10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to       

Commission File Number 0-26524

LOUD TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

Washington	91-1432133
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

16220 Wood-Red Road, N.E., Woodinville, Washington 98072

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (425) 487-4333

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
None	None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yeso   No  ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes o   No  ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ý   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):   Yes o   No  ý

The aggregate market value of common stock held by non-affiliates of registrant at June 30, 2005 was approximately $16,389,607 based upon the closing price of the registrant’s common stock as quoted on the Nasdaq OTC Bulletin Board System on June 30, 2005 of $15.55. Per-share data contained in this report reflect the 1-for-5 reverse split effected on November 17, 2005.

On March 31, 2006, 4,566,202 shares of common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2006 annual meeting of stockholders (including amendments thereto) are incorporated by reference into Part III of this Form 10-K

LOUD TECHNOLOGIES INC.

FORM 10-K

For the Year Ended December 31, 2005

INDEX

Part I
	Item 1.	Business
	Item 1A.	Risk Factors
	Item 2.	Properties
	Item 3.	Legal Proceedings
	Item 4.	Submission of Matters to a Vote of Securities Holders
Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
	Item 6.	Selected Financial Data
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operation
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
	Item 8.	Financial Statements and Supplementary Data
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
	Item 9A.	Controls and Procedures
	Item 9B.	Other Information
Part III
	Item 10.	Directors and Executive Officers of the Registrant
	Item 11.	Executive Compensation
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
	Item 13.	Certain Relationships and Related Transactions
	Item 14.	Principal Accountant Fees and Services
Part IV
	Item 15.	Exhibits, Financial Statement Schedules
Signatures

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PART I

Certain statements set forth in or incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2005, particularly including but not limited to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain “forward-looking statements” within the meaning of Section 21D of the Securities Exchange Act of 1934, as amended. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Such forward-looking statements include among others, those statements including the words “expect,” “anticipate,” “intend,” “believe” and similar expressions. Actual results could differ materially and adversely from those discussed in this report. Factors that could cause or contribute to such differences include but are not limited to the risks discussed in the “Risk Factors” section in Item 1A. Readers are cautioned not to place undue reliance on these forward-looking statements, and should recognize that these statements are accurate only as of the date of this report and will not be updated to reflect future developments.

Item 1. Business

Overview

LOUD Technologies Inc. was founded in 1988 and incorporated in Washington under the name Mackie Designs Inc., and changed its name to Loud Technologies Inc. September 13, 2003. LOUD is one of the world’s largest dedicated professional audio and music products companies. As the corporate parent for world-recognized brands Alvarez®, Ampeg®, Crate®, EAW®, Knilling®, Mackie®, SIA® and TAPCO®, LOUD engineers, manufactures, markets and distributes a wide range of professional audio and musical instrument products worldwide. Additionally, LOUD is one of the largest distributors of branded professional audio and music accessories through its SLM Marketplace catalog.

Our product lines include sound reinforcement speakers, analog mixers, guitar and bass amplifiers, professional loudspeaker systems, violins and other stringed instruments, and digital mixers. These products can be found in professional and project recording studios, video and broadcast suites, post-production facilities, sound reinforcement applications including churches and nightclubs, retail locations, and on major musical tours.

On March 4, 2005, we acquired all of the shares of St. Louis Music, Inc., a Missouri-based manufacturer, distributor and importer of branded musical instruments and professional audio products. This transaction is explained in more detail in Note 18 of the accompanying financial statements.

On August 29, 2005 we completed a refinancing of our credit facilities with our U.S. lenders that were to mature in the first half of 2006. This transaction is explained in more detail in Note 10 of the accompanying financial statements.

On November 3, 2005 we announced a 1-for-5 reverse split of the Company’s outstanding common stock. The 1-for-5 reverse stock split was effective after the close of business on November 17, 2005. In lieu of fractional shares, shareholders received cash at a rate of $2.95 per whole post-split share. Mellon Investor Services LLC, the Company’s transfer agent, acted as the exchange agent.

At December 31, 2005, 3,370,127 shares, representing 73.8% of our outstanding common stock, were owned by affiliates of Sun Capital Partners, Inc., a private investment firm. Accordingly, we are a controlled company within the meaning of the NASD rules governing companies listed on the Nasdaq Capital Market and, as discussed in greater detail below and in our proxy statement for our 2006 annual shareholder meeting, we are therefore exempt from application of certain of the corporate governance

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rules, particularly including those relating to independent board composition and compensation and nominating committee requirements.

The Company voluntarily delisted from the Nasdaq Small Cap Market™ on February 7, 2003 because of ongoing difficulties in satisfying certain of the Nasdaq continuing listing requirements. The Company’s stock began trading on the OTC Bulletin Board on February 11, 2003. We applied for reinstatement to the Nasdaq Capital Market™ on November 23, 2005. Our stock began trading on the Nasdaq Capital Market™ under the symbol “LTEC” on March 1, 2006.

“MACKIE,” the running man figure, “TAPCO,” “EAW,” and “SIA” are registered trademarks or “common law” trademarks of LOUD Technologies Inc. “Alvarez”, “Ampeg”, “Crate”, and “Knilling” are registered trademarks of our wholly owned subsidiary, St. Louis Music, Inc. To the extent our trademarks are unregistered, we are unaware of any conflicts with trademarks owned by third parties. This document also contains names and marks of other companies, and we claim no rights in the trademarks, service marks and trade names of entities other than those in which we have a financial interest or licensing right.

Marketing

Innovative marketing is the hallmark of each LOUD brand. As a result, each brand holds an enviable, unique position in its respective marketplace. Each brand is supported by a dedicated team of brand-specific product, business and communication resources backed by an in-house marketing and design team that handles all media planning, buying, print literature and advertising design, web design, public relations, product documentation, product training, as well as end-user and dealer trade shows and special events.

Our Major Brands

Alvarez is an acoustic guitar line geared to players of all types – from entry-level to professional.

Ampeg is the industry standard in bass amplification for more than 50 years.

Crate is an entry-level brand of musical instrument amplification products.

EAW is precision engineered, technologically superior loudspeakers and digital mixers. EAW systems are found in public spaces including sporting arenas, churches, nightclubs, and on major musical tours.

Mackie is innovative professional audio systems for both recording and sound reinforcement applications.

Distribution and Sales

Sales to customers in the United States represent 63%, 58% and 63% of total net sales in 2005, 2004 and 2003 respectively. In the United States, for Mackie, EAW, SIA and TAPCO products, we use a network of independent representatives to sell to over 2,500 retail dealers. These products are sold in musical instrument stores, professional audio outlets and several mail order outlets. For the acquired brands of St. Louis Music (Alvarez, Ampeg, Crate, SLM Marketplace, and Knilling), we use a dedicated, domestic employee sales force (there were approximately 25 as of December 31, 2005) who sell to musical instrument stores and retail locations. Beginning in 2006, this employee sales force will begin selling Mackie and TAPCO products as well, while our existing base of independent representatives will continue to sell EAW and SIA products. Sales to our top 10 U.S. dealers represented approximately 27%,

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22% and 27% of net sales made in 2005, 2004 and 2003, respectively. One dealer, Guitar Center Inc., accounted for approximately 16%, 12% and 12% of net sales in 2005, 2004 and 2003, respectively. No other dealer accounted for more than 10% of net sales in this period.

Internationally, our products are offered direct to dealers in the United Kingdom, Canada, France, Germany, Belgium, Netherlands and Luxembourg primarily through our subsidiaries in the United Kingdom and Canada. We also sell direct to dealers in Japan. Our products are also distributed through local distributors in countries where we do not have direct operations. No single international distributor accounted for more than 10% of international net sales in this period.

Sales to customers in the United States were $128.7 million, $71.6 million, and $82.0 million for 2005, 2004 and 2003 respectively, while international sales were $75.7 million, $51.7 million and $48.7 million, for the comparable periods.

Customer Support

Customer support programs are designed to enhance brand loyalty by building customer understanding of product use and capabilities. The customer service and support operation also provides us with a means of understanding customer requirements for future product enhancements. This understanding comes through direct customer contact, as well as through close analysis of responses to various product registration surveys.

Product support specialists are located in Woodinville, Washington, Whitinsville, Massachusetts, and St. Louis, Missouri to provide direct technical service and support. Technical support is provided either through a toll-free number or web-based support during scheduled business hours, and via the website after business hours, as well. Service and repairs on our speaker products sold in the United States are performed at our Whitinsville site. Service and repairs on our electronic products sold in the United States are performed at approximately 100 authorized service centers located throughout the United States. Internationally, our subsidiary in the United Kingdom, as well as our independent distributors, are utilized to provide product support and are also responsible for warranty repairs for products sold into their markets. Additionally, certain products returned to stock are processed through a contract repair facility in Shanghai, China.

Research and Development

We pride ourselves on employing the top engineering and product design talent in the professional-audio and musical instrument industries. Research and development teams are located in Woodinville, Washington; Whitinsville, Massachusetts; St. Louis, Missouri; Shenzhen, China; and Victoria, B.C., Canada. We also utilize third-party engineering service groups to supplement our in-house personnel. Research and development investment was approximately $10.3 million, $7.8 million, and $7.7 million in 2005, 2004 and 2003, respectively.

Competition

The professional audio and musical instrument industries are fragmented and highly competitive. There are many manufacturers, large and small, domestic and international, which offer products that vary widely in price and quality and are distributed through a variety of channels. We compete primarily on the basis of product quality and reliability, price, ease of use, brand name recognition and reputation, ability to meet customers’ changing requirements and customer service and support. We compete with a number of professional audio and musical instrument manufacturers, several of whom have significantly greater development, sales and financial resources. Our major competitors are subsidiaries of Harman

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International Industries; Yamaha Corporation; Peavey Electronics Corporation; and Fender Musical Instruments Corporation.

Proprietary Technologies

We have a strong interest in protecting the intellectual property assets that reflect original research, creative development and product development. As such, we have sought protection through patents, copyrights, trademarks and trade secrets and have applied and filed for various design and utility patents, both domestically and internationally. We have actively used certain trademarks, and have applied for and registered specific trademarks in the United States and in foreign countries. While the registration of patents and trademarks, and the use of copyrights, trade secrets and other intellectual property protections provides us with certain legal rights, there can be no assurance that any such registration will prevent others from infringing upon these trademarks.

Manufacturing

In 2005, we continued to streamline our manufacturing operations to focus on our core competency of building loudspeaker systems at third party contract manufacturers. The majority of our products are manufactured in Asia. We continue to operate our Whitinsville, Massachusetts manufacturing facility, which focuses primarily on the EAW brand, and our Yellville, Arkansas manufacturing facility, which focuses primarily on guitar amplifiers. We have established a team in China who manages and facilitates the transition of products from design to manufacturing at our Asian contract manufacturers.

Employees

At December 31, 2005, we had 704 full-time equivalent employees, including 172 in marketing, sales and customer support; 113 in research and development; 346 in manufacturing, manufacturing support and manufacturing engineering; and 73 in administration and finance. Of our employees, 34 were members of an organized labor union as of December 31, 2005.

Website Access to Reports

Our website address is www.loudtechinc.com. The contents of our website are not incorporated into this report or into any of our filings with the Securities and Exchange Commission. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, the Forms 3, 4 and 5 filed by our executive officers, directors and certain shareholders pursuant to Section 16(a) of the Exchange Act, and any amendments to those reports are available free of charge on our website, as soon as is reasonably practicable, after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. The SEC also maintains a website, http://www.sec.gov, at which you may access all of our filings of other persons who are required to file reports with respect to the ownership, disposition, and voting of our equity securities.

Item 1A.  Risk Factors

Dependence on Key Customer. In 2005, 2004, and 2003 one customer, Guitar Center Inc., accounted for approximately 16%, 12% and 12%, respectively, of our net sales revenues. We anticipate that this customer will continue to represent a significant portion of our sales however, the customer is not obligated to continue purchasing products from us. Were our relationship with this customer to deteriorate for any reason we could lose a significant portion of our net sales revenues, which would have a material adverse impact on our results of operations, liquidity and financial condition.

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Liquidity and Debt Obligations. Under the terms of our U.S. credit agreements, we must maintain certain financial covenants and ratios and must maintain adequate levels of eligible collateral to support our borrowing level. The agreements also provide, among other matters, restrictions on additional financing, dividends, mergers, acquisitions, and an annual capital expenditure limit. The covenants in these credit agreements may restrict our operations. If we are unable to generate adequate levels of sales and operating profit, our lenders could declare us to be in default of our obligations. If we are in default, there is no assurance that the lenders would grant waivers or agree to restructure our debt or that we would be able to attain other financing. If we default on our debt, our lenders have a variety of remedies against us including accelerating all amounts so that they come due immediately and foreclosing on their security interests, which would allow the creditors to take possession of all of our assets. Moreover, our debt obligations are largely cross-defaulted, which means that a default under one of the agreements causes a default against each other credit agreement. In such instances, if we cannot obtain alternate financing in a very short period of time, we may have to suspend or discontinue our operations, liquidate our assets or take other measures that would result in a material adverse effect upon our financial condition and results of operations.

Our line of credit accrues interest based on variable short-term interest rates. Increases in the prime rate or LIBOR would increase our interest expense, which would adversely affect our profitability and cash flows.

Competition. Our industry is highly competitive, and we face competition from a number of well-known brands including Yamaha, Harman-Kardon, Peavey and Fender. Many of our competitors are substantially better capitalized and have substantially stronger market presence than we have. We also expect increasing competition from both established and emerging companies. Competition may have the effects of reducing the prices we can charge for our products, increasing our marketing costs associated with developing and maintaining our market niche, or reducing the demand for our products. If we fail to compete successfully against current and future sources of competition, our profitability and financial performance will be adversely affected, and those effects may be material.

Acquisitions and Business Combinations. We have acquired businesses in the past, and we may do so in the future. We may pursue additional acquisitions of complementary technologies or product lines. Further acquisitions may include risks of entering markets where we have no or limited prior experience, the potential loss of key employees of the acquired company, and impairment of relationships with existing employees, customers and business partners. Further acquisitions may also impact our financial position. For example, we may use significant cash or incur additional debt, which would weaken our financial position. We cannot guarantee that future acquisitions will improve our business or operating results.

Variability in Quarterly Operating Results. Our operating results tend to vary from quarter to quarter. Revenue in each quarter is substantially dependent on orders received within that quarter as well as product availability. Conversely, our expenditures are based on investment plans and estimates of future revenues. We may, therefore, be unable to quickly reduce spending if revenues decline in a given quarter. As a result, operating results for such quarters would be adversely impaired. Results of operations for any one quarter is not necessarily indicative of results for any future period.

Other factors which may cause quarterly results to fluctuate include:

•increased competition in niche markets;

•timing of new product announcements;

•product releases and pricing changes by us or our competitors;

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•market acceptance or delays in the introduction of new products;

•production constraints;

•the timing of significant orders;

•customers’ budgets; and

•foreign currency exchange rates.

It is likely in some quarters our operating results will be adversely affected by these factors.

Rapid Technological Change. Product technology evolves rapidly, making timely product innovation essential to success in the marketplace. The introduction of products with improved technologies or features may render our existing products obsolete and unmarketable. If we cannot develop products in a timely manner in response to industry changes, or if our products do not perform well, our business and financial condition will be adversely affected. Also, new products may contain defects or errors which could cause the products to fail to gain market acceptance.

Product Liability. Some of our products, such as amplifiers, speakers and sound mixers, are electronically powered and carry a risk of electrical shock or fire. These and other products create a risk that our customers or third parties may bring claims that our products have caused property damage, physical injury or death. In extreme cases these claims may be asserted as class actions, contending that such products brought harm to large numbers of people. These types of litigation, if threatened or brought, may be costly and may distract management’s attention from operating our business, whether or not we ultimately are adjudged to be liable and whether or not we settle such an action.

Dependence on Suppliers. Certain parts used in our products are currently available from either a single supplier or from a limited number of suppliers. If we cannot develop alternative sources of these components, or if we experience deterioration in our relationship with these suppliers, there may be delays or reductions in product introductions or shipments, which may materially adversely affect our operating results.

Because we rely on a small number of suppliers for certain parts, we are subject to possible price increases by these suppliers. Also, we may be unable to accurately forecast our production schedule. If we underestimate our production schedule, suppliers may be unable to meet our demand for components. This delay in the supply of key components may materially adversely affect our business.

Use of Third Party Distribution Centers. We store and ship the majority of our products from our Woodinville, Washington and St. Louis, Missouri locations. In addition, we utilize third party distribution centers in Europe and Asia. These distribution centers may encounter personnel issues, business disruptions, information systems outages or other disruptions, which may not be remedied quickly, resulting in delays in shipments of our products. Failure to maintain adequate systems and internal controls at these facilities could result in customer shipments being delayed or otherwise improperly transacted, potentially resulting in lost revenue, products or customers.

Use of Contract Manufacturers. The majority of our products are manufactured by third-party contract manufacturers. Third-party manufacturing creates additional risks including:

•reduction in control of the manufacturing process;

•longer lead times for transitions of newly released products from engineering to full release;

•lead times for transitions of existing products to new third party manufacturers;

•reduced flexibility in reacting to demand changes;

•increased transportation cost and delivery times;

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•fluctuations in currency exchange rates (specifically the “floating” currency rate in China);

•delays or inability to source parts on reasonable payment terms; and

•concentration of production by certain key manufacturers.

Manufacturing in China. Our ability to import products from China at current tariff levels could be materially and adversely affected if the “normal trade relations” (“NTR”, formerly “most favored nation”) status the United States government has granted to China for trade and tariff purposes is terminated. As a result of its NTR status, China receives the same favorable tariff treatment that the United States extends to its other “normal” trading partners. China’s NTR status, coupled with its membership in the World Trade Organization, could eventually reduce barriers to manufacturing products in and exporting products from China. However, we cannot provide any assurance that China’s WTO membership or NTR status will not change.

International Operations. We have significant net sales to customers outside the United States and believe that international sales will continue to represent a significant portion of our revenue. International sales may fluctuate due to various factors, including:

•changes in regulatory requirements;

•tariffs and taxes;

•increases in freight costs, or damage or loss in shipment;

•difficulties in staffing and managing foreign operations;

•longer average payment cycles and difficulty in collecting accounts receivable;

•fluctuations in foreign currency exchange rates;

•product safety and other certification requirements; and

•political and economic instability, wars and terrorist activity.

Sales Regulations. In the United States, our products must comply with various regulations and standards defined by the Federal Communications Commission, the Consumer Products Safety Commission and Underwriters’ Laboratories. Internationally, our products may be required to comply with regulations or standards established by telecommunications authorities in the countries into which we sell our products, as well as various multinational or extranational bodies. Recent environmental legislation in the European Union may increase our costs of doing business internationally as we comply with and implement these new requirements. The European Union, or EU, has issued a directive on the restriction of certain hazardous substances in electronic and electrical equipment, known as RoHs, and has enacted the Waste Electrical and Electronic Equipment, or WEEE, directive applicable to persons who import electrical or electronic equipment into Europe. Although neither of these directives is applicable to our products as of the date of this report, both are expected to become effective in 2006. We are currently implementing measures to comply with each of these directives as individual EU nations adopt their implementation guidelines. Although we believe our products are currently in compliance with domestic and international standards and regulations in countries to which we export, we can offer no assurances that our existing and future product offerings will remain compliant with evolving standards and regulations. If we fail to obtain timely domestic or foreign regulatory approvals or certification, we may be unable to sell our products into jurisdictions to which these standards apply, which may prevent us from sustaining our revenues or maintaining profitability.

Protection of Intellectual Property. We have a strong interest in protecting the intellectual property assets that reflect original research, creative development, and product development. As such, we have sought protection through patents, copyrights, trademarks, and trade secrets. Along with extensive trademark and patent registration and filings, we have claimed copyright protection for works of original authorship, including product brochures, literature, advertisement, and web pages. While certain legal

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rights of enforceability are available to us, there can be no assurance as to the ability to successfully prevent others from infringing upon our intellectual property.

We have never conducted a comprehensive patent search relating to the technology used in our products, however, we believe that our products do not infringe upon the proprietary rights of others. There can be no assurance, however, that others will not assert infringement claims against us in the future or that those claims, if brought, will not be successful.

While we pursue patent, trademark and copyright protection for products and various marks, we also rely on the use of confidentiality agreements with our employees, consultants, development partners and contract manufacturers to protect our trade secrets, proprietary information and other intellectual property. There can be no assurance, however, that these confidentiality agreements will be honored or will be effective in protecting our trade secrets, proprietary information and other intellectual property. Moreover, there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

Dependence on Key Personnel. Our future success will depend in a large part on the continued service of many of our technical, marketing, sales and management personnel and on our ability to attract, train, motivate and retain highly qualified employees. Our employees may voluntarily terminate their employment at any time. The loss of the services of key personnel or the inability to attract new personnel could have a material adverse effect upon our results of operations.

Restructured Sales Force. In early 2006, we decided to eliminate our relationship with independent representatives in the United States and Canada who sell Mackie and TAPCO brands, and instead use an existing domestic employee sales force that had, and will continue to, sell existing St. Louis Music brands. Our independent representatives have had strong relationships with our distributors and retailers, and if our new sales force is unable to continue and grow these relationships, sales could be negatively affected.

Item 2.  Properties

We own one building, a 63,250 square foot building located on 7.66 acres in Yellville, Arkansas, the remainder of our properties are leased. The building we own is primarily used for manufacturing. We lease facilities in Woodinville, Washington totaling approximately 170,000 sq. ft. to house our corporate headquarters as well as a distribution center. The lease on the approximately 80,000 sq. ft. of distribution and warehouse space was renewed in January of 2006 and expires July 31, 2011. The lease on the approximately 90,000 sq. ft. of corporate headquarters and distribution center was renewed in May of 2005 and expires December 31, 2011. We lease a series of connected buildings in a manufacturing complex in Whitinsville, Massachusetts, totaling 220,285 sq. ft. This lease continues through April 2008. We lease a warehouse (approximately 78,000 sq. ft), a research and development center (approximately 26,000 sq. ft), and a warehouse with office space (approximately 67,000 sq. ft) all located in St. Louis, Missouri. All three of these leases were renewed and extended with the acquisition of St. Louis Music, Inc. The warehouse was renewed again in February of 2006 and now expires June 30, 2009, the R&D center and the main office/warehouse expire March 5, 2008. The lessors for two of the St. Louis, Missouri leases are immediate family members of Edward Kornblum, our Senior Vice President of Entertainment and Artist Relations. We lease additional smaller facilities in the United States, Canada, Europe and Asia for our regional sales and support offices. We believe our properties are adequate for our anticipated needs.

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Item 3.  Legal Proceedings

On or about November 29, 2005, LOUD Technologies Inc. and its subsidiary, St. Louis Music Company, were named as party-defendants in a lawsuit in the United States District Court, Southern District of Florida. The lawsuit, filed by Ace Pro Sound and Recordings and served upon the Company, alleges individual and class action claims against LOUD, as well as other, unrelated defendants. The claims include civil conspiracy, tortuous interference, violation of Florida’s state and the Federal Racketeering Influenced and Corrupt Organization Act as well as Section 1 and Section 2 Sherman Act antitrust claims. Management believes these claims are completely without merit, and LOUD has filed a motion to dismiss this case and intends to vigorously defend these claims.

In addition to the case noted above, we are also involved in various legal proceedings and claims that arise in the ordinary course of business. We currently believe that these matters will not have a material adverse impact on our financial position, liquidity or results of operations.

Item 4.  Submission of Matters to a Vote of Securities Holders

No matters were submitted to a vote of our security holders during the fourth quarter of the fiscal year ended December 31, 2005.

PART II

Item 5.  Market for Registrant’s Common Equity and Related Shareholder Matters

The Company voluntarily delisted from the Nasdaq Small Cap Market™ on February 7, 2003 because of ongoing difficulties in satisfying certain of the Nasdaq continuing listing requirements. The Company’s stock began trading on the OTC Bulletin Board on February 11, 2003. We applied for reinstatement to the Nasdaq Capital Market™ on November 23, 2005. Our stock began trading on the Nasdaq Capital Market™ under the symbol “LTEC” on March 1, 2006.

As of December 31, 2005, there were 4,566,202 common stock shares of LOUD Technologies Inc. issued and outstanding and approximately 105 shareholders of record. The following table shows the high and low sales prices for our common stock for the periods indicated. Prices reported in this table are adjusted to reflect the 1-for-5 reverse split announced on November 3, 2005 and effected November 17, 2005.

	Common Stock
	HIGH		LOW
Year Ended December 31, 2005:
Fourth Quarter	$	16.00	$	10.00
Third Quarter	$	15.75	$	13.25
Second Quarter	$	18.25	$	13.75
First Quarter	$	17.00	$	9.00
Year Ended December 31, 2004:
Fourth Quarter	$	11.00	$	6.50
Third Quarter	$	11.00	$	8.50
Second Quarter	$	12.75	$	9.25
First Quarter	$	13.50	$	9.50

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We have not paid dividends on our common stock in the past, and it is not anticipated that cash dividends will be paid on shares of our common stock in the foreseeable future. Any future dividends will be dependent upon our financial condition, results of operations, current and anticipated cash requirements, acquisition plans and plans for expansion, and any other factors that our Board of Directors deems relevant. Under our current loan and security agreement, we are prohibited from paying any dividends.

Sales of Unregistered Securities

In connection with the acquisition of St. Louis Music and pursuant to the Acquisition Agreement dated March 4, 2005 by and among Loud Technologies, Inc., SLM Holding Corp., SLM Merger Corp. and St. Louis Music, we issued 79,358 shares of common stock to Edward Kornblum, one of the shareholders of St. Louis Music. The shares were issued in an unregistered private placement in reliance upon an exemption from registration set forth in Section 4(2) of the Securities Act of 1933, as amended.

On August 29, 2005 we issued 51,547 shares of common stock, par value $14.55 per share, to certain institutional and accredited investors in accordance with Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. The consideration for these shares was cash in the amount of $750,000 and the proceeds of such sale are to be used for debt retirement and working capital.

Equity Compensation Plan Information

The Company has a shareholder-approved equity plan that enables the Compensation Committee of the Board of Directors to make stock option awards.

The table below provides information, as of December 31, 2005, concerning securities under current and former equity compensation plans.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights	(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (a))
Equity compensation plans approved by security holders	628,712	15.27	869,579
Total	628,712	15.27	869,579

During July 2003, our board of directors adopted the 2003 Stock Option Plan (the 2003 Plan), authorizing options to purchase 345,600 shares of common stock. The 2003 Plan calls for options to be non-qualified stock options with exercise prices equal to the fair market value of the stock on the date granted. Options generally vest over a five-year period and expire on the earlier of ten years from grant date or three months from termination. If an option holder is terminated for Cause, as defined in the 2003 Plan, the options would terminate a day prior to termination. At December 31, 2005, 61,000 shares of common stock were available for future grants under the 2003 Plan.

The Company also has a 1995 Stock Option Plan (the 1995 Plan), which authorized 1.3 million shares of common stock for grants. The exercise price of incentive stock options granted under the 1995 Plan may not be less than the fair market value of the common stock on the date of grant. The exercise price of nonqualified stock options granted under the plan may be greater or less than the fair market value of the common stock on the date of grant, as determined by the stock option committee of the board of directors at its discretion. Options generally vest over a four to five-year period and expire no later than ten years after the date of grant. At December 31, 2005, 809,000 shares of common stock were available for future grants under the 1995 Plan.

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Item 6.  Selected Consolidated Financial Data

The following selected Consolidated Statements of Operations data for each of the three years in the period ended December 31, 2005 and the Consolidated Balance Sheet data as of December 31, 2005 and 2004 are derived from our audited Consolidated Financial Statements included elsewhere herein. The selected Statements of Operations data for the years ended December 31, 2002 and 2001 and the Balance Sheet data as of December 31, 2003, 2002, and 2001 were derived from our audited Financial Statements, as restated for discontinued operations, which are not included in this Form 10-K. The following data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of the Company, including the notes thereto, included elsewhere in this Form 10-K.

	Years ended December 31,
	2005		2004			2003			2002			2001
	(In thousands, except per share data)
Consolidated Statements of Operations Data (a):
Net sales	$	204,328	$	123,276		$	130,766		$	159,362		$	171,967
Gross profit	65,324		41,349			29,310			37,860			51,865
Operating expenses (b)	56,816		40,043			44,974			69,512			52,622
Net income (loss) from continuing operations	930		(2,291		)	(15,412		)	(30,050		)	(3,159		)
Net income (loss) from discontinued operations	2,827		—			(6,383		)	(7,878		)	(2,170		)
Net income (loss)	3,757		(2,291		)	(21,795		)	(37,928		)	(5,329		)
Basic net income (loss) per share:
Net income (loss) from continuing operations	$	0.20	$	(0.52	)	$	(3.94	)	$	(12.03	)	$	(1.27	)
Net income (loss) from discontinued operations	0.59		—			(1.63		)	(3.15		)	(0.88		)
Basic net income (loss) per share	$	0.79	$	(0.52	)	$	(5.57	)	$	(15.18	)	$	(2.15	)
Diluted net income (loss) per share:
Net income (loss) from continuing operations	$	0.19	$	(0.52	)	$	(3.94	)	$	(12.03	)	$	(1.27	)
Net income (loss) from discontinued operations	0.57		—			(1.63		)	(3.15		)	(0.88		)
Diluted net income (loss) per share	$	0.76	$	(0.52	)	$	(5.57	)	$	(15.18	)	$	(2.15	)

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	December 31,
	2005		2004		2003		2002		2001
	(In thousands)
Consolidated Balance Sheets Data:
Working capital	$	27,305	$	1,764	$	2,582	$	14,890	$	23,366
Total assets	$	95,545	$	60,795	$	50,422	$	123,955	$	153,964
Long-term debt (c)	$	40,944	$	11,612	$	16,262	$	20,266	$	19,401
Shareholders’ equity	$	9,087	$	3,320	$	832	$	17,236	$	52,810

(a)The consolidated statements of operations data for years ended 2003, 2002 and 2001 have been restated for discontinued operations.

(b)Included in operating expenses for the year ended December 31, 2002, is a $15,829 non-cash charge relating to the impairment of goodwill and other long-lived assets.

(c)Long-term debt excludes current portion.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with “Selected Consolidated Financial Data” and the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report. This discussion contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Actual results could differ materially from those discussed here. The cautionary statements made in this Annual Report should be read as being applicable to all forward-looking statements wherever they appear. Factors that could cause or contribute to such differences include those discussed in “Risk Factors,” as well as those discussed elsewhere herein. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be required to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

General

We develop, manufacture, and sell high-quality, affordable sound reinforcement speakers, analog mixers, guitar and bass amplifiers, professional loudspeaker systems, violins and other stringed instruments, and digital mixers on a worldwide basis. Our products are used by both professional and amateur musicians; school music programs; sound installation contractors and broadcast professionals in sound recordings, live presentations systems and installed sound systems. We distribute our products primarily through retail dealers, mail order outlets and installed sound contractors. We have our primary operations in the United States with smaller operations in the United Kingdom, Canada, China and Japan.

We had a significant improvement in our operating results in 2005, owing in part to our acquisition of St. Louis Music, Inc., on March 4, 2005 and in part to improved margins due to the continued transition of manufacturing to Asia. For the twelve months ended December 31, 2005, revenue increased 65.7% to $204.3 million from $123.3 million for 2004. Revenue for 2005 included $67.2 million attributable to St. Louis Music, Inc., without which our year-over-year improvements in revenues

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would have been $13.8 million, or 11.2%. Operating income for 2005 increased by 553.8% to $8.5 million, or 4.2% of sales, compared to $1.3 million, or 1.1% of sales, for 2004. Income from continuing operation rose to $0.9 million, or $0.19 per diluted share, compared to a loss from continuing operations of $2.3 million, or $0.52 per share, for 2004. Net income for 2005 was $3.8 million, or $0.76 per diluted share, which included a gain on sale of the Company’s discontinued operations in Italy of $2.8 million (net of tax), or $0.57 per diluted share. This compares to a net loss for 2004 of $2.3 million, or $0.52 per share. All per-share amounts in this report are adjusted to reflect the 1-for-5 reverse stock split that was effected on November 17, 2005.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations following are based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales and expenses, and related disclosure of contingent assets and liabilities.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Certain of these critical accounting policies affect working capital account balances, including the policies for revenue recognition, allowance for doubtful accounts, inventory valuation and income taxes. These policies require that we make estimates in the preparation of our financial statements as of a given date. However, since our business cycle is relatively short, actual results related to these estimates are generally known within the six-month period following the financial statement date. Thus, these policies generally affect only the timing of reported amounts.

Inventory Valuation. LOUD inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out method, or market for Mackie, EAW, SIA and TAPCO brands. For the Crate, Alvarez, Knilling, and Ampeg brands, the inventory is valued at the lower of average cost or market. Included in our inventories balance are demonstration products used by our sales representatives and marketing department including finished goods that have been shipped to customers for evaluation. Market value adjustments are recorded for excess and obsolete material, slow-moving product, service and demonstration products. We make judgments regarding the carrying value of our inventory based upon current market conditions. These conditions may change depending upon competitive product introductions, customer demand and other factors. If the market for our previously released products changes, we may be required to write down the cost of our inventory.

Allowance for Doubtful Accounts. We make ongoing estimates relating to the collectibility of our accounts receivable and maintain an allowance for estimated losses resulting from the inability of our customers to meet their financial obligations to us. In determining the amount of the allowance, we consider our historical level of credit losses and make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Since we cannot predict future changes in the financial stability of our customers, actual future losses from uncollectible accounts may differ from our estimates. If the financial condition of our customers were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. In the event we determine a smaller or larger allowance appropriate, we would record a credit or a charge to selling, general, and administrative expense in the period in which we made such a determination.

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Long-lived Assets. We assess the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Significant judgment is used in assessing factors which might trigger impairment including significant underperformance relative to expected operating results, significant changes in our use of the assets or the strategy for our overall business, and significant negative industry or economic trends. As we continue to review our distribution methods and transition our manufacturing to third parties, this may result in circumstances where the carrying value of certain long-lived assets may not be recoverable.

Goodwill and Other Intangible Assets. We adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective January 1, 2002. In accordance with SFAS No. 142, we no longer amortize goodwill and intangible assets with indefinite lives, but instead we measure these assets for impairment at least annually, or when events indicate that impairment exists. At December 31, 2005, we had goodwill of $2.2 million. We will continue to amortize intangible assets that have definite lives over their useful lives.

Revenue Recognition. Revenues from sales of products, net of sales discounts, returns and allowances, are generally recognized upon shipment under an agreement with a customer when risk of loss has passed to the customer, all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection of the resulting receivable is considered probable. Products are generally shipped “FOB shipping point” with no right of return. We do have some dealers who finance their purchases through finance companies. We have a manufacturer’s repurchase agreement with the finance companies. We defer the revenue and related cost of goods sold of these sales at the time of the sale. We then recognize the revenue and related cost of goods sold of these sales when the right of return no longer exists. Sales with contingencies, such as rights of return, rotation rights, conditional acceptance provisions and price protection, are rare and insignificant. We generally warrant our products against defects in materials and workmanship for periods of between one and six years, with the exception of Alvarez Yairi guitars which have a limited lifetime warranty. The estimated cost of warranty obligations, sales returns and other allowances are recognized at the time of revenue recognition based on contract terms and prior claims experience.

Income Taxes. As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or change this allowance in a period, it may materially impact the tax provision in the Statement of Operations.

Accounting for Acquisitions. Significant judgment is required to estimate the fair value of purchased assets and liabilities at the date of acquisition, including estimating future cash flows from the acquired business, determining appropriate discount rates, asset lives and other assumptions. Our process to determine the fair value of trademarks, customer relationships, and developed technology includes the use of estimates including: the potential impact on operating results of the revenue estimates for customers acquired through the acquisition based on an assumed customer attrition rate; estimated costs to be incurred to purchase the capabilities gained through the developed technology and appropriate discount rates based on the particular business’s weighted average cost of capital. Our process to determine the fair value of inventories acquired was to estimate the selling price of the inventories less the sum of costs to sell and a reasonable selling profit allowance.

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Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Net Sales

Net sales from continuing operations increased by 65.7% to $204.3 million in 2005, from $123.3 million in 2004. Sales were positively impacted due to the acquisition of St. Louis Music, Inc. Net sales of the St. Louis brands for the ten months ended December 31, 2005 were $67.2 million, or 83.0% of the total increase. The remaining increase in sales primarily related to increased product availability from our contract manufacturers and the introduction of new products. We have one significant customer who represented approximately 16% and 12% of our total revenues in 2005 and 2004, respectively. U.S. sales represented approximately 63% of our total sales in 2005, compared to approximately 58% in 2004. In 2006, we anticipate introducing and shipping new products, resulting in increased revenues in 2006 over 2005. We will also have twelve months of sales for the acquired brands of St. Louis Music, Inc., which we anticipate will increase revenues in 2006.

Gross Profit

Gross profit increased by 58.1% to $65.3 million, or 32.0% of net sales, in 2005 from $41.3 million, or 33.5% of net sales, in 2004. $14.5 million of this increase related to the acquisition of St. Louis Music, Inc. $2.4 million, or 1.2% of net sales, of the decline in gross profit percentage is a result of the impact of recording St. Louis Music’s inventories at fair value as a result of the purchase price allocation of St. Louis Music.

The remaining increase is due to higher sales in 2005 for Mackie, TAPCO and EAW brands. The reduction in gross profit percentage from 2004 to 2005 is primarily attributable to the addition of St. Louis Music brands, which are typically sold at lower margin percentages. In 2006, we anticipate our margins to remain in the 32%-35% range.

Selling, General and Administrative

Selling, general and administrative expenses increased by 44.3% to $46.6 million in 2005, from $32.3 million in 2004. The primary cause of this increase was due to the acquisition of St. Louis Music, Inc. Selling, general and administrative expenses for St. Louis Music were $11.8 million for period from acquisition through December 31, 2005. The remaining increase was primarily due to higher marketing expenses and higher commission expense and personnel expense as a result of higher revenues, partially offset by decreases in rent and telephone expenses, and lower allowances for doubtful accounts due to an improved accounts receivable aging. We expect selling, general and administrative expenses to increase in 2006 when we will have a full year of expenses of St. Louis Music, Inc.

Research and Development

Research and development expenses increased by 31.7% to $10.3 million in 2005, from $7.8 million in 2004, of which $1.9 million relates to the acquisition of St. Louis Music, Inc. We anticipate our research and development costs will be higher in 2006 compared to 2005, due to investing in new products and improvements in existing products, in addition to a full year of expenses of St. Louis Music, Inc.

Other Income (Expense)

Net other expense increased $3.9 million, or 110.1% from $3.6 million in 2004 to $7.5 million in 2005. The causes of this increase were an increase of interest expense of $2.7 million, an increase in management fee of $0.7 million, an increase to other expense of $0.8 million, partially offset by an increase to interest income of $0.3 million.

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The increase to interest expense was primarily caused by the increase in debt related to the acquisition of St. Louis Music, Inc., along with a rise in variable interest rates during 2005.

The increase in management fees of $0.7 million was principally due to higher EBITDA. Management fees are paid to Sun Capital Partners Management, LLC quarterly and are calculated as the greater of $400,000 annually or 6% of EBITDA, not to exceed $1,000,000 per year. Of the $1.2 million of management fees expensed during 2005, $1.0 million relates to the 2005 EBITDA calculation, $0.1 million is a result of a correction to the management fee owed for the 2004 EBITDA calculation, and the remaining amount is miscellaneous expenses incurred by Sun Capital Partners Management, LLC, for which Sun Capital is entitled to reimbursement pursuant to our Management Services Agreement dated February 21, 2003.

Other expense in 2005 was primarily due to the expensing of unamortized fees related to the prior debt facility as a result of the refinancing of our debt facilities and foreign exchange transaction losses. Other expense in 2004 was primarily a loss on conversion of Sun Capital debt to equity, partially offset by income from the sale of fixed assets.

Income Tax Expense (Benefit)

Income tax expense from continuing operations was $47,000 and $58,000 from discontinued operations for a total expense of $105,000 in 2005 compared to $12,000 in 2004. The tax expense primarily consists of alternative minimum tax because the regular tax is offset by the utilization of net operating carryforwards and by a corresponding decrease in the deferred tax asset valuation allowance. For 2004, the entire tax expense related to our non-U.S. subsidiaries.

At December 31, 2005, we had net operating loss carryforwards for federal income tax purposes of approximately $28.8 million, which if not utilized would begin to expire in 2024. Approximately $27.5 million of these loss carryforwards relate to the United States and U.K. Approximately $1.3 million of these loss carryforwards relate to our discontinued operation in France, which we believe we will not be able to recapture. We have total net deferred tax assets, including our net operating loss carryforwards, of approximately $16.0 million as of December 31, 2005. We have recorded a valuation allowance for all of the net deferred tax assets as a result of uncertainties of future taxable income necessary for the realization of these net assets.

Gain on Discontinued Operations

In March 2005, we recognized a $2.8 million gain from the discontinued operations of our former Italian subsidiary, net of tax of $58,000. This gain was a result of an agreement with Mackie Italy to settle the net outstanding amounts owed by the Company.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Net Sales

Our net sales from continuing operations in 2004 were $123.3 million compared to $130.8 million in 2003, a decrease of $7.5 million, or 5.7%. Sales were negatively impacted during the majority of 2004 due to shortages on certain products. These product shortages were due to the migration of certain product manufacturing from Woodinville, Washington to contract manufacturers, as well as the closure of our Italian operations. We have one significant customer who represented approximately 12% of our total

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revenues in each of the years 2004 and 2003. U.S. sales represented approximately 58% of our total sales in 2004, compared to approximately 63% in 2003.

Gross Profit

Our gross profit increased in 2004 to $41.3 million, or 33.5% of net sales, from $29.3 million, or 22.4% of net sales in 2003. The improvement to our gross profit in 2004 was due primarily to increased use of off-shore third party contract manufacturers to produce our products as well as lower levels of write downs of excess and obsolete inventory. Specifically, we took charges against cost of sales of approximately $0.4 million in 2004 related to excess or obsolete products compared to $5.7 million in 2003.

Selling, General and Administrative

Selling, general and administrative expenses were $32.3 million in 2004, a decrease of $3.4 million, or 9.6%, over 2003 expenses of $35.7 million. The primary causes of this reduction were the full year benefits of the cost reduction initiatives completed in 2003 as well as lower third party commissions in 2004 caused by lower sales revenue.

Research and Development

Our research and developments expenses were $7.8 million in 2004, an increase of $0.1 million, or 0.9%, compared to 2003 expenses of $7.7 million.

Restructuring Costs

During 2003, we incurred $1.6 million in restructuring expenses, primarily representing employee severance and related costs for displaced employees associated with our closing down the manufacturing facility in Woodinville, Washington, after production of goods had terminated.

Other Income (Expense)

Net other expense during 2004 was $3.6 million compared to $0.9 million in 2003. Interest expense was $2.9 million in each year while other expense was $0.7 million in 2004 compared to other income of $1.8 million in 2003. The primary component of other expense in 2004 was a $0.4 million loss on the conversion of Sun Mackie debt to equity while the primary component of other income in 2003 was a $1.6 million gain related to favorable settlements on liabilities of Mackie Designs Engineering Services BVBA (“Mackie Belgium”), which was closed in 2003.

Income Tax Benefit (Expense)

We had income tax expense of $12,000 in 2004 compared to an income tax benefit of $1.2 million in 2003. During 2003, we received $5.0 million in income tax refunds related to carrying back our taxable losses from 2002 to prior year’s returns where we had paid income taxes. The $1.2 million income tax benefit in 2003 represents primarily the difference between income tax refunds received during 2003 in excess of the estimated income tax receivable recorded at December 31, 2002.

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Discontinued Operations

Discontinued operations related to the operations of our former subsidiary, Mackie Italy. We incurred a loss on discontinued operations of $6.4 million in 2003. During 2003, the loss consisted of a $1.7 million loss on the disposition of Mackie Italy, losses from operations of $2.9 million, $1.1 million net interest expense, $0.5 million of income tax expense and $0.2 million of other non-operating losses.

Liquidity and Capital Resources

On August 29, 2005, a new credit facility was completed providing a $69.5 million senior secured loan facility and a $14.8 million senior subordinated note. The senior secured loan facility consists of a $40.0 million revolving loan (of which $9.6 million was outstanding as of December 31, 2005), a $15.0 million Term Loan A, and a $14.5 million Term Loan B. In connection with the senior subordinated note, the Company issued 51,547 shares of common stock to the subordinated lender at a per share price of $14.55.

The $29.5 million term loans under the Credit Agreement have quarterly principal payments.  The term loans bear interest at the Bloomberg's prime rate or LIBOR, both plus a specified margin.  This rate for Term Loan A was 7.88% and Term Loan B was 8.38% at December 31, 2005.  Interest is due monthly on each term loan. The final Term Loan A principal payment is due August 29, 2010. The final Term Loan B principal payment is due August 29, 2011. Under the revolving line of credit, the Company can borrow up to $40.0 million, subject to certain restrictions, including available borrowing capacity. Interest is due monthly or at the end of a LIBOR period (but in such case no greater than 3 months) and is based on Bloomberg's prime rate or LIBOR, both plus a specified margin.  The term loans and the line of credit are both secured by substantially all of the assets of the Company and its subsidiaries, and are both senior to other long-term debt.  The $14.8 million in senior subordinated notes issued is subordinate to all amounts due under the Credit Agreement and to any refinancing thereof.  Interest accrues on the senior subordinated notes at a rate of 14% and is due quarterly. Of the 14% interest rate, up to two percent may be added to principal on each interest payment date. The principal under the Senior Subordinated Note Agreements is due February 29, 2012.

In February 2005, we made an offer to Mackie Italy to settle any outstanding amounts owed by the Company to Mackie Italy for $4.7 million. This proposal was accepted by the Italian court appointed trustee on behalf of Mackie Italy in May 2005. Under the terms of the settlement agreement, we made additional payments of $2.5 million during 2005. We also committed to pay $2.2 million during 2006. We recognized a gain on discontinued operations of $2.9 million in 2005 related to this settlement.

On March 4, 2005, we acquired all of the shares of St. Louis Music, Inc., a Missouri-based manufacturer, distributor and importer of branded musical instruments and professional audio products for total cash consideration including transaction costs of $35.3 million and the assumption of certain liabilities of $7.2 million. The Company believes the acquisition will further diversify the Company’s product offerings and to help acquire, retain and extend relationships with customers.

As of December 31, 2005, we had cash and cash equivalents of $0.5 million and total debt and short-term borrowings of $56.0 million, including $2.2 million payable to our former Italian subsidiary.  At December 31, 2005 we had availability of $23.3 million on our revolving line of credit, net of a $3.2 million standby letter of credit issued for the commitment to pay the former shareholders of St. Louis Music, Inc.

Net Cash Provided by (Used in) Operating Activities

Cash provided by operations was $10.0 million in 2005 while cash used in operations was $1.2 million in 2004. In 2003, $122 million was provided by operations. Net income for 2005 was $3.8

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million, that included $4.5 million in depreciation and amortization, $1.1 million in amortization of deferred financing fees and a $2.9 million gain on discontinued operations. In 2005, a decrease of our receivables and inventory levels provided cash of  $8.0 million, while a decrease of our accounts payable and accrued expenses used $5.4 million of cash.

In 2006, we anticipate increasing our inventory levels to meet increased demand. We expect increases in revenues to increase our receivables. Additionally, accounts payable is expected to increase in 2006 due primarily to the forecasted increase in inventory.

Net Cash Used in Investing Activities

Cash used in investing activities was $37.0 million in 2005, an increase from $1.2 million used in 2004 and $1.8 million used in 2003. $35.3 million of this investing activity was the acquisition of St. Louis Music, Inc. The remaining increase is due to capital expenditures for equipment primarily used in manufacturing.

As part of our third party manufacturing agreements, most of our contract manufacturers require that we invest in tooling equipment prior to the start of manufacture. Accordingly, in 2006 we anticipate increasing spending on new tooling devices required to build our products and other equipment used in the manufacturing process.

Net Cash Provided by (Used in) Financing Activities

Our cash provided by financing activities was $27.0 million in 2005 and $2.1 million in 2004. Cash used in financing activities was $12.9 million in 2003. Financing activities in 2005 related primarily to a new credit facility of $69.5 million consisting of a revolving loan facility under which $9.6 million was outstanding at December 31, 2005, a Term Loan A of $15.0 million, a Term Loan B of $14.5 million, and subordinated debt of $14.8 million. Along with this refinancing, we paid off our existing note payable of $11.4 million, a term loan of $0.6 million, a credit facility of $11.8 million, and incurred $3.8 million in deferred financing costs. In 2004, financing activities related primarily to proceeds on our existing line of credit, as well as payments on our long-term debt.

Payments and Proceeds from Long-term Debt, Line of Credit and Other Short-term Borrowings

Under the terms of the line of credit and subordinated loan agreements, we are required to maintain certain financial ratios, such as measuring our EBITDA to our total debt and senior debt, and maintaining a certain fixed charge coverage ratio. The agreement also provides, among other matters, restrictions on additional financing, dividends, mergers, acquisitions, and an annual capital expenditure limit.

Our continued liquidity is dependent upon the following key factors:

Ability to stay in compliance with debt covenants

Our new senior secured and senior subordinated loan agreements require us to meet certain financial covenants such as capital expenditures limits and measuring EBITDA to senior and total debt, as well as a fixed charge coverage ratio. The first measurement date for these covenants was December 31, 2005, and as of that date we had met all of our covenant requirements. We believe we will continue to meet these requirements in each quarter of 2006.

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Commitments

We had the following material contractual commitments related to operating leases for equipment facilities at December 31, 2005. In addition, we had material obligations related to short-term and long-term debt arrangements, excluding our accounts payable, accrued liabilities and taxes payable of $27.3 million at December 31, 2005:

	Payments due by period (dollars in thousands)
	Total			Less than 1 year			1-3 years			3-5 years			5-7 years
Operating Leases	$		9,701	$		2,359	$		3,901	$		2,486	$		955
Line of Credit	9,595			9,595
Payable to former Italian subsidiary	2,200			2,200
Future commitment to pay former shareholders of St. Louis Music, Inc., including interest	3,188						3,188
Short-term and long-term debt	44,250			3,306			5,540			10,323			25,081
Total	$	68,934		$	17,460		$	12,629		$	12,809		$	26,036

With the refinancing of our existing debt and cash flows from existing operations, we believe we will have adequate resources to meet our obligations as they come due through December 31, 2006.

Recent Accounting Pronouncements

During the fourth quarter of 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123R, “Share Based Payment: An Amendment of SFAS Nos. 123 and 95.” The new standard requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in an entity’s statement of income. Our options are typically granted with vesting periods of 4-5 years, and we intend to amortize compensation cost over this vesting period using the straight-line method. We will adopt SFAS 123R, effective January 1, 2006, using the Modified Prospective Application Method whereby previously awarded but unvested equity awards are accounted for in accordance with SFAS 123R and prospective amounts are recognized in the income statement instead of simply being disclosed. Once adopted, we expect SFAS 123R will impact our financial results by significantly reducing our net income. We expect the implementation of SFAS123R will have a significant impact on our future results of operations. For the year ended December 31, 2006 we expect our stock option expense to be between $0.3 million and $0.6 million.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—An Amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4”. SFAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be expensed as incurred and not included in overhead. Further, SFAS 151 requires that allocation of fixed and production facilities overheads to conversion costs should be based on normal capacity of the production facilities. The provisions in this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not believe that the adoption of SFAS 151 will have a material effect on our financial position, results of operations or cash flows.

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In March 2005, the FASB issued Interpretation (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations”. This statement, effective for the period ending December 31, 2005,  provides guidance to ensure consistency in recording legal obligations associated with long-lived tangible asset retirements. FIN 47 did not have a material effect on our financial position, results of operations or cash flows.

In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination” (“EITF 05-6”). EITF 05-6 requires that leasehold improvements that are placed in service significantly after and not contemplated at or near the beginning of the lease term be amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased. EITF 05-6 was adopted in the fourth quarter of 2005. EITF 05-6 did not have a significant impact on our financial position, results of operations or cash flows.

7A. Qualitative and Quantitative Disclosures About Market Risk

We are exposed to various market risks, including fluctuations in foreign currency rates and interest rates. We may enter into various derivative transactions to manage certain of these exposures; however we did not have any derivative financial instruments as of December 31, 2005.

At December 31, 2005, we had variable rate lines of credit with outstanding balances of $9.6 million. In addition, our $29.5 million term loans also had variable interest rates. As such, changes in U.S. interest rates affect interest paid on debt and we are exposed to interest rate risk. For the year ended December 31, 2005, an increase in the average interest rate of 10%, i.e. from 8.08% to 8.89%, would have resulted in an approximately $346,000 decrease in net income before income taxes. The fair value of such debt approximates the carrying amount on the consolidated balance sheet at December 31, 2005.

A substantial majority of our revenues are denominated in U.S. Dollars, and during the fiscal year ended December 31, 2005 approximately 13% of our revenues were denominated in foreign currencies. We ordinarily do not engage in hedging, rate swaps, or other derivatives as a means to minimize our foreign currency risk and, instead, mitigate that exposure by limiting the portion of our sales that are denominated in other than U.S. Dollars. Assuming the same level of foreign currency denominated sales as in 2005, a 10% decline in the average exchange rates for all these currencies would have caused a decline of approximately $2.4 million, or 1%, of our revenues.

Item 8. Consolidated Financial Statements and Supplementary Data

The following consolidated financial statements and supplementary data are included beginning on page 23 of this report.

22

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
LOUD Technologies Inc.:

We have audited the accompanying consolidated balance sheets of LOUD Technologies Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations,  shareholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2005. These consolidated financial statements are the responsibility of LOUD Technologies Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LOUD Technologies Inc., and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Seattle, Washington

March 27, 2006

23

LOUD TECHNOLOGIES INC.

AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2005 and 2004

(In thousands, except for share amounts)

	2005					2004
Assets
Current assets:
Cash and cash equivalents	$			468		$			450
Accounts receivable, net of allowances of $2,224 and $1,671 respectively	28,224					16,800
Inventories	39,290					27,959
Prepaid expenses and other current assets	1,859					2,385
Total current assets	69,841					47,594
Property, plant and equipment, net	7,863					7,381
Goodwill	2,248					—
Other intangible assets, net	12,198					5,128
Deferred financing costs, net	3,378					632
Other assets	17					60
Total assets	$			95,545		$			60,795
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term borrowings	$		9,595			$		11,826
Accounts payable	16,133					17,679
Accrued liabilities	10,009					6,972
Taxes payable	1,293					1,466
Current portion of long-term debt	3,306					300
Current portion of payable to former Italian subsidiary	2,200					7,587
Total current liabilities	42,536					45,830
Long-term debt, excluding current portion	40,944					11,612
Deferred tax liabilities	40					—
Future commitment to pay	2,938					—
Other liabilities	—					33
Total liabilities	86,458					57,475
Commitments and contingencies (Note 15)	—					—
Shareholders’ equity:
Preferred stock, no par value. Authorized 5,000,000 shares, no shares issued and outstanding	—					—
Common stock, no par value. Authorized 40,000,000 shares, issued and outstanding 4,566,202 and 4,427,638 shares at December 31, 2005 and 2004,respectively	40,788					38,778
Accumulated deficit	(31,701				)	(35,458				)
Total shareholders’ equity	9,087					3,320
Total liabilities and shareholders’ equity	$	95,545				$	60,795

See accompanying notes to consolidated financial statements.

24

LOUD TECHNOLOGIES INC.

AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2005, 2004, and 2003

(In thousands, except per share data)

	2005				2004					2003
Net sales	$		204,328		$			123,276		$			130,766
Cost of sales	139,004				81,927					101,456
Gross profit	65,324				41,349					29,310
Operating expenses:
Selling, general, and administrative	46,561				32,259					35,678
Research and development	10,255				7,784					7,711
Restructuring costs	—				—					1,585
Total operating expenses	56,816				40,043					44,974
Operating income (loss)	8,508				1,306					(15,664				)
Other income (expense):
Interest income	322				13					141
Interest expense	(5,635			)	(2,947				)	(2,851				)
Management fee	(1,161			)	(400				)	(400				)
Other	(1,057			)	(251				)	2,201
Total other income (expense)	(7,531			)	(3,585				)	(909				)
Income (loss) before income taxes and discontinued operations	977				(2,279				)	(16,573				)
Income tax expense (benefit)	47				12					(1,161				)
Income (loss) from continuing operations	930				(2,291				)	(15,412				)
Gain (loss) on discontinued operations, net of income tax expense of $58, $0 and $539, respectively	2,827				—					(6,383				)
Net income (loss)	$		3,757		$			(2,291	)	$			(21,795	)
Per share data
Basic net income (loss) per share:
Net income (loss) from continuing operations	$		0.20		$			(0.52	)	$			(3.94	)
Net income (loss) from discontinued operations	0.59				—					(1.63				)
Basic net income (loss) per share	$		0.79		$		(0.52		)	$			(5.57	)
Diluted net income (loss) per share:
Net income (loss) from continuing operations	$	0.19			$		(0.52		)	$		(3.94		)
Net income (loss) from discontinued operations	0.57				—					(1.63				)
Diluted net income (loss) per share	$	0.76			$	(0.52			)	$	(5.57			)
Shares outstanding
Shares used in computing basic net income (loss) per share	4,758				4,383					3,911
Shares used in computing diluted net income (loss) per share	4,957				4,383					3,911

25

LOUD TECHNOLOGIES INC.

AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

Years ended December 31, 2005, 2004, and 2003

(In thousands)

										Accumulated
										other
	Common stock					Accumulated				comprehensive
	Shares	Amount				Deficit				income (loss)				Total
Balance at December 31, 2002	2,511	$		29,345		$		(11,372	)	$		(737	)	$		17,236
Shares issued in private transaction, net	1,387	3,619				—				—				3,619
Warrants issued in connection with debt agreement	—	600				—				—				600
Options issued for covenant not to compete	—	285				—				—				285
Exercise of stock options	23	1				—				—				1
Amortization of deferred stock compensation	—	149				—				—				149
Comprehensive loss:
Net loss	—	—				(21,795			)	—				(21,795			)
Foreign currency translation adjustment	—	—				—				(228			)	(228			)
Realization of loss on currency translation adjustment	—	—								965				965
Total comprehensive loss														(21,058			)
Balance at December 31, 2003	3,921	33,999				(33,167			)	—				832
Conversion of debt to equity	496	4,837				—				—				4,837
Exercise of stock options	10	1				—				—				1
Additional offering costs for shares issued in private transaction	—	(115			)									(115			)
Amortization of deferred stock compensation	—	56				—				—				56
Comprehensive loss:
Net loss	—	—				(2,291			)					(2,291			)
Total comprehensive loss														(2,291			)
Balance at December 31, 2004	4,427	38,778				(35,458			)	—				3,320
Shares issued- acquisition of St. Louis Music, Inc.	79	1,190				—				—				1,190
Exercise of stock options	8	11				—				—				11
Issuance in connection with debt refinance	52	750				—				—				750
Amortization of deferred stock compensation	—	59				—				—				59
Comprehensive income:
Net income	—	—				3,757				—				3,757
Total comprehensive income														3,757
Balance at December 31, 2005	4,566	$	40,788			$	(31,701		)	$	—			$	9,087

See accompanying notes to consolidated financial statements.

26

LOUD TECHNOLOGIES INC.

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2005, 2004, and 2003

(In thousands)

	2005				2004				2003
Operating activities:
Net income (loss)	$		3,757		$		(2,291	)	$				(21,795	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Gain on disposal of business	—				—				(1,577					)
Depreciation and amortization	4,513				3,307				6,982
Amortization of deferred financing costs	1,064				506				379
(Gain) loss on asset dispositions	—				(232			)	113
(Gain) loss on discontinued operations	(2,885			)	—				1,694
Deferred stock compensation	59				56				149
Loss on conversion of debt to equity					400				—
Non-cash interest expense	57				88				113
Changes in operating assets and liabilities, net of acquisition and disposition:
Accounts receivable	664				(3,761			)	8,992
Inventories	7,365				(9,029			)	18,746
Prepaid expenses and other current assets	813				(713			)	(1,634					)
Other assets	60				465				76
Accounts payable and accrued expenses	(5,402			)	9,836				(4,166					)
Taxes payable	(173			)	178				4,090
Other liabilities	139				(39			)	—
Net cash provided by (used in) operating activities	10,031				(1,229			)	12,162
Investing activities:
Proceeds from sales of property, plant and equipment	—				830				221
Purchases of property, plant and equipment	(1,726			)	(2,053			)	(1,982					)
Acquisition of St. Louis Music, Inc., including transaction fees paid	(35,288			)	—				—
Net cash used in investing activities	(37,014			)	(1,223			)	(1,761					)
Financing activities:
Proceeds from long-term debt and warrants	—				—				17,500
Payments on long-term debt	(11,969			)	(1,698			)	(16,791					)
Issuance of long-term debt	44,250				—				—
Net proceeds (payments) on line of credit and short term borrowings	9,595				3,958				(17,254					)
Net payment of existing credit facility	(11,826			)	—				—
Payments on debt conversion costs	—				(115			)	—
Financing costs associated with debt issuance	(3,810			)	—				—
Net proceeds from stock sales and exercise of stock options	761				—				3,620
Cash provided by (used in) financing activities	27,001				2,145				(12,925					)
Effect of exchange rate changes on cash	—				—				219
Increase (decrease) in cash and cash equivalents	18				(307			)	(2,305					)
Cash and cash equivalents at beginning of year	450				757				3,062
Cash and cash equivalents at end of year	$		468		$		450		$				757
Supplemental schedule of noncash financing and investing activities
Cash paid for interest	$		4,732		$		1,655		$				3,060
Cash paid (refunded) for income taxes	$		169		$		(329	)	$				(4,628	)
Conversion of note payable and accrued interest to equity	$		—		$		4,437		$			—
Accrued interest converted to note payable	$		—		$		960		$			—
Issuance of shares related to the acquisition of St. Louis Music	$	1,190			$	—			$		—
Other supplemental disclosures
Payoff on existing line of credit relating to St. Louis Music, Inc. by borrowings under line of credit	$	39,313			$	—			$	—

See accompanying notes to consolidated financial statements.

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOUD TECHNOLOGIES INC.

(1)           Description of Business

We develop, manufacture, and sell high-quality, affordable digital and analog audio mixers, speakers, guitar and bass amplifiers, branded musical instruments and related accessories, and other professional audio equipment on a worldwide basis. Our products are used by professional and amateur musicians; school music programs; sound installation contractors and broadcast professionals in sound recordings, live presentations systems and installed sound systems. We distribute our products primarily through retail dealers, mail order outlets and installed sound contractors. We have our primary operations in the United States with smaller operations in the United Kingdom, Canada, China and Japan.

(2)           Summary of Significant Accounting Policies

a)Basis of Presentation

The financial statements consolidate the accounts of LOUD Technologies Inc. and our wholly owned subsidiaries. The companies are collectively hereinafter referred to as “the Company,” “LOUD”, “we,” “our” and “us.” All significant intercompany accounts and transactions have been eliminated. Financial information includes St. Louis Music, Inc. for the period March 5, 2005 through December 31, 2005. All common stock shares information and share prices have been adjusted for the 1-for-5 reverse stock split that occurred on November 17, 2005.

b)Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the allocation of purchase cost to assets acquired and liabilities assumed, the carrying amount of property and equipment and intangibles; valuation allowances for receivables, inventories, and deferred income tax assets and liabilities. Actual results may differ from those estimates.

c)Revenue Recognition

Revenues from sales of products, net of sales discounts, returns and allowances, are generally recognized upon shipment under an agreement with a customer when risk of loss has passed to the customer, all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection of the resulting receivable is considered probable. Products are generally shipped “FOB shipping point” with no right of return. We do have some dealers who finance their purchases through finance companies. We have manufacturer’s repurchase agreements with the finance companies and defer the revenue and related cost of goods sold of these sales at the time of the sale. We then recognize the revenue and related cost of goods sold from these sales when the repurchase obligation no longer exists. Sales with contingencies, such as rights of return, rotation rights, conditional acceptance provisions and price protection, are deferred until the contingencies have been satisfied or the contingent period has lapsed. We generally warrant our products against defects in materials and workmanship for periods of between one and six years, with the exception of Alvarez Yairi guitars, which have a limited

28

lifetime warranty. The estimated cost of warranty obligations, sales returns and other allowances are recognized at the time of revenue recognition based on contract terms and prior claims experience.

d)Advertising Expense

The cost of advertising included in selling, general and administrative expense is expensed as incurred. For 2005, 2004, and 2003 these expenses totaled $7.1 million, $4.2 million, and $2.4 million, respectively.

e)Research and Development Costs

Expenditures relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. Under our current practice of developing new products and enhancements, the technological feasibility of the underlying products is not established until the completion of a working model at which time all product development is substantially complete. Accordingly no such costs have been capitalized because the impact would not be material.

f)Foreign Currency

The financial statements of our non-U.S. subsidiaries are in United States Dollars in accordance with Statement of Financial Accounting Standards No. 52, Foreign Currency Translation. In 2003, due to the restructuring of our operations in Europe subsequent to the sale of Mackie Italy, we determined the functional currency of our remaining non-U.S. subsidiaries to be the United States Dollar. Prior to the sale of our Italian operations in December 2003, we had entities whose functional currency was the local currency of the country in which they operate. As a result, all monetary assets and liabilities in the balance sheets of these subsidiaries are stated in the United States Dollar. Foreign currency transaction gains and losses are included in other income (expense). Realized and unrealized gains and losses on foreign currency transactions are included in other income (expense). For the year ended December 31, 2005 the amount related to transaction losses was $466,000, whereas for the years 2004 and 2003, the amount related to transaction gains was $8,000 and $615,000, respectively.

g)Cash Equivalents

We consider all demand deposits and all highly liquid debt instruments with maturity at purchase of three months or less to be cash equivalents.

29

h)Accounts Receivable

Accounts receivable are recorded at the invoice amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance for doubtful accounts based upon our historical write-off experience, the current aging of accounts receivable, and customer specific credit risk factors. Accounts receivable balances are written off when we determine that it is unlikely we will receive future remittances. We do not have any off-balance-sheet credit exposures related to our customers.

Allowances deducted from accounts receivable for the years ended December 31, 2005, 2004, and 2003 are as follows (in thousands):

	Balance at beginning of year		Additions			Increase from Acquisition			Deductions*				Balance at end of year
2005	$	1,671	$		401	$		775	$		(623	)	$	2,224
2004	$	2,163	$		609	$		—	$	(1,101		)	$	1,671
2003	$	2,684	$	1,359		$	—		$	(1,880		)	$	2,163

*              Deductions represent uncollectible accounts written off against the allowance, net of recoveries. For 2003, deductions include $1,159 related to amounts included  in beginning balance of discontinued operations sold in 2003.

i)Inventories

LOUD inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out method, or market for Mackie, EAW, SIA and TAPCO brands. For the Crate, Alvarez, Knilling, and Ampeg brands, the inventory is valued at the lower of average cost or market. Market value adjustments are recorded for excess and obsolete material, slow-moving product, service and demonstration products. We make judgments regarding the carrying value of our inventory based upon current market conditions. In 2005, 2004 and 2003, we made adjustments, included in cost of sales, associated with products that are no longer marketable due to a combination of product obsolescence and poor field performance. Inventory adjustments recorded in cost of sales associated with these products amounted to approximately $0.4 million, $0.4 million and $5.7 million in 2005, 2004 and 2003, respectively.

j)Property, Plant and Equipment

Property, plant and equipment are stated at cost, (fair value as of the acquisition date in the case of St. Louis Music, Inc. acquired property, plant and equipment), less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets as follows: buildings, 20 years; machinery and equipment, 5 to 7 years; and furniture and fixtures, 3 to 5 years. Leasehold improvements are amortized over the shorter of their useful lives or the term of the lease. Maintenance and repairs are expensed as incurred.

k)Deferred Financing Costs

Financing costs associated with debt financing are capitalized and amortized over the term of the debt. The amortization periods are five years for our revolving loan and Term Loan A, six years for our Term Loan B and six and a half years for our senior subordinated note. The amortization method for the revolving loan is straight line, whereas the Term Loans and senior subordinated note are amortized using the effective interest rate method. As of December 31, 2005 accumulated amortization was approximately $232,000.

30

Expected future amortization expense related to deferred financing costs is as follows (in thousands):

Year ending December 31:
2006	$	686
2007	678
2008	670
2009	650
2010	495
2011	176
2012	23

l)Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over fair value of assets of businesses acquired. We adopted SFAS No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. In accordance with SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment at least annually, or when events indicate that impairment exists (see Note 3). Intangible assets that are determined to have definite lives will continue to be amortized on the straight-line method over their estimated useful lives. Developed technology and the trademark of EAW are amortized over 20 years. Trademarks, customer relationships and developed technology due to the acquisition of St. Louis Music are amortized over 20, 15, and 5 years respectively.

m)Impairment of Long-Lived Assets

The recoverability of long-lived assets including property, plant and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less cost to sell. Factors which may trigger impairment include significant underperformance relative to expected operating results, significant changes in our use of the assets or the strategy for our overall business, and significant negative industry or economic trends.

n)Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, short-term borrowings, accounts payable, accrued liabilities and long-term debt approximates their fair value because they are of a short-term nature or have interest rates that approximate market rates.

o)Stock-Based Compensation

Stock-based employee compensation plans are accounted for using the intrinsic-value method prescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including SFAS Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25. Under this method, compensation expense is recorded only if the current market price of the underlying stock exceeds the exercise price or if options were issued to non-employees.

We have elected to apply the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of SFAS No. 123.

31

SFAS No.123, as amended, permits companies to recognize, as expense over the vesting period, the fair value of all stock-based awards on the date of grant. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Because our stock-based compensation plans have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, management believes that the existing option valuation models do not necessarily provide a reliable single measure of the fair value of awards from the plan. Therefore, as currently permitted, we apply the existing accounting rules under APB No. 25 and provide pro forma net income (loss) and pro forma income (loss) per share disclosures for stock-based awards made as if the fair value method defined in SFAS No. 123 have been applied.

The following table summarizes relevant information as to the reported amounts under the Company’s intrinsic value method of accounting for stock awards, with pro forma information as if the fair value recognition provisions of SFAS No. 123 have been applied:

	2005				2004					2003
	(In thousands, except for per share data)
Net income (loss):
As reported	$		3,757		$			(2,291	)	$			(21,795	)
Add stock-based employee compensation expense included in reported net loss	—				—					101
Less stock-based employee compensation expense determined under fair value based method	(458			)	(840				)	(1,307				)
Pro forma	$		3,299		$		(3,131		)	$			(23,001	)
Basic net income (loss) per share:
As reported	$	0.79			$		(0.52		)	$		(5.57		)
Pro forma	0.69				(0.71				)	(5.88				)
Diluted net income (loss) per share:
As reported	$	0.76			$	(0.52			)	$	(5.57			)
Pro forma	0.67				(0.71				)	(5.88				)

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model, assuming no expected dividends and the following weighted average assumptions:

	2005		2004		2003
Weighted average risk-free interest rate	4.0	%	3.1	%	3.5	%
Expected volatility	85.0	%	90.0	%	95.0	%
Expected lives (in years)	5		5		7

For options granted with an exercise price equal to the market price at the time of issuance, the weighted average fair value of options granted during the years 2005, 2004 and 2003 was $14.85, $8.00, and $4.35, respectively. There were no options granted in 2005, 2004 and 2003 for which the exercise price was less than the market price.

32

p)Guarantees

In the ordinary course of business, we are not subject to any significant obligations under guarantees that fall within the scope of FIN No. 45 Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others except for standard indemnification and warranty provisions and give rise only to the disclosure requirements prescribed by FIN No. 45.

Indemnification and warranty provisions contained within our sales agreements are generally consistent with those prevalent in our industry. The duration of product warranties is generally one to six years following delivery of products, with the exception of Alvarez Yairi guitars, which have a limited lifetime warranty.

The warranty liability is summarized as follows (in thousands):

	Balance at beginning of period		Charged to cost of sales		Increase from Acquisition		Applied to liability			Balance at end of period
2005	$	978	$	2,456	$	290	$	(2,744	)	$	980
2004	$	1,081	$	2,379	$	—	$	(2,482	)	$	978
2003	$	1,525	$	2,788	$	—	$	(3,232	)	$	1,081

q)Income Taxes

In accordance with SFAS 109, “Accounting for Income Taxes”, we recognize deferred tax assets and liabilities for the future tax consequences attributed to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credits and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company performs periodic evaluations of recorded tax assets and liabilities and maintains a valuation allowance if deemed necessary. The determination of taxes payable for the current year includes estimates. In the event that actual results differ materially from management’s expectations, the estimated taxes payable could materially change, directly impacting the Company’s financial position or results of operations.

r)Computation of Basic and Diluted Net Income (Loss) per Share

Net income (loss) per share has been calculated under SFAS No. 128, Earnings per Share. Basic net income (loss) per share is computed using the weighted average number of common stock outstanding for the year including warrants and options to purchase shares exercisable for little cash consideration. Diluted earnings per share is computed on the basis of the weighted average number of common shares outstanding during the year increased by the weighted average number of potential common shares outstanding during the period, using the treasury stock method. During the years ended December 31, 2005, 2004 and 2003, potential common shares related to stock options of 430,000, 731,000, and 800,000, respectively, wee excluded from the calculation of diluted net income (loss) per share, as their effect wa anti-dilutive in 2004 and 2003, whereas in 2005, they were excluded because they were out of the money.

s)Concentration of Credit and Supply Risk

We sell products on a worldwide basis and a significant portion of our accounts receivable are due from customers outside of the United States. Where we are exposed to material credit risk, we generally require letters of credit, advance payments, or carry foreign credit insurance. No individual

33

country outside of the United States accounted for more than 10% of net sales in any of the periods presented. Sales to U.S. customers are generally on open credit terms. In the United States, we primarily sell our products through third-party resellers and experience individually significant annual sales volumes with major resellers. In 2005, 2004 and 2003, we had sales to one customer of $32.4 million, $14.4 million and $15.6 million or 16%, 12% and 12%, respectively, of consolidated net sales from continuing operations.

Many of our products are currently being manufactured exclusively by contract manufacturers on our behalf. During 2005, sales of products manufactured by one manufacturer were $56.1 million, or approximately 27% of consolidated net sales, while sales of products manufactured by another manufacturer were $21.9 million or approximately 11% of consolidated net sales. No other contract manufacturer manufactured more than 10% of our consolidated net sales in 2005.

t)Recent Accounting Pronouncements

During the fourth quarter of 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123R, “Share Based Payment: An Amendment of SFAS Nos. 123 and 95.” The new standard requires the measurement of all share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in an entity’s statement of income. Our options are typically granted with vesting periods of 4-5 years, and we intend to amortize compensation cost over this vesting period using the straight-line method. We will adopt SFAS 123R, effective January 1, 2006, using the Modified Prospective Application Method whereby previously awarded but unvested equity awards are accounted for in accordance with SFAS 123R and prospective amounts are recognized in the income statement instead of simply being disclosed. Once adopted, we expect SFAS 123R will impact our financial results by significantly reducing our net income. We expect the implementation of SFAS123R will have a significant impact on our future results of operations. For the year ended December 31, 2006 we expect our stock option expense to be between $0.3 million and $0.6 million.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs—An Amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4”. SFAS 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs and spoilage should be expensed as incurred and not included in overhead. Further, SFAS 151 requires that allocation of fixed and production facilities overheads to conversion costs should be based on normal capacity of the production facilities. The provisions in this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We do not believe that the adoption of SFAS 151 will have a material effect on our financial position, results of operations or cash flows.

In March 2005, the FASB issued Interpretation (“FIN”) 47, “Accounting for Conditional Asset Retirement Obligations”. This statement, effective for the period ending December 31, 2005, provides guidance to ensure consistency in recording legal obligations associated with long-lived tangible asset retirements. FIN 47 did not have a material effect on our financial position, results of operations or cash flows.

In June 2005, the Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 05-6, “Determining the Amortization Period for Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination” (“EITF 05-6”). EITF 05-6 requires that leasehold improvements that are placed in service significantly after and not contemplated at or near the beginning of the lease term be amortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemed to be reasonably assured at the date the leasehold improvements are purchased. EITF 05-6 was adopted in the fourth quarter of 2005. EITF 05-6 did not have a significant impact on our financial position, results of operations or cash flows.

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u)Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

v)Reverse Stock Split

On November 17, 2005, the Company effected a 1-for-5 reverse split of our outstanding common stock. Historical share numbers and prices throughout this Annual Report on Form 10-K are split-adjusted.

(3)           Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, which supercede Accounting Principles Board Opinion No. 17, Intangible Assets. SFAS No. 141 requires that all business combinations be accounted for under the purchase method. The statement also specifies criteria for recognizing and reporting intangible assets apart from goodwill; however, assembled workforce must be recognized and reported in goodwill. SFAS No. 142 requires the use of a nonamortization approach to account for purchased goodwill and intangibles having an indefinite life. Under a nonamortization approach, goodwill and certain intangible assets are no longer amortized into results of operations, but instead are reviewed for impairment and written down and charged to results of operations only in the periods in which the recorded value of goodwill and certain intangibles is more than fair value.

We adopted SFAS No. 142 on January 1, 2002. SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill and the timing of transitional impairment steps. The first phase identifies indications of impairment; while the second phase (if necessary), measures the impairment. As required by SFAS No. 142, we performed an impairment test on the goodwill acquired related to the acquisition of St. Louis Music, Inc. as of December 31, 2005, and determined no impairment was necessary.

(4)Discontinued Operations

In December 2003, we placed our indirect wholly owned Italian subsidiary, Mackie Designs (Italy) S.p.A. (“Mackie Italy”), into an Italian form of court-supervised liquidation and sold all of the shares of Mackie Italy to a third party. Mackie Italy was a manufacturer of many of our speaker products, which were purchased by the Company for subsequent sale outside of Italy. At the time of sale, the Company owed Mackie Italy approximately $9.2 million related to the purchase of goods in the normal course of business. During 2004, we made payments to Mackie Italy of approximately $1.6 million, lowering our liability to $7.6 million at December 31, 2004. Additionally, Mackie Italy had a payable to a separate wholly-owned subsidiary of the Company for approximately $2.7 million, which was fully reserved at the date of sale in 2003.

In February 2005, we made an offer to Mackie Italy to settle any outstanding amounts owed by the Company to Mackie Italy for $4.7 million. This proposal was accepted by the Italian court appointed trustee on behalf of Mackie Italy in May 2005. Under the terms of the settlement agreement, we made payments of $2.5 million in 2005. Additionally, we committed to pay $2.2 million during 2006. We recognized a gain on discontinued operations of $2.9 million in 2005 related to this settlement.

The disposition of these operations is accounted for as a discontinued operation. At December 31, 2003, we do not show any assets or liabilities of this entity on our consolidated balance sheet. We have reclassified and condensed the results of discontinued operations on our consolidated statements of operations for all years presented. Cash flows from these operations are included in our consolidated statements of cash flows for all periods presented. Summarized operating results of the discontinued operations for the year ended December 31, 2003, is as follows:

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	2003
	(in thousands)
Revenues	$	29,121
Gross Profit	5,058
Operating income (loss)	(3,707		)
Loss before income taxes	(4,637		)
Income tax expense	(539		)
Loss from discontinued operations*	(6,383		)

*Includes loss on disposition of $1.7 million.

Interest was allocated to discontinued operations based on actual debt held by Mackie Italy. At December 10, 2003, the assets and liabilities associated with this disposition were as follows (in thousands):

Accounts receivable, net	$	12,099
Intercompany receivables, net	5,028
Inventory, net	15,590
Property, plant and equipment, net	8,815
Other assets	1,424
Accounts payable and accrued liabilities	18,231
Line of credit and long term debt	22,953

(5)           Restructuring Costs

During 2003, management approved and implemented a plan to restructure operations. Major activities primarily involved the reduction of workforce due to our decision to close certain manufacturing facilities. We incurred $1.6 million in restructuring expenses, primarily representing employee severance and related costs for approximately 210 displaced employees.

(6)           Inventories

Inventories consist of the following:

	December 31,
	2005		2004
	(In thousands)
Raw materials	$	5,531	$	3,951
Work in process	976		657
Finished goods	32,783		23,351
	$	39,290	$	27,959

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(7)           Intangible Assets

Intangible assets with finite lives consist of the following:

	December 31,
	2005			2004
	(In thousands)
Developed technology	$	5,470		$	5,200
Customer relationships	3,080			—
Trademark	5,930			1,380
Non-compete agreement	285			285
	14,765			6,865
Less accumulated amortization	(2,567		)	(1,737		)
	$	12,198		$	5,128

Amortization expense for intangible assets was $830,000, $424,000 and $408,000 in 2005, 2004 and 2003, respectively.

Expected future amortization expense related to identifiable intangible assets for the next five years is as follows (in thousands):

Year ending December 31:
2006	$	832
2007	816
2008	816
2009	816
2010	771

(8)           Property, Plant and Equipment

As of December 31, 2005 and 2004, property, plant and equipment consisted of the following:

	December 31,
	2005			2004
	(In thousands)
Land and buildings	$	851		$	—
Machinery, equipment and software	15,169			12,564
Furniture and fixtures	1,293			928
Leasehold improvements	1,739			1,518
	19,052			15,010
Less accumulated depreciation and amortization	(11,189		)	(7,629		)
	$	7,863		$	7,381

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(9)           Income Taxes

Components of income (loss) before income taxes are as follows (in thousands):

	2005			2004			2003
U.S.	$	5,618		$	(1,229	)	$	(20,786	)
Foreign	(1,756		)	(1,050		)	(1,631		)
Income (loss) before income taxes	$	3,862		$	(2,279	)	$	(22,417	)

The income tax expense (benefit) is as follows (in thousands):

	2005		2004		2003
Current income taxes:
U.S. federal	$	—	$	—	$	(1,191	)
Foreign	65		12		569
Total current	65		12		(622		)
Deferred income taxes:
U.S. federal	40		—		—
State and local	—		—		—
Foreign	—		—		—
Total deferred	40		—		—
Total income tax expense (benefit)	$	105	$	12	$	(622	)

The allocation of income tax expense (benefit) is as follows (in thousands):

	2005		2004		2003
Total income tax expense (benefit) from continuing operations	$	47	$	12	$	(1,161	)
Total income tax expense from discontinued operations	58		—		539
Total income tax expense (benefit)	$	105	$	12	$	(622	)

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The tax effects of temporary differences and carryforwards that give rise to significant components of deferred tax assets and liabilities are as follows:

	December 31,
	2005			2004
	(In thousands)
Deferred tax assets:
Accrued expenses	$	947		$	768
Bad debt allow ance	494			517
Inventory adjustments	1,311			1,216
Net operating loss carryforwards	10,185			11,287
Capital loss carryforwards	5,445			5,435
Tax credit carryforwards	706			385
Other items, net	—			9
	19,088			19,617
Less valuation allowance	(15,962		)	(17,324		)
Total deferred tax assets	3,126			2,293
Deferred tax liabilities:
Property, plant, and equipment	1,495			566
Specifically identifiable intangible assets	1,671			1,727
Total deferred tax liabilities	3,166			2,293
Net deferred tax liabilities	$	(40	)	$	—

Utilization of net operating loss carryforwards and tax credit carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended. Deferred tax assets of foreign jurisdictions comprised $1.7 million and $1.2 million at December 31, 2005 and 2004, respectively. Deferred tax liabilities of foreign jurisdictions were zero at December 31, 2005 and 2004.

Reconciliation from the United States statutory income tax rate of 34% to the effective income tax rate is as follows:

	2005			2004			2003
	(In thousands)
Tax at the statutory rate	$	1,313		$	(775	)	$	(7,621	)
US tax loss on discontinued operations	—			—			(6,255		)
Research and development tax credit	(192		)	(100		)	(26		)
Change in income tax reserve	(125		)	—			—
Nondeductible expenses and other permanent differences	259			123			90
Foreign tax greater (less) than U.S. statutory rate	27			(5		)	2,555
Increase(decrease in valuation allowance)	(1,362		)	1,085			10,786
State taxes, net of federal impact	86			(186		)	(151		)
Other	99			(130		)	—
Income tax expense (benefit)	$	105		$	12		$	(622	)

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At December 31, 2005 we had U.S. and international net operating loss carryforwards of approximately $28.8 million. Approximately $23.9 million of these loss carryforwards relate to the United States, and approximately $3.6 million relate to the U.K. Approximately $1.3 million of these loss carryforwards relate to our discontinued operation in France, which we believe we will not be able to realize. These carryforwards generally begin expiring in 2024.

We have provided a valuation allowance on the net deferred tax assets. Due to our history of operating losses, we have determined it is more likely than not that they will not be fully realized since the utilization of our deferred tax assets depends on future profits, which are not assured.

(10)        Debt and Liquidity

On August 29, 2005, a new credit facility was completed providing a $69.5 million secured loan facility and a $14.8 million senior subordinated note payable. The senior secured loan facility consists of a $40.0 million revolving loan, a $15.0 million Term Loan A, and a $14.5 million Term Loan B. In connection with the senior subordinated note, the Company issued 51,547 shares of common stock to the subordinated lender at a per share price of $14.55. The Company deferred $3.6 million of financing fees associated with this debt issuance, $3.4 million of which remained on the balance sheet at December 31, 2005. Of the deferred financing fees, $0.9 million was paid to an affiliate of Sun Capital, a related party, as part of this transaction.

The Company's obligations under the Credit Agreement and the Subordinated Note Agreements are automatically accelerated upon certain bankruptcy or insolvency events, and may be accelerated upon the occurrence of other events of default under the Credit Agreement and the Subordinated Note Agreement, such as non-payment of principal, interest or fees when due, or failure to comply with affirmative and negative covenants, subject to any applicable grace periods.

As of December 31, 2005, the Company was in compliance with all financial covenants.

(a))                                Short-Term Borrowings

At December 31, 2005 and 2004, the outstanding balance on our line of credit was $9.6 million (current credit agreement) and $11.8 million (previous credit agreement), respectively. At December 31, 2005, we had the ability to borrow an additional $23.3 million on this current line of credit. Under the revolving line of credit, the Company can borrow up to $40.0 million, subject to certain restrictions that take effect December 31, 2005, including available borrowing capacity. Interest is due monthly or at the end of a LIBOR period (but in such case no greater than 3 months) and is based on Bloomberg's prime rate or LIBOR, both plus a specified margin. Under the terms of the line of credit and subordinated loan agreements, we are required to maintain certain financial ratios, such as measuring our EBITDA to our total debt and senior debt, and maintaining a certain fixed charge coverage ratio. The agreement also provides, among other matters, restrictions on additional financing, dividends, mergers, acquisitions, and an annual capital expenditure limit.

The weighted average interest rate on total short-term borrowings was 8.77% and 5.75% at December 31, 2005 and 2004, respectively.

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(b)Long-Term Debt

Long-term debt consisted of the following at December 31:

	2005			2004
	(In thousands)
U.S. term loans	$	—		$	552
U.S. subordinated note payable	—			11,360
Term Loan A	15,000			—
Term Loan B	14,500			—
Subordinated note payable	14,750			—
	44,250			11,912
Less current portion	(3,306		)	(300		)
	$	40,944		$	11,612

Principal payments on the $29.5 million Term Loan A and Term Loan B, under the Credit Agreement, are paid quarterly.  The term loans bear interest at the Bloomberg's prime rate or LIBOR, both plus a specified margin. This rate for Term Loan A was 7.88% and Term Loan B was 8.38% at December 31, 2005.  Interest is due monthly on each term loan. The final Term Loan A principal payment is due August 29, 2010. The final Term Loan B principal payment is due August 29, 2011.   The term loans and the line of credit are both secured by substantially all of the assets of the Company and its subsidiaries, and are both senior to other long-term debt.  The $14.8 million in senior subordinated notes issued is subordinate to all amounts due under the Credit Agreement and to any refinancing thereof.  Interest accrues on the senior subordinated notes at a rate of 14% and is due quarterly. Of the 14% interest rate, up to two percent may be added to principal on each interest payment date. The principal under the Senior Subordinated Note Agreements is due February 29, 2012.

In addition, we have a future commitment to pay the former owners of St. Louis Music $3.0 million plus interest of 3%. This commitment is due two years after the date of acquisition and was secured by a standby letter of credit in September 2005.

Principal payments on the United States term loan were originally due in equal monthly payments over five years, beginning in July 2003. A portion of the term loan was backed by U.S. based fixed assets. Due to the sale of the Woodinville, Washington manufacturing equipment, an additional $1.3 million was paid on the term loan in 2004. Additionally, in August 2004, we executed a Loan Amendment Agreement which reduced the monthly principal payment due on the term loan to $25,000. Interest was also due monthly and was calculated at the bank’s prime rate plus a specified margin. This rate was 6.00% at December 31, 2004.

In March 2003, we obtained a note payable for $11.0 million, which was subordinate to the previous line of credit with another lender. Interest accrued at a rate of 10%, of which 8% was paid monthly while the remaining 2% was paid monthly if there was specific excess availability on our line of credit; otherwise, the 2% interest was added to principal. Principal and interest were originally due May 2006. During 2004, we had added a total of $360,000 in accrued interest to the note payable.

In August 2004, we executed an Exchange Agreement whereby we exchanged our entire debt to Sun Mackie, an affiliate of Sun Capital Partners, Inc., for 496,031 shares of common stock valued at $9.75 per share. We recognized a loss on early extinguishment of debt with this transaction of $0.5 million representing the difference in the carrying value of the debt and the fair value of the common stock issued.

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Aggregate annual principal payments of long-term debt are stated below (in thousands):

2006	$	3,306
2007	2,645
2008	2,895
2009	3,770
2010	6,553
2011	10,331
2012	14,750
Total long-term debt	$	44,250

(11)        Related-Party Transactions

At December 31, 2003, we had a $4.0 million note payable to Sun Mackie. This note was exchanged for common stock as discussed in Note 10.

We have a management agreement with Sun Mackie to pay the greater of $0.4 million or 6% of EBITDA, as defined, up to $1.0 million, per year to an affiliate of Sun Mackie. During 2005 and 2004, we recorded expenses of approximately $1.2 million and $0.4 million, respectively, under this agreement. Of the $1.2 million of management fees expensed during 2005, $1.0 million relates to the 2005 EBITDA calculation, $0.1 million is a result of a correction to the management fee owed for the 2004 EBITDA calculation, and the remaining amount is miscellaneous expenses incurred by Sun Capital Partners Management, LLC

Edward Kornblum is the Senior Vice President of Entertainment and Artist Relations for LOUD. Two entities owned by Edward’s direct relations are the landlords of two buildings leased by the Company. Under one lease, we pay approximately $11,000 per month, and under the second lease we pay approximately $8,000 per month. Edward’s parents are 100% owners of the entity that receives approximately $8,000 per month and 50% owners of the entity that receives approximately $11,000 per month.

(12)        Employee Benefit Plans

We currently have qualified profit-sharing plans under the provisions of Internal Revenue Code Section 401(k) for all U.S. based employees meeting the eligibility requirements. Contributions are based on a matching formula as defined in each of the plans. Additional contributions may be made at the discretion of the board of directors. Contributions to the respective plans vest ratably over a 5-year period. Contributions to the plan were $0.4 million in 2005, and $0.2 million in 2003. The Company made no contribution to the plan in 2004.

(13)        Net Income (Loss) Per Share

The following table sets forth the computation of basic and diluted net income (loss) per share. Stock options representing 430,000, 731,000, and 800,000 shares in 2005, 2004 and 2003, respectively, were excluded from the calculation of diluted net income (loss) per share because they were antidilutive in 2004 and 2003, whereas in 2005, they were excluded because they were out of the money.

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	2005		2004			2003
	(In thousands)
Numerator:
Net income (loss) from continuing operations	$	930	$	(2,291	)	$	(15,412	)
Netincome (loss) from discontinued operations	2,827		—			(6,383		)
Numerator for basic and diluted net income (loss) per share	$	3,757	$	(2,291	)	$	(21,795	)
Denominator:
Weighted average shares outstanding	4,758		4,129			3,718
Dilutive potential common shares from outstanding warrants and options	192		254			193
Denominator for diluted net income (loss) per share	4,950		4,383			3,911

	2005		2004			2003
Basic net income (loss) per share:
Continuing operations	$	0.20	$	(0.52	)	$	(3.94	)
Discontinued operations	0.59		—			(1.63		)
Basic net income (loss) per share	$	0.79	$	(0.52	)	$	(5.57	)
Diluted net income (loss) per share:
Continuing operations	$	0.19	$	(0.52	)	$	(3.94	)
Discontinued operations	0.57		—			(1.63		)
Diluted net income (loss) per share	$	0.76	$	(0.52	)	$	(5.57	)

(14)        Shareholders’ Equity

In February 2003, we finalized an agreement with Sun Mackie, an affiliate of Sun Capital Partners, Inc., a private investment firm, whereby Sun Mackie, purchased approximately 2.9 million shares of our common stock for $10.0 million. Sun Mackie acquired approximately 1.5 million of these shares from certain selling shareholders. It acquired approximately 1.4 million newly issued shares directly from the Company for approximately $3.6 million. In March 2003, Sun Mackie provided $4.0 million for a note payable and warrants to purchase 240,000 shares of common stock at $0.05 per share. In August 2004, we executed an Exchange Agreement whereby we exchanged our entire debt to Sun Mackie for 496,031 shares of common stock valued at $9.75 per share. We recognized a loss on early extinguishment of debt with this transaction of $0.5 million representing the difference in the carrying value of the debt and the fair value of the common stock issued. The warrants to purchase 240,000 shares of common stock were still outstanding after this transaction.

During July 2003, our board of directors adopted the 2003 Stock Option Plan (the 2003 Plan), authorizing options to purchase 345,600 shares of common stock. The 2003 Plan calls for options to be

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non-qualified stock options with exercise prices equal to the fair market value of the stock on the date granted. Options generally vest over a five-year period and expire on the earlier of ten years from grant date or three months from termination. If an option holder is terminated for Cause, as defined in the 2003 Plan, the options would terminate a day prior to termination. At December 31, 2005, 61,000 shares of common stock were available for future grants under the 2003 Plan.

The Company also has a 1995 Stock Option Plan (the 1995 Plan), which authorized 1.3 million shares of common stock for grants. The exercise price of incentive stock options granted under the 1995 Plan may not be less than the fair market value of the common stock on the date of grant. The exercise price of nonqualified stock options granted under the plan may be greater or less than the fair market value of the common stock on the date of grant, as determined by the stock option committee of the board of directors at its discretion. Options generally vest over a four to five-year period and expire no later than ten years after the date of grant. At December 31, 2005, 809,000 shares of common stock were available for future grants under the 1995 Plan.

In February 2003, as part of a separation agreement with a former founder and director, we repriced options to purchase 66,000 shares with an average exercise price of $31.35 to a new exercise price of $5.10 in exchange for a non-compete agreement valued at $285,000.

The following table summarizes the stock option activity for the three-year period ended December 31, 2005:

	Shares subject to exercise		Weighted average exercise price
	(In thousands)
Options outstanding at December 31, 2002	790		$	26.30
Granted	250		5.25
Forfeited	(200	)	26.85
Exercised	(23	)	0.05
Options outstanding at December 31, 2003	817		18.35
Granted	25		11.00
Forfeited	(94	)	20.80
Exercised	(10	)	0.05
Options outstanding at December 31, 2004	738		18.05
Granted	79		14.85
Forfeited	(180	)	27.00
Exercised	(8	)	1.52
Options outstanding at December 31, 2005	629		$	15.27

At December 31, 2005, 2004, and 2003 a total of 406,000, 512,000 and 492,000 options were exercisable, respectively. The weighted average exercise price of these options was $18.65, $22.75, and $24.85 respectively.

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The following table summarizes information about options outstanding and exercisable at December 31, 2005:

	Options outstanding			Options exercisable
Range of exercise price	Number outstanding	Weighted average remaining contractual life (years)	Weighted average exercise price	Number exercisable	Weighted average exercise price
	(In thousands)			(In thousands)
$ 5.10-8.85	305	6.4	5.22	174	5.27
$ 11.30-23.75	130	7.9	20.54	38	16.22
$ 25.30-32.50	155	3.0	28.61	155	28.61
$ 33.44-43.75	39	2.0	37.30	39	37.30
	629	5.6	$15.27	406	$18.65

(15)        Commitments and Contingencies

(a)           Commitments

We have leases on two buildings in St. Louis, Missouri that are owned by former owners, their relatives, and shareholders of St. Louis Music, Inc. One building, a research and development center, has monthly rent expense of approximately $8,000. The other building, a warehouse with office space, has monthly rent expense of approximately $11,000. Both leases were renewed at the date of acquisition and were extended through March 5, 2008. In addition to these buildings, we lease another warehouse in St. Louis, Missouri. This lease was renewed in February of 2006 and extended until June 30, 2009. We lease facilities in Woodinville, Washington totaling approximately 170,000 sq. ft. to house our corporate headquarters as well as a distribution center. The lease on the approximately 80,000 sq. ft. of distribution and warehouse space was renewed in January of 2006 and expires July 31, 2011. The lease on our approximately 90,000 sq. ft. corporate headquarters and distribution center was renewed in March of 2006 and expires December 31, 2011. We lease a series of connected buildings in a manufacturing complex in Whitinsville, Massachusetts, totaling 220,285 sq. ft. This lease continues through April 2008. We lease additional smaller facilities in the United States, Canada, Europe and Asia for our regional sales and support offices.

Future minimum rental payments under facility leases at December 31, 2005, are as follows (in thousands):

2006	$	2,359
2007	2,252
2008	1,648
2009	1,298
2010	1,189
2011	955

Total rent expense for 2005, 2004, and 2003 was $2.4 million, $2.1 million, and $2.2 million, respectively.

(b)           Contingencies

On or about November 29, 2005, LOUD Technologies Inc. and its subsidiary, St. Louis Music Company, were named as party-defendants in a lawsuit in the United States District Court, Southern

45

District of Florida. The lawsuit, filed by Ace Pro Sound and Recordings and served upon the Company, alleges individual and class action claims against LOUD, as well as other, unrelated defendants. The claims include civil conspiracy, tortuous interference, violation of Florida’s state and the Federal Racketeering Influenced and Corrupt Organization Act as well as Section 1 and Section 2 Sherman Act antitrust claims. LOUD has filed a motion to dismiss this case.

We are also involved in various legal proceedings and claims that arise in the ordinary course of business. We currently believe that these matters will not have a material adverse impact on our financial position, liquidity or results of operations.

(16)        Geographic Information

As of December 31, 2005, our major operations outside the United States include a sales and support office in the United Kingdom. Certain geographic information for continuing operations for the three years ended December 31, 2005 is presented in the table that follows. Sales between affiliated entities are excluded from these amounts. Net sales, as shown in the table below, are based upon the geographic area into which the products were sold and delivered. The profit on transfers between geographic areas is not recognized until sales are made to nonaffiliated customers.

Sales to customers outside of the United States approximated 37%, 42%, and 37% of net sales in 2005, 2004, and 2003, respectively.

	2005		2004		2003
	(In thousands)
Net sales:
U.S.	$	128,681	$	71,590	$	82,046
Non-U.S.	75,647		51,686		48,720
	$	204,328	$	123,276	$	130,766

As of December 31, 2005 we had inventory (net) and receivables (gross) in foreign locations as shown in the table below.

	2005		2004
	(In thousands)
Gross Receivables
U.S.	$	18,897	$	8,871
Non-U.S.	11,551		9,600
	$	30,448	$	18,471
Net Inventory
U.S.	$	33,795	$	21,304
Non-U.S.	5,495		6,655
	$	39,290	$	27,959

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(17)        Quarterly Financial Data (Unaudited) (In thousands, except per share data, prior periods adjusted for 1-for-5 reverse stock split)

	2005
	First		Second			Third		Fourth
Net sales	$	39,945	$	54,290		$	53,987	$	56,106
Gross profit	13,335		15,648			18,206		18,135
Net income (loss)	3,323		(1,690		)	379		1,745
Basic net income (loss) per share	0.71		(0.36		)	0.08		0.36
Diluted net income (loss) per share	0.68		(0.36		)	0.08		0.35

	2004
	First			Second			Third			Fourth
Net sales	$	25,681		$	30,531		$	31,041		$	36,023
Gross profit	6,912			10,295			10,348			13,794
Net income (loss)	(3,954		)	(957		)	(603		)	3,223
Basic net income (loss) per share	(0.95		)	(0.23		)	(0.13		)	0.69
Diluted net income (loss) per share	(0.95		)	(0.23		)	(0.13		)	0.67

(18)        Business Combinations

On March 4, 2005, we acquired all of the shares of St. Louis Music, Inc. (“St. Louis”), a Missouri-based manufacturer, distributor and importer of branded musical instruments and professional audio products. The Company believes the acquisition of St. Louis Music, Inc. will further diversify the Company’s product offerings to help acquire, retain and extend relationships with customers. Our total purchase price was approximately $43.7 million, consisting of $33.7 million in cash; a commitment to pay $3.0 million plus interest in two years, the present value of which as of the acquisition date was $2.8 million, 79,358 shares of the Company’s common stock, assumed liabilities of $4.4 million and  transaction costs of $1.6 million. The $3.0 million future commitment plus accrued interest is secured by a standby letter of credit issued in September 2005. The St. Louis Music acquisition was conducted through SLM Merger Corp., an indirect wholly owned subsidiary of the Company. Included in the Company’s results of operations are the operations of St. Louis Music for the period March 5 through December 31, 2005.

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In connection with the acquisition, the purchase price has been allocated as follows (in thousands):

Allocation of purchase price
Accounts receivable	12,088
Inventories	18,696
Prepaid expenses and other current assets	287
Property, plant and equipment	2,440
Goodwill	2,248
Trademarks (estimated life of 20 years)	4,550
Developed Technology (estimated life of 5 years)	270
Customer Relationships (estimated life of 15 years)	3,080
Other assets	17
Total assets	$	43,676
Accounts payable	2,610
Accrued liabilities (including remaining amount due to sellers)	4,588
Total liabilities	$	7,198
Common stock issued	1,190
Cash consideration paid, (net of $88 cash acquired and including $1,633 of transaction costs)	$	35,288

Changes to the purchase price allocation from those reported in our Quarterly Report on Form 10-Q for the period ended September 30, 2005 are as follows (in thousands):  a decrease to property, plant and equipment of $986 due to receipt of a final appraisal of the fair value of the assets and an increase to accrued liabilities of $451, of which $230 is due to a correction to the accrued vacation accrual and $221 is due to a tax indemnification due to the sellers of St. Louis Music. The effects of the above items less minor adjustments totaling approximately $51 caused a net increase to goodwill of  $1,386.

Goodwill of $2.2 million, representing the excess of the purchase consideration over the fair value of tangible and identifiable intangible assets acquired, will not be amortized, consistent with the guidance of SFAS 142. Amortization of the entire $2.2 million is expected to be deductible for tax purposes.

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The following unaudited pro forma information represents the results of operations for LOUD and St. Louis Music, Inc. for the year ended December 31, 2005 and 2004, as if the acquisition had been consummated as of the beginning of each period presented. Included in the St. Louis Music net loss for the year ended December 31, 2005 are $2.1 million of St. Louis Music’s transaction expenses that relate to the sale of the business that are nonrecurring in nature. This pro forma information does not purport to be indicative of what may occur in the future (in thousands, except per share data):

	2005		2004
	Pro Forma		Pro Forma
Net sales	$	220,916	$	206,781
Gross profit	69,677		59,820
Net income (loss)	2,277		(3,710		)
Basic net income(loss) per share	$	0.50	$	(0.84	)

Included in the pro forma adjustments are fair value adjustments that relate to inventories and property, plant, and equipment; reversal of interest expense on St. Louis Music, Inc. debt that was in existence prior to the acquisition; recording of interest expense on the demand credit facility obtained as a result of the acquisition; and amortization of the intangible assets recorded as a result of the acquisition.

Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s “disclosure controls and procedures” as of December 31, 2005, pursuant to Rules 13a-15(b) and 15d-15(b) under the Exchange Act. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of December 31, 2005, were effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

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There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act) during the fourth quarter of 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

PART III

The information required by Part III (Items 10 - 14) will be included in our definitive Proxy Statement for our 2006 Annual Meeting of Shareholders and is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

(a)           Documents filed as part of this report:

1.     Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Balance Sheets at December 31, 2005 and 2004

Consolidated Statements of Operations for each of the years in the three-year period ended December 31, 2005

Consolidated Statements of Shareholders' Equity and Comprehensive Income for each of the years in the three-year period ended December 31, 2005

Consolidated Statements of Cash Flows for each of the years in the three-year period ended December 31, 2005

Notes to Consolidated Financial Statements

All financial statement schedules are omitted since the required information is not applicable, not required, or the required information is included in the consolidated financial statements or notes thereto.

(b)Exhibits:  See Index to Exhibits on Page 53.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LOUD TECHNOLOGIES INC.
By:	/s/ James T. Engen
	James T. Engen Chairman, President, Chief Executive Officer and Director
Date:	March 31, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 14, 2003.

Signature	Title
/s/ James T. Engen	Chairman, President, Chief Executive Officer and Director
James T. Engen
/s/ Timothy P. O’Neil	Chief Financial Officer, Senior Vice President, Secretary and
Timothy P. O’Neil	Treasurer (Principal Financial and Accounting Officer)
/s/ Marc J. Leder	Director and Vice President
Marc J. Leder
/s/ Clarence E. Terry	Director and Vice President
Clarence E. Terry
/s/ R. Lynn Skillen	Director and Vice President
R. Lynn Skillen
/s/ Rodger Krouse	Director and Vice President
Rodger Krouse
/s/ Jason H. Neimark	Director and Vice President
Jason H. Neimark
/s/ T. Scott King	Director and Vice President
T. Scott King
/s/ Jon W. Gacek	Director
Jon W. Gacek
/s/ George Rea	Director
George Rea
/s/ C. Daryl Hollis	Director
C. Daryl Hollis

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INDEX TO EXHIBITS

Exhibits	Description
2.1	Stock Purchase Agreement, dated as of January 16, 2003, by and among Sun Mackie, LLC, Mackie Designs Inc., Gregory Mackie, on behalf of himself and as the sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust and the Christine Radke Irrevocable Trust, and C. Marcus Sorenson and Judith B. Sorenson, as co-trustees of the Children of Matthew Adam Sorenson Irrevocable Trust, the Children of Karen Marie Lopez Irrevocable Trust, the Children of Kimberly Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family Trust. Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated January 16, 2003.
2.2	First Amendment to Stock Purchase Agreement, dated as of February 7, 2003, by and among Sun Mackie, LLC, Mackie Designs Inc., Gregory Mackie, on behalf of himself and as the sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust and the Christine Radke Irrevocable Trust, and C. Marcus Sorenson and Judith B. Sorenson, as co-trustees of the Children of Matthew Adam Sorenson Irrevocable Trust, the Children of Karen Marie Lopez Irrevocable Trust, the Children of Kimberly Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family Trust. Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated February 21, 2003.
2.3	Second Amendment to Stock Purchase Agreement, dated as of February 13, 2003, by and among Sun Mackie, LLC, Mackie Designs Inc., Gregory Mackie, on behalf of himself and as the sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust and the Christine Radke Irrevocable Trust, and C. Marcus Sorenson and Judith B. Sorenson, as co-trustees of the Children of Matthew Adam Sorenson Irrevocable Trust, the Children of Karen Marie Lopez Irrevocable Trust, the Children of Kimberly Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family Trust. Incorporated by reference to Exhibit 2.2 to Current Report on Form 8-K dated February 21, 2003.
2.4	Third Amendment to Stock Purchase Agreement, dated as of February 21, 2003, by and among Sun Mackie, LLC, Mackie Designs Inc., Gregory Mackie, on behalf of himself and as the sole trustee of the Clair Mackie Irrevocable Trust, the Nathalia Mackie Irrevocable Trust, the Kathleen Staples Irrevocable Trust and the Christine Radke Irrevocable Trust, and C. Marcus Sorenson and Judith B. Sorenson, as co-trustees of the Children of Matthew Adam Sorenson Irrevocable Trust, the Children of Karen Marie Lopez Irrevocable Trust, the Children of Kimberly Kaye Parker Irrevocable Trust, the Matthew Adam Sorenson Irrevocable Trust, the Karen Marie Lopez Irrevocable Trust, the Kimberly Kaye Parker Irrevocable Trust and the Sorenson Family Trust. Incorporated by reference to Exhibit 2.3 to Current Report on Form 8-K dated February 21, 2003.
2.5	Management Services Agreement, dated as of February 21, 2003 by and between Mackie Designs Inc. and Sun Capital Partners Management, LLC. Incorporated by reference to Exhibit 2.4 to Current Report on Form 8-K dated February 21, 2003.

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2.6	Post-Closing Funding Agreement, dated as of February 21, 2003, by and between Mackie Designs Inc. and Sun Mackie, LLC. Incorporated by reference to Exhibit 2.5 to Current Report on Form 8-K dated February 21, 2003.
2.7	Agreement by and among LOUD Technologies Inc., Mackie Designs (Netherlands) B.V. and Knight Italia S.p.A. Incorporated by reference to Exhibit 2.8 to Current Report on Form 8-K dated December 10, 2003.
2.8	Irrevocable Offer Letter from Knight Italia S.p.A. Incorporated by reference to Exhibit 2.9 to Current Report on Form 8-K dated December 10, 2003.
2.9	Irrevocable Offer Letter from LOUD Technologies Inc. Incorporated by reference to Exhibit 2.10 to Current Report on Form 8-K dated December 10, 2003.
2.10	Concordato Preventivo Petition dated as of December 6, 2003, by Mackie Designs (Italy) S.p.A. Incorporated by reference to Exhibit 2.11 to Current Report on Form 8-K dated December 10, 2003.
2.11	Acquisition Agreement dated March 4, 2005 by and among SLM Merger Corp., SLM Holding Corp., LOUD Technologies Inc. and St. Louis Music, Inc. Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated March 7, 2005.
3.1	Restated Articles of Incorporation. Incorporated by reference to Exhibit 3.1 to Registration Statement filed under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514.
3.2	Articles of Amendment to Article of Incorporation. Incorporated by reference to Exhibit 3.1.1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
3.3	Second Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.2 to Annual Report as Form 10-K for the fiscal year ended December 31, 2002.
4.1	See Articles II, III, IV, IX, X and XI of Exhibit 3.1 and Articles I, V, VI and VII of Exhibit 3.2 confirming the rights of the holders of Common Stock.
10.1	Mackie Designs Inc. Third Amended and Restated 1995 Stock Option Plan. Incorporated by reference to Exhibit 10.1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
10.2	Mackie Designs Inc. 2003 Stock Option Plan. Incorporated by reference to Exhibit 10.1.1 to Registration Statement filed under the Securities Act of 1933 on Form S-8 dated July 15, 2003.
10.3	Industrial Lease, dated December 15, 1994, by and between Mackie Holdings, L.L.C. and Mackie Designs Inc. Incorporated by reference to Exhibit 10.3 to Registration Statement filed under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514.
10.4	Amendment to Industrial Lease dated December 12, 2001 by and between Mackie Holdings, L.L.C. and Mackie Designs Inc. Incorporated by reference to Exhibit 10.2.1 to Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

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10.5	Industrial Real Estate Lease dated April 28, 1995, by and between Woodinville II LLC, successor in interest to Intrawest Properties Partnership U.S. and Mackie Designs Inc. Incorporated by reference to Exhibit 10.4 to Registration Statement filed under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514.
10.6	Mackie Designs Inc. 401(k) Profit Sharing Plan dated December 20, 1993. Incorporated by reference to Exhibit 10.15 to Registration Statement filed under the Securities Act of 1933 on Form S-1, as amended, Registration No. 33-93514.
10.7	Loan and Security Agreement, dated March 31, 2003, by and among Mackie Designs Inc. and Mackie Designs UK Plc, as borrowers, Mackie Designs Manufacturing, Inc., SIA Software Company, Inc. and Mackie Investment Co., as guarantors, and Congress Financial Corporation, as agent for and on behalf of the financial institutions which are parties thereto as lenders, and the financial institutions named from time to time as parties thereto as lenders. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated March 31, 2003.
10.8	Amendment No. 2 and Waiver to Loan and Security Agreement, dated April 16, 2004, by and among LOUD Technologies Inc. and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs Inc., SIA Software Company, and Mackie Investment Co. as guarantors; and Congress Financial Corporation, as agent for and on behalf of the financial institutions which are parties thereto and the parties to the Loan Agreement as lenders. Incorporated by reference to Exhibit 10.5.1 to Annual Report on Form 10-K for fiscal year ended December 31, 2003.
10.9	Amendment No. 3 and Waiver to Loan and Security Agreement, dated August 3, 2004, by and among LOUD Technologies Inc. and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs Inc., SIA Software Company, and Mackie Investment Co. as guarantors; and Congress Financial Corporation, as agent for and on behalf of the financial institutions which are parties thereto and the parties to the Loan Agreement as lenders. Incorporated by reference to Exhibit 10.5.2 to Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004.
10.10	Amendment No. 4 and Waiver to Loan and Security Agreement, dated October 25, 2004, by and among LOUD Technologies Inc. and LOUD Technologies (Europe) Plc, as borrowers; Mackie Designs Inc., SIA Software Company, and Mackie Investment Co. as guarantors; and Congress Financial Corporation, as agent for and on behalf of the financial institutions which are parties thereto and the parties to the Loan Agreement as lenders. Incorporated by reference to Exhibit 10.5.3 to Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004.
10.11	Term Promissory Note, dated March 31, 2003, made by Mackie Designs Inc. to the order of Congress Financial Corporation in the principal amount of $2,500,000. Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated March 31, 2003.
10.12	Pledge and Security Agreement, dated March 31, 2003, made by Mackie Designs Inc. to and in favor of Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions which are parties thereto as lenders. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated March 31, 2003.
10.13	Patent Collateral Assignment and Security Agreement, dated March 31, 2003, by and between Mackie Designs Inc. and Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions which are parties thereto as lenders. Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated March 31, 2003.

55

10.14	Copyright Collateral Assignment and Security Agreement, dated March 31, 2003, by and between Mackie Designs Inc. and Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions, which are parties thereto as lenders. Incorporated by reference to Exhibit 10.5 to Current Report on Form 8-K dated March 31, 2003.
10.15	Trademark Collateral Assignment and Security Agreement, dated March 31, 2003, by and between Mackie Designs Inc. and Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions, which are parties thereto as lenders. Incorporated by reference to Exhibit 10.6 to Current Report on Form 8-K dated March 31, 2003.
10.16	Guarantee, dated March 31, 2003, made by Mackie Designs Manufacturing, Inc., SIA Software Company, Inc. and Mackie Investment Co. for and on behalf of Mackie Designs Inc. in favor of Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions which are parties thereto as lenders, and the financial institutions which are parties to the Loan Agreement as lenders. Incorporated by reference to Exhibit 10.7 to Current Report on Form 8-K dated March 31, 2003.
10.17	Guarantee, dated March 31, 2003, made by Mackie Designs Inc., Mackie Designs Manufacturing, Inc., SIA Software Company, Inc. and Mackie Investment Co. for and on behalf of Mackie Designs UK Plc in favor of Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions which are parties thereto as lenders, and the financial institutions which are parties to the Loan Agreement as lenders. Incorporated by reference to Exhibit 10.8 to Current Report on Form 8-K dated March 31, 2003.
10.18	Second Amended and Restated Subordination Credit Agreement, dated March 31, 2003, between and among U.S. Bank National Association, as lender, Mackie Designs Inc., as borrower, and Mackie Designs Manufacturing, Inc., SIA Software Company, Inc., and Mackie Investment Co., as guarantors. Incorporated by reference to Exhibit 10.9 to Current Report on Form 8-K dated March 31, 2003.
10.19	Intercreditor and Subordination Agreement, dated March 31, 2003, by and among Congress Financial Corporation, in its capacity as agent pursuant to the Loan Agreement acting for and on behalf of the financial institutions which are parties thereto as lenders, and the financial institutions from time to time party to the Senior Loan Agreement as lenders, and U.S. Bank National Association. Incorporated by reference to Exhibit 10.10 to Current Report on Form 8-K dated March 31, 2003.
10.20	Stock Purchase Warrant, dated March 31, 2003, issued by Mackie Designs Inc. to Sun Mackie, LLC for the right to purchase 1,179,429 shares of common stock. Incorporated by reference to Exhibit 10.11 to Current Report on Form 8-K dated March 31, 2003.
10.21	Subordinated Promissory Note, dated March 31, 2003, made by Mackie Designs Inc. to the order of Sun Mackie, LLC in the principal amount of $3,931,429. Incorporated by reference to Exhibit 10.12 to Current Report on Form 8-K dated March 31, 2003.
10.22	Loan Agreement dated October 21, 1999 between James T. Engen and Mackie Designs, Inc. in the amount of $250,000. Incorporated by reference to Exhibit 10.20 to Annual Report on Form 10-K for the fiscal year ended December 31, 1999.

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10.23	Exchange Agreement dated August 3, 2004, among LOUD Technologies Inc., Sun Mackie, LLC, Randolph Street Partners V, and H.I.G. Partners, Inc. Incorporated by reference to Exhibit 10.19 to current Report on Form 8-K dated August 3, 2004.
10.24	Credit Agreement, dated August 29, 2005, among Loud Technologies, Inc., St. Louis Music, Inc., the financial institutions of other entities from time to time parties thereto, 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. Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated August 29, 2005.
10.25	Securities Purchase Agreement, dated August 29, 2005, among Loud Technologies, Inc., St. Louis Music, Inc., the other guarantors from time to time party thereto, and OCM Mezzanine Fund, L.P. Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated August 29, 2005.
10.26	Subordination Agreement, dated August 29, 2005, among Loud Technologies, Inc., St. Louis Music, Inc., and certain of their subsidiaries, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Administrative Agent, and OCM Mezzanine Fund, L.P. Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated August 29, 2005.
10.27	Acquisition Agreement, dated March 4, 2005, by and among SLM Merger Corp., SLM Holding Corp., Loud Technologies, Inc. and St. Louis Music, Inc. Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated March 7, 2005.
*10.28	Lease Agreement dated September 12, 1990, as amended to date, by and between Eugene M. Kornblum and Helen H. Kornblum, as landlord, and St. Louis Music, Inc., as tenant.
*10.29	Commercial Lease dated December 20, 2001, by and between Eugene M. Kornblum, Trustee of The Eugene M. Kornblum Trust Agreement Dated July 18, 1997, as to an undivided 25% interest as tenants in common; Helen H. Kornblum, Trustee of The Helen H. Kornblum Trust Agreement Dated July 11, 1997, as to an undivided 25% interest as tenants in common; and Carole A. Simon and Robert S. Simon, Trustees of The Carole A. Simon and Robert S. Simon Revocable Trust U/T/A dated November 27, 1991, as to an undivided 50% interest as tenants in common, as landlord, and St. Louis Music, Inc. as tenant.
*10.30	Lease dated November 8, 2000, as amended to date, by and between Cornerstone Industrial Fund I, L.L.C., as landlord, and Loud Technologies Inc., as tenant.
*21.1	Subsidiaries of LOUD Technologies Inc.
*23.1	Consent of KPMG LLP,-Independent Registered Public Accounting Firm.
*31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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99.1 Press release, dated March 17, 2006, issued by LOUD Technologies Inc. announcing its anticipated financial performance for the twelve months and three months ended December 31, 2005. Incorporated by reference to Exhibit 99.1 to Current Report of Form 8-K dated March 29, 2006.

* Filed herewith

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EX-10.28

Exhibit 10.28

AMENDMENT TO LEASE AGREEMENT[Congressional]

THIS AMENDMENT TO LEASE AGREEMENT (“Amendment”) is made and entered into effective as of the       day of March, 2005 (the “Effective Date”) by and between Eugene M. Kornblum and Helen H. Kornblum (hereinafter collectively referred to as “Landlord”) and ST, LOUIS MUSIC, INC., a corporation, existing under the laws of the State of Missouri (hereinafter referred to as “Tenant”).

RECITALS:

A.Landlord and Tenant entered into that certain Lease Agreement (“Lease”) dated as of September 12,1990, for land and all appurtenances, buildings and improvements located thereon situated in the County of St. Louis, State of Missouri as more particularly described in the Lease.

B.Landlord and Tenant now wish to amend the Lease as set forth herein.

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and obligations contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged and confessed, Landlord and Tenant agree as follows:

1.All capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in the Lease. In the event of any conflict or inconsistency between this Amendment and the Lease, this Amendment shall control.

2.The ending date of the term of the Lease as described in Paragraph 2 of the Lease is hereby extended to and shall be February 29,2008, unless sooner terminated pursuant to other provisions of the Lease, inaddition, Tenant shall have no further renewal or extension options and any such rights in the Lease are deleted.

3.Paragraph 3 of the Lease is hereby stricken in its entirety and replaced with the following language:

“3.Use of the Premises. Tenant shall be entitled to have and to hold the Premises, subject to the conditions herein contained, for any use permitted by law. Landlord and Tenant shall comply with, and shall maintain the Premises in compliance with, all laws and all requirements of all governmental authorities applicable to the Premises and to the use thereof, and shall maintain the Premises in compliance with the requirements of the insurance companies providing the insurance required by subparagraph (b)(3) of Paragraph 4 below.”

4.Paragraph 5 of the Lease is hereby stricken in its entirety and replaced with the following language:

“5.Maintenance, Repairs, Alterations and Restorations.

(a)Tenant shall, at its sole cost and expense, maintain and care for the building and improvements located on the Premises, including landscaped areas, roadways and the parking areas, except as otherwise provided in subparagraph (b) below. Tenant shall, at its sole cost and expense, maintain and care for the Interiors of the building and improvements, including all plumbing, heating, air conditioning, electrical and sewer systems devices and installations. Tenant agrees to keep the Premises free from any nuisance or filth upon or adjacent thereto, Except as otherwise

provided in subparagraph (b) below, all repairs and alterations deemed necessary to the exterior and interior of the buildings and improvements located on the Premises shall be made or constructed by Tenant with the consent of Landlord; and all repairs, alterations, restorations, buildings and other improvements so made or constructed shall remain as or become, as the case may be, a part of the realty.

(b)Landlord shall conduct all structural maintenance and repairs to the foundation, the exterior walls and the roof of the building as may be required for the preservation, protection or restoration of the Premises, unless any such maintenance and/or repair is required as a result of damage caused by the gross negligence or willful acts and/or omissions of Tenant, its employees or invitees, on or after the Effective Date. Landlord shall also conduct all maintenance and repairs to the Premises that are required as a result of damage caused prior to the Effective Date, and shall perform any such alterations to the Premises as are required by law, except and to the extent such alterations are so required due to improvements or intended improvements to the Premises by Tenant.

(c)All repairs, alterations, restorations, buildings and other improvements made or constructed to or on the Premises shall be performed by the responsible party in a good and workmanlike manner, shall be pursued by the responsible party with due diligence until the Premises will again be fit for occupancy of Tenant, or until said construction shall be reasonably deemed completed by Landlord, and shall be performed in conformity with all applicable laws, ordinances, rules and regulations. Tenant shall not, under any circumstances, allow or permit any lien for labor and material to attach to the Premises.

(d)Subject to paragraph 6(b) below, Tenant shall pay for all costs and expenses incurred by Tenant arising out of Tenant’s obligations to make the repairs,, alterations or restorations described in subparagraph (a) above. Landlord shall also pay for all costs and expenses incurred by Landlord arising out of Landlord’s obligations to make the repairs, alterations or restorations described in subparagraph (b) above.”

5.Paragraph 6 of the Lease is hereby stricken in its entirety and replaced with the following language:

“6.Indemnification.

(a)Tenant agrees that it will protect, indemnify and save Landlord harmless from and against any penalty, damage or charge imposed for any violation of any law or ordinance by Tenant, its agents, employees or anyone acting on behalf of Tenant. Tenant further agrees that it will protect, indemnify and save Landlord harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities arising from Tenant’s use of the Premises on or after the Effective Date, or from any act permitted, or any omission to act, in or about the Premises by Tenant or its employees or invitees on or after the Effective Date, or from any breach or default by Tenant of this Lease, except to the extent caused by Landlord’s negligence or willful misconduct.

(b)Landlord agrees that it will protect, indemnify and save Tenant harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities arising from any breach or default by Landlord of this Lease, except to the extent caused by Tenant’s negligence or willful misconduct, Landlord further agrees that

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it will protect, indemnify and save Tenant harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities associated with, related to, or arising out of (i) the maintenance and repair of the roof, including without limitation any removal, disposal or other remediation required by law with respect to any asbestos containing materials (“ACMs”) or presumed ACMs that may be present in the roof; (ii) any underground storage tanks that may be or have been present on the Premises; and (iii) without limitation to item (i) above, the presence of any ACMs or presumed ACMs on the Promises; provided, however that Landlord shall have no such indemnification obligation with respect to any remediation, maintenance, encapsulation, removal, disposal, labeling or other actions with respect to any ACMs, presumed ACMs or underground storage tanks except to the extent such action is required under applicable laws.”

5.Paragraph 8 of the Lease is hereby stricken in its entirety and replaced with the following language:

“8.Destruction and Eminent Domain.

(a)Should the entire area of the Premises, or such portion thereof as to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, be destroyed by fire or other cause or be acquired or taken by condemnation by any public or quasi-public authority or under the power of eminent domain, this Lease may, at the option of Tenant, be terminated and of no further force and effect from and after the date of such total destruction or the effective date of the taking by such public or quasi-public authority. Tenant shall have no interest in nor shall it share in any insurance proceeds or condemnation award received by Landlord for the Premises.

(b)Should only a portion of the Premises be so destroyed, acquired or condemned, and the portion thus destroyed or taken be of such an amount as not to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, then this Lease shall continue in full force and effect as to the portion not so destroyed or taken with a reduction in the fixed annual rent proportionate to the area of the Premises so destroyed or taken for a period up to, but not exceeding, six (6) months, provided that Landlord has in force business interruption insurance payable to the lender of any indebtedness of Landlord which is secured by the premises in an amount sufficient to pay the debt service on such indebtedness during the period of rent reduction. The parties shall make all of the repairs and improvements deemed necessary in order to restore the Premises to its original condition and shall perform, pursue and complete said repairs and improvements in accordance with the terms and provisions of Paragraph 5 above. The costs and expenses incurred by Tenant in making said repairs and improvements shall be paid for by Tenant and shall be reimbursed by Landlord, but only to the extent paid for by the insurance proceeds or condemnation award received by Landlord. Upon completion of said repairs and improvements in accordance with and as determined by the terms and provisions of Paragraph 5 above, the fixed annual rent, if reduced under the terms of this subparagraph (b), shall be increased to the amount set forth in Paragraph 4.”

(c)The fact of whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days shall be determined by the mutual decision of Landlord and Tenant. If

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Landlord and Tenant cannot agree as to whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days, the fact shall be determined by arbitration in accordance with and as provided by the Missouri Uniform Arbitration Act, Section 435.350 et. seq. R.S. Mo. 1994.”

6.Paragraph 9 of the Lease is hereby stricken in its entirety and replaced with the following language:

“9.Default.

(a)In the event that Tenant shall fail to pay any installment of rent within ten (10) days from the date that the same shall become due hereunder or shall fail to pay any insurance premiums or taxes and assessments within ten (10) days after written notice from Landlord that the same shall be due, or in the event that Tenant shall fail in the observance of performance of any of the other terms, conditions and provisions of this Lease for more than thirty (30) days after written notice of such default shall have been mailed to Tenant (provided, however, that if Tenant shall promptly proceed to correct such failure upon notice thereof then said thirty (30) day period if insufficient, shall be extended for such reasonable time as may be necessary), or in the event that Tenant shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state or federal insolvency or bankruptcy act, or if Tenant shall make a general assignment for the benefit of creditors, or if a receiver of the property of Tenant shall be appointed and such appointment shall not be vacated within 120 days after it is made, or if Tenant shall allow or permit any lien for labor or material to attach to the Premises, then Landlord, besides other rights or remedies Landlord may have, shall have the immediate right to pursue any one or more of the following remedies without notice or demand whatsoever, which remedies are cumulative and not alternative;

(i)Landlord shall have the right to remedy or attempt to remedy any default of Tenant, and in so doing to make any payments due or alleged to be due by Tenant to third parties and to enter upon the Premises to do any work or other things therein, and in such event all reasonable expenses of Landlord in remedying or attempting to remedy such default shall be payable by Tenant to Landlord on demand. All sums so paid by Landlord and all expenses in connection therewith, shall bear interest thereon at the rate of fifteen percent (15%) per annum or the highest legal rate if less and if not otherwise demanded by Landlord shall be deemed additional rent;

(ii)Landlord shall have the right to terminate this Lease or terminate Tenant’s right to possession of the Premises without terminating this Lease forthwith by leaving upon the Premises or by affixing to on entrance door to the Premises notice terminating the Lease or possession. Upon the giving by the Landlord of a notice in writing terminating this Lease or terminating Tenant’s right to possession of the Premises, Tenant shall remain liable for and shall pay on demand by Landlord (A) the full amount of all Rent which accrues or which would have accrued until the date on which this Lease would have expired had termination not occurred, and any and all damages and expenses incurred by Landlord in re-entering and repossessing the Premises in making good any default of Tenant, in making any alterations, remodeling or new tenant finish to the Premises, and any and all expenses which the Landlord may incur during the occupancy of any new tenant, legs (B) the net proceeds of any re-letting of the Premises which has occurred at the time of the aforesaid demand by Landlord to Tenant. Landlord shall be

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entitled to any excess with no credit to Tenant. Landlord may, in its sole, discretion, make demand on Tenant as aforesaid on any one or more occasions, and any suit brought by Landlord to enforce collection of such difference for any subsequent month or months. Tenant’s liability shall survive the institution of summary proceedings and the issuance of any warrant hereunder; and

(iii)Landlord shall have the right of injunction and the right to invoke any other remedy allowed at law or in equity, and mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy at law or in equity.

(b)In the event that Tenant shall fail in the observance of performance of any of the terms, conditions or provisions of this Lease, including but not limited to payments or money to Landlord or any other person or entity, and Landlord engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Landlord shall be entitled to recover from Tenant the entire cost of collection or other enforcement, including reasonable attorneys’ fees, which if not otherwise demanded by Landlord shall be deemed additional rent hereunder. In the event that Landlord shall fail in the observance or performance of any of the terms, conditions or provision of this Lease on its part to be performed, and Tenant engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Tenant shall be entitled to recover from Landlord the entire cost of enforcement, including reasonable attorneys’ fees.”

6.There is herby added to the Lease a new Paragraph 13, which reads in its entirety as follows:

13.Limitation of Liability. Tenant agrees that it shall look solely to Landlord’s estate and interest in the Premises (or the proceeds thereof) for the satisfaction of any right of Tenant for the collection of a judgment or other judicial process requiring the payment of money by Landlord. No other properly or assets of Landlord, its partners, its joint venturers or any officers, directors or employees of any of the foregoing, shall be subject to any enforcement procedures for the satisfaction of any of Tenant’s rights and remedies under or as to: (i) the Lease, (ii) the relationship of Landlord and Tenant under this Lease or under law, (iii) Tenant’s use and occupancy of the Premises, or (iv) any other liability of Landlord to Tenant. This provision shall not be deemed, construed or interpreted to be or constitute an agreement, express or implied, between Landlord and Tenant that Landlord’s interest hereunder and in the Premises shall be subject to any equitable lien or other similar lien or charge. From and after the due date upon which Landlord shall convey the Premises to another party, Landlord shall be released from its obligations hereunder, provided that such third party shall assume all obligations of Landlord as set forth herein.

7.There is hereby added to the Lease a new paragraph 14, which reads in its entirety as follows:

“14.Landlord Agreement. Landlord hereby agrees to execute and deliver to Tenant, contemporaneously with this Lease, that form of Landlord Agreement attached hereto as Exhibit A.”

8.There is hereby added to the Lease a new paragraph 15, which reads in its entirety as follows:

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“15.Miscellaneous.

(a)Tenant shall maintain during the termof this Lease the insurance coverages referenced in paragraph 4(b)(3).

(b)The terms and provisions of the Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, assigns and personal representatives provided, however, that no assignment by, from, through or under Tenant in violation of any provisions hereof shall vest in such assignee any right, title or interest whatsoever.

(c)Tenant may not record this Lease or a Memorandum or other notice of this Lease without Landlord’s prior written consent, which consent shall not be unreasonably conditioned, delayed or withhold.

(d)This Lease may not be modified or amended except by a written instrument executed by both Landlord and Tenant. This Lease shall be governed by and interpreted pursuant to the laws of the State of Missouri.

(e)The invalidity of one or more of the provisions of this Lease shall not cause the invalidity of the remainder of this Lease.

(f)In the event that either party hereto shall bring legal action against the other party, then the prevailing party shall be entitled to reimbursement from the other party for all expenses thus incurred, including a reasonable attorney’s fee.

(g)The captions or other headings of any sections of this Lease are inserted for convenience only and shall not be considered in construing the provision hereof if any question of intent should arise.

(h)All rights and remedies of Landlord herein enumerated shall be cumulative and shall not be construed to exclude any other remedies allowed at law or in equity, whether or not specified herein. The failure of Landlord to insist in any one or more cases upon the strict performance of any of the provisions of this Lease or to exercise any option under this Lease shall not be construed as a waiver or a relinquishment for the future of any such provision, and one or more waivers of any breach of any provision shall not be construed as a waiver of any subsequent breach of the same. The receipt and acceptance by Landlord of any partial payment under this Lease shall not be deemed a waiver of such breach or an accord and satisfaction.”

9.This Amendment shall be binding upon and inure to the benefit of Landlord and Tenant and their heirs, successors and assigns. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Lease and except as expressly modified and superseded by this Amendment, the terms and provisions of the Lease are ratified and confirmed and shall continue in full force and effect. Landlord and Tenant acknowledge and agree that the Lease as amended hereby shall continue to be legal, valid, binding and enforceable in accordance with its terms. This Amendment may be executed in multiple and facsimile counterparts each of which shall be deemed to be an original and together shall constitute one instrument. This Amendment shall be governed by and construed in accordance with the laws of the State of Missouri.

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LEASE AGREEMENT

LEASE AGREEMENT, made and entered into as of the 12th day of September, 1990, by and between Eugene M. Kornblum and Helen H. Kornblum (hereinafter collectively referred to as “Landlord”), and St. Louis Music, Inc., a corporation existing under the laws of the State of Missouri (hereinafter referred to as “Tenant”).

1.Description of Premises.

Landlord, for and in consideration of the rents, covenants and agreements hereinafter mentioned and hereby agreed to be paid, kept and performed by Tenant, has leased and by these presents does lease unto Tenant the parcel of land described in Exhibit 1 attached hereto and made a part hereof, together with all appurtenances, buildings and improvements located thereon, and situated in the County of St. Louis, State of Missouri (hereinafter referred to as the “Premises”). This lease shall be subject to that certain lease dated October 12, 1989 by and between Borman Congressional Partners, a Missouri partnership, as Lessor, and Gerard Packaging Systems, Inc., as Lessee (the “Gerard Lease”). The Gerard Lease was assigned by Borman Congressional Partners to Tenant upon Tenant’s acquisition of the Premises pursuant to an Assignment and Assumption Agreement dated May 4, 1990, and further assigned by Tenant to Landlord upon Landlord’s acquisition of the Premises pursuant to an Assignment and Assumption Agreement dated September 10, 1990.

2.Lease Term.

This lease (hereinafter referred to as the “Lease”) shall commence on the 1st day of November, 1990, and shall end on the 31st day of October, 2005, unless sooner terminated pursuant to other provisions of this Lease.

3.Use of Premises.

Tenant shall be entitled to have and to hold the Premises, subject to the conditions herein contained, for the purposes of manufacturing, storage, warehousing, shipping and office center and for any other use permitted by law. Tenant shall comply with, and shall maintain the Premises in compliance with, all laws and all requirements of all governmental authorities applicable to the Premises and to the use thereof, and shall maintain the Premises in compliance with the requirements of the insurance companies providing the insurance required by subparagraph (b) (3) of Paragraph 4 below.

4.Rental.

(a)As fixed annual rent Tenant shall pay directly to Landlord, or to such other person as Landlord designates, without previous demand therefor, the sum of One Hundred Thousand Dollars ($100,000.00) per year, payable in equal monthly installments of

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Eight Thousand Three Hundred Thirty-Three and 33/100 Dollars ($8,333.33) in advance on the first day of each and every month during the term of this Lease.

(b)As additional rental during the term of this Lease, Tenant shall fully pay all costs and charges in connection with or arising out of the following:

(1)All taxes, assessments and other governmental charges levied, during the term hereof, on the Premises or any part thereof, including, but not limited to, all general and special assessments, sewer taxes, water licenses, and any other taxes, penalties, fines, interests and costs imposed upon or against the Premises or against any of the personal property placed upon the Premises;

(2)All electricity, water, sewer use, gas, costs of operation of heating and air conditioning and other utilities used on the Premises during the full term of this Lease;

(3)All insurance premiums for the following described insurance required to be maintained on the Premises by Tenant, in the name of Landlord or such other person or entity as Landlord may designate:

(A)Insurance for all risks of direct physical loss or damage to the Premises (subject to standard policy exclusions) in an amount representing the full replacement costs of the improvements located on the Premises, in insurance companies approved by Landlord and authorized to do business in the state of Missouri; and

(B)Insurance for public liability coverage, protecting both Landlord and Tenant against any and all claims for personal injury, loss of life or damage to property sustained or claimed to have been sustained in, on or about the Premises or the building, improvements and appurtenances located thereon or upon the adjoining sidewalks, streets or alleyways. Such insurance shall be in such amounts and contain such coverages as Landlord may reasonably require; and

(C)Acertificate or certificates of the insurers that such insurance is in force and effect shall be deposited with Landlord and shall contain an undertaking by the respective insurers that the insurance policies shall not be canceled or modified adversely to the interests of Landlord without at least thirty (30) days’ prior notice to Landlord. Prior to the expiration of any such policy, Tenant shall furnish Landlord with evidence satisfactory to Landlord that the policy has been renewed or replaced or is no longer required by this Lease.

(4)All other expenses and charges which shall be incurred or shall be required in connection with the possession,

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occupation, operation, alteration, maintenance, repair, protection, preservation and use of the Premises, it being intended that this Lease shall be a net net lease to Landlord and that, except as is otherwise specifically provided for herein, Landlord shall have no cost or expense in connection with the Premises subleased hereunder.

5.Maintenance, Repairs, Alterations and Restorations.

(a)Tenant shall make all structural repairs and alterations to the foundation, exterior walls and roof of the building and improvements located on the Premises as way be required for the preservation, protection or restoration of the Premises, unless any such repair or alteration is required as a result of damage caused by the acts of Landlord, its employees or invitees.

(b)Tenant shall, at its sole cost and expense, maintain and care for the building and improvements located on the Premises, including landscaped areas, roadways and the parking areas. Tenant shall, at its sole cost and expense, maintain and care for the interiors of the building and improvements, including all plumbing, heating, air conditioning, electrical and sewer systems, devices and installations. Tenant agrees to keep the Premises free from any nuisance or filth upon or adjacent thereto. Except as otherwise provided in subparagraph (a) above, all repairs and alterations deemed necessary to the exterior and interior of the buildings and improvements located on the Premises shall be made or constructed by Tenant with the consent of Landlord; and all repairs, alterations, restorations, buildings and other improvements so made or constructed shall remain as or become, as the case may be, a part of the realty. All repairs, alterations, restorations, buildings and other improvements made or constructed by Tenant to or on the Premises shall be performed by Tenant in a good and workmanlike manner, shall be pursued by Tenant with due diligence until the Premises will again be fit for occupancy by Tenant, or until said construction shall be deemed completed by Landlord, and shall be performed in conformity with all applicable laws, ordinances, rules and regulations. Tenant shall not, under any circumstances, allow or permit any lien for labor and material to attach to the Premises.

(c)Tenant shall pay for all costs and expenses incurred by Tenant arising out of Tenant’s obligations to make the repairs, alterations or restorations described in subparagraphs (a) and (b) above.

6.Indemnification.

Tenant agrees that it will protect, indemnify and save Landlord harmless from and against any penalty, damage or charge imposed for any violation of any law or ordinance by Tenant, its agents, employees or anyone acting on behalf of Tenant. Tenant further agrees that it will protect, indemnify and save Landlord harmless from and against any and all claims, suits, demands and

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causes of action of any nature whatsoever, and any expense incident to the defense thereof, for personal injury, loss of life or damage to property sustained or alleged to have been sustained upon, about or adjacent to the Premises.

7.Damage to Person or Property.

Landlord shall not be liable to Tenant or any other person or corporation, including Tenant’s employees, for any damage to their person or property caused by water, rain, snow, frost, fire, storm and accidents, or by breakage, stoppage or leakage of water, gas, heating and sewer pipes, air conditioning units or plumbing upon about or adjacent to the Premises.

8.Destruction and Eminent Domain.

(a)Should the entire area of the Premises, or such portion thereof as to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, be destroyed by fire or other cause or be acquired or taken by condemnation by any public or quasi-public authority or under the power of eminent domain, and should all indebtednesses of Landlord to all lenders which are secured by the Premises, be paid in full, this Lease may, at the option of Tenant, be terminated, and of no further force and effect from and after the date of such total destruction or the effective date of the taking by such public or quasi-public authority. Tenant shall have no interest in nor shall it share in any insurance proceeds or condemnation award received by Landlord for the Premises.

(b)Should only a portion of the Premises be so destroyed, acquired or condemned, and the portion thus destroyed or taken be of such an amount as not to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, or should all indebtednesses of Landlord to all lenders which are secured by the Premises not be paid in full, then, and in either of such events, this Lease shall continue in full force and effect as to the portion not so destroyed or taken with a reduction in the fixed annual rent proportionate to the area of the Premises so destroyed or taken for a period up to, but not exceeding, six (6) months, provided that Landlord has in force business interruption insurance payable to the lender of any indebtedness of Landlord which is secured by the premises in an amount sufficient to pay the debt service on such indebtedness during the period of rent reduction. Tenant shall make all of the repairs and improvements deemed necessary in order to restore the Premises to its original condition and shall perform, pursue and complete said repairs and improvements in accordance with the terms and provisions of subparagraph (b) of Paragraph 5 above. The costs and expenses incurred by Tenant in making said repairs and improvements shall be paid for by Tenant and shall be reimbursed by Landlord, but only to the extent paid for by the insurance proceeds or condemnation award received by Landlord. Upon completion of said repairs and improvements in accordance with and as determined by

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the terms and provisions of subparagraph (b) of Paragraph 5 above, the fixed annual rent, if reduced under the terms of this subparagraph (b), shall be increased to the amount set forth in Paragraph 4.

(c)The fact of whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days shall be determined by the mutual decision of Landlord and Tenant. If Landlord and Tenant cannot agree as to whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days, the fact shall be determined by arbitration in accordance with and as provided by the Missouri Uniform Arbitration Act, Section 435.350 et seq., R.S.Mo. 1980.

9.Default.

(a)In the event that Tenant shall fail to pay any installment of rent within ten (10) days from the date that the same shall become due hereunder or shall fail to pay any Insurance premiums or taxes and assessments within ten (10) days after written notice from Landlord that the same shall be due, or in the event that Tenant shall fail in the observance or performance of any of the other terms, conditions and provisions of this Lease for more than thirty (30) days after written notice of such default shall have been mailed to Tenant (provided, however, that if Tenant shall promptly proceed to correct such failure upon notice thereof then said thirty (30) day period if insufficient, shall be extended for such reasonable time as may be necessary), or in the event that Tenant shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state or federal insolvency or bankruptcy act, or if Tenant shall make a general assignment for the benefit of creditors, or if a receiver of the property of Tenant shall be appointed and such appointment shall not be vacated within 120 days after it is made, or if Tenant shall allow or permit any lien for labor or material to attach to the Premises, then Landlord, besides other rights or remedies Landlord may have, shall have the immediate right to reenter the Premises and remove all persons and property from the Premises, all without service of notice or resort to legal process and without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby.

(b)Should Landlord elect to reenter the Premises, as herein provided, or should Landlord take possession pursuant to Legal proceedings or pursuant to any notice provided by law, Landlord may either terminate this Lease or may, from time to time without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the Premises and relet the Premises or any part thereof as the agent for and in the name of Tenant, for such term or terms (which may be for a term extending beyond the term of this Lease) and at such rental or rentals and upon such other terms and conditions as Landlord in Landlord’s sole

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discretion may deem advisable. Upon each such reletting, all rentals received by Landlord shall be applied first to the payment of any indebtedness other than fixed annual rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees, attorneys’ fees and costs of such alterations and repairs; third, to the payment of such fixed annual rent under the terms of this Lease, due and unpaid; and the residue, if any, shall be held by Landlord and applied in payment of future required payments under the terms of this Lease as the same may become due and payable. If such rentals received from such reletting during any month be less than the required payments to be paid during that month by Tenant under the terms of this Lease, Tenant shall pay any such deficiency to Landlord.

(c)No such reentry or taking possession of the Premises by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof by decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. Should Landlord at any time terminate this Lease for any breach, then in addition to any other remedies Landlord may have, Landlord may recover from Tenant all damages Landlord may incur by reason of such breach, including the cost of recovering the Premises and reasonable attorneys’ fees, all of which amounts shall be immediately due and payable from Tenant to Landlord.

(d)In the event that Tenant shall fail in the observance or performance of any of the terms, conditions or provisions of this Lease, including but not limited to payments of money to Landlord or any other person or entity, and Landlord engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Landlord shall be entitled to recover from Tenant the entire cost of collection or other enforcement, including reasonable attorneys’ fees. In the event that Landlord shall fail in the observance or performance of any of the terms, conditions or provisions of this Lease on its part to be performed, and Tenant engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Tenant shall be entitled to recover from Landlord the entire cost of enforcement, including reasonable attorneys’ fees.

10.Assignment and Subletting.

Tenant shall not transfer, assign or sublease this Lease or its interest hereunder, nor permit the same to be transferred or assigned by operation of law without the consent of Landlord, which consent shall not be unreasonably withheld by Landlord. No transfer or assignment by Tenant of this Lease or its interest hereunder and no subletting by Tenant of the Premises or any portion thereof shall operate to release Tenant from the

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fulfillment on Tenant’s part of its obligations under this Lease, nor affect Landlord’s right to exercise any of Landlord’s rights or remedies hereunder, without the consent of or notice to any assignee or sublessee.

11.Waiver and Severability.

(a)No waiver of any forfeiture, by acceptance of rent or otherwise, shall waive any subsequent cause of forfeiture or breach of any condition of this Lease; nor shall any consent when applicable by Landlord to any assignment or subletting of the Premises, or any part thereof, be held to waive or release any assignee or sublessee from any of the foregoing conditions or covenants as against him or them; but every such assignee and sublessee shall be expressly subject thereto.

(b)If any term, covenant or condition of this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition of this Lease, shall be valid and be enforced to the fullest extent permitted by law.

12.Notices; Amendment.

(a)Any notices to be given by Landlord or Tenant to each other for any purpose connected with this Lease or otherwise, shall be in writing and deemed to have been properly given if served personally or if sent by United states registered or certified mail, return receipt request, to the following address of Landlord and Tenant, respectively, or to such other persons and addresses as Landlord and Tenant may from time to time designate:

Landlord:	Eugene M. Kornblum and Helen H. Kornblum
	7736 W. Biltmore
	Clayton, Missouri 63105
Tenant:	St. Louis Music, Inc.
	1400 Ferguson Avenue
	St. Louis, Missouri 63133

(b)So long as Century Life of America (“Century”) holds any security interest in or deed of trust encumbering the Premises, this lease shall not be amended without the prior written consent of Century.

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IN WITNESS WHEREOF, the parties have duly executed this Lease as of the day and year first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

Landlord:
/s/ Eugene M. Kornblum
Eugene M. Kornblum
/s/ Helen H. Kornblum
Helen H. Kornblum
Tenant:
ST. LOUIS MUSIC, INC.
By:	/s/ Eugene M. Kornblum
Title:		President

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EXHIBIT 1

Lot 9 of West Plains Industrial Park Plat No. 3, according to the plat thereof recorded in Plat Book 137 Page 81 of the St. Louis County Records.

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EX-10.29

Exhibit 10.29

AMENDED AND RESTATED LEASE AGREEMENT

THIS AMENDED AND RESTATED LEASE AGREEMENT (the “Lease”) is made and entered into as of this day of March, 2005, by and between Eugene M. Komblum, Trustee of THE EUGENE M. KORNBLUM TRUST AGREEMENT DATED JULY 18, 1997, as to an undivided 25% interest as tenants in common; Helen H. Komblum, Trustee of THE HELEN H. KORNBLUM TRUST AGREEMENT DATED JULY 11, 1997, as to an undivided 25% interest as tenants in common; and Carole A, Simon, Trustee of THE CAROLE A. SIMON REVOCABLE TRUST U/T/A dated November 27,1991, as to an undivided 50% interest as tenants in common (hereinafter collectively referred to as “Landlord”), and ST. LOUIS MUSIC, INC., a corporation existing under the laws of the State of Missouri (hereinafter referred to as “Tenant”).

RECITALS:

A.Landlord and Tenant entered into that certain Commercial Lease (“Original Lease”) dated as of December 20, 2001.

B.Landlord and Tenant now wish to amend and restate the Original Lease as set forth herein.

NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual covenants and obligations contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged and confessed, Landlord and Tenant agree as follows:

1.Description of Premises.

Landlord, for and in consideration of the rents, covenants and agreements hereinafter mentioned and hereby agreed to be paid, kept and performed by Tenant, has leased and by these presents does lease unto Tenant a certain brick warehouse and office building together with all land surrounding the same, containing approximately 3.47 acres in total, known and numbers as 1400 Ferguson, in the City of Pagedale and State of Missouri (hereinafter referred to as the “Premises”).

2.Lease Term.

This lease (hereinafter referred to as the “Lease”) shall commence on the            day of March, 2005, and shall end on the 29th day of February, 2008, unless sooner terminated pursuant to other provisions of this Lease.

3.Use of Premises.

Tenant shall be entitled to have and to hold the Premises, subject to the conditions herein contained, for any use permitted by law. Landlord and Tenant shall comply with, and shall maintain the Premises in compliance with, all laws and all requirements of all governmental authorities applicable to the Premises and to the use thereof, and shall maintain the Premises in

compliance with the requirements of the insurance companies providing the insurance required by subparagraph (b)(3) of Paragraph 4 below.

4.Rental.

(a)As fixed annual rent Tenant shall pay directly to Landlord, or to such other person as Landlord designates, without previous demand therefore, the sum of One Hundred Thirty Thousand One Hundred Six and 08/100 Dollars ($130,106.08) per year, payable in equal monthly installments of Ten Thousand Eight Hundred Forty-two and 17/100 Dollars ($ 10,842.17) in advance on the first day of each and every month during the term of the Lease.

(b)As additional rental during the term of this Lease, Tenant shall fully pay all costs and charges in connection with or arising out of the following:

(1)All taxes, assessments and other governmental charges levied, during the term hereof, on the Premises or any part thereof, including, but not limited to, all general and special assessments, sewer taxes, water licenses, and any other taxes, penalties, fines, interests and costs imposed upon or against the Premises or against any of the personal property placed upon the Premises;

(2)All electricity, water, sewer use, gas, costs of operation of heating and air conditioning and other utilities used on the Premises during the full term at this Lease;

(3)All insurance premiums for the following described insurance which Tenant hereby agrees to maintain on the Premises, in the name of Landlord or such other person or entity as Landlord may designate:

(A)Insurance for all risks of direct physical loss or damage to the Premises (subject to standard policy exclusions) in an amount representing the full replacement costs of the improvements located on the Premises, in insurance companies approved by Landlord and authorized to do business in the State of Missouri; and

(B)Insurance for public liability coverage, protecting both Landlord and Tenant against any and all claims for personal injury, loss of life or damage to property sustained or claimed to have been sustained in, on or about the Premises or the building, improvements and appurtenances located thereon or upon the adjoining sidewalks, streets or alleyways. Such insurance shall be in such amounts and contain such coverages as Landlord may reasonably require; and

(C)A certificate or certificates of the insurers that such insurance is in force and effect shall be deposited with Landlord and shall contain an undertaking by the respective insurers that the insurance policies shall not be canceled or modified adversely to the interests of Landlord without at least thirty (30) days’ prior notice to Landlord. Prior to the expiration of any such policy, Tenant shall furnish Landlord with evidence satisfactory to Landlord that the policy has been renewed or replaced or is no longer required by this Lease.

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(4)All other expenses and charges which shall be Incurred or shall be required in connection with the possession, occupation, operation, alteration, maintenance, repair, protection, preservation and use of the Premises (except as is otherwise specifically provided for herein), it being intended that this Lease shall be a net net lease to Landlord and that, except as is otherwise specifically provided for herein, Landlord shall have no cost or expense in connection with the Premises leased hereunder.

5.Maintenance, Repairs, Alterations and Restorations.

(a)Tenant shall, at its sole cost and expense, maintain and care for the building and improvements located on the Premises, including landscaped areas, roadways and the parking areas, except as otherwise provided in subparagraph (b) below. Tenant shall, at its sole cost and expense, maintain and care for the interiors of the building and improvements, including all plumbing, heating, air conditioning, electrical and sewer systems, devices and installations. Tenant agrees to keep the Premises free from any nuisance or filth upon or adjacent thereto, Except as otherwise provided in subparagraph (b) below, all repairs and alterations deemed necessary to the exterior and interior of the buildings and improvements located on the Premises shall be made or constructed by Tenant with the consent of Landlord; and all repairs, alterations, restorations, buildings and other improvements so made or constructed shall remain as or become, as the case may be, a part of the realty.

(b)Landlord shall conduct all maintenance and repairs to the roof of the building (including the replacement thereof, should Landlord in its reasonable discretion determine that any material defect thereto could not otherwise be repaired), and all structural maintenance and repairs to the foundation and the exterior walls of the building, as may be required for the preservation, protection or restoration of the Premises, unless any such maintenance and/or repair is required as a result of damage caused by the negligence or willful acts and/or omissions of Tenant, its employees or invitees, on or after the date of this Lease. Landlord shall also (i) conduct all maintenance and repairs to the Premises that are required as a result of damage caused prior to the date of this Lease and (ii) perform any such alterations to the Premises as are required by law, except and to the extent such alterations are so required due to improvements or intended improvements to the Premises by Tenant.

(c)All repairs, alterations, restorations, buildings and other improvements made or constructed to or on the Premises shall be performed by the responsible party in a good and workmanlike manner, shall be pursued by the responsible party with due diligence until the Premises will again be fit for occupancy of Tenant, or until said construction shall be reasonably deemed completed by Landlord, and shall be performed in conformity with all applicable laws, ordinances, rules and regulations. Tenant shall not, under any circumstances, allow or permit any lien for labor end material to attach to the Premises.

(d)Subject to paragraph 6(b) below, Tenant shall pay for all costs and expenses incurred by Tenant arising out of Tenant’s obligations to make the repairs or maintenance described in subparagraph (a) above. Landlord shall also pay for all costs and expenses incurred by Landlord arising out of Landlord’s obligations to make the repairs or maintenance described in subparagraph (b) above.

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6.Indemnification.

(a)Tenant agrees that it will protect, indemnify and save Landlord harmless from and against any penalty, damage or charge imposed for any violation of any law or ordinance by Tenant, its agents, employees or anyone acting on behalf of Tenant. Tenant further agrees that it will protect, indemnify and save Landlord harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities arising from Tenant’s use of the Premises on or after the date of this Lease, or from any act permitted, or any omission to act, in or about the Premises by Tenant or its employees or invitees on or after the date of this Lease, or from any breach or default by Tenant of this Lease, except to the extent caused by Landlord’s negligence or willful misconduct.

(b)Landlord agrees that it will protect, indemnify and save Tenant harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities arising from any breach or default by Landlord of this Lease, except to the extent caused by Tenant’s negligence or willful misconduct. Landlord further agrees that it will protect, indemnify and save Tenant harmless from and against any and all claims, suits, demands, causes of action, costs and liabilities associated with, related to, or arising out of (i) the maintenance and repair of the roof, including without limitation any removal, disposal or other remediation required by law with respect to any asbestos containing materials (“ACMs”) or presumed ACMs that may be present in the roof; (ii) any underground storage tanks that may be or have been present on the Premises; and (iii) without limitation to item (i) above, the presence of any ACMs or presumed aCMs on the Premises; provided, however that Landlord shall have no such indemnification obligation with respect to any remediation, maintenance, encapsulation, removal, disposal, labeling or other actions with respect to any ACMs, presumed ACMs or underground storage tanks except to the extent such action is required under applicable laws.

7.Damage to Person or Property.

Landlord shall not be liable to Tenant or any other person or corporation, including Tenant’s employees, for any damage to their person or property caused by water, rain, snow, float, fire, storm and accidents, or by breakage, stoppage or leakage of water, gas, heating and sewer pipes, air conditioning units or plumbing upon about or adjacent to the Promises, except and to the extent such damage is caused by Landlord’s failure to perform its obligations under this Lease.

8.Destruction and Eminent Domain.

(a)Should the entire area of the Premises, or such portion thereof as to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, be destroyed by fire or other cause or be acquired or taken by condemnation by any public or quasi-public authority or under the power of eminent domain, this Lease may at the option of Tenant, be terminated and of no further force and effect from and after the date of such total destruction or the effective date of the taking by such public or quasi-public authority.

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Tenant shall have no interest in nor shall it share in any insurance proceeds or condemnation award received by Landlord for the Premises.

(b)Should only aportion of the Premises be so destroyed, acquired or condemned, and the portion thus destroyed or taken be of such an amount as not to interfere materially with or curtail the operations of Tenant’s business for a period in excess of sixty (60) days, then this Lease shall continue in full force and effect as to the portion not so destroyed or taken with a reduction in the fixed annual rent proportionate to the area of the Premises so destroyed or taken for a period up to, but not exceeding, six (6) months, provided that Landlord has in force business interruption insurance payable tothe lender of any indebtedness of Landlord which is secured by the premises in an amount sufficient to pay the debt service on such indebtedness during the period of rent reduction. The parties shall make all of the repairs and improvements deemed necessary in order to restore the Premises to its original condition and shall perform, pursue and complete said repairs and improvements in accordance with the terms and provisions of Paragraph 5 above. The costs and expenses incurred by Tenant in making said repairs and improvements shall be paid for by Tenant and shall be reimbursed by Landlord, but only to the extent paid for by the insurance proceeds or condemnation award received by Landlord. Upon completion of said repairs and improvements in accordance with and as determined by the terms and provisions of Paragraph 5 above, the fixed annual rent, if reduced under the terms of this subparagraph (b), shall be increased to the amount set forth in Paragraph 4.

(c)The fact of whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days shall be determined by the mutual decision of Landlord and Tenant. If Landlord and Tenant cannot agree as to whether such destruction, acquisition or condemnation has materially interfered with or curtailed the operations of Tenant’s business for a period in excess of sixty (60) days, the fact shall be determined by arbitration in accordance with and as provided by the Missouri Uniform Arbitration Act, Section 435.350 et seq. R. S. Mo. 1994.

9.Default

(a)In the event that Tenant shall fail to pay any installment of rent within ten (10) days from the date that the same shall become due hereunder or shall fail to pay any insurance premiums or taxes and assessments within ten (10) days afterwritten notice from Landlord that the same shall be due, or in the event that Tenant shall fail in the observance of performance of any of the other terms, conditions and provisions of this Lease for more than thirty (30) days after written notice of such default shall have been mailed to Tenant (provided, however, that if Tenant stall promptly proceed to correct such failure upon notice thereof then said thirty (30) day period if insufficient, shall be extended for such reasonable time asmay be necessary), or in the event that Tenant shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state or federal insolvency or bankruptcy act, or if Tenant shall make ageneral assignment for the benefit of creditors, or if a receiver of the property of Tenant shall be appointed and such appointment shall not be vacated within 120 days after it is made, or if Tenant shall allow or permit any lien for labor or material to attach to the Premises, then Landlord, besides other rights or remedies Landlord may have, shall have the immediate right to

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pursue any one or more of the following remedies without notice or demand whatsoever, which remedies are cumulative and not alternative:

(i)LandLord shall have the right to remedy or attempt to remedy any default of Tenant, and in so doing to make any payments due or alleged to be due by Tenant to third parties and to enter upon the Premises to do any work or other things therein, and in such event all reasonable expenses of Landlord in remedying or attempting to remedy such default shall be payable by Tenant to Landlord on demand. All sums so paid by Landlord and all expenses in connection therewith, shall bear interest thereon at the rate of fifteen percent (15%) per annum or the highest legal rate if less and if not otherwise demanded by Landlord shall be deemed additional rent;

(ii)Landlord shall have the right to terminate this Lease or terminate Tenant’s right to possession of the Premises without terminating this Lease forthwith by leaving upon the Premises or by affixing to an entrance door to the Premises notice terminating the Lease or. Upon the giving by Landlord of a notice in writing terminating this Lease or terminating Tenant’s right to possession of the Premises, Tenant shall remain liable for and shall pay on demand by Landlord (A) the full amount of all Rent which accrues or which would have accrued until the date on which this Lease would have expired had termination not occurred, and any and all damages and expenses incurred by Landlord in re-entering and repossessing the Premises in making good any default of the Tenant, in making any alterations, remodeling or new tenant finish to the Premises, and any and all expenses which Landlord may incur during the occupancy of any new tenant, less (B) the net proceeds of any re-letting of the Premises which has occurred at the time of the aforesaid demand by Landlord to Tenant. Landlord shall be entitled to any excess with no credit to Tenant Landlord may, in its sole discretion, make demand on Tenant as aforesaid on any one or more occasions, and any suit brought by Landlord to enforce collection of such difference for any subsequent month or months. Tenant’s liability shall survive the institution of summary proceedings and the issuance of any warrant hereunder; and

(iii)Landlord shall have the right of injunction and the right to invoke any other remedy allowed at law or in equity, and mention in this Lease of any particular remedy shall not preclude Landlord from any other remedy at law or in equity.

(b)In fee event that Tenant shall fail in the observance of performance of any of the terms, conditions or provisions of this Lease, including but not limited to payments or money to Landlord or any other person or entity, and Landlord engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Landlord shall be entitled to recover from Tenant the entire cost of collection or other enforcement, including reasonable attorneys’ fees, which if not otherwise demanded by Landlord shall be deemed additional rent hereunder. In the event that Landlord shall fail in the observance or performance of any of the terms, conditions or provisions of this Leaser on its part to be performed, and Tenant engages the services of an attorney to enforce such terms, conditions or provisions, then and in such event, Tenant shall be entitled to recover from Landlord the entire cost of enforcement, including reasonable attorneys’ fees.

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10.Assignment and Subletting.

Tenant shall not transfer, assign or sublease this Lease or its Interest hereunder, nor permit the same to be transferred or assigned by operation of law without the consent of Landlord, which consent shall not be unreasonably conditioned, delayed of withheld by Landlord. No transfer or assignment by Tenant of this Lease or its interest hereunder and no subletting by Tenant of the Premises of any portion thereof shall operate to release Tenant from the fulfillment on Tenant’s part of its obligations under this Lease, nor affect Landlord’s right to exercise any of Landlord’s rights or remedies hereunder, without the consent of or notice to any assignee or sublessee.

11.Waiver and Severability.

(a)No waiver of any forfeiture, by acceptance of rent or otherwise, shall waive any subsequent cause of forfeiture or breach of any condition of this Lease; nor shall any consent when applicable by Landlord to any assignment or subletting of the Premises, or any part thereof, be held to waive or release any assignee or sublessee from any of the foregoing conditions or covenants as against him or them; but every such assignee and sublessee shall be expressly subject thereto,

(b)If any term, covenant or condition of this Lease, or the application thereof to any parson or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition of this Lease, shall be valid and be enforced to the fullest extent permitted by law.

12.Limitation of Liability. Tenant agrees that it shall look solely to Landlord’s estate and interest in the Premises (or the proceeds thereof) for the satisfaction of any right of Tenant for the collection of a judgment or other judicial process requiring the payment of money by Landlord. No other property or assets of Landlord, its partners, its joint venturers or any officers, directors or employees of any of the foregoing, shall be subject to any enforcement procedures for the satisfaction of any of Tenant’s rights and remedies under or as to; (i) the Lease, (ii) the relationship of Landlord and Tenant under this Lease or under law, (iii) Tenant’s use and occupancy of the Premises, or (iv) any other liability of Landlord to Tenant. This provision shall not be deemed, construed or interpreted to be or constitute an agreement, express or implied, between Landlord and Tenant that Landlord’s interest hereunder and in the Premises shall be subject to any equitable lien or other similar lien or charge. From and after the due date upon which Landlord shall convey the Premises to another party, Landlord shall be released from its obligations hereunder, provided that such third party shall assume all obligations of Landlord as set forth herein,

13.Notices.

(a)Any notices to be given by Landlord or Tenant to each other for any purpose connected with this Lease or otherwise, shall be in writing and deemed to have been properly given if served personally or if sent by United States registered or certified mail, return receipt request, to the Mowing address of Landlord and Tenant, respectively, or to such other persons and addresses as Landlord and Tenant may from time to time designate:

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Landlord:	Eugene M. Kornblum and Helen H. Kornblum
	7736 W. Biltmore
	Clayton, Missouri 63105
Tenant:	St. Louis Music, Inc.
	1400 Ferguson Avenue
	St. Louis, Missouri 63133

14.Landlord Agreement. Landlord hereby agrees to execute and deliver to Tenant, contemporaneously with this Lease, that form of Landlord Agreement attached hereto as Exhibit A.

15.Miscellaneous.

(a)The terms and provisions of the Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, assigns and personal representatives provided, however, that no assignment by, from, through or under Tenant in violation of any provisions hereof shall vest in such assignee any right, title or interest whatsoever.

(b)Tenant may not record this Lease or a Memorandum or other notice of this Lease without Landlord’s prior written consent, which consent may not be unreasonably conditioned, delayed or withheld.

(c)This Lease may not be modified or amended except by a written instrument executed by both Landlord and Tenant. This Lease shall be governed by and interpreted pursuant to the laws of the State of Missouri.

(d)The invalidity of one or more of the provisions of this Lease shall not cause the invalidity of the remainder of this Lease.

(e)In the event that either party hereto shall bring legal action against the other party, then the prevailing party shall be entitled to reimbursement from the other party for all expenses thus incurred, including a reasonable attorney’s fee.

(f)The captions or other headings of any sections of this Lease are inserted for convenience only and shall not be considered in construing the provision hereof if any question of intent should arise.

(g)All rights and remedies of Landlord herein enumerated shall be cumulative and shall not be construed to exclude any other remedies allowed at law or in equity, whether or not specified herein. The failure of Landlord to insist in any one or more cases upon the strict performance of any of the provisions of this Lease or to exercise any option under this Lease shall not be construed as a waiver or a relinquishment for the future of any such provision, and one or more waivers of any breach of any provision shall not be construed as a waiver of any

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subsequent breach of the same. The receipt and acceptance by Landlord of any partial payment under this Lease shall not be deemed a waiver of such breach or an accord and satisfaction.

[The remainder of this page is intentionally blank. The next page is the signature page.]

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IN WITNESS WHEREOF, the parties have duly executed this Lease asof the day and year first above written.

THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

ST. LOUIS MUSIC, INC.	THE EUGENE M. KORNBLUM TRUST
	AGREEMENT dated July 18, 1997
By:
Name:
Tile:	EUGENE M. KORNBLUM, Trustee
	THE HELEN H. KORNBLUM TRUST
	AGREEMENT dated July 11, 1997
	HELEN H. KORNBLUM, Trustee
	THE CAROLE A. SIMON REVOCABLE
	TRUST U/T/A dated November 27, 1991
	CAROLEA. SIMON, Trustee

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Printed and for Sale to the St. Louis Printing & Legal Firms Co., St. Louis, Mn.
FORM                   REVISED	A DIVISION OF [LOGO]	CLASS A

COMMERCIAL LEASE

	This Lease, made and entered into, this 20th day of DECEMBER 2001, by and between Eugene M. Kormblum, trustee of THE EUGENE M. KORNBLUM TRUST AGREEMENT DATED JULY 18, 1997, as to an undivided 25% interest as tenants in common; Helen M. Kornblum, Trustee of THE HELEN H. KORMBLUM TRUST AGREEMENT DATED JULY 11, 1997, as to an undivided 25% interest as tenants in common; and Carole A. Simon and Robert S. Simon, Trustees of THE CAROLE A. SIMON REVOCABLE TRUST U/T/A dated November 27, 1991, as to an undivided 50% interest as tenants in common.
Parties	Hereinafter called Lessor, and ST. LOUIS MUSIC, INC., hereinafter called Lessee, WITNESSETH, That the said Lessor for and in consideration of the rents, covenants and agreements hereinafter mentioned and herby agreed to be paid, kept and performed by said Lessee, or Lessees, successors and assigns has leased and by these presents do lease to said Lessee the following described premises, situated in the county of St. Louis, state of Missouri, to-wit:
Premises	A certain brick warehouse and office building together with all land surrounding the same, containing approximately 3.47 acres in total, known and number as 1400 Ferguson, in the City of Pagedale and State of Missouri.
Use of premises	To have and to hold the same, subject to the conditions herein contained, and for no other purpose or business than that of office, warehouse, and selling of any and all types of musical instruments and any and all types of kindred products.
Term and Rental	For and during the terms of three (3) years commencing on the 1st day of January 2002 and ending on the 31st day of December 2004 at the yearly rental of One Hundred Five Thousand One Hundred Six and 00/100 Dollars($103,106.00), payable in advance in equal monthly installments of Eight Thousand Seven Hundred Fifty-Eight and 83/100 Dollars (88,758.83)
Assignment or Sub-letting	On the first day of each and every month during the said term. This lease is not assignable, nor shall said premises or any part thereof be sublet used or permitted to be used for any purposes other than above set forth without the lease or any part thereof sublet without the written consent of the Lessor, or if the Lessee shall become the subject of a court proceeding in bankruptcy or liquidating receivership or shall make an assignment for the benefit of creditors, this lease may by such fact or unauthorized act be cancelled at the option of the Lessor. Any assignment of this lease or subletting or said premises or any part thereof with the written consent of the Lessor shall not operate to release the lessee from the fulfillment on Leasee’s part of the covenants and agreements herein contained to be by said Lessee performed, nor authorize any subsequent assignment or subletting without the written consent of the Lessor.
Repairs and Alternations	All repairs and alternations deemed necessary by Lessee shall be made by said Lessee at Leasee’s cost and expense with the consent of Lessor; and all repairs and alterations so made shall remain as a part of the realty all plate and other class now in said demised premises is at the risk of said Lessee, and if broken, is to be replaced by and at the expense of said Lessee.

	The Lessor reserves the right to prescribe the form, size, character and location of any and all awnings affixed to and all signs which may be placed or painted upon any part of the demised premises, and the              agrees not to place any awning or sign on any part of the demised premises without the written consent of theLessor, or to bore or cut into any column, beam or any part of the demised premises without the written consent of Lessor. The Lessee and all holding under said Lessee agrees to use reasonable diligence in the care and protection of said premises during the term of this lease, to keep the water pipes, sewer drains, heating apparatus, elevator machinery and sprinkler system in good order and repair and to surrender said premises at the termination of this lease in substantially the same and in as good condition as received, ordinary wear and tear excepted.
	The Lessee shall pay according to the rules and regulations of the water department for all water used in the demised premises. The Lessee will erect fire escapes on said premises at said Lessee’s own cost, according to law, should the proper authorities demand same.
	The Lessee agrees to keep said premises in good order and repair and free from any               or              upon or adjacent thereto, and not to use or permit the use of the same or any part thereof for any purpose forbidden by law or ordinance now in force or hereafter enacted in respect to the use or occupancy of said premises. The Lessor or legal representatives may, at all reasonable hours, enter upon said premises for the purpose of examining the condition thereof and making such repairs as Lessor may see fit to make.
	If the cost of Insurance to said Lessor on said premises shall be increased by reason of the occupancy and use of said demised premises by said Lessee or any other person under said Lessee, all such increase over the existing rate shall be paid by said Lessee to said Lessor on demand. The Leases agrees to pay double rent for each day the Lessee, or any one holding under the Lessee, shall retain the demised premises after the termination of this lease, whether by limitation or forfeiture.
Damage to Tenants’ Property	Lessor shall not be liable to said Lessee or any other person or corporation, including employees, for any damage to their person or property caused by water, rain, snow, frost, fire, storm and accidents, or by breakage, stoppage or leakage of water, gas, heating and sewer pipes or plumbing, upon, about or adjacent to said premises.
	The destruction of said building or premises by fire, or the elements, or                material injury thereto as to render said premises unquestionably untenantable for 45 days, shall at the option of said Lessor or Lessee produce and work a termination of this lease.
	If the Lessor and Lessee cannot agree as to whether said building or premises are unquestionably untenantable for 45 days, the fact shall be determined by arbitration; the Lessor and the Lessee shall each choose an arbitrator within five days after either has notified the other in writing of such damage, the two so chosen, before entering on the discharge of their duties, shall elect a third, and the decision of any two of such arbitrators shall be conclusive and binding upon both parties hereto.
	If it is determined by arbitration, or agreement between the Lessor and the Lessee, that said building is not unquestionably untenantable for 45 days, then said Lessor must restore said building at Lessor’s own expense, with all reasonable speed and promptness, and in such case a just and proportionate part of said rental shall be abated until said premises haw been restored.
	Failure on the part of the Lesseeto pay any installment of rent or increase in insurance rate promptly as above set out, as and when the same becomes due and payable, or failure of the Lessee promptly and faithfully to keep and perform each and every covenant, agreement and atipulation herein on the part of the Lessee to be kept and performed, shall at the option of the Lessor cause the forfeiture of this lease.
	Possession of the within demised premises and all additions and permanent improvementsthereof shall be delivered to Lessor upon ten days’ written notice that Lessor has exercised said option, and thereupon Lessor shall be entitled to and may take immediate possession of the demised premises, any other notice or demand being hereby waived.
	Any and all notices to be served by the Lessor upon the Lessee for any breach of covenant of this lease, or otherwise, shall be served upon the Lessee in person, or loft with anyone in charge of the premises, or posted upon some conspicuous part of said premises.
Re-Entry	Said Lessee will quit and deliver up the possession of said premises to the Lessoror Lessor’s heirs, successors, agents or assigns, when this lease terminates by limitation or forfeiture, with all window glass replaced, if broken, and with all keys, locks, bolts, plumbing fixtures, elevator, sprinkler, boiler and heating appliances in as goodorder and condition as the same are now, or may hereaftar be made by repair in compliance with all the covenants of this lease, save only the wear thereof from reasonable and careful use.
	But it is hereby understood, and Lessee hereby covenants with the Lessor, that such forfeiture, annullment or voidance shall not relieve the Lessee from the obligation of the Lessee to make the monthly payments of rent hereinbefore reserved, at the times and in the manner aforesaid; and in case of any such default of the Lessee, the Lessor may re-let the said premises an the agent for and in the name of the Lessee, at any rental readily obtainable, applying the proceeds and avails thereof, first, to the payment of such expense as the Lessor may be put to in re-entering, and then to the payment of said rent as the same may from time to time become due, and toward the fulfillment of the other covenants and agreements of the Lessee herein contained, and the balance, if any, shall be paid to the Lessee; and the Lessee hereby covenants and agrees that if the Lessor shall recover or take possession of said premises as aforesaid, and be unable to re-let and rent the same so as to realise a sum equal to the rent hereby reserved, the Lessee shall and will pay to the Lessor any and all loss of difference of rent for the residue of the term. The Lessee hereby gives to the Lessor the right to place and maintain its usual “for rent” signs upon the demised premises, in the place that the same are usually displayed on property similar to that herein demised, for the last thirty days of this lease.
	“No representation is made that permises are lead free or that these premises are legally habitable.”

ADDITIONAL TERMS AND PROVISIONS

1.Lessee shall have the option to renew the Lease after the expiration of the original term thereof for an additional term of two (2) years under the same terms and conditions, excepting that the annual rental for the premises during such renewal period shall be One Hundred Ten Thousand Three Hundred Sixty-One and 00/100 Dollars ($110,361.00), payable in equal monthly installments. Such renewal shall be exercised by notice in writing sent to Lessor at least sixty (60) days prior to the expiration of the original term.

2.In addition to the rentals herein provided, Lessee shall pay all real estate taxes, whether general or special, assessed on the premises during the term of the lease, as well as the cost of all utility, water and sewer charges incurred with the use and occupancy of the building. Lessee shall pay for fire and extended coverage liability insurance on the building, naming the owners as an additional insured as their interest may appear.

No Constructive Waiver	No waiver of any forfeiture, by acceptance of rent or otherwise, shall waive any subsequent cause of forfeiture, or breach of any condition of this lease; nor shall any consent by the Lessor to any assignment or subletting of said premises, or any part thereof, be held to waive or release any assignee or sub-lessee from any of the foregoing conditions or covenants as against him or them; but every such assignee and sub-lessee shall be expressly subject thereto.
	Whenever the word “Lessor” is used herein it shall be construed to include the heirs, executors, administrators, successors, assigns or legal representatives of the Lessor; and the word “Lessee” shall include the heirs, executors, administrators, successors, assigns or legal representatives of the Lessee and the words Lessor and Lessee shall include single and plural, individual or corporation, subject always to the restrictions herein contained, as to subletting or assignment of this lease.
	IN WITNESS WHEREOF, the said parties aforesaid have duly executed the foregoing instrument or caused the same to be executed the day and year first above written.

Lessee:	ST. LOUIS MUSIC, INC.,			Lessor:	THE EUGENE M. KORNBLUM TRUST
	A Missouri corporation				AGREEMENT DATED JULY 18, 1997
					By:	/s/ Eugene M. Kornblum
	By:	/s/ Eugene M. Kornblum					Eugene M. Kornblum, Trustee
			Its President
					THE HELEN H. KORNBLUM TRUST
	ATTEST:				AGREEMENT DATED JULY 11, 1997
					By:	/s/ Helen H. Kornblum Trustee
	By:	/s/ Donald J. Collins					Helen H. Kornblum, Trustee
			Its Secretary
					THE CAROLE A. SIMON REVOCABLE TRUST U/T/A
					DATED NOVEMBER 27, 1991
					By:	/s/ Robert S. Simon
							Robert S. Simon, Trustee
					By:	/s/ Carole A. Simon,
							Carole A. Simon, Trustee

State of Missouri,
of ) )      ss. ) On this 20 day of December, 2001,

before me personally appeared Eugene M. Kornblum, Trustee of THE EUGENE M. KORNBLUM TRUST AGREEMENT DATED JULY 18, 1997, and Helen H. Kornblum, Trustee of THE HELEN H. KORNBLUM TRUST AGREEMENT DATED JULY 11, 1997, to me known to be the persons described in and who executed the foregoing instrument, and acknowledged that they, executed the same as their free act and deed, in their capacity as Trustees of their respective Trusts.

IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal in the                      and State aforesaid, the day and year first above written.

	/s/ Andrew Clones
		Notary Public.
My terms expires

ANDREW CLONES
NOTARY PUBLIC STATE OF MISSOURI
ST. LOUIS COUNTY
MY COMMISSION EXP. MAR 23, 2008

State of Missouri,
of ) )      ss. ) On this 20 day of December, 2001,

before me appeared Eugene M. Kornblum to me personally known, who, being by me duly sworn, did say that he is the President of ST. LOUIS MUSIC, INC., a Corporation of the State of Missouri, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation, by authority of its Board of Directors; and said President acknowledged sold instrument to be the free act and deed of said corporation.

IN TESTIMONY WHEREOF, I have hereinto set my hand and affixed my official seal in the                      and State aforesaid, the day and year first above written.

	/s/ Andrew Clones
		Notary Public.
My terms expires

ANDREW CLONES
NOTARY PUBLIC STATE OF MISSOURI
ST. LOUIS COUNTY
MY COMMISSION EXP.MAR 23, 2008

State of Missouri,
of ) )      ss. ) On this 20 day of December, 2001,

before me personally appeared Carol A. Simon and Robert S. Simon, Trustees of THE CAROLE A. SIMON REVOCABLE TRUST U/T/A dated November 27, 1991 to me known to be the persons described in and who executed the foregoing instrument, and acknowledged that they executed the same as their free act and deed, in their capacity as Trustees of the Trust.

IN TESTIMONY WHEREOF, I have hereinto set my hand and affixed my official seal in the                      and State aforesaid, the day and year first above written.

	/s/ Andrew Clones
		Notary Public.
My terms expires

ANDREW CLONES
NOTARY PUBLIC STATE OF MISSOURI
ST. LOUIS COUNTY
MY COMMISSION EXP. MAR 23, 2008

LEASE
TO
Premises No.
Begins
Ends
	$	per month

EX-10.30

Exhibit 10.30

Re:	8480-8514 Mid County Industrial Drive
	St. Louis, Missouri

SEVENTH AMENDMENT TO LEASE

THIS SEVENTH AMENDMENT TO LEASE (“Seventh Amendment”) has been executed as of the 9^th day of February, 2006, by CORNERSTONE INDUSTRIAL FUND I, L.L.C, a Missouri limited liability company (“Landlord”) and ST. LOUIS MUSIC, INC., and Loud Technologies Inc. (hereinafter collectively referred to as “Tenant”).

R E C I T A L S:

A.THE REALTY ASSOCIATES FUND III, L.P. (“Prior Landlord”) and Tenant have heretofore executed a Sixth Amendment to Lease dated November 8, 2000. Missouri State Employees’ Retirement System (“First Prior Landlord”) and Tenant have heretofore executed that certain Lease Agreement (the “Original Lease”), dated as of May 23, 1988, as amended by Addendum to Lease dated March 1, 1989, Second Addendum to Lease dated December 3, 1991, Third Amendment to Lease dated March 3, 1994, Fourth Amendment to Lease dated May 9, 1995, and Fifth Amendment to Lease dated as of June 26, 1998 (the Original Lease, as so amended by all Amendments First through Sixth Amendment, is hereinafter collectively called the “Lease”).

B.Landlord has acquired the Building and succeeded to all of the Prior Landlord and First Prior Landlord’s Interest under the Lease, as amended. Tenant hereby recognizes CORNERSTONE INDUSTRIAL FUND I, L.L.C., as a Missouri limited liability company, as the Landlord, under the Lease, as amended, and pursuant to this Seventh Amendment.

C.Landlord and Tenant desire to execute this Seventh Amendment in order to evidence their agreement to (i) extend the Lease Term and (ii) make certain other amendments to the Lease, all as more particularly set forth in this Seventh Amendment.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

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CERTAIN AMENDMENTS

1.Lease Term. The Lease Term shall be extended for thirty-nine (39) months, commencing April 1, 2006 and ending June 30, 2009, subject to adjustment or earlier termination as set forth in the Lease, as amended herein.

2.Reduced Premises. Effective as of July 1, 2006, and subject to the terms and conditions set forth in this Seventh Amendment, the Lease shall be amended to reflect that the Premises shall be reduced from the current square footage of 78,531 rentable square feet to approximately 46,000 rentable square feet. The reduced premises of approximately 46,000 rentable square feet will hereinafter be known as the “Reduced Premises”. Landlord and Tenant will execute a Confirmation Agreement as to the exact location and exact square footage (as verified by an architect) of the Reduced Premises, which shall be outlined on a cross-hatched floor plan, which will hereinafter be attached hereto as Exhibit A, which will consist of the Reduced Premises in that certain building known as Mid County 6, located at 8480-8514 Mid County Industrial Drive, St. Louis, Missouri, and as more particularly described in the Lease (the “Building”).

3.Base Rent. As of April 1, 2006, the Base Rent during the Seventh Amendment Term shall be as follows:

Period:	Monthly Base Rent:			Square Footage:		Annual Base Rent per R.S.F.:		Monthly Base Rent per R.S.F.:
4/1/06 - 6/30/06	$	3.85	p.s.f.	78,531	s.f.	$	302,344.35	$	25,195.36
7/1/06 - 6/30/07	$	3.85	p.s.f.	46,000	s.f.	$	177,100.00	$	14,758.33
7/1/07 - 6/30/08	$	3.95	p.s.f.	46,000	s.f.	$	181,700.00	$	15,141.67
7/1/08 - 6/30/09	$	4.05	p.s.f.	46,000	s.f.	$	186,300.00	$	15,525.00

The Base Rent shall be due and payable in equal monthly installments, with each such monthly installment due and payable on the first day of each calendar month, in advance, without demand and without setoff or deduction whatsoever. Prior to April 1, 2006, Tenant shall continue to pay Base Rent for the Premises as set forth in the Sixth Amendment to Lease. The Square Footage, Monthly Base Rent per Square Foot, and Annual Base Rent per Square Foot, shall be adjusted from the approximately 46,000 square foot amounts as stated hereinabove, to the actual square footage (as measured by the Architect), and said adjustment shall be included in the Confirmation Agreement.

4.“AS IS”. Tenant accepts the Premises in its “as is” condition and acknowledges that Landlord has no obligation to pay or reimburse Tenant for, or otherwise make, any improvements, alterations or additions to the Premises. Notwithstanding the foregoing, Landlord shall do the work and/or pay the following cost in reference to Tenant’s Reduced Premises, being to-wit:

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A.Make the demising wall between Tenant’s current space and the Reduced Premises compliant with St. Louis County Code; and

B.Install separate meters for electrical service to the Reduced Premises and the vacated premises of Tenant.

5.Options. Any renewal option, right of first offer, or any other options Tenant has pursuant to the Lease, as amended, are hereby terminated.

6.Brokers/Commission. Tenant and Landlord hereby acknowledge that the foregoing disclosure has been previously made:   Colliers Turley Martin Tucker Agent Jeff Hawley was the Landlord’s Agent (the “Listing Broker”) and was serving solely as Agent for the Landlord in connection with this Lease. Colliers Turley Martin Tucker, Agent, Mike Statter, was the Tenant’s Agent and was serving solely as Agent for Tenant in connection with this Lease. Both Landlord and Tenant acknowledge that this disclosure has been made to them. Landlord will pay Tenant’s Agent a commission of two percent (2%), being $12,413.72.

7.Further Amendments. The Lease shall be and hereby is further amended wherever necessary, even though not specifically referred to herein, in order to give effect to the terms of this Seventh Amendment.

8.Ratification. The Lease, as amended hereby, is hereby ratified, confirmed and deemed in fullforce and effective in accordance with its terms. Tenant represents to Landlord that Tenant (a) is currently unaware of any default by Landlord under the Lease; and (b) has full power and authority to execute and deliver this Seventh Amendment and this Seventh Amendment represents a valid and binding obligation of Tenant enforceable in accordance with its terms.

9.Governing Law. This Seventh Amendment shall be governed by and construed in accordance with the laws of the State of Missouri.

10.Counterparts. This Seventh Amendment may be executed in multiple counterparts each of which is deemed an original but together constitute one and the same instrument. This Seventh Amendment may be executed by facsimile and each party has the right to rely upon a facsimile counterpart of this Seventh Amendment signed by the other party to the same extent as if such party had received an original counterpart.

IN WITNESS WHEREOF, this Seventh Amendment has been executed as of (but not necessarily on) the date and year first above written.

3

Dated: 2/9, 2006	LANDLORD:
	CORNERSTONE INDUSTRIAL FUND I, L.L.C.
	By:	/s/ [ILLEGIBLE]
		Its Managing Member
Dated: 2/7, 2006	TENANT:
	ST. LOUIS MUSIC, INC., a Missouri corporation
	By:		/s/ Donald J. Collins
	Name:		Donald J. Collins
	Title:		Vice President
	LOUD TECHNOLOGIES INC., a Washington corporation
	By:		/s/ Tim O’ Neil
	Name:		Tim D. Neil
	Title:		CFO

4

Re:	8480-8514 Mid County Industrial Drive
	St. Louis, Missouri

SIXTH AMENDMENT TO LEASE

THE STATE OF MISSOURI	§
	§	KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ST. LOUIS	§

THIS SIXTH AMENDMENT TO LEASE (this “Amendment”) has been executed as of this 8^th day of November, 2000, by THE REALTY ASSOCIATES FUND III, L.P., a Delaware limited partnership (“Landlord”) and ST. LOUIS MUSIC, INC. (“Tenant”).

R E C I T A L S:

A.Missouri State Employees’ Retirement System (“Prior Landlord”) and Tenant have heretofore executed that certain Lease Agreement (the “Original Lease”), dated as of May 23, 1988, as amended by Addendum toLease dated March 1, 1989, Second Addendum to Lease dated December 3, 1991, Third Amendment to Lease dated March 3, 1994, Fourth Amendment to Lease dated May 9, 1995, and Fifth Amendment to Lease dated asofJune 26, 1998 (such Original Lease, asso amended, is hereinafter called the “Lease”), pursuant to which Tenant leased from Prior Landlord approximately 45,984 square feet (the “Original Premises”) in that certain warehouse building and related improvements more particularly described in the Lease (the “Project”).

B.Landlord and Tenant desire to execute this Amendment in order to evidence their agreement to (i) extend theterm of the Lease, (ii) expand the Original Premises; and (iii) make certain other amendments to the Lease, all as more particularly set forth in this Amendment.

NOW THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows, subject to the contingencies set forth in this Amendment:

Article I

CERTAIN AMENDMENTS

SECTION 1.01.Additional Premises. Effective as of February 1, 2001, or such later date as described in Section 1.07 below (such data being the “Effective Date”), and subject

SIXTH AMENDMENT TO LEASE - Page 1 of 4
L:TA002-957\1ST. LOUIS MUSIC 1 NOV 1, 2000

1

to the terms and conditions set forth in this Amendment, the Lease shall be amended to reflect that the Original Premises shall be hereby expanded to include the premises outlined on the crosshatched floor plan attached hereto as Exhibit A (the “Additional Premises”) consisting of approximately 32,547 rentable square feet (the Original Premises and the Additional Premises being collectively referred to as the “Premises”) In that certain building known as Mid County 6, located at 8480-8514 Mid County Industrial Drive, St. Louis, Missouri, and more particularly described in the Lease (the “Building”). As of the Effective Date, Exhibit A to the Lease shall be amended to include Exhibit A attached to this Amendment. Accordingly, the Premises shall consist of 78,531 rentable square feet in the Building.

SECTION 1.02.Lease Term. The term of the Lease is hereby extended for a period of five (5) years from the Effective Date, unless otherwise terminated in accordance with its express terms. Tenant has no further renewal or extension options and any such rights in the Lease are deleted.

SECTION 1.03.Base Rent. Tenant must pay Landlord, commencing on the Effective Date and continuing on the first day of each month thereafter throughout the term, Base Rent for the entire Premises in the amounts set forth below:

Lease Year	Annual Rate per R.S.F.		Monthly Amount
1 - 3	$	4.00	$	26,177.00
4 - 5	$	4.15	$	27,158.64

The Base Rent shall be due and payable in equal monthly installments, each such monthly installment due and payable on the first day of each calendar month, in advance, without demand and without setoff or deduction whatsoever. As used herein, “Lease Year” means each consecutive twelve-month period beginning with the Effective Date, except that if the Effective Date is not the first day of a calendar month, then the first Lease Year shall be the period from the Effective Date through the final day of the twelve months after the first day of the following month, and each subsequent Lease Year shall be the twelve months following the prior Lease Year.

SECTION 1.04.Additional Rent. As of the Effective Date, Tenant must pay Landlord, as additional rent, Tenant’s proportionate share of (a) any increases in real estate taxes and insurance premiums above that incurred during the 2000 calendar year, (b) all common area maintenance and similar charges, which is currently estimated at $0.35 per square foot for the 2000 calendar year and (c) Tenant’s Proportionate Share shall be increased to take into account the Additional Premises. The foregoing payments must be made at the time and in the manner set forth in the Lease. Tenant shall remain responsible for all utilities.

SECTION 1.05.Right of First Offer.Landlord grants Tenant a right of first offer subject to Exhibit C attached hereto. Tenant shall have no further rights to lease space in any other premises in the Building and allsuch rights in the Lease are deleted.

SIXTH AMENDMENT TO LEASE - Page 2 of 4
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SECTION 1.06.AS IS. Tenant accepts the Additional Premises “as is” “where is”  without representation or warranty, without any obligation to alter, remodel, improve, repair or decorate any part of the Additional Premises, except as set forth on Exhibit B attached hereto.

SECTION 1.07.Availability. Landlord and Tenant acknowledge that there is currently an existing tenant occupying the Additional Premises. If the Additional Premises are not available at the estimated time, Tenant agrees to take such Additional Premises at the time of availability. Landlord shall have no liability to Tenant if the current tenant holds over or the Additional Premises do not become available. If the Additional Premises do not become available on or before March 31, 2001. Tenant, as its sole remedy, may terminate this Amendment upon written notice to Landlord given on or before April 1, 2001.

SECTION 1.08.Further Amendments. The Lease shall be and hereby is further amended wherever necessary, even though not specifically referred to herein, in order to give effect to the terms of this Amendment. The reference to “$500,000” in Section 13 of the Original Lease is hereby amended to “$3,000,000” and the reference to “$50,000” is amended to “$1,000,000.”

Article II

MISCELLANEOUS

SECTION 2.01.Ratification, The Lease, as amended hereby, is hereby ratified, confirmed and deemed in full force and effect in accordance with its terms. Each party represents to the other that such party (a) is currently unaware of any default by the other party under the Lease; and (b) has full power and authority to execute and deliver this Amendment and this Amendment represents a valid and binding obligation of such party enforceable in accordance with its terms, Landlord and Tenant acknowledge that no brokers have been involved in this Amendment other than Sansone Group DDR/LLC (“Sansone”) and that Landlord shall be liable for any commission that is due to Sansone. Landlord and Tenant hereby indemnify each other from the payment of any commissions owed to any other broker with respect to this Amendment resulting from the acts of such party, but not otherwise.

SECTION 2.02.Notices. All notices to be delivered to Landlord under the Lease or otherwise with respect to the Premises shall, unless Landlord otherwise notifies Tenant, be delivered to Landlord in accordance with Paragraph 21 the Lease to the following address:

c/o TA Realty Corporation
25 State Street, 10th floor
Boston, Massachusetts 02109
Attention: Asset Manager

SECTION 2.03.Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Missouri.

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SECTION 2.04.Counterparts. This Amendment may be executed in multiple counterparts each of which is deemed an original but together constitute one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been executed as of (but not necessarily on) the date and year first above written.

LANDLORD:
THE REALTY ASSOCIATES FUND III, L.P., a Delaware limited partnership
By:		Realty Associates Fund III LLC, a Delaware limited liability company, its sole general partner
		By:		Realty Associates Fund III Trust, a Massachusetts business trust, sole Member
				By:		/s/ Henry G. Brauer
				Name:			Henry G. Brauer
				Title:			Regional Director
By:		Realty Associates Fund III Texas Corporation, a Texas corporation general partner
		By:		/s/ Henry G. Brauer
		Name:			Henry G. Brauer
		Title:			Regional Director
TENANT:
ST. LOUIS MUSIC, INC.
By:	/s/ Donald J. Collins
Name:			Donald J. Collins
Title:			Vice President - Finance

SIXTH AMENDMENT TO LEASE - Page 4 of 4
L:TA002-957\1ST. LOUIS MUSIC 1 NOV 1, 2000

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EXHIBIT B

LANDLORD’S WORK

Tenant hereby accepts the Additional Premises in their “AS–IS” condition, and Landlord shall have no obligation to perform any work therein (including, without limitation, demolition of any improvements existing therein or construction of any tenant finish-work or other improvements therein), and shall not be obligated to reimburse Tenant or provide an allowance for any costs related to the demolition or construction of improvements therein. Notwithstanding the foregoing, Landlord agrees to install 2 - 3 openings in the existing demising wall, using available Project standard colors and materials, at Landlord’s sole cost and expense, on or before the Effective Date, subject to the terms of the Lease.

1

EXHIBIT C

ONE-TIME RIGHT OF FIRST OFFER

Subject to Subsection B below, and subject to any expansion or renewal options of any current tenant in the Building (a “Prior Tenant”), Landlord hereby grants to Tenant for the term of the Lease a one-time right of first offer for the space shown on Exhibit C-l (collectively, the “ROFO Space”), to be exercised in accordance with Subsection A below.

A.Ifany ROFO Space becomes available for lease to anyone other than a Prior Tenant, Landlord shall so notify Tenant (“Landlord’s ROFO Notice”) identifying the available ROFO Space (the “Subject ROFO Space”). Landlord’s ROFO Notice may be given up to seven (7) months in advance of such availability and shall contain the terms upon which Landlord intends to offer the Subject ROFO Space for lease to the market. Tenant shall notify Landlord within thirty (30) days of receipt of Landlord’s ROFO Notice whether it desires to lease the Subject ROFO Space on the terms set forth in Landlord’s ROFO Notice. If Tenant does not notify Landlord within said thirty (30) day period that it will lease the Subject ROFO Space. Tenant shall be deemed to have refused the Subject ROFO Space. After any refusal, Tenant shall have no further right of first offer for any ROFO Space and Landlord shall be free to lease such space to any party for any term on terms and conditions acceptable to Landlord and this Exhibit Cshall terminate. If Tenant exercises its right of first offer wish respect to the Subject ROFO Space, such space shall be added to the Premises for all purposes of this lease for the remaining Term of the Lease (but in no event less than three (3) years) on (a) the terms specified in Landlord’s ROFO Notice, and (b) the terms of this Lease to the extent that they do not conflict with the terms specified in Landlord’s ROFO Notice, except that Tenant shall have no further renewal or expansion rights.

B.Tenant’s right of first offer is subject to the conditions that: (i) on the date that Tenant delivers its notice exercising its right of first offer. Tenant is not in default under the Lease after the expiration of any applicable notice and cure periods, and (ii) Tenant shall not have assigned the Lease, or sublet and portion of the Premises under a sublease which is in effect at any time during the period commencing with Tenant’s delivery of its notice and ending on the date the ROFO Space is added to the Premises.

C.Promptly after Tenant’sexerciseof its right of first offer, Landlord shall execute and deliver to Tenant an amendment to the Lease to reflect changes in the Premises, Base Rental, Tenant’s proportionate share and any other appropriate terms changed by the addition of the ROFO Space. Within ten(10) days thereafter, Tenant shall execute and return the amendment.

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF LOUD TECHNOLOGIES INC.

As of December 31, 2005

Subsidiary	State of Incorporation or Country in which Organized
LOUD Technologies Canada Inc.	Canada
LOUD Technologies (Europe) Plc.	UK
Mackie Designs Inc.	Washington, U.S.A
SIA Software Company, Inc.	New York, U.S.A.
St. Louis Music, Inc.	Missouri, U.S.A.

1

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

LOUD Technologies Inc.:

We consent to the incorporation by reference in the registration statements (Nos. 33-98720 and 333-107060) on Form S-8 of LOUD Technologies Inc., of our report dated March 27, 2006, with respect to the consolidated balance sheets of LOUD Technologies Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2005, which report appears in the December 31, 2005 annual report on Form 10-K of LOUD Technologies Inc.

/s/ KPMG LLP

Seattle, Washington

March 27, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James T. Engen, certify that:

1. I have reviewed this annual report on Form 10-K of LOUD Technologies Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   March 31, 2006	By:	/s/ James T. Engen
		James T. Engen
		Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy P. O’Neil, certify that:

1. I have reviewed this annual report on Form 10-K of LOUD Technologies Inc.;

 2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of   internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   March 31, 2006	By:	/s/ Timothy P. O’Neil
		Timothy P. O’Neil
		Chief Financial Officer, Senior Vice President,
		Secretary and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of LOUD Technologies Inc. (the “Company”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, James T. Engen and Timothy P. O’Neil, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: March 31, 2006	By:	/s/ James T. Engen
		James T. Engen
		Chairman, President and Chief   Executive Officer
			/s/ Timothy P. O’Neil
			Timothy P. O’Neil
			Chief Financial Officer, Senior Vice President Finance, Secretary and Treasurer

A signed original of this written statement required by Section 906 has been provided to LOUD Technologies Inc. and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.