[EXECUTION COPY]
EXHIBIT 10.6
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of
April 28, 2004, among PREMIER ELECTRONIC LABORATORIES, INC., a Connecticut
corporation (the "Subordinated Creditor"); MEDIABAY, INC., a Florida corporation
("MediaBay"); and ZOHAR CDO 2003-1, LIMITED, a Cayman Islands exempted company,
as administrative agent (in such capacity, together with any successors or
assigns, the "Agent") for itself and all Senior Lenders party to the Senior
Credit Agreement (as defined herein).
R E C I T A L S
A. MediaBay, Xxxxx Xxxxxxx, Inc., a Delaware corporation ("Xxxxx
Xxxxxxx"), and Audio Book Club, Inc., a Delaware corporation ("Audio Book Club",
and, together with MediaBay and Xxxxx Xxxxxxx, collectively, the "Borrowers" and
each, a "Borrower"), certain subsidiaries of the Borrowers signatory thereto
(the "Guarantors"), Agent and Senior Lenders (as hereinafter defined) have
entered into a Credit Agreement of even date herewith (as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Senior Credit Agreement") pursuant to which, among other things,
Senior Lenders have agreed, subject to the terms and conditions set forth in the
Senior Credit Agreement, to make a term loan and certain financial
accommodations to the Borrowers. All of the Borrowers' obligations to Agent and
Senior Lenders under the Senior Credit Agreement and the other Senior Debt
Documents (as hereinafter defined) are secured by liens on and security
interests in substantially all of the now existing and hereafter acquired real
and personal property of the Borrowers and certain of its Guarantors
(collectively, the "Collateral").
B. MediaBay has entered into that certain Agreement, dated on or about the
date hereof ("Premier Settlement Agreement"), with Subordinated Creditor, Edison
Realty and Marketing, Inc., a Delaware corporation, and Video Yesteryear, Inc.
(formerly known as Classic Radio Acquisition Corp.), a Delaware corporation,
pursuant to which MediaBay is obligated to pay Subordinated Creditor $950,000 in
cash, without interest, in accordance with the terms thereof.
C. As an inducement to and as one of the conditions precedent to the
agreement of Agent and Senior Lenders to consummate the transactions
contemplated by the Senior Credit Agreement, Agent and Senior Lenders have
required the execution and delivery of this Agreement by the Subordinated
Creditor and the Borrowers in order to set forth the relative rights and
priorities of Agent, Senior Lenders and Subordinated Creditor under the Senior
Debt Documents and the Subordinated Debt Documents (as hereinafter defined).
NOW, THEREFORE, in order to induce Agent and Senior Lenders to consummate
the transactions contemplated by the Senior Credit Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings in this
Agreement:
"Agent" shall have the meaning set forth in the Recitals.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United
States Code, as amended from time to time and any successor statute and
all rules and regulations promulgated thereunder.
"Distribution" means, with respect to any indebtedness, obligation
or security, (a) any payment or distribution by any Person of cash,
securities or other property, by set-off or otherwise, on account of such
indebtedness, obligation or security, (b) any redemption, purchase or
other acquisition of such indebtedness, obligation or security by any
Person or (c) the granting of any lien or security interest to or for the
benefit of the holders of such indebtedness, obligation or security in or
upon any property of any Person.
"Enforcement Action" shall mean (a) to take from or for the account
of MediaBay or any guarantor of or any obligor on the Subordinated Debt,
by set-off or in any other manner, the whole or any part of any moneys
which may now or hereafter be owing by MediaBay or any such guarantor with
respect to the Subordinated Debt, (b) to xxx for payment of, or to
initiate or participate with others in any suit, action or proceeding
against MediaBay, any such guarantor or any such obligor to (i) enforce
payment of or to collect the whole or any part of the Subordinated Debt or
(ii) commence judicial enforcement of any of the rights and remedies under
the Subordinated Debt Documents or applicable law with respect to the
Subordinated Debt, (c) to accelerate the Subordinated Debt, (d) to
exercise any put option or to cause MediaBay, any such guarantor or any
such obligor to honor any redemption or mandatory prepayment obligation
under any Subordinated Debt Document, (e) to notify account debtors or
directly collect accounts receivable or other payment rights of MediaBay,
any such guarantor or any such obligor or (f) to take any action under the
provisions of any state or federal law, including, without limitation, the
Uniform Commercial Code, or under any contract or agreement, to enforce,
foreclose upon, take possession of or sell any property or assets of
MediaBay, any such guarantor or any such obligor, including, without
limitation, the Collateral.
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"MediaBay" has the meaning set forth in the Preamble.
"Permitted Subordinated Debt Payments" means payments due and
payable on a non-accelerated basis in accordance with the terms of the
Subordinated Debt Documents in effect on the date hereof of as modified in
accordance with the terms of this Agreement of regularly scheduled
payments.
"Person" means any natural person, corporation, general or limited
partnership, limited liability company, firm, trust, association,
government, governmental agency or other entity, whether acting in an
individual, fiduciary or other capacity.
"Premier Settlement Agreement" has the meaning set forth in the
Recitals.
"Proceeding" shall mean any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with similar powers or any
other proceeding for the liquidation, dissolution or other winding up of a
Person.
"Senior Debt" shall mean all obligations, liabilities and
indebtedness of every nature of the Borrowers from time to time owed to
Agent or any Senior Lender under the Senior Debt Documents, including,
without limitation, the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all fees, costs and
expenses, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and from time to time hereafter owing, due or
payable, whether before or after the filing of a Proceeding under the
Bankruptcy Code together with (a) any amendments, modifications, renewals
or extensions thereof to the extent not prohibited by the terms of this
Agreement and (b) any interest accruing thereon after the commencement of
a Proceeding, without regard to whether or not such interest is an allowed
claim. Senior Debt shall be considered to be outstanding whenever the term
loan under any Senior Credit Document is outstanding.
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"Senior Debt Documents" shall mean the Senior Credit Agreement and
all other agreements, documents and instruments executed from time to time
in connection therewith (including, without limitation, any security
agreements, guaranties and securities pledge agreements), as the same may
be amended, amended and restated, supplemented or otherwise modified from
time to time.
"Senior Default" shall mean any "event of default" under the Senior
Debt Documents, or any condition or event that, after notice or lapse of
time or both, would constitute such an event of default if that condition
or event were not cured or removed within any applicable grace or cure
period set forth therein.
"Senior Lenders" shall mean the holders of the Senior Debt.
Initially, Zohar shall be the sole Senior Lender.
"Subordinated Debt" shall mean all of the obligations of MediaBay to
the Subordinated Creditor evidenced by or incurred pursuant to the
Subordinated Debt Documents.
"Subordinated Debt Documents" shall mean the Premier Settlement
Agreement, any guaranty (if any) with respect to the Subordinated Debt,
any security agreement or other collateral document (if any) securing the
Subordinated Debt and all other documents, agreements and instruments now
existing or hereinafter entered into evidencing or pertaining to all or
any portion of the Subordinated Debt.
"Subordinated Debt Default" shall mean a default in the payment of
the Subordinated Debt or in the performance of any term, covenant or
condition contained in the Subordinated Debt Documents or any other
occurrence permitting Subordinated Creditor to accelerate the payment of
all or any portion of the Subordinated Debt.
"Subordinated Debt Default Notice" shall mean a written notice from
the Subordinated Creditor or MediaBay to Agent pursuant to which Agent is
notified of the occurrence of a Subordinated Debt Default, which notice
incorporates a reasonably detailed description of such Subordinated Debt
Default and which notice states that it is a "Subordinated Debt Default
Notice" hereunder.
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2. SUBORDINATION.
2.1 SUBORDINATION OF SUBORDINATED DEBT TO SENIOR DEBT. MediaBay covenants
and agrees, and the Subordinated Creditor by its acceptance of the Subordinated
Debt Documents (whether upon original issue or upon transfer or assignment)
likewise covenants and agrees, notwithstanding anything to the contrary
contained in any of the Subordinated Debt Documents, that the payment of any and
all of the Subordinated Debt shall be subordinate and subject in right and time
of payment, to the extent and in the manner hereinafter set forth, to the prior
indefeasible payment in full in cash of all Senior Debt. Each holder of Senior
Debt, whether such Senior Debt is now outstanding or hereafter created,
incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in
reliance upon the provisions contained in this Agreement.
2.2 LIQUIDATION, DISSOLUTION, BANKRUPTCY. In the event of any Proceeding
involving any Borrower or Guarantor or after the occurrence and during the
continuation of a Senior Default or if a Senior Default would result from any
payment:
(a) All Senior Debt shall first be indefeasibly paid in full in cash
and all commitments to lend (if any) under the Senior Debt Documents shall
be terminated before any Distribution, whether in cash, securities or
other property, shall be made to Subordinated Creditor on account of any
Subordinated Debt.
(b) Any Distribution, whether in cash, securities or other property
which would otherwise, but for the terms hereof, be payable or deliverable
in respect of the Subordinated Debt shall be paid or delivered directly to
Agent (to be held and/or applied by Agent in accordance with the terms of
the Senior Debt Documents) until all Senior Debt is indefeasibly paid in
full in cash and all commitments to lend (if any) under the Senior Debt
Documents shall have been terminated. The Subordinated Creditor
irrevocably authorizes, empowers and directs any debtor, debtor in
possession, receiver, trustee, liquidator, custodian, conservator or other
Person having authority, to pay or otherwise deliver all such
Distributions to Agent. The Subordinated Creditor also irrevocably
authorizes and empowers Agent, in the name of such Subordinated Creditor,
to demand, xxx for, collect and receive any and all such Distributions.
(c) The Subordinated Creditor agrees not to initiate, prosecute or
participate in any claim, action or other proceeding challenging the
enforceability, validity, perfection or priority of the Senior Debt or any
liens and security interests securing the Senior Debt.
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(d) The Subordinated Creditor agrees that Agent and Senior Lenders
may consent to the use of cash collateral or provide financing to the
Borrowers or any of their affiliates on such terms and conditions and in
such amounts as Agent and Senior Lenders, in their sole discretion, may
decide and, in connection therewith, the Borrowers and/or such affiliates
may grant to Agent and Senior Lenders liens and security interests upon
all of the property of all of the Borrowers and/or such affiliates, which
liens and security interests (i) shall secure payment of all Senior Debt
(whether such Senior Debt arose prior to the commencement of any
Proceeding or at any time thereafter) and all other financing provided by
Senior Lenders during such Proceeding and (ii) shall be superior in
priority to the liens and security interests, if any, in favor of any
Subordinated Creditor on the property of any Borrowers and/or such
affiliates. The Subordinated Creditor agrees that it will not object to or
oppose a sale or other disposition of any property securing all of any
part of the Senior Debt free and clear of security interests, liens or
other claims of such Subordinated Creditor (if any) under Section 363 of
the Bankruptcy Code or any other provision of the Bankruptcy Code if Agent
and Senior Lenders have consented to such sale or disposition. The
Subordinated Creditor agrees not to assert any right it may have to
"adequate protection" of such Subordinated Creditor's interest in any
Collateral in any Proceeding and agrees that it will not seek to have the
automatic stay lifted with respect to any Collateral without the prior
written consent of Agent. The Subordinated Creditor waives any claim it
may now or hereafter have arising out of Agent's or Senior Lenders'
election, in any Proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, and/or any
borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code by any Borrower and/or any of its affiliates, as debtor in
possession. The Subordinated Creditor further agrees that it will not seek
to participate or participate on any creditor's committee without Agent's
prior written consent.
(e) The Subordinated Creditor agrees to execute, verify, deliver and
file any proofs of claim in respect of the Subordinated Debt requested by
Agent in connection with any such Proceeding and hereby irrevocably
authorizes, empowers and appoints Agent its agent and attorney-in-fact to
(i) execute, verify, deliver and file such proofs of claim upon the
failure of such Subordinated Creditor promptly to do so prior to 30 days
before the expiration of the time to file any such proof of claim and (ii)
vote such claim in any such Proceeding any time prior the expiration of
the time to vote any such claim (for the avoidance of doubt, such
Subordinated Creditor shall have no right to vote such claim); provided
Agent shall have no obligation to execute, verify, deliver, file and/or
vote any such proof of claim. In the event that Agent votes any claim in
accordance with the authority granted hereby, such Subordinated Creditor
shall not be entitled to change or withdraw such vote.
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(f) The Senior Debt shall continue to be treated as Senior Debt and
the provisions of this Agreement shall continue to govern the relative
rights and priorities of Senior Lenders and Subordinated Creditor even if
all or part of the Senior Debt or the security interests securing the
Senior Debt are subordinated, set aside, avoided, invalidated or
disallowed in connection with any such Proceeding, and this Agreement
shall be reinstated if at any time any payment of any of the Senior Debt
is rescinded or must otherwise be returned by any holder of Senior Debt or
any representative of such holder.
2.3 SUBORDINATED DEBT PAYMENT RESTRICTIONS.
(a) Notwithstanding the terms of the Subordinated Debt Documents,
MediaBay hereby agrees that it may not make, and the Subordinated Creditor
hereby agrees that it will not accept from MediaBay, any Distribution with
respect to the Subordinated Debt until the Senior Debt is indefeasibly
paid in full in cash and all commitments to lend (if any) under the Senior
Debt Documents have terminated, other than Permitted Subordinated Debt
Payments, subject to the terms of subsection 2.2 of this Agreement;
provided, however, that MediaBay and the Subordinated Creditor further
agree that no Permitted Subordinated Debt Payment may be made by MediaBay
or any of its affiliates or accepted by the Subordinated Creditor if, at
the time of such payment, a Senior Default exists or would result from
such payment and such Senior Default shall not have been cured or waived.
(b) MediaBay may resume Permitted Subordinated Debt Payments in
respect of the Subordinated Debt or any judgment with respect thereto upon
a cure or waiver of the Senior Default.
(c) No Senior Default shall be deemed to have been waived for
purposes of this subsection 2.3 or the determination of Permitted
Subordinated Debt Payments unless and until MediaBay shall have received a
written waiver from Agent or all Senior Lenders addressed to the
Subordinated Creditor.
(d) Notwithstanding any provision of this subsection 2.3 to the
contrary, the failure of MediaBay to make any Distribution with respect to
the Subordinated Debt by reason of the operation of this subsection 2.3
shall not be construed as preventing the occurrence of a Subordinated Debt
Default under the applicable Subordinated Debt Documents.
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2.4 SUBORDINATED DEBT STANDSTILL PROVISIONS. Until the Senior Debt is
indefeasibly paid in full in cash and all commitments to lend (if any) under the
Senior Debt Documents shall be terminated, no Subordinated Creditor shall,
without the prior written consent of Agent, take any Enforcement Action with
respect to the Subordinated Debt. Notwithstanding the foregoing, the
Subordinated Creditor may file proofs of claim against MediaBay and/or its
affiliates in any Proceeding involving MediaBay and/or such affiliates. Any
Distributions or other proceeds of any Enforcement Action obtained by the
Subordinated Creditor in violation of the foregoing prohibition shall in any
event be held in trust by it for the benefit of Agent and promptly paid or
delivered to Agent for itself and for the benefit of the Senior Lenders in the
form received until all Senior Debt is indefeasibly paid in full in cash and all
commitments to lend (if any) under the Senior Debt Documents shall have been
terminated.
2.5 INCORRECT PAYMENTS. If any Distribution on account of the Subordinated
Debt not permitted to be made by MediaBay and/or any of its affiliates or
accepted by the Subordinated Creditor under this Agreement is made and received
by the Subordinated Creditor, such Distribution shall not be commingled with any
of the assets of such Subordinated Creditor, shall be held in trust by such
Subordinated Creditor for the benefit of Agent, for itself and for the benefit
of the Senior Lenders, and shall be promptly paid over to Agent for application
(in accordance with the Senior Debt Documents) to the payment of the Senior Debt
then remaining unpaid, until all of the Senior Debt is paid in full.
2.6 AGREEMENT NOT TO CONTEST. The Subordinated Creditor agrees that it
will not at any time contest the validity, perfection, priority or
enforceability of the Senior Debt, the Senior Debt Documents, or the liens and
security interests of the Agent and Senior Lenders in the Collateral securing
the Senior Debt.
2.7 APPLICATION OF PROCEEDS FROM SALE OR OTHER DISPOSITION OF THE
COLLATERAL. In the event of any sale, transfer or other disposition (including a
casualty loss or taking through eminent domain) of the Collateral, the proceeds
resulting therefrom (including insurance proceeds) shall be applied in
accordance with the terms of the Senior Debt Documents or as otherwise consented
to by Agent and Senior Lenders until such time as the Senior Debt is
indefeasibly paid in full in cash and all commitments to lend under the Senior
Debt Documents have been terminated.
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2.8 SALE, TRANSFER OR OTHER DISPOSITION OF SUBORDINATED DEBT.
(a) No Subordinated Creditor shall sell, assign, pledge, dispose of
or otherwise transfer all or any portion of the Subordinated Debt or any
Subordinated Debt Document: (i) unless, prior to the consummation of any
such action, the transferee thereof shall execute and deliver to Agent an
agreement substantially identical to this Agreement, providing for the
continued subordination of the Subordinated Debt to the Senior Debt as
provided herein and for the continued effectiveness of all of the rights
of Agent and Senior Lenders arising under this Agreement and (ii) unless,
following the consummation of any such action, there shall be either (A)
no more than four holders (or four representatives of such holders) of the
Subordinated Debt at any time or (B) one Person acting as agent for all
holders of the Subordinated Debt pursuant to documentation reasonably
satisfactory to Agent such that any Senior Default Notices and other
notices and communications to be delivered to the Subordinated Creditor
hereunder and any consents required of the Subordinated Creditor shall be
made to or obtained from such agent and shall be binding on such
Subordinated Creditor as if directly obtained from such Subordinated
Creditor.
(b) Notwithstanding the failure of any transferee to execute or
deliver an agreement substantially identical to this Agreement or
otherwise, the subordination effected hereby shall survive any sale,
assignment, pledge, disposition or other transfer of all or any portion of
the Subordinated Debt, and the terms of this Agreement shall be binding
upon the successors and assigns of the Subordinated Creditor, as provided
in Section 12 hereof.
3. MODIFICATIONS.
3.1 MODIFICATIONS TO SENIOR DEBT DOCUMENTS. Senior Lenders may at any time
and from time to time without the consent of or notice to Subordinated Creditor,
without incurring liability to Subordinated Creditor and without impairing or
releasing the obligations of Subordinated Creditor under this Agreement, change
the manner or place of payment or extend the time of payment of or renew or
alter any of the terms of the Senior Debt, or amend in any manner any agreement,
note, guaranty or other instrument evidencing or securing or otherwise relating
to the Senior Debt; provided that the Senior Lenders shall not (a) increase the
Senior Debt (or the aggregate commitments (if any) for the Senior Debt), by more
than $5,000,000; or (b) increase the interest rate with respect to the Senior
Debt by more than 200 basis points, except in connection with the imposition of
a default rate of interest in accordance with the terms of the Senior Debt
Documents; or (c) extend the final maturity of the Senior Debt (as set forth in
the Senior Loan Documents in effect on the date hereof) by more than two years.
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3.2 MODIFICATIONS TO SUBORDINATED DEBT DOCUMENTS. Until the Senior Debt
has been indefeasibly paid in full in cash and all lending commitments (if any)
under the Senior Debt Documents have terminated, and notwithstanding anything to
the contrary contained in the Subordinated Debt Documents, no Subordinated
Creditor shall, without the prior written consent of Agent, agree to any
amendment, modification or supplement to the Subordinated Debt Documents the
effect of which is to (a) increase the maximum principal amount of the
Subordinated Debt or rate of interest (if any) on any of the Subordinated Debt,
(b) change the dates upon which payments of principal or interest (if any) on
the Subordinated Debt are due to any earlier date, (c) add any event of default
or any covenant with respect to the Subordinated Debt, (d) change any redemption
or prepayment provisions of the Subordinated Debt the effect of which would be
to accelerate any payments thereunder, (e) alter the subordination provisions
with respect to the Subordinated Debt, including, without limitation,
subordinating the Subordinated Debt to any other indebtedness, (f) take any
liens or security interests in any assets of any Borrower or any guarantor of
the Subordinated Debt or (g) change or amend any other term of the Subordinated
Debt Documents if such change or amendment would result in a Senior Default,
increase the obligations of the any Borrower or any guarantor of or any obligor
on the Subordinated Debt or confer additional material rights on Subordinated
Creditor or any other holder of the Subordinated Debt in a manner adverse to any
Borrower, any such guarantor, any such obligor or Senior Lenders.
4. WAIVER OF CERTAIN RIGHTS BY SUBORDINATED CREDITOR.
4.1 MARSHALING. Subordinated Creditor hereby waives any rights it may have
under applicable law to assert the doctrine of marshaling or to otherwise
require Agent or Senior Lenders to marshal any property of MediaBay for the
benefit of Subordinated Creditor.
4.2 RIGHTS RELATING TO AGENT'S ACTIONS WITH RESPECT TO THE COLLATERAL. The
Subordinated Creditor hereby waives, to the extent permitted by applicable law,
any rights which it may have to enjoin or otherwise obtain a judicial or
administrative order preventing Agent or Senior Lenders from taking, or
refraining from taking, any action with respect to all or any part of the
Collateral. Without limitation of the foregoing, the Subordinated Creditor
hereby agrees (a) that it has no right to direct or object to the manner in
which Agent and Senior Lenders apply the proceeds of the Collateral resulting
from the exercise by Agent and Senior Lenders of rights and remedies under the
Senior Debt Documents to the Senior Debt and (b) that Agent has not assumed any
obligation to act as the agent for any Subordinated Creditor with respect to the
Collateral.
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5. REPRESENTATIONS AND WARRANTIES.
5.1 REPRESENTATIONS AND WARRANTIES OF SUBORDINATED CREDITOR. The
Subordinated Creditor hereby represents and warrants to Agent, MediaBay and
Senior Lenders that as of the date hereof: (a) such Subordinated Creditor is a
corporation, duly formed and validly existing under the laws of the State of
Connecticut; (b) such Subordinated Creditor has the power and authority to enter
into, execute, deliver and carry out the terms of this Agreement, all of which
have been duly authorized by all proper and necessary action; (c) the execution
of this Agreement by such Subordinated Creditor will not violate or conflict
with the organizational documents of the Subordinated Creditor, any material
agreement binding upon the Subordinated Creditor or any law, regulation or order
or require any consent or approval which has not been obtained; (d) this
Agreement is the legal, valid and binding obligation of the Subordinated
Creditor, enforceable against the Subordinated Creditor in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by equitable principles; (e) the Subordinated
Creditor is the sole owner, beneficially and of record, of the Subordinated Debt
Documents and the Subordinated Debt to which it is a party and the related
Subordinated Debt; (f) the Subordinated Creditor has not relied and shall not
rely on any representation or information of any nature made by or received from
Agent or any Senior Lender relative to any Borrower (including, without
limitation, MediaBay) or any of its Affiliates in deciding to execute this
Agreement or to permit it to continue in effect; and (g) Agent has been
furnished with a true, correct and complete copy of all instruments, agreements
and securities evidencing or pertaining to the Subordinated Debt to which such
Subordinated Creditor is a party or in which it has an interest.
5.2 REPRESENTATIONS AND WARRANTIES OF MEDIABAY. MediaBay hereby represents
and warrants to Agent, each Senior Lender and the Subordinated Creditor that as
of the date hereof: (a) it is a duly formed corporation and validly existing
under the laws of the State of Connecticut; (b) Agent has been furnished with a
true, correct and complete copy of all instruments, agreements and securities
evidencing or pertaining to the Subordinated Debt; (c) it has the power and
authority to enter into, execute, deliver and carry out the terms of this
Agreement, all of which have been duly authorized by all proper and necessary
action; (d) the execution of this Agreement by it will not violate or conflict
with its organizational documents, any material agreement binding upon it or any
law, regulation or order or require any consent or approval which has not been
obtained; and (e) this Agreement is the legal, valid and binding obligation of
MediaBay, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles.
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5.3 REPRESENTATIONS AND WARRANTIES OF AGENT. Agent hereby represents and
warrants to Subordinated Creditor that as of the date hereof: (a) Agent is an
exempted company duly formed and validly existing under the laws of the Cayman
Islands; (b) Agent has the power and authority to enter into, execute, deliver
and carry out the terms of this Agreement, all of which have been duly
authorized by all proper and necessary action; (c) the execution of this
Agreement by Agent will not violate or conflict with the organizational
documents of Agent, any material agreement binding upon Agent or any law,
regulation or order or require any consent or approval which has not been
obtained; and (d) this Agreement is the legal, valid and binding obligation of
Agent, enforceable against Agent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles.
6. SUBROGATION. Subject to the indefeasible payment in full in cash of all
Senior Debt and the termination of all lending commitments (if any) under the
Senior Debt Documents, the Subordinated Creditor shall be subrogated to the
rights of Agent and Senior Lenders to receive Distributions with respect to the
Senior Debt until the Subordinated Debt is paid in full. The Subordinated
Creditor agrees that in the event that all or any part of a payment made with
respect to the Senior Debt is recovered from the holders of the Senior Debt in a
Proceeding or otherwise, any Distribution received by such Subordinated Creditor
with respect to the Subordinated Debt at any time after the date of the payment
that is so recovered, whether pursuant to the right of subrogation provided for
in this Agreement or otherwise, shall be deemed to have been received by such
Subordinated Creditor in trust as property of the holders of the Senior Debt and
such Subordinated Creditor shall forthwith deliver the same to the Agent for the
benefit of the Senior Lenders for application to the Senior Debt until the
Senior Debt is paid in full. A Distribution made pursuant to this Agreement to
Agent or Senior Lenders which otherwise would have been made to the Subordinated
Creditor is not, as between the relevant Borrower and such Subordinated
Creditor, a payment by such Borrower to or on account of the Senior Debt.
7. MODIFICATION; WAIVER. Any modification or waiver of any provision of this
Agreement, or any consent to any departure by any party from the terms hereof,
shall not be effective in any event unless the same is in writing and signed by
Agent and the Subordinated Creditor, and then such modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose given. Any notice to or demand on any party hereto in any event not
specifically required hereunder shall not entitle the party receiving such
notice or demand to any other or further notice or demand in the same, similar
or other circumstances unless specifically required hereunder.
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8. FURTHER ASSURANCES. Each party to this Agreement promptly will execute and
deliver such further instruments and agreements and do such further acts and
things as may be reasonably requested in writing by any other party hereto that
may be necessary or desirable in order to effect fully the purposes of this
Agreement.
9. NOTICES. Unless otherwise specifically provided herein, any notice delivered
under this Agreement shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied or sent by overnight
courier service or certified or registered United States mail and shall be
deemed to have been given (a) if delivered in person, when delivered; (b) if
delivered by telecopy, on the date of transmission if transmitted on a business
day before 4:00 p.m. (New York City time) or, if not, on the next succeeding
business day; (c) if delivered by overnight courier, one business day after
delivery to such courier properly addressed; or (d) if by United States mail,
four business days after deposit in the United States mail, postage prepaid and
properly addressed.
Notices shall be addressed as follows:
(a) If to the Subordinated Creditor:
Premier Electronic Laboratories, Inc.
Xxx 000
Xxxxxx, XX 00000
With a copy to:
Xxxxxxxx Profit & Wood LIP
Two World Financial Center
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
(b) If to the MediaBay:
MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Chairman
With a copy to:
Blank Rome LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
13
(c) If to Agent or Senior Lenders:
Zohar CDO 2003-1, Limited
c/o Patriarch Partners VIII, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx
Attention: Loan Administration/MediaBay
Telecopy: (000) 000-0000
With delivery of original instruments to:
Zohar CDO 2003-1, Limited
c/o U.S. Bank National Association
Xxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: CDO Department
Ref: Zohar CDO 2003-1, Limited
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxxx Xxxxxx Xxxxx & Xxxx LLP
Xxx Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
or in any case, to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 9.
10. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of, and
shall be binding upon, the respective successors and assigns of Agent, Senior
Lenders, MediaBay and Subordinated Creditor. To the extent permitted under the
Senior Debt Documents, Senior Lenders may, from time to time, without notice to
any Subordinated Creditor, assign or transfer any or all of the Senior Debt or
any interest therein to any Person and, notwithstanding any such assignment or
transfer, or any subsequent assignment or transfer, the Senior Debt shall,
subject to the terms hereof, be and remain Senior Debt for purposes of this
Agreement, and every permitted assignee or transferee of any of the Senior Debt
or of any interest therein shall, to the extent of the interest of such
permitted assignee or transferee in the Senior Debt, be entitled to rely upon
and be the third party beneficiary of the subordination provided under this
Agreement and shall be entitled to enforce the terms and provisions hereof to
the same extent as if such assignee or transferee were initially a party hereto.
14
11. RELATIVE RIGHTS. This Agreement shall define the relative rights of Agent,
Senior Lenders, MediaBay and the Subordinated Creditor. Nothing in this
Agreement shall (a) impairs, as among MediaBay and the Subordinated Creditor,
the obligations of MediaBay with respect to the payment of the Subordinated Debt
in accordance with its terms and, as among the Borrowers, Agent and Senior
Lenders and as between the Borrowers and the Subordinated Creditor, the
obligation of any Borrower with respect to the payment of the Senior Debt in
accordance with its respective terms or (b) affect the relative rights of
MediaBay or Subordinated Creditor with respect to any other creditors of
MediaBay.
12. CONFLICT. In the event of any conflict between any term, covenant or
condition of this Agreement and any term, covenant or condition of any of the
Subordinated Debt Documents, the provisions of this Agreement shall control and
govern.
13. HEADINGS. The paragraph headings used in this Agreement are for convenience
only and shall not affect the interpretation of any of the provisions hereof.
14. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
15. SEVERABILITY. In the event that any provision of this Agreement is deemed to
be invalid, illegal or unenforceable by reason of the operation of any law or by
reason of the interpretation placed thereon by any court or governmental
authority, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not in any way be affected or impaired thereby, and the
affected provision shall be modified to the minimum extent permitted by law so
as most fully to achieve the intention of this Agreement.
16. CONTINUATION OF SUBORDINATION; TERMINATION OF AGREEMENT. This Agreement
shall remain in full force and effect until the indefeasible payment in full in
cash of the Senior Debt and the termination of all lending commitments (if any)
under the Senior Debt Documents after which this Agreement shall terminate
without further action on the part of the parties hereto.
15
17. APPLICABLE LAW. This Agreement, and all claims, disputes and matters arising
hereunder or related hereto, shall be governed by and shall be construed and
enforced in accordance with the internal laws of the State of New York, without
regard to conflicts of law principles.
18. CONSENT TO JURISDICTION. THE SUBORDINATED CREDITOR AND MEDIABAY HEREBY
CONSENTS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN
NEW YORK COUNTY AND THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA SITTING
IN THE SOUTHERN DISTRICT OF NEW YORK AND IN NEW YORK COUNTY AND IRREVOCABLY
AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL CLAIMS, DISPUTES AND MATTERS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.
THE SUBORDINATED CREDITOR AND MEDIABAY EXPRESSLY SUBMITS AND CONSENT TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. THE SUBORDINATED CREDITOR AND MEDIABAY HEREBY WAIVE PERSONAL SERVICE
OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO
SUCH SUBORDINATED CREDITOR AND MEDIABAY AT THEIR RESPECTIVE ADDRESSES SET FORTH
IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE
SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE
RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT, ALL DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS OF THE SUBORDINATED CREDITOR, A BORROWER OR ANY OF THEIR
RESPECTIVE AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS OF SUCH
SUBORDINATED CREDITOR OR SUCH BORROWER, AS APPLICABLE, FOR PURPOSES OF ALL
APPLICABLE LAW OR COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE
FOR TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE). THE SUBORDINATED
CREDITOR AND MEDIABAY AGREE THAT AGENT'S OR ANY LENDER'S COUNSEL IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF UNDER
CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED
IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. THE SUBORDINATED
CREDITOR AND MEDIABAY IN ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS
TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE
MANNER REQUESTED BY AGENT OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN
TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER THINGS UNDER ITS RESPECTIVE CONTROL
AND RELATING TO THE DISPUTE.
19. WAIVER OF JURY TRIAL. EACH SUBORDINATED CREDITOR, MEDIABAY AND AGENT HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE SUBORDINATED DEBT
DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS. EACH SUBORDINATED CREDITOR,
MEDIABAY AND AGENT ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH OF THE FOREGOING HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE SENIOR DEBT DOCUMENTS AND THAT
EACH OF THE FOREGOING WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH SUBORDINATED CREDITOR, MEDIABAY AND AGENT WARRANT AND
REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.
[Remainder of page intentionally left blank; signatures follow on next page]
16
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first above written.
SUBORDINATED CREDITOR: PREMIER ELECTRONIC LABORATORIES, INC.,
a Connecticut corporation
By: /s/ J. Xxxxx Xxxxxx
--------------------------------
Name: J. Xxxxx Xxxxxx
Title: President
SUBORDINATING PARTY: MEDIABAY, INC.,
a Florida corporation
By: /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
AGENT: ZOHAR CDO 2003-1, LIMITED,
a Cayman Islands exempted company
By: Patriarch Partners VIII, LLC,
its Collateral Manager
By: /s/ Xxxx Xxxxxx
--------------------------------
Name: Xxxx Xxxxxx
Title: Manager
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