures to the benefit of successors and
assigns to ROCKFORD, and (d) is binding upon my heirs and legal
representatives.
7. I certify that to the best of my information and belief, I am not
a party to any other agreement which will interfere with my full
compliance with this Agreement except as specifically identified
below.
8. I certify and acknowledge that I have carefully read all of the
provisions of this Agreement and that I understand and will fully
and faithfully comply with such provisions.
The effective date of this Agreement is the date my employment began at
ROCKFORD.
ROCKFORD EMPLOYEE
By ________________________________________ By _____________________________
Jacque Mott, Director of Human Resources
Printed Name____________________
2
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 8.9
Confidentiality Agreement
MUTUAL NON_DISCLOSURE AGREEMENT
This Agreement is made and entered into by and between Simple Devices
having his principal place of business at Burlingame, CA and Rockford
Corporation having a place of business 600 South Rockford Drive, Tempe, Arizona
85281 ("Rockford").
Rockford designs and manufactures audio products. Simple Devices is
engages in the business of software and services. The parties with to explore
the possibility of a possible business relationship ("the Activity").
Rockford and Simple Devices each possess Confidential Information
pertaining to their respective software, technology and business practices. The
parties for their mutual benefit desire that certain information, including
Confidential Information, be disclosed in order that the parties may work
together to accomplish the Activity. The parties wish to define their rights
with respect to Confidential Information.
Therefore the parties agree as follows:
Definition. Confidential Information shall mean information provided under this
Agreement to further the Activity, which the disclosing party reasonably
believes to be confidential or proprietary. Confidential Information shall be
marked in a fashion to alert a reasonable individual to its proprietary or
confidential status. Confidential Information may be transmitted in electronic,
written, visual, verbal or audio form and the markings shall be applied in a
fashion consistent with generally accepted practices related to the transmission
method used. Confidential Information which is disclosed by video, verbal or
audio means shall be identified as confidential at the time of its disclosure
and summarized and designated as confidential in writing within thirty (30) days
of the disclosure. Confidential Information shall not include information which:
(i) was rightfully in the Recipient's possession or was rightfully known
to the Recipient without disclosure restrictions prior to its
receipt from the Disclosing Party;
(ii) is or becomes public knowledge by acts other than those of the
Recipient;
(iii) is developed by the Recipient independent of the Confidential
Information received under this Agreement;
(iv) is rightfully received by the Recipient, from a third party, without
a duty of confidentiality;
(v) is disclosed under operation of law, provided the Disclosing Party
has been
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
notified of the requirement prior to disclosure; or
(vi) is disclosed by the Recipient with the Disclosing Party's prior
written approval
Confidential Information shall not be deemed to be in the public domain
merely because any part of such information is embodied in general disclosures
by the party owning the Confidential Information or because individual features,
components or combinations are now or become known to the public.
Use of Confidential Information. The parties shall take reasonable precautions
to limit the disclosure of Confidential Information only to employees who are
necessary to accomplish the Activity. The Recipient of Confidential Information
shall not copy Confidential Information, in whole or in part, without the prior
written consent of the Disclosing Party and shall not divulge, in whole or in
part, such Confidential Information to any third party without the prior written
consent of the Disclosing Party. Neither party shall disclose to any third party
this Agreement, any provision of this Agreement or the substance of this
Agreement, without the prior written consent of the other party.
Limitation on Use. The parties shall have the right to utilize the Confidential
Information only for the purposes of the Activity. Neither party shall make any
other use, in whole or in part, of any Confidential Information without the
prior written consent of the other party.
Term and Termination. This Agreement shall terminate with respect to further
disclosures upon thirty (30) days written notice of termination received by one
party from the other party. The rights and obligations with respect to keeping
the Confidential Information confidential, however, shall survive the
termination of this Agreement. The originals, and all copies, of Confidential
Information shall be returned to the Disclosing Party upon: 1) termination of
this Agreement, 2) within thirty (30) days following the Receiving Party's
written notice to the Disclosing Party that it no longer requires the materials;
or 3) upon written request by the Disclosing Party.
Disclaimer. This Agreement sets forth the entire agreement and understanding
between the parties and supersedes all prior oral and written understandings,
representations and discussions between them concerning this subject matter.
This Agreement may be amended only by a written agreement executed by Rockford
and Simple Devices.
No Rights Granted. No rights, obligations, representations or terms other than
those expressly recited in this Agreement are to be implied from this Agreement.
In particular, without limitation, no license is hereby granted directly or
indirectly under any patent, trademark, trade secret or copyright now held by,
or which is or may be licensable by Rockford or Simple Devices. Nothing in this
Agreement shall abrogate or affect any protection of the Confidential
Information provided under the patent, trademark, trade secret or copyright
statutes or under common law.
No Obligation. The parties acknowledge that no obligation exists under this
Agreement to come to the final agreement concerning any matter, including
without limitation the Activity described in this Agreement. Nothing contained
herein shall give rise to any obligation to provide any specific products or
systems that implement the applications or specifications to be discussed.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Either party shall have the right to refuse to accept any information under this
Agreement and nothing in this Agreement shall obligate either party to disclose
to the other party any particular information. Neither party shall be obligated
to compensate the other party for exchanging any information under this
Agreement and the parties agree that no warranties of any kind are given with
respect to the Confidential Information disclosed under this Agreement.
Remedies. The parties to this Agreement acknowledge that the restrictions
contained in this Agreement are a reasonable and necessary protection of the
legitimate interests of both parties and that any violation of them could cause
substantial injury to the parties. The parties further acknowledge that an
action for damages would not be expected to provide full and adequate
compensation to the Disclosing Party in the event of violation of such
restrictions by the Recipient. Therefore, in the event of any violation of such
restrictions, the Disclosing Party shall be entitled, in addition to any other
remedy available under law, to immediate preliminary injunctive relief
prohibiting or stopping any disclosure.
Each of the parties to this Agreement have caused this Agreement to be signed on
its behalf by its duly authorized representative and shall be effective as of
the date of the last signature to this Agreement.
Rockford Corporation Simple Devices
____________________________ ____________________________
Rex Whitehead, Lou Hughes
Director of Product Planning CEO
3
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 10.2
Option Agreement
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is among Simple Devices, Inc., a
Delaware corporation ("Corporation"), the shareholders of Corporation who
execute a Shareholder Signature Page to this Agreement ("Shareholders"), and
Rockford Corporation, an Arizona corporation ("Rockford").
1. BACKGROUND.
1.1 Stock Acquisition. Pursuant to a Stock Purchase Agreement dated as
of October 16, 2002 (the "Purchase Agreement"), Rockford is
acquiring *** shares of common stock of Corporation, representing
*** of the capital stock of Corporation on a fully-diluted basis.
Capitalized terms used in this Agreement but not defined will have
the meanings given such terms in the Purchase Agreement.
1.2 Option to Acquire Shares. A condition to the closing of the
transactions contemplated by the Purchase Agreement is that Rockford
must be granted the right and option to acquire **** of capital
stock and Security Rights of Corporation held by the other
shareholders of Corporation.
1.3 Purpose. The purpose of this Agreement is to state the terms and
conditions of Rockford's right to acquire the shares of capital
stock and Security Rights of Corporation held by Shareholders.
2. GRANT OF OPTION. Each Shareholder grants to Rockford the right and option
(the "Option") to purchase ****, of the shares of capital stock and
Security Rights of Corporation held by such Shareholder (the "Shares") at
the purchase price and on the terms and conditions set forth in this
Agreement.
3. TIME OF EXERCISE. The Option will be exercisable at any time beginning on
[the 2nd anniversary of the Closing Date] and ending at 5:00 p.m. MST on
[the 4th anniversary of the Closing Date]. However, if Corporation fails
to meet the quarterly cash flow requirements set forth on the attached
Exhibit A, Rockford may exercise the Option at any time beginning on the
30th day after the end of the quarter in which Corporation fails to meet
the cash flow requirements and ending at 5:00 p.m. MST on [the fourth
anniversary of the Closing Date]. In either case, the period during which
Rockford may exercise the Option is the "Option Period." For purposes of
determining whether Corporation has met the quarterly cash flow targets,
amounts held by Rockford as part of the Reserve but not yet the subject of
a Loss will be included as part of Corporation's cash.
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
4. METHOD OF EXERCISE. Rockford may exercise the Option by delivering written
notice to Shareholders' Representative (as defined in Section 7.1) at any
time during the Option Period stating Rockford's intention to exercise the
Option and acquire the Shares.
5. PURCHASE PRICE.
5.1 Fairness Opinion. The purchase price for the Shares will be the fair
market value of the Shares as determined by a mutually acceptable
investment banking firm ("Investment Banker") selected by Rockford
and Shareholders' Representative in good faith. Investment Banker
must deliver its written opinion of the fair market value of the
Shares to Rockford and Shareholders' Representative within 30 days
after the appointment of Investment Banker. The fair market value of
the Shares may include an appropriate discount for lack of
marketability of the Shares, but may not include any discount for
minority interest or lack of control.
5.2 Security Rights. All unvested Security Rights held by Shareholders
will automatically vest in full in connection with the exercise of
the Option. The purchase price for the Shares represented by any
Security Rights will be reduced by the exercise or strike price for
the Shares associated with the Security Rights. If the fair market
value of the Shares as determined by Investment Banker is less than
the exercise or strike price, the Security Rights will be canceled
and surrendered and Shareholder will not be entitled to any payment
for such Security Rights.
5.3 Payment. The purchase price for the Shares must be paid in cash (or,
if mutually agreed by Rockford and Shareholders' Representative,
shares of Rockford common stock) within 30 days after Investment
Banker issues its opinion as to the fair market value of the Shares.
At the closing, Shareholder must deliver to Rockford certificates
representing the Shares, duly endorsed for transfer to Rockford, or
an executed stock assignment separate from certificate.
6. THIRD PARTY OFFERS.
6.1 Receipt of Offer. At any time prior to the expiration of the Option
Period, if Corporation receives an offer from a third party who is
interested in purchasing Corporation or substantially all of its
assets, then Corporation's board of directors will consider the
offer in accordance with its fiduciary obligations and will decide
whether to recommend the offer to the shareholders of Corporation,
including Rockford.
6.2 Shareholder Election. If the board of directors recommends the third
party offer to the shareholders of Corporation but Rockford does not
elect to accept the third party offer, and if shareholders of
Corporation (other than Rockford) holding at least *** of the shares
of capital stock held by such shareholders on a fully-diluted basis
elect to accept the third party offer, then Rockford and
Shareholders' Representative must select an Investment Banker to
provide an opinion with respect to the fairness of the third party
offer.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
(a) Fair Offer. If the fairness opinion finds that the third party
offer is fair to all of Corporation's shareholders, then
Rockford must within 30 days of delivery of the opinion either
(1) purchase the Shares of Shareholders on the terms of the
third party offer or (2) agree to participate in the sale of
Corporation or its assets on the terms of the third party
offer.
(b) Unfair Offer. If the fairness opinion finds that the third
party offer is not fair to all of Corporation's shareholders,
then Rockford is not required to participate in the
transaction and the Shareholders will be free to sell their
Shares to the third party, but subject in any event to
Rockford's continuing right to exercise the Option in
accordance with this Agreement.
7. SHAREHOLDERS' REPRESENTATIVE.
7.1 Appointment. Shareholders agree to appoint Lou Hughes to act as
Shareholders' representative ("Shareholders' Representative") for
the purpose of:
(a) representing Shareholders in any proceedings relating to this
Agreement, including the selection of Investment Banker; and
(b) performing any other actions specifically delegated to
Shareholders' Representative under the terms of this
Agreement.
7.2 Removal. Shareholders may remove Shareholders' Representative only
by the vote of Shareholders holding more than 50% of the shares of
capital stock held by Shareholders on a fully-diluted basis, but
such vote is not effective unless Shareholders also vote to appoint
a new Shareholders' Representative. If Shareholders' Representative
resigns or is no longer able to serve, Shareholders must vote to
appoint a new Shareholders' Representative within 30 days after the
resignation or notice of inability to serve. A vote to appoint a new
Shareholders' Representative is effective when (a) Shareholders
holding more than 50% of the shares of capital stock held by
Shareholders on a fully-diluted basis vote to elect a new
Shareholders' Representative and (b) the new Shareholders'
Representative gives notice to Rockford and the prior Shareholders'
Representative of such vote.
7.3 Reliance. Rockford is entitled to rely upon notices given by
Shareholders' Representative. Rockford is not liable for actions it
takes or does not take in reliance upon actions Shareholders'
Representative takes or does not take (including Shareholders'
Representative's notices to Rockford). Until Rockford receives
notice of appointment of a new Shareholders' Representative,
Rockford may rely upon actions taken by the prior Shareholders'
Representative.
8. BOARD OF DIRECTORS. For 10 years from the Closing Date under the Purchase
Agreement, each Shareholder and Rockford agree to vote all shares of
Corporation in any election for directors for the candidates required
under Section 12.3 of the Purchase Agreement.
9. LEGEND. Each certificate representing Shares subject to this Agreement
will be marked with the following legend:
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
The shares of common stock evidenced by this certificate are
subject to a Stock Option Agreement dated _________, 2002 among
Simple Devices, Inc. ("Corporation"), the shareholder of Corporation
to which this certificate was originally issued, and Rockford
Corporation. Corporation will furnish a copy of the Stock Option
Agreement to any person upon request.
Upon notice from Corporation, Shareholders will deliver their Share
certificates to Corporation so that the legend may be imprinted on the
certificates.
10. MISCELLANEOUS.
10.1 Integration and Amendment. This Agreement constitutes the entire
agreement of the parties, and supersedes all prior agreements or
understandings among the parties with respect to the subject matter
of this Agreement. This Agreement may be amended only in a written
agreement signed by all of the parties.
10.2 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.
10.3 Binding Effect. This Agreement is binding upon, and inures to the
benefit of, each party and its successors and assigns.
10.4 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.
10.5 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.
10.6 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.
10.7 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 the other party.
10.8 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together are one original.
10.9 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.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
11. EXECUTION DATE. This Agreement is executed and effective as of
______________, 2002.
Simple Devices, Inc., a Delaware corporation
By:_________________________________________
President
By:_________________________________________
Secretary
Rockford Corporation, an Arizona corporation
By:_________________________________________
President
By:_________________________________________
Secretary
The undersigned consents to his appointment as Shareholders' Representative
under this Agreement, agrees to serve in such capacity at and after the Closing
(subject to removal or resignation as permitted under this Agreement), and
agrees to be bound by the terms of this Agreement.
____________________________________________
Lou Hughes
Address:____________________________________
____________________________________
____________________________________
Telephone: (___)___________________________
Facsimile: (___)__________________________
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
SHAREHOLDER SIGNATURE PAGE
The Shareholder identified below accepts and agrees to be bound by the
terms and conditions of this Agreement. Shareholder authorizes Corporation and
Rockford to attach this Shareholder Signature Page to the Agreement.
This Shareholder Signature Page will not be effective until shareholders
of Corporation holding at least *** of the capital stock of Corporation held by
such shareholders (other than Rockford Corporation) on a fully-diluted basis
consent to be bound by this Agreement.
____________________________________________
Shareholder's Name
____________________________________________
Individual's Signature
OR
By:_________________________________________
Its:________________________________________
OR
____________________________________________
Name of Attorney
____________________________________________
Attorney in Fact's Signature
(Power of Attorney Attached)
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 10.4
Opinion of Company's Counsel
October 16, 2002 Brobeck, Phleger & Harrison LLP
2000 University Avenue
East Palo Alto, California 94303-0913
phone 650.331.8000
fax 650.331.8100
To the Purchaser as set forth in the
SimpleDevices, Inc. Stock Purchase Agreement
dated October 16, 2002
Ladies and Gentlemen:
We have acted as counsel for SimpleDevices, Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale of shares of its Common
Stock pursuant to the SimpleDevices, Inc. Stock Purchase Agreement dated October
16, 2002 (the "Stock Purchase Agreement") between the Company and you. This
opinion letter is being rendered to you pursuant to Section 10.4 of the Stock
Purchase Agreement in connection with the Closing of the sale of the Common
Stock. Capitalized terms not otherwise defined in this opinion letter have the
meanings given them in the Stock Purchase Agreement.
In connection with the opinions expressed herein, we have made such examination
of matters of law and of fact as we considered appropriate or advisable for
purposes hereof. As to matters of fact material to the opinions expressed
herein, we have relied upon the representations and warranties as to factual
matters contained in and made by the Company pursuant to the Stock Purchase
Agreement and upon certificates and statements of government officials and of
officers of the Company. With respect to our opinion in paragraph 3 regarding
issued and outstanding capital stock of the Company, such opinion is based
solely on our review of a certificate of the Company and of the Company's stock
records and resolutions of the Company's Board of Directors relating to such
issuances. We have also examined originals or copies of such corporate documents
or records of the Company as we have considered appropriate for the opinions
expressed herein. We have assumed for the purposes of this opinion letter the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity of the documents submitted to us as originals, the conformity to
the original documents of all documents submitted to us as certified, facsimile
or photostatic copies, and the authenticity of the originals of such copies.
In rendering this opinion letter we have also assumed: (A) that the Stock
Purchase Agreement and the Schedules attached thereto (the "Schedule"), the
Right of Purchase Agreement, the Second Amended and Restated Voting Agreement,
and the Written Consent and Termination Agreement (collectively, the
"Transaction Agreements"), have been duly and validly executed and delivered by
you or on your behalf, that you have the power to enter into and perform all
your obligations thereunder and have taken any and all necessary corporate,
partnership or other relevant action to authorize the Transaction Agreements,
and that the Transaction Agreements constitute valid, legal, binding and
enforceable obligations upon you; (B) that the representations
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
and warranties made in the Stock Purchase Agreement by you are true and correct;
(C) that any wire transfers, drafts or checks tendered by you will be honored;
and (D) that you have filed any required state franchise, income or similar tax
returns and have paid any required state franchise, income or similar taxes.
As used in this opinion letter, the expression "we are not aware" or the phrase
"to our knowledge," or any similar expression or phrase with respect to our
knowledge of matters of fact, means as to matters of fact that, based on the
actual knowledge of individual attorneys within the firm principally responsible
for handling current matters for the Company (and not including any constructive
or imputed notice of any information), and after an examination of documents
referred to herein and after inquiries of certain officers of the Company, no
facts have been disclosed to us that have caused us to conclude that the
opinions expressed are factually incorrect; but beyond that we have made no
factual investigation for the purposes of rendering this opinion letter.
Specifically, but without limitation, we have not searched the dockets of any
courts and we have made no inquiries of securities holders or employees of the
Company, other than such officers. No inference as to our knowledge of the
existence or absence of any fact should be drawn from our representation of the
Company or the rendering of the opinions set forth below.
This opinion letter relates solely to the laws of the State of California, the
General Corporation Law of the State of Delaware and the federal law of the
United States, and we express no opinion with respect to the effect or
application of any other laws. Special rulings of authorities administering such
laws or opinions of other counsel have not been sought or obtained. We have not
examined the question of what law would govern the interpretation or enforcement
of the Transaction Agreements, and our opinion with regard to the validity,
binding nature and enforceability of the Transaction Agreements is based upon
the assumption that the internal laws of the State of California would govern
the provisions thereof.
Based upon our examination of and reliance upon the foregoing and subject to the
limitations, exceptions, qualifications and assumptions set forth below and
except as set forth in the Stock Purchase Agreement or the Schedule thereto, we
are of the opinion that as of the date hereof:
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and the Company has the
requisite corporate power and authority to own its properties and to conduct its
business as, to our knowledge, it is presently conducted The Company is
qualified to do business as a foreign corporation in the state of California.
The Company has the requisite corporate power and authority to execute,
deliver and perform the Transaction Agreements. Each of the Transaction
Agreements has been duly and validly authorized by the Company, duly executed
and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable by you against the Company in accordance
with its terms.
The capitalization of the Company is as follows:
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Preferred Stock. The Company has Eighteen Million Two Hundred Fifty
Thousand (18,250,000) authorized shares of Preferred Stock, par value $0.001 per
share (the "Preferred Stock"), of which (i) *** shares have been designated
Series A Preferred Stock, of which, to our knowledge, all are currently issued
and outstanding, and (ii) *** shares have been designated Series B Preferred
Stock of which, to our knowledge, *** shares are currently issued and
outstanding. Such *** shares of outstanding Series A Preferred Stock have been
duly authorized and validly issued, are nonassessable and, to our knowledge, are
fully paid. Such *** shares of outstanding Series B Preferred Stock have been
duly authorized and validly issued, are nonassessable and, to our knowledge, are
fully paid. Pursuant to the Restated Certificate all issued and outstanding
shares of Series A Preferred Stock and Series B Preferred Stock will be
converted to Common Stock pursuant to the automatic and mandatory conversion
provisions contained in the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate").The respective changes to the rights,
privileges, restrictions and preferences of the Series A and Series B Preferred
Stock are as stated in the Company's Restated Certificate as filed with the
Secretary of State of Delaware.
Common Stock. The Company has One Hundred Twenty Five Million
(125,000,000) authorized shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of which *** shares are currently issued and outstanding and of
which up to *** of which may be purchased pursuant to the Stock Purchase
Agreement. Such *** shares of outstanding Common Stock have been duly authorized
and validly issued, are nonassessable, and, to our knowledge, are fully paid.
The Common Stock issuable upon conversion of the Series A Preferred
Stock and the Series B Preferred Stock have been duly and validly reserved for
issuance and, when and if issued upon such conversion in accordance with the
Company's Restated Certificate, will be validly issued, fully paid and
nonassessable. The Common Stock to be purchased at the Closing has been duly and
validly reserved for issuance and, when and if issued upon such purchase in
accordance with the Company's Restated Certificate and the Transaction
Agreements, will be validly issued, fully paid and nonassessable.
There are no statutory or charter preemptive rights nor, to our
knowledge, are there any options, warrants, conversion privileges or other
rights (or agreements for any such rights) outstanding to purchase or otherwise
obtain from the Company any of the Company's equity securities, except for (i)
the conversion privileges of the Series A Preferred Stock, (ii) the conversion
privileges of the Series B Preferred Stock, (iii) warrants to purchase ***
shares of Preferred Stock, (iv) outstanding options to purchase *** shares of
Common Stock pursuant to the Company's 2000 Stock Option/Stock Issuance Plan.
Other than in connection with any securities laws (with respect to which
we direct you to paragraph 6 below), the Company's execution and delivery of,
and its performance and compliance as of the date hereof with the terms of, the
Transaction Agreements do not violate any provision of any federal, Delaware
corporate or California law, rule or regulation applicable to the Company or any
provision of the Company's Restated Certificate or Bylaws and do not conflict
with or constitute a default under the provisions of any judgment, writ, decree
or order
-3-
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
specifically identified in the Schedule or the material provisions of any of the
material agreements specifically identified in the Schedule.
Other than in connection with any securities laws (with respect to which
we direct you to paragraph 6 below), all consents, approvals, permits, orders or
authorizations of, and all qualifications by and registrations with, any federal
or Delaware corporate or California state governmental authority on the part of
the Company required in connection with the execution and delivery of the Stock
Purchase Agreement and consummation at the Closing of the transactions
contemplated by the Stock Purchase Agreement have been obtained, and are
effective, and we are not aware of any proceedings, or written threat of any
proceedings, that question the validity thereof.
On the assumption that the representations of the Purchaser in the Stock
Purchase Agreement are correct, the offer and sale of the Common Stock to the
Purchaser pursuant to the terms of the Stock Purchase Agreement are exempt from
the registration requirement of Section 5 of the Securities Act of 1933, as
amended, and from the qualification requirement of the California Corporate
Securities Law of 1968, as amended, and from the registration requirements of
the applicable securities laws of the state of California, and, under such
securities laws as they presently exist, the issuance of Common Stock to you
upon conversion of the Preferred Stock would also be exempt from such
registration and qualification requirements.
We are not aware that there is any action, proceeding or governmental
investigation pending, or overtly threatened in writing, against the Company
which questions the validity of the Transaction Agreements or the right of the
Company to enter into the Transaction Agreements.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
The legality, validity, binding nature and enforceability of the Company's
obligations under the Transaction Agreements may be subject to or limited by (1)
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
transfer and other similar laws affecting the rights of creditors generally; (2)
general principles of equity (whether relief is sought in a proceeding at law or
in equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the discretion of any court of
competent jurisdiction in awarding specific performance or injunctive relief and
other equitable remedies; and (3) without limiting the generality of the
foregoing, (a) principles requiring the consideration of the impracticability or
impossibility of performance of the Company's obligations at the time of the
attempted enforcement of such obligations, and (b) the effect of California
court decisions and statutes which indicate that provisions of the Transaction
Agreements which permit any of you to take action or make determinations may be
subject to a requirement that such action be taken or such determinations be
made on a reasonable basis in good faith or that it be shown that such action is
reasonably necessary for your protection.
We express no opinion as to the Company's or this transaction's compliance
or noncompliance with applicable federal or state antifraud or antitrust
statutes, laws, rules and
-4-
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
regulations or Section 721 (as amended by Section 5021 of the Omnibus Trade and
Competitiveness Act of 1988: the so-called "Exon-Florio" provision) of the
Defense Production Act of 1950 and the regulations thereunder.
We express no opinion concerning the past, present or future fair market
value of any securities.
We express no opinion as to the enforceability under certain circumstances
of any provisions indemnifying a party against, or requiring contributions
toward, that party's liability for its own wrongful or negligent acts, or where
indemnification or contribution is contrary to public policy or prohibited by
law. In this regard, we advise you that in the opinion of the Securities and
Exchange Commission, provisions regarding indemnification of directors, officers
and controlling persons of an issuer against liabilities arising under the
Securities Act of 1933, as amended, are against public policy and are therefore
unenforceable.
We express no opinion as to the enforceability under certain circumstances
of any provisions prohibiting waivers of any terms of the Transaction Agreements
other than in writing, or prohibiting oral modifications thereof or modification
by course of dealing. In addition, our opinions are subject to the effect of
judicial decisions which may permit the introduction of extrinsic evidence to
interpret the terms of written contracts such as the Transaction Agreements.
We express no opinion as to the effect of Section 1670.5 of the California
Civil Code or any other California law, federal law or equitable principle which
provides that a court may refuse to enforce, or may limit the application of, a
contract or any clause thereof which the court finds to have been unconscionable
at the time it was made or contrary to public policy.
We express no opinion as to the effect of Sections 1203 and 1102(3) of the
California Uniform Commercial Code or any other California law, federal law or
equitable principle, providing for an obligation of good faith in the
performance or enforcement of contracts and prohibiting disclaimer of such
obligation.
Our opinions in paragraphs 4 and 5 are limited to laws and regulations
normally applicable to transactions of the type contemplated in the Transaction
Agreements and do not extend to licenses, permits and approvals necessary for
the conduct of the Company's business. In addition and without limiting the
previous sentence, we express no opinion herein with respect to the effect of
any land use, safety, hazardous material, environmental or similar law, or any
local or regional law. Further, we express no opinion as to the effect of or
compliance with any state or federal laws or regulations applicable to the
transactions contemplated by the Transaction Agreements because of the nature of
the business of any party thereto other than the Company. Also, we express no
opinion with respect to any patent, copyright, trademark or other intellectual
property matter, or as to the statutes, regulations, treaties or common laws of
any nation, state or jurisdiction with regard thereto.
In connection with our opinion in paragraph 4 relating to the agreements
listed on the Schedule, we have not reviewed, and express no opinion on, (i)
financial covenants or similar provisions requiring financial calculations or
determinations to ascertain whether there is any
-5-
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
such conflict or (ii) provisions relating to the occurrence of a "material
adverse event" or words of similar import. In addition, our opinion relating to
the agreements listed on the Schedule is subject to the effect of judicial
decisions which may permit the introduction of extrinsic evidence to interpret
the terms of written contracts or allow non-written modifications of written
contracts. Moreover, to the extent that any of the agreements listed on the
Schedule are governed by the laws of any jurisdiction other than the State of
California our opinion relating to those agreements is based solely upon the
plain meaning of their language without regard to interpretation or construction
that might be indicated by the laws governing those agreements.
We express no opinion as to your compliance with any Federal or state law
relating to your legal or regulatory status or the nature of your business.
We express no opinion as to the effect of subsequent issuances of
securities of the Company, to the extent that further issuances which may be
integrated with the Closing may include purchasers that do not meet the
definition of "accredited investors" under Rule 501 of Regulation D and
equivalent definitions under state securities or "blue sky" laws.
We assume that the approval by the Company's Board of Directors of the
Transaction Agreements and the transactions contemplated thereby did not violate
the business judgment rule and we further assume that the Transaction Agreements
and the transactions contemplated thereby were entirely fair as to the Company
as of the time the Company's Board of Directors approved them, and in each
instance, to our knowledge we are not aware of any facts that would contradict
our assumption.
Our opinions with regard to each respective Transaction Agreement do not
extend to other agreements or instruments (or forms of agreements or
instruments) which may be attached thereto as exhibits.
We express no opinion as to:
The effect on the liquidation provisions of the Restated Certificate
of applicable state law, federal law or equitable principles restricting in
certain circumstances distributions by a corporation to its shareholders,
relating to dissenters' rights or relating to involuntary dissolution;
The enforceability under certain circumstances of provisions
expressly or by implication waiving broadly or vaguely stated rights, unknown
future rights, or defenses to obligations or rights granted by law, when such
waivers are against public policy or prohibited by law;
The enforceability under certain circumstances of provisions to the
effect that rights or remedies may be exercised without notice, or that failure
to exercise or delay in exercising rights or remedies will not operate as a
waiver of any such right or remedy;
The enforceability under certain circumstances of provisions to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be
-6-
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
exercised in addition to or with any other right or remedy, or that election of
a particular remedy or remedies does not preclude recourse to one or more
remedies;
Any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections to the laying of venue or to forum on the basis of forum
non conveniens, in connection with any litigation arising out of or pertaining
to the Transaction Agreements;
Any provision or section of any of the Transaction Agreements to the
extent that such provisions or sections purport to exclude conflict of law
principles;
The effect of any law, federal law or equitable principles which
limit the amount of attorneys' fees that can be recovered under certain
circumstances;
The effect of Section 1717 of the California Civil Code, which
provides that, among other things, where a contract permits one party to the
contract to recover attorneys' fees, the prevailing party in any action to
enforce any provision of the contract shall be entitled to recover its
reasonable attorneys' fees; and
This opinion letter is rendered as of the date first written above solely for
your benefit in connection with the Stock Purchase Agreement and may not be
delivered to, quoted or relied upon by any person other than you, or for any
other purpose, without our prior written consent. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company. We
assume no obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.
We advise you that our firm, and some of our attorneys are among the investors
in the Company.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
-7-
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 10.5
Company's Certificate
SIMPLEDEVICES, INC.
COMPLIANCE CERTIFICATE
The undersigned, Louis S. Hughes, III, does hereby certify that he has
been duly elected and qualified as, and at this date is, President and Chief
Executive Officer of SimpleDevices, Inc. (the "Company"), a Delaware
corporation, and that:
1. The representations and warranties contained in Section 6 of the
Company's Stock Purchase Agreement, dated as of the date hereof (the
"Stock Purchase Agreement") by and among the Company and the
investors listed on SCHEDULE A attached thereto, are true and
correct in all material respects as of the date hereof, except as
provided in the Schedule of Exceptions attached thereto.
2. The Company has performed and complied with all agreements,
obligations and conditions contained in the Stock Purchase Agreement
that are required to be performed by or complied with it on or
before the date hereof.
3. No consents, approvals, filings, qualifications and/or registrations
were required to be obtained or effected under any applicable state
of provincial securities laws prior to the Closing.
4. The representations and warranties of the Company in Section 5 of
the Stock Purchase Agreement are true and correct in all respects on
and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the
date of the Agreement.
5. The Company has performed and complied with all agreements,
obligations, and conditions contained in the Agreement that are
required to be performed or complied with by it on or before the
date hereof. The undersigned confirms that in the Closing the
Company is receiving aggregate proceeds of $*** in the amounts and
from the Purchasers as listed on Exhibit A hereto.
6. There has been no adverse change in the business, affairs,
operations, properties, assets or condition of the Company from that
described in the Agreement.
The foregoing shall be deemed to be representations of the Company and not
of the undersigned personally.
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
IN WITNESS WHEREOF, the undersigned has executed this Compliance
Certificate this 16th day of October, 2002.
_____________________________________
Louis S. Hughes, III
President and Chief Executive Officer
2
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
Exhibit 11.4
Opinion of Purchaser's Counsel
October 16, 2002
Simple Devices, Inc.
2121 El Camino Real
San Mateo, CA 94403
Re: Stock Purchase Transaction (the "Transaction") between Rockford
Corporation, an Arizona corporation ("Buyer"), and Simple Devices,
Inc., a Delaware corporation ("Company")
Ladies and Gentlemen:
We have acted as counsel to Buyer in connection with the Transaction
evidenced by the Documents (as defined below). You have requested our opinion
about certain matters pursuant to Section 11.4 of the Agreement (as defined
below). Capitalized terms used and not otherwise defined in this letter shall
have the meanings given to them in the Documents.
For purposes of this opinion, we have examined such questions of law and
fact as we have deemed necessary or appropriate, and have examined the following
documents (collectively, the "Documents"):
a. Stock Purchase Agreement, dated as of October 16, 2002, between Seller
and Buyer (the "Agreement"); and
b. Form of Employment and Non-Competition Agreement, to be entered into by
Buyer the Key Employees (as defined in the Agreement).
c. Invention Agreement to be entered into by Buyer and the Other Employees
(as defined in the Agreement).
We have further examined:
CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
i. The Articles of Incorporation and bylaws of Buyer, as amended to date;
and
ii. A Certificate of Good Standing with respect to Buyer, dated as of
October 16, 2002.
Based on the foregoing, and subject to the qualifications set forth below,
it is our opinion that:
1. Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Arizona.
2. Buyer has the requisite corporate power and corporate authority (i) to
own and operate its properties and assets; (ii) to carry out its business as
such business is currently being conducted; and (iii) to carry out the terms and
conditions applicable to it under the Documents. The execution, delivery, and
performance of the Documents by Buyer have been duly authorized by all requisite
corporate action on the part of Buyer and the applicable Documents have been
duly executed and delivered by Buyer.
3. The execution and delivery of the Documents and consummation of the
Transaction by the Buyer will not conflict with or result in a violation of
Buyer's Articles of Incorporation or bylaws.
4. The Documents constitute legal, valid, and binding obligations of
Buyer, enforceable in accordance with their terms.
In rendering the foregoing opinions we have assumed:
(i) The genuineness of the signatures not witnessed, the authenticity of
documents submitted as originals, and the conformity to originals of documents
submitted as copies;
(ii) The legal capacity of all natural persons executing the Documents;
(iii) That the Documents accurately describe and contain the mutual
understanding of the parties, and that there are no oral or written statements
or agreements that modify, amend, or vary, or purport to modify, amend, or vary,
any of the terns of the Documents; and
(iv) That Buyer owns all of the property, assets, and rights purported to
be owned by it.
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
The opinions set forth above are subject to the following qualifications
and limitations:
a. The enforceability of the Documents may be subject to or limited by
bankruptcy, insolvency, reorganization, arrangement, moratorium, or other
similar laws relating to or affecting the rights of creditors generally;
b. The enforceability of the Documents is subject to general principles of
equity; and
c. The enforceability of the Documents is further subject to the
qualification that certain waivers, procedures, remedies, and other provisions
of the Documents may be unenforceable under or limited by the law of the State
of Arizona; however, such law does not, in our opinion, substantially prevent
the practical realization of the benefits intended by the Documents.
We are qualified to practice law in the State of Arizona, and we do not
purport to be experts on, or to express any opinion concerning, any law other
than the law of the State of Arizona and applicable federal law.
The opinions expressed in this letter are based upon the law in effect on
the date hereof, and we assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision, or
otherwise.
This opinion is being furnished to you solely for your benefit and only
with respect to the Transaction. Accordingly, it may not be relied upon by,
quoted in any manner to, or delivered to, any person or entity without, in each
instance, our prior written consent.
Very truly yours,
Steptoe & Johnson LLP
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CONFIDENTIAL TREATMENT REQUESTED BY ROCKFORD CORPORATION
EXHIBIT 11.5
CERTIFICATE OF PURCHASER
This Certificate is issued pursuant to the Stock Purchase Agreement
("Agreement") dated October 16, 2002, between Rockford Corporation ("Purchaser")
and Simple Devices, Inc. ("Company"). Defined terms used in this Certificate
have the same meaning given in the Agreement.
THE PURCHASER CERTIFIES THAT:
1. THE CONDITIONS STATED IN SECTION 11 OF THE AGREEMENT HAVE BEEN
COMPLETELY MET IN ALL MATERIAL RESPECTS;
2. THE REPRESENTATIONS AND WARRANTIES OF PURCHASER IN SECTION 7 OF THE
AGREEMENT ARE TRUE AND CORRECT WHEN MADE AND ON THE CLOSING DATE;
AND
3. PURCHASER HAS PERFORMED ALL MATERIAL COVENANTS, AGREEMENTS, AND
OBLIGATIONS REQUIRED OF IT BY THE AGREEMENT, AND EXECUTED AND
DELIVERED TO COMPANY'S SHAREHOLDERS ALL DOCUMENTS REQUIRED TO BE
DELIVERED AT OR PRIOR TO THE CLOSING.
ROCKFORD CORPORATION
BY:___________________________
PRINT NAME:
TITLE: