Exhibit
10.1


FORBEARANCE AND CONSENT
AGREEMENT


FORBEARANCE
AND CONSENT AGREEMENT, dated as of March 5, 2007 is entered into by and among
LOUD TECHNOLOGIES INC., a Washington corporation (“LOUD”), ST. LOUIS
MUSIC, INC., a Missouri corporation (“SLM”; and, together with LOUD,
each a “Borrower” and collectively the “Borrowers”), MERRILL
LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.,
for itself as a Lender and as Administrative Agent (“Administrative Agent”)
for the financial institutions from time to time party to the Credit Agreement
(as defined below) as lenders (“Lenders”), and the other Lenders
signatory hereto.


R E C I T A L S:


WHEREAS,
Borrowers, Administrative Agent and Lenders are parties to that certain Credit
Agreement dated as of August 29, 2005 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”;
capitalized terms not otherwise defined herein having the definitions provided
therefor in the Credit Agreement);


WHEREAS,
Events of Default exist under Section 8.1(b) of the Credit Agreement as a
result of violations of each of the financial covenants set forth in
Sections 6.2, 6.3 and 6.4 of the Credit Agreement for the period ending
December 31, 2006 (collectively, the “Existing Defaults”);


WHEREAS,
Administrative Agent and Lenders are willing to agree to forbear from
exercising certain of their rights and remedies with respect to the Existing
Defaults solely for the period and on the terms and conditions specified
herein;


WHEREAS,
Borrowers have requested that Administrative Agent and Lenders consent to
(i) the formation by LOUD of a Wholly-Owned Subsidiary organized under the
laws of England and Wales and the acquisition (the “Martin Audio Acquisition”)
by such Wholly-Owned Subsidiary of all of the outstanding equity securities of
Martin Audio Limited, a limited company organized under the laws of England and
Wales (“Martin Audio”), and (ii) the departure by Borrowers from
certain provisions of the Credit Agreement in order to facilitate the
consummation of the Martin Audio Acquisition; and


WHEREAS,
Administrative Agent and Lenders are willing to consent to the consummation of
the Martin Audio Acquisition and the departure by Borrowers from certain
provisions of the Credit Agreement in order to facilitate the consummation of
the Martin Audio Acquisition, in each case subject to the terms and conditions
specified herein and certain other agreements of Borrowers as specified herein;


NOW,
THEREFORE, in consideration of the foregoing, and the respective agreements,
warranties and covenants contained herein, the parties hereto agree as follows:













SECTION 1.                                        ACKNOWLEDGEMENTS


1.1.          Acknowledgment of Obligations.  All of the Obligations, together with
interest accrued and accruing thereon, and all fees, costs, expenses and other
charges now or hereafter payable by Borrowers to Administrative Agent and
Lenders, are unconditionally owing by Borrowers to Administrative Agent and
Lenders, without offset, defense or counterclaim of any kind, nature or description
whatsoever.


1.2.          Acknowledgment of Security Interests.  Borrowers hereby acknowledge, confirm and
agree that Administrative Agent has and shall continue to have valid,
enforceable and perfected first-priority liens upon and security interests in
the Collateral
heretofore granted to Administrative Agent pursuant to the Financing Documents
or otherwise granted to or held by Administrative Agent, subject only to
Permitted Liens.


1.3.          Binding Effect of Documents.  Borrowers hereby acknowledge, confirm and agree
that:  (a) each of the Financing
Documents to which any Credit Party is a party has been duly executed and
delivered to Administrative Agent or Lenders by such Credit Parties, and each
is and shall remain in full force and effect as of the date hereof,
(b) the agreements and obligations of the Credit Parties contained in such
documents and in this Agreement constitute the legal, valid and binding
obligations of Borrowers and the other Credit Parties, as applicable,
enforceable against them in accordance with their respective terms, and
Borrowers and the other Credit Parties have no valid defense to the enforcement
of such obligations, and (c) Administrative Agent and Lenders are and
shall be entitled to the rights, remedies and benefits provided for under the
Financing Documents and applicable law.


SECTION 2.                                        FORBEARANCE
IN RESPECT OF EXISTING DEFAULTS


2.1.          Acknowledgment of Default.  Borrowers hereby acknowledge and agree that
the Existing Defaults have occurred and are continuing, each of which constitutes
an Event of Default and entitles Administrative Agent and Lenders to exercise
their rights and remedies under the Financing Documents, applicable law or
otherwise.  Borrowers further represent
and warrant that as of the date hereof no other Events of Default under the
Financing Documents exist other than the Existing Defaults.  Neither Administrative Agent nor any Lender
has waived, and neither intends to waive any Existing Default and nothing
contained herein or the transactions contemplated hereby shall be deemed to
constitute any such waiver.


2.2.          Forbearance.


(a)           In
reliance upon the representations, warranties and covenants of Borrowers
contained in this Agreement, and subject to the terms and conditions of this
Agreement and any documents or instruments executed in connection herewith,
Administrative Agent and Lenders agree to forbear from exercising their rights
and remedies under the Financing Documents or applicable law in respect of or
arising out of the Existing Defaults, for the period (the “Forbearance
Period”) commencing on the date hereof and ending on the date which is the
earliest of:  (i) April 7, 2007 or
(ii) the occurrence or existence of any Event of Default, other than the
Existing Defaults.



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(b)           Upon
the termination of the Forbearance Period, the agreement of Administrative
Agent and Lenders to forbear shall automatically and without further action
terminate and be of no force and effect, it being expressly agreed that the
effect of such termination will be to permit Administrative Agent and Lenders
to exercise immediately all rights and remedies under the Financing Documents
and applicable law, including, but not limited to, (i) ceasing to make any
further Revolving Loans and (ii) accelerating all of the Obligations; in each
case without any further notice, passage of time or forbearance of any kind.


2.3.          No Other Waivers; Reservation of Rights.


(a)           Neither
Administrative Agent nor any Lender has waived, is not by this Agreement
waiving, and has no intention of waiving, any Events of Default which may be
continuing on the date hereof or any Events of Default which may occur after
the date hereof (whether the same or similar to the Existing Defaults or
otherwise), and neither Administrative Agent nor any Lender has agreed to
forbear with respect to any of its rights or remedies concerning any other
Events of Default (other than, during the Forbearance Period, the Existing
Defaults to the extent expressly set forth herein), occurring at any time.


(b)           Subject
to Section 2.2 above (solely with respect to the Existing Defaults),
Administrative Agent and each Lender reserve the right, in their discretion, to
exercise any or all of their rights and remedies under the Credit Agreement and the other
Financing Documents as a result of any other Events of Default occurring at any
time.  Neither Administrative Agent nor
any Lender has waived any of such rights or remedies, and nothing in this
Agreement, and no delay on its part in exercising any such rights or remedies,
should be construed as a waiver of any such rights or remedies.


2.4.          Additional Events of Default.  This Agreement shall be deemed to be a
Financing Document.  The parties hereto
acknowledge, confirm and agree that any representation by any Borrower being
incorrect in any respect (or any material respect if such representation is not
already qualified as to materiality), or any failure of any Borrower to comply
with the covenants, conditions and agreements contained in this Agreement, any
other Financing
Document or in any other agreement, document or instrument at any time
executed and/or delivered by Borrowers with, to or in favor of Administrative
Agent or any Lender shall constitute an immediate Event of Default under this
Agreement, the Credit Agreement and the other Financing Documents.  In the event any Person (including without
limitation any holder of Subordinated Debt), other than Administrative Agent or
any Lender, shall at any time exercise for any reason (including, without
limitation, by reason of any Existing Default or any other present or future
Event of Default, or otherwise) any of its rights or remedies against any
Borrower or any obligor providing credit support for any Borrower’s obligations
to such other Person, or against any Borrower’s or any such obligor’s properties
or assets, such event shall constitute an immediate Event of Default hereunder
and an immediate Event of Default under the Credit Agreement.


2.5.          Minimum Excess Availability.  Borrowers, Administrative Agent and Lenders
agree that until such time, if any, that the Existing Defaults have been waived
pursuant 



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to the terms of the Credit Agreement: 
(i) at no time may the amount (such amount, the “Excess Availability
Amount”) equal to the Revolving Loan Limit minus the Revolving Loan
Outstandings be less than $2,000,000; and (ii) none of Administrative Agent,
any Lender nor any other Person shall be obligated to make Loans or extend any
other financial accommodations to any Borrower if after giving effect thereto,
the Excess Availability Amount would be less than $2,000,000.  A violation of clause (i) of this Section 2.5
shall constitute an immediate Event of Default.


SECTION 3.                                        CONSENT
TO MARTIN AUDIO ACQUISITION; RELATED CONSENTS; RELATED AGREEMENTS; SLM HOLDBACK
PAYMENT


3.1.          Consent to Martin Audio Acquisition.  In reliance upon the representations,
warranties, covenants and other agreements of Borrowers contained in this
Agreement, and subject to the terms and conditions of this Agreement and any
documents or instruments executed in connection herewith, Administrative Agent
and Lenders hereby consent to: 
(i) the formation of Grace Acquisitionco Limited, a limited company
organized under the laws of England and Wales (“Martin Holdco”), as a
Wholly-Owned Subsidiary of LOUD, provided that Martin Holdco is capitalized
solely with the proceeds of capital contributions made to LOUD after the date
hereof (such proceeds being referred to as the “New Equity”) and
(ii) the consummation of the Martin Audio Acquisition pursuant to the
terms and conditions set forth in that certain Share Purchase Agreement dated
as of March 5, 2007, by and among Martin Holdco, LOUD and the vendors and
optionholders listed on Schedule 1 thereto (as amended or otherwise modified
prior to the date hereof, including all exhibits and schedules thereto, the “Martin
Audio Purchase Agreement”), a true, correct and complete copy of which has
been provided to Administrative Agent, provided that Borrowers comply (and the
terms and conditions of the Martin Audio Acquisition comply) with, the provisions
of Sections 5.8(b)(iv), (v), (vi), (xii) and (xiii) of the Credit
Agreement, and provided further that all consideration paid pursuant to the
Martin Audio Purchase Agreement and all fees, costs and expenses paid or
payable in connection with the consummation of the Martin Audio Acquisition are
paid solely with the proceeds of the New Equity.


3.2.          Additional Consents and Agreements.  In connection with the consents provided
pursuant to Section 3.1 above, and in connection with the consummation of the Martin
Audio Acquisition, Borrowers, Administrative Agent and Lenders hereby agree to
the following, notwithstanding any provision of the Credit Agreement or any of
the other Financing Documents to the contrary:


(a)           To
the extent that the New Equity is used to consummate the Martin Audio
Acquisition and pay costs, fees and expenses in connection therewith, Borrowers
shall not be required to prepay any of the Loans with the proceeds of the New
Equity, as would otherwise be required pursuant to the provisions of Section
2.1(c)(iii) of the Credit Agreement;


(b)           Amounts
expended to consummate the Martin Audio Acquisition pursuant to the Martin
Audio Purchase Agreement shall be excluded for purposes of calculating “Capital
Expenditures”;



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(c)           Except
for the contribution by LOUD to Martin Audio of proceeds of the New Equity,
prior to or concurrently with the closing of the Martin Audio Acquisition,
neither Borrowers nor any other Credit Party shall directly or indirectly make
any loan to, make any Investment in, or extend any other financial
accommodations (including without limitation trade credit) to, Martin Holdco,
Martin Audio or any Subsidiary of Martin Holdco or Martin Audio;


(d)           No
Borrower or any other Credit Party will, directly or indirectly, enter into or permit
to exist any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with Martin Holdco, Martin Audio
or any Subsidiary of Martin Holdco or Martin Audio;


(e)           Subject
to the limitations contained in this Section 3.2, for all purposes of the
Credit Agreement and the other Financing Documents, each of Martin Holdco and
Martin Audio will be a “Consolidated Subsidiary”; and


(f)            For
purposes of calculating the financial covenants set forth in Article 6 of
the Credit Agreement, Martin Holdco and Martin Audio and all Subsidiaries
thereof (including without limitation the assets, liabilities, revenues,
expenses, gains and losses thereof) will be excluded.


3.3.          Payment of SLM Holdback Payment Obligations.  Administrative Agent and Lenders
hereby expressly consent to the payment of the SLM Holdback Payment Obligations
by SLM.


SECTION 4.                                        REPRESENTATIONS
AND WARRANTIES


Borrowers
hereby represent, warrant and covenant as follows:


4.1.          Representations in Financing Documents.  Each of the representations and warranties
made by or on behalf of each Credit Party to Administrative Agent or any Lender
in any of the Financing Documents is true and correct on and as of the date of
this Agreement as if each of such representations and warranties has been made
by each Credit Party on the date hereof with the same force and effect,
except:  (i) with respect to any
representation that no Default or Event of Default has occurred or is
continuing, for the Existing Defaults, and (ii) to the extent that any
such representation or warranty relates to a specific date, in which case such
representation or warranty shall be true and correct as of such earlier date.


4.2.          Binding Effect of Documents.  This Agreement has been duly authorized,
executed and delivered to Administrative Agent by Borrowers, is enforceable in
accordance with its terms and is in full force and effect.


4.3.          No Conflict.  The execution, delivery and performance of
this Agreement by each Credit Party will not violate any requirement of law or
contractual 



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obligation of any such Credit Party and will not result in, or require,
the creation or imposition of any Lien on any of its properties or revenues.


SECTION 5.                                        CONDITIONS
TO EFFECTIVENESS OF CERTAIN PROVISIONS OF THIS AGREEMENT


5.1.          Conditions to Sections 2.2, 3.1 and 3.2.  The effectiveness of the terms and provisions
of Sections 2.2,
3.1 and 3.2 of this Agreement shall be subject to the receipt by
Administrative Agent of a fully executed copy of this Agreement.  The effectiveness of the terms and provisions
of Sections 3.1 and 3.2 of this Agreement shall also be subject to the
conditions set forth in Section 5.2 below.


5.2.          Additional Conditions to Sections 3.1 and 3.2.  The effectiveness of the terms and provisions
of Sections 3.1 and 3.2 of this Agreement shall be subject to the satisfaction
of each of the following conditions: 
(a)  receipt by Administrative Agent of a fully executed copy of
the Martin Acquisition Purchase Agreement, and (b) receipt by Administrative
Agent of a fully executed consent to the Subordinated Debt Documents in respect
of the transactions described herein and in form and substance satisfactory to
Administrative Agent.


SECTION 6.                                        MISCELLANEOUS


6.1.          Effect of Agreement.  Except as modified pursuant hereto, no other
changes or modifications to the Financing Documents are intended or implied and
in all other respects the Financing Documents hereby are ratified, restated and
confirmed by all parties hereto as of the effective date hereof.  To the extent of conflict between the terms
of this Agreement and the other Financing Documents, the terms of this
Agreement shall govern and control.  The
Credit Agreement and this Agreement shall be read and construed as one
agreement.


6.2.          Costs and Expenses.  Borrowers absolutely and unconditionally
agree to pay to Administrative Agent, on demand by Administrative Agent at any
time, whether or not all or any of the transactions contemplated by this
Agreement are consummated, all reasonable fees and out-of-pocket disbursements
of any counsel to Administrative Agent in connection with the preparation,
negotiation, execution or delivery of this Agreement.


6.3.          Further Assurances.  At Borrowers’ expense, the parties hereto
shall execute and deliver such additional documents and take such further
action as may be necessary to effectuate the provisions and purposes of this
Agreement.


6.4.          Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.


6.5.          Survival of Representations and Warranties.  All representations and warranties made in
this Agreement or any other document furnished in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
other documents, 



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and no investigation by Administrative Agent or any Lender or any
closing shall affect the representations and warranties or the right of
Administrative Agent to rely upon them.


6.6.          Release.


(a)           In
consideration of the agreements of Administrative Agent and Lenders contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Borrower, on behalf of
itself, each other Credit Party, and such Borrower’s successors, assigns, and
other legal representatives, hereby absolutely, unconditionally and irrevocably
releases, remises and forever discharges Administrative Agent and each Lender,
and their respective successors and assigns, and their present and former
shareholders, affiliates, subsidiaries, divisions, predecessors, directors,
officers, attorneys, employees, agents and other representatives
(Administrative Agent, each Lender and all such other Persons being hereinafter
referred to collectively as the “Releasees” and individually as a “Releasee”),
of and from all demands, actions, causes of action, suits, covenants,
contracts, controversies, agreements, promises, sums of money, accounts, bills,
reckonings, damages and any and all other claims, counterclaims, defenses,
rights of set-off, demands and liabilities whatsoever (individually, a “Claim”
and collectively, “Claims”) of every kind and nature, known or unknown,
suspected or unsuspected, at law or in equity, which such Borrower, any other
Credit Party or any of their successors, assigns, or other legal
representatives may now or hereafter own, hold, have or claim to have against
the Releasees or any of them for, upon, or by reason of any circumstance,
action, cause or thing whatsoever which arises at any time on or prior to the
date of this Agreement, including, without limitation, for or on account of, or
in relation to, or in any way in connection with this Agreement, the Credit
Agreement, or any of the other Financing Documents or transactions hereunder or
thereunder.


(b)           Borrowers
understand, acknowledge and agree that the release set forth above may be
pleaded as a full and complete defense and may be used as a basis for an
injunction against any action, suit or other proceeding which may be instituted,
prosecuted or attempted in breach of the provisions of such release.


(c)           Borrowers
agree that no fact, event, circumstance, evidence or transaction which could
now be asserted or which may hereafter be discovered shall affect in any manner
the final, absolute and unconditional nature of the release set forth above.


6.7.          Severability.  Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement.


6.8.          Counterparts.  This Agreement may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement.



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Delivered
as of the day and year first above written.


 


	
  

  	
  LOUD TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
  Tim O’Neil

  
	
   

  	
  Title

  	
  CFO

  
	
   

  	
   

  
	
   

  	
  ST. LOUIS MUSIC, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
  Tim O’Neil

  
	
   

  	
  Title

  	
  VP

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH CAPITAL, a division of

  
	
   

  	
  Merrill Lynch Business Financial Services Inc.,

  
	
   

  	
  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
  Scott E. Gast

  
	
   

  	
  Title

  	
  Vice President

  
				



 











 


	
  

  	
  ING CAPITAL LLC, as a Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   

  	 

	
   

  	
  Name

  	
   

  	 

	
   

  	
  Title

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  CIT LENDING SERVICES CORPORATION, as a Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   

  	 

	
   

  	
  Name

  	
  Barbara F. Perich

  	 

	
   

  	
  Title

  	
  Vice President

  	 

	
   

  	
   

  	 

	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as a

  Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   

  	 

	
   

  	
  Name

  	
  Christopher W Rupp

  
	
   

  	
  Title

  	
  Vice President

  	 

	
   

  	
   

  	 

	
   

  	
  FM LEVERAGED CAPITAL FUND I, as a Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   

  	 

	
   

  	
  Name

  	
  Melissa Marano

  	 

	
   

  	
  Title

  	
  Authorized Signatory

  	 

	
   

  	
   

  	 

	
   

  	
  FRIEDBERGMILSTEIN PRIVATE CAPITAL

  FUND I, as a Lender

  	 

	
   

  	
   

  	 

	
   

  	
  By 

  	
   

  	 

	
   

  	
  Name

  	
  Melissa Marano

  	 

	
   

  	
  Title

  	
  Authorized Signatory

  	 

					



 











 


	
  

  	
  GSC PARTNERS CDO FUND VI, LIMITED,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:    GSCP (NJ), L.P., as Collateral
  Manager

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
  GSC CAPITAL CORP. LOAN FUNDING 2005-1,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:    GSCP (NJ), L.P., as Collateral
  Manager

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  
				



 


	
  Acknowledged and Agreed to (including without 

  limitation, the release set forth in Section 6.6):

  	
   

  
	
   

  	
   

  
	
  SLM HOLDING CORP.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Name

  	
  Tim O’Neil

  	
   

  
	
  Title

  	
  VP

  	
   

  
	
   

  	
   

  
	
  MACKIE DESIGNS INC.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Name

  	
  Tim O’Neil

  	
   

  
	
  Title

  	
  VP

  	
   

  
	
   

  	
   

  
	
  SIA SOFTWARE COMPANY, INC.

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Name

  	
  Tim O’Neil

  	
   

  
	
  Title

  	
  VP