Document:

Exhibit 10.8

 

GUARANTEE

 

March 31, 2003

 

Congress Financial Corporation (Florida), as

Agent
  for and on behalf of the Lenders as

referred to below

777 Brickell Avenue, Suite 808

Miami, Florida 33131

 

Re:                               Mackie

Designs UK Plc (“Borrower”)

 

Gentlemen:

 

Congress

Financial Corporation (Florida), in its capacity as agent pursuant to the Loan

Agreement (as hereinafter defined) acting for and on behalf of the financial

institutions which are parties thereto as lenders (in such capacity “Agent”),

and the financial institutions which are parties to the Loan Agreement as

lenders (individually, a “Lender” and collectively, “Lenders”) have entered

into financing arrangements with Borrower and the undersigned pursuant to which

Lenders (or Agent on behalf of Lenders) may make loans and advances and provide

other financial accommodations to Borrower as set forth in the Loan and

Security Agreement, dated of even date herewith, by and among Borrower, the

undersigned, Agent and Lenders (as the same now exists or may hereafter be

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

“Loan Agreement”), and the other agreements, documents and instruments referred

to therein or at any time executed and/or delivered in connection therewith or

related thereto, including, but not limited to, this Guarantee (all of the

foregoing, together with the Loan Agreement, as the same now exist or may

hereafter be amended, modified, supplemented, extended, renewed, restated or

replaced, being collectively referred to herein as the “Financing Agreements”).

 

Due to the

close business and financial relationships between Borrower and each of the

undersigned (individually each a “Guarantor” and collectively, “Guarantors”),

in consideration of the benefits which will accrue to Guarantors and as an

inducement for and in consideration of Lenders (or Agent on behalf of Lenders)

making loans and advances and providing other financial accommodations to

Borrower pursuant to the Loan Agreement and the other Financing Agreements,

each Guarantor hereby jointly and severally agrees in favor of Agent and

Lenders as follows:

 

1.               Guarantee.

 

(a)          Each Guarantor

absolutely and unconditionally, jointly and severally, guarantees and agrees to

be liable for the full and payment and performance when due of the following

(all of which are collectively referred to herein as the “Guaranteed

Obligations”):  (i) all obligations,

liabilities and indebtedness of any kind, nature and description of Borrower to

Agent and any Lender and/or their affiliates, including principal, interest,

fees, costs and expenses, however evidenced, whether as principal, surety,

endorser, guarantor or, otherwise, whether arising under the Loan Agreement,

any of the other Financing Agreements or otherwise, whether now existing or

hereafter arising, whether arising

 

 

before, during or after the initial or any

renewal term of the Loan Agreement or after the commencement of any case with

respect to Borrower under the United States Bankruptcy Code or any similar

statute (including, without limitation, the payment of interest and other

amounts, which would accrue and become due but for the commencement of such

case, whether or not such amounts are allowed or allowable in whole or in part

in any such case and including loans, interest, fees, charges and expenses

related thereto and all other obligations of Borrower or its successors to

Agent and any Lender arising after the commencement of such case), whether

direct or indirect, absolute or contingent, joint or several, due or not due,

primary or secondary, liquidated or unliquidated, secured or unsecured, and

however acquired by Agent or any Lender and (ii) all expenses (including,

without limitation, reasonable attorneys’ fees and legal expenses) incurred by

Agent or any Lender in connection with the preparation, execution, delivery,

recording, administration, collection, liquidation, enforcement and defense of

Borrower’s obligations, liabilities and indebtedness as aforesaid to Agent or

any Lender, the rights of Agent or any Lender in any collateral or under this

Guarantee and all other Financing Agreements or in any way involving claims by

or against Agent or any Lender directly or indirectly arising out of or related

to the relationships between Borrower, any Guarantor or other Obligor (as

hereinafter defined) and Agent or any Lender, whether such expenses are

incurred before, during or after the initial or any renewal term of the Loan

Agreement and the other Financing Agreements or after the commencement of any

case with respect to Borrower or any Guarantor under the United States

Bankruptcy Code or any similar statute.

 

(b)         This Guarantee is a

guaranty of payment and not of collection. 

Each Guarantor agrees that Agent and Lenders need not attempt to collect

any Guaranteed Obligations from Borrower, any other Guarantor or any other

Obligor or to realize upon any collateral, but may require any Guarantor to

make immediate payment of all of the Guaranteed Obligations to Agent when due,

whether by maturity, acceleration or otherwise, or at any time thereafter.  Agent and Lenders may apply any amounts

received in respect of the Guaranteed Obligations to any of the Guaranteed

Obligations, in whole or in part (including reasonable attorneys’ fees and

legal expenses incurred by Agent or any Lender with respect thereto or

otherwise chargeable to Borrower or Guarantors) and in such order as Agent may

elect.

 

(c)          Payment by Guarantors

shall be made to Agent at the office of Agent from time to time on demand as

Guaranteed Obligations become due.  Guarantors shall make all payments to Agent on the Guaranteed

Obligations free and clear of, and without deduction or withholding for or on

account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,

fees, deductions, withholding, restrictions or conditions of any kind.  One or more successive or concurrent actions

may be brought hereon against any Guarantor either in the same action in which

Borrower or any of the other Guarantors or any other Obligor is sued or in

separate actions.  In the event any

claim or action, or action on any judgment, based on this Guarantee is brought

against any Guarantor, each Guarantor agrees not to deduct, set-off, or seek

any counterclaim for or recoup any amounts which are or may be owed by Agent or

any Lender to any Guarantor.

 

(d)         Each Guarantor hereby

agrees that to the extent that a Guarantor shall have paid more than its

proportionate share of any payment made hereunder, such Guarantor shall be

entitled to seek and

 

2

 

receive contribution from and against any

other Guarantor hereunder who has not paid its proportionate share of such

payment.  Each Guarantor’s right of

contribution shall be subject to the terms and conditions of Section (e)

hereof.  The provisions of this Section

shall in no respect limit the obligations and liabilities of any Guarantor to

the Agent and the Lenders, and each Guarantor shall remain liable to the Agent

and the Lenders for the full amount guaranteed by such Guarantor hereunder.

 

(e)          Notwithstanding any

payment or payments made by any of the Guarantors hereunder or any set-off or

application of funds of any of the Guarantors by any Lender, no Guarantor shall

be entitled to be subrogated to any of the rights of the Agent or any Lender

against any Borrower or any other Guarantor or any collateral security or

guarantee or right of offset held by any Lender for the payment of the

Obligations, nor shall any Guarantor seek or be entitled to seek any

contribution or reimbursement from any Borrower or any other Guarantor in

respect of payments made by such Guarantor hereunder, until all amounts owing

to the Agent and the Lenders by Borrowers on account of the Obligations are

paid in full and Financing Agreements are terminated.  If any amount shall be paid to any Guarantor on account of such

subrogation rights at any time when all of the Obligations shall not have been

paid in full, such amount shall be held by such Guarantor in trust for the

Agent and the Lenders, segregated from other funds of such Guarantor, and

shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in

the exact form received by such Guarantor (duly indorsed by such Guarantor to

the Agent, if required), to be applied against the Obligations, whether matured

or unmatured, in such order as the Agent may determine.

 

2.               Waivers and

Consents.

 

(a)          Notice of acceptance of

this Guarantee, the making of loans and advances and providing other financial

accommodations to Borrower and presentment, demand, protest, notice of protest,

notice of nonpayment or default and all other notices to which Borrower or any

Guarantor is entitled are hereby waived by each Guarantor.  Each Guarantor also waives notice of and

hereby consents to, (i) any amendment, modification, supplement, extension,

renewal, or restatement of the Loan Agreement and any of the other Financing

Agreements, including, without limitation, extensions of time of payment of or

increase or decrease in the amount of any of the Guaranteed Obligations, the

interest rate, fees, other charges, or any collateral, and the guarantee made

herein shall apply to the Loan Agreement and the other Financing Agreements and

the Guaranteed Obligations as so amended, modified, supplemented, renewed,

restated or extended, increased or decreased, (ii) the taking, exchange,

surrender and releasing of collateral or guarantees now or at any time held by

or available to Lender for the obligations of Borrower or any other party at

any time liable on or in respect of the Guaranteed Obligations or who is the

owner of any property which is security for the Guaranteed Obligations

(individually, an “Obligor” and collectively, the “Obligors”), including,

without limitation, the surrender or release by Agent of any one of Guarantors hereunder,

(iii) the exercise of, or refraining from the exercise of any rights against

Borrower, any Guarantor or any other Obligor or any collateral, (iv) the

settlement, compromise or release of, or the waiver of any default with respect

to, any of the Guaranteed Obligations and (v) any financing by Agent or any

Lender of Borrower under Section 364 of the United States Bankruptcy Code or

consent to the use of cash collateral by Agent or Lenders under Section 363 of

the United States Bankruptcy Code.  Each

Guarantor agrees that the amount of

 

3

 

the Guaranteed Obligations shall not be

diminished and the liability of Guarantors hereunder shall not be otherwise

impaired or affected by any of the foregoing.

 

(b)         No invalidity,

irregularity or unenforceability of all or any part of the Guaranteed

Obligations shall affect, impair or be a defense to this Guarantee, nor shall

any other circumstance which might otherwise constitute a defense available to

or legal or equitable discharge of Borrower in respect of any of the Guaranteed

Obligations, or any Guarantor in respect of this Guarantee, affect, impair or

be a defense to this Guarantee.  Without

limitation of the foregoing, the liability of any Guarantor hereunder shall not

be discharged or impaired in any respect by reason of any failure by Agent or

any Lender to perfect or continue perfection of any lien or security interest

in any collateral or any delay by Agent or any Lender in perfecting any such

lien or security interest.  As to

interest, fees and expenses, whether arising before or after the commencement

of any case with respect to Borrower under the United States Bankruptcy Code or

any similar statute, each Guarantor shall be liable therefor, even if Borrower’s

liability for such amounts does not, or ceases to, exist by operation of

law.  Each Guarantor acknowledges that

Agent and Lenders have not made any representations to any Guarantor with

respect to Borrower, any other Guarantor or Obligor or otherwise in connection

with the execution and delivery by any Guarantor of this Guarantee and each

Guarantor is not in any respect relying upon Agent or any Lender or any

statements by Agent or any Lender in connection with this Guarantee.

 

(c)          Until all of the Guaranteed

Obligations have been fully and finally paid and satisfied in full in

immediately available funds and the Financing Agreements have been terminated,

(i) each Guarantor hereby irrevocably and unconditionally waives and

relinquishes all statutory, contractual, common law, equitable and all other

claims against Borrower, any collateral for the Guaranteed Obligations or other

assets of Borrower or any other Obligor, for subrogation, reimbursement,

exoneration, contribution, indemnification, setoff or other recourse in respect

to sums paid or payable to Agent or any Lender by each Guarantor hereunder and

(ii) each Guarantor hereby further irrevocably and unconditionally waives and

relinquishes any and all other benefits which Guarantors might otherwise directly

or indirectly receive or be entitled to receive by reason of any amounts paid

by or collected or due from Guarantors, Borrower or any other Obligor upon the

Guaranteed Obligations or realized from their property.

 

3.                Subordination.  Payment of all amounts now or hereafter owed

to Guarantors by Borrower or any other Obligor is hereby subordinated in right

of payment to the fully and finally payment to Agent and Lenders of the

Guaranteed Obligations and, except as permitted to be paid by Borrower to Guarantors

pursuant to and in accordance with the Loan Agreement, all such amounts and any

security and guarantees therefor are hereby assigned to Agent as security for

the Guaranteed Obligations.

 

4.                Acceleration.  Notwithstanding anything to the contrary contained

herein or any of the terms of any of the other Financing Agreements, the

liability of Guarantors for the entire Guaranteed Obligations shall mature and

become immediately due and payable, even if the liability of Borrower or any

other Obligor does not, upon the occurrence of any act, condition or event

which constitutes an Event of Default as such term is defined in the Loan

Agreement.

 

4

 

5.                Account Stated.  The books and records of Agent showing the

account between Agent and Borrower shall be admissible in evidence in any

action or proceeding against or involving Guarantors as prima facie evidence of

the items therein set forth, and the monthly statements of Agent rendered to

Borrower, to the extent to which no written objection is made within thirty

(30) days from the date of sending thereof to Borrower, shall be deemed

conclusively correct and constitute an account stated between Lender and

Borrower and be binding on Guarantors.

 

6.                Termination.  This Guarantee is continuing, unlimited,

absolute and unconditional.  All

Guaranteed Obligations shall be conclusively presumed to have been created in

reliance on this Guarantee.  Each

Guarantor shall continue to be liable hereunder until the earlier to occur of

the following:  (a) subject to the terms

of Section 7 of this Guarantee, the Guaranteed Obligations, other than

unasserted contingent indemnification obligations, have been paid and satisfied

in full in cash or other immediately available funds and (b) one of Agent’s

officers actually receives a written termination notice from a Guarantor sent

to Agent at its address set forth above by certified mail, return receipt

requested and thereafter as set forth below. 

Such notice received by Agent from any one of Guarantors shall not

constitute a revocation or termination of this Guarantee as to any of the other

Guarantors.  Revocation or termination

hereof by any Guarantor shall not affect, in any manner, the rights of Agent or

any obligations or duties of any Guarantor (including the Guarantor which may

have sent such notice) under this Guarantee with respect to (a) Guaranteed

Obligations which have been created, contracted, assumed or incurred prior to

the receipt by Agent of such written notice of revocation or termination as

provided herein, including, without limitation, (i) all amendments, extensions,

renewals and modifications of such Guaranteed Obligations (whether or not

evidenced by new or additional agreements, documents or instruments executed on

or after such notice of revocation or termination), (ii) all interest, fees and

similar charges accruing or due on and after revocation or termination, and

(iii) all reasonable attorneys’ fees and legal expenses, costs and other

expenses paid or incurred on or after such notice of revocation or termination

in attempting to collect or enforce any of such Guaranteed Obligations against

Borrower, Guarantors or any other Obligor (whether or not suit be brought), or

(b) Guaranteed Obligations which have been created, contracted, assumed or

incurred after the receipt by Agent of such written notice of revocation or

termination as provided herein pursuant to any contract entered into by Agent

or any Lender prior to receipt of such notice. 

The sole effect of such revocation or termination by any Guarantor shall

be to exclude from this Guarantee the liability of such Guarantor for those

Guaranteed Obligations arising after the date of receipt by Agent of such

written notice which are unrelated to Guaranteed Obligations arising or

transactions entered into prior to such date. 

Without limiting the foregoing, this Guarantee may not be terminated and

shall continue so long as the Loan Agreement shall be in effect (whether during

its original term or any renewal, substitution or extension thereof).

 

7.                Reinstatement.  If after receipt of any payment of, or

proceeds of collateral applied to the payment of, any of the Guaranteed

Obligations, Agent or any Lender is required to surrender or return such

payment or proceeds to any Person for any reason, then the Guaranteed

Obligations intended to be satisfied by such payment or proceeds shall be

reinstated and continue and this Guarantee shall continue in full force and

effect as if such payment or proceeds had not been received by Agent or such

Lender.  Each Guarantor shall be liable

to pay to Agent and Lenders, and does indemnify and hold

 

5

 

Agent and Lenders harmless for the amount of

any payments or proceeds surrendered or returned. This Section 7 shall remain

effective notwithstanding any contrary action which may be taken by Agent or

any Lender in reliance upon such payment or proceeds.  This Section 7 shall survive the termination or revocation of

this Guarantee.

 

8.                Amendments and

Waivers.  Neither this Guarantee nor

any provision hereof shall be amended, modified, waived or discharged orally or

by course of conduct, but only by a written agreement signed by an authorized

officer of Agent.  Agent shall not by

any act, delay, omission or otherwise be deemed to have expressly or impliedly

waived any of its rights, powers and/or remedies unless such waiver shall be in

writing and signed by an authorized officer of Agent.  Any such waiver shall be enforceable only to the extent specifically

set forth therein.  A waiver by Agent of

any right, power and/or remedy on any one occasion shall not be construed as a

bar to or waiver of any such right, power and/or remedy which Agent would

otherwise have on any future occasion, whether similar in kind or otherwise.

 

9.                Existence,

Power and Authority.  Each Guarantor

is an entity duly organized or formed and in good standing under the laws of

its state or other jurisdiction of incorporation and is duly qualified as a

foreign entity and in good standing in all states or other jurisdictions where

the nature and extent of the business transacted by it or the ownership of

assets makes such qualification necessary, except for those jurisdictions in

which the failure to so qualify would not have a material adverse effect on the

financial condition, results of operation or businesses of any Guarantor or the

rights of Agent and Lenders hereunder or under any of the other Financing

Agreements.  The execution, delivery and

performance of this Guarantee is within the corporate powers of each Guarantor,

have been duly authorized and are not in contravention of law or the terms of

the certificates of incorporation, by-laws, or other organizational

documentation of each Guarantor, or any indenture, agreement or undertaking to

which any Guarantor is a party or by which any Guarantor or its property are

bound.  This Guarantee constitutes the

legal, valid and binding obligation of each Guarantor enforceable in accordance

with its terms, except as the enforceability thereof may be limited by

bankruptcy, insolvency or similar laws of general application affecting the

enforceability of creditors’ rights generally or by general principles of

equity limiting the availability of equitable remedies.  Any one of Guarantors signing this Guarantee

shall be bound hereby whether or not any of the other Guarantors or any other

person signs this Guarantee at any time.

 

10.          Governing Law; Choice

of Forum; Service of Process; Jury Trial Waiver.

 

(a)          The validity,

interpretation and enforcement of this Guarantee and any dispute arising out of

the relationship between any Guarantor or Agent or any Lender, whether in

contract, tort, equity or otherwise, shall be governed by the internal laws of

the State of Florida excluding any principles of conflicts of laws or other

rule that would cause the application of the law of any jurisdiction other than

the laws of the State of Florida.

 

(b)         Each Guarantor hereby

irrevocably consents and submits to the non-exclusive jurisdiction of the Circuit

Court of Dade County, Florida and the United States District Court for the

 

6

 

Southern District of Florida and waives any

objection based on venue or forum non conveniens with respect to any action

instituted therein arising under this Guarantee or any of the other Financing

Agreements or in any way connected with or related or incidental to the

dealings of any Guarantor and Agent or any Lender in respect of this Guarantee

or any of the other Financing Agreements or the transactions related hereto or

thereto, in each case whether now existing or hereafter arising and whether in

contract, tort, equity or otherwise, and agrees that any dispute arising out of

the relationship between any Guarantor or any Borrower and Agent or any Lender

or the conduct of any such persons in connection with this Guarantee, the other

Financing Agreements or otherwise shall be heard only in the courts described

above (except that Agent and Lenders shall have the right to bring any action

or proceeding against any Guarantor or its property in the courts of any other

jurisdiction which Agent deems necessary or appropriate in order to realize on

collateral at any time granted by any Borrower or any Guarantor to Agent or any

Lender or to otherwise enforce its or their rights against any Guarantor or its

property).

 

(c)          Each Guarantor hereby

waives personal service of any and all process upon it and consents that all

such service of process may be made by certified mail (return receipt requested)

directed to its address set forth on the signature pages hereof and service so

made shall be deemed to be completed five (5) days after the same shall have

been so deposited in the U.S. mails, or, at Agent’s option, by service upon any

Guarantor in any other manner provided under the rules of any such courts.

 

(d)         EACH GUARANTOR HEREBY

WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF

ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE OTHER FINANCING

AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE

DEALINGS OF ANY GUARANTOR AND AGENT OR ANY LENDER IN RESPECT OF THIS GUARANTEE

OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR

THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN

CONTRACT, TORT, EQUITY OR OTHERWISE. 

EACH GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,

ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND

THAT ANY GUARANTOR OR AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS

AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY GUARANTOR

AND AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

(e)          Notwithstanding any

provision contained herein, Agent and Lenders shall not have any liability to

any Guarantor (whether in tort, contract, equity or otherwise) for losses

suffered by such Guarantor in connection with, arising out of, or in any way

related to the transactions or relationships contemplated by this Guarantee, or

any act, omission or event occurring in connection herewith, unless it is

determined by a final and non-appealable judgment or court order binding on

Agent or such Lender that the losses were the result of acts or omissions

constituting gross negligence or willful misconduct. In any such litigation,

Agent and Lenders shall be entitled to the benefit of the rebuttable

presumption

 

7

 

that it acted in good faith and with the

exercise of ordinary care in the performance by it of the terms of the Loan

Agreement and the other Financing Agreements.

 

11.          Notices.  All notices, requests and demands hereunder

shall be in writing and deemed to have been given or made:  if delivered in person, immediately upon

delivery; if by facsimile transmission, immediately upon sending and upon

confirmation of receipt; if by nationally recognized overnight courier service

with instructions to deliver the next business day, one (1) business day after

sending; and if by certified mail, return receipt requested, five (5) days

after mailing.  All notices, requests

and demands upon the parties are to be given to the following addresses (or to

such other address as any party may designate by notice in accordance with this

Section):

 

	

  If to Guarantor:

  	

   

  	

  Mackie Designs Inc.

  
	

   

  	

   

  	

  16220 Woodinville-Redmond Rd., N.E.

  
	

   

  	

   

  	

  Attention: Chief Financial Officer

  
	

   

  	

   

  	

  Telephone No.: 425-487-4335

  
	

   

  	

   

  	

  Telecopy No.: 425-483-6595

  
	

   

  	

   

  	

   

  
	

  with a copy

  to:

  	

   

  	

  Sun Capital Partners Management, LLC

  
	

   

  	

   

  	

  5355 Town Center Road, Suite 802

  
	

   

  	

   

  	

  Boca Raton, Florida 33486

  
	

   

  	

   

  	

  Attention:

  	

  Marc J. Leder,

  
	

   

  	

   

  	

   

  	

  Rodger R. Krouse and

  
	

   

  	

   

  	

   

  	

  C. Deryl Couch, Esq.

  
	

   

  	

   

  	

  Telephone No.: 561-394-0550

  
	

   

  	

   

  	

  Telecopier No.: 561-394-0540

  
	

   

  	

   

  	

   

  
	

  with a copy to:

  	

   

  	

  Kirkland & Ellis

  
	

   

  	

   

  	

  200 East Randolph Drive

  
	

   

  	

   

  	

  Chicago, Illinois

  
	

   

  	

   

  	

  Attention: Francesco Penati, Esq.

  
	

   

  	

   

  	

  Telephone No.: 312-861-2000

  
	

   

  	

   

  	

  Telecopier No.: 312-861-2200

  
	

   

  	

   

  	

   

  
	

  If to Agent:

  	

   

  	

  Congress Financial Corporation

  
	

   

  	

   

  	

  (Florida)

  
	

   

  	

   

  	

  777 Brickell Avenue

  
	

   

  	

   

  	

  Miami, Florida 33131

  
	

   

  	

   

  	

  Attention: Portfolio Manager

  
	

   

  	

   

  	

  Telephone No.:305-371-6671

  
	

   

  	

   

  	

  Telecopy No.:305-371-9456

  

 

12.          Partial Invalidity.  If any provision of this Guarantee is held

to be invalid or unenforceable, such invalidity or unenforceability shall not

invalidate this Guarantee as a whole, but this

 

8

 

Guarantee shall be construed as though it did

not contain the particular provision held to be invalid or unenforceable and

the rights and obligations of the parties shall be construed and enforced only

to such extent as shall be permitted by applicable law.

 

13.          Entire Agreement.  This Guarantee represents the entire

agreement and understanding of this parties concerning the subject matter

hereof, and supersedes all other prior agreements, understandings, negotiations

and discussions, representations, warranties, commitments, proposals, offers

and contracts among the parties concerning the subject matter hereof, whether

oral or written.

 

14.          Successors and

Assigns.  This Guarantee shall be

binding upon Guarantors and their respective successors and assigns and shall

inure to the benefit of Agent and each Lender and their successors, endorsees,

transferees and assigns.  The

liquidation, dissolution or termination of any Guarantor shall not terminate

this Guarantee as to such entity or as to any of the other Guarantors.

 

15.          Construction.  All references to the term “Guarantors”

wherever used herein shall mean each and all of Guarantors and their respective

successors and assigns, individually and collectively, jointly and severally

(including, without limitation, any receiver, trustee or custodian for any

Guarantor or any of their respective assets or any Guarantor in its capacity as

debtor or debtor-in-possession under the United States Bankruptcy Code or any similar

law).  All references to the term

“Agent” wherever used herein shall mean Agent and its successors and

assigns.  All references to the term

“Lender” wherever used herein shall mean Lender and its successors and

assigns.  All references to the term “Borrower”

wherever used herein shall mean Borrower and its successors and assigns

(including, without limitation, any receiver, trustee or custodian for Borrower

or any of its assets or Borrower in its capacity as debtor or

debtor-in-possession under the United States Bankruptcy Code or any similar

law).  All references to the term

“Person” or “person” wherever used herein shall mean any individual, sole

proprietorship, partnership, corporation (including, without limitation, any

corporation which elects subchapter S status under the Internal Revenue Code of

1986, as amended), limited liability company, limited liability partnership,

business trust, unincorporated association, joint stock corporation, trust,

joint venture or other entity or any government or any agency or

instrumentality of political subdivision thereof.  All references to the plural shall also mean the singular and to

the singular shall also mean the plural.

 

(REMAINDER OF

PAGE INTENTIONALLY LEFT BLANK)

 

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IN WITNESS

WHEREOF, each Guarantor has executed and delivered this Guarantee as of the day

and year first above written.

 

	

   

  	

  MACKIE DESIGNS INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  James T. Engen

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

  President & CEO

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  MACKIE DESIGNS MANUFACTURING, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  James T. Engen

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

  President

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SIA SOFTWARE COMPANY, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  James T. Engen

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

  President

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  MACKIE INVESTMENT CO.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  James T. Engen

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  Title:

  	

  PresidentExhibit

10.9

 

 

 

 

SECOND AMENDED AND RESTATED

SUBORDINATED CREDIT AGREEMENT

 

 

Between and Among

 

 

U.S. BANK NATIONAL

ASSOCIATION

 

 

as Lender

 

 

MACKIE DESIGNS INC.

 

as Borrower

 

and

 

MACKIE DESIGNS MANUFACTURING, INC.,

SIA SOFTWARE COMPANY, INC.,

and MACKIE INVESTMENT CO.

 

 

as Guarantors

 

 

Dated March 31, 2003

 

 

 

 

TABLE OF

CONTENTS

 

	

  RECITALS

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  ARTICLE I

  	

  DEFINITIONS

  
	

   

  	

   

  	

   

  
	

  Section 1.1

  	

   

  	

  Defined Terms

  
	

   

  	

   

  	

   

  
	

  Section 1.2

  	

   

  	

  Accounting Terms

  
	

   

  	

   

  	

   

  
	

  Section 1.3

  	

   

  	

  Rules of Construction

  
	

   

  	

   

  	

   

  
	

  Section 1.4

  	

   

  	

  Incorporation of Recitals

  
	

   

  	

   

  	

   

  
	

  ARTICLE II

  	

  THE NEW TERM LOAN

  
	

   

  	

   

  	

   

  
	

  Section 2.1

  	

   

  	

  The New Term Loan

  
	

   

  	

   

  	

   

  
	

  Section 2.2

  	

   

  	

  Interest Rates

  
	

   

  	

   

  	

   

  
	

  Section 2.3

  	

   

  	

  Monthly Cash Interest Payments

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (a)

  	

  Minimum Interest Payments

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (b)

  	

  Additional Interest Payments

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (c)

  	

  Possible Default Interest

  Payments

  
	

   

  	

   

  	

   

  
	

  Section 2.4

  	

   

  	

  Effect of Failure to Make an Interest

  Payment

  
	

   

  	

   

  	

   

  
	

  Section 2.5

  	

   

  	

  Loan Fees

  
	

   

  	

   

  	

   

  
	

  Section 2.6

  	

   

  	

  Annual Excess Cash Flow Payments

  
	

   

  	

   

  	

   

  
	

  Section 2.7

  	

   

  	

  Procedure for Establishing the Annual

  Excess Cash Flow Payment Amount

  
	

   

  	

   

  	

   

  
	

  Section 2.8

  	

   

  	

  Information Regarding Excess

  Availability

  
	

   

  	

   

  	

   

  
	

  Section 2.9

  	

   

  	

  Maturity Date of the New Term Loan

  
	

   

  	

   

  	

   

  
	

  Section 2.10

  	

   

  	

  No Payments in Contravention of the

  Intercreditor Agreement

  
	

   

  	

   

  	

   

  
	

  ARTICLE III

  	

  CONDITIONS OF LENDING

  
	

   

  	

   

  	

   

  
	

  Section 3.1

  	

   

  	

  Conditions Precedent

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (a)

  	

  Required Paydown

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (b)

  	

  Elimination

  of U.S. Bank’s Letter of Credit Exposure

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (c)

  	

  Documents and Agreements

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (d)

  	

  Execution of the CFC

  Loan Agreement and the Intercreditor Agreement

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (e)

  	

  Execution of the Subordination

  Agreements

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (f)

  	

  No Litigation

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (g)

  	

  Lien Perfection

  
					

 

i

 

	

   

  	

   

  	

  (h)

  	

  Payment of Attorney Fees

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (i)

  	

  No Defaults

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (j)

  	

  Other Information

  
	

   

  	

   

  	

   

  
	

  ARTICLE IV

  	

  COLLATERAL FOR MACKIE’S OBLIGATIONS

  
	

   

  	

   

  	

   

  
	

  Section 4.1

  	

   

  	

  The New Security Agreements

  
	

   

  	

   

  	

   

  
	

  Section 4.2

  	

   

  	

  The New Guaranties

  
	

   

  	

   

  	

   

  
	

  Section 4.3

  	

   

  	

  Other Documents

  
	

   

  	

   

  	

   

  
	

  Section 4.4

  	

   

  	

  Appraisals and Collateral Examinations

  
	

   

  	

   

  	

   

  
	

  ARTICLE V

  	

  REPRESENTATIONS AND WARRANTIES

  
	

   

  	

   

  	

   

  
	

  Section 5.1

  	

   

  	

  Corporate Existence, Power and

  Authority

  
	

   

  	

   

  	

   

  
	

  Section 5.2

  	

   

  	

  Name; State of Organization; Chief

  Executive Office; Collateral Locations

  
	

   

  	

   

  	

   

  
	

  Section 5.3

  	

   

  	

  Financial Statements; No Material

  Adverse Change

  
	

   

  	

   

  	

   

  
	

  Section 5.4

  	

   

  	

  Priority of Liens; Title to Properties

  
	

   

  	

   

  	

   

  
	

  Section 5.5

  	

   

  	

  Tax Returns

  
	

   

  	

   

  	

   

  
	

  Section 5.6

  	

   

  	

  Litigation

  
	

   

  	

   

  	

   

  
	

  Section 5.7

  	

   

  	

  Compliance with Other Agreements and

  Applicable Laws

  
	

   

  	

   

  	

   

  
	

  Section 5.8

  	

   

  	

  Environmental Compliance

  
	

   

  	

   

  	

   

  
	

  Section 5.9

  	

   

  	

  Employee Benefits

  
	

   

  	

   

  	

   

  
	

  Section 5.10

  	

   

  	

  Bank Accounts

  
	

   

  	

   

  	

   

  
	

  Section 5.11

  	

   

  	

  Intellectual Property

  
	

   

  	

   

  	

   

  
	

  Section 5.12

  	

   

  	

  Subsidiaries.  Affiliates, Capitalization; Solvency

  
	

   

  	

   

  	

   

  
	

  Section 5.13

  	

   

  	

  Labor Disputes

  
	

   

  	

   

  	

   

  
	

  Section 5.14

  	

   

  	

  Restrictions on Subsidiaries

  
	

   

  	

   

  	

   

  
	

  Section 5.15

  	

   

  	

  Material Contracts

  
	

   

  	

   

  	

   

  
	

  Section 5.16

  	

   

  	

  Payable Practices; Retention of Title

  
	

   

  	

   

  	

   

  
	

  Section 5.17

  	

   

  	

  Acquisition of Purchased Stock

  
	

   

  	

   

  	

   

  
	

  Section 5.18

  	

   

  	

  Accuracy and Completeness of

  Information

  
	

   

  	

   

  	

   

  
	

  Section 5.19

  	

   

  	

  Survival of Warranties:  Cumulative

  

 

ii

 

	

  ARTICLE VI

  	

  AFFIRMATIVE AND NEGATIVE COVENANTS

  
	

   

  	

   

  
	

  Section 6.1

  	

   

  	

  Maintenance of Existence

  
	

   

  	

   

  	

   

  
	

  Section 6.2

  	

   

  	

  New Collateral Locations

  
	

   

  	

   

  	

   

  
	

  Section 6.3

  	

   

  	

  Compliance with Laws and Regulations

  
	

   

  	

   

  	

   

  
	

  Section 6.4

  	

   

  	

  Payment of Taxes and Claims

  
	

   

  	

   

  	

   

  
	

  Section 6.5

  	

   

  	

  Insurance

  
	

   

  	

   

  	

   

  
	

  Section 6.6

  	

   

  	

  Financial Statements and Other

  Information

  
	

   

  	

   

  	

   

  
	

  Section 6.7

  	

   

  	

  Sale of Assets; Consolidation, Merger,

  or Dissolution

  
	

   

  	

   

  	

   

  
	

  Section 6.8

  	

   

  	

  Encumbrances

  
	

   

  	

   

  	

   

  
	

  Section 6.9

  	

   

  	

  Indebtedness

  
	

   

  	

   

  	

   

  
	

  Section 6.10

  	

   

  	

  Loans and Investments

  
	

   

  	

   

  	

   

  
	

  Section 6.11

  	

   

  	

  Dividends and Redemptions

  
	

   

  	

   

  	

   

  
	

  Section 6.12

  	

   

  	

  Transactions with Affiliates

  
	

   

  	

   

  	

   

  
	

  Section 6.13

  	

   

  	

  Compliance with ERISA

  
	

   

  	

   

  	

   

  
	

  Section 6.14

  	

   

  	

  End of Fiscal Years:  Fiscal Quarters

  
	

   

  	

   

  	

   

  
	

  Section 6.15

  	

   

  	

  Change in Business

  
	

   

  	

   

  	

   

  
	

  Section 6.16

  	

   

  	

  Limitation of Restrictions Affecting

  Subsidiaries

  
	

   

  	

   

  	

   

  
	

  Section 6.17

  	

   

  	

  EBITDA

  
	

   

  	

   

  	

   

  
	

  Section 6.18

  	

   

  	

  Capital Expenditures

  
	

   

  	

   

  	

   

  
	

  Section 6.19

  	

   

  	

  License Agreements

  
	

   

  	

   

  	

   

  
	

  Section 6.20

  	

   

  	

  After Acquired Real Property

  
	

   

  	

   

  	

   

  
	

  Section 6.21

  	

   

  	

  New Subsidiaries

  
	

   

  	

   

  	

   

  
	

  Section 6.22

  	

   

  	

  Dissolution of Inactive Domestic

  Subsidiaries

  
	

   

  	

   

  	

   

  
	

  Section 6.23

  	

   

  	

  Costs and Expenses

  
	

   

  	

   

  	

   

  
	

  Section 6.24

  	

   

  	

  Further Assurances

  
	

   

  	

   

  	

   

  
	

  ARTICLE VII

  	

  EVENTS OF DEFAULT AND REMEDIES

  
	

   

  	

   

  	

   

  
	

  Section 7.1

  	

   

  	

  Events of Default

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (a)

  	

  Failure to Pay

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (b)

  	

  Breach of Certain Covenants

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (c)

  	

  Breach of Warranty

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (d)

  	

  Revocation of Agreements

  

 

iii

 

	

   

  	

   

  	

  (e)

  	

  Judgment

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (f)

  	

  Dissolution

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (g)

  	

  Assignment for Benefit of Creditors

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (h)

  	

  Involuntary Bankruptcy

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (i)

  	

  Voluntary Bankruptcy

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (j)

  	

  Default on Material Indebtedness

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (k)

  	

  Enforceability Challenge

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (l)

  	

  ERISA Noncompliance

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (m)

  	

  Change of Control

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (n)

  	

  Enforcement Proceeding

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (o)

  	

  Material Adverse Effect

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (p)

  	

  EAW Fire Proceeding

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  (q)

  	

  Other Defaults

  
	

   

  	

   

  	

   

  
	

  Section 7.2

  	

   

  	

  Consequences of Default

  
	

   

  	

   

  	

   

  
	

  Section 7.3

  	

   

  	

  Remedies Following Acceleration

  
	

   

  	

   

  	

   

  
	

  Section 7.4

  	

   

  	

  U.S. Bank’s Rights Subject to

  Limitations of the Intercreditor Agreement

  
	

   

  	

   

  	

   

  
	

  ARTICLE VIII

  	

  MISCELLANEOUS TERMS AND CONDITIONS

  
	

   

  	

   

  	

   

  
	

  Section 8.1

  	

   

  	

  No Waivers; Remedies Cumulative

  
	

   

  	

   

  	

   

  
	

  Section 8.2

  	

   

  	

  Governing Law

  
	

   

  	

   

  	

   

  
	

  Section 8.3

  	

   

  	

  Consent to Jurisdiction and Venue;

  Waiver of Immunities

  
	

   

  	

   

  	

   

  
	

  Section 8.4

  	

   

  	

  Notices

  
	

   

  	

   

  	

   

  
	

  Section 8.5

  	

   

  	

  Indemnification of U.S. Bank

  
	

   

  	

   

  	

   

  
	

  Section 8.6

  	

   

  	

  Amendments and Waivers

  
	

   

  	

   

  	

   

  
	

  Section 8.7

  	

   

  	

  Counterparts

  
	

   

  	

   

  	

   

  
	

  Section 8.8

  	

   

  	

  Waiver of Jury Trial

  
	

   

  	

   

  	

   

  
	

  Section 8.9

  	

   

  	

  Assignment of Rights or Obligations

  
	

   

  	

   

  	

   

  
	

  Section 8.10

  	

   

  	

  Severability

  
	

   

  	

   

  	

   

  
	

  Section 8.11

  	

   

  	

  Entire Agreement

  
	

   

  	

   

  	

   

  
	

  Section 8.12

  	

   

  	

  Interpretation

  

 

iv

 

	

  Section 8.13

  	

   

  	

  Headings

  
	

   

  	

   

  	

   

  
	

  Section 8.14

  	

   

  	

  Construction

  
	

   

  	

   

  	

   

  
	

  Section 8.15

  	

   

  	

  Statutory Notice

  

 

v

 

SECOND AMENDED AND RESTATED 

SUBORDINATED CREDIT AGREEMENT

 

This

Second Amended and Restated Subordinated Credit Agreement (the “Agreement”) is

entered into on March 31, 2003, between and among U.S. BANK NATIONAL

ASSOCIATION (“U.S. Bank”); MACKIE DESIGNS INC. (“Mackie”); and MACKIE

DESIGNS MANUFACTURING, INC., SIA SOFTWARE COMPANY, INC, and MACKIE INVESTMENT

CO. (collectively, the “Guarantors”).

 

RECITALS

 

A.                                   Mackie and

U.S. Bank are parties to that certain Amended and Restated Credit

Agreement dated as of April 30, 2002 (as modified and amended by the First

Amendment to Amended and Restated Credit Agreement dated as of

September 19, 2002, and by the Forbearance Agreement dated as of

February 21, 2003, the “Existing Credit Agreement”)

 

B.                                     Mackie and

Congress Financial Corporation (Florida), in its capacity as agent for the

Lenders (as defined in the CFC Loan Agreement) (“CFC”) are prepared to enter

into financing arrangements whereby the Lenders will extend a revolving credit

facility and a term loan to Mackie. 

Contemporaneously with the closing of the transaction with CFC, Mackie

is prepared to repay all but $11,000,000 of the amount it owes U.S. Bank

pursuant to the Existing Credit Agreement and the promissory notes executed by

Mackie in connection therewith, provided that U.S. Bank makes an

$11,000,000 term loan to Mackie (the “New Term Loan”) on the basis set forth in

this Agreement.

 

C.                                     This Agreement

sets forth the terms and conditions on which U.S. Bank will extend the New

Term Loan to Mackie.

 

NOW,

THEREFORE, for valuable consideration, the receipt and sufficiency of which

hereby are acknowledged, U.S. Bank and Mackie agree that the Existing

Credit Agreement is and shall be hereby amended and restated as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                      Defined

Terms.  The following terms shall

have the meanings set forth below when used in this Agreement:

 

“Additional

Interest Payment” has the meaning specified in Section 2.3 of this

Agreement.

 

“Adjusted

EBITDA” means for any year EBITDA of Mackie and its Subsidiaries less

(a) cash payments of principal and interest on debt during the year in

question (excluding principal payments on the CFC Facility, other than payments

accompanied by a permanent reduction in availability under the CFC Facility,

and payments made in respect of Banco Mediocredito debt payable in

June 2003 with cash reserves that were set aside prior to the start of

Mackie’s 

 

1

 

2003 fiscal year),

(b) cash income taxes paid by Mackie and its Subsidiaries during the year

in question, (c) any change in Consolidated Working Capital during the

year in question (which change would be an addition to EBITDA if positive and a

deduction from EBITDA if negative), other than any change resulting from

payments made in respect of Banco Mediocredito debt payable in June 2003

with cash reserves that were set aside prior to the start of Mackie’s 2003

fiscal year, (d) the lesser of (i) unfunded capital expenditures of

Mackie and its Subsidiaries paid in cash during the year in question, or

(ii) the maximum amount of capital expenditures permitted during the year

in question pursuant to the terms of the CFC Loan Agreement, (e) all management

fees paid or accrued, (f) all non-cash credits, and (g) all non-cash income.

 

“Affiliate”

means, with respect to a specified Person, any other Person that directly or

indirectly, through one or more intermediaries, controls or is controlled by or

is under common control with such Person, and without limiting the generality

of the foregoing, includes (a) any Person that beneficially owns or holds

15 percent or more of any class of Voting Stock of such Person or other

equity interests in such Person, (b) any Person of which such Person

beneficially owns or holds 15 percent or more of any class of Voting Stock

or in which such Person beneficially owns or holds 15 percent or more of

the equity interests, and (c) any director or executive officer of such

Person.  For the purposes of this

definition, the term “control” (including with correlative meanings, the terms

“controlled by” and “under common control with”), as used with respect to any

Person, means the possession, directly or indirectly, of the power to direct or

cause the direction of the management and policies of such Person, whether

through the ownership of Voting Stock, by agreement, or otherwise.

 

“Agreement”

means this Amended and Restated Credit Agreement, as amended, modified,

renewed, restated, or supplemented from time to time.

 

“Annual Excess

Cash Flow Amount” has the meaning specified in Section 2.6 of this

Agreement.

 

“Base Amount”

has the meaning specified in Section 6.18 of this Agreement.

 

“Belgian

Guaranty” means the letter (undated) from Mackie and Mackie Designs

(Belgium) BVBA (“Mackie Belgium”) in favor of KBC Bank N.V., with respect to

the outstanding obligations of Sydec NV (as predecessor-in-interest to Mackie

Belgium) to KBC Bank N.V.

 

“Blockage

Period” has the meaning specified in the Intercreditor Agreement.

 

“Business Day”

means any day except a Saturday, Sunday, or other day on which national banks

in the state of Washington are authorized or required by law to close.

 

2

 

“Capital

Expenditures” means all expenditures for, or contracts for expenditures

for, any fixed or capital assets (including, but not limited to, tooling) or

improvements, or for replacements, substitutions, or additions thereto, that

have a useful life of more than one year, including, but not limited to, the

direct or indirect acquisition of such assets by way of offset items or

otherwise and shall include the principal amount of capitalized lease payments.

 

“Capital Leases”

means, as applied to any Person, any lease of (or any agreement conveying the

right to use) any property (whether real, personal, or mixed) by such Person as

lessee that in accordance with GAAP is required to be reflected as a liability

on the balance sheet of such Person.

 

“Capital Stock”

means, with respect to any Person, any and all shares, interests,

participations, or other equivalents (however designated) of such Person’s

capital stock or partnership, limited liability company, or other equity

interests at any time outstanding, and any and all rights, warrants, or options

exchangeable for or convertible into such capital stock or other interests (but

excluding any debt security that is exchangeable for or convertible into such

capital stock).

 

“Cash

Equivalents” means, at any time, (a) any evidence of Indebtedness with

a maturity date of 180 days or less issued or directly and fully

guaranteed or insured by the United States of America or any agency or

instrumentality thereof; provided that the full faith and credit of the United

States of America is pledged in support thereof, (b) certificates of

deposit or bankers’ acceptances with a maturity of 180 days or less of any

financial institution that is a member of the Federal Reserve System having

combined capital and surplus and undivided profits of not less than

$500,000,000; (c) commercial paper (including variable rate demand notes)

with a maturity of 180 days or less issued by an entity (except an

Affiliate of Mackie or any Guarantor) organized under the laws of any state of

the United States of America or the District of Columbia, and rated at least

A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill

Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.;

(d) repurchase obligations with a term of not more than 30 days for

underlying securities of the types described in clause (a) above entered

into with any financial institution having combined capital and surplus and

undivided profits of not less than $500,000,000; (e) repurchase agreements

and reverse repurchase agreements relating to marketable direct obligations

issued or unconditionally guaranteed by the United States of America issued by

any governmental agency thereof and backed by the full faith and credit of the

United States of America maturing within 180 days or less from the date of

acquisition; provided that the terms of such agreements comply with the

guidelines set forth in the Federal Financial Agreements of Depository Institutions

with Securities Dealers and Others, as adopted by the Comptroller of the

Currency on October 31, 1985; and (f) investments in money market

funds and mutual funds that invest substantially all of their assets in

securities of the types described in clauses (a) through (e) above.

 

3

 

“CFC” means

Congress Financial Corporation (Florida) and its successors and assigns and any

replacement lender or agent under the CFC Loan Agreement.

 

“CFC Facility”

means the credit facility extended to Mackie pursuant to the CFC Loan

Agreement.

 

“CFC Loan

Agreement” means the Loan and Security Agreement, dated of even date

herewith, by and among CFC, as Senior Creditor Agent, CFC, and any other

lenders from time to time party thereto, Mackie, and the Guarantors, as the

same may be amended, modified, supplemented, extended, renewed, restated,

refinanced, replaced, or restructured (in whole or in part and including any

agreement with, to, or in favor of any other lender or group of lenders that at

any time refinances, replaces, or succeeds to all or any portion of the

indebtedness evidenced and governed by the CFC Loan Agreement).

 

“Change of

Control” means, other than as permitted in Section 6.7 of this Agreement,

(a) the transfer (in one transaction or a series of transactions) of all

or substantially all of the assets of Mackie or any Guarantor to any Person or

group (as such term is used in Section 13(d)(3) of the Exchange Act);

(b) the liquidation or dissolution of Mackie or any Guarantor or the

adoption of a plan by the stockholders of Mackie or any Guarantor relating to

the dissolution or liquidation of Mackie or such Guarantor; (c) the

acquisition by any Person or group (as such term is used in

Section 13(d)(3) of the Exchange Act), except for one or more Permitted

Holders, of beneficial ownership, directly or indirectly, of a majority of the

voting power of the total outstanding Voting Stock of Mackie or the Board of

Directors of Mackie; (d) during any period of two consecutive years,

individuals who at the beginning of such period constituted the Board of

Directors of Mackie (together with any new directors who have been appointed by

any Permitted Holder, or whose nomination for election by the stockholders of

Mackie, was approved by a vote of at least 66 2/3 percent of the

directors then still in office who were either directors at the beginning of

such period or whose election or nomination for election was previously so

approved) cease for any reason to constitute a majority of the Board of

Directors of Mackie then still in office, unless the new directors have been

appointed by a Permitted Holder; or (e) the failure of Sun Capital

Partners II, L.P. and/or its Affiliates to collectively own and control,

directly or indirectly, more than 50 percent of the total outstanding

Voting Stock of either of Parent or Mackie.

 

“Closing Date”

means the date on which all of the conditions set forth in Section 3.1 of this

Agreement have been satisfied and the New Term Loan is made hereunder, but in

no event shall such date be later than April 20, 2003.

 

“Code”

means the Internal Revenue Code of 1986, as the same now exists or may from

time to time hereafter be amended, modified, recodified, or supplemented,

together with all rules, regulations, and interpretations thereunder or related

thereto.

 

4

 

“Collateral”

means all the personal property, tangible or intangible, now owned or hereafter

acquired, in which U.S. Bank has been or is to be granted a security

interest by Mackie, or any other Person, pursuant to the Security Agreements to

secure the Obligations.

 

“Consolidated

Net Income” means, with respect to any Person for any period, the aggregate

of the net income (loss) of such Person and its Subsidiaries, on a consolidated

basis, for such period (excluding to the extent included therein any

extraordinary and/or one time or unusual and non-recurring gains, or any

non-cash charges, non-cash credits, and non-cash income) after deducting all

charges that should be deducted before arriving at the net income (loss) for

such period and, without duplication, after deducting the Provision for Taxes

for such period, all as determined in accordance with GAAP; provided that

(a) the net income of any Person that is not a Subsidiary or that is

accounted for by the equity method of accounting shall be included only to the

extent of the amount of dividends or distributions paid or payable to such

Person or a Subsidiary of such Person; (b) except to the extent included

pursuant to the foregoing clause, the net income of any Person accrued prior to

the date it becomes a Subsidiary of such Person or is merged into or

consolidated with such Person or any of its Subsidiaries or that Person’s

assets are acquired by such Person or by its Subsidiaries shall be excluded;

and (c) the net income (if positive) of any Subsidiary (other than Mackie

or a Guarantor) to the extent that the declaration or payment of dividends or

similar distributions by such Subsidiary to such Person or to any other

wholly-owned Subsidiary of such Person is not at the time permitted by

operation of the terms of its charter or any agreement, instrument, judgment,

decree, order, statute, rule, or governmental regulation applicable to such Subsidiary

shall be excluded.  For the purposes of

this definition, net income excludes any gain or non-cash loss, together with

any related Provision for Taxes for such gain or non-cash loss, realized upon

the sale or other disposition of any assets that are not sold in the ordinary

course of business (including, without limitation, dispositions pursuant to

sale and leaseback transactions) or of any Capital Stock of such Person or a

Subsidiary of such Person and any net income realized or loss incurred as a result

of changes in accounting principles or the application thereof to such Person.

 

“Consolidated

Working Capital” means (i) current assets of Mackie and its

Subsidiaries on a consolidated basis at the time in question less

(ii) current liabilities of Mackie and its Subsidiaries on a consolidated

basis at such time, all as determined in accordance with GAAP.  The term “Consolidated Working Capital”

shall not include (a) cash, (b) Cash Equivalents, (c) current

maturities of long-term Indebtedness, and (d) deferred taxes.

 

“Default”

means any act, condition, or event that with notice or passage of time

(including applicable grace periods, if any, expressly set forth in Section 7.1

of this Agreement) or both would constitute an Event of Default.

 

“Default Interest

Rate” means 13 percent per annum.

 

5

 

“EAW Fire

Proceeding” means any existing or future action, suit, proceeding or claim

against Mackie or any Guarantor relating to the fire in or around the premises

of Eastern Acoustic Works, Inc., that occurred in 1996.

 

“EBITDA”

means, as to any Person, with respect to any period, an amount equal to

(a) the Consolidated Net Income of such Person and its Subsidiaries for

such period, plus (b) depreciation, amortization, and other non-cash

charges (including, but not limited to, imputed interest, deferred

compensation, and charges associated with impairment of goodwill pursuant to

FASB 142) for such period (to the extent deducted in the computation of

Consolidated Net Income of such Person), all in accordance with GAAP, plus

(c) Interest Expense for such period (to the extent deducted in the

computation of Consolidated Net Income of such Person), plus (d) the

Provision for Taxes for such period (to the extent deducted in the computation

of Consolidated Net Income of such Person), plus (e) management fees paid

or accrued during such period in accordance with Section 6.12(b)(ii) of this

Agreement (to the extent deducted in the computation of Consolidated Net Income

of such Person).

 

“ECF Excess

Availability” means not less than $4,000,000 in Excess Availability for a

30-day period prior to the date on which payment of all or any portion of an

Annual Excess Cash Flow Amount is due and pro-forma taking into account any

payment proposed to be made in respect of an Annual Excess Cash Flow Amount.

 

“Environmental

Laws” means all foreign, federal, state, and local laws (including common

law), legislation, rules, codes, licenses, permits (including any conditions

imposed therein), authorizations, judicial or administrative decisions,

injunctions or agreements between Mackie or any Guarantor and any Governmental

Authority, (a) relating to pollution and the protection, preservation, or

restoration of the environment (including air, water vapor, surface water,

ground water, drinking water, drinking water supply, surface land, subsurface

land, plant and animal life, or any other natural resource), or to occupational

health or safety, (b) relating to the exposure to, or the use, storage, recycling,

treatment, generation, manufacture, processing, distribution, transportation,

handling, labeling, production, release or disposal, or threatened release, of

Hazardous Materials, or (c) relating to all laws with regard to

recordkeeping, notification, disclosure, and reporting requirements respecting

Hazardous Materials.  The term

“Environmental Laws” includes (x) the Federal Comprehensive Environmental

Response, Compensation and Liability Act of 1980, the Federal Superfund

Amendments and Reauthorization Act, the Federal Water Pollution Control Act of

1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal

Resource Conservation and Recovery Act of 1976 (including the Hazardous and

Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the

Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and

Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,

(y) applicable state counterparts to such laws, and (z) any common

law or equitable doctrine that may impose liability or 

 

6

 

obligations for

injuries or damages due to, or threatened as a result of, the presence of or

exposure to any Hazardous Materials.

 

“ERISA”

means the Employee Retirement Income Security Act of 1974, as in effect from

time to time, together with all rules and regulations thereunder or related

thereto.

 

“ERISA

Affiliate” means any person required to be aggregated with Mackie, any

Guarantor, or any of its or their respective Subsidiaries under

Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

“ERISA Event”

means the occurrence of any of the following: 

(a) any “reportable event”, as defined in Section 4043(c) of

ERISA or the regulations issued thereunder, with respect to a Plan for which

the Pension Benefit Guaranty Corporation notice requirement has not been

waived; (b) the adoption of any amendment to a Plan that would require the

provision of security pursuant to Section 401(a)(29) of the Code or

Section 307 of ERISA; (c) the existence with respect to any Plan of

an “accumulated funding deficiency” (as defined in Section 412 of the Code

or Section 302 of ERISA), whether or not waived; (d) the filing

pursuant to Section 412 of the Code or Section 303(d) of ERISA of an

application for a waiver of the minimum funding standard with respect to any

Plan; (e) the occurrence of a non-exempt “prohibited transaction” (within

the meaning of Section 4975 of the Code) or with respect to which Mackie

or any Guarantor or any of its or their respective Subsidiaries could

reasonably be expected to have liability in excess of $250,000; (f) a

complete or partial withdrawal by Mackie, any Guarantor, or any ERISA Affiliate

from a Multiemployer Plan (or a cessation of operations that is treated as such

a withdrawal), or notification that a Multiemployer Plan is in reorganization

that could reasonably be expected to result in liability to Mackie or the

Guarantors in excess of $250,000; (g) the filing of a notice of intent to

terminate a Plan (other than a Multiemployer Plan), the treatment of a Plan

amendment as a termination under Section 4041 or 4041A of ERISA, or the

commencement of proceedings by the Pension Benefit Guaranty Corporation to

terminate a Plan; or (h) the appointment by the Pension Benefit Guaranty

Corporation of a trustee to administer any Plan.

 

“Event of

Default” has the meaning set forth in Section 7.1 of this Agreement.

 

“Excess

Availability” means, as to Mackie, the amount, as determined by CFC,

calculated at any date, equal to: 

(a) the lesser of (i) the Borrowing Base (as that term is

defined in the CFC Loan Agreement) of Mackie and (ii) the Revolving Loan

Limit (as defined in the CFC Loan Agreement) of Mackie (in each case under

clauses (i) and (ii) after giving effect to any Reserves (as that

term is defined in the CFC Loan Agreement) attributable to Mackie other than

Reserves in respect of Letter of Credit Accommodations (as that term is defined

in the CFC Loan Agreement)), minus (b) the sum of (i) the amount of all then

outstanding and unpaid obligations of Mackie under the CFC Loan Agreement plus

(ii) the amount 

 

7

 

of Reserves then

established in respect of Letter of Credit Accommodations for the account of

Mackie.

 

“Exchange Act”

means the Securities Exchange Act of 1934, together with all rules,

regulations, and interpretations thereunder or related thereto.

 

“Existing

Credit Agreement” has the meaning specified in Recital A to this

Agreement and includes any amendments, modifications, renewals, replacements,

or restatements thereof.

 

“GAAP”

means generally accepted accounting principles in the United States of America

as in effect from time to time as set forth in the opinions and pronouncements

of the Accounting Principles Board and the American Institute of Certified

Public Accountants and the statements and pronouncements of the Financial

Accounting Standards Board that are applicable to the circumstances as of the

date of determination consistently applied, except that, (a) for purposes

of Sections 6.17 and 6.18 hereof, GAAP shall be determined on the

basis of such principles in effect on the date hereof and consistent with those

used in the preparation of the most recent audited financial statements delivered

to U.S. Bank prior to the date hereof and (b) if GAAP is used with

respect to a Person that is not incorporated or formed under the laws of the

United States of America or a political subdivision thereof, then GAAP shall

mean the accounting principles, concepts and policies generally adopted and

accepted in the jurisdiction of incorporation of such Person as in effect from

time to time.

 

“Governmental

Authority” means any nation or government, any state, province, or other

political subdivision thereof, any central bank (or similar monetary or

regulatory authority) thereof, and any entity exercising executive,

legislative, judicial, regulatory or administrative functions of or pertaining

to government.

 

“Guaranties”

has the meaning set forth in Section 4.2 of this Agreement and includes all

amendments, modifications, renewals, replacements, or restatements thereof.

 

“Guarantors”

means Mackie Designs Manufacturing Inc., Mackie Investment Co., and SIA

Software Company, Inc., each of which is required to execute and deliver to

U.S. Bank a Guaranty pursuant to the terms of this Agreement.

 

“Hazardous

Materials” means any hazardous, toxic, or dangerous substances, materials,

and wastes, including hydrocarbons (including naturally occurring or man-made

petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde

insulation, radioactive materials, biological substances, polychlorinated

biphenyls, pesticides, herbicides and any other kind and/or type of pollutants

or contaminants (including materials which include hazardous constituents),

sewage, sludge, industrial slag, solvents, and/or any other similar substances,

materials, or wastes and including any other substances,

 

8

 

materials, or

wastes that are or become regulated under any Environmental Law (including any

that are or become classified as hazardous or toxic under any Environmental

Law).

 

“HIG” means

H.I.G. Sun Partners, Inc., a Cayman Islands corporation.

 

“HIG

Subordination Agreement” means the Subordination Agreement, dated of even

date herewith, by and between U.S. Bank and HIG, as acknowledged by US Borrower

and certain of its subsidiaries, as the same now exists and may hereafter be

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

 

“Inactive

Domestic Subsidiaries” means, collectively, Blackstone Technologies, Inc.,

and Mackie Industrial, Inc.

 

“Indebtedness”

means, with respect to any Person, any liability of such Person, whether or not

contingent, (a) in respect of borrowed money (whether or not the recourse

of the lender is to the whole of the assets of such Person or only to a portion

thereof) or evidenced by bonds, notes, debentures, or similar instruments;

(b) representing the balance deferred and unpaid of the purchase price of

any property or services (except any such balance that constitutes an account

payable to a trade creditor (excluding an Affiliate) created, incurred,

assumed, or guaranteed by such Person in the ordinary course of business of

such Person in connection with obtaining goods, materials, or services that is

not overdue from the due date by more than 90 days (or in the case of

accounts payable owing to Amoisonic, 120 days past the due date), unless the

trade payable is being contested in good faith; provided that, for purposes of

computing the amount of accounts payable of any Person owing to Amoisonic under

this definition, the amount of such accounts payable at any such time shall be

reduced by the unpaid accounts of such Person that are owing by Amoisonic at

any such time); (c) representing all obligations as lessee under leases

that have been, or should be, in accordance with GAAP recorded as Capital

Leases; (d) representing any contractual obligation, contingent or

otherwise, of such Person to pay or be liable for the payment of any

indebtedness described in this definition of another Person, including, without

limitation, any such indebtedness, directly or indirectly guaranteed, or any

agreement to purchase, repurchase, or otherwise acquire such indebtedness,

obligation or liability or any security therefor, or to provide funds for the

payment or discharge thereof, or to maintain solvency, assets, level of income,

or other financial condition; (e) representing all obligations with

respect to redeemable stock and redemption or repurchase obligations under any

Capital Stock or other equity securities issued by such Person (excluding

redemption or repurchase obligations that may be triggered solely at the option

of such Person); (f) representing all reimbursement obligations and other

liabilities of such Person with respect to surety bonds (whether bid,

performance, or otherwise), letters of credit, banker’s acceptances, drafts or

similar documents or instruments issued for such Person’s account; (g) representing

all indebtedness of such Person in respect of indebtedness of another Person

for borrowed money or indebtedness of another Person otherwise described in

this definition that is secured by any consensual 

 

9

 

lien, security

interest, collateral assignment, conditional sale, mortgage, deed of trust, or

other encumbrance on any asset of such Person, whether or not such obligations,

liabilities, or indebtedness are assumed by or are a personal liability of such

Person, all as of such time; (h) representing all obligations,

liabilities, and indebtedness of such Person (marked to market) arising under

swap agreements, cap agreements and collar agreements and other agreements or

arrangements designed to protect such person against fluctuations in interest

rates or currency or commodity values; and (i) representing all

obligations owed by such Person under License Agreements with respect to

non-refundable, advance or minimum guarantee royalty payments.

 

“Information

Certificate” shall mean, collectively, the Information Certificates of

Mackie and the Guarantors constituting Exhibit A hereto containing

material information with respect to Mackie and the Guarantors, their

respective businesses and assets provided by or on behalf of Mackie and the

Guarantors to U.S. Bank in connection with the preparation of this

Agreement and the other Loan Documents and the financing arrangements provided

for herein.

 

“Intercreditor

Agreement” means that certain Intercreditor and Subordination Agreement of

even date herewith between U.S. Bank and CFC, and acknowledged by Mackie

and the Guarantors, setting forth their respective rights and obligations with

respect to the indebtedness of Mackie and the Guarantors to U.S. Bank, the

indebtedness of Mackie and the Guarantors pursuant to the CFC Loan Agreement,

and the Collateral.

 

“Interest

Excess Availability” means not less than $6,000,000 in Excess Availability

for a 30-day period prior to the applicable Interest Payment Date and pro-forma

taking into account any Additional Interest Payment proposed to be made on the

Interest Payment Date in question.

 

“Interest

Expense” shall mean, for any period, as to any Person, as determined in

accordance with GAAP, the total interest expense of such Person, whether paid

or accrued during such period (including the interest component of Capital

Leases for such period), including, without limitation, discounts in connection

with the sale of any accounts and bank fees, commissions, discounts, and other

fees and charges owed with respect to letters of credit, banker’s acceptances,

or similar instruments.

 

“Interest

Payment Date” has the meaning specified in Section 2.3(a) of this

Agreement.

 

“License

Agreements” has the meaning specified in Section 5.11 of this Agreement.

 

“Loan Documents”

means this Agreement, the New Term Loan Note, the Security Agreements, and the

Guaranties, together with all other agreements, instruments, and documents

arising out of or relating to this Agreement, or the 

 

10

 

New Term Loan, and

includes all amendments, modifications, renewals, replacements, and

restatements of those documents and instruments.

 

“Losses”

has the meaning specified in Section 6.3(d) of this Agreement.

 

“Mackie”

means Mackie Designs Inc. and any Successor thereof.

 

“Material

Adverse Effect” means a material adverse effect on (a) the financial

condition, business, performance, or operations of Mackie or of Mackie and the

Guarantors (taken as a whole); (b) the legality, validity, or

enforceability of any material provision this Agreement or any material

provision of the other Loan Documents; (c) the legality, validity,

enforceability, perfection, or priority of the security interests and liens of

U.S. Bank upon any Collateral having an aggregate value in excess of

$500,000; (d) any Collateral having an aggregate value in excess of

$500,000; (e) the ability of Mackie and the Guarantors (taken as a whole)

to repay the Obligations, or of Mackie or any Guarantor to perform its

obligations under this Agreement or any of the other Loan Documents as and when

to be performed; or (f) the ability of U.S. Bank to enforce the

Obligations or realize upon any Collateral having an aggregate value in excess

of $500,000, or otherwise with respect to the rights and remedies of

U.S. Bank under this Agreement or any of the other Loan Documents;

provided that, in no event shall the outcome of the EAW Fire Proceeding be

deemed to cause a Material Adverse Effect.

 

“Material

Contract” means any contract or other agreement (other than the Loan

Documents), whether written or oral, to which Mackie or any Guarantor is a

party as to which the breach, nonperformance, cancellation, or failure to renew

by any party thereto would have a Material Adverse Effect.

 

“Maturity Date”

has the meaning specified in Section 2.9 of this Agreement.

 

“Minimum Excess

Availability” mean not less than $2,000,000 in Excess Availability for a

30-day period prior to the applicable Interest Payment Date and pro-forma

taking into account any Minimum Interest Payment or loan fee payment proposed

to be made on the Interest Payment Date in question.

 

“Minimum

Interest Payment” has the meaning specified in Section 2.3(a) of this

Agreement.

 

“Multiemployer

Plan” means a “multi-employer plan” as defined in Section 4001(a)(3)

of ERISA that is or was at any time during the current year or the immediately

preceding six years contributed to by Mackie, any Guarantor, or any ERISA

Affiliate.

 

“Net Cash

Proceeds” means, with respect to any sale or other disposition of assets

permitted under Section 6.7(b) of this Agreement, the aggregate amount of cash

received from time to time by Mackie or any Guarantor in connection 

 

11

 

with such sale or

other disposition after deducting therefrom only (a) legal fees, finder’s

fees, and other similar fees and other commissions, and (b) the amount of

income taxes reasonably estimated to be actually payable by Mackie or such

Guarantor (or the direct or indirect equity holders of Mackie or such

Guarantor) in connection with or as a result of such sale or other disposition.

 

“New Term Loan”

has the meaning specified in Recital B of this Agreement.

 

“New Term Loan

Note” has the meaning specified in Section 2.1 of this Agreement and

includes any amendments, modifications, renewals, restatements, or supplements

thereof.

 

“Obligations”

means any and all obligations, liabilities, and indebtedness of every kind,

nature, and description owing by Mackie to U.S. Bank and/or any of its

Affiliates, including principal, interest, charges, fees, costs, and expenses,

however evidenced, whether as principal, surety, endorser, guarantor, or

otherwise, arising under this Agreement or any of the other Loan Documents,

whether now existing or hereafter arising, whether arising before, during, or

after the initial or any renewal term of this Agreement, or after the

commencement of any case with respect to Mackie under the United States

Bankruptcy Code or any similar statute (including the payment of interest and

other amounts that would accrue and become due but for the commencement of such

case, whether or not such amounts are allowed or allowable in whole or in part

in such case), whether direct or indirect, absolute or contingent, joint or

several, due or not due, primary or secondary, liquidated or unliquidated, or

secured or unsecured.

 

“Parent”

means Sun Mackie, LLC, and its Successors and assigns.

 

“Permits”

has the meaning specified in Section 5.7(b) of this Agreement.

 

“Permitted

Holder” means the persons listed on the Schedule  of Permitted Holders

attached to this Agreement and their respective successors and assigns

(including officers, directors, and employees of Mackie and the Guarantors that

replace officers, directors, and employees of Mackie and the Guarantors that

held Capital Stock of Mackie on the date hereof).

 

“Person”

means any individual, sole proprietorship, partnership, corporation (including

any corporation which elects subchapter S status under the Code), limited

liability company, limited liability partnership, business trust,

unincorporated association, joint stock corporation, trust, joint venture, or

other entity, or any government or any agency or instrumentality or political

subdivision thereof.

 

“Plan”

means an employee benefit plan (as defined in Section 3(3) of ERISA) that

Mackie or any Guarantor sponsors, maintains, or to which it makes, is making,

or is obligated to make contributions, or, in the case of a 

 

12

 

Multiemployer

Plan, has made contributions at any time during the immediately preceding six

plan years.

 

“Provision for

Taxes” means an amount equal to all taxes imposed on or measured by net

income, whether federal, state, county, or local, and whether foreign or

domestic, that are paid or payable by any Person in respect of any period in

accordance with GAAP.

 

“Purchase

Agreements” means, individually and collectively, the Stock Purchase

Agreement, dated January 16, 2003, among Parent, Mackie, and Sellers, as

amended by the First Amendment dated as of February 7, 2003, the Second

Amendment dated as of February 13, 2003, and the Third Amendment dated as

of February 21, 2003, together with bills of sale, quitclaim deeds, assignment

and assumption agreements, and such other instruments of transfer as are

referred to therein and all side letters with respect thereto, and all

agreements, documents, and instruments executed and/or delivered in connection

therewith, as all of the foregoing now exist or may hereafter be amended,

modified, supplemented, extended, renewed, restated, or replaced.

 

“Purchased

Stock” means all of the issued and outstanding shares of Capital Stock of

Mackie acquired pursuant to the Purchase Agreements.

 

“Quarterly

Amount” has the meaning specified in Section 6.12(b)(ii) of this Agreement.

 

“Randolph”

means Randolph Street Partners V, an Illinois general partnership.

 

“Randolph

Subordination Agreement” means the Subordination Agreement, dated of even

date herewith, by and between U.S. Bank and Randolph, as acknowledged by Mackie

and certain of its subsidiaries, as the same now exists and may hereafter be

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

 

“Security

Agreements” has the meaning set forth in Section 4.1 of this Agreement and

includes all amendments, modifications, renewals, replacements, or restatements

thereof.

 

“Sellers”

means (a) Gregory Mackie, individually and as the sole trustee of certain

trusts described in the Purchase Agreements, and (b) C. Marcus

Sorenson and Judith B. Sorenson, as co-trustees of certain trusts

described in the Purchase Agreements.

 

“Solvent”

means, at any time with respect to any Person, that at such time such Person

(a) is able to pay its debts as they mature and has (and has a reasonable

basis to believe it will continue to have) sufficient capital (and not

unreasonably small capital) to carry on its business consistent with its

practices as of the date hereof, and (b) the assets and properties of such

Person at a fair valuation (and including as assets for this purpose at a fair

valuation all rights of subrogation, contribution or indemnification arising

pursuant to any guarantees 

 

13

 

given by such

Person) are greater than the Indebtedness of such Person, and including

subordinated and contingent liabilities computed at the amount which, such

person has a reasonable basis to believe, represents an amount than can

reasonably be expected to become an actual or matured liability (and including

as to contingent liabilities arising pursuant to any guarantee the face amount

of such liability as reduced to reflect the probability of it becoming a

matured liability).

 

“Specified

Foreign Subsidiaries” means, collectively, Mackie Designs (France) S.A.,

Mackie Designs (Deutschland) GmbH and Mackie Designs (Netherlands) B.V.; each

sometimes being referred to herein as a “Specified Foreign Subsidiary”;

provided that Mackie Designs (France) S.A. and Mackie Designs (Deutschland)

GmbH shall cease to be Specified Foreign Subsidiaries commencing upon the

Triggering Date.

 

“Subordinated

Lenders” means, collectively, the Parent, Randolph, and HIG and each of

their affiliates; each sometimes being referred to herein individually as a “Subordinated

Lender”.

 

“Subordinated

Notes” means collectively, the separate subordinated promissory notes, each

dated as of the date hereof, issued by Mackie in favor of Subordinated Lenders

in the original aggregate principal amount of $4,000,000; each sometimes being

referred to herein individually as a “Subordinated Note”.

 

“Subordination

Agreements” means collectively, the Sun Mackie Subordination Agreement, the

HIG Subordination Agreement, and the Randolph Subordination Agreement; each

sometimes being referred to herein individually as a “Subordination Agreement”.

 

“Subsidiary”

or “subsidiary” means, with respect to any Person, any corporation,

limited liability company, limited liability partnership, or other limited or

general partnership, trust, association, or other business entity of which an

aggregate of at least a majority of the outstanding Capital Stock or other

interests entitled to vote in the election of the board of directors of such

corporation (irrespective of whether, at the time, Capital Stock of any other

class or classes of such corporation shall have or might have voting power by

reason of the happening of any contingency), managers, trustees or other

controlling persons, or an equivalent controlling interest therein, of such

Person is, at the time, directly or indirectly, owned by such Person and/or one

or more subsidiaries of such Person.

 

“Successor”

means, for any corporation or banking association, any successor by merger or

consolidation, or by acquisition of substantially all of the assets or stock of

the predecessor.

 

“Sun Capital”

means Sun Capital Partners Management, LLC, and its Successors and assigns.

 

14

 

“Sun Mackie

Subordination Agreement” means the Subordination Agreement, dated as of

even date herewith, by and between U.S. Bank and Parent, as acknowledged

by Mackie and certain of its subsidiaries, as the same now exists and may

hereafter be amended, modified, supplemented, extended, renewed, restated, or

replaced.

 

“Taxes”

means any and all present or future taxes, levies, imposts, deductions,

charges, or withholdings, and all liabilities with respect thereto, excluding,

in the case of U.S. Bank, (a) such taxes (including income taxes,

franchise taxes, or capital taxes) as are imposed on or measured by

U.S. Bank’s net income or capital (or other taxes imposed in lieu thereof)

by any jurisdiction or political subdivision thereof, and (b) all interest

and penalties imposed on U.S. Bank with respect to the taxes described in clause (a)

above.

 

“Triggering

Date” means the earlier of (a) one hundred twenty days after the date of

this Agreement and (b) the date upon which each of Mackie Designs (France) S.A.

and Mackie Designs (Deutschland) GmbH shall have dissolved.

 

“Triggering

Event of Default” has the meaning specified in the Intercreditor Agreement.

 

“U.S. Bank”

means U.S. Bank National Association and any Successor or assign thereof.

 

“Voting Stock”

means with respect to any Person, (a) one or more classes of Capital Stock

of such Person having general voting powers to elect at least a majority of the

board of directors, managers, or trustees of such Person, irrespective of

whether at the time Capital Stock of any other class or classes have or might

have voting power by reason of the happening of any contingency, and

(b) any Capital Stock of such Person convertible or exchangeable without

restriction at the option of the holder thereof into Capital Stock of such

Person described in clause (a) of this definition.

 

“Warehouseman”

means Expeditors International of Washington, Inc.

 

Section 1.2                                      Accounting

Terms.  Except as otherwise provided

in this Agreement, accounting terms that are not defined specifically in this

Agreement shall be interpreted and construed in accordance with GAAP and all

accounting procedures shall be performed in accordance with GAAP.

 

Section 1.3                                      Rules

of Construction.  For purposes of

this Agreement, the following rules of construction shall apply, unless

specifically indicated to the contrary: 

(a) wherever from the context it appears appropriate, each term

stated in either the singular or plural shall include the singular and the

plural, and pronouns stated in the masculine, feminine, or neuter gender shall

include the masculine, feminine, and neuter genders; (b) the term “or” is

not exclusive; (c) the term “including” (or any form of that term) shall

not be limiting or exclusive; (d) all references to statutes and related

regulations shall include any amendments thereof and any successor statutes and

regulations; (e) the words “this Agreement”, “herein”, 

 

15

 

“hereof”, “hereunder” or other words of similar import

refer to this Agreement as a whole, including any schedules, exhibits, and

annexes hereto, as the same may be amended, modified, or supplemented;

(f) all references in this Agreement to sections, schedules, exhibits, and

annexes shall refer to the corresponding sections, schedules, exhibits, and

annexes of or to this Agreement; and (g) all references to any instruments

or agreements, including references to any of the Loan Documents, shall include

any and all amendments, extensions, modifications, renewals, and restatements

thereof, to the extent permitted under this Agreement.

 

Section 1.4                                      Incorporation

of Recitals.  The Recitals to this

Agreement hereby are incorporated into this Agreement and constitute a part of

this Agreement.

 

ARTICLE II

 

THE NEW TERM LOAN

 

Section 2.1                                      The

New Term Loan.  Upon satisfaction of

all of the conditions precedent specified in Section 3.1 of this Agreement, on

the Closing Date U.S. Bank shall extend the New Term Loan to Mackie.  On the Closing Date, Mackie shall execute

and deliver to U.S. Bank a promissory note in form and content

satisfactory to U.S. Bank in its reasonable discretion evidencing Mackie’s

repayment obligation in respect of the New Term Loan (which promissory note is

referred to in this Agreement as the “New Term Loan Note”).  The New Term Loan shall be repaid by Mackie

in accordance with the provisions of the New Term Loan Note and this Agreement.

 

Section 2.2                                      Interest

Rates.  Mackie hereby acknowledges

and agrees that, except as specified in the following sentence, interest shall

accrue on the New Term Loan at the rate of 10 percent per annum.  Following the occurrence of an Event of

Default and during the continuance thereof, U.S. Bank shall be entitled to

charge interest on the principal balance outstanding under the New Term Loan at

the Default Interest Rate.  Interest

owed by Mackie pursuant to the New Term Loan Note shall be calculated on the

basis of a 360-day year.

 

Section 2.3                                      Monthly

Cash Interest Payments.  Mackie

shall make cash payments of interest to U.S. Bank in respect of the

outstanding principal balance of the New Term Loan monthly in arrears as

follows:

 

(a)                                  Minimum Interest Payments.  8 percent per annum (the “Minimum

Interest Payment”) in cash on May 1, 2003, and the first Business Day of

each month thereafter (each of which dates is an “Interest Payment Date”),

provided that Minimum Excess Availability exists;

 

(b)                                 Additional Interest Payments.  2 percent per annum (the “Additional

Interest Payment”) in cash on each Interest Payment Date, provided that

Interest Excess Availability exists; and

 

(c)                                  Possible Default Interest Payments.  3 percent per annum in cash on each

Interest Payment Date following the occurrence of an uncured Event of Default,

provided that Interest Excess Availability exists, and, provided further, 

 

16

 

that

U.S. Bank is entitled to be paid such interest in cash pursuant to the

terms of Section 2.8(f) of the Intercreditor Agreement.

 

If Mackie was not

required to make any of the above-referenced interest payments on an Interest

Payment Date as a result of the applicable limitation on availability, nothing

in this Agreement prohibits Mackie from making such payment (or payments) on a

subsequent Interest Payment Date if on such subsequent Interest Payment Date

the requisite amount of availability (whether it be Minimum Excess Availability

or Interest Excess Availability) exists after giving effect to such deferred

payment and any regularly scheduled interest payments due on such date.

 

Section 2.4                                      Effect

of Failure to Make an Interest Payment. 

Notwithstanding anything herein or in the other Loan Documents to the

contrary, Mackie’s failure to make a Minimum Interest Payment within the time

permitted by Section 7.1(a) of this Agreement shall constitute an Event of

Default.  However, if such failure

occurred because of the Minimum Excess Availability limitation, that Event of

Default shall only entitle U.S. Bank to invoke the Default Interest Rate

and thereby cause interest to accrue on the principal amount of the New Term

Loan at the Default Interest Rate. 

Mackie’s failure to pay an Additional Interest Payment in cash shall not

constitute an Event of Default if such failure was due to the Interest Excess

Availability limitation.  If Mackie has

sufficient Interest Excess Availability as of the date any payment owed

pursuant to Section 2.3(b) of this Agreement is due, and Mackie fails to make

such payment and fails to cure that failure within the time permitted by

Section 7.1(a) of this Agreement, an Event of Default shall occur under this

Agreement.  If Mackie is not required to

make all or any portion of any interest payment owed hereunder as a result of

either the Minimum Excess Availability limitation or the Interest Excess

Availability limitation, the unpaid interest shall be due and payable on the

Maturity Date.  If Mackie does not pay

all accrued interest due and owing on the Interest Payment Date on which it is

due, interest shall begin to accrue on such unpaid amount of interest effective

as of the Interest Payment Date on which the interest payment in question was

due.

 

Section 2.5                                      Loan

Fees.  On the Closing Date, Mackie

shall pay U.S. Bank $13,750 as an initial loan fee with respect to the New

Term Loan.  On July 1, 2003, and

the first day of each calendar quarter thereafter until the Maturity Date,

Mackie shall pay U.S. Bank an additional loan fee of one-eighth of

1 percent of the principal amount of the New Term Loan outstanding as of

the date such loan fee payment is owed, provided that Minimum Excess

Availability exists and no Blockage Period or Triggering Event of Default

exists.  Mackie’s failure to make a loan

fee payment owed pursuant to the preceding sentence shall not constitute an

Event of Default if such failure was due to the failure to satisfy any of the

conditions set forth in the immediately preceding proviso.  If Mackie is not required to make all or any

portion of any loan fee payment owed hereunder due to the failure to satisfy

any of the conditions set forth in the immediately preceding proviso, the

unpaid amount of such loan fee payment shall be due and payable on the Maturity

Date.  If Mackie satisfies the

conditions set forth in the immediately preceding proviso as of the date any

payment owed pursuant to this Section 2.5 of this Agreement is due, and Mackie

fails to make such payment and fails to cure that failure within the time

permitted by Section 7.1(a) of this Agreement, an Event of Default shall occur

under this Agreement.

 

Section 2.6                                      Annual

Excess Cash Flow Payments.  Mackie

shall pay U.S. Bank the lesser of (a) $1,650,000, and

(b) 50 percent of Adjusted EBITDA for fiscal year 2003 and

 

17

 

each fiscal year thereafter, as more particularly specified below

(which amount, if any, is referred to in this Agreement as an “Annual Excess

Cash Flow Amount”), provided that ECF Excess Availability exists and no

Blockage Period or Triggering Event of Default exists.  In particular, on May 15th of each year,

starting with May 15, 2004 for the fiscal year ended December 31,

2003, and the 15th day of each month thereafter until the Annual Excess Cash

Flow Amount for the immediately preceding fiscal year has been paid in full,

Mackie shall pay U.S. Bank an amount equal to the lesser of

(y) one-sixth of the Annual Excess Cash Flow Amount plus the unpaid sum of

amounts from prior months by which Mackie’s payments with respect to the Annual

Excess Cash Flow Amount were less than one-sixth of the amount thereof, and

(z) the amount of unutilized availability under the CFC Facility, minus

the ECF Excess Availability, provided that ECF Excess Availability exists and

no Blockage Period or Triggering Event of Default exists.  Mackie’s failure to make a payment in

respect of the Annual Excess Cash Flow Amount shall not constitute an Event of

Default if such failure was due to the failure to satisfy any of the conditions

set forth in the immediately preceding proviso.  If Mackie satisfies the conditions set forth in the immediately

preceding proviso as of the date any payment owed pursuant to this Section 2.6

of this Agreement is due, and Mackie fails to make such payment and fails to

cure that failure within the time permitted by Section 7.1(a) of this

Agreement, an Event of Default shall occur under this Agreement.

 

Section 2.7                                      Procedure

for Establishing the Annual Excess Cash Flow Payment Amount.  On or before May 10, 2004, and the same

day of each year thereafter, Mackie shall deliver to U.S. Bank a written

report in a form satisfactory to U.S. Bank in its reasonable discretion

setting forth in detail Mackie’s calculation of Adjusted EBITDA for the

immediately preceding fiscal year. 

Except as specified in the following sentence, the calculation of

Adjusted EBITDA shall be based upon Mackie’s audited financial statement for

the immediately preceding fiscal year. 

Notwithstanding the foregoing, if Mackie incurs Indebtedness or makes

capital expenditures that violate the provisions of Section 9 of the CFC

Loan Agreement (as in effect on the Closing Date), and the violation impacts or

relates to the determination of Adjusted EBITDA (or any component of such

definition), then for purposes of determining the amount of Mackie’s Annual

Excess Cash Flow Amount for the fiscal year in question, such determination

shall be made based upon the actions Mackie was permitted to take in accordance

with Section 9 of the CFC Loan Agreement (as in effect on the Closing

Date), rather than on Mackie’s actual performance in respect of the financial

covenant or other issue in question. 

For example, if Mackie made capital expenditures during fiscal year 2003

of $5,000,000, the figure of $4,000,000 (which is the maximum amount of capital

expenditures that Mackie is permitted to make during fiscal year 2003 in

accordance with Section 9.18 of the CFC Loan Agreement) would be used for

purposes of calculating Adjusted EBITDA and determining the Annual Excess Cash

Flow Amount for the fiscal year in question.

 

Section 2.8                                      Information

Regarding Excess Availability.  On

the date each payment specified in Section 2.3, Section 2.5, and Section 2.6 of

this Agreement is due, Mackie shall deliver to U.S. Bank a written report

in a form satisfactory to U.S. Bank in its reasonable discretion setting

forth Mackie’s calculation of Minimum Excess Availability, Interest Excess

Availability, or ECF Excess Availability, as applicable, as of the date in

question.

 

Section 2.9                                      Maturity

Date of the New Term Loan.  On the

earlier of (a) March 31, 2006, or (b) acceleration of the

Obligations following an Event of Default, the

 

18

 

entire balance of principal, interest, and fees owed

pursuant to the New Term Loan Note shall be due and payable by Mackie in

full.  The earlier of the dates referred

to in the preceding sentence is the “Maturity Date.”

 

Section 2.10                                No

Payments in Contravention of the Intercreditor Agreement.  U.S. Bank and Mackie hereby acknowledge

and agree that, notwithstanding anything in this Article II of this Agreement

requiring Mackie to make any payments to U.S. Bank in respect of the New

Term Loan, if any such payment is prohibited by the Intercreditor Agreement,

Mackie shall not make (and U.S. Bank shall not accept) such payment.  The foregoing limitation on Mackie’s ability

to pay (and U.S. Bank’s right to receive) any amount owed by Mackie

hereunder shall have no bearing or effect on whether Mackie’s failure to make

such payment constitutes an Event of Default under this Agreement.

 

ARTICLE III

 

CONDITIONS OF LENDING

 

Section 3.1                                      Conditions

Precedent.  The obligation of

U.S. Bank to make the New Term Loan is subject to the timely satisfaction

of each and all of the following conditions precedent:

 

(a)                                  Required Paydown.  U.S. Bank shall have received from Mackie payments that

reduce the total amount of principal, interest, and fees and charges owed

pursuant to the Existing Credit Agreement (and the promissory notes executed in

connection therewith) (which principal, interest, attorney fees, and

miscellaneous costs under the Existing Credit Agreement as of March 31,

2003, are $25,832,514.98, $148,517.62, $59,835.00, and $913.72, respectively)

to $11,000,000 (or less);

 

(b)                                 Elimination of U.S. Bank’s

Letter of Credit Exposure. 

Any letters of credit issued by U.S. Bank pursuant to the

provisions of Article V of the Existing Credit Agreement shall have been

terminated (and U.S. Bank shall have received payment of any amount it is

owed by Mackie with respect to any such letters of credit), or Mackie shall

have made arrangements satisfactory to U.S. Bank in its reasonable

discretion that eliminate U.S. Bank’s credit exposure in relation to any

remaining letters of credit;

 

(c)                                  Documents and Agreements.  U.S. Bank shall have received the

following agreements, documents, certificates, and opinions in form and

substance satisfactory to U.S. Bank in its reasonable discretion and duly

executed and delivered by the parties thereto:

 

(i)                                     This

Agreement;

 

(ii)                                  The

New Term Loan Note;

 

(iii)                               The Security Agreements;

 

19

 

(iv)                              The

Guaranties;

 

(v)                                 A

certificate of the Secretary or an Assistant Secretary of Mackie (or the

Guarantors, as applicable) with respect to resolutions of the Board of

Directors of Mackie (or the Guarantors) authorizing the execution and delivery

of this Agreement, the New Term Loan Note, the Security Agreements, and the

Guaranties and identifying the officer or officers authorized to execute,

deliver, and take all other actions required under this Agreement, and

providing specimen signatures of such officer or officers;

 

(vi)                              The

articles of incorporation of Mackie and the Guarantors and all amendments and

supplements thereto, as filed in the office of the Washington Secretary of

State (or, in the case of SIA Software Company, Inc., the New York Secretary of

State), certified by said Secretary of State as being a true and correct copy

thereof;

 

(vii)                           The Bylaws of Mackie and the

Guarantors and all amendments and supplements thereto, certified by the

Secretary or an Assistant Secretary of Mackie (or the Guarantors, as

applicable) as being a true and correct copy thereof;

 

(viii)                        A certificate of the Washington

Secretary of State as to the legal existence and status of Mackie, Mackie

Designs Manufacturing, Inc., and Mackie Investment Co. in such state;

 

(ix)                                A

certificate of the New York Secretary of State as to the legal existence and

status of SIA Software Company, Inc., in such state;

 

(x)                                   An

opinion addressed to U.S. Bank from counsel to Mackie, as to such matters

reasonably requested by U.S. Bank; and

 

(xi)                                Such

other documents, instruments, opinions, and certificates, and completion of

such other matters, as U.S. Bank reasonably may deem necessary or

appropriate.

 

(d)                                 Execution of the CFC Loan Agreement

and the Intercreditor Agreement. 

Mackie and CFC shall have executed the CFC Loan Agreement and the

Intercreditor Agreement;

 

20

 

(e)                                  Execution of the Subordination

Agreements.  Parent, HIG, and

Randolph each shall have each executed the respective Subordination Agreements;

 

(f)                                    No Litigation. 

No litigation, arbitration, proceeding, or investigation shall be

pending or threatened that questions the validity or legality of the

transactions contemplated by any Loan Document or seeks a restraining order,

injunction, or damages in connection therewith, or which reasonably could be

expected to adversely affect the transactions contemplated hereby or have a

Material Adverse Effect;

 

(g)                                 Lien Perfection.  All necessary filings and recordings against the Collateral shall

have been completed and U.S. Bank’s liens on the Collateral shall have

been perfected;

 

(h)                                 Payment of Attorney Fees.  Mackie shall have paid U.S. Bank an

amount equal to the reasonable attorney fees incurred by U.S. Bank in

connection with the negotiation of the New Term Loan and the negotiation and

preparation of this Agreement;

 

(i)                                     No Defaults. 

As of the date of this Agreement, no Default or Event of Default exists;

and

 

(j)                                     Other Information.  U.S. Bank shall have received such

other statements, opinions, certificates, documents, and information with

respect to the matters contemplated by this Agreement as U.S. Bank

reasonably may request.

 

Upon the satisfaction of the above-referenced

conditions this Agreement and the New Term Loan Note shall become effective and

shall supersede and replace the Existing Credit Agreement and the promissory

notes executed in connection with the Existing Credit Agreement (and Mackie

shall have no further obligations under the Existing Credit Agreement and the

promissory notes and other loan documents executed in connection therewith).  If Mackie fails to satisfy any of the

above-referenced conditions precedent by April 20, 2003, and such conditions

are not waived or deferred (in writing) by U.S. Bank in its sole and

absolute discretion, U.S. Bank shall have no commitment or obligation to

subordinate its security interests and liens in any assets of Mackie or to

restructure the indebtedness governed by the Existing Credit Agreement, and the

parties’ rights and obligations shall continue to be governed by the loan

documents that were in effect between and among the parties immediately prior

to the date of this Agreement (including, but not limited to, the Existing

Credit Agreement and the promissory notes executed in connection with the

Existing Credit Agreement).

 

ARTICLE IV

 

COLLATERAL FOR MACKIE’S OBLIGATIONS

 

Section 4.1                                      The

New Security Agreements. 

Contemporaneously with the execution of this Agreement, Mackie and the

Guarantors shall execute and deliver to U.S. Bank security agreements in

form and content satisfactory to U.S. Bank in its reasonable discretion 

 

21

 

granting U.S. Bank security interests and liens

in all personal property of Mackie and the Guarantors as collateral for the

Obligations (the “Security Agreements”). 

At the time Mackie and the Guarantors provide U.S. Bank with the

executed Security Agreements, Mackie and the Guarantors thereby authorize

U.S. Bank to file any financing statements reasonably deemed necessary by

U.S. Bank to perfect the security interests granted by Mackie and the

Guarantors in the personal property described in the Security Agreements.  The Security Agreements shall supersede any

security agreements previously executed by Mackie or any Guarantor in favor of

U.S. Bank and such previously executed security agreements shall be of no

further force or effect.

 

Section 4.2                                      The

New Guaranties.  Contemporaneously

with the execution of this Agreement, the Guarantors shall execute and deliver

to U.S. Bank guaranties (the “Guaranties”) in form and content satisfactory

to U.S. Bank in its reasonable discretion.  Pursuant to the terms of the Guaranties, the Guarantors shall

guarantee payment and performance of the Obligations.  The Guaranties shall supersede any guaranties previously executed

by any Guarantor in favor of U.S. Bank and such previously executed

guaranties shall be of no further force or effect.

 

Section 4.3                                      Other

Documents.  Mackie hereby agrees

that until Mackie satisfies the Obligations in full (other than contingent and

indemnification obligations), Mackie promptly shall execute and deliver to

U.S. Bank (and shall cause the Guarantors promptly to execute and deliver

to U.S. Bank) all documents reasonably deemed necessary or desirable by

U.S. Bank to create, evidence, perfect, or continue U.S. Bank’s

security interests and liens in the Collateral.

 

Section 4.4                                      Appraisals

and Collateral Examinations.  Mackie

hereby acknowledges and agrees that U.S. Bank may order such appraisals

and, upon reasonable prior notice to Mackie and at reasonable times, may

conduct such examinations of the Collateral, as U.S. Bank reasonably deems

necessary or desirable.  Notwithstanding

the foregoing, if no Event of Default exists, such appraisals and collateral

examinations shall not be conducted more often than annually, unless

U.S. Bank is required by applicable law or regulation to conduct such

examinations or appraisals more frequently than annually.  Mackie further acknowledges and agrees that

Mackie shall pay the reasonable charges for any such appraisals and collateral

examinations (which payment shall be due within 30 days of Mackie’s receipt of

a bill for such appraisal or examination, provided that Mackie shall not make

any such payment at any time that a Blockage Period or Triggering Event of

Default exists).  U.S. Bank shall

make reasonable efforts to obtain information from CFC regarding CFC’s

examinations and analysis of the Collateral in an effort to eliminate or

minimize costs that would result from collateral examinations required by

U.S. Bank.  U.S. Bank shall

release and hold harmless CFC from any obligations or liabilities with respect

to any information provided to U.S. Bank by CFC regarding the Collateral

or otherwise.

 

22

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

Mackie

and each Guarantor hereby represents and warrants to U.S. Bank the

following (which shall survive the execution and delivery of this Agreement),

the truth and accuracy of which are a continuing condition of the making of the

New Term Loan:

 

Section 5.1                                      Corporate

Existence, Power and Authority. 

Mackie and each Guarantor is a limited liability company or a

corporation duly formed or organized and in good standing under the laws of its

state or jurisdiction of incorporation or organization and is duly qualified as

a foreign limited liability company or foreign corporation and in good standing

in all states or other jurisdictions where the nature and extent of the

business transacted by it or the ownership of assets makes such qualification

necessary, except for those jurisdictions in which the failure to so qualify

would not have a Material Adverse Effect. 

The execution, delivery, and performance of this Agreement, the other

Loan Documents, and the transactions contemplated hereunder and thereunder

(a) are all within Mackie’s and each Guarantor’s powers as a limited

liability company or corporation, (b) have been duly authorized,

(c) are not in contravention of law or the terms of Mackie’s or any

Guarantor’s articles of organization, operating agreement, certificate of

incorporation, by-laws, or other organizational documentation, or any

indenture, agreement, or undertaking to which Mackie or any Guarantor is a

party, or by which Mackie or any Guarantor or its property are bound, and (d) will

not result in the creation or imposition of, or require or give rise to any

obligation to grant, any lien, security interest, charge, or other encumbrance

upon any property of Mackie or any Guarantor. 

This Agreement and the other Loan Documents to which Mackie or any

Guarantor is a party constitute legal, valid, and binding obligations of Mackie

and such Guarantor enforceable in accordance with their respective terms,

except as such enforceability may be limited by bankruptcy, insolvency,

moratorium, or similar laws limiting creditors’ rights generally and by general

equitable principles.

 

Section 5.2                                      Name;

State of Organization; Chief Executive Office; Collateral Locations.

 

(a)                                  The

exact legal name of Mackie and each Guarantor is as set forth on the signature

page of this Agreement and in the Information Certificate.  Neither Mackie nor any Guarantor has, during

the past five years, been known by or used any other corporate or fictitious

name or been a party to any merger or consolidation, or acquired all or

substantially all of the assets of any Person, or acquired any of its property

or assets out of the ordinary course of business, except for the acquisition of

the Purchased Stock or as set forth in the Information Certificate.

 

(b)                                 Mackie

and each Guarantor is an organization of the type and formed or organized in

the jurisdiction set forth in the Information Certificate.  The Information Certificate accurately sets

forth the organizational identification number of Mackie and each Guarantor or

accurately states that Mackie or a Guarantor has none and accurately sets forth

the federal employer identification number of Mackie and each Guarantor.

 

23

 

(c)                                  The

chief executive office and mailing address of Mackie and each Guarantor and

Mackie’s and each Guarantor’s records concerning accounts are located only at

the address identified as such in Schedule 5.2 to the Information

Certificate and its only other places of business and the only other locations

of Collateral, if any, are the addresses set forth in Schedule 5.2 to the

Information Certificate or are in transit to one of the addresses set forth in

Schedule 5.2 to the Information Certificate, subject to the rights of

Mackie or any Guarantor to establish new locations in accordance with Section

6.2 of this Agreement; provided that Mackie and each Guarantor shall have the

right to send equipment out for repair in the ordinary course of business and

consistent with past practice so long as such equipment is promptly returned

upon the completion of such repair to a location set forth on Schedule 5.2 to

the Information Certificate (as supplemented by new locations established in

accordance with Section 6.2 of this Agreement).  The Information Certificate correctly identifies any of such

locations that are not owned by Mackie or a Guarantor and sets forth the owners

and/or operators thereof.

 

Section 5.3                                      Financial

Statements; No Material Adverse Change. 

All financial statements relating to Mackie or any Guarantor that have

been or may hereafter be delivered by Mackie or any Guarantor to U.S. Bank

have been prepared in accordance with GAAP (except as to any interim financial

statements, to the extent such statements are subject to normal year-end

adjustments and do not include any notes) and fairly present in all material

respects the financial condition and the results of operation of Mackie and the

Guarantors as at the dates and for the periods set forth therein.  Except as disclosed in any interim financial

statements furnished by Mackie and the Guarantors to U.S. Bank prior to

the date of this Agreement, there has been no act, condition, or event that has

had or is reasonably likely to have a Material Adverse Effect since the date of

the most recent audited financial statements of Mackie or any Guarantor

furnished by Mackie or any Guarantor to U.S. Bank prior to the date of

this Agreement.  The execution and

delivery of the Purchase Agreements and the consummation of the transactions

contemplated thereby do not and will not result in (a) any violation by

Mackie or any Guarantor of any provisions of the Worker Adjustment and

Retraining Notification Act (or any similar law), or (b) any liability to

Mackie or any Guarantor under such act (or similar law) or under any pension

plan, benefits plan, severance plan, or union contract.

 

Section 5.4                                      Priority

of Liens; Title to Properties.  The

security interests and liens granted to U.S. Bank under this Agreement and

the other Loan Documents constitute valid and perfected liens and security

interests in and upon the Collateral, subject only to the liens and security

interests of CFC that secure the indebtedness governed by the CFC Loan

Agreement, liens and security interests indicated on Schedule 5.4 to the

Information Certificate, and the other liens permitted under Section 6.8 of

this Agreement, provided that, solely for the purposes of this sentence, the

term “Collateral” shall not be deemed to include the property described in

clauses (o) and (p) of Section 1 in the Security Agreements that is not

described in any other clause of Section 1 in the Security

Agreements.  Mackie and each Guarantor

has good and marketable fee simple title to or valid leasehold interests in all

of its real property and good, valid, and merchantable title to all of its

other properties and assets subject to no liens, mortgages, pledges, security

interests, encumbrances, or charges of any kind, except those granted to

U.S. Bank, the 

 

24

 

security interests and liens in favor of CFC, and such

others as are specifically listed on Schedule 5.4 to the Information

Certificate or permitted under Section 6.8 of this Agreement.

 

Section 5.5                                      Tax

Returns.  Except as set forth on

Schedule 5.5 to the Information Certificate, Mackie and each Guarantor has

filed, or caused to be filed, in a timely manner all material tax returns,

reports, and declarations that are required to be filed by it.  All information in such tax returns,

reports, and declarations is complete and accurate in all material

respects.  Mackie and each Guarantor has

paid or caused to be paid all material taxes due and payable or claimed due and

payable in any assessment received by it, except (a) taxes the validity of

which are being contested in good faith by appropriate proceedings diligently

pursued and available to Mackie or such Guarantor and with respect to which

adequate reserves have been set aside on its books, and (b) taxes for

which a valid extension to file the applicable tax returns have been

granted.  Adequate provision has been

made for the payment of all material accrued and unpaid federal, state, county,

local, foreign, and other taxes whether or not yet due and payable and whether

or not disputed.

 

Section 5.6                                      Litigation.  Except as set forth on Schedule 5.6 to

the Information Certificate, (a) there is no investigation by any

Governmental Authority pending, or to the best of Mackie’s or any Guarantor’s

knowledge threatened, against or affecting Mackie or any Guarantor, or its or

their assets or business, and (b) there is no action, suit, proceeding, or

claim by any Person pending, or to the best of Mackie’s or any Guarantor’s

knowledge threatened, against Mackie or any Guarantor or its or their assets or

goodwill, or against or affecting any transactions contemplated by this

Agreement, in each case, which if adversely determined against Mackie or a

Guarantor has or could reasonably be expected to have a Material Adverse

Effect.

 

Section 5.7                                      Compliance

with Other Agreements and Applicable Laws.

 

(a)                                  Mackie

and the Guarantors are not in default in any respect under, or in violation in

any material respect of the terms of, any Material Contract.  Mackie and the Guarantors are in compliance

with the requirements of all applicable laws, rules, regulations, and orders of

any Governmental Authority relating to their respective businesses, including,

without limitation, those set forth in or promulgated pursuant to the

Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards

Act of 1938, as amended, ERISA, the Code, as amended, and the rules and

regulations thereunder, and all Environmental Laws, except where the failure to

so comply would not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Mackie

and the Guarantors have obtained all material permits, licenses, approvals,

consents, certificates, orders, or authorizations of any Governmental Authority

required for the lawful conduct of its business (the “Permits”), except that as

to Permits required under Environmental Laws, such Permits have been obtained

in accordance with Section 5.8(d) of this Agreement.  All of the Permits are valid and subsisting and in full force and

effect.  There are no actions, claims,

or proceedings pending, or to the best of Mackie’s or any Guarantor’s

knowledge, threatened that seek the revocation, cancellation, suspension, or

modification of any of the Permits.

 

25

 

(c)                                  No

consent, approval, or other action of, filing with, or notice to any

Governmental Authority is required in connection with the execution, delivery,

and performance of this Agreement, the other Loan Documents, or any of the

instruments or documents to be delivered pursuant hereto or thereto, except for

the filing of UCC financing statements and similar instruments.

 

Section 5.8                                      Environmental

Compliance.

 

(a)                                  Except

as set forth on Schedule 5.8 to the Information Certificate, Mackie, the

Guarantors, or any Subsidiary of Mackie or any Guarantor have not generated,

used, stored, treated, transported, manufactured, handled, produced, or

disposed of any Hazardous Materials, on or off its premises (whether or not

owned by it) in any manner that at any time violates any applicable

Environmental Law or Permit, except for such violations that could not

reasonably be expected to result in a Material Adverse Effect, and the

operations of Mackie, the Guarantors, or any Subsidiary of Mackie or any

Guarantor comply in all material respects with all Environmental Laws and all

Permits, except where the failure to so comply could not reasonably be expected

to have a Material Adverse Effect.

 

(b)                                 Except

as set forth on Schedule 5.8 to the Information Certificate, there has

been no investigation by any Governmental Authority or any proceeding,

complaint, order, directive, claim, citation, or notice by any Governmental

Authority or any other Person, nor is any pending, or to the best of Mackie’s

or any Guarantor’s knowledge threatened, with respect to any non-compliance

with or violation of the requirements of any Environmental Law by Mackie or any

Guarantor, or any Subsidiary of Mackie or any Guarantor involving the release,

spill, or discharge, threatened or actual, of any Hazardous Material or the

generation, use, storage, treatment, transportation, manufacture, handling,

production, or disposal of any Hazardous Materials or any other environmental,

occupational health or safety matter, that could reasonably be expected to have

a Material Adverse Effect.

 

(c)                                  Except

as set forth on Schedule 5.8 to the Information Certificate, Mackie, the

Guarantors, and their Subsidiaries have no material liability (contingent or

otherwise) in connection with a release, spill, or discharge, threatened or

actual, of any Hazardous Materials or the generation, use, storage, treatment,

transportation, manufacture, handling, production, or disposal of any Hazardous

Materials that could reasonably be expected to result in a Material Adverse

Effect.

 

(d)                                 Except

as set forth on Schedule 5.8 to the Information Certificate, Mackie, the

Guarantors, and their Subsidiaries have all Permits required to be obtained or

filed in connection with the operations of Mackie and the Guarantors under any

Environmental Law and all of such licenses, certificates, approvals, or similar

authorizations and other Permits are valid and in full force and effect, except

where the failure to obtain or file could not reasonably be expected to have a

Material Adverse Effect.

 

26

 

Section 5.9                                      Employee

Benefits.

 

(a)                                  Each

Plan is in compliance in all material respects with the applicable provisions

of ERISA, the Code, and other federal or state law.  Each Plan that is intended to qualify under Section 401(a)

of the Code has received a favorable determination letter from the Internal

Revenue Service and to the best of Mackie’s or any Guarantor’s knowledge,

nothing has occurred that would cause the loss of such qualification.  Mackie and its ERISA Affiliates have made

all required contributions to any Plan subject to Section 412 of the Code,

and no application for a funding waiver or an extension of any amortization

period pursuant to Section 412 of the Code has been made with respect to

any Plan.

 

(b)                                 There

are no pending, or to the best of Mackie’s or any Guarantor’s knowledge,

threatened claims (other than routine claims for benefits), actions or

lawsuits, or action by any Governmental Authority, with respect to any

Plan.  There has been no non-exempt

prohibited transaction or violation of the fiduciary responsibility rules with

respect to any Plan that could reasonably be expected to result in any material

liability to Mackie or any Guarantor.

 

(c)                                  (i) No

ERISA Event has occurred and no condition, event, or circumstance exists that

could reasonably be expected to result in the occurrence of an ERISA Event;

(ii) the current value of the assets of each Plan subject to Title IV of

ERISA (determined in accordance with the assumptions used for funding such Plan

pursuant to Section 412 of the Code) are not less than such Plan’s

liabilities under Section 4001(a)(16) of ERISA; (iii) Mackie and each

Guarantor and their ERISA Affiliates have not incurred, and no condition, event

or circumstance exists that could reasonably be expected to result in, any material

liability under Title IV of ERISA with respect to any Plan (other than

premiums due and not delinquent under Section 4007 of ERISA);

(iv) Mackie and each Guarantor, and their ERISA Affiliates, have not

incurred and do not reasonably expect to incur, any liability (and no event has

occurred that, with the giving of notice under Section 4219 of ERISA,

would result in such liability) under Section 4201 or 4243 of ERISA with

respect to a Multiemployer Plan; and (v) Mackie and each Guarantor, and

their ERISA Affiliates, have not engaged in a transaction that would be subject

to Section 4069 or 4212(c) of ERISA.

 

Section 5.10                                Bank

Accounts.  All of the deposit

accounts, investment accounts or other accounts in the name of or used by

Mackie or any Guarantor maintained at any bank or other financial institution

are set forth on Schedule 5.10 to the Information Certificate, subject to

the right of Mackie and the Guarantors to establish new accounts in accordance

with the CFC Loan Agreement.

 

Section 5.11                                Intellectual

Property.  Except as set forth on

Schedule 5.11 to the Information Certificate, to the knowledge of Mackie

or any Guarantor, Mackie and each Guarantor owns or licenses or otherwise has

the right to use all Intellectual Property necessary for the operation of its

assets and its business as presently conducted or proposed to be

conducted.  As of the date hereof,

Mackie and the Guarantors do not have any Intellectual Property registered, or

subject to pending applications, in the United States Patent and 

 

27

 

Trademark Office or any similar office or agency in

the United States, any state thereof, any political subdivision thereof or in

any other country, other than those described in Schedule 5.11 to the

Information Certificate and have not granted any licenses with respect thereto

other than as set forth in Schedule 5.11 to the Information

Certificate.  Except as set forth on

Schedule 5.11 to the Information Certificate, no event has occurred that

permits or would permit after notice or passage of time or both, the

revocation, suspension, or termination of such rights, other than the

expiration in the ordinary course of business of any license agreement

pertaining to any licensed Intellectual Property and the expiration of any

registered Intellectual Property in accordance with its terms.  To the knowledge of Mackie and the

Guarantors, no slogan or other advertising device, product, process, method,

substance, or other Intellectual Property or goods bearing or using any

Intellectual Property presently contemplated to be sold by or employed by

Mackie or any Guarantor infringes any patent, trademark, servicemark,

tradename, copyright, license, or other intellectual property owned by any

other Person presently and no claim or litigation is pending or, to the

knowledge of Mackie and the Guarantors, threatened against or affecting Mackie

or any Guarantor contesting its right to sell or use any such Intellectual

Property.  Schedule 5.11 to the

Information Certificate sets forth all of the agreements or other arrangements

of Mackie and the Guarantors pursuant to which Mackie or any Guarantor has a

license (other than shrink wrap licenses available in retail stores) or other

right to use any trademarks, logos, designs, representations, or other

Intellectual Property owned by another person as in effect on the date hereof

(collectively, together with such agreements or other arrangements as may be

entered into by any Mackie or any Guarantor after the date hereof, the “License

Agreements” and individually, a “License Agreement”).

 

Section 5.12                                Subsidiaries.  Affiliates, Capitalization; Solvency.

 

(a)                                  Mackie

and each Guarantor does not have any direct or indirect Subsidiaries or

Affiliates and is not engaged in any joint venture or partnership except as set

forth in Schedule 5.12 to the Information Certificate.

 

(b)                                 Mackie

and each Guarantor is the record and beneficial owner of all of the issued and

outstanding shares of Capital Stock of each of the Subsidiaries listed on

Schedule 5.12 to the Information Certificate as being owned by Mackie or

such Guarantor and there are no proxies, irrevocable or otherwise, with respect

to such shares and no equity securities of any of the Subsidiaries are or may

become required to be issued by reason of any options, warrants, rights to

subscribe to, calls or commitments of any kind or nature and there are no

contracts, commitments, understandings, or arrangements by which any Subsidiary

is or may become bound to issue additional shares of its Capital Stock or

securities convertible into or exchangeable for such shares, except as set

forth in Schedule 5.12 to the Information Certificate.

 

(c)                                  The

issued and outstanding shares of Capital Stock of Mackie and each Guarantor are

directly and beneficially owned and held by the persons indicated in the

Information Certificate, and in each case all of such shares have been duly

authorized and are fully paid and non-assessable, free and clear of all claims,

liens, pledges, and encumbrances of any kind, except as set forth in

Schedule 5.12 to the Information Certificate.

 

28

 

(d)                                 Mackie

is Solvent and will continue to be Solvent after the creation of the

Obligations, the security interests of U.S. Bank, and the other

transaction contemplated under this Agreement and after giving effect to any

rights of contribution that Mackie may have.

 

(e)                                  Sun

Capital Partners II, L.P. and/or its Affiliates, Randolph, and HIG have on or

before the date hereof, made a cash equity contribution to Parent in an

aggregate amount not less than $10,000,000, and the Subordinated Lenders have,

on or before the date hereof, made a cash contribution to Mackie in the form of

a subordinated loan in an aggregate amount not less than $4,000,000, and the

proceeds of such cash equity capital contribution have been applied to pay the

purchase price for the Purchased Stock in accordance with Section 5.17 of this

Agreement.

 

Section 5.13                                Labor

Disputes.

 

(a)                                  Set

forth on Schedule 5.13 to the Information Certificate is a list (including

dates of termination) of all collective bargaining or similar agreements

between or applicable to Mackie and each Guarantor and any union, labor

organization, or other bargaining agent in respect of the employees of Mackie

or any Guarantor on the date hereof.

 

(b)                                 There

is (i) no material unfair labor practice complaint pending against Mackie

or any Guarantor or, to the best of Mackie’s or any Guarantor’s knowledge,

threatened against it, before the National Labor Relations Board (or similar

Governmental Authority), and no material grievance or material arbitration

proceeding arising out of or under any collective bargaining agreement is

pending on the date hereof against Mackie or any Guarantor or, to best of

Mackie’s or any Guarantor’s knowledge, threatened against it, and (ii) no

material strike, labor dispute, slowdown, or stoppage is pending against Mackie

or any Guarantor or, to the best of Mackie’s or any Guarantor’s knowledge,

threatened against Mackie or any Guarantor.

 

Section 5.14                                Restrictions

on Subsidiaries.  Except as set

forth in Schedule 5.14 to the Information Certificate and except for

restrictions contained in this Agreement or any other agreement with respect to

Indebtedness of Mackie or any Guarantor permitted hereunder as in effect on the

date hereof, there are no contractual or consensual restrictions on Mackie or

any Guarantor or any of its Subsidiaries that prohibit or otherwise restrict

(a) the transfer of cash or other assets (i) between Mackie or any

Guarantor and any of its or their Subsidiaries or (ii) between any

Subsidiaries of Mackie or any Guarantor or (b) the ability of Mackie or

any Guarantor or any of its or their Subsidiaries to incur Indebtedness or

grant security interests to U.S. Bank in the Collateral.

 

Section 5.15                                Material

Contracts.  Schedule 5.15 to

the Information Certificate sets forth all Material Contracts to which Mackie

or any Guarantor is a party or is bound as of the date of this Agreement.  Mackie and the Guarantors are not in breach

or in default in any material respect of or under any Material Contract and

have not received any notice of the intention of any other party thereto to

terminate any Material Contract.  Mackie

and each 

 

29

 

Guarantor is a party to all contracts necessary for

the operation of its business as presently conducted, as conducted immediately

prior to the date hereof, or as presently proposed to be conducted, except for

those the failure to obtain could not reasonably be expected to have a Material

Adverse Effect.

 

Section 5.16                                Payable

Practices; Retention of Title. 

Mackie and the Guarantors have not made any material change in the

historical accounts payable practices from those in effect immediately prior to

the date hereof.  As of the date hereof,

none of the conditions of supply of any supplier or other creditor of Mackie or

any Guarantor include any retention of title or Romalpa provisions that pertain

to Mackie or the Guarantors.

 

Section 5.17                                Acquisition

of Purchased Stock.

 

(a)                                  The

Purchase Agreements and the transactions contemplated thereunder have been duly

executed, delivered, and performed in accordance with their terms by the

respective parties thereto in all material respects, including the fulfillment

(not merely the waiver, except as may be disclosed to U.S. Bank and

consented to in writing by U.S. Bank) of all conditions precedent set

forth therein and giving effect to the terms of the Purchase Agreements and the

assignments executed and delivered by Sellers (or any of their affiliates or

subsidiaries) thereunder, Parent has acquired and has good and marketable title

to the Purchased Stock, free and clear of all claims, liens, pledges, and

encumbrances of any kind, except as permitted hereunder.

 

(b)                                 All

actions and proceedings required (if any) of Mackie or the Guarantors by the

Purchase Agreements, applicable law or regulation (including, but not limited

to, compliance by Mackie, the Guarantors, Parent, and Sellers with the

Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, and

compliance by Mackie and Guarantors with the Worker Adjustment and Retaining

Notification Act) have been taken, and the transactions required thereunder

have been duly and validly taken and consummated.

 

(c)                                  No

court of competent jurisdiction has issued any injunction, restraining order,

or other order that prohibits the consummation of the transactions described in

the Purchase Agreements and no governmental or other action or proceeding has

been commenced or, to Mackie’s or any Guarantor’s knowledge, threatened,

seeking any injunction, restraining order, or other order that seeks to void or

otherwise modify the transactions described in the Purchase Agreements.

 

(d)                                 Mackie

has delivered, or caused to be delivered, to U.S. Bank, true, correct, and

complete copies of the Purchase Agreements.

 

Section 5.18                                Accuracy

and Completeness of Information. 

All information furnished by or on behalf of Mackie or any Guarantor in

writing to U.S. Bank in connection with this Agreement or any of the other

Loan Documents or any transaction contemplated hereby or thereby, including all

information on the Information Certificate (but excluding any financial

projections for purposes of this Section 5.18 of this Agreement) is true and

correct in all material 

 

30

 

respects on the date as of which such information is

dated or certified and does not omit any material fact necessary in order to

make such information not misleading in any material respect.  No event or circumstance has occurred since

December 31, 2002, that has had or could reasonably be expected to have a

Material Adverse Affect, that has not been fully and accurately disclosed to

U.S. Bank in writing prior to the date of this Agreement.

 

Section 5.19                                Survival

of Warranties:  Cumulative.  All representations and warranties of Mackie

and the Guarantors contained in this Agreement or any of the other Loan

Documents shall survive the execution and delivery of this Agreement and shall

be conclusively presumed to have been relied on by U.S. Bank regardless of

any investigation made or information possessed by U.S. Bank.  The representations and warranties set forth

herein shall be cumulative and in addition to any other representations or

warranties that Mackie or any Guarantor shall now or hereafter give, or cause

to be given, to U.S. Bank.

 

ARTICLE VI

 

AFFIRMATIVE AND NEGATIVE COVENANTS

 

Section 6.1                                      Maintenance

of Existence.

 

(a)                                  Mackie

and each Guarantor shall at all times preserve, renew, and keep in full force

and effect its existence and rights and franchises with respect thereto and

maintain in full force and effect all licenses, trademarks, tradenames,

approvals, authorizations, leases, contracts and Permits necessary to carry on

its business as presently conducted, except as to any Guarantor permitted under

Section 6.7 of this Agreement.

 

(b)                                 Neither

Mackie nor any Guarantor shall change its name unless each of the following

conditions is satisfied: 

(i) U.S. Bank shall have received not less than 30 days

prior written notice from Mackie of such proposed name change, which notice

shall accurately set forth the new name; and (ii) U.S. Bank shall

have received a copy of the amendment to the Articles of Organization or

Certificate of Incorporation (or similar organizational documents) of Mackie or

such Guarantor providing for the name change certified by the Secretary of

State (or similar Governmental Authority) of the jurisdiction of incorporation

or organization of Mackie or such Guarantor as soon as it is available.

 

(c)                                  Neither

Mackie nor any Guarantor shall change its chief executive office or its mailing

address or organizational identification number (or if it does not have one,

shall not acquire one) unless U.S. Bank shall have received not less than

30 days’ prior written notice from Mackie of such proposed change, which

notice shall set forth such information with respect thereto as U.S. Bank

may require and U.S. Bank shall have received such agreements as

U.S. Bank reasonably may require in connection therewith.  Neither Mackie nor any Guarantor shall

change its type of organization or jurisdiction of organization.

 

Section 6.2                                      New

Collateral Locations.  Mackie may

open or occupy any new location within the continental United States or the

Netherlands, and each Guarantor may open 

 

31

 

or occupy any new location within the United States,

in each case, provided that Mackie or such Guarantor (a) gives

U.S. Bank 30 days prior written notice of the intended opening of any

such new location and (b) executes and delivers, or causes to be executed

and delivered, to U.S. Bank such agreements, documents, and instruments as

U.S. Bank may deem reasonably necessary or desirable to perfect and

protect its interests in the Collateral at such location.

 

Section 6.3                                      Compliance

with Laws and Regulations.

 

(a)                                  Mackie

and each Guarantor shall, and shall cause any Subsidiary to, at all times,

comply in all material respects with all laws, rules, regulations, licenses,

approvals, orders, and other Permits applicable to it and duly observe all

requirements of any foreign, federal, state, or local Governmental Authority,

including without limitation, ERISA, the Code, the Occupational Safety and

Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as

amended, and all Environmental Laws; provided that unless the failure to comply

with Environmental Laws could reasonably be expected to have a Material Adverse

Effect as determined by U.S. Bank in good faith, the failure by Mackie or

any Guarantor to comply with Environmental Laws in any material respect shall

not constitute a breach of this Section 6.3(a) of this Agreement so long as

each of the following conditions have been satisfied as determined by

U.S. Bank in good faith: 

(i) Mackie or the Guarantor is promptly and diligently taking

actions in accordance with applicable Environmental Laws to cure and remedy

such non-compliance to the extent required by Environmental Laws and adequate

reserves have been established on the books of Mackie or the Guarantor with

respect thereto as required in accordance with GAAP; (ii) Mackie or the

Guarantor shall promptly notify U.S. Bank in writing of such failure to

comply and state whether or not Mackie or such Guarantor is liable for losses,

costs, and expenses in connection with such failure, and (iii) the

aggregate amounts incurred (or reasonably expected to be incurred) by Mackie

and the Guarantors in connection with such non-compliance (whether remediation

costs or otherwise) shall not exceed $750,000 during any 12-month period.

 

(b)                                 Mackie

and the Guarantors shall give written notice to U.S. Bank promptly upon

Mackie’s or any Guarantor’s receipt of any written notice of, or Mackie’s or any

Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any

event involving the release, spill, or discharge, threatened or actual, of any

Hazardous Material by Mackie or any Guarantor that is material or required to

be reported to a Governmental Authority under any Environmental Law, or

(ii) any investigation, proceeding, complaint, order, directive, claims,

citation, or notice with respect to: 

(A) any non-compliance with or violation of any Environmental Law

by Mackie or any Guarantor in any material respect or (B) the release,

spill, or discharge, threatened or actual, of any Hazardous Material by Mackie

or any Guarantor other than in the ordinary course of business and other than

as permitted under any applicable Environmental Law.  Copies of all material environmental surveys, audits,

assessments, feasibility studies, and results of remedial investigations shall

be promptly furnished, or caused to be furnished, by Mackie or the Guarantor to

U.S. Bank.  Mackie and the

Guarantors shall take 

 

32

 

prompt

action to respond to any material non-compliance with any of the Environmental

Laws and shall regularly report to U.S. Bank on such response.

 

(c)                                  Without

limiting the generality of the foregoing, whenever U.S. Bank reasonably

determines that there is a violation, or any condition that requires any action

by or on behalf of Mackie or any Guarantor in order to avoid any violation, of

any Environmental Law in any material respect, Mackie (or such Guarantor)

shall, at U.S. Bank’s request and Mackie’s (or such Guarantor’s)

expense:  (i) cause an independent

environmental engineer reasonably acceptable to U.S. Bank to conduct such

tests of the site where a violation or alleged violation of such Environmental

Laws has occurred as to the subject matter of such violation and prepare and

deliver to U.S. Bank a report as to the violation setting forth the

results of such tests, a proposed plan for responding to any violation of

Environmental Laws described therein, and an estimate of the costs thereof and

(ii) provide to U.S. Bank a supplemental report of such engineer

whenever the scope of such violation, or Mackie’s or the Guarantor’s response

thereto or the estimated costs thereof, shall change in any material respect.

 

(d)                                 Mackie

and each Guarantor shall indemnify and hold harmless U.S. Bank and its

directors, officers, employees, agents, invitees, representatives, successors,

and assigns, from and against any and all losses, claims, damages, liabilities,

costs, and expenses (including reasonable attorneys’ fees and expenses)

directly or indirectly arising out of or attributable to the use, generation,

manufacture, reproduction, storage, release, threatened release, spill,

discharge, disposal, or presence of a Hazardous Material, including the costs

of any required or necessary repair, cleanup, or other remedial work with

respect to any property of Mackie or any Guarantor and the preparation and

implementation of any closure, remedial or other required plans (“Losses”),

except to the extent it is determined pursuant to a final non-appealable order

of a court of competent jurisdiction that the Losses were the result of acts or

omissions constituting gross negligence or willful misconduct of

U.S. Bank.  All representations,

warranties, covenants, and indemnifications in this Section 6.3 of this

Agreement shall survive the payment of the Obligations and the termination of

this Agreement.

 

Section 6.4                                      Payment

of Taxes and Claims.  Mackie and

each Guarantor shall, and shall cause any Subsidiary to, duly pay and discharge

when due all material taxes, assessments, contributions, and governmental

charges upon or against it or its properties or assets, except for taxes the

validity of which are being contested in good faith by appropriate proceedings

diligently pursued and available to Mackie, the Guarantor, or the Subsidiary,

as the case may be, and with respect to which adequate reserves have been set

aside on its books.  Mackie and each

Guarantor shall be liable for any tax or penalties imposed on U.S. Bank as

a result of the financing arrangements provided for herein and Mackie and each

Guarantor agrees to indemnify and hold U.S. Bank harmless with respect to

the foregoing, and to repay U.S. Bank on demand the amount thereof, and

until paid by Mackie or such Guarantor such amount shall be added and deemed

part of the New Term Loan, provided that nothing contained herein shall be

construed to require Mackie or any Guarantor to pay any income or franchise

taxes attributable to the income of U.S. Bank from any amounts charged or

paid hereunder to U.S. Bank.  The 

 

33

 

foregoing indemnity shall survive the payment of the

Obligations and the termination of this Agreement.

 

Section 6.5                                      Insurance.  Mackie and each Guarantor shall at all times

maintain with financially sound and reputable insurers insurance with respect

to the Collateral against loss or damage and all other insurance of the kinds

and in the amounts customarily insured against or carried by corporations of

established reputation engaged in the same or similar businesses and similarly

situated.  Said policies of insurance

shall be reasonably satisfactory to U.S. Bank as to form, amount, and

insurer.  Mackie and the Guarantors

shall furnish certificates, policies, or endorsements to U.S. Bank as

U.S. Bank shall reasonably require as proof of such insurance, and, if

Mackie or any Guarantor fails to do so, U.S. Bank is authorized, but not

required, to obtain such insurance at the expense of Mackie.  Mackie and the Guarantors shall cause

U.S. Bank to be named as a loss payee and an additional insured (but

without any liability for any premiums) under such insurance policies.

 

Section 6.6                                      Financial

Statements and Other Information.

 

(a)                                  Mackie

and each Guarantor shall, and shall cause any Subsidiary to, keep proper books

and records in which true and complete entries shall be made of all dealings or

transactions of or in relation to the Collateral and the business of Mackie,

the Guarantors, and its Subsidiaries in accordance with GAAP.  Mackie and the Guarantors shall promptly

furnish to U.S. Bank all such financial and other information as

U.S. Bank shall reasonably request relating to the Collateral and the

assets, business, and operations of Mackie and the Guarantors, and Mackie and

the Guarantors shall notify the auditors and accountants of Mackie and the

Guarantors that U.S. Bank is authorized to obtain such information

directly from them.  Without limiting

the foregoing, Mackie and the Guarantors shall furnish or cause to be furnished

to U.S. Bank, the following: 

(i) within 30 days after the end of each fiscal month, monthly

unaudited consolidated financial statements, and unaudited consolidating

financial statements (including in each case balance sheets, statements of

income and loss, statements of cash flow, and statements of shareholders’

equity), all in reasonable detail, fairly presenting in all material respects

the financial position and the results of the operations of Mackie and its

Subsidiaries as of the end of and through such fiscal month, certified to be

correct by the chief financial officer of Mackie, subject to normal year-end

adjustments and no footnotes and accompanied by a compliance certificate substantially

in the form of Exhibit B hereto along with a schedule in a form

satisfactory to U.S. Bank of the calculations used in determining, as of

the end of such month, whether Mackie and the Guarantors are in compliance with

the covenants set forth in Section 6.17 and Section 6.18 of this Agreement for

such month, (ii) within 45 days after the end of each fiscal quarter,

quarterly unaudited consolidated financial statements, and unaudited

consolidating financial statements (including in each case balance sheets,

statements of income and loss, statements of cash flow, and statements of

shareholders’ equity), all in reasonable detail, fairly presenting in all

material respects the financial position and the results of the operations of

Mackie and its Subsidiaries as of the end of and through such fiscal quarter,

certified to be 

 

34

 

correct

by the chief financial officer of Mackie, subject to normal year-end

adjustments and no footnotes and accompanied by a compliance certificate

substantially in the form of Exhibit B hereto along with a schedule in a

form satisfactory to U.S. Bank of the calculations used in determining, as

of the end of such quarter, whether Mackie and the Guarantors are in compliance

with the covenants set forth in Section 6.17 and Section 6.18 of this Agreement

for such quarter and (iii) within 120 days after the end of each

fiscal year, commencing with the fiscal year ending December 31, 2003,

audited consolidated financial statements and unaudited consolidating financial

statements of Mackie and its Subsidiaries (including in each case balance

sheets, statements of income and loss, statements of cash flow, and statements

of shareholders’ equity), and the accompanying notes thereto, all in reasonable

detail, fairly presenting in all material respects the financial position and

the results of the operations of Mackie and its Subsidiaries as of the end of

and for such fiscal year, together with the opinion of independent certified

public accountants (which shall not contain a scope or a going concern

qualification) with respect to the audited consolidated financial statements,

which accountants shall be an independent accounting firm selected by Mackie

and acceptable to U.S. Bank, that such audited consolidated financial

statements have been prepared in accordance with GAAP, and present fairly in

all material respects the results of operations and financial condition of

Mackie and its Subsidiaries as of the end of and for the fiscal year then ended.

 

(b)                                 Mackie

and the Guarantors shall promptly notify U.S. Bank in writing of the

details of (i) any loss, damage, investigation, action, suit, proceeding,

or claim relating to Collateral having a value of more than $250,000 or which

if adversely determined would result in any material adverse change in Mackie’s

or any Guarantor’s business, properties, assets, goodwill or condition,

financial or otherwise, (ii) any Material Contract being terminated or

amended in any material adverse respect or any new Material Contract entered

into (in which event Mackie and the Guarantors shall provide U.S. Bank

with a copy of such Material Contract), (iii) any order, judgment, or

decree in excess of $250,000 that shall have been entered against Mackie or any

Guarantor, any of its or their properties or assets, (iv) any notification

of a material violation of laws or regulations received by Mackie or any

Guarantor, (v) any ERISA Event, (vi) the occurrence of any Default or

Event of Default, and (vii) any material events, developments, or

occurrences with respect to the EAW Fire Proceeding.

 

(c)                                  Promptly

upon becoming aware of the same, Mackie and the Guarantors shall notify

U.S. Bank in writing of any supplier or other creditor whose arrangements

include any retention of title liens or other rights with respect to any goods

supplied to Mackie or any Guarantor. 

Mackie and the Guarantors shall promptly after the sending or filing

thereof furnish or cause to be furnished to U.S. Bank copies of all

reports that Mackie or any Guarantor sends to its stockholders generally and

copies of all reports and registration statements that Mackie or any Guarantor

files with the Securities and Exchange Commission, any national securities

exchange or the National Association of Securities Dealers, Inc., or similar

securities commission or exchange.

 

35

 

(d)                                 Mackie

and the Guarantors shall furnish or cause to be furnished to U.S. Bank

annual projected financial statements (prepared on a monthly basis) and such

other budgets, forecasts, projections, and other information respecting the

Collateral and the business of Mackie and the Guarantors, as U.S. Bank

may, from time to time, reasonably request. 

U.S. Bank acknowledges that any financial projections and forecasts

delivered by Mackie or any Guarantor (i) may contain projected results

that could differ from the actual results and (ii) will be prepared by

Mackie or such Guarantor in good faith, based upon assumptions that are

reasonable in light of the circumstances existing at the time such financial

projections or forecasts are prepared. 

Mackie and each Guarantor hereby irrevocably authorizes and directs all

of their accountants or auditors to deliver to U.S. Bank, at Mackie’s

expense, copies of the financial statements of Mackie and any Guarantor and any

reports or management letters prepared by such accountants or auditors on

behalf of Mackie or any Guarantor and to disclose to U.S. Bank such

information as they may have regarding the business of Mackie and any

Guarantor.  Any documents, schedules,

invoices, or other papers delivered to U.S. Bank may be destroyed or

otherwise disposed of by U.S. Bank one year after the same are delivered

to U.S. Bank, except as otherwise designated by Mackie to U.S. Bank

in writing.

 

Section 6.7                                      Sale

of Assets; Consolidation, Merger, or Dissolution.  Mackie and each Guarantor shall not directly or indirectly,

 

(a)                                  merge

into or with or consolidate with any other Person or permit any other Person to

merge into or with or consolidate with it except that any Guarantor may merge

with and into or consolidate with any other Guarantor, provided that each of

the following conditions is satisfied as determined by U.S. Bank in good

faith:  (i) U.S. Bank shall

have received not less than ten Business Days’ prior written notice of the

intention of such Guarantors to so merge or consolidate, which notice shall set

forth in reasonable detail satisfactory to U.S. Bank the persons that are

merging or consolidating, which person will be the surviving entity, the

locations of the assets of the persons that are merging or consolidating, and

the material agreements and documents relating to such merger or consolidation,

(ii) U.S. Bank shall have received such other information with respect

to such merger or consolidation as U.S. Bank may reasonably request,

(iii) as of the effective date of the merger or consolidation and after

giving effect thereto, no Default or Event of Default shall exist or have

occurred and be continuing, (iv) U.S. Bank shall have received true,

correct, and complete copies of all agreements, documents, and instruments

relating to such merger or consolidation, including, but not limited to, the

certificate or certificates of merger to be filed with each appropriate Secretary

of State (with a copy as filed promptly after such filing), (v) the

surviving corporation shall expressly confirm, ratify, and assume the

Obligations and the Loan Documents to which it is a party in writing, in form

and substance satisfactory to U.S. Bank, and Mackie and the Guarantors

shall execute and deliver such other agreements, documents, and instruments as

U.S. Bank may request in connection therewith;

 

36

 

(b)                                 sell,

assign, lease, transfer, abandon, or otherwise dispose of any Capital Stock or

Indebtedness to any other Person, or any of its assets to any other Person,

except for

 

(i)                                     sales

of inventory in the ordinary course of business,

 

(ii)                                  the

sale or other disposition of equipment (including worn-out or obsolete

equipment or equipment no longer used or useful in the business of Mackie or

any Guarantor) so long as such sales or other dispositions do not involve

equipment having an aggregate fair market value in excess of $500,000 for all such

equipment disposed of in any fiscal year of Mackie or as U.S. Bank may

otherwise agree; provided that all Net Cash Proceeds from any such sale or

other disposition shall be promptly paid to CFC to be applied to the

outstanding principal amount of the CFC Facility, which amounts may be

reborrowed in accordance with the terms hereof, or if (x) CFC shall have been

paid in full, (y) the CFC Loan Agreement shall have been terminated, and (z)

the CFC Facility has not been re-financed, then such proceeds shall be paid to

U.S. Bank for application to the New Term Loan in inverse order of

maturity,

 

(iii)                               the issuance and sale by

Mackie or any Guarantor of Capital Stock of Mackie or such Guarantor after the

date hereof; provided that (A) U.S. Bank shall have received not less

than ten Business Days’ prior written notice of such issuance and sale by

Mackie or such Guarantor, which notice shall specify the parties to whom such

shares are to be sold, the terms of such sale, the total amount that it is

anticipated will be realized from the issuance and sale of such stock and the

Net Cash Proceeds that it is anticipated will be received by Mackie or such

Guarantor from such sale, (B) Mackie or such Guarantor shall not be

required to pay any cash dividends or repurchase or redeem such Capital Stock

or make any other payments in respect thereof, except as otherwise permitted in

Section 6.11 hereof, (C) the terms of such Capital Stock, and the terms

and conditions of the purchase and sale thereof, shall not include any terms

that include any limitation on the right of Mackie or any Guarantor to amend or

modify any of the terms and conditions of this Agreement or any of the other

Loan Documents or otherwise in any way relate to or affect the arrangements of

Mackie and the Guarantors with U.S. Bank or are more restrictive or

burdensome to Mackie or any Guarantor than the terms of any Capital Stock in

effect on the date hereof, (D) except as U.S. Bank may 

 

37

 

otherwise

agree in writing, all of the proceeds of the sale and issuance of such Capital

Stock shall be paid to CFC for application to the loans governed by the CFC

Loan Agreement in such order and manner as CFC may determine or at CFC’s

option, to be held as cash collateral for the loans governed by the CFC Loan

Agreement, or if (x) CFC shall have been paid in full, (y) the CFC Loan

Agreement shall have been terminated, and (z) the CFC Facility has not been

re-financed, then such proceeds shall be paid to U.S. Bank for application

to the New Term Loan, and (E) as of the date of such issuance and sale and

after giving effect thereto, no Default or Event of Default shall exist or have

occurred,

 

(iv)                              the

issuance of Capital Stock of Mackie or any Guarantor consisting of common stock

pursuant to an employee stock option or grant or similar equity plan or 401(k)

plans of Mackie or such Guarantor for the benefit of its employees, directors,

and consultants, provided that in no event shall Mackie or such Guarantor be

required to issue, or shall Mackie or such Guarantor issue, Capital Stock

pursuant to such stock plans or 401(k) plans that would result in a Change of

Control or other Event of Default; and

 

(v)                                 sales

or other dispositions of assets made in accordance with the terms of the

Intercreditor Agreement;

 

provided that, if (x) CFC

shall have been paid in full, (y) the CFC Loan Agreement shall have been

terminated, and (z) the CFC Facility has not been re-financed, then any

proceeds that (A) result from a sale or assignment of assets used or useful in

the business of Mackie or such Guarantor, (B) exceed $200,000, (C) are not

permitted pursuant to Sections 6.7(b)(i) through (iv) above, and (D) Mackie or

such subsidiary does not intend to reinvest, shall be paid to U.S. Bank for application

to the New Term Loan in inverse order of maturity.

 

(c)                                  wind

up, liquidate, or dissolve, except that any Guarantor may wind up, liquidate,

and dissolve, provided that each of the following conditions is satisfied,

(i) the winding up, liquidation, and dissolution of such Guarantor shall

not violate any law or any order or decree of any court or other Governmental

Authority in any material respect and shall not conflict with or result in the

breach of, or constitute a default under, any indenture, mortgage, deed of

trust, or any other agreement or instrument to which Mackie or any Guarantor is

a party or may be bound, (ii) such winding up, liquidation, or dissolution

shall be done in accordance with the requirements of all applicable laws and regulations,

(iii) effective upon such winding up, liquidation, or dissolution, all of

the assets and properties of such Guarantor shall be duly and validly

transferred and assigned to Mackie, free and clear of any liens, restrictions,

or encumbrances 

 

38

 

other

than the security interest and liens of CFC and U.S. Bank (and

U.S. Bank shall have received such evidence thereof as U.S. Bank may

require) and U.S. Bank shall have received such deeds, assignments, or

other agreements as U.S. Bank may request to evidence and confirm the

transfer of such assets of such Guarantor to Mackie, (iv) U.S. Bank

shall have received all documents and agreements that Mackie or any Guarantor

has filed with any Governmental Authority or as are otherwise required to

effectuate such winding up, liquidation, or dissolution, (v) neither

Mackie nor any Guarantor shall assume any Indebtedness, obligations, or

liabilities as a result of such winding up, liquidation, or dissolution, or otherwise

become liable in respect of any obligations or liabilities of the entity that

is winding up, liquidating, or dissolving, unless such Indebtedness is

otherwise expressly permitted hereunder, (vi) U.S. Bank shall have

received not less than ten Business Days prior written notice of the

intention of such Guarantor to wind up, liquidate, or dissolve, and

(vii) as of the date of such winding up, liquidation, or dissolution and

after giving effect thereto, no Default or Event of Default shall exist or have

occurred; or

 

(d)                                 agree

to do any of the foregoing; provided that nothing in this Section 6.7(d) of

this Agreement shall prohibit Mackie or any Guarantor from entering into a

non-binding letter of intent with respect to any of the foregoing.

 

Section 6.8                                      Encumbrances.  Mackie and each Guarantor shall not create,

incur, assume, or suffer to exist any security interest, mortgage, pledge,

lien, charge, or other encumbrance of any nature whatsoever on any of its

assets or properties, including the Collateral, except:

 

(a)                                  the

security interests and liens of U.S. Bank with respect to the assets of

Mackie and the Guarantors;

 

(b)                                 liens

securing the payment of taxes, assessments, or other governmental charges or

levies either not yet overdue or the validity of which are being contested in

good faith by appropriate proceedings diligently pursued and available to

Mackie, or such Guarantor, as the case may be and with respect to which

adequate reserves have been set aside on its books;

 

(c)                                  non-consensual

statutory liens (other than liens securing the payment of taxes) arising in the

ordinary course of Mackie’s or a Guarantor’s business to the extent:  (i) such liens secure Indebtedness or

other liabilities that are not overdue or (ii) such liens secure

Indebtedness relating to claims or liabilities that are fully insured and being

defended at the sole cost and expense and at the sole risk of the insurer, or

being contested in good faith by appropriate proceedings diligently pursued and

available to Mackie or the Guarantor, in each case prior to the commencement of

foreclosure or other similar proceedings and with respect to which adequate

reserves have been set aside on its books;

 

(d)                                 zoning

restrictions, easements, licenses, covenants, and other restrictions affecting

the use of real property that do not interfere in any material respect with the

use of such real property or ordinary conduct of the business of 

 

39

 

Mackie

or any Guarantor as presently conducted thereon or materially impair the value

of the real property that may be subject thereto;

 

(e)                                  purchase

money security interests in equipment (including Capital Leases) and purchase

money mortgages on real property to secure Indebtedness permitted under Section

6.9(b) hereof;

 

(f)                                    pledges

and deposits of cash by Mackie or any Guarantor after the date hereof in the

ordinary course of business in connection with workers’ compensation,

unemployment insurance, and other types of social security benefits consistent

with the current practices of Mackie or such Guarantor as of the date hereof;

 

(g)                                 pledges

and deposits of cash by Mackie or any Guarantor after the date hereof to secure

the performance of tenders, bids, leases, trade contracts (other than for the

repayment of Indebtedness), statutory obligations, and other similar

obligations in each case in the ordinary course of business consistent with the

current practices of Mackie or such Guarantor as of the date hereof; provided

that in connection with any performance bonds issued by a surety or other

person, the issuer of such bond shall have waived in writing any rights in or

to, or other interest in, any of the Collateral in an agreement, in form and

substance satisfactory to U.S. Bank;

 

(h)                                 liens

arising from (i) operating leases and precautionary UCC financing

statement filings in respect thereof and (ii) equipment or other materials

that are not owned by Mackie or any Guarantor located on the premises of Mackie

or such Guarantor (but not in connection with, or as part of, the financing

thereof) from time to time in the ordinary course of business and consistent

with current practices of Mackie or such Guarantor and the precautionary UCC

financing statement filings in respect thereof;

 

(i)                                     judgments

and other similar liens arising in connection with court proceedings that do

not constitute an Event of Default, provided that (i) such liens are being

contested in good faith and by appropriate proceedings diligently pursued,

(ii) adequate reserves or other appropriate provision, if any, as are

required by GAAP have been made therefor, and (iii) a stay of enforcement

of any such liens is in effect;

 

(j)                                     liens

and security interests to secure the Indebtedness governed by the CFC Loan

Agreement, subject to the terms of the Intercreditor Agreement;

 

(k)                                  the

replacement of any lien or security interest permitted by Section 6.8(j) hereof

on the same property subject to the lien so replaced; provided that

(A) any such lien or security interest shall not secure any Indebtedness

or other liabilities except for the Indebtedness permitted by Section 6.9(i)

hereof and (B) U.S. Bank shall have received an intercreditor

agreement, substantially in the form of the Intercreditor Agreement (or

otherwise 

 

40

 

acceptable

to U.S. Bank), duly authorized, executed, and delivered by the holder or

holders of such lien or security interest;

 

(l)                                     liens

and security interests of the Warehouseman on the inventory of Mackie that is

in the possession or control of the Warehouseman solely to the extent

(i) such liens and security interests secure accrued and unpaid fees and

charges that are owing by Mackie to the Warehouseman and (ii) such fees

and charges are not overdue;

 

(m)                               the

security interests and liens set forth on Schedule 5.4 to the Information

Certificate; and

 

(n)                                 other

liens incurred in the ordinary course of business that do not exceed $100,000

in the aggregate.

 

Section 6.9                                      Indebtedness.  Mackie and each Guarantor shall not incur,

create, assume, become or be liable in any manner with respect to, or permit to

exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become

responsible for (directly or indirectly) any Indebtedness, except:

 

(a)                                  the

Obligations;

 

(b)                                 purchase

money Indebtedness (including Capital Leases) arising after the date hereof to

the extent secured by purchase money security interests in equipment (including

Capital Leases) and purchase money mortgages on real property not to exceed

$3,000,000 in the aggregate at any time outstanding so long as such security

interests and mortgages do not apply to any property of Mackie or such

Guarantor other than the equipment or real property so acquired, and the

Indebtedness secured thereby does not exceed the cost of the equipment or real

property so acquired, as the case may be;

 

(c)                                  guarantees

by Mackie or any Guarantor of the obligations of Mackie or the other Guarantors

in connection with the CFC Loan Facility;

 

(d)                                 the

Indebtedness of Mackie or any Guarantor to Mackie or any other Guarantor

arising after the date hereof pursuant to loans by Mackie or any Guarantor or

any of its Subsidiaries permitted under Section 6.10(g) or Section 6.10(h)

hereof;

 

(e)                                  unsecured

Indebtedness of Mackie or any Guarantor arising after the date hereof to any

third person (but not to Mackie or any other Guarantor), provided that each of

the following conditions is satisfied as determined by U.S. Bank:  (i) such Indebtedness shall be on terms

and conditions acceptable to U.S. Bank and shall be subject and

subordinate in right of payment to the right of U.S. Bank to receive the

prior indefeasible payment and satisfaction in full payment of all of the

Obligations pursuant to the terms of an intercreditor agreement between

U.S. Bank and such third party, in form and substance satisfactory to

U.S. Bank, (ii) U.S. Bank shall have received not less than

10 days 

 

41

 

prior

written notice of the intention of Mackie or such Guarantor to incur such

Indebtedness, which notice shall set forth in reasonable detail satisfactory to

U.S. Bank the amount of such Indebtedness, the person or persons to whom

such Indebtedness will be owed, the interest rate, the schedule of repayments

and maturity date with respect thereto, and such other information as

U.S. Bank may request with respect thereto, (iii) U.S. Bank

shall have received true, correct, and complete copies of all agreements,

documents, and instruments evidencing or otherwise related to such Indebtedness,

(iv) except as U.S. Bank may otherwise agree in writing (including

the Intercreditor Agreement), all of the proceeds of the loans or other

accommodations giving rise to such Indebtedness shall be paid to U.S. Bank

for application to the Obligations in such order and manner as U.S. Bank

may determine or at U.S. Bank’s option, may be held as cash collateral for

the Obligations, (v) as of the date of incurring such Indebtedness and

after giving effect thereto, no Default or Event of Default shall exist or have

occurred and be continuing, (vi) Mackie and the Guarantors shall not,

directly or indirectly, (A) amend, modify, alter, or change the terms of

such Indebtedness or any agreement, document, or instrument related thereto,

except, that Mackie or such Guarantor may, after prior written notice to

U.S. Bank, amend, modify, alter, or change the terms thereof so as to

extend the maturity thereof, or defer the timing of any payments in respect

thereof, or to forgive or cancel any portion of such Indebtedness (other than

pursuant to payments thereof), or to reduce the interest rate or any fees in

connection therewith, or (B) redeem, retire, defease, purchase, or

otherwise acquire such Indebtedness (except pursuant to regularly scheduled

payments permitted herein), or set aside or otherwise deposit or invest any

sums for such purpose, and (vii) Mackie and the Guarantors shall furnish

to U.S. Bank all notices or demands in connection with such Indebtedness

either received by Mackie or any Guarantor or on its behalf promptly after the

receipt thereof, or sent by Mackie or any Guarantor or on its behalf

concurrently with the sending thereof, as the case may be;

 

(f)                                    the

Indebtedness of Mackie to the Subordinated Lenders as evidenced by the

Subordinated Notes (as in effect on the date hereof); provided that each of the

following conditions is satisfied as determined by U.S. Bank:

 

(i)                                     the

aggregate original principal amount of such Indebtedness shall not exceed

$8,000,000 less the aggregate amount of all repayments, repurchases, or redemptions,

whether optional or mandatory, in respect thereof,

 

(ii)                                  such

Indebtedness shall be on terms and conditions acceptable to U.S. Bank and

U.S. Bank shall have received true, correct, and complete copies of all

agreements, documents, and instruments evidencing or otherwise related to such

Indebtedness, including the Subordinated Note, each as duly authorized,

executed, and delivered by the parties thereto,

 

42

 

(iii)                               U.S. Bank shall

have received each Subordination Agreement, in form and substance satisfactory

to U.S. Bank, duly authorized, executed, and delivered by the parties

thereto,

 

(iv)                              such

Indebtedness shall be at all times unsecured,

 

(v)                                 Mackie

and the Guarantors shall not, and shall not permit any of their Subsidiaries

to, make any payments with respect to such Indebtedness, except (A) Mackie

may make regularly scheduled non-cash capitalized interest payments in respect

of such Indebtedness in accordance with the terms of the Subordinated Notes as

in effect on the date hereof, in the form of additional indebtedness having

substantially the same terms and (B) Mackie may convert any or all of the

principal amount of such Indebtedness into shares of common stock of Mackie or

preferred stock of Mackie which, by the terms of such preferred stock, could

not be (at the request of the holders thereof or otherwise) subject to

mandatory sinking fund payments, redemption, other acceleration or other

interests,

 

(vi)                              Mackie

and the Guarantors shall not, directly or indirectly, (A) amend, modify,

alter, or change the terms of such Indebtedness or any agreement, document, or

instrument related thereto, except, that, Mackie or the Guarantors may, after

prior written notice to U.S. Bank, amend, modify, alter, or change the

terms thereof so as to extend the maturity thereof, or defer the timing of any

payments in respect thereof, or to forgive or cancel any portion of such

Indebtedness (other than pursuant to payments thereof), or to reduce the

interest rate or any fees in connection therewith, or (B) redeem, retire,

defease, purchase, or otherwise acquire such Indebtedness (except pursuant to

regularly scheduled payments permitted herein), or set aside or otherwise

deposit or invest any sums for such purpose, and

 

(vii)                           Mackie and the Guarantors

shall furnish to U.S. Bank all demands or material notices in connection

with such Indebtedness either received by Mackie or any Guarantor promptly

after the receipt thereof, or sent by Mackie or any Guarantor or on its behalf

concurrently with the sending thereof, as the case may be;

 

(g)                                 Indebtedness

of Mackie and the Guarantors under interest rate swap agreements, interest rate

cap agreements, interest rate collar agreements, interest rate exchange

agreements, or similar contractual arrangements intended to

 

43

 

protect

such Person against fluctuations in interest rates and currency swap

agreements, forward currency purchase agreements, or similar contractual

arrangements intended to protect such Person against fluctuations in currency

exchange rates; provided that (i) such arrangements are with banks or

other financial institutions that have combined capital and surplus and

undivided profits of not less than $250,000,000 and are not for speculative

purposes and (ii) such Indebtedness shall be unsecured (but such

Indebtedness may be supported by letters of credit issued pursuant to the CFC

Loan Agreement);

 

(h)                                 the

Indebtedness set forth on Schedule 6.9 to the Information Certificate that

is not otherwise permitted under this Section 6.9 of this Agreement; provided

that (i) Mackie and the Guarantors may only make regularly scheduled

payments of principal and interest in respect of such Indebtedness in

accordance with the terms of the agreement or instrument evidencing or giving

rise to such Indebtedness as in effect on the date hereof, (ii) Mackie and

the Guarantors shall not, directly or indirectly, (A) amend, modify,

alter, or change the terms of such Indebtedness or any agreement, document, or

instrument related thereto as in effect on the date hereof except, that, Mackie

and the Guarantors may, after prior written notice to U.S. Bank, amend,

modify, alter, or change the terms thereof so as to extend the maturity thereof,

or defer the timing of any payments in respect thereof, or to forgive or cancel

any portion of such Indebtedness (other than pursuant to payments thereof), or

to reduce the interest rate or any fees in connection therewith, or

(B) redeem, retire, defease, purchase, or otherwise acquire such

Indebtedness, or set aside or otherwise deposit or invest any sums for such

purpose, and (iii) Mackie and the Guarantors shall furnish to

U.S. Bank all notices or demands in connection with such Indebtedness either

received by Mackie or any Guarantor or on its behalf, promptly after the

receipt thereof, or sent by Mackie or any Guarantor or on its behalf,

concurrently with the sending thereof, as the case may be,

 

(i)                                     Indebtedness

of Mackie and the Guarantors that refinances in full the Indebtedness permitted

under Section 6.9(k) of this Agreement (the “Refinanced Indebtedness”),

provided that each of the following conditions is satisfied as determined by

U.S. Bank in good faith:  (i) U.S. Bank

shall have received an intercreditor agreement, substantially in the form of

the Intercreditor Agreement (or otherwise acceptable to U.S. Bank), duly

authorized, executed, and delivered by the holder or holders of such

Indebtedness, (ii) U.S. Bank shall have received not less than ten Business

Days prior written notice of the intention of Mackie or the Guarantors to incur

such Indebtedness, which notice shall set forth in reasonable detail

satisfactory to U.S. Bank the amount of such Indebtedness, the person or

persons to whom such Indebtedness will be owed, the interest rate, the schedule

of repayments and maturity date with respect thereto, and such other

information as U.S. Bank may request with respect thereto,

(iii) U.S. Bank shall have received true, correct, and complete

copies of all agreements, documents, and instruments evidencing or otherwise

related to such Indebtedness, (iv) all of the net proceeds of the loans or

other accommodations giving rise to such Indebtedness remaining after the

repayment of the Refinanced Indebtedness shall 

 

44

 

be

paid to U.S. Bank for application to the Obligations in such order as

U.S. Bank may determine, and (v) Mackie and the Guarantors shall

furnish to U.S. Bank all notices or demands in connection with such

Indebtedness either received by Mackie or any Guarantor or on its behalf

promptly after the receipt thereof, or sent by Mackie or any Guarantor or on

its behalf concurrently with the sending thereof, as the case may be.

 

(j)                                     unsecured

Indebtedness of Mackie arising pursuant to the redemption by Mackie of its

common stock in accordance with Section 6.11(d) of this Agreement; provided

that (i) the aggregate principal amount of such Indebtedness incurred in

any fiscal year shall not exceed the amount expressly permitted in Section

6.11(d) of this Agreement, (ii) neither Mackie nor any Guarantor shall

make, or be required to make, any payments in respect of such Indebtedness

other than regularly scheduled payments of interest at a rate per annum not to

exceed the Prime Rate (as defined in the CFC Loan Agreement) plus

2 percent, (iii) U.S. Bank shall have received a subordination

agreement, in form and substance satisfactory to U.S. Bank, duly executed

and delivered by the holder or holders of such Indebtedness, (iv) Mackie

and the Guarantors shall not, directly or indirectly, (A) amend, modify,

alter, or change the terms of such Indebtedness or any agreement, document, or

instrument related thereto except, that Mackie and the Guarantors may, after

prior written notice to U.S. Bank, amend, modify, alter, or change the

terms thereof so as to extend the maturity thereof, or defer the timing of any

payments in respect thereof, or to forgive or cancel any portion of such

Indebtedness (other than pursuant to payments thereof), or to reduce the

interest rate or any fees in connection therewith, or (B) redeem, retire,

defease, purchase, or otherwise acquire such Indebtedness, or set aside or

otherwise deposit or invest any sums for such purpose, and (v) Mackie and

the Guarantors shall furnish to U.S. Bank all notices or demands in

connection with such Indebtedness either received by Mackie or any Guarantor or

on its behalf, promptly after the receipt thereof, or sent by Mackie or any

Guarantor or on its behalf, concurrently with the sending thereof, as the case

may be;

 

(k)                                  the

Indebtedness of Mackie and the Guarantors evidenced by the CFC Loan Agreement;

provided that each of the following conditions is satisfied as determined by

U.S. Bank:

 

(i)                                     the

aggregate principal amount of such Indebtedness shall not exceed $33,500,000;

 

(ii)                                  U.S. Bank

shall have received true, correct, and complete copies of all agreements,

documents, and instruments evidencing or otherwise related to such

Indebtedness, each as duly authorized, executed, and delivered by the parties

thereto,

 

(iii)                               U.S. Bank shall

have received the Intercreditor Agreement, in form and substance satisfactory

to U.S. Bank, duly authorized, executed, and delivered by the parties

thereto,

 

45

 

(iv)                              Mackie

and the Guarantors shall not, directly or indirectly, amend, modify, alter, or

change the terms of such Indebtedness or any agreement, document, or instrument

related thereto in a manner prohibited by clauses (y) and (z) of

Section 4.4 of the Intercreditor Agreement, and

 

(v)                                 Mackie

and the Guarantors shall furnish to U.S. Bank all demands or material

notices in connection with such Indebtedness either received by Mackie or any

Guarantor promptly after the receipt thereof, or sent by Mackie or any

Guarantor or on its behalf concurrently with the sending thereof, as the case

may be;

 

(l)                                     the

Indebtedness of Mackie to KBC Bank, N.V. as evidenced by the Belgian Guarantee

(as in effect on the date hereof); provided that each of the following

conditions is satisfied as determined by U.S. Bank:

 

(i)                                     the

aggregate maximum principal amount of such Indebtedness shall not exceed

580,000 Euros, less the aggregate amount of all repayments, repurchases, or

redemptions, whether optional or mandatory, in respect thereof, plus interest,

fees, and expenses,

 

(ii)                                  such

Indebtedness shall be unsecured and U.S. Bank shall have received true,

correct, and complete copies of all agreements, documents, and instruments

evidencing or otherwise related to such Indebtedness, each as duly authorized,

executed, and delivered by the parties thereto,

 

(iii)                               Mackie and the

Guarantors shall not, directly or indirectly, (A) amend, modify, alter, or

change the terms of such Indebtedness or any agreement, document, or instrument

related thereto, except that Mackie or the Guarantors may, after prior written

notice to U.S. Bank, amend, modify, alter, or change the terms thereof so

as to extend the maturity thereof, or defer the timing of any payments in respect

thereof, or to forgive or cancel any portion of such Indebtedness (other than

pursuant to payments thereof), or to reduce the interest rate, or any fees in

connection therewith, or (B) redeem, retire, defease, purchase, or

otherwise acquire such Indebtedness (except pursuant to regularly scheduled

payments permitted herein), or set aside or otherwise deposit or invest any

sums for such purpose, and

 

(iv)                              Mackie

and the Guarantors shall furnish to U.S. Bank all demands or material

notices in connection with such Indebtedness either received by Mackie or any

Guarantor 

 

46

 

promptly

after the receipt thereof, or sent by Mackie or any Guarantor or on its behalf

concurrently with the sending thereof, as the case may be;

 

(m)                               Indebtedness

of Mackie arising pursuant to the redemption by Mackie of its common stock in

accordance with Section 6.11(d) of this Agreement; provided that (i) the

aggregate principal amount of such Indebtedness incurred in any fiscal year shall

not exceed $2,000,000 (plus any non-cash capitalized interest on any such

outstanding Indebtedness to the extent permitted by clause (ii) below),

(ii) neither Mackie nor any Guarantor shall make, or be required to make,

any payments in respect of such Indebtedness prior to the end of then current

term of this Agreement except for regularly scheduled non-cash capitalized

interest payments in respect of such Indebtedness, (iii) Mackie and the

Guarantors shall not, directly or indirectly, (A) amend, modify, alter, or

change the terms of such Indebtedness or any agreement, document, or instrument

related thereto except that Mackie and the Guarantors may, after prior written

notice to U.S. Bank, amend, modify, alter, or change the terms thereof so

as to extend the maturity thereof, or defer the timing of any payments in

respect thereof, or to forgive or cancel any portion of such Indebtedness

(other than pursuant to payments thereof), or to reduce the interest rate or

any fees in connection therewith, or (B) redeem, retire, defease,

purchase, or otherwise acquire such Indebtedness, or set aside or otherwise

deposit or invest any sums for such purpose, (iv) such Indebtedness shall

be subject to, and subordinate in right of payment to, the right of U.S. Bank

to receive the prior final payment and satisfaction in full of all of the

Obligations on terms and conditions acceptable to U.S. Bank,

(v) U.S. Bank shall have received a subordination agreement, in form

and substance satisfactory to U.S. Bank, duly authorized, executed, and

delivered by each holder of such Indebtedness and (vi) Mackie and the

Guarantors shall furnish to U.S. Bank all notices or demands in connection

with such Indebtedness either received by Mackie or any Guarantor or on its

behalf, promptly after the receipt thereof, or sent by Mackie or any Guarantor

or on its behalf, concurrently with the sending thereof, as the case may be;

and

 

(n)                                 other

unsecured Indebtedness in an aggregate amount not to exceed $300,000.

 

Section 6.10                                Loans

and Investments.  Mackie and each

Guarantor shall not directly or indirectly make any loans or advance money or

property to any person, or invest in (by capital contribution, dividend, or

otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all

or a substantial part of the assets or property of any person, or form or

acquire any Subsidiaries, or agree to do any of the foregoing, except:

 

(a)                                  the

endorsement of instruments for collection or deposit in the ordinary course of

business;

 

(b)                                 investments

in cash or Cash Equivalents.

 

47

 

(c)                                  the

existing equity investments of Mackie and each Guarantor as of the date hereof

in its Subsidiaries, provided that neither Mackie nor any Guarantor shall have

any further obligations or liabilities to make any capital contributions or

other additional investments or other payments to or in or for the benefit of

any of such Subsidiaries;

 

(d)                                 loans

and advances by Mackie or any Guarantor to employees of Mackie or such

Guarantor not to exceed the principal amount of $250,000 in the aggregate at

any time outstanding for: 

(i) reasonable and necessary work-related travel or other ordinary

business expenses to be incurred by such employee in connection with their work

for Mackie or such Guarantor and (ii) reasonable and necessary relocation

expenses of such employees (including home mortgage financing for relocated

employees);

 

(e)                                  stock

or obligations issued to Mackie or any Guarantor by any Person (or the

representative of such Person) in respect of Indebtedness of such Person owing

to Mackie or such Guarantor in connection with the insolvency, bankruptcy,

receivership, or reorganization of such Person or a composition or readjustment

of the debts of such Person; provided that the original of any such stock or

instrument evidencing such obligations shall be promptly delivered to

U.S. Bank, upon U.S. Bank’s request, together with such stock power,

assignment or endorsement by Mackie or such Guarantor as U.S. Bank may

request;

 

(f)                                    obligations

of account debtors to Mackie or any Guarantor arising from accounts that are

past due evidenced by a promissory note made by such account debtor payable to

Mackie or such Guarantor; provided that promptly upon the receipt of the

original of any such promissory note by Mackie or such Guarantor, such

promissory note shall be endorsed to the order of CFC (or U.S. Bank only

if (x) CFC has been paid in full, (y) the CFC Loan Agreement shall have been

terminated, and (z) the CFC Facility has not been re-financed) by Mackie or

such Guarantor and promptly delivered to CFC (or U.S. Bank only if (x) CFC

has been paid in full, (y) the CFC Loan Agreement shall have been terminated,

and (z) the CFC Facility has not been re-financed) as so endorsed;

 

(g)                                 loans

by Mackie or a Guarantor to Mackie or another Guarantor or to the Specified

Foreign Subsidiaries after the date hereof, provided that

 

(i)                                     as

to all of such loans, (A) within 30 days after the end of each fiscal

month, Mackie shall provide to U.S. Bank a report in form satisfactory to

U.S. Bank of the outstanding amount of such loans as of the last day of

the immediately preceding month and indicating any loans made and payments

received during the immediately preceding month, (B) the Indebtedness arising

pursuant to any such loan shall not be evidenced by a promissory note or other

instrument, unless the single original of such note or other instrument is

promptly delivered to CFC to hold as part of the Collateral, with such

endorsement and/or assignment by 

 

48

 

the

payee of such note or other instrument as CFC may require, (C) as of the

date of any such loan and after giving effect thereto, Mackie or the Guarantor

making such loan shall be Solvent, and (D) as of the date of any such loan

and after giving effect thereto, no Default or Event of Default shall exist or

have occurred and be continuing,

 

(ii)                                  such

loans are permitted by the CFC Loan Agreement.

 

(h)                                 loans

to Mackie or any Guarantor by a Subsidiary thereof that is not a Guarantor,

provided that as to all of such loans, (i) within 30 days after the

end of each fiscal month, Mackie and the Guarantors shall provide to

U.S. Bank a report in form and substance satisfactory to U.S. Bank of

the outstanding amount of such loans as of the last day of the immediately

preceding month and indicating any loans made and payments received during the

immediately preceding month, (ii) the Indebtedness arising pursuant to

each such loan shall be subject to, and subordinate in right of payment to, the

right of U.S. Bank to receive the prior final payment and satisfaction in

full of all of the Obligations on terms and conditions acceptable to

U.S. Bank, (iii) promptly upon U.S. Bank’s request,

U.S. Bank shall have received a subordination agreement, in form and

substance satisfactory to U.S. Bank, providing for the terms of the

subordination in right of payment of such Indebtedness of Mackie or a Guarantor

to the prior final payment and satisfaction in full of all of the Obligations,

duly authorized, executed and delivered by such Subsidiary, and

(iv) Mackie or a Guarantor shall not, directly or indirectly make, or be

required to make, any payments in respect of such Indebtedness prior to the end

of then current term of this Agreement;

 

(i)                                     the

loans and advances set forth on Schedule 6.10 to the Information

Certificate; provided that as to such loans and advances, Mackie and the

Guarantors shall not, directly or indirectly, amend, modify, alter, or change

the terms of such loans and advances or any agreement, document, or instrument

related thereto and Mackie and the Guarantors shall furnish to U.S. Bank

all notices or demands in connection with such loans and advances either

received by Mackie or any Guarantor or on its behalf, promptly after the

receipt thereof, or sent by Mackie or any Guarantor or on its behalf,

concurrently with the sending thereof, as the case may be;

 

(j)                                     the

formation of new Subsidiaries incorporated or formed outside of the United

States of America or any state thereof; provided that (i) neither Mackie

nor any Guarantor shall at any time make any capital contributions or

investments or other payments to or in or for the benefit of any such

Subsidiaries and (ii) neither Mackie nor any Guarantor shall have any

liability (whether by contract, operation of law, or otherwise) in respect of

the indebtedness and obligations of any such Subsidiary;

 

(k)                                  loans

and advances made prior to the date hereof and outstanding as of the date

hereof (i) to Mackie Designs (Netherlands) B.V. in the aggregate 

 

49

 

principal

amount of $1,300,000, and (ii) to Mackie Designs Engineering Services BVBA

in the aggregate principal amount of $660,000;

 

(l)                                     sales

of goods by Mackie or any Guarantor in the ordinary course of business (whether

for cash or on credit) so long as any such sale and any such credit do not

contravene or breach any other terms or provisions of this Agreement;

 

(m)                               the

payment by Mackie to KBC Bank N.V. pursuant to the Belgian Guaranty, to

the extent permitted by Section 6.9(l), together with any rights of

subrogation arising in favor of Mackie as a result of such payment; and

 

(n)                                 other

investments in an aggregate amount not to exceed $300,000.

 

Section 6.11                                Dividends

and Redemptions.  Mackie and each

Guarantor shall not, directly or indirectly, declare or pay any dividends on

account of any shares of any class of Capital Stock of Mackie or such Guarantor

now or hereafter outstanding, or set aside or otherwise deposit or invest any

sums for such purpose, or redeem, retire, defease, purchase, or otherwise

acquire any shares of any class of Capital Stock (or set aside or otherwise

deposit or invest any sums for such purpose) for any consideration or apply or set

apart any sum, or make any other distribution (by reduction of capital or

otherwise) in respect of any such shares or agree to do any of the foregoing,

except that:

 

(a)                                  Mackie

or any Guarantor may declare and pay such dividends or redeem, retire, defease,

purchase, or otherwise acquire any shares of any class of Capital Stock for

consideration in the form of shares of common stock (so long as after giving

effect thereto no Change of Control or other Default or Event of Default shall

exist or occur);

 

(b)                                 Mackie

and Guarantors may pay dividends to the extent permitted in Section 6.12 below;

 

(c)                                  any

Subsidiary of Mackie or any Guarantor may pay dividends to Mackie; and

 

(d)                                 Mackie

may repurchase Capital Stock consisting of its common stock held by employees

pursuant to any employee stock ownership plan thereof upon the termination,

retirement, or death of any such employee in accordance with the provisions of

such plan, provided that as to any such repurchase, each of the following

conditions is satisfied:  (i) as of

the date of the payment for such repurchase and after giving effect thereto, no

Default or Event of Default shall exist or have occurred and be continuing,

(ii) such repurchase shall be paid with funds legally available therefor

either in cash or in the form of Indebtedness permitted under Section 6.9(j) of

this Agreement, (iii) such repurchase shall not violate any law or

regulation or the terms of any indenture, agreement, or undertaking to which

Mackie or such Guarantor is a party or by which Mackie or such Guarantor or its

or their property is bound, (iv) the aggregate amount of all cash payments

for such repurchases in any fiscal year shall not exceed $300,000, 

 

50

 

and

(v) the aggregate amount of all payments for such repurchases through the

incurrence of subordinated Indebtedness shall not exceed $2,000,000 in any

fiscal year;

 

Section 6.12                                Transactions

with Affiliates.  Mackie and each

Guarantor shall not, directly or indirectly:

 

(a)                                  purchase,

acquire, or lease any property or services from, or sell, transfer, or lease

any property or services to, any officer, director, or other Affiliate of

Mackie or such Guarantor, except (i) for transfers of property expressly

permitted under Section 6.7 of this Agreement and loans and investments

expressly permitted under Section 6.9 and Section 6.10 of this Agreement and

(ii) except for transfers in the ordinary course of and pursuant to the

reasonable requirements of Mackie’s or such Guarantor’s business (as the case

may be) and upon fair and reasonable terms no less favorable to Mackie or such

Guarantor than Mackie or such Guarantor would obtain in a comparable arm’s

length transaction with an unaffiliated person; provided that, with respect to

accounts receivables of Mackie or a Guarantor owing by an Affiliate thereof and

existing on the date hereof, the payment terms for such account receivables

offered by Mackie and any Guarantor may be longer than the payment terms

offered by Mackie and any Guarantor to unaffiliated account debtors; or

 

(b)                                 make

any payments (whether by dividend, loan, or otherwise) of management,

consulting or other fees for management or similar services, or of any

Indebtedness owing to any officer, employee, shareholder, director, or any

other Affiliate of Mackie or any Guarantor, except:

 

(i)                                     reasonable

compensation to officers, employees, and directors for services rendered to

Mackie or any Guarantor in the ordinary course of business;

 

(ii)                                  payments

by Mackie or any Guarantor to Sun Capital of a management fee in an aggregate

amount per calendar quarter not to exceed the greater of 6 percent of

EBITDA of Mackie and its Subsidiaries for such fiscal quarter and $100,000 (the

“Quarterly Amount”); provided that as to any such payment, as of the date of

such payment and after giving effect thereto, (A) no Event of Default has

occurred and is continuing or would result therefrom, and

(B) U.S. Bank has received all payments scheduled to be made

hereunder through the date in question; provided, further, that if the

aggregate amount of management fees paid by Mackie and the Guarantors under

this clause (ii) during any fiscal quarter is less than the Quarterly

Amount for such fiscal quarter, then the Quarterly Amount for the succeeding

fiscal quarters shall be increased by the amount equal to such shortfall until

such shortfall is paid in full to 

 

51

 

Sun

Capital pursuant to this Section 6.12(b)(ii) of this Agreement; and

 

(iii)                               reimbursement of

reasonable out-of-pocket costs and expenses incurred by Sun Capital and its

Affiliates for the direct benefit of Mackie and the Guarantors in the ordinary

course of and pursuant to the reasonable requirements of their business;

provided that, as of the date of such reimbursement and after giving effect

thereto, no Event of Default has occurred and is continuing or would result

therefrom.

 

Section 6.13                                Compliance

with ERISA.  Mackie and each

Guarantor shall, and shall cause each of its ERISA Affiliates, to:  (a) maintain each Plan in compliance in

all material respects with the applicable provisions of ERISA, the Code, and

other federal and state law; (b) cause each Plan that is qualified under

Section 401(a) of the Code to maintain such qualification; (c) not

terminate any of such Plans so as to incur any material liability to the

Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any

prohibited transaction involving any of such Plans or any trust created

thereunder that would subject Mackie, any Guarantor, or such ERISA Affiliate to

a material tax or penalty or other liability on prohibited transactions imposed

under Section 4975 of the Code or ERISA; (e) make all required

contributions to any Plan that it is obligated to pay under Section 302 of

ERISA, Section 412 of the Code, or the terms of such Plan; (f) not

allow or suffer to exist any accumulated funding deficiency, whether or not

waived, with respect to any such Plan; or (g) allow or suffer to exist any

occurrence of a reportable event or any other event or condition that presents

a material risk of termination by the Pension Benefit Guaranty Corporation of

any such Plan that is a single employer plan, which termination could result in

any material liability to the Pension Benefit Guaranty Corporation.

 

Section 6.14                                End

of Fiscal Years:  Fiscal Quarters.  Mackie and each Guarantor shall, for

financial reporting purposes, cause its, and each of its Subsidiaries’

(a) fiscal years to end on December 31 of each year and

(b) fiscal quarters to end on March 31, June 30,

September 30, and December 31 of each year.

 

Section 6.15                                Change

in Business.  Mackie and each

Guarantor shall not engage in any business other than the business of Mackie or

such Guarantor on the date hereof and any business reasonably related,

ancillary, or complimentary to the business in which Mackie or such Guarantor

is engaged on the date hereof.

 

Section 6.16                                Limitation

of Restrictions Affecting Subsidiaries. 

Neither Mackie nor any Guarantor shall directly or indirectly create or

otherwise cause or suffer to exist any encumbrance or restriction that

prohibits or limits the ability of any Subsidiary of Mackie or any Guarantor

that is also a Guarantor to (a) pay dividends or make other distributions

or pay any Indebtedness owed to Mackie or such Guarantor or any such Subsidiary

of Mackie or such Guarantor, (b) make loans or advances to Mackie or any

Guarantor or any such Subsidiary of Mackie or any Guarantor, (c) transfer

any of its properties or assets to Mackie or any Guarantor or any such

Subsidiary of Mackie or such Guarantor, or (d) create, incur, assume, or

suffer to exist any lien upon any of its property, assets, or revenues, whether

now owned or hereafter 

 

52

 

acquired, other than encumbrances and restrictions

arising under (i) applicable law, (ii) this Agreement,

(iii) customary provisions restricting subletting or assignment of any

lease governing a leasehold interest of Mackie or such Guarantor or any such

Subsidiary of Mackie or such Guarantor, (iv) customary restrictions on

dispositions of real property interests found in reciprocal easement agreements

of Mackie or any Guarantor or any such Subsidiary of Mackie or such Guarantor,

(v) any agreement relating to permitted Indebtedness incurred by any such

Subsidiary of Mackie or any Guarantor prior to the date on which such

Subsidiary was acquired by Mackie or such Guarantor and outstanding on such

acquisition date, (vi) customary provisions in license agreements restricting

assignments or transfers of the rights of a licensee under such license

agreement, and (vii) the extension, refinancing, or continuation of

contractual obligations in existence on the date hereof; provided that any such

encumbrances or restrictions contained in such extension, refinancing, or

continuation are no less favorable to U.S. Bank than those encumbrances

and restrictions under or pursuant to the contractual obligations so extended,

refinanced, or continued.

 

Section 6.17                                EBITDA.  Mackie and its Subsidiaries shall not permit

the EBITDA of Mackie and its Subsidiaries, for each period set forth below, to

be less than the amount listed opposite such period:

 

	

  Period

  	

   

  	

  Amount

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  April

  1, 2003, through June 30, 2003

  	

   

  	

  $

  	

  1,117,600

  	

   

  
	

  April

  1, 2003, through September 30, 2003

  	

   

  	

  $

  	

  2,435,200

  	

   

  
	

  April 1,

  2003, through December 31, 2003

  	

   

  	

  $

  	

  4,735,200

  	

   

  
	

  April 1,

  2003, through March 31, 2004

  	

   

  	

  $

  	

  6,237,600

  	

   

  
	

  July 1,

  2003, through June 30, 2004

  	

   

  	

  $

  	

  6,864,800

  	

   

  
	

  October 1,

  2003, through September 30, 2004

  	

   

  	

  $

  	

  7,170,400

  	

   

  
	

  January 1,

  2004, through December 31, 2004

  	

   

  	

  $

  	

  7,057,600

  	

   

  
	

  April 1,

  2004, through March 31, 2005

  	

   

  	

  $

  	

  6,625,600

  	

   

  
	

  July 1,

  2004, through June 30, 2005

  	

   

  	

  $

  	

  7,196,800

  	

   

  
	

  October 1,

  2004, through September 30, 2005

  	

   

  	

  $

  	

  7,322,400

  	

   

  
	

  January 1,

  2005, through December 31, 2005

  	

   

  	

  $

  	

  7,500,000

  	

   

  
	

  April 1,

  2005, through March 31, 2006

  	

   

  	

  $

  	

  7,016,000

  	

   

  

 

Section 6.18                                Capital

Expenditures.  Mackie and its

Subsidiaries shall not directly or indirectly, make or commit to make, whether

through purchase, Capital Leases, or otherwise, Capital Expenditures in any

fiscal year of Mackie and its Subsidiaries in excess of $4,800,000 in such

fiscal year (the “Base Amount”); provided that if the aggregate amount of

Capital Expenditures expended by Mackie and its Subsidiaries during any fiscal

year, commencing with the fiscal year ending December 31, 2003, is less

than the Base Amount for such fiscal year, then the amount of Capital

Expenditures permitted to be expended hereunder in the immediately succeeding

fiscal year shall be increased by the lesser of (a) such shortfall and

(b) 50 percent of such Base Amount.

 

53

 

Section 6.19                                License

Agreements.

 

(a)                                  Mackie

and each Guarantor shall (i) promptly and faithfully observe and perform

all of the material terms, covenants, conditions, and provisions of the

material License Agreements to which it is a party to be observed and performed

by it, at the times set forth therein, if any, (ii) not do, permit,

suffer, or refrain from doing anything that could reasonably be expected to

result in a default under or breach of any of the terms of any material License

Agreement, (iii) not cancel, surrender, modify, amend, waive, or release

any material License Agreement in any material respect or any term, provision,

or right of the licensee thereunder in any material respect, or consent to or

permit to occur any of the foregoing; except that, subject to Section 6.19(b)

below, Mackie or such Guarantor may cancel, surrender, or release any material

License Agreement in the ordinary course of the business of Mackie or such

Guarantor; provided that Mackie or such Guarantor (as the case may be) shall

give U.S. Bank not less than 15 days prior written notice of its

intention to so cancel, surrender, and release any such material License

Agreement, (iv) give U.S. Bank prompt written notice of any material

License Agreement entered into by Mackie or such Guarantor after the date

hereof, together with a true, correct, and complete copy thereof and such other

information with respect thereto as U.S. Bank may request, (v) give

U.S. Bank prompt written notice of any material breach of any obligation,

or any default, by any party under any material License Agreement, and deliver

to U.S. Bank (promptly upon the receipt thereof by Mackie or such

Guarantor in the case of a notice to Mackie or such Guarantor and concurrently

with the sending thereof in the case of a notice from Mackie or such Guarantor)

a copy of each notice of default and every other notice and other communication

received or delivered by Mackie or such Guarantor in connection with any

material License Agreement that relates to the right of Mackie or such

Guarantor to continue to use the property subject to such License Agreement,

and (vi) furnish to U.S. Bank, promptly upon the request of

U.S. Bank, such information and evidence as U.S. Bank may reasonably

require from time to time concerning the observance, performance, and

compliance by Mackie or such Guarantor or the other party or parties thereto

with the material terms, covenants, or provisions of any material License

Agreement.

 

(b)                                 Mackie

and such Guarantor will either exercise any option to renew or extend the term

of each material License Agreement to which it is a party in such manner as will

cause the term of such material License Agreement to be effectively renewed or

extended for the period provided by such option and give prompt written notice

thereof to U.S. Bank or give U.S. Bank prior written notice that

Mackie or such Guarantor does not intend to renew or extend the term of any

such material License Agreement or that the term thereof shall otherwise be

expiring, not less than 60 days prior to the date of any such non-renewal

or expiration.

 

Section 6.20                                After

Acquired Real Property.  If Mackie

or any Guarantor hereafter acquires any real property, fixtures, or any other

property that is of the kind or nature 

 

54

 

that can be perfected by the filing of a mortgage,

deed of trust, or deed to secure debt and such real property, fixtures, or

other property at any one location has a fair market value in an amount equal

to or greater than $200,000 (or if a Default or Event of Default exists, then

regardless of the fair market value of such assets), without limiting any other

rights of U.S. Bank, or duties or obligations of Mackie or any Guarantor,

promptly upon U.S. Bank’s request, Mackie or such Guarantor shall execute

and deliver to U.S. Bank a mortgage, deed of trust, or deed to secure

debt, as U.S. Bank may determine, in form and substance satisfactory to

U.S. Bank and in form appropriate for recording in the real estate records

of the jurisdiction in which such real property or other property is located

granting to U.S. Bank a perfected lien and mortgage on and security

interest in such real property, fixtures or other property subject to the terms

of the Intercreditor Agreement (except as Mackie or such Guarantor would

otherwise be permitted to incur hereunder or as otherwise consented to in

writing by U.S. Bank) and such other agreements, documents, and

instruments as U.S. Bank may in good faith require in connection

therewith.

 

Section 6.21                                New

Subsidiaries.  If Mackie or any

Guarantor shall form or acquire any Subsidiary on or after the date hereof,

(a) Mackie or such Guarantor shall promptly cause any such Subsidiary to

execute and deliver to U.S. Bank, in form and substance satisfactory to

U.S. Bank, (i) an absolute and unconditional guarantee of payment of

any and all present and future Obligations, (ii) a security agreement

granting U.S. Bank a security interest and lien on all of the assets of

such Subsidiary (except as otherwise consented to by U.S. Bank in

writing), (iii) related Uniform Commercial Code Financing Statements (and

similar lien registrations), and (iv) such other agreements, documents,

and instruments as U.S. Bank may require, including, but not limited to,

supplements and amendments hereto and other loan agreements or instruments

evidencing indebtedness of such new Subsidiary to U.S. Bank, and

(b) promptly upon Agent’s request (i) Mackie or such Guarantor shall

execute and deliver to U.S. Bank in form and substance satisfactory to

U.S. Bank, a pledge and security agreement granting to Agent a pledge of

and lien on all of the issued and outstanding shares of Capital Stock of such

Subsidiary; provided, that any Subsidiary of Mackie or any Guarantor that is

not incorporated or formed under the United States of America or a political

subdivision thereof shall not be required to execute a guaranty or pledge its

assets hereunder.

 

Section 6.22                                Dissolution

of Inactive Domestic Subsidiaries. 

Mackie and the Guarantors shall, on or before 180 days after the

date hereof, cause each Inactive Domestic Subsidiary to (a) dissolve in

accordance with the requirements of all applicable laws and regulations and

(b) assign all assets of such Subsidiary to its shareholders.

 

Section 6.23                                Costs

and Expenses.  Mackie and the

Guarantors shall pay to U.S. Bank on demand all costs, expenses, filing

fees, and taxes paid or payable in connection with the preparation,

negotiation, execution, delivery, recording, administration, collection,

liquidation, enforcement, and defense of the Obligations, U.S. Bank’s

rights in the Collateral, this Agreement, the other Loan Documents and all

other documents related hereto or thereto, including any amendments,

supplements, or consents that may hereafter be contemplated (whether or not

executed) or entered into in respect hereof and thereof, including:  (a) all costs and expenses of filing or

recording (including Uniform Commercial Code financing statement filing taxes

and fees, documentary taxes, intangibles taxes, and mortgage recording taxes

and fees, if applicable); (b) costs and expenses and fees for insurance premiums,

appraisal fees, and search fees; (c) costs and expenses of preserving and

protecting the Collateral; (d) costs and 

 

55

 

expenses paid or incurred in connection with obtaining

payment of the Obligations, enforcing the security interests and liens of

U.S. Bank, selling or otherwise realizing upon the Collateral, and

otherwise enforcing the provisions of this Agreement and the other Loan

Documents or defending any claims made or threatened against U.S. Bank

arising out of the transactions contemplated hereby and thereby (including

preparations for and consultations concerning any such matters); (e) all

out-of-pocket expenses and costs heretofore and from time to time hereafter

reasonably incurred by U.S. Bank; and (f) the reasonable fees and

disbursements of counsel (including legal assistants) to U.S. Bank in

connection with any of the foregoing.

 

Section 6.24                                Further

Assurances.  At the request of

U.S. Bank at any time and from time to time, Mackie and the Guarantors

shall, at their expense, duly execute and deliver, or cause to be duly executed

and delivered, such further agreements, documents, and instruments, and do or

cause to be done such further acts as may be necessary or proper to evidence, perfect,

maintain, and enforce the security interests and the priority thereof in the

Collateral, and to otherwise effectuate the provisions or purposes of this

Agreement or any of the other Loan Documents.

 

ARTICLE VII

 

EVENTS OF DEFAULT AND REMEDIES

 

Section 7.1                                      Events

of Default.  The occurrence or

existence of any one or more of the following events are referred to herein

individually as an “Event of Default”, and collectively as “Events of Default”:

 

(a)                                  Failure to Pay.  Mackie fails to pay when due any amount of principal of or

interest on the New Term Loan Note, or any other amount payable by Mackie under

Article II of this Agreement, within three Business Days of the date that

such payment is due;

 

(b)                                 Breach of Certain Covenants.  (i) Mackie or any Guarantor fails to

perform any of the covenants contained in Sections 6.3, 6.4, 6.6, 6.13,

6.14, 6.15, and 6.16 of this Agreement and such failure shall continue for

15 days, provided that such fifteen-day period shall not apply in the case

of (A) any failure to observe any such covenant that is not capable of

being cured at all or within such fifteen-day period or that has been the

subject of a prior failure within a six-month period or (B) an intentional

breach by Mackie or any Guarantor of any such covenant; or (ii) Mackie or

any Guarantor fails to perform any of the terms, covenants, conditions, or

provisions contained in this Agreement, or any of the other Loan Documents,

other than those described in Section 7.1(a) and Section 7.1(b)(i) of this Agreement;

 

(c)                                  Breach of Warranty.  Any representation, warranty, or statement of fact made by Mackie

or any Guarantor to U.S. Bank in this Agreement, the other Loan Documents

or any other written agreement, schedule, confirmatory assignment, or otherwise

shall when made or deemed made be false or misleading in any material respect;

 

56

 

(d)                                 Revocation of Agreements.  Any Guarantor revokes or terminates or fails

to perform any of the terms, covenants, conditions, or provisions of any

guarantee, endorsement, or other agreement of such party in favor of

U.S. Bank;

 

(e)                                  Judgment. 

One or more judgments for the payment of money is or are rendered

against Mackie or any Guarantor in excess of $450,000 in the aggregate (to the

extent not covered by insurance where the insurer has assumed responsibility in

writing for such judgment) and shall remain undischarged or unvacated for a

period in excess of 45 days or execution shall at any time not be

effectively stayed, or any judgment other than for the payment of money, or

injunction, attachment, garnishment or execution is rendered against Mackie or

any Guarantor or any of the Collateral having a value in excess of $450,000;

provided that this clause (e) shall not apply to judgments, injunctions,

attachments, garnishments, or executions in connection with the EAW Fire

Proceeding;

 

(f)                                    Dissolution. 

Mackie or any Guarantor that is a partnership, limited liability

company, limited liability partnership or a corporation, dissolves or suspends

or discontinues doing business;

 

(g)                                 Assignment for Benefit of Creditors.  Mackie or any Guarantor makes an assignment

for the benefit of creditors, makes or sends notice of a bulk transfer, or

calls a meeting of its creditors or principal creditors in connection with a

moratorium or adjustment of the Indebtedness due to them;

 

(h)                                 Involuntary Bankruptcy.  A case or proceeding under the bankruptcy

laws of the United States of America now or hereafter in effect or under any

insolvency, reorganization, receivership, readjustment of debt, dissolution or

liquidation law or statute of any jurisdiction now or hereafter in effect

(whether at law or in equity) is filed against Mackie or any Guarantor or all

or any part of its properties and such petition or application is not dismissed

within 45 days after the date of its filing, or Mackie or any Guarantor

shall file any answer admitting or not contesting such petition or application

or indicates its consent to, acquiescence in or approval of, any such action or

proceeding or the relief requested is granted sooner;

 

(i)                                     Voluntary Bankruptcy.  A case or proceeding under the bankruptcy

laws of the United States of America now or hereafter in effect or under any

insolvency, reorganization, receivership, readjustment of debt, dissolution, or

liquidation law or statue of any jurisdiction now or hereafter in effect

(whether at law or in equity) is filed by Mackie or any Guarantor or for all or

any part of its property;

 

(j)                                     Default on Material Indebtedness.  Indebtedness of Mackie or any Guarantor

(other than Indebtedness owing to U.S. Bank hereunder), in any case in an

amount in excess of $450,000 shall have been accelerated or otherwise declared

to be due and payable prior to the stated maturity date thereof;

 

57

 

(k)                                  Enforceability Challenge.  Any material provision hereof or of any of

the other Loan Documents shall for any reason cease to be valid, binding, and

enforceable with respect to any party hereto or thereto (other than

U.S. Bank) in accordance with its terms, or any such party shall challenge

the enforceability hereof or thereof, or shall assert in writing, or take any

action or fail to take any action based on the assertion that any provision

hereof or of any of the other Loan Documents has ceased to be or is otherwise

not valid, binding, or enforceable in accordance with its terms, or any

security interest provided for herein or in any of the other Loan Documents

shall cease to be a valid and perfected first priority security interest in any

of the Collateral purported to be subject thereto (except as otherwise

permitted herein or therein);

 

(l)                                     ERISA Noncompliance.  An ERISA Event shall occur that results in

or could reasonably be expected to result in liability of Mackie or the

Guarantors in an aggregate amount in excess of $450,000;

 

(m)                               Change of Control.  Any Change of Control shall occur;

 

(n)                                 Enforcement Proceeding.  The indictment by any Governmental

Authority, or as U.S. Bank may reasonably and in good faith determine, the

threatened indictment by any Governmental Authority of Mackie or any Guarantor

of which Mackie, any Guarantor, or U.S. Bank receives notice, in either

case, as to which there is a reasonable likelihood of an adverse determination,

in the good faith determination of U.S. Bank, under any criminal statute,

or commencement or threatened commencement of criminal or civil proceedings

against Mackie or any Guarantor, pursuant to which statute or proceedings the

penalties or remedies sought or available include forfeiture of (i) any of

the Collateral having a value in excess of $450,000, or (ii) any other

property of Mackie or any Guarantor that is necessary or material to the

conduct of its business;

 

(o)                                 Material Adverse Effect.  There shall occur any event, development or

condition that would constitute or have a Material Adverse Effect after the

date hereof;

 

(p)                                 EAW Fire Proceeding.  (i) one or more judgments in connection

with the EAW Fire Proceeding for the payment of money is or are rendered

against Mackie or any Guarantor in excess of $1,000,000 in the aggregate (but

only to the extent such amount exceeds the insurance coverage where the insurer

has assumed responsibility in writing for such judgment or portion of such

judgment) and shall remain undischarged or unvacated for a period in excess of

45 days or execution shall at any time not be effectively stayed, or any

judgment in connection with the EAW Fire Proceeding other than for the payment

of money, or injunction, attachment, garnishment, or execution in connection

with the EAW Fire Proceeding is rendered against Mackie or any Guarantor or any

of the Collateral having a value in excess of $1,000,000, or (ii) Mackie

or Guarantors shall be liable in respect of the EAW Fire Proceeding (whether by

settlement agreement or otherwise) in an aggregate amount in excess of 

 

58

 

$1,000,000;

provided that no such judgment injunction, attachment, garnishment, execution,

or liability shall constitute an Event of Default under this Section 7.1(o) if

(A) as of the date of the occurrence of any of the foregoing, the

aggregate Excess Availability of Mackie shall not be less than the sum of the

amount of any of the foregoing plus $4,000,000, or (B) if, after giving

effect to the payment or any of the foregoing, the aggregate Excess

Availability of Mackie shall not be less than $4,000,000; and

 

(q)                                 Other Defaults.  There shall be an event of default (after applicable grace

periods, if any) under any of the other Loan Documents.

 

Section 7.2                                      Consequences

of Default.  If any Event of Default

shall occur and be continuing, then in any such case and at any time thereafter

so long as any such Event of Default shall be continuing, U.S. Bank may

invoke the Default Interest Rate and interest shall accrue and, subject to the

provisions of Section 7.2 of this Agreement and Section 2.8 of the

Intercreditor Agreement, shall be payable on the New Term Loan Note at that

rate thereafter until the Event of Default is cured.  In addition to its rights under the preceding sentence, and

subject to the terms of the Intercreditor Agreement, U.S. Bank at its

option may declare the principal of and the interest on the New Term Loan Note

and all other sums payable by Mackie under the this Agreement or under the New

Term Loan Note to be immediately due and payable at any time following an

uncured Event of Default, whereupon Mackie’s obligations under the New Term

Loan Note shall become immediately due and payable (with interest accruing and

payable thereon at the Default Interest Rate) without protest, presentment,

notice, or demand, all of which Mackie expressly waives.  Upon the occurrence of an Event of Default

pursuant to Section 7.1 of this Agreement, subject to the terms of the Intercreditor

Agreement, all of the Obligations shall be immediately due and payable.

 

Section 7.3                                      Remedies

Following Acceleration.  Upon the

occurrence of an Event of Default and acceleration of Mackie’s obligations

under this Agreement and the New Term Loan Note in accordance with Section 7.2

of this Agreement and subject to the terms of the Intercreditor Agreement,

U.S. Bank may exercise from time to time any rights and remedies available

to it under the Uniform Commercial Code and any other applicable law in

addition to, and not in lieu of, any rights and remedies expressly granted in

this Agreement or in any of the Loan Documents and all of U.S. Bank’s

rights and remedies shall be cumulative and non-exclusive to the extent

permitted by law.

 

Section 7.4                                      U.S. Bank’s

Rights Subject to Limitations of the Intercreditor Agreement.  Notwithstanding anything in the this

Agreement to the contrary, U.S. Bank may not take any action that is

prohibited by the terms of the Intercreditor Agreement.

 

ARTICLE VIII

 

MISCELLANEOUS TERMS AND CONDITIONS

 

Section 8.1                                      No

Waivers; Remedies Cumulative.  No

failure by U.S. Bank to exercise any right, power, or remedy under this

Agreement, or any Loan Document, and no delay by U.S. Bank in exercising

any right, power, or remedy under this Agreement or any Loan Document, shall

operate as a waiver thereof.  No single

or partial exercise of any right, power, or 

 

59

 

remedy of U.S. Bank under this Agreement or any Loan Document

shall preclude any other or further exercise thereof, or the exercise of any

other right, power, or remedy of U.S. Bank.  The exercise of any right, power, or remedy of U.S. Bank

shall in no event constitute a cure or waiver of any Event of Default, or a

waiver of the right of U.S. Bank or the holder of the New Term Loan Note

to exercise any other right under this Agreement or the New Term Loan Note,

unless in the exercise of such right, all obligations of Mackie under this

Agreement and the New Term Loan Note are paid in full.  The rights and remedies provided for in this

Agreement and the Loan Documents are cumulative and are not exclusive of any

right or remedy provided by law.  Time

is of the essence and the provisions of this Agreement and the other Loan Documents

shall be enforced strictly.

 

Section 8.2                                      Governing

Law.  This Agreement and the other

Loan Documents shall be governed by and construed in accordance with the laws

of the state of Washington, without regard to conflicts of law principles.

 

Section 8.3                                      Consent

to Jurisdiction and Venue; Waiver of Immunities.  Mackie hereby irrevocably submits to the jurisdiction and venue

of any state or federal court sitting in Seattle, Washington, in any action or

proceeding brought to enforce or otherwise arising out of or relating to this

Agreement, the New Term Loan Note, or any other Loan Document.  Mackie irrevocably waives to the fullest

extent permitted by law any objection that Mackie now or hereafter may have to

the laying of venue in any such action or proceeding in any such forum, and

hereby further irrevocably waives any claim that any such forum is an

inconvenient forum.  Mackie agrees that

a final judgment in any such action or proceeding shall be conclusive and may

be enforced in any other jurisdiction by suit on the judgment, or in any other

manner provided by law.  Nothing in this

Section 8.3 of this Agreement shall impair the right of U.S. Bank, or the

holder of the New Term Loan Note to bring any action or proceeding against

Mackie or its property in the courts of any other jurisdiction.  In that regard, Mackie irrevocably submits

to the nonexclusive jurisdiction of the appropriate courts of the jurisdiction

in which Mackie is incorporated, or sitting in any place where property or an

office of Mackie is located.

 

Section 8.4                                      Notices.  All notices and other communications

provided for in this Agreement shall be in writing and shall be sent (unless

otherwise specified) by certified mail, return receipt requested (with postage

prepaid), or delivered by messenger or a nationally recognized courier service,

to each party at the following addresses, or at such other address as shall be

designated by such party in a written notice to each other party:

 

	

  To U.S. Bank:

  	

   

  	

  Suite 810

  
	

   

  	

   

  	

  111

  S.W. Fifth Avenue

  
	

   

  	

   

  	

  Portland, Oregon 

  97204

  
	

   

  	

   

  	

  Attention: 

  Ms. Elizabeth C. Hengeveld

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  	

   

  	

  Miller Nash LLP

  
	

   

  	

   

  	

  Suite 3500

  
	

   

  	

   

  	

  111

  S.W. Fifth Avenue

  
	

   

  	

   

  	

  Portland, Oregon 

  97204-3699

  
	

   

  	

   

  	

  Attention: 

  Mr. Louis G. Henry

  

 

60

 

	

  To Mackie:

  	

   

  	

  16220 Woodinville-Redmond Road N.E.

  
	

   

  	

   

  	

  Woodinville, Washington  98072

  
	

   

  	

   

  	

  Attention: 

  Chief Executive Officer

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  	

   

  	

   

  
	

   

  	

   

  	

  Kirkland & Ellis

  
	

   

  	

   

  	

  200 E. Randolph

  
	

   

  	

   

  	

  Chicago, Illinois 60601

  
	

   

  	

   

  	

  Attention: 

  Mr. Francesco Penati

  

 

Except as otherwise specified, all such notices and

communications if duly given or made shall be effective upon receipt.

 

Section 8.5                                      Indemnification

of U.S. Bank.  Mackie hereby

agrees to indemnify and hold harmless U.S. Bank, as well as

U.S. Bank’s shareholders, directors, officers, agents, attorneys,

subsidiaries, and Affiliates, from and against all damages, losses, settlement

payments, obligations, liabilities, claims, suits, penalties, assessments,

citations, directives, demands, judgments, actions, or causes of action,

whether statutorily created or under the common law, all reasonable costs and

expenses (including, without limitation, attorneys’ fees and reasonable fees

and disbursements of consultants), and all other liabilities whatsoever

(including, without limitation, liabilities under Environmental Laws) that

shall at any time or times be incurred, suffered, sustained, or required to be

paid by any such indemnified Person (except any of the foregoing that result

from the gross negligence or willful misconduct of the indemnified Person) on

account of, in relation to, or in any way in connection with any of the

arrangements or transactions contemplated by, associated with, or ancillary to

this Agreement, the other Loan Documents, or any other documents executed or

delivered in connection herewith or therewith, all as the same may be amended

from time to time.  In any

investigation, proceeding, or litigation, or the preparation therefor,

U.S. Bank may select its own counsel and, in addition to the foregoing

indemnity, Mackie agrees to pay promptly the reasonable fees and expenses of

such counsel.  In the event of the

commencement of any such proceeding or litigation, Mackie shall be entitled to

participate in such proceeding or litigation with counsel of its choice at its

own expense, provided that such counsel shall be reasonably satisfactory to

U.S. Bank.  The provisions of this

Section 8.5 of this Agreement shall survive payment or satisfaction of payment

of all amounts owing with respect to the New Term Loan Note, any other Loan

Document, or any other Obligation.

 

Section 8.6                                      Amendments

and Waivers.  No term, provision, or

condition of this Agreement, the New Term Loan Note, or any of the other Loan

Documents may be amended, waived, discharged, or terminated, except by a

written instrument signed by U.S. Bank and, in the case of amendments, by

Mackie.

 

Section 8.7                                      Counterparts.  This Agreement and any amendment of this

Agreement may be executed in counterparts and by each party on a separate

counterpart, each of which when so executed and delivered shall be an original,

but all of which together shall constitute one document.  In proving this Agreement, it shall not be

necessary to produce or account for more than one such counterpart signed by

the party against whom enforcement is sought.

 

61

 

Section 8.8                                      Waiver

of Jury Trial.  MACKIE AND U.S. BANK HEREBY WAIVE

THEIR RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF

ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NEW TERM LOAN NOTE, OR ANY

OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,

OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.  EXCEPT AS PROHIBITED BY LAW, MACKIE AND U.S. BANK HEREBY

WAIVE ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO

IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL

DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.  MACKIE (a) CERTIFIES THAT NO REPRESENTATIVE,

AGENT, OR ATTORNEY OF U.S. BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE,

THAT U.S. BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE

FOREGOING WAIVERS AND (b) ACKNOWLEDGES THAT U.S. BANK HAS BEEN

INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH

U.S. BANK IS A PARTY BECAUSE OF, AMONG OTHER THINGS, MACKIE’S WAIVERS AND

CERTIFICATIONS CONTAINED HEREIN.

 

Section 8.9                                      Assignment

of Rights or Obligations.  This

Agreement shall be binding upon and inure to the benefit of Mackie and

U.S. Bank and their respective Successors and assigns.  Mackie may not assign or otherwise transfer

all or any part of its rights or obligations under this Agreement without the

prior, written consent of U.S. Bank, and any such assignment or transfer

purported to be made without such consent shall be ineffective.  U.S. Bank at any time may assign or

otherwise transfer all or any part of U.S. Bank’s interest under this

Agreement, the New Term Loan Note, and the other Loan Documents (including assignments

for security and sales of participations). 

Mackie acknowledges and agrees that U.S. Bank may share such

information regarding Mackie with a prospective assignee or transferee of

U.S. Bank’s interest in the New Term Loan Note and the other Loan

Documents as U.S. Bank reasonably deems appropriate, provided that the

prospective assignee or transferee agrees in writing to maintain the

confidentiality of such information.

 

Section 8.10                                Severability.  Any provision of this Agreement, the New

Term Loan Note, or any other Loan Document that is prohibited or unenforceable

in any jurisdiction shall as to such jurisdiction be ineffective to the extent

of such prohibition or unenforceability without invalidating the remaining

provisions of this Agreement, or affecting the validity or enforceability of

such provision in any other jurisdiction. 

To the extent permitted by applicable law, the parties hereto waive any

provision of law that renders any provision of this Agreement prohibited or

unenforceable in any respect.

 

Section 8.11                                Entire

Agreement.  This Agreement and the

Loan Documents set forth and constitute the entire agreement between the

parties hereto with respect to the loan evidenced by the New Term Loan Note and

the security for that loan.  No oral

promise or agreement of any kind or nature, other than those that have been

reduced to writing and have been set forth in this Agreement and in the Loan

Documents, has been made between U.S. Bank and Mackie with respect to the

loan evidenced by the New Term Loan Note and the security for that loan.

 

62

 

Section 8.12                                Interpretation.  This Agreement is a negotiated

agreement.  In the event of any

ambiguity in this Agreement, such ambiguity shall not be subject to a rule of

contract interpretation that would cause the ambiguity to be construed against

either of the parties to this Agreement.

 

Section 8.13                                Headings.  The headings of the various provisions of

this Agreement are for convenience of reference only, do not constitute a part

of this Agreement, and shall not affect the meaning or construction of any

provision of this Agreement.

 

Section 8.14                                Construction.  In the event of any conflict between or

among the terms, conditions, and provisions of this Agreement and those of any

other document or instrument referred to in this Agreement, the terms,

conditions, and provisions of this Agreement shall control.

 

Section 8.15                                Statutory

Notice.  ORAL AGREEMENTS OR ORAL COMMITMENTS TO

LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE

NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

[Remainder

of page intentionally left blank]

 

63

 

IN

WITNESS WHEREOF, the Lender, Borrower and Guarantors have executed and

delivered this Amended and Restated Credit Agreement as of the day and year

first above written.

 

	

  MACKIE

  DESIGNS INC.

  	

   

  	

   

  	

  U.S. BANK

  NATIONAL ASSOCIATION

  
	

   

  	

   

  	

   

  	

   

  
	

  By

  	

  James T. Engen

  	

   

  	

   

  	

  By

  	

  /s/ E. C. Hengeveld

  
	

   

  	

   

  	

   

  	

   

  
	

  Name: James T. Engen

  	

   

  	

   

  	

  Elizabeth C. Hengeveld

  
	

   

  	

   

  	

   

  	

   

  
	

  Title: President & CEO

  	

   

  	

   

  	

  Vice President

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  MACKIE

  DESIGNS MANUFACTURING, INC.

  	

   

  	

   

  	

  MACKIE

  INVESTMENT CO.

  
	

   

  	

   

  	

   

  	

   

  
	

  By

  	

  James T. Engen

  	

   

  	

   

  	

  By

  	

  James T. Engen

  
	

   

  	

   

  	

   

  	

   

  
	

  Name: James

  T. Engen

  	

   

  	

   

  	

  Name: James

  T. Engen

  
	

   

  	

   

  	

   

  	

   

  
	

  Title: President

  	

   

  	

   

  	

  Title: President

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  SIA

  SOFTWARE COMPANY, INC.

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  By

  	

   James T. Engen

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Name: James

  T. Engen

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Title: President

  	

   

  	

   

  	

   

  

 

64

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