EXECUTION COPY
THIS JUNIOR SUBORDINATED UNSECURED CONVERTIBLE PROMISSORY NOTE (THIS
"SUBORDINATED NOTE") WAS ORIGINALLY ISSUED ON NOVEMBER 8, 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 CONVERTIBLE
PROMISSORY NOTE DUE 2007
November 8, 1999 $20,000,000
MUZAK LLC, a Delaware limited liability company (the
"Company"), for value received, hereby promises to pay, in immediately available
funds, to the Subordinated Payee (as defined herein), the principal amount of
Twenty Million Dollars ($20,000,000) (such amount, the "Original Principal
Amount"), on June 30, 2007 (the "Maturity Date") together with interest thereon
calculated from the date hereof in accordance with the provisions contained
herein. The initial Subordinated Payee is MEM Holdings, LLC.
I. PAYMENT OF PRINCIPAL. Subject to the provisions of Section 10:
A. Scheduled Payment. The Company will pay the entire unpaid principal amount of
this Subordinated Note on the Maturity Date.
A. Optional Prepayment. The Company may prepay the principal amount 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.
I. INTEREST. Subject to the provisions of Section 10, interest will accrue at
the rate of fifteen percent (15%) per annum (computed on the basis of a
365/366-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 or the conversion of this Subordinated Note pursuant
to Section 16 hereof, any accrued interest which is not paid as of any March 31,
June 30, September 30 or December 31 (each, an "Interest Accumulation Date")
will thereafter bear interest at the rate of fifteen percent (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.
I. EVENTS OF DEFAULT.
A. Definition. An "Event of Default" will be deemed to have occurred if:
1. 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
1. 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.
A. Consequences of Events of Default.
1. 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.
1. 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.
I. DEFINITIONS. For purposes of this Subordinated Note, the following
capitalized terms have the following meanings:
"Business Day" means any day other than a Saturday, Sunday or
a legal holiday under the laws of the State of New York.
"Class A Units" means Holdings' Class A Units (as such term is
defined in the LLC Agreement).
"Credit Party" means each Person (other than any agent or
lender or any other representative thereof) from time to time party to the
Senior Credit Agreement.
"distribution" (a) means any distribution of any kind or
character, including, without limitation, (i) a payment, purchase, redemption or
other acquisition or retirement for cash, property or securities, (ii) by way of
cancellation, forgiveness or offset of the indebtedness evidenced by this
Subordinated Note against any indebtedness owed by the Subordinated Payee to the
Company or (iii) payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of this
Subordinated Note, except a conversion of this Subordinated Note pursuant to
Section 16 hereof, and (b) may consist of cash, securities, or other property.
"Holdings" means Muzak Holdings LLC, a Delaware limited
liability company, and, as of the date hereof, the owner of all of the issued
and outstanding equity securities of the Company.
"indefeasible payment and satisfaction in full" or similar
words mean (i) all amounts due or to become due on or in respect of the Senior
Indebtedness shall have been previously paid in full in cash and shall not be
subject to avoidance under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, (ii) all commitments to lend under the Senior
Indebtedness shall have been terminated, (iii) all letters of credit shall have
been cancelled or otherwise terminated, (iv) all guarantees constituting Senior
Indebtedness shall have been terminated and (v) all lender guarantees
constituting Senior Indebtedness shall have been permanently reduced to zero.
"LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of Holdings, dated as of March 18, 1999, as amended
from time to time.
"Obligations" means all obligations for principal, premium,
interest (including, but not limited to, interest accruing at the legal rate on
or after the filing of any Bankruptcy Proceeding (as herein defined), and any
additional interest that would have accrued thereon but for the commencement of
such proceeding, whether or not a claim for such is allowed in any such
proceeding), penalties, charges, fees, fees and expenses of counsel (including,
without limitation, any expenses in connection with claims and litigation),
commissions, indemnitees, reimbursement obligations, damages, rescission costs,
guarantees, claims and other amounts and liabilities payable under the
documentation governing any indebtedness, secured or unsecured, contingent or
otherwise, or otherwise arising in respect of such indebtedness.
"Person" means an individual, a partnership, a corporation, a
limited 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.
"property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
subsidiaries under generally accepted accounting principles as in effect in the
United States from time to time.
"Senior Agent" means Canadian Imperial Bank of Commerce, as
Administrative Agent for the Lenders, the Lender Counterparties and the
Indemnitees under the Senior Credit Agreement, and its successors in such
capacity, or if there is then no acting Administrative Agent under any Senior
Credit Agreement, the holders of a majority in principal amount of the
outstanding Senior Indebtedness.
"Senior Credit Agreement" means one or more credit agreements,
loan agreements or similar agreements providing for working capital advances,
term loans, letter of credit facilities or similar advances, loans, or
facilities to the Company or any of its subsidiaries, including the Credit and
Guaranty Agreement, dated as of March 18, 1999, by and among the Company,
Holdings and 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 amended by (i) the First
Amendment, Consent and Waiver, dated as of July 1, 1999, and (ii) the Second
Amendment and Consent dated as of October 30, 1999, initially providing for term
loan and revolving credit facilities and including any related notes,
guarantees, security or pledge agreements, collateral documents, instruments and
agreements executed in connection therewith, in each case as such credit
facilities and/or related documents may be further amended, restated,
supplemented, renewed, refunded, refinanced, replaced, restructured, in whole or
in part, or otherwise modified from time to time, whether or not with the same
agents, trustee, representative lenders or group of lenders or holders, and
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Agreement"
shall include agreements in respect of interest rate agreements and hedging
obligations with lenders party to any Senior Credit Agreement and their
affiliates and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to any Senior
Credit Agreement and any and all refundings, refinancings (in whole or in part)
and replacements of any Senior Credit Agreement, whether by the same or any
other agents, trustee, representative lenders or group of lenders or holders and
irrespective of any changes in the terms and conditions thereof, including one
or more agreements (i) extending the maturity of, or increasing the amount of,
any indebtedness incurred thereunder or contemplated thereby, or (ii) adding or
deleting borrowers or guarantors thereunder, so long as borrowers and issuers
include one or more of the Company and its subsidiaries and their respective
successors and assigns.
"Senior Indebtedness" means (i) the indebtedness outstanding
or arising under the Senior Credit Agreement, (ii) all Obligations incurred by
or owing to the Senior Agent, the holders of such indebtedness or any other
agent or representative thereof outstanding or arising under any Senior Credit
Agreement, whether now or hereafter incurred, made or created, whether absolute
or contingent, liquidated or unliquidated, whether due or not due, including,
without limitation, and (iii) all obligations of the Company or any other Credit
Party in respect of all interest rate agreements and hedging obligations arising
in connection therewith with any party to the Senior Credit Agreement or any of
its affiliates.
"Sub Debt Default" shall have the meaning given to the term
"Default" in the Sub Debt Indenture.
"Sub Debt Event of Default" shall have the meaning given to
the term "Event of Default" in the Sub Debt Indenture.
"Sub Debt Indebtedness" means all Obligations under or in
respect of the Sub Debt Indenture.
"Sub Debt Indenture" means the indenture, dated as of March
18, 1999, pursuant to which the Sub Debt Notes are issued, as the same may from
time to time be amended, renewed, supplemented or otherwise modified.
"Sub Debt Notes" means the $115,000,000 in aggregate principal
amount of 9-7/8% Senior Subordinated Notes due 2009 of the Company and Muzak
Finance Corp. issued pursuant to the Sub Debt Indenture.
"Subordinated Payee" means MEM Holdings, LLC, or any Permitted
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.
I. CANCELLATION. After all principal and accrued interest at any 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.
I. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of 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.
I. BUSINESS DAYS. If any payment is due, or any time period for 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.
I. GENERAL. This Subordinated Note, the Sub Debt Indenture and the Senior Credit
Agreement 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.
I. WAIVER OF JURY TRIAL. THE COMPANY (AND, BY ITS ACCEPTANCE OF 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 HEREOF.
I. SUBORDINATION.
A. Extent of Subordination to Senior Indebtedness. The Company covenants and
agrees, and the Subordinated Payee, by accepting this Subordinated Note,
covenants and agrees, that, to the extent and in the manner hereinafter set
forth in this Section 10, the indebtedness represented by this Subordinated
Note, whether for principal of, premium, if any, interest on, this Subordinated
Note, and any other Obligation under or in respect hereof and all rights or
claims arising out of or associated with such indebtedness (collectively, the
"Subordinated Obligations"), are hereby expressly made junior and subordinate in
right of payment as provided in this Section 10 to the prior indefeasible
payment and satisfaction in full in cash of all Obligations in respect of all
Senior Indebtedness (including post-petition interest thereon).
Any provision of this Subordinated Note to the contrary
notwithstanding, the Company shall not make and the Subordinated Payee shall not
accept, any distribution or payment of any kind whatsoever with respect to the
Subordinated Obligations at any time when any of the Senior Indebtedness remains
outstanding. In no event shall the Subordinated Payee commence any action or
proceeding to contest or otherwise contest the enforceability of the provisions
of this Subordinated Note, the validity, perfection or priority of any security
interests or other liens granted to secure the Senior Indebtedness by the
Company or any other Person, the rights of the Senior Agent or any holders of
Senior Indebtedness or the enforceability of the Senior Credit Agreement.
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 Subordinated Obligations, on any property or assets, whether now existing or
hereafter acquired, of the Company or any other Credit Party or (ii) any
guarantee, of any nature whatsoever, by the Company or any other Credit Party,
of any Subordinated Obligations.
The Subordinated Payee acknowledges and agrees that the
subordination provisions herein are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of this
Subordinated Note, to acquire and continue to hold, or to continue to hold such
Senior Indebtedness.
To the extent that any payment of or distribution in respect
of Senior Indebtedness (whether by or on behalf of the Company , 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 that 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.
A. Distributions and Liquidation, Dissolution, Bankruptcy. In the event of (i)
any distribution of assets of the Company, (ii) any insolvency, or bankruptcy,
case or proceeding, or any receivership, liquidation, reorganization,
arrangement, adjustment, action for the relief of debtors, or other similar case
or proceeding in connection therewith, relative to the Company, its debts, its
operations or to its creditors, as such, or to its assets, or (iii) any
liquidation, dissolution or other winding-up of the Company and whether or not
involving insolvency or bankruptcy, or (iv) any assignment for the benefit of
creditors or any other marshaling of assets or liabilities of the Company, in
each case whether voluntary or involuntary, including, without limitation, the
filing of any petition or the taking of any action to commence any of the
foregoing under any law, foreign or domestic, federal or state (clauses (ii)
through (iv) are referred to as a "Bankruptcy Proceeding"), then and in any such
event:
(i) The Senior Agent and the holders of Senior Indebtedness
shall be entitled to receive indefeasible payment and satisfaction in
full in cash of all amounts due on or in respect of all Senior
Indebtedness (including, but not limited to, interest accruing at the
legal rate on or after the filing of any Bankruptcy Proceeding, and any
additional interest that would have accrued thereon but for
the commencement of such proceeding, whether or not a claim for such is
allowed in such proceeding), before the Subordinated Payee is entitled
to receive or retain any payment or distribution of any kind or
character on account of this Subordinated Note or any Subordinated
Obligations on this Subordinated Note;
(ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Subordinated Payee would be entitled
but for the provisions of this Section 10 shall be paid by the Company,
a liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the Senior Agent or the
holders of Senior Indebtedness, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each to the extent necessary to make indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Senior Agent or the holders of such Senior
Indebtedness; and
(iii) in the event that, notwithstanding the foregoing
provisions of this Section 10(b), the Subordinated Payee shall have
received any payment or distribution of assets of the Company of any
kind or character, whether in cash, or property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of principal of, premium, if any, interest or any Subordinated
Obligations on this Subordinated Note before all Senior Indebtedness is
indefeasibly paid in full in cash, then and in such event payment or
distribution shall be held in trust for the benefit of and shall be
paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other
Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to indefeasibly pay and satisfy all Senior
Indebtedness in full in cash, after giving effect to any concurrent
payment or distribution to or for the holders of the Senior
Indebtedness.
A. No Payments with Respect to Subordinated Obligations.
1. Unless Section 10(b) shall be applicable, no payment or distribution of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of this
Subordinated Note) may be made by or on behalf of the Company or accepted by the
Subordinated Payee, including, without limitation, by way of set-off or
otherwise, for or on account of this Subordinated Note or of any Subordinated
Obligations under this Subordinated Note, or for or on account of the purchase,
redemption or other acquisition of this Subordinated Note, and the Subordinated
Payee shall not take or receive from the Company, directly or indirectly in any
manner, payment in respect of all or any portion of this Subordinated Note or of
any Subordinated Obligations under this Subordinated Note, or for or on account
of the purchase, redemption or other acquisition of this Subordinated Note until
the indefeasible payment and satisfaction in full in cash of all Senior
Indebtedness.
A. When Distribution Must Be Paid Over. In the event that notwithstanding these
provisions, the Subordinated Payee receives any payment or distribution of
assets of the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of
this Subordinated Note or any Subordinated Obligations under this Subordinated
Note, that the Subordinated Payee is not entitled to receive or retain under the
provisions of this Subordinated Note, then such payment or distribution shall be
held by the Subordinated Payee in trust for the benefit of the Senior Agent and
the Subordinated Payees of Senior Indebtedness, (segregated from other assets
held by the Subordinated Payee) and shall be immediately paid over or delivered
to the Senior Agent in the form received (with any necessary endorsement) to the
extent necessary to make indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
In the event of the failure of the Subordinated Payee to endorse or assign any
such payment or distribution, the Senior Agent is hereby irrevocably authorized
to endorse or assign the same.
A. Exercise of Remedies. Until the indefeasible payment and satisfaction in full
in cash of all Senior Indebtedness, the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note) shall not exercise any rights or
remedies with respect to this Subordinated Note, including, without limitation,
any administrative, legal, equitable or other action (i) to demand or sue for
collection of amounts payable hereunder, (ii) to accelerate the principal of
this Subordinated Note, (iii) to commence or join with any other creditor in
commencing any proceeding in connection with or premised on the occurrence of a
Bankruptcy Proceeding, or (iv) to take, obtain or hold (or to permit anyone
acting on its behalf to take, obtain or hold) any assets of the Company.
A. Rights. The provisions of this Section 10 are for the benefit of, and shall
be enforceable directly by, the Senior Agent and the holders of Senior
Indebtedness (and their successors and assigns), the Senior Agent and each
holder of Senior Indebtedness is made an obligee hereunder, and the Senior Agent
and each holder of Senior Indebtedness, whether now outstanding or hereafter
created, incurred, assumed, or guaranteed shall be deemed conclusively to have
acquired or to continue to hold such Senior Indebtedness in reliance upon the
covenants and provisions contained in this Subordinated Note. The Subordinated
Payee acknowledges and agrees that any breach of the provisions of this Section
10 will cause irreparable harm of which the payment of monetary damages may be
inadequate. For this reason, the Subordinated Payee agrees that, in addition to
any remedies at law or in equity to which the Senior Agent or a Subordinated
Payee of the Senior Indebtedness may be entitled, the Senior Agent or a holder
of the Senior Indebtedness will be entitled to an injunction or other equitable
relief to prevent breaches of the provisions of this Section 10 and to compel
specific performance of such provisions.
The provisions of this Section 10 are and are intended solely
for the purpose of defining the relative rights of the Subordinated Payee on the
one hand and the Senior Agent and the holders of Senior Indebtedness on the
other hand. Nothing contained in this Section 10 or elsewhere in this
Subordinated Note is intended to or shall impair, as among the Company its
creditors other than the holders of Senior Indebtedness and the Subordinated
Payee, the obligation of the Company, which is absolute and unconditional, to
pay to the Subordinated Payee the principal of, premium, if any, and interest on
this Subordinated Note as and when the same shall become due and payable in
accordance with its terms.
A. Acceleration of Payment of Subordinated Note. If this Subordinated Note is
declared due and payable prior to the Maturity Date, no direct or indirect
payment that is due solely by reason of such declaration shall be made, nor
shall application be made of any distribution of assets of the Company to the
payment, purchase or other acquisition or retirement of this Subordinated Note,
unless, in either case, all Senior Indebtedness shall have been previously
indefeasibly paid and satisfied in full in cash.
A. Voting Rights; Authorization to Effect Subordination. The Senior Agent shall
be entitled to file and prove all claims and to exercise any right to vote of
the Subordinated Payee in respect of this Subordinated Note in connection with a
Bankruptcy Proceeding. Notwithstanding the foregoing, in the event that the
Senior Agent shall allow the Subordinated Payee to retain the right to vote and
otherwise act in a Bankruptcy 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
the Senior Agent, (y) the relative rights and duties of the Senior Agent or the
holders of the Senior Indebtedness established in the Senior Credit Agreement
with respect to such liens and security interests or (z) the enforceability of
the Senior Credit Agreement or these subordination provisions.
The Subordinated Payee hereby irrevocably authorizes , directs
and empowers the Senior Agent, and hereby appoints the Senior Agent to act as
its attorney-in-fact, for any and all of the following purposes, (i) to demand,
sue for, collect and receive all payments and distributions under the terms of
this Subordinated Note, (ii) to file and prove all claims and to exercise any
right to vote in any Bankruptcy Proceeding as set forth above, and (iii) to take
any and all other actions in the name of the Subordinated Payee (solely in its
capacity as a holder of this Subordinated Note), as the Senior Agent determines
in its sole discretion to be necessary or appropriate for the enforcement of the
subordination provisions in this Section 10. 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 Senior Agent, including, without limitation, executing
and delivering any additional powers of attorney, assignments or proofs of
claims or other instruments and supplying any information and documents, to
enable the Senior Agent to take any of the foregoing actions.
Each right, power and remedy of the Senior Agent provided for
in this Subordinated Note or the Senior Credit Agreement, whether now existing
or hereafter available at law or in equity or by statute or otherwise, shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Senior Agent
of any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise of all other such rights, powers or remedies, and
no course of dealing or failure or delay on the part of any party hereto in
exercising any such right, power, or remedy shall operate as a waiver thereof or
otherwise prejudice its rights, powers or remedies.
A. Subrogation. Upon the indefeasible payment and satisfaction in full in cash
of all Senior Indebtedness, the Subordinated Payee shall be subrogated to the
rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of, premium, if any, and interest on this
Subordinated Note shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any cash,
property or securities to which the Subordinated Payee would be entitled except
for the provisions of this Section 10, and no payments over pursuant to the
provisions of this Section 10 to the Senior Agent or the holders of Senior
Indebtedness by the Subordinated Payee shall, as among the Company, its
creditors other than the Senior Agent or the holders of Senior Indebtedness, and
the Subordinated Payee be deemed to be a payment or distribution by the Company
to or on account of the Senior Indebtedness.
If any payment or distribution to which the Subordinated Payee
would otherwise have been entitled but for the provisions of this Section 10
shall have been applied, pursuant to the provisions of this Section 10, to the
payment of all amounts payable under the Senior Indebtedness, then and in such
case the Subordinated Payee shall be entitled to receive from the Senior Agent
or the holders of such Senior Indebtedness at the time outstanding any payments
or distributions received by such
holders of such Senior Indebtedness in excess of the amount sufficient to
indefeasibly pay and satisfy all amounts payable under or in respect of such
Senior Indebtedness in full in cash.
A. Waivers and Consents. 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 to be applied in any
particular order to discharge such Senior Indebtedness. The Subordinated Payee
expressly waives the right to require the Senior Agent or the 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
the power of the Senior Agent or any such holder 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 (i) 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 the Senior Agent or
any holder of Senior Indebtedness; (ii) the Senior Agent or 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 (iii) 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 the Senior Agent or
any holder of Senior Indebtedness. Any vote by the Senior Agent or any holder of
Senior Indebtedness 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 receipt by the Senior Agent or any holder of Senior
Indebtedness receipt on account of all or part of any Senior Indebtedness of any
cash, property or securities distributed in any Bankruptcy Proceeding, shall not
discharge, exonerate or reduce the obligations of the Subordinated Payee
hereunder to the Senior Agent and the holders of Senior Indebtedness.
No right of the Senior Agent or any present or future holder
of any Senior Indebtedness to enforce the provisions herein shall at any time in
any way be prejudiced or impaired or affected by (i) any act or failure to act
on the part of the Company or by any act or failure to act by the Senior Agent
or any such holder, (ii) any non-compliance by the Company with the terms,
provisions and covenants of this Subordinated Note or the Senior Credit
Agreement, or (iii) 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, regardless in any case of any knowledge thereof of the Senior Agent or
any such holder may have or be otherwise charged with.
Without limiting the generality of the foregoing, the Senior
Agent and the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to or knowledge of the Subordinated
Payee, without incurring
responsibility to the Subordinated Payee and without impairing or releasing the
provisions herein or the obligations hereunder of the Subordinated Payee to the
Senior Agent and the holders of Senior Indebtedness , do any one or more of the
following: (i) change the manner, place or terms of payment or extend the time
of payment of, or renew, alter, compromise or waive any Senior Indebtedness or
otherwise amend, modify or supplement in any manner any Senior Indebtedness or
any instrument evidencing the same or any agreement under which any Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing any Senior Indebtedness;
(iii) release any Person liable in any manner for the collection or payment of
any Senior Indebtedness; (iv) exercise or refrain from exercising any rights
against the Company or any other Person; and (v) fail to perfect a security
interest in any collateral for the payment of the Senior Indebtedness.
The Subordinated Payee waives all rights and defenses arising
out of an election of remedies by the Senior Agent or any holder of Senior
Indebtedness, even though that election of remedies, including, without
limitation, any nonjudicial foreclosure with respect to collateral for such
Senior Indebtedness, has impaired the value of the Subordinated Payee's rights
of subrogation, reimbursement or contribution against the Company, 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.
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 the Senior Agent
or any holder of Senior Indebtedness may be rescinded in whole or in part by the
Senior Agent or any 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 Person 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
Senior Agent or any holder 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.
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 the Senior Agent or any holder of Senior Indebtedness
upon the provisions of this Section 10. The Subordinated Payee waives
presentment, protest and demand for payment.
To the maximum extent permitted by law, the Subordinated Payee
waives any claim it might have against the Senior Agent or 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 the Senior Agent or any such holder
of Senior Indebtedness or any requirement on the part of the Senior Agent or any
such holder of Senior Indebtedness to mitigate damages resulting from any
default under such Senior Indebtedness, any error of judgment, negligence or
mistake or oversight whatsoever on the part of the Senior Agent or any such
holder of Senior Indebtedness or its respective directors, officers, employees
or agents with respect to any exercise of rights or remedies under the
agreements governing or relating to such Senior Indebtedness.
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 the Senior Agent or 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. Neither the Senior Agent nor
any holder of Senior Indebtedness is under any duty or obligation, and the
Subordinated Payee hereby waives any right it may have to compel the Senior
Agent or 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.
The Subordinated Payee hereby waives and releases all rights
which a guarantor or surety with respect to any Senior Indebtedness could
exercise.
The Subordinated Payee hereby waives any duty on the part of
the Senior Agent or any holder of Senior Indebtedness to disclose to it any fact
known or hereafter known by it relating to the operation or financial condition
of the Company or any guarantor of such Senior Indebtedness or their respective
businesses or assets.
The Subordinated Payee unconditionally waives (i) notice of
any of the matters referred to in this Section 10, (ii) 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 the Senior Agent or any holder of
any Senior Indebtedness against the Company, including, without limitation, any
demand, presentment, protest and default, proof of notice of nonpayment under
any Senior Indebtedness and notice of any failure on the part of the Company or
any other Credit Party to perform and comply with any covenant, agreement, term
or condition of the Senior Indebtedness, (iii) any right to the enforcement,
assertion or exercise by the Senior Agent or any holder of any Senior
Indebtedness of any right, power, privilege or remedy conferred in such Senior
Indebtedness or otherwise, and (iv) any notice of any sale, transfer or other
disposition of any Senior Indebtedness by any holder thereof.
A. Subordination to the Sub Debt Indebtedness. The Company covenants and agrees,
and the Subordination Payee by accepting this Subordinated Note covenants and
agrees, that so long as any Sub Debt Default or Sub Debt Event of Default
shall have occurred and be continuing, no payment of principal of (and premium,
if any) or interest on, or any other payment obligations with respect to, this
Subordinated Note or any judgment with respect hereto shall be made by or on
behalf of the Company or any other Credit Party.
A. Conversion of this Subordinated Note. Notwithstanding anything contained
herein to the contrary, nothing contained in this Section 10 shall prevent any
conversion of this Subordinated Note in accordance with the provisions of
Section 16 hereof.
I. TRANSFERABILITY AND ASSIGNMENT. A Subordinated Payee may not transfer, sell,
pledge, convey, assign or otherwise dispose of ("Transfer") this 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 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.
I. COUNTERPARTS. This Subordinated Note may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
I. USURY LAWS. It is the intention of the Company and the 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.
I. NO STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
I. AMENDMENTS; WAIVERS. So long as any Senior Indebtedness remains 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.
I. CONVERSION.
A. Conversion Procedure.
1. Voluntary Conversion; Automatic Conversion. At any time after the date hereof
and prior to the payment of this Subordinated Note in full, the then
Subordinated Payee may convert this Subordinated Note into a number of Class A
Units determined by dividing (x) the then Convertible Amount (as herein defined)
by (y) $1,000 (the "Conversion Price"). Notwithstanding anything contained
herein to the contrary, if as of May 8, 2001, this Subordinated Note has not
been paid in full, then this Subordinated Note shall automatically be converted
into a number of Class A Units in accordance with the formula contained in the
first sentence of this Section 16(a)(i). If the Subordinated Payee is not a
Member (as such term is defined in the LLC Agreement) at the time of a
conversion of this Subordinated Note, then, at the time of such conversion of
this Subordinated Note, such Subordinated Payee agrees to deliver to the
Secretary of Holdings an executed joinder to the LLC Agreement and any other
documentation necessary in accordance with the requirements of the LLC Agreement
or any of the Related Agreements (as such term is defined in the LLC Agreement).
For purposes of this Subordinated Note, the "Convertible Amount" at any time
shall equal (x) the then outstanding principal amount of this Subordinated Note
plus (y) the interest which has
then accrued in accordance with the provisions contained herein and which is
then unpaid, in each case, at such time.
1. Effect of Conversion. A conversion of this Subordinated Note will be deemed
to have been effected as of the close of business on the date on which this
Subordinated Note has been surrendered for conversion by the then Subordinated
Payee to the Secretary of Holdings; provided, that in the event of an automatic
conversion of this Subordinated Note, such automatic conversion will be deemed
to have been effected as of the close of business on the date of such automatic
conversion. At such time as such conversion has been effected, the rights of the
then Subordinated Payee (as well as any and all prior Subordinated Payees and
any other former or current holder of this Subordinated Note) under this
Subordinated Note will cease, the Company shall thereafter have no obligation to
make any principal, interest or other payments under this Subordinated Note and
such Subordinated Payee shall be deemed to be the record holder of the
applicable Class A Units which this Subordinated Note shall have then been
converted into. If this Subordinated Note is converted pursuant to this Section
16, no principal amount of, accrued interest on or any other amount pursuant to
this Subordinated Note will be payable at any time as of or after such
conversion.
A. Subdivision or Combination of Class A Units. If Holdings at any time
subdivides (by any unit split, unit distribution or otherwise) the Class A Units
into a greater number of units, then the Conversion Price in effect immediately
prior to such subdivision will be proportionately reduced. If Holdings at any
time combines (by reverse unit split or otherwise) the Class A Units into a
smaller number of units, then the Conversion Price in effect immediately prior
to such combination will be proportionately increased.
A. Organic Change.
1. Organic Change Defined. Any recapitalization, reorganization,
reclassification, consolidation or merger of Holdings, which in each case is
effected in such a manner that holders of the Class A Units are entitled to
receive stock or any other securities or property with respect to or in exchange
for such Class A Units is referred to herein as an "Organic Change."
1. Provisions for Organic Change. Prior to the consummation of any Organic
Change, Holdings' Board of Directors will, in good faith, make lawful and
adequate provision to insure that the Subordinated Payee will thereafter have
the right to acquire and receive, in lieu of or addition to (as the case may be)
the Class A Units immediately theretofore acquirable and receivable upon the
conversion of this Subordinated Note, such shares of stock and/or such
securities or property as may be issued or payable with respect to or in
exchange for the Class A Units immediately theretofore acquirable and receivable
upon conversion of this Subordinated Note had such Organic Change not taken
place.
A. Pre-Emptive Rights. The Company and the Subordinated Payee acknowledge and
agree to comply with the pre-emptive rights, if any, of Joseph Koff, CMS
Diversified Partners, L.P., CMS Co-Investment Subpartnership and CBC Acquisition
Company, Inc. in connection with any conversion of this Note pursuant to this
Section 16.
I. SEVERABILITY. If the provisions of this Subordinated Note, or the application
of such provision to any Person or circumstance, shall be held invalid, illegal
or unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions in this Subordinated Note, or the application of
such provision in jurisdictions or to Persons or circumstances other than to
those to which it is held invalid, illegal or unenforceable shall not be
affected thereby.
IN WITNESS WHEREOF, the Company has executed and delivered this Junior
Subordinated Unsecured Convertible Promissory Note on the date specified above.
MUZAK LLC
-------------------------
By:
----------------------
Name: Royce Yudkoff
Title: Vice President
Muzak Holdings LLC hereby agrees to comply with the provisions of Section 16
hereof:
MUZAK HOLDINGS LLC
By:
Name: Royce Yudkoff
Title: Vice President
Accepted and Agreed to:
MEM HOLDINGS, LLC
By:
Name: Peni Garber
Title: Executive Vice President