[EXECUTION COPY]
EXHIBIT 10.5
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") is
entered into as of April 28, 2004, among HUNTINGDON CORPORATION, a Florida
corporation ("Huntingdon"), and XXXXXX XXXXXXX, a natural person, and X. XXXXXXX
IRREVOCABLE ABC TRUST, a Michigan trust ("Xxxxxxx Trust", and, together with
Huntingdon and Xxxxxxx, collectively, the "Subordinated Creditors" and each, a
"Subordinated Creditor"); MEDIABAY, INC., a Florida corporation ("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"); 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. The Borrowers, 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. Huntingdon Corporation, a Florida corporation ("Huntingdon"), has made
(i) that certain $2,500,000 senior secured loan to MediaBay (as defined in the
Prior Credit Agreement) (the "Huntingdon Financing Debt") as evidenced by that
certain senior secured convertible promissory note of even amount (the
"Huntingdon Senior Secured Note"), (ii) that certain $800,000 secured
subordinated loan to MediaBay (the "Huntingdon Secured Subordinated Debt") as
evidenced by that certain secured convertible subordinated promissory note of
even amount (the "Huntingdon Subordinated Secured Note") (iii) those certain
secured loans made to MediaBay pursuant to certain promissory notes in the
original principal amounts of $1,000,000, $150,000, $350,000 and $500,000 issued
pursuant to that certain Loan Agreement, dated as of October 3, 2002 (the
"Huntingdon October 2002 Loan Agreement"), between MediaBay and Huntingdon, as
amended (the "Huntingdon October 2002 Debt" and, together with the Huntingdon
Financing Debt, the Huntingdon Secured Subordinated Debt and that certain
related Agreement, dated as of the date hereof, between the Company and Xxxxxxx,
collectively, the "Huntingdon Debt").
C. MediaBay has issued that certain convertible senior subordinated
promissory note due December 31, 2004 in the principal amount of $1,984,250, in
favor of Xxxxxx Xxxxxxx (the "Xxxxxxx Note" and, together with the loan
evidenced thereby and that certain related Agreement, dated as of the date
hereof, between the Company and Xxxxxxx, collectively, the "Xxxxxxx Debt").
D. MediaBay has issued that certain convertible promissory note due
December 31, 2004 in the principal amount of $500,000, in favor of the X.
Xxxxxxx Irrevocable ABC Trust (the "Trust") (the "Trust Note" and, together with
the loan evidenced thereby and that certain related Agreement, dated as of the
date hereof, between the Company and the Trust, collectively, the "Trust Debt").
E. 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 the Senior Lenders have
required the execution and delivery of this Agreement by Subordinated Creditors
and the Borrowers in order to set forth the relative rights and priorities of
Agent, Senior Lenders and Subordinated Creditors 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:
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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 any Borrower, 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 any Borrower 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 any Borrower, 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 any Borrower, 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 any Borrower, 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 any Borrower, any such guarantor or any
such obligor, including, without limitation, the Collateral.
"Xxxxxxx Reimbursement Obligations" means those certain obligations
of Borrowers to a Subordinated Creditor to the extent permitted under
Section 6.1(a)(E) and as set forth in Part III of Schedule 6.1(a).
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"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.
"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.
"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 (i) all of the obligations of any
Borrower to a Subordinated Creditor evidenced by or incurred pursuant to
the Subordinated Debt Documents and (ii) the Xxxxxxx Reimbursement
Obligations.
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"Subordinated Debt Documents" shall mean the Huntingdon Senior
Secured Note, the Huntingdon Subordinated Secured Note, the Huntingdon
October 2002 Loan Agreement, the Xxxxxxx Note, the Trust Note, any
guaranty with respect to the Subordinated Debt, any security agreement or
other collateral document 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 or otherwise exercise remedies
with respect thereto.
"Subordinated Debt Default Notice" shall mean a written notice from
a Subordinated Creditor or any Borrower 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.
2. SUBORDINATION.
2.1 SUBORDINATION OF SUBORDINATED DEBT TO SENIOR DEBT. Each Borrower
covenants and agrees, and each 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.
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2.2 LIQUIDATION, DISSOLUTION, BANKRUPTCY. In the event of any Proceeding
involving any Borrower:
(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. Each 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. Each 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) Each 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.
(d) Each 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. Each 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 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. Each
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. Each 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 the any Borrower and/or any of its affiliates, as
debtor in possession. Each Subordinated Creditor further agrees that it
will not seek to participate or participate on any creditor's committee
without Agent's prior written consent.
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(e) Each 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)
Senior Lenders shall be allowed to vote the claim in connection with any
such Proceeding either in its own name or in the name of the Subordinated
Creditors (including without limitation voting on any plan of
reorganization) that the holders of Subordinated Debt would be authorized
to vote, but for this Agreement, in the event that the Senior Lenders
believe such action is necessary to protect their respective interests in
the Senior Debt and under this Agreement and after first giving the
Subordinated Creditors five (5) days' written notice of any intent to take
such action (to the extent such notice is practicable), provided that the
Senior Lenders agree to permit the Subordinated Creditors to take action
on the Subordinated Creditors' own behalf in connection with any such
Proceeding as may be necessary to reasonably protect the Subordinated
Creditors' interests, as long as (x) the Senior Lenders believe that such
action is not contrary to or in conflict with the actions and interests of
the Senior Lenders and (y) such action does not affect the status of the
Subordinated Debt as having a junior positions to the Senior Debt;
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 Creditors 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,
each Borrower hereby agrees that it may not make, and each Subordinated
Creditor hereby agrees that it will not accept from any Person, any
Distribution with respect to the Subordinated Debt until the Senior Debt
is indefeasibly paid in full in cash and all commitments (if any) to lend
under the Senior Debt Documents have terminated, subject to the terms of
subsection 2.2 of this Agreement, provided however, that a Borrower may
make, and a Subordinated Creditor may accept payments on account of the
Xxxxxxx Reimbursement Obligations solely to the extent such payments are
made and received in accordance with the schedule of payments set forth in
Part III of Schedule 6.1(a) of the Senior Credit Agreement.
(b) Notwithstanding any provision of this subsection 2.3 to the
contrary, the failure of any Borrower 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.
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, each
Subordinated Creditor may file proofs of claim against any Borrower and/or its
affiliates in any Proceeding involving such Borrower and/or such affiliates. Any
Distributions or other proceeds of any Enforcement Action obtained by a
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.
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2.5 INCORRECT PAYMENTS. If any Distribution on account of the Subordinated
Debt not permitted to be made by any Borrower and/or any of its affiliates or
accepted by a Subordinated Creditor under this Agreement is made and received by
a 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 SUBORDINATION OF LIENS AND SECURITY INTERESTS; AGREEMENT NOT TO
CONTEST; AGREEMENT TO RELEASE LIENS. Until the Senior Debt has been indefeasibly
paid in full in cash and all lending commitments under the Senior Debt Documents
have terminated, all liens and security interests of a Subordinated Creditor in
all or part of the Collateral pursuant to the Subordinated Loan Documents or
otherwise shall be and hereby are subordinated for all purposes and in all
respects to the liens and security interests of Agent and Senior Lenders in the
Collateral, regardless of the time, manner or order of perfection of any such
liens and security interests. Each 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
Agent and Senior Lenders in the Collateral securing the Senior Debt. In the
event that Agent or Senior Lenders release or agree to release any of their
liens or security interests in the Collateral in connection with the sale or
other disposition thereof or any of the Collateral is sold or retained pursuant
to a foreclosure or similar action, each Subordinated Creditor shall (or shall
cause its agent) to promptly execute and deliver to Agent such termination
statements and releases as Agent shall reasonably request to effect the release
of the liens and security interests of such Subordinated Creditor in such
Collateral. In furtherance of the foregoing, each Subordinated Creditor hereby
irrevocably appoints Agent its attorney-in-fact, with full authority in the
place and stead of such Subordinated Creditor and in the name of such
Subordinated Creditor or otherwise, to execute and deliver any document or
instrument which such Subordinated Creditor may be required to deliver pursuant
to this subsection 2.6.
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) without the prior written consent of Agent
(such consent not to be unreasonably withheld), (ii) 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
(iii) unless, following the consummation of any such action, there shall
be either (A) no more than three holders (or three 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 a Subordinated
Creditor hereunder and any consents required of a 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 each Subordinated Creditor, as provided
in Section 12 hereof.
2.9 LEGENDS. Until the termination of this Agreement in accordance with
Section 16 hereof, each Subordinated Creditor will cause to be clearly,
conspicuously and prominently inserted on the face of the Subordinated Note and
any other Subordinated Debt Document, as well as any renewals or replacements
thereof, the following legend:
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"This instrument and the rights and obligations evidenced hereby are
subordinate in the manner and to the extent set forth in that certain
Subordination and Intercreditor Agreement (the "Subordination Agreement"),
dated as of April 28, 2004, among Huntingdon Corporation ("Huntingdon"),
Xxxxxx Xxxxxxx ("Xxxxxxx"), and X. Xxxxxxx Irrevocable ABC Trust ("Xxxxxxx
Trust", and, together with Huntingdon and Xxxxxxx, collectively, the
"Subordinated Creditors"), MediaBay, Inc. ( "MediaBay"), Xxxxx Xxxxxxx,
Inc. ("Xxxxx Xxxxxxx"), and Audio Book Club, Inc. ("Audio Book Club", and,
together with MediaBay and Xxxxx Xxxxxxx, collectively, the "Borrowers"),
the Guarantors signatory thereto, and Zohar CDO 2003-1, Limited, as
administrative agent (in such capacity, the "Agent") for itself and all
lenders party to the Senior Credit Agreement (as defined below), to the
indebtedness (including interest) owed by the Borrowers pursuant to that
certain Credit Agreement, dated as of April 28, 2004 (the "Credit
Agreement"), among the Borrowers, certain subsidiaries of the Borrowers
signatory thereto, Agent and the lenders from time to time party thereto,
as such Credit Agreement has been and hereafter may be amended, amended
and restated, supplemented or otherwise modified from time to time; and
each holder of this instrument, by its acceptance hereof, irrevocably
agrees to be bound by the provisions of the Subordination Agreement."
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
Creditors, without incurring liability to Subordinated Creditors and without
impairing or releasing the obligations of Subordinated Creditors 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 (except 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 on any of the Subordinated Debt, (b)
change the dates upon which payments of principal or interest 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 other 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 any Borrower or any guarantor of or 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; provided,
however, that nothing herein shall in any way restrict or prohibit MediaBay and
any Subordinated Creditor from amending, modifying or supplementing the
conversion price or conversion provisions contained in any of the Subordinated
Debt Documents.
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 any Borrower or any
guarantor of the Senior Debt for the benefit of Subordinated Creditor.
4.2 RIGHTS RELATING TO AGENT'S ACTIONS WITH RESPECT TO THE COLLATERAL.
Each 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, each 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. Each
Subordinated Creditor hereby represents and warrants to Agent and Senior Lenders
that as of the date hereof: (a) such Subordinated Creditor (i) with respect to
Huntingdon only, is a corporation, duly formed and validly existing under the
laws of the State of Florida; (ii) with respect to Xxxxxxx only, is a natural
person, domiciled in the State of Florida; and (iii) with respect to Xxxxxxx
Trust only, is a trust, duly formed and validly existing under the laws of the
State of Michigan (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) with
respect to Huntingdon and the Xxxxxxx Trust only, the execution of this
Agreement by such Subordinated Creditor will not violate or conflict with the
organizational documents of such Subordinated Creditor, any material agreement
binding upon such 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 such Subordinated Creditor,
enforceable against such 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) such
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, and the Subordinated Creditors, collectively, are
the sole owners, beneficially and of record, of the Subordinated Debt Documents
and the Subordinated Debt as of the date hereof; (f) such 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 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 THE BORROWERS AND GUARANTORS. Each
Borrower hereby represents and warrants to Agent, each Senior Lender and each
Subordinated Creditor that as of the date hereof: (a) such Borrower is duly
formed and validly existing under the laws of the state of its organization; (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) such Borrower 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 such Borrower will not violate or conflict with the
organizational documents of such Borrower, any material agreement binding upon
such Borrower 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 such Borrower, enforceable against such Borrower 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.
13
5.3 REPRESENTATIONS AND WARRANTIES OF AGENT. Agent hereby represents and
warrants to Subordinated Creditors 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, each 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. Each 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 a 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.
14
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 each 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.
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 HUNTINGDON:
__________________________
__________________________
ATTENTION: ______________
TELECOPY: ______________
WITH A COPY TO:
__________________________
__________________________
ATTENTION:
TELECOPY:
15
(b) IF TO XXXXXX XXXXXXX:
__________________________
__________________________
ATTENTION: ______________
TELECOPY: ______________
WITH A COPY TO:
__________________________
__________________________
ATTENTION: ______________
TELECOPY: ______________
(c) IF TO X. XXXXXXX IRREVOCABLE ABC TRUST:
__________________________
__________________________
ATTENTION: ______________
TELECOPY: ______________
WITH A COPY TO:
__________________________
__________________________
ATTENTION: ______________
TELECOPY: ______________
(d) If to the Borrowers:
MediaBay, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: Chairman
Telecopy:
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
16
(e) 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, Subordinated Creditors and the Borrowers. 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.
17
11. RELATIVE RIGHTS. This Agreement shall define the relative rights of Agent,
Senior Lenders and Subordinated Creditors. Nothing in this Agreement shall (a)
impair, as among the Borrowers, Agent and Senior Lenders and as between the
Borrowers and each Subordinated Creditor, the obligation of any Borrower with
respect to the payment of the Senior Debt and the Subordinated Debt in
accordance with their respective terms or (b) affect the relative rights of
Agent, Senior Lenders or Subordinated Creditors with respect to any other
creditors of any Borrower.
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.
18
17. APPLICABLE LAW. This Agreement 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 EACH BORROWER 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 SITTING 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 EACH BORROWER EXPRESSLY SUBMITS AND CONSENT TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. THE SUBORDINATED CREDITOR AND EACH BORROWER 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 EACH BORROWER 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 EACH BORROWER 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 EACH BORROWER 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
19. WAIVER OF JURY TRIAL. EACH SUBORDINATED CREDITOR, EACH BORROWER 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, EACH
BORROWER 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, EACH BORROWER 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]
20
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first above written.
SUBORDINATED CREDITORS: HUNTINGDON CORPORATION,
a Florida corporation
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
XXXXXX XXXXXXX,
a natural person
/s/ Xxxxxx Xxxxxxx
--------------------------------
X. XXXXXXX IRREVOCABLE ABC
TRUST, a Michigan trust
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title: Trustee
BORROWERS: MEDIABAY, INC.,
a Florida corporation
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
[Signatures continue on next page]
S-1
XXXXX XXXXXXX, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
AUDIO BOOK CLUB, INC.,
a Delaware corporation
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
[Signature continue on next page]
S-2
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
S-3
