**Exhibit 10.5.2**

 

AMENDMENT NO. 3**TO LOAN AND SECURITY AGREEMENT

 

AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT(“Amendment No. 3”), dated as of August 3,**2004,by and among LOUD Technologies Inc., a Washington corporation formerly known asMackie Designs Inc. (“US Borrower”), LOUD Technologies (Europe) Plc. formerlyknown as Mackie Designs UK Plc, a company incorporated under the laws ofEngland and Wales with registration number 02506901 (“UK Borrower”, andtogether with US Borrower, each individually a “Borrower” and collectively, “Borrowers”),Mackie Designs Inc., a Washington corporation, formerly known as Mackie DesignsManufacturing, Inc. (“Mackie”), SIA Software Company, Inc., a New Yorkcorporation (“SIA”) Mackie Investment Co., a Washington corporation (“MackieInvestment”, and together with Mackie and SIA, each individually a “Guarantor”and collectively, “Guarantors”), Congress Financial Corporation (Florida), inits capacity as agent pursuant to the Loan Agreement (as hereinafter defined)acting for and on behalf of the parties thereto as lenders (in such capacity, “Agent”),and the parties to the Loan Agreement as lenders (individually, each a “Lender”and collectively, “Lenders”).

 

W I T N E S S E T H :

 

WHEREAS, Agent, Lenders, Borrowers and Guarantorshave entered into financing arrangements pursuant to which Agent and Lendershave made and may make loans and advances to Borrowers as set forth in the Loanand Security Agreement, dated March 31, 2003, by and among Agent, Lenders,Borrowers and Guarantors, as amended by Amendment No. 1 to Loan and SecurityAgreement dated as of June 30, 2003 and Amendment No. 2 and Waiver to Loan andSecurity Agreement dated April 16, 2004 (as the same now exists or mayhereafter be amended, modified, supplemented, extended, renewed, restated orreplaced, the “Loan Agreement”) and other agreements, documents and instrumentsreferred to therein or at any time executed and/or delivered in connectiontherewith or related thereto (all of the foregoing, together with the LoanAgreement, as the same now exist or may hereafter be amended, modified,supplemented, extended, renewed, restated or replaced, being collectivelyreferred to herein as the “Financing Agreements”);

 

WHEREAS, Agent, Lender, Borrowers andGuarantors desire to amend the Loan Agreement to, among other things, modifythe lending formulas contained therein.

 

WHEREAS, by this Amendment No. 3, Agent,Lenders, Borrowers and Guarantors desire and intend to evidence such amendment;

 

NOW THEREFORE, in consideration of theforegoing and the mutual agreements and covenants contained herein, the partieshereto agree as follows:

 

----

 

1.             Definitions.

 

(a)           Amendmentsto Definitions.

 

(i)            Clause (ii)(a)(i)(A) of thedefinition of ‘Borrowing Base” in Section 1.12 of the Loan Agreement is herebyamended by deleting “seventy-five (75%) percent” and replacing it with “eighty(80%) percent”.

 

(ii)           The definition of “Eligible Inventory”in Section 1.37 of the Loan Agreement is hereby amended by deleting “rawmaterials for such finished goods” and replacing it with “raw materials forsuch finished goods consisting of transducers”.

 

(iii)          The definition of “Interest Rate inSection 1.69 of the Loan Agreement is hereby amended by deleting such Sectionin its entirety and replacing it with the following:

 

“1.69                     “Interest Rate” shall mean,

 

(a)                                  Subject to clause (b) of this definitionbelow:

 

(i)                                     as to Prime Rate Loans that are RevolvingLoans, a rate equal to three-quarters of one (.75%) percent per annum in excessof the Prime Rate, and

 

(ii)                                  as to Eurodollar Rate Loans that are RevolvingLoans, a rate equal to three and one-half (3.50%) percent per annum in excessof the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rateapplicable for the Interest Period selected by a Borrower, or by AdministrativeBorrower on behalf of such Borrower, as in effect three (3) Business Days afterthe date of receipt by Agent of the request of or on behalf of a Borrower forsuch Eurodollar Rate Loans in accordance with the terms hereof, whether suchrate is higher or lower than any rate previously quoted to any Borrower orGuarantor), and

 

(iii)                               as to Term Loans, a rate equal to one (1.00%)percent per annum in excess of the Prime Rate.

 

(b)                                 Notwithstanding anything to the contrarycontained in clause (a) of this definition, the Interest Rate shall mean theper annum rates set forth above plus (in each case) two (2%) percent, at Agent’soption, upon prior notice, (i) either (A) for the period on and after the dateof termination or non-renewal hereof until such time as all Obligations arepaid and satisfied in full in immediately available funds, or (B) for the periodfrom and after the date of the occurrence of any Event of Default, and for solong as such Event of Default is continuing as determined by Agent in goodfaith and (ii) on the Revolving Loans to each Borrower at any time outstandingin excess of the Borrowing Base of such Borrower or the Revolving Loan Limit ofsuch Borrower

 

2

----

 

(whetheror not such excess(es) arise or are made with or without Agent’s or any Lender’sknowledge or consent and whether made before or after an Event of Default).Upon the request of a Borrower, Agent will promptly notify such Borrower inwriting if the Interest Rate specified in this clause (b) is in effect.”

 

(iv)                              The definition of “Inventory Loan Limit” inSection 1.71 of the Loan Agreement is hereby amended by deleting “US$16,000,000”and replacing it with “US$12,000,000”.

 

(v)                                  The definition of “Maximum Credit” in Section1.84 of the Loan Agreement is hereby amended by deleting “US$28,500,000” andreplacing it with “US$25,000,000”.

 

(vi)                              The definition of “Raw Material Availability”in Section 1.110 of the Loan Agreement is hereby amended by deleting suchsection in its entirety and replacing the following therefore

 

“1.110     “Raw Material Availability” shall mean thelesser of (a) twenty two (22%) percent multiplied by the US Dollar Equivalentof the Value of the Eligible Inventory of US Borrower consisting of rawmaterials which are transducers or (b) eighty five (85%) percent of the NetRecovery Percentage of Inventory of US Borrower consisting of raw materialswhich are transducers multiplied by the US Dollar Equivalent of the Value ofEligible Inventory of US Borrower consisting of raw materials which aretransducers or (c) the US Dollar Equivalent of $500,000.”

 

(vii)                           The definition of “Reserve” in Section 1.117of the Loan Agreement is herebyamended by deleting the phrase “greater than fifteen (15%)” and replacing itwith “greater than ten (10%)”.

 

(viii)                        The definition of “Revolving Loan Limit” inSection 1.118 of the Loan Agreement is hereby amended by deleting “US$26,000,000”and replacing it with “US$25,000,000”.

 

(b)                                 Existing Definitions in Loan Agreement.Capitalized terms used herein which are not otherwise defined herein shall havethe respective meanings ascribed thereto in the Loan Agreement.

 

2.                                       Loans. Section 2.1 (c) of the Loan Agreement is hereby amended by:

 

(a)                                  deleting “Eligible Inventory of US” fromclause (iv) of such Section and replacing it with “Eligible Inventory of USBorrower”;

 

(b)                                 deleting “and” at the end of clause (v) ofsuch Section and replacing it with “;” and

 

3

----

 

(c)                                  inserting the following immediately before theperiod at the end of such Section; “and (vii) the aggregate principal amountsof the Revolving Loans and Letter of Credit Accommodations outstanding at anytime to US Borrower based on the Eligible Inventory of US Borrower located atthe Dutch Warehouse shall not exceed the US Dollar Equivalent of US$2,000,000”.

 

3.                                       Term Loans. Section 2.3 of the Loan Agreement is hereby amended by deleting clause(b) of such Section in its entirety and replacing it with the following:

 

“(b) Each of the Term Loans is (i) evidenced by an Amended and RestatedTerm Promissory Note in such original principal amount duly executed anddelivered by US Borrower to Agent; (ii) to be repaid, together with interestand other amounts, in accordance with this Agreement, such Amended and RestatedTerm Promissory Note, and the other Financing Agreements and (iii) secured bythe Collateral as provided in Section 5.1. The principal amount of each of theTerm Loans shall be repaid in forty (40) consecutive monthly installments (orearlier as provided herein) payable on the first day of each month commencingJuly 1, 2003, the first twelve (12) of which shall be each in the amount of$41,666 and the following twenty-eight (28) installments of which shall each bein the amount of $25,000; provided,that, the entire unpaidprincipal amount of each Term Loan and all accrued and unpaid interest thereonshall be due and payable on the effective date of termination or non-renewal ofthe Financing Agreements.”

 

4.                                       Fees. Section 3.2(a) of the Loan Agreement is hereby amended by deleting “US$26,000,000”and replacing it with “US$25,000,000”,

 

5.                                       Excess Availability. Section 9.19 of the Loan Agreement is herebyamended by deleting “US$1,500,000 and replacing it with “US$500,000”.

 

6.                                       Additional Representations, Warranties andCovenants. Borrowersrepresent, warrant and covenant with and to Agent and Lenders as follows, whichrepresentations, warranties and covenants are continuing and shall survive theexecution and delivery hereof, and the truth and accuracy of, or compliancewith each, together with the representations, warranties and covenants in theother Financing Agreements, being a continuing condition of the making of Loansby Lenders (or Agent on behalf of Lenders) to Borrowers:

 

(a)                                  no Default or Event of Default has occurredand is continuing as of the dateof this Amendment No. 3; and

 

(b)                                 this Amendment No. 3 and all agreements,documents and instruments executed and/or delivered in connection herewith havebeen duly executed and delivered by Borrowers and Guarantors and the agreementsand obligations of Borrowers and Guarantors contained herein and thereinconstitute legal, valid and binding obligations of Borrowers and Guarantorsenforceable against Borrowers and Guarantors in accordance with theirrespective

 

4

----

 

terms, except as such enforceability may be limitedby bankruptcy, insolvency, moratorium or similar laws limiting creditors rightsgenerally and by general equitable principles.

 

7.                                       Conditions Precedent for Amendment. The amendments contained herein shall beeffective upon Agent’s receipt of the following; (a) this Amendment No. 3, dulyauthorized, executed and delivered by Borrowers, Guarantors and RequiredLenders, and (b) an Amended and Restated Term Promissory Note, in form andsubstance satisfactory to Agent, duly authorized, executed and delivered by USBorrower.

 

8.                                       Effect of this Amendment. Except as modified pursuant hereto, no otherchanges or modifications to the Financing Agreements are intended or implied,and in all other respects the Financing Agreements are hereby specificallyratified, restated and confirmed by all parties hereto as of the effective dateof this Amendment No. 3. To the extent of conflict between the terms of thisAmendment No. 3 and the other Financing Agreements, the terms of this AmendmentNo. 3 shall control.

 

9.                                       Further Assurances. Borrowers and Guarantors shall execute anddeliver such additional documents and take such additional action as may bereasonably necessary or desirable to effectuate the provisions and purposes ofthis Amendment No. 3.

 

10.                                 Governing Law. The validity, interpretation and enforcementof this Amendment No. 3 and any dispute arising out of the relationship betweenthe parties hereto whether in contract, tort, equity or otherwise, shall begoverned by the internal laws of the State of Florida (without giving effect toprinciples of conflicts of laws).

 

11.                                 Binding Effect. This Amendment No. 3 shall be binding uponand inure to the benefit of each of the parties hereto and their respectivesuccessors and assigns.

 

12.                                 Headings. The headings listed herein are for convenience only and do not constitutematters to be construed in interpreting this Amendment No. 3.

 

13.                                 Counterparts. This Amendment No. 3 may be executed in any number of counterparts,but all of such counterparts shall together constitute but one and the same agreement.In making proof of this Amendment No. 3, it shall not be necessary to produceor account for more than one counterpart thereof signed by each of the partieshereto. This Amendment No. 3 may be executed and delivered by telecopier withthe same force and effect as if it were a manually executed and deliveredcounterpart.

 

5

----

 

IN WITNESS WHEREOF, the parties hereto havecaused this Amendment No. 3 to be duly executed and delivered by theirauthorized officers as of the day and year first above written.

 
|   | BORROWERS                                                                   |
|--------|-----------------------------------------------------------------------------|
|   |                                                                        |
|   | LOUD TECHNOLOGIES INC.,  formerly known  as Mackie Designs Inc.             |
|   |                                                                        |
| `      | By:                                                                         | /s/ Timothy P. O’Neil |   |
|   |                                                                        |   |
|   | Title:                                                                      | CFO |   |
|   |                                                                        |
|   | LOUD TECHNOLOGIES (EUROPE)  PLC.,  formerly know as Mackie Designs UK Plc.  |
|   |                                                                        |
|   | By:                                                                         | /s/ Timothy P. O’Neil |   |
|   |                                                                        |
|   | Title:                                                                      | VP |   |
| `      |                                                                        |
|   | By:                                                                         | /s/ James T. Engen |   |
|   |                                                                        |
|   | Title:                                                                      | VP |   |
|   |                                                                        |
|   | GUARANTORS                                                                  |
|   |                                                                        |
|   | MACKIE DESIGNS INC., formerly  known as  Mackie Designs Manufacturing, Inc. |
|   |                                                                        |
|   | By:                                                                         | /s/ Timothy P. O’Neil |   |
|   |                                                                        |
|   | Title:                                                                      | VP |   |
|   |                                                                        |
|   |                                                                        |
|   | SIA SOFTWARE COMPANY, INC.                                                  |
|   |                                                                        |
|   | By:                                                                         | /s/ Timothy P. O’Neil |   |
|   |                                                                        |   |
|   | Title:                                                                      | VP |   |
|        |                                                                             |  |  |  |

 

----

 
|   | MACKIE INVESTMENT CO.                               |
|--------|-----------------------------------------------------|
|   |                                                |
|   | By:                                                 | /s/ Timothy P. O’Neil |   |
|   |                                                |
|   | Title:                                              | VP |   |
|   |                                                |
|   |                                                |
|   | AGENT                                               |
|   |                                                |
|   | CONGRESS  FINANCIAL CORPORATION(FLORIDA) , as Agent |
|   |                                                |
|   | By:                                                 | /s/ Martin J. Coloson |   |
|   |                                                |   |
|   | Title:                                              | FIRST VICE PRESIDENT |   |
|   |                                                |
|   |                                                |
|   | LENDER                                              |
|   |                                                |
|   | CONGRESS FINANCIAL CORPORATION  (FLORIDA)           |
|   |                                                |
|   | By:                                                 | /s/ Martin J. Coloson |   |
|   |                                                |
|   | Title:                                              | FIRST VICE PRESIDENT |   |
|        |                                                     |  |  |  |

 

----