EXHIBIT 10.3
AMENDMENT NO. 1 TO FINANCING AGREEMENT
          This AMENDMENT NO. 1 TO FINANCING AGREEMENT (this “Amendment”), dated
as of May 24, 2007, is entered into by and among LOUD TECHNOLOGIES INC., a
Washington corporation (“Parent” or “US Borrower”), and GRACE ACQUISITIONCO
LIMITED, a company incorporated under the laws of England and Wales with
registered number 06078534 (“UK Borrower”), each subsidiary of the Parent listed
on the signature pages hereto, the lenders from time to time party hereto (each
a “Lender” and collectively, the “Lenders”), ABLECO FINANCE LLC, a Delaware
limited liability company (“Ableco”), as collateral agent for the Lenders (in
such capacity, together with any successor collateral agent, the “Collateral
Agent”), and GMAC COMMERCIAL FINANCE LLC (“GMAC”), as administrative agent for
the Lenders (in such capacity, together with any successor administrative agent,
the “Administrative Agent” and together with the Collateral Agent, each an
“Agent” and collectively, the “Agents”).
RECITALS
          WHEREAS, Parent, the UK Borrower, each subsidiary of the Parent listed
on the signature pages thereto (such subsidiaries, together with Parent and UK
Borrower, each a “Loan Party” and collectively the “Loan Parties”), the Agents,
and the Lenders are parties to that certain Financing Agreement, dated as of
March 30, 2007 (as amended, restated, supplemented or otherwise modified from
time to time, the “Financing Agreement”); and
          WHEREAS, the Loan Parties have requested that the Lenders amend the
Financing Agreement, in each case as provided below, and the Lenders are willing
to accommodate the Loan Parties’ requests, but only on the terms and subject to
the conditions specified herein.
          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Financing Agreement, as amended
hereby.
2. Amendments To Financing Agreement.
     (a) The definition of “TTM EBITDA” in Section 1.01 of the Financing
Agreement is hereby amended and restated in its entirety as follows:
          ”“TTM EBITDA” means, as of any date of determination and with respect
to a Person, the Consolidated EBITDA of such Person and its Subsidiaries for the
period of 12 consecutive months most recently ended; provided, however, that
(a) in the case of the First Test Period, TTM EBITDA shall be calculated as
(i) the Consolidated EBITDA of such Person and its Subsidiaries for the period
from and after May 1, 2007 up to and including the last day of the First Test
Period, times (ii) 6.00, (b) in the case of the Second Test Period, TTM EBITDA
shall be calculated as (i) the Consolidated EBITDA of such Person and its
Subsidiaries for the period from and after May 1, 2007 up to and including the
last day of the Second Test Period, times (ii) 2.40, (c) in the case of the
Third Test Period, TTM EBITDA shall be calculated as (i) the

 

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Consolidated EBITDA of such Person and its Subsidiaries for the period from and
after May 1, 2007 up to and including the last day of the Third Test Period,
times (ii) 1.50, and (d) in the case of the Fourth Test Period, TTM EBITDA shall
be calculated as (i) the Consolidated EBITDA of such Person and its Subsidiaries
for the period from and after May 1, 2007 up to and including the last day of
the Fourth Test Period, times (ii) 1.09.”
     (b) The definition of “Fixed Charge Coverage Ratio” appearing in
Section 1.01 of the Financing Agreement is hereby amended and restated in its
entirety as follows:
          ““Fixed Charge Coverage Ratio” means, with respect to any Person for
any period, the ratio of (i) the TTM EBITDA of such Person and its Subsidiaries
calculated as of the last day of such period, minus the sum of (A) TTM Capital
Expenditures made by such Person and its Subsidiaries calculated as of the last
day of such period plus (B) the TTM Income Tax Liabilities calculated as of the
last day of such period, to the extent that such amount is greater than zero to
(ii) TTM Fixed Charges calculated as of the last day of such period.”
     (c) Section 1.01 of the Financing Agreement is hereby amended by adding the
following new definitions in the appropriate alphabetical order:
““First Test Period” means the period ended on June 30, 2007.”
““Second Test Period” means the period ended on September 30, 2007.”
““Third Test Period” means the period ended on December 31, 2007.”
““Fourth Test Period” means the period ended on March 31, 2008.”
          ““TTM Capital Expenditures” means, as of any date of determination and
with respect to a Person, the Capital Expenditures of such Person and its
Subsidiaries for the 12 consecutive months most recently ended; provided,
however, that (a) in the case of the First Test Period, TTM Capital Expenditures
shall be calculated as (i) the Capital Expenditures of such Person and its
Subsidiaries for the period from and after May 1, 2007 up to and including the
last day of the First Test Period, times (ii) 6.00, (b) in the case of the
Second Test Period, TTM Capital Expenditures shall be calculated as (i) the
Capital Expenditures of such Person and its Subsidiaries for the period from and
after May 1, 2007 up to and including the last day of the Second Test Period,
times (ii) 2.40, (c) in the case of the Third Test Period, TTM Capital
Expenditures shall be calculated as (i) the Capital Expenditures of such Person
and its Subsidiaries for the period from and after May 1, 2007 up to and
including the last day of the Third Test Period, times (ii) 1.50, and (d) in the
case of the Fourth Test Period, TTM Capital Expenditures shall be calculated as
(i) the Capital Expenditures of such Person and its Subsidiaries for the period
from and after May 1, 2007 up to and including the last day of the Fourth Test
Period, times (ii) 1.09.”
          ““TTM Fixed Charges” means, as of any date of determination and with
respect to a Person for the 12 consecutive months most recently ended, the sum
of (A) all principal of Indebtedness of such Person and its Subsidiaries
scheduled to be paid during such period (excluding the amount of any prepayments
of such Indebtedness that were made in prior periods), plus (B) Consolidated Net
Interest Expense of such Person and its Subsidiaries for such

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period, plus (C) cash dividends or distributions paid by such Person and its
Subsidiaries (other than, in the case of the Parent, dividends or distributions
paid to the Parent or its wholly-owned Subsidiaries) for such period; provided,
however, that (a) in the case of the First Test Period, TTM Fixed Charges shall
be calculated as (i) the sum of (A) all principal of Indebtedness of such Person
and its Subsidiaries scheduled to be paid for the period from and after May 1,
2007 up to and including the last day of the First Test Period (excluding the
amount of any prepayments of such Indebtedness that were made in prior periods),
plus (B) Consolidated Net Interest Expense of such Person and its Subsidiaries
for the period from and after May 1, 2007 up to and including the last day of
the First Test Period, plus (C) cash dividends or distributions paid by such
Person and its Subsidiaries (other than, in the case of the Parent, dividends or
distributions paid to the Parent or its wholly-owned Subsidiaries) for the
period from and after May 1, 2007 up to and including the last day of the First
Test Period, times (ii) 6.00, (b) in the case of the Second Test Period, TTM
Fixed Charges shall be calculated as (i) the sum of (A) all principal of
Indebtedness of such Person and its Subsidiaries scheduled to be paid for the
period from and after May 1, 2007 up to and including the last day of the Second
Test Period (excluding the amount of any prepayments of such Indebtedness that
were made in prior periods), plus (B) Consolidated Net Interest Expense of such
Person and its Subsidiaries for the period from and after May 1, 2007 up to and
including the last day of the Second Test Period, plus (C) cash dividends or
distributions paid by such Person and its Subsidiaries (other than, in the case
of the Parent, dividends or distributions paid to the Parent or its wholly-owned
Subsidiaries) for the period from and after May 1, 2007 up to and including the
last day of the Second Test Period, times (ii) 2.40, (c) in the case of the
Third Test Period, TTM Fixed Charges shall be calculated as (i) the sum of
(A) all principal of Indebtedness of such Person and its Subsidiaries scheduled
to be paid for the period from and after May 1, 2007 up to and including the
last day of the Third Test Period (excluding the amount of any prepayments of
such Indebtedness that were made in prior periods), plus (B) Consolidated Net
Interest Expense of such Person and its Subsidiaries for the period from and
after May 1, 2007 up to and including the last day of the Third Test Period,
plus (C) cash dividends or distributions paid by such Person and its
Subsidiaries (other than, in the case of the Parent, dividends or distributions
paid to the Parent or its wholly-owned Subsidiaries) for the period from and
after May 1, 2007 up to and including the last day of the Third Test Period,
times (ii) 1.50, and (d) in the case of the Fourth Test Period, TTM Fixed
Charges shall be calculated as (i) the sum of (A) all principal of Indebtedness
of such Person and its Subsidiaries scheduled to be paid for the period from and
after May 1, 2007 up to and including the last day of the Fourth Test Period
(excluding the amount of any prepayments of such Indebtedness that were made in
prior periods), plus (B) Consolidated Net Interest Expense of such Person and
its Subsidiaries for the period from and after May 1, 2007 up to and including
the last day of the Fourth Test Period, plus (C) cash dividends or distributions
paid by such Person and its Subsidiaries (other than, in the case of the Parent,
dividends or distributions paid to the Parent or its wholly-owned Subsidiaries)
for the period from and after May 1, 2007 up to and including the last day of
the Fourth Test Period, times (ii) 1.09.”
          ““TTM Income Tax Liabilities” means, as of any date of determination
and with respect to a Person, all income tax liabilities (after the application
of any refunds or credits) of such Person and its Subsidiaries for the 12
consecutive months most recently ended; provided, however, that (a) in the case
of the First Test Period, TTM Income Tax Liabilities shall be calculated as
(i) all income tax liabilities (after the application of any refunds or credits)
of such Person and its Subsidiaries for the period from and after May 1, 2007 up
to and including the last

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day of the First Test Period, times (ii) 6.00, (b) in the case of the Second
Test Period, TTM Income Tax Liabilities shall be calculated as (i) all income
tax liabilities (after the application of any refunds or credits) of such Person
and its Subsidiaries for the period from and after May 1, 2007 up to and
including the last day of the Second Test Period, times (ii) 2.40, (c) in the
case of the Third Test Period, TTM Income Tax Liabilities shall be calculated as
(i) all income tax liabilities (after the application of any refunds or credits)
of such Person and its Subsidiaries for the period from and after May 1, 2007 up
to and including the last day of the Third Test Period, times (ii) 1.50, and
(d) in the case of the Fourth Test Period, TTM Income Tax Liabilities shall be
calculated as (i) all income tax liabilities (after the application of any
refunds or credits) of such Person and its Subsidiaries for the period from and
after May 1, 2007 up to and including the last day of the Fourth Test Period,
times (ii) 1.09.”
3. First Amendment Fee. Parent hereby agrees to pay to Collateral Agent for the
ratable benefit of the Lenders an amendment fee in an amount equal to $75,000
(the “First Amendment Fee”) which shall fully earned and due and payable in full
in immediately available funds on the date hereof and shall be non-refundable
when paid.
4. Limited Amendments; Full Force And Effect. The amendments set forth in
Section 2 of this Amendment shall be limited precisely as written and shall not
be deemed (a) to be an amendment of any other term or condition of the Financing
Agreement or the other Loan Documents, to prejudice any right or remedy which
the Agents or the Lenders may now have or may have in the future under or in
connection with the Financing Agreement or the other Loan Documents or (b) to be
a consent or waiver to any future amendment or departure from the terms and
conditions of the Financing Agreement or the other Loan Documents. This
Amendment shall be construed in connection with and as part of the Loan
Documents, and all terms, conditions, representations, warranties, covenants and
agreements set forth in the Loan Documents, except as herein amended, are hereby
ratified and confirmed and shall remain in full force and effect.
5. Representations And Warranties. Each Loan Party hereby represents and
warrants to each Agent and each Lender as follows:
     (a) Each has the requisite power and authority to execute and deliver this
Amendment and to perform its obligations hereunder and under the Loan Documents
to which it is a party. The articles of organization and operating agreement of
each Loan Party have not been amended since the Effective Date;
     (b) The execution, delivery, and performance by each Loan Party of this
Amendment and the performance by it of each Loan Document to which it is a party
(i) have been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on or
otherwise affecting it or any of its properties, (iii) do not and will not
result in or require the creation of any Lien (other than pursuant to any Loan
Document) upon or with respect to any of its properties, and (iv) do not and
will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to its operations or any of its properties, except where any
such default,

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noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal
could not reasonably be expected to result in a Material Adverse Effect;
     (c) This Amendment has been duly executed and delivered by each Loan Party.
This Amendment and each Loan Document is the legal, valid and binding obligation
of each Loan Party, enforceable against such Loan Party in accordance with its
terms, and is in full force and effect, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws;
     (d) The execution, delivery and performance by each Loan Party of this
Amendment and the performance by each Loan Party of the Financing Agreement as
amended hereby do not and will not require any authorization or approval of, or
other action by, or notice to or filing with any Governmental Authority or
regulatory body or the consent of any third party which has not yet been
obtained;
     (e) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein has been issued and remains in force by any Governmental
Authority against any Loan Party, either Agent or any Lender;
     (f) After giving effect to this Amendment, no event has occurred and is
continuing or will result from the consummation of the transactions contemplated
by this Amendment that would constitute a Default or an Event of Default; and
     (g) After giving effect to this Amendment, the representations and
warranties in the Financing Agreement and the other Loan Documents are true and
correct in all material respects (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date).
6. Conditions Precedent To Amendment
     The satisfaction of each of the following shall constitute conditions
precedent to the effectiveness of this Amendment and each and every provision
hereof (the date of such effectiveness being herein called the “First Amendment
Effective Date”):
     (a) Collateral Agent shall have received this Amendment, duly executed and
delivered by the parties hereto, and the same shall be in full force and effect;
     (b) Collateral Agent shall have received payment in full in immediately
available funds of the First Amendment Fee;
     (c) The representations and warranties herein and in the Financing
Agreement and the other Loan Documents shall be true and correct in all material
respects (except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) on and as of the date hereof, as though

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made on such date (except to the extent that such representations and warranties
relate solely to an earlier date);
     (d) No Default or Event of Default shall have occurred and be continuing on
the date hereof; and
     (e) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against the Borrower, any Guarantor, any Agent, or any
Lender.
7. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.
8. Entire Amendment; Effect Of Amendment. This Amendment, and the terms and
provisions hereof, constitute the entire agreement among the parties pertaining
to the subject matter hereof and supersedes any and all prior or contemporaneous
amendments relating to the subject matter hereof. Except for the amendments to
the Financing Agreement expressly set forth in Section 2 hereof, the Financing
Agreement and other Loan Documents shall remain unchanged and in full force and
effect. To the extent any terms or provisions of this Amendment conflict with
those of the Financing Agreement or other Loan Documents, the terms and
provisions of this Amendment shall control. This Amendment is a Loan Document.
The amendments set forth herein are limited to the specifics hereof, shall not
apply with respect to any facts or occurrences other than those on which the
same are based, shall not excuse future non-compliance with the Financing
Agreement or the other Loan Documents, and shall not operate as a consent to or
waiver of any other matter under the Loan Documents.
9. Headings. Section and subsection headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose or be given any substantive effect.
10. Counterparts; Telecopy Execution. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Amendment by
signing any such counterpart. Delivery of an executed counterpart of this
Amendment by telecopy shall be equally as effective as delivery of an original
executed counterpart of this Amendment. Any party delivering an executed
counterpart of this Amendment by telecopy also shall deliver an original
executed counterpart of this Amendment, but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and binding
effect of this Amendment.
11. Miscellaneous.
     (a) Upon the effectiveness of this Amendment, each reference in the
Financing Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or
words of like import referring to the Financing Agreement shall mean and refer
to the Financing Agreement as amended by this Amendment.

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     (b) Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the “Financing Agreement”, “thereunder”, “therein”, “thereof” or
words of like import referring to the Financing Agreement shall mean and refer
to the Financing Agreement as amended by this Amendment.
     (c) Except as expressly provided herein, (i) the Agents and the Lenders
hereby reserve all remedies, powers, rights, and privileges that the Agents and
the Lenders may have under the Financing Agreement or the other Loan Documents,
at law (including under the Code), in equity, or otherwise; (ii) all terms,
conditions, and provisions of the Financing Agreement and the other Loan
Documents are and shall remain in full force and effect; and (iii) nothing
herein shall operate as a consent to or a waiver, amendment, or forbearance in
respect of any matter (including any Event of Default whether presently existing
or subsequently occurring) or any other right, power, or remedy of the Agents or
the Lenders under the Financing Agreement and the other Loan Documents. No delay
on the part of the Agents and the Lenders in the exercise of any remedy, power,
right or privilege shall impair such remedy, power, right, or privilege or be
construed to be a waiver of any default, nor shall any partial exercise of any
such remedy, power, right or privilege preclude further exercise thereof or of
any other remedy, power, right or privilege.
[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered as of the date first written above.

            LOAN PARTIES:

LOUD TECHNOLOGIES INC.,
a Washington corporation, as US Borrower and as a US
Guarantor
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   CFO        GRACE ACQUISITIONCO LIMITED,
a company organized under the laws of England and
Wales, as UK Borrower
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   VP        LOUD TECHNOLOGIES EUROPE PLC,
a company organized under the laws of England and
Wales, as a Foreign Guarantor
      By:   /s/ James T. Engen         Name:   James T. Engen        Title:  
Director        MACKIE DESIGN INC.,
a Washington corporation, as a US Guarantor
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   VP     

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]

 

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            SIA SOFTWARE COMPANY INC.,
a New York corporation, as a US Guarantor
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   VP        SLM HOLDING CORP.,
a Delaware corporation, as a US Guarantor
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   VP        ST. LOUIS MUSIC, INC.,
a Missouri corporation, as a US Guarantor
      By:   /s/ Timothy P. O’Neil         Name:   Timothy P. O’Neil       
Title:   VP   

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]

 

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            ABLECO FINANCE LLC, as Collateral Agent,
and on behalf of itself and its affiliates as Lenders
      By:   /s/ Daniel E. Wolf         Name:   Daniel E. Wolf        Title:  
President     

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]

 

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            GMAC COMMERCIAL FINANCE LLC,
as Administrative Agent and as a Lender
      By:   /s/ Christopher M. Gauch         Name:   Christopher M. Gauch      
  Title:   Vice President     

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]

 

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              FORTRESS CREDIT FUNDING I LP,     as a Lender
 
       
 
  By:   Fortress Credit Funding I GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
            FORTRESS CREDIT FUNDING II LP,     as a Lender
 
       
 
  By:   Fortress Credit Funding II GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
            FORTRESS CREDIT FUNDING III LP,     as a Lender
 
       
 
  By:   Fortress Credit Funding III GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
       
 
            FORTRESS CREDIT FUNDING IV LP,     as a Lender
 
       
 
  By:   Fortress Credit Funding IV GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
       

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]

 

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              FORTRESS CREDIT OPPORTUNITIES I LP,     as a Lender
 
       
 
  By:   Fortress Credit Opportunities I GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
            FORTRESS CREDIT OPPORTUNITIES II LP,     as a Lender
 
       
 
  By:   Fortress Credit Opportunities II GP LLC,
 
      its general partner
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER
 
            FCCD LIMITED, as a Lender
 
       
 
  By:   /s/ Constantine Dakolias
 
  Title:  
 
  CHIEF CREDIT OFFICER

[SIGNATURE PAGE TO AMENDMENT NO. 1 TO FINANCING AGREEMENT]