Document:

Exhibit 10.2

 

 

TERM PROMISSORY NOTE

 

	

  $2,500,000

  	

   

  	

  March 31, 2003

  

 

FOR VALUE RECEIVED, MACKIE

DESIGNS INC., a Washington corporation (“Debtor”), unconditionally promises to

pay to the order of CONGRESS FINANCIAL CORPORATION (FLORIDA), a Florida

corporation in its capacity as agent (in such capacity, the “Payee”) acting for

and on behalf of the financial institutions which are from time to time parties

to the Loan Agreement (as hereinafter defined) as lenders, at the offices of

Payee at 777 Brickell Avenue, Suite 808, Miami, Florida, 33131 or at such other

place as the Payee or any holder hereof may from time to time designate, the

principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) in

lawful money of the United States of America and in immediately available

funds, in sixty (60) consecutive monthly installments (or earlier as

hereinafter provided) on the first day of each month commencing July 1, 2003,

of which the first fifty-nine (59) installments shall each be in the amount of

FORTY ONE THOUSAND SIX HUNDRED AND SIXTY SEVEN DOLLARS ($41,667 ), and the last

installment shall be in the amount of the entire unpaid balance of this Note.

 

Debtor hereby further

promises to pay interest to the order of Payee on the unpaid principal balance

hereof at the Interest Rate (as defined in the Loan Agreement).  Such interest shall be paid in like money at

said office or place from the date hereof, commencing May 1, 2003 and on the

first day of each month thereafter until the indebtedness evidenced by this Note

is paid in full.  Interest payable upon

and after an Event of Default or termination or non-renewal of the Loan

Agreement shall be payable upon demand.

 

For purposes hereof, (a) the

term “Event of Default” shall mean an Event of Default as such term is defined

in the Loan Agreement, and (b) the term “Loan Agreement” shall mean the Loan

and Security Agreement, dated of even date herewith, among Debtor, certain of

its affiliates, Payee and the financial institutions which are party thereto as

lenders (each, a “Lender” and collectively, “Lenders”), as the same now exists

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

restated or replaced.  Unless otherwise

defined herein, all capitalized terms used herein shall have the meaning assigned

thereto in the Loan Agreement.

 

This Note is issued pursuant

to the terms and provisions of the Loan Agreement to evidence the Term Loans by

Payee and Lenders to Debtor.  This Note

is secured by the Collateral described in the Loan Agreement and all notes,

guarantees, security agreements and other agreements, documents and instruments

now or at any time hereafter executed and/or delivered by Debtor or any other

party in connection therewith (all of the foregoing, together with the Loan

Agreement, as the same now exist or may hereafter be amended, modified,

supplemented, renewed, extended, restated or replaced, being collectively

referred to herein as the “Financing Agreements”), and is entitled to all of

the benefits and rights thereof and

 

 

of

the other Financing Agreements.  At the

time any payment is due hereunder, at its option, Payee may charge the amount

thereof to any account of Debtor maintained by Payee.

 

If any Event of Default

shall occur for any reason, or if the Loan Agreement shall be terminated or not

renewed for any reason whatsoever, then and in any such event, in addition to

all rights and remedies of Payee and Lenders under the Financing Agreements,

applicable law or otherwise, all such rights and remedies being cumulative, not

exclusive and enforceable alternatively, successively and concurrently, Payee

may, at its option, upon prior notice to Debtor, declare any or all of Debtor’s

obligations, liabilities and indebtedness owing to Payee and Lenders under the

Loan Agreement and the other Financing Agreements (the “Obligations”),

including, without limitation, all amounts owing under this Note, to be due and

payable, whereupon the then unpaid balance hereof, together with all interest

accrued thereon, shall forthwith become due and payable, together with interest

accruing thereafter at the then applicable Interest Rate stated above until the

indebtedness evidenced by this Note is paid in full, plus the costs and

expenses of collection hereof, including, but not limited to, reasonable attorneys’

fees and legal expenses.

 

Debtor (i) waives diligence,

demand, presentment, protest and notice of any kind, (ii) agrees that it will

not be necessary for Payee to first institute suit in order to enforce  payment of this Note and (iii) consents to

any one or more extensions or postponements of time of payment, release,

surrender or substitution of collateral security, or forbearance or other

indulgence, without notice or consent. 

The pleading of any statute of limitations as a defense to any demand

against Debtor is expressly hereby waived by Debtor.  Upon any Event of Default or termination or non-renewal of the

Loan Agreement, Payee and Lenders shall have the right, but not the obligation,

to setoff against this Note all money owed by Payee to Debtor.

 

Payee shall not be required

to resort to any Collateral for payment, but may proceed against Debtor and any

guarantors or endorsers hereof in such order and manner as Payee may

choose.  None of the rights of Payee shall

be waived or diminished by any failure or delay in the exercise thereof.

 

The validity, interpretation

and enforcement of this Note and the other Financing Agreements and any dispute

arising in connection herewith or therewith shall be governed by the internal

laws of the State of Florida but excluding any principles of conflicts of law

or other rule of law that would cause the application of the law of any other

jurisdiction other than the laws of the state of Florida.

 

Debtor irrevocably consents

and submits to the non-exclusive jurisdiction of the Circuit Court for Dade

County, Florida and the United States District Court for the 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 Note or any of

the other Financing Agreements or in any way connected with or related or

incidental to the dealings of Debtor and Payee in respect of this Note 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 among Debtor and Payee or the conduct of such persons in

connection with this Note or otherwise shall be heard only in the courts

described above (except that Payee or any Lender shall have the right to bring

any action or proceeding against Debtor or its property in the courts of any

other

 

2

 

jurisdiction

which Payee deems necessary or appropriate in order to realize on the

Collateral or to otherwise enforce its rights against Debtor or its property).

 

Debtor 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 it 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

Payee’s option, by service upon Debtor in any other manner provided under the

rules of any such courts.

 

DEBTOR HEREBY WAIVES ANY

RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i)

ARISING UNDER THIS NOTE OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL

TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF THIS NOTE OR 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.  DEBTOR AGREES AND

CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE

DECIDED BY COURT TRIAL WITHOUT A JURY.

 

The execution and delivery

of this Note has been authorized by the board of directors of Debtor and by any

necessary vote or consent of the shareholders of Debtor.  Debtor hereby authorizes Payee to complete

this Note in any particulars according to the terms of the loan evidenced

hereby.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

3

 

This Note shall be binding

upon the successors and assigns of Debtor and inure to the benefit of Payee and

its successors, endorsees and assigns. 

Whenever used herein, the term “Debtor” shall be deemed to include its

successors and assigns and the term “Payee” shall be deemed to include its

successors, endorsees and assigns.  If

any term or provision of this Note shall be held invalid, illegal or

unenforceable, the validity of all other terms and provisions hereof shall in

no way be affected thereby.

 

 

	

   

  	

  MACKIE

  DESIGNS INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/

  James T. Engen

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  President

  & CEO

  
				

 

4Exhibit 10.3

 

 

PLEDGE

AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY

AGREEMENT (“Pledge Agreement”), dated March 31, 2003, is by Mackie Designs

Inc., a Washington corporation (“Pledgor”), with its chief executive office at

16220 Woodinville-Redmond Road, N.E., Woodinville, Washington 98072 to and in

favor of Congress Financial Corporation (Florida), a Florida corporation, 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 “Pledgee”) having an office at 777

Brickell Avenue, Miami, Florida 33131.

 

W  I  T

N  E  S  S  E  T  H:

 

WHEREAS, Pledgor is now the

direct and beneficial owner of all of the issued and outstanding shares of capital

stock of the corporations listed on Exhibit A hereto and made a part hereof

(hereinafter referred to individually as an “Issuer” and collectively as

“Issuers”);

 

WHEREAS, Pledgor and certain

of its affiliates have entered into or are about to enter into financing

arrangements pursuant to which Pledgee may make loans and advances and provide

other financial accommodations to Pledgor and Mackie Designs UK Plc (the “UK

Borrower”, and together with Pledgor, each a “Borrower” and collectively,

“Borrowers”), as set forth in the Loan and Security Agreement, dated of even

date herewith, by and among Pledgor, Pledgee, Lenders, and certain affiliates

of Pledgor (as the same now exists or may hereafter be amended, modified,

supplemented, extended, renewed, restated or replaced, the “Loan Agreement”)

and 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 Pledge Agreement (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”); and

 

WHEREAS, in order to induce

Pledgee and Lenders to enter into the Loan Agreement and the other Financing

Agreements and to make loans and advances and provide other financial

accommodations to Borrowers pursuant thereto, Pledgor has agreed to secure the

payment and performance of the Obligations (as hereinafter defined) and to

accomplish same by (i) executing and delivering to Pledgee this Pledge

Agreement, (ii) delivering to Pledgee the Pledged Securities (as hereinafter

defined) which are registered in the name of Pledgor, together with appropriate

powers duly executed in blank by Pledgor, and (iii) delivering to Pledgee any

and all other documents which Pledgee deems necessary to protect Pledgee’s

interests hereunder;

 

NOW, THEREFORE, in

consideration of the premises and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees

as follows:

 

 

1.  GRANT OF SECURITY INTEREST

 

As collateral security for

the prompt performance, observance and indefeasible payment in full of all of

the Obligations (as hereinafter defined), Pledgor hereby assigns, pledges,

hypothecates, transfers and sets over to Pledgee and grants to Pledgee, for the

benefit of itself and  Lenders, a

security interest in and lien upon (a) the shares of capital stock of the

Issuers as described on Exhibit A (the “Pledged Securities”), (b)  all cash dividends, stock dividends,

interests, profits, redemptions, warrants, subscription rights, stock,

securities options, substitutions, exchanges and other distributions now or

hereafter distributed by any Issuer in respect of or otherwise in connection

with the Pledged Securities or which may hereafter be delivered to the

possession of Pledgor or Pledgee in respect of or otherwise in connection with

the Pledged Securities, (c) Pledgor’s records with respect to the foregoing,

and (d) the proceeds of all of the foregoing 

(all of the foregoing being collectively referred to herein as the

“Pledged Property”).  Notwithstanding

anything to the contrary contained in this Pledge Agreement to secure the

payment and performance of the Obligations of Pledgor, the pledge by  Pledgor of any of the Pledged Securities

which constitute capital stock of any Issuer that is not incorporated or formed

under the laws of the United States of America or a political subdivision

thereof shall not exceed sixty-five (65%) percent of all of the issued and

outstanding shares of capital stock of such Issuer.

 

2.  OBLIGATIONS SECURED

 

The security interest, lien

and other interests granted to Pledgee pursuant to this Pledge Agreement shall

secure the prompt performance and payment in full of any and all obligations,

liabilities and indebtedness of every kind, nature and description owing by

Pledgor and UK Borrower to Pledgee and any Lender and/or their respective

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

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

otherwise, arising under this Pledge Agreement, the Loan Agreement or any of

the other Financing Agreements, 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 Pledgor

and UK 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

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 Pledgee (all of the foregoing being collectively referred

to herein as the “Obligations”).

 

3.  REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Pledgor hereby represents,

warrants and covenants with and to Pledgee and Lenders the following (all of

such representations, warranties and covenants being continuing so long as any

of the Obligations are outstanding):

 

(a)  The Pledged Securities are duly authorized,

validly issued, fully paid and non-assessable capital stock of Issuers and

constitute all of the issued and outstanding shares of capital stock in Issuers

 

2

 

and are not registered, nor

has Pledgor authorized the registration thereof, in the name of any person or

entity other than Pledgor or Pledgee. 

Pledgor is the owner and holder of all the issued and outstanding shares

of capital stock of Issuers.

 

(b)  The Pledged Property is directly, legally

and beneficially owned by Pledgor, free and clear of all claims, liens, pledges

and encumbrances of any kind, nature or description, except for the pledge and

security interest in favor of Pledgee, for the benefit of itself and Lenders,

and the pledges and security interests permitted under the Loan Agreement.

 

(c) Except for those

restrictions imposed by federal securities law and state blue sky laws, the

Pledged Property is not subject to any restrictions relative to the transfer

thereof and Pledgor has the right to transfer and hypothecate the Pledged

Property free and clear of any liens, encumbrances or restrictions.

 

(d)  The Pledged Property is duly and validly

pledged to Pledgee, for the benefit of itself and Lenders, and no consent or approval

of any governmental or regulatory authority or of any securities exchange or

the like, nor any consent or approval of any other third party, is necessary to

the validity and enforceability of this Pledge Agreement, except for any

consents and approvals that have been obtained and are and shall continue to be

unconditional, valid, enforceable and in full effect.

 

(e)  Pledgor authorizes Pledgee to: (i) store,

deposit and safeguard the Pledged Property, (ii) perform any and all other acts

which Pledgee in good faith deems reasonable and/or necessary for the

protection and preservation of the Pledged Property or its value or Pledgee’s

security interest therein, including, without limitation, subject to Section 5

hereof, transferring, registering or arranging for the transfer or registration

of the Pledged Property to or in Pledgee’s or any Lender’s own name and

receiving the income therefrom as additional security for the Obligations and

(iii) pay any charges or expenses which Pledgee deems necessary for the

foregoing purpose, but without any obligation to do so.  Any obligation of Pledgee for reasonable

care for the Pledged Property in Pledgee’s possession shall be limited to the

same degree of care which Pledgee uses for similar property pledged to Pledgee

by other persons.

 

(f)  If Pledgor shall become entitled to receive

or acquire, or shall receive any stock certificate, or option or right in

respect of or related to the Pledged Securities (including, without limitation,

any certificate representing a dividend or a distribution or exchange of or in

connection with reclassification of the Pledged Securities) whether as an

addition to, in substitution of, or in exchange for any of the Pledged Property

or otherwise, Pledgor agrees to accept same as Pledgee’s agent, to hold same in

trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee’s agent

or bailee in the form received, with the endorsement(s) of Pledgor where

necessary and/or appropriate powers and/or assignments duly executed to be held

by Pledgee or Pledgee’s agent or bailee subject to the terms hereof, as further

security for the Obligations.

 

(g)  Pledgor shall not, without the prior consent

of Pledgee, directly or indirectly, sell, assign, transfer, or otherwise

dispose of, or grant any option with respect to the Pledged Property, nor shall

 

3

 

Pledgor create, incur or

permit any further pledge, hypothecation, encumbrance, lien, mortgage or

security interest with respect to the Pledged Property.

 

(h)  So long as no Event of Default (as

hereinafter defined) has occurred and is continuing, Pledgor shall have the

right to vote and exercise all corporate rights with respect to the Pledged

Securities, except as expressly prohibited herein, and to receive any cash

dividends payable in respect of the Pledged Securities.

 

(i)  Pledgor shall not permit any Issuer,

directly or indirectly, to issue, sell, grant, assign, transfer or otherwise

dispose of, any additional shares of capital stock of any Issuer or any option

or warrant with respect to, or other right or security convertible into, any

additional shares of capital stock of any Issuer, now or hereafter authorized,

unless all such additional shares, options, warrants, rights or other such securities

are made and shall remain part of the Pledged Property subject to the pledge

and security interest granted herein.

 

(j)  Pledgor shall pay all charges and

assessments of any nature against the Pledged Property or with respect thereto

prior to said charges and/or assessments being delinquent.

 

(k)  Pledgor shall promptly reimburse Pledgee on

demand, together with interest at the rate then applicable to the Obligations

set forth in the Loan Agreement, for any charges, assessments or expenses paid

or incurred by Pledgee or any Lender in Pledgee’s discretion for the

protection, preservation and maintenance of the Pledged Property and the

enforcement of Pledgee’s rights hereunder, including, without limitation,

reasonable attorneys’ fees and legal expenses incurred by Pledgee in seeking to

protect, collect or enforce its rights in the Pledged Property or otherwise

hereunder.

 

(l)  Pledgee may notify any Issuer or the

appropriate transfer agent of the Pledged Securities to register the security

interest and pledge granted herein and honor the rights of Pledgee and Lenders

with respect thereto.

 

(m)  Pledgor waives: (i) all rights to require

Pledgee or any Lender to proceed against any other person, entity or collateral

or to exercise any remedy, (ii) the defense of the statute of limitations in

any action upon any of the Obligations, (iii) any right of subrogation or

interest in the Obligations or Pledged Property until all Obligations have been

paid in full, and (iv) any rights to notice of any kind or nature whatsoever,

unless specifically required in this Pledge Agreement or non-waivable under any

applicable law.  Pledgor agrees that the

Pledged Property, other collateral, or any other guarantor or endorser may be

released, substituted or added with respect to the Obligations, in whole or in

part, without releasing or otherwise affecting the liability of Pledgor, the

pledge and security interests granted hereunder, or this Pledge Agreement.  Pledgee is entitled to all of the benefits

of a secured party set forth in Section 9-207 of the New York Uniform

Commercial Code.

 

4

 

4.  EVENTS OF DEFAULT

 

The occurrence or existence

of any Event of Default under any of the Financing Agreements is referred to

herein individually as an “Event of Default”, and collectively, as “Events of

Default”.

 

5.  RIGHTS AND REMEDIES

 

At any time an Event of

Default exists or has occurred and is continuing, in addition to all other

rights and remedies of Pledgee and Lenders, whether provided under this Pledge

Agreement, the Loan Agreement, the other Financing Agreements, applicable law

or otherwise, Pledgee shall have the following rights and remedies which may be

exercised without notice to, or consent by, Pledgor except as such notice or

consent is expressly provided for hereunder:

 

(a)  Pledgee, at its option, shall be empowered

to exercise its continuing right to instruct any Issuer (or the appropriate

transfer agent of the Pledged Securities) to register any or all of the Pledged

Securities in the name of Pledgee or in the name of Pledgee’s nominee

(including, without limitation, any Lender) and Pledgee may complete, in any

manner Pledgee may deem expedient, any and all stock powers, assignments or

other documents heretofore or hereafter executed in blank by Pledgor and

delivered to Pledgee.   After said

instruction, and without further notice, Pledgee shall have the exclusive right

to exercise all voting and corporate rights with respect to the Pledged

Securities and other Pledged Property, and exercise any and all rights of

conversion, redemption, exchange, subscription or any other rights, privileges,

or options pertaining to any shares of the Pledged Securities or other Pledged

Property as if Pledgee were the absolute owner thereof, including, without

limitation, the right to exchange, in its discretion, any and all of the

Pledged Securities and other Pledged Property upon any merger, consolidation,

reorganization, recapitalization or other readjustment with respect thereto.  Upon the exercise of any such rights,

privileges or options by Pledgee, Pledgee shall have the right to deposit and

deliver any and all of the Pledged Securities and other Pledged Property to any

committee, depository, transfer agent, registrar or other designated agency

upon such terms and conditions as Pledgee may determine, all without liability,

except to account for property actually received by Pledgee.  However, Pledgee shall have no duty to

exercise any of the aforesaid rights, privileges or options (all of which are

exercisable in the sole discretion of Pledgee) and shall not be responsible for

any failure to do so or delay in doing so.

 

(b)  In addition to all the rights and remedies

of a secured party under the Uniform Commercial Code or other applicable law,

Pledgee shall have the right, at any time and without demand of performance or

other demand, advertisement or notice of any kind (except the notice specified

below of time and place of public or private sale) to or upon Pledgor or any

other person (all and each of which demands, advertisements and/or notices are

hereby expressly waived to the extent permitted by applicable law), to proceed

forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or

otherwise dispose of and deliver said Pledged Property or any part thereof in

one or more lots at public or private sale or sales at any exchange, broker’s

board or at any of Pledgee’s offices or elsewhere at such prices and on such

terms as Pledgee may deem best.  The

foregoing disposition(s) may be for cash or on credit or for future delivery

without assumption of any credit risk, with Pledgee having the right to

purchase all or any part of said Pledged Property so sold at any such sale or

sales, public or private, free of any right or equity of redemption in Pledgor,

which right or equity is hereby expressly

 

5

 

waived or released by

Pledgor to the extent permitted by applicable law.  The proceeds of any such collection, redemption, recovery,

receipt, appropriation, realization, sale or other disposition, after deducting

all costs and expenses of every kind incurred relative thereto or incidental to

the care, safekeeping or otherwise of any and all Pledged Property or in any

way relating to the rights of Pledgee hereunder, including reasonable

attorneys’ fees and legal expenses, shall be applied first to the satisfaction

of the Obligations (in such order as Pledgee may elect and whether or not due)

and then to the payment of any other amounts required by applicable law,

including Section 9-615(a)(3) of the Uniform Commercial Code, with Pledgor to

be and remain liable for any deficiency. 

Pledgor shall be liable to Pledgee for the payment on demand of all such

costs and expenses, together with interest at the then applicable rate set

forth in the Loan Agreement, and any reasonable attorneys’ fees and legal

expenses.  Pledgor agrees that ten(10)

days prior written notice by Pledgee designating the place and time of any

public sale or of the time after which any private sale or other intended

disposition of any or all of the Pledged Property is to be made, is reasonable

notification of such matters.

 

(c)  Pledgor recognizes that Pledgee may be

unable to effect a public sale of all or part of the Pledged Property by reason

of certain prohibitions contained in the Securities Act of 1933, as amended, as

now or hereafter in effect or in applicable Blue Sky or other state securities

law, as now or hereafter in effect, but may be compelled to resort to one or

more private sales to a restricted group of purchasers who will be obliged to

agree, among other things, to acquire such Pledged Property for their own

account for investment and not with a view to the distribution or resale

thereof.  If at the time of any sale of

the Pledged Property or any part thereof, the same shall not, for any reason

whatsoever, be effectively registered (if required) under the Securities Act of

1933 (or other applicable state securities law), as then in effect, Pledgee in

its sole and absolute discretion is authorized to sell such Pledged Property or

such part thereof by private sale in such manner and under such circumstances

as Pledgee or its counsel may deem necessary or advisable in order that such

sale may legally be effected without registration.  Pledgor agrees that private sales so made may be at prices and

other terms less favorable to the seller than if such Pledged Property were

sold at public sale, and that Pledgee has no obligation to delay the sale of

any such Pledged Property for the period of time necessary to permit any Issuer

with respect thereto, even if such Issuer would agree, to register such Pledged

Property for public sale under such applicable securities laws.  Pledgor agrees that any private sales made

under the foregoing circumstances shall be deemed to have been in a

commercially reasonable manner.

 

(d)  All of the rights and remedies of the

Pledgee and Lenders, including, but not limited to, the foregoing and those

otherwise arising under this Pledge Agreement, the Loan Agreement and the other

Financing Agreements, the instruments comprising the Pledged Property,

applicable law or otherwise, shall be cumulative and not exclusive and shall be

enforceable alternatively, successively or concurrently as Pledgee and Lenders

may deem expedient.  No failure or delay

on the part of Pledgee in exercising any of its options, powers or rights or

partial or single exercise thereof, shall constitute a waiver of such option,

power or right.

 

6

 

6.  JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

 

(a)  The validity, interpretation and enforcement

of this Pledge Agreement any dispute arising out of the relationship between

the parties hereto, 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 law or any other rule of law that would cause the application

of the law of any jurisdiction other than the State of Florida.

 

(b)  Pledgor irrevocably consents and submits to

the non-exclusive jurisdiction of the Circuit Court of Dade County, Florida or

the United States District Court for the Southern District of Florida,

whichever Pledgee may elect, and waives any objection based on venue or forum

non conveniens with respect to any action instituted therein arising under this

Pledge Agreement or any of the other Financing Agreements or in any way

connected with or related or incidental to the dealings of the parties hereto in

respect of this Pledge Agreement 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 with respect to any such matters shall be heard only in

the courts described above (except that Pledgee shall have the right to bring

any action or proceeding against Pledgor or its property in the courts of any

other jurisdiction which Pledgee deems necessary or appropriate in order to

realize on the Pledged Property or to otherwise enforce its rights against

Pledgor or its property).

 

(c)  Pledgor 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 herein 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

Pledgee’s option, by service upon Pledgor in any other manner provided under

the rules of any such courts.

 

(d)  PLEDGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY

JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS

PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY

CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE

OR ANY LENDER IN RESPECT OF THIS PLEDGE AGREEMENT 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.  PLEDGOR 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 PLEDGOR OR PLEDGEE OR ANY LENDER

MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY

COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF

THEIR RIGHT TO TRIAL BY JURY.

 

(e)  Pledgee and Lenders shall not have any

liability to Pledgor (whether in tort, contract, equity or otherwise) for

losses suffered by Pledgor in connection with, arising out of, or in any way

related to the transactions or relationships contemplated by this Pledge

Agreement, or any act, omission or event

 

7

 

occurring in connection

herewith, unless it is determined by a final and non-appealable judgment or

court order binding on Pledgee, that the losses were the result of acts or

omissions constituting gross negligence or willful misconduct of Pledgee.  In any such litigation, Pledgee shall be

entitled to the benefit of the rebuttable presumption that it acted in good

faith and with the exercise of ordinary care in the performance by it of the

terms of this Pledge Agreement.

 

7.  MISCELLANEOUS

 

(a)  Pledgor agrees that at any time and from

time to time upon the written request of Pledgee, Pledgor shall execute and

deliver such further documents, including, but not limited to, irrevocable

proxies or stock powers, in form reasonably satisfactory to counsel for

Pledgee, and will take or cause to be taken such further acts as Pledgee may

request in order to effect the purposes of this Pledge Agreement and perfect or

continue the perfection of the security interest in the Pledged Property

granted to Pledgee hereunder.

 

(b)  Beyond the exercise of reasonable care to

assure the safe custody of the Pledged Property (whether such custody is

exercised by Pledgee, or Pledgee’s nominee, agent or bailee) Pledgee or

Pledgee’s nominee agent or bailee shall have no duty or liability to protect or

preserve any rights pertaining thereto and shall be relieved of all

responsibility for the Pledged Property upon surrendering it to Pledgor or

foreclosure with respect thereto.

 

(c)  All notices, requests and demands to or upon

the respective parties hereto shall be in writing and shall be deemed to have

been duly given or made:  if delivered

in person, immediately upon delivery; if by telex, telegram or 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 registered

or 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 Pledgor:

  	

   

  	

  Mackie Designs Inc.

  
	

   

  	

   

  	

  16220 Woodinville-Redmond

  Rd., N.E.

  
	

   

  	

   

  	

  Woodinville, Washington

  
	

   

  	

   

  	

  Attention: Chief Financial

  Officer

  
	

   

  	

   

  	

  Telephone No.:

  425-487-4333

  
	

   

  	

   

  	

  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.

  

 

8

 

	

   

  	

   

  	

  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 Pledgee:

  	

   

  	

  Congress Financial

  Corporation

  
	

   

  	

   

  	

  (Florida)

  
	

   

  	

   

  	

  777 Brickell Avenue

  
	

   

  	

   

  	

  Miami, Florida 33131

  
	

   

  	

   

  	

  Attention: Portfolio

  Manager

  
	

   

  	

   

  	

  Telephone No.:305-371-6671

  
	

   

  	

   

  	

  Telecopy No.:305-371-9456

  

 

(d)  All references to the plural herein shall

also mean the singular and to the singular shall also mean the plural.  All references to Pledgor, Pledgee and

Issuers pursuant to the definitions set forth in the recitals hereto, or to any

other person herein, shall include their respective successors and assigns. The

words “hereof,” “herein,” “hereunder,” “this Pledge Agreement” and words of similar

import when used in this Pledge Agreement shall refer to this Pledge Agreement

as a whole and not any particular provision of this Pledge Agreement and as

this Pledge Agreement now exists or may hereafter be amended, modified,

supplemented, extended, renewed, restated or replaced.  An Event of Default shall exist or continue

or be continuing until such Event of Default is waived in accordance with

Section 7(g) hereof or cured in a manner satisfactory to Pledgee as determined

in good faith.  All references to the

term “Person” or “Persons” 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 corporation, limited liability

participation, limited liability company, business trust, unincorporated

association, joint stock company, trust, joint venture or other entity or any

government or any agency, instrumentality or political subdivision thereof.

 

(e)  This Pledge Agreement, the other Financing

Agreements and any other document referred to herein or therein shall be

binding upon Pledgor and its successors and assigns and inure to the benefit of

and be enforceable by Pledgee and its successors and assigns.

 

(f)  If any provision of this Pledge Agreement is

held to be invalid or unenforceable, such invalidity or unenforceability shall

not invalidate this Pledge Agreement as a whole, but this Pledge Agreement

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.

 

9

 

(g)  Neither this Pledge Agreement 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 Pledgee.  Neither Pledgee nor

Lenders shall by any act, delay, omission or otherwise be deemed to have

expressly or impliedly waived any of their respective rights, powers and/or

remedies unless such waiver shall be in writing and signed by an authorized

officer of Pledgee. Any such waiver shall be enforceable only to the extent

specifically set forth therein.  A

waiver by Pledgee or any Lender 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 Pledgee or such Lender would otherwise have on any future

occasion, whether similar in kind or otherwise.  This Pledge Agreement may be executed and delivered by telecopier

with the same force and effect as if it were a manually executed and delivered counterpart.

 

(h) Upon payment and

satisfaction in full of the Obligations and the terminations of the Financing

Agreements, and upon Pledgor’s written request, Pledgee shall promptly deliver

the stock certificates representing the Pledged Securities to Pledgor.

 

[REMAINDER

OF PAGE INTENTIONALLY LEFT BLANK]

 

10

 

IN WITNESS WHEREOF, Pledgor

has executed this Pledge Agreement as of the day and year first above written.

 

	

   

  	

  MACKIE DESIGNS INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ James T. Engen

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:

  	

  President & CEO

  	

   

  	

   

  
						

 

 

EXHIBIT

A

TO

PLEDGE

AND SECURITY AGREEMENT

 

	

  Issuer

  	

   

  	

  Certificate Nos.

  	

   

  	

  Shares

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mackie

  Designs Manufacturing, Inc.

  	

   

  	

  1

  	

   

  	

  100 shares of Common

  Stock, NPV

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Mackie

  Investment Co.

  	

   

  	

  1

  	

   

  	

  100 shares of Common

  Stock, NPV

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  SIA

  Software Company, Inc.

  	

   

  	

  7

  	

   

  	

  200 shares, NPV

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