EXHIBIT 4.2
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL IN CASH OF ALL OF SENIOR INDEBTEDNESS (AS DEFINED BELOW)
PURSUANT TO THE TERMS OF THIS SUBORDINATED NOTE AND TO THE EXTENT PROVIDED
HEREIN.
FORM OF SUBORDINATED NOTE
Dated: ___________, ____
FOR VALUE RECEIVED, the undersigned DIVA SYSTEMS CORPORATION, a Delaware
corporation ("DIVA"), HEREBY PROMISES TO PAY TO THE ORDER OF _______________,
_______________ [lender] or its permitted registered assigns F(the "Subordinated
Lender"), the principal amount of [SPECIFY PRINCIPAL AMOUNT EVIDENCED BY THIS
NOTE IN WORDS] DOLLARS ($__________) on __________ __, ____. Interest shall
accrue on the principal amount outstanding from time to time under this
Subordinated Note, from and including the date of issuance hereof until such
principal amount is paid in full, at a rate per annum (computed on the basis of
a 365/366-day year) equal to __%. Accrued and unpaid interest shall be added
automatically to the principal amount outstanding under this Subordinated Note
and shall become a part thereof. Capitalized terms not otherwise defined in
this Subordinated Note shall have the same meanings as specified therefor in the
Indenture (as hereinafter defined).
Both principal and interest are payable in lawful money of the United
States of America to the Subordinated Lender, at its offices at __________,
__________, __________ or at such other location as shall be designated by the
Subordinated Lender in a written notice to DIVA and the Senior Representative
(as hereinafter defined), in same day funds. The loan made by the Subordinated
Lender to DIVA hereunder, and all payments and prepayments made on account of
principal hereof, shall be recorded by the Subordinated Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto that is part of this
Subordinated Note; provided that the failure of the Subordinated Lender to make
any such recordation or endorsement shall not affect the obligations of DIVA
under this Subordinated Note.
Subject to the provisions of the Indenture, the principal amount
outstanding under this Subordinated Note may, at the option of DIVA, be prepaid
at any time, in whole or in part, without penalty or premium.
The aggregate principal amount owing to the Subordinated Lender from time
to time under this Subordinated Note, all accrued and unpaid interest thereof,
and any other indebtedness
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The stated maturity date of each of the Subordinated Notes shall be no
earlier than the later of (a) March 1, 2008 and (b) the payment in full cash
of all Senior Notes. None of the Subordinated Notes shall have any other
scheduled or mandatory redemption or repurchase dates.
evidenced by or otherwise owing in respect of this Subordinated Note
(collectively, the "Subordinated Debt") is and shall be subordinate and junior
in right of payment and otherwise, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all of the Senior Indebtedness (as
hereinafter defined), whether now or hereafter existing; provided that the
Subordinated Debt may be repaid in whole or in part at any time from the
proceeds of the sale of Capital Stock (as defined in the Indenture) (other than
Disqualified Stock (as defined in the Indenture)) of the Company after the date
of this Subordinated Note. For all purposes of this Subordinated Note, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms defined):
"Indenture" means the Indenture dated as of February 19, 1998 between DIVA
Systems Corporation and The Bank of New York relating to the 12% Senior
Discount Notes due 2008, as amended, supplemented or otherwise modified from
time to time.
"Senior Creditors" means the trustee under the Indenture and the holders
from time to time of Senior Debt.
"Senior Notes" means the 12% Senior Discount Notes due 2008 issued under
the Indenture, as such notes may be amended, supplemented or otherwise
modified from time to time.
"Senior Debt" means (i) all obligations of DIVA, whether now or hereafter
existing, under or in respect of the Indenture and the Senior Notes, whether
direct or indirect, absolute or contingent, and whether for principal,
interest (including, without limitation, interest accruing after the filing
of a petition initiating any Insolvency Proceeding (as hereinafter defined),
whether or not such interest accrues after the filing of such petition for
purposes of any applicable Insolvency Laws (as hereinafter defined), or is
an allowed claim in such Insolvency Proceeding), premium, fees,
indemnification payments, contract causes of action, costs, expenses or
otherwise and (ii) any and all extensions, modifications, substitutions,
amendments, renewals, refinancings, replacements and refundings of any or
all of the obligations referred to in clause (i) of this definition, and any
instrument or agreement evidencing or otherwise setting forth the terms of
any Indebtedness or other obligations incurred in any such extension,
modification, substitution, amendment, renewal, refinancing, replacement or
refunding.
"Senior Representative" means the trustee for the Senior Notes or the
holders of a majority in aggregate principal amount at maturity of the
outstanding Senior Notes.
In the event of any dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief or composition of DIVA or its
debts, whether voluntary or involuntary, in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or other similar action or
proceeding under the United States Federal Bankruptcy Code or any other federal
or state bankruptcy or insolvency laws or any similar requirements of law of any
other jurisdiction covering
the protection of creditors' rights or the relief of debtors (collectively, the
"Insolvency Laws"), or upon an assignment for the benefit of creditors or any
other marshalling of the property, assets and liabilities of DIVA or otherwise
(each, an "Insolvency Proceeding"), the Senior Creditors shall be entitled to
receive payment in full in cash of all of the Senior Debt before the
Subordinated Lender is entitled to receive any payment or distribution of any
kind or character on account of all or any of the Subordinated Debt, and, to
that end, any payment or distribution of any kind or character (whether in cash,
property or securities) that otherwise would be payable or deliverable upon or
with respect to the Subordinated Debt in any such Insolvency Proceeding
(including, without limitation, any payment that may be payable by reason of any
other Indebtedness of DIVA being subordinated to payment of the Subordinated
Debt) shall be paid or delivered forthwith directly to the Senior
Representative, for the ratable account of the Senior Creditors, in the same
form as so received (with any necessary endorsement or assignment), for
application (in the case of cash) to, or to be held as collateral (in the case
of noncash property or securities) for, the payment or prepayment of the Senior
Debt until all of the Senior Debt shall have been paid in full in cash.
No payment or distribution of any property or assets of DIVA of any kind or
character (including, without limitation, any payment that may be payable by
reason of any other Indebtedness of DIVA being subordinated to payment of the
Subordinated Debt) shall be made by or on behalf of DIVA for or on account of
any Subordinated Debt, unless and until all of the Senior Debt shall have been
paid in full in cash or unless such payment is expressly permitted to be made
under Section 4.04 of the Indenture; provided that the Subordinated Debt may be
repaid in whole or in part at any time from the proceeds of the sale of Capital
Stock (other than Disqualified Stock) of the Company after the date of this
Subordinated Note. Furthermore, so long as the Senior Debt shall not have been
paid in full in cash, the Subordinated Lender shall not (a) ask, demand, sue
for, take or receive from DIVA, directly or indirectly, in cash or other
property or by setoff or in any manner (including, without limitation, from or
by way of collateral), payment of all or any of the Subordinated Debt, except to
the extent that such payment is expressly permitted to be made under Section
4.04 of the Indenture, (b) commence, or join with any creditor other than the
Senior Representative in commencing, or directly or indirectly cause DIVA to
commence, or assist DIVA in commencing, any Insolvency Proceeding, or (c)
request or accept any collateral or other security for the Subordinated Debt.
If the Subordinated Lender, in contravention hereof, shall commence, prosecute
or participate in any Insolvency Proceeding, then the Senior Representative may
intervene and interpose as a defense or plea the terms of this Subordinated Note
in its own name or in the name of the Subordinated Lender.
Until such time as all of the Senior Debt has been paid in full in cash, if
any Insolvency Proceeding is commenced by or against DIVA:
(i) the Senior Representative is hereby irrevocably authorized and
empowered (in its own name or in the name of the Subordinated Lender or
otherwise), but shall have no obligation, to demand, sue for, collect and
receive every payment or distribution otherwise payable to the Subordinated
Lender in respect of this Subordinated Note and give acquittance therefor,
and to file claims and proofs of claim and take such other actions
(including,
without limitation, voting the Subordinated Debt or enforcing any security
interest or other lien securing payment of the Subordinated Debt) as it may
deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of the Senior Representative or any of the other Senior
Creditors under this Subordinated Note; and
(ii) the Subordinated Lender shall duly and promptly take such action as
the Senior Representative may reasonably request (a) to collect the
Subordinated Debt for the account of the Senior Representative, for the
ratable benefit of the Senior Creditors, and to file appropriate claims or
proofs of claim in respect of the Subordinated Debt, (b) to execute and
deliver to the Senior Representative such powers of attorney, assignments or
other instruments as the Senior Representative may reasonably request in
order to enable the Senior Representative to enforce any and all claims with
respect to, and any security interests and other liens securing payment of,
the Subordinated Debt and (c) to collect and receive any and all payments or
distributions that may be payable or deliverable upon or with respect to the
Subordinated Debt.
All payments or distributions upon or with respect to the Subordinated Debt
that are received by the Subordinated Lender contrary to the provisions of this
Subordinated Note shall be received in trust for the benefit of the Senior
Representative and the Senior Creditors, shall be segregated from other property
or funds of the Subordinated Lender and shall be paid or delivered forthwith
directly to the Senior Representative, for the account of the Senior Creditors,
in the same form as so received (with any necessary endorsement or assignment),
to be applied (in the case of cash) to, or held as collateral (in the case of
noncash property or securities) for, the payment or prepayment of the Senior
Debt until all of the Senior Debt shall have been paid in full in cash.
To the extent that DIVA, the Subordinated Lender or any of their respective
Subsidiaries or any other guarantor of or provider of collateral for the Senior
Debt shall make any payment on the Senior Debt that is subsequently invalidated,
declared to be fraudulent or preferential or set aside or is required to be
repaid to a trustee, receiver or any other party under any applicable Insolvency
Law or equitable cause (any such payment being a "Voided Payment"), then to the
extent of such Voided Payment, that portion of the Senior Debt that had been
previously satisfied by such Voided Payment shall be reinstated and continue in
full force and effect as if such Voided Payment had never been made. To the
extent that the Subordinated Lender shall have received any payments subsequent
to the date of the initial receipt of such Voided Payment by the Senior
Representative or any of the other Senior Creditors and such payments have not
been invalidated, declared to be fraudulent or preferential or set aside or
required to be repaid to a trustee, receiver or any other party under any
applicable Insolvency Law or equitable cause, the Subordinated Lender shall be
obligated and hereby agrees that any such payment so made or received shall be
deemed to have been received in trust for the benefit of the Senior
Representative and the other Senior Creditors, and the Subordinated Lender
hereby agrees to pay to the Senior Representative, upon demand, the full amount
so received by the Subordinated Lender during such period of time to the extent
necessary to fully restore to the Senior Representative and the other Senior
Creditors the amount of such Voided Payment, which amount shall be applied as
set forth in the immediately preceding paragraph.
The Senior Representative is hereby authorized to demand specific
performance of the subordination provisions of this Subordinated Note, whether
or not DIVA shall have complied with any of the provisions hereof applicable to
it, at any time when the Subordinated Lender shall have failed to comply with
any of the subordination provisions of this Subordinated Note. The Subordinated
Lender hereby irrevocably waives any defense based on the adequacy of a remedy
at law which might be asserted as a bar to such remedy of specific performance.
The Subordinated Lender will not:
(i) Cancel or otherwise discharge any of the Subordinated Debt (except
upon payment in full of all of the Senior Debt or, at any time and from time
to time prior thereto, to the extent that such payment is expressly
permitted to be made under Section 4.04 of the Indenture or is made from the
proceeds of the sale of Capital Stock (other than Disqualified Stock) of the
Company after the date of this Subordinated Note, (ii) convert or exchange
any of the Subordinated Debt into or for any other Indebtedness (except to
the extent expressly permitted by the Indenture), or (iii) convert or
exchange any of the Subordinated Debt into or for any Capital Stock of DIVA
(except to the extent expressly permitted by the Indenture);
(ii) Sell, assign, pledge, encumber or otherwise dispose of any of the
Subordinated Debt; or
(iii) Permit the terms of any of the Subordinated Debt to be amended,
waived, supplemented or otherwise modified in such a manner as could have an
adverse effect upon the rights or interests of the Senior Representative or
any of the other Senior Creditors under this Subordinated Note, the
Indenture or any of the other agreements, instruments or other documents
evidencing or otherwise setting forth the terms of any of the Senior Debt.
No payment or distribution to the Senior Representative or any of the other
Senior Creditors pursuant to the provisions of this Subordinated Note shall
entitle the Subordinated Lender to exercise any rights of subrogation in respect
thereof, nor shall the Subordinated Lender have any right of reimbursement,
restitution, exoneration, contribution or indemnification whatsoever from any
property or assets of DIVA or any of the other guarantors, sureties or providers
of collateral security for the Senior Debt, or any right to participate in any
claim or remedy of the Senior Representative or any of the other Senior
Creditors against DIVA, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law (including, without limitation,
the right to take or receive from DIVA, directly or indirectly, in cash or other
property or by setoff or in any other manner, payment or security on account of
such claim, remedy or right), until all of the Senior Debt shall have been paid
in full.
The holders of the Senior Debt may, at any time and from time to time,
without any consent of or notice to the Subordinated Lender or any other holder
of the Subordinated Debt and without impairing or releasing the obligations of
the Subordinated Lender hereunder:
(i) change the manner, place or terms of payment of, or change or
extend the time of payment of, or renew payment or change or extend the time
or payment of, or renew or alter, the Senior Debt (including any change in
the rate of interest thereon), or amend, supplement or otherwise modify in
any manner any instrument, agreement or other document under which any of
the Senior Debt is outstanding;
(ii) sell, exchange, release, not perfect and otherwise deal with any
of the property or assets of any Person at any time pledged, assigned or
mortgaged to secure the Senior Debt;
(iii) release any Person liable in any manner under or in respect of
the Senior Debt;
(iv) exercise or refrain from exercising any rights against DIVA or any
of its Subsidiaries or any other Person;
(v) apply to the Senior Debt any sums from time to time received by or
on behalf of the Senior Representative or any of the other Senior Creditors;
and
(vi) sell, assign, transfer or exchange any of the Senior Debt.
Each of DIVA and the Subordinated Lender will, if reasonably requested by
the Senior Representative or either of the trustees for the Senior Notes,
further mark their respective books of account in such a manner as shall be
effective to give proper notice of the effect of the subordination provisions of
this Subordinated Note. Each of DIVA and the Subordinated Lender will, at its
sole expense and at any time and from time to time, promptly execute and deliver
all further instruments and documents, and take all further actions, that may be
necessary or that the Senior Representative or the trustee under the Indenture
may reasonably deem desirable and may request in order to protect any right or
interest granted or purported to be granted under the subordination provisions
of this Subordinated Note or to enable the Senior Representative or any of the
other Senior Creditors to exercise and enforce its rights and remedies
hereunder.
The foregoing provisions regarding subordination are and are intended
solely for the purpose of defining the relative rights of the holders of the
Senior Debt, on the one hand, and the holders of the Subordinated Debt, on the
other hand. Such provisions are for the benefit of the holders of the Senior
Debt and shall inure to the benefit of, and shall be enforceable by, the Senior
Representative, on behalf of itself and the other Senior Creditors, directly
against the holders of the Subordinated Debt, and no holder of the Senior Debt
shall be prejudiced in its right to enforce the subordination of any of the
Subordinated Debt by any act or failure to act by DIVA or any Person in custody
of its property or assets. The subordination provisions herein shall constitute
a continuing offer to each and every holder of Senior Debt from time to time and
such holders are intended third party beneficiaries hereof. Nothing contained
in the foregoing provisions is intended to or shall impair, as between DIVA and
the holders of the Subordinated Debt, the obligations of DIVA to such holders.
DIVA agrees to pay, upon demand therefor, all of the reasonable and
properly documented out-of-pocket costs and expenses (including, without
limitation, reasonable fees and expenses of counsel) incurred by the Senior
Representative or any of the other Senior Creditors in enforcing the provisions
of this Subordinated Note.
DIVA hereby waives promptness, diligence, presentment for payment, demand,
notice of dishonor and protest and any other notice with respect to this
Subordinated Note.
None of the rights or interests of the Subordinated Lender in this
Subordinated Note may be assigned or otherwise transferred thereby to any Person
without the prior written consent of DIVA and the Senior Representative.
No amendment, waiver or modification of this Subordinated Note (including,
without limitation, the subordination provisions hereof), and no consent to any
departure herefrom, shall be effective unless the same shall be in writing and
signed by the Subordinated Lender and, if any such amendment, waiver or
modification of this Subordinated Note (including, without limitation, the
subordination provisions hereof) could adversely affect the rights or interests
of the Senior Representative or any of the other Senior Creditors under or in
respect of this Subordinated Note, the Indenture or any of the other agreements,
instruments or other documents evidencing or otherwise setting forth the terms
of any of the Senior Debt in any manner, signed by the Senior Representative,
and then, in each case, such waiver, modification or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided that the trustee for the Senior Notes shall not be required to consent
to any such amendment, waiver or modification that would adversely affect the
rights or interests of any of the Senior Creditors.
No failure on the part of the Subordinated Lender or the Senior
Representative or any of the other Senior Creditors to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof or a consent thereto; nor shall a single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and are not exclusive of any remedies provided by applicable law.
This Subordinated Note shall be governed by, and construed in accordance
with, the laws of the State of New York, excluding (to the fullest extent a New
York court would permit) any rule of law that would cause application of the
laws of any jurisdiction other than the State of New York.
DIVA SYSTEMS CORPORATION
By _______________________________
Name:
Title: