EXHIBIT 10.11
THIS JUNIOR SUBORDINATED UNSECURED PROMISSORY NOTE (THIS "SUBORDINATED NOTE")
WAS ORIGINALLY ISSUED ON JULY 1, 1999, AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, OTHERWISE DISPOSED OF OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE OR OTHER SECURITIES LAW OR AN EXEMPTION FROM SUCH REGISTRATION
AND EXCEPT IN COMPLIANCE WITH SECTION 11 HEREOF.
MUZAK LLC
15% JUNIOR SUBORDINATED UNSECURED PROMISSORY NOTE DUE 2007
July 1, 1999 $3,000,000
MUZAK LLC, a Delaware limited liability company (the "Company"), for
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value received, hereby promises to pay, in immediately available funds, to the
Subordinated Payee (as defined herein), the principal amount of Three Million
Dollars ($3,000,000) (such amount, the "Original Principal Amount"), on June 30,
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2007 (the "Maturity Date") together with interest thereon calculated from the
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date hereof in accordance with the provisions contained herein. The initial
Subordinated Payee is MEM Holdings, LLC.
1. Payment of Principal. Subject to the provisions of Section 10:
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(a) Scheduled Payment. The Company will pay the entire unpaid
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principal amount of this Subordinated Note on the Maturity Date.
(b) Optional Prepayment. The Company may prepay the principal amount
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of this Subordinated Note, in whole or in part (together with all interest
accrued thereon), at any time and from time to time, without premium or penalty.
2. Interest. Subject to the provisions of Section 10, interest will
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accrue at the rate of fifteen percent (15%) per annum (computed on the basis of
a 360-day year and the actual number of days elapsed in any year) on the unpaid
principal amount of this Subordinated Note outstanding from time to time during
the applicable period, and will be payable on the Maturity
Date. Prior to the Maturity Date, any accrued interest which is not paid as of
any March 31, June 30, September 30 or December 31 (each, an "Interest
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Accumulation Date") will thereafter bear interest at the rate of fifteen percent
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(15%) per annum (computed on the basis of a 365/366-day year and the actual
number of days elapsed in any year) until such interest is paid or extinguished.
3. Events of Default.
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(a) Definition. An "Event of Default" will be deemed to have occurred
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if:
(i) the Company fails to pay any amount of the principal of this
Subordinated Note within ten Business Days after the date such principal
amount becomes due and payable pursuant to the terms of this Subordinated
Note, whether or not such payment shall be prohibited by Section 10; or
(ii) the Company makes an assignment for the benefit of creditors; or
an order, judgment or decree is entered by a court of competent
jurisdiction adjudicating the Company bankrupt or insolvent; or the Company
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Company; or any such petition or
application is filed against the Company and such petition or application
is not dismissed within 90 days.
(b) Consequences of Events of Default.
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(i) Except as provided in (b)(ii) below, and subject to the
provisions of Section 10, if any Event of Default has occurred and is
continuing, then, at any time after the Subordinated Payee has given five
days prior written notice to any holder of Senior Indebtedness (as herein
defined), the Subordinated Payee may declare (by written notice delivered
to the Company) all or any portion of the outstanding principal amount of
this Subordinated Note (together with all accrued interest thereon) to be
immediately due and payable and may demand immediate payment of all or any
portion of the outstanding principal amount of this Subordinated Note and
interest thereon.
(ii) If an Event of Default under (a)(ii) above has occurred, the
outstanding principal amount of this Subordinated Note (together with all
accrued interest thereon) shall become due and payable without any action
by the Subordinated Payee, and, subject to the provisions of Section 10,
the Subordinated Payee may demand immediate payment of the outstanding
principal amount of this Subordinated Note and interest thereon.
4. Definitions. For purposes of this Subordinated Note, the
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following capitalized terms have the following meaning.
"Business Day" means any day other than a Saturday, Sunday or a legal
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holiday under the laws of the State of New York.
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"Credit Agreement" means that certain Credit and Guaranty Agreement,
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dated as of March 18, 1999, among the Company, Muzak Holdings LLC, certain
subsidiaries of the Company, various lenders from time to time party thereto,
Goldman Sachs Credit Partners L.P. ("GSCP"), as syndication agent, Canadian
Imperial Bank of Commerce, as administrative agent, and GSCP and CIBC
Oppenheimer Corp., as co-lead arrangers, as well as any related notes,
guarantees, security or pledge agreements, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
restated, supplemented, modified, renewed, refunded, restructured, replaced or
refinanced (whether in one or more credit agreements, loan agreements or similar
agreements providing for loans or advances to the Company or any of its
subsidiaries), in whole or in part, from time to time, whether or not with the
same lenders or agents and irrespective of any changes in the terms and
conditions thereof, including, without limitation, changes in the borrowers or
guarantors.
"Credit Party" has the meaning specified in the Credit Agreement.
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"Distribution of Assets" means any distribution of assets of the
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Company of any kind or character, including without limitation (a) a payment,
purchase or other acquisition or retirement for cash, property or securities or
(b) by way of cancellation, forgiveness or offset of the indebtedness evidenced
by this Subordinated Note against any indebtedness owed by the Subordinated
Payee of this Subordinated Note to the Company or (c) payable or deliverable by
reason of the payment of any other indebtedness of the Company being
subordinated to the payment of this Subordinated Note.
"Person" means an individual, a partnership, a corporation, a limited
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liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof or any other entity or
organization.
"Senior Indebtedness" means all principal, premium (if any), interest
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(including interest accruing on or after the filing of any Proceeding (as
defined herein) relating to the Company or any Credit Party whether or not a
claim for post-filing interest is allowed or allowable in any such Proceedings),
fees, commissions, charges, expenses (including but not limited to expenses in
connection with claims and litigation), damages, penalties, claims,
reimbursement or indemnity obligations, guarantees and all other amounts or
obligations payable (collectively, "Obligations") (i) under or in respect of the
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Credit Agreement including, without limitation, all obligations of the Company
or any Credit Party in respect of interest rate agreements and hedging
obligations with any lender party to the Credit Agreement (or any affiliate of
any such lender), or (ii) any Obligations of the Company or its subsidiaries
which is not expressly pari passu with or subordinated to this Subordinated
Note, and, in each case, all renewals, extensions or refinancings thereof.
"Subordinated Payee" means MEM Holdings, LLC, or any Permitted
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Transferee (as defined herein); provided, that any Subordinated Payee shall
cease to be a Subordinated Payee once such Subordinated Payee ceases to own any
right to any principal amount of this Subordinated Note.
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A "distribution" may consist of cash, securities or other property, by
set-off or otherwise.
5. Cancellation. After all principal and accrued interest at any
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time owed on this Subordinated Note have been paid in full, this Subordinated
Note will be surrendered to the Company for cancellation and will not be
reissued.
6. Descriptive Headings; Governing Law. The descriptive headings of
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the several Sections of this Subordinated Note are inserted for convenience only
and do not constitute a part of this Subordinated Note. This Subordinated Note
will be governed by the internal law of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
law of any jurisdiction other than the State of New York.
7. Business Days. If any payment is due, or any time period for
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giving notice or taking action expires, on a day which is not a Business Day,
then the payment will be due and payable on, and the time period will
automatically be extended to, the next Business Day immediately following such
day which is not a Business Day, and interest will continue to accrue at the
required rate under this Subordinated Note until any such payment is made.
8. General. This Subordinated Note and the Credit Agreement
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constitute the entire agreement among the parties with respect to the subject
matter hereof; supersede any and all prior understandings relating to such
subject matter; and will be binding upon and inure to the benefit of the parties
and their respective successors and assigns.
9. Waiver of Jury Trial. THE COMPANY (AND, BY ITS ACCEPTANCE OF
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THIS SUBORDINATED NOTE, THE SUBORDINATED PAYEE HEREOF) HEREBY WAIVES, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS SUBORDINATED NOTE OR
THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.
10. Subordination.
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(a) Extent of Subordination. The Company covenants and agrees, and
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the Subordinated Payee by accepting this Subordinated Note covenants and agrees,
that (1) the indebtedness evidenced by this Subordinated Note, including, but
not limited to, the payment of principal of, premium, if any, and interest on,
this Subordinated Note, and any other payment Obligation of the Company in
respect of this Subordinated Note (including any obligation to repurchase this
Subordinated Note), is subordinated and junior in right of payment, to the
extent and in the manner provided in this Section 10, to the prior indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed) and (2) the subordination is for the benefit of and shall be
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enforceable by all holders of Senior Indebtedness. Until the Senior
Indebtedness shall have been indefeasibly paid in full in cash, (A) no payment
or distribution on account of principal of, or premium or interest on, or any
other Obligation with respect to, this Subordinated Note or any judgment with
respect hereto (and no payment or distribution on account of the purchase or
redemption or other acquisition of this Subordinated Note) shall be made by or
on behalf of the Company or any other Credit Party and (B) the Subordinated
Payee may not (x) demand, collect or receive any payment or distribution on
account of principal of, or premium or interest on, or any other Obligation with
respect to, this Subordinated Note, (y) accelerate the Maturity Date or the
maturity of all or any portion of the subordinated indebtedness or other
Obligations owed pursuant to this Subordinated Note or (z) seek any other remedy
allowed at law or in equity to collect or enforce on all or any portion of the
subordinated indebtedness or other Obligations owed pursuant to this
Subordinated Note.
(i) In the event that the Subordinated Payee receives any payment or
distribution with respect to this Subordinated Note at a time when such
payment or distribution is prohibited by this Section 10, such payment or
distribution shall be held by the Subordinated Payee, in trust for the
benefit of, and shall be immediately paid forthwith over or delivered and
transferred to, the holders of Senior Indebtedness (pro rata to such
holders on the basis of the respective amounts of Senior Indebtedness held
by such holders) or their representative as their respective interests may
appear to the extent necessary to pay all Senior Indebtedness in full, in
cash. In the event of the failure of the Subordinated Payee to endorse or
assign such payment or distribution, each holder of Senior Indebtedness is
hereby irrevocably authorized to endorse or assign the same.
(ii) Upon any Distribution of Assets of the Company or upon any
dissolution, winding up, liquidation or reorganization of the Company,
whether in bankruptcy, insolvency, reorganization, arrangement or
receivership proceedings or other similar proceeding, or upon any
assignment for the benefit of creditors or any other marshaling of the
assets and liabilities of the Company, whether voluntary or involuntary or
otherwise (each, a "Proceeding"):
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1) holders of Senior Indebtedness shall first be entitled to
receive indefeasible payment in full in cash of such Senior
Indebtedness (whenever arising and including interest after the
commencement of any such Proceeding at the rate specified in the
Senior Indebtedness, whether or not a claim for such interest would be
allowed in such Proceeding) before the Subordinated Payee shall be
entitled to receive any payment on account of any Obligation with
respect to this Subordinated Note, whether as principal, interest or
otherwise; and
2) any payment by, or on behalf of, or Distribution of Assets
of, the Company of any kind or character, whether in cash, property or
securities, to which the Subordinated Payee would be entitled except
for the provisions of this Section 10 shall be paid or delivered by
the Person making such payment or distribution
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(whether the Company, a trustee in bankruptcy, a receiver, custodian
or liquidating trustee or other Person) directly to holders of Senior
Indebtedness as their interests may appear, until the indefeasible
payment in full in cash of all Senior Indebtedness.
(iii) The Company will not give, or permit to be given, and the
Subordinated Payee will not receive, accept or demand, (i) any security of
any nature whatsoever for any indebtedness evidenced by this Subordinated
Note, whether principal or interest, on any property or assets, whether now
existing or hereafter acquired, of the Company or any subsidiary thereof or
(ii) any guarantee, of any nature whatsoever, by the Company or any
subsidiary thereof, of any indebtedness evidenced by of this Subordinated
Note, whether principal or interest.
(iv) The Subordinated Payee agrees not to file, or to join with any
other creditors of the Company or any Credit Party in filing, any petition
commencing any Proceeding. The Subordinated Payee further agrees, to the
fullest extent permitted under applicable law, that it will not cause the
Company or any Credit Party to file any petition commencing any Proceeding
until all Senior Indebtedness has been indefeasibly paid in full in cash.
(v) To the extent any payment of or distribution in respect of
Senior Indebtedness (whether by or on behalf of the Company or any Credit
Party, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person under any bankruptcy, insolvency,
receivership, fraudulent conveyance or similar law, then if such payment or
distribution is recovered by, or paid over to, such receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not
occurred. To the extent the obligation to repay the Senior Indebtedness is
declared to be fraudulent, invalid or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside
(and all other amounts that would come due with respect thereto had such
obligation not been so affected) shall be deemed to be reinstated and
outstanding as Senior Indebtedness for all purposes hereof as if such
declaration, invalidity or setting aside had not occurred.
(vi) The holders of the Senior Indebtedness shall be entitled pro
rata in accordance with the priorities then existing among such holders to
vote all claims of the Subordinated Payee in respect of this Subordinated
Note in connection with a Proceeding. Notwithstanding the foregoing, in
the event that the holders of the Senior Indebtedness shall allow the
Subordinated Payee to retain the right to vote and otherwise act in a
Proceeding (including, without limitation, the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension), the Subordinated Payee shall not
vote with respect to any such plan or take any other action in any way so
as to contest (x) the validity of any liens or security interests granted
to, or for the benefit of, the holders
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of the Senior Indebtedness, (y) the relative rights and duties of the
holders of the Senior Indebtedness established in the Credit Agreement with
respect to such liens and security interests or (z) the enforceability of
the Credit Agreement or these subordination provisions.
(vii) In connection with any Proceeding, the Subordinated Payee
irrevocably authorizes the holders of the Senior Indebtedness or any of
them, to demand, sue for, collect and receive all payments and
distributions to the extent required in this Section 10(a), to give
acquittance therefor and to take such other actions as such holders of the
Senior Indebtedness may deem necessary or advisable for the enforcement of
these subordination provisions. The Subordinated Payee further agrees duly
and promptly to take such action as may be requested at any time or from
time to time by the holders of the Senior Indebtedness, to file appropriate
proofs of claim in respect of the Subordinated Note and to execute and
deliver such powers of attorney, assignments or proofs of claim or other
instruments as may be requested by the holders of the Senior Indebtedness,
all as may be necessary or advisable to enable such holders of the Senior
Indebtedness to enforce any and all claims upon or in respect of this
Subordinated Note and to receive any and all payments or distributions to
the extent required in this Section 10(a).
(b) Waivers and Consents.
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(i) The Subordinated Payee waives the right to compel that any
collateral or any other property of the Company or the property of any
guarantor of any Senior Indebtedness or any other Person be applied in any
particular order to discharge such Senior Indebtedness. The Subordinated
Payee expressly waives the right to require holders of Senior Indebtedness
to proceed against the Company, any collateral or any guarantor of any
Senior Indebtedness or any other Person, or to pursue any other remedy in
any such holder's power which the Subordinated Payee cannot pursue and
which would lighten the Subordinated Payee's burden, notwithstanding that
the failure of any holder of Senior Indebtedness to do so may thereby
prejudice the Subordinated Payee. The Subordinated Payee agrees that it
shall not be discharged, exonerated or have its obligations hereunder to
any holder of Senior Indebtedness reduced by any such holder's delay in
proceeding against or enforcing any remedy against the Company, any
collateral or any guarantor of any Senior Indebtedness or any other Person;
by any holder of Senior Indebtedness releasing the Company, any collateral
or any guarantor of any Senior Indebtedness or any other Person from all or
any part of such Senior Indebtedness; or by the discharge of the Company,
any collateral or any guarantor of any Senior Indebtedness or any other
Person by operation of law or otherwise, with or without the intervention
or omission of a holder of Senior Indebtedness. Any holder's of Senior
Indebtedness vote to accept or reject any plan of reorganization relating
to the Company, any collateral, or any guarantor of such Senior
Indebtedness or any other Person, or any holder's of Senior Indebtedness
receipt on account of all or part of any Senior Indebtedness of any cash,
property or securities distributed in any Proceeding, shall not discharge,
exonerate or reduce the obligations of the Subordinated Payee hereunder to
any holder of Senior Indebtedness.
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(ii) The rights under these subordination provisions of the holders
of any Senior Indebtedness as against the Subordinated Payee shall remain
in full force and effect without regard to, and shall not be impaired or
affected by: (A) any act or failure to act on the part of the Company; (B)
any extension, renewal or indulgence in respect of any payment or
prepayment of Senior Indebtedness or any part thereof or in respect of any
other amount payable to any holder of Senior Indebtedness; (C) any
amendment, modification or waiver of, or addition or supplement to, or
deletion from, or compromise, release, consent or other action in respect
of, any of the terms of Senior Indebtedness or any other agreement which
may be made relating to Senior Indebtedness; (D) any exercise or non-
exercise by the holders of Senior Indebtedness of any right, power,
privilege or remedy under or in respect of the Senior Indebtedness or these
subordination provisions or any waiver of any such right, power, privilege
or remedy or of any default in respect of the Senior Indebtedness or these
subordination provisions, or any receipt by the holders of Senior
Indebtedness of any securi ty, or any failure by such holder to perfect a
security interest in, or any release by such holder of, any security for
the payment of the Senior Indebtedness; (E) any merger or consolidation of
the Company or any of its subsidiaries into or with any other Person, or
any sale, lease or transfer of any or all of the assets of the Company or
any of its subsidiaries to any other Person; or (F) or absence of any
notice to, or knowledge by, the Subordinated Payee of the existence or
occurrence of any of the foregoing matters or events.
(iii) The Subordinated Payee waives all rights and defenses arising
out of an election of remedies by any holder of Senior Indebtedness, even
though that election of remedies, including without limitation any
nonjudicial foreclosure with respect to security for such Senior
Indebtedness, has impaired the value of the Subordinated Payee's rights of
subrogation, reimbursement or contribution against the Company or any
guarantor of any Senior Indebtedness or any other Person. The Subordinated
Payee expressly waives any rights or defenses it may have by reason of
protection afforded to the Company or any guarantor of any Senior
Indebtedness or any other Person with respect to such Senior Indebtedness
pursuant to any anti-deficiency laws or other laws of similar import which
limit or discharge the principal debtor's indebtedness upon judicial or
nonjudicial foreclosure of real property or personal property collateral
for any Senior Indebtedness.
(iv) The Subordinated Payee agrees that, without the necessity of any
reservation of rights against it, and without notice to or further assent
by it, any demand for payment of any Senior Indebtedness made by a holder
thereof may be rescinded in whole or in part by such holder, and any Senior
Indebtedness may be continued, and such Senior Indebtedness, or the
liability of the Company or any of its subsidiaries or any other guarantor
or any other party upon or for any part thereof, or any collateral or
guarantee therefor or right of offset with respect thereto, may, from time
to time, in whole or in part, be renewed, extended, modified, accelerated,
compromised, waived, surrendered or released by the holders of such Senior
Indebtedness, in each case without notice to or further assent by the
Subordinated Payee and without impairing, abridging, releasing or affecting
the subordination provided for herein.
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(v) The Subordinated Payee waives any and all notice of the
creation, renewal, extension or accrual of any Senior Indebtedness and
notice of or proof of reliance by any holder of Senior Indebtedness upon
the provisions of this Section 10. Any Senior Indebtedness shall be deemed
conclusively to have been created, contracted or incurred and the consent
given to create the obligations of the Company in respect of this
Subordinated Note in reliance upon the provisions of this Section 10, and
all dealings between the Company and any holder of Senior Indebtedness
shall be deemed to have been consummated in reliance upon the provisions of
this Section 10. The Subordinated Payee waives notice of or proof of
reliance on the provisions of this Section 10 and protest, demand for
payment and notice of default.
(c) Waiver of Claims.
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(i) To the maximum extent permitted by law, the Subordinated Payee
waives any claim it might have against any holder of Senior Indebtedness
with respect to, or arising out of, any action or failure to act or any
requirement of diligence on the part of any holder of Senior Indebtedness
or any requirement on the part of any holder of Senior Indebtedness to
mitigate damages resulting from any default under such Senior Indebtedness
or any error of judgment, negligence or mistake or oversight whatsoever on
the part of any holder of Senior Indebtedness or its directors, officers,
employees or agents with respect to any exercise of rights or remedies
under the agreements governing or relating to such Senior Indebtedness.
(ii) The Subordinated Payee, for itself and on behalf of its
successors and assigns, hereby waives any and all now existing or hereafter
arising rights it may have to require any holder of Senior Indebtedness to
marshal assets for the benefit of the Subordinated Payee, or to otherwise
direct or receive notice of the timing, order or manner of any sale,
collection or other enforcement of any collateral. The holders of Senior
Indebtedness are under no duty or obligation, and the Subordinated Payee
hereby waives any right it may have to compel any holder of Senior
Indebtedness, to pursue any guarantor or other Person who may be liable for
such Senior Indebtedness, or to enforce any lien or security interest in
any collateral.
(iii) The Subordinated Payee hereby waives and releases all rights
which a guarantor or surety with respect to any Senior Indebtedness could
exercise.
(iv) The Subordinated Payee hereby waives any duty on the part of any
holder of Senior Indebtedness to disclose to it any fact known or hereafter
known by such holder relating to the operation or financial condition of
the Company or any guarantor of such Senior Indebtedness or their
respective businesses.
(v) The Subordinated Payee unconditionally waives (A) notice of any
of the matters referred to in Section 10(b) and this Section 10(c), (B) to
the extent permitted by law, all notices which may be required, whether by
statute, rule of law or otherwise, to preserve intact any rights of any
holder of any Senior Indebtedness against the Company, including,
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without limitation, any demand, presentment and protest, proof of notice of
nonpayment under any Senior Indebtedness and notice of any failure on the
part of the Company to perform and comply with any covenant, agreement,
term or condition of the Senior Indebtedness, (C) any right to the
enforcement, assertion or exercise by any holder of any Senior Indebtedness
of any right, power, privilege or remedy conferred in such Senior
Indebtedness or otherwise, and (D) any notice of any sale, transfer or
other disposition of any Senior Indebtedness by any holder thereof.
(d) Relative Rights. This Section 10 defines the relative rights of
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the Subordinated Payee and holders of Senior Indebtedness. Nothing in this
Subordinated Note shall: (i) impair, as between the Company and the Subordinated
Payee, the obligation of the Company which is absolute and unconditional, to pay
principal of, premium, if any, and interest on this Subordinated Note in
accordance with its terms; or (ii) affect the relative rights of the
Subordinated Payee and creditors of the Company other than their rights in
relation to holders of Senior Indebtedness.
(e) Subrogation. The Subordinated Payee shall not have any
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subrogation or other rights as the holder of Senior Indebtedness, and the
Subordinated Payee hereby waives all such rights of subrogation and all rights
of reimbursement or indemnity whatsoever and all rights of recourse to any
security for any Senior Indebtedness, until such time as all the Senior
Indebtedness shall be indefeasibly paid in full in cash and all of the
Obligations of the Credit Parties under the Senior Indebtedness shall have been
duly performed. From and after the time at which all Senior Indebtedness has
been indefeasibly paid in full in cash, the rights of the Subordinated Payee
shall be subrogated to all rights of any holders of Senior Indebtedness to
receive any further payments or distributions applicable to the Senior
Indebtedness until the subordinated amounts due pursuant to the Subordinated
Note shall have been indefeasibly paid in full in cash, and for the purposes of
such subrogation, no payment or distribution received by the holders of Senior
Indebtedness of cash, securities or other property to which the Subordinated
Payee would have been entitled except for these subordination provisions shall,
as between the Company and its creditors other than the holders of Senior
Indebtedness, on the one hand, and the Subordinated Payee, on the other, be
deemed to be a payment or distribution by the Company to or on account of the
Senior Indebtedness.
(f) Authorization to Effect Subordination. The Subordinated Payee
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by its acceptance of this Subordinated Note authorizes and directs the holders
of Senior Indebtedness to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Section (including, without
limitation, to demand, sue for, collect and receive all payments and
distributions), and appoints the holders of Senior Indebtedness to act as their
attorney-in-fact for any and all such purposes, including, upon the occurrence
of any Proceeding as set forth in Section 10(a).
11. Transferability and Assignment. A Subordinated Payee may not
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transfer, sell, pledge, convey, assign or otherwise dispose of ("Transfer") this
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Subordinated Note to any other Person without (a) the prior written consent of
the Company's Board of Directors, (b) first delivering to the Company (i) an
opinion of counsel reasonably acceptable in form and substance to the
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Company (which counsel must be reasonably acceptable to the Company) that
registration under the Securities Act, or any state or other securities law is
not required in connection with such Transfer and (ii) a written joinder to this
Subordinated Note by the proposed transferee pursuant to which such proposed
transferee shall agree to be bound by the provisions of this Subordinated Note,
including Section 10 and (c) so long as any Senior Indebtedness remains
outstanding, the prior written consent of the holders of Senior Indebtedness or
any representative of such holders authorized to give a consent to such joinder
and such transferee. Any transferee executing and delivering such a joinder and
thereafter acquiring this Subordinated Note in accordance with the preceding
sentence shall be referred to herein as a "Permitted Transferee". Any Transfer
or attempted Transfer of this Subordinated Note in violation of any provision of
this Subordinated Note shall be null and void, and the Company shall not record
such Transfer on its books or treat any purported transferee of this
Subordinated Note as the owner of this Subordinated Note for any purpose.
12. Counterparts. This Subordinated Note may be executed in separate
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counter parts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
13. Usury Laws. It is the intention of the Company and the
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Subordinated Payee to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Subordinated Note shall
be subject to reduction to the amount not in excess of the maximum legal amount
allowed under the applicable usury laws as now or hereafter construed by the
courts having jurisdiction over such matters. If the maturity of this
Subordinated Note is accelerated by reason of an election by the holder hereof
resulting from an Event of Default, voluntary prepayment by the Company or
otherwise, then earned interest may never include more than the maximum amount
permitted by law, computed from the date hereof until payment, and any interest
in excess of the maximum amount permitted by law shall be canceled automatically
and, if theretofore paid, shall at the option of the Subordinated Payee either
be rebated to the Company or credited on the principal amount of this
Subordinated Note, or if this Subordinated Note has been paid, then the excess
shall be rebated to the Company. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Subordinated Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal balance of
this Subordinated Note remaining unpaid from time to time. If such interest
does exceed the maximum legal rate, it shall be deemed a mistake and such excess
shall be canceled automatically and, if theretofore paid, rebated to the Company
or credited on the principal amount of this Subordinated Note, or if this
Subordinated Note has been repaid, then such excess shall be rebated to the
Company.
14. No Strict Construction. The parties hereto have participated
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jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
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15. Amendments; Waivers. So long as any Senior Indebtedness remains
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outstanding, no amendment or modification to or waiver of any provisions of, or
the definitions of any terms appearing in, Section 10, or to or of any other
provision of this Subordinated Note may be made that affects the rights of any
holder of Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness, or any representative of such holders authorized to give a
consent, consent to such amendment, modification or waiver; provided, however,
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that this Subordinated Note may be amended to increase the Original Principal
Amount by an additional amount not to exceed $5,000,000 without the consent of
the holders of Senior Indebtedness.
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IN WITNESS WHEREOF, the Company has executed and delivered this Junior
Subordinated Unsecured Promissory Note on the date specified above.
MUZAK LLC
By:_______________________________
Name: Royce Yudkoff
Title: Vice President
Accepted and Agreed to:
MEM HOLDINGS, LLC
By:___________________________________
Name: Peni Garber
Title: Executive Vice President