Document:

Exhibit 10.1

 

 

CREDIT AGREEMENT

DATED AS OF AUGUST 29, 2005

AMONG

LOUD TECHNOLOGIES INC.

and

ST. LOUIS MUSIC, INC.,

as Borrowers,

MERRILL LYNCH CAPITAL,

a Division of Merrill Lynch Business Financial Services Inc.,

as Administrative Agent, as a Lender and

as Sole Bookrunner and Sole Lead Arranger,

ING CAPITAL LLC,

as Syndication Agent

AND

THE ADDITIONAL LENDERS

FROM TIME TO TIME PARTY HERETO

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 DEFINITIONS

  	
   

  
	
  Section 1.1

  	
  Certain
  Defined Terms

  	
   

  
	
  Section 1.2

  	
  Accounting
  Terms and Determinations

  	
   

  
	
  Section 1.3

  	
  Other
  Definitional Provisions

  	
   

  
	
  Section 1.4

  	
  Certifications

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 LOANS AND LETTERS OF CREDIT

  	
   

  
	
  Section 2.1

  	
  Term Loans

  	
   

  
	
  Section 2.2

  	
  Revolving
  Loans and Swingline Loans

  	
   

  
	
  Section 2.3

  	
  Interest,
  Interest Calculations and Certain Fees

  	
   

  
	
  Section 2.4

  	
  Notes

  	
   

  
	
  Section 2.5

  	
  Letters of
  Credit and Letter of Credit Fees

  	
   

  
	
  Section 2.6

  	
  General Provisions
  Regarding Payment; Loan Account

  	
   

  
	
  Section 2.7

  	
  Maximum Interest

  	
   

  
	
  Section 2.8

  	
  Taxes

  	
   

  
	
  Section 2.9

  	
  Capital Adequacy

  	
   

  
	
  Section
  2.10

  	
  Mitigation
  Obligations

  	
   

  
	
  Section
  2.11

  	
  Appointment
  of Borrower Representative

  	
   

  
	
  Section
  2.12

  	
  Joint and
  Several Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  Section 3.1

  	
  Existence and
  Power

  	
   

  
	
  Section 3.2

  	
  Organization
  and Governmental Authorization; No Contravention

  	
   

  
	
  Section 3.3

  	
  Binding Effect

  	
   

  
	
  Section 3.4

  	
  Capitalization

  	
   

  
	
  Section 3.5

  	
  Financial
  Information

  	
   

  
	
  Section 3.6

  	
  Litigation

  	
   

  
	
  Section 3.7

  	
  Ownership of
  Property

  	
   

  
	
  Section 3.8

  	
  No Default

  	
   

  
	
  Section 3.9

  	
  Labor Matters

  	
   

  
	
  Section 3.10

  	
  Regulated
  Entities

  	
   

  
	
  Section 3.11

  	
  Margin
  Regulations

  	
   

  
	
  Section
  3.12

  	
  Compliance
  With Laws; Anti-Terrorism Laws

  	
   

  
	
  Section 3.13

  	
  Taxes

  	
   

  
	
  Section 3.14

  	
  Compliance
  with ERISA

  	
   

  
	
  Section 3.15

  	
  Brokers

  	
   

  
	
  Section 3.16

  	
  Related
  Transactions

  	
   

  
	
  Section 3.17

  	
  Material
  Contracts

  	
   

  
	
  Section 3.18

  	
  Environmental
  Matters

  	
   

  
	
  Section 3.19

  	
  Intellectual
  Property

  	
   

  
	
  Section
  3.20

  	
  Real
  Property Interests

  	
   

  
	
  Section 3.21

  	
  Solvency

  	
   

  
	
  Section 3.22

  	
  Full Disclosure

  	
   

  

 

i

 

	
  ARTICLE 4 AFFIRMATIVE COVENANTS

  	
   

  
	
  Section 4.1

  	
  Financial
  Statements and Other Reports

  	
   

  
	
  Section 4.2

  	
  Payment and
  Performance of Obligations

  	
   

  
	
  Section 4.3

  	
  Maintenance
  of Existence

  	
   

  
	
  Section 4.4

  	
  Maintenance
  of Property; Insurance

  	
   

  
	
  Section 4.5

  	
  Compliance with
  Laws

  	
   

  
	
  Section 4.6

  	
  Inspection
  of Property, Books and Records

  	
   

  
	
  Section 4.7

  	
  Use
  of Proceeds

  	
   

  
	
  Section 4.8

  	
  Lenders’
  Meetings

  	
   

  
	
  Section 4.9

  	
  [Intentionally omitted]

  	
   

  
	
  Section 4.10

  	
  Hazardous
  Materials; Remediation

  	
   

  
	
  Section 4.11

  	
  [Intentionally omitted]

  	
   

  
	
  Section 4.12

  	
  Further
  Assurances

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 NEGATIVE COVENANTS

  	
   

  
	
  Section 5.1

  	
  Debt

  	
   

  
	
  Section 5.2

  	
  Liens

  	
   

  
	
  Section 5.3

  	
  Contingent
  Obligations

  	
   

  
	
  Section 5.4

  	
  Restricted
  Distributions

  	
   

  
	
  Section 5.5

  	
  Restrictive
  Agreements

  	
   

  
	
  Section 5.6

  	
  Payments
  and Modifications of Subordinated Debt

  	
   

  
	
  Section 5.7

  	
  Consolidations,
  Mergers and Sales of Assets

  	
   

  
	
  Section 5.8

  	
  Purchase of
  Assets, Investments

  	
   

  
	
  Section 5.9

  	
  Transactions
  with Affiliates

  	
   

  
	
  Section
  5.10

  	
  Modification
  of Organizational Documents

  	
   

  
	
  Section
  5.11

  	
  Modification
  of Certain Agreements

  	
   

  
	
  Section 5.12

  	
  Fiscal Year

  	
   

  
	
  Section 5.13

  	
  Conduct of
  Business

  	
   

  
	
  Section 5.14

  	
  Investor Fees

  	
   

  
	
  Section 5.15

  	
  [Intentionally omitted]

  	
   

  
	
  Section
  5.16

  	
  Limitation
  on Sale and Leaseback Transactions

  	
   

  
	
  Section 5.17

  	
  Bank Accounts

  	
   

  
	
  Section
  5.18

  	
  Compliance
  with Anti-Terrorism Laws

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 FINANCIAL COVENANTS

  	
   

  
	
  Section 6.1

  	
  Capital
  Expenditures

  	
   

  
	
  Section 6.2

  	
  Fixed
  Charge Coverage Ratio

  	
   

  
	
  Section 6.3

  	
  Total
  Debt to Adjusted EBITDA Ratio

  	
   

  
	
  Section 6.4

  	
  Senior
  Debt to Adjusted EBITDA Ratio

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7
  CONDITIONS

  	
   

  
	
  Section 7.1

  	
  Conditions
  to Closing

  	
   

  
	
  Section 7.2

  	
  Conditions
  to Each Loan, Support Agreement and Lender Letter of Credit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 EVENTS OF DEFAULT

  	
   

  
	
  Section 8.1

  	
  Events
  of Default

  	
   

  
	
  Section 8.2

  	
  Acceleration
  and Suspension or Termination of Revolving Loan Commitment

  	
   

  

 

ii

 

	
  Section 8.3

  	
  Cash
  Collateral

  	
   

  
	
  Section 8.4

  	
  Default
  Rate of Interest and Suspension of LIBOR Rate Options

  	
   

  
	
  Section 8.5

  	
  Setoff
  Rights

  	
   

  
	
  Section 8.6

  	
  Application
  of Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9 EXPENSES AND INDEMNITY

  	
   

  
	
  Section 9.1

  	
  Expenses

  	
   

  
	
  Section 9.2

  	
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10 ADMINISTRATIVE AGENT

  	
   

  
	
  Section 10.1

  	
  Appointment
  and Authorization

  	
   

  
	
  Section 10.2

  	
  Administrative
  Agent and Affiliates

  	
   

  
	
  Section 10.3

  	
  Action
  by Administrative Agent

  	
   

  
	
  Section 10.4

  	
  Consultation
  with Experts

  	
   

  
	
  Section 10.5

  	
  Liability
  of Administrative Agent

  	
   

  
	
  Section 10.6

  	
  Indemnification

  	
   

  
	
  Section 10.7

  	
  Right
  to Request and Act on Instructions

  	
   

  
	
  Section 10.8

  	
  Credit
  Decision

  	
   

  
	
  Section 10.9

  	
  Collateral
  Matters

  	
   

  
	
  Section 10.10

  	
  Agency
  for Perfection

  	
   

  
	
  Section 10.11

  	
  Notice
  of Default

  	
   

  
	
  Section 10.12

  	
  Successor
  Administrative Agent

  	
   

  
	
  Section 10.13

  	
  Disbursements
  of Revolving Loans; Payment and Sharing of Payment

  	
   

  
	
  Section 10.14

  	
  Right
  to Perform, Preserve and Protect

  	
   

  
	
  Section 10.15

  	
  Additional
  Titled Agents

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11 MISCELLANEOUS

  	
   

  
	
  Section 11.1

  	
  Survival

  	
   

  
	
  Section 11.2

  	
  No
  Waivers

  	
   

  
	
  Section 11.3

  	
  Notices

  	
   

  
	
  Section 11.4

  	
  Severability

  	
   

  
	
  Section 11.5

  	
  Amendments
  and Waivers

  	
   

  
	
  Section 11.6

  	
  Assignments;
  Participations; Replacement of Lenders

  	
   

  
	
  Section 11.7

  	
  Headings

  	
   

  
	
  Section 11.8

  	
  Confidentiality

  	
   

  
	
  Section
  11.9

  	
  Waiver of
  Consequential and Other Damages

  	
   

  
	
  Section
  11.10

  	
  Marshaling;
  Payments Set Aside

  	
   

  
	
  Section
  11.11

  	
  GOVERNING
  LAW; SUBMISSION TO JURISDICTION

  	
   

  
	
  Section 11.12

  	
  WAIVER OF JURY
  TRIAL

  	
   

  
	
  Section
  11.13

  	
  Publication;
  Advertisement

  	
   

  
	
  Section
  11.14

  	
  Counterparts;
  Integration

  	
   

  
	
  Section
  11.15

  	
  No Strict
  Construction

  	
   

  

 

iii

 

ANNEXES, EXHIBITS AND SCHEDULES

 

	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex A

  	
  -

  	
  Commitment Annex

  
	
  Annex B

  	
  -

  	
  Closing Checklist

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Assignment Agreement

  
	
  Exhibit B

  	
  -

  	
  Excess Cash Flow Certificate

  
	
  Exhibit C

  	
  -

  	
  Compliance Certificate

  
	
  Exhibit D

  	
  -

  	
  Borrowing Base Certificate

  
	
  Exhibit E

  	
  -

  	
  Notice of Borrowing

  
	
  Exhibit F

  	
  -

  	
  Payment Notification

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 3.1

  	
  -

  	
  Existence, Organizational Identification Numbers,
  Foreign Qualification, Prior Names

  
	
  Schedule 3.4

  	
  -

  	
  Capitalization

  
	
  Schedule 3.6

  	
  -

  	
  Litigation

  
	
  Schedule 3.15

  	
  -

  	
  Brokers

  
	
  Schedule 3.17

  	
  -

  	
  Material Contracts

  
	
  Schedule 3.18

  	
  -

  	
  Environmental Matters

  
	
  Schedule 3.19

  	
  -

  	
  Intellectual Property

  
	
  Schedule 3.20

  	
  -

  	
  Owned Real Estate

  
	
  Schedule 5.1

  	
  -

  	
  Debt

  
	
  Schedule 5.2

  	
  -

  	
  Liens

  
	
  Schedule 5.3

  	
  -

  	
  Contingent Obligations

  
	
  Schedule 5.8

  	
  -

  	
  Investments

  
	
  Schedule 5.9

  	
  -

  	
  Affiliate Transactions

  
	
  Schedule 5.13

  	
  -

  	
  Business Description

  

 

 

CREDIT AGREEMENT

 

CREDIT
AGREEMENT dated as of August 29, 2005 among LOUD TECHNOLOGIES INC., a
Washington corporation (“LOUD”),
ST. LOUIS MUSIC, INC., a Missouri corporation (“SLM”; LOUD and SLM, each as a Borrower), the financial
institutions or other entities from time to time parties hereto, each as a
Lender, MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial
Services Inc., individually as a Lender, as Administrative Agent, Sole
Bookrunner and Sole Lead Arranger, and ING CAPITAL LLC, as Syndication Agent.

 

RECITALS:

 

WHEREAS,
Borrowers desire that Lenders extend certain term credit and working capital
facilities to Borrowers to provide funds necessary to refinance Debt of
Borrowers and to provide working capital financing for Borrowers; and

 

WHEREAS,
each Borrower desires to secure all of the Obligations by granting to
Administrative Agent, for the benefit of Administrative Agent and Lenders, a
first priority perfected Lien upon all of its personal and real property,
including without limitation all of the outstanding capital stock or other
equity securities, as applicable, of each Domestic Subsidiary and sixty-five
percent (65%) of the outstanding capital stock or other equity securities of
each Foreign Subsidiary that is directly owned by a Borrower or a Domestic
Subsidiary but that is not a Dormant Subsidiary; and

 

WHEREAS,
each Domestic Subsidiary of each Borrower is willing to guaranty all of the
Obligations, and to grant to Administrative Agent, for the benefit of
Administrative Agent and Lenders, a first priority perfected Lien upon
substantially all of its personal and real property;

 

NOW,
THEREFORE, in consideration of the premises and the agreements, provisions and
covenants herein contained, Borrowers, Lenders and Administrative Agent agree
as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.1             Certain
Defined Terms.

 

The
following terms have the following meanings:

 

“Acceleration Event” means the occurrence of
an Event of Default (i) in respect of which Administrative Agent has
declared all or any portion of the Obligations to be immediately due and
payable, in accordance with the provisions of Section 8.2, (ii) pursuant
to Section 8.1(a), and in respect of which Administrative Agent has suspended
or terminated the Revolving Loan Commitment pursuant to Section 8.2 and/or
(iii) pursuant to either Section 8.1(f) and/or Section 8.1(g).

 

 

“Account Debtor” means “account debtor”, as
defined in Article 9 of the UCC.

 

“Accounts” means “accounts” (as defined in
Article 9 of the UCC), including any and all rights to payment for the sale or
lease of goods or rendition of services, whether or not they have been earned
by performance.

 

“Acquisition Pro Forma” has the meaning set
forth in Section 5.8(b).

 

“Acquisition Projections” has the meaning
set forth in Section 5.8(b).

 

“Additional Titled Agents” has the meaning
set forth in Section 10.15.

 

“Adjusted EBITDA” has the meaning provided
in the Compliance Certificate.

 

“Adjustment Date” means the first Business
Day of each March, June, September and December of each year, commencing with
the first Business Day of March, 2006.

 

“Administrative Agent”
means Merrill Lynch in its capacity as administrative agent for the Lenders
hereunder, as such capacity is established in, and subject to the provisions
of, Article 10, and the successors of Merrill Lynch in such capacity.

 

“Affected Lender” has the meaning set forth
in Section 11.6(c).

 

“Affiliate” means with respect to any Person (i) any
Person that directly or indirectly controls such Person, (ii) any Person
which is controlled by or is under common control with such controlling Person,
(iii) each of such Person’s (other than, with respect to any Lender, any
Lender’s) officers or directors (or Persons functioning in substantially
similar roles) and the spouses, parents, descendants and siblings of such
officers, directors or other Persons.  As
used in this definition, the term “control” of a
Person means the possession, directly or indirectly, of the power to vote ten
percent (10%) or more of any class of voting securities of such Person or to
direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Credit Agreement, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.

 

“Anti-Terrorism Laws” means any Laws
relating to terrorism or money laundering, including Executive Order
No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the
Laws comprising or implementing the Bank Secrecy Act, and the Laws administered
by OFAC.

 

“Approved Fund” means any
(i) investment company, fund, trust, securitization vehicle or conduit
that is (or will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary

 

2

 

course of its
business or (ii) any Person (other than a natural person) which
temporarily warehouses loans for any Lender or any entity described in the
preceding clause (i) and that, with respect to each of the preceding clauses
(i) and (ii), is administered or managed, with respect to investment activities
by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person
(other than a natural person) or an Affiliate of a Person (other than a natural
person) that administers or manages a Lender.

 

“Asset Disposition” means any sale, lease, license, transfer,
assignment or other consensual disposition by any Credit Party of any asset,
but excluding (i) dispositions of Inventory in the Ordinary Course of
Business, (ii) dispositions of Cash Equivalents, (iii) transfers among
Borrowers and their Domestic Subsidiaries (other than Dormant Subsidiaries) not
otherwise prohibited hereunder, (iv) the granting of licenses of
Intellectual Property in the Ordinary Course of Business and (v) related
dispositions which do not involve proceeds in excess of $150,000.

 

“Assignment Agreement” means an agreement
substantially in the form of Exhibit A hereto.

 

“Bankruptcy Code” means Title 11 of the
United States Code entitled “Bankruptcy”.

 

“Base Rate” means a
variable per annum rate, as of any date of determination, equal to the greater
of (i) the Federal Funds Rate plus one-half of one percent (0.50%) per
annum and (ii) the rate of interest which is identified and normally
published by Bloomberg Professional Service Page Prime as the “Prime Rate” (or,
if more than one rate is published as the Prime Rate, then the highest of such
rates).  Any change in Base Rate will
become effective as of the date the rate of interest which is so identified as
the “Prime Rate” is different from that published on the preceding Business
Day.  If Bloomberg Professional Service
no longer reports the Prime Rate, or if such Page Prime no longer exists, or
Administrative Agent determines in good faith that the rate so reported no
longer accurately reflects an accurate determination of the prevailing Prime
Rate, Administrative Agent may select a reasonably comparable index or source
to use as the basis for the Base Rate.

 

“Base Rate Loans” means Loans which accrue
interest by reference to the Base Rate, in accordance with the terms of this
Agreement.

 

“Base Rate Margin” means (i) as of the
Closing Date, 2.50% per annum, with respect to the Revolving Loans, Swingline
Loans, Term Loan A and other Obligations (other than Term Loan B), and 3.00%
per annum with respect to Term Loan B and (ii) thereafter, as of each
Adjustment Date, the applicable percent per annum set forth in the Pricing
Table corresponding to the Total Debt to Adjusted EBITDA Ratio as of the last
day of the most recently completed calendar quarter prior to the applicable
Adjustment Date; provided, that if an Event of
Default under Section 8.1(a) or Section 8.1(b) as a result of a
violation of Article 6 has occurred and is continuing on an Adjustment Date, no
reduction in the Base Rate Margin shall occur on such Adjustment Date.

 

3

 

“Blocked Person” means any Person:  (i) listed in the annex to, or is
otherwise subject to the provisions of, Executive Order No. 13224;
(ii) a Person owned or controlled by, or acting for or on behalf of, any
Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224; (iii) a Person with which
any Lender is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law; (iv) a Person that commits, threatens or
conspires to commit or supports “terrorism” as defined in Executive Order
No. 13224; or (v) a Person that is named a “specially designated
national” or “blocked person” on the most current list published by OFAC or
other similar list.

 

“Borrowers” mean collectively LOUD and SLM.

 

“Borrower Representative” means LOUD in its
capacity as Borrower Representative pursuant to the provisions of
Section 2.11, or any successor Borrower Representative selected by
Borrowers and approved by Agent.

 

“Borrower’s Account” means, with respect to any Borrower, the
account specified on the signature pages hereof below such Borrower’s name into
which Loans for the benefit of such Borrower shall, absent other instructions,
be made, or such other account as such Borrower may specify by notice to
Administrative Agent.

 

“Borrowing Base” means, as of any date of calculation, a
dollar amount calculated pursuant to the Borrowing Base Certificate most
recently delivered to Administrative Agent in accordance with the terms hereof,
equal to the sum of 85% of Eligible Accounts and 60% of Eligible Inventory
(exclusive of raw materials) and 35% of Eligible Inventory consisting of raw
materials.  The maximum amount of
Eligible Accounts of LOUD UK (after the application of the 85% advance rate)
that can be included when calculating the Borrowing Base will be $2,500,000.

 

“Borrowing Base Certificate” means a certificate, duly
executed by a Responsible Officer of Borrower Representative, appropriately
completed and substantially in the form of Exhibit D hereto.

 

“Business Day” means any day except a Saturday, Sunday or
other day on which either the New York Stock Exchange is closed, or on which
commercial banks in Chicago and New York City are authorized by law to close
and, in the case of a Business Day which relates to a LIBOR Loan, a day on
which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” has the meaning provided in the
Compliance Certificate.

 

“Capital Lease” of any Person means any lease of any property
by such Person as lessee which would, in accordance with GAAP, be required to
be accounted for as a capital lease on the balance sheet of such Person.

 

4

 

“Cash Equivalents” means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof with a maturity date of
no more than one (1) year from the date of acquisition, (ii) commercial
paper with a duration of not more than nine (9) months rated at least A-1 by
Standard & Poor’s Ratings Service and P-1 by Moody’s Investors Services,
Inc., which is issued by a Person (other than any Credit Party or an Affiliate
of any Credit Party) organized under the laws of any State of the United States
or of the District of Columbia, (iii) time deposits, certificates of
deposit and banker’s acceptances with a duration of not more than six (6)
months issued by any office located in the United States of any bank or trust
company which is organized under the laws of the United States or any State
thereof, or is licensed to conduct a banking business in the United States, and
has capital, surplus and undivided profits of at least $500,000,000 and which
issues (or the parent of which issues) certificates of deposit or commercial
paper with a rating described in clause (ii) above, (iv) repurchase
agreements and reverse repurchase agreements with a duration of not more than
30 days with respect to securities described in clause (i) above entered into
with an office of a bank or trust company meeting the criteria specified in
clause (iii) above, or (v) any money market or mutual fund which invests
only in the foregoing types of investments, has portfolio assets in excess of
$5,000,000,000 and is rated AAA by Standard & Poor’s Ratings Service and
Aaa by Moody’s Investors Services, Inc. 
With respect to any Foreign Subsidiary, “Cash Equivalents” shall mean
any Investment substantively comparable to the foregoing but in the currency of
the jurisdiction of organization of such Subsidiary or Euros.

 

“CERCLA” means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980.

 

“Chattel Paper” means “chattel paper”, as defined
in Article 9 of the UCC.

 

“Closing Checklist” means Annex B to this
Agreement.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the Internal Revenue Code of 1986.

 

“Collateral” means all property, now existing or hereafter
acquired, mortgaged or pledged to, or purported to be subjected to a Lien in
favor of, Administrative Agent, for the benefit of Administrative Agent and
Lenders, pursuant to the Security Documents.

 

“Commitment Annex” means Annex A to this Agreement.

 

“Commitment Expiry Date” means August 29,
2010.

 

“Compliance Certificate” means a
certificate, duly executed by a Responsible Officer of Borrower Representative,
appropriately completed and substantially in the form of Exhibit C hereto.

 

5

 

“Consolidated Subsidiary” means at any date any Subsidiary or
other Person the accounts of which would be consolidated with those of a
Borrower (or any other Person, as the context may require hereunder) in its
consolidated financial statements if such statements were prepared as of such
date.

 

“Contingent Obligation” means, with respect to any Person,
any direct or indirect liability of such Person:  (i) with respect to any debt, lease,
dividend or other payment obligation of another Person if the purpose or intent
of such Person incurring such liability, or the effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreement to pay relating thereto will be complied
with, or that any holder of such liability will be protected, in whole or in
part, against loss with respect thereto (other than pursuant to Ordinary Course
of Business indemnification provisions in agreements for which no claim has
been asserted); (ii) with respect to any undrawn portion of any letter of
credit issued for the account of such Person or as to which such Person is
otherwise liable for the reimbursement of any drawing; (iii) under any
Swap Contract, to the extent not yet due and payable; (iv) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement; or (v) for any obligations of
another Person pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to preserve
the solvency, financial condition or level of income of another Person,
excluding in the case of this clause (v) any obligation in connection with
upfront payments from vendors or suppliers. 
The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported or, if not a fixed and
determinable amount, the maximum amount so guaranteed or otherwise
supported.  It is hereby understood and
agreed that all Floor Plan Obligations shall constitute Contingent Obligations.

 

“Controlled Group” means all members of a
group of corporations and all members of a group of trades or businesses
(whether or not incorporated) under common control which, together with any
Borrower, are treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code or Section 4001(b) of ERISA.

 

“Credit Exposure” means any period of time during which the
Revolving Loan Commitment is outstanding or any Loan, Reimbursement Obligation
or other Obligation remains unpaid or any Letter of Credit or Support Agreement
remains outstanding; provided,
that no Credit Exposure shall be deemed to exist solely due to the existence of
contingent indemnification liability, absent the assertion of a claim, or the
existence of a claim known to Administrative Agent and reasonably likely to be
asserted, with respect thereto.

 

“Credit Party” means any of any Borrower and any Subsidiary
of any Borrower, whether now existing or hereafter acquired or formed; and “Credit Parties” means all such Persons,
collectively.

 

“Debt” of a Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds,

 

6

 

debentures, notes
or other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except (a) trade
accounts payable and accrued expenses arising and paid in the ordinary course
of business as modified from time to time, (b) except as provided in
clause (ix) below, the SLM Holdback Payment Obligations, and (c) salaries,
employee benefits and deferred compensation, (iv) all Capital Leases of
such Person, (v) all obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under any letter of credit and all
non-contingent obligations of such Person to reimburse any bank or other Person
in respect of amounts paid under a banker’s acceptance or similar instrument,
(vi) all equity securities of such Person subject to repurchase or
redemption otherwise than at the sole option of such Person (except where such
repurchase or redemption rights may not, by the terms thereof, arise at any
time during the term of this Agreement or while any of the Obligations (other
than contingent indemnification liability, absent the assertion of a claim with
respect thereto) remain outstanding), (vii) all obligations secured by a
consensual Lien on any asset of such Person, whether or not such obligation is
otherwise an obligation of such Person (but, if not, then only to the extent of
the fair market value of the asset securing such obligations), (viii) ”earnouts”
and similar payment obligations of such Person, (ix) the undrawn portion
of the SLM Letter of Credit (and prior to the issuance thereof, the SLM
Holdback Payment Obligation; it being agreed that the SLM Holdback Payment Obligation
shall not be considered “Debt” for purposes of Section 5.1), and (x) all
Debt of others Guaranteed by such Person. 
It is hereby understood and agreed that in no event shall the term “Debt”
include the Foreign Payment Obligations and any Floor Plan Obligations.

 

“Default” means any condition or event which with the giving
of notice or lapse of time or both would, unless cured or waived, become an
Event of Default.

 

“Defaulted Lender” means, so long as such
failure shall remain in existence and uncured, any Lender which shall have
failed to make any Loan or other credit accommodation, disbursement or
reimbursement required pursuant to the terms of any Financing Document.

 

“Domestic Subsidiary” means a Subsidiary
organized, incorporated or otherwise formed under the laws of the United States
or any State thereof.

 

“Dormant Subsidiaries” means Mackie Designs
(France) S.A., a French entity, Class A, s.r.o., a Czech entity, Mackie
Designs (Deutschland) GmbH, a German entity, Mackie Designs (Netherlands) B.V.,
a Netherlands entity and Mackie Designs Inc., a Washington corporation.

 

“EBITDA” has the meaning provided in the Compliance
Certificate.

 

“Eligible  Accounts”
means all Accounts of each Borrower and LOUD UK, except for any Account:

 

(A)          that
is unpaid more than sixty (60) days after the due date therefor, not to exceed
one hundred eighty (180) days after the date of the original invoice therefor,
in the

 

7

 

case of dated
accounts, or more than one hundred twenty (120) days after the date of the
original invoice therefor, in the case of undated accounts;

 

(B)           that
is the obligation of an Account Debtor if fifty percent (50%) or more of the
dollar amount of all Accounts owing by that Account Debtor are ineligible under
the other criteria set forth herein;

 

(C)           that
arises from a sale to any director,
officer, other employee, salesperson or Affiliate of any Credit Party, or to
any Person (other than a natural person) which has any common officer or
director with any Credit Party, excluding any Account Debtor that is an
Affiliate of any Credit Party solely because such Affiliate is owned or
controlled by Investor or an Affiliate of Investor or has common officers or
directors as a result thereof and is otherwise on terms and conditions
comparable to those that would be agreed to in an arms-length transaction.

 

(D)          that
is the obligation of an Account Debtor located in a foreign country other than
Canada (but, in the case of Canada, limited to Account Debtors located in
Ontario or any other province of Canada in which the Personal Property Security
Act has been adopted in substantially the same form as currently in effect in
Ontario) unless (i) the Account Debtor has delivered to, and for the
benefit of, the applicable Borrower or LOUD UK an irrevocable letter of
credit issued or confirmed by a bank satisfactory to Administrative Agent and
payable only in the United States and in United States dollars, sufficient to
cover such Account, in form and substance satisfactory to Administrative Agent
and, if required by Administrative Agent, the original of such letter of credit
has been delivered to Administrative Agent or Administrative Agent’s agent, and
applicable Borrower or LOUD UK has assigned the proceeds of such letter of
credit to Administrative Agent pursuant to documentation in form and substance
acceptable to Administrative Agent or otherwise named Administrative Agent as
transferee beneficiary thereunder, as Administrative Agent may specify,
(ii) such Account is subject to credit insurance payable to Administrative
Agent issued by an insurer and on terms and in an amount acceptable to
Administrative Agent, or (iii) such Account is otherwise acceptable in all
respects to Administrative Agent (subject to such limits or lending formulae
with respect thereto as Administrative Agent may determine);

 

(E)           that
is the obligation of an Account Debtor that is the United States government or
a political subdivision thereof, or any state or municipality or department,
agency or instrumentality thereof unless and to the extent with respect to all
such Accounts in excess of $100,000 that Borrower or LOUD UK has either
(i) complied in a manner reasonably acceptable to Administrative Agent
with the Federal Assignment of Claims Act of 1940 or any applicable state
statute or municipal ordinance of similar purpose and effect, with respect to
such obligation; or (ii) delivered to Administrative Agent information
reasonably acceptable to Administrative Agent indicating that compliance with
such Laws is not a necessary precondition for Administrative Agent to send a
binding, enforceable notification to the applicable Account Debtor to make
payment on such Account directly to Administrative Agent;

 

8

 

(F)           as
to which any proceedings or actions known to any Credit Party (or to
Administrative Agent) are threatened or pending against the Account Debtor with
respect to such Account which could reasonably be expected to have a material
adverse change in any such Account Debtor’s financial condition (including,
without limitation, any bankruptcy, dissolution, liquidation, reorganization or
similar proceeding);

 

(G)           that
consists of progress billings (such that the obligation of the Account Debtors
with respect to such Account is conditioned upon the applicable Borrower’s or
LOUD UK’s satisfactory completion of any further performance under the
agreement giving rise thereto), bill and hold invoices or retainage invoices,
except as to bill and hold invoices, if Administrative Agent shall have
received an agreement from the Account Debtor, in form and substance
satisfactory to Administrative Agent, confirming the unconditional obligation
of the Account Debtor to take the goods related thereto and pay such invoice;

 

(H)          owed
by an Account Debtor obligated in respect of Accounts constituting more than
thirty percent (30%) of the aggregate amount of all Accounts (but the portion
of the Accounts not in excess of the applicable percentages may be deemed Eligible
Accounts);

 

(I)            to
the extent any good faith defense, counterclaim, setoff or dispute is asserted
as to such Account but, subject to the terms hereof, the amount not subject to
any such defense, counterclaim, set-off or dispute may nonetheless be an Eligible
Account;

 

(J)            to
the extent such Account is evidenced by a judgment, Instrument or Chattel
Paper;

 

(K)          as
to which Administrative Agent’s Lien therein, on behalf of itself and Lenders,
is not a first priority perfected security interest;

 

(L)           that
(i) is not owned by the applicable Borrower or LOUD UK or
(ii) is subject to any Lien of any other Person, other than Liens in favor
of Administrative Agent, on behalf of itself and Lenders and other than
Permitted Liens described in clauses (d), (e), (f) and (g) of Section 5.2;

 

(M)         upon
which (i) the applicable Borrower’s or LOUD UK’s right to receive
payment is not absolute or is contingent (subject to Ordinary Course of
Business return rights) upon the fulfillment of any condition whatsoever
(including any Account that arises from a sale on consignment, guaranteed sale,
sale and return, sale on approval or other terms under which payment by the
Account Debtor may be conditioned or contingent) or (ii) the applicable
Borrower or LOUD UK is not able to bring suit or otherwise enforce its
remedies against the Account Debtor through judicial process;

 

(N)          that
does not arise from the actual and bona fide sale and delivery of goods or the
performance of services by the applicable Borrower or LOUD UK in the Ordinary
Course of Business, or that does not arise from a transaction completed in all

 

9

 

material respects
in accordance with the terms and provisions contained in any documents related
thereto; and

 

(O)          that
is payable in any currency other than United States dollars (other than
Accounts generated by LOUD or SLM and payable in euros or pounds sterling in an
aggregate Dollar equivalent not to exceed $3,000,000 and Accounts generated by
LOUD UK).

 

For purposes of this Agreement, the amount of Eligible
Accounts at any time shall be equal to the face amount of such Eligible
Accounts at such time less, without duplication, any and all sales
returns, rebates, quick pay discounts, sales credits, international warranty
reserves, allowances or excise taxes of any nature issued, owing, claimed by
Account Debtors, granted, outstanding or payable in connection with such
Accounts at such time. Any Accounts of Borrowers and LOUD UK which are not
Eligible Accounts shall nevertheless be part of the Collateral to the extent
provided in the Security Documents.

 

“Eligible Assignee” means (i) a Lender,
(ii) an Affiliate of a Lender, (iii) an Approved Fund, and
(iv) any other financial institution or institutional investor approved by
(a) Administrative Agent, (b) in the case of any assignment of any
portion of the Revolving Loan Commitment, Swingline Lender, and (c) unless
either (I) Administrative Agent has not notified Borrowers that
Administrative Agent has completed the primary syndication of the Loans and/or
(II) an Event of Default has occurred and is continuing, Borrower
Representative (such approval of Borrower Representative not to be unreasonably
withheld or delayed, and shall be deemed provided unless expressly withheld by Borrower
Representative within ten (10) Business Days of request therefor); provided that notwithstanding the
foregoing, (x) ”Eligible Assignee” shall not include any Borrower or any
of a Borrower’s Affiliates or Subsidiaries and (y) no proposed assignee intending
to assume all or any portion of the Revolving Loan Commitment shall be an
Eligible Assignee unless such proposed assignee either already holds a portion
of the Revolving Loan Commitment, or has been approved as an Eligible Assignee
by Administrative Agent and Swingline Lender.

 

“Eligible Inventory” means all Inventory of each Borrower,
except for any Inventory:

 

(A)          that
consists of work-in-process;

 

(B)           that
in Administrative Agent’s reasonable determination or in the determination of
the applicable Borrower’s management is excess, obsolete, unsaleable, shopworn,
seconds, damaged or unfit for sale;

 

(C)           that
is not of a type held for sale by the applicable Borrower in the Ordinary
Course of Business;

 

(D)          as
to which Administrative Agent’s security interest therein, on behalf of itself
and Lenders, is not a first priority perfected security interest;

 

10

 

(E)           that
is not owned by the applicable Borrower free and clear of all Liens and rights
of any other Person (including the rights of a purchaser that has made progress
payments and the rights of a surety that has issued a bond to assure
performance with respect to that Inventory), except the Liens in favor of
Administrative Agent, on behalf of itself and Lenders;

 

(F)           that
is located on premises leased by the applicable Borrower or stored with a
bailee, warehouseman, processor or similar Person, unless
(i) Administrative Agent has given its consent thereto, (ii) a Lien
waiver and collateral access agreement, in form and substance satisfactory to
Administrative Agent has been delivered to Administrative Agent, together, in
the case of a processor, with any and all duly authorized UCC financing
statements required by Administrative Agent naming such Person as debtor, the
applicable Borrower as secured creditor and Administrative Agent as assignee or
(iii) reserves (three months rent) against borrowing availability
hereunder reasonably satisfactory to Administrative Agent have been established
with respect thereto;

 

(G)           that
is placed on consignment, is in transit (except for up to an aggregate amount
of Inventory in transit of $2,500,000), is outside the possession or control of
the applicable Borrower (other than as described in the preceding clause (F)
and it being understood that, for purposes of this clause (G), Inventory at any
location leased by a Credit Party shall be deemed to be in the possession and
control of such Credit Party)) or is in possession of the applicable Borrower
on a sale-on-approval or sale-on-return basis or subject to any other
repurchase agreement;

 

(H)          that
is manufactured, assembled or otherwise produced in violation of the Fair Labor
Standards Act and subject to the “hot goods” provisions contained in Title 25
U.S.C. 215(a)(i);

 

(I)            that
is located outside the United States of America or The Netherlands; and

 

(J)            as
to which Administrative Agent’s Lien thereon, on behalf of itself and Lenders,
is not a first priority perfected security interest.

 

For purposes of this Agreement, the amount of Eligible
Inventory shall be determined on a first-in, first-out, lower of cost or market
basis in accordance with GAAP, reduced by reserves established by any Borrower
in the Ordinary Course of Business, including without limitation reserves for “MRB”,
spare parts and loaner Inventory. 
Inventory located in The Netherlands will not be Eligible Inventory
until such time as Security Documents, in form and substance reasonably
satisfactory to the Administrative Agent have been executed, delivered and
recorded, as deemed necessary or advisable by Administrative Agent.  Thereafter, all of such Inventory shall be
Eligible Inventory, to the extent that such Inventory satisfies the eligibility
provisions set forth above.  Any
Inventory of Borrowers which is not Eligible Inventory shall nevertheless be
part of the Collateral to the extent provided in the Security Documents.

 

11

 

“Eligible Swap Counterparty” means
Administrative Agent, any Affiliate of Administrative Agent, any Lender and/or
any Affiliate of any Lender that (i) at any time it occupies such role or
capacity enters into a Swap Contract with any Borrower or any Subsidiary and
(ii) in the case of a Lender or an Affiliate of a Lender other than Administrative
Agent, is expressly identified by Administrative Agent as maintaining a
reporting system acceptable to Administrative Agent with respect to Swap
Contract exposure and agrees with Administrative Agent to provide regular
reporting to Administrative Agent, in form and content reasonably satisfactory
to Administrative Agent, with respect to such exposure.

 

“Environmental Laws” means any and all Laws relating to the
environment or the effect of Hazardous Materials on human health or to
emissions, discharges or releases of Hazardous Materials or wastes into the
environment, including ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials or
wastes or the clean-up or other remediation thereof.

 

“ERISA” means the Employee Retirement Income Security Act of
1974.

 

“ERISA Plan” means any “employee benefit
plan”, as such term is defined in Section 3(3) of ERISA (other than a
Multiemployer Plan), which any Borrower maintains, sponsors or contributes to,
or, in the case of an employee benefit plan which is subject to Section 412 of
the Code or Title IV of ERISA, to which any Borrower or any member of the
Controlled Group may have any liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.

 

“Event of Default” has the meaning set forth in Section 8.1.

 

“Excess Cash Flow” has the meaning provided in the Excess
Cash Flow Certificate.

 

“Excess Cash Flow Certificate” means a certificate, duly
executed by a Responsible Officer of Borrower Representative, appropriately
completed and substantially in the form of Exhibit B hereto.

 

“Extraordinary Receipts” means any cash, net
of expenses reasonably related thereto, received by any Credit Party not in the
Ordinary Course of Business (and not consisting of proceeds described in any of
clauses (ii), (iii) and/or (iv) of Section 2.1(c) and not consisting of amounts
received in respect of foreign, United States, State or local tax refunds),
including without limitation pension plan reversions.

 

“Federal Funds Rate” means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the

 

12

 

Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day and (ii) if no such rate is so published
on such next preceding Business Day, the Federal Funds Rate for such day shall
be the average rate quoted to Administrative Agent on such day on such
transactions as determined by Administrative Agent.

 

“Financing Documents” means this Agreement, any Notes, the
Security Documents, any fee letter among Merrill Lynch and any of the Borrowers
relating to the transactions contemplated hereby, the Subordination Agreement,
any subordination or intercreditor agreement (other than the Subordination
Agreement) pursuant to which any Debt (other than the Subordinated Debt) and/or
any Liens securing such Debt is subordinated to all or any portion of the
Obligations and all other documents, instruments and agreements contemplated
herein or thereby and heretofore executed, executed concurrently herewith or
executed at any time and from time to time hereafter, as any or all of the same
may be amended, supplemented, restated or otherwise modified from time to time.

 

“Fiscal Year” means a fiscal year of Borrowers, ending on
December 31 of each calendar year.

 

“Fixed Charge Coverage Ratio” has the
meaning provided in the Compliance Certificate.

 

“Floor Plan Obligations” means obligations
of the Borrowers in connection with the financing of inventory purchased by any
Borrower’s customer.

 

“Foreign Lender” has the meaning set forth
in Section 2.8(c).

 

“Foreign Payment Obligations” means
obligations owed to Mackie Designs (Italy) SPA in Liquidazione E
Concordato Preventivo, in an aggregate principal amount not to exceed
$3,200,000.

 

“Foreign Subsidiary” means any Subsidiary
that is not a Domestic Subsidiary.

 

“GAAP” means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
United States accounting profession), which are applicable to the circumstances
as of the date of determination.

 

“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, and any agency,
department or Person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to

 

13

 

government and any
corporation or other Person owned or controlled (through stock or capital
ownership or otherwise) by any of the foregoing, whether domestic or foreign.

 

“Guarantee” by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
payment obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other payment
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part) (other than pursuant to Ordinary Course
of Business indemnification provisions in agreement, for which no claim has
been asserted), provided that the term Guarantee
shall not include endorsements for collection or deposit in the Ordinary Course
of Business.  The term “Guarantee” used
as a verb has a corresponding meaning.

 

“Hazardous Materials” means (i) any “hazardous substance”
as defined in CERCLA, (ii) any “hazardous waste” as defined by the
Resource Conservation and Recovery Act, (iii) asbestos,
(iv) polychlorinated biphenyls, (v) petroleum, its derivatives, by-products
and other hydrocarbons, (vi) mold and (vii) any other pollutant,
toxic, radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.

 

“Hazardous Materials Contamination” means contamination
(whether now existing or hereafter occurring) of the improvements, buildings,
facilities, personalty, soil, groundwater, air or other elements on or of
property by Hazardous Materials which requires clean up or remediation under
Environmental Laws.

 

“Indemnitees” has the meaning set forth in Section 9.2.

 

“Instrument” means “instrument”, as defined
in Article 9 of the UCC.

 

“Intellectual Property” means, all patents,
trademarks, trade names, trade styles, trade dress, service marks, logos and
other business identifiers, copyrights, technology, know-how and processes,
computer hardware and software and all applications and licenses therefor.

 

“Intercompany Loans” has the meaning set
forth in Section 2.11.

 

“Interest Period” means, as to any LIBOR
Loan, the period commencing on the date such Loan is borrowed or continued as,
or converted into, a LIBOR Loan and ending on the date one (1), two (2), three
(3) or six (6) months (or, if all applicable Lenders consent thereto, twelve
(12) months) thereafter, as selected by Borrower Representative pursuant to
Section 2.3(e); provided,
that:  (a) if
any Interest Period would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the following Business Day

 

14

 

unless the result
of such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the preceding Business
Day; (b) any Interest Period that begins on a
day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; (c) Borrower
Representative may not select any Interest Period for a Revolving Loan which
would extend beyond the Commitment Expiry Date; and (d) Borrower
Representative may not select any Interest Period for a Term Loan if, after
giving effect to such selection, the aggregate principal amount of such Term
Loan having Interest Periods ending after any date on which an installment of
such Term Loan is scheduled to be repaid would exceed the aggregate principal
amount of such Term Loan scheduled to be outstanding after giving effect to
such repayment.

 

“Inventory” means “inventory” (as defined in Article 9 of the
UCC).

 

“Investment” means any investment in any Person, whether by
means of acquiring (whether for cash, property, services, securities or
otherwise) or holding securities, capital contributions, loans, time deposits,
advances, Guarantees or otherwise (it being agreed that Accounts held in the
Ordinary Course of Business shall not constitute Investments).  The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect thereto.

 

“Investor” means Sun Capital Partners Management, LLC, a
Delaware limited liability company and its Affiliates, successors and assigns.

 

“Laws” means any and all federal, state,
local and foreign statutes, laws, judicial decisions, regulations, binding
guidelines, ordinances, rules, judgments, orders, decrees, codes, injunctions,
permits, governmental concessions, grants, governmental agreements and
governmental restrictions, whether now or hereafter in effect.

 

“LC Issuer” means one or more banks, trust companies or other
Persons in each case expressly identified by Administrative Agent from time to
time, in its sole discretion, as an LC Issuer for purposes of issuing one or
more Letters of Credit hereunder. 
Without limitation of Administrative Agent’s discretion to identify any
Person as an LC Issuer, no Person shall be designated as an LC Issuer unless
such Person maintains reporting systems acceptable to Administrative Agent with
respect to letter of credit exposure and agrees to provide regular reporting to
Administrative Agent satisfactory to it with respect to such exposure.

 

“Lender” means each of (i) Merrill Lynch, (ii) each
other Person party hereto in its capacity as a lender, (iii) each other
Eligible Assignee that becomes a party hereto pursuant to Section 11.6,
(iv) Administrative Agent, to the extent of any Revolving Loans made by
Administrative Agent which have not been settled among the Lenders pursuant to
Section 10.13, and (v) the respective successors of all of the foregoing,
and “Lenders” means all of the foregoing. 
In addition to the foregoing, solely for the purpose of identifying the

 

15

 

Persons entitled
to share in the Collateral as more fully set forth in this Agreement and the
Security Documents (and not for purposes of any other rights, including voting
rights hereunder), the term “Lender” shall include Eligible Swap
Counterparties.  In connection with any
such distribution of payments and collections, Administrative Agent shall be
entitled to assume that no amounts are due to any Eligible Swap Counterparty
unless such Eligible Swap Counterparty has notified Administrative Agent of the
amount of any such liability owed to it prior to such distribution.

 

“Lender Letter of Credit” means a Letter of
Credit issued by an LC Issuer that is also, at the time of issuance of such
Letter of Credit, a Lender.

 

“Letter of Credit” means a standby or documentary (trade)
letter of credit issued for the account of any Borrower by an LC Issuer which
expires by its terms within one year after the date of issuance and in any
event at least five (5) days prior to the Commitment Expiry Date.  Notwithstanding the foregoing, a Letter of
Credit may provide for automatic extensions of its expiry date for one or more
successive one (1) year periods provided that the LC Issuer that issued such
Letter of Credit has the right to terminate such Letter of Credit on each such
annual expiration date and no renewal term may extend the term of the Letter of
Credit to a date that is later than the fifth (5th) day prior to the
Commitment Expiry Date.

 

“Letter of Credit Liabilities” means, at any time of
calculation, the sum of (i) without duplication, the amount then available
for drawing under all outstanding Lender Letters of Credit and all Supported
Letters of Credit, in each case without regard to whether any conditions to
drawing thereunder can then be met plus
(ii) without duplication, the aggregate unpaid amount of all reimbursement
obligations in respect of previous drawings made under all such Lender Letters
of Credit and Supported Letters of Credit.

 

“LIBOR” means, with respect to any LIBOR
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) equal to (i) the rate of interest which is
identified and normally published by Bloomberg Professional Service Page BBAM 1
as the offered rate for loans in United States dollars for the applicable
Interest Period under the caption British Bankers Association LIBOR Rates as of
11:00 a.m. (London time), on the second full Business Day next preceding the
first day of such Interest Period (unless such date is not a Business Day, in
which event the next succeeding Business Day will be used); divided by
(ii) the sum of one minus the daily average during such Interest Period of
the aggregate maximum reserve requirement (expressed as a decimal) then imposed
under Regulation D of the Board of Governors of the Federal Reserve System (or
any successor thereto) for “Eurocurrency Liabilities” (as defined
therein).  If Bloomberg Professional
Service no longer reports the LIBOR or Administrative Agent determines in good
faith that the rate so reported no longer accurately reflects the rate
available to Administrative Agent in the London Interbank Market or if such
index no longer exists or if Page BBAM 1 no longer exists or accurately
reflects the rate available to Administrative Agent in the London Interbank
Market, Administrative Agent may select a replacement index or replacement
page, as the case may be.

 

16

 

“LIBOR Loans” means any Loans, other than
Swingline Loans, which accrue interest by reference to the LIBOR, in accordance
with the terms of this Agreement.

 

“LIBOR Margin” means (i) as of the
Closing Date, 3.50% per annum, with respect to the Revolving Loans, Term Loan A
and other Obligations (other than the Swingline Loans and Term Loan B), and
4.00% per annum with respect to Term Loan B and (ii) thereafter, as of
each Adjustment Date, the applicable percent per annum set forth in the Pricing
Table corresponding to the Total Debt to Adjusted EBITDA Ratio as of the last
day of the most recently completed calendar quarter prior to the applicable
Adjustment Date; provided, that if an Event of
Default under Section 8.1(a) or 8.1(b) as a result of a violation of Article 6
has occurred and is continuing on an Adjustment Date, no reduction in the LIBOR
Margin shall occur on such Adjustment Date.

 

“Lien” means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. 
For the purposes of this Agreement and the other Financing Documents,
any Borrower or any Subsidiary shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or other title
retention agreement relating to such asset. 
No Person shall be deemed to have a Lien on any asset solely as a result
of such Person filing an unauthorized UCC-1 financing statement against any
such asset.

 

“Litigation” means any action, suit or
proceeding before any court, mediator, arbitrator or Governmental Authority.

 

“Loan Account” has the meaning set forth in Section 2.6(b).

 

“Loans” means Term Loan A, Term Loan B, the Revolving Loans
and the Swingline Loans, or any combination of the foregoing, as the context
may require.

 

“LOUD UK” means LOUD Technologies
(Europe) Plc, a public liability company organized under the laws of England
and Wales.

 

“Major Casualty Proceeds” means (i) the aggregate
insurance proceeds received in connection with one or more related events under
any Property Insurance Policy or (ii) any award or other compensation with
respect to any eminent domain, condemnation of property or similar proceedings
(or any transfer or disposition of property in lieu of condemnation), if the
amount of such aggregate insurance proceeds or award or other compensation exceeds
$250,000.

 

“Management Agreement” means the Management Services Agreement dated
as of February 21, 2003 between LOUD and Sun Capital Partners Management, LLC,
which agreement has not been amended or otherwise modified.

 

“Margin Stock” has the meaning assigned thereto in Regulation
U of the Federal Reserve Board.

 

17

 

“Material Adverse Effect” means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any
of (i) the financial condition, operations, business or properties of the
Credit Parties, taken as a whole, (ii) the rights and remedies (taken as a
whole) of Administrative Agent or Lenders under any Financing Document, or the
ability of any Credit Party to perform their obligations under any Financing
Document to which it is a party, (iii) the legality, validity or
enforceability of any Financing Document, or (iv) the existence,
perfection or priority of any security interest granted in any Financing
Document or the value of any material portion of the Collateral.

 

“Material Contracts” has the meaning set
forth in Section 3.17.

 

“Maximum Lawful Rate” has the meaning set
forth in Section 2.7(b).

 

“Merrill Lynch” means Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., and its
successors.

 

“Multiemployer Plan” means a multiemployer
plan, that is intended to meet the definition set forth in Section 4001(a)(3)
of ERISA, to which any Borrower or any member of the Controlled Group may have
any liability.

 

“Net Cash Proceeds” means, with respect to any transaction or
event or any event giving rise to Major Casualty Proceeds, an amount equal to
the cash proceeds received by any Credit Party from or in respect of such
transaction or event (including cash proceeds of any non-cash proceeds of such
transaction), less (i) any out-of-pocket expenses (including legal fees,
brokers’ or underwriters’ commissions, accountants’ fees and other customary
fees and expenses) that are reasonably incurred by such Credit Party in
connection therewith, (ii) amounts required to be paid to Governmental
Authorities in connection therewith, and (iii) in the case of an Asset
Disposition, the amount of any Debt secured by a Lien on the related asset and
discharged from the proceeds of such Asset Disposition and any taxes paid or
reasonably estimated by the applicable Credit Party to be payable by such
Person in respect of such Asset Disposition (provided,
that if the actual amount of taxes paid is materially less than the estimated
amount, the difference shall immediately constitute Net Cash Proceeds and shall
be promptly paid to the Administrative Agent for application in accordance with
the terms hereof).

 

“Non-Funding Revolving Lender” means a
Revolving Lender that has delivered a notice to each of Administrative Agent
and Swingline Lender stating that such Revolving Lender shall cease making
Revolving Loans due to the non-satisfaction of one or more conditions set forth
in Article 7, and specifying any such non-satisfied conditions; provided, that any Revolving Lender
delivering any such notice shall be a Non-Funding Revolving Lender solely over
the period commencing on the Business Day following receipt by Administrative
Agent and Swingline Lender of such notice, and terminating on such date

 

18

 

that such
Revolving Lender has either revoked the effectiveness of such notice or
acknowledged to each of Administrative Agent and Swingline Lender the
satisfaction of the condition specified in such notice.

 

“Notes” means the Term Notes A, the Term Notes B, the
Revolving Loan Notes and the Swingline Loan Note, or any combination of the
foregoing, as the context may require.

 

“Notice of Borrowing” means a notice of a Responsible Officer
of Borrower Representative, appropriately completed and substantially in the
form of Exhibit E hereto.

 

“Notice of LC Credit Event” means a notice from a Responsible
Officer of Borrower Representative to Administrative Agent with respect to any
issuance, increase or extension of a Letter of Credit specifying: (i) the
date of issuance or increase of a Letter of Credit; (ii) the identity of
the LC Issuer with respect to such Letter of Credit, (iii) the expiry date
of such Letter of Credit; (iv) the proposed terms of such Letter of
Credit, including the face amount; and (v) the transactions that are to be
supported or financed with such Letter of Credit or increase thereof.

 

“Obligations” means all obligations,
liabilities and indebtedness (monetary (including post-petition interest,
whether or not allowed) or otherwise) of each Credit Party under this Agreement
or any other Financing Document, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.  In
addition to, but without duplication of, the foregoing, the Obligations shall
include, without limitation, all obligations, liabilities and indebtedness
arising from or in connection with (i) all Support Agreements,
(ii) all Lender Letters of Credit and (iii) all Swap Contracts
entered into with any Eligible Swap Counterparty.

 

“OFAC” means the U.S. Department of Treasury
Office of Foreign Assets Control.

 

“OFAC Lists” means, collectively, the
Specially Designated Nationals and Blocked Persons List maintained by OFAC
pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001)
and/or any other list of terrorists or other restricted Persons maintained
pursuant to any of the rules and regulations of OFAC or pursuant to any other
applicable Executive Orders.

 

“Operative Documents” means the Financing Documents and the
Subordinated Debt Documents.

 

“Ordinary Course of Business” means, in
respect of any transaction involving any Credit Party, the ordinary course of
such Credit Party’s business, as conducted by such Credit Party in accordance
with past practices.

 

“Organizational Documents” means, with respect to any Person
other than a natural person, the documents by which such Person was organized
(such as a certificate of incorporation, certificate of limited partnership or
articles of organization, and including,

 

19

 

without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Person
(such as by-laws, a partnership agreement or an operating, limited liability
company or members agreement).

 

“Overadvance Revolving Loans” has the
meaning set forth in Section 2.2(a)(ii).

 

“Participant” has the meaning set forth in
Section 11.6(b).

 

“Payment Account” means the account specified on the
signature pages hereof into which all payments by or on behalf of each Borrower
to Administrative Agent under the Financing Documents shall be made, or such
other account as Administrative Agent shall from time to time specify by notice
to Borrower Representative.

 

“Payment Notification” means a written
notification substantially in the form of Exhibit F hereto.

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any Person succeeding to any or all of its functions under
ERISA.

 

“Pension Plan” means any ERISA Plan that is
subject to Section 412 of the Code or Title IV of ERISA.

 

“Permits” has the meaning set forth in
Section 3.1.

 

“Permitted Acquisition” has the meaning set
forth in Section 5.8(b).

 

“Permitted Contest” means a contest maintained in good faith
by appropriate proceedings timely instituted and diligently conducted and with
respect to which such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made; provided that
compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.

 

“Permitted Liens” means Liens permitted pursuant to Section 5.2.

 

“Person” means any natural person, corporation, limited
liability company, professional association, limited partnership, general
partnership, joint stock company, joint venture, association, company, trust,
bank, trust company, land trust, business trust or other organization, whether
or not a legal entity, and any Governmental Authority.

 

20

 

“Pricing Table” means the following table:

 

	
  Tier

  	
   

  	
  Total Debt to

  Adjusted EBITDA

  	
   

  	
  Revolving Loans, Term

  Loan A and all other

  Obligations (other than

  Swingline Loans and Term

  Loan B)

  	
   

  	
  Term Loan B

  	
   

  	
  Swingline

  Loans

  	
   

  
	
  Level

  	
   

  	
  Ratio

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  	
  LIBOR

  	
   

  	
  Base Rate

  	
   

  
	
  1

  	
   

  	
  Greater than or equal to 4.50 to 1.0

  	
   

  	
  2.75

  	
  %

  	
  3.75

  	
  %

  	
  3.25

  	
  %

  	
  4.25

  	
  %

  	
  2.75

  	
  %

  
	
  2

  	
   

  	
  Greater than or equal to 3.50 to 1.0, but less than
  4.50 to 1.0

  	
   

  	
  2.50

  	
  %

  	
  3.50

  	
  %

  	
  3.00

  	
  %

  	
  4.00

  	
  %

  	
  2.50

  	
  %

  
	
  3

  	
   

  	
  Less than 3.50 to 1.0

  	
   

  	
  2.25

  	
  %

  	
  3.25

  	
  %

  	
  2.75

  	
  %

  	
  3.75

  	
  %

  	
  2.25

  	
  %

  

 

For
purposes of the Pricing Table, if Borrower Representative shall at any time
fail to timely deliver a Compliance Certificate, then effective as of the tenth
(10th) Business Day following the date on which such Compliance Certificate was
due, each applicable Base Rate Margin and each applicable LIBOR Margin shall be
conclusively presumed to equal the highest applicable Base Rate Margin and the
highest applicable LIBOR Margin specified in the Pricing Table until the date
of delivery of such Compliance Certificate.

 

“Property Insurance Policy” means any insurance policy
maintained by any Credit Party covering losses with respect to tangible real or
personal property or improvements or losses from business interruption.

 

“Pro Rata Share” means (i) with respect
to a Lender’s right to receive payments of principal and interest with respect
to Term Loan A, the Term Loan A Commitment Percentage of such Lender,
(ii) with respect to a Lender’s right to receive payments of principal and
interest with respect to Term Loan B, the Term Loan B Commitment
Percentage of such Lender, (iii) with respect to a Lender’s obligation to
make Revolving Loans, such Lender’s right to receive payments of principal and
interest with respect thereto, such Lender’s right to receive the unused line
fee described in Section 2.3(b), and such Lender’s obligation to share in
Letter of Credit Liabilities and to receive the related Letter of Credit fee
described in Section 2.5(b), the Revolving Loan Commitment Percentage of
such Lender, and (iv) for all other purposes (including without limitation
the indemnification obligations arising under Section 10.6) with respect
to any Lender, the percentage obtained by dividing (x) the sum of the
Revolving Loan Commitment Amount of such Lender (or, in the event the Revolving
Loan Commitment shall have been terminated, such Lender’s then existing
Revolving Loan Outstandings), plus such Lender’s then outstanding principal
amount of the Term Loans by (y) the sum of the Revolving Loan Commitment
(or, in the event the Revolving Loan Commitment shall have been terminated,

 

21

 

the then existing
Revolving Loan Outstandings) of all Lenders, plus the then outstanding
principal amount of the Term Loans of all Lenders.

 

“Reimbursement Obligations” means, at any date, the
obligations of each Borrower then outstanding to reimburse
(i) Administrative Agent for payments made by Administrative Agent under a
Support Agreement and/or (ii) any LC Issuer, for payments made by such LC
Issuer under a Lender Letter of Credit.

 

“Replacement Lender” has the meaning set
forth in Section 11.6(c).

 

“Required Lenders” means, subject to the provisions of
Section 10.13(d), at any time Lenders holding (i) more than fifty percent
(50%) of the sum of the Revolving Loan Commitment and the outstanding principal
balance of the Term Loans (taken as a whole) or (ii) if the Revolving Loan
Commitment has been terminated, more than fifty percent (50%) of the sum of
(x) the then aggregate outstanding principal balance of the Loans plus
(y) the then aggregate amount of Letter of Credit Liabilities.  Notwithstanding the foregoing,
(A) during such time period as Merrill Lynch and any one additional Lender
holds greater than fifty percent (50%) of the total of (x) the Revolving Loan
Commitment and (y) the then outstanding principal balance of the Term Loans, “Required
Lenders” shall mean at least three Lenders holding the portion of the Term
Loans and the Revolving Loan Commitment set forth in clause (i) or (ii) of the
preceding sentence, as applicable, but (B) if at any time one or more
Lenders hold greater than sixty-six and two-thirds percent (66 2/3%) of
the total of (x) the Revolving Loan Commitment and (y) the then
outstanding principal balance of the Term Loans, “Required Lenders” shall mean
Lenders holding (i) more than sixty-six and two-thirds percent
(66 2/3%) of the sum of the Revolving Loan Commitment and the outstanding
principal balance of the Term Loans (taken as a whole) or (ii) if the
Revolving Loan Commitment has been terminated, more than sixty-six and
two-thirds percent (66 2/3%) of the sum of the then aggregate outstanding
principal balance of the Loans plus the then aggregate amount of the Letter of
Credit Liabilities.  Defaulted Lenders
shall be excluded for purposes of calculating Required Lenders.

 

“Required Revolving Lenders” means, subject
to the provisions of Section 10.13(d), at any time Revolving Lenders
holding (i) more than fifty percent (50%) of the Revolving Loan Commitment
or (ii) if the Revolving Loan Commitment has been terminated, more than
fifty percent (50%) of the sum of (x) the then aggregate outstanding
principal balance of the Revolving Loans plus (y) the then aggregate
amount of Letter of Credit Liabilities. 
Notwithstanding the foregoing, (A) during such time period as
Merrill Lynch and any one additional Lender holds greater than fifty percent
(50%) of the aggregate of the Revolving Loan Commitment, “Required Revolving
Lenders” shall mean at least three Lenders holding at least fifty percent (50%)
of the Revolving Loan Commitment, but (B) if at any time one or more
Lenders hold greater than sixty-six and two-thirds percent (66 2/3%) of
the Revolving Loan Commitment, “Required Revolving Lenders” shall mean Lenders
holding more than sixty-six and two-thirds percent (66 2/3%) of the
Revolving Loan Commitment.  Defaulted
Lenders shall be excluded for purposes of calculating Required Revolving
Lenders.

 

22

 

“Responsible Officer” means any of the Chief
Executive Officer, Chief Financial Officer or any Vice President of the
applicable Borrower.

 

“Restricted Distribution” means as to any Person (i) any
dividend or other distribution (whether in cash, cash pay securities or other
property) on any equity interest in such Person (except those payable solely in
its non-cash pay equity interests) or (ii) any payment by such Person on
account of (a) the purchase, redemption, retirement, defeasance,
surrender, cancellation, termination or acquisition (exclusive of a reverse
stock split of equity securities issued by LOUD) of any equity interests in
such Person or any claim respecting the purchase or sale of any equity interest
in such Person or (b) any option, warrant or other right to acquire any
equity interests in such Person.

 

“Revolving Lender” means, as of any date of
determination, each Lender having a Revolving Loan Commitment Amount at such
date in excess of zero (or, in the event the Revolving Loan Commitment shall
have been terminated at such date, each Lender at such time having Revolving
Loan Outstandings in excess of zero).

 

“Revolving Loan Borrowing”
means a borrowing of a Revolving Loan.

 

“Revolving Loan Commitment”
means the sum of each Lender’s Revolving Loan Commitment Amount.

 

“Revolving Loan Commitment Amount” means, as
to any Lender, the dollar amount set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Amount” (if such
Lender’s name is not so set forth thereon, then the dollar amount on the
Commitment Annex for the Revolving Loan Commitment Amount for such Lender shall
be deemed to be zero), as such amount may be adjusted from time to time by any “Amounts
Assigned” (with respect to such Lender’s portion of Revolving Loans outstanding
and its commitment to make Revolving Loans) pursuant to the terms of any and
all effective Assignment Agreements to which such Lender is a party.

 

“Revolving Loan Commitment
Percentage” means, as to any Lender, (i) on the Closing Date,
the percentage set forth opposite such Lender’s name on the Commitment Annex
under the column “Revolving Loan Commitment Percentage” (if such Lender’s name
is not so set forth thereon, then, on the Closing Date, such percentage for
such Lender shall be deemed to be zero) and (ii) on any date following the
Closing Date, the percentage equal to the Revolving Loan Commitment Amount of
such Lender on such date divided by
the Revolving Loan Commitment on such date.

 

“Revolving Loan Limit”
means, at any time, the lesser of (i) the Revolving Loan Commitment minus
the amount of Swingline Loan Outstandings minus the SLM Holdback Payment
Obligations (but only until such time as the SLM Letter of Credit is issued)
and (ii) the Borrowing Base minus the amount of Swingline Loan
Outstandings minus the SLM Holdback Payment Obligations (but only until
such time as the SLM Letter of Credit is issued).

 

23

 

“Revolving  Loan Note” has the meaning set forth in Section 2.4.

 

“Revolving Loan
Outstandings” means at any time of calculation (i) the sum of
the then existing aggregate outstanding principal amount of Revolving Loans and
the then existing Letter of Credit Liabilities and (ii) when used with
reference to any single Lender, the sum of the then existing outstanding
principal amount of Revolving Loans advanced by, or for the account of, such
Lender and the then existing Letter of Credit Liabilities for the account of
such Lender.

 

“Revolving Loans”
has the meaning set forth in Section 2.2(a).

 

“Security Documents” means any agreement, document or
instrument executed concurrently herewith or at any time hereafter pursuant to
which one or more Credit Parties or any other Person either (i) Guarantees
payment or performance of all or any portion of the Obligations and/or
(ii) provides, as security for all or any portion of the Obligations, a
Lien on any of its assets in favor of Administrative Agent for its own benefit
and the benefit of the Lenders, as any or all of the same may be amended,
supplemented, restated or otherwise modified from time to time.

 

“Senior Debt” has the meaning provided in
the Compliance Certificate.

 

“Senior Debt  to Adjusted EBITDA Ratio” has the meaning provided in the
Compliance Certificate.

 

“Settlement Date” has the meaning set forth
in Section 10.13(a).

 

“Settlement Service” has the meaning set
forth in Section 11.6(a).

 

“SLM Holdback Payment Obligations” means,
obligations of SLM, not to exceed $3,000,000 plus accrued interest thereon, to
make the “Post-Closing Payment” pursuant to that certain Acquisition Agreement
dated as of March 4, 2005 among LOUD, SLM, SLM Holding Corp. and SLM
Merger Corp.

 

“SLM Letter of Credit” means any Letter of
Credit (or any replacement Letter of Credit) to collateralize the SLM Holdback
Payment Obligations.

 

“Small Scale Acquisition” means any
Permitted Acquisition for which the sum of all amounts payable in connection
with such Permitted Acquisition (as calculated in clause viii of
Section 5.8(b) hereof) is less than $1,500,000.

 

“Solvent” means, with respect to any Person,
that such Person (i) owns and will own assets the fair saleable value of
which, on a going concern basis, are (a) greater than the total amount of
its liabilities (including the amount of Contingent Obligations to the extent
reasonably expected to become non-contingent) and (b) greater than the
amount that will be required to pay the probable liabilities of its then
existing debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to it;
(ii) has capital that is not unreasonably small in relation to its

 

24

 

business as
presently conducted or after giving effect to any contemplated transaction; and
(iii) does not intend to incur and does not believe that it will incur
debts beyond its ability to pay such debts as they become due in the ordinary
course of business.

 

“Stated Rate” has the meaning set forth in
Section 2.7(b).

 

“Subordinated Debt” means Debt of Borrowers
owing to OCM Mezzanine Fund, L.P. (and its successors and assigns) in the
principal amount of $14,750,000 (together with capitalized interest, fees,
costs and other amounts) incurred pursuant to the terms of the Subordinated
Debt Documents.

 

“Subordinated Debt Documents” means that
certain Securities Purchase Agreement dated as of the Closing Date among LOUD,
SLM, certain Affiliates of LOUD and OCM Mezzanine Fund, L.P., as the same may
be amended, supplemented, restated or otherwise modified from time to time in
compliance with the Subordination Agreement (the “SPA”), and all other “Subordinated Note Documents” (as defined
in the SPA).

 

“Subordination Agreement” means that certain
Subordination Agreement dated as of August 29, 2005, among Administrative
Agent, OCM Mezzanine Fund, L.P., Borrowers, and certain Affiliates of
Borrowers, as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof.

 

“Subsidiary” means, with respect to any Person, (i) any
corporation of which an aggregate of more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, capital
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially by such Person or
one or more Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of more than 50% of such
capital stock whether by proxy, agreement, operation of law or otherwise, and
(ii) any partnership or limited liability company in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more
than 50% or of which any such Person is a general partner or may exercise the
powers of a general partner.  Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of a Borrower.

 

“Support Agreement” has the meaning set forth in Section
2.5(a).

 

“Supported Letter of Credit” means a Letter
of Credit issued by an LC Issuer in reliance on one or more Support Agreements.

 

“Swap Contract” means any “swap agreement”,
as defined in Section 101 of the Bankruptcy Code, that is intended to provide
protection against fluctuations in interest or currency exchange rates and is
entered into in the ordinary course of business and not for purposes of
speculation.

 

25

 

“Swingline Lender” means Merrill Lynch or
any Lender expressly identified by Merrill Lynch as the Swingline Lender or, if
Merrill Lynch shall at any time resign as Swingline Lender, a Lender other than
Merrill Lynch selected by Administrative Agent in its sole discretion and
reasonably acceptable to Borrower Representative.

 

“Swingline Loan” has the meaning set forth
in Section 2.2(e).

 

“Swingline Loan Limit” means, at any time,
the smallest of the following amounts:  (i) $4,000,000,
(ii) the Revolving Loan Commitment minus the amount of Revolving
Loan Outstandings and (iii) the Borrowing Base minus the amount of
Revolving Loan Outstandings.

 

“Swingline Loan Note” has the meaning set
forth in Section 2.4.

 

“Swingline Loan Outstandings” means, at any
time of calculation, the then existing aggregate outstanding principal amount
of Swingline Loans.

 

“Target” has the meaning set forth in Section 5.8(b).

 

“Taxes” has the meaning set forth in Section 2.8.

 

“Term Loan A”
has the meaning set forth in Section 2.1.

 

“Term Loan A
Commitment Percentage” means, as to any Lender, (i) on the
Closing Date, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Term Loan A Commitment Percentage” (if such
Lender’s name is not so set forth thereon, then, on the Closing Date, such
percentage for such Lender shall be deemed to be zero) and (ii) on any
date following the Closing Date, the percentage equal to the principal amount
of Term Loan A held by such Lender on such date divided by the aggregate principal amount of Term Loan A on
such date.

 

“Term Loan B”
has the meaning set forth in Section 2.1.

 

“Term Loan B
Commitment Percentage” means, as to any Lender, (i) on the
Closing Date, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Term Loan B Commitment Percentage” (if such
Lender’s name is not so set forth thereon, then, on the Closing Date, such
percentage for such Lender shall be deemed to be zero) and (ii) on any
date following the Closing Date, the percentage equal to the principal amount
of Term Loan B held by such Lender on such date divided by the aggregate principal amount of Term Loan B on
such date.

 

“Term Loans” means Term Loan A and Term Loan
B, collectively.

 

“Term Note A” has the
meaning set forth in Section 2.4.

 

“Term Note B”
has the meaning set forth in Section 2.4.

 

26

 

“Termination
Date” has the meaning set forth in Section 2.2(c).

 

“Total Debt”
has the meaning provided in the Compliance Certificate.

 

“Total Debt to Adjusted EBITDA Ratio” has
the meaning provided in the Compliance Certificate.

 

“UCC” means the Uniform Commercial Code of
the State of Illinois or of any other state the laws of which are required to
be applied in connection with the perfection of security interests in any
Collateral.

 

“United States” means the United States of
America.

 

“Wholly-Owned Subsidiary” means, with
respect to any Person, any Subsidiary of such Person of which all of the equity
securities (other than, in the case of a corporation, directors’ qualifying
shares, to the extent legally required) are directly or indirectly owned and
controlled by such Person or one or more Wholly-Owned Subsidiaries of such
Person.

 

Section 1.2                                      Accounting
Terms and Determinations.

 

Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder (including without limitation
determinations made pursuant to the exhibits hereto) shall be made, and all financial
statements required to be delivered hereunder shall be prepared on a
consolidated basis in accordance with GAAP applied on a basis consistent with
the most recent audited consolidated financial statements of Borrowers and its
Consolidated Subsidiaries delivered to Administrative Agent and each of the
Lenders. Except as provided in clause (vi) of the definition of the term “Debt”,
in no event shall any capital stock be deemed to constitute Debt or any payment
of any dividend or distribution thereon be deemed to constitute interest solely
as a result of the application of FAS 150. If at any time any change in GAAP
would affect the computation of any financial ratio or financial requirement
set forth in any Financing Document, and either Borrowers or the Required
Lenders shall so request, the Administrative Agent, the Lenders and Borrowers
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders); provided
that, until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein
and (ii) Borrowers shall provide to the Administrative Agent and the
Lenders financial statements and other documents required under this Agreement
which include a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

 

Section 1.3                                      Other
Definitional Provisions.

 

References in this
Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or “Schedules” shall
be to Articles, Sections, Annexes, Exhibits or Schedules of or to this
Agreement unless otherwise specifically provided.  Any term defined herein may be used in

 

27

 

the singular or
plural.  “Include”, “includes” and “including”
shall be deemed to be followed by “without limitation”.  Except as otherwise specified or limited
herein, references to any Person include the successors and assigns of such
Person.  References “from” or “through”
any date mean, unless otherwise specified, “from and including” or “through and
including”, respectively.  Unless
otherwise specified herein, the settlement of all payments and fundings hereunder
between or among the parties hereto shall be made in lawful money of the United
States and in immediately available funds. 
Time is of the essence in Borrowers’ and each other Credit Party’s
performance under this Agreement and all other Financing Documents.  All amounts used for purposes of financial
calculations required to be made herein shall be without duplication.  References to any statute or act shall
include all related current regulations and all amendments and any successor
statutes, acts and regulations. 
References to any statute or act, without additional reference, shall be
deemed to refer to federal statutes and acts of the United States.  References to any agreement, instrument or
document shall include all schedules, exhibits, annexes and other attachments
thereto.  References to “knowledge” of
any Credit Party means the actual knowledge of a Responsible Officer.

 

Section 1.4                                      Certifications.

 

All certifications to be
made hereunder by an officer or representative of a Credit Party shall be made
by such person in his or her capacity as an officer or a representative of such
Credit Party, on such Credit Party’s behalf and not in such person’s individual
capacity.

 

ARTICLE 2

LOANS AND LETTERS OF CREDIT

 

Section 2.1                                      Term Loans.

 

(a)                                  Term Loan Amounts.  On the terms and subject to the conditions
set forth herein, the Lenders hereby agree to make the following Loans to
Borrowers on the Closing Date:

 

(i)                                     a
term loan in an original principal amount equal to $15,000,000 (“Term Loan A”); and

 

(ii)                                  a
term loan in an original principal amount equal to $14,500,000 (“Term Loan B”).

 

Each Lender’s obligation
to fund the Term Loans shall be limited to such Lender’s Term Loan A Commitment
Percentage of Term Loan A, and such Lender’s Term Loan B Commitment Percentage
of Term Loan B, and no Lender shall have any obligation to fund any portion of
any Term Loan required to be funded by any other Lender, but not so
funded.  No Borrower shall have any right
to reborrow any portion of the Term Loans which are repaid or prepaid from time
to time.

 

(b)                                 Scheduled Repayments.  There shall become due and payable, and
Borrowers shall repay the Term Loans through, scheduled payments on each date
set forth

 

28

 

below, each equal to the applicable installment amount
set forth below (or, if less, the outstanding amount of the applicable Loan):

 

Term Loan A

 

	
  Date

  	
   

  	
  Installment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  625,000

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  875,000

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
  August 29, 2010

  	
   

  	
  $

  	
  1,000,000

  	
   

  

 

Term Loan B

 

	
  Date

  	
   

  	
  Installment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  36,250

  	
   

  

 

29

 

	
  Date

  	
   

  	
  Installment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  36,250

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  3,443,750

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  3,443,750

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  3,443,750

  	
   

  
	
  August 29, 2011

  	
   

  	
  $

  	
  3,443,750

  	
   

  

 

(c)                                  Mandatory Prepayments.  There shall become due and payable and
Borrowers shall prepay the Term Loans (and the Revolving Loans and Swingline
Loans, to the extent required by Section 2.1(e)(i)) in the following
amounts and at the following times:

 

(i)                                     on
the one hundredth (100th) day following the last day of each Fiscal Year,
beginning with the Fiscal Year ending December 31, 2006, an amount equal
to Excess Cash Flow for such Fiscal Year;

 

(ii)                                  promptly
after the date on which any Credit Party (or Administrative Agent as loss payee
or assignee) receives any Major Casualty Proceeds, an amount equal to one
hundred percent (100%) of the Net Cash Proceeds such Major Casualty Proceeds; provided, that, so long as no Event of
Default under Section 8.1(a) or Section 8.1(b) as a result
of a violation of Article 6 has occurred and is continuing, the recipient
(other than Administrative Agent) of any Major Casualty Proceeds may reinvest
(or enter into a binding commitment to reinvest) the amount of such Major
Casualty Proceeds within one hundred eighty (180) days, in replacement assets
useful in the business of the Credit Parties; provided,
that the aggregate amount which may be reinvested by the applicable Borrower
and its Subsidiaries pursuant to the preceding proviso may not exceed
$1,000,000 in any Fiscal Year; provided,
further, that if the applicable
Credit Party does not intend to fully reinvest or commit to reinvest such Major
Casualty Proceeds, or if the time period set forth in this sentence expires
without such Credit Party having reinvested or committed to reinvest such Major
Casualty Proceeds, Borrowers shall prepay the Loans in an amount equal to the
Net Cash Proceeds such Major Casualty Proceeds (to the extent not reinvested,
committed to be reinvested or intended to be reinvested, as applicable within
such time period);

 

(iii)                               upon
receipt by any Credit Party of the proceeds from the issuance and sale of any Debt
or equity securities (other than (1) proceeds of Debt securities permitted
pursuant to Section 5.1, (2) proceeds of the issuance of equity
securities by any Borrower received on or before the Closing Date, (3) proceeds
from the issuance of equity securities to members of the management of any
Credit Party or, so long as no Event of Default is then in existence, to any
Person that on the Closing Date owns equity securities of any Borrower,

 

30

 

(4) proceeds of the issuance of equity securities
to any Borrower or any Wholly-Owned Subsidiary and (5) proceeds of the
issuance of equity securities issued for the purpose of consummating a
Permitted Acquisition), an amount equal to one hundred percent (100%) of the
Net Cash Proceeds of such issuance and sale;

 

(iv)                              upon
receipt by any Credit Party of the proceeds of any Asset Disposition, an amount
equal to one hundred percent (100%) of the Net Cash Proceeds of such Asset
Disposition; provided, that no
prepayment shall be required pursuant to this Section 2.1(c)(iv) unless
and until the aggregate Net Cash Proceeds received during any Fiscal Year from
Asset Dispositions exceeds $1,000,000 (in which case all Net Cash Proceeds in
excess of such amount shall be used to make prepayments pursuant to this Section 2.1(c)(iv)),
and provided, that, so long as no Default or Event of Default
has occurred and is continuing, the recipient of such Net Cash Proceeds may
reinvest (or enter into a binding commitment to reinvest) the amount of such
Net Cash Proceeds within one hundred eighty (180) days, in replacement fixed
assets of a kind then used or usable in the business of such Credit Party.  If the applicable Credit Party does not
intend to so reinvest or commit to reinvest such Net Cash Proceeds, or if the
time period set forth in the immediately preceding sentence expires without
such Credit Party having reinvested or committed to reinvest such Net Cash
Proceeds, Borrowers shall prepay the Loans in an amount equal to such Net Cash
Proceeds; and

 

(v)                                 upon
receipt by any Credit Party of any Extraordinary Receipts (exclusive of the
first $250,000 of Extraordinary Receipts in any Fiscal Year), an amount equal
to one hundred percent (100%) of such Extraordinary Receipts.

 

(d)                                 Optional Prepayments.  Subject to the provisions of Section 2.3(e)(iv),
Borrowers may from time to time, with at least two (2) Business Days prior
delivery to Administrative Agent of an appropriately completed Payment
Notification, prepay any Term Loan in whole or in part; provided
that any such partial prepayment shall be in an amount equal to $100,000 or a
higher integral multiple of $25,000.

 

(e)                                  All Prepayments.

 

(i)                                     Any
prepayment of a LIBOR Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to Section 2.3(e)(iv). 
All prepayments of a Loan shall be applied first to that portion of such
Loan comprised of Base Rate Loans and then to that portion of such Loan comprised
of LIBOR Loans, in direct order of Interest Period maturities.  Any required prepayment in respect of either
Major Casualty Proceeds or Net Cash Proceeds of any Asset Disposition shall be
applied first against outstanding Revolving Loans and Swingline Loans, to the
extent that, after giving effect to the event giving rise to such proceeds and
any related modification of the most recently delivered Borrowing Base
Certificate to reflect such event, a mandatory prepayment of Revolving Loans
and/or Swingline Loans would be required pursuant to either of Section 2.2(c)(ii) or
Section 2.2(e)(i), with the remaining amount of such proceeds being
applied to the Term Loans as provided herein. 
All mandatory prepayments of Term Loans shall be applied pro rata between
the Term Loans according to

 

31

 

the outstanding principal amounts thereof and, as to
each Term Loan, pro rata to the remaining installments thereof.  All optional prepayments of the Term Loans
shall be applied first to Term Loan A, pro rata to the remaining
installments thereof, and following the repayment in full of Term Loan A,
to Term Loan B, pro rata to the remaining installments thereof.  Following the payment in full of the Term
Loans, any remaining amounts required by Section 2.1(c) to be used to
prepay the Term Loans (whether resulting from an optional prepayment or a
mandatory prepayment) shall instead be applied as a repayment of the
outstanding Revolving Loans and the outstanding Swingline Loans (which amounts
applied to the Revolving Loans and Swingline Loans are subject to reborrowing
in accordance with the terms of this Agreement).

 

(ii)                                  Borrower
Representative shall deliver to Administrative Agent an appropriately completed
Payment Notification at least two (2) Business Days prior to each
mandatory prepayment pursuant to Section 2.1(c) and each optional
prepayment pursuant to Section 2.1(d), and Administrative Agent shall
promptly notify each Lender of such notice.

 

Section 2.2                                      Revolving Loans and Swingline Loans.

 

(a)                                  Revolving Loans and Borrowings.

 

(i)                                     On
the terms and subject to the conditions set forth herein, each Lender severally
agrees to make Loans to Borrowers from time to time as set forth herein (each a
“Revolving Loan”, and collectively,
“Revolving Loans”) equal to such Lender’s
Revolving Loan Commitment Percentage of Revolving Loans requested by Borrower
Representative hereunder, provided that after giving effect thereto, the
Revolving Loan Outstandings shall not exceed the Revolving Loan Limit.  Within the foregoing limits, each Borrower
may borrow under this Section 2.2(a)(i), may prepay or repay Revolving
Loans from time to time and may reborrow Revolving Loans pursuant to this Section 2.2(a)(i).

 

(ii)                                  If
Borrower Representative requests that Revolving Lenders make, or permit to
remain outstanding, Revolving Loans in an aggregate principal amount in excess
of the then existing Borrowing Base minus the sum of the then existing
Swingline Loan Outstandings and the Letter of Credit Liabilities, Required
Revolving Lenders may in their discretion elect to cause all Revolving Lenders
to make, or permit to remain outstanding, such excess Revolving Loans (such
excess Revolving Loans being referred to as “Overadvance
Revolving Loans”), provided,
however, that such Lenders may
not at any time cause all Revolving Lenders to make, or permit to remain
outstanding, (a) Revolving Loans in excess of the Revolving Loan
Commitment less the sum at such time of (i) the Swingline Loan
Outstandings and (ii) the Letter of Credit Liabilities or (b) Overadvance
Revolving Loans in excess of $4,000,000. 
Absent the consent of all Lenders, Administrative Agent shall be
required to demand the repayment of all Overadvance Revolving Loans at least
once every forty-five (45) days.  Absent
repayment of such Overadvance Loans, no additional Overadvance Loans will be
permitted hereunder.  If Overadvance
Revolving Loans are made, or permitted to remain outstanding, pursuant to the
preceding sentence, then (a) clauses (ii) and (iii) of the
definitions of Revolving Loan Limit and Swingline Loan Limit, respectively,
shall each be deemed increased by the amount of such permitted

 

32

 

Overadvance
Revolving Loans, but only for so long as Required Revolving Lenders allow such
Overadvance Revolving Loans to be outstanding and (b) all Revolving
Lenders shall be bound to make, or permit to remain outstanding such
Overadvance Revolving Loans based upon their Pro Rata Shares of the Revolving
Loan Commitment in accordance with the terms of this Agreement.

 

(b)                                 Advancing Revolving Loans.

 

(i)                                     Borrower
Representative shall deliver to Administrative Agent a Notice of Borrowing with
respect to each proposed Revolving Loan Borrowing (other than Revolving Loans
made pursuant to clause (iii) below), such Notice of Borrowing to be
delivered no later than 1:00 p.m. (Chicago time) (1) on the day of
such proposed borrowing, in the case of Base Rate Loans in an aggregate
principal amount equal to or less than $5,000,000, (2) on the Business Day
prior to such proposed borrowing, in the case of Base Rate Loans in an
aggregate principal amount greater than $5,000,000 and (3) on the third
(3rd) Business Day prior to such proposed borrowing, in the case of all LIBOR
Loans.  Once given, except as provided in
Section 2.3(e)(ii), a Notice of Borrowing shall be irrevocable and
Borrowers shall be bound thereby.

 

(ii)                                  Each
Borrower hereby authorizes Lenders and Administrative Agent to make Revolving
Loans (other than LIBOR Loans) based on telephonic notices made by any Person
which Administrative Agent, in good faith, believes to be authorized and acting
on behalf of Borrower Representative. 
Borrower Representative agrees to deliver to Administrative Agent a
Notice of Borrowing in respect of each Revolving Loan requested by telephone no
later than one Business Day following such request.  If the Notice of Borrowing differs in any
respect from the action taken by Administrative Agent and Lenders, the records
of Administrative Agent and the Lenders shall govern absent manifest
error.  Each Borrower further hereby
authorizes Lenders and Administrative Agent to make Revolving Loans based on
electronic notices made by any Person which Administrative Agent, in good
faith, believes to be authorized and acting on behalf of Borrower
Representative, but only after Administrative Agent shall have established
procedures acceptable to Administrative Agent for accepting electronic Notices
of Borrowing, as indicated by Administrative Agent’s written confirmation
thereof.

 

(iii)                               Each
Borrower and each Revolving Lender hereby authorizes Administrative Agent to
make Revolving Loans (which shall be Base Rate Loans) on behalf of Revolving
Lenders, at any time in its sole discretion, (x) as provided in Section 2.2(e)(ii),
with respect to obligations arising in respect of Swingline Loans, (y) as
provided in Section 2.5(c), with respect to obligations arising under
Support Agreements and/or Lender Letters of Credit, and (z) to pay
principal owing in respect of the Loans (excluding principal payments in
respect of the Loans commencing one Business Day following receipt by
Administrative Agent of a written notice from any Lender, in accordance with
the provisions of Section 10.11, of the occurrence of an Event of
Default), interest and regularly scheduled fees of any Credit Party from time
to time arising hereunder or under any other Financing Document and, following
not less than two weeks prior notice thereof, any and all fees not otherwise
described above, charges and expenses of any Credit Party from time to time
arising under

 

33

 

this Agreement or any other Financing Document, so
long as, in each case after giving effect to any such Revolving Loans, the
Revolving Loan Outstandings do not exceed the Revolving Loan Limit; provided, that (1) Administrative
Agent shall have no obligation at any time to make any Revolving Loan pursuant
to the provisions of the preceding sub-clause (z) and (2) Administrative
Agent shall have no right to make Revolving Loans (A) as provided in each
of Section 2.2(e)(ii) and Section 2.5(c) for the account of
any Revolving Lender that was a Non-Funding Revolving Lender at the time
Swingline Lender advanced a Swingline Loan, Administrative Agent executed a
Support Agreement, or at the time of issuance of any Lender Letter of Credit,
for which, in any case, reimbursement obligations have arisen pursuant to
either Section 2.2(e)(ii) and/or Section 2.5(c) and (B) for
the account of any then existing Non-Funding Revolving Lender to pay interest,
fees, expenses and other charges of any Credit Party (other than reimbursement
obligations that have arisen pursuant to either Section 2.2(e)(ii) and/or
Section 2.5(c) in respect of Support Agreements executed or Lender
Letters of Credit issued at the time any such Non-Funding Revolving Lender was
not then a Non-Funding Revolving Lender). 
Subject to the preceding provisions of this clause (iii), Administrative
Agent shall have the right to make Revolving Loans pursuant to the provisions
of this clause (iii) regardless of whether the conditions precedent set
forth in Section 7.2 are then satisfied, including the existence of any
Default or Event of Default either before or after giving effect to the making
of such Revolving Loans.

 

(c)                                  Mandatory Revolving Loan Repayments and Prepayments.

 

(i)                                     The
Revolving Loan Commitment shall terminate upon the earlier to occur of (i) the
Commitment Expiry Date and (ii) any date on which Administrative Agent or
Required Lenders elect to terminate the Revolving Loan Commitment pursuant to Section 8.2
(such earlier date being the “Termination Date”).  On the Termination Date, there shall become
due, and Borrowers shall pay, the entire outstanding principal amount of each
Revolving Loan and of each Swingline Loan, together with accrued and unpaid
Obligations pertaining thereto.

 

(ii)                                  If
at any time the Revolving Loan Outstandings exceed the Revolving Loan Limit,
then, no later than the tenth (10th) succeeding Business Day, Borrowers shall
repay the Revolving Loans and/or Swingline Loans or cash collateralize Letter
of Credit Liabilities in the manner specified in Section 2.5(e) or
cancel outstanding Letters of Credit, or any combination of the foregoing, in
an aggregate amount equal to such excess.

 

(d)                                 Optional Prepayments and Commitment Reduction.

 

(i)                                     Subject
to the provisions of Section 2.3(e)(iv), Borrowers may from time to time
prepay the Revolving Loans and/or Swingline Loans in whole or in part; provided that any such partial prepayment
shall be in an amount equal to $100,000 or a higher integral multiple of
$25,000.

 

(ii)                                  Upon
not less than three (3) Business Days prior notice to Administrative
Agent, Borrowers may from time to time (but no more than two (2) times in
any Fiscal Year) reduce the Revolving Loan Commitment in minimum amounts equal
to

 

34

 

$1,000,000 and, if larger, in one or more increments
of $1,000,000; provided, that no
such reduction shall be permitted if, after giving effect thereto (x) the
Revolving Loan Outstandings would exceed the Revolving Loan Limit and/or
(y) the Revolving Loan Commitment would equal less than $10,000,000
(unless the same is being reduced to zero in connection with a prepayment in
full of all Obligations and the collateralization of any then existing Letter
of Credit Liability). Any reduction of the Revolving Loan Commitment pursuant
to this clause (ii) shall be permanent, and shall be allocated among the
Revolving Lenders according to their respective Pro Rata Shares with respect to
the Revolving Loan Commitment.

 

(e)                                  Swingline Loans.

 

(i)                                     Swingline
Lender may, from time to time, at
its sole election and without prior notice to or consent by any Lender or any
Borrower, convert any request or deemed request by a Borrower for a Revolving
Loan that is a Base Rate Loan into a request for an advance made by, and for
the account of, Swingline Lender in accordance with the terms of this Agreement
(each such advance, a “Swingline Loan”).  Each Swingline Loan shall be a Base Rate
Loan, and shall be advanced by Swingline Lender in the same manner as Revolving
Loans are advanced hereunder, in accordance with the provisions of Section 2.2(b).  Swingline Lender shall have the right (but
not the obligation) to advance Swingline Loans regardless of whether the
conditions precedent set forth in Section 8.2 are then satisfied,
including the existence of any Default or Event of Default either before or
after giving effect to the making of such Swingline Loan; provided, that Swingline Lender shall not
advance any Swingline Loan if the Swingline Loan Outstandings exceed the
Swingline Loan Limit, either before or after giving effect to the making of any
proposed Swingline Loan.  If at any time the
Swingline Loan Outstandings exceed the Swingline Loan Limit, then, on the next
succeeding Business Day, Borrowers shall repay Revolving Loans and/or Swingline
Loans or cash collateralize Letter of Credit Liabilities in the manner
specified in Section 2.5(e) or cancel outstanding Letters of Credit,
or any combination of the foregoing, in an aggregate amount equal to such
excess.

 

(ii)                                  Swingline
Lender shall give Administrative Agent prompt notice of each Swingline Loan
advanced by Swingline Lender.  In the
event that on any Business Day Swingline Lender desires that all or any portion
of the outstanding Swingline Loans should be reduced, in whole or in part,
Swingline Lender shall notify Administrative Agent to that effect and indicate
the portion of the Swingline Loan to be so reduced.  Swingline Lender hereby agrees that it shall
notify Administrative Agent to reduce the Swingline Loan to zero at least once
every month.  Administrative Agent agrees
to transmit to Revolving Lenders the information contained in each notice
received by Administrative Agent from Swingline Lender regarding the reduction
of outstanding Swingline Loans and shall concurrently notify such Lenders of
each such Lender’s Pro Rata Share of the obligation to make a Revolving Loan to
repay outstanding Swingline Loans (or the applicable portion thereof).  Each of the Revolving Lenders, other than any
Revolving Lender that was a Non-Funding Revolving Lender at the time the
applicable Swingline Loans were advanced, hereby unconditionally and
irrevocably agrees to fund to the Payment Account, for the benefit of Swingline
Lender, not later than noon (Chicago time) on the Business Day immediately
following the Business

 

35

 

Day of such Lender’s receipt of such notice from
Administrative Agent (provided
that if any Revolving Lender shall receive such notice at or prior to 10:00 a.m.
(Chicago time) on a Business Day, such funding shall be made by such Lender on
such Business Day), such Lender’s Pro Rata Share of a Revolving Loan (which
Revolving Loan shall be a Base Rate Loan and shall be deemed to be requested by
Borrower Representative) in the principal amount of such portion of the
Swingline Loan which is required to be paid to Swingline Lender under this Section 2.2(e) (regardless
of whether the conditions precedent thereto set forth in Section 7.2 are
then satisfied, including without limitation the existence of any Default or
Event of Default either before or after giving effect to the making of such
Swingline Loan, but subject to the other provisions of this Section 2.2(e)).  The proceeds of any such Revolving Loans
shall be immediately paid over to Administrative Agent for the benefit of
Swingline Lender for application against then outstanding Swingline Loans.  For purposes of this clause (ii),
Swingline Lender shall be conclusively entitled to assume that, at the time of
the advance of any Swingline Loan, each Revolving Lender, other than any then
existing Non-Funding Revolving Lender, will fund its Pro Rata Share of the
Revolving Loans provided for in this clause (ii).

 

(iii)                               In
the event that, at any time any Swingline Loans are outstanding, either (1) an
Event of Default pursuant to either Section 8.1(f) or 8.1(g) has
occurred or (2) the Revolving Loan Commitment has been suspended or
terminated in accordance with the provisions of this Agreement, then in either
case, each of the Revolving Lenders (other than Swingline Lender and any
Revolving Lender that was a Non-Funding Revolving Lender at the time the
applicable Swingline Loans were advanced) shall be deemed to have irrevocably
and immediately purchased and received from Swingline Lender, without recourse
or warranty, an undivided interest and participation in the Swingline Loan in
an amount equal to such Lender’s Revolving Loan Commitment Percentage (but
recalculated to disregard any interest of any Non-Funding Revolving Lender in
the Revolving Loans) multiplied by the total amount of the Swingline Loans
outstanding.  Any purchase obligation
arising pursuant to the immediately preceding sentence shall be absolute and
unconditional and shall not be affected by any circumstances whatsoever.  In the event that on any Business Day
Swingline Lender desires to effect settlement of any such purchase, Swingline
Lender shall promptly notify Administrative Agent to that effect and indicate
the payment amounts required by each Lender to effect such settlement.  Administrative Agent agrees to transmit to
Revolving Lenders the information contained in each notice received by
Administrative Agent from Swingline Lender and shall concurrently notify such
Lenders of each such Lender’s Pro Rata Share of the required payment settlement
amount.  Each such Lender (other than
Non-Funding Revolving Lenders, as specified above) shall effect such settlement
upon receipt of any such notice by transferring to the Payment Account not
later than noon (Chicago time) on the Business Day immediately following the
Business Day of receipt of such notice (provided
that if any such Lender shall receive such notice at or prior to 10:00 a.m.
(Chicago time) on a Business Day, such funding shall be made by such Lender on
such Business Day), an amount equal to such Lender’s participation in the
Swingline Loan.

 

(iv)                              In
the event any Revolving Lender (other than Non-Funding Revolving Lenders,
as specified above) fails to make available to Swingline Lender when

 

36

 

due the amount of such Lender’s participation in the
Swingline Loans, Swingline Lender shall be entitled to recover such amount on
demand from such Lender together with interest at the Federal Funds Rate, for
the first three (3) days following the due date, and thereafter at the
Base Rate plus the Base Rate Margin in respect of Swingline Loans.  Any Lender’s failure to make any payment
requested under this Section 2.2(e) shall not relieve any other
Lender of its obligations hereunder, but no Lender shall be responsible for the
failure of any other Lender to make available to Swingline Lender such other
Lender’s required payment hereunder.  The
obligations of the Lenders under this Section 2.2(e) shall be deemed
to be binding upon Administrative Agent, Swingline Lender and Lenders
notwithstanding the occurrence of any Default or Event of Default, or any
insolvency or bankruptcy proceeding pertaining to any Borrower or any other
Credit Party.

 

Section 2.3                                      Interest, Interest Calculations and Certain Fees.

 

(a)                                  Interest.  From and following the Closing Date,
depending upon Borrower Representative’s election from time to time, subject to
the terms hereof, to have portions of the Loans accrue interest determined by
reference to the Base Rate or the LIBOR, the Loans and the other Obligations
shall bear interest at the applicable rates set forth below:

 

(i)                                     If
a Base Rate Loan, or any other Obligation other than a LIBOR Loan, then at the
sum of the Base Rate plus the applicable Base Rate Margin.

 

(ii)                                  If
a LIBOR Loan, then at the sum of the LIBOR plus the applicable LIBOR
Margin.

 

(b)                                 Unused Line Fee.  From and following the Closing Date,
Borrowers shall pay Administrative Agent, for the benefit of all Lenders
committed to make Revolving Loans, in accordance with their respective Pro Rata
Shares, a fee in an amount equal to (1) (a) the Revolving Loan
Commitment less (b) the average daily balance of the sum of the
Revolving Loan Outstandings plus the Swingline Loan Outstandings during
the preceding month, multiplied  by (2) one-half of one
percent (.50%) per annum.  Such fee is to
be paid monthly in arrears on
the last day of each month.

 

(c)                                  [Intentionally Omitted]

 

(d)                                 Computation of Interest and Related Fees.  All interest and fees under each Financing
Document shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.  The date of
funding of a Base Rate Loan and the first day of an Interest Period with
respect to a LIBOR Loan shall be included in the calculation of interest.  The date of payment of a Base Rate Loan and
the last day of an Interest Period with respect to a LIBOR Loan shall be
excluded from the calculation of interest. 
If a Loan is repaid on the same day that it is made, one (1) day’s
interest shall be charged.  Interest on
all Base Rate Loans is payable in arrears on the last day of each month and on the maturity of such
Loans, whether by acceleration or otherwise. 
Interest on LIBOR Loans shall be payable on the last day of the
applicable Interest Period, unless the Interest Period is greater than three (3) months,
in which case interest will be payable on the last day of each three (3) month

 

37

 

interval.  In
addition, interest on LIBOR Loans is due on the maturity of such Loans, whether
by acceleration or otherwise.

 

(e)                                  LIBOR Provisions.

 

(i)                                     LIBOR Election.  All Loans made on the Closing Date shall be
Base Rate Loans and shall remain so until three (3) Business Days after
the Closing Date.  Thereafter, subject to
the provisions of Section 8.4, Borrower Representative may request that
Revolving Loans permitted to be made hereunder be LIBOR Loans, that outstanding
portions of Revolving Loans permitted to be made hereunder and outstanding
portions of each Term Loan be converted to LIBOR Loans and that all or any
portion of a LIBOR Loan be continued as a LIBOR Loan upon expiration of the
applicable Interest Period.  Any such
request will be made by submitting a Notice of Borrowing to Administrative
Agent.  Once given, and except as
provided in clause (ii) below, a Notice of Borrowing shall be irrevocable
and Borrowers shall be bound thereby. 
Upon the expiration of an Interest Period, in the absence of a new
Notice of Borrowing submitted to Administrative Agent not less than three (3) Business
Days prior to the end of such Interest Period, the LIBOR Loan then maturing
shall be automatically converted to a Base Rate Loan.  There may be no more than six (6) LIBOR
Loans outstanding at any one time.  Each
request for a LIBOR Loan, whether by original issuance, conversion or
continuation, shall be in a minimum amount of $250,000 and, if in excess of
such amount, in an integral multiple of $50,000 in excess of such amount.  Loans which are not requested as LIBOR Loans
in accordance with this Section 2.3(e)(i) shall be Base Rate
Loans.  Administrative Agent shall notify
Lenders, by telephonic or facsimile notice, of each Notice of Borrowing
received by Administrative Agent not less than two (2) Business Days prior
to the first day of the Interest Period of the LIBOR Loan requested
thereby.  Notwithstanding the foregoing,
until the earlier to occur of September 30, 2005 and the date on which
Merrill Lynch has completed the primary syndication of the Loans, all LIBOR
Loans shall have an Interest Period of one (1) month.

 

(ii)                                  Inability to Determine LIBOR.  In the event, prior to commencement of any
Interest Period relating to a LIBOR Loan, Administrative Agent shall determine
or be notified by Required Lenders that adequate and reasonable methods do not
exist for ascertaining LIBOR, Administrative Agent shall promptly provide
notice of such determination to Borrower Representative and Lenders (which
shall be conclusive and binding on Borrowers and Lenders).  In such event (1) any request for a
LIBOR Loan or for a conversion to or continuation of a LIBOR Loan shall be automatically
withdrawn and shall be deemed a request for a Base Rate Loan, (2) each
LIBOR Loan will automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan and (3) the obligations
of Lenders to make LIBOR Loans shall be suspended until Administrative Agent or
Required Lenders determine that the circumstances giving rise to such
suspension no longer exist, in which event Administrative Agent shall so notify
Borrower Representative and Lenders.

 

(iii)                               Illegality.  Notwithstanding any other provisions hereof,
if any Law shall make it unlawful for any Lender to make, fund or maintain
LIBOR Loans, such Lender shall promptly give notice of such circumstances to
Administrative Agent, Borrower

 

38

 

Representative and the other Lenders.  In such an event, (1) the commitment of
such Lender to make LIBOR Loans, continue LIBOR Loans as LIBOR Loans or convert
Base Rate Loans to LIBOR Loans shall be immediately suspended until such time
that it is no longer unlawful for such Lender to make LIBOR Loans, and (2) such
Lender’s outstanding LIBOR Loans shall be converted automatically to Base Rate
Loans on the last day of the Interest Period thereof or at such earlier time as
may be required by law.

 

(iv)                              LIBOR Breakage Fee.  Upon (i) any default by any Borrower in
making any borrowing of, conversion into or continuation of any LIBOR Loan
following Borrower Representative’s delivery to Administrative Agent of any
applicable Notice of Borrowing or (ii) any payment of a LIBOR Loan on any
day that is not the last day of the Interest Period applicable thereto
(regardless of the source of such prepayment and whether voluntary, by
acceleration or otherwise), Borrowers shall promptly pay Administrative Agent,
for the benefit of all Lenders that funded or were prepared to fund any such
LIBOR Loan, an amount equal to the amount of any losses, expenses and
liabilities (including, without limitation, any loss (including interest paid
but excluding lost profits) in connection with the re-employment of such funds)
that any Lender may sustain as a result of such default or such payment.  For purposes of calculating amounts payable
to a Lender under this paragraph, each Lender shall be deemed to have actually
funded its relevant LIBOR Loan through the purchase of a deposit bearing
interest at LIBOR in an amount equal to the amount of that LIBOR Loan and
having a maturity and repricing characteristics comparable to the relevant
Interest Period; provided, however, that each Lender may fund each of
its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall
be utilized only for the calculation of amounts payable under this subsection.

 

(v)                                 Increased Costs.  If, after the Closing Date (or in the case of
a Lender becoming a party to this Agreement following the Closing Date, after
the date on which such Lender becomes a party hereto), the adoption or taking
effect of, or any change in, any Law, or any change in the interpretation,
administration or application of any Law by any Governmental Authority, central
bank or comparable agency charged with the interpretation, administration or
application thereof, or compliance by any Lender with any request, guideline or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:  (1) shall
impose, modify or deem applicable any reserve (including any reserve imposed by
the Board of Governors of the Federal Reserve System, or any successor thereto,
but excluding any reserve included in the determination of the LIBOR pursuant
to the provisions of this Agreement), special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by any Lender; or (2) shall
impose on any Lender any other condition affecting its LIBOR Loans, any of its
Notes (if any) or its obligation to make LIBOR Loans; and the result of
anything described in clauses (1) above and (2) is to increase the
cost to (or to impose a cost on) such Lender of making or maintaining any LIBOR
Loan, or to reduce the amount of any sum received or receivable by such Lender
under this Agreement or under any of its Notes (if any) with respect thereto,
then upon demand by such Lender (which demand shall be accompanied by a written
statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of

 

39

 

which shall be furnished to Administrative Agent),
Borrowers shall promptly pay directly to such Lender such additional amount as
will compensate such Lender for such increased cost or such reduction, so long
as such amounts have accrued on or after the day which is two hundred seventy
(270) days prior to the date on which such Lender first made demand therefor.

 

Section 2.4                                      Notes.

 

The portion of Term Loan
A made by each Lender shall be evidenced, if so requested by such Lender, by a
promissory note executed by Borrowers on a joint and several basis (a “Term Note A”), the portion of Term Loan B made by each
Lender shall be evidenced, if so requested by such Lender, by a promissory note
executed by Borrowers on a joint and several basis (a “Term Note B”)
and the portion of the Revolving Loans made by each Lender shall be evidenced,
if so requested by such Lender, by a promissory note executed by Borrowers on a
joint and several basis (a “Revolving Loan Note”)
in an original principal amount equal to such Lender’s Pro Rata Share of Term
Loan A, Term Loan B and the Revolving Loan Commitment,
respectively.  The Swingline Loans made
by Swingline Lender shall be evidenced, if so requested by Swingline Lender, by
a promissory note executed by Borrowers on a joint and several basis (a “Swingline Loan Note”) in an original
principal amount equal to the amount identified in clause (i) of the
definition of Swingline Loan Limit.

 

Section 2.5                                      Letters of Credit and Letter of Credit Fees.

 

(a)                                  Letter of Credit.  On the terms and subject to the conditions
set forth herein, the Revolving Loan Commitment may be used by Borrowers, in
addition to the making of Revolving Loans hereunder, for the issuance, prior to
the Termination Date, by (i) Administrative Agent, of letters of credit,
guarantees or other agreements or arrangements (each, a “Support
Agreement”) to induce an LC Issuer to issue or increase the amount
of, or extend the expiry date of, one or more Letters of Credit and (ii) a
Lender, identified by Administrative Agent, as an LC Issuer, of one or more
Lender Letters of Credit, so long as, in each case:

 

(i)                                     Administrative
Agent shall have received a Notice of LC Credit Event at least two (2) Business
Days before the relevant date of issuance, increase or extension; and

 

(ii)                                  after
giving effect to such issuance, increase or extension, (x) the aggregate
Letter of Credit Liabilities under all Letters of Credit do not exceed
$10,000,000 and (y) the Revolving Loan Outstandings do not exceed the
Revolving Loan Limit.

 

Nothing in this Agreement
shall be construed to obligate any Lender to issue, increase the amount of or
extend the expiry date of any letter of credit, which act or acts, if any,
shall be subject to agreements to be entered into from time to time between the
applicable Borrower and such Lender. 
Notwithstanding the foregoing, Administrative Agent shall use its
reasonable best efforts to cause the issuance of the SLM Letter of Credit.  Each Lender that is an LC Issuer hereby
agrees to give Administrative Agent prompt written notice of each

 

40

 

issuance of a Lender
Letter of Credit by such Lender and each payment made by such Lender in respect
of Lender Letters of Credit issued by such Lender.

 

(b)                                 Letter of Credit Fee.  Borrowers shall pay to Administrative
Agent, for the benefit of the Revolving Lenders, a letter of credit fee with
respect to the Letter of Credit Liabilities for each Letter of Credit, computed
for each day from the date of issuance of such Letter of Credit to the date
that is the last day a drawing is available under such Letter of Credit, at a
rate per annum equal to the LIBOR Margin then applicable to Revolving
Loans.  Such fee shall be payable in
arrears on the last day of each
calendar month prior to the Termination Date and on such date.  In addition, Borrowers agree to pay promptly
to the LC Issuer such fronting or other fees that it may charge in connection
with any Letter of Credit.

 

(c)                                  Reimbursement Obligations of Borrowers.  If either (x) Administrative Agent shall
make a payment to an LC Issuer pursuant to a Support Agreement, or (y) any
Lender shall honor any draw request under, and make payment in respect of, a
Lender Letter of Credit, (i) the applicable Borrower shall promptly
reimburse Administrative Agent or such Lender, as applicable, for the amount of
such payment and (ii) Borrower Representative shall be deemed to have
immediately requested that Revolving Lenders make a Revolving Loan, which shall
be a Base Rate Loan, in a principal amount equal to the amount of such payment
(but solely to the extent such Borrower shall have failed to directly reimburse
Administrative Agent or, with respect to Lender Letters of Credit, the
applicable LC Issuer, for the amount of such payment).  Administrative Agent shall promptly notify
Revolving Lenders of any such deemed request and each Revolving Lender (other
than any such Revolving Lender that was a Non-Funding Revolving Lender at the
time the applicable Supported Letter of Credit or Lender Letter of Credit was
issued) hereby agrees to make available to Administrative Agent not later than
noon (Chicago time) on the Business Day following such notification from
Administrative Agent such Revolving Lender’s Pro Rata Share of such Revolving
Loan (calculated to disregard any interest of any Non-Funding Revolving Lender
in the Revolving Loans).  Each Revolving
Lender (other than any applicable Non-Funding Revolving Lender specified above)
hereby absolutely and unconditionally agrees to fund such Revolving Lender’s Pro
Rata Share of the Loan described in the immediately preceding sentence,
unaffected by any circumstance whatsoever, including (without limitation) (i) the
occurrence and continuance of a Default or Event of Default, (ii) the fact
that, whether before or after giving effect to the making of any such Revolving
Loan, the Revolving Loan Outstandings exceed or will exceed the Revolving Loan
Limit and/or (iii) the non-satisfaction of any conditions set forth in Section 7.2.  Administrative Agent hereby agrees to apply
the gross proceeds of each Revolving Loan deemed made pursuant to this Section 2.5(c) in
satisfaction of Borrowers’ reimbursement obligations arising pursuant to this Section 2.5(c).  The applicable Borrower shall pay interest,
on demand, on all amounts so paid by Administrative Agent for each day until
Borrowers reimburse Administrative Agent therefor at a rate per annum equal to
the then current interest rate applicable to Revolving Loans (which are Base
Rate Loans) for such day.

 

(d)                                 Reimbursement and Other Payments by Borrowers.  The obligations of each Borrower to reimburse
Administrative Agent and/or the applicable LC Issuer pursuant to Section 2.5(c) shall
be absolute, unconditional and irrevocable, and shall be performed

 

41

 

strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including the following (but, in
each case, without prejudice to any claims Borrowers may have against, and
without modification of any obligations or liabilities of, the LC Issuer):

 

(i)                                     any
lack of validity or enforceability of, or any amendment or waiver of or any
consent to departure from, any Letter of Credit or any related document (provided, that any LC Issuer shall be
bound by the terms of any such amendment or waiver of, consent to or written
departure from any such Letter of Credit or related document to the extent
approved by such LC Issuer in writing);

 

(ii)                                  the
existence of any claim, set-off, defense or other right which any Borrower may
have at any time against the beneficiary of any Letter of Credit, the LC Issuer
(including any claim for improper payment), Administrative Agent, any Lender or
any other Person, whether in connection with any Financing Document or any unrelated
transaction, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or compulsory
counterclaim;

 

(iii)                               any
statement or any other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;

 

(iv)                              any
affiliation between the LC Issuer and Administrative Agent; or

 

(v)                                 to
the extent permitted under applicable law, any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.

 

(e)                                  Deposit Obligations of Borrowers.  In the event any Letters of Credit are
outstanding at the time that Borrowers prepay or are required to repay the
Obligations in full or the Revolving Loan Commitment is terminated in full,
Borrowers shall (i) deposit with Administrative Agent for the benefit of
all Revolving Lenders cash in an amount equal to one hundred and five percent
(105%) of the aggregate outstanding Letter of Credit Liability to be available
to Administrative Agent, for its benefit and the benefit of issuers of Lender
Letters of Credit,  to reimburse payments
of drafts drawn under such Letters of Credit and pay any fees and expenses
related thereto and (ii) prepay the fee payable under Section 2.5(b) with
respect to such Letters of Credit for the full remaining terms of such Letters
of Credit.  Upon termination of any such
Letter of Credit and provided no Event of Default then exists, the unearned
portion of such prepaid fee attributable to such Letter of Credit shall be
refunded to Borrowers, together with the deposit described in the preceding
clause (i) attributable to such Letter of Credit, but only to the extent
not previously applied by Administrative Agent in the manner described herein provided, that if an Event of Default then exists,
Administrative Agent may either retain such portion of the deposit and unearned
portion of such prepaid fee as cash collateral to secure the Obligations and/or
apply any or all such amounts against then outstanding Obligations; provided, further, that upon the cure or waiver of such
Event of Default, and if no other Event of Default then exists, the
Administrative Agent shall promptly return the applicable portion of the
deposit described in

 

42

 

clause (i) above to Borrowers, but only to the
extent not previously applied by Administrative Agent in the manner described
above.

 

(f)                                    Participations in Support Agreements and Lender
Letters of Credit.

 

(i)                                     Concurrently
with the issuance of each Supported Letter of Credit, Administrative Agent
shall be deemed to have sold and transferred to each Revolving Lender (other
than any Non-Funding Revolving Lenders at the time of such issuance), and each
such Revolving Lender shall be deemed irrevocably and immediately to have
purchased and received from Administrative Agent, without recourse or warranty,
an undivided interest and participation in, to the extent of such Lender’s Pro
Rata Share of the Revolving Loan Commitment, Administrative Agent’s Support
Agreement liabilities and obligations in respect of such Letters of Credit and
Borrowers’ Reimbursement Obligations with respect thereto (calculated to
disregard any interest of any Non-Funding Revolving Lender in the Revolving
Loans).  Concurrently with the issuance
of each Lender Letter of Credit, the LC Issuer in respect thereof shall be
deemed to have sold and transferred to each Revolving Lender (other than any
Non-Funding Revolving Lenders at the time of such issuance), and each such
Revolving Lender shall be deemed irrevocably and immediately to have purchased
and received from such LC Issuer, without recourse or warranty, an undivided
interest and participation in, to the extent of such Lender’s Pro Rata Share of
the Revolving Loan Commitment, such Lender Letter of Credit and Borrowers’
Reimbursement Obligations with respect thereto (calculated to disregard any
interest of any Non-Funding Revolving Lender in the Revolving Loans).  Any purchase obligation arising pursuant to
the immediately two preceding sentences shall be absolute and unconditional and
shall not be affected by any circumstances whatsoever.

 

(ii)                                  If
either (x) Administrative Agent makes any payment or disbursement under
any Support Agreement and/or (y) an LC Issuer makes any payment or
disbursement under any Lender Letter of Credit, and (A) Borrowers have not
reimbursed Administrative Agent or, as applicable, the applicable LC Issuer,
with respect to any Lender Letter of Credit, in full for such payment or
disbursement in accordance with Section 2.5(c), or (B) any
reimbursement received by Administrative Agent or any LC Issuer from any
Borrower is or must be returned or rescinded upon or during any bankruptcy or
reorganization of any Credit Party or otherwise, each Revolving Lender (other
than any Revolving Lender that was a Non-Funding Revolving Lender at the time
of the issuance of such Supported Letter of Credit or Lender Letter of Credit)
shall be irrevocably and unconditionally obligated to pay to Administrative
Agent or the applicable LC Issuer, as applicable, its Pro Rata Share of such
payment or disbursement (but no such payment shall diminish the Obligations of
each Borrower under Section 2.5(c)), calculated to disregard any interest
of any Non-Funding Revolving Lender in the Revolving Loans.  To the extent any such Revolving Lender shall
not have made such amount available to Administrative Agent or the applicable
LC Issuer, as applicable, by noon (Chicago time) on the Business Day on which
such Lender receives notice from Administrative Agent or the applicable LC
Issuer, as applicable, of such payment or disbursement, such Lender agrees to
pay interest on such amount to Administrative Agent or the applicable LC
Issuer, as applicable, forthwith on demand accruing daily at the Federal Funds
Rate, for the first three (3) days following such Lender’s

 

43

 

receipt of such notice, and thereafter at the Base
Rate plus the Base Rate Margin in respect of Revolving Loans.  Any Revolving Lender’s failure to make
available to Administrative Agent or the applicable LC Issuer, as applicable,
its Pro Rata Share of any such payment or disbursement shall not relieve any
other Lender of its obligation hereunder to make available such other Revolving
Lender’s Pro Rata Share of such payment, but no Revolving Lender shall be
responsible for the failure of any other Lender to make available such other
Lender’s Pro Rata Share of any such payment or disbursement.

 

Section 2.6                                      General
Provisions Regarding Payment; Loan Account.

 

(a)                                  All
payments to be made by each Borrower under any Financing Document, including
payments of principal and interest made hereunder and pursuant to any other
Financing Document, and all fees, expenses, indemnities and reimbursements,
shall be made without set-off or counterclaim. 
If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension (it being understood
and agreed that, solely for purposes of calculating financial covenants and
computations contained herein and determining compliance therewith, if payment
is made, in full, on any such extended due date, such payment shall be deemed
to have been paid on the original due date without giving effect to any
extension thereto).  Any payments
received in the Payment Account before 1:00 p.m. (Chicago time) on any
date shall be deemed received by Administrative Agent on such date, and any
payments received in the Payment Account after 1:00 p.m. (Chicago time) on
any date shall be deemed received by Administrative Agent on the next
succeeding Business Day.  Any optional or
mandatory prepayment of Term Loans shall be accompanied by timely delivery to
Administrative Agent of an appropriately completed Payment Notification, as
provided in Section 2.1(e).  In the
absence of receipt by Administrative Agent of an appropriately completed
Payment Notification on or prior to such prepayment, each Borrower and each
Lender hereby fully authorizes and directs Administrative Agent,
notwithstanding any contrary application provisions contained herein, to apply
payments and/or prepayments received from any Borrower against then outstanding
Revolving Loans, and second, if no Revolving Loans are then outstanding, pro
rata against all outstanding Term Loans in accordance with the provisions of Section 2.1(e);
provided, that (i) if
Administrative Agent receives an appropriately completed Payment Notification
within two (2) Business Days of the making of any such payment or
prepayment, Administrative Agent shall be fully authorized by each Borrower and
each Lender to apply such amounts received in accordance with the terms of such
Payment Notification and to make any corresponding Loan Account reversals in
respect thereof and (ii) if Administrative Agent at any time determines
(including, without limitation, by receipt of notice from any Lender or any
Credit Party) that payments received by Administrative Agent were in respect of
a mandatory prepayment event, Administrative Agent shall apply such payments in
accordance with the provisions of Section 2.1(e), and shall be fully
authorized by each Borrower and each Lender to make any corresponding Loan
Account reversals in respect thereof.

 

44

 

(b)                                 Administrative Agent shall maintain a loan
account (the “Loan Account”) on its books to
record Loans and other extensions of credit made by the Lenders hereunder or
under any other Financing Document, and all payments thereon made by each
Borrower.  All entries in the Loan
Account shall be made in accordance with Administrative Agent’s customary
accounting practices as in effect from time to time.  The balance in the Loan Account, as recorded
on Administrative Agent’s most recent printout or other written statement,
shall be prima facie evidence of the amounts due and owing to Administrative
Agent by each Borrower absent clear and convincing evidence to the contrary; provided that any
failure to so record or any error in so recording shall not limit, increase or
otherwise affect any Borrower’s duty to pay all amounts owing hereunder or
under any other Financing Document. 
Unless any Borrower notifies Administrative Agent of any objection to
any such printout or statement (specifically describing the basis for such
objection) within thirty (30) days after the date of receipt thereof, it shall
be deemed final, binding and conclusive upon Borrowers in all respects as to
all matters reflected therein, absent manifest error.

 

Section 2.7                                      Maximum
Interest.

 

(a)                                  In
no event shall the interest charged with respect to the Notes (if any) or any
other obligations of any Borrower under any Financing Document exceed the
maximum amount permitted under the laws of the State of Illinois or of any
other applicable jurisdiction.

 

(b)                                 Notwithstanding
anything to the contrary herein or elsewhere, if at any time the rate of
interest payable hereunder or under any Note or other Financing Document (the “Stated Rate”) would exceed the highest rate of interest
permitted under any applicable law to be charged (the “Maximum
Lawful Rate”), then for so long as the Maximum Lawful Rate would be
so exceeded, the rate of interest payable shall be equal to the Maximum Lawful
Rate; provided, that if at any
time thereafter the Stated Rate is less than the Maximum Lawful Rate, each
Borrower shall, to the extent permitted by law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received is equal to
the total interest which would have been received had the Stated Rate been (but
for the operation of this provision) the interest rate payable.  Thereafter, the interest rate payable shall
be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply.

 

(c)                                  In
no event shall the total interest received by any Lender exceed the amount
which it could lawfully have received had the interest been calculated for the
full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior
sentence, any Lender has received interest hereunder in excess of the Maximum
Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Loans or to other amounts (other than interest)
payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to Borrowers.

 

(d)                                 In
computing interest payable with reference to the Maximum Lawful Rate applicable
to any Lender, such interest shall be calculated at a daily rate equal to the

 

45

 

Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made.

 

Section 2.8                                      Taxes.

 

(a)                                  All
payments of principal and interest on the Loans and all other amounts payable
hereunder shall be made free and clear of and without deduction for any present
or future excise, stamp, documentary or property taxes and other taxes, fees,
duties, levies, assessments, withholdings or other charges of any nature
whatsoever (including interest and penalties thereon) imposed by any taxing
authority, excluding taxes imposed on or measured by Administrative Agent’s or
any Lender’s net income or revenue by any jurisdiction under which
Administrative Agent or such Lender is organized or conducts business, any
branch profit taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which any Borrower is located (all non-excluded items
being called “Taxes”).  If any withholding or deduction from any
payment to be made by any Borrower hereunder is required in respect of any
Taxes pursuant to any applicable Law, then Borrowers will:  (i) pay directly to the relevant
authority the full amount required to be so withheld or deducted; (ii) promptly
forward to Administrative Agent an official receipt or other documentation
satisfactory to Administrative Agent evidencing such payment to such authority;
and (iii) pay to Administrative Agent for the account of Administrative
Agent and Lenders such additional amount or amounts as is or are necessary to
ensure that the net amount actually received by Administrative Agent and each
Lender will equal the full amount Administrative Agent and such Lender would
have received had no such withholding or deduction been required.  If any Taxes are directly asserted against
Administrative Agent or any Lender with respect to any payment received by
Administrative Agent or such Lender hereunder, Administrative Agent or such
Lender may pay such Taxes and Borrowers will promptly pay such additional
amounts (including any penalty, interest or expense, other than as a result of
default by Administrative Agent or a Lender) as is necessary in order that the
net amount received by such Person after the payment of such Taxes (including
any Taxes on such additional amount) shall equal the amount such Person would
have received had such Taxes not been asserted so long as such amounts have
accrued on or after the day which is two hundred seventy (270) days prior to
the date on which Administrative Agent or such Lender first made demand therefore
provided, that the foregoing obligation
to pay such additional amounts shall not apply: 
(i) to any payment to a Lender, assignee, Administrative Agent or
Participant that fails to comply with Section 2.8(c), or (ii) to any
Taxes imposed by reason of the voluntary change by a Lender, assignee,
Administrative Agent or Participant of the jurisdiction to which such Lender,
assignee, Administrative Agent or Participant is subject from the United States
to a jurisdiction outside the United States, (iii) to any Taxes imposed by
reason of an assignment, participation or replacement of a Lender (other than
pursuant to a request by any Borrower pursuant to Section 11) or (iv) to
any withholding tax that is imposed on amounts payable to a Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office), provided that (for purposes of this clause (iv)) at such time
no Event of Default exists.

 

(b)                                 If
any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Administrative Agent, for the account of
Administrative

 

46

 

Agent and the respective Lenders, the required
receipts or other required documentary evidence, Borrowers shall indemnify
Administrative Agent and Lenders for any incremental Taxes, interest or
penalties that may become payable by Administrative Agent or any Lender as a
result of any such failure.

 

(c)                                  Each
Lender that (i) is organized under the laws of a jurisdiction other than
the United States and (ii) (A) is a party hereto on the Closing Date
or (B) purports to become an assignee of an interest pursuant to Section 11.6(a) after
the Closing Date (unless such Lender was already a Lender hereunder immediately
prior to such assignment) (each such Lender a “Foreign Lender”) shall execute and deliver to each of
Borrowers and Administrative Agent one or more (as Borrowers or Administrative
Agent may reasonably request) United States Internal Revenue Service Forms W-8ECI,
W-8BEN, W-8IMY (as applicable) and other applicable forms, certificates or
documents prescribed by the United States Internal Revenue Service or
reasonably requested by Administrative Agent certifying as to such Lender’s
entitlement to a complete exemption from withholding or deduction of
Taxes.  Borrowers shall not be required
to pay additional amounts to any Lender pursuant to this Section 2.8 with
respect to United States withholding and income Taxes to the extent that the
obligation to pay such additional amounts would not have arisen but for the
failure of such Lender to comply with this paragraph other than as a result of
a change in law.

 

Section 2.9                                      Capital Adequacy.

 

If any Lender shall
reasonably determine that the adoption or taking effect of, or any change in,
any applicable Law regarding capital adequacy, in each instance, after the
Closing Date (or, in the case of a Lender becoming a party to this Agreement
following the Closing Date, after the date on which such Lender becomes a party
hereto), or any change after the Closing Date in the interpretation,
administration or application thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation, administration or
application thereof, or the compliance by any Lender or any Person controlling
such Lender with any request, guideline or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency adopted or otherwise taking effect after the
Closing Date (but without duplication of amounts required under Section 2.3(e)(v)),
has or would have the effect of reducing the rate of return on such Lender’s or
such controlling Person’s capital as a consequence of such Lender’s obligations
hereunder or under any Support Agreement or Lender Letter of Credit to a level
below that which such Lender or such controlling Person could have achieved but
for such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, upon demand by such Lender (which demand shall be accompanied by a
written statement setting forth the basis for such demand and a calculation of
the amount thereof in reasonable detail, a copy of which shall be furnished to
Administrative Agent), Borrowers shall promptly pay to such Lender such
additional amount as will compensate such Lender or such controlling Person for
such reduction, so long as such amounts have accrued on or after the day which
is two hundred seventy (270) days prior to the date on which such Lender first
made demand therefor.

 

47

 

Section 2.10                                Mitigation Obligations.

 

(a)                                  If any Lender requests compensation under
either Section 2.3(e)(v) or Section 2.9, or if any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.8, then,
upon the written request of Borrower Representative, such Lender shall use reasonable efforts
to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder (subject to the
provisions of Section 11.6) to another of its offices, branches or
affiliates, if, in the reasonable judgment of such Lender, such designation or
assignment (i) would eliminate or materially reduce amounts payable
pursuant to any such Section, as the case may be, in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender (as determined in its sole
discretion).  Without limitation of the
provisions of Section 9.1, Borrowers hereby agree to pay all reasonable
out-of-pocket costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

(b)                                 If the Administrative Agent or any Lender
obtains knowledge that the Administrative Agent or such Lender has received any
credit against, remission for, repayment or refund of, or deduction for, any
Taxes, costs, expenses, or other amount giving rise to any payment or
reimbursement, or increase in payment or reimbursement, by Borrowers under
Sections 2.3(e)(v) or 2.8, the Administrative Agent or such Lender shall
promptly reimburse to Borrowers the full amount of such credit, remission,
repayment, refund, or deduction, net of any expenses incurred by the
Administration Agent or such Lender directly attributable to the receipt of
such credit, remission, repayment, refund or deduction.

 

Section 2.11                                Appointment of Borrower Representative.

 

Each Borrower hereby
designates LOUD as its representative and agent on its behalf for the purposes
of issuing Notices of Borrowing and Notices of LC Credit Events, giving
instructions with respect to the disbursement of the proceeds of the Loans,
selecting interest rate options, requesting Letters of Credit, giving and
receiving all other notices and consents hereunder or under any of the other
Financing Documents and taking all other actions (including in respect of
compliance with covenants) on behalf of any Borrower or Borrowers under the
Financing Documents.  Borrower
Representative hereby accepts such appointment. 
Notwithstanding anything to the contrary contained in this Agreement, no
Borrower other than Borrower Representative shall be entitled to take any of
the foregoing actions.  The proceeds of
each Loan made hereunder shall be advanced to or at the direction of Borrower
Representative and if not used by Borrower Representative in its business (for
the purposes provided in this Agreement) shall be deemed to be immediately
advanced by Borrower Representative to the appropriate other Borrower hereunder
as an intercompany loan (collectively, “Intercompany
Loans”).  All Letters of
Credit and Support Agreements issued hereunder shall be issued at Borrower
Representative’s request therefor and shall be allocated to the appropriate
Borrower’s Intercompany Loan account by Borrower Representative.  All collections of each Borrower in respect
of Accounts and other proceeds of Collateral of such Borrower received by
Administrative Agent and applied to the

 

48

 

Obligations shall
also be deemed to be repayments of the Intercompany Loans owing by such
Borrower to Borrower Representative. 
Borrowers shall maintain accurate books and records with respect to all
Intercompany Loans and all repayments thereof. 
Administrative Agent and each Lender may regard any notice or other
communication pursuant to any Financing Document from Borrower Representative
as a notice or communication from all Borrowers, and may give any notice or
communication required or permitted to be given to any Borrower or all
Borrowers hereunder to Borrower Representative on behalf of such Borrower or
all Borrowers.  Each Borrower agrees that
each notice, election, representation and warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as if the same had been
made directly by such Borrower.

 

Section 2.12                                Joint and Several Liability.

 

Each Borrower
acknowledges that it is jointly and severally liable for all of the Obligations
and as a result hereby unconditionally guaranties the full and prompt payment
when due, whether at maturity or earlier, by reason of acceleration or
otherwise, and at all times thereafter, of all indebtedness, liabilities and
obligations of every kind and nature of each other Borrower to Administrative
Agent and Lenders and, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, joint or several, now or hereafter
existing, or due or to become due, and howsoever owned, held or acquired by
Administrative Agent or any Lender.  Each
Borrower agrees that if this guaranty, or any Liens securing this guaranty,
would, but for the application of this sentence, be unenforceable under
applicable law, this guaranty and each such Lien shall be valid and enforceable
to the maximum extent that would not cause this guaranty or such Lien to be
unenforceable under applicable law, and this guaranty shall automatically be
deemed to have been amended accordingly at all relevant times.

 

Each Borrower hereby
agrees that its obligations under this guaranty shall be unconditional,
irrespective of (a) the validity or enforceability of the Obligations or
any part thereof, or of any promissory note or other document evidencing all or
any part of the Obligations, (b) the absence of any attempt to collect the
Obligations from any other Borrower or any guarantor or other action to enforce
the same, (c) the waiver or consent by Administrative Agent or any Lender
with respect to any provision of any agreement, instrument or document
evidencing or securing all or any part of the Obligations, or any other
agreement, instrument or document now or hereafter executed by any other
Borrower and delivered to Administrative Agent or any Lender (other than a
waiver, forgiveness or consent by Administrative Agent and Lenders that reduces
the amount of any of the Obligations), (d) the failure by Administrative
Agent or any Lender to take any steps to perfect and maintain its security
interest in, or to preserve its rights to, any security or Collateral for the
Obligations, for its benefit, (e) Administrative Agent’s or any Lender’s
election, in any proceeding instituted under the Bankruptcy Code or any other
similar bankruptcy or insolvency legislation, of the application of Section 1111(b)(2) of
the Bankruptcy Code or any other similar bankruptcy or insolvency legislation, (f) any
borrowing or grant of a security interest by any Borrower as
debtor-in-possession, under

 

49

 

Section 364
of the Bankruptcy Code or any other similar bankruptcy or insolvency
legislation, (g) the disallowance, under Section 502 of the Bankruptcy
Code or any other similar bankruptcy or insolvency legislation, of all or any
portion of Administrative Agent’s or any Lender’s claim(s) for repayment of the
Obligations or (h) any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a borrower or a guarantor.

 

Each Borrower hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of receivership or bankruptcy of any Borrower, protest or notice
with respect to the Obligations and all demands whatsoever, and covenants that
this guaranty will not be discharged, except by complete and irrevocable
payment and performance of the Obligations. 
No notice to any Borrower or any other party shall be required for
Administrative Agent or any Lender to make demand hereunder.  Such demand shall constitute a mature and
liquidated claim against the applicable Borrower.  Upon the occurrence of any Event of Default,
Administrative Agent or any Lender may, in its sole election, proceed directly
and at once, without notice, against all or any Borrower to collect and recover
the full amount or any portion of the Obligations, without first proceeding
against any other Borrower or any other Person, or any security or collateral
for the Obligations.  During any period
in which an Event of Default exists, each Borrower irrevocably waives the right
to direct the application of any and all payments and collections at any time
or times hereafter received by Administrative Agent from or on behalf of such
Borrower, and each Borrower does hereby irrevocably agree that Administrative
Agent shall have the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time or times hereafter by
Administrative Agent or its agent against the Obligations, in such manner as
Administrative Agent may deem advisable, notwithstanding any entry by
Administrative Agent or any Lender upon any of its books and records.

 

At any time after and
during the continuance of an Event of Default, Administrative Agent and each
Lender may, in its sole discretion, without notice to any Borrower and
regardless of the acceptance of any collateral for the payment hereof,
appropriate and apply toward payment of the Obligations (i) any indebtedness
due or to become due from Administrative Agent or any Lender to such Borrower
and (ii) any moneys, credits or other property belonging to such Borrower
at any time held by or coming into the possession of Administrative Agent or
any Lender or any Affiliates thereof, whether for deposit or otherwise.

 

Notwithstanding anything
to the contrary set forth in this Section 2.12, it is the intent of the
parties hereto that the liability incurred by each Borrower in respect of the
Obligations of the other Borrowers (and any Lien granted by each Borrower to
secure such Obligations), not constitute a fraudulent conveyance under Section 548
of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under
the provisions of any applicable law of any state or other governmental unit (“Fraudulent Conveyance”). Consequently, each
Borrower, Administrative Agent and each Lender hereby agree that if a court of
competent jurisdiction determines that the incurrence of liability by any
Borrower in respect of the Obligations of any other Borrower (or any Liens
granted by such Borrower to

 

50

 

secure such
Obligations) would, but for the application of this sentence, constitute a
Fraudulent Conveyance, such liability (and such Liens) shall be valid and
enforceable only to the maximum extent that would not cause the same to
constitute a Fraudulent Conveyance, and this Agreement and the other Financing
Documents shall automatically be deemed to have been amended accordingly.

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

 

To induce Administrative
Agent and Lenders to enter into this Agreement and to make the Loans and other
credit accommodations contemplated hereby, each Borrower hereby represents and
warrants to Administrative Agent and each Lender that, after giving effect to
the transactions contemplated by the Operative Documents to be consummated on
the Closing Date:

 

Section 3.1                                      Existence
and Power.

 

Each Credit Party is an
entity as specified on Schedule 3.1, is duly organized, validly existing
and in good standing under the laws of the jurisdiction specified on Schedule 3.1,
has the same legal name as it appears in such Credit Party’s Organizational
Documents and an organizational identification number (if any), in each case as
specified on Schedule 3.1, and has all powers and all governmental
licenses, authorizations, registrations, permits, consents and approvals
required under all applicable Laws and required in order to carry on its
business as now conducted (collectively, “Permits”),
except where the failure to have such Permits could not reasonably be expected
to have a Material Adverse Effect.  Each
Credit Party is qualified to do business as a foreign entity in each
jurisdiction in which it is required to be so qualified, which jurisdictions as
of the Closing Date are specified on Schedule 3.1, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect.  Except as set forth on Schedule 3.1,
no Credit Party over the five (5) year period preceding the Closing Date, (i) has
had any name other than its current name or (ii) was incorporated or
organized under the laws of any jurisdiction other than its current
jurisdiction of incorporation or organization.

 

Section 3.2                                      Organization
and Governmental Authorization; No Contravention.

 

The execution, delivery
and performance by each Credit Party of the Operative Documents to which it is
a party are within its powers, have been duly authorized by all necessary
action pursuant to its Organizational Documents, require no further action by
or in respect of, or filing with, any Governmental Authority and do not
violate, conflict with or cause a breach or a default under (i) any Law or
any of the Organizational Documents of any Credit Party or (ii) any
agreement or instrument binding upon it, except for such violations, conflicts,
breaches or defaults as could not, with respect to this clause (ii), reasonably
be expected to have a Material Adverse Effect.

 

51

 

Section 3.3                                      Binding
Effect.

 

Each of the Operative
Documents to which any Credit Party is a party constitutes a valid and binding
agreement or instrument of such Credit Party, enforceable against such Credit
Party in accordance with its respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws relating
to the enforcement of creditors’ rights generally and by general equitable
principles.

 

Section 3.4                                      Capitalization.

 

The authorized equity
securities of each of the Credit Parties as of the Closing Date is as set forth
on Schedule 3.4.  All issued and
outstanding equity securities of each of the Credit Parties are duly authorized
and validly issued, fully paid and nonassessable and all of such equity
securities (other than those issued by LOUD, as to which no such representation
or warranty is made) are free and clear of all Liens other than those in favor
of Administrative Agent for the benefit of Administrative Agent and Lenders,
and all such equity securities were issued in compliance with all applicable
Laws.  The identity of the holders of the
equity securities of each of the Credit Parties (other than LOUD, as to which
no such representation or warranty is made) and the percentage of their fully-diluted
ownership of the equity securities of each of the Credit Parties as of the
Closing Date is set forth on Schedule 3.4. 
As of the Closing Date, on a fully diluted basis, Investor owns not less
than sixty-four and one-half of one percent (64.5%) of the issued and
outstanding share of each class of equity securities of LOUD.  No shares of the capital stock or other
equity securities of any Credit Party, other than those described above, are
issued and outstanding as of the Closing Date. 
Except as set forth on Schedule 3.4, as of the Closing Date there
are no preemptive or other outstanding rights, options, warrants, conversion
rights or similar agreements or understandings for the purchase or acquisition
from any Credit Party of any equity securities of any such entity.

 

Section 3.5                                      Financial
Information.

 

(a)                                  The
consolidated and consolidating balance sheet of LOUD and its Consolidated
Subsidiaries as of December 31, 2004 and the related consolidated and
consolidating statements of operations, stockholders’ equity (or comparable
calculation, if such Person is not a corporation) and cash flows for the fiscal
year then ended, reported on by KPMG, copies of which have been delivered to
Administrative Agent, fairly present, in all material respects in conformity
with GAAP, the consolidated and consolidating financial position of LOUD and
its Consolidated Subsidiaries as of such date and their consolidated and
consolidating results of operations, changes in stockholders’ equity (or comparable
calculation) and cash flows for such period. 
The consolidated and consolidating balance sheet of SLM and its
Consolidated Subsidiaries as of December 31, 2004 and the related
consolidated and consolidating statements of operations, stockholders’ equity
(or comparable calculation, if such Person is not a corporation) and cash flows
for the fiscal year then ended, reported on by KPMG, copies of which have been
delivered to Administrative Agent, fairly present in all material respects, in
conformity with GAAP, the consolidated and consolidating financial position of
SLM and its Consolidated Subsidiaries as of such date and

 

52

 

their consolidated and consolidating results of
operations, changes in stockholders’ equity (or comparable calculation) and
cash flows for such period.

 

(b)                                 The
unaudited consolidated and consolidating balance sheet of LOUD and its
Consolidated Subsidiaries as of June 30, 2005 and the related unaudited consolidated and consolidating
statements of operations and cash flows for the six (6) months then ended
(it being understood that SLM was acquired on March 7, 2005), copies of
which have been delivered to Administrative Agent, fairly present in all
material respects, in conformity with GAAP applied on a basis consistent with
the applicable financial statements referred to in Section 3.5(a), the consolidated and consolidating financial
position of LOUD and its Consolidated Subsidiaries as of such date and their
consolidated and consolidating results of operations and cash flows for the six
(6) months then ended (subject to normal year-end adjustments and the
absence of footnote disclosures).

 

(c)                                  The
pro forma balance sheet of LOUD and its Consolidated Subsidiaries as of June 30,
2005, copies of which have been delivered to Administrative Agent, fairly
presents in all material respects applied on a basis consistent with the
financial statements referred to in Section 3.5(a),
the consolidated and consolidating financial position of LOUD and its
Consolidated Subsidiaries as of such date, adjusted to give effect (as if such
events had occurred on such date) to (i) the transactions contemplated by
the Operative Documents, (ii) the making of the initial Loans and the
issuance of any initial Letters of Credit, (iii) the application of the
proceeds therefrom as contemplated by the Operative Documents and (iv) the
payment of all legal, accounting and other fees related thereto to the extent
known at the time of the preparation of such balance sheet.  As of the date of such balance sheet and the
date hereof, no Credit Party had or has any material liabilities, contingent or
otherwise, including liabilities for taxes, long-term leases or forward or long-term
commitments, which under GAAP would be required to be reflected on such balance
sheet, but which are not properly reflected on such balance sheet.

 

(d)                                 The
information contained in the most recently delivered Borrowing Base Certificate
is complete and correct and the amounts shown therein as “Eligible Receivables”
and “Eligible Inventory” have been determined as provided in the Financing
Documents.

 

(e)                                  Since
December 31, 2004, there has been no material adverse change in the
business, operations, properties, prospects or financial condition of Borrowers
and their Consolidated Subsidiaries, taken as a whole.

 

Section 3.6                                      Litigation.

 

Except as set forth on Schedule 3.6,
as of the Closing Date there is no Litigation pending against, or to such
Borrower’s knowledge threatened in writing against any Credit Party.  As of the Closing Date, there is no
Litigation pending which could reasonably be expected to have a Material
Adverse Effect or which in any manner draws into question the validity of any
of the Operative Documents.

 

53

 

Section 3.7                                      Ownership
of Property.

 

Each Borrower and each of
its Subsidiaries is the lawful owner of, has good and marketable title to and
is in lawful possession of, or has valid leasehold interests in, all material
properties and other material assets (real or personal, tangible, intangible or
mixed) purported or reported to be owned or leased (as the case may be) by such
Person, except as may have been disposed of in the
Ordinary Course of Business or otherwise in compliance with the terms hereof.

 

Section 3.8                                      No
Default.

 

No Default or Event of
Default has occurred and is continuing. 
No Credit Party is in breach or default under or with respect to any
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected, which breach or default could
reasonably be expected to have a Material Adverse Effect.

 

Section 3.9                                      Labor
Matters.

 

As of the Closing Date,
there are no strikes or other labor disputes pending or, to such Borrower’s
knowledge, threatened against any Credit Party. 
Hours worked and payments made to the employees of the Credit Parties
have not been in violation of the Fair Labor Standards Act or any other
applicable Law dealing with such matters. 
All payments due from the Credit Parties, or for which any claim may be
made against any of them, on account of wages and employee and retiree health
and welfare insurance and other benefits have been paid or accrued as a
liability on their books, as the case may be. 
The consummation of the transactions contemplated by the Financing
Documents and the other Operative Documents will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which it is a party or by which it is bound.

 

Section 3.10                                Regulated
Entities.

 

No
Credit Party is an “investment company” or a company “controlled” by an “investment
company” or a “subsidiary” of an “investment company,” all within the meaning
of the Investment Company Act of 1940. 
No Credit Party is a “holding company”, or a “subsidiary
company” of a “holding company”, or an “affiliate” of a “holding company” or of
a “subsidiary company” of a “holding company”, within the meaning of the Public
Utility Holding Company Act of 1935.

 

Section 3.11                                Margin
Regulations.

 

None of the proceeds from
the Loans have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any Margin Stock or for any other purpose which might cause any of the Loans to
be considered a “purpose credit” within the meaning of Regulation T, U or X of
the Federal Reserve Board.

 

54

 

Section 3.12                                Compliance With Laws; Anti-Terrorism Laws.

 

(a)                                  Each Credit Party is in compliance with the
requirements of all applicable Laws, except for such Laws the noncompliance
with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 None
of the Credit Parties, their Affiliates or any of their respective agents
acting or benefiting in any capacity in connection with the transactions
contemplated by this Agreement is (i) in violation of any Anti-Terrorism
Law, (ii) engaged in or conspires to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in any Anti-Terrorism Law, (iii) a
Blocked Person, or is controlled by a Blocked Person, (iv) acting or will
act for or on behalf of a Blocked Person, (v) associated with, or will
become associated with, a Blocked Person or (vi) is providing, or will
provide, material, financial or technological support or other services to or
in support of acts of terrorism of a Blocked Person.  No Credit Party nor, to the knowledge of any
Credit Party, any of its Affiliates or agents acting or benefiting in any
capacity in connection with the transactions contemplated by this Agreement,
(x) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (y) deals in, or otherwise engages in any transaction relating
to, any property or interest in property blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law.

 

Section 3.13                                Taxes.

 

All Federal, and all
material state and local tax returns, reports and statements required to be
filed by or on behalf of each Credit Party have been filed with the appropriate
Governmental Authorities (unless such Credit Party has timely requested an
extension to file or has received an approved extension to file such returns,
reports and statements) in all jurisdictions in which such returns, reports and
statements are required to be filed and, except to the extent subject to a
Permitted Contest, all Taxes (including real property Taxes) and other charges
shown to be due and payable on such returns, reports and statements have been
timely paid prior to the date on which any fine, penalty, interest, late charge
or loss may be added thereto for nonpayment thereof.  Except to the extent subject to a Permitted
Contest, all state and local sales and use Taxes required to be paid by each
Credit Party in an aggregate amount in excess of $250,000 have been paid.  All Federal and state returns have been filed
by each Credit Party for all periods for which returns were due with respect to
employee income tax withholding, social security and unemployment taxes, and,
except to the extent subject to a Permitted Contest, the amounts shown thereon
to be due and payable have been paid in full or adequate provisions therefor
have been made.

 

Section 3.14                                Compliance
with ERISA.

 

(a)                                  Each
ERISA Plan (and the related trusts and funding agreements) complies in form and
in operation with, has been administered in compliance with, and the terms of
each ERISA Plan satisfy, the applicable requirements of ERISA and the Code
except to the extent any such noncompliance could not reasonably be expected to
have a

 

55

 

Material Adverse Effect.  Each ERISA Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified, and the
United States Internal Revenue Service has issued a favorable opinion or
determination letter which is still in effect. 
No Credit Party has incurred liability for any material excise tax under
any of Sections 4971 through 5000 of the Code.

 

(b)                                 Except
in each case to the extent that any of the following has not and could not
reasonably be expected to have a Material Adverse Effect during the thirty-six
(36) month period prior to the Closing Date or the making of any Loan or the
issuance of any Letter of Credit, (i) no steps have been taken to
terminate any Pension Plan and (ii) no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA.  No condition exists or event or
transaction has occurred with respect to any Pension Plan which could
reasonably be expected to result in the incurrence by any Credit Party of any
liability, fine or penalty in excess of $250,000.  No Credit Party has incurred liability to the
PBGC (other than for current premiums) with respect to any employee Pension
Plan in excess of $250,000.  Except in
each case to the extent that any of the following has not and could not
reasonably be expected to have a Material Adverse Effect all contributions (if
any) have been made on a timely basis to any Multiemployer Plan that are
required to be made by any Credit Party or any other member of the Controlled
Group under the terms of the plan or of any collective bargaining agreement or
by applicable Law; no Credit Party nor any member of the Controlled Group has
withdrawn or partially withdrawn from any Multiemployer Plan, incurred any
withdrawal liability with respect to any such plan or received notice of any
claim or demand for withdrawal liability or partial withdrawal liability from
any such plan, and no condition has occurred which, if continued, could
reasonably be expected to result in a withdrawal or partial withdrawal from any
such plan, and no Credit Party nor any member of the Controlled Group has
received any notice that any Multiemployer Plan is in reorganization, that
increased contributions are reasonably expected to be required to avoid a
reduction in plan benefits or the imposition of any excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or could reasonably be expected to be
terminated, or that any such plan is or could reasonably be expected to become
insolvent.

 

Section 3.15                                Brokers.

 

Except as set forth on Schedule 3.15,
and except for fees payable to Administrative Agent and/or Lenders, no broker,
finder or other intermediary has brought about the obtaining, making or closing
of the transactions contemplated by the Operative Documents, and no Credit
Party has or will have any obligation to any Person in respect of any finder’s
or brokerage fees in connection herewith or therewith.

 

Section 3.16                                Related
Transactions.

 

The transactions
contemplated by the Subordinated Debt Documents to be consummated on or prior
to the date hereof have been so consummated (including without limitation the
disbursement and transfer of all funds in connection therewith) in all material

 

56

 

respects pursuant
to the provisions of the applicable Operative Documents, true and complete
copies of which have been delivered to Administrative Agent, and in compliance
with all applicable Law.

 

Section 3.17                                Material
Contracts.

 

Except for the Operative
Documents and the other agreements set forth on Schedule 3.17 (collectively
with the Operative Documents, the “Material
Contracts”), as of the Closing Date there are no (i) employment
agreements covering the management of any Credit Party, (ii) collective
bargaining agreements or other labor agreements covering any employees of any
Credit Party, (iii) agreements for managerial, consulting or similar
services to which any Credit Party is a party or by which it is bound, (iv) agreements
regarding any Credit Party, its assets or operations or any investment therein
to which any of its equityholders is a party or by which it is bound, (v) real
estate leases, Intellectual Property licenses or other lease or license
agreements to which any Credit Party is a party, either as lessor or lessee, or
as licensor or licensee, or (vi) customer, distribution, marketing or
supply agreements to which any Credit Party is a party, in each case with
respect to the preceding clauses (i), (iii), (iv), (v) and (vi) requiring
payment by or to any Credit Party of more than $750,000 in any year, (vii) partnership
agreements to which any Credit Party is a general partner or joint venture
agreements to which any Credit Party is a party or (viii) any other
agreements or instruments to which any Credit Party is a party, and the breach,
nonperformance or cancellation of which, or the failure of which to renew,
could reasonably be expected to have a Material Adverse Effect.  Schedule 3.17 sets forth, with respect
to each real estate lease agreement to which any Credit Party is a party as of
the Closing Date, the address of the subject property and the annual rental
(or, where applicable, a general description of the method of computing the
annual rental).  The consummation of the
transactions contemplated by the Financing Documents and the other Operative Documents
will not give rise to a right of termination in favor of any party to any
Material Contract (other than any Credit Party).

 

Section 3.18                                Environmental
Matters.

 

Except in each case as
set forth on Schedule 3.18:

 

(a)                                  no
Hazardous Materials Contamination is located on any properties now or
previously owned, leased or operated by any Credit Party or has been released,
deposited, discharged, placed or disposed of at, on, under or near any of such
properties in a manner that would require the taking of any action under any
Environmental Law, in each case that has given rise to, or could reasonably be
expected to give rise to, remediation costs and expenses on the part of the
Credit Parties in excess of $250,000.  No
portion of any such property is currently being used, or has been used at any
previous time, for the disposal, storage, treatment, processing or other
handling of Hazardous Materials in violation of any Environmental Law nor is
any such property affected by any Hazardous Materials Contamination, except as
could not be reasonably expected to give rise to a Material Adverse Effect;

 

57

 

(b)                                 no
written notice, notification, demand, request for information, citation,
summons, complaint or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending, or to such
Borrower’s knowledge, threatened by any Governmental Authority or other Person
with respect to any (i) alleged violation by any Credit Party of any
Environmental Law, (ii) alleged failure by any Credit Party to have any
Permits required in connection with the conduct of its business or to comply
with the terms and conditions thereof, (iii) any generation, treatment,
storage, recycling, transportation or disposal by any Credit Party of any
Hazardous Materials or (iv) release of Hazardous Materials, except in each
case as could not be reasonably expected to give rise to a Material Adverse
Effect;

 

(c)                                  all
oral or written notifications of a release of Hazardous Materials required to
be filed by any Credit Party under any applicable Environmental Law have been
filed or are in the process of being timely filed by the applicable Credit
Party, except where the failure to so file could not be reasonably expected to
give rise to a Material Adverse Effect;

 

(d)                                 no
property now owned or leased by any Credit Party and, to the knowledge of such
Borrower, no such property previously owned or leased by any Credit Party, to
which any Credit Party has, directly or indirectly, transported or arranged for
the transportation of any Hazardous Materials, is listed or, to such Borrower’s
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list
or is the subject of Federal, state or local enforcement actions or, to the
knowledge of such Borrower, other governmental investigations which could
reasonably be expected to lead to claims against any Credit Party for clean-up
costs, remedial work, damage to natural resources or personal injury claims,
including, but not limited to, claims under CERCLA, except as could not be
reasonably expected to give rise to a Material Adverse Effect;

 

(e)                                  there
are no underground storage tanks located on any property owned or leased by any
Credit Party that are not properly closed, registered or permitted under
applicable Environmental Laws or that are leaking or disposing of Hazardous
Materials, except as could not be reasonably expected to give rise to a
Material Adverse Effect; and

 

(f)                                    there
are no Liens (other than those described in clause (n) of Section 5.2)
under or pursuant to any applicable Environmental Laws on any real property or
other assets owned or leased by any Credit Party, and no actions by any
Governmental Authority have been taken or, to the knowledge of such Borrower,
are in process which could subject any of such properties or assets to such
Liens.

 

Section 3.19                                Intellectual
Property.

 

Each Credit Party owns,
is licensed to use or otherwise has the right to use, all Intellectual Property
that is material to the condition (financial or other), business or operations
of such Credit Party.  All such
Intellectual Property existing as of the Closing Date, owned by a Credit Party
and registered with any United States or foreign

 

58

 

Governmental
Authority is set forth on Schedule 3.19. 
All Intellectual Property owned by each Credit Party and material to is
business is fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such registrations,
filings or issuances.  To such Borrower’s
knowledge, (a) each Credit Party conducts its business without
infringement or claim of infringement of any Intellectual Property rights of
others and (b) there is no infringement or claim of infringement by others
of any Intellectual Property rights owned by any Credit Party, which
infringement in (a) or (b) or claim of infringement could reasonably
be expected to have a Material Adverse Effect.

 

Section 3.20                                Real
Property Interests.

 

Except for leasehold
interests disclosed on Schedule 3.17, and except for the ownership or
other interests set forth on Schedule 3.20, no Credit Party has, as of the
Closing Date, any ownership, leasehold or other interest in real property.  Schedule 3.20 sets forth, with respect
to each parcel of real estate owned by any Credit Party as of the Closing Date,
the address and legal description of such parcel.

 

Section 3.21                                Solvency.

 

Each Borrower and each
additional Credit Party is Solvent.

 

Section 3.22                                Full
Disclosure.

 

Other than with respect
to financial projections, with respect to which this sentence is inapplicable,
none of the written information (financial or otherwise) furnished by or on
behalf of any Credit Party and delivered to Administrative Agent or any Lender
in connection with the consummation of the transactions contemplated by the
Operative Documents taken as a whole, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.  All budgets and financial projections
delivered to Administrative Agent and the Lenders have been and will be
prepared on the basis of the assumptions believed by Borrowers at the time made
to be reasonable in light of the facts and circumstances known by management at
the time made.  Such budgets and projections
at the time made were believed by Borrowers to be reasonable in light of the
facts and circumstances known to management at the time made; provided that Borrowers can give no assurance that such
budgets and projections will be attained and actual results may differ
materially from such budgets or projections.

 

ARTICLE 4

AFFIRMATIVE COVENANTS

 

Each Borrower agrees
that, so long as any Credit Exposure exists:

 

Section 4.1                                      Financial
Statements and Other Reports.

 

Each Borrower will, and
will cause each other Credit Party to, maintain a system of accounting
established and administered in accordance with sound business

 

59

 

practices to
permit preparation of financial statements in accordance with GAAP and to provide
the information required to be delivered to Administrative Agent and the
Lenders hereunder, and will deliver to Administrative Agent, and, in the case
of the deliveries required by paragraphs (a) through (f), (m), (n), (p)
and (q), each Lender:

 

(a)                                  within
thirty (30) days after the end of each month (forty-five (45) days in the case
of the months of March, June, September and December), a consolidated and
consolidating balance sheet of LOUD and its Consolidated Subsidiaries as at the
end of such month and the related consolidated and consolidating statements of
operations and cash flows for such month, and for the portion of the Fiscal
Year ended at the end of such month setting forth in each case in comparative
form the figures for the corresponding periods of the previous Fiscal Year and
the figures for such month and for such portion of the Fiscal Year ended at the
end of such month set forth in the annual operating and Capital Expenditure
budgets and cash flow forecast delivered pursuant to Section 4.1(m), all
in reasonable detail and certified by a Responsible Officer of Borrower
Representative as fairly presenting in all material respects the financial
condition and results of operations of LOUD and its Consolidated Subsidiaries
and as having been prepared in accordance with GAAP applied on a basis
consistent with the audited financial statements of LOUD, subject to changes
resulting from audit and normal year-end adjustments and the absence of
footnote disclosures;

 

(b)                                 within
ninety (90) days after the end of each Fiscal Year, a consolidated and
consolidating balance sheet of LOUD and its Consolidated Subsidiaries as of the
end of such Fiscal Year and the related consolidated and consolidating
statements of operations, stockholders’ equity (or the comparable item, if LOUD
is not a corporation) and cash flows for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous Fiscal Year and the
figures for such Fiscal Year set forth in the annual operating and Capital
Expenditure budgets and cash flow forecast delivered pursuant to Section 4.1(m),
certified (solely with respect to such consolidated statements) without
qualification (including with respect to the scope of audit) or exception by
independent public accountants of nationally recognized standing and acceptable
to Administrative Agent;

 

(c)                                  together
with each delivery of financial statements pursuant to Sections 4.1(a) and 4.1(b), a
Compliance Certificate;

 

(d)                                 together
with each delivery of financial statements pursuant to 4.1(b) above,
an Excess Cash Flow Certificate;

 

(e)                                  promptly
upon receipt thereof, copies of all reports submitted to any Credit Party by
independent public accountants in connection with each annual, interim or
special audit of the financial statements of any Credit Party made by such
accountants, including any comment letter submitted by such accountants to
management in connection with any audit;

 

(f)                                    promptly
upon their being entered into, copies of all Swap Contracts entered into by any
Credit Party;

 

60

 

(g)                                 [intentionally omitted]

 

(h)                                 promptly
upon any officer of any Credit Party obtaining knowledge (i) of the
existence of any Event of Default or Default, or becoming aware that the holder
of any Debt of any Credit Party in excess of $500,000 has given any notice or
taken any other action with respect to a claimed default thereunder, (ii) of
any change in any Credit Party’s certified accountant or any resignation, or
decision not to stand for re-election, by any independent member of any Credit
Party’s board of directors (or comparable body), (iii) that any Person has
given any notice to any Credit Party or taken any other action with respect to
a claimed default under any Material Contract, (iv) of the institution of
any Litigation seeking equitable relief or involving an alleged liability of
any Credit Party equal to or greater than $500,000 or any adverse determination
in any Litigation involving equitable relief or a potential liability of any
Credit Party equal to or greater than $500,000 or (v) any loss, damage or
destruction of any Collateral having a fair market value in excess of $500,000,
whether or not covered by insurance, a certificate of a Responsible Officer of
Borrower Representative specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default (including any Event of
Default or Default), event or condition, and what action the applicable Credit
Party has taken, is taking or proposes to take with respect thereto;

 

(i)                                     promptly
upon any officer of any Credit Party obtaining knowledge of (i) the
institution of any steps by any member of the Controlled Group or any other
Person to terminate any Pension Plan, (ii) the failure of any member of
the Controlled Group to make a required contribution on a timely basis to any
Pension Plan or to any Multiemployer Plan, (iii) the taking of any action
with respect to a Pension Plan which could result in the requirement that any
Borrower or any Subsidiary furnish a bond or other security to the PBGC or such
Pension Plan, (iv) the occurrence of a reportable event under Section 4043
of ERISA (for which a reporting requirement is not waived) with respect to any
Pension Plan, (v) the occurrence of any event with respect to any ERISA
Plan, Pension Plan or Multiemployer Plan which could reasonably be expected to
result in the incurrence by any member of the Controlled Group of any material
liability, fine or penalty (including any claim or demand for withdrawal
liability or partial withdrawal from any Multiemployer Plan), (vi) any
material increase in the liability or contingent liability of any Borrower or
any Subsidiary with respect to any post-retirement welfare plan benefit or (vii) the
receipt by any Credit Party of any notice that any Multiemployer Plan is in
reorganization, that increased contributions could reasonably be expected to be
required to avoid a reduction in plan benefits or the imposition of an excise
tax, that any such plan is or has been funded at a rate less than that required
under Section 412 of the Code, that any such plan is or could reasonably
be expected to be terminated, or that any such plan is or could reasonably be
expected to become insolvent, a certificate of a Responsible Officer of such
Credit Party specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person, and what action the applicable Credit Party has taken, is
taking or proposed to take with respect thereto;

 

61

 

(j)                                     promptly
upon receipt by any officer of any Credit Party of any complaint, order,
citation, notice or other written communication from any Person delivered to
any Credit Party with respect to (i) the existence of a violation of any
applicable Environmental Law, (ii) any Hazardous Materials Contamination, (iii) the
commencement of any cleanup of any Hazardous Materials Contamination, (iv) any
pending legislative or threatened proceeding for the termination, suspension or
non-renewal of any Permit required under any applicable Environmental Law, or (v) any
property of any Credit Party that becomes subject to a Lien imposed pursuant to
any Environmental Law, in each case that could give rise to any material
liability, notice from a Responsible Officer of such Credit Party specifying,
to the extent reasonably ascertainable, the nature and period of existence of
any such condition or event, or specifying the notice given or action taken by
such holder or Person, and what action the applicable Credit Party has taken,
is taking or proposes to take with respect thereto;

 

(k)                                  together
with the delivery of the Compliance Certificate pursuant to Section 4.1(c) for
each fiscal quarter, a summary of (i) Intellectual Property that any
Credit Party has registered or applied to register with any Governmental
Authority and (ii) a list of interests acquired by any Credit Party in
real property (including leasehold interests), in each case during such fiscal
quarter and describing such Intellectual Property and/or such real property in
such detail as Administrative Agent shall reasonably require;

 

(l)                                     promptly
upon receipt or filing thereof, copies of any delinquency reports or notices
related to any material taxes and any other material reports or notices
received by any Credit Party from, or filed by any Credit Party with, any
Governmental Authority;

 

(m)                               within
thirty (30) days following the conclusion of each Fiscal Year, each Borrower’s
annual operating plans, operating and Capital Expenditure budgets, and
financial forecasts, including cash flow projections covering proposed
fundings, repayments, additional advances, investments and other cash receipts
and disbursements, each for the following Fiscal Year presented on a monthly
basis, which shall be in a format reasonably consistent with projections,
budgets and forecasts theretofore provided to the Lenders, and promptly
following the preparation thereof, updates to any of the foregoing from time to
time prepared by management of each Borrower;

 

(n)                                 within
ten (10) Business Days after the end of each month, and from time to time
following the occurrence and during the continuation of a Default upon the
request of Administrative Agent, a Borrowing Base Certificate as of the last
day of the month most recently ended, together with such reconciliation reports
as may be reasonably requested by Administrative Agent with respect to the
components of such Borrowing Base Certificate;

 

(o)                                 within
five (5) Business Days after any request therefor, such information in
such reasonable detail concerning the amount, composition and manner of
calculation of the Borrowing Base as Administrative Agent or any Lender may
reasonably request;

 

62

 

(p)                                 upon
the request of Administrative Agent, which may be made not more than once each
year so long as no Event of Default exists, and at any time (but not more often
than quarterly) while and so long as an Event of Default shall be continuing, a
report of an independent collateral auditor reasonably satisfactory to
Administrative Agent (which may be, or be affiliated with, a Lender) with
respect to the components of the Borrowing Base, which report shall (i) indicate
whether or not the information set forth in the Borrowing Base Certificate most
recently delivered is accurate and complete in all material respects based upon
a review by such auditors of the Accounts of Borrowers (including verification
with respect to the amount, aging, identity and credit of the respective
account debtors and the billing practices of Borrowers) and Inventory of
Borrowers (including verification as to the value, location and respective
types) and (ii) be addressed to, or otherwise provide for express reliance
by, Administrative Agent and the Lenders;

 

(q)                                 from
time to time, if Administrative Agent or any Lender determines that obtaining
appraisals is necessary in order for Administrative Agent or such Lender to
comply with applicable Laws, appraisal reports in form and substance and from
appraisers reasonably satisfactory to Administrative Agent stating the then
current fair market values of all or any portion of the real estate owned by
any Borrower or any Subsidiaries.  In
addition to the foregoing, from time to time, but in the absence of a Default
or Event of Default not more than once during each calendar year,
Administrative Agent may require Borrowers to obtain and deliver to
Administrative Agent appraisal reports in form and substance and from
appraisers satisfactory to Administrative Agent stating the then current market
values of all or any portion of the real estate and personal property owned by
any Borrower or any Subsidiaries; and

 

(r)                                    with
reasonable promptness, such other information and data with respect to any
Credit Party as from time to time may be reasonably requested by Administrative
Agent or any Lender.

 

Section 4.2                                      Payment
and Performance of Obligations.

 

Each Borrower (i) will
pay and discharge, and cause each Subsidiary to pay and discharge, at or before
maturity, all of their respective obligations and liabilities, including tax
liabilities, except for such obligations and/or liabilities (x) that may
be the subject of a Permitted Contest and (y) the nonpayment or
nondischarge of which could not reasonably be expected to have a Material
Adverse Effect, (ii) will maintain, and cause each Subsidiary to maintain,
in accordance with GAAP, appropriate reserves for the accrual of all of their
respective obligations and liabilities and (iii) will not breach or permit
any Subsidiary to breach, or permit to exist any default under, the terms of
any lease, commitment, contract, instrument or obligation to which it is a
party, or by which its properties or assets are bound, except for such breaches
or defaults which could not reasonably be expected to have a Material Adverse
Effect.

 

63

 

Section 4.3                                      Maintenance
of Existence.

 

Each Borrower will
preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect, their
respective existence (except for Subsidiary mergers permitted by Section 5.7)
and their respective rights, privileges and franchises necessary or desirable
in the normal conduct of business except for such rights, privileges and/or
franchises the failure of which to maintain could not reasonably be expected to
have a Material Adverse Effect.

 

Section 4.4                                      Maintenance
of Property; Insurance.

 

(a)                                  Each
Borrower will keep, and will cause each Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary
wear and tear and casualty (subject to the obligations to repair if such
Borrower or such Subsidiary so elected pursuant to Section 2.1(c)(ii))
excepted.

 

(b)                                 Each
Borrower will maintain, and will cause each Subsidiary to maintain in each case
subject to customary exclusions and deductibles that are not materially and
adversely inconsistent with those in effect on the Closing Date, (i) casualty
insurance on all real and personal property on an all risks basis (including
the perils of flood and quake), covering the repair and replacement cost of all
such property and coverage for business interruption and public liability
insurance (including products/completed operations liability coverage) in each
case of the kinds and in amounts generally consistent with Borrower’s insurance
coverage as of the Closing Date, as adjusted from time to time in respect of
any future growth in Borrower’s business, including as a result of Permitted
Acquisitions and (ii) such other insurance coverage in such amounts and
with respect to such risks as Administrative Agent may reasonably request.  All such insurance shall be provided by
insurers having an A.M. Best policyholders rating reasonably acceptable to
Administrative Agent.   Borrowers will
not, and will not permit any Subsidiary to, bring or keep any article on
any business location of any Credit Party, or cause or allow any condition to
exist, if the presence of such article or the occurrence of such condition
could reasonably cause the invalidation of any insurance required by this Section 4.4(b),
or would otherwise be prohibited by the terms thereof.

 

(c)                                  On
or prior to the Closing Date, and at all times thereafter, each Borrower will
cause Administrative Agent to be named as an additional insured, assignee and
loss payee (which shall include, as applicable, identification as mortgagee),
as applicable, on each insurance policy required to be maintained pursuant to
this Section 4.4 pursuant to endorsements in form
and content acceptable to Administrative Agent.  Borrowers will deliver to Administrative
Agent and the Lenders (i) on the Closing Date, a certificate from
Borrowers’ insurance broker dated on or about such date showing the amount of
coverage as of such date, and that such policies will include effective waivers
(whether under the terms of any such policy or otherwise) by the insurer of all
claims for insurance premiums against all loss payees and additional insureds
and all rights of subrogation against all loss payees and additional insureds,
and that if all or any part of such policy is canceled, terminated or expires,
the insurer will forthwith give notice thereof to each additional

 

64

 

insured, assignee and loss payee and that no
cancellation, reduction in amount or material change in coverage thereof shall
be effective until at least thirty (30) days after receipt by each additional
insured, assignee and loss payee of written notice thereof, (ii) upon the
request of any Lender through Administrative Agent from time to time full
information as to the insurance carried, (iii) within five (5) days
of receipt of notice from any insurer, a copy of any notice of cancellation,
nonrenewal or material change in coverage from that existing on the date of
this Agreement and (iv) forthwith, notice of any cancellation or
nonrenewal of coverage by any Borrower.

 

(d)                                 In
the event any Borrower fails to provide Administrative Agent with evidence of
the insurance coverage required by this Agreement, Administrative Agent may
purchase insurance at Borrowers’ expense to protect Administrative Agent’s
interests in the Collateral.  This
insurance may, but need not, protect any Borrower’s interests.  The coverage purchased by Administrative
Agent may not pay any claim made by any Borrower or any claim that is made
against any Borrower in connection with the Collateral.  The applicable Borrower may later cancel any
insurance purchased by Administrative Agent, but only after providing
Administrative Agent with evidence that such Borrower has obtained insurance as
required by this Agreement.  If
Administrative Agent purchases insurance for the Collateral, to the fullest
extent provided by law Borrowers will be responsible for the costs of that
insurance, including interest and other charges imposed by Administrative Agent
in connection with the placement of the insurance, until the effective date of
the cancellation or expiration of the insurance.  The costs of the insurance may be added to
the Obligations.  The costs of the
insurance may be more than the cost of insurance each Borrower is able to
obtain on its own.

 

Section 4.5                                      Compliance
with Laws.

 

Each Borrower will
comply, and cause each Subsidiary to comply, with the requirements of all
applicable Laws, except to the extent that failure to so comply could not
reasonably be expected to have a Material Adverse Effect or result in any Lien
upon a material portion of the assets of any such Person in favor of any
Governmental Authority.

 

Section 4.6                                      Inspection
of Property, Books and Records.

 

Each Borrower will keep,
and will cause each Subsidiary to keep, proper books of record and account in
accordance with GAAP in which full, true and correct entries in all material
respects shall be made of all dealings and transactions in relation to its
business and activities; and will permit, and will cause each Subsidiary to
permit, at the sole cost of the applicable Borrower or any applicable
Subsidiary, representatives of Administrative Agent and of any Lender (but at
such Lender’s expense unless any Event of Default is then continuing and such
visit or inspection is made concurrently with Administrative Agent) to visit
and inspect any of their respective properties, to examine and make abstracts
or copies from any of their respective books and records, to conduct a
collateral audit and analysis of their respective Inventory and Accounts and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants as often as may
reasonably be desired in the presence of an

 

65

officer of a Borrower.  In the
absence of an Event of Default, Administrative Agent or any Lender exercising
any rights pursuant to this Section 4.6 shall give the applicable Borrower or
any applicable Subsidiary commercially reasonable prior written notice of such
exercise.  No notice shall be required
during the existence and continuance of any Event of Default.

 

Section 4.7             Use of Proceeds.

 

Borrowers will use the proceeds of the Term Loans
solely for transaction fees incurred in connection with the Operative Documents
and the refinancing on the Closing Date of Debt.  The proceeds of Revolving Loans shall be used
by Borrowers solely for the purposes set forth in the preceding sentence, to
consummate Permitted Acquisitions and for working capital needs and general
corporate purposes of Borrowers and their Subsidiaries (subject to all
limitations set forth herein).

 

Section 4.8             Lenders’ Meetings.

 

Up to once per Fiscal Year, or more
frequently as specified by Administrative Agent during the continuance of an
Event of Default, Borrowers will, in each case to the extent requested by
either Administrative Agent or Required Lenders, conduct a face-to-face meeting
of Administrative Agent and the Lenders to discuss the most recently reported
financial results and the financial condition of Borrowers and the
Subsidiaries, at which shall be present a Responsible Officer and such other
officers of the Credit Parties as may be reasonably requested to attend by
Administrative Agent or any Lender, such request or requests to be made within
a reasonable time prior to the scheduled date of such meeting.  Such meetings shall be held at a time and
place convenient to the Lenders and to Borrowers.  Up to one (1) additional time per year,
Borrowers will, as requested by either Administrative Agent or Required
Lenders, conduct a meeting of the type described above, except that each such
meeting shall be conducted by a telephone conference call.

 

Section 4.9             [Intentionally
omitted].

 

Section 4.10           Hazardous
Materials; Remediation.

 

(a)           If
any Hazardous Materials Contamination shall occur or shall have occurred on any
real property of any Borrower or any other Credit Party, such Borrower will
cause, or direct the applicable Credit Party to cause, the prompt containment,
removal, remediation or other such actions that are necessary to comply in all
material respects with all Environmental Laws (the “Remediation”).  Without
limiting the generality of the foregoing, each Borrower shall, and shall cause
each other Credit Party to, comply in all material respects with each
Environmental Law requiring the performance at any real property by any
Borrower or any other Credit Party of activities in response to the release or
threatened release of a Hazardous Material.

 

(b)           Borrowers
will provide Administrative Agent within thirty (30) days after demand therefor
(or other period approved by Administrative Agent) with a bond, letter of
credit or similar financial assurance evidencing to the satisfaction of
Administrative Agent

 

66

 

that sufficient funds are available to pay the cost of any Remediation
required pursuant to Section 4.10(a), such demand to be made, if at all, upon
Administrative Agent’s reasonable business determination that the failure to
remove, treat or dispose of any Hazardous Materials Contamination, or the
failure to discharge any such assessment could reasonably be expected to have a
Material Adverse Effect.

 

Section 4.11           [Intentionally omitted].

 

Section 4.12           Further Assurances.

 

(a)           Each
Borrower will, and will cause each Subsidiary to, at its own cost and expense,
cause to be promptly and duly taken, executed, acknowledged and delivered all
such further acts, documents and assurances as may from time to time be
necessary or as Administrative Agent or the Required Lenders may from time to
time reasonably request in order to implement or to give effect to the
provisions of the Financing Documents, including all such actions in accordance
with and subject to the provisions of the Security Documents to establish,
create, preserve, protect and perfect a first priority Lien (subject only to
Permitted Liens) in favor of Administrative Agent for the benefit of the
Lenders on the Collateral (including Collateral acquired after the date hereof),
including on any and all assets of each Credit Party described in the Security
Documents (subject to carve-outs contained therein), whether now owned or
hereafter acquired; provided, however, that pursuant to the Security Documents
(i) no Lien in the assets of a Foreign Subsidiary shall be granted and
(ii) a Lien shall be granted in the capital stock or other equity
securities of a Foreign Subsidiary only if (A) such capital stock is
directly owned by LOUD or a Domestic Subsidiary and (B) no more than
sixty-five percent (65%) of the total outstanding capital stock or other equity
securities in such a Foreign Subsidiary is subject to the Lien.

 

(b)           Without
limiting the generality of the foregoing, in the event that any Borrower or any
Domestic Subsidiaries shall acquire or form any new Domestic Subsidiary after
the date hereof (which acquisitions and formations may only be consummated in
compliance with the provisions hereof), the respective Borrower or the
respective Domestic Subsidiary will cause such new Domestic Subsidiary, upon
such acquisition and concurrently with such formation, (i) to execute a
Guarantee (in form and content acceptable to Administrative Agent) guaranteeing
payment and performance of all of the Obligations and to take such other action
(including, without limitation, authorizing the filing of such UCC financing
statements and delivering certificates in respect of the equity securities of
such Domestic Subsidiary) as shall be necessary or appropriate to establish,
create, preserve, protect and perfect a first priority Lien (subject only to
Permitted Liens) in favor of Administrative Agent for the benefit of
Administrative Agent and the Lenders on all assets described in the Security
Documents (subject to carve-outs contained therein), both real and personal, in
which such new Domestic Subsidiary has or may thereafter acquire any interest,
(ii) to execute such other Security Documents, in form and content
acceptable to Administrative Agent, as may be required or requested by Administrative
Agent in connection with the actions contemplated by the preceding clause (i)
and (iii) to deliver such proof of corporate (or comparable) action,
incumbency of officers, opinions of counsel and other documents as
Administrative Agent shall have required or requested.

 

67

 

(c)           Each
Borrower will, and will cause each of its Subsidiaries to, take such action
from time to time as shall be necessary to ensure that each of its Subsidiaries
is a Wholly-Owned Subsidiary and that Administrative Agent shall have, for the
benefit of Administrative Agent and Lenders, a first priority Lien on all
capital stock or other equity securities of each Domestic Subsidiary and
sixty-five percent (65%) of the capital stock or other equity securities of
each Foreign Subsidiary (other than Dormant Subsidiaries) which is a direct
Subsidiary of a Borrower or a Domestic Subsidiary.  In the event that any additional capital
stock or other equity securities shall be issued by any Domestic Subsidiary,
the applicable Borrower shall or shall cause each of its Domestic Subsidiaries
to, concurrently with such issuance, deliver to Administrative Agent to the
extent required by the applicable Financing Documents the certificates
evidencing such securities, accompanied by undated powers executed in blank and
to take such other action as Administrative Agent shall request to perfect the
security interest created therein pursuant to such Financing Documents.

 

(d)           Concurrently with the acquisition by any
Borrower or any Domestic Subsidiaries
following the Closing Date of any fee title to real estate for an amount
exceeding $250,000, such Borrower will, within thirty (30) days following
written request by Administrative Agent, deliver or cause to be delivered to
Administrative Agent, with respect to such real estate, (i) a mortgage or
deed of trust, as applicable, in form and substance reasonably satisfactory to
Administrative Agent, executed by the title holder thereof, (ii) an ALTA
lender’s title insurance policy issued by a title insurer reasonably
satisfactory to Administrative Agent in form and substance and in amounts
reasonably satisfactory to Administrative Agent insuring Administrative Agent’s
first priority Lien on such real estate, free and clear of all defects and
encumbrances except Permitted Liens; (iii) a current ALTA survey,
certified to Administrative Agent by a licensed surveyor, in form and substance
reasonably satisfactory to Administrative Agent, (iv) a certificate, in
form and substance acceptable to Administrative Agent, to Administrative Agent
from a national certification agency reasonably acceptable to Administrative
Agent, certifying that such real estate is not located in a special flood
hazard area and (v) in the case of real estate that consists of a
leasehold estate, such estoppel letters, consents and waivers from the
landlords and non-disturbance agreements from any holders of mortgages or deeds
of trust on such real estate as may be reasonably requested by Administrative
Agent, all of which shall be in form and substance reasonably satisfactory to
Administrative Agent.

 

ARTICLE
5

NEGATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit
Exposure exists:

 

Section 5.1             Debt.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, create, incur, assume, guarantee or otherwise become or
remain directly or indirectly liable with respect to, any Debt (or payables and
other obligations owing among any of the Credit Parties), except for:

 

68

 

(a)           Debt
under the Financing Documents and Letter of Credit Liabilities;

 

(b)           Debt
outstanding on the date of this Agreement and set forth in Item 1 on
Schedule 5.1 and refinancings thereof to the extent any such refinancing
(i) does not result in a final or weighted average maturity that is
earlier than the Debt being refinanced, (ii) does not result in an
increase in the original principal amount of the Debt being refinanced, and
(iii) does not, taken as a whole, impose provisions or restrictions that
are materially more adverse to the obligors thereunder than under the Debt
being refinanced;

 

(c)           Subordinated
Debt;

 

(d)           Debt
incurred or assumed for the purpose of financing all or any part of the cost of
acquiring, constructing or improving any fixed or capital asset (including
through Capital Leases), in an aggregate principal amount at any time
outstanding not greater than $2,000,000;

 

(e)           Debt,
if any, arising under Swap Contracts;

 

(f)            (i) intercompany
Debt, payables and other obligations owing to a Borrower by its Wholly-Owned
Subsidiaries which are Domestic Subsidiaries (but are not Dormant Subsidiaries)
or by another Borrower, or (ii) intercompany Debt, payables and other
obligations owing to a Borrower by its Wholly-Owned Subsidiaries which are
Foreign Subsidiaries (but are not Dormant Subsidiaries) in an aggregate amount
for all of such Debt, payables and other obligations owing to the Borrowers
under this clause (ii) not to exceed $8,000,000 at any time outstanding, minus
the amount of Investments made by the Borrowers after the Closing Date in their
Wholly-Owned Subsidiaries which are Foreign Subsidiaries (but are not Dormant
Subsidiaries) pursuant to Section 5.8(a)(iii) and minus the amount of
Guarantees made pursuant to the final proviso of Section 5.1(j), or
(iii) intercompany Debt, payables and other obligations owing to any
Wholly-Owned Subsidiary (other than a Dormant Subsidiary) of any Borrower by
such Borrower; provided, however, that with respect to any of the foregoing upon the
request of Administrative Agent at any time, any such Debt, payables and other
obligations described in this paragraph (f) (but not including any
intercompany Debt, payables and other obligations described in the foregoing
clause (iii) if such intercompany Debt, payables and other obligations is owing
to any Wholly-Owned Subsidiary that is a Foreign Subsidiary) shall be evidenced
by promissory notes having terms reasonably satisfactory to Administrative
Agent, the sole originally executed counterparts of which shall be pledged and
delivered to Administrative Agent, for the benefit of Administrative Agent and
Lenders, as security for the Obligations, and upon the request of
Administrative Agent at any time, such Debt, payables and other obligations
described in this paragraph (f) (but not including any intercompany Debt,
payables and other obligations described in the foregoing clause (iii) if such
intercompany Debt, payables and other obligations is owing to any Wholly-Owned
Subsidiary that is a Foreign Subsidiary) shall be secured by perfected first
priority Liens on substantially all of the assets of the obligor of such Debt,
payables and other obligations pursuant to agreements in form and substance
reasonably satisfactory to Administrative Agent;

 

69

 

(g)           the
Foreign Payment Obligations;

 

(h)           additional
unsecured Debt not to exceed $300,000 in the aggregate at any time outstanding;

 

(i)            Debt
in the form of deferred purchase price consideration payable in connection with
Permitted Acquisitions (including seller notes, maximum earn-outs, consulting
and non-competition payments), provided
that such Debt has terms and provisions acceptable to Administrative Agent and
is subordinated to the Obligations pursuant to documentation in form and
content reasonably acceptable to Administrative Agent in its sole discretion;

 

(j)            Debt
in respect of Guarantees by Borrowers or any of its Subsidiaries of Debt
otherwise permitted hereunder (provided,
that if the guaranteed Debt is subordinated to the Obligations, any such
guarantee shall be no less subordinated to the Obligations and provided that if Borrower or any Domestic Subsidiary
Guarantees Debt of any Foreign Subsidiary the amount of the Debt so Guaranteed
shall count against the limit set forth in each of clause (ii) of Section
5.1(f) above and clause (iii)(z) of Section 5.8(a));

 

(k)           Debt
in respect of guarantees in respect of obligations of any Borrower or any of
its Subsidiaries under leases and other contractual obligations not prohibited
hereunder (provided that
no Borrower or any of its Domestic Subsidiaries may guarantee any lease or
contractual obligation of any Foreign Subsidiary);

 

(l)            Debt
incurred by any Borrower or any of its Subsidiaries arising from agreements
providing for customary indemnification, adjustment of purchase price or
similar obligations in connection with permitted Asset Dispositions and
Permitted Acquisitions (excluding Debt described in clause (i) above);

 

(m)          Debt
in the form of financing of insurance premiums provided by the vendors of such
insurance or their agents and software maintenance contracts;

 

(n)           Debt
with respect to judgments or awards which do not constitute an Event of Default
under Section 8.1 hereof;

 

(o)           Debt
in respect of netting services, ordinary course overdraft protections for
overdrafts not to exceed $25,000 per account and comparable deposit account
services, so long as (i) such Debt is incurred in the Ordinary Course of
Business, (ii) such Debt is not outstanding for more than two (2) Business
Days and (iii) such deposit accounts are subject to control agreements, to
the extent required under the Financing Documents;

 

(p)           Contingent
Obligations permitted under Section 5.3, to the extent constituting Debt; and

 

(q)           Debt
arising under the last sentence of Section 5.4.

 

70

 

Section 5.2             Liens.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, create, assume or suffer to exist any Lien on any asset
now owned or hereafter acquired by it, except:

 

(a)           Liens
created by the Security Documents;

 

(b)           Liens
existing on the date of this Agreement and set forth on Schedule 5.2 and
refinancings thereof to the extent such refinancing does not result in such
Lien covering assets or properties not covered under the Lien being refinanced,
and in the case of Liens securing Debt, the refinancing of the Debt so secured
(i) does not result in a final or weighted average maturity that is earlier
than the Debt being refinanced, (ii) does not result in an increase in the
original principal amount of the Debt being refinanced, and (iii) does
not, taken as a whole, impose provisions or restrictions that are materially
more adverse to the obligors thereunder than under the Debt being refinanced;

 

(c)           any
Lien on any asset securing Debt permitted under Section 5.1(d), provided that
such Lien attaches only to the assets financed by such Debt, and such Lien
attaches concurrently with or within ninety (90) days after the acquisition
thereof;

 

(d)           Liens
for taxes, assessments or other governmental levies, fees or charges not at the
time delinquent or thereafter payable without penalty or the subject of a
Permitted Contest;

 

(e)           Liens
arising in the Ordinary Course of Business (i) in favor of carriers,
warehousemen, mechanics, lessors, landlords and materialmen, and other similar
Liens imposed by law or in connection with statutory obligations or
(ii) in connection with worker’s compensation, unemployment compensation
and other types of social security (excluding Liens arising under ERISA) or in
connection with surety bonds, bids, performance bonds and similar obligations
for sums not overdue or the subject of a Permitted Contest which Liens may
involve deposits and advances incurred in the Ordinary Course of Business but
not involving borrowed money or the deferred purchase price of property or
services and, in each case, for which it maintains adequate reserves;

 

(f)            attachments,
appeal bonds and judgment Liens, for sums not exceeding $300,000 in the
aggregate arising in connection with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are the subject of a
Permitted Contest;

 

(g)           easements,
rights of way, covenants, conditions, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of any Borrower or any
Subsidiary;

 

(h)           Liens
arising from the precautionary UCC financing statements filed under any lease
permitted by this Agreement;

 

71

 

(i)            customary
rights of set-off, revocation, refund or chargeback under deposit agreements or
under the Uniform Commercial Code of banks or other financial institutions
where any Credit Party maintains deposits (other than deposits intended as cash
collateral) in the Ordinary Course of Business;

 

(j)            any
interest or title of a licensor, sublicensor, lessor or sublessor in the
property covered by any license or lease agreement of any Credit Party not
prohibited hereunder;

 

(k)           licenses,
sublicenses, leases or subleases granted by any Credit Party to any third
parties in the Ordinary Course of Business;

 

(l)            Liens
on insurance policies and the proceeds thereof securing Debt described in
Section 5.1(m);

 

(m)          Liens
in favor of collecting banks arising under Section 4-210 of the Uniform
Commercial Code and other bankers liens arising by operation of law; and

 

(n)           zoning,
building codes and other land use laws regulating the use or occupancy of real
property or the activities conducted thereon which are imposed by any
Governmental Authority having jurisdiction over such real property which are
not violated in any material respect by the current use or occupancy or the
operation of the business on such real property.

 

Section 5.3             Contingent Obligations.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, create, assume, incur or suffer to exist any Contingent
Obligations, except for:

 

(a)           Contingent
Obligations arising in respect of the Debt under (i) the Financing
Documents, (ii) Letter of Credit Liabilities and (iii) the
Subordinated Debt Documents;

 

(b)           Contingent
Obligations resulting from endorsements for collection or deposit in the
Ordinary Course of Business;

 

(c)           so
long as there exists no Event of Default both immediately before and
immediately after giving effect to any such transaction, Contingent Obligations
existing or arising under any Swap Contract, provided
that such obligations are (or were) entered into by a Borrower or a Subsidiary
in the Ordinary Course of Business for the purpose of directly mitigating risks
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person and not for purposes of speculation;

 

(d)           Contingent
Obligations outstanding on the date of this Agreement and set forth on Schedule
5.3;

 

72

 

(e)           Contingent
Obligations incurred in the Ordinary Course of Business with respect to surety
and appeal bonds, performance bonds and other similar obligations not to exceed
$500,000 in the aggregate at any time outstanding;

 

(f)            Contingent
Obligations arising under indemnity agreements with title insurers to cause
such title insurers to issue to Administrative Agent mortgagee title insurance
policies;

 

(g)           Contingent
Obligations arising with respect to customary indemnification obligations in
favor of purchasers in connection with dispositions permitted under Section 5.7
or in favor of sellers in connection with Investments and acquisitions
permitted under Section 5.8;

 

(h)           Contingent
Obligations arising with respect to Floor Plan Obligations, provided that the
maximum amount of such Contingent Obligations shall not exceed an aggregate of
$5,000,000 at any one time and provided that the Borrowers account for all such
Floor Plan Obligations and the related revenues in a manner consistent with
past practices as in existence on the Closing Date; and

 

(i)            Contingent
Obligations in respect to the guarantee of any obligations otherwise permitted
or not prohibited hereunder (provided, that
if any such obligations are subordinated to the Obligations, any such guarantee
shall be no less subordinated to the Obligations).

 

Section
5.4             Restricted
Distributions.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Distribution; provided that
the foregoing shall not restrict or prohibit (a) any Subsidiary from
making dividends or distributions, directly or indirectly, to any Borrower or
(b) purchases of shares of (or options to purchase shares of) equity
interests in LOUD or options therefor from employees of any Credit Party upon
their death, termination of their employment or retirement, so long as
(x) before and after giving effect to any such dividend or distribution
for such purpose, (i) no Event of Default shall have occurred and be
continuing, (ii) Borrowers are in compliance on a pro forma basis with the
covenants set forth in Article 6 recomputed for the most recently ended quarter
for which information is available and is in compliance with all other terms
and conditions of this Agreement and (iii) if such dividend or
distribution is made prior to the Commitment Expiry Date, the Revolving Loan
Limit minus the Revolving Loan Outstandings is equal to or greater than
$5,000,000 and (y) such purchases or payments after the date hereof do not
exceed $250,000 in any Fiscal Year and do not exceed $1,000,000 in the
aggregate from and after the Closing Date. 
Notwithstanding the limitations set forth in clause (b) of the
immediately preceding sentence, LOUD may purchase shares of (or options to
purchase shares of) equity interests in LOUD or options therefor from employees
of any Credit Party upon their death, termination of their employment or
retirement, solely in exchange for Debt issued by LOUD; provided, that (A) the terms of such
Debt expressly provide that no payments may be made in cash or any other
property prior to repayment in

 

73

 

full of the Obligations and the termination of all commitments
hereunder, (B) such Debt is subordinated to the Obligations pursuant to an
agreement in form and substance satisfactory to Administrative Agent,
(C) such Debt is unsecured and is not guaranteed by any other Credit
Party, and (D) the aggregate outstanding principal amount of all such Debt
does not exceed $3,500,000 at any time.

 

Section 5.5             Restrictive
Agreements.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly (i) enter into or assume any agreement (other than
the Financing Documents and the Subordinated Debt Documents) prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired or (ii) create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
(except as provided by the Subordinated Debt Documents) on the ability of any
Subsidiary to:  (1) pay or make
Restricted Distributions to any Borrower or any Subsidiary; (2) pay any
Debt owed to any Borrower or any Subsidiary; (3) make loans or advances to
any Borrower or any Subsidiary; or (4) transfer any of its property or
assets to any Borrower or any Subsidiary; provided
that any Borrower and any of its Subsidiaries will be permitted to enter into
agreements:  (i) containing
customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of any Borrower or a Subsidiary,
(ii) containing customary provisions restricting assignment of any
agreement entered into by Borrower or a Subsidiary in the Ordinary Course of
Business, (iii) containing restrictions on the transfer of assets subject
to Liens permitted by Section 5.2(c), and (iv) containing customary
restrictions and conditions contained in any agreement relating to the sale of
any property permitted under Section 5.7 pending the consummation of such sale.

 

Section
5.6             Payments and Modifications of Subordinated Debt.

 

No Borrower will, or will permit any
Subsidiary to, directly or indirectly (a) declare, pay, make or set aside
any amount for payment in respect of Subordinated Debt, except as permitted by
the Subordination Agreement; or (b) amend or otherwise modify the terms of
any Subordinated Debt in a manner prohibited by the Subordination Agreement.  Each Borrower shall, prior to entering into
any amendment or modification to any Subordinated Debt Document, deliver to
Administrative Agent reasonably in advance of the execution thereof, any final
or execution form copy thereof.

 

Section
5.7             Consolidations,
Mergers and Sales of Assets.

 

No Borrower will, or will permit any
Subsidiary to, directly or indirectly (a) consolidate or merge with or
into any other Person other than, with not less than twenty (20) Business Days’
prior written notice to Administrative Agent (or such lesser amount of notice
as Administrative Agent, in its sole discretion, may from time to time permit),
mergers of any Wholly-Owned Subsidiary with and into a Borrower (with such
Borrower as the surviving entity of such merger) or with and into any other
Wholly-Owned Subsidiary of a Borrower or (b) consummate any Asset
Dispositions other than dispositions of assets for cash and fair value that the
applicable Borrower determines in good faith is no longer used or

 

74

 

useful in the business of such
Borrower and its Subsidiaries if all of the following
conditions are met:  (i) the market
value of assets sold or otherwise disposed of in any single transaction or
series of related transactions does not exceed $500,000 and the aggregate market
value of assets sold or otherwise disposed of in any Fiscal Year of the
applicable Borrower does not exceed $1,000,000; (ii) the Net Cash Proceeds
of any such disposition are applied as required by Section 2.1(c);
(iii) after giving effect to any such disposition and the repayment of
Debt with the proceeds thereof, Borrowers are in compliance on a pro forma
basis with the covenants set forth in Article 6 recomputed for the most
recently ended quarter for which information is available and is in compliance
with all other terms and conditions of this Agreement; and (iv) no Default
or Event of Default then exists or would result from any such disposition.

 

Section
5.8             Purchase
of Assets, Investments.

 

(a)           No Borrower will, or will permit any Subsidiary to,
directly or indirectly (w) acquire or enter into any agreement to acquire
any assets other than in the Ordinary Course of Business, constituting Capital
Expenditures to the extent permitted pursuant to Section 6.1 or
constituting replacement assets purchased with proceeds of Property Insurance
Policies, awards or other compensation with respect to any eminent domain,
condemnation or similar proceeding, (x) create, acquire or enter into any
agreement to create or acquire any Subsidiary other
than Wholly-Owned Subsidiaries which are Domestic Subsidiaries acquired or
created to consummate a Permitted Acquisition and for which the requirements
set forth in Sections 4.12(b) and 4.12(c) have been satisfied, (y) engage or enter into any
agreement to engage in any joint venture or partnership with any other Person
or (z) acquire or own or enter into any agreement to acquire or own any
Investment in any Person other than (without duplication):

 

(i)            Investments
existing on the date of this Agreement and set forth on Schedule 5.8;

 

(ii)           Cash
Equivalents;

 

(iii)          (y) additional
Investments in the capital stock or other equity interests of any Wholly-Owned
Subsidiaries existing as of the Closing Date which are Domestic Subsidiaries
(but are not Dormant Subsidiaries) and
(z) additional Investments in the capital stock or other equity interests
of any Wholly-Owned Subsidiaries existing as of the Closing Date which are
Foreign Subsidiaries (but are not Dormant 
Subsidiaries) in an aggregate amount for all such Foreign Subsidiaries not to exceed
$8,000,000, minus the amount of loans, payables and other obligations owing by
Wholly-Owned Subsidiaries pursuant to clause (ii) of Section 5.1(f) above and
minus the amount of Guarantees made pursuant to the final proviso of Section
5.1(j);

 

(iv)          bank deposits established in accordance with
Section 5.17;

 

75

 

(v)           Investments in securities of account debtors
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors;

 

(vi)          Investments in the form of Swap Contracts
permitted under Section 5.1(e) and Section 5.3(c);

 

(vii)         (y) cashless loans to officers
and employees provided that the proceeds thereof are used by such officers and
employees solely to purchase capital stock of LOUD, and (z) loans to officers and
employees in an aggregate principal amount not to exceed $500,000 at any time
outstanding;

 

(viii)        payroll advances in the Ordinary Course of Business;

 

(ix)           Investments in the form of loans between or
among the Credit  Parties made in lieu of
distributions otherwise permitted under Section 5.4 (with such loans being
subject to the same dollar restrictions, if any, applicable to the
corresponding provisions of Section 5.4, and with any such loans reducing, on a
dollar-by-dollar basis, the corresponding amount of distributions otherwise
permitted by Section 5.4);

 

(x)            Investments received as consideration for
Asset Dispositions permitted in Section 5.7; and

 

(xi)           other Investments in an aggregate amount at
any one time outstanding not to exceed $100,000.

 

(b)           Notwithstanding
the foregoing, any Borrower may acquire, or may cause a Wholly-Owned Subsidiary
that is a Domestic Subsidiary to acquire, all or substantially all of the
assets, or all (but not less than all) of the capital stock or other equity
securities, of any Person (the “Target”)
(in each case, a “Permitted Acquisition”)
with the prior written approval of Required Lenders or subject to the
satisfaction of each of the following conditions:

 

(i)            Administrative
Agent shall have received not less than twenty (20) Business Days’ prior notice
(or any more reduced period of prior notice as may be approved from time to
time by Administrative Agent) of such proposed Permitted Acquisition, which
notice shall include a due diligence package including the following materials,
each in form and substance reasonably satisfactory to Administrative Agent:

 

(A)          copies
of the Target’s three most recent annual income statements and balance sheets,
together with the audit opinions thereon, if any, of the Target’s independent
accountants, together with available interim financial statements, (B) if
available, any asset or business appraisals, (C) a general description of
the business to be acquired, (D) a general description of the competitive
position of the business to be acquired within its industry, (E) a summary
of pending and known threatened litigation
adversely affecting the business or assets to be acquired, (F) a
description of the method of financing such acquisition, including sources and
uses, (G) a listing of locations of all personal and real property to be

 

76

 

acquired, (H) a description of any change in management of the
Credit Parties, after giving effect to such acquisition, (I) all
agreements to be assumed or acquired, but solely to the extent such agreements
are of equivalent or greater materiality to the Credit Parties as compared to
any applicable Material Contract, (J) if the Target owns or leases, or if
the assets to be acquired includes, any owned real property or leased real
property, and if reasonably requested by Administrative Agent, environmental
reports and related information regarding any such property (other than leased
property used solely as office space), (K) draft copies of all proposed
acquisition agreements and all related transaction documents for such
acquisition, together with all schedules thereto (followed by updated drafts as
the same are generated and fully executed copies thereof within five (5)
Business Days after the closing of such acquisition), and (L) any other
material or reports reasonably requested by Administrative Agent and otherwise
available; provided that with
respect to each Small Scale Acquisition, Borrowers shall only be obligated to
deliver the materials described in clauses (A), (D) and (L), to the extent that
such materials are readily available.

 

(ii)           Concurrently
with delivery of the notice and due diligence materials referred to in clause
(i) above, Borrower Representative shall have delivered to Administrative
Agent, in form and substance reasonably satisfactory to Administrative Agent:

 

(A)          a
pro forma consolidated and consolidating balance sheet, income statement and
cash flow statement of LOUD and its Subsidiaries (the “Acquisition Pro Forma”), based on most
recently available financial statements, which shall be complete and shall
fairly present in all material respects the assets, liabilities, financial
condition and results of operations of LOUD and its Subsidiaries in accordance
with GAAP consistently applied, but taking into account such Permitted
Acquisition, the funding of all Loans and the incurrence or assumption of all
other Debt and repayment of Debt in connection therewith, and such Acquisition
Pro Forma shall reflect that (I) on a pro forma basis, LOUD and its
Subsidiaries would have had a Senior Debt to EBITDA Ratio for the four quarter
period reflected in the Compliance Certificate most recently delivered to
Administrative Agent pursuant to Section 4.1(c) prior to the consummation
of such Permitted Acquisition (after giving effect to such Permitted
Acquisition and all Loans funded in connection therewith as if made on the
first day of such period) of not more than the difference between (x) the
maximum permitted amount of the Senior Debt to EBITDA Ratio as of the most
recently completed Fiscal Quarter period for which a Compliance Certificate was
required to be delivered to Administrative Agent less (y) fifty
(50) basis points, (II) on a pro forma basis the condition set forth in
clause II of Section 8.8(b)(ii)(A) of the Securities Purchase Agreement
referred to in the defined term “Subordinated Debt Documents” is satisfied, and
(III) on a pro forma basis, no Event of Default has occurred and is
continuing or would result after giving effect to such Permitted Acquisition,
the funding of all Loans and the incurrence or assumption of all other Debt and
repayment of Debt in connection therewith;

 

(B)           updated
versions of the projections most recently delivered to Administrative Agent
pursuant to Section 4.1(m) covering the one (1) year period commencing on the
date of such Permitted Acquisition and otherwise prepared in accordance with
the requirements of Section 4.1(m) (the “Acquisition
Projections”) and based upon

 

77

 

historical financial data of a recent date reasonably satisfactory to
Administrative Agent, taking into account such Permitted Acquisition, the
funding of all Loans and the incurrence or assumption of all other Debt and
repayment of Debt in connection therewith; and

 

(C)           a
certificate of a Responsible Officer of Borrower Representative to the effect
that:  (w) LOUD and each Subsidiary
taken as a whole will be Solvent upon the consummation of the Permitted
Acquisition; (x) the Acquisition Pro Forma fairly presents the financial
condition of LOUD and its
Subsidiaries (on a consolidated basis) in all material respects as of the date
thereof and the periods covered thereby, in each case after giving effect to
the Permitted Acquisition and related transactions; (y) the Acquisition
Projections represent Borrowers’ reasonable estimate of LOUD’s consolidated future financial
performance as of the date thereof and after giving effect to the Permitted
Acquisition, the assumptions contained therein are believed by Borrowers to be
fair and reasonable in light of current business conditions and the Acquisition
Projections demonstrate Borrowers’ projected compliance with the covenants set
forth in Article 6 for the one-year period immediately following the
consummation of such Permitted Acquisition; provided,
that Borrowers can give no assurance that the results reflected in the
Acquisition Projections will be attained; and (z) LOUD and its
Subsidiaries have completed their due diligence investigation with respect to
the Target and such Permitted Acquisition, which investigation was conducted in
a manner similar to that which would have been conducted by a prudent purchaser
of a comparable business and the results of which investigation, to the extent
requested, were delivered to Administrative Agent;

 

(iii)          such
Permitted Acquisition shall only involve assets located in the United States
(and in connection with the acquisition of the capital stock or other equity
securities of a Target, such Target and any of its Subsidiaries shall be
formed, incorporated or otherwise organized under the laws of a State within
the United States) and comprising a business, or those assets of a business, of
the type engaged in by Borrowers as of the Closing Date and businesses
reasonably related thereto, and which business would not subject Administrative
Agent or any Lender to regulatory or third party approvals in connection with
the exercise of its rights and remedies under this Agreement or any other
Financing Documents other than approvals applicable to the exercise of such
rights and remedies with respect to Borrowers prior to such Permitted
Acquisition;

 

(iv)          such
Permitted Acquisition shall be consensual, shall have been approved by the
Target’s board of directors (or comparable governing body) and shall be
consummated in accordance with the terms of the agreements and documents
related thereto, and in material compliance with all applicable Laws;

 

(v)           no
assets or liabilities (including, without limitation, Investments, Debt and
Contingent Obligations) shall be acquired, incurred, assumed or otherwise be
reflected on a consolidated balance sheet of LOUD and its Subsidiaries after
giving effect to such Permitted Acquisition, except (A) Loans made
hereunder and (B) those assets and liabilities which may be acquired,
incurred or assumed in accordance with the provisions of this Agreement
(including, without limitation, the provisions of Section 5.1, 5.3 and 5.8(a));

 

78

 

(vi)          the
business and assets acquired in such Permitted Acquisition shall be free and
clear of all Liens (other than Permitted Liens);

 

(vii)         at
or prior to the closing of any Permitted Acquisition, Administrative Agent will
be granted a first priority perfected Lien (subject to Permitted Liens and any
express carve-outs set forth in the Security Documents) in all assets acquired
pursuant thereto or, as contemplated by Section 4.12, in the assets and capital
stock or other equity interests of the Target, and LOUD, its Subsidiaries and
the Target shall have executed such documents and taken such actions (including
without limitation, the delivery of (A) certified copies of the
resolutions of the board of directors (or comparable governing board) of LOUD,
its Subsidiaries and the Target authorizing such Permitted Acquisition and the
granting of Liens described herein, (B) legal opinions in form and
substance reasonably acceptable to Administrative Agent, and (C) evidence
of insurance of the business to be acquired consistent with the requirements of
Section 4.4) as may be reasonably required by Administrative Agent in
connection therewith;

 

(viii)        the
sum of all amounts payable in connection with any Permitted Acquisition
(including all transaction costs, all Debt, all liabilities and Contingent
Obligations assumed and the maximum amount of any earn-out or comparable
contingent payment obligation in connection therewith (whether or not any of
the foregoing is reflected on LOUD’s consolidated balance sheet) and the fair
market value of property transferred, but excluding the amount of any capital
stock of LOUD sold or transferred to finance Permitted Acquisitions), shall not
exceed (a) $2,500,000 in any Fiscal Year and (b) $5,000,000 from and
following the Closing Date;

 

(ix)           any
earn-outs or other comparable contingent payment obligations incurred by the
Credit Parties in connection with such Permitted Acquisition shall contain a
stated maximum payment amount, the sum of which shall not exceed fifty percent
(50%) of the amounts described in the preceding clause (viii) with respect to
such Permitted Acquisition;

 

(x)            the
Target shall not have incurred an operating loss for the trailing twelve-month
period preceding the date of the Permitted Acquisition, as determined based
upon the Target’s financial statements for its most recently completed fiscal
year and its most recent interim financial period completed within sixty (60)
days prior to the date of consummation of such Permitted Acquisition;

 

(xi)           on
or prior to the date of such Permitted Acquisition, Administrative Agent shall
have received, in form and substance reasonably satisfactory to Administrative
Agent, (a) copies of the acquisition agreement and related agreements and
instruments, and all opinions, certificates, lien search results and other
documents reasonably requested by Administrative Agent and (b) amendments
to the Schedules, to the extent necessary to make the representations and
warranties in this Agreement true and correct in all material respects after
giving effect to the consummation of such Permitted Acquisition;

 

79

 

(xii)          at
the time of such Permitted Acquisition and after giving effect thereto, no Default
or Event of Default has occurred and is continuing; and

 

(xiii)         at
the time of such Permitted Acquisition and after giving effect thereto, the
aggregate amount of additional Revolving Loans available to Borrowers pursuant
to the terms of this Agreement shall be not less than $5,000,000.

 

Section
5.9             Transactions
with Affiliates.

 

Except (i) as expressly permitted by the
Financing Documents, (ii) as otherwise disclosed on Schedule 5.9, and
(iii) for transactions entered into with portfolio companies of Investor
(or which are otherwise disclosed to Administrative Agent in advance of being
entered into) and which in either such case contain terms that are no less
favorable to the applicable Borrower or any Subsidiary, as the case may be,
than those which would reasonably be obtained from a third party not an
Affiliate of any Credit Party, no Borrower will, or will permit any Subsidiary
to, directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of any Borrower other than another
Credit Party; provided that
nothing in this Section 5.9 shall prohibit Borrower or its Subsidiaries from
engaging in the following transactions: 
(x) the performance of Borrower’s or any Subsidiary’s obligations
under any employment contract, collective bargaining agreement, employee
benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the Ordinary Course of Business,
(y) the payment of compensation to employees, officers, directors (other
than the payment of directors’ fees to directors that are employees of any
Credit Party or any of their Affiliates or that are appointed by Investor or
any of its Affiliates) or non-affiliated consultants in the Ordinary Course of
Business or (z) the maintenance of benefit programs or arrangements for
employees, officers or directors, including, without limitation, vacation
plans, health and life insurance plans, deferred compensation plans, and
retirement or savings plans and similar plans, in each case, in the Ordinary
Course of Business.

 

Section
5.10           Modification
of Organizational Documents.

 

No Borrower will, or will permit any Subsidiary to, directly or indirectly, amend or
otherwise modify any Organizational Documents of such Person, except for such
amendments or other modifications fully disclosed to Administrative Agent no
later than the effective date of such amendment or modification, and which
amendments or modifications are either (i) required by Law or
(ii) could not reasonably be considered to be adverse to Administrative
Agent or to the Lenders or to affect in any adverse way the Liens of
Administrative Agent.

 

Section 5.11           Modification
of Certain Agreements.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, amend or otherwise modify the Management Agreement
which in any case:

 

80

 

(a)           is
contrary to the terms of this Agreement or any other Financing Document;

 

(b)           could
reasonably be expected to be adverse to the rights or interests of the
Administrative Agent or the Lenders under any of the Financing Documents or
their ability to enforce the same;

 

(c)           results
in the imposition or expansion in any material respect of any restriction or
burden on any Borrower or any Subsidiary; or

 

(d)           reduces
in any material respect any rights or benefits of any Borrower or any
Subsidiaries without reasonably adequate consideration.

 

Each Borrower shall, prior to entering into any
amendment or other modification of any of the foregoing documents, deliver to
Administrative Agent reasonably in advance of the execution thereof, any final
or execution form copy of amendments or other modifications to such documents,
and, if approval of Required Lenders is required by the terms of this Section
5.11 prior to the taking of any such action, such Borrower agrees not to take,
nor permit any of its Subsidiaries to take, any such action with respect to any
such documents without obtaining such approval from Required Lenders.

 

Section
5.12           Fiscal
Year.

 

No Borrower will, or will permit any Subsidiary to,
change its Fiscal Year.

 

Section
5.13           Conduct of Business.

 

No Borrower will, or will permit any
Subsidiary to, directly or indirectly, engage in any line of business other
than those businesses engaged in on the Closing Date and described on Schedule
5.13 and businesses reasonably related thereto.

 

Section
5.14           Investor
Fees.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, pay or become obligated to pay any management,
consulting or similar advisory fees (exclusive of up to $250,000 of fees paid
to independent directors in any Fiscal Year) to or for the account of Investor
or any Affiliate of Investor except, so long as no Event of Default is then
continuing or would result therefrom, pursuant to the Management Agreement as
it exists on the date hereof.

 

Section 5.15         [Intentionally
omitted].

 

Section 5.16           Limitation
on Sale and Leaseback Transactions.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, enter into any arrangement with any Person whereby in a
substantially contemporaneous transaction any Borrower or any Subsidiaries
sells or transfers all or substantially all of its

 

81

 

right, title and interest in an asset and, in connection therewith,
acquires or leases back the right to use such asset.

 

Section 5.17           Bank Accounts.

 

No Borrower will, or will permit any Subsidiary to,
directly or indirectly, establish any new bank account without prior written
notice to Administrative Agent and unless Administrative Agent, such Borrower
or such Subsidiary and the bank at which the account is to be opened enter into
a control agreement regarding such bank account pursuant to which such bank
acknowledges the security interest of Administrative Agent in such bank
account, agrees to comply with instructions originated by Administrative Agent
directing disposition of the funds in such bank account without further consent
from any Borrower, and agrees to subordinate and limit any security interest
such bank may have in such bank account on terms reasonably satisfactory to
Administrative Agent.

 

Section 5.18           Compliance
with Anti-Terrorism Laws.

 

(a)           No
Borrower will, or will permit any Subsidiary to, directly or indirectly,
knowingly enter into any Operative Documents or Material Contracts with any
Person listed on the OFAC Lists.  Each
Borrower shall immediately notify Administrative Agent if such Borrower has
knowledge that any Borrower, any additional Credit Party or any of their
respective Affiliates or agents acting or benefiting in any capacity in
connection with the transactions contemplated by this Agreement is or becomes a
Blocked Person or (i) is convicted on, (ii) pleads nolo contendere to, (iii) is indicted on or
(iv) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering.  No
Borrower will, or will permit any Subsidiary to, directly or indirectly,
(i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including, without limitation, the making or receiving of any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to,
any property or interests in property blocked pursuant to Executive Order
No. 13224, any similar executive order or other Anti-Terrorism Law, or
(iii) engage in or conspire to engage in any transaction that evades, or
has the purpose of evading, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

(b)           Administrative
Agent hereby notifies Borrowers that pursuant to the requirements of the USA
PATRIOT Act, and the Administrative Agent’s policies and procedures, the
Administrative Agent is required to obtain, verify and record certain
information and documentation that identifies Borrowers, which information
includes the name and address of each Borrower and such other information that
will allow the Administrative Agent to identify each Borrower in accordance
with the USA PATRIOT Act.

 

82

 

ARTICLE 6

FINANCIAL COVENANTS

 

Each Borrower agrees that, so long
as any Credit Exposure exists:

 

Section 6.1             Capital
Expenditures.

 

Borrowers will not permit the aggregate amount of
Capital Expenditures for any period set forth below to exceed the amount set
forth below for such period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Closing Date through 12/31/05

  	
   

  	
  $

  	
  1,350,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2010

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2011

  	
   

  	
  $

  	
  3,000,000

  	
   

  

 

If Borrowers do not utilize the entire amount of
Capital Expenditures permitted in any period set forth above, Borrowers may
carry forward to the immediately succeeding period only, one hundred percent
(100%) of such unutilized amount, with the amount carried forward to any period
not to exceed fifty percent (50%) of the amount set forth above for the
immediately preceding period (with Capital Expenditures made by Borrowers in
such succeeding period applied last to such carried forward amount).

 

Section 6.2             Fixed Charge Coverage Ratio.

 

Borrowers will not permit the Fixed
Charge Coverage Ratio for the twelve (12) month period ending on any date set
forth below to be less than the ratio set forth below and measured as of such
date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005

  	
   

  	
  1.30 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  1.30 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  1.30 to 1.00

  	
   

  
	
  September 30,
  2006

  	
   

  	
  1.30 to 1.00

  	
   

  
	
  December 31,
  2006

  	
   

  	
  1.30 to 1.00

  	
   

  
	
  The last day of
  each calendar quarter thereafter

  	
   

  	
  1.35 to 1.00

  	
   

  

 

83

 

Section 6.3             Total Debt to Adjusted EBITDA Ratio.

 

Borrowers will not permit the ratio of (i) Total
Debt on any date set forth below to (ii) Adjusted EBITDA for the twelve
(12) month period ending on such date to exceed the ratio set forth below and
measured as of such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  September 30,
  2006

  	
   

  	
  4.25 to 1.00

  	
   

  
	
  December 31,
  2006

  	
   

  	
  4.25 to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  4.00 to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  4.00 to 1.00

  	
   

  
	
  September 30,
  2007

  	
   

  	
  3.50 to 1.00

  	
   

  
	
  December 31,
  2007

  	
   

  	
  3.50 to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  3.50 to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.50 to 1.00

  	
   

  
	
  September 30,
  2008

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  December 31,
  2008

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  The last day of
  each calendar quarter thereafter

  	
   

  	
  3.00 to 1.00

  	
   

  

 

Section 6.4             Senior Debt to Adjusted EBITDA Ratio.

 

Borrowers will not permit the ratio of (i) Senior
Debt on any date set forth below to (ii) Adjusted EBITDA for the twelve
(12) month period ending on such date to exceed the ratio set forth below and
measured as of such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005

  	
   

  	
  3.60 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  3.55 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  3.50 to 1.00

  	
   

  
	
  September 30,
  2006

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  December 31,
  2006

  	
   

  	
  3.25 to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  3.00 to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  3.00 to 1.00

  	
   

  
	
  September 30,
  2007

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  December 31,
  2007

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  September 30,
  2008

  	
   

  	
  2.40 to 1.00

  	
   

  

 

84

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2008

  	
   

  	
  2.40 to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  2.40 to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  2.40 to 1.00

  	
   

  
	
  The last day of
  each calendar quarter thereafter

  	
   

  	
  2.15 to 1.00

  	
   

  

 

ARTICLE 7

CONDITIONS

 

Section 7.1             Conditions to Closing.

 

The obligation of each Lender to make the initial
Loans, of Administrative Agent to issue any Support Agreements on the Closing
Date and of any LC Issuer to issue any Lender Letter of Credit on the Closing
Date shall be subject to the receipt by Administrative Agent of each agreement,
document and instrument set forth on the Closing Checklist, each in form and
substance satisfactory to Administrative Agent, and to the satisfaction of the
following conditions precedent, each to the satisfaction of Administrative
Agent and Lenders in their sole discretion:

 

(a)           evidence
of the consummation of the transactions contemplated by the Operative
Documents, including without limitation the funding of any and all loans
contemplated by the Subordinated Debt Documents;

 

(b)           the
payment of all fees, expenses and other amounts due and payable under each
Financing Document;

 

(c)           the
absence, since December 31, 2004, of any material adverse change in any
aspect of the business, operations, properties, prospects or condition
(financial or otherwise) of any Credit Party, or any event or condition which
could reasonably be expected to result in such a material adverse change;

 

(d)           the
receipt of the initial Borrowing Base Certificate, prepared as of the Closing
Date, which certificate shall evidence immediately available excess borrowing
capacity of Revolving Loans of not less than $7,500,000 after giving effect to
the initial funding of Loans and issuance of any Support Agreements and Lender
Letters of Credit on the Closing Date and the consummation of the transactions
contemplated by the Operative Documents;

 

(e)           the
receipt of pro forma financial statements of Borrowers and their Consolidated
Subsidiaries which evidence a Senior Debt to EBITDA Ratio, in each case for the
twelve (12) month period for which financial statements are most recently
available, prepared to give effect to the initial funding of Loans, and the
consummation of the transactions contemplated by the Operative Documents, of
not more than 3.05 to 1.0; and

 

85

 

(f)            receipt
by Administrative Agent of such other documents, instruments and/or agreements
as Administrative Agent may reasonably request.

 

Section 7.2             Conditions to
Each Loan, Support Agreement and Lender Letter of Credit.

 

The obligation of the Lenders to make a Loan (other
than Revolving Loans made pursuant to either of Section 2.2(e)(ii) and/or
Section 2.5(c)), of Administrative Agent to issue any Support Agreement or of
any LC Issuer to issue any Lender Letter of Credit (including, in each case, on
the Closing Date) is subject to the satisfaction of the following additional
conditions:

 

(a)           in
the case of a Revolving Loan Borrowing, receipt by Administrative Agent of a
Notice of Borrowing (or telephonic or electronic notice as permitted by
Section 2.2(b)(ii)) in accordance with Section 2.2(b)
and, in the case of any Support Agreement or Lender Letter of Credit, receipt
by Administrative Agent of a Notice of LC Credit Event in accordance with
Section 2.5(a);

 

(b)           the
fact that, immediately after such borrowing and after application of the
proceeds thereof or after such issuance, the Revolving Loan Outstandings will
not exceed the Revolving Loan Limit;

 

(c)           the
fact that, immediately before and after such borrowing or issuance, no Default
or Event of Default shall have occurred and be continuing; and

 

(d)           the
fact that the representations and warranties of each Credit Party contained in
the Financing Documents shall be true, correct and complete in all material
respects on and as of the date of such borrowing or issuance, except to the
extent that any such representation or warranty relates to a specific date in
which case such representation or warranty shall be true and correct in all
material respects as of such earlier date.

 

Each giving of a Notice of LC Credit Event hereunder,
each giving of a Notice of Borrowing hereunder and each acceptance by any
Borrower of the proceeds of any Loan made hereunder shall be deemed to be a
representation and warranty by each Borrower on the date of such notice or
acceptance as to the facts specified in Sections 7.2(b),
7.2(c) and 7.2(d).

 

ARTICLE 8

EVENTS OF DEFAULT

 

Section 8.1             Events of Default.

 

For purposes of the Financing Documents, the occurrence
of any of the following conditions and/or events, whether voluntary or
involuntary, by operation of law or otherwise, shall constitute an “Event of Default”:

 

86

 

(a)           any
Borrower shall fail to pay when due any principal or within three (3) Business
Days of the due date thereof any interest, premium or fee under any Financing
Document or within three (3) Business Days of the due date thereof any other
amount payable under any Financing Document;

 

(b)           any
Borrower shall fail to observe or perform any covenant contained in
Section 4.1 (exclusive of 4.1(e), (f), (k), (l), (p) and (q)),
Section 4.4, Section 4.6,
Section 4.7, Article 5, or Article 6;

 

(c)           any
Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 8.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied or waived within thirty (30) days after the earlier of
(1) receipt by Borrower Representative of notice from Administrative Agent
or Required Lenders of such default or (2) actual knowledge of any
Borrower or any other Credit Party of such default;

 

(d)           any
representation, warranty, certification or statement made by any Credit Party
to Administrative Agent or any Lender in any Financing Document or in any
certificate, financial statement or other document delivered pursuant to any
Financing Document is incorrect in any respect (or in any material respect if
such representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);

 

(e)           (1) failure
of any Credit Party to pay when due or within any applicable grace period any
principal, interest or other amount on Debt (other than the Loans) or in
respect of any Swap Contract, or the occurrence of any breach, default,
condition or event with respect to any Debt (other than the Loans) or in
respect of any Swap Contract, if the effect of such failure or occurrence is to
cause or to permit the holder or holders of any such Debt, or the counterparty
under any such Swap Contract, to cause, Debt or other liabilities having an
individual principal amount (or, in the case of a Swap Contract, a notional
amount) in excess of $500,000 or having an aggregate principal amount (and, for
purposes of Swap Contracts, including the notional amount) in excess of
$500,000 to become or be declared due prior to its stated maturity; or
(2) the occurrence of any breach or default under any terms or provisions
of any Subordinated Debt Document or under any agreement subordinating the
Subordinated Debt to all or any portion of the Obligations or the occurrence of
any event requiring the prepayment of any Subordinated Debt;

 

(f)            any
Credit Party shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail

 

87

 

generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;

 

(g)           an
involuntary case or other proceeding shall be commenced against any Credit
Party seeking liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of forty-five (45) days; or an order for
relief shall be entered against any Credit Party under the federal bankruptcy
laws as now or hereafter in effect;

 

(h)           (1) institution
of any steps by any Person to terminate a Pension Plan if as a result of such
termination any Credit Party could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such Pension Plan, in
excess of $250,000, (2) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA,
or (3) there shall occur any withdrawal or partial withdrawal from a
Multiemployer Plan and the withdrawal liability (without unaccrued interest) to
Multiemployer Plans as a result of such withdrawal (including any outstanding
withdrawal liability that any Credit Party or any member of the Controlled
Group have incurred on the date of such withdrawal) exceeds $250,000;

 

(i)            one
or more judgments or orders for the payment of money (not paid or fully covered
by insurance maintained in accordance with the requirements of this Agreement
and as to which the relevant insurance company has acknowledged coverage)
aggregating in excess of $500,000 shall be rendered against any or all Credit
Parties and either (a) enforcement proceedings shall have been commenced
by any creditor upon any such judgments or orders or (b) there shall be
any period of twenty (20) consecutive days during which a stay of enforcement
of any such judgments or orders, by reason of a pending appeal, bond or
otherwise, shall not be in effect;

 

(j)            (1) Investor
shall collectively cease to, directly or indirectly, own and control at least
(i) eighty percent (80%) of the outstanding equity interests of LOUD owned
by them on the Closing Date or (ii) that percentage of the outstanding
voting equity interests of LOUD necessary at all times to elect a majority of
the board of directors (or similar governing body) of LOUD and to direct the
management policies and decisions of LOUD, (2) except as permitted by
Section 5.7, LOUD shall cease to, directly or indirectly own and control one
hundred percent (100%) of each class of the outstanding equity interests of SLM
or UK or Acuma Labs Inc., (3) except as permitted by Section 5.7, any
Borrower shall cease to, directly or indirectly, own and control one hundred
percent (100%) of each class of the outstanding equity interests of any other
Subsidiary or (4) any “Change of Control”, “Change in Control”, or terms
of similar import occurs under any Subordinated Debt Document;

 

(k)           any
Lien created by any of the Security Documents shall at any time fail to
constitute a valid and perfected Lien on any material portion of the Collateral

 

88

 

purported to be secured thereby, subject to no prior or equal Lien
except Permitted Liens, or any Credit Party shall so assert;

 

(l)            any
Credit Party shall be prohibited or otherwise materially restrained from
conducting the business theretofore conducted by it by virtue of any casualty,
any labor strike, any determination, ruling, decision, decree or order of any
court or regulatory authority of competent jurisdiction or any other event and
such casualty, labor strike, determination, ruling, decision, decree, order or
other event remains unstayed and in effect for any period of ten (10) days;

 

(m)          any
of the Operative Documents shall for any reason fail to constitute the valid
and binding agreement of any party thereto, or any such party shall so assert;
or

 

(n)           any
Dormant Subsidiary engages in any type of business activity other than those
necessary or convenient to complete the wind-down thereof.

 

Section 8.2             Acceleration and Suspension or Termination of Revolving Loan Commitment.

 

Upon the occurrence and during the continuance of an
Event of Default, Administrative Agent shall if so requested by Required
Lenders, (i) by notice to Borrower Representative suspend or terminate the
Revolving Loan Commitment and the obligations of Administrative Agent and the
Lenders with respect thereto, in whole or in part (and, if in part, such
reduction shall be pro rata among the Lenders having a Revolving Loan
Commitment Percentage) and/or (ii) by notice to Borrower Representative
declare all or any portion of the Obligations to be, and such Obligations shall
thereupon become, immediately due and payable, with accrued interest thereon, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower and Borrowers will pay the same; provided that in the case of any of the Events of Default
specified in Section 8.1(f) or 8.1(g) above, without any notice to any Borrower or any
other act by Administrative Agent or the Lenders, the Revolving Loan Commitment
and the obligations of Administrative Agent and the Lenders with respect
thereto shall thereupon terminate and all of the Obligations shall become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Borrower and
Borrowers will pay the same.

 

Section 8.3             Cash Collateral.

 

If an Acceleration Event shall have occurred, and so
long as it continues, then without any request or the taking of any other
action by Administrative Agent or the Lenders, Borrowers shall immediately
comply with the provisions of Section 2.5(e) with respect to the deposit
of cash collateral to secure the existing Letter of Credit Liability and future
payment of related fees.

 

89

 

Section 8.4             Default Rate of Interest and Suspension of LIBOR Rate Options.

 

At the election of Required Lenders, after the
occurrence of an Event of Default and for so long as it continues, (i) the
Loans and other Obligations shall bear interest at rates that are two percent
(2.0%) in excess of the rates otherwise payable under this Agreement and
(ii) the fee described in Section 2.5(b) shall increase by a rate that is
two percent (2.0%) in excess of the rate otherwise payable under such
Section.  Furthermore, at the election of
Required Lenders during any period in which any Event of Default is continuing
(x) as the Interest Periods for LIBOR Loans then in effect expire, such
Loans shall be converted into Base Rate Loans and (y) the LIBOR election
will not be available to any Borrower.

 

Section 8.5             Setoff Rights.

 

During the continuance of any Event of Default, each
Lender is hereby authorized by each Borrower at any time or from time to time,
with reasonably prompt subsequent notice to such Borrower (any prior or
contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender or
any of such Lender’s Affiliates at any of its offices for the account of such
Borrower or any of its Subsidiaries (regardless of whether such balances are
then due to such Borrower or its Subsidiaries), and (B) other property at
any time held or owing by such Lender to or for the credit or for the account
of such Borrower or any of its Subsidiaries, against and on account of any of
the Obligations; except that no Lender shall exercise any such right without
the prior written consent of Administrative Agent.  Any Lender exercising a right to set off
shall purchase for cash (and the other Lenders shall sell) interests in each of
such other Lender’s Pro Rata Share of the Obligations as would be necessary to
cause all Lenders to share the amount so set off with each other Lender in
accordance with their respective Pro Rata Share of the Obligations.  Each Borrower agrees, to the fullest extent
permitted by law, that any Lender and any of such Lender’s Affiliates may
exercise its right to set off with respect to the Obligations as provided in
this Section 8.5.

 

Section 8.6             Application of Proceeds.

 

(a)           Notwithstanding
anything to the contrary contained in this Agreement, upon the occurrence and
during the continuance of an Event of Default, each Borrower irrevocably waives
the right to direct the application of any and all payments at any time or
times thereafter received by Administrative Agent from or on behalf of any
Borrower or any guarantor of all or any part of the Obligations, and, as
between Borrowers on the one hand and Administrative Agent and Lenders on the
other, Administrative Agent shall have the continuing and exclusive right to
apply and to reapply any and all payments received against the Obligations in
such manner as Administrative Agent may deem advisable notwithstanding any
previous application by Administrative Agent.

 

(b)           Notwithstanding
anything to the contrary contained in this Agreement, if an Acceleration Event
shall have occurred, and so long as it continues, Administrative

 

90

 

Agent shall apply any and all payments received by Administrative Agent
in respect of the Obligations, and any and all proceeds of Collateral received
by Administrative Agent, in the following order: first, to all fees,
costs, indemnities, liabilities, obligations and expenses incurred by or owing
to Administrative Agent with respect to this Agreement, the other Financing
Documents or the Collateral; second, to all fees, costs, indemnities, liabilities,
obligations and expenses incurred by or owing to any Lender with respect to
this Agreement, the other Financing Documents or the Collateral; third,
to accrued and unpaid interest on the Obligations (including any interest
which, but for the provisions of the Bankruptcy Code, would have accrued on
such amounts); fourth, to the principal amount of the Obligations
outstanding and to provide cash collateral to secure any and all Letter of
Credit Liability and future payment of related fees, as provided for in Section
2.5(e); fifth to Obligations owing to any Eligible Swap Counterparty in
respect of any Swap Contracts permitted, but not required, by the terms of this
Agreement; and sixth to any other indebtedness or obligations of
Borrowers owing to Administrative Agent or any Lender under the Financing
Documents.

 

(c)           Absent
the occurrence and continuance of an Acceleration Event, Administrative Agent
shall apply any and all payments received by Administrative Agent in respect of
the Obligations, and any and all proceeds of Collateral received by
Administrative Agent, in such order as Administrative Agent may from time to
time elect.  In the absence of any
specific election made by Administrative Agent pursuant to this
clause (c), payments and proceeds received by Administrative Agent
pursuant to this clause (c) shall be applied in the following order:  first, to all fees, costs,
indemnities, liabilities, obligations and expenses incurred by or owing to
Administrative Agent with respect to this Agreement, the other Financing
Documents or the Collateral; second, to all fees, costs, indemnities,
liabilities, obligations and expenses incurred by or owing to any Lender with
respect to this Agreement, the other Financing Documents or the Collateral; third,
to accrued and unpaid interest on the Obligations; fourth, to the
principal amount of the Obligations outstanding; fifth to Obligations
owing to any Eligible Swap Counterparty in respect of any Swap Contracts
permitted, but not required, by the terms of this Agreement; sixth to
provide cash collateral to secure any then outstanding Loans, Letter of Credit
Liability and payment of related fees; seventh to provide cash
collateral to secure any other then outstanding Obligations, other than in
respect of Swap Contracts permitted, but not required, by the terms of this
Agreement, eighth to provide cash collateral to secure Obligations in
respect of Swap Contracts permitted, but not required, by the terms of this
Agreement; and ninth to any other indebtedness or obligations of
Borrowers owing to Administrative Agent or any Lender under the Financing
Documents.

 

(d)           Any
balance remaining after giving effect to the applications set forth in this
Section 8.6 shall be delivered to Borrowers or to whoever may be lawfully entitled
to receive such balance or as a court of competent jurisdiction may
direct.  In carrying out any of the
applications set forth in this Section 8.6, (x) amounts received shall be
applied in the numerical order provided until exhausted prior to the application
to the next succeeding category and (y) each of the Persons entitled to
receive a payment in any particular category shall receive an amount equal to
its pro rata share of amounts available to be applied pursuant thereto for such
category.

 

91

 

ARTICLE 9

EXPENSES AND INDEMNITY

 

Section 9.1             Expenses.

 

Each Borrower hereby agrees to promptly pay
(i) all reasonable costs and out-of-pocket expenses of
Administrative Agent (including without limitation the reasonable fees, costs
and expenses of counsel to, and independent appraisers and consultants retained
by Administrative Agent) in connection with the examination, review, due
diligence investigation, documentation, negotiation, closing and syndication of
the transactions contemplated by the Financing Documents, in connection with
the performance by Administrative Agent of its rights and remedies under the
Financing Documents and in connection with the continued administration of the
Financing Documents including (x) any amendments, modifications, consents
and waivers to and/or under any and all Financing Documents and (y) any
periodic public record searches conducted by or at the request of
Administrative Agent (including, without limitation, title investigations, UCC
searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons), (ii) without limitation of the preceding
clause (i), all reasonable costs and out-of-pocket expenses of
Administrative Agent in connection with the creation, perfection and
maintenance of Liens pursuant to the Financing Documents, (iii) without
limitation of the preceding clause (i), all reasonable costs and out-of-pocket
expenses of Administrative Agent in connection with (x) protecting,
storing, insuring, handling, maintaining or selling any Collateral;
(y) any litigation, dispute, suit or proceeding relating to any Financing
Document; and (z) any workout, collection, bankruptcy, insolvency and
other enforcement proceedings under any and all of the Financing Documents, and
(iv) all reasonable costs and expenses incurred by Lenders in connection
with any litigation, dispute, suit or proceeding relating to any Financing
Document and in connection with any workout, collection, bankruptcy, insolvency
and other enforcement proceedings under any and all Financing Documents, provided, that to the extent that the
costs and expenses referred to in this clause (iv) consist of fees, costs
and expenses of counsel, Borrowers shall be obligated to pay such fees, costs
and expenses for counsel to Administrative Agent and for only one counsel acting
for all Lenders (other than Administrative Agent).

 

Section 9.2             Indemnity.

 

Each Borrower hereby agrees to indemnify, pay and hold
harmless Administrative Agent and Lenders and the officers, directors,
employees, trustees, agents, investment advisors, collateral managers,
servicers, and counsel of Administrative Agent and Lenders (collectively called
the “Indemnitees”) from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, response, remedial,
administrative or judicial matter or proceeding, whether or not such Indemnitee
shall be designated a party thereto and including any such proceeding initiated
by

 

92

 

or on behalf of a Credit Party, and the reasonable expenses of
investigation by engineers, environmental consultants and similar technical
personnel and any commission, fee or compensation claimed by any broker (other
than any broker retained by Administrative Agent or Lenders) asserting any
right to payment for the transactions contemplated hereby, which may be imposed
on, incurred by or asserted against such Indemnitee as a result of or in
connection with the transactions contemplated hereby or by the other Operative
Documents (including (i)(A) as a direct or indirect result of the presence
on or under, or escape, seepage, leakage, spillage, discharge, emission or
release from, any property now or previously owned, leased or operated by any
Borrower, any Subsidiary or any other Person of any Hazardous Materials or any
Hazardous Materials Contamination, (B) arising out of or relating to the
offsite disposal of any materials generated or present on any such property or
(C) arising out of or resulting from the environmental condition of any
such property or the applicability of any governmental requirements relating to
Hazardous Materials, whether or not occasioned wholly or in part by any
condition, accident or event caused by any act or omission of any Borrower or
any Subsidiary, and (ii) proposed and actual extensions of credit under
this Agreement) and the use or intended use of the proceeds of the Loans and
Letters of Credit, except that no Borrower shall have any obligation hereunder
to an Indemnitee with respect to any liability resulting from the gross
negligence, bad faith or willful misconduct of such Indemnitee or its officers,
directors, employees, trustees, agents, investment advisors, collateral
managers, servicers or counsel, as determined by a final non-appealable
judgment of a court of competent jurisdiction. 
To the extent that the undertaking set forth in the immediately
preceding sentence may be unenforceable, each Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all such indemnified liabilities incurred by
the Indemnitees or any of them.

 

ARTICLE 10

ADMINISTRATIVE AGENT

 

Section 10.1           Appointment and
Authorization.

 

Each Lender hereby irrevocably appoints and authorizes
Administrative Agent to enter into each of the Financing Documents to which it
is a party (other than this Agreement) on its behalf and to take such actions
as Administrative Agent on its behalf and to exercise such powers under the
Financing Documents as are delegated to Administrative Agent by the terms
thereof, together with all such powers as are reasonably incidental
thereto.  Subject to the terms of
Section 11.5 and to the terms of the other Financing Documents,
Administrative Agent is authorized and empowered to amend, modify, or waive any
provisions of this Agreement or the other Financing Documents on behalf of
Lenders.  The provisions of this Article
10 are solely for the benefit of Administrative Agent and Lenders and neither
any Borrower nor any other Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof. 
In performing its functions and duties under this Agreement,
Administrative Agent shall act solely as agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for any Borrower or any other Credit Party.  Administrative Agent

 

93

 

may perform any of its duties hereunder, or under the Financing
Documents, by or through its own agents or employees.

 

Section 10.2           Administrative
Agent and Affiliates.

 

Administrative Agent
shall have the same rights and powers under the Financing Documents as any
other Lender and may exercise or refrain from exercising the same as though it
were not Administrative Agent, and Administrative Agent and its Affiliates may
lend money to, invest in and generally engage in any kind of business with each
Credit Party or Affiliate of any Credit Party as if it were not Administrative
Agent hereunder.

 

Section 10.3           Action by
Administrative Agent.

 

The duties of Administrative Agent shall be mechanical
and administrative in nature. 
Administrative Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender.  Nothing in this Agreement or any of the
Financing Documents is intended to or shall be construed to impose upon
Administrative Agent any obligations in respect of this Agreement or any of the
Financing Documents except as expressly set forth herein or therein.

 

Section 10.4           Consultation with
Experts.

 

Administrative Agent may consult with legal counsel,
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.

 

Section 10.5           Liability of
Administrative Agent.

 

Neither Administrative Agent nor any of its directors,
officers, agents or employees shall be liable to any Lender for any action
taken or not taken by it in connection with the Financing Documents, except
that Administrative Agent shall be liable with respect to its specific duties
set forth hereunder but only to the extent of its own gross negligence or
willful misconduct in the discharge thereof as determined by a final
non-appealable judgment of a court of competent jurisdiction.  Neither Administrative Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements specified in any Financing Document; (iii) the satisfaction of
any condition specified in any Financing Document; (iv) the validity,
effectiveness, sufficiency or genuineness of any Financing Document, any Lien
purported to be created or perfected thereby or any other instrument or writing
furnished in connection therewith; (v) the existence or non-existence of
any Default or Event of Default; or (vi) the financial condition of any
Credit Party.  Administrative Agent shall
not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile or electronic transmission or similar writing) believed by it to be

 

94

 

genuine or to be signed by the proper party or parties.  Administrative Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith and if
any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not
made, shall be to recover from other Lenders any payment in excess of the
amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them).

 

Section 10.6           Indemnification.

 

Each Lender shall, in accordance with its Pro Rata
Share, indemnify Administrative Agent (to the extent not reimbursed by
Borrowers) upon demand against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from Administrative Agent’s gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction) that Administrative Agent may suffer or incur in connection with
the Financing Documents or any action taken or omitted by Administrative Agent
hereunder or thereunder.  If any
indemnity furnished to Administrative Agent for any purpose shall, in the
opinion of Administrative Agent, be insufficient or become impaired,
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against even if so directed by Required
Lenders until such additional indemnity is furnished.

 

Section 10.7           Right to Request and Act on Instructions.

 

Administrative Agent may at any time request instructions
from Lenders with respect to any actions or approvals which by the terms of
this Agreement or of any of the Financing Documents Administrative Agent is
permitted or desires to take or to grant, and if such instructions are promptly
requested, Administrative Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Financing Documents until it shall
have received such instructions from Required Lenders or all or such other
portion of the Lenders as shall be prescribed by this Agreement.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Administrative Agent as a
result of Administrative Agent acting or refraining from acting under this
Agreement or any of the other Financing Documents in accordance with the
instructions of Required Lenders or Required Revolving Lenders (or all or such
other portion of the Lenders as shall be prescribed by this Agreement) and,
notwithstanding the instructions of Required Lenders or Required Revolving
Lenders (or such other applicable portion of the Lenders), Administrative Agent
shall have no obligation to take any action if it believes, in good faith, that
such action would violate applicable Law or exposes Administrative Agent to any
liability for which it has not received satisfactory indemnification in
accordance with the provisions of Section 10.6.

 

95

 

Section 10.8           Credit Decision.

 

Each Lender acknowledges that it has, independently
and without reliance upon Administrative Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will,
independently and without reliance upon Administrative Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking any
action under the Financing Documents.

 

Section 10.9           Collateral Matters.

 

Lenders irrevocably authorize Administrative Agent, at
its option and in its discretion, to (x) release any Lien granted to or
held by Administrative Agent under any Security Document (i) upon
termination of the Revolving Loan Commitment and payment in full of all
Obligations, the expiration, termination or cash collateralization (to the
satisfaction of Administrative Agent) of all Letters of Credit and, to the
extent required by Administrative Agent in its sole discretion, the expiration,
termination or cash collateralization (to the satisfaction of Administrative Agent)
of all Swap Contracts secured, in whole or in part, by any Collateral; or
(ii) constituting property sold or disposed of as part of or in connection
with any disposition permitted under any Financing Document (it being
understood and agreed that Administrative Agent may conclusively rely without
further inquiry on a certificate of a Responsible Officer as to the sale or
other disposition of property being made in full compliance with the provisions
of the Financing Documents) and (y) release or subordinate any Lien
granted to or held by Administrative Agent under any Security Document
constituting property described in Section 5.2(c) (it being understood and
agreed that Administrative Agent may conclusively rely without further inquiry
on a certificate of a Responsible Officer as to the identification of any
property described in Section 5.2(c)). 
Upon request by Administrative Agent at any time, Lenders will confirm
Administrative Agent’s authority to release and/or subordinate particular types
or items of Collateral pursuant to this Section 10.9.

 

Section 10.10         Agency for Perfection.

 

Administrative Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Administrative Agent’s
security interest in assets which, in accordance with the Uniform Commercial
Code in any applicable jurisdiction, can be perfected by possession or
control.  Should any Lender (other than
Administrative Agent) obtain possession or control of any such assets, such
Lender shall notify Administrative Agent thereof, and, promptly upon
Administrative Agent’s request therefor, shall deliver such assets to
Administrative Agent or in accordance with Administrative Agent’s instructions
or transfer control to Administrative Agent in accordance with Administrative
Agent’s instructions.  Each Lender agrees
that it will not have any right individually to enforce or seek to enforce any
Security Document or to realize upon any Collateral for the Loans unless
instructed to do so by Administrative Agent (or consented to by Administrative

 

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Agent, as provided in Section 8.5), it being understood and agreed
that such rights and remedies may be exercised only by Administrative Agent.

 

Section 10.11         Notice of Default.

 

Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default except
with respect to defaults in the payment of principal, interest and fees
required to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice from a Lender or a
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”.  Administrative Agent will notify each Lender
of its receipt of any such notice. 
Administrative Agent shall take such action with respect to such Default
or Event of Default as may be requested by Required Lenders, Required Revolving
Lenders (or all or such other portion of the Lenders as shall be prescribed by
this Agreement) in accordance with the terms hereof.  Unless and until Administrative Agent has
received any such request, Administrative Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interests
of Lenders.

 

Section 10.12         Successor
Administrative Agent.

 

Administrative Agent may at any time give notice of
its resignation to the Lenders, Swingline Lender and Borrowers.  Upon receipt of any such notice of
resignation, Required Lenders shall have the right to appoint a successor
Administrative Agent, provided that so long as no Event of Default exists, the
Required Lenders shall obtain the consent of the Borrowers (which consent shall
not be unreasonably withheld and which consent shall be deemed to have been
given if not denied within ten (10) days after a request therefor).  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder and notice of such acceptance to
the retiring Administrative Agent, such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
(or retired) Administrative Agent, the retiring Administrative Agent’s
resignation shall become immediately effective and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder and
under the other Financing Documents (if such resignation was not already effective
and such duties and obligations not already discharged, as provided below in
this paragraph).  The fees payable by
Borrowers to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed among Borrowers and such
successor.  If no such successor shall
have been so appointed by Required Lenders (and consented to by Borrowers) and
shall have accepted such appointment within thirty (30) days after the retiring
Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may on behalf of the Lenders and Swingline Lender (but
without any obligation) appoint a successor Administrative Agent.  From and following the expiration of such
thirty (30) day period, Administrative Agent shall have the exclusive right,
upon one (1) Business Day’s notice to Borrower Representative and the Lenders,
to make its resignation effective immediately. 
From and following the effectiveness of such notice, (i) the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Financing Documents and (ii) all

 

97

 

payments, communications and determinations provided to be made by, to
or through Administrative Agent shall instead be made by or to each Lender and
Swingline Lender directly, until such time as Required Lenders appoint a
successor Administrative Agent as provided for above in this paragraph.  The provisions of this Agreement shall
continue in effect for the benefit of any retiring Administrative Agent and its
sub-agents after the effectiveness of its resignation hereunder and under the
other Financing Documents in respect of any actions taken or omitted to be
taken by any of them while the retiring Administrative Agent was acting or was
continuing to act as Administrative Agent.

 

Section 10.13         Disbursements of Revolving Loans; Payment and Sharing of Payment.

 

(a)           Revolving Loan Advances, Payments and Settlements;
Interest and Fee Payments.

 

(i)            Administrative
Agent shall have the right, on behalf of Revolving Lenders (other than
Non-Funding Revolving Lenders) to disburse funds to each Borrower for all
Revolving Loans requested or deemed requested by such Borrower pursuant to the
terms of this Agreement regardless of whether the conditions precedent set
forth in Section 7.2 are then satisfied, including the existence of any Default
or Event of Default either before or after giving effect to the making of such
Revolving Loans; provided, that
Administrative Agent shall not advance any Revolving Loan pursuant to this
clause (i) if the Revolving Loan Outstandings exceed the Revolving Loan
Limit, either before or after giving effect to the making of any proposed
Revolving Loan.  Administrative Agent shall
be conclusively entitled to assume, for purposes of the preceding sentence,
that each Revolving Lender, other than any Non-Funding Revolving Lenders, will
fund its Pro Rata Share of all Revolving Loans requested by each Borrower.  Each Revolving Lender (other than any
Non-Funding Revolving Lender) shall reimburse Administrative Agent on demand,
in accordance with the provisions of the immediately following paragraph, for
all funds disbursed on its behalf by Administrative Agent pursuant to the first
sentence of this clause (i), or if Administrative Agent so requests, each
Revolving Lender will remit to Administrative Agent its Pro Rata Share of any
Revolving Loan before Administrative Agent disburses the same to a Borrower.  If Administrative Agent elects to require
that each Revolving Lender make funds available to Administrative Agent, prior
to a disbursement by Administrative Agent to a Borrower, Administrative Agent
shall advise each Revolving Lender by telephone, facsimile or e-mail of the
amount of such Revolving Lender’s Pro Rata Share of the Revolving Loan
requested by such Borrower no later than noon (Chicago time) on the date of
funding of such Revolving Loan, and each such Revolving Lender shall, subject
to the provisions of Article 7, pay Administrative Agent on such date such
Revolving Lender’s Pro Rata Share of such requested Revolving Loan, in same day
funds, by wire transfer to the Payment Account, or such other account as may be
identified by Administrative Agent to Revolving Lenders from time to time.  If any Lender fails to pay the amount of its
Pro Rata Share within one (1) Business Day after Administrative Agent’s demand,
Administrative Agent shall promptly notify Borrower Representative, and
Borrowers shall immediately repay such amount to Administrative Agent.  Any repayment required by Borrowers pursuant
to this Section 10.13 shall be accompanied by accrued interest thereon
from and including the date such amount is

 

98

 

made available to a Borrower to but excluding the date of payment at
the rate of interest then applicable to Revolving Loans which are Base Rate
Loans but, subject to Section 8.4, without premium or penalty.  Nothing in this Section 10.13 or
elsewhere in this Agreement or the other Financing Documents shall be deemed to
require Administrative Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights that Administrative Agent or any Borrower may have
against any Lender as a result of any default by such Lender hereunder.

 

(ii)           On
a Business Day of each week as selected from time to time by Administrative
Agent, or more frequently (including daily), if Administrative Agent so elects
(each such day being a “Settlement Date”),
Administrative Agent will advise each Revolving Lender by telephone, facsimile
or e-mail of the amount of each such Revolving Lender’s Pro Rata Share of the
Revolving Loan balance as of the close of business of the Business Day
immediately preceding the Settlement Date. 
In the event that payments are necessary to adjust the amount of such
Revolving Lender’s actual Pro Rata Share of the Revolving Loan balance to such
Lender’s required Pro Rata Share of the Revolving Loan balance as of any
Settlement Date, the party from which such payment is due shall pay
Administrative Agent, without setoff or discount, to the Payment Account not
later than noon (Chicago time) on the Business Day following the Settlement
Date the full amount necessary to make such adjustment.  Any obligation arising pursuant to the
immediately preceding sentence shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever. 
In the event settlement shall not have occurred by the date and time
specified in the second preceding sentence, interest shall accrue on the
unsettled amount at the Federal Funds Rate, for the first three (3) days
following the scheduled date of settlement, and thereafter at the Base Rate plus
the Base Rate Margin applicable to Revolving Loans.

 

(iii)          On
each Settlement Date, Administrative Agent shall advise each Revolving Lender
by telephone, facsimile or e-mail of the amount of such Revolving Lender’s Pro
Rata Share of principal, interest and fees paid for the benefit of Revolving
Lenders with respect to each applicable Revolving Loan, to the extent of such
Revolving Lender’s credit exposure with respect thereto, and shall make payment
to such Revolving Lender not later than noon (Chicago time) on the Business Day
following the Settlement Date of such amounts in accordance with wire
instructions delivered by such Revolving Lender to Administrative Agent, as the
same may be modified from time to time by written notice to Administrative
Agent; provided, that, in the
case such Revolving Lender is a Defaulted Lender, Administrative Agent shall be
entitled to set off the funding short-fall against that Defaulted Lender’s
respective share of all payments received from any Borrower.

 

(iv)          The
provisions of this Section 10.13(a) shall be deemed to be binding upon
Administrative Agent and Lenders notwithstanding the occurrence of any Default
or Event of Default, or any insolvency or bankruptcy proceeding pertaining to
any Borrower or any other Credit Party.

 

(b)           Term Loan Payments.  Payments of principal, interest and fees in
respect of the Term Loans will be settled on the date of receipt if received by
Administrative

 

99

 

Agent on the last Business Day of a month or on the Business Day
immediately following the date of receipt if received on any day other than the
last Business Day of a month.

 

(c)           Return of Payments.

 

(i)            If
Administrative Agent pays an amount to a Lender under this Agreement in the
belief or expectation that a related payment has been or will be received by
Administrative Agent from a Borrower and such related payment is not received
by Administrative Agent, then Administrative Agent will be entitled to recover
such amount from such Lender on demand without setoff, counterclaim or
deduction of any kind, together with interest accruing on a daily basis at the
Federal Funds Rate.

 

(ii)           If
Administrative Agent determines at any time that any amount received by
Administrative Agent under this Agreement must be returned to any Borrower or
paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other
Financing Document, Administrative Agent will not be required to distribute any
portion thereof to any Lender.  In
addition, each Lender will repay to Administrative Agent on demand any portion
of such amount that Administrative Agent has distributed to such Lender,
together with interest at such rate, if any, as Administrative Agent is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.

 

(d)           Defaulted Lenders.  The failure of any Defaulted Lender to make
any Revolving Loan or any payment required by it hereunder shall not relieve
any other Lender of its obligations to make such Revolving Loan or payment, but
neither any other Lender nor Administrative Agent shall be responsible for the
failure of any Defaulted Lender to make a Revolving Loan or make any other payment
required hereunder.  Notwithstanding
anything set forth herein to the contrary, a Defaulted Lender shall not have
any voting or consent rights under or with respect to any Financing Document or
constitute a “Lender” (or be included in the calculation of “Required Lenders”
or “Required Revolving Lenders” hereunder) for any voting or consent rights
under or with respect to any Financing Document.

 

(e)           Sharing of Payments.  If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Sections
2.3(e)(v) or Section 2.9) in excess of its pro rata share of payments entitled
pursuant to the other provisions of this Section 10.13, such Lender shall
purchase from the other Lenders such participations in extensions of credit
made by such other Lenders (without recourse, representation or warranty) as
shall be necessary to cause such purchasing Lender to share the excess payment
or other recovery ratably with each of them; provided,
however, that if all or any portion of the excess payment or other
recovery is thereafter required to be returned or otherwise recovered from such
purchasing Lender, such portion of such purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such return
or recovery, without interest.  Each
Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant

 

100

 

to this clause (e) may, to the fullest extent permitted by law,
exercise all its rights of payment (including pursuant to Section 8.5) with
respect to such participation as fully as if such Lender were the direct
creditor of Borrowers in the amount of such participation.  If under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this clause (e) applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this clause (e) to
share in the benefits of any recovery on such secured claim.

 

Section 10.14         Right to Perform, Preserve and Protect.

 

If any Credit Party fails to perform any obligation
hereunder or under any other Financing Document, Administrative Agent itself
may, but shall not be obligated to, cause such obligation to be performed at
Borrowers’ expense.  Administrative Agent
is further authorized by Borrowers and the Lenders to make expenditures from
time to time which Administrative Agent, in its reasonable business judgment,
deems necessary or desirable to (i) preserve or protect the business
conducted by Borrowers, the Collateral, or any portion thereof and/or
(ii) enhance the likelihood of, or maximize the amount of, repayment of
the Loans and other Obligations.  Each
Borrower hereby agrees to reimburse Administrative Agent on demand for any and
all costs, liabilities and obligations incurred by Administrative Agent
pursuant to this Section 10.14. 
Each Lender hereby agrees to indemnify Administrative Agent upon demand
for any and all costs, liabilities and obligations incurred by Administrative
Agent pursuant to this Section 10.14, in accordance with the provisions of
Section 10.6.

 

Section 10.15         Additional Titled Agents.

 

Except for rights and powers, if any, expressly
reserved under this Agreement to any bookrunner, arranger or to any titled
agent named on the cover page of this Agreement, other than Administrative
Agent (collectively, the “Additional Titled
Agents”), and except for obligations, liabilities, duties and
responsibilities, if any, expressly assumed under this Agreement by any
Additional Titled Agent, no Additional Titled Agent, in such capacity, has any
rights, powers, liabilities, duties or responsibilities hereunder or under any
of the other Financing Documents.  Without
limiting the foregoing, no Additional Titled Agent shall have nor be deemed to
have a fiduciary relationship with any Lender. 
At any time that any Lender serving as an Additional Titled Agent shall
have transferred to any other Person (other than any Affiliates) all of its
interests in the Loans and in the Revolving Loan Commitment, such Lender shall
be deemed to have concurrently resigned as such Additional Titled Agent.

 

101

 

ARTICLE 11

MISCELLANEOUS

 

Section 11.1           Survival.

 

All agreements, representations and warranties made
herein and in every other Financing Document shall survive the execution and
delivery of this Agreement and the other Financing Documents and the other
Operative Documents.  The provisions of
Sections 2.8 and 2.9 and Articles 9, 10 and 11 shall survive the
payment of the Obligations (both with respect to any Lender and all Lenders
collectively) and any termination of this Agreement.

 

Section 11.2           No Waivers.

 

No failure or delay by Administrative Agent or any
Lender in exercising any right, power or privilege under any Financing Document
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.  The
rights and remedies herein and therein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.  Any reference in any Financing Document to the
“continuing” nature of any Event of Default shall not be construed as establishing
or otherwise indicating that any Borrower or any other Credit Party has the
independent right to cure any such Event of Default, but is rather presented
merely for convenience should such Event of Default be waived in accordance
with the terms of the applicable Financing Documents.

 

Section 11.3           Notices.

 

(a)           All
notices, requests and other communications to any party hereunder shall be in
writing (including prepaid overnight courier, facsimile transmission, e-mail,
electronic submissions or similar writing) and shall be given to such party at
its address, facsimile number or e-mail address set forth on the signature
pages hereof (or, in the case of any such Lender who becomes a Lender after the
date hereof, in an Assignment Agreement or in a notice delivered to Borrower
Representative and Administrative Agent by the assignee Lender forthwith upon
such assignment) or at such other address, facsimile number or e-mail address
as such party may hereafter specify for the purpose by notice to Administrative
Agent and Borrower Representative; provided,
that notices, requests or other communications shall be permitted by e-mail
or other electronic submissions only in accordance with the provisions of
Section 11.3(b).  Each such notice,
request or other communication shall be effective (i) if given by
facsimile, when such notice is transmitted to the facsimile number specified by
this Section and the sender receives a confirmation of transmission from the
sending facsimile machine, (ii) if given by e-mail or other electronic
submissions, as set forth in Section 11.3(c) or (iii) if given by
mail, prepaid overnight courier or any other means, when received at the
applicable address specified by this Section.

 

(b)           Notices
and other communications to the parties hereto may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet

 

102

 

websites) provided, that
(i) the foregoing shall not apply to notices sent directly to any party
hereto if such party has notified the Administrative Agent that it has elected
not to receive notices by electronic communication (which election may be
limited to particular notices) and (ii) no Notices of Borrowing, Notices
of LC Credit Event or any notices regarding request for advances hereunder
shall be permitted to be delivered or furnished by electronic communication
unless made in accordance with specific procedures approved from time to time
by Administrative Agent.

 

(c)           Unless
the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon
the sender’s receipt of an acknowledgment from the intended recipient (such as
by the “return receipt requested” function, as available, return e-mail
or other written acknowledgment), and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor, provided, that if any such notice or other communication is
not sent or posted during normal business hours, such notice or communication shall
be deemed to have been sent at the opening of business on the next Business
Day.

 

Section 11.4           Severability.

 

In case any provision of or obligation under this
Agreement or any other Financing Document shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 11.5           Amendments and
Waivers.

 

(a)           No
provision of this Agreement or any other Financing Document may be amended,
waived or otherwise modified unless such amendment, waiver or other
modification is in writing and is signed or otherwise approved by Borrowers and
the Required Lenders (and, if (x) any amendment, waiver or other
modification would either increase a Lender’s Revolving Loan Commitment Amount
or increase a Lender’s funding obligations in respect of any Term Loan, by such
Lender and (y) the rights or duties of Administrative Agent, LC Issuer
and/or Swingline Lender are affected thereby, by Administrative Agent, LC
Issuer and/or Swingline Lender, as the case may be); provided that no such amendment, waiver or other
modification shall, unless signed by all the Lenders directly affected thereby,
(i) reduce the principal of, rate of interest on or any fees with respect
to any Loan or Reimbursement Obligation or forgive any principal, interest or
fees with respect to any Loan or Reimbursement Obligation; (ii) postpone
the date fixed for, or waive, any payment (other than a payment pursuant to
Section 2.1(c)) of principal of any Loan, or of any Reimbursement
Obligation or of interest on any Loan or any Reimbursement Obligation or any
fees hereunder or for any termination of any commitment; (iii) change the
definition of the term Required Lenders or the percentage of Lenders which
shall be required

 

103

 

for Lenders to take any action hereunder; (iv) release all or
substantially all of the Collateral, authorize any Borrower to sell or
otherwise dispose of all or substantially all of the Collateral or release any
guarantor of all or any portion of the Obligations of its Guarantee obligations
with respect thereto, except, in each case with respect to this
clause (iv), as otherwise may be provided in this Agreement or the other
Financing Documents (including in connection with any disposition permitted
hereunder); (v) amend, waive or otherwise modify this Section 11.5(a)
or the definitions of the terms used in this Section 11.5(a) insofar as the
definitions affect the substance of this Section 11.5(a); or (vi) consent
to the assignment, delegation or other transfer by any Credit Party of any of
its rights and obligations under any Financing Document or release any Borrower
of its payment obligations under any Financing Document, except, in each case
with respect to this clause (vi), pursuant to a merger or consolidation
permitted pursuant to this Agreement.  It
is hereby understood and agreed that all Lenders shall be deemed directly
affected by an amendment, waiver or other modification of the type described in
the preceding clauses (iii), (iv), (v) and (vi) of the preceding sentence.

 

(b)           Without
limitation of the provisions of the preceding clause (a), no amendment, waiver
or other modification to this Agreement shall, unless signed by Required
Revolving Lenders, (i) increase any of the advance rates set forth in the
Borrowing Base Certificate, (ii) make less restrictive the calculation of
the Borrowing Base; (iii) amend, waive or otherwise modify Section 2.2(a)
or the definitions of the terms used in Section 2.2(a) insofar as the
definitions affect the substance of such Section; (iv) change the
definition of the term Required Revolving Lenders or the percentage of Lenders
which shall be required for Required Revolving Lenders to take any action
hereunder or (v) amend, waive or otherwise modify this Section 11.5(b) or
the definitions of the terms used in this Section 11.5(b) insofar as the definitions
affect the substance of this Section 11.5(b).

 

Section 11.6           Assignments; Participations; Replacement of Lenders.

 

(a)           Assignments.

 

(i)            Any
Lender may at any time assign to one or more Eligible Assignees all or any
portion of such Lender’s Loans and interest in the Revolving Loan Commitment,
together with all related obligations of such Lender hereunder.  Except as Administrative Agent may otherwise
agree, the amount of any such assignment (determined as of the date of the
applicable Assignment Agreement or, if a “Trade Date” is specified in such
Assignment Agreement, as of such Trade Date) shall be in a minimum aggregate
amount equal to $1,000,000 or, if less, the assignor’s entire interests in the
Revolving Loan Commitment and outstanding Loans; provided, that,
in connection with simultaneous assignments to two or more related Approved
Funds, such Approved Funds shall be treated as one assignee for purposes of
determining compliance with the minimum assignment size referred to above.  Borrowers and Administrative Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned to an Eligible Assignee until Administrative
Agent shall have received and accepted an effective Assignment Agreement executed,
delivered and fully completed by the applicable parties thereto and a
processing fee

 

104

 

of $3,500; provided, only
one processing fee shall be payable in connection with simultaneous assignments
to two or more related Approved Funds.

 

(ii)           From
and after the date on which the conditions described above have been met,
(i) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (ii) the assigning Lender, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment Agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination pursuant to
Section 11.1).  Upon the request of
the Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an
effective Assignment Agreement, each Borrower shall execute and deliver to
Administrative Agent for delivery to the Eligible Assignee (and, as applicable,
the assigning Lender) Notes in the aggregate principal amount of the Eligible
Assignee’s percentage interest in the Revolving Loan Commitment plus the
principal amount of the Eligible Assignee’s Term Loans (and, as applicable,
Notes in the principal amount of that portion of the Revolving Loan Commitment
retained by the assigning Lender plus the principal amount of the Term Loans
retained by the assigning Lender).  Upon
receipt by the assigning Lender of such Note, the assigning Lender shall return
to Borrower Representative any prior Note held by it.

 

(iii)          Administrative
Agent, acting solely for this purpose as an agent of Borrowers, shall maintain
at its offices located in Chicago, Illinois a copy of each Assignment Agreement
delivered to it and a register for the recordation of the names and addresses
of each Lender, and the commitments of, and principal amount of the Loans owing
to, such Lender pursuant to the terms hereof. 
The entries in such register shall be conclusive, and Borrowers,
Administrative Agent and Lenders may treat each Person whose name is recorded
therein pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  Such register shall be available for
inspection by any Borrower and any Lender, at any reasonable time upon
reasonable prior notice to Administrative Agent.

 

(iv)          Notwithstanding
the foregoing provisions of this Section 11.6(a) or any other provision of
this Agreement, any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that
no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

 

(v)           Notwithstanding
the foregoing provisions of this Section 11.6(a) or any other provision of this
Agreement, Administrative Agent has the right, but not the obligation, to
effectuate assignments of Loans and Revolving Loan Commitments via an
electronic settlement system acceptable to Administrative Agent as designated
in writing from time to time to the Lenders by Administrative Agent (the “Settlement Service”).  At any time when the Administrative Agent
elects, in its sole discretion, to implement such Settlement Service,

 

105

 

each such assignment shall be effected by the assigning Lender and
proposed assignee pursuant to the procedures then in effect under the
Settlement Service, which procedures shall be consistent with the other
provisions of this Section 11.6(a).  Each
assigning Lender and proposed Eligible Assignee shall comply with the
requirements of the Settlement Service in connection with effecting any
assignment of Loans and Revolving Loan Commitments pursuant to the Settlement
Service.  If so elected by each of Administrative
Agent and the Borrowers, Administrative Agent’s and the Borrowers’ approval of
such Eligible Assignee shall be deemed to have been automatically granted with
respect to any transfer effected through the Settlement Service.  Assignments and assumptions of the Loans and
Revolving Loan Commitments shall be effected by the provisions otherwise set
forth herein until Administrative Agent notifies Lenders of the Settlement
Service as set forth herein.

 

(b)           Participations.

 

Any Lender may at any time, without the consent of, or
notice to, any Borrower or Administrative Agent, sell to one or more Persons
participating interests in its Loans, commitments or other interests hereunder
(any such Person, a “Participant”).  In the event of a sale by a Lender of a
participating interest to a Participant, (a) such Lender’s obligations
hereunder shall remain unchanged for all purposes, (b) Borrowers and
Administrative Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations hereunder and
(c) all amounts payable by each Borrower shall be determined as if such
Lender had not sold such participation and shall be paid directly to such
Lender.  No Participant shall have any
direct or indirect voting rights hereunder except with respect to any event
described in Section 11.5 expressly requiring the unanimous vote of all
Lenders or, as applicable, all affected Lenders.  Except as otherwise consented to by
Administrative Agent, each Lender agrees to incorporate the requirements of the
preceding sentence into each participation agreement which such Lender enters
into with any Participant.  Each Borrower
agrees that if amounts outstanding under this Agreement are due and payable (as
a result of acceleration or otherwise), each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement; provided that
such right of set-off shall be subject to the obligation of each Participant to
share with Lenders, and Lenders agree to share with each Participant, as
provided in Section 8.5.

 

(c)           Replacement of Lenders.

 

Within thirty (30) days after: (i) receipt by
Administrative Agent of notice and demand from any Lender for payment of
additional costs as provided in Sections 2.3(e)(v) or Section 2.9, which demand
shall not have been revoked, (ii) any Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.8, (iii) any Lender is a Defaulted
Lender, and the circumstances causing such status shall not have been cured or
waived; or (iv) any failure by any Lender to consent to a requested
amendment, waiver or modification to any Financing Document in which Required
Lenders have already consented to such amendment, waiver or modification

 

106

 

but the consent of each Lender, or each Lender affected thereby, is
required with respect thereto (each relevant Lender in the foregoing
clauses (i) through (iv) being an “Affected
Lender”), each of Borrower
Representative and Administrative Agent may, at its option, notify such
Affected Lender and, in the case of Borrowers’ election, the Administrative
Agent, of such Person’s intention to obtain, at Borrowers’ expense, a
replacement Lender (“Replacement Lender”)
for such Lender, which Replacement Lender shall be an Eligible Assignee
and, in the event the Replacement Lender is to replace an Affected Lender
described in the preceding clause (iv), such Replacement Lender consents to the
requested amendment, waiver or modification making the replaced Lender an
Affected Lender.  In the event Borrowers
or Administrative Agent, as applicable, obtains a Replacement Lender within
ninety (90) days following notice of its intention to do so, the Affected
Lender shall sell, at par, and assign all of its Loans and funding commitments
hereunder to such Replacement Lender in accordance with the procedures set
forth in Section 11.6(a); provided,
that (i) Borrowers shall have reimbursed such Lender for its increased
costs and additional payments for which it is entitled to reimbursement under
any of Sections 2.3(e)(v), 2.8 or Section 2.9, as applicable, of this Agreement
through the date of such sale and assignment and (ii) Borrowers shall pay
to Administrative Agent the $3,500 processing fee in respect of such
assignment.  In the event that a replaced
Lender does not execute an Assignment Agreement pursuant to Section 11.6(a)
within five (5) Business Days after receipt by such replaced Lender of notice
of replacement pursuant to this Section 11.6(c) and presentation to such
replaced Lender of an Assignment Agreement evidencing an assignment pursuant to
this Section 11.6(c), such replaced Lender shall be deemed to have consented to
the terms of such Assignment Agreement, and any such Assignment Agreement
executed by Administrative Agent, the Replacement Lender and, to the extent
required pursuant to Section 11.6(a), Borrowers, shall be effective for
purposes of this Section 11.6(c) and Section 11.6(a). Upon any such assignment
and payment, such replaced Lender shall no longer constitute a “Lender” for
purposes hereof, other than with respect to such rights and obligations that
survive termination as set forth in Section 11.1.

 

(d)           Credit Party Assignments.

 

No Credit Party may assign, delegate or otherwise
transfer any of its rights or other obligations hereunder or under any other
Financing Document without the prior written consent of Administrative Agent
and each Lender.

 

Section 11.7           Headings.

 

Headings and captions used in the Financing Documents
(including the Exhibits, Schedules and Annexes hereto and thereto) are included
for convenience of reference only and shall not be given any substantive
effect.

 

Section 11.8           Confidentiality.

 

Administrative Agent and each Lender
shall hold all non-public or confidential information regarding the Credit
Parties and their respective businesses identified as such by Borrowers and
obtained by Administrative Agent or any Lender pursuant to the requirements

 

107

 

hereof in accordance with such
Person’s customary procedures for handling information of such nature, except
that disclosure of such information may be made (i) to their respective
agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional
consultants, rating agencies, insurance industry associations and portfolio
management services, (ii) to prospective transferees or purchasers of any
interest in the Loans, and to prospective contractual counterparties (or the
professional advisors thereto) in
Swap Contracts permitted hereby, provided that any such Persons shall have agreed to be bound
by the provisions of this Section 11.8, (iii) as required by Law,
subpoena, judicial order or similar order and in connection with any
litigation, (iv) as may be required in connection with the examination,
audit or similar investigation of such Person and (v) to
a Person that is a trustee, investment advisor, collateral manager, servicer,
noteholder or secured party in a Securitization (as hereinafter defined) in
connection with the administration, servicing and reporting on the assets
serving as collateral for such Securitization provided that the Administrative
Agent or such Lenders shall endeavor to notify promptly the applicable Credit
Party of any disclosure pursuant to clauses (iii) or (iv).  For the purposes of this Section, “Securitization”
shall mean a public or private offering by a Lender or any of its Affiliates or
their respective successors and assigns, of securities which represent an interest
in, or which are collateralized, in whole or in party, by the Loans.  Confidential
information shall include only such information identified as such at the time
provided to Administrative Agent and shall not include information that
either:  (i) is in the public
domain, or becomes part of the public domain after disclosure to such Person
through no fault of such Person, or (ii) is disclosed to such Person by a
Person other than a Credit Party, an Investor or an Affiliate of an Investor, provided Administrative Agent does not have actual knowledge
that such Person is prohibited from disclosing such information.  The obligations of Administrative Agent and
Lenders under this Section 11.8 shall supersede and replace the obligations of
Administrative Agent and Lenders under any confidentiality agreement in respect
of this financing executed and delivered by Administrative Agent or any Lender
prior to the date hereof.

 

Section
11.9           Waiver of
Consequential and Other Damages.

 

To the fullest extent permitted by
applicable law, no Borrower shall assert, and each Borrower hereby waives, any
claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of this Agreement,
any other Financing Document or any agreement or instrument contemplated hereby
or thereby, the transactions contemplated hereby or thereby, any Loan or Letter
of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed by it through telecommunications, electronic or other
information transmission systems in connection with this Agreement or the other
Financing Documents or the transactions contemplated hereby or thereby.

 

Section
11.10         Marshaling; Payments Set Aside.

 

Neither Administrative Agent nor any
Lender shall be under any obligation to marshal any assets in payment of any or
all of the Obligations.  To the extent
that any

 

108

 

Borrower makes any payment or
Administrative Agent enforces its Liens or Administrative Agent or any Lender
exercises its right of set-off, and such payment or the proceeds of such
enforcement or set-off is subsequently invalidated, declared to be fraudulent
or preferential, set aside, or required to be repaid by anyone, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefore, shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.

 

Section
11.11         GOVERNING
LAW; SUBMISSION TO JURISDICTION.

 

THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING
DOCUMENT, AND ALL MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM
(WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD
REQUIRE APPLICATION OF LAWS OTHER THAN THOSE OF THE STATE OF ILLINOIS.  EACH BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK,
STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO ADMINISTRATIVE AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH
COURTS.  EACH BORROWER, ADMINISTRATIVE
AGENT AND EACH LENDER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH BORROWER HEREBY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE
SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

Section
11.12         WAIVER OF
JURY TRIAL.

 

EACH OF EACH BORROWER, ADMINISTRATIVE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.  EACH OF EACH BORROWER, ADMINISTRATIVE AGENT
AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH

 

109

 

HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH
WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS.  EACH OF EACH BORROWER, ADMINISTRATIVE AGENT
AND EACH LENDER WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF
REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

Section 11.13         Publication;
Advertisement.

 

(a)           Publication.  No
Credit Party will directly or indirectly publish, disclose or otherwise use in
any public disclosure, advertising material, promotional material, press
release or interview, any reference to the name, logo or any trademark of
Merrill Lynch or any of its Affiliates or any reference to this Agreement or
the financing evidenced hereby, in any case except (i) as required by Law,
subpoena or judicial or similar order, in which case the applicable Credit
Party shall give Administrative Agent prior written notice of such publication
or other disclosure or (ii) with Merrill Lynch’s prior written consent.

 

(b)           Advertisement.  Each
Lender and each Credit Party hereby authorizes Merrill Lynch to publish the
name of such Lender and Credit Party, the existence of the financing
arrangements referenced under this Agreement, the primary purpose and/or
structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which Merrill Lynch elects to submit for
publication.  In addition, each Lender
and each Credit Party agrees that Merrill Lynch may provide lending industry
trade organizations with information necessary and customary for inclusion in
league table measurements after the Closing Date.  With respect to any of the foregoing, Merrill
Lynch shall provide Borrowers with an opportunity to review and confer with
Merrill Lynch regarding the contents of any such tombstone, advertisement or
information, as applicable, prior to its submission for publication and,
following such review period, Merrill Lynch may, from time to time, publish
such information in any media form desired by Merrill Lynch, until such time
that Borrowers shall have requested Merrill Lynch cease any such further
publication.

 

Section
11.14         Counterparts;
Integration.

 

This Agreement and the other Financing Documents may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument.  Signatures by facsimile
shall bind the parties hereto.  This
Agreement and the other Financing Documents constitute the entire agreement and
understanding among the parties hereto and supersede any and all prior agreements
and understandings, oral or written, relating to the subject matter hereof.

 

110

 

Section 11.15         No Strict
Construction.

 

The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

 

111

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective authorized officers as
of the day and year first above written.

 

 

	
   

  	
  LOUD TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tim O’Neil

  
	
   

  	
  Name: Tim O’Neil

  
	
   

  	
  Title: CFO

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  16220 Wood-Red Road, N.E.

  
	
   

  	
   

  	
  Woodinville, Washington
  98072

  
	
   

  	
   

  
	
   

  	
  Facsimile number:

  	
   

  
	
   

  	
  E-mail Address:

  	
   

  
	
   

  	
  Taxpayer Identification Number:

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower’s Account Designation:

  
	
   

  	
   

  
	
   

  	
  Name of Bank: U.S. Bank National Association

  
	
   

  	
  ABA No.:125000105

  
	
   

  	
  Account No.: [redacted]

  
	
   

  	
  Account Name: LOUD Technologies Inc.

  
	
   

  	
  Reference:

  	
   

  
								

 

 

	
   

  	
  ST. LOUIS MUSIC, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tim O’Neil

  
	
   

  	
  Name: Tim O’Neil

  
	
   

  	
  Title: Treasurer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile number:

  	
   

  
	
   

  	
  E-mail Address:

  	
   

  
	
   

  	
  Taxpayer Identification Number:

  	
   

  
	
   

  	
   

  
	
   

  	
  Borrower’s Account Designation:

  
	
   

  	
   

  
	
   

  	
  Name of Bank: Commerce Bank, N.A.

  
	
   

  	
  ABA No.:101000019

  
	
   

  	
  Account No.: [redacted] 

  
	
   

  	
  Account Name: St. Louis Music, Inc.

  
	
   

  	
  Reference:

  	
   

  
								

 

 

	
   

  	
  MERRILL LYNCH CAPITAL,
  a division of

  Merrill Lynch Business Financial Services Inc.,

  as Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Emily L. Koehn

  
	
   

  	
  Name: Emily L. Koehn

  
	
   

  	
  Title: Assistant Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
    222 N.
  LaSalle Street, 16th Floor

  
	
   

  	
   

  	
  Chicago, Illinois  60601

  
	
   

  	
   

  	
  Attn:  Account Manager for LOUD
  Technologies transaction

  
	
   

  	
   

  
	
   

  	
  Facsimile number: 
  (312) 499-3920

  
	
   

  	
  E-Mail Address: 
  emily-koehn@ml.com

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
  Merrill Lynch Capital

  222 N. LaSalle Street, 16th Floor

  Chicago, Illinois 60601

  Attn: Group Senior Transaction Attorney, Corporate

  Finance, for LOUD Technologies transaction

  Facsimile number: (312) 499-3126

  
	
   

  	
   

  
	
   

  	
  And with an additional
  copy to:

  
	
   

  	
   

  
	
   

  	
  GOLDBERG, KOHN, BELL,
  BLACK,

  ROSENBLOOM & MORITZ, LTD.

  55 East Monroe Street, Suite 3700

  Chicago, Illinois  60603

  
	
   

  	
   

  
	
   

  	
  Facsimile number: 
  (312) 332-2196

  
	
   

  	
  E-Mail Address: 
  david.mason@goldbergkohn.com

  
	
   

  	
   

  
	
   

  	
  Payment Account Designation:

  
	
   

  	
   

  
	
   

  	
   

  	
  La Salle Bank

  
	
   

  	
   

  	
  200 West Monroe

  
	
   

  	
   

  	
  Chicago, IL 60606

  
	
   

  	
   

  	
  ABA No.:

  	
  071000505

  
	
   

  	
   

  	
  Account No.:

  	
  [redacted]

  
	
   

  	
   

  	
  Account Name:

  	
  MLBFS Corp. Finance

  
								

 

 

	
   

  	
  CIT LENDING SERVICES
  CORPORATION, as

  a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marshall McFeelors

  
	
   

  	
  Name: Marshall
  McFeelors

  
	
   

  	
  Title: Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  1211 Avenue of the
  Americas

  
	
   

  	
   

  	
  New York, New York
  10036

  
	
   

  	
   

  
	
   

  	
  Facsimile
  number: 212-382-9004

  
	
   

  	
  E-Mail Address: marshall-mcfeelors@cit.com

  
				

 

 

	
   

  	
  ING CAPITAL LLC, as
  Syndication Agent and a

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Doug S. Clarida

  
	
   

  	
  Name:  Doug S. Clarida

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  200 Galleria Parkway,
  Suite 950

  
	
   

  	
   

  	
  Atlanta, GA 30339

  
	
   

  	
   

  
	
   

  	
   Facsimile number: 770-951-1005

  
	
   

  	
  E-Mail Address: doug.clarida@americas.ing.com

  
				

 

 

	
   

  	
  U.S. Bank National Association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher P. Zinn

  
	
   

  	
  Name:  Christopher P. Zinn

  
	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  800 Nicollet Mall,
  BC-MN-HO3Q

  
	
   

  	
   

  	
  Minneapolis, MN 55402

  
	
   

  	
   

  
	
   

  	
  Facsimile number: 612-303-2257

  
	
   

  	
  E-Mail Address: Christopher.zinn@usbank.comExhibit 10.2

 

 

 

Securities Purchase Agreement

 

among

 

LOUD
Technologies Inc.

 

St.
Louis Music, Inc.

 

The
Other Guarantors from Time to Time Party Hereto

 

OCM
Mezzanine Fund, L.P.

 

 

Dated
as of August 29, 2005

 

 

 

 

Table of Contents

 

	
  Article I

  	
  Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  The Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Article II

  	
  Purchase and Sale

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Purchase and Sale of the Notes

  	
   

  
	
  2.2

  	
  Closing

  	
   

  
	
  2.3

  	
  Commitment Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  Article III

  	
  Closing Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Documents

  	
   

  
	
  3.2

  	
  Transactions

  	
   

  
	
  3.3

  	
  Representations and Warranties

  	
   

  
	
  3.4

  	
  No Default

  	
   

  
	
  3.5

  	
  Material Adverse Change

  	
   

  
	
  3.6

  	
  Litigation

  	
   

  
	
  3.7

  	
  Fees and Expenses Paid

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  	
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Existence and Power

  	
   

  
	
  4.2

  	
  Organization and Governmental Authorization; No Contravention

  	
   

  
	
  4.3

  	
  Binding Effect

  	
   

  
	
  4.4

  	
  Capitalization

  	
   

  
	
  4.5

  	
  Financial Information

  	
   

  
	
  4.6

  	
  Litigation

  	
   

  
	
  4.7

  	
  Ownership of Property

  	
   

  
	
  4.8

  	
  No Default

  	
   

  
	
  4.9

  	
  Labor Matters

  	
   

  
	
  4.10

  	
  Regulated Entities

  	
   

  
	
  4.11

  	
  Margin Regulations

  	
   

  
	
  4.12

  	
  Compliance With Laws; Anti-Terrorism Laws

  	
   

  
	
  4.13

  	
  Taxes

  	
   

  
	
  4.14

  	
  Compliance with ERISA

  	
   

  
	
  4.15

  	
  Brokers

  	
   

  
	
  4.16

  	
  Related Transactions

  	
   

  
	
  4.17

  	
  Material Contracts

  	
   

  
	
  4.18

  	
  Environmental Matters

  	
   

  
	
  4.19

  	
  Intellectual Property

  	
   

  
	
  4.20

  	
  Real Property Interests

  	
   

  
	
  4.21

  	
  Solvency

  	
   

  

 

i

 

	
  4.22

  	
  Full Disclosure

  	
   

  
	
  4.23

  	
  Senior Financing Documents

  	
   

  
	
  4.24

  	
  Private Offering

  	
   

  
	
   

  	
   

  	
   

  
	
  Article V

  	
  Representations and Warranties of the
  Purchasers

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
   

  
	
  5.2

  	
   

  	
   

  
	
  5.3

  	
   

  	
   

  
	
  5.4

  	
   

  	
   

  
	
  5.5

  	
  Source of Funds

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VI

  	
  Terms of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Interest

  	
   

  
	
  6.2

  	
  Redemption; Repurchase

  	
   

  
	
  6.3

  	
  Payments

  	
   

  
	
  6.4

  	
  Certain Taxes

  	
   

  
	
  6.5

  	
  Transfer and Exchange of Notes

  	
   

  
	
  6.6

  	
  Replacement of Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VII

  	
  Affirmative Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Financial Statements and Other Reports

  	
   

  
	
  7.2

  	
  Payment and Performance of Obligations

  	
   

  
	
  7.3

  	
  Maintenance of Existence

  	
   

  
	
  7.4

  	
  Maintenance of Property; Insurance

  	
   

  
	
  7.5

  	
  Compliance with Laws

  	
   

  
	
  7.6

  	
  Inspection of Property, Books and Records

  	
   

  
	
  7.7

  	
  Use of Proceeds

  	
   

  
	
  7.8

  	
  Purchasers’ Meetings

  	
   

  
	
  7.9

  	
  [Intentionally Omitted]

  	
   

  
	
  7.10

  	
  Hazardous Materials; Remediation

  	
   

  
	
  7.11

  	
  [Intentionally Omitted]

  	
   

  
	
  7.12

  	
  Further Assurances

  	
   

  
	
  7.13

  	
  [Intentionally Omitted]

  	
   

  
	
  7.14

  	
  Non-Voting Board Observer

  	
   

  
	
   

  	
   

  	
   

  
	
  Article VIII

  	
  Negative Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Debt

  	
   

  
	
  8.2

  	
  Liens

  	
   

  
	
  8.3

  	
  Contingent Obligations

  	
   

  
	
  8.4

  	
  Restricted Distributions

  	
   

  

 

ii

 

	
  8.5

  	
  Restrictive Agreements

  	
   

  
	
  8.6

  	
  [Intentionally Omitted]

  	
   

  
	
  8.7

  	
  Consolidations, Mergers and Sales of Assets

  	
   

  
	
  8.8

  	
  Purchase of Assets, Investments

  	
   

  
	
  8.9

  	
  Transactions with Affiliates

  	
   

  
	
  8.10

  	
  Modification of Organizational Documents

  	
   

  
	
  8.11

  	
  Modification of Certain Agreements

  	
   

  
	
  8.12

  	
  Fiscal Year

  	
   

  
	
  8.13

  	
  Conduct of Business

  	
   

  
	
  8.14

  	
  Investor Fees

  	
   

  
	
  8.15

  	
  [Intentionally
  Omitted]

  	
   

  
	
  8.16

  	
  Limitation on Sale and Leaseback
  Transactions

  	
   

  
	
  8.17

  	
  [Intentionally Omitted]

  	
   

  
	
  8.18

  	
  Compliance with Anti-Terrorism Laws

  	
   

  
	
  8.19

  	
  Changes to Senior Financing Documents

  	
   

  
	
  8.20

  	
  Limitation on Layering

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IX

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Capital
  Expenditures

  	
   

  
	
  9.2

  	
  Fixed Charge
  Coverage Ratio

  	
   

  
	
  9.3

  	
  Total
  Debt to Adjusted EBITDA Ratio

  	
   

  
	
  9.4

  	
  Senior
  Covenant Debt to Adjusted EBITDA Ratio

  	
   

  
	
   

  	
   

  	
   

  
	
  Article X

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Payment Default

  	
   

  
	
  10.2

  	
  Certain Covenants

  	
   

  
	
  10.3

  	
  General Default

  	
   

  
	
  10.4

  	
  Representations; Warranties

  	
   

  
	
  10.5

  	
  Default Under Other Debt

  	
   

  
	
  10.6

  	
  Voluntary Bankruptcy

  	
   

  
	
  10.7

  	
  Involuntary Bankruptcy

  	
   

  
	
  10.8

  	
  ERISA

  	
   

  
	
  10.9

  	
  Judgments

  	
   

  
	
  10.10

  	
  [Intentionally Omitted]

  	
   

  
	
  10.11

  	
  [Intentionally Omitted]

  	
   

  
	
  10.12

  	
  Labor

  	
   

  
	
  10.13

  	
  Operative Documents

  	
   

  
	
  10.14

  	
  Dormant Subsidiaries

  	
   

  

 

iii

 

	
  Article XI

  	
  Acceleration; Remedies on Default

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Acceleration

  	
   

  
	
  11.2

  	
  Other Remedies

  	
   

  
	
  11.3

  	
  Distribution of Proceeds

  	
   

  
	
  11.4

  	
  Annulment of Defaults

  	
   

  
	
  11.5

  	
  Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  Article XII

  	
  Cross-Guaranty

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Cross-Guaranty

  	
   

  
	
  12.2

  	
  Guaranty Absolute

  	
   

  
	
  12.3

  	
  Waiver

  	
   

  
	
  12.4

  	
  Subrogation

  	
   

  
	
  12.5

  	
  Limitation on Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  Article XIII

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Definitions

  	
   

  
	
  13.2

  	
  Other Interpretive Provisions

  	
   

  
	
  13.3

  	
  Accounting Terms, Etc.

  	
   

  
	
  13.4

  	
  Rounding

  	
   

  
	
  13.5

  	
  Times of Day

  	
   

  
	
  13.6

  	
  Headings

  	
   

  
	
  13.7

  	
  Disregarded Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  Article XIV

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Amendments; Actions by the Purchasers;
  Solicitation of the Purchasers

  	
   

  
	
  14.2

  	
  Addresses for Notices, Etc.

  	
   

  
	
  14.3

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
  14.4

  	
  Costs, Expenses and Taxes

  	
   

  
	
  14.5

  	
  Indemnification; Limitation of Liability

  	
   

  
	
  14.6

  	
  Successors and Assigns; No Third-Party
  Beneficiaries

  	
   

  
	
  14.7

  	
  Survival of Agreements; Representations and
  Warranties

  	
   

  
	
  14.8

  	
  Prior Agreements

  	
   

  
	
  14.9

  	
  Severability

  	
   

  
	
  14.10

  	
  GOVERNING LAW

  	
   

  
	
  14.11

  	
  Consent to Jurisdiction

  	
   

  
	
  14.12

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  14.13

  	
  Judgment Currency

  	
   

  
	
  14.14

  	
  Service of Process

  	
   

  

 

iv

 

	
  14.15

  	
  Confidentiality

  	
   

  
	
  14.16

  	
  Further Assurances

  	
   

  
	
  14.17

  	
  Reproduction of Documents

  	
   

  
	
  14.18

  	
  Counterparts

  	
   

  

 

v

 

	
  SCHEDULES

  	
   

  	
   

  
	
  Schedule 2.1

  	
  Purchasers

  	
   

  
	
  Schedule 3.1

  	
  Existence, Organizational Identification Numbers,
  Foreign Qualification, Prior Names

  	
   

  
	
  Schedule 3.4

  	
  Capitalization

  	
   

  
	
  Schedule 3.6

  	
  Litigation

  	
   

  
	
  Schedule 3.15

  	
  Brokers

  	
   

  
	
  Schedule 3.17

  	
  Material Contracts

  	
   

  
	
  Schedule 3.18

  	
  Environmental Matters

  	
   

  
	
  Schedule 3.19

  	
  Intellectual Property

  	
   

  
	
  Schedule 3.20

  	
  Owned Real Estate

  	
   

  
	
  Schedule 5.1

  	
  Debt

  	
   

  
	
  Schedule 5.2

  	
  Liens

  	
   

  
	
  Schedule 5.3

  	
  Contingent Obligations

  	
   

  
	
  Schedule 5.8

  	
  Investments

  	
   

  
	
  Schedule 5.9

  	
  Affiliate Transactions

  	
   

  
	
  Schedule 5.13

  	
  Business Description

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Note

  	
   

  
	
  Exhibit B

  	
  Form of Closing Certificate

  	
   

  
	
  Exhibit C

  	
  Form of Opinion of Kirkland &
  Ellis LLP

  	
   

  
	
  Exhibit D

  	
  Form of Assignment and Acceptance

  	
   

  
	
  Exhibit E

  	
  Form of Compliance Certificate

  	
   

  
	
  Exhibit F

  	
  Form of Subsidiary Joinder

  	
   

  
	
  Exhibit G

  	
  Form of Subordination Agreement

  	
   

  

 

vi

 

LOUD Technologies Inc.

16220 Wood-Red Road, N.E.

Woodinville, Washington 98072

 

Dated as of August 29, 2005

 

To
Each Purchaser Listed
  on the Signature Pages Hereto

 

Dear
Purchaser:

 

LOUD
Technologies Inc., a Washington corporation (the “Company”) and St.
Louis Music, Inc., a Missouri corporation (“SLM”) propose to refinance
all of their existing outstanding Debt through: (a) $69,500,000 in
aggregate principal amount of committed senior secured loan facilities of the
Company and SLM to be comprised of (i) up to $15,000,000 aggregate
principal amount of term loan A to be drawn on the Closing Date, (ii) up
to $14,500,000 of term loan B to be drawn on the Closing Date and (iii)
a $40,000,000 revolving credit facility, in each case pursuant to and in
accordance with the Senior Financing Documents (as defined in Article XIII)
and (b) the issuance and sale of the Notes (as defined in Article XIII)
in the aggregate principal amount of $14,750,000, pursuant to and in accordance
with the Subordinated Note Documents (as defined in Article XIII).

 

The
Company, SLM and each of the other Guarantors (as such term and other
capitalized terms used herein are defined in Article XIII) hereby
agree with you as follows:

 

Article I

Authorization

 

1.1                                 The Notes.  The Company has authorized the
issuance and sale to the Purchasers of its 14% Senior Subordinated Notes due
February 29, 2012 in the aggregate original principal amount of
$14,750,000.  The 14% Senior Subordinated
Notes shall be substantially in the form set forth as Exhibit A
attached hereto and are referred to individually as a “Note” and
collectively as the “Notes,” which terms shall also include any notes
delivered in exchange or replacement therefor.

 

Article II

Purchase and Sale

 

2.1                                 Purchase and Sale of the Notes. 
Subject to and in reliance upon the representations, warranties, terms
and conditions of this Agreement, each Purchaser severally agrees to purchase
from the Company, and the Company agrees to sell to each

 

 

Purchaser, Notes in the principal amount set forth
opposite such Purchaser’s name on Schedule 2.1 attached hereto.

 

2.2                                 Closing.  The closing of the purchase
and sale of Notes to you and the other Purchasers (the “Closing”) shall
take place remotely or at such location as agreed to by the Company and the
Purchasers, at 10:00 a.m. local
time, on the date on which this Agreement is executed and delivered and upon
satisfaction of the conditions described in Article III (the “Closing
Date”).  At the Closing, the Company
will deliver to each Purchaser a single Note (or such greater number of notes
as the Purchasers may request), dated the Closing Date and registered in such
Purchaser’s name (or in the name of such Purchaser’s nominee), in the principal
amount set forth opposite such Purchaser’s name on Schedule 2.1, in
consideration for delivery by such Purchaser to the Company of immediately
available funds by wire transfer to an account designated by the Company in
writing prior to the Closing in the aggregate amount of the purchase price
therefor set forth opposite such Purchaser’s name on Schedule 2.1.  If at the Closing the Company shall fail to
tender such Notes as provided in this Section 2.2 or any of the
conditions specified in Article III shall not have been fulfilled to any
Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of
all further obligations hereunder, without thereby waiving any other rights it may
have by reason of such failure or such nonfulfillment.

 

2.3                                 Commitment Fee.  On
the Closing Date, the Company will deliver to the Purchasers, in amounts
proportional to the relative principal amounts allocated to each Purchaser on Schedule
2.1, immediately available funds by wire transfer to accounts designated by
the Purchasers prior to Closing in the aggregate amount of $295,000 (the “Commitment
Fee”).

 

Article III

Closing Conditions

 

The
obligation of each Purchaser to purchase the Notes at the Closing is subject at
the time of the making of such purchase to satisfaction of the following
conditions:

 

3.1                                 Documents.  Each Purchaser shall have
received on or before the Closing Date all of the following in form and
substance reasonably satisfactory to each of the Purchasers:

 

(a)                                  this Agreement, the Notes and all other
Subordinated Note Documents, each duly executed where appropriate and in
sufficient copies for each of the Purchasers;

 

(b)                                 true and correct copies, certified as to
authenticity by the Company, of (i) the Senior Financing Documents, (ii)
definitive documentation, if

 

2

 

any,
in connection with the purchase by OCM of any equity interest in Company and (iii) such
other documents or instruments as may be reasonably requested by the
Purchasers, including, without limitation, a copy of any debt instrument,
security agreement or other material contract to which any of the Note Parties
may be a party;

 

(c)                                  a business plan for fiscal years 2005 through
2011 and a reasonably satisfactory written analysis of the business and
prospects of the Company and its Subsidiaries for the period from the Closing
Date through the final maturity of the Notes;

 

(d)                                 a certificate of the Company, dated the
Closing Date, substantially in the form of Exhibit B, signed by a
Responsible Officer and certifying, among other things, that all of the
conditions contained in Article III have been satisfied on such date;

 

(e)                                  the legal opinion of Kirkland & Ellis
LLP, counsel to Company and its Subsidiaries, substantially in the form of Exhibit C,
covering such matters incident to the transactions contemplated by this
Agreement as the Purchasers may reasonably require;

 

(f)                                    the financial statements of the Company and
its Consolidated Subsidiaries, and the projections and statements evidence, in
each case for the twelve (12) month period for which financial statements are
most recently available, prepared to give effect to the initial funding of
loans under the Senior Credit Agreement, the issuance and sale of the Notes and
the consummation of the transactions contemplated by the Operative Documents, a
Senior Debt to Adjusted EBITDA Ratio of not more than 3.05 to 1.0 and a Total
Debt to Adjusted EBITDA Ratio of not more than 4.20 to 1.0.  The Purchasers shall have received a
certificate of Responsible Officer demonstrating with supporting calculations
in reasonable detail the satisfaction of the foregoing requirements.  OCM shall not have become aware of any
information or other matter (including any matter relating to financial models
and underlying assumptions relating to any financial projections concerning
Company and its subsidiaries that have been made available to any Purchaser by
Investor, Company or any of their respective representatives) affecting Company
or any of its Subsidiaries that is inconsistent in a material and adverse
manner with any information or other matter disclosed to OCM prior to the
Closing Date;

 

(g)                                 evidence that all material governmental and
third party approvals necessary in connection with the Transactions and the
continuing operations of Company have been obtained and are in full force and
effect, and all applicable waiting periods have expired without any action
being taken or threatened by any

 

3

 

competent
authority which would restrain, prevent or otherwise impose materially adverse
conditions on the Transactions;

 

(h)                                 the results of a recent lien search in each
of the jurisdictions in which a Uniform Commercial Code financing statement or
other filings or recordations should be made to evidence or perfect security
interests in all assets of the Note Parties, and such search shall reveal no
liens on any of the assets of the Note Party, except for Liens permitted by Section 8.2;

 

(i)                                     evidence of the insurance under all insurance
policies to be maintained under Section 7.4;

 

(j)                                     sufficiently in advance of the Closing Date,
all documentation and other information required by regulatory authorities
under applicable “know your customer” and anti-money laundering rules and
regulations, including without limitation the United States PATRIOT Act;

 

(k)                                  a true and correct statement of the sources
and uses of funds in connection with the Transactions;

 

(l)                                     a copy of payoff letters evidencing repayment
in full of all prior debt to be refinanced on the Closing Date, termination of
all agreements relating thereto and the release of all Liens granted in
connection therewith, with Uniform Commercial Code or other appropriate
termination statements and documents effective to evidence the foregoing; and

 

(m)                               such additional documentation as any of the
Purchasers may request.

 

3.2                                 Transactions.  The
following transactions shall have been consummated, or shall be consummated substantially
concurrently with the purchase of the Notes on the Closing Date, in each case
on terms and conditions reasonably satisfactory to each Purchaser:

 

(a)                                  The Company (i) shall have
received at least $46,500,000 in gross proceeds from borrowings under and
pursuant to the Senior Credit Agreement (which borrowings shall include
revolving credit borrowings in an amount of approximately $17,500,000) and (ii) shall
have at least $7,500,000 available for future revolving credit borrowings under
and pursuant to the Senior Credit Agreement, after giving effect to the
borrowings on the Closing Date;

 

(b)                                 The Company shall have received at least
$750,000 from OCM in consideration for the purchase by OCM of equity interest
in the Company; and

 

4

 

(c)                                  the corporate structure, capital structure,
other debt instruments, material contracts and governing documents of the
Company and its Affiliates and the tax effects resulting from the Transactions
shall be reasonably satisfactory in all respects.

 

3.3                                 Representations and Warranties.  All
of the representations and warranties contained in Article IV and
in each of the other Subordinated Note Documents shall be true and complete in
all material respects (unless any such representation or warranty is already
qualified as to materiality, in which case it shall be true and correct in all
respects) on and as of the Closing Date, both before and immediately after
giving effect to the issuance of the Notes.

 

3.4                                 No Default.  No Event of Default or Default
shall have occurred and be continuing or would immediately result from the
consummation of the Transactions on the Closing Date.

 

3.5                                 Material Adverse Change.  The
absence, since December 31, 2004, of any material adverse change in any aspect
of the business, operations, properties, prospects or condition (financial or
otherwise) of any Note Party, or any event or condition which could reasonably
be expected to result in such a material adverse change.

 

3.6                                 Litigation.  No litigation, investigation
or other proceeding shall be pending or threatened, (a) with respect to
which there is a reasonable possibility of an adverse determination, and that,
if adversely determined, could reasonably be expected to result in a Material
Adverse Effect or (b) that challenges or purports to challenge any
aspect of the Transactions.

 

3.7                                 Fees and Expenses Paid. 
There shall have been paid to each of the Purchasers, for their
respective accounts, all fees and, to the extent documented, reasonable expenses
(including the reasonable legal fees of outside counsel to each of the
Purchasers) due and payable on or before the Closing Date.

 

Article IV

Representations and Warranties

 

In
order to induce the Purchasers to purchase the Notes, each of the Note Parties,
jointly and severally, makes the following representations, warranties,
covenants and agreements, in each case as of the Closing Date and both before
and after giving effect to the Transaction, all of which shall survive the
execution and delivery of this Agreement and the Notes:

 

4.1                                 Existence and Power.  Each
Note Party is an entity as specified on Schedule 4.1, is duly organized,
validly existing and in good standing under the laws of the jurisdiction
specified on Schedule 4.1, has the same legal name as it appears in
such

 

5

 

Note Party’s Organizational Documents and an
organizational identification number (if any), in each case as specified on Schedule 4.1,
and has all powers and all governmental licenses, authorizations,
registrations, permits, consents and approvals required under all applicable
Laws and required in order to carry on its business as now conducted
(collectively, “Permits”), except where the failure to have such Permits
could not reasonably be expected to have a Material Adverse Effect.  Each Note Party is qualified to do business
as a foreign entity in each jurisdiction in which it is required to be so
qualified, which jurisdictions as of the Closing Date are specified on Schedule 4.1,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect.  Except
as set forth on Schedule 4.1, no Note Party over the five (5) year
period preceding the Closing Date, (a) has had any name other than its
current name or (b) was incorporated or organized under the laws of
any jurisdiction other than its current jurisdiction of incorporation or
organization.

 

4.2                                 Organization and Governmental Authorization;
No Contravention.  The execution, delivery and performance by
each Note Party of the Operative Documents to which it is a party are within
its powers, have been duly authorized by all necessary action pursuant to its
Organizational Documents, require no further action by or in respect of, or
filing with, any Governmental Authority and do not violate, conflict with or
cause a breach or a default under (a) any Law or any of the
Organizational Documents of any Note Party or (b) any agreement or
instrument binding upon it, except for such violations, conflicts, breaches or
defaults as could not, with respect to this clause (b), reasonably be expected
to have a Material Adverse Effect.

 

4.3                                 Binding Effect.  Each
of the Operative Documents to which any Note Party is a party constitutes a
valid and binding agreement or instrument of such Note Party, enforceable
against such Note Party in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws relating to the enforcement of creditors’ rights generally and by
general equitable principles.

 

4.4                                 Capitalization.  The
authorized equity securities of each of the Note Parties as of the Closing Date
is as set forth on Schedule 4.4. 
All issued and outstanding equity securities of each of the Note Parties
are duly authorized and validly issued, fully paid and nonassessable and all of
such equity securities (other than those issued by Company, as to which no
representation or warranty is made) are free and clear of all Liens other than
those in favor of Agent for the benefit of Agent and Senior Lenders, and all
such equity securities were issued in compliance with all applicable Laws.  The identity of the holders of the equity
securities of each of the Note Parties (other than Company, as to which no such
representation or warranty is made) and the percentage of their fully-diluted
ownership of the equity securities of each of the Note Parties as of the
Closing Date is set forth on Schedule 4.4.  As of the Closing Date, on a fully diluted
basis, Investor owns not less than sixty-four and one half percent (64 1⁄2%) of
the issued

 

6

 

and outstanding share of each class of equity
securities of Company.  No shares of the
capital stock or other equity securities of any Note Party, other than those
described above, are issued and outstanding as of the Closing Date.  Except as set forth on Schedule 4.4,
as of the Closing Date there are no preemptive or other outstanding rights,
options, warrants, conversion rights or similar agreements or understandings
for the purchase or acquisition from any Note Party of any equity securities of
any such entity.

 

4.5                                 Financial Information.

 

(a)                                  The consolidated and consolidating balance
sheet of Company and its Consolidated Subsidiaries as of December 31, 2004
and the related consolidated and consolidating statements of operations,
stockholders’ equity (or comparable calculation, if such Person is not a
corporation) and cash flows for the fiscal year then ended, reported on by
KPMG, copies of which have been delivered to each Purchaser, fairly present, in
all material respects in conformity with GAAP, the consolidated and
consolidating financial position of Company and its Consolidated Subsidiaries
as of such date and their consolidated and consolidating results of operations,
changes in stockholders’ equity (or comparable calculation) and cash flows for
such period.  The consolidated and
consolidating balance sheet of SLM and its Consolidated Subsidiaries as of
December 31, 2004 and the related consolidated and consolidating
statements of operations, stockholders’ equity (or comparable calculation, if
such Person is not a corporation) and cash flows for the fiscal year then
ended, reported on by KPMG, copies of which have been delivered to each
Purchaser, fairly present in all material respects, in conformity with GAAP,
the consolidated and consolidating financial position of SLM and its
Consolidated Subsidiaries as of such date and their consolidated and
consolidating results of operations, changes in stockholders’ equity (or
comparable calculation) and cash flows for such period.

 

(b)                                 The unaudited consolidated and consolidating
balance sheet of Company and its Consolidated Subsidiaries as of June 30,
2005 and the related unaudited consolidated and consolidating statements of
operations and cash flows for the six (6) months then ended (it being
understood that SLM was acquired on March 7, 2005), copies of which have
been delivered to each Purchaser, fairly present in all material respects, in
conformity with GAAP applied on a basis consistent with the applicable
financial statements referred to in Section 4.5(a), the
consolidated and consolidating financial position of Company and its
Consolidated Subsidiaries as of such date and their consolidated and
consolidating results of operations and cash flows for the six (6) months then
ended (subject to normal year-end adjustments and the absence of footnote
disclosures).

 

(c)                                  The pro forma balance sheet of Company and
its Consolidated Subsidiaries as of June 30, 2005, copies of which have
been delivered to each Purchaser, fairly presents in all material respects
applied on a basis consistent with the financial

 

7

 

statements referred to in Section 4.5(a), the
consolidated and consolidating financial position of Company and its
Consolidated Subsidiaries as of such date, adjusted to give effect (as if such
events had occurred on such date) to (i) the transactions
contemplated by the Operative Documents, (ii) the making of the
initial loans and the issuance of any initial letters of credit under the
Senior Credit Agreement and the issuance and sale of the Notes, (iii) the
application of the proceeds therefrom as contemplated by the Operative Documents
and (iv) the payment of all legal, accounting and other fees
related thereto to the extent known at the time of the preparation of such
balance sheet.  As of the date of such
balance sheet and the date hereof, no Note Party had or has any material liabilities,
contingent or otherwise, including liabilities for taxes, long-term leases or
forward or long-term commitments, which under GAAP would be required to be
reflected on such balance sheet, but which are not properly reflected on such
balance sheet.

 

(d)                                 [Intentionally Omitted].

 

(e)                                  Since December 31, 2004, there has been
no material adverse change in the business, operations, properties, prospects
or financial condition of the Specified Companies and their Consolidated
Subsidiaries, taken as a whole.

 

4.6                                 Litigation.  Except as set forth on Schedule 4.6,
as of the Closing Date there is no Litigation pending against, or to any
Specified Company’s knowledge threatened in writing against any Note
Party.  As of the Closing Date, there is
no Litigation pending which could reasonably be expected to have a Material
Adverse Effect or which in any manner draws into question the validity of any
of the Operative Documents.

 

4.7                                 Ownership of Property.  Each
Specified Company and each of its Subsidiaries is the lawful owner of, has good
and marketable title to and is in lawful possession of, or has valid leasehold
interests in, all material properties and other material assets (real or
personal, tangible, intangible or mixed) purported or reported to be owned or
leased (as the case may be) by such Person, except as may have been disposed of
in the Ordinary Course of Business or otherwise in compliance with the terms
hereof.

 

4.8                                 No Default.  No Default or Event of Default
has occurred and is continuing.  No Note Party
is in breach or default under or with respect to any contract, agreement, lease
or other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.

 

4.9                                 Labor Matters.  As
of the Closing Date, there are no strikes or other labor disputes pending or,
to any Specified Company’s knowledge, threatened against any Note Party.  Hours worked and payments made to the
employees of the Note Parties have not been in violation of the Fair Labor
Standards Act or any other applicable Law dealing

 

8

 

with such matters. 
All payments due from the Note Parties, or for which any claim may be
made against any of them, on account of wages and employee and retiree health
and welfare insurance and other benefits have been paid or accrued as a
liability on their books, as the case may be. 
The consummation of the transactions contemplated by the Subordinated
Note Documents and the other Operative Documents will not give rise to a right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which it is a party or by which it is bound.

 

4.10                           Regulated Entities.  No
Note Party is an “investment company” or a company “controlled” by an “investment
company” or a “subsidiary” of an “investment company,” all within the meaning
of the Investment Company Act of 1940. 
No Note Party is a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company”, within the meaning of the Public Utility Holding
Company Act of 1935.

 

4.11                           Margin Regulations.  None
of the proceeds from the issuance and sale of the Notes have been or will be
used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry any Margin Stock or for any other
purpose which might cause any of the Notes to be considered a “purpose credit”
within the meaning of Regulation T, U or X of the Federal Reserve Board.

 

4.12                           Compliance With Laws; Anti-Terrorism Laws.

 

(a)                                  Each Note Party is in compliance with the
requirements of all applicable Laws, except for such Laws the noncompliance
with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 None of the Note Parties, their Affiliates or
any of their respective agents acting or benefiting in any capacity in
connection with the transactions contemplated by this Agreement is (i) in
violation of any Anti-Terrorism Law, (ii) engaged in or conspires
to engage in any transaction that evades or avoids, or has the purpose of
evading or avoiding, or attempts to violate, any of the prohibitions set forth
in any Anti-Terrorism Law, (iii) a Blocked Person, or is controlled
by a Blocked Person, (iv) acting or will act for or on behalf of a
Blocked Person, (v) associated with, or will become associated
with, a Blocked Person or (vi) is providing, or will provide,
material, financial or technological support or other services to or in support
of acts of terrorism of a Blocked Person. 
No Note Party nor, to the knowledge of any Note Party, any of its
Affiliates or agents acting or benefiting in any capacity in connection with
the transactions contemplated by this Agreement, (x) conducts any
business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any Blocked Person, or (y) deals
in, or otherwise engages in any transaction relating to, any property or
interest in property

 

9

 

blocked pursuant to Executive Order No. 13224,
any similar executive order or other Anti-Terrorism Law.

 

4.13                           Taxes.  All Federal, and all material
state and local tax returns, reports and statements required to be filed by or
on behalf of each Note Party have been filed with the appropriate Governmental
Authorities (unless such Note Party has timely requested an extension to file
or has received an approved extension to file such returns, reports and
statements) in all jurisdictions in which such returns, reports and statements
are required to be filed and, except to the extent subject to a Permitted
Contest, all Taxes (including real property Taxes) and other charges shown to
be due and payable on such returns, reports and statements have been timely
paid prior to the date on which any fine, penalty, interest, late charge or
loss may be added thereto for nonpayment thereof.  Except to the extent subject to a Permitted
Contest, all state and local sales and use Taxes required to be paid by each
Note Party in an aggregate amount in excess of $250,000 have been paid.  All Federal and state returns have been filed
by each Note Party for all periods for which returns were due with respect to
employee income tax withholding, social security and unemployment taxes, and,
except to the extent subject to a Permitted Contest, the amounts shown thereon
to be due and payable have been paid in full or adequate provisions therefor
have been made.

 

4.14                           Compliance with ERISA.

 

(a)                                  Each ERISA Plan (and the related trusts and
funding agreements) complies in form and in operation with, has been
administered in compliance with, and the terms of each ERISA Plan satisfy, the
applicable requirements of ERISA and the Code except to the extent any such
noncompliance could not reasonably be expected to have a Material Adverse
Effect.  Each ERISA Plan which is
intended to be qualified under Section 401(a) of the Code is so qualified,
and the United States Internal Revenue Service has issued a favorable opinion
or determination letter which is still in effect.  No Note Party has incurred liability for any
material excise tax under any of Sections 4971 through 5000 of the Code.

 

(b)                                 Except in each case to the extent that any of
the following has not and could not reasonably be expected to have a Material
Adverse Effect during the thirty-six (36) month period prior to the Closing
Date or the issuance and sale of any Note, (i) no steps have been
taken to terminate any Pension Plan and (ii) no contribution
failure has occurred with respect to any Pension Plan sufficient to give rise
to a Lien under Section 302(f) of ERISA. 
No condition exists or event or transaction has occurred with respect to
any Pension Plan which could reasonably be expected to result in the incurrence
by any Note Party of any liability, fine or penalty in excess of $325,000.  No Note Party has incurred liability to the
PBGC (other than for current premiums) with respect to any employee Pension
Plan in excess of $325,000.  Except in
each case to the extent that any of the following has not and could not
reasonably be expected to have a

 

10

 

Material Adverse Effect all contributions (if any)
have been made on a timely basis to any Multiemployer Plan that are required to
be made by any Note Party or any other member of the Controlled Group under the
terms of the plan or of any collective bargaining agreement or by applicable
Law; no Note Party nor any member of the Controlled Group has withdrawn or
partially withdrawn from any Multiemployer Plan, incurred any withdrawal
liability with respect to any such plan or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability from any such
plan, and no condition has occurred which, if continued, could reasonably be
expected to result in a withdrawal or partial withdrawal from any such plan,
and no Note Party nor any member of the Controlled Group has received any
notice that any Multiemployer Plan is in reorganization, that increased
contributions are reasonably expected to be required to avoid a reduction in
plan benefits or the imposition of any excise tax, that any such plan is or has
been funded at a rate less than that required under Section 412 of the
Code, that any such plan is or could reasonably be expected to be terminated,
or that any such plan is or could reasonably be expected to become insolvent.

 

4.15                           Brokers.  Except as set forth on Schedule 4.15,
and except for fees payable to any Purchaser, no broker, finder or other
intermediary has brought about the obtaining, making or closing of the
transactions contemplated by the Operative Documents, and no Note Party has or
will have any obligation to any Person in respect of any finder’s or brokerage
fees in connection herewith or therewith.

 

4.16                           Related Transactions.  The
transactions contemplated by the Senior Financing Documents to be consummated
on or prior to the date hereof have been so consummated (including without
limitation the disbursement and transfer of all funds in connection therewith)
in all material respects pursuant to the provisions of the applicable Operative
Documents, true and complete copies of which have been delivered to each
Purchaser, and in compliance with all applicable Law.

 

4.17                           Material Contracts. 
Except for the Operative Documents and the other agreements set forth on
Schedule 4.17 (collectively with the Operative Documents, the “Material
Contracts”), as of the Closing Date there are no (i) employment
agreements covering the management of any Note Party, (ii) collective
bargaining agreements or other labor agreements covering any employees of any
Note Party, (iii) agreements for managerial, consulting or similar
services to which any Note Party is a party or by which it is bound, (iv) agreements
regarding any Note Party, its assets or operations or any investment therein to
which any of its equityholders is a party or by which it is bound, (v) real
estate leases, Intellectual Property licenses or other lease or license
agreements to which any Note Party is a party, either as lessor or lessee, or
as licensor or licensee, or (vi) customer, distribution, marketing
or supply agreements to which any Note Party is a party, in each case with
respect to the preceding clauses (i), (iii), (iv), (v) and (vi) requiring
payment by or to any Note Party of more than $750,000 in any year, (vii) partnership
agreements to which any Note Party is a general partner or joint venture

 

11

 

agreements to which any Note Party is a party or (viii) any
other agreements or instruments to which any Note Party is a party, and the
breach, nonperformance or cancellation of which, or the failure of which to
renew, could reasonably be expected to have a Material Adverse Effect.  Schedule 4.17 sets forth, with
respect to each real estate lease agreement to which any Note Party is a party
as of the Closing Date, the address of the subject property and the annual
rental (or, where applicable, a general description of the method of computing
the annual rental).  The consummation of
the transactions contemplated by the Subordinated Note Documents and the other
Operative Documents will not give rise to a right of termination in favor of
any party to any Material Contract (other than any Note Party).

 

4.18                           Environmental Matters. 
Except in each case as set forth on Schedule 4.18:

 

(a)                                  no Hazardous Materials Contamination is
located on any properties now or previously owned, leased or operated by any
Note Party or has been released, deposited, discharged, placed or disposed of
at, on, under or near any of such properties in a manner that would require the
taking of any action under any Environmental Law, in each case that has given
rise to, or could reasonably be expected to give rise to, remediation costs and
expenses on the part of the Note Parties in excess of $250,000.  No portion of any such property is currently
being used, or has been used at any previous time, for the disposal, storage,
treatment, processing or other handling of Hazardous Materials in violation of
any Environmental Law nor is any such property affected by any Hazardous
Materials Contamination, except as could not be reasonably expected to give
rise to a Material Adverse Effect;

 

(b)                                 no written notice, notification, demand,
request for information, citation, summons, complaint or order has been issued,
no complaint has been filed, no penalty has been assessed and no investigation
or review is pending, or to any Specified Company’s knowledge, threatened by
any Governmental Authority or other Person with respect to any (i) alleged
violation by any Note Party of any Environmental Law, (ii) alleged
failure by any Note Party to have any Permits required in connection with the
conduct of its business or to comply with the terms and conditions thereof, (iii) any
generation, treatment, storage, recycling, transportation or disposal by any
Note Party of any Hazardous Materials or (iv) release of Hazardous
Materials, except in each case as could not be reasonably expected to give rise
to a Material Adverse Effect;

 

(c)                                  all oral or written notifications of a
release of Hazardous Materials required to be filed by any Note Party under any
applicable Environmental Law have been filed or are in the process of being
timely filed by the applicable Note Party, except where the failure to so file
could not be reasonably expected to give rise to a Material Adverse Effect;

 

12

 

(d)                                 no property now owned or leased by any Note
Party and, to the knowledge of any Specified Company, no such property
previously owned or leased by any Note Party, to which any Note Party has,
directly or indirectly, transported or arranged for the transportation of any
Hazardous Materials, is listed or, to any Specified Company’s knowledge,
proposed for listing, on the National Priorities List promulgated pursuant to CERCLA,
or CERCLIS (as defined in CERCLA) or any similar state list or is the subject
of Federal, state or local enforcement actions or, to the knowledge of any
Specified Company, other governmental investigations which could reasonably be
expected to lead to claims against any Note Party for clean-up costs, remedial
work, damage to natural resources or personal injury claims, including, but not
limited to, claims under CERCLA, except as could not be reasonably expected to
give rise to a Material Adverse Effect;

 

(e)                                  there are no underground storage tanks
located on any property owned or leased by any Note Party that are not properly
closed, registered or permitted under applicable Environmental Laws or that are
leaking or disposing of Hazardous Materials, except as could not be reasonably
expected to give rise to a Material Adverse Effect; and

 

(f)                                    there are no Liens (other than those
described in clause (n) of Section 8.2) under or pursuant to any
applicable Environmental Laws on any real property or other assets owned or
leased by any Note Party, and no actions by any Governmental Authority have
been taken or, to the knowledge of any Specified Company, are in process which
could subject any of such properties or assets to such Liens.

 

4.19                           Intellectual Property.  Each
Note Party owns, is licensed to use or otherwise has the right to use, all
Intellectual Property that is material to the condition (financial or other),
business or operations of such Note Party. 
All such Intellectual Property existing as of the Closing Date, owned by
a Note Party and registered with any United States or foreign Governmental
Authority is set forth on Schedule 4.19.  All Intellectual Property owned by each Note
Party and material to is business is fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions for
such registrations, filings or issuances. 
To any Specified Company’s knowledge, (a) each Note Party
conducts its business without infringement or claim of infringement of any
Intellectual Property rights of others and (b) there is no
infringement or claim of infringement by others of any Intellectual Property
rights owned by any Note Party, which infringement in (a) or (b) or claim of
infringement could reasonably be expected to have a Material Adverse Effect.

 

4.20                           Real Property Interests. 
Except for leasehold interests disclosed on Schedule 4.17,
and except for the ownership or other interests set forth on Schedule 4.20,

 

13

 

no Note Party has, as of the Closing Date, any
ownership, leasehold or other interest in real property.  Schedule 4.20 sets forth, with
respect to each parcel of real estate owned by any Note Party as of the Closing
Date, the address and legal description of such parcel.

 

4.21                           Solvency.  Each Specified Company and
each additional Note Party is Solvent.

 

4.22                           Full Disclosure. 
Other than with respect to financial projections, with respect to which
this sentence is inapplicable, none of the written information (financial or
otherwise) furnished by or on behalf of any Note Party and delivered to any
Purchaser in connection with the consummation of the transactions contemplated
by the Operative Documents taken as a whole, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.  All budgets and financial projections
delivered to any Purchaser have been and will be prepared on the basis of the
assumptions believed by Specified Companies at the time made to be reasonable
in light of the facts and circumstances known by management at the time
made.  Such budgets and projections at
the time made were believed by Specified Companies to be reasonable in light of
the facts and circumstances known to management at the time made; provided
that Specified Companies can give no assurance that such budgets and
projections will be attained and actual results may differ materially from such
budgets or projections.

 

4.23                           Senior Financing Documents.  The
Senior Financing Documents (including all exhibits, annexes and schedules
thereto) delivered or disclosed by the Company to the Purchasers pursuant to Section 3.1(b)
constitute the only agreements related to the transactions contemplated
thereby, and no amendments, modifications and supplements thereto, and no
waiver of any rights thereunder by the Note Parties, nor of any condition to
the obligations of such Persons under any thereof, has been made, except as
disclosed to each of the Purchasers in writing prior to the Closing.

 

4.24                           Private Offering.  No
Note Party nor anyone acting on the behalf of any Note Party has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or otherwise approached or negotiated in respect thereof
with, any person other than the Initial Purchasers and not more than 25 other
institutional investors, each of which has been offered the Notes at a private
sale for investment.  No Note Party nor
anyone acting on the behalf of any Note Party has taken, or will take, any
action that would subject the issuance or sale of the Notes to the registration
requirements of Section 5 of the Securities Act.

 

14

 

Article V

Representations and Warranties of the Purchasers

 

Each
Purchaser, severally for itself only, hereby represents and warrants that:

 

5.1                                 Such Purchaser is acquiring the Notes for its
own account (or for the account of funds that such Purchaser manages), and not
as nominee or agent, for the purpose of investment and not with a view to
distribution in violation of the Securities Act, without prejudice, however, to
each Purchaser’s right at all times to sell or otherwise dispose of all or any
part of such Notes pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from such registration under the
Securities Act or pursuant to a pledge by a Purchaser which is a fund of all or
any portion of its rights under this Agreement to its trustee in support of its
obligations to its trustee; subject, nevertheless, to the condition that the
disposition of the property of such Purchaser shall at all times be within its
control.

 

5.2                                 Such Purchaser understands that it must bear
the economic risk of its investment for an indefinite period of time because
the Notes will not be registered under the Securities Act or any applicable
state securities laws and may not be resold unless subsequently registered
under the Securities Act or unless an exemption from such registration is
available.  Such Purchaser acknowledges
that, in issuing the Notes, the Company is relying on the representations and
warranties of such Purchaser in this Article V.

 

5.3                                 Such Purchaser represents that it is a
sophisticated institutional investor and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of its investment in the Notes. 
Such Purchaser further represents that it is an “accredited investor” as
such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act with respect to the purchase
of the Notes.

 

5.4                                 Such Purchaser hereby acknowledges that the
Notes (unless such a Securities Act legend is no longer required in the opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to the
Company, it being agreed that Debevoise & Plimpton LLP shall be
satisfactory) shall bear a legend substantially in the following form (in
addition to any other legend required by the Operative Documents):

 

THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF SUCH
SECURITIES ACT OR APPLICABLE

 

15

 

STATE
SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.

 

The
acquisition by such Purchaser of the Notes shall constitute a confirmation by
it of the foregoing representations.

 

5.5                                 Source of Funds.  Each
Purchaser represents that at least one of the following statements is an
accurate representation as to each source of funds (a “Source”) to be
used by such Purchaser to pay the purchase price of the Notes to be purchased
by such Purchaser hereunder:

 

(a)                                  the Source is an “insurance company general
account” within the meaning of Department of Labor Prohibited Transaction
Exemption (“PTE”) 95-60 (issued
July 12, 1995), and there is no employee benefit plan, treating as a
single plan, all plans maintained by the same employer or employee
organization, with respect to which the amount of the general account reserves
and liabilities for all contracts held by or on behalf of such plan exceeds ten
percent (10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in the
NAIC Annual Statement filed with your state of domicile; or

 

(b)                                 the Source is either (i) an
insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990) or (ii) a
bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except
as you have disclosed to the Company in writing pursuant to this Section
5.5(b), no employee benefit plan or group of plans maintained by the same
employer or employee organization beneficially owns more than ten percent (10%)
of all assets allocated to such pooled separate account or collective
investment fund; or

 

(c)                                  the Source constitutes assets of an “investment
fund” (within the meaning of Part V of the QPAM Exemption) managed by a “qualified
professional asset manager” or “QPAM”
(within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s
assets that are included in such investment fund, when combined with the assets
of all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of the
QPAM Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed twenty percent (20%) of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM
Exemption are satisfied, neither the QPAM nor a person controlling or
controlled by the QPAM (applying the definition of “control” in
Section V(e) of the QPAM Exemption) owns a five percent (5%) or more
interest in the Company and (i) the identity of such QPAM and (ii) the

 

16

 

names
of all employee benefit plans whose assets are included in such investment fund
have been disclosed to the Company in writing pursuant to this Section
5.5(c); or

 

(d)                                 the Source is a governmental plan; or

 

(e)                                  the Source is one or more employee benefit
plans or a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in writing
pursuant to this Section 5.5(e); or

 

(f)                                    the Source does not include assets of any
employee benefit plan, other than a plan exempt from the coverage of ERISA.

 

As
used in this Section 5.5, the terms “employee benefit plan”, “governmental
plan”, and “separate account” shall have the respective meanings assigned to
such terms in Section 3 of
ERISA.

 

Article VI

Terms of Notes

 

6.1                                 Interest.

 

(a)                                  Interest Rate; Payment.  The
Notes shall bear interest (based on a 360-day year of twelve 30-day
months) on the unpaid principal amount thereof until due at the rate of
fourteen percent (14%) per annum, of which (i) at least twelve
percent (12%) per annum shall be payable in cash quarterly in arrears on each
Quarterly Payment Date in each year, commencing with the next Quarterly Payment
Date following the Closing Date and (ii) two percent (2%) per annum
may, at the sole option of the Company, (x) be added to the
principal amount of the Notes on each Quarterly Payment Date in each year or, (y) at
the request of a Purchaser, be paid by the issuance of additional Notes on any
Quarterly Payment Date.

 

(b)                                 Default Rate of Interest. 
During the continuance of an Event of Default, and upon request by the
Required Holders, principal and, to the extent permitted by law, overdue
interest in respect of the Notes shall, in each case, bear interest from the
occurrence of such Event of Default, payable on demand in cash, at a rate of
two percent (2%) per annum higher than the rate of interest otherwise
applicable hereunder, compounded quarterly.

 

(c)                                  Maximum Legal Rate of Interest. 
Nothing in this Agreement or in the Notes shall require the Company to
pay interest at a rate in excess of the highest rate permitted by Applicable
Law.

 

17

 

6.2                                 Redemption; Repurchase.

 

(a)                                  Redemption at Maturity.  The
Notes shall be payable in full on February 29, 2012 (the “Maturity Date”).  On the Maturity Date or upon any earlier
acceleration of the maturity of the Notes, the Company shall redeem the Notes
by paying the principal amount of the Notes then outstanding (plus any
applicable premium) together with all accrued and unpaid interest and fees
thereon.  No redemption of less than all
of the Notes shall affect the obligation of the Company to make the redemption
required by this subsection.

 

(b)                                 Voluntary Redemptions.

 

(i)                                     The Company shall have the right at any time
after the Closing Date, upon not less than ten (10) Business Days’ prior
written notice sent to each Purchaser, to redeem the Notes in whole or in part,
in an amount specified in such notice, by payment of the principal amount of
the Notes (or portion thereof in a minimum amount of $2,000,000 and
integral multiples of $250,000 in
excess of such amount) to be redeemed, plus accrued and unpaid interest and
fees thereon through the date of such redemption, plus a premium equal to the
applicable percentage set forth below opposite the period in which such
redemption is to take place multiplied by the principal amount to be redeemed,
determined as follows (such percentage, the “Applicable Percentage”, and
such premium, the “Applicable Premium”):

 

	
  Prepayment Year

  	
   

  	
  Applicable Percentage

  	
   

  
	
  12-Month Period Ending August 29, 2006

  	
   

  	
  3

  	
  %

  
	
  12-Month Period Ending August 29, 2007

  	
   

  	
  2

  	
  %

  
	
  12-Month Period Ending August 29, 2008

  	
   

  	
  1

  	
  %

  
	
  12-Month Period Ending August 29, 2009
  and thereafter

  	
   

  	
  0

  	
  %

  

 

(ii)                                  Once a notice has been delivered pursuant to
this Section 6.2(b), the aggregate principal amount of the Notes to
be redeemed stated in such notice, together with the accrued interest thereon
and the Applicable Premium, shall become due and payable on the payment date
specified therein.

 

(c)                                  Redemption or Offer to Purchase In Connection
With Change of Control.

 

(i)                                     Subject to the provisions of the
Subordination Agreement, not less than fifteen (15) nor more than sixty (60) days prior to the occurrence of a
Change of Control, the Company shall send to each Purchaser written notice
setting forth in reasonable detail the facts and circumstances underlying such
Change of Control, including the date from which such Change of Control will
have effect.

 

18

 

Pursuant
to such notice, the Company shall make an irrevocable offer to repurchase all,
but not less than all, of the Notes held by such Purchaser, at a purchase price
equal to the aggregate principal amount of such Notes to be so repurchased,
plus all accrued and unpaid interest on the amount so repurchased through the
date of repurchase, plus a premium equal to the applicable percentage
multiplied by the principal amount to be repurchased (or redeemed pursuant to Section 6.2(c)(ii),
as the case may be), determined in accordance with the table below (such
percentage, the “Change of Control Applicable Percentage”, and such
premium, the “Change of Control Applicable Premium”), on a date to be
specified by such Purchaser, which date shall be prior to, or simultaneous
with, the occurrence of such Change of Control. 
Such offer may be contingent upon the occurrence of the Change of
Control.

 

	
  Period

  	
   

  	
  Change of Control

  Applicable Percentage

  	
   

  
	
  12-Month Period Ending August 29, 2006

  	
   

  	
  3

  	
  %

  
	
  12-Month Period Ending August 29, 2007

  	
   

  	
  2

  	
  %

  
	
  12-Month Period Ending August 29, 2008

  	
   

  	
  1

  	
  %

  
	
  12-Month Period Ending August 29, 2009
  and thereafter

  	
   

  	
  0

  	
  %

  

 

Following
receipt of any offer to repurchase Notes under this Section 6.2(c)(i),
each Purchaser shall advise the Company, by written notice, within ten
(10) days after receipt of such offer, as to whether it desires to sell
all or any portion of the Notes held by it, specifying the principal amount of
Notes to be sold by it and the date on which such sale is to occur.  If a Purchaser accepts such offer but does
not specify an amount it wishes to receive, it will be deemed to have elected
to sell all of the Notes held by it.  If
a Purchaser fails to respond to such offer by the Company within ten
(10) days after receipt thereof, such Purchaser shall be deemed to have
accepted the offer contained therein, with the repurchase to be consummated on
the date of occurrence of such Change of Control.

 

(ii)                                  Upon the occurrence of a Change of Control,
the Company may redeem all, but not less than all, of the Notes (which remain
outstanding following the consummation of the offer to repurchase described in Section 6.2(c)(i)
above), by payment of the principal amount of the Notes, plus accrued and
unpaid interest thereon to the date of such redemption, plus the Change of
Control Applicable Premium.

 

(d)                                 Mandatory Redemptions.  To
the extent not applied to prepay Senior Debt under the Senior Credit Agreement
in (i) a prepayment of the term loans thereunder or (ii) a
prepayment that results in, or is made concurrently with, a permanent reduction
in

 

19

 

the commitments thereunder in the amount of such
prepayment, the Company shall make the following redemptions (the “Mandatory
Redemptions,” and each a “Mandatory Redemption”) of the Notes
outstanding at the time of the occurrence of any of the following events in the
following amounts:

 

(i)                                     Major Casualty Proceeds. 
Promptly after the date on which any Note Party receives any Major
Casualty Proceeds, an amount equal to one hundred percent (100%) of the Net
Cash Proceeds of such Major Casualty Proceeds; provided, that, so long
as no Event of Default under Section 10.1 or Section 10.2 as
a result of a violation of Article IX has occurred and is continuing,
the recipient of any Major Casualty Proceeds may reinvest (or enter into a
binding commitment to reinvest) the amount of such Major Casualty Proceeds
within one hundred eighty (180) days, in investments in the same line of
business as the Note Parties; provided, that the aggregate amount which
may be reinvested by the applicable Specified Company and its Subsidiaries
pursuant to the preceding proviso may not exceed $2,000,000 in any Fiscal Year;
provided, further, that if the applicable Note Party does not
intend to fully reinvest or commit to reinvest such Major Casualty Proceeds, or
if the time period set forth in this sentence expires without such Note Party
having reinvested or committed to reinvest such Major Casualty Proceeds,
Specified Companies shall redeem the Notes in an amount equal to the Net Cash
Proceeds of such Major Casualty Proceeds (to the extent not reinvested,
committed to be reinvested or intended to be reinvested, as applicable within
such time period).

 

(ii)                                  Asset Dispositions.  Upon
receipt by any Note Party of the proceeds of any Asset Disposition, an amount
equal to one hundred percent (100%) of the Net Cash Proceeds of such Asset
Disposition; provided, that no prepayment shall be required pursuant to
this Section 6.2(ii) unless and until the aggregate Net Cash Proceeds
received during any Fiscal Year from Asset Dispositions exceeds $2,000,000 (in
which case all Net Cash Proceeds in excess of such amount shall be used to make
prepayments pursuant to this Section 6.2(d)(ii)), and provided,
that, so long as no Default or
Event of Default has occurred and is continuing, the recipient of such Net Cash
Proceeds may reinvest (or enter into a binding commitment to reinvest) the
amount of such Net Cash Proceeds within one hundred eighty (180) days, in
investments in the same line of business as the Note Parties.  If the applicable Note Party does not intend
to so reinvest or commit to reinvest such Net Cash Proceeds, or if the time
period set forth in the immediately preceding sentence expires without such
Note Party having reinvested or committed to reinvest such Net Cash Proceeds,
Company shall redeem the Notes in an amount equal to such Net Cash Proceeds.

 

(iii)                               Extraordinary Receipts.  Upon
receipt by any Note Party of any Extraordinary Receipts (exclusive of the first
$250,000 of Extraordinary Receipts

 

20

 

in
any Fiscal Year), an amount equal to one hundred percent (100%) of such
Extraordinary Receipts.

 

(iv)                              Prior written notice of any Mandatory
Redemption shall be delivered to each Purchaser at least three (3) Business
Days prior to the date of such redemption.

 

(v)                                 Any payment in respect of a Mandatory
Redemption may be declined by any Purchaser without prejudice to such Purchaser’s
rights hereunder to accept or decline any future payments in respect of
Mandatory Redemptions.  Any Purchaser
that chooses to decline payment in respect of a Mandatory Redemption shall
provide written notice thereof to the Company not less than one Business Day
prior to the date of such redemption, provided that the Company shall
have complied with Section 6.2.(d)(iv).  The Company shall retain the amount of any
such declined payment.

 

(vi)                              Any Mandatory Redemption to be made pursuant
to Section 6.2.(d) shall be made at a redemption price equal to the
principal amount of the Notes so redeemed, plus all accrued and unpaid interest
and fees on the amount so redeemed through the date of such redemption.

 

(e)                                  No Other Redemption or Repurchase;
Cancellation.  Except for payments of principal, repurchases
or redemptions made in accordance with Section 6.1(a) or this Section 6.2:  (i) the Company may not make any
repurchase, redemption or other payment of principal in respect of the Notes
and (ii) the Company may not, and will not permit any Subsidiary or
Affiliate of any Note Party to, directly or indirectly, repurchase or otherwise
acquire or make any offer to repurchase or otherwise acquire any Notes.  The Company will promptly cancel all Notes
acquired by it or any of its Subsidiaries or Affiliates pursuant to any
purchase, redemption, prepayment or tender for the Notes pursuant to any
provision of this Agreement or otherwise, and no Notes may be issued in
substitution or exchange for any such Notes.

 

6.3                                 Payments.  Payments of principal,
interest and premium, if any, on the Notes shall be made (i) without
setoff or counterclaim, (ii) directly by wire transfer to an
account designated in writing by each Purchaser and (iii) without
any presentment or notation of payment. 
Any payment to be made to the Purchasers hereunder shall be deemed to
have been made on the Business Day that such payment actually becomes available
at such Purchaser’s bank prior to the close of business of such bank; provided,
that interest for one day at the interest rate specified in Section 6.1(a) shall be due on the amount of any such
payment that actually becomes available to such Purchaser at such Purchaser’s bank
after 12:00 noon (New York City
time).  Whenever any payment to be made
shall be due on a day which 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

 

21

 

included in the computation of payment of interest
due.  Each redemption of Notes pursuant
to Sections 6.2(a), 6.2(b) and 6.2(d) and, except as
otherwise provided herein, all other payments of principal shall be made pro rata, based on the principal amount then
outstanding and held by each Purchaser who is the holder thereof.

 

6.4                                 Certain Taxes.

 

(a)                                  Any and all payments of principal, interest
and premium, if any, on the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholding or similar
charges, and all liabilities with respect thereto, excluding, in the
case of each Purchaser, taxes imposed on or measured by its net income,
franchise taxes, branch profits taxes, taxes on doing business or taxes
measured by or imposed upon the overall capital or net worth of any Purchaser
or its applicable lending office, or any branch or affiliate thereof, in each
case imposed by the jurisdiction under the laws of which such Purchaser,
applicable lending office, branch or affiliate is organized or is located, or
any nation within which such jurisdiction is located or any political
subdivision thereof (all such non-excluded taxes, duties, levies, imposts,
deductions, assessments, fees, withholding or similar charges, and liabilities
being hereinafter referred to as “Taxes”).  If any Note Party shall be required by any
Applicable Law to deduct any Taxes from or in respect of any sum payable under,
or in respect of, any Note, (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 6.4), the
relevant Purchaser receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the relevant Note Party
shall make such deductions, (iii) such Note Party shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with Applicable Law and (iv) within thirty (30) days
after the date of such payment, such Note Party shall furnish to the relevant
Purchaser the original or a certified copy of a receipt evidencing payment thereof.

 

(b)                                 In addition, the Note Parties agree to pay
any and all present or future stamp, court or documentary taxes and any other
excise or property taxes or charges or similar levies which arise from any
payment made under the Notes or any Subordinated Note Document or from the
execution, delivery, performance, enforcement or registration of, or otherwise
with respect to, the Notes or any Subordinated Note Document (hereinafter
referred to as “Other Taxes”).

 

(c)                                  The Note Parties agree to indemnify each Purchaser
for (i) the full amount of Taxes and Other Taxes (including any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 6.4) paid by such Purchaser and (ii) any
liability (including additions to tax, penalties, interest and expenses)
arising therefrom or with respect thereto, in each case, whether or not such
Taxes or Other Taxes

 

22

 

were correctly or legally imposed or asserted by the
relevant Governmental Authority.  Payment
under this Section 6.4(c) shall be made within thirty (30) days
after the date the relevant Purchaser makes a demand therefor.  Such demand shall be accompanied by a
certificate in reasonable detail as to the amount (and calculation) of any
Non-Excluded Taxes or Other Taxes, plus any incremental taxes, interest or
penalties.

 

(d)                                 If a Purchaser determines in its sole
judgment that it has received a refund in respect of any Taxes or Other Taxes
which have been paid or indemnified by a Note Party or with respect to which a
Note Party has paid an additional amount pursuant to this Section 6.4,
it shall within thirty (30) days from the date of such receipt pay over such
refund to the relevant Note Party (or Parties) (but only to the extent of
indemnity payments made, or additional amounts paid, by the Note Party with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of such Purchaser and without interest (other than
interest paid by the relevant Governmental Authority with respect to such
refund); provided, however, that the relevant Note Party (or
Parties), upon the request of the applicable Purchaser, agrees to repay the
amount paid over to such Note Party (plus penalties, interest and other charges
and any costs and expenses paid or payable by such Purchaser in connection
therewith) to such Purchaser in the event such Purchaser is required to repay
such refund to such Governmental Authority. 
Notwithstanding anything else to the contrary in this Section 6.4(d),
(i) any Purchaser may determine, in its sole discretion consistent
with its internal policies, whether or not to seek a Tax Refund and (ii) no
Purchaser shall be required to disclose any confidential information to the
Company (including its tax returns and other tax information).

 

(e)                                  Any Purchaser claiming any additional amounts
payable pursuant to this Section 6.4 shall use commercially reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to take any reasonable action that would reduce the amount of any
such additional amounts that may thereafter accrue and would not, in the sole
judgment of such Purchaser, be otherwise disadvantageous to such Purchaser.

 

(f)                                    If a Note Party makes a payment hereunder to
a Purchaser that is a partnership (or other fiscally transparent entity) for
U.S. federal income tax purposes (a “Flow-Through Purchaser”) and, in
connection therewith, such Flow-Through Purchaser shall be required to deduct
or withhold any Taxes imposed by any taxation authority in the United States
(or any political authority thereof or therein) with respect to the portion of
such payment which is allocable to a non-U.S. partner or member of such
Flow-Through Purchaser (other than any withholding under section 1446 of the Code), such Note Party shall
indemnify, reimburse and hold harmless such Flow-Through Purchaser for any such
deduction or withholding (including any deduction or withholding required with
respect to payments made under this Section 6.4(f)); provided, however,
that a Note Party shall be required to make payments under this Section
6.4(f) only with respect to Taxes imposed as a result of any change in
Applicable Law, treaty or governmental rule,

 

23

 

regulation or order, or any change in the
interpretation, administration or application thereof occurring after the date
hereof, and such Note Party shall not be required to make any such payments to
the extent that such Taxes would not have been imposed but for the failure by
the non-U.S. partner or member to deliver to the Flow-Through Purchaser any
form or certification which such partner or member is legally entitled to
deliver and which is required by Applicable Law to obtain an exemption from, or
reduced rate of, withholding tax.

 

(g)                                 (i)                                     Each Purchaser that is not a “United States
person” within the meaning of Section 7701(a)(30) of the Code (a “Foreign
Purchaser”) shall deliver to each Note Party on the date hereof, or upon
accepting an assignment of an interest in a Note, two duly signed completed
copies of either IRS Form W-8BEN or any successor thereto (relating to such
Foreign Purchaser and entitling it to an exemption from, or reduction of,
withholding tax on all payments to be made to such Foreign Purchaser by the
Note Parties on or with respect to the Notes) or IRS Form W-8ECI or any
successor thereto (relating to all payments to be made to such Foreign
Purchaser by the Note Parties) or such other evidence satisfactory to the Note
Parties that such Foreign Purchaser is entitled to an exemption from, or
reduction of, United States withholding tax, including any exemption pursuant
to Section 881(c) of the Code; provided, however, that if
any Foreign Purchaser provides an IRS Form W-8-BEN claiming a “portfolio
interest” exemption from United States withholding taxes pursuant to Code
Section 871(h) or Code Section 881(c), then such Foreign Purchaser
also shall provide each of the Note Parties with a certificate representing
that it (w) is not a “bank” within the meaning of Section 581 of the Code, (x) has not
been, on or prior to the date hereof, subject to any regulatory or other legal
requirements as a bank in any jurisdiction in which it transacts business and
has not been, on or prior to the date hereof, treated as a bank for purposes of
any tax, securities law or other filing or submission made to any Governmental
Authority, any application made to a rating agency or any qualification for
exemption from any tax, securities laws or other legal requirements, (y) does
not currently own, or own unrestricted options to purchase, ten percent (10%)
or more of the Capital Stock of the Company or any other relevant Note Party
and (z) is not a controlled foreign corporation related to the
Company or any other relevant Note Party (within the meaning of
Section 864(d)(4) of the Code). 
Thereafter and from time to time, each such Foreign Purchaser shall (A) upon
reasonable request therefor by the Note Parties, promptly submit to the Note
Parties such additional duly completed and signed copies of one of such forms
(or such successor forms as shall be adopted from time to time by the relevant
United States taxing authorities) as may then be available under then current
United States laws and regulations to avoid, or such evidence as is reasonably
satisfactory to the Note Parties of any available exemption from or reduction
of, United States withholding taxes in respect of all payments to be made to
such Foreign Purchaser by a Note Party under, or in respect of, any Note and (B) promptly
notify the Note Parties of any change in circumstances which would modify or
render invalid any claimed exemption or reduction.

 

24

 

(ii)                                  None of the Note Parties shall be required to
pay any additional amount to (or indemnify) any Foreign Purchaser under this Section 6.4
(A) to the extent that the obligation to withhold such
amounts with respect to Taxes existed on the date that the Foreign Purchaser
became a party to this Agreement or (B) if such Foreign Purchaser
shall have failed to satisfy the foregoing provisions of this Section 6.4(g),
provided that if such Foreign Purchaser shall have satisfied the
requirements of this Section 6.4(g) on the date such Foreign
Purchaser became a Foreign Purchaser or ceased to act for its own account with
respect to any payment due under, or in respect of, a Note, nothing in this Section 6.4(g)
shall relieve the Note Parties of their obligation to pay any amounts pursuant
to this Section 6.4 with respect to Taxes imposed as a
result of any change in Applicable Law, treaty or governmental rule, regulation
or order, or any change in the interpretation, administration or application
thereof; provided  further, that nothing in this Section 6.4(g)(ii)
shall relieve the Note Parties of their obligation to pay amounts pursuant to
this Section 6.4 to (x) a Foreign Purchaser
that acquires an interest in a Note by way of assignment, to the extent that
such amounts do not exceed the amounts that the assigning Foreign Purchaser was
entitled to receive under this Section 6.4 immediately
prior to such assignment and (y) to a Foreign Purchaser that ceases
to act for its own account, to the extent that such amounts do not exceed the
amounts that such Foreign Purchaser was entitled to receive under this Section 6.4 immediately prior to ceasing to act for its own account.

 

(iii)                               The Note Parties may withhold any taxes
required to be deducted and withheld from any payment under, or in respect of, a Note with respect to which
the Note Parties are not required to pay additional amounts under this Section 6.4 and such withheld amounts shall be deemed to have been paid to the
relevant Purchaser.

 

(h)                                 Each Purchaser that is a “United States
person” within the meaning of Section 7701(a)(30) of the Code shall
deliver to the Note Parties two duly signed completed copies of IRS Form
W-9.  If such Purchaser fails to deliver
such forms, then the Note Parties may withhold from any payment to such
Purchaser an amount equivalent to the applicable back-up withholding tax
imposed by the Code, without reduction.

 

6.5                                 Transfer and Exchange of Notes.  The
Company shall keep a register which shall provide for the registration of the
Notes and the registration of transfers of Notes (the “Note Register”).  The principal amount of and stated rate of
interest on the Notes, the names and addresses of the Purchasers holding the
Notes, the transfer of the Notes, and the names and addresses of the
transferees of the Notes shall be registered in the Note Register.  No Note may be transferred unless such
transfer is recorded in the Note Register, and the transferee thereof has
assumed such Purchaser’s rights and obligations hereunder by executing an
Assignment and Acceptance in substantially the form of Exhibit D.  Each such transfer shall be in a minimum
amount of $2,500,000.  The Purchaser
holding any Note or Notes may, prior to maturity or prepayment thereof,
surrender such Note or Notes at the principal office of the Company for
transfer or

 

25

 

exchange.  Any
Purchaser desiring to transfer or exchange any Note shall first notify the
Company in writing at least three (3) Business Days in advance of such transfer
or exchange; provided no such notice will be required (x) during
the continuation of any Event of Default, (y) with respect to any
transfer to any subsidiary of any Purchaser or (z) with respect to any
pledge to the holders of any indebtedness of any Purchaser or any transfer upon
realization upon such pledge.  Within a
reasonable time after such notice to the Company from a Purchaser of its
intention to make such transfer or exchange and without expense (other than
transfer taxes, if any) to such Purchaser, the Company shall:

 

(a)                                  acknowledge such transfer or exchange by
executing an Assignment and Acceptance;

 

(b)                                 record such transfer or exchange in the Note
Register, effective as of the date of such Assignment and Acceptance; and

 

(c)                                  issue in exchange therefor another Note or
Notes, in denominations of at least $2,000,000
and in multiples of $250,000 in
excess of such minimum denomination (except (x) in the case of a
Note for the aggregate amount or the balance of the Note or Notes so
transferred or (y) upon the occurrence and during the continuation
of a Default or Event of Default, in which case there shall be no minimum
denomination and Notes shall not be required to be in multiples of $250,000)
all as requested by the Purchaser, for the same aggregate principal amount, as
of the date of such issuance, as the unpaid principal amount of the Note or
Notes so surrendered, and having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note or Notes so surrendered (provided, that no minimum shall apply
to a liquidating distribution of Notes to investors in a Purchaser and any
Notes so distributed may be subsequently transferred by such investor and its
successors in the original denomination thereof without restriction under this
sentence).  Each new Note shall be made
payable to such Person or Persons, or assigns, as the Purchaser holding such
surrendered Note or Notes may designate, and such transfer or exchange shall be
made in such a manner that no gain or loss of principal or interest shall
result therefrom.  The Company shall have
no obligation hereunder or under any Note to any Person other than the
Purchaser that is the registered holder of each such Note.

 

6.6                                 Replacement of Notes.  Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of any Note and, if requested in the case of any such
loss, theft or destruction, upon delivery of an indemnity bond or other
agreement or security reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon surrender and cancellation of such Note, the
Company will issue a new Note, of like tenor and amount and dated the date to
which interest has been paid, in lieu of such lost, stolen, destroyed or mutilated
Note; provided, however, that if any Note

 

26

 

held by a Purchaser that is an institutional
investor is lost, stolen or destroyed, the affidavit of an authorized partner
or officer of the Purchaser setting forth the circumstances with respect to
such loss, theft or destruction shall be accepted as satisfactory evidence
thereof, and no indemnification bond or other security shall be required as a
condition to the execution and delivery by the Company of a new Note in
replacement of such lost, stolen or destroyed Note, other than such Purchaser’s
written agreement to indemnify the Company.

 

Article VII

Affirmative Covenants

 

The
Note Parties jointly and severally covenant and agree that, for so long as any
of the Notes is outstanding, each of the Note Parties shall, and shall cause
each of its Subsidiaries to, observe and abide by each of the covenants and
agreements contained in this Article VII.

 

7.1                                 Financial Statements and Other Reports.  Each
Specified Company will, and will cause each other Loan Party to, maintain a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in accordance
with GAAP and to provide the information required to be delivered to the
Purchasers hereunder, and will deliver to each Purchaser:

 

(a)                                  within thirty (30) days after the end of each
month (forty-five (45) days in the case of the months of March, June, September
and December), a consolidated and consolidating balance sheet of Company and
its Consolidated Subsidiaries as at the end of such month and the related
consolidated and consolidating statements of operations and cash flows for such
month, and for the portion of the Fiscal Year ended at the end of such month
setting forth in each case in comparative form the figures for the
corresponding periods of the previous Fiscal Year and the figures for such
month and for such portion of the Fiscal Year ended at the end of such month
set forth in the annual operating and Capital Expenditure budgets and cash flow
forecast delivered pursuant to Section 7.1(n), all in reasonable
detail and certified by a Responsible Officer of Company as fairly presenting
in all material respects the financial condition and results of operations of
Company and its Consolidated Subsidiaries and as having been prepared in
accordance with GAAP applied on a basis consistent with the audited financial
statements of Company, subject to changes resulting from audit and normal year-end
adjustments and the absence of footnote disclosures;

 

(b)                                 [Intentionally Omitted];

 

(c)                                  within ninety (90) days after the end of each
Fiscal Year, a consolidated and consolidating balance sheet of Company and its
Consolidated

 

27

 

Subsidiaries
as of the end of such Fiscal Year and the related consolidated and
consolidating statements of operations, stockholders’ equity (or the comparable
item, if Company is not a corporation) and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year and the figures for such Fiscal Year set forth in the annual
operating and Capital Expenditure budgets and cash flow forecast delivered
pursuant to Section 7.1(n), certified (solely with respect to such
consolidated statements) without qualification (including with respect to the
scope of audit) or exception by independent public accountants of nationally
recognized standing and acceptable to the Required Holders;

 

(d)                                 together with each delivery of financial
statements pursuant to Sections 7.1(a) and 7.1(c) a
Compliance Certificate;

 

(e)                                  [Intentionally Omitted];

 

(f)                                    promptly upon receipt thereof, copies of all
reports submitted to any Note Party by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of any Note Party made by such accountants, including any comment
letter submitted by such accountants to management in connection with any
audit;

 

(g)                                 promptly upon their being entered into,
copies of all Swap Contracts entered into by any Note Party;

 

(h)                                 [Intentionally Omitted];

 

(i)                                     promptly upon any officer of any Note Party
obtaining knowledge (i) of the existence of any Event of Default or
Default, or becoming aware that the holder of any Debt of any Note Party in
excess of $500,000 has given any notice or taken any other action with respect
to a claimed default thereunder, (ii) of any change in any Note
Party’s certified accountant or any resignation, or decision not to stand for
re-election, by any independent member of any Note Party’s board of directors
(or comparable body), (iii) that any Person has given any notice to
any Note Party or taken any other action with respect to a claimed default under
any Material Contract, (iv) of the institution of any Litigation
seeking equitable relief or involving an alleged liability of any Note Party
equal to or greater than $500,000 or any adverse determination in any
Litigation involving equitable relief or a potential liability of any Note
Party equal to or greater than $500,000 or (v) any loss, damage or
destruction of any Collateral having a fair market value in excess of $500,000,
whether or not covered by insurance, a certificate of a Responsible Officer of
Company specifying the nature and period of existence of any such condition or
event, or specifying the notice given or action taken by such

 

28

 

holder
or Person and the nature of such claimed default (including any Event of
Default or Default), event or condition, and what action the applicable Note
Party has taken, is taking or proposes to take with respect thereto;

 

(j)                                     promptly upon any officer of any Note Party
obtaining knowledge of (i) the institution of any steps by any
member of the Controlled Group or any other Person to terminate any Pension
Plan, (ii) the failure of any member of the Controlled Group to
make a required contribution on a timely basis to any Pension Plan or to any
Multiemployer Plan, (iii) the taking of any action with respect to
a Pension Plan which could result in the requirement that any Specified Company
or any Subsidiary furnish a bond or other security to the PBGC or such Pension
Plan, (iv) the occurrence of a reportable event under
Section 4043 of ERISA (for which a reporting requirement is not waived)
with respect to any Pension Plan, (v) the occurrence of any event
with respect to any ERISA Plan, Pension Plan or Multiemployer Plan which could
reasonably be expected to result in the incurrence by any member of the
Controlled Group of any material liability, fine or penalty (including any
claim or demand for withdrawal liability or partial withdrawal from any
Multiemployer Plan), (vi) any material increase in the liability or
contingent liability of any Specified Company or any Subsidiary with respect to
any post-retirement welfare plan benefit or (vii) the receipt by
any Note Party of any notice that any Multiemployer Plan is in reorganization,
that increased contributions could reasonably be expected to be required to
avoid a reduction in plan benefits or the imposition of an excise tax, that any
such plan is or has been funded at a rate less than that required under
Section 412 of the Code, that any such plan is or could reasonably be
expected to be terminated, or that any such plan is or could reasonably be
expected to become insolvent, a certificate of a Responsible Officer of such
Note Party specifying the nature and period of existence of any such condition
or event, or specifying the notice given or action taken by such holder or
Person, and what action the applicable Note Party has taken, is taking or
proposed to take with respect thereto;

 

(k)                                  promptly upon receipt by any officer of any
Note Party of any complaint, order, citation, notice or other written
communication from any Person delivered to any Note Party with respect to (i) the
existence of a violation of any applicable Environmental Law, (ii) any
Hazardous Materials Contamination, (iii) the commencement of any cleanup
of any Hazardous Materials Contamination, (iv) any pending
legislative or threatened proceeding for the termination, suspension or
non-renewal of any Permit required under any applicable Environmental Law or (v) any
property of any Note Party that becomes subject to a Lien imposed pursuant to
any Environmental Law, in each case that could give rise to any material
liability, notice from a Responsible Officer of such Note Party specifying, to
the extent reasonably ascertainable, the nature and period of existence of any
such condition or event, or specifying the notice given

 

29

 

or
action taken by such holder or Person, and what action the applicable Note
Party has taken, is taking or proposes to take with respect thereto;

 

(l)                                     [Intentionally Omitted];

 

(m)                               promptly upon receipt or filing thereof,
copies of any delinquency reports or notices related to any material taxes and
any other material reports or notices received by any Note Party from, or filed
by any Note Party with, any Governmental Authority;

 

(n)                                 within thirty (30) days following the
conclusion of each Fiscal Year, each Specified Company’s annual operating
plans, operating and Capital Expenditure budgets, and financial forecasts,
including cash flow projections covering proposed fundings, repayments,
additional advances, investments and other cash receipts and disbursements,
each for the following Fiscal Year presented on a monthly basis, which shall be
in a format reasonably consistent with projections, budgets and forecasts
theretofore provided to the Purchasers, and promptly following the preparation
thereof, updates to any of the foregoing from time to time prepared by
management of each Specified Company;

 

(o)                                 no later than three (3) Business Days
following execution thereof, true, correct and complete copies of any
agreement, instrument or document effecting an amendment, modification,
supplement or waiver of any Senior Financing Document;

 

(p)                                 promptly upon the same becoming available,
any written materials, including any “board books,” prepared for any meeting of
and distributed generally to all members of the board of directors of the
Company; and

 

(q)                                 with reasonable promptness, such other
information and data with respect to any Note Party as from time to time may be
reasonably requested by any Purchaser.

 

7.2                                 Payment and Performance of Obligations.  Each
Specified Company (a) will pay and discharge, and cause each
Subsidiary to pay and discharge, at or before maturity, all of their respective
obligations and liabilities, including tax liabilities, except for such
obligations and/or liabilities (i) (x) that may be the
subject of a Permitted Contest and (y) the nonpayment or
nondischarge of which could not reasonably be expected to have a Material
Adverse Effect, or (ii) that arise under the Senior Financing Documents,
(b) will maintain, and cause each Subsidiary to maintain, in
accordance with GAAP, appropriate reserves for the accrual of all of their
respective obligations and liabilities and (c) will not breach or
permit any Subsidiary to breach, or permit to exist any default under, the
terms of any lease, commitment, contract, instrument or obligation

 

30

 

to which it is a party, or by which its properties
or assets are bound, except for such breaches or defaults which could not
reasonably be expected to have a Material Adverse Effect.

 

7.3                                 Maintenance of Existence.  Each
Specified Company will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and
effect, their respective existence (except for Subsidiary mergers permitted by Section 8.7)
and their respective rights, privileges and franchises necessary or desirable
in the normal conduct of business except for such rights, privileges and/or
franchises the failure of which to maintain could not reasonably be expected to
have a Material Adverse Effect.

 

7.4                                 Maintenance of Property; Insurance.

 

(a)                                  Each Specified Company will keep, and will
cause each Subsidiary to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear and tear and
casualty (subject to the obligations to repair if such Specified Company or
such Subsidiary so elected pursuant to Section 6.2(d)(i)) excepted.

 

(b)                                 Each Specified Company will maintain, and
will cause each Subsidiary to maintain in each case subject to customary
exclusions and deductibles that are not materially and adversely inconsistent
with those in effect on the Closing Date, casualty insurance on all real and
personal property on an all risks basis (including the perils of flood and
quake), covering the repair and replacement cost of all such property and
coverage for business interruption and public liability insurance (including
products/completed operations liability coverage) in each case of the kinds and
in amounts generally consistent with such Specified Company’s insurance
coverage as of the Closing Date, as adjusted from time to time in respect of
any future growth in such Specified Company’s business, including as a result
of Permitted Acquisitions.  All such
insurance shall be provided by insurers having an A.M. Best policyholders
rating reasonably acceptable to the Required Holders.  Specified Companies will not, and will not
permit any Subsidiary to, bring or keep any article on any business location of
any Note Party, or cause or allow any condition to exist, if the presence of
such article or the occurrence of such condition could reasonably cause the
invalidation of any insurance required by this Section 7.4(b), or
would otherwise be prohibited by the terms thereof.

 

(c)                                  Specified Companies will deliver to each
Purchaser (i) on the Closing Date, a certificate from Specified
Companies’ insurance broker dated on or about such date showing the amount of
coverage as of such date, (ii) upon the request of any Purchaser
from time to time full information as to the insurance carried, (iii) within
five (5) days of receipt of notice from any insurer, a copy of any notice of
cancellation, nonrenewal or material change in coverage from that existing on
the date of this

 

31

 

Agreement and (iv) forthwith, notice of
any cancellation or nonrenewal of coverage by any Specified Company.

 

7.5                                 Compliance with Laws.  Each
Specified Company will comply, and cause each Subsidiary to comply, with the
requirements of all applicable Laws, except to the extent that failure to so
comply could not reasonably be expected to have a Material Adverse Effect or
result in any Lien upon a material portion of the assets of any such Person in
favor of any Governmental Authority.

 

7.6                                 Inspection of Property, Books and Records.  Each
Specified Company will keep, and will cause each Subsidiary to keep, proper
books of record and account in accordance with GAAP in which full, true and
correct entries in all material respects shall be made of all dealings and
transactions in relation to its business and activities and will permit, and
will cause each Subsidiary to permit, at the sole cost of the applicable
Specified Company (provided that so long as no Event of Default has occurred or
is continuing, the Specified Companies together shall not be required to
reimburse the Purchasers’ reasonable out-of-pocket costs and expenses for more
than a single visit for all such Purchasers in any Fiscal Year),
representatives of any Purchaser to visit and inspect (so long as such visits
and inspections are made concurrently) any of their respective properties, to
examine and make abstracts or copies from any of their respective books and
records and to consult with respect to their respective affairs, finances and
accounts with their respective officers, employees and independent public
accountants as often as may reasonably be desired in the presence of an officer
of a Specified Company.  In the absence
of an Event of Default, any Purchaser exercising any rights pursuant to this Section 7.6
shall give the applicable Specified Company or any applicable Subsidiary
commercially reasonable prior written notice of such exercise.  No notice shall be required during the
existence and continuance of any Event of Default.

 

7.7                                 Use of Proceeds. 
Specified Companies will use the proceeds of the issuance and sale of
the Notes solely for transaction fees incurred in connection with the Operative
Documents, the refinancing on the Closing Date of Debt and for working capital
needs and general corporate purposes of Specified Companies and their
Subsidiaries (subject to all limitations set forth herein).

 

7.8                                 Purchasers’ Meetings.  Up
to once per Fiscal Year, or more frequently as specified by the Required
Holders during the continuance of an Event of Default, Specified Companies
will, in each case to the extent requested by Required Holders, conduct a
face-to-face meeting of the Purchasers to discuss the most recently reported
financial results and the financial condition of Specified Companies and the
Subsidiaries, at which shall be present a Responsible Officer and such other
officers of the Note Parties as may be reasonably requested to attend by any
Purchaser, such request or requests to be made within a reasonable time prior
to the scheduled date of such meeting. 
Such meetings shall be held at a time and place convenient to the
Purchasers and to the

 

32

 

Specified Companies. 
Up to one (1) additional time per year, Specified Companies will, as
requested by the Required Holders, conduct a meeting of the type described
above, except that each such meeting shall be conducted by a telephone
conference call.

 

7.9                                 [Intentionally Omitted].

 

7.10                           Hazardous Materials; Remediation.

 

(a)                                  If any Hazardous Materials Contamination
shall occur or shall have occurred on any real property of any Specified
Company or any other Note Party, such Specified Company will cause, or direct
the applicable Note Party to cause, the prompt containment, removal,
remediation or other such actions that are necessary to comply in all material
respects with all Environmental Laws (the “Remediation”).  Without limiting the generality of the
foregoing, each Specified Company shall, and shall cause each other Note Party
to, comply in all material respects with each Environmental Law requiring the
performance at any real property by any Specified Company or any other Note
Party of activities in response to the release or threatened release of a
Hazardous Material.

 

(b)                                 Specified Companies will provide each
Purchaser within thirty (30) days after demand therefor (or other period
approved by the Required Holders) with a bond, letter of credit or similar
financial assurance evidencing to the satisfaction of the Required Holders that
sufficient funds are available to pay the cost of any Remediation required pursuant
to Section 7.10(a), such demand to be made, if at all, upon the
Required Holder’s reasonable business determination that the failure to remove,
treat or dispose of any Hazardous Materials Contamination, or the failure to
discharge any such assessment could reasonably be expected to have a Material
Adverse Effect.

 

7.11                           [Intentionally Omitted].

 

7.12                           Further Assurances.

 

(a)                                  Each Specified Company will, and will cause
each Subsidiary to, at its own cost and expense, cause to be promptly and duly
taken, executed, acknowledged and delivered all such further acts, documents
and assurances as may from time to time be necessary or as the Required Holders
may from time to time reasonably request in order to implement or to give
effect to the provisions of the Subordinated Note Documents.

 

(b)                                 Without limiting the generality of the
foregoing, in the event that any Specified Company or any Domestic Subsidiaries
shall acquire or form any new Domestic Subsidiary after the date hereof (which
acquisitions and formations may only be consummated in compliance with the
provisions hereof), the respective Specified Company or the respective Domestic
Subsidiary will cause such new Domestic Subsidiary, upon such acquisition and
concurrently with such formation, (i) to execute a Subsidiary
Joinder in order to become a Note Party and (ii) to execute and
deliver, or

 

33

 

cause to be executed and delivered, all other
relevant documentation of the type described in Article III as such new
Domestic Subsidiary would have had to deliver if such new Domestic Subsidiary
were a Note Party on the Closing Date, including such proof of corporate (or
comparable) action, incumbency of officers, opinions of counsel and other
documents as the Required Holders shall have required or requested.

 

(c)                                  Each Specified Company will, and will cause
each of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that each of its Subsidiaries is a Wholly-Owned Subsidiary.

 

7.13                           [Intentionally Omitted]

 

7.14                           Non-Voting Board Observer.  So
long as any Notes remain outstanding, the Company agrees that one of (a)
OCM or (b) any other Purchaser designated by OCM from time to time (the “Observer
Nominator”) shall be entitled to designate one authorized representative
(such representative, a “Non-Voting Observer”), who shall be entitled to
attend (but not be entitled to vote at) each meeting of the board of directors
of the Company and to participate in each telephonic meeting of such board of
directors conducted in accordance with the by-laws of the Company and
applicable law.  The Non-Voting Observer
shall be entitled to reimbursement for reasonable out-of-pocket expenses
incurred in connection with such attendance. 
The Non-Voting Observer will be entitled to receive all documents,
notices, written materials and other information given to directors in
connection with such meetings (collectively, “Material”) as if such
Non-Voting Observer were a director at the same time such materials and
information are given to the directors, whether or not the Non-Voting Observer
is attending the board meeting.  If the
Company proposes to take any action by written consent in lieu of a meeting of
its board of directors, the Company shall forward the form of such written
consent to the Non-Voting Observer prior to its execution and at the same time
as it is forwarded to its board of directors. 
Notwithstanding the foregoing, the Non-Voting Observer shall not be entitled
to attend any meeting of the board of directors of the Company or receive any
Material (1) to the extent that any attorney-client privilege would
be waived by such attendance or receipt of such Material (but only with respect
to the portion of such meeting or such Material that would reasonably be
expected to result in such waiver), (2) to the extent necessary to
protect any proprietary information in the absence of a confidentiality
agreement in form and substance acceptable to the Company in its reasonable
discretion and (3) where there is or would reasonably be expect to
be a conflict of interest.

 

34

 

Article VIII

Negative Covenants

 

Each
of the Note Parties covenants and agrees, for so long as any of the Notes is
outstanding, to observe and abide by each of the covenants and agreements
contained in this Article VIII.

 

8.1                                 Debt.  No Specified Company will, or
will permit any Subsidiary to, directly or indirectly, create, incur, assume,
guarantee or otherwise become or remain directly or indirectly liable with
respect to, any Debt (or payables and other obligations owing among any of the
Note Parties), except for:

 

(a)                                  Debt under the Senior Financing Documents; provided
that the aggregate principal amount of Senior Debt (other than with respect to
Swap Contracts) shall not exceed $77,000,000, as such aggregate principal
amount is reduced by (i) actual paid principal installments of any term
loan under the Senior Credit Agreement and (ii) any repayment of
revolving loans under the Senior Credit Agreement to the extent made in
connection with a permanent reduction of any revolving credit commitment under
the Senior Credit Agreement (excluding any such repayment or reduction
occurring by reason of a refinancing thereof, in an amount up to the aggregate
principal amount of term loans and/or revolving credit commitments borrowed or
provided, as applicable, in such refinancing); provided  further
that, notwithstanding any reduction pursuant to the foregoing clauses (i) and
(ii), up to $15,000,000 of Senior Debt constituting Debt with respect to a
revolving credit facility shall be permitted under this clause (a);

 

(b)                                 Debt outstanding on the date of this
Agreement and set forth on Schedule 8.1 and refinancings thereof to
the extent such refinancing (i) does not result in a final or weighted
average maturity that is earlier than the Debt being refinanced, (ii)
does not result in an increase in the original principal amount of the Debt
being refinanced, and (iii) does not, taken as a whole, impose
provisions or restrictions that are materially more adverse to the obligors
thereunder than under the Debt being refinanced;

 

(c)                                  Debt under the Subordinated Note Documents;

 

(d)                                 Debt incurred or assumed for the purpose of
financing all or any part of the cost of acquiring, constructing or improving
any fixed or capital asset (including through Capital Leases), in an aggregate
principal amount at any time outstanding not greater than $2,400,000;

 

(e)                                  Debt, if any, arising under Swap Contracts;

 

35

 

(f)                                    (i) intercompany Debt, payables
and other obligations owing to a Specified Company by its Wholly-Owned
Subsidiaries which are Domestic Subsidiaries (but are not Dormant Subsidiaries)
or by another Specified Company, or (ii) intercompany Debt,
payables and other obligations owing to a Specified Company by its Wholly-Owned
Subsidiaries which are Foreign Subsidiaries (but are not Dormant Subsidiaries)
in an aggregate amount for all of such Debt, payables and other obligations
owing to the Specified Companies under this clause (ii) not to exceed
$12,000,000 at any time outstanding, minus the amount of Investments made by
the Specified Companies after the Closing Date in their Wholly-Owned
Subsidiaries which are Foreign Subsidiaries (but are not Dormant Subsidiaries)
pursuant to Section 8.8(a)(iii) and minus the amount of Guarantees
made pursuant to the final proviso of Section 8.1(j) or (iii)
intercompany Debt, payables and other obligations owing to any Wholly-Owned
Subsidiary (other than a Dormant Subsidiary) of any Specified Company by such
Specified Company; provided, however, that with respect to any of
the foregoing upon the request of the Required Holders at any time, any such
Debt, payables and other obligations described in this paragraph (f) (but
not including any intercompany Debt, payables and other obligations described
in the foregoing clause (iii) if such intercompany Debt, payables and other
obligations is owing to any Wholly-Owned Subsidiary that is a Foreign
Subsidiary) shall be evidenced by promissory notes having terms reasonably
satisfactory to the Required Holders;

 

(g)                                 the Foreign Payment Obligations;

 

(h)                                 additional unsecured Debt not to exceed
$500,000 in the aggregate at any time outstanding;

 

(i)                                     Debt in the form of deferred purchase price
consideration payable in connection with Permitted Acquisitions (including
seller notes, maximum earn-outs, consulting and non-competition payments), provided
that such Debt has terms and provisions acceptable to the Required Holders, is
subordinated to the Note Party Obligations pursuant to documentation in form
and content reasonably acceptable to the Required Holders in their sole
discretion;

 

(j)                                     Debt in respect of Guarantees by Specified
Companies or any of its Subsidiaries of Debt otherwise permitted hereunder (provided,
that if the guaranteed Debt is subordinated to the Note Party Obligations, any
such guarantee shall be no less subordinated to the Note Party Obligations and provided
that if any Specified Company or any Domestic Subsidiary Guarantees Debt of any
Foreign Subsidiary the amount of the Debt so Guaranteed shall count against the
limit set forth in each of clause (ii) of Section 8.1(f) above and
clause (iii)(z) of Section 8.8(a));

 

36

 

(k)                                  Debt in respect of guarantees in respect of
obligations of any Specified Company or any of its Subsidiaries under leases
and other contractual obligations not prohibited hereunder (provided
that no Specified Company or any of its Domestic Subsidiaries may guarantee any
lease or contractual obligation of any Foreign Subsidiary);

 

(l)                                     Debt incurred by any Specified Company or any
of its Subsidiaries arising from agreements providing for customary
indemnification, adjustment of purchase price or similar obligations in
connection with permitted Asset Dispositions and Permitted Acquisitions
(excluding Debt described in clause (i) above);

 

(m)                               Debt in the form of financing of insurance
premiums provided by the vendors of such insurance or their agents and software
maintenance contracts;

 

(n)                                 Debt with respect to judgments or awards
which do not constitute an Event of Default under Section 10.9
hereof;

 

(o)                                 Debt in respect of netting services, ordinary
course overdraft protections for overdrafts not to exceed $50,000 per account
and comparable deposit account services, so long as (i) such Debt
is incurred in the Ordinary Course of Business and (ii) such Debt
is not outstanding for more than two (2) Business Days;

 

(p)                                 Contingent Obligations permitted under Section 8.3,
to the extent constituting Debt; and

 

(q)                                 Debt arising under the last sentence of Section 8.4.

 

8.2                                 Liens.  No Specified Company will, or
will permit any Subsidiary to, directly or indirectly, create, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired by it, except:

 

(a)                                  Liens created by Senior Financing Documents;

 

(b)                                 Liens existing on the date of this Agreement
and set forth on Schedule 8.2 and refinancings thereof to the
extent such refinancing does not result in such Lien covering assets or
properties not covered under the Lien being refinanced, and in the case of
Liens securing Debt, the refinancing of the Debt so secured (i) does not
result in a final or weighted average maturity that is earlier than the Debt
being refinanced, (ii) does not result in an increase in the original
principal amount of the Debt being refinanced, and (iii) does not, taken
as a whole, impose provisions or restrictions that are materially more adverse
to the obligors thereunder than under the Debt being refinanced;

 

37

 

(c)                                  any Lien on any asset securing Debt permitted
under Section 8.1(d), provided that such Lien attaches only
to the assets financed by such Debt, and such Lien attaches concurrently with
or within ninety (90) days after the acquisition thereof;

 

(d)                                 Liens for taxes, assessments or other
governmental levies, fees or charges not at the time delinquent or thereafter
payable without penalty or the subject of a Permitted Contest;

 

(e)                                  Liens arising in the Ordinary Course of
Business (i) in favor of carriers, warehousemen, mechanics,
lessors, landlords and materialmen, and other similar Liens imposed by law or
in connection with statutory obligations or (ii) in connection with
worker’s compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
bonds, bids, performance bonds and similar obligations for sums not overdue or
the subject of a Permitted Contest which Liens may involve deposits and
advances incurred in the Ordinary Course of Business but not involving borrowed
money or the deferred purchase price of property or services and, in each case,
for which it maintains adequate reserves;

 

(f)                                    attachments, appeal bonds and judgment Liens,
for sums not exceeding $500,000 in the aggregate arising in connection with
court proceedings; provided that the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby are the subject
of a Permitted Contest;

 

(g)                                 easements, rights of way, covenants,
conditions, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary conduct
of the business of any Specified Company or any Subsidiary;

 

(h)                                 Liens arising from the precautionary UCC financing
statements filed under any lease permitted by this Agreement;

 

(i)                                     customary rights of set-off, revocation,
refund or chargeback under deposit agreements or under the Uniform Commercial
Code of banks or other financial institutions where any Note Party maintains
deposits (other than deposits intended as cash collateral) in the Ordinary
Course of Business;

 

(j)                                     any interest or title of a licensor,
sublicensor, lessor or sublessor in the property covered by any license or
lease agreement of any Note Party not prohibited hereunder;

 

38

 

(k)                                  licenses, sublicenses, leases or subleases
granted by any Note Party to any third parties in the Ordinary Course of
Business;

 

(l)                                     Liens on insurance policies and the proceeds
thereof securing Debt described in Section 8.1(m);

 

(m)                               Liens in favor of collecting banks arising
under Section 4-210 of the Uniform Commercial Code and other bankers liens
arising by operation of law; and

 

(n)                                 zoning, building codes and other land use
laws regulating the use or occupancy of real property or the activities
conducted thereon which are imposed by any Governmental Authority having
jurisdiction over such real property which are not violated in any material
respect by the current use or occupancy or the operation of the business on
such real property.

 

8.3                                 Contingent Obligations.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, create, assume, incur or suffer to exist any Contingent
Obligations, except for:

 

(a)                                  (i) Contingent Obligations arising in
respect of the Debt and letter of credit liabilities under the Senior Financing
Documents and (ii) Contingent Obligations arising in respect of the Debt
under the Subordinated Note Documents;

 

(b)                                 Contingent Obligations resulting from
endorsements for collection or deposit in the Ordinary Course of Business;

 

(c)                                  so long as there exists no Event of Default
both immediately before and immediately after giving effect to any such
transaction, Contingent Obligations existing or arising under any Swap
Contract;

 

(d)                                 Contingent Obligations outstanding on the
date of this Agreement and set forth on Schedule 8.3;

 

(e)                                  Contingent Obligations incurred in the
Ordinary Course of Business with respect to surety and appeal bonds,
performance bonds and other similar obligations not to exceed $750,000 in the
aggregate at any time outstanding;

 

(f)                                    Contingent Obligations arising under
indemnity agreements with title insurers to cause such title insurers to issue
to Agent mortgagee title insurance policies;

 

39

 

(g)                                 Contingent Obligations arising with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions permitted under Section 8.7 or in favor of sellers in
connection with Investments and acquisitions permitted under Section 8.8;

 

(h)                                 Contingent Obligations arising with respect
to Floor Plan Obligations, provided that the maximum amount of such Contingent
Obligations shall not exceed an aggregate of $7,500,000 at any one time and
provided that the Specified Companies accounts for all such Floor Plan
Obligations and the related revenues in a manner consistent with past practices
as in existence on the Closing Date; and

 

(i)                                     Contingent Obligations in respect to the
guarantee of any obligations otherwise permitted or not prohibited hereunder (provided,
that if any such obligations are subordinated to the Note Party Obligations,
any such guarantee shall be no less subordinated to the Note Party
Obligations).

 

8.4                                 Restricted Distributions.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, declare, order, pay, make or set apart any sum for any Restricted
Distribution; provided that the foregoing shall not restrict or prohibit
(a) any Subsidiary from making dividends or distributions, directly
or indirectly, to any Specified Company or (b) purchases of shares
of (or options to purchase shares of) equity interests in Company or options
therefor from employees of any Note Party upon their death, termination of
their employment or retirement, so long as (i) before and after
giving effect to any such dividend or distribution for such purpose, (w) no
Event of Default shall have occurred and be continuing, (x) Specified
Companies are in compliance on a pro forma basis with the covenants set forth
in Article IX recomputed for the most recently ended quarter for
which information is available and is in compliance with all other terms and
conditions of this Agreement and (y) if such dividend or distribution is
made prior to the expiration of the revolving commitments under the Senior
Credit Agreement, at least $4,000,000 in availability will remain under the
revolving credit facility provided under the Senior Credit Agreement, and (ii) such
purchases or payments after the date hereof do not exceed $500,000 in any
Fiscal Year and do not exceed $1,500,000 in the aggregate from and after the
Closing Date.  Notwithstanding the
limitations set forth in clause (b) of the immediately preceding sentence,
Company may purchase shares of (or options to purchase shares of) equity
interests in Company or options therefor from employees of any Note Party upon
their death, termination of their employment or retirement, solely in exchange
for Debt issued by Company; provided, that (A) the terms of
such Debt expressly provide that no payments may be made in cash or any other
property prior to repayment in full of the Note Party Obligations, (B) such
Debt is subordinated to the Note Party Obligations pursuant to an agreement in
form and substance satisfactory to Required Holders, (C) such Debt
is unsecured and is not guaranteed by any other Note Party and (D) the

 

40

 

aggregate outstanding principal amount of all such
Debt does not exceed $4,200,000 at any time.

 

8.5                                 Restrictive Agreements.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly (a) enter into or assume any agreement (other than the
Senior Financing Documents and the Subordinated Note Documents) prohibiting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired or (b) create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind (except as provided by the Subordinated Note Documents) on the
ability of any Subsidiary to:  (i) pay
or make Restricted Distributions to any Specified Company or any Subsidiary, (ii) pay
any Debt owed to any Specified Company or any Subsidiary, (iii) make
loans or advances to any Specified Company or any Subsidiary or (iv) transfer
any of its property or assets to Company or any Subsidiary; provided
that any Specified Company and any of its Subsidiaries will be permitted to
enter into agreements:  (1) containing
customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of any Specified Company or a Subsidiary, (2) containing
customary provisions restricting assignment of any agreement entered into by
any Specified Company or a Subsidiary in the Ordinary Course of Business, (3) containing
restrictions on the transfer of assets subject to Liens permitted by Section 8.2(c)
and (4) containing customary restrictions and conditions contained
in any agreement relating to the sale of any property permitted under Section 8.7
pending the consummation of such sale.

 

8.6                                 [Intentionally Omitted].

 

41

 

8.7                                 Consolidations, Mergers and Sales of Assets.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly (a) consolidate or merge with or into any other Person
other than, with not less than twenty (20) Business Days’ prior written notice
to each Purchaser (or such lesser amount of notice as the Required Holders, in
their sole discretion, may from time to time permit), mergers of any
Wholly-Owned Subsidiary with and into a Specified Company (with such Specified
Company as the surviving entity of such merger) or with and into any other
Wholly-Owned Subsidiary of a Specified Company or (b) consummate
any Asset Dispositions other than dispositions of assets for cash and fair
value that the applicable Specified Company determines in good faith is no
longer used or useful in the business of such Specified Company and its
Subsidiaries if all of the following conditions are met:  (i) the market value of assets
sold or otherwise disposed of in any single transaction or series of related
transactions does not exceed $700,000 and the aggregate market value of assets
sold or otherwise disposed of in any Fiscal Year of the applicable Specified
Company does not exceed $1,250,000, (ii) the Net Cash Proceeds of
any such disposition are applied as required by Section 6.2(d)(ii), (iii) after
giving effect to any such disposition and the repayment of Debt with the
proceeds thereof, Specified Companies are in compliance on a pro forma basis
with the covenants set forth in Article IX recomputed for the most
recently ended quarter for which information is available and is in compliance
with all other terms and conditions of this Agreement and (iv) no
Default or Event of Default then exists or would result from any such
disposition.

 

8.8                                 Purchase of Assets, Investments.

 

(a)                                  No Specified Company will, or will permit any
Subsidiary to, directly or indirectly (w) acquire or enter into any
agreement to acquire any assets other than in the Ordinary Course of Business,
constituting Capital Expenditures to the extent permitted pursuant to Section 9.1
or constituting replacement assets purchased with proceeds of Property
Insurance Policies, awards or other compensation with respect to any eminent
domain, condemnation or similar proceeding, (x) create, acquire or
enter into any agreement to create or acquire any Subsidiary other than
Wholly-Owned Subsidiaries which are Domestic Subsidiaries acquired or created
to consummate a Permitted Acquisition and for which the requirements set forth
in Section 7.12(b) have been satisfied, (y) engage or
enter into any agreement to engage in any joint venture or partnership with any
other Person or (z) acquire or own or enter into any agreement to
acquire or own any Investment in any Person other than (without duplication):

 

(i)                                     Investments existing on the date of this
Agreement and set forth on Schedule 8.8;

 

(ii)                                  Cash Equivalents;

 

42

 

(iii)                               (y) additional Investments in the
capital stock or other equity interests of any Wholly-Owned Subsidiaries
existing as of the Closing Date which are Domestic Subsidiaries (but are not
Dormant Subsidiaries) and (z) additional Investments in the capital
stock or other equity interests of any Wholly-Owned Subsidiaries existing as of
the Closing Date which are Foreign Subsidiaries (but are not Dormant
Subsidiaries) in an aggregate amount for all such Foreign Subsidiaries not to
exceed $12,000,000, minus the amount of loans, payables and other obligations
owing by Wholly-Owned Subsidiaries pursuant to clause (ii) of Section 8.1(f)
above and minus the amount of Guarantees made pursuant to the final proviso of Section 8.1(j);

 

(iv)                              bank deposits established in accordance with Section 8.17;

 

(v)                                 Investments in securities of account debtors
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors;

 

(vi)                              Investments in the form of Swap Contracts
permitted under Sections 8.1(e) and 8.3(c);

 

(vii)                           (y) cashless loans to officers
and employees provided that the proceeds thereof are used by such officers and
employees solely to purchase capital stock of Company and (z) loans
to officers and employees in an aggregate principal amount not to exceed
$600,000 at any time outstanding;

 

(viii)                        payroll advances in the Ordinary Course of
Business;

 

(ix)                                Investments in the form of loans between or
among the Note Parties made in lieu of distributions otherwise permitted under Section 8.4
(with such loans being subject to the same dollar restrictions, if any,
applicable to the corresponding provisions of Section 8.4, and with
any such loans reducing, on a dollar-by-dollar basis, the corresponding amount
of distributions otherwise permitted by Section 8.4);

 

(x)                                   Investments received as consideration for
Asset Dispositions permitted in Section 8.7; and

 

(xi)                                other Investments in an aggregate amount not
to exceed $100,000.

 

(b)                                 Notwithstanding the foregoing, any Specified
Company may acquire, or may cause a Wholly-Owned Subsidiary that is a Domestic
Subsidiary to acquire, all or substantially all of the assets, or all (but not
less than all) of the capital stock or other equity securities, of any Person
(the “Target”) (in each case, a “Permitted Acquisition”)

 

43

 

with the prior written approval of the Required
Holders or subject to the satisfaction of each of the following conditions:

 

(i)                                     Each Purchaser shall have received not less
than twenty (20) Business Days’ prior notice (or any more reduced period of
prior notice as may be approved from time to time by the Required Holders) of
such proposed Permitted Acquisition, which notice shall include a due diligence
package including the following materials, each in form and substance
reasonably satisfactory to the Required Holders:

 

(A)                              copies of the Target’s three most recent annual income statements and
balance sheets, together with the audit opinions thereon, if any, of the Target’s
independent accountants, together with available interim financial statements,
(B) if available, any asset or business appraisals, (C) a
general description of the business to be acquired, (D) a general
description of the competitive position of the business to be acquired within
its industry, (E) a summary of pending and known threatened
litigation adversely affecting the business or assets to be acquired, (F) a
description of the method of financing such acquisition, including sources and
uses, (G) a listing of locations of all personal and real property
to be acquired, (H) a description of any change in management of
the Note Parties, after giving effect to such acquisition, (I) all
agreements to be assumed or acquired, but solely to the extent such agreements
are of equivalent or greater materiality to the Note Parties as compared to any
applicable Material Contract, (J) if the Target owns or leases, or
if the assets to be acquired includes, any owned real property or leased real
property, and if reasonably requested by the Required Holders, environmental
reports and related information regarding any such property (other than leased
property used solely as office space), (K) draft copies of all
proposed acquisition agreements and all related transaction documents for such
acquisition, together with all schedules thereto (followed by updated drafts as
the same are generated and fully executed copies thereof within five (5)
Business Days after the closing of such acquisition), and (L) any
other material or reports reasonably requested by any Purchaser and otherwise
available; provided that with respect to each Small Scale Acquisition, Company
shall only be obligated to deliver the materials described in clauses (A), (D)
and (L), to the extent that such materials are readily available.

 

(ii)                                  Concurrently with delivery of the notice and
due diligence materials referred to in clause (i) above, Company shall have
delivered to each Purchaser, in form and substance reasonably satisfactory to
the Required Holders:

 

44

 

(A)                              a pro forma consolidated and consolidating balance sheet, income
statement and cash flow statement of Company and its Subsidiaries (the “Acquisition
Pro Forma”), based on most recently available financial statements, which
shall be complete and shall fairly present in all material respects the assets,
liabilities, financial condition and results of operations of Company and its
Subsidiaries in accordance with GAAP consistently applied, but taking into
account such Permitted Acquisition, the funding of all loans under the Senior
Credit Agreement and the incurrence or assumption of all other Debt and
repayment of Debt in connection therewith, and such Acquisition Pro Forma shall
reflect that (I) on a pro forma basis, Company and its Subsidiaries
would have had a Senior Debt to EBITDA Ratio for the four quarter period
reflected in the Compliance Certificate most recently delivered to each
Purchaser pursuant to Section 7.1(d) prior to the consummation of
such Permitted Acquisition (after giving effect to such Permitted Acquisition
and all loans under the Senior Credit Agreement funded in connection therewith
as if made on the first day of such period) of not more than the lesser of (x)
the Senior Debt to EBITDA Ratio on the Closing Date or (y) the
difference between (aa) the maximum permitted amount of the Senior
Debt to EBITDA Ratio as of the most recently completed Fiscal Quarter period
for which a Compliance Certificate was required to be delivered to each
Purchaser less (bb) fifty (50) basis points, (II)  on a
pro forma basis, Company and its Subsidiaries would have had a Total Debt to
Adjusted EBITDA Ratio for the four quarter period reflected in the Compliance
Certificate most recently delivered to each Purchaser pursuant to Section 7.1(d)
prior to the consummation of such Permitted Acquisition (after giving effect to
such Permitted Acquisition and all loans under the Senior Credit Agreement
funded in connection therewith as if made on the first day of such period) of
not more than the lesser of (x) the Total Debt to Adjusted EBITDA Ratio
on the Closing Date or (y) the difference between (aa) the
maximum permitted amount of the Total Debt to Adjusted EBITDA Ratio as of the
most recently completed Fiscal Quarter period for which a Compliance
Certificate was required to be delivered to each Purchaser less (bb) fifty
(50) basis points, and (III) on a pro forma basis, no Event of Default
has occurred and is continuing or would result after giving effect to such
Permitted Acquisition, the funding of all loans under the Senior Credit
Agreement and the incurrence or assumption of all other Debt and repayment of
Debt in connection therewith;

 

(B)                                updated versions of the projections most recently delivered to each
Purchaser pursuant to Section 7.1(n) covering the one (1) year
period commencing on the date of such Permitted Acquisition and otherwise
prepared in accordance with the requirements of Section 7.1(n)

 

45

 

(the “Acquisition Projections”) and based upon historical
financial data of a recent date reasonably satisfactory to the Required
Holders, taking into account such Permitted Acquisition, the funding of all
loans under the Senior Credit Agreement and the incurrence or assumption of all
other Debt and repayment of Debt in connection therewith; and

 

(C)                                a certificate of a Responsible Officer of Company to the effect
that:  (w) Company and each
Subsidiary taken as a whole will be Solvent upon the consummation of the
Permitted Acquisition, (x) the Acquisition Pro Forma fairly
presents the financial condition of Company and its Subsidiaries (on a consolidated
basis) in all material respects as of the date thereof and the periods covered
thereby, in each case after giving effect to the Permitted Acquisition and
related transactions, (y) the Acquisition Projections represent
Specified Companies’ reasonable estimate of Company’s consolidated future
financial performance as of the date thereof and after giving effect to the
Permitted Acquisition, the assumptions contained therein are believed by
Specified Companies to be fair and reasonable in light of current business
conditions and the Acquisition Projections demonstrate Specified Companies’
projected compliance with the covenants set forth in Article 9 for
the one-year period immediately following the consummation of such Permitted
Acquisition; provided, that Specified Companies can give no assurance
that the results reflected in the Acquisition Projections will be attained; and
(z) Company and its Subsidiaries have completed their due diligence
investigation with respect to the Target and such Permitted Acquisition, which
investigation was conducted in a manner similar to that which would have been
conducted by a prudent purchaser of a comparable business and the results of
which investigation, to the extent requested, were delivered to each Purchaser;

 

(iii)                               such Permitted Acquisition shall only involve
assets located in the United States (and in connection with the acquisition of
the capital stock or other equity securities of a Target, such Target and any
of its Subsidiaries shall be formed, incorporated or otherwise organized under
the laws of a State within the United States) and comprising a business, or
those assets of a business, of the type engaged in by Company as of the Closing
Date and businesses reasonably related thereto, and which business would not
subject any Purchaser to regulatory or third party approvals in connection with
the exercise of its rights and remedies under this Agreement or any other
Subordinated Note Documents other than approvals applicable to the exercise of
such rights and remedies with respect to Specified Companies prior to such
Permitted Acquisition;

 

46

 

(iv)                              such Permitted Acquisition shall be
consensual, shall have been approved by the Target’s board of directors (or comparable
governing body) and shall be consummated in accordance with the terms of the
agreements and documents related thereto, and in material compliance with all
applicable Laws;

 

(v)                                 no assets or liabilities (including, without
limitation, Investments, Debt and Contingent Obligations) shall be acquired,
incurred, assumed or otherwise be reflected on a consolidated balance sheet of
Company and its Subsidiaries after giving effect to such Permitted Acquisition,
except (A) loans made under the Senior Credit Agreement and (B) those
assets and liabilities which may be acquired, incurred or assumed in accordance
with the provisions of this Agreement (including, without limitation, the
provisions of Sections 8.1, 8.3 and 8.8(a));

 

(vi)                              the business and assets acquired in such
Permitted Acquisition shall be free and clear of all Liens (other than
Permitted Liens);

 

(vii)                           at or prior to the closing of any Permitted
Acquisition, Company, its Subsidiaries and the Target shall have executed such
documents and taken such actions (including without limitation, the delivery of
(A) certified copies of the resolutions of the board of directors
(or comparable governing board) of Company, its Subsidiaries and the Target
authorizing such Permitted Acquisition, (B) legal opinions in form
and substance reasonably acceptable to each Purchaser, and (C) evidence
of insurance of the business to be acquired consistent with the requirements of
Section 7.4) as may be reasonably required by the Required Holders
in connection therewith;

 

(viii)                        the sum of all amounts payable in connection
with any Permitted Acquisition (including all transaction costs, all Debt, all
liabilities and Contingent Obligations assumed and the maximum amount of any
earn-out or comparable contingent payment obligation in connection therewith
(whether or not any of the foregoing is reflected on Company’s consolidated
balance sheet) and the fair market value of property transferred, but excluding
the amount of any capital stock of Company sold or transferred to finance such
Permitted Acquisitions), shall not exceed (a) $3,000,000 in any
Fiscal Year and (b) $6,000,000 from and following the Closing Date;

 

(ix)                                any earn-outs or other comparable contingent
payment obligations incurred by the Note Parties in connection with such
Permitted Acquisition shall contain a stated maximum payment amount, the sum of
which shall not exceed fifty percent (50%) of the amounts described in the
preceding clause (viii) with respect to such Permitted Acquisition;

 

47

 

(x)                                   the Target shall not have incurred an
operating loss for the trailing twelve-month period preceding the date of the
Permitted Acquisition, as determined based upon the Target’s financial
statements for its most recently completed fiscal year and its most recent
interim financial period completed within sixty (60) days prior to the date of
consummation of such Permitted Acquisition;

 

(xi)                                on or prior to the date of such Permitted
Acquisition, each Purchaser shall have received, in form and substance
reasonably satisfactory to the Required Holders, (a) copies of the
acquisition agreement and related agreements and instruments, and all opinions,
certificates, lien search results and other documents reasonably requested by
the Required Holders and (b) amendments to the Schedules, to the
extent necessary to make the representations and warranties in this Agreement
true and correct in all material respects after giving effect to the
consummation of such Permitted Acquisition;

 

(xii)                             at the time of such Permitted Acquisition and
after giving effect thereto, no Default or Event of Default has occurred and is
continuing; and

 

(xiii)                          at the time of such Permitted Acquisition and
after giving effect thereto, at least $4,000,000 in availability will exist
under the revolving credit facility provided under the Senior Credit Agreement.

 

8.9                                 Transactions with Affiliates. 
Except (a) as expressly permitted by the Subordinated Note
Documents, (b) as otherwise disclosed on Schedule 8.9
and (c) for transactions that contain terms that are no less
favorable to the applicable Specified Company or any Subsidiary, as the case
may be, than those which would reasonably be obtained from a third party not an
Affiliate of any Note Party, no Specified Company will, or will it permit any
Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of any Specified Company other
than another Note Party; provided that nothing in this Section 8.9
shall prohibit any Specified Company or its Subsidiaries from engaging in the
following transactions:  (i) the
performance of Specified Companies’ or any Subsidiary’s obligations under any
employment contract, collective bargaining agreement, employee benefit plan,
related trust agreement or any other similar arrangement heretofore or
hereafter entered into in the Ordinary Course of Business, (ii) the
payment of compensation to employees, officers, directors (other than the
payment of directors’ fees to directors that are employees of any Note Party or
any of their Affiliates or that are appointed by Investor or any of its
Affiliates) or non-affiliated consultants in the Ordinary Course of Business or
(iii) the maintenance of benefit programs or arrangements for
employees, officers or directors, including, without limitation, vacation
plans, health and life insurance plans,

 

48

 

deferred compensation plans, and retirement or
savings plans and similar plans, in each case, in the Ordinary Course of
Business.

 

8.10                           Modification of Organizational Documents.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, amend or otherwise modify any Organizational Documents of such
Person, except for such amendments or other modifications fully disclosed to
each Purchaser no later than the effective date of such amendment or
modification, and which amendments or modifications are either (a) required
by Law or (b) could not reasonably be considered to be adverse to
any Purchaser.

 

8.11                           Modification of Certain Agreements.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, amend or otherwise modify the Management Agreement which in any
case:

 

(a)                                  is contrary to the terms of this Agreement or
any other Subordinated Note Document;

 

(b)                                 could reasonably be expected to be adverse to
the rights or interests of any Purchaser under any of the Subordinated Note
Documents or their ability to enforce the same;

 

(c)                                  results in the imposition or expansion in any
material respect of any restriction or burden on any Specified Company or any
Subsidiary; or

 

(d)                                 reduces in any material respect any rights or
benefits of any Specified Company or any Subsidiaries without reasonably
adequate consideration.

 

Each
Specified Company shall, prior to entering into any amendment or other
modification of any of the foregoing documents, deliver to each Purchaser
reasonably in advance of the execution thereof, any final or execution form
copy of amendments or other modifications to such documents, and, if approval
of Required Holders is required by the terms of this Section 8.11
prior to the taking of any such action, such Specified Company agrees not to
take, nor permit any of its Subsidiaries to take, any such action with respect
to any such documents without obtaining such approval from Required Holders.

 

8.12                           Fiscal Year.  No Specified Company will, or
will permit any Subsidiary to, change its Fiscal Year.

 

49

 

8.13                           Conduct of Business.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, engage in any line of business other than those businesses engaged
in on the Closing Date and described on Schedule 8.13 and
businesses reasonably related thereto.

 

8.14                           Investor Fees.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, pay or become obligated to pay any management, consulting or
similar advisory fees (exclusive of up to $250,000 of fees paid to independent
directors in any Fiscal Year) to or for the account of Investor or any
Affiliate of Investor except, so long as no Event of Default is then continuing
or would result therefrom, pursuant to the Management Agreement as it exists on
the date hereof.

 

8.15                           [Intentionally Omitted].

 

8.16                           Limitation on Sale and Leaseback Transactions.  No
Specified Company will, or will permit any Subsidiary to, directly or indirectly,
enter into any arrangement with any Person whereby in a substantially
contemporaneous transaction any Specified Company or any Subsidiaries sells or
transfers all or substantially all of its right, title and interest in an asset
and, in connection therewith, acquires or leases back the right to use such
asset.

 

8.17                           [Intentionally Omitted].

 

8.18                           Compliance with Anti-Terrorism Laws.

 

(a)                                  No Specified Company will, or will permit any
Subsidiary to, directly or indirectly, knowingly enter into any Operative
Documents or Material Contracts with any Person listed on the OFAC Lists.  Each Specified Company shall immediately
notify each Purchaser if such Specified Company has knowledge that any
Specified Company, any additional Note Party or any of their respective
Affiliates or agents acting or benefiting in any capacity in connection with
the transactions contemplated by this Agreement is or becomes a Blocked Person
or (i) is convicted on, (ii) pleads nolo contendere to, (iii) is
indicted on or (iv) is arraigned and held over on charges involving
money laundering or predicate crimes to money laundering.  No Specified Company will, or will permit any
Subsidiary to, directly or indirectly, (i) conduct any business or
engage in any transaction or dealing with any Blocked Person, including,
without limitation, the making or receiving of any contribution of funds, goods
or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224, any
similar executive order or other Anti-Terrorism Law or (iii) engage
in or conspire to engage in any transaction that evades, or has the purpose of
evading, or attempts to violate, any of the prohibitions set forth in Executive
Order No. 13224 or other Anti-Terrorism Law.

 

50

 

(b)                                 Each Purchaser hereby notifies Specified
Companies that pursuant to the requirements of the USA PATRIOT Act, and each Purchaser’s
policies and procedures, each Purchaser is required to obtain, verify and
record certain information and documentation that identifies Specified
Companies, which information includes the name and address of each Specified
Company and such other information that will allow each Purchaser to identify
each Specified Company in accordance with the USA PATRIOT Act.

 

8.19                           Changes to Senior Financing Documents.  No
Specified Company will, or will permit any Subsidiary to, directly or
indirectly, amend or modify the terms of any Senior Debt except to the extent
not prohibited by the terms of the Subordination Agreement.

 

8.20                           Limitation on Layering.  No
Specified Company will, or will permit any of its Subsidiaries to, incur any
Debt (other than the Note Party Obligations and the Senior Debt, regardless of
the tranche characterization and provider of such Senior Debt) that is
subordinate or junior in right of payment to any Debt or any other obligations
of such Specified Company or Subsidiary, unless such Debt is subordinate or
junior to the Note Party Obligations in the same manner and to the same extent;
provided Debt that is pari passu
with the Note Party Obligations shall be permitted to the extent incurred
pursuant to (and subject to the limitations of) Section 8.1(h).

 

Article IX

Financial Covenants

 

Each
of the Note Parties covenants and agrees, for so long as any of the Notes is
outstanding, to observe and abide by each of the covenants and agreements
contained in this Article IX.

 

9.1                                 Capital Expenditures. 
Specified Companies will not permit the aggregate amount of Capital
Expenditures for any period set forth below to exceed the amount set forth
below for such period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Closing Date
  through 12/31/05

  	
   

  	
  $

  	
  1,519,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  3,375,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  3,375,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  3,375,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  3,375,000

  	
   

  
	
  2010

  	
   

  	
  $

  	
  3,375,000

  	
   

  
	
  2011 and
  thereafter

  	
   

  	
  $

  	
  3,375,000

  	
   

  

 

51

 

If
Specified Companies do not utilize the entire amount of Capital Expenditures
permitted in any period set forth above, Specified Companies may carry forward
to the immediately succeeding period only, one hundred percent (100%) of such
unutilized amount, with the amount carried forward to any period not to exceed
fifty percent (50%) of the amount set forth above for the immediately preceding
period (with Capital Expenditures made by Specified Companies in such
succeeding period applied last to such carried forward amount).

 

9.2                                 Fixed Charge Coverage Ratio.  Specified Companies will not permit the Fixed
Charge Coverage Ratio for the twelve (12) month period ending on any date set
forth below to be less than the ratio set forth below and measured as of such
date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  1.11 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  1.11 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  1.11 to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  1.11 to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  1.11 to 1.00

  	
   

  
	
  The last day of each calendar quarter
  thereafter

  	
   

  	
  1.15 to 1.00

  	
   

  

 

9.3                                 Total Debt to Adjusted EBITDA Ratio. 
Specified Companies will not permit the ratio of (a) Total
Debt on any date set forth below to (b) Adjusted EBITDA for the
twelve (12) month period ending on such date to exceed the ratio set forth
below and measured as of such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  5.06 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  5.06 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  5.06 to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  4.78 to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  4.78 to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  3.94 to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.94 to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  3.94 to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.94 to 1.00

  	
   

  

 

52

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30, 2008

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  The last day of each calendar quarter
  thereafter

  	
   

  	
  3.38 to 1.00

  	
   

  

 

9.4                                 Senior Covenant Debt to Adjusted EBITDA Ratio. 
Specified Companies will not permit the ratio of (a) Senior
Covenant Debt on any date set forth below to (b) Adjusted EBITDA
for the twelve (12) month period ending on such date to exceed the ratio set
forth below and measured as of such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  4.05 to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  3.99 to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  3.94 to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  3.66 to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  3.38 to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  3.38 to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  3.09 to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.09 to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  3.09 to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.09 to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  2.70 to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  2.70 to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  2.70 to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  2.70 to 1.00

  	
   

  
	
  The last day of each calendar quarter
  thereafter

  	
   

  	
  2.42 to 1.00

  	
   

  

 

Article X

Events of Default

 

The
occurrence of any one or more of the following events (regardless of the reason
therefor) shall constitute an “Event of Default” hereunder:

 

53

 

10.1                           Payment Default.  Any
Specified Company shall fail to pay when due any principal or within three (3)
Business Days of the due date thereof any interest, premium or fee under any
Subordinated Note Document or within three (3) Business Days of the due date
thereof any other amount payable under any Subordinated Note Document.

 

10.2                           Certain Covenants.  Any
Specified Company shall fail to observe or perform any covenant contained in Section
6.2, Section 7.1 (exclusive of 7.1(f), (g) and (m)),
Section 7.4, Section 7.6, Section 7.7, Article VIII
or Article IX.

 

10.3                           General Default.  Any
Note Party defaults in the performance of or compliance with any term contained
in this Agreement or in any other Subordinated Note Document (other than
occurrences described in other provisions of this Article X for
which a different grace or cure period is specified or for which no grace or
cure period is specified and thereby constitute immediate Events of Default)
and such default is not remedied or waived within thirty (30) days after the
earlier of (1) receipt by Company of notice from any Purchaser of
such default or (2) actual knowledge of any Specified Company or
any other Note Party of such default.

 

10.4                           Representations; Warranties.  Any
representation, warranty, certification or statement made by any Note Party to
any Purchaser in any Subordinated Note Document or in any certificate,
financial statement or other document delivered pursuant to any Subordinated
Note Document is incorrect in any respect (or in any material respect if such
representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);

 

10.5                           Default Under Other Debt.

 

(a)                                  Failure of any Note Party to pay when due or
within any applicable grace period any principal, interest or other amount on
Debt (other than the Notes and Senior Debt) or in respect of any Swap Contract
(unless it constitutes Senior Debt), or the occurrence of any breach, default,
condition or event with respect to any Debt (other than the Notes and Senior
Debt) or in respect of any Swap Contract (unless it constitutes Senior Debt),
if the effect of such failure or occurrence is to cause or to permit the holder
or holders of any such Debt, or the counterparty under any such Swap Contract
(unless it constitutes Senior Debt), to cause, Debt or other liabilities having
an individual principal amount (or, in the case of a Swap Contract (unless it
constitutes Senior Debt), a notional amount) in excess of $500,000 or having an
aggregate principal amount (and, for purposes of Swap Contracts, including the
notional amount) in excess of $500,000 to become or be declared due prior to
its stated maturity;

 

(b)                                 The acceleration of the Senior Debt prior to
its expressed maturity or upon the failure to pay the Senior Debt when due at
final maturity; and

 

54

 

(c)                                  The failure of any Note Party to pay the
notional amount under a Swap Contract (if it constitutes Senior Debt) that
shall have become due because of early termination of such Swap Contract and
failure to pay such notional amount when due at final maturity.

 

10.6                           Voluntary Bankruptcy.  Any
Note Party shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing.

 

10.7                           Involuntary Bankruptcy.  An
involuntary case or other proceeding shall be commenced against any Note Party
seeking liquidation, reorganization or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of forty-five (45) days; or an order for relief shall be entered
against any Note Party under the federal bankruptcy laws as now or hereafter in
effect.

 

10.8                           ERISA.  (1) institution of
any steps by any Person to terminate a Pension Plan if as a result of such
termination any Note Party could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such Pension Plan, in
excess of $500,000, (2) a contribution failure occurs with respect
to any Pension Plan sufficient to give rise to a Lien under Section 302(f)
of ERISA or (3) there shall occur any withdrawal or partial
withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued
interest) to Multiemployer Plans as a result of such withdrawal (including any
outstanding withdrawal liability that any Note Party or any member of the
Controlled Group have incurred on the date of such withdrawal) exceeds
$500,000.

 

10.9                           Judgments.  One or more judgments or
orders for the payment of money (not paid or fully covered by insurance
maintained in accordance with the requirements of this Agreement and as to
which the relevant insurance company has acknowledged coverage) aggregating in
excess of $600,000 shall be rendered against any or all Note Parties and either
(a) enforcement proceedings shall have been commenced by any
creditor upon any such judgments or orders or (b) there shall be
any period of twenty (20) consecutive days during which a stay of enforcement
of any such judgments or orders, by reason of a pending appeal, bond or
otherwise, shall not be in effect.

 

55

 

10.10                     [Intentionally Omitted].

 

10.11                     [Intentionally Omitted].

 

10.12                     Labor.  Any Note Party shall be
prohibited or otherwise materially restrained from conducting the business
theretofore conducted by it by virtue of any casualty, any labor strike, any
determination, ruling, decision, decree or order of any court or regulatory
authority of competent jurisdiction or any other event and such casualty, labor
strike, determination, ruling, decision, decree, order or other event remains
unstayed and in effect for any period of ten (10) days.

 

10.13                     Operative Documents.  Any
of the Operative Documents shall for any reason fail to constitute the valid
and binding agreement of any party thereto, or any such party shall so assert.

 

10.14                     Dormant Subsidiaries.  Any
Dormant Subsidiary engages in any type of business activity other than those
necessary or convenient to complete the wind-down thereof.

 

Article XI

Acceleration; Remedies on Default

 

11.1                           Acceleration.

 

(a)                                  If any Event of Default has occurred, the
Required Holders may, by notice to the Company, declare the entire unpaid principal
amount of the Notes, plus (except in the case of an Event of Default
that has occurred for a reason other than any willful action or inaction taken
or not taken by or on behalf of any Note Party with the intention of avoiding
payment of the premium that the Company would otherwise have had to pay) a
premium equal to (i) the then Applicable Percentage for redemptions
of the Notes under Section 6.2(b) multiplied by (ii) the aggregate principal amount of Notes
then outstanding, plus all interest accrued and unpaid thereon and all
other amounts payable under this Agreement, to be forthwith due and payable,
whereupon the Notes, such premium, all such accrued interest and all such other
amounts shall become and be forthwith due and payable (unless there shall have
occurred an Event of Default under Sections 10.6 or 10.7
with respect to any Note Party, in which case all such amounts shall
automatically become due and payable), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Note Parties.

 

(b)                                 For the avoidance of doubt, in the case of an
acceleration under Section 11.1(a) above, each Purchaser may
proceed to protect and enforce its rights by suit in equity, action at law
and/or other appropriate proceeding either for specific performance of any
covenant, provision or condition contained or incorporated by

 

56

 

reference in this Agreement or in aid of the
exercise of any power granted in this Agreement.

 

11.2                           Other Remedies.  In
case any one or more of the Events of Default under Article X shall
have occurred and be continuing, and whether or not the Purchasers shall have
accelerated the maturity of the Notes pursuant to Section 11.1,
each Purchaser, if owed any amount with respect to the Notes, may proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement and the other Subordinated Note Documents
or any instrument pursuant to which the Note Party Obligations to such
Purchaser are evidenced, including as permitted by Applicable Law, the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of such Purchaser; provided,
however, that no acceleration of the unpaid principal amount of the
Notes may be made except in accordance with the terms of Section 11.1.  In case of an Event of Default under Article X,
the Note Parties shall pay to each Purchaser such further amount as shall be
sufficient to cover the reasonable costs and expenses of collection, including,
without limitation, reasonable attorneys’ fees, expenses and
disbursements.  No remedy herein
conferred upon any Purchaser is intended to be exclusive of any other remedy
and each and every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity
or by statute or any other provision of law.

 

11.3                           Distribution of Proceeds.  In
the event that following the occurrence or during the continuance of any
Default or Event of Default, any Purchaser receives any monies with respect to
the amounts due hereunder, such monies shall be distributed for application as
follows:

 

(a)                                  First, to the payment of, or (as the case may
be) the reimbursement of the Purchasers for or in respect of all costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Purchasers in connection with the collection of such monies by the Purchasers,
for the exercise, protection or enforcement by the Purchasers of all or any of
the rights, remedies, powers and privileges of the Purchasers under this
Agreement or any of the other Subordinated Note Documents pro  rata
based on the relative amount so incurred or sustained;

 

(b)                                 Second, to all other Note Party Obligations
in such order or preference as the Purchasers may determine; provided, however,
that distributions shall be made among the Purchasers pro  rata;
and

 

(c)                                  Third, the excess, if any, shall be returned
to the Company or to such other Persons as are entitled thereto.

 

57

 

11.4                           Annulment of Defaults.  Section 11.1 and Article X are subject to the condition that, if at any
time after the principal of any of the Notes shall have become due and payable,
and before any judgment or decree for the payment of the moneys so due, or any
portion thereof, shall have been entered, then and in every such case the
Required Holders may, by written instrument filed with the Company, rescind and
annul such declaration and its consequences; provided, however, that
(a) all arrears of interest upon all of the Notes and all of the
other sums payable hereunder and under the Notes (except any principal of, or
interest or premium, if any, or other amount due and payable on the Notes by
reason of such declaration) shall have been duly paid, (b) each and
every other Default and Event of Default shall have been waived pursuant to Section 11.5 or otherwise made good or cured and (c) no judgment or
decree has been entered for the payment of any monies due pursuant to the Notes
or this Agreement, and provided, further, that no such rescission
or annulment shall extend to or affect any subsequent Default or Event of
Default or impair any right consequent thereon.

 

11.5                           Waiver.  Except as otherwise provided
for in this Agreement or by Applicable Law, each Note Party waives:  (a) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to accelerate,
notice of acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any Notes at any time held by
any Purchaser on which the Note Parties may in any way be liable, and hereby
ratifies and confirms whatever such Purchaser may do in this regard and (b) the
benefit of all valuation, appraisal, marshaling and exemption laws.

 

Article XII

Cross-Guaranty

 

12.1                           Cross-Guaranty.  Each
Guarantor unconditionally guarantees, as a primary obligor and not merely as a
surety, jointly and severally with each other Guarantor, the due and punctual
payment of the principal of, and interest and premium, if any, on, each of the
Notes when and as due, whether at maturity, by acceleration, by notice of
prepayment or otherwise and the due and punctual payment and performance of all
other Note Party Obligations with respect to the Notes (the “Note Guaranteed
Obligations”).  Each Guarantor
further agrees that the Note Guaranteed Obligations may be amended, modified,
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guaranty notwithstanding any
extension or renewal of any Note Guaranteed Obligations.

 

12.2                           Guaranty Absolute.  The
obligations of each Guarantor hereunder shall be unconditional and shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, settlement,
surrender, alteration or compromise, and shall not be subject to any defense or
set off, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality or unenforceability of the Note Guaranteed Obligations
or otherwise.  Without

 

58

 

limiting the generality of the foregoing, the
obligations of each Guarantor hereunder with respect to any of the Note
Guaranteed Obligations shall not be discharged or impaired or otherwise
affected by and no Guarantor shall be entitled to raise as a defense the
failure of any Purchaser to assert any claim or demand or to enforce any remedy
under this Agreement, the Notes, or under any other guaranty or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of any Note
Guaranteed Obligations, or by any other act or omission which may or might
otherwise in any manner or to any extent vary the risk or reduce or extinguish
the liability of such Guarantor or otherwise operate as a discharge of such
Guarantor as a matter of law or equity.

 

Each
Guarantor further agrees that its guaranty shall be a continuing guaranty and
shall stand as a guaranty of full and final payment and performance of all Note
Guaranteed Obligations hereunder from time to time and shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal or interest on any of the Note Guaranteed
Obligations is rescinded or must otherwise be returned by the Purchasers upon
the bankruptcy or reorganization of any Note Party or otherwise.

 

12.3                           Waiver.  Each Guarantor unconditionally
waives (a) notice of any of the matters referred to in Section 12.2,
(b) notice to such Guarantor of the incurrence of any of the Note
Guaranteed Obligations, notice to such Guarantor of any breach or default by
any Guarantor with respect to any of the Note Guaranteed Obligations or any
other notice that may be required, by statute, rule of law or otherwise, to
preserve any rights of any Purchaser holding any of the Notes against such
Guarantor, (c) presentment to or demand of payment from any other
Guarantor with respect to any Note or protest for nonpayment or dishonor, (d) any
right to the enforcement, assertion, exercise or exhaustion by any Purchaser
holding any of the Notes of any right, power, privilege or remedy conferred in
this Agreement, the Notes or any other Subordinated Note Documents or
otherwise, (e) any requirement of diligence on the part of any
Purchaser holding any of the Notes, (f) any requirement to mitigate
the damages resulting from any default under this Agreement, the Notes or any
other Subordinated Note Documents, (g) any notice of any sale,
transfer or other disposition of any right, title or interest to or in this
Agreement, the Notes or any other Subordinated Note Documents, (h) any
release of any Guarantor from its obligations hereunder resulting from any loss
by it of its rights of subrogation hereunder and (i) any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge, release or defense of a guarantor or surety or which might otherwise
limit recourse against such Guarantor.

 

12.4                           Subrogation.  Each Guarantor hereby
subordinates to the prior payment in full of all Note Party Obligations all
rights of subrogation against or in respect of each other Guarantor and its
respective properties and all rights of indemnification, contribution and
reimbursement from other each Guarantor and their respective

 

59

 

properties, in each case in connection with this
guaranty and any payments made hereunder, and regardless of whether such rights
arise by operation of law, pursuant to contract or otherwise until such time as
the obligations hereunder have been fully and finally performed and paid.

 

12.5                           Limitation on Liability.  Each
Guarantor acknowledges that it will derive substantial economic and other
benefits from the issuance of the Notes, and that the incurrence of the Note
Party Obligations is in the best interests of each Guarantor.  If, in any action to enforce this guaranty or
any proceeding to allow or adjudicate a claim under this guaranty, a court of
competent jurisdiction shall determine that enforcement of this guaranty
against any Guarantor for the full amount of the obligations hereunder is not
lawful under, or would be subject to avoidance under, Section 548 of the Bankruptcy Code or any
applicable provision of comparable state law, the liability of such Guarantor
under this guaranty shall be limited to the maximum amount lawful (taking into
account the Senior Debt of such Guarantor and the provisions of the
Subordination Agreement) and not subject to avoidance under such law.

 

Article
XIII

Definitions

 

13.1                           Definitions.  The following terms shall have
the following meanings:

 

“Accounts”:
means “accounts” (as defined in Article 9 of the UCC), including any and
all rights to payment for the sale or lease of goods or rendition of services,
whether or not they have been earned by performance.

 

“Acquisition
Pro Forma”: has the meaning set forth in Section 8.8(b).

 

“Acquisition
Projections”: has the meaning set forth in Section 8.8(b).

 

“Adjusted
EBITDA”: has the meaning provided in the Compliance Certificate.

 

“Affiliate”:
means with respect to any Person (a) any Person that directly or
indirectly controls such Person, (b) any Person which is controlled
by or is under common control with such controlling Person or (c) each
of such Person’s (other than, with respect to any Purchaser, any Purchaser’s)
officers or directors (or Persons functioning in substantially similar roles)
and the spouses, parents, descendants and siblings of such officers, directors
or other Persons.  As used in this
definition, the term “control” of a Person means the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of any class of
voting securities of such Person or to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.

 

60

 

“Agent”:
means Merrill Lynch Capital, a Division of Merrill Lynch Business Financial
Services Inc. as agent for the Senior Lenders under the Senior Credit
Agreement, and any successor in such capacity.

 

“Agreement”:
means this Securities Purchase Agreement, as modified, supplemented, amended,
restated (including any amendment and restatement hereof), extended or renewed,
from time to time.

 

“Anti-Terrorism
Laws”: means any Laws relating to terrorism or money laundering, including
Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT
Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws
administered by OFAC.

 

“Applicable
Law”: includes statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other
regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at
any time or from time to time heretofore or hereafter made upon or otherwise
issued to any Purchaser by any central bank or other fiscal, taxation, monetary
or other authority.

 

“Applicable
Percentage”: has the meaning assigned to that term in Section 6.2(b).

 

“Applicable
Premium”: has the meaning assigned to that term in Section 6.2(b).

 

“Asset
Disposition”: means any sale, lease, license, transfer, assignment or other
consensual disposition by any Note Party of any asset, but excluding (a) dispositions
of Inventory in the Ordinary Course of Business, (b) dispositions
of Cash Equivalents, (c) transfers among Specified Companies and
their Domestic Subsidiaries (other than Dormant Subsidiaries) not otherwise
prohibited hereunder (d) the granting of licenses of Intellectual
Property in the Ordinary Course of Business and (e) related
dispositions which do not involve proceeds in excess of $300,000.

 

“Bankruptcy
Code”: means Title 11 of the United States Code entitled “Bankruptcy”.

 

“Blocked
Person” means any Person:  (a) listed
in the annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (b) a Person owned or controlled by, or acting for
or on behalf of, any Person that is listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (c) a
Person with which any Purchaser is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224 or (e) a Person that is named
a “specially designated national” or “blocked person” on the most current list
published by OFAC or other similar list.

 

61

 

“Business
Day”: means any day except a Saturday, Sunday or other day on which either
the New York Stock Exchange is closed, or on which commercial banks in Chicago
and New York City are authorized by law to close.

 

“Capital
Expenditures”: has the meaning provided in the Compliance Certificate.

 

“Capital
Lease”: of any Person means any lease of any property by such Person as
lessee which would, in accordance with GAAP, be required to be accounted for as
a capital lease on the balance sheet of such Person.

 

“Capital
Stock”: means, any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

 

“Cash
Equivalents”: means any Investment in (a) direct obligations of
the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof with a maturity date of no more than one
(1) year from the date of acquisition, (b) commercial paper with a
duration of not more than nine (9) months rated at least A-1 by Standard &
Poor’s Ratings Service and P-1 by Moody’s Investors Services, Inc., which is
issued by a Person (other than any Note Party or an Affiliate of any Note
Party) organized under the laws of any State of the United States or of the
District of Columbia, (c) time deposits, certificates of deposit
and banker’s acceptances with a duration of not more than six (6) months issued
by any office located in the United States of any bank or trust company which
is organized under the laws of the United States or any State thereof, or is
licensed to conduct a banking business in the United States, and has capital,
surplus and undivided profits of at least $500,000,000 and which issues (or the
parent of which issues) certificates of deposit or commercial paper with a
rating described in clause (b) above, (d) repurchase agreements and
reverse repurchase agreements with a duration of not more than thirty (30) days
with respect to securities described in clause (a) above entered into with an
office of a bank or trust company meeting the criteria specified in clause (c)
above or (e) any money market or mutual fund which invests only in
the foregoing types of investments, has portfolio assets in excess of
$5,000,000,000 and is rated AAA by Standard & Poor’s Ratings Service and
Aaa by Moody’s Investors Services, Inc. 
With respect to any Foreign Subsidiary, “Cash Equivalents” shall mean
any Investment substantively comparable to the foregoing but in the currency of
the jurisdiction of organization of such Subsidiary or Euros.

 

“CERCLA”:
means the Comprehensive Environmental Response, Compensation and Liability Act
of 1980.

 

62

 

“Change
of Control”: means the occurrence of any of the following:  (a) Investor shall collectively
cease to, directly or indirectly, own and control at least (i) eighty
percent (80%) of the outstanding equity interests of Company owned by them on
the Closing Date or (ii) that percentage of the outstanding voting
equity interests of Company necessary at all times to elect a majority of the
board of directors (or similar governing body) of Company and to direct the
management policies and decisions of Company, (b) except as
permitted by Section 8.7, Company shall cease to, directly or indirectly
own and control one hundred percent (100%) of each class of the outstanding
equity interests of SLM or Loud UK or Acuma Labs Inc., (c) except
as permitted by Section 8.7, Company shall cease to, directly or
indirectly, own and control one hundred percent (100%) of each class of the
outstanding equity interests of any other Subsidiary or (d) any “Change
of Control”, “Change in Control”, or terms of similar import occurs under any
Senior Financing Document.

 

“Change
of Control Applicable Percentage”: has the meaning assigned to that term in
Section 6.2(c).

 

“Change
of Control Applicable Premium”: has the meaning assigned to that term in Section 6.2(c).

 

“Closing
Date”: has the meaning assigned to that term in Section 2.2.

 

“Code”:
means the Internal Revenue Code of 1986, as amended from time to time.

 

“Collateral”:
means all property, now existing or hereafter acquired, mortgaged or pledged
to, or purported to be subjected to a Lien in favor of, Agent, for the benefit
of Agent and Senior Lenders, pursuant to Senior Financing Documents.

 

“Commitment
Fee”: has the meaning assigned to that term in Section 2.3.

 

“Company”:
has the meaning assigned to that term in the first paragraph of this Agreement.

 

“Compliance
Certificate”: means a certificate duly executed by a Responsible Officer,
substantially in the form of Exhibit E attached hereto.

 

“Condemnation”:
means any taking by a Governmental Authority of property or assets, or any part
thereof or interest therein, for public or quasi-public use under the power of
eminent domain, by reason of any public improvement or condemnation or in any
other manner.

 

“Confidential
Information”: has the meaning assigned to that term in Section 14.15.

 

63

 

“Consolidated
Subsidiary”: means at any date any Subsidiary or other Person the accounts
of which would be consolidated with those of Company (or any other Person, as
the context may require hereunder) in its consolidated financial statements if
such statements were prepared as of such date.

 

“Contingent
Obligation”: means, with respect to any Person, any direct or indirect
liability of such Person:  (a) with
respect to any debt, lease, dividend or other payment obligation of another
Person if the purpose or intent of such Person incurring such liability, or the
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreement to pay
relating thereto will be complied with, or that any holder of such liability
will be protected, in whole or in part, against loss with respect thereto
(other than pursuant to Ordinary Course of Business indemnification provisions
in agreements for which no claim has been asserted), (b) with
respect to any undrawn portion of any letter of credit issued for the account
of such Person or as to which such Person is otherwise liable for the
reimbursement of any drawing, (c) under any Swap Contract, to the
extent not yet due and payable, (d) to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement or (e) for any obligations of another Person
pursuant to any agreement to purchase, repurchase or otherwise acquire any
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to preserve the solvency,
financial condition or level of income of another Person, excluding in the case
of this clause (e) any obligation in connection with upfront payments from
vendors or suppliers.  The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determinable amount,
the maximum amount so guaranteed or otherwise supported.  It is hereby understood and agreed that all
Floor Plan Obligations shall constitute Contingent Obligations.

 

“Control
Investment Affiliate”: means, as to any Person, any other Person that (a) directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person and (b) is organized by such Person primarily for
the purpose of making equity or debt investments in one or more companies.  For purposes of this definition, “control” of
a Person means the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.  All investment funds advised
by Investor or by an Affiliate of Investor will be deemed to be Control
Investment Affiliates of each other and Investor.

 

“Controlled
Group”: means all members of a group of corporations and all members of a
group of trades or businesses (whether or not incorporated) under common
control which, together with Company, are treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

 

64

 

“Debt”:
of a Person means at any date, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except (i) trade accounts payable
and accrued expenses arising and paid in the ordinary course of business as
modified from time to time, (ii) except as provided in clause (i)
below, the SLM Holdback Payment Obligations and (iii) salaries,
employee benefits and deferred compensation, (d) all Capital Leases
of such Person, (e) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under any letter of credit and
all non-contingent obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a banker’s acceptance or similar
instrument, (f) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person
(except where such repurchase or redemption rights may not, by the terms
thereof, arise at any time during the term of this Agreement or while any of
the Note Party Obligations (other than contingent indemnification liability,
absent the assertion of a claim with respect thereto) remain outstanding), (g) all
obligations secured by a consensual Lien on any asset of such Person, whether
or not such obligation is otherwise an obligation of such Person (but, if not,
then only to the extent of the fair market value of the asset securing such
obligations), (h) ”earnouts” and similar payment obligations of
such Person, (i) the undrawn portion of the SLM Letter of Credit
(and prior to the issuance thereof, the SLM Holdback Payment Obligation; it
being agreed that the SLM Holdback Payment Obligation shall not be considered “Debt”
for purposes of Section 8.1) and (j) all Debt of others
Guaranteed by such Person.  It is hereby
understood and agreed that in no event shall the term “Debt” include the
Foreign Payment Obligations and any Floor Plan Obligations.

 

“Default”:
means any condition or event which with the giving of notice or lapse of time
or both would, unless cured or waived, become an Event of Default.

 

“Disregarded
Notes”: has the meaning assigned to that term in Section 13.7.

 

“Dollars”
and “$”: means lawful currency of the United States of America.

 

“Domestic
Subsidiary”: means a Subsidiary organized, incorporated or otherwise formed
under the laws of the United States or any State thereof.

 

“Dormant
Subsidiaries”: means Mackie Designs (France) S.A., a French entity, Class
A, s.r.o., a Czech entity, Mackie Designs (Deutschland) GmbH, a German entity,
Mackie Designs (Netherlands) B.V., a Netherlands entity and Mackie Designs
Inc., a Washington corporation.

 

“EBITDA”:
has the meaning provided in the Compliance Certificate.

 

65

 

“Environmental
Laws”: means any and all Laws relating to the environment or the effect of
Hazardous Materials on human health or to emissions, discharges or releases of
Hazardous Materials or wastes into the environment, including ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials or wastes or the clean-up or other remediation
thereof.

 

“ERISA”: means the
Employee Retirement Income Security Act of 1974.

 

“ERISA
Plan”: means any “employee benefit plan”, as such term is defined in
Section 3(3) of ERISA (other than a Multiemployer Plan), which Company maintains,
sponsors or contributes to, or, in the case of an employee benefit plan which
is subject to Section 412 of the Code or Title IV of ERISA, to which Company or
any member of the Controlled Group may have any liability, including any
liability by reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

“Event
of Default”: has the meaning assigned to that term in Article X.

 

“Extraordinary
Receipts” means any cash, net of expenses reasonably related thereto,
received by any Note Party not in the Ordinary Course of Business (and not
consisting of proceeds described in any of Section 6.2(d)(i) and Section
6.2(d)(ii) or in clauses (ii), (iii) and/or (iv) of Section 2.1(c) of the
Senior Credit Agreement and not consisting of amounts received in respect of
foreign, United States, State or local tax refunds), including without
limitation pension plan reversions.

 

“Fiscal
Year”: means a fiscal year of Specified Companies, ending on
December 31 of each calendar year.

 

“Fixed
Charge Coverage Ratio”: has the meaning provided in the Compliance
Certificate.

 

“Floor
Plan Obligations”: means obligations of the Specified Companies in
connection with the financing of inventory purchased by any Specified Company’s
customer.

 

“Flow-Through
Purchaser”: has the meaning assigned to that term in Section 6.4(f).

 

“Foreign
Payment Obligations”: means obligations owed to Mackie Designs Italy and
(Italy) SPA in Liquidazione E Concordato Preventivo, in an aggregate principal
amount not to exceed $3,200,000.

 

66

 

“Foreign
Subsidiary”: means any Subsidiary that is not a Domestic Subsidiary.

 

“GAAP”:
means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the
date of determination.

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any agency, department or Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation or other Person owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing, whether
domestic or foreign.

 

“Guarantee”:
by any Person means any obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Debt or other payment obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other payment obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part) (other than pursuant to Ordinary Course of Business
indemnification provisions in agreement, for which no claim has been asserted),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the Ordinary Course of Business.  The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Guarantors”:
means, collectively, (i)  each Domestic Subsidiary of Company
(including SLM) and (ii) each other Person which guarantees,
pursuant to this Agreement or otherwise, all or any part of the Note
Obligations.

 

“Hazardous
Materials”: means (a) any “hazardous substance” as defined in
CERCLA, (b) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act, (c) asbestos, (d) polychlorinated
biphenyls, (e) petroleum, its derivatives, by-products and other
hydrocarbons, (f) mold and (g) any other pollutant,
toxic, radioactive, caustic or otherwise hazardous substance regulated under
Environmental Laws.

 

“Hazardous
Materials Contamination”: means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,

 

67

 

soil, groundwater, air or other elements on
or of property by Hazardous Materials which requires clean up or remediation
under Environmental Laws.

 

“Indemnified
Liabilities”: has the meaning assigned to that term in Section 13.5(a).

 

“Indemnitee”:
has the meaning assigned to that term in Section 13.5(a).

 

“Intellectual
Property”: means, all patents, trademarks, trade names, trade styles, trade
dress, service marks, logos and other business identifiers, copyrights,
technology, know-how and processes, computer hardware and software and all
applications and licenses therefor.

 

“Inventory”:
means “inventory” (as defined in Article 9 of the UCC).

 

“Investment”:
means any investment in any Person, whether by means of acquiring (whether for
cash, property, services, securities or otherwise) or holding securities,
capital contributions, loans, time deposits, advances, Guarantees or otherwise
(it being agreed that Accounts held in the Ordinary Course of Business shall
not constitute Investments).  The amount
of any Investment shall be the original cost of such Investment plus the cost
of all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect thereto.

 

“Investor”:
means Sun Capital Partners Management, LLC, a Delaware limited liability
company and its Affiliates, successors and assigns.

 

“IRS”:
means the Internal Revenue Service.

 

“Judgment
Currency”: has the meaning assigned to that term in Section 14.13.

 

“Laws”:
means any and all federal, state, local and foreign statutes, laws, judicial
decisions, regulations, binding guidelines, ordinances, rules, judgments,
orders, decrees, codes, injunctions, permits, governmental concessions, grants,
governmental agreements and governmental restrictions, whether now or hereafter
in effect.

 

“Lien”:
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset.  For the purposes
of this Agreement and the other Subordinated Note Documents, any Specified
Company or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, Capital Lease or other title retention
agreement relating to such asset.  No
Person shall be deemed to have a Lien on any asset solely as a result of such
Person filing an unauthorized UCC-1 financing statement against any such asset.

 

68

 

“Litigation”:
means any action, suit or proceeding before any court, mediator, arbitrator or
Governmental Authority.

 

“LOUD
UK”: means LOUD Technologies (Europe) Plc, a public liability company
organized under the laws of England and Wales.

 

“Major
Casualty Proceeds”: means (a) the aggregate insurance proceeds
received in connection with one or more related events under any Property
Insurance Policy or (b) any award or other compensation with
respect to any eminent domain, condemnation of property or similar proceedings
(or any transfer or disposition of property in lieu of condemnation), if the
amount of such aggregate insurance proceeds or award or other compensation
exceeds $300,000.

 

“Management
Agreement”: means the Management Services Agreement dated as of February
21, 2003 between Company and Sun Capital Partners Management, LLC, which
agreement has not been amended or otherwise modified.

 

“Mandatory
Redemptions”: has the meaning assigned to such term in Section 6.2(d).

 

“Margin
Stock”: has the meaning assigned thereto in Regulation U of the Federal
Reserve Board.

 

“Material
Adverse Effect”: means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Note Parties,
taken as a whole, (b) the rights and remedies (taken as a whole) of
any Purchaser under any Subordinated Note Document, or the ability of any Note
Party to perform their obligations under any Subordinated Note Document to
which it is a party or (c) the legality, validity or enforceability
of any Subordinated Note Document.

 

“Material
Contracts”: has the meaning set forth in Section 4.17.

 

“Materials
of Environmental Concern”: means any gasoline or petroleum (including crude
oil or any fraction thereof) or petroleum products, polychlorinated biphenyls,
urea-formaldehyde insulation, asbestos, pollutants, contaminants,
radioactivity, and any other substances or forces of any kind, whether or not
any such substance or force is defined as hazardous or toxic under any
Environmental Law, that is regulated pursuant to or could give rise to
liability under any Environmental Law.

 

69

 

“Maturity
Date”: has the meaning assigned to that term in Section 6.2(a).

 

“Multiemployer
Plan”: means a multiemployer plan, that is intended to meet the definition
set forth in Section 4001(a)(3) of ERISA, to which Company or any member of the
Controlled Group may have any liability.

 

“Net
Cash Proceeds”: means, with respect to any transaction or event or any
event giving rise to Major Casualty Proceeds, an amount equal to the cash
proceeds received by any Note Party from or in respect of such transaction or
event (including cash proceeds of any non-cash proceeds of such transaction),
less (a) any out-of-pocket expenses (including legal fees, brokers’
or underwriters’ commissions, accountants’ fees and other customary fees and
expenses) that are reasonably incurred by such Note Party in connection
therewith, (b) amounts required to be paid to Governmental
Authorities in connection therewith and (c) in the case of an Asset
Disposition, the amount of any Debt secured by a Lien on the related asset and
discharged from the proceeds of such Asset Disposition and any taxes paid or
reasonably estimated by the applicable Note Party to be payable by such Person
in respect of such Asset Disposition (provided, that if the actual
amount of taxes paid is materially less than the estimated amount, the
difference shall immediately constitute Net Cash Proceeds and shall be promptly
paid to the Purchasers in accordance with the terms hereof).

 

“Non-Voting
Observer”: has the meaning assigned to that term in Section 7.14.

 

“Note
Guaranteed Obligations”: has the meaning assigned to that term in Article XII.

 

“Note
Party”: means any of Company or SLM and any Subsidiary of Company or SLM,
whether now existing or hereafter acquired or formed; and “Note Parties”
means all such Persons, collectively.

 

“Note
Party Obligations”: means all loans, advances, debts, liabilities and
obligations for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Note
Party to any Purchaser, and all covenants and duties regarding such amounts, of
any kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, in each case, arising under this Agreement or
any of the other Subordinated Note Documents. 
This term includes, without limitation all principal, premium, interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Note Party in bankruptcy, whether or not allowed
in such case or proceeding), fees, charges, expenses, attorneys’ fees and any
other sum chargeable to any Note Party under this Agreement or any of the other
Subordinated Note Documents.

 

70

 

“Note
Register”: has the meaning assigned to that term in Section 6.5.

 

“Notes”:
has the meaning assigned to that term in Section 1.1.

 

“OCM”:
means OCM Mezzanine Fund, L.P., a Delaware limited partnership.

 

“OFAC”:
means the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC
Lists”: means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

“Operative
Documents”: means (a) the Senior Financing Documents, (b)
Subordinated Note Documents and (c) final documentation, if any,
concerning the purchase by OCM of any equity interest in the Company.

 

“Ordinary
Course of Business”: means, in respect of any transaction involving any
Note Party, the ordinary course of such Note Party’s business, as conducted by
such Note Party in accordance with past practices.

 

“Organizational
Documents”: means, with respect to any Person other than a natural person,
the documents by which such Person was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or
other forms of preferred equity) and which relate to the internal governance of
such Person (such as by-laws, a partnership agreement or an operating, limited
liability company or members agreement).

 

“Other
Taxes”: has the meaning assigned to that term in Section 6.4(b).

 

“PBGC”:
means the Pension Benefit Guaranty Corporation and any Person succeeding to any
or all of its functions under ERISA.

 

“Pension
Plan”: means any ERISA Plan that is subject to Section 412 of the Code or
Title IV of ERISA.

 

“Permits”:
has the meaning set forth in Section 4.1.

 

“Permitted
Acquisition”: has the meaning set forth in Section 8.8(b).

 

71

 

“Permitted
Contest”: means a contest maintained in good faith by appropriate
proceedings timely instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; provided that compliance
with the obligation that is the subject of such contest is effectively stayed
during such challenge.

 

“Permitted
Investors”: means the collective reference to the Investor and its Control
Investment Affiliates.

 

“Permitted
Liens”: means Liens permitted pursuant to Section 8.2.

 

“Person”:
means any natural person, corporation, limited liability company, professional
association, limited partnership, general partnership, joint stock company,
joint venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
Governmental Authority.

 

“Property
Insurance Policy”: means any insurance policy maintained by any Note Party
covering losses with respect to tangible real or personal property or
improvements or losses from business interruption.

 

“PTE”:
has the meaning assigned to that term in Section 5.5(a).

 

“Purchasers”:
means the holder or holders from time to time of the Notes.

 

“Quarterly
Payment Date”: means each March 31, June 30, September 30
and December 31 occurring after the Closing Date, commencing on September
30, 2005.

 

“Release”:
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, seeping, migrating, dumping or disposing of any
Hazardous Material (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Hazardous Material) into
the indoor or outdoor environment, including ambient air, soil, surface or
ground water.

 

“Remediation”:
has the meaning assigned to that term in Section 7.10(a).

 

“Required
Holders”: means, at any time, the Purchasers holding at least a majority of
the principal amount of all Notes then outstanding.

 

“Responsible
Officer”: means any of the Chief Executive Officer, Chief Financial Officer
or any Vice President.

 

“Restricted
Distribution”: means as to any Person (a) any dividend or other
distribution (whether in cash, cash pay securities or other property) on any
equity interest in such Person (except those payable solely in its non-cash pay
equity interests) or

 

72

 

(b) any payment by such Person on
account of (i) the purchase, redemption, retirement, defeasance,
surrender, cancellation, termination or acquisition (exclusive of a reverse
stock split of equity securities issued by Company) of any equity interests in
such Person or any claim respecting the purchase or sale of any equity interest
in such Person or (ii) any option, warrant or other right to
acquire any equity interests in such Person.

 

“Securities
Act”: means the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.

 

“Senior
Credit Agreement”: means the Credit Agreement, dated as of August 29, 2005,
by and among the Company, SLM, the Senior Lenders and the Agent as in effect on
the Closing Date, and to the extent not prohibited under Section 8.19
and the Subordination Agreement, any amendments, restatements, extensions,
modifications, refinancings or replacements thereof.

 

“Senior
Covenant Debt”: has the meaning provided in the Compliance Certificate.

 

“Senior
Debt”: has the meaning assigned to that term in the Subordination
Agreement.

 

“Senior
Covenant Debt to Adjusted EBITDA Ratio”: has the meaning provided in the
Compliance Certificate.

 

“Senior
Financing Documents”: means the “Financing Documents” (as defined in the
Senior Credit Agreement) as in effect on the Closing Date, and to the extent
not prohibited under Section 8 and the Subordination Agreement, any
amendments, restatements, extensions, modifications, refinancings or
replacements thereof.

 

“Senior
Lenders”: means the lenders from time to time party to the Senior Credit
Agreement and their successors and assigns.

 

“SLM
Holdback Payment Obligations”: means, obligations of SLM, not to exceed
$3,000,000 plus accrued interest thereon, to make the “Post-Closing Payment”
pursuant to that certain Acquisition Agreement dated as of March 4, 2005 among
Company, SLM, SLM Holding Corp. and SLM Merger Corp.

 

“SLM
Letter of Credit”: means any letter of credit (or any replacement letter of
credit) to collateralize the SLM Holdback Payment Obligations.

 

“Small
Scale Acquisition”: means any Permitted Acquisition for which the sum of
all amounts payable in connection with such Permitted Acquisition (as
calculated in clause viii of Section 8.8 (b) hereof) is less than
$1,500,000.

 

73

 

“Solvent”:
means, with respect to any Person, that such Person (a) owns and
will own assets the fair saleable value of which, on a going concern basis, are
(i) greater than the total amount of its liabilities (including the
amount of Contingent Obligations to the extent reasonably expected to become
non-contingent) and (ii) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to it, (b) has capital
that is not unreasonably small in relation to its business as presently
conducted or after giving effect to any contemplated transaction; and (c) does
not intend to incur and does not believe that it will incur debts beyond its
ability to pay such debts as they become due in the ordinary course of
business.

 

“Source”:
has the meaning assigned to that term in Section 5.5.

 

“Specified
Companies”: means the Company and SLM.

 

“Subordinated
Note Documents”: means (a) this Agreement, (b) the Notes, (c)
the Subordination Agreement and (e) all other documents, agreements and
certificates executed or delivered in connection therewith from time to time.

 

“Subordination
Agreement”: the Subordination Agreement, dated the date hereof, among the
Company, SLM the Subsidiary Guarantors, the Agent, OCM Mezzanine Fund, L.P. and
the other Purchasers party thereto, substantially in the form of Exhibit G.

 

“Subsidiary”:
means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, capital stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such capital stock whether by proxy,
agreement, operation of law or otherwise and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of a Specified Company.

 

“Subsidiary
Guarantor”: means each Subsidiary of the Company that is a party to this
Agreement from time to time.

 

“Subsidiary
Joinder”: means a subsidiary joinder in the form of Exhibit F
attached hereto.

 

74

 

“Swap
Contract”: means any “swap agreement”, as defined in Section 101 of the
Bankruptcy Code, that is intended to provide protection against fluctuations in
interest or currency exchange rates and is entered into in the ordinary course
of business and not for speculation.

 

“Target”:
has the meaning set forth in Section 8.8(b).

 

“Taxes”:
has the meaning assigned to that term in Section 6.4(a).

 

“Total
Debt”: has the meaning provided in the Compliance Certificate.

 

“Total
Debt to Adjusted EBITDA Ratio”: has the meaning provided in the Compliance
Certificate.

 

“Transaction”:
means, collectively, (a)  the issuance and sale of the Notes, (b) the
entering into of the Senior Financing Documents and the incurrence of loans
thereunder on the Closing Date, (c) the purchase by OCM of any equity
interest in the Company and (d) the payment of all fees and expenses
in connection with the foregoing.

 

“UCC”:
means the Uniform Commercial Code of the State of Illinois or of any other
state the laws of which are required to be applied in connection with the
perfection of security interests in any Collateral.

 

“United
States” and “U.S.”: each mean the United States of America.

 

“Wholly-Owned
Subsidiary”: means, with respect to any Person, any Subsidiary of such
Person of which all of the equity securities (other than, in the case of a
corporation, directors’ qualifying shares, to the extent legally required) are
directly or indirectly owned and controlled by such Person or one or more
Wholly-Owned Subsidiaries of such Person.

 

13.2                           Other Interpretive Provisions.  With
reference to this Agreement and each other Subordinated Note Document, unless
otherwise specified herein or in such other Subordinated Note Document:

 

(a)                                  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”,
“includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The
word “will” shall be construed to have the same meaning and effect as
the word “shall”. Unless the context requires otherwise, (i) any
definition of or reference to any agreement, instrument or other document
(including any Organizational Document) shall be construed as referring to such
agreement, instrument or any other document as from time to

 

75

 

time
amended, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein or in any other
Subordinated Note Document), (ii) any reference herein to any
Person shall be construed to include such Person’s successors and assigns, (iii) the
words “herein,” “hereof” and “hereunder” and words of
similar import when used in any Subordinated Note Document shall be construed
to refer to such Subordinated Note Document in its entirety and not to any
particular provision thereof, (iv) all references in a Subordinated
Note Document to Articles and Sections of, and Exhibits and Schedules to, the
Subordinated Note Document in which such references appear, (v) any
reference to any law shall include all statutory and regulatory provisions
consolidating, amending, replacing or interpreting such law and any reference
to any law or regulation shall, unless otherwise specified, refer to such law
or regulation as amended, modified or supplemented from time to time and (vi) the
words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

 

(b)                                 In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from
and including;” the words “to” and “until” each mean “to
but excluding;” and the word “through” means “to and including.”

 

(c)                                  Section headings herein and in the other
Subordinated Note Documents are included for convenience of reference only and
shall not affect the interpretation of this Agreement or any other Subordinated
Note Document.

 

13.3                           Accounting Terms, Etc.

 

(a)                                  Generally.  All accounting terms not
specifically or completely defined herein shall be construed in conformity
with, and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be
prepared in conformity with, GAAP. 
Except as provided in clause (d) of the definition of the term “Debt”,
in no event shall any capital stock be deemed to constitute Debt or any payment
of any dividend or distribution thereon be deemed to constitute interest solely
as a result of the application of FAS 150.

 

(b)                                 Changes in GAAP.  In
the event that any “Accounting Change” (as defined below) shall occur and such
change results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Company and the Purchasers agree
to enter into negotiations in order to amend such provisions of this Agreement
so as to equitably reflect such Accounting Change with the desired result that
the criteria for evaluating the Company’s financial condition shall be the same
after such Accounting Change as if such Accounting Change had not been

 

76

 

made.  Until
such time as such an amendment shall have been executed and delivered by the
Company and the Required Holders, all financial covenants, standards and terms
in this Agreement shall continue to be calculated or construed as if such
Accounting Change had not occurred.  “Accounting
Change” refers to any change in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.

 

13.4                           Rounding.  All calculations of financial
ratios set forth in Article IX shall be calculated to the same number of
decimal places as the relevant ratios are expressed in and shall be rounded
upward if the number in the decimal place immediately following the last
calculated decimal place is five or greater. 
For example, if the relevant ratio is to be calculated to the hundredth
decimal place and the calculation of the ratio is 5.126, the ratio will be
rounded up to 5.13.

 

13.5                           Times of Day. 
Unless otherwise specified, all references herein to times of day shall
be references to Eastern time (daylight or standard, as applicable).

 

13.6                           Headings.  Article, Section and
Subsection headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

 

13.7                           Disregarded Notes.  Any
Notes owned by any Specified Company, any Subsidiary, any Permitted Investor or
any of their respective Affiliates (collectively, the “Disregarded Notes”),
shall be disregarded for purposes of, and no holder of any Disregarded Note
shall have the right to make or participate in, any request, demand,
authorization, direction, notice, vote, nomination, consent, waiver or
amendment under or in connection with this Agreement or any other Subordinated
Note Document.  Any request, demand,
authorization, direction, notice, vote, nomination, consent, wavier or
amendment consented to by the requisite quorum of holders of Notes (other than
the Disregarded Notes) shall be binding upon the Disregarded Notes.

 

Article XIV

Miscellaneous

 

14.1                           Amendments; Actions by the Purchasers;
Solicitation of the Purchasers.

 

(a)                                  No amendment, alteration, modification or
waiver of any term or provision of this Agreement, the Notes or the other
Subordinated Note Documents, nor consent to any departure by any Note Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Holders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, alteration,

 

77

 

modification or waiver shall be effective to reduce
or to postpone the date fixed for the payment of the principal (excluding any
Mandatory Redemption), interest, or premium, if any, payable on any Note or any
fees or other amounts payable hereunder or to alter or amend the consent
mechanism provided for under Section 11.4 or this Section 14.1 without the consent of all of the Purchasers holding Notes then
outstanding.  Any waiver or consent may
be given subject to satisfaction of conditions stated therein.  Written notice of any waiver or consent
affected under this subsection shall be promptly delivered by the Company to
any Purchasers that did not execute the same.

 

(b)                                 The Company will deliver executed or true,
correct and complete copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 14.1 to each
Purchaser promptly following the date on which it is executed and delivered by,
or receives the consent or approval of, the Required Holders.

 

(c)                                  The Note Parties shall not, nor shall any of
such Note Parties permit any Subsidiary or Affiliate of any Note Parties to,
directly or indirectly, pay or cause to be paid any remuneration, whether by
way of supplemental or additional interest, fee or otherwise, or grant any
security, to any Purchaser of Notes as consideration for or as an amendment of
any of the provisions hereof or of the Notes unless such remuneration is
concurrently paid, or security is concurrently granted, on the same terms,
ratably to the Purchasers of all Notes then outstanding.

 

(d)                                 Any amendment or waiver made pursuant to this
Section 14.1 by a Purchaser of Notes that has
transferred or has agreed to transfer its Notes to any of the Note Parties or
any of their Subsidiaries or Affiliates and has provided or has agreed to
provide such amendment or waiver as a condition to such transfer shall be void
and of no force and effect except solely as to such Purchaser, and any
amendments effected or waivers granted that would not have been or would not be
so effected or granted but for such amendment or waiver (and the amendments or
waivers of all other Purchasers of Notes that were acquired under the same or
similar conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect, except solely
as to such Purchaser.

 

(e)                                  Except as otherwise stated in paragraph (a)
above and Articles X and XI, wherever in this Agreement action is
required or permitted to be taken by, or consent is required of, or a matter
requires the satisfaction of, the Purchasers, such action may be taken by,
and/or such consent may be obtained from, and/or such satisfaction may be
expressed by, the Required Holders.

 

14.2                           Addresses for Notices, Etc.  All
notices, requests, demands and other communications provided for hereunder
shall be in writing and mailed (by first class registered or certified mail,
postage prepaid), sent by express overnight courier service or

 

78

 

facsimile transmission, or delivered to the
applicable party at the addresses indicated below:

 

If to any Note Party:

 

LOUD Technologies Inc

c/o Sun Mackie, LLC

c/o Sun Capital Partners, Inc.

5200 Town Center Circle, Suite 470

Boca Raton, Florida 
33486

Attention: 
Marc J. Leder, Rodger R. Krouse and C.

Deryl Couch

Facsimile:  (561) 394-0540

 

with a copy to:

 

LOUD Technologies Inc.

16220 Wood-Red Road Northeast

Woodinvalle, Washington 98072

Attention: 
Timothy P. O’Neil

Facsimile: 
(425) 483-1801

 

and

 

Kirkland
& Ellis LLP

200 East Randolph Drive

Chicago, Illinois 60601

Attention: Francesco Penati, Esq.

Facsimile:  (312) 861-2200

 

If to OCM Mezzanine Fund, L.P.:

 

OCM
Mezzanine Fund, L.P.

1301 Avenue of the Americas

New York, New York  10019

Attention:  Gary Trabka and Raj Makam

Facsimile:  (212) 284-1969

 

with
a copy to:

 

79

 

Debevoise
& Plimpton LLP

919 Third Avenue

New York, New York  10022

Attention:  David A. Brittenham, Esq.

Facsimile:                                            (212) 909-6836

 

If to any other Purchaser:

 

At
such Purchaser’s address for notice as set forth in the transfer records of the
Company

 

or,
as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery
with the terms of this Section (such designation, if made by a Purchaser
holding Notes, to be recorded by the Company in the Note Register).  All such notices, requests, demands and other
communications shall be deemed to have been validly served, given or delivered
(a) in the case of communications to the Purchasers in respect of
any matter contemplated by Section 6.2(c) or Section 6.2(d), when received and (b) in
the case of all other communications, (i) upon the earlier of actual
receipt and three (3) days after deposit in the United States mail, registered
or certified mail, return receipt requested, with proper postage paid, (ii) upon
transmission, when sent by e-mail, telecopy or other similar facsimile
transmission and confirmed by telephone, (iii) one Business Day
after deposit with a reputable overnight courier with all charges prepaid or (iv) when
delivered, if hand delivered by messenger.

 

14.3                           No Waiver; Cumulative Remedies.  No
failure or delay on the part of any Purchaser, in exercising any right, power
or remedy hereunder shall operate as a suspension or waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder.  The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.

 

14.4                           Costs, Expenses and Taxes.  The
Company agrees to pay on demand (a) all reasonable out-of-pocket
costs and expenses of the Purchasers in connection with the preparation,
execution, delivery, administration, modification and amendment of this
Agreement, the Notes, the other Subordinated Note Documents and other
instruments and documents to be delivered hereunder (including, without
limitation, (i) all reasonable business due diligence expenses
(including travel expenses) incurred by the Purchasers, their affiliates and
their respective officers, directors, and employees, (ii)  transportation,
duplication, search, filing and recording fees and expenses and (iii) the
reasonable fees and expenses of counsel for the Purchasers with respect
thereto, with respect to advising the Purchasers as to their rights and
responsibilities, or the protection or preservation of rights or interests,
under this Agreement, the Notes, the other Subordinated Note

 

80

 

Documents and other instruments and documents to be
delivered hereunder, with respect to negotiations thereunder arising out of any
Default or Event of Default or any events or circumstances that may give rise
to a Default or Event of Default and with respect to presenting claims in or
otherwise participating in or monitoring any bankruptcy, insolvency or other
similar proceeding involving creditors’ rights generally and any proceeding
ancillary thereto), (b) all out-of-pocket costs and expenses of
each Purchaser in connection with the enforcement of this Agreement, the Notes,
the other Subordinated Note Documents and other instruments and documents to be
delivered hereunder (including, without limitation, with respect to enforcement
of rights under this Section 14.4 and Section 14.5), whether
in any action, suit or litigation, or any bankruptcy, insolvency or other
similar proceeding affecting creditors’ rights generally (including, without
limitation, the reasonable fees and expenses of counsel for all Purchasers with
respect thereto) (including, without limitation, with respect to enforcement of
rights under this Section 14.4 and Section 14.5), (c) any
and all stamp, registration, documentary and other similar taxes (expressly
excluding income and capital gain taxes) payable or determined to be payable in
connection with the execution, delivery, performance, enforcement and
admissibility into evidence of this Agreement, the Notes, the other
Subordinated Note Documents, and the other instruments and documents to be
delivered hereunder or thereunder and (d) the reasonable expenses
of preparing Notes from time to time in connection with exchanges and transfers
of Notes, and the expenses of delivering copies of Operative Documents to
Purchasers, and the Note Parties agrees to save each Purchaser harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and filing fees.

 

14.5                           Indemnification; Limitation of Liability.

 

(a)                                  In addition to the payment of expenses
pursuant to Section 14.4, whether or not the transactions
contemplated hereby shall be consummated, each Note Party agrees, jointly and
severally, to indemnify, pay and hold each Purchaser and the partners, members,
officers, directors, employees, Affiliates and agents of each Purchaser
(collectively, the “Indemnitees”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, interest and penalties with respect
thereto and out-of-pocket expenses and the fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceedings, whether or not such Indemnitees shall be designated a
party thereto but excluding any lost profit with respect to its holding of the
Notes), whether absolute, accrued, conditional or otherwise and whether or not
resulting from third party claims, which may be imposed on, incurred by, or
asserted against any such Indemnitee, in any manner relating to or arising out
of (i) the Subordinated Note Documents and the other Operative
Documents and all other matters related thereto or in connection therewith, (ii) the
Purchasers’ agreement to purchase the Notes or the use or

 

81

 

intended use of the proceeds of the sale of the
Notes or the use or intended use of the proceeds of the sale of the Notes
hereunder, (iii) the violation of any securities law by any Note
Party, (iv) the failure of any of the parties (other than the
Purchasers) to the Operative Documents to comply with any law, rule or
regulation applicable to the transactions contemplated thereby, (v) 
any Environmental Law, Environmental Permit, Environmental Liabilities or any
Materials of Environmental Concern (w) present on or under any real
property owned, leased or used, at any time, by any of the Note Parties, (x) Released
from or onto any such real property, (y) generated or Released by
any of the Note Parties or (z) related to any Environmental
Liability (the “Indemnified Liabilities”); provided that no Note
Party shall have any obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities to the extent such Indemnified Liabilities are
determined by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence, bad faith or willful
misconduct of such Indemnitee or any of its partners, members, officers,
directors, employees, Affiliates and agents. 
Notwithstanding any thing to the contrary set forth herein, the
agreements and obligations of the Note Parties contained in this Section 14.5 shall survive the payment in full of principal, interest and all other
amounts payable hereunder and under any of the other Subordinated Note
Documents.

 

(b)                                 No party hereto shall have any liability to
any other party hereto (whether in tort, contract, or otherwise) for
consequential damages suffered by such other party in connection with, arising
out of, or in any way related to, the transactions or relationships
contemplated by the Subordinated Note Documents, or any act, omission or event
occurring in connection therewith, or for any special, exemplary or punitive
damages, and each party hereto hereby waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover any of the
foregoing.

 

14.6                           Successors and Assigns; No Third-Party
Beneficiaries.  This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the Company and each of the
Purchasers and their respective successors and assigns and, in particular,
shall inure to the benefit of and be enforceable by any Purchaser or Purchasers
holding the Notes from time to time, except that no Note Party shall have the
right to assign its rights hereunder or any interest therein without the prior
written consent of the Purchasers.  Any
such purported assignment without the prior written consent of the Purchasers
shall be null and void ab initio.  Except
as expressly set forth herein, nothing in this Agreement shall confer any
claim, right, interest or remedy on any third party or inure to the benefit of
any third party.

 

14.7                           Survival of Agreements; Representations and
Warranties.  All agreements, representations and
warranties contained in this Agreement, the Notes, the Operative Documents or
any other instrument or document delivered in connection herewith or therewith,
or made in writing by or on behalf of any of the Note Parties in connection
herewith or therewith, shall survive the execution and delivery hereof and
thereof,

 

82

 

regardless of any investigation made by the
Purchasers or on behalf of the Purchasers. 
All statements in any certificate or other instrument delivered by or on
behalf of any of the Note Parties pursuant to the terms of this Agreement shall
constitute warranties and representations hereunder.  All obligations hereunder (other than payment
of the Notes, but including, without limitation, reimbursement obligations in
respect of costs, expenses and fees) shall survive the payment of the Notes and
the termination hereof.

 

14.8                           Prior Agreements. 
Except as stated in Section 14.7, this Agreement constitutes
the entire agreement between the parties and supersedes any prior
understandings or agreements, written or oral, concerning the subject matter
hereof.

 

14.9                           Severability.  If
any provision of this Agreement is held to be invalid or unenforceable for any
reason, it shall be adjusted rather than voided, if possible, to achieve the
intent of the parties hereto to the maximum extent possible.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

14.10                     GOVERNING LAW.  THIS
AGREEMENT AND (UNLESS OTHERWISE EXPRESSLY PROVIDED) ALL AMENDMENTS AND
SUPPLEMENTS TO, AND ALL CONSENTS AND WAIVERS PURSUANT TO, THIS AGREEMENT SHALL
IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF
LAWS RULES THEREOF TO THE EXTENT THEY ARE NOT MANDATORILY APPLICABLE BY STATUTE
AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

 

14.11                     Consent to Jurisdiction.

 

(a)                                  Each Note Party irrevocably submits to the
non-exclusive jurisdiction of any state or federal court sitting in the County
of New York over any suit, action or proceeding arising out of or relating to
this Agreement, the Notes or any of the other Subordinated Note Documents.  To the fullest extent it may effectively do
so under Applicable Law, each Note Party irrevocably waives and agrees not to
assert, by way of motion, as a defense or otherwise, any claim that it is not
subject to the jurisdiction of any such court, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum.

 

83

 

(b)                                 Each Note Party agrees, to the fullest extent
it may effectively do so under Applicable Law, that a judgment in any suit,
action or proceeding of the nature referred to in paragraph (a) above brought
in any court referred to therein shall, subject to such rights of appeal on
issues other than jurisdiction as may be available to such Note Party, be
conclusive and binding upon such Note Party and may be enforced in the courts
of the United States of America or the State of New York (or any other courts
to the jurisdiction of which such Note Party is or may be subject) by a suit
upon such judgment.

 

14.12                     WAIVER OF JURY TRIAL.  EACH
PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER SUBORDINATED NOTE DOCUMENT, OR THE BREACH, TERMINATION OR VALIDITY OF
THIS AGREEMENT, OR ANY OTHER SUBORDINATED NOTE DOCUMENT, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.  EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (D) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 14.12.

 

14.13                     Judgment Currency.  All
amounts to be paid pursuant to this Agreement and the other Subordinated Note
Documents, whether payable by the Company or any other Note Party, shall be
payable when due in dollars, in the full amount due, without deduction for any
variation in any rate of exchange (as defined below).  Each Note Party hereby agrees to indemnify
the Purchasers against any loss incurred by any of them as a result of any
judgment or order being given or made for the amount due hereunder and such
judgment or order being expressed and paid in a currency (the “Judgment
Currency”) other than dollars and as a result of any variation as between (a) the
rate of exchange at which the amount in dollars is converted into Judgment
Currency for the purpose of such judgment or order and (b) the rate
of exchange at which the Purchasers are then able to purchase dollars with the
amount of the Judgment Currency actually received by such Purchasers.  The term “rate of exchange” shall include any
premiums and costs of exchange payable in connection with the purchase of, or
conversion into, the relevant currency with or from dollars.

 

84

 

14.14                     Service of Process.  Each
Note Party consents to service of process in any suit, action or proceeding of
the nature referred to in Section 14.11 by actual receipt of a copy thereof by
registered or certified mail, postage prepaid, return receipt requested, to the
address of such Note Party specified in or designated pursuant to Section 14.2.  Each Note Party agrees that such service (a) shall
be deemed in every respect effective service of process upon such Note Party in
any such suit, action or proceeding and (b) shall, to the fullest
extent permitted by law, be taken and held to be valid personal service upon
and personal delivery to such Note Party. 
Nothing in this Agreement shall affect the right of any Purchaser to
serve process in any manner permitted by law, or limit any right that any
Purchaser may have against any of the Note Parties to bring proceedings against
the Note Parties in the courts of any jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other jurisdiction.

 

14.15                     Confidentiality.  Each
Purchaser agrees that it shall not disclose any Confidential Information to any
Person without the consent of the Company, other than (a) to such
Purchaser’s Affiliates and the officers, directors, limited partners,
employees, agents, accountants, attorneys and other professional advisors of it
and its Affiliates and to actual or prospective eligible assignees or
transferees, and then only on a confidential basis, (b) as required
by any law, rule or regulation or judicial process, (c) as
requested or required by any state, federal or foreign authority or examiner
regulating such Purchaser and (d) to any rating agency when
required by it.  For purposes of this Section 14.15,
“Confidential Information” means information obtained pursuant to the
requirements of this Agreement relating to a Note Party or its business that
any Note Party furnishes to any Purchaser, but does not include any such
information that (i) is or becomes generally available to the
public other than as a result of a breach by such Purchaser of its obligations
hereunder, (ii) is or becomes available to such Purchaser from a
source other than the Note Parties or another Person known by the Purchasers to
be bound by confidentiality requirements not to disclose such information or (iii) prior
to such information having been provided or obtained, such information was
already in the possession of such Purchaser on a nonconfidential basis without
a duty of confidentiality to any Note Party being violated.

 

14.16                     Further Assurances.  From
and after the date of this Agreement, upon the request of the Purchasers, each
Note Party shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of the Subordinated Note
Documents.

 

14.17                     Reproduction of Documents.  This
Agreement and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications that may hereafter be executed, (b) documents
received by any Purchaser at the Closing (except the Notes themselves) and (c) financial
statements, certificates and other information previously or hereafter
furnished to any Purchaser, may be reproduced by any Purchaser

 

85

 

by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced.  The Company agrees and stipulates that, to
the fullest extent permitted by Applicable Law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.  This
Section 14.17 shall not prohibit the Company or any
other Purchaser from contesting any such reproduction to the same extent that
it could contest the original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.

 

14.18                     Counterparts.  This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.

 

[The remainder of this page has been
left blank intentionally]

 

86

 

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.

 

 

	
  COMPANY:

  	
  LOUD TECHNOLOGIES INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim O’Neil

  	
   

  
	
   

  	
  Name:
  Tim O’Neil

  
	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  SLM:

  	
  ST. LOUIS MUSIC, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim O’Neil

  	
   

  
	
   

  	
  Name:
  Tim O’Neil

  
	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
  SUBSIDIARY

  	
   

  
	
  GUARANTORS:

  	
  MACKIE DESIGNS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim O’Neil

  	
   

  
	
   

  	
  Name:
  Tim O’Neil

  
	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIA SOFTWARE COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim O’Neil

  	
   

  
	
   

  	
  Name:
  Tim O’Neil

  
	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  
	
   

  	
  SLM HOLDING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tim O’Neil

  	
   

  
	
   

  	
  Name:
  Tim O’Neil

  
	
   

  	
  Title:
  Vice President

  

 

[Signature Page to Securities Purchase Agreement]

 

 

	
  PURCHASERS:

  	
  OCM MEZZANINE FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Oaktree
  Capital Management LLC, its

  general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gary D. Trabka

  	
   

  
	
   

  	
  Name:
  Gary D. Trabka

  
	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Raj Makam

  	
   

  
	
   

  	
  Name:
  Raj Makam

  
	
   

  	
  Title:
  Senior Vice President

  

 

[Signature Page to Securities Purchase Agreement]

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