Document:

EXHIBIT 10.6

 

THE SECURITIES

REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

OR APPLICABLE STATE, SECURITIES LAWS, NOR THE SECURITIES LAWS OF ANY OTHER

JURISDICTION.  THEY MAY NOT BE SOLD OR

TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THOSE

SECURITIES LAWS OR PURSUANT TO AN EXEMPTION THEREFROM.

 

AXCESS INC.

 

Senior

Promissory Note

 

 

	

  $ 400,000.00

  	

   

  	

  April 12, 2002

  

 

                AXCESS INC., a Delaware corporation having its

principal place of business in Carrollton, Texas (the Company”), for value

received, hereby promises to pay to the order of J.P. Morgan Investment

Corporation, or its transferees or assigns (the “Holder”), on December 31, 2003

(the “Final Maturity Date”), the principal sum of FOUR HUNDRED THOUSAND UNITED

STATES DOLLARS (U.S. $400,000.00), or the aggregate unpaid amount of all

principal outstanding hereunder, whichever is less, together with interest on

the outstanding principal balance hereunder from time to time, at the rate of

six and sixty-four-one-hundredths percent (6.64%) per annum, calculated on the

basis of the actual number of days elapsed over a 364- (or 365-) day year (the

“Base Interest Rate”).  Each payment

received by the Holder hereunder shall be applied first to the interest accrued

on and then to the unpaid principal amount of this Note.

 

This Note is given

in extension and partial renewal of that certain Senior Promissory Note, dated

June 25, 1997, made by the Company and payable to the order of the Holder,

as extended and modified by Note Payable Conversion Agreement, dated

March     , 1999, between the Company and Holder (such

Senior Promissory Note, as so extended and modified, being herein referred to

as the “Original Note”).  The Original

Note was one of the Senior Promissory Notes (“Notes”) issued and sold by the

Company under the Note Purchase Agreement, dated as of June 25, 1997, as

amended on December 29, 1997 (the “Note Purchase Agreement”), among the

Company, the initial Holder and the other purchaser named therein.

 

                Payment of principal and interest shall be made in

such coin or currency of the United States of America as at the time of payment

shall be legal tender for the payment of public and private debts.  All such payments shall be paid by wire

transfer of Federal funds in accordance with the written instructions of the

Holder or, in the absence of such instructions, by check mailed to the Holder

at the address last given to the Company by the Holder in writing for such

purpose.

 

                This Note may be prepaid in whole or in part at any

time at the option of the Company, without premium or penalty, upon not less

than 20 days’ prior written notice to the Holder.

 

If any time after

the date hereof the Company or any subsidiary completes (i) an equity or

long-term debt financing, (ii) a sale of assets outside the ordinary course of

business, (iii) a sale-leaseback or similar financing, or (iv) a joint venture

or other strategic partnership (any such transaction, an “Extraordinary

Transaction”), and such Extraordinary Transaction results in cash proceeds to

the Company (together with the cash proceeds of any other Extraordinary

Transaction 

 

 

1

 

after the date hereof, to

the extend not previously applied) in excess of $5,000,000 (such excess, the

“Available Cash Proceeds”), then a portion of Available Cash Proceeds shall be

applied to prepay this Note as provided herein.

 

The Company hereby

waives presentment for payment, demand for payment, notice of nonpayment,

protest and notice of protest.

 

This Note may be

prepaid in whole or in part (in amounts not less than $50,000) at any time at

the option of the Company, upon not less than 20 days’ prior written notice to

the Holder, without premium or penalty; provide, however, that any

amounts prepaid hereunder on any of the other Notes shall be applied to prepay

this Note and all other Notes issued under the Note Purchase Agreement on a pro

rata basis, in proportion to the respective aggregate unpaid principal

amounts thereof.

 

                This Note shall be binding upon the Company and its

successors and assigns and shall inure to the benefit of the Holder and its

successors, assigns and transferees.

 

If the Company

fails to pay any amount of principal or interest when due, the entire unpaid principal

of and accrued interest on outstanding principal amounts hereunder shall

forthwith become absolutely due and payable without any notice, demand, protest

or presentment whatsoever, all of which are hereby expressly waived.  Interest on any past due principal amount,

whether at the Final Maturity Date or by acceleration, shall accrue at a rate

equal to the Base Interest Rate plus five percent (5%) per annum, but in no

event higher than the maximum legal rate of interest permitted under applicable

law.  In addition, if any amount payable

hereunder shall remain unpaid after 3:00 p.m., New York City time, on the Final

Maturity Date, the Company shall pay to the record Holder of this Note at such

time the Additional Consideration provided for in the Note Purchase Agreement

(as such term is defined therein).  The

Company shall pay to the Holder all costs and expense of collection and

enforcement relating to this Note, including without limitation reasonable

attorneys’ fees and expenses.

 

                This Note shall be

governed by and construed in accordance with the laws of the State of New York,

without reference to its rules as to conflicts of law.  Any judicial proceeding brought against the

Company to enforce, or otherwise in connection with, this Note may be brought

in any court of competent jurisdiction the City of New York, and, by execution

and delivery of this Note, the Company (i) accepts, generally and

unconditionally, the nonexclusive jurisdiction of such courts and any related

appellate court and irrevocably agrees to be bound by any final judgment

rendered thereby in connection with this Note and (ii) irrevocably waives any

objection it may now or hereafter have as to the venue of any such proceeding

brought in such a court or that such a court is in inconvenient forum.

 

                THE COMPANY HEREBY

UNCONDITIONALLY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT,

COUNTERCLAIM OR CROSS CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE.

 

 

2

 

IN WITNESS WHEREOF, the Company has caused this Note

to be signed by its Vice President and has caused its corporate seal to be

affixed and attested by its Secretary.

 

	

  [Corporate Seal]            Attested:

  	

   

  	

  AXCESS INC.

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  /s/ Allan Frank

  	

   

  	

  By:

  	

  /s/ Allan Griebenow

  
	

   

  	

   

  	

   

  	

  Allan Griebenow, Chief Executive Officer

  
	

  Allan Frank, Secretary

  	

   

  	

   

  	

   

  

 

 

3Exhibit 10.1

 

AMENDED AND RESTATED

CREDIT AGREEMENT

 

Between

 

U.S. BANK NATIONAL ASSOCIATION

 

and

 

MACKIE DESIGNS INC.

 

 

Dated as of April 30, 2002

 

 

TABLE OF CONTENTS

 

	

  ARTICLE I.

  	

   

  	

  DEFINITIONS

  
	

   

  	

   

  	

   

  
	

   

  	

  1.1

  	

  Terms Defined

  
	

   

  	

  1.2

  	

  Accounting

  Terms

  
	

   

  	

  1.3

  	

  Rules

  of Construction

  
	

   

  	

  1.4

  	

  Incorporation of

  Recitals and Exhibits

  
	

   

  	

  1.5

  	

  Existing

  Credit Agreement and Loan Documents; Waiver

  
	

   

  	

   

  	

   

  
	

  ARTICLE II.

  	

   

  	

  REVOLVING LOAN

  
	

   

  	

   

  	

   

  
	

   

  	

  2.1

  	

  Loan Commitment

  
	

   

  	

  2.2

  	

  Use of Proceeds

  
	

   

  	

  2.3

  	

  Revolving Note

  
	

   

  	

  2.4

  	

  Interest Rate

  
	

   

  	

  2.5

  	

  Repayment

  
	

   

  	

  2.6

  	

  Fundings

  
	

   

  	

  2.7

  	

  Revolving

  Loan Fee

  
	

   

  	

  2.8

  	

  Borrowing Base

  
	

   

  	

   

  	

   

  
	

  ARTICLE III.

  	

   

  	

  TERM LOAN A

  
	

   

  	

   

  	

   

  
	

   

  	

  3.1

  	

  Loan Commitment

  
	

   

  	

  3.2

  	

  Use of Proceeds

  
	

   

  	

  3.3

  	

  Term Note A

  
	

   

  	

  3.4

  	

  Interest Rates

  
	

   

  	

  3.5

  	

  Repayment

  
	

   

  	

  3.6

  	

  Term

  Loan A Fee

  
	

   

  	

  3.7

  	

  Adjustment of Principal

  Balance

  
	

   

  	

   

  	

   

  
	

  ARTICLE IV.

  	

   

  	

  TERM LOAN B

  
	

   

  	

   

  	

   

  
	

   

  	

  4.1

  	

  Loan Commitment

  
	

   

  	

  4.2

  	

  Use of Proceeds

  
	

   

  	

  4.3

  	

  Term Note B

  
	

   

  	

  4.4

  	

  Interest Rates

  
	

   

  	

  4.5

  	

  Repayment

  
	

   

  	

  4.6

  	

  Term

  Loan B Fee

  
	

   

  	

   

  	

   

  
	

  ARTICLE V

  	

   

  	

  LETTERS OF

  CREDIT

  
	

   

  	

   

  	

   

  
	

   

  	

  5.1

  	

  Commitment

  
	

   

  	

  5.2

  	

  Letter

  of Credit Fees

  
	

   

  	

  5.3

  	

  Draws on Letters of Credit

  
	

   

  	

   

  	

   

  
	

  ARTICLE VI.

  	

   

  	

  GENERAL

  PROVISIONS APPLICABLE TO THE LOANS

  
	

   

  	

   

  	

   

  
	

   

  	

  6.1

  	

  Manner of

  Payment

  

 

i

 

	

   

  	

  6.2

  	

  Statements

  
	

   

  	

  6.3

  	

  Book

  Entry Loan Account

  
	

   

  	

  6.4

  	

  Lockbox; Bank Control

  Account

  
	

   

  	

  6.5

  	

  Computations

  of Interest

  
	

   

  	

  6.6

  	

  Default

  Interest

  
	

   

  	

  6.7

  	

  Maximum

  Interest Rate

  
	

   

  	

  6.8

  	

  Late Charge

  
	

   

  	

  6.9

  	

  Prepayments

  
	

   

  	

  6.10

  	

  Extensions, Renewals and

  Modifications

  
	

   

  	

  6.11

  	

  Increased Costs

  
	

   

  	

  6.12

  	

  LIBOR Rate Loan Provisions

  
	

   

  	

  6.13

  	

  Deposits

  Unavailable or Interest Rate Unascertainable or Inadequate; Impracticability

  
	

   

  	

  6.14

  	

  Changes

  in Law Rendering LIBOR Rate Loan Unlawful

  
	

   

  	

  6.15

  	

  Discretion

  of U.S. Bank as to Manner of Funding

  
	

   

  	

  6.16

  	

  Collateral;

  Existing Security Documents

  
	

   

  	

   

  	

   

  
	

  ARTICLE VII.

  	

   

  	

  CONDITIONS

  PRECEDENT FOR FUNDINGS UNDER THE LOANS

  
	

   

  	

   

  	

   

  
	

   

  	

  7.1

  	

  Conditions

  Precedent for Initial Funding

  
	

   

  	

  7.2

  	

  Conditions

  Precedent to Each Subsequent Funding

  
	

   

  	

   

  	

   

  
	

  ARTICLE VIII.

  	

   

  	

  AFFIRMATIVE

  COVENANTS

  
	

   

  	

   

  	

   

  
	

   

  	

  8.1

  	

  Financial Data

  
	

   

  	

  8.2

  	

  Licenses

  and Permits

  
	

   

  	

  8.3

  	

  Maintenance of Properties

  
	

   

  	

  8.4

  	

  Payment of

  Charges

  
	

   

  	

  8.5

  	

  Insurance

  
	

   

  	

  8.6

  	

  Maintenance

  of Records

  
	

   

  	

  8.7

  	

  Inspection

  
	

   

  	

  8.8

  	

  Hazardous

  Substances

  
	

   

  	

  8.9

  	

  Corporate

  Existence

  
	

   

  	

  8.10

  	

  Notice of Disputes

  and Other Matters

  
	

   

  	

  8.11

  	

  Exchange of

  Note

  
	

   

  	

  8.12

  	

  Maintenance

  of Liens

  
	

   

  	

  8.13

  	

  Other

  Agreements

  
	

   

  	

  8.14

  	

  After-Acquired Collateral

  
	

   

  	

  8.15

  	

  Further

  Assurances

  
	

   

  	

  8.16

  	

  Maintenance of Bank

  Accounts

  
	

   

  	

  8.17

  	

  Disposition

  of Assets

  
	

   

  	

  8.18

  	

  Appraisal

  
	

   

  	

  8.19

  	

  Issuance of

  Equity

  
	

   

  	

   

  	

   

  
	

  ARTICLE IX.

  	

   

  	

  NEGATIVE

  COVENANTS

  
	

   

  	

   

  	

   

  
	

   

  	

  9.1

  	

  Dividends and Distributions

  

 

ii

 

	

   

  	

  9.2

  	

  Transactions With

  Affiliates

  
	

   

  	

  9.3

  	

  Other

  Indebtedness

  
	

   

  	

  9.4

  	

  Leases

  and Leasebacks

  
	

   

  	

  9.5

  	

  Liens

  
	

   

  	

  9.6

  	

  Advances

  and Loans

  
	

   

  	

  9.7

  	

  Investments

  
	

   

  	

  9.8

  	

  Consolidation,

  Merger and Sale of Assets

  
	

   

  	

  9.9

  	

  Subsidiaries

  
	

   

  	

  9.10

  	

  Type of

  Business

  
	

   

  	

  9.11

  	

  Change of State of

  Organization

  
	

   

  	

  9.12

  	

  Change in

  Documents

  
	

   

  	

  9.13

  	

  Control

  
	

   

  	

  9.14

  	

  Pension Plan

  
	

   

  	

  9.15

  	

  Tangible

  Net Worth

  
	

   

  	

  9.16

  	

  Funded Debt

  Ratio

  
	

   

  	

  9.17

  	

  Fixed Charge Coverage Ratio

  
	

   

  	

  9.18

  	

  Working Capital

  
	

   

  	

  9.19

  	

  Limitation on

  Capital Expenditures

  
	

   

  	

   

  	

   

  
	

  ARTICLE X.

  	

   

  	

  REPRESENTATIONS AND

  WARRANTIES

  
	

   

  	

   

  	

   

  
	

   

  	

  10.1

  	

  Corporate

  Status

  
	

   

  	

  10.2

  	

  Power and

  Authority

  
	

   

  	

  10.3

  	

  No Violation of Agreements

  
	

   

  	

  10.4

  	

  Recording and

  Enforceability

  
	

   

  	

  10.5

  	

  Litigation

  
	

   

  	

  10.6

  	

  Good

  Title to Properties

  
	

   

  	

  10.7

  	

  Licenses

  and Permits

  
	

   

  	

  10.8

  	

  No

  Burdensome Agreements

  
	

   

  	

  10.9

  	

  Properties in Good

  Condition

  
	

   

  	

  10.10

  	

  Financial

  Statements

  
	

   

  	

  10.11

  	

  Outstanding

  Indebtedness

  
	

   

  	

  10.12

  	

  Taxes

  
	

   

  	

  10.13

  	

  License Fees

  
	

   

  	

  10.14

  	

  Trademarks, Patents, Etc.

  
	

   

  	

  10.15

  	

  Disclosure

  
	

   

  	

  10.16

  	

  Regulations

  U and X

  
	

   

  	

  10.17

  	

  Names

  
	

   

  	

  10.18

  	

  Condition

  of Property

  
	

   

  	

  10.19

  	

  Pension Plans

  
	

   

  	

   

  	

   

  
	

  ARTICLE XI.

  	

   

  	

  EVENTS OF

  DEFAULT; REMEDIES

  
	

   

  	

   

  	

   

  
	

   

  	

  11.1

  	

  Events of

  Default

  
	

   

  	

  11.2

  	

  Acceleration;

  Remedies

  

 

iii

 

	

  ARTICLE XII.

  	

   

  	

  MISCELLANEOUS

  
	

   

  	

   

  	

   

  
	

   

  	

  12.1

  	

  Notices

  
	

   

  	

  12.2

  	

  Payment

  of Expenses

  
	

   

  	

  12.3

  	

  Setoff

  
	

   

  	

  12.4

  	

  Waiver of

  Setoff

  
	

   

  	

  12.5

  	

  Fees

  and Commissions

  
	

   

  	

  12.6

  	

  No Waiver

  
	

   

  	

  12.7

  	

  Entire Agreement and

  Amendments

  
	

   

  	

  12.8

  	

  Benefit

  of Agreement

  
	

   

  	

  12.9

  	

  Severability

  
	

   

  	

  12.10

  	

  Descriptive

  Headings

  
	

   

  	

  12.11

  	

  Governing Law

  
	

   

  	

  12.12

  	

  Consent

  to Jurisdiction, Service and Venue

  
	

   

  	

  12.13

  	

  Counterparts

  
	

   

  	

  12.14

  	

  Jury Waiver

  
	

   

  	

  12.15

  	

  Statutory

  Notice

  

 

EXHIBITS

 

Exhibit A      —    Revolving

Note, Section 2.3

 

Exhibit B       —    Term

Note A, Section 3.3

 

Exhibit C       —    Term

Note B, Section 4.3

 

Exhibit D      —    Board

Resolution and Incumbency Certificate, Section 7.1(d)(iii)

 

Exhibit E       —    Existing

Liens, Section 9.5

 

iv

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This amended and restated

credit agreement is made and entered into as of the 30th day of April, 2002, by

and between U.S. BANK NATIONAL ASSOCIATION, a national banking association

(“U.S. Bank”), and MACKIE DESIGNS INC., a Washington corporation

(“Borrower”).  Words and phrases with

initial capitalized letters have the meanings assigned in Article I

hereof.

 

RECITALS

 

A.            Borrower and U.S. Bank are parties to that certain

Credit Agreement dated as of June 18, 1998 (collectively with all

amendments and modifications thereto, the “Existing Credit Agreement”).

 

B.            Borrower has requested U.S. Bank to modify

Borrower’s existing credit facilities with U.S. Bank under the Existing

Credit Agreement.

 

C.            Borrower and U.S. Bank desire to amend and restate

the Existing Credit Agreement on the terms and conditions of this Credit

Agreement and the other Loan Documents.

 

NOW, THEREFORE, in

consideration of the mutual covenants and conditions set forth herein, the

parties hereto (a) agree that the Existing Credit Agreement is hereby

amended and restated in its entirety as provided herein, (b) agree that

all the Loan Documents executed in connection with or relating to the Existing

Credit Agreement shall remain in full force and effect, except as specifically

provided in this Agreement, and (c) further agree as follows:

 

ARTICLE I.                                                        DEFINITIONS

 

1.1                               Terms Defined

 

As used herein, the

following terms have the meanings set forth below:

 

“Adjusted EBITDA” means,

for a given period, EBITDA less cash paid for principal and interest payments

on Interest Bearing Debt (excluding principal payments on the Revolving Loan),

less cash income taxes paid and less Unfunded Capital Expenditures paid in

cash.

 

“Adjustment Date” means

the date reasonably determined by U.S. Bank that is within 30 days of

the date U.S. Bank receives, reviews and approves the Appraisal.

 

“Affiliate” means a

Person that now or hereafter, directly or indirectly through one or more

intermediaries, controls, is controlled by or is under common control with

Borrower.  A Person shall be deemed to

control a corporation, limited liability company or partnership if

 

 

such Person

possesses, directly or indirectly, the power to direct or cause the direction

of the management of such corporation, limited liability company or

partnership, whether through the ownership of voting securities, by contract,

or otherwise.

 

“Agreement” means this

credit agreement and includes all amendments to this Agreement.

 

“Applicable Law” means

all applicable provisions and requirements of all (a) constitutions,

statutes, ordinances, rules, regulations, standards, orders and directives of

any Governmental Bodies, (b) Governmental Approvals, and (c) orders,

decisions, decrees, judgments, injunctions and writs of all courts and

arbitrators, whether such Applicable Laws presently exist, or are modified,

promulgated or implemented after the date hereof.

 

“Applicable Margin” means

the rate per annum that is determined by reference to the following matrix and

based upon the quarterly financial statements of Borrower provided to U.S. Bank

in accordance with the terms of this Agreement for the preceding fiscal quarter

of Borrower.  Adjustments shall be made

60 days after the end of each fiscal quarter of Borrower (when quarterly

financial statements are required to be delivered to U.S. Bank); provided,

however, that if Borrower has not delivered its financial statements for the

previous fiscal quarter within 60 days of the end of such fiscal quarter, then

the Applicable Margin in effect for the previous fiscal quarter shall continue

to apply unless U.S. Bank exercises its right to impose the default rate

provided for in this Agreement.

	

  Funded

  Debt Ratio

  	

   

  	

  Prime Rate Loan Applicable Margin

  	

   

  	

  LIBOR Rate Loan Applicable Margin

  	

   

  
	

  > 3.5:1.0

  	

   

  	

  2.00

  	

  %

  	

  3.50

  	

  %

  
	

  £

  3.5:1.0 and > 3.0:1.0

  	

   

  	

  0.75

  	

  %

  	

  3.00

  	

  %

  
	

  £

  3.0:1.0 and > 2.0:1.0

  	

   

  	

  0.50

  	

  %

  	

  2.50

  	

  %

  
	

  £

  2.0:1.0 and > 1.0:1.0

  	

   

  	

  0.25

  	

  %

  	

  2.00

  	

  %

  
	

  £

  1.0:1.0

  	

   

  	

  0

  	

  %

  	

  1.75

  	

  %

  

 

Where:

£ = less than or equal to

>

=  greater than

 

2

 

The Applicable Margins

set forth above shall apply unless there exists an Event of Default, in which

case U.S. Bank may elect to apply the default rate pursuant to the terms of

this Agreement.  The Funded Debt Ratio

as used in this definition shall be calculated as of the last day of the

relevant fiscal quarter of Borrower for the four trailing fiscal quarters then

ended.  U.S. Bank and Borrower

acknowledge that notwithstanding the Applicable Margin matrix set forth above,

Section 9.16 of the Credit Agreement provides that for Borrower’s fiscal

quarter ending December 31, 2002, and for each of Borrower’s fiscal

quarters thereafter, the Funded Debt Ratio shall not exceed 3.00:1.00.

 

“Appraisal” has the

meaning set forth in Section 8.18 hereof.

 

“Borrower” means Mackie

Designs Inc., a Washington corporation, and its successors.

 

“Borrowing Base” has the

meaning set forth in Section 2.8 hereof.

 

“Borrowing Notice” has

the meaning set forth in Section 2.6(a) hereof.

 

“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.

 

“Capital Expenditures”

means the aggregate amount of capital expenditures of Borrower as determined on

a consolidated basis in accordance with generally accepted accounting

principles, including leases that are or should be capitalized pursuant to

generally accepted accounting principles.

 

“Collateral” means all

the property, real or personal, tangible or intangible, now owned or hereafter

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

interest by Borrower or any other Person, to secure the Indebtedness of

Borrower to U.S. Bank.

 

“Commitment Period” has

the meaning set forth in Section 2.1 hereof.

 

“Default” means any

condition or event that constitutes an Event of Default or with the giving of

notice or lapse of time or both would, unless cured or waived, become an Event

of Default.

 

“Deficit Amount” has the

meaning set forth in Section 3.7 hereof.

 

“Disposition Payment” has

the meaning set forth in Section 8.17 hereof.

 

“EBITDA” for a given

period and on a consolidated basis, means Borrower’s net income, plus interest

expense, plus income tax expense, plus depreciation expense, plus amortization

expense, and minus revenues derived from net gains from sales of capital

assets.

 

3

 

“Eligible Accounts

Receivable” means the accounts receivable owed directly to Borrower or any of

its domestic Subsidiaries, excluding the following:  (a) accounts receivable that have been outstanding in excess

of 60 days from the due date, (b) all accounts receivable from any

single customer of Borrower if 10 percent or more of such customer’s

accounts owed to Borrower are ineligible for any reason, (c) accounts

receivable due from officers, employees, or Affiliates of Borrower,

(d) accounts receivable that are partially or wholly subject to the right

of setoff, (e) accounts receivable resulting from COD sales, finance

charges, and consignments, (f) accounts receivable due from Persons not

residents of the United States, (g) accounts receivable due from the

federal government, (h) accounts receivable that constitute any retainage,

(i) accounts receivable that constitute dated billings, and

(j) accounts receivable in which any Person other than U.S. Bank has

a security interest.  Notwithstanding

the foregoing, “Eligible Accounts Receivable” shall not include any accounts receivable

unless and until U.S. Bank holds a first, valid, binding perfected

security interest in any such accounts receivable.

 

“Eligible Inventory”

means inventory owned directly by Borrower, including raw materials and

finished goods, valued at the lower of cost or market.  “Eligible Inventory” shall exclude inventory

that is obsolete, consigned inventory, inventory that is not in saleable

condition, work–in–process and inventory in which any Person other

than U.S. Bank has a security interest. 

Notwithstanding the foregoing, “Eligible Inventory” shall not include

any inventory unless and until U.S. Bank holds a first, valid and binding

perfected security interest in that inventory.

 

“ERISA” means the

Employee Retirement Income Security Act of 1974, as amended from time to time.

 

“Equity Payment” has the

meaning set forth in Section 8.19 hereof.

 

“Event of Default” has

the meaning set forth in Section 11.1 hereof.

 

“Excess Amount” has the

meaning set forth in Section 3.7 hereof.

 

“Existing Credit

Agreement” has the meaning set forth in Recital A of this Agreement.

 

“Fixed Charge Coverage

Ratio” means the ratio of (a) EBITDA minus cash taxes, cash dividends and

Unfunded Capital Expenditures for the relevant period to (b) the sum of

all required principal payments (on all Interest Bearing Debt and capital

leases), and interest expense for the relevant period.

 

“Funded Debt Ratio” means

the ratio of Interest Bearing Debt to EBITDA.

 

“Funding” means any

disbursement of the proceeds of the Revolving Loan, Term Loan A, Term

Loan B, or the issuance or renewal of any Letter of Credit.

 

4

 

“Governmental Approval”

means any authorization, consent, approval, certificate of compliance, license,

permit or exemption from, contract with, registration or filing with, or report

or notice to, any Governmental Body required or permitted by Applicable Law.

 

“Governmental Body” means

the government of the United States, any state or any foreign country, or any

governmental or regulatory official, body, department, bureau, subdivision,

agency, commission, court, arbitrator or authority, or any instrumentality

thereof, whether federal, state, or local.

 

“Guaranties” has the

meaning set forth in Section 8.15(a)(vi) hereof and includes all

replacements, amendments and modifications of the Guaranties.

 

“Guarantors” means

Blackstone Technologies, Inc., Mackie Designs Manufacturing Inc., and

SIA Software Company, Inc., each of whom is required to execute and

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

 

“Hazardous Materials”

means oil or petrochemical products, PCB’s, asbestos, urea formaldehyde,

flammable explosives, radioactive materials, hazardous wastes, toxic substances

or related materials, including, but not limited to, substances defined as or

included in the definition of “hazardous substances,” “hazardous wastes,”

“hazardous materials” or “toxic substances” under any Hazardous Materials Laws.

 

“Hazardous Materials

Claims” means (a) enforcement, cleanup, removal or other regulatory

actions instituted, completed or threatened by any Governmental Body pursuant

to any applicable Hazardous Materials Laws and (b) claims made or

threatened by any third party against Borrower, any Subsidiary, or their property

relating to damage, contribution, cost recovery, compensation, loss or injury

resulting from Hazardous Materials.

 

“Hazardous Materials

Laws” means all Applicable Laws pertaining to Hazardous Materials.

 

“Indebtedness” means all

items that in accordance with generally accepted accounting principles would be

included in determining total liabilities as shown on the liabilities side of

the balance sheet as of the date that “Indebtedness” is to be determined and in

any event includes liabilities secured by any mortgage, deed of trust, pledge,

lien or security interest on property owned or acquired, whether or not such a

liability has been assumed, Subordinated Debt and the guaranties, endorsements

(other than for collection in the ordinary course of business) and other

contingent obligations with regard to the obligations of other Persons.

 

“Interest Bearing Debt”

means any Indebtedness of Borrower on a consolidated basis (other than

contingent obligations) that bears interest, including, without limitation,

leases that are or should be capitalized under generally accepted accounting

principles.

 

“Interest Differential”

shall mean that sum equal to the greater of $-0- or the financial loss incurred

by U.S. Bank resulting from prepayment, calculated as the difference between

the amount of interest U.S. Bank would have earned (from like investments

in the Money

 

5

 

Markets as of the

first day of the LIBOR Rate Loan) had prepayment not occurred and the interest

U.S. Bank will actually earn (from like investments in the Money Markets

as of the date of prepayment) as a result of the redeployment of funds from the

prepayment.

 

“Letters of Credit” has

the meaning set forth in Section 5.1 hereof and includes all renewals,

replacements and modifications thereof.

 

“LIBOR Rate Loan” has the

meaning set forth in Section 2.4 hereof.

 

“Loan Documents” means

this Agreement, the Notes, the Pledge Agreements, the Security Agreements and

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

arising out of or relating to this Agreement, the Existing Credit Agreement, or

the Loans, and includes all renewals, replacements and amendments thereof.

 

“Loans” means the

Revolving Loan, Term Loan A and Term Loan B, as well as all renewals,

replacements and amendments thereof.

 

“Money Markets” refers to

one or more wholesale funding markets available to U.S. Bank, including

negotiable certificates of deposit, commercial paper, eurodollar deposits, bank

notes, federal funds and others.

 

“Notes” means the

Revolving Note, Term Note A and Term Note B, as well as all renewals,

replacements and amendments thereof.

 

“Obligations” has the

meaning set forth in Section 12.3 hereof.

 

“Participant” means any

financial institution to which U.S. Bank sells a participation in any of

the Loans.

 

“Permitted Liens” has the

meaning set forth in Section 9.5 hereof.

 

“Person” means any

individual, partnership, limited liability company, joint venture, firm,

corporation, association, trust or other enterprise or any Governmental Body.

 

“Plan” means an employee

pension benefit plan that is covered by ERISA or subject to the minimum funding

standards under Section 412 of the Internal Revenue Code of 1986 and is

either (a) maintained by Borrower or any Affiliate for employees of

Borrower or any Affiliate or (b) maintained pursuant to a collective

bargaining agreement or any other arrangement under which more than one

employer makes contributions and to which Borrower or any Affiliate is then

making or accruing an obligation to make contributions or has within the

preceding five plan years made contributions.

 

“Pledge Agreement” has

the meaning set forth in Section 8.15(a)(ii)  hereof and includes all

renewals, replacements and amendments of the Pledge Agreement.

 

6

 

“Prime Rate” means the

prime rate announced by U.S. Bank from time to time, as when such rate

changes.

 

“Prime Rate Loan” has the

meaning set forth in Section 2.4 hereof.

 

“Revolving Loan” has the

meaning set forth in Section 2.1 hereof and includes all renewals,

replacements and amendments of the Revolving Loan.

 

“Revolving Loan

Commitment Amount” means $25,000,000.

 

“Revolving Note” has the

meaning set forth in Section 2.3 hereof and includes all renewals,

replacements and amendments of the Revolving Note.

 

“Security Agreements” has

the meaning set forth in Section 8.15(a)(i) hereof and includes all

renewals, replacements and amendments of the Security Agreements.

 

“Setoff” has the meaning

set forth in Section 12.3 hereof.

 

“Subordinated Debt” means

the Indebtedness of Borrower that is subordinated to the Indebtedness of

Borrower to U.S. Bank pursuant to a subordination agreement or

subordination provisions approved in writing by U.S. Bank.

 

“Subsidiary” means any

corporation, association, partnership, limited liability company, limited

liability partnership, joint venture or other business entity of which more

than 50 percent of the voting stock, membership interest or other equity

interests, is owned or controlled directly or indirectly by Borrower, or one or

more of the Subsidiaries of Borrower, or a combination thereof.

 

“Tangible Net Worth”

means, on a consolidated basis, Borrower’s net worth determined in accordance

with generally accepted accounting principles, less (a) the amount of all

deferred charges; (b) all intangible assets, including, but not limited

to, goodwill, licenses, franchises, trademarks, trade names, service marks,

patents and copyrights; (c) unamortized debt discount and expense;

(d) the cost of capital stock of an Affiliate; (e) any Indebtedness

owing to Borrower by an Affiliate thereof, unless such Indebtedness arose in

connection with the sale or lease of goods or property in the ordinary course

of business or the performance of services in the ordinary course of business

and would otherwise constitute current assets in accordance with generally

accepted accounting principles; and (f) the amount of any write–up

in book value of the assets of Borrower resulting from any revaluation of

assets.

 

“Term Loan A” has

the meaning set forth in Section 3.1 hereof and includes all renewals,

replacements and amendments of Term Loan A.

 

“Term Loan A

Commitment Amount” has the meaning set forth in Section 3.1 hereof.

 

7

 

“Term Loan B” has

the meaning set forth in Section 4.1 hereof and includes all renewals,

replacements and amendments of Term Loan B.

 

“Term Loan B

Commitment Amount” has the meaning set forth in Section 4.1 hereof.

 

“Term Note A” has

the meaning set forth in Section 3.3 hereof and includes all renewals,

replacements and amendments of Term Note A.

 

“Term Note B” has

the meaning set forth in Section 4.3 hereof and includes all renewals,

replacements and amendments of Term Note B.

 

“U.S. Bank” means

U.S. Bank National Association, a national banking association, and its

successors and assigns.

 

“Unfunded Capital

Expenditures” means the sum of all purchases of capital assets or acquisitions

of other companies less the sum of all new financing amounts received or

assumed to acquire capital assets or acquisitions of other companies for the

period specified.

 

“Working Capital” means

Borrower’s current assets, less Borrower’s current liabilities; provided that

for purposes of calculating Working Capital, short–term debt of Mackie

Designs (Italy) S.p.A. and AVM S.r.l. shall not be deemed to constitute a

current liability so long as U.S. Bank has received evidence satisfactory

to U.S. Bank that the maturity date of such short–term debt will be

extended.  For purposes of calculating

Working Capital, all outstanding principal on the Revolving Loan shall be

deemed to constitute a current liability.

 

1.2                               Accounting Terms

 

Unless otherwise

specified herein, all accounting terms used herein shall be interpreted, all

accounting determinations and financial covenant calculations hereunder shall

be made, and all financial statements required to be delivered hereunder shall

be prepared on a consolidated basis in accordance with generally accepted accounting

principles consistently applied.

 

1.3                               Rules of Construction

 

Unless the context

otherwise requires, the following rules of construction apply to the Loan

Documents:

 

(a)           Words in the singular include the

plural and in the plural include the singular.

 

(b)           Provisions of the Loan Documents

apply to successive events and transactions.

 

8

 

(c)           In the event of any inconsistency

between the provisions of this Agreement and the provisions of any of the other

Loan Documents, the provisions of this Agreement govern.

 

1.4                               Incorporation of Recitals and Exhibits

 

The foregoing recitals

are incorporated into this Agreement by reference.  All references to “Exhibits” contained herein are references to

exhibits attached hereto, the terms and conditions of which are made a part

hereof for all purposes.

 

1.5                               Existing Credit Agreement and Loan

Documents; Waiver

 

(a)           This Agreement amends and restates in

its entirety the Existing Credit Agreement; provided, however, that nothing

contained herein is intended to amend or impair any other agreement,

instrument, statement, or certificate delivered in connection with the Existing

Credit Agreement or the effect or efficacy thereof.  All Loan Documents executed in connection with the Existing

Credit Agreement shall remain in full force and effect and all references

therein to “Credit Agreement” shall henceforth refer to this Agreement.

 

(b)           Upon satisfaction of the conditions

set forth in Section 7.1 hereof, U.S. Bank U.S. Bank hereby

waives violation of the financial covenants set forth in Sections 7.15 —

7.18 of the Existing Credit Agreement.

 

ARTICLE II.                                                    REVOLVING LOAN

 

2.1                               Loan Commitment

 

(a)           Subject to and upon the terms and

conditions set forth herein and in reliance upon the representations,

warranties, and covenants of Borrower contained herein or made pursuant hereto,

U.S. Bank will make Fundings to Borrower from time to time during the

period ending on April 30, 2003, (“Commitment Period”), but such Fundings

(together with any outstanding Letters of Credit) shall not exceed, in the

aggregate principal amount at any one time outstanding, the Revolving Loan

Commitment Amount (the “Revolving Loan”). 

Borrower may borrow, repay and reborrow hereunder either the full amount

of the Revolving Loan or any lesser sum.

 

(b)           The Revolving Loan is a renewal of

and in substitution for, but not in payment of, the revolving line of credit

extended by U.S. Bank to Borrower pursuant to the terms of the Existing

Credit Agreement.  The parties agree

that the outstanding principal balances of the revolving credit loans under the

Existing Credit Agreement shall constitute a Funding under the Revolving Loan

for all purposes of this Agreement and the other Loan Documents.

 

2.2                               Use of Proceeds

 

The initial Funding of

the Revolving Loan shall be used to refinance the “Revolving Loan” and a

portion of the “Acquisition Loan” under the Existing Credit Agreement.

 

9

 

Subsequent

Fundings of the Revolving Loan shall be used by Borrower for general business

purposes.

 

2.3                               Revolving Note

 

The Revolving Loan shall

be evidenced by a promissory note in the form attached hereto as Exhibit A

(the “Revolving Note”).  The Revolving

Note shall be a renewal of and in substitution for, but not in payment of, the

promissory notes that evidence the “Revolving Loan” under the Existing Credit

Agreement (which, upon satisfaction of the conditions set forth in

Article VI, shall be arked “renewed” and retained by U.S. Bank until

the Revolving Loan has been repaid in full and U.S. Bank’s commitment

under the Credit Agreement has terminated).

 

2.4                               Interest Rate

 

Interest on the

outstanding principal balance of the Revolving Loan shall accrue at the

following per annum rates selected by Borrower (i) upon notice to

U.S. Bank (or in the event that no other selection is made by Borrower),

the Applicable Margin plus the Prime Rate (a “Prime Rate Loan”); or

(ii) upon a minimum of two New York banking days prior notice, the Applicable

Margin plus the 1, 2, 3, 6, or 12–month LIBOR rate quoted by

U.S. Bank from Telerate Page 3750 or any successor thereto (which

shall be the LIBOR rate in effect two New York banking days prior to

commencement of the LIBOR loan advance) (a “LIBOR Rate Loan”).  If a LIBOR Rate Loan is prepaid by Borrower,

whether as a result of acceleration, upon default or otherwise, Borrower agrees

to pay all of U.S. Bank’s costs, expenses and Interest Differential (as

determined by U.S. Bank) incurred as a result of such prepayment.  Because of the short–term nature of

this facility, Borrower agrees that the Interest Differential shall not be

discounted to its present value.  Any

prepayment of a LIBOR Rate Loan shall be in an amount equal to the remaining

entire principal balance of such LIBOR Rate Loan.  In the event Borrower does not timely select another interest

rate option at least two New York banking days before a LIBOR Rate Loan

expires, U.S. Bank may at any time thereafter convert the LIBOR Rate Loan

to a Prime Rate Loan, but until such conversion, the funds advanced under the

expired LIBOR Rate Loan shall continue to accrue interest at the same rate as

the interest rate under such expired LIBOR Rate Loan.  U.S. Bank’s internal records of applicable interest rates

shall be determinative in the absence of manifest error.  Each LIBOR rate option selected shall apply

to a minimum principal amount of $1,000,000 with increments of $500,000 in

excess thereof.  For determining payment

dates for LIBOR Rate Loans, the New York banking day shall be the standard

convention.  In the event after the date

of initial funding any governmental authority subjects U.S. Bank to any

new or additional charge, fee, withholding or tax of any kind with respect to

any loans hereunder or changes the method of taxation of such loans or changes

the reserve or deposit requirements applicable to such loans, Borrower shall

pay to U.S. Bank such additional amounts as will compensate U.S. Bank

for such costs or lost income resulting therefrom as reasonably determined by

U.S. Bank.

 

10

 

2.5                               Repayment

 

(a)           Commencing on the first day of the

first month following the initial Funding under the Revolving Loan and on the

first day of each month thereafter, Borrower shall pay U.S. Bank an amount

equal to all accrued interest on the Revolving Loan.

 

(b)           Borrower shall pay U.S. Bank all

Disposition Payments and Equity Payments required under Sections 8.17 and

8.19, respectively for application against the outstanding principal balance of

the Revolving Loan.

 

(c)           Borrower shall pay U.S. Bank all

outstanding principal, accrued interest and other charges with respect to the

Revolving Loan on the last day of the Commitment Period.

 

2.6                               Fundings

 

(a)           U.S. Bank is hereby authorized

by Borrower to make Fundings under the Revolving Loan upon receipt for each

Funding of a written or oral request therefor (including written requests

communicated by facsimile) calculating the Borrowing Base (“Borrowing Notice”)

from the Chief Executive Officer or Chief Financial Officer of Borrower, each

of whom is authorized to request Fundings and direct the disposition of any

such Fundings until written notice by Borrower of the revocation of such

authority is received by U.S. Bank. 

Any such Funding shall be conclusively presumed to have been made to or

for the benefit of Borrower when made in accordance with such a request and

direction for disposition or when such Funding is deposited to the credit of

the account of Borrower with U.S. Bank or is transmitted to any other bank

with directions to credit the same to the account of Borrower at such bank,

regardless of whether persons other than those authorized hereunder to make

requests for Fundings have authority to draw against any such account.

 

(b)           Borrower acknowledges that

U.S. Bank cannot effectively determine whether a particular request for a

Funding is valid, authorized or authentic. 

It is nevertheless important to Borrower that it has the privilege of

making requests for Fundings in accordance with Section 2.6(a)

hereof.  Therefore, to induce

U.S. Bank to lend funds in response to such requests and in consideration

for U.S. Bank’s agreement to receive and consider such requests, Borrower

assumes all risk of the validity, authenticity and authorization of such

requests, whether or not the individual making such requests has authority to

request Fundings and whether or not the aggregate sum owing exceeds the maximum

principal amount referred to above. 

U.S. Bank shall not be responsible under principles of contract,

tort or otherwise for the amount of an unauthorized or invalid Funding; rather,

Borrower agrees to repay any sums with interest as provided herein.

 

2.7                               Revolving Loan Fee

 

Concurrently with the

execution of this Agreement, Borrower shall pay U.S. Bank a nonrefundable

fee for the Revolving Loan in the amount of $62,500.

 

11

 

2.8                               Borrowing Base

 

(a)           The outstanding balance of principal

on the Revolving Loan (together with the outstanding amount of any Letters of

Credit)  shall

at no time exceed an amount equal to the following (“Borrowing Base”):

 

(i)            80 percent of Eligible Accounts

Receivable, plus

 

(ii)           the lesser of

(A) 50 percent of Eligible Inventory or (B) $14,000,000.

 

(b)           Borrower shall submit to

U.S. Bank a Borrowing Base certificate in a form acceptable to

U.S. Bank calculating the Borrowing Base and executed by Borrower

(i) on or before Friday of each week dated as of the Friday of the

previous week; provided that for the first two months of this Agreement, such

Borrowing Base certificates shall be due every other Friday and dated as of the

Friday of the previous week, and (ii) promptly after any request by

U.S. Bank.

 

(c)           If at any time the aggregate

principal amount of the Revolving Loan shall exceed the Borrowing Base,

Borrower shall immediately repay such outstanding portion of the Revolving Loan

in an amount equal to such excess within one Business Day.  Borrower’s failure to do so shall constitute

an Event of Default without any further cure period.

 

ARTICLE III.                                                TERM LOAN A

 

3.1                               Loan Commitment

 

(a)           Subject to and upon the terms and

conditions set forth herein and in reliance upon the representations,

warranties and covenants of Borrower contained herein or made pursuant hereto,

U.S. Bank will lend $6,000,000 (“Term Loan A Commitment Amount”) to

Borrower on a term loan basis (“Term Loan A”).

 

(b)           Term Loan A together with Term

Loan B constitute renewals of and substitutions for, but not payment of,

the “Acquisition Loan” extended by U.S. Bank to Borrower pursuant to the

terms of the Existing Credit Agreement. 

The parties agree that the outstanding principal balance of the

“Acquisition Loan” under the Existing Credit Agreement shall constitute a

Funding under Term Loan A and Term Loan B for all purposes under this

Agreement and the other Loan Documents.

 

3.2                               Use of Proceeds

 

The proceeds of Term

Loan A and Term Loan B, together with a portion of the proceeds of

the Revolving Loan, shall be used solely to renew and refinance the “Acquisition

Loan” under the Credit Agreement.

 

12

 

3.3                               Term Note A

 

Term Loan A shall be

evidenced by a promissory note in the form attached hereto as Exhibit B

(“Term Note A”).  Term Note A

and Term Note B shall be a renewal of and in substitution for, but not in

payment of, the promissory notes that evidence the “Acquisition Loan” under the

Existing Credit Agreement (which, upon satisfaction of the conditions set forth

in Article VI, shall be marked “renewed” and retained by U.S. Bank

until the Term Loan A and Term Loan B have been repaid in full and

U.S. Bank’s commitment under the Credit Agreement has terminated).

 

3.4                               Interest Rates

 

Interest on the

outstanding principal balance of Term Loan A shall accrue at the following

per annum rates selected by Borrower (i) upon notice to U.S. Bank (or

in the event that no other selection is made by Borrower), the Applicable

Margin plus the Prime Rate (a “Prime Rate Loan”); or (ii) upon a minimum

of two New York banking days prior notice, the Applicable Margin plus the 1, 2,

3, 6, or 12–month LIBOR rate quoted by U.S. Bank from Telerate

Page 3750 or any successor thereto (which shall be the LIBOR rate in

effect two New York banking days prior to commencement of the LIBOR loan

advance) (a “LIBOR Rate Loan”).  If a

LIBOR Rate Loan is prepaid by Borrower, whether as a result of acceleration,

upon default or otherwise, Borrower agrees to pay all of U.S. Bank’s

costs, expenses and Interest Differential (as determined by U.S. Bank)

incurred as a result of such prepayment. 

Because of the short–term nature of this facility, Borrower agrees

that the Interest Differential shall not be discounted to its present

value.  Any prepayment of a LIBOR Rate

Loan shall be in an amount equal to the remaining entire principal balance of

such LIBOR Rate Loan.  In the event

Borrower does not timely select another interest rate option at least two New

York banking days before a LIBOR Rate Loan expires, U.S. Bank may at any

time thereafter convert the LIBOR Rate Loan to a Prime Rate Loan, but until

such conversion, the funds advanced under the expired LIBOR Rate Loan shall

continue to accrue interest at the same rate as the interest rate under such

expired LIBOR Rate Loan. 

U.S. Bank’s internal records of applicable interest rates shall be

determinative in the absence of manifest error.  Each LIBOR rate option selected shall apply to a minimum

principal amount of $1,000,000 with increments of $500,000 in excess

thereof.  For determining payment dates

for LIBOR Rate Loans, the New York banking day shall be the standard

convention.  In the event after the date

of initial funding any governmental authority subjects U.S. Bank to any

new or additional charge, fee, withholding or tax of any kind with respect to

any loans hereunder or changes the method of taxation of such loans or changes

the reserve or deposit requirements applicable to such loans, Borrower shall

pay to U.S. Bank such additional amounts as will compensate U.S. Bank

for such costs or lost income resulting therefrom as reasonably determined by

U.S. Bank.

 

13

 

3.5                               Repayment

 

(a)           Borrower shall pay U.S. Bank an

amount equal to all accrued interest on Term Loan A on the first day of

each month until Term Loan A shall have been paid in full, commencing on

June 1, 2002.

 

(b)           Commencing on June 1, 2002,

Borrower shall make principal payments to U.S. Bank on the first day of

each month until Term Loan A is paid in full.  The amount of each such payment during the period from the date

of this Agreement to the Adjustment Date shall be $100,000.  The amount of each such payment thereafter

shall be an amount equal to the outstanding principal balance of Term Loan A

on the Adjustment Date after the adjustment of such principal balance in

accordance with the provisions of Section 3.7 hereof, divided by 60.

 

(c)           Borrower shall pay U.S. Bank all

Disposition Payments and Equity Payments required under Sections 8.17 and

8.19, respectively, for application against the outstanding principal balance

of the Term Loan A in the inverse order of maturity.

 

(d)           Notwithstanding the five-year

amortization schedule set  forth in Section 3.5(b), Borrower

shall pay U.S. Bank all outstanding principal, accrued interest and other charges

with respect to Term Loan A on September 30, 2003.

 

3.6                               Term Loan A Fee

 

Concurrently with the

execution of this Agreement, Borrower shall pay U.S. Bank a nonrefundable

fee for Term Loan A in the amount of $15,000.

 

3.7                               Adjustment of Principal Balance

 

(a)           On the Adjustment Date, the

outstanding principal balance of Term Loan A shall be adjusted to an

amount equal to 75 percent of the appraised value of the fixed assets of

Borrower and its domestic Subsidiaries as established in the Appraisal.  In the event that such amount exceeds the

then outstanding principal balance of Term Loan A, then the outstanding

principal balance of Term Loan A shall be increased by the difference

(“Excess Amount”) and the outstanding principal balance of Term Loan B

shall be reduced by the Excess Amount. 

In the event that such amount is less than the then outstanding

principal balance of Term Loan A, then the outstanding principal balance

of Term Loan A shall be decreased by the difference (“Deficit Amount”) and

the outstanding principal balance of Term Loan B shall be increased by the

Deficit Amount.

 

(b)           Within 10 days of request by

U.S. Bank after the Adjustment Date, Borrower shall execute and deliver to

U.S. Bank notes to renew Term Note A and Term Note B in such

form as requested by U.S. Bank, in order to accurately reflect the

adjusted principal balance of Term Loan A and Term Loan B in

accordance with Section 3.7(a).

 

14

 

ARTICLE IV.                                               TERM LOAN B

 

4.1                               Loan Commitment

 

(a)           Subject to and upon the terms and

conditions set forth herein and in reliance upon the representations,

warranties and covenants of Borrower contained herein or made pursuant hereto,

U.S. Bank will lend $8,632,590 (“Term Loan B Commitment Amount”) to Borrower

on a term loan basis (“Term Loan B”).

 

(b)           Term Loan A together with Term

Loan B constitute renewals of and substitutions for, but not payment of,

the “Acquisition Loan” extended by U.S. Bank to Borrower pursuant to the

terms of the Existing Credit Agreement. 

The parties agree that the outstanding principal balance of the

“Acquisition Loan” under the Existing Credit Agreement shall constitute a

Funding under Term Loan A and Term Loan B for all purposes under this

Agreement and the other Loan Documents.

 

4.2                               Use of Proceeds

 

The proceeds of Term

Loan A and Term Loan B, together with a portion of the proceeds of

the Revolving Loan, shall be used solely to renew and refinance the

“Acquisition Loan” under the Credit Agreement.

 

4.3                               Term Note B

 

Term Loan B shall be

evidenced by a promissory note in the form attached hereto as Exhibit C

(“Term Note B”).  Term Note A

and Term Note B shall be a renewal of and in substitution for, but not in

payment of, the promissory notes that evidence the “Acquisition Loan” under the

Existing Credit Agreement (which, upon satisfaction of the conditions set forth

in Article VI, shall be marked “renewed” and retained by U.S. Bank

until the Term Loan A and Term Loan B have been repaid in full and

U.S. Bank’s commitment under the Credit Agreement has terminated).

 

4.4                               Interest Rates

 

The unpaid principal

balance of Term Loan B will bear interest at an annual rate equal to

3 percent plus the Prime Rate.

 

4.5                               Repayment

 

(a)           Borrower shall pay U.S. Bank an

amount equal to all accrued interest on Term Loan B on the first day of

each month until Term Loan B shall have been paid in full, commencing on

June 1, 2002.

 

(b)           Borrower shall make a principal

payment to U.S. Bank in an amount equal to 50 percent of the Adjusted

EBITDA for Borrower’s fiscal year ending December 31, 2002.  One-half of such principal payment shall be

due on or before February 28, 2003, and shall be

 

15

 

based upon

Borrower’s preliminary fiscal year 2002 financial statements, with the

remainder due on July 30, 2003, based upon Borrower’s fiscal year 2002

audited financial statements.

 

(c)           In the event that U.S. Bank

extends the maturity date of Term Loan B (which extension shall be in

U.S. Bank’s sole and absolute discretion), Borrower shall make a principal

payment to U.S. Bank in an amount equal to 50 percent of the Adjusted

EBITDA for each fiscal year of Borrower. 

One-half of each such principal payment shall be due on or before

February 28 of each year, and shall be based upon Borrower’s preliminary

financial statements for the prior fiscal year, with the remainder due on

July 30, based upon Borrower’s audited financial statements for the prior

fiscal year.  In no event shall this

provision be construed as a commitment of U.S. Bank to extend the maturity

date of Term Loan B.

 

(d)           Borrower shall pay U.S. Bank all

Disposition Payments and Equity Payments required under Sections 8.17 and

8.19, respectively, for application against the outstanding principal balance

of the Term Loan B in the inverse order of maturity.

 

(e)           Borrower shall pay U.S. Bank all

outstanding principal, accrued interest and other charges with respect to Term

Loan B on September 30, 2003.

 

4.6                               Term Loan B Fee

 

(a)           Concurrently with the execution of

this Agreement, Borrower shall pay U.S. Bank a nonrefundable fee for Term

Loan B in the amount of $21,600. 

In addition, on December 1, 2002, Borrower shall pay U.S. Bank

a nonrefundable fee for Term Loan B in an amount of equal to

..25 percent of the outstanding principal balance of Term Loan B on

such datein the event that the Funded Debt Ratio is greater than 3.5:1.0 as

of September 30, 2002, for the four trailing fiscal quarters then ended.

 

(b)           Commencing March 1, 2003, and on

first day of each June, September, December and March thereafter until Term

Loan B is paid in full, Borrower shall pay U.S. Bank a nonrefundable

fee for Term Loan B in an amount equal to .125 percent of the

outstanding principal balance of Term Loan B as of each such payment date

in the event that the Funded Debt Ratio is greater than 3.5:1.0 as of the last

day of the fiscal quarter immediately preceding the applicable payment date for

the four trailing fiscal quarters then ended.

 

ARTICLE V                                                      LETTERS OF CREDIT

 

5.1                               Commitment

 

Subject to and upon the

terms and conditions set forth herein and in reliance upon the representations,

warranties and covenants of Borrower contained herein or made pursuant hereto,

U.S. Bank will issue standby and commercial letters of credit (the “Letters

of Credit”) for the benefit of Borrower and the Subsidiaries in forms

acceptable to U.S. Bank from time to time and for the period ending on the

last day of the Commitment Period.  The

expiration

 

16

 

date of any Letter

of Credit shall not extend beyond the Commitment Period.  The maximum aggregate amount of outstanding

Letters of Credit shall not exceed, at any one time, $5,000,000.  The maximum aggregate amount of outstanding

Letters of Credit plus the aggregate outstanding amount of principal and

interest on the Revolving Loan shall not exceed, at any one time, the Revolving

Loan Commitment Amount.  The parties

agree that the outstanding letters of credit under the Existing Credit

Agreement shall constitute Letters of Credit for all purposes under this

Agreement and the other Loan Documents.

 

5.2                               Letter of Credit Fees

 

Borrower shall pay to

U.S. Bank a fee for the issuance of each Letter of Credit in an amount

equal to U.S. Bank’s standard fee plus U.S. Bank’s customary fees and

handling charges.  Such fees may be paid

to U.S. Bank by U.S. Bank’s making a Funding under the Revolving

Loan.

 

5.3                               Draws on Letters of Credit

Any draws on Letters of

Credit issued by U.S. Bank pursuant to the terms of this Agreement shall

be paid by Borrower immediately upon receipt of notice from U.S. Bank of

such draw.  So long as Borrower meets

the conditions to Fundings under the Loans, draws on Letters of Credit may be

paid from Fundings under the Revolving Loan. 

In the event Borrower fails to make such immediate repayment,

U.S. Bank shall be authorized to consider any such draws as Fundings under

the Revolving Loan.  In the event that

there exists a Default or Event of Default under this Agreement on the date of

any such draw, such draw will nevertheless constitute a Funding on the

Revolving Loan and shall not constitute a waiver of any of U.S. Bank’s

rights hereunder or under any of the other Loan Documents.  In the event that any Letters of Credit are

outstanding upon the expiration of the Commitment Period for the Revolving

Loan, Borrower shall, upon U.S. Bank’s request, deposit with

U.S. Bank in a special demand deposit account set up by Borrower, an

amount of cash necessary to cover all outstanding Letters of Credit.  Borrower hereby grants U.S. Bank a

security interest in any such demand deposit account and gives U.S. Bank

the authority to charge against such account upon a draw on outstanding Letters

of Credit in an amount equal to the amount paid by U.S. Bank to the beneficiaries

of such Letters of Credit.  In the event

Borrower does not establish such an account, or in the event the amount of

funds in such account are insufficient to satisfy the obligations of

U.S. Bank under all outstanding Letters of Credit, then all payments made

by U.S. Bank under such Letters of Credit shall automatically constitute

Fundings under the Revolving Loan, notwithstanding the fact that the Commitment

Period for the Revolving Loan has expired. 

U.S. Bank shall maintain possession of the Revolving Note until all

Letters of Credit have either expired, been canceled or been paid by

U.S. Bank and U.S. Bank has been reimbursed in full.

 

17

 

ARTICLE VI.                                               GENERAL PROVISIONS APPLICABLE TO THE

LOANS

 

6.1                               Manner of Payment

 

All sums payable to

U.S. Bank pursuant to this Agreement shall be paid directly to

U.S. Bank in immediately available United States funds.  Whenever any payment to be made hereunder or

on any of the Notes becomes due and payable on a day that is not a Business

Day, such payment may be made on the next succeeding Business Day and such

extension of time shall in such case be included in computing interest on such

payment.

 

6.2                               Statements

 

U.S. Bank shall send

Borrower statements of all amounts due hereunder; the statements shall be

considered correct and conclusively binding, absent manifest error, on Borrower

unless Borrower notifies U.S. Bank to the contrary within 30 days of

receipt of any statement that Borrower claims to be incorrect.  Borrower agrees that accounting entries made

by U.S. Bank with respect to Borrower’s loan accounts shall constitute

evidence of all Fundings made under and payments made on any of the Loans.  Without limiting the methods by which

U.S. Bank may otherwise be entitled by Applicable Law to make demand for

payment of the Loans upon Borrower, Borrower agrees that any statement, invoice

or payment notice from U.S. Bank to Borrower with respect to any principal

or interest obligation of Borrower to U.S. Bank shall be deemed to be a

demand for payment in accordance with the terms of such statement, invoice or

payment notice.  Under no circumstances

shall a demand by U.S. Bank for partial payment of principal or interest or

both be construed as a waiver by U.S. Bank of its right thereafter to

demand and receive payment (in part or in full) of any remaining principal or

interest obligation.

 

6.3                               Book Entry Loan Account

 

U.S. Bank shall

establish a book entry loan account for each of the Loans in which

U.S. Bank will make debit entries of all Fundings pursuant to the terms of

this Agreement.  U.S. Bank will

also record in the applicable loan account, in accordance with customary

banking practices, all interest and other charges, expenses and other items

properly chargeable to Borrower, if any, together with all payments made by

Borrower on account of the Indebtedness evidenced by Borrower’s respective loan

accounts and all other sums credited to the respective loan accounts.  The debit balance of Borrower’s respective

loan accounts shall reflect the amount of Borrower’s Indebtedness to

U.S. Bank from time to time by reason of advances, charges, payments or

credits.

 

6.4                               Lockbox; Bank Control Account

 

(a)           So long as any amounts remain

outstanding under any of the Loans, there shall be established for Borrower a

lockbox into which all payments made to Borrower by any Person shall be

deposited.

 

18

 

(b)           So long as any amounts remain

outstanding under any of the Loans, there shall be established for Borrower a

bank control account at U.S. Bank into which all funds obtained by

Borrower from the collection of accounts receivable, from the sale of inventory

or services or otherwise during the terms of the Loans (including all deposits

in the lockbox referred to in Section 6.4(a)) shall be deposited.  U.S. Bank and Borrower hereby agree

that U.S. Bank may credit the bank control account in order to make any

payments under the Loans that Borrower is required to make pursuant to the

terms of this Agreement and in order to reduce the outstanding principal

balance of the Revolving Loan.

 

6.5                               Computations of Interest

 

All computations of

interest shall be based on a 360–day year for the actual number of days

elapsed.

 

6.6                               Default Interest

 

Upon the occurrence and

during the continuance of any Event of Default, U.S. Bank may, at its

option, raise the interest rate charged on the Loans to a rate of up to the

then applicable rate plus 4 percent per annum from the date of the

occurrence of the Event of Default until the Event of Default is cured or

waived by U.S. Bank or, absent cure or waiver, until the Loans are repaid

in full.

 

6.7                               Maximum Interest Rate

 

Notwithstanding any

provision contained herein or in the Notes, the total liability of Borrower for

payment of interest pursuant hereto, including late charges, shall not exceed

the maximum amount of interest permitted by Applicable Law to be charged,

collected or received from Borrower; and if any payments by Borrower include

interest in excess of that maximum amount, U.S. Bank shall apply the

excess first to reduce the unpaid balance of the Loans, then to reduce the

balance of any other Indebtedness of Borrower to U.S. Bank.  If there is no such Indebtedness, the excess

shall be returned to Borrower.

 

6.8                               Late Charge

 

If any payment of

principal or interest required under any of the Loans is 15 days or more

past due, Borrower will be charged a late charge of 5 percent of the

delinquent payment or $5, whichever is greater, for each such late payment.  The 15–day period provided for herein

shall not be construed as a waiver of any Default or Event of Default resulting

from any late payment under any of the Loans.

 

6.9                               Prepayments

 

Borrower shall have the

right, at any time, to prepay the whole or any part of any Prime Rate Loan

without prepayment charges concurrently with any regular monthly payment.  Borrower may not prepay all or any portion

of any LIBOR Rate Loan whether voluntarily, by acceleration or otherwise unless

concurrently with such prepayment Borrower

 

19

 

pays

U.S. Bank all amounts due in accordance with Section 2.4 or

Section 3.4, as applicable.  All

prepayments shall be applied first to accrued interest on the Loans and then to

the outstanding principal balance of the Loans in the inverse order of

maturity.

 

6.10                        Extensions, Renewals and Modifications

 

Any extensions, renewals,

and modifications of the Loans shall be governed by the terms and conditions of

this Agreement and the other Loan Documents unless otherwise agreed to in

writing by U.S. Bank and Borrower.

 

6.11                        Increased Costs

 

If, as a result of any

law, rule, regulation, treaty or directive, or any change therein or in the

interpretation or administration thereof, or compliance by U.S. Bank with

any request or directive (whether or not having the force of law) from any

court, central bank, governmental authority, agency or instrumentality, or

comparable agency:

 

(a)           Any tax, duty or other charge to any

of the Loans is imposed thereunder, modified or deemed applicable, or the basis

of taxation of payments to U.S. Bank of interest or principal of the Loans

or of the commitment fees (other than taxes imposed on the overall net income

of U.S. Bank by the jurisdiction in which has its principal office) is

changed;

 

(b)           Any reserve, special deposit, special

assessment or similar requirement against assets of, deposits with, or for the

account of, or credit extended by, U.S. Bank is imposed, modified or

deemed applicable;

 

(c)           Any increase in the amount of capital

required or expected to be maintained by U.S. Bank or any person or entity

controlling U.S. Bank is imposed, modified or deemed applicable; or

 

(d)           Any other condition affecting any of

the Loans is imposed on U.S. Bank or the relevant funding markets;

 

and U.S. Bank

determines that, by reason thereof, the cost to U.S. Bank of making or

maintaining the Loans is increased, or the amount of any sum receivable by

U.S. Bank hereunder or under any of the Notes is reduced;

 

then,

Borrower shall pay to U.S. Bank upon demand such additional amount or

amounts as will compensate U.S. Bank (or the controlling person or entity

in the instance of (c) above) for such additional costs or reduction (provided

that U.S. Bank has not been compensated for such additional cost or

reduction in the calculation of the rate applicable to LIBOR Rate Loans).  Determinations by U.S. Bank for

purposes of this Section 6.11 of the additional amounts required to compensate

U.S. Bank shall be conclusive in the absence of manifest error.  In determining such amounts, U.S. Bank

may use any reasonable averaging, attribution and allocation methods.

 

20

 

6.12                        LIBOR Rate Loan Provisions

 

(a)           Borrower may obtain LIBOR rate quotes

from U.S. Bank between 8 a.m. and 12 noon (Seattle, Washington

time) on any New York banking day.

 

(b)           There shall not be outstanding more

than three LIBOR Rate Loans under the Revolving Loan and three LIBOR

Rate Loans under Term Loan A.

 

(c)           Notwithstanding any other term of

this Agreement, Borrower may not select the LIBOR rate if an Event of Default

hereunder has occurred and is continuing.

 

(d)           Nothing contained in this Agreement,

including without limitation the determination of any monthly term for a LIBOR

Rate Loan or U.S. Bank’s quotation of any LIBOR rate, shall be construed

to prejudice U.S. Bank’s right to decline to make any requested Funding

provided that U.S. Bank acts in accordance with the provisions of this

Agreement.

 

6.13                        Deposits Unavailable or Interest Rate

Unascertainable or Inadequate; Impracticability

 

If U.S. Bank

reasonably determines (which determination shall be conclusive and binding on

the parties hereto) that:

 

(a)           Deposits of the necessary amount for

the relevant monthly term for any LIBOR Rate Loan are not available to

U.S. Bank in the relevant markets or that, by reason of circumstances

affecting such market, adequate and reasonable means do not exist for

ascertaining the LIBOR rate;

 

(b)           The LIBOR rate will not adequately

and fairly reflect the cost to U.S. Bank of making or funding the LIBOR

Rate Loan for a relevant monthly term; or

 

(c)           The making or funding of LIBOR Rate

Loans has become impracticable as a result of any event occurring after the

date of this Agreement which, in the opinion of U.S. Bank, materially and

adversely affects such LIBOR Rate Loan or U.S. Bank’s commitment to make

such LIBOR Rate Loan or the relevant market;

 

U.S. Bank shall

promptly give notice of such determination to Borrower, and (i) any notice

of a new LIBOR Rate Loan previously given by Borrower and not yet borrowed or

converted shall be deemed to be a notice to make a Prime Rate Loan, and

(ii) Borrower shall be obligated to either prepay in full any outstanding

LIBOR Rate Loan, on the expiration date of the current LIBOR Rate Loan with

respect thereto or convert any such LIBOR Rate Loan to a Prime Rate Loan on

such expiration date.

 

21

 

6.14                        Changes in Law Rendering LIBOR Rate

Loan Unlawful

 

If at any time due to the

adoption of any law, rule, regulation, treaty, or directive, or any change

therein or in the interpretation or administration thereof by any court,

central bank, governmental authority, agency, or instrumentality, or comparable

agency charged with the interpretation or administration thereof, or for any

other reason arising subsequent to the date of this Agreement, it shall become

unlawful or impossible for U.S. Bank to make or fund any LIBOR Rate Loan,

the obligation of U.S. Bank to provide such LIBOR Rate Loan shall, upon

the happening of such event, forthwith be suspended for the duration of such

illegality or impossibility.  If any

such event shall make it unlawful or impossible for U.S. Bank to continue

any LIBOR Rate Loan previously made by it hereunder, U.S. Bank shall, upon

the happening of such event, notify Borrower thereof in writing, and Borrower

shall, at the time notified by U.S. Bank, either convert each such

unlawful LIBOR Rate Loan to a Prime Rate Loan or repay such LIBOR Rate Loan in

full, together with accrued interest thereon, subject to the provisions of

Section 2.4 or Section 3.4, as applicable.

 

6.15                        Discretion of U.S. Bank as to

Manner of Funding

 

Notwithstanding any

provision of this Agreement to the contrary, U.S. Bank shall be entitled

to fund and maintain its funding of all or any part of the Loans in any manner

it elects; it being understood, however, that for purposes of this Agreement,

all determinations hereunder shall be made as if U.S. Bank had actually

funded and maintained each LIBOR Rate Loan during the monthly term for such

LIBOR Rate Loan through the purchase of deposits having a term corresponding to

such monthly term and bearing an interest rate equal to the LIBOR rate for such

monthly term (whether or not U.S. Bank shall have granted any

participations in such LIBOR Rate Loan).

 

6.16                        Collateral; Existing Security

Documents

 

(a)           As security for repayment of all of

the Loans and all other Indebtedness of Borrower to U.S. Bank,

(i) Borrower and each Guarantor shall grant to U.S. Bank a first and

exclusive Lien in substantially all of its personal property, tangible and

intangible, including without limitation all accounts, general intangibles,

chattel paper, documents, inventory, equipment, leasehold interests,

trademarks, patents, copyrights, software, trade names, instruments, investment

property now owned or hereafter acquired, and proceeds thereof, and

(ii) Borrower and each Guarantor shall grant to U.S. Bank, a first

and exclusive lien against all of the capital stock of their respective

domestic Subsidiaries (now and hereafter formed) and 65 percent of the

capital stock of their respective foreign Subsidiaries (now and hereafter

formed).

 

(b)           The parties acknowledge and agree

that all security agreements, pledge agreements, financing statements, and

other Loan Documents executed in connection with the Existing Credit Agreement,

creating, evidencing, or perfecting U.S. Bank’s security interests in and

liens against the Collateral, shall remain in full force and effect and shall

secure all of Borrower’s Indebtedness to U.S. Bank, as such Indebtedness

may be amended or

 

22

 

restated in this

Agreement.  Borrower agrees to execute,

and cause each Guarantor to execute, such amendments to any such Loan

Documents, or such amended and restated security agreements or pledge

agreements, as are deemed necessary by U.S. Bank to reflect the terms of

this Agreement.

 

ARTICLE VII.                                           CONDITIONS PRECEDENT FOR FUNDINGS UNDER

THE LOANS

 

7.1                               Conditions Precedent for Initial

Funding

 

U.S. Bank shall not

be required to make the initial Funding under any of the Loans unless or until

the following conditions have been fulfilled to the satisfaction of

U.S. Bank:

 

(a)           U.S. Bank shall have received

this Agreement, the Revolving Note, Term Note A, and Term Note B,

duly executed and delivered by the respective parties thereto.

 

(b)           No Default or Event of Default

hereunder shall exist, and after having given effect to the requested Funding,

no Default or Event of Default shall exist.

 

(c)           All representations and warranties of

Borrower contained herein or otherwise made in writing in connection herewith

shall be true and correct in all material respects with the same effect as

though such representations and warranties had been made on and as of the date

of the initial Funding.

 

(d)           All corporate proceedings of

Borrower, Guarantors and each other Subsidiary shall be satisfactory in form

and substance to U.S. Bank, and U.S. Bank shall have received all

information and copies of all documents, including records of all corporate

proceedings, that U.S. Bank has requested in connection therewith, such

documents where appropriate to be certified by proper corporate authorities or

Governmental Bodies.  Borrower shall

provide U.S. Bank with the following documents prior to or upon the

execution of this Agreement:

 

(i)            Copies of the

articles or certificate of incorporation of Borrower, Guarantors, and each

other Subsidiary, together with all amendments thereto, certified by Borrower

to be true and complete;

 

(ii)           A certificate of

authority/existence or good standing (as the case may be) for Borrower,

Guarantors, and each other Subsidiary in their respective states of

incorporation and, in the case of Borrower and Guarantors, in the state of

Washington, dated within 30 days of the date of the execution of this

Agreement; and

 

(iii)          A certified

resolution of the directors and incumbency certificate for Borrower and each

Guarantor, in the form attached hereto as Exhibit D.

 

(e)           U.S. Bank shall have received

such evidence deemed necessary by U.S. Bank that U.S. Bank’s security

interests in the Collateral constitute first priority and exclusive security

interests, except as otherwise provided herein.

 

23

 

7.2                               Conditions Precedent to Each

Subsequent Funding

 

The obligation of

U.S. Bank to make any Funding subsequent to the initial Funding hereunder

is subject to the fulfillment, to the satisfaction of U.S. Bank, of the

following:

 

(a)           The conditions set forth in

Section 7.1 hereof shall have been previously satisfied, and

U.S. Bank shall have received evidence satisfactory to U.S. Bank of

satisfaction thereof;

 

(b)           U.S. Bank shall have received a

Borrowing Notice for each requested Funding under the applicable Loan;

 

(c)           There shall be executed and delivered

to U.S. Bank such further instruments, agreements and documents, as may be

reasonably necessary or proper in the opinion of U.S. Bank to confirm the

obligations of Borrower to U.S. Bank hereunder, the grant of security

therefor and the proper use of the proceeds of all Fundings;

 

(d)           The representations and warranties of

Borrower in Article X hereof shall be true on the date of each Funding

with the same force and effect as if made on and as of that date;

 

(e)           No Default or Event of Default shall

exist, and after having given effect to the requested Funding, no Default or

Event of Default shall exist; and

 

(f)            To the extent not previously

delivered, all other documents, agreements and instruments from or with respect

to Borrower or any other Person that may be called for hereunder shall be duly

executed and delivered to U.S. Bank, including, but not limited to, all

documents, agreements and instruments deemed necessary by U.S. Bank to

perfect its security interest in Collateral acquired after the date of this

Agreement.  For the purposes of this

Agreement, the waiver of delivery of any document, agreement or instrument from

or with respect to Borrower or any other Person does not constitute a

continuing waiver with respect to the obligation to fulfill the conditions

precedent to each Funding hereunder.

 

ARTICLE VIII.                                       AFFIRMATIVE COVENANTS

 

Borrower hereby covenants

and agrees that so long as this Agreement is in effect, and until the Loans,

together with interest thereon, and all other obligations incurred hereunder

are paid or satisfied in full, Borrower shall:

 

8.1                               Financial Data

 

Keep its books of account

in accordance with generally accepted accounting principles, consistently

applied, and furnish to U.S. Bank:

 

(a)           As soon as practicable and in any

event within 30 days after the close of each calendar month, the following

unaudited financial statements of Borrower on a consolidated

 

24

 

basis, for each

such calendar month, all in reasonable detail and certified by Borrower to be

true and correct:  balance sheet and

statement of income.

 

(b)           As soon as practicable and in any

event within 60 days after the close of each fiscal quarter of Borrower,

the following unaudited financial statements of Borrower on a consolidated

basis, for each such fiscal quarter, all in reasonable detail and certified by

Borrower to be true and correct: 

balance sheet, statement of income and statement of cash flows.  There shall be included in such quarterly

financial report (i) a calculation of the financial covenants provided for

in Article IX hereof and (ii) a copy of Borrower’s 10 Q report

for such fiscal quarter.

 

(c)           As soon as practicable and in any

event within 90 days after the close of each fiscal year of Borrower,

(i) Borrower’s 10 K report for such fiscal year and (ii) the

following financial statements of Borrower, setting forth the corresponding

figures for the previous fiscal year in comparative form where appropriate, all

in reasonable detail and audited (without any qualification or exception deemed

material by U.S. Bank) by Borrower’s current independent certified public

accountant or such other independent certified public accountants selected by

Borrower and satisfactory to U.S. Bank: 

balance sheet, statement of income and statement of cash flows.  Borrower shall provide U.S. Bank with a

copy of its independent certified public accountants’ management letter or

other similar report or correspondence to Borrower.

 

(d)           As soon as practicable and in any

event within 60 days after the close of each fiscal quarter of Borrower,

certificates signed by Borrower, stating that during such period no Default or

Event of Default existed or if any such Default or Event of Default existed,

specifying the nature thereof, the period of existence thereof and what action

Borrower proposes to take or has taken with respect thereto, and that during

such period Borrower was in compliance with all of the financial covenants set

forth in Article IX hereof; and promptly upon the occurrence of any

Default or Event of Default, a certificate signed by Borrower, specifying the

nature thereof, the period of existence thereof and what action Borrower proposes

to take or has taken with respect thereto.

 

(e)           As soon as practicable and in any

event within 30 days of the end of each calendar month, accounts

receivable and accounts payable agings for each such month in a form and in

such detail as is acceptable to U.S. Bank.

 

(f)            Upon request by U.S. Bank,

copies of all reports relative to the operations of Borrower and its Affiliates

filed with any Governmental Body.

 

(g)           As soon as practicable and in any

event within 90 days after the beginning of each fiscal year of Borrower,

a summary projecting all Capital Expenditures to be made or committed to during

such fiscal year with respect to Borrower and the Subsidiaries.

 

25

 

(h)           With reasonable promptness, such other

information regarding the business, operations and financial condition of

Borrower and the Subsidiaries as U.S. Bank may from time to time

reasonably request.

 

8.2                               Licenses and Permits

 

Maintain all Governmental

Approvals and all related or other material agreements necessary for Borrower

or the Subsidiaries to operate their businesses, as they now exist or as they

may be modified or expanded.  Borrower

will at all times comply with all Applicable Laws relating to the operations,

facilities or activities of Borrower or the Subsidiaries.

 

8.3                               Maintenance of Properties

 

Keep Borrower’s and the

Subsidiaries’ properties in good repair and in good working order and

condition, in a manner consistent with past practices and comparable to

industry standards; from time to time make all appropriate and proper repairs,

renewals, replacements, additions and improvements thereto; and keep all

equipment that may now or in the future be subject to compliance with any

Applicable Laws in full compliance with such Applicable Laws.

 

8.4                               Payment of Charges

 

Duly pay and discharge

all material (a) taxes, assessments, levies and any other charges of

Governmental Bodies imposed on or against Borrower or any Subsidiary or its

property or assets, or upon any property leased by Borrower or any Subsidiary,

prior to the date on which penalties attached thereto, unless and to the extent

only that such taxes, assessments, levies and any other charges of Governmental

Bodies, after written notice thereof having been given to U.S. Bank, are

being contested in good faith and by appropriate proceedings; (b) claims

allowed by Applicable Laws, whether for labor, materials, rentals or anything

else, which could, if unpaid, become a lien or charge upon Borrower’s or any

Subsidiary’s property or assets or the outstanding capital stock of Borrower or

any Subsidiary or adversely affect the facilities or operations of Borrower or

any Subsidiary (unless and to the extent only that the validity thereof is

being contested in good faith and by appropriate proceedings after written

notice thereof has been given to U.S. Bank); (c) trade bills in

accordance with the terms thereof or generally prevailing industry standards;

and (d) other Indebtedness heretofore or hereafter incurred or assumed by

Borrower, unless such Indebtedness be renewed or extended.  In the event any charge is being contested

by Borrower or any Subsidiary as allowed above, Borrower shall establish

adequate reserves against possible liability therefor.

 

8.5                               Insurance

 

(a)           Maintain insurance upon Borrower’s

and the Subsidiaries’ properties and business insuring against such risks as

U.S. Bank shall reasonably determine from time to time.  Borrower shall cause each insurance policy

issued in connection therewith to provide and shall cause the insurer issuing

such policy to certify to U.S. Bank that (i) if such

 

26

 

insurance is

proposed to be canceled or materially changed for any reason whatsoever, such

insurer will promptly notify U.S. Bank, and such cancellation or change

shall not be effective as to U.S. Bank for 30 days after receipt by

U.S. Bank of such notice, unless the effect of the change is to extend or

increase coverage under the policy; (ii) U.S. Bank will have the

right at its election to remedy any default in the payment of premiums within

30 days of notice from the insurer of the default; and (iii) loss

payments from casualty/property loss insurance in excess of $100,000 in each

instance will be payable jointly to Borrower and U.S. Bank as secured

party or otherwise as its interest may appear.

 

(b)           From time to time upon request by

U.S. Bank, promptly furnish or cause to be furnished to U.S. Bank

evidence, in form and substance satisfactory to U.S. Bank, of the

maintenance of all insurance, indemnities or bonds required by this

Section 8.5 or by any license, lease or other agreement to be maintained,

including, but not limited to, such originals or copies as U.S. Bank may

request of policies, certificates of insurance, riders, assignments and

endorsements relating to the insurance and proof of premium payments.

 

8.6                               Maintenance of Records

 

Keep at all times books

of account and other records in which full, true and correct entries will be

made of all dealings or transactions in relation to the business and affairs of

Borrower and the Subsidiaries.

 

8.7                               Inspection

 

Allow any representative

of U.S. Bank to visit and inspect any of the properties of Borrower and

the Subsidiaries, to examine the books of account and other records and files of

Borrower and the Subsidiaries, to make copies thereof, and to discuss the

affairs, business, finances and accounts of Borrower and the Subsidiaries with

their officers, employees and accountants, all at such reasonable times and as

often as U.S. Bank may desire. 

This right of inspection shall specifically include U.S. Bank’s

collateral and financial examinations.

 

8.8                               Hazardous Substances

 

(a)           Borrower hereby covenants and agrees

that so long as any Indebtedness of Borrower to U.S. Bank is outstanding:

 

(i)            Borrower will not

permit its property or that of the Subsidiaries or any portion thereof to be a

site for the storage, use, generation, manufacture, disposal or transportation

of Hazardous Materials in violation of Hazardous Materials Laws;

 

(ii)           Borrower will not

permit any Hazardous Materials to be disposed of off its property or that of

the Subsidiaries other than in properly licensed disposal sites;

 

(iii)          Borrower, at

Borrower’s sole cost and expense, will keep and maintain its property and that

of the Subsidiaries and each portion thereof in compliance with

 

27

 

and shall not cause or

permit its property or any portion thereof to be in violation of any Hazardous

Materials Laws; and

 

(iv)          Borrower will

immediately advise U.S. Bank in writing of any Hazardous Material Claim.

 

(b)           Borrower agrees to indemnify

U.S. Bank and hold U.S. Bank harmless from and against any and all

claims, demands, damages, losses, liens, liabilities, penalties, fines,

lawsuits and other proceedings and costs and expenses (including attorneys’

fees), arising directly or indirectly from or out of or in any way connected

with (i) the accuracy of the representations contained in

Section 10.18 hereof; (ii) any activities on the property of Borrower

or any Subsidiary during their ownership, possession or control thereof which

directly or indirectly results in such property or any other property becoming

contaminated with Hazardous Materials; (iii) the discovery of Hazardous

Materials on the property of Borrower or any Subsidiary; (iv) the cleanup

of Hazardous Materials from the property of Borrower or any Subsidiary; and

(v) the discovery of Hazardous Materials or the cleanup of Hazardous

Materials from adjacent or other property that has become contaminated as a

result of any activity on the property of Borrower or any Subsidiary.  As between Borrower and U.S. Bank,

Borrower acknowledges that it will be solely responsible for all costs and expenses

relating to the cleanup of Hazardous Materials from its property, the property

of the Subsidiaries, or from any other properties that become contaminated with

Hazardous Materials as a result of activities on or the contamination of the

property of Borrower or any Subsidiary.

 

(c)           Borrower’s obligations under this

Section 8.8 are unconditional and shall not be limited by any nonrecourse

or other limitations of liability provided for in the Loan Documents.  The representations, warranties and covenants

of Borrower set forth in this Section 8.8 and Section 10.18 hereof

(including, but not limited to, the indemnity provided for in

Section 8.8(b) hereof) shall survive the closing and repayment of the

Loans to U.S. Bank; and, to the extent permitted by Applicable Laws

and Hazardous Materials Laws, shall survive the transfer of its property by

foreclosure proceedings (whether judicial or nonjudicial), deed in lieu of

foreclosure or otherwise.  Borrower

acknowledges and agrees that its covenants and obligations hereunder are

separate and distinct from its obligations under the Loans and the Loan

Documents.

 

8.9                               Corporate Existence

 

Maintain and preserve the

corporate existence of Borrower and the Subsidiaries.

 

8.10                        Notice of Disputes and Other Matters

 

Promptly give written

notice to U.S. Bank of:

 

(a)           Any citation, order to show cause or

other legal process or order that could have a material adverse effect on

Borrower, directing Borrower to become a party to or to appear at any

proceeding or hearing by or before any Governmental Body that has granted to

 

28

 

Borrower any

Governmental Approval, and include with such notice a copy of any such

citation, order to show cause, or other legal process or order;

 

(b)           Any (i) refusal, denial,

threatened denial or failure by any Governmental Body to grant, issue, renew or

extend any material Governmental Approval; (ii) proposed or actual

revocation, termination or modification (whether favorable or adverse) of any

Governmental Approval by any Governmental Body; (iii) dispute or other

action with regard to any Governmental Approval by any Governmental Body;

(iv) notice from any Governmental Body of the imposition of any material

fines or penalties or forfeitures; or (v) threats or notice with respect to

any of the foregoing or with respect to any proceeding or hearing that might

result in any of the foregoing;

 

(c)           Any dispute concerning or any

threatened nonrenewal or modification of any material lease for real or

personal property to which Borrower is a party; or

 

(d)           Any actions, proceedings or claims of

which Borrower may have notice that may be commenced or asserted against

Borrower or any Subsidiary in which the amount involved is $100,000 or more and

is not fully covered by insurance or which, if not solely a claim for monetary

damages, could, if adversely determined, have a material adverse effect on

Borrower.

 

8.11                        Exchange of Note

 

Upon receipt of a written

notice of loss, theft, destruction or mutilation of a Note, and upon

surrendering such Note for cancellation if mutilated, execute and deliver a new

Note or a Note of like tenor in lieu of such lost, stolen, destroyed or

mutilated Note.  Any Note issued

pursuant to this Section 8.11 shall be dated so that neither gain nor loss

of interest shall result therefrom.

 

8.12                        Maintenance of Liens

 

At all times maintain the

liens and security interests provided under or pursuant to this Agreement as

valid and perfected first liens and security interests on the property and

assets intended to be covered thereby. 

Except as contemplated under Section 9.5, hereof Borrower shall

take all action requested by U.S. Bank necessary to assure that

U.S. Bank has valid and exclusive liens and security interests in all

Collateral.

 

8.13                        Other Agreements

 

Comply with all covenants

and agreements set forth in or required pursuant to any of the other Loan

Documents.

 

8.14                        After-Acquired Collateral

 

(a)           Within ten days from the date of this

Agreement and on or before the 30th day of June of each year during

the term of the Loans, Borrower shall deliver to U.S. Bank an

 

29

 

updated schedule

of all patents, trademarks, trade names, copyrights, and similar intellectual

property of Borrower and each Guarantor (which schedule shall include all applications

for the foregoing), for use by U.S. Bank in perfecting its security

interest in such Collateral.

 

(b)           Without the need for any request by

U.S. Bank, execute and deliver to U.S. Bank appropriate instruments

in order to effectuate the proper granting and perfection of a first priority

security interest in or assignment of all property to U.S. Bank, whether

personal, real or mixed, hereafter acquired by Borrower or any Guarantor,

concurrently with the acquisition thereof.

 

8.15                        Further Assurances

 

(a)           Within ten days of request by

U.S. Bank, deliver to U.S. Bank the following:

 

(i)            A security agreement in form and

substance acceptable to U.S. Bank, duly executed and delivered by Borrower

and each Guarantor, granting to U.S. Bank a first priority and exclusive

security interest in all of the personal property of Borrower or Guarantor (as

applicable), whether tangible or intangible, now owned or hereafter acquired

(“Security Agreements”), ogether with landlord waivers executed and delivered

by Borrower’s and Guarantors’ landlords in a form reasonably designated by

U.S. Bank.

 

(ii)           A pledge agreement in form and

substance acceptable to U.S. Bank, (“Pledge Agreement”), duly executed and

delivered by Borrower and any Subsidiary that holds an equity interest in any

other Subsidiary, pledging to U.S. Bank a first priority Lien against all

of the outstanding capital stock and other equity interests of all domestic

Subsidiaries and 65 percent of all of the outstanding capital stock and

other equity interests of all foreign Subsidiaries, together with an assignment

separate from certificate for each share certificate pledged, the originals of

all share certificates representing the stock pledged thereunder and such other

instruments, documents, opinion letters and other documentation reasonably

requested by U.S. Bank.

 

(iii)          Such financing statements and other

documents deemed necessary by U.S. Bank to perfect the security interest

granted to U.S. Bank, together with an Article 9 certificate in a

form designated by U.S. Bank, all duly executed and delivered by Borrower

and Guarantors.

 

(iv)          Such assignments of trademarks, trade

names, service marks, patents and applications therefor as deemed necessary by

U.S. Bank in order to perfect a security interest in such Collateral, all

duly executed and delivered by Borrower and Guarantors.

 

(v)           A guaranty in form and substance

acceptable to U.S. Bank, duly executed and delivered by each Guarantor

(“Guaranties”).

 

(vi)          In connection with the execution and

delivery of this Agreement and the related documents, an opinion addressed to

U.S. Bank in form and substance acceptable to U.S. Bank, from counsel

of Borrower, dated as of the date of this Agreement.

 

30

 

(b)           Within ten days of request by

U.S. Bank, duly execute and deliver or cause to be duly executed and

delivered to U.S. Bank such further instruments, agreements and documents

and do or cause to be done such further acts as may be necessary or proper in

the opinion of U.S. Bank to carry out more effectively the provisions and

purpose of this Agreement and the other Loan Documents, including, without

limitation lockbox agreements and sweep account agreements.

 

8.16                        Maintenance of Bank Accounts

 

As security for repayment

of the Loans, maintain its principal depository accounts with U.S. Bank

and effectuate the transfer of such accounts within a reasonable period of time

after execution of this Agreement. 

Borrower hereby grants to U.S. Bank a security interest in all such

accounts in order to secure the obligations of Borrower hereunder.

 

8.17                        Disposition of Assets

 

Pay to U.S. Bank for

application against the Loans the proceeds of any sale or other dispositions of

any asset of Borrower or any Guarantor (excluding sales of inventory in the

ordinary course of business and the sale of any assets for less than $5,000)

(“Disposition Payment”).  All

Disposition Payments shall be due concurrently with the receipt by Borrower or

any Guarantor of the proceeds of the disposition of the asset giving rise to

the requirement for the Disposition Payment. 

Disposition Payments shall be applied to the outstanding principal

balance of the Loans, in the inverse order of maturity, as follows:  (a) first, to reduce the outstanding

principal balance of Term Loan B, (b) second, to reduce the

outstanding principal balance of Term Loan A, and (c) third, to

reduce the outstanding principal balance of the Revolving Loan, with a

corresponding permanent reduction in the Revolving Loan Commitment Amount.

 

8.18                        Appraisal

 

On or before May 31,

2002, cause to be delivered to U.S. Bank an independent appraisal of the

fixed assets of Borrower and the Guarantors (the “Appraisal”).  The Appraisal shall be addressed to

U.S. Bank, prepared by an appraiser acceptable to U.S. Bank, and

subject to U.S. Bank’s approval. 

The Appraisal shall be at Borrower’s sole cost.

 

8.19                        Issuance of Equity

 

Concurrently with the

issuance of any equity or the receipt of any Subordinated Debt, make a

principal payment to U.S. Bank in the amount of 50 percent of the

proceeds of such equity or Subordinated Debt net of ordinary and necessary

expenses incurred in connection therewith, as applicable (“Equity

Payment”).  All Equity Payments shall be

applied to the outstanding principal balance of the Loans, in the inverse order

of maturity, as follows: 

(a) first, to reduce the outstanding principal balance of Term

Loan B, (b) second, to reduce the outstanding principal balance of

Term Loan A, and (c) third, to reduce the outstanding principal balance

of the Revolving Loan, with a corresponding permanent reduction in the

Revolving Loan Commitment Amount. 

Notwithstanding the foregoing, Equity Payments

 

31

 

shall be required

only to the extent that after pro forma application of the Equity Payment to

the Loans as provided in this Section 8.19, the Funded Debt Ratio of

Borrower is greater 3.5:1.0 as of the last day of the previous fiscal quarter

of Borrower for the four trailing fiscal quarters then ended.

 

ARTICLE IX.                                               NEGATIVE COVENANTS

 

Borrower covenants and

agrees that until all the Loans, together with interest thereon, and all other

obligations incurred hereunder are paid or satisfied in full, Borrower shall

not, and shall not permit any Subsidiary to, without the prior written consent

of U.S. Bank:

 

9.1                               Dividends and Distributions

 

Declare or pay any cash

distributions or dividends or return any capital to any of Borrower’s

shareholders; authorize or make any distribution, payment or delivery of property

or cash to any of Borrower’s shareholders; redeem, retire, purchase or

otherwise acquire, directly or indirectly, for consideration, any shares or

other interests of Borrower now or hereafter outstanding; or set aside any

funds for any of the foregoing purposes.

 

9.2                               Transactions With Affiliates

 

Enter into any

transaction, other than an arm’s length transaction, that results in a transfer

or conveyance of assets, tangible or intangible, real, personal, or mixed, by

Borrower to any Affiliate of Borrower except (a) as otherwise provided by

this Agreement or (b) for the initial capitalization of a Subsidiary by

Borrower with the prior written consent of U.S. Bank.

 

9.3                               Other Indebtedness

 

Create, incur, assume or

suffer to exist, contingently or otherwise, any Indebtedness measured on a

consolidated basis except (a) Indebtedness represented by the Notes;

(b) accounts and other current payables arising from the ordinary course

of business; and (c) additional Indebtedness outstanding or committed to

at any time (including, but not limited to, indebtedness evidenced by notes,

bonds, debentures, leases, purchase agreements, and other contractual

obligations) not in excess of an aggregate amount at any one time outstanding

of $3,000,000.  Notwithstanding clause (c)

above, Borrower may not guarantee or become contingently liable for the

obligation of any Person except as provided for herein.  In computing the additional indebtedness

permitted by clause (c) hereof, all capital lease payments due from

Borrower within 12 months shall be included if the amounts of such rental

payments are not otherwise included as Indebtedness in accordance with

generally accepted accounting principles. 

Except as set forth in Section 9.5 hereof, none of the additional

indebtedness permitted by this Section 9.3 shall be secured by any assets

of Borrower of any Subsidiary.

 

32

 

9.4                               Leases and Leasebacks

 

Except to the extent

permitted pursuant to the provisions of Section 9.3(c) hereof and except

for arrangements entered into prior to the date hereof, enter into any new

agreement to rent or lease any material real or personal property or enter into

any arrangement with any bank, insurance company or other domestic bank or

investor providing for the leasing of any real or personal property or

equipment (a) that at the time has been or is sold or transferred by

Borrower to such domestic bank or investor or (b) that has been or is

being acquired from another Person by such domestic bank or investor or on

which one or more buildings have been or are to be constructed by such domestic

bank or investor, for the purpose of leasing such property to Borrower.

 

9.5                               Liens

 

Contract, create, incur,

assume or suffer to exist any mortgage, pledge, lien or other charge or

encumbrance of any kind (including, but not limited to, the charge upon

property purchased under conditional sales or other title retention agreements)

upon or grant any interest in any of its property or assets whether now owned

or hereafter acquired, except (a) liens granted pursuant to this

Agreement; (b) liens in connection with worker’s compensation,

unemployment insurance or other social security obligations; (c) good

faith deposits in connection with bids, tenders, contracts or leases or

deposits to secure public statutory obligations; (d) mechanic’s,

carrier’s, repairmen’s or other like liens in the ordinary course of business

with respect to obligations that are not overdue or that are being contested in

good faith and for which appropriate reserves have been established or for

which deposits to obtain the release of such liens have been made;

(e) liens for taxes, assessments, levies or charges of Governmental Bodies

imposed upon Borrower or its property, operations, income, products or profits

that are not at the time due or payable or for which, if the validity thereof

is being contested in good faith by legal or administrative proceedings,

appropriate reserves have been established; (f) encumbrances consisting of

zoning regulations, easements, rights–of–way, survey exceptions and

other similar restrictions on the use of real property or minor irregularities

in title thereto that do not materially impair the use of such property in the

operation of the business of Borrower; (g) liens that are not consensual

arising by operation of law out of judgments or awards with regard to which

Borrower shall be prosecuting an appeal in good faith and for which a stay of

execution has been issued and appropriate reserves established; and (h) the

currently existing liens listed on Exhibit E hereto.  The liens described in clauses

(a) through (h) hereof are called the “Permitted Liens.”

 

9.6                               Advances and Loans

 

Lend money, make credit

available (other than in the ordinary course of business to customers) or lend

property or the use thereof to any Person; purchase or repurchase the stock or

Indebtedness or all or a substantial part of the assets or properties of any

Person; guarantee, assume, endorse or otherwise become responsible for

(directly or indirectly or by any instrument having the effect of assuring any

Person’s payment, performance, or capability) the Indebtedness, performance,

obligations, stock or dividends of any Person; or agree to do

 

33

 

any of the

foregoing; provided that (a) Borrower may endorse negotiable instruments

for deposit or collection in the ordinary course of business and Borrower may

make loans to its Affiliates on an arm’s–length basis provided that the

aggregate outstanding principal balance of such loans shall not exceed

$2,000,000 at any time.

 

9.7                               Investments

 

Invest in (by capital

contribution, assumption of Indebtedness or otherwise), acquire, purchase or

make any commitment to purchase the obligations, stock or other equity, or a

substantial portion of the assets of any Person except (a) direct

obligations of the government of the United States of America or any agency or

instrumentality thereof, (b) interest–bearing certificates of

deposit or repurchase agreements issued by any commercial banking institution

satisfactory to U.S. Bank and (c) stock or obligations issued in

settlement of claims of Borrower against others by reason of bankruptcy or a

composition or readjustment of debt or reorganization of any debtor of Borrower.

 

9.8                               Consolidation, Merger and Sale of Assets

 

Wind up, liquidate or

dissolve Borrower’s or any Subsidiary’s affairs or enter into any transaction

of merger or consolidation with any Person; convey, sell, lease or otherwise

dispose of (or agree to do any of the foregoing at any time) any of its

material licenses, contracts or permits; sell all or a substantial part of its

property or assets or sell any part of its property or assets necessary or

desirable for the conduct of its business as now generally conducted or as

proposed to be conducted; sell any of its notes receivable, installment or

conditional sales agreements, or accounts receivable; purchase, lease or

otherwise acquire all or a substantial part of the property or assets of any

other Person.

 

9.9                               Subsidiaries

 

Form or acquire any

Person or any portion thereof.

 

9.10                        Type of Business

 

Enter into any business

which is substantially different from or not connected with the manufacture and

sale of audio equipment and software or make any substantial change in the

nature of its business or operations.

 

9.11                        Change of State of Organization

 

Change (a) the state

of organization of Borrower or any Guarantor, (b) the chief executive

office of Borrower or any Guarantor, (b) Borrower’s or any Guarantor’s

name, or (c) the location of any of the Collateral; or adopt or use any

trade name without (x) prior written notice to U.S. Bank and

(y) the execution, delivery and filing (and payment of filing fees and

taxes) of all such documents as may be necessary or advisable in the opinion of

U.S. Bank to continue to perfect and protect the liens and security

interests in the Collateral.

 

34

 

9.12                        Change in Documents

 

Amend, supplement,

terminate or otherwise modify in any way Borrower’s articles of incorporation,

contracts or other documents delivered to U.S. Bank hereunder or executed

in connection herewith.

 

9.13                        Control

 

Enter into any agreement

(other than employment agreements) with any Person that confers upon such

Person the right or authority to control or direct a major portion of the

business or assets of Borrower or any Subsidiary.

 

9.14                        Pension Plan

 

Terminate or partially

terminate any Plan now existing or hereafter established for Borrower or its

Affiliates or withdraw from participation therein under circumstances that

result or could result in liability to the Pension Benefit Guaranty

Corporation, to the fund by which the Plan is funded, or to the employees (or

their beneficiaries) for whom the Plan is or shall be maintained; or permit any

other event or circumstance to occur that results or could result in liability

to the Pension Benefit Guaranty Corporation or a violation of ERISA.

 

9.15                        Tangible Net Worth

 

Permit Tangible Net Worth

to be less than (a) $25,000,000 as of March 31, 2002, and (b) at

any time thereafter, an amount equal to $25,000,000 plus, on a cumulative

basis, 50 percent of Borrower’s consolidated net income for each of

Borrower’s fiscal quarters, commencing with the fiscal quarter ending

June 30, 2002 (without reduction for any consolidated net losses

experienced by Borrower in any fiscal quarter).

 

9.16                        Funded Debt Ratio

 

Permit the Funded Debt

Ratio to be greater than (a) 3.5:1.0 as of the last day of Borrower’s

fiscal quarter ending September 30, 2002, for the trailing four quarters

then ended, and (b) 3.0:1.0 as of the last day of Borrower’s fiscal

quarter ending December 31, 2002, or any fiscal quarter thereafter, for

the trailing four quarters then ended.

 

9.17                        Fixed Charge Coverage Ratio

 

Permit the Fixed Charge

Coverage Ratio to be less than (a) 1.10:1.00 as of the last day of

Borrower’s fiscal quarter ending June 30, 2002, for the fiscal quarter

then ended, (b) 1.15:1.00 as of the last day of Borrower’s fiscal quarter

ending September 30, 2002, for the fiscal quarter then ended, and

(c) 1.25:1.00 as of the last day of Borrower’s fiscal quarter ending

December 31, 2002 and any fiscal quarter thereafter, for the trailing four

quarters then ended.

 

35

 

9.18                        Working Capital

 

Permit Working Capital to

be less than (a) $23,000,000 as of June 30, 2002, and (b) at any

time thereafter, an amount equal to $23,000,000 plus, on a cumulative basis,

50 percent of Borrower’s consolidated net income for each of Borrower’s

fiscal quarters, commencing with the fiscal quarter ending September 30,

2002 (without reduction for any consolidated net losses experienced by Borrower

in any fiscal quarter).

 

9.19                        Limitation on Capital Expenditures

 

Permit the total amount

of Capital Expenditures to exceed $5,000,000 during the fiscal year of Borrower

ending December 31, 2002, and during any fiscal year of Borrower

thereafter.

 

ARTICLE X.                                                   REPRESENTATIONS AND WARRANTIES

 

In order to induce

U.S. Bank to enter into this Agreement and to make the Loans as herein

provided, Borrower hereby makes the following representations, covenants and

warranties, all of which shall survive the execution and delivery of this

Agreement and shall not be affected or waived by any inspection or examination

made by or on behalf of U.S. Bank:

 

10.1                        Corporate Status

 

Borrower and Mackie

Designs Manufacturing Inc. are corporations organized and validly existing

under the laws of the state of Washington. 

Blackstone Technologies, Inc. is corporation organized and validly

existing under the laws of the state of Massachusetts.  SIA Software Company, Inc. is a corporation

organized and validly existing under the laws of the state of New York.  Borrower and each Subsidiary has the power

and authority to own its property and assets and to transact the business in

which it is engaged or presently proposes to engage.  Borrower and each Subsidiary is qualified to do business in all

states except where the failure to be qualified could not have a material

adverse effect on Borrower or any Subsidiary.

 

10.2                        Power and Authority

 

Borrower and each

Guarantor has the power to execute, deliver and carry out the terms and

provisions of this Agreement and each of the Loan Documents and has taken all

necessary action to authorize the execution, delivery and performance of this

Agreement and the other Loan Documents, the borrowings hereunder and the making

and delivery of the Notes and all Loan Documents delivered hereunder.  This Agreement constitutes and the Notes and

other Loan Documents and instruments issued or to be issued hereunder, when

executed and delivered pursuant hereto, constitute or will constitute the

authorized, valid and legally binding obligations of Borrower and Guarantors

(as the case may be), enforceable in accordance with their respective terms.

 

36

 

10.3                        No Violation of Agreements

 

Neither Borrower nor any

Subsidiary is in default under any material provision of any agreement to which

it is a party or in violation of any Applicable Laws.  The execution and delivery of this Agreement, the Notes, the

other Loan Documents and the instruments incidental hereto; the consummation of

the transactions herein or therein contemplated; and compliance with the terms

and provisions hereof or thereof (a) will not violate any material

Applicable Law, (b) will not conflict or be inconsistent with, result in

any breach of any of the material terms, covenants, conditions or provisions

of, constitute a default under, or result in the creation or imposition of (or

the obligation to impose) any lien, charge or encumbrance upon any of the

property or assets of Borrower or any Guarantor pursuant to the terms of any

material Governmental Approval, mortgage, deed of trust, lease, agreement or

other instrument to which Borrower or any Guarantor is a party, by which

Borrower or any Guarantor may be bound or to which Borrower or any Guarantor

may be subject, and (c) will not violate any of the provisions of the

articles of incorporation of Borrower or any Guarantor.  No Governmental Approval is necessary

(x) for the execution of this Agreement, the making of the Notes or the

assumption and performance of this Agreement, or the Notes by Borrower or the

Guaranties by any Guarantor or (y) for the consummation by Borrower or any

Guarantor of the transactions contemplated by this Agreement, including, but

not limited to, the grant of the security interests to U.S. Bank.

 

10.4                        Recording and Enforceability

 

Neither the articles of

incorporation, bylaws or other applicable corporate documents of Borrower or

any Guarantor nor other agreements require recording, filing, registration,

notice or other similar action in order to insure the legality, validity,

binding effect or enforceability against all Persons of this Agreement, the

Notes or other Loan Documents executed or to be executed hereunder, other than

filings or recordings that may be required under the Uniform Commercial Code or

in connection with the perfection of the security interests of U.S. Bank

in patents, trademarks and similar types of Collateral.

 

10.5                        Litigation

 

Except as disclosed in

this Section 10.5, there are no actions, suits or proceedings pending or

threatened against or affecting Borrower or any Subsidiary before any

Governmental Body that could have a material adverse effect on Borrower, any

Subsidiary, or the Collateral.  Neither

Borrower nor any Subsidiary is in default under any material provision of any

Applicable Law or Governmental Approval of any Governmental Body which could

have a material adverse effect on Borrower, any Subsidiary, or on the

Collateral.  U.S. Bank acknowledges the disclosure by Borrower of the existence

of the case entitled The Travelers Insurance Company vs. Eastern Acoustic

Works, Inc., et al, Superior Court Department, Worcester Massachusetts, Civil

Action No. 97-0922-B, and agrees that neither the existence of such case nor

the results of any trial or any pending motions in such case will be deemed a

violation of any warranty or representation given by Borrower or Eastern

 

37

 

Acoustic Works, Inc. either in this Agreement or any other agreement or

documentation given in connection herewith.

 

10.6                        Good Title to Properties

 

Borrower and each

Subsidiary has good and marketable title to, or a valid leasehold interest in,

its property and assets, subject to no liens, mortgages, pledges, encumbrances

or charges of any kind, except those permitted under the provisions of

Section 9.5 hereof.

 

10.7                        Licenses and Permits

 

All Governmental

Approvals with respect to the business of Borrower and each Subsidiary were to

Borrower’s knowledge duly and validly issued by the respective Governmental

Bodies, are in full force and effect and are to Borrower’s knowledge valid and

enforceable in accordance with their terms. 

With regard to such Governmental Approvals, no fact or circumstance

exists that constitutes or, with the passage of time or the giving of notice or

both, would constitute a material default under any thereof, or permit the

grantor thereof to cancel or terminate the rights thereunder, except upon the

expiration of the full term thereof. 

Borrower and each Subsidiary presently holds all material Governmental

Approvals as are necessary or advisable in connection with the conduct of its

business as now conducted and as presently proposed to be conducted.

 

10.8                        No Burdensome Agreements

 

Neither Borrower nor any

Subsidiary is a party to any agreement or instrument or subject to any

restrictions that now have or, as far as can be foreseen, could have a material

adverse effect on Borrower or any Subsidiary.

 

10.9                        Properties in Good Condition

 

All the material

properties of Borrower and each Subsidiary are, and all material properties to

be added in connection with any contemplated expansion will be in good repair

and good working order and condition in a manner consistent with past practices

of Borrower and each Subsidiary, and comparable to industry standards and are

and will be in compliance with all Applicable Laws.

 

10.10                 Financial Statements

 

The (a) audited

financial statements of Borrower dated December 31, 2001, and all

schedules and notes included in such financial statements and

(b) unaudited financial statements of Borrower and each Subsidiary that

have heretofore been delivered to U.S. Bank are true and correct in all

material respects and present fairly (i) the financial position of

Borrower and each Subsidiary as of the date of said statements and

(ii) the results of operations of Borrower and each Subsidiary for the

periods covered thereby; and there are not any significant liabilities that

should have been reflected in the financial statements or the notes thereto

under generally accepted accounting principles, contingent or otherwise,

 

38

 

including

liabilities for taxes or any unusual forward or long–term commitments,

that are not disclosed or reserved against in the statements referred to above

or in the notes thereto or that are not disclosed herein.  All such financial statements have been

prepared in accordance with generally accepted accounting principles

consistently applied.  There has been no

material adverse change (including, but not limited to, any such change

occasioned by accident, act of God, war, fire, flood, explosion, strike or

other labor dispute, or orders or action by any Governmental Body or public

utility) in the operations, business, property, assets or condition (financial

or otherwise) of Borrower and each Subsidiary since December 31, 2001.

 

10.11                 Outstanding Indebtedness

 

Other than current trade

payables, Borrower has no Indebtedness, including, but not limited to,

Indebtedness to Affiliates, that is not listed on Borrower’s unaudited

financial statements dated December 31, 2001.

 

10.12                 Taxes

 

Borrower and each

Subsidiary has duly filed all tax returns and reports required by Applicable

Law to be filed; and all taxes, assessments, levies, fees and other charges of

Governmental Bodies upon Borrower and each Subsidiary or upon its assets that

are due and payable have been paid (except as otherwise permitted in this

Agreement).

 

10.13                 License Fees

 

Borrower and each

Subsidiary has paid all fees and charges that have become due for any

Governmental Approval for its business or has made adequate provisions for any

such fees and charges that have accrued.

 

10.14                 Trademarks, Patents, Etc.

 

Attached to the Security

Agreements are schedules of all trademarks, trade names, service marks, patents

and applications therefor currently held by Borrower and each Subsidiary or in

which it has an interest, e.g., a license. 

Borrower and each Subsidiary possesses all necessary trademarks, trade

names, service marks, copyrights, patents, patent rights and licenses to

conduct its businesses as now and as proposed to be conducted, without conflict

with the rights or claimed rights of others.

 

10.15                 Disclosure

 

To the best of Borrower’s

knowledge, the exhibits hereto, the financial information and statements

referred to in Section 10.10 hereof, any certificate, statement, report or

other document furnished to U.S. Bank by Borrower or any other Person in

connection herewith or in connection with any transaction contemplated hereby,

and this Agreement, do not contain any untrue statements of material fact or

omit to state any material fact necessary in order to make the statements

contained therein or herein not misleading.

 

39

 

10.16                 Regulations U and X

 

Borrower does not own and

no part of the proceeds hereof will be used to purchase or carry any margin

stock (within the meaning of Regulation U of the Board of Governors of the

Federal Reserve System) or to extend credit to others for the purpose of

purchasing or carrying any margin stock. 

Borrower is not engaged principally or as one of its important

activities in the business of extending credit for the purpose of purchasing or

carrying any margin stock.  If requested

by U.S. Bank, Borrower will furnish to U.S. Bank a statement in

conformity with the requirements of Federal Reserve Form U–1

referred to in said Regulation.  No part

of the proceeds of the Loans will be used for any purpose that violates or is

inconsistent with the provisions of Regulation X of said Board of

Governors.

 

10.17                 Names

 

Neither Borrower, any

Guarantor, nor any of their predecessors operate or do business or during the

past five years have operated or done business under a fictitious, trade

or assumed name.

 

10.18                 Condition of Property

 

Except as otherwise

disclosed to U.S. Bank, Borrower hereby represents and warrants to

U.S. Bank that as of the date hereof and continuing hereafter, Borrower’s

property and that of each Subsidiary (both owned and leased) and each portion

thereof (a) are not and to the best knowledge of Borrower after due

investigation have not been a site for the use, generation, manufacture,

storage, disposal or transportation of any Hazardous Material in violation of

Hazardous Materials Laws; (b) are presently in compliance with all

Hazardous Materials Laws; and (c) are not being used and to the best

knowledge of Borrower after due investigation have not been used in any manner

that has resulted in or will result in Hazardous Materials being spilled or

disposed of on any adjacent or other property.

 

10.19                 Pension Plans

 

No “reportable event” as

defined in Section 4043(b) of Title IV of ERISA has occurred and is

continuing with respect to any plan maintained for employees of Borrower or any

Affiliate.  In addition, each of the

plans maintained for the employees of Borrower and its Affiliates are in

compliance with the requirements of ERISA, including the minimum funding

requirements.

 

ARTICLE XI.                                               EVENTS OF DEFAULT; REMEDIES

 

11.1                        Events of Default

 

“Event of Default,”

wherever used herein, means any one of the following events (whatever the

reason for the Event of Default, whether it shall relate to one or more of the

parties hereto, and whether it shall be voluntary or involuntary or be pursuant

to or affected by operation of Applicable Law):

 

40

 

(a)           If Borrower fails to pay the

principal of or any installment of interest on either of the Notes, within five

days of the date when and as the same becomes due and payable, whether at

scheduled maturity, by acceleration or otherwise; or

 

(b)           If any Indebtedness of Borrower or

any Subsidiary for money borrowed or credit extended becomes or is declared due

and payable (after any applicable grace period) prior to the stated maturity

thereof or is not paid as and when it becomes due and payable, or if any event

occurs which constitutes an event of default under any instrument, agreement or

evidence of Indebtedness relating to any such obligation of Borrower or any

Subsidiary; or

 

(c)           If Borrower or any Subsidiary fails

to pay or perform (after any applicable grace period) any obligation or

Indebtedness to others in excess of $50,000 (other than as set forth in

Section 11.1(b) hereof), whether now or hereafter incurred; or

 

(d)           If any representation or warranty

(i) made by Borrower in this Agreement or (ii) made by Borrower, any

Guarantor, or any other Person in any document, certificate or statement

furnished pursuant to this Agreement or in connection herewith, is false or

misleading in any material respect; or

 

(e)           If Borrower fails to observe or

perform any term, covenant or agreement to be performed or observed pursuant to

Articles VIII and IX hereof; or

 

(f)            If Borrower fails to observe or

perform (not otherwise specified in this Article XI) any term, covenant or

agreement to be performed or observed pursuant to the provisions of this

Agreement, the other Loan Documents or any other agreement incidental hereto

and such default is not cured within 30 days; or

 

(g)           If Borrower fails to perform any of

its obligations under any of the Loan Documents not otherwise specified in this

Article XI, or if the validity of any of such documents has been

disaffirmed by or on behalf of any of the parties thereto other than

U.S. Bank and such default is not cured within 30 days; or

 

(h)           If custody or control of any

substantial part of the property of Borrower or any Subsidiary is assumed by

any Governmental Body or if any Governmental Body takes any final action, the

effect of which would be to have a material adverse effect on Borrower; or

 

(i)            If Borrower or any Subsidiary

suspends or discontinues its business, or if Borrower or any Subsidiary makes

an assignment for the benefit of creditors or a composition with creditors, is

unable or admits in writing its inability to pay its debts as they mature,

files a petition in bankruptcy, becomes insolvent (howsoever such insolvency

may be evidenced), is adjudicated insolvent or bankrupt, petitions or applies

to any tribunal for the appointment of any receiver, liquidator or trustee of

or for it or any substantial part of its property or assets, commences any

proceeding relating to it under any Applicable Law of any jurisdiction whether

now or hereafter in effect relating to bankruptcy, reorganization, arrangement,

readjustment of debt, receivership, dissolution or liquidation; or if there is

commenced against Borrower or any Subsidiary any such proceeding that remains

undismissed for a

 

41

 

period of

60 days or more, or an order, judgment or decree approving the petition in

any such proceeding is entered; or if Borrower or any Subsidiary by any act or

failure to act indicates its consent to, approval of, or acquiescence in, any

such proceeding or any appointment of any receiver, liquidator or trustee of or

for it or for any substantial part of its property or assets, suffers any such

appointment to continue undischarged or unstayed for a period of 90 days

or more, or takes any corporate action for the purpose of effecting any of the

foregoing; or if any court of competent jurisdiction assumes jurisdiction with

respect to any such proceeding, or if a receiver or a trustee or other officer

or representative of a court or of creditors, or if any Governmental Body,

under color of legal authority, takes and holds possession of any substantial

part of the property or assets of Borrower or any Subsidiary; or

 

(j)            If there is any refusal or failure

by any Governmental Body to issue, renew, or extend any lease or Governmental

Approval with respect to the operation of the business of Borrower or any

Subsidiary, or any denial, forfeiture or revocation by any Governmental Body of

any Governmental Approval that could have a material adverse effect on Borrower

or any Subsidiary; or

 

(k)           If any of the events described in Section 8.10

hereof occur or are threatened and, in U.S. Bank’s reasonable judgment,

such event jeopardizes or could reasonably be expected to jeopardize repayment

of any of the Notes; or

 

(l)            If at any time Gregory C.

Mackie does not own or have voting control of 20 percent or more of the

issued and outstanding voting stock of Borrower; or

 

(m)          If any material adverse change in the

business or financial condition of Borrower or any Subsidiary occurs, or if any

event that materially increases U.S. Bank’s risk or materially impairs the

Collateral occurs.

 

11.2                        Acceleration; Remedies

 

(a)           If any Event of Default described in

Section 11.1(i) shall occur, then immediately and automatically

U.S. Bank’s commitment under the Revolving Loan shall terminate and all

other amounts owing under this Agreement and the Revolving Note shall become

due and payable and U.S. Bank’s obligation to make any advances under the

Revolving Loan shall immediately terminate.

 

(b)           If any Event of Default other than

those described in Section 11.1(i) shall occur and be continuing,

U.S. Bank may (i) by written notice to Borrower, declare

U.S. Bank’s commitment under the Revolving Loan terminated forthwith,

whereupon such obligations shall immediately terminate; and (ii) by

written notice of default to Borrower, declare the Revolving Loan, with accrued

interest thereon, and all other amounts owing under this Agreement and the

Revolving Note to be due and payable forthwith, whereupon the same shall

immediately become due and payable.

 

(c)           Except as expressly provided above in

this Section 11.2, presentment, demand and all other notices of any kind

are hereby expressly waived. 

U.S. Bank may proceed to

 

42

 

protect and

enforce its rights hereunder or realize on any or all security granted pursuant

to any the Loan Documents in any manner or order it deems expedient without

regard to any equitable principles of marshaling or otherwise.  No failure or delay on the part of

U.S. Bank in exercising any right, power or privilege hereunder and no

course of dealing between Borrower and U.S. Bank shall operate as a waiver

thereof; nor shall any single or partial exercise of any right, power or

privilege hereunder preclude any other or further exercise thereof or the

exercise of any right, power or privilege. 

The rights and remedies herein expressly provided are cumulative and not

exclusive of any rights or remedies that U.S. Bank would otherwise have.  No notice to or demand on Borrower in any

case shall entitle Borrower to any other or further notice or demand in similar

or other circumstances or shall constitute a waiver of the right of

U.S. Bank to any other or further action in any circumstances without

notice or demand.

 

ARTICLE XII.                                           MISCELLANEOUS

 

12.1                        Notices

 

All notices, requests,

consents, demands, approvals and other communications hereunder shall be deemed

to have been duly given, made or served if made in writing and delivered

personally, sent via facsimile or mailed by first–class mail, postage

prepaid, to the respective parties to this Agreement as follows:

 

(a)                                  If

to Borrower:

 

Mackie Designs Inc.

16220 Woodinville-Redmond Road NE

Woodinville, Washington 98072

Attention:  Chief Financial Officer

Facsimile No.:  (425) 483-1801

 

(b)                                 If

to U. S. Bank:

 

U. S. Bank National Association

10800 NE Eighth Street, Suite 1000

Bellevue, Washington  98004

Attention:  Tom V. Silver

Facsimile No.:  (425) 450-5989

 

The designation of the

persons to be so notified or the address of such persons for the purposes of such

notice may be changed from time to time by similar notice in writing, except

that any communication with respect to a change of address shall be deemed to

be given or made when received by the party to whom such communication was

sent.

 

43

 

12.2                        Payment of Expenses

 

Whether or not the

transactions hereby contemplated are consummated, Borrower shall pay on demand

all costs and expenses of U.S. Bank incurred in connection with the

preparation, negotiation, execution and delivery of the Loan Documents, as well

as any amendments, modifications, consents or waivers relating thereto,

including, without limitation, reasonable attorneys’ fees, appraisal fees,

title insurance fees and recording fees. 

In addition, if there shall occur any Default or Event of Default,

U.S. Bank shall be entitled to recover any costs and expenses incurred in

connection with the preservation of rights under, and enforcement of, the Loan

Documents, whether or not any lawsuit or arbitration proceeding is commenced,

in all such cases, including, without limitation, reasonable attorneys’ fees

and costs (including the allocated fees of internal counsel).  Costs and expenses as referred to above,

shall include, without limitation, a reasonable hourly rate for collection

personnel, whether employed in-house or otherwise, overhead costs as reasonably

allocated to the collection effort and all other expenses actually

incurred.  Reasonable attorneys’ fees shall

include, without limitation, attorneys’ fees and costs incurred in connection

with any bankruptcy case or other insolvency proceeding commenced by or against

Borrower or any Person granting a security interest in any item of Collateral,

including all fees incurred in connection with (a) moving from relief from

the automatic stay, to convert or dismiss the case or proceeding, or to appoint

a trustee or examiner, or (b) proposing or opposing confirmation of a plan

of reorganization or liquidation, in any case without regard to the identity of

the prevailing party.

 

12.3                        Setoff

 

As additional security

for the payment of the obligations described in this Agreement and the other

Loan Documents and any other obligations of Borrower to U.S. Bank of any

nature whatsoever (collectively the “Obligations”), Borrower hereby grants to

U.S. Bank, and any Participant, a security interest in, a lien on and an

express contractual right to set off against all depository account balances,

cash and any other property of Borrower now or hereafter in the possession of

U.S. Bank, or any Participant, and the right to refuse to allow

withdrawals from any account (collectively “Setoff”).  U.S. Bank and any Participant may, at any time upon the

occurrence of a Default or Event of Default (notwithstanding any notice requirements

or grace/cure periods under this Agreement or the other Loan Documents) Setoff

against the Obligations whether or not the Obligations (including future

installments) are then due or have been accelerated, all without any advance or

contemporaneous notice or demand of any kind to Borrower, such notice and

demand being expressly waived.

 

12.4                        Waiver of Setoff

 

In the event that

U.S. Bank sells all or any portion of the Loans to any Participant,

Borrower hereby waives the right to interpose any setoff, counterclaim or cross–claim

(other than compulsory counterclaims or cross–claims) in connection with

any litigation or dispute under this Agreement, regardless of the nature of

such setoff, counterclaim or cross–claim.

 

44

 

12.5                        Fees and Commissions

 

Borrower agrees to

indemnify U.S. Bank and hold it harmless with regard to any commissions,

fees, judgments or expenses of any nature and kind that U.S. Bank may

become liable to pay by reason of any claims by or on behalf of brokers,

finders or agents in connection with any act or failure to act by Borrower or

any litigation or similar proceeding arising from such claims.  Borrower states that it is aware of no valid

basis for any such claims.

 

12.6                        No Waiver

 

No failure or delay on

the part of U.S. Bank or the holder of any of the Notes in exercising any

right, power or privilege hereunder and no course of dealing between Borrower

and U.S. Bank or the holder of any of the Notes shall operate as a waiver

thereof; nor shall any single or partial exercise of any right, power or

privilege hereunder preclude any other or further exercise thereof or the

exercise of any right, power or privilege. 

The rights and remedies herein expressly provided are cumulative and not

exclusive of any rights or remedies that U.S. Bank or any subsequent

holder of any of the Notes would otherwise have.  No notice to or demand on Borrower in any case shall entitle

Borrower to any other or further notice or demand in similar or other circumstances

or shall constitute a waiver of the right of U.S. Bank to any other or

further action in any circumstances without notice or demand.

 

12.7                        Entire Agreement and Amendments

 

This Agreement represents

the entire agreement between the parties hereto with respect to the Loans and

the transactions contemplated hereunder and, except as expressly provided

herein, shall not be affected by reference to any other documents.  This Agreement, or any provision hereof, may

not be changed, waived, discharged or terminated orally, but only by an

instrument in writing, signed by the party against whom enforcement of the

change, waiver, discharge or termination is sought.

 

12.8                        Benefit of Agreement

 

This Agreement is binding

upon and inures to the benefit of Borrower and U.S. Bank and their

successors and assigns and all subsequent holders of any of the Notes or any

portion thereof.  Borrower expressly

acknowledges that U.S. Bank is not prohibited or restricted from assigning

rights or participations hereunder or any portion thereof to another

Person.  Borrower, however, is precluded

from assigning any of its respective rights or delegating any of its

obligations hereunder or under any of the other agreements between Borrower and

U.S. Bank without the prior written consent of U.S. Bank.

 

12.9                        Severability

 

If any provision of this

Agreement or any of the Loan Documents is held invalid under any Applicable

Laws, such invalidity shall not affect any other provision of this

 

45

 

Agreement that can

be given an effect without the invalid provision, and, to this end, the

provisions hereof are severable.

 

12.10                 Descriptive Headings

 

The descriptive headings

of the several sections of this Agreement are inserted for convenience only and

do not affect the meaning or construction of any of the provisions hereof.

 

12.11                 Governing Law

 

Except to the extent that

the federal laws of the United States of America provide U.S. Bank with

greater rights or remedies, this Agreement and the rights and obligations of

the parties hereunder and under the other Loan Documents shall be construed in

accordance with and shall be governed by the laws of the state of Washington

without regard to the choice of law rules thereof.

 

12.12                 Consent to Jurisdiction, Service and Venue

 

For the purpose of

enforcing payment of any of the Notes, performance of the obligations under any

of the Notes, any arbitration award under the other Loan Documents, or

otherwise in connection herewith, Borrower hereby consents to the jurisdiction

and venue of the courts of the state of Washington or of any federal court

located in such state including, but not limited to, the Superior Court of

Washington for King County and the United States District Court for the Western

District of Washington.  Borrower hereby

waives the right to contest the jurisdiction and venue of courts located in

King County, Washington, on the ground of inconvenience or otherwise and waives

any right to bring any action or proceeding against U.S. Bank in any court

outside King County, Washington.  The

provisions of this Section 12.12 do not limit or otherwise affect the

right of U.S. Bank to institute and conduct action in any other

appropriate manner, jurisdiction, or court.

 

12.13                 Counterparts

 

This Agreement and each

of the Loan Documents may be executed in one or more counterparts, each of

which shall constitute an original agreement, but all of which together shall

constitute one and the same instrument.

 

12.14                 Jury Waiver

 

BORROWER HEREBY WAIVES ANY RIGHT TO

TRIAL BY JURY OF ANY CLAIM ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN

DOCUMENT, WHETHER NOW OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT,

TORT OR OTHERWISE, AND HEREBY CONSENTS AND AGREES THAT ANY SUCH CLAIM MAY, AT

U.S. BANK’S ELECTION, BE DECIDED BY TRIAL WITHOUT A JURY AND THAT

U.S. BANK MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH

ANY COURT

 

46

 

AS WRITTEN EVIDENCE OF THE WAIVER AND

AGREEMENT CONTAINED HEREIN.

 

12.15                 Statutory Notice

 

ORAL AGREEMENTS OR ORAL COMMITMENTS

TO LOAN MONEY, EXTEND CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE

NOT ENFORCEABLE UNDER WASHINGTON LAW.

 

IN WITNESS WHEREOF,

Borrower and U.S. Bank have caused this Agreement to be duly executed by

the respective, duly authorized signatories as of the date first above written.

 

	

   

  	

   

  	

  MACKIE DESIGNS INC.

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

  /s/ William A. Garrard

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Willliam A. Garrard

  	

   

  
	

   

  	

   

  	

  Title:

  	

  Vice President, Finance and Chief Financial

  Officer

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  U.S. BANK NATIONAL ASSOCIATION

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

  /s/Tom V. Silver

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Tom Silver

  	

   

  
	

   

  	

   

  	

  Title:

  	

  Vice President

  	

   

  

 

47

 

ACKNOWLEDGMENT AND CONSENT

 

Each of the undersigned

hereby:  (a) acknowledges that it

has read the foregoing Amended and Restated Credit Agreement, (b) consents

to the execution, delivery and performance by Borrower of the foregoing Amended

and Restated Credit Agreement, (c) reaffirms and agrees that the

respective Guaranty and Security Agreement to which the undersigned is a party

and all other documents and agreements executed and delivered by the

undersigned to the U.S. Bank in connection with the Existing Credit

Agreement (as amended and restated by this Agreement) are in full force and

effect, without defense, offset or counterclaim, and (d) agrees that its

guaranty guarantees and its security agreement secures the repayment of the

Loans.  Capitalized terms used herein

have the meanings specified in this Agreement.

 

	

   

  	

   

  	

   

  	 

	

   

  	

  BLACKSTONE TECHNOLOGIES, INC.

  	 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

   

  	

   

  	 

	

   

  	

   

  	

  Name:

  	

   

  	

   

  	 

	

   

  	

   

  	

  Title:

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

   

  	

   

  	

   

  	 

	

   

  	

  MACKIE DESIGNS MANUFACTURING INC.

  	 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

   

  	

   

  	 

	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  SIA SOFTWARE COMPANY, INC.

  	 

	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

  By

  	

   

  	

   

  	 

	

   

  	

   

  	

  Name:

  	

   

  	

   

  
	

   

  	

   

  	

  Title:

  	

   

  	

   

  
												

 

48

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