Exhibit

10.12




 




THIS NOTE IS SUBORDINATED

TO THE PAYMENT AND SATISFACTION IN FULL OF THE SENIOR DEBT, AS DEFINED IN AND

PURSUANT TO THE TERMS OF THE SUBORDINATION AGREEMENT REFERRED TO BELOW.




 




THIS NOTE HAS NOT BEEN

REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER

ANY OTHER APPLICABLE SECURITIES LAWS. 

IT MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, PLEDGED, HYPOTHECATED OR

OTHERWISE DISPOSED OF WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR

EXEMPTION THEREFROM.




 




MACKIE

DESIGNS INC.


SUBORDINATED PROMISSORY NOTE




 




March 31, 2003


Woodinville, Washington




 




MACKIE DESIGNS INC., a

Washington corporation (the “Company”), for value received, hereby promises to

pay to the order of SUN MACKIE, LLC a Delaware limited liability company

(“Sun”), its successors and permitted assigns, the principal sum of Three

Million Nine Hundred Thirty One Thousand, Four Hundred Twenty Nine Dollars

($3,931,429) (as such amount may be increased from time to time pursuant to the

following paragraph, the “Principal Sum”).




 




Interest shall accrue on

a daily basis at the rate of fifteen percent (15.0%) per annum (compounded

annually as set forth below), commencing on the date hereof, on the unpaid

Principal Sum outstanding from time to time. 

The Company shall pay all accrued interest on each anniversary of the

date hereof, subject to the terms of the Subordination Agreement.  In the event that the Company does not pay

all accrued interest due and owing on the date on which it is due, such accrued

interest shall, effective as of such due date, be added to the Principal

Sum.  Any interest that is added to the

Principal Sum pursuant to the terms of this paragraph will no longer be

considered accrued and unpaid hereunder. 

Any accrued interest which for any reason has not theretofore been paid

shall be paid in full on the date on which the Principal Sum is paid, subject

to the terms of the Subordination Agreement. 

The Company shall not pay any accrued interest in cash without the prior

written consent of the holder hereof, subject to the terms of the Subordination

Agreement.




 




The Principal Sum shall

be payable in one payment of Three Million Nine Hundred Thirty One Thousand,

Four Hundred Twenty Nine Dollars ($3,931,429), plus any amount by which

the Principal Sum has been increased under the foregoing paragraph, on March

     , 2007, subject to the terms of the Subordination

Agreement.  The Principal Sum, together

with any accrued but unpaid interest, shall be immediately due and owing on the

occurrence of an Event of Default, subject to the terms of the Subordination

Agreement.




 




For purposes of this

Subordinated Promissory Note (this “Note”), “Event of Default” shall mean (a)

the Company shall default in the payment of principal or accrued interest of

this Note on any date when due, (b) the Company makes a general assignment for

the benefit of 




 





























 




creditors; or an order,

judgment or decree is entered adjudicating the Company bankrupt or insolvent;

or any order for relief with respect to the Company is entered under the

federal Bankruptcy Code, or the Company petitions or applies to any tribunal

for the appointment of a custodian, trustee, receiver or liquidator of the

Company of any substantial part of the assets of the Company, or commences any

proceeding relating to the Company under any bankruptcy, reorganization,

arrangement, insolvency, readjustment of debt, dissolution or liquidation law

of any jurisdiction; or any such petition or application is filed, or any such

proceeding is commenced, against the Company and either (i) the Company by any

act or failure to act indicates its approval thereof, consent thereto or

acquiescence therein or (ii) such petition, application or proceeding is not

dismissed within 90 days or (c) Sun shall cease to own a majority of the issued

and outstanding Common Stock, no par value, of the Company.




 




All cash payments on or

in respect of this Note shall be made in the lawful currency of the United

States of America as at the time of payment is legal tender for the payment of

public and private debts by wire transfer of immediately available funds

pursuant to written wire transfer instructions given to the Company by the

holder hereof from time to time. 

Whenever a payment to be made hereunder shall be due on a day which is

not a business day in New York, New York, such payment shall be made on the

next succeeding business day and such extension of time shall be included in

the computation of the payment of interest hereunder.




 




The holder hereof, by

acceptance of the Note, covenants and agrees that the indebtedness evidenced by

the Note shall be subordinate and junior in right of payment to the prior

payment in full of all Senior Debt as defined, and upon terms and conditions

set forth, in the Subordination Agreement, dated on or about the date hereof,

between Sun and Congress Financial Corporation (Florida) (as the same may be

amended, modified, supplemented, extended, renewed, restated or replaced, the

“Subordination Agreement”).




 




The Company waives

diligence, presentment, demand, protest and notice of every kind

whatsoever.  The failure of the holder

hereof to exercise any of its rights hereunder in any particular instance shall

not constitute a waiver of the same or of any other right in that or any

subsequent instance.




 




The Note shall be binding

upon the Company, its successors, and permitted assigns, and shall inure to the

benefit of Sun, its successors, and permitted assigns.




 




This Note is a contract

made under and governed by, and shall be construed and enforced in accordance

with, the laws of the State of Delaware, without regard to conflict of laws

principles.




 




*     *    

*     *     *




 




2





























 




IN WITNESS WHEREOF, the

undersigned has executed this Subordinated Promissory Note as of the date first

above written.




 




	

   


  	

  MACKIE DESIGNS INC.


  
	

   


  	

   


  
	

   


  	

   


  
	

  By: 


  	

  James T. Engen


  
	

   


  	

  Name: James T. Engen


  
	

   


  	

  Its: President &

  CEO


  





 




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AFFIDAVIT

REGARDING DELIVERY




 




I, JASON H. NEIMARK,

hereby certify that I am a Vice President of Sun Mackie, LLC, and that the

foregoing was delivered to me as a representative of such entity in the State

of Washington, County of King.




 




 




	

   


  	

  /s/ Jason H. Neimark


  
	

   


  	

  Signature


  





 




On this the 27th day of

March, 2003, before me, the undersigned, a Notary Public in and for the State

of Washington, County of King, JASON H. NEIMARK personally known to me or

proved to me on the basis of satisfactory evidence to be a Vice President of

Sun Mackie, LLC, a Delaware limited liability company, who executed the

foregoing affidavit on behalf of such entity and acknowledged to me that such

entity executed the foregoing pursuant to its charter documents, said execution

taking place in the State of Washington, County of King.




 




	

  Nancy L. Keller


  	

   


  
	

  Notary Signature


  	

   


  
	

   


  	

   


  
	

  Commission

  Expires:


  	

   


  
	

   


  	

   


  
	

  4-1-2005


  	

   


  
	

   


  	

   


  
	

  [Affix Notarial

  Seal]


  	

   


  





 




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