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Exhibit 10.1
FORBEARANCE AND CONSENT AGREEMENT
FORBEARANCE AND CONSENT AGREEMENT, dated as of March 5, 2007 is
entered into by and among LOUD TECHNOLOGIES INC., a Washington
corporation (" LOUD "), ST. LOUIS MUSIC, INC., a Missouri
corporation (" SLM "; and, together with LOUD, each a "
Borrower " and collectively the " Borrowers "),
MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS
FINANCIAL SERVICES INC., for itself as a Lender and as
Administrative Agent (" Administrative Agent ") for the
financial institutions from time to time party to the Credit
Agreement (as defined below) as lenders (" Lenders "), and
the other Lenders signatory hereto.
R E C I T A L S:
WHEREAS, Borrowers, Administrative Agent and Lenders are parties
to that certain Credit Agreement dated as of August 29, 2005
(as amended, supplemented or otherwise modified from time to time,
the " Credit Agreement "; capitalized terms not otherwise
defined herein having the definitions provided therefor in the
Credit Agreement);
WHEREAS, Events of Default exist under Section 8.1(b) of the
Credit Agreement as a result of violations of each of the financial
covenants set forth in Sections 6.2, 6.3 and 6.4 of the Credit
Agreement for the period ending December 31, 2006
(collectively, the " Existing Defaults ");
WHEREAS, Administrative Agent and Lenders are willing to agree
to forbear from exercising certain of their rights and remedies
with respect to the Existing Defaults solely for the period and on
the terms and conditions specified herein;
WHEREAS, Borrowers have requested that Administrative Agent and
Lenders consent to (i) the formation by LOUD of a Wholly-Owned
Subsidiary organized under the laws of England and Wales and the
acquisition (the " Martin Audio Acquisition ") by such
Wholly-Owned Subsidiary of all of the outstanding equity securities
of Martin Audio Limited, a limited company organized under the laws
of England and Wales (" Martin Audio "), and (ii) the
departure by Borrowers from certain provisions of the Credit
Agreement in order to facilitate the consummation of the Martin
Audio Acquisition; and
WHEREAS, Administrative Agent and Lenders are willing to consent
to the consummation of the Martin Audio Acquisition and the
departure by Borrowers from certain provisions of the Credit
Agreement in order to facilitate the consummation of the Martin
Audio Acquisition, in each case subject to the terms and conditions
specified herein and certain other agreements of Borrowers as
specified herein;
NOW, THEREFORE, in consideration of the foregoing, and the
respective agreements, warranties and covenants contained herein,
the parties hereto agree as follows:
1.1.
Acknowledgment of Obligations. All of the
Obligations, together with interest accrued and accruing thereon,
and all fees, costs, expenses and other charges now or hereafter
payable by Borrowers to Administrative Agent and Lenders, are
unconditionally owing by Borrowers to Administrative Agent and
Lenders, without offset, defense or counterclaim of any kind,
nature or description whatsoever.
1.2.
Acknowledgment of Security Interests. Borrowers
hereby acknowledge, confirm and agree that Administrative Agent has
and shall continue to have valid, enforceable and perfected
first-priority liens upon and security interests in the Collateral
heretofore granted to Administrative Agent pursuant to the
Financing Documents or otherwise granted to or held by
Administrative Agent, subject only to Permitted Liens.
1.3.
Binding Effect of Documents. Borrowers hereby
acknowledge, confirm and agree that: (a) each of the
Financing Documents to which any Credit Party is a party has been
duly executed and delivered to Administrative Agent or Lenders by
such Credit Parties, and each is and shall remain in full force and
effect as of the date hereof, (b) the agreements and
obligations of the Credit Parties contained in such documents and
in this Agreement constitute the legal, valid and binding
obligations of Borrowers and the other Credit Parties, as
applicable, enforceable against them in accordance with their
respective terms, and Borrowers and the other Credit Parties have
no valid defense to the enforcement of such obligations, and
(c) Administrative Agent and Lenders are and shall be entitled
to the rights, remedies and benefits provided for under the
Financing Documents and applicable law.
2.1.
Acknowledgment of Default. Borrowers hereby
acknowledge and agree that the Existing Defaults have occurred and
are continuing, each of which constitutes an Event of Default and
entitles Administrative Agent and Lenders to exercise their rights
and remedies under the Financing Documents, applicable law or
otherwise. Borrowers further represent and warrant that as of
the date hereof no other Events of Default under the Financing
Documents exist other than the Existing Defaults. Neither
Administrative Agent nor any Lender has waived, and neither intends
to waive any Existing Default and nothing contained herein or the
transactions contemplated hereby shall be deemed to constitute any
such waiver.
2.2.
Forbearance.
(a)
In reliance upon the representations, warranties and covenants of
Borrowers contained in this Agreement, and subject to the terms and
conditions of this Agreement and any documents or instruments
executed in connection herewith, Administrative Agent and Lenders
agree to forbear from exercising their rights and remedies under
the Financing Documents or applicable law in respect of or arising
out of the Existing Defaults, for the period (the " Forbearance
Period ") commencing on the date hereof and ending on the date
which is the earliest of: (i) April 7, 2007 or
(ii) the occurrence or existence of any Event of Default,
other than the Existing Defaults.
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(b)
Upon the termination of the Forbearance Period, the agreement of
Administrative Agent and Lenders to forbear shall automatically and
without further action terminate and be of no force and effect, it
being expressly agreed that the effect of such termination will be
to permit Administrative Agent and Lenders to exercise immediately
all rights and remedies under the Financing Documents and
applicable law, including, but not limited to, (i) ceasing to
make any further Revolving Loans and (ii) accelerating all of
the Obligations; in each case without any further notice, passage
of time or forbearance of any kind.
2.3. No
Other Waivers; Reservation of Rights.
(a)
Neither Administrative Agent nor any Lender has waived, is not by
this Agreement waiving, and has no intention of waiving, any Events
of Default which may be continuing on the date hereof or any Events
of Default which may occur after the date hereof (whether the same
or similar to the Existing Defaults or otherwise), and neither
Administrative Agent nor any Lender has agreed to forbear with
respect to any of its rights or remedies concerning any other
Events of Default (other than, during the Forbearance Period, the
Existing Defaults to the extent expressly set forth herein),
occurring at any time.
(b)
Subject to Section 2.2 above (solely with respect to the Existing
Defaults), Administrative Agent and each Lender reserve the right,
in their discretion, to exercise any or all of their rights and
remedies under the Credit Agreement and the other Financing
Documents as a result of any other Events of Default occurring at
any time. Neither Administrative Agent nor any Lender has
waived any of such rights or remedies, and nothing in this
Agreement, and no delay on its part in exercising any such rights
or remedies, should be construed as a waiver of any such rights or
remedies.
2.4.
Additional Events of Default. This Agreement shall be
deemed to be a Financing Document. The parties hereto
acknowledge, confirm and agree that any representation by any
Borrower being incorrect in any respect (or any material respect if
such representation is not already qualified as to materiality), or
any failure of any Borrower to comply with the covenants,
conditions and agreements contained in this Agreement, any other
Financing Document or in any other agreement, document or
instrument at any time executed and/or delivered by Borrowers with,
to or in favor of Administrative Agent or any Lender shall
constitute an immediate Event of Default under this Agreement, the
Credit Agreement and the other Financing Documents. In the
event any Person (including without limitation any holder of
Subordinated Debt), other than Administrative Agent or any Lender,
shall at any time exercise for any reason (including, without
limitation, by reason of any Existing Default or any other present
or future Event of Default, or otherwise) any of its rights o
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